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Form 8-K HERCULES OFFSHORE, INC. For: May 26

May 31, 2016 6:04 AM EDT

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of report (date of earliest event reported): May 26, 2016

 

 

HERCULES OFFSHORE, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-37623   56-2542838

(State of incorporation

or organization)

  (Commission File Number)  

(IRS Employer

Identification No.)

9 Greenway Plaza, Suite 2200

Houston, Texas

   

77046

(Address of principal executive offices)     (Zip code)

Registrant’s telephone number, including area code: (713) 350-5100

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

  ¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

  ¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

  ¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

  ¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 1.01. Entry into a Material Definitive Agreement.

The information set forth under Item 8.01 of this Current Report on Form 8-K is hereby incorporated by reference into this Item 1.01.

 

Item 1.02. Termination of a Material Definitive Agreement.

The information set forth under Item 8.01 of this Current Report on Form 8-K is hereby incorporated by reference into this Item 1.02.

 

Item 2.01. Completion of Acquisition or Disposition of Assets.

The information set forth under Item 8.01 of this Current Report on Form 8-K is hereby incorporated by reference into this Item 2.01.

 

Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information set forth under Item 8.01 of this Current Report on Form 8-K is hereby incorporated by reference into this Item 2.03.

 

Item 2.04. Triggering Events That Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement.

The information set forth under Item 8.01 of this Current Report on Form 8-K is hereby incorporated by reference into this Item 2.04.

 

Item 8.01. Other Events.

Sale and Purchase of Vessel and Related Contracts and Equipment

As previously disclosed, on May 19, 2014, HBOL (as defined below) entered into a five-year contract with Maersk Oil North Sea UK Limited (the “Operator”) to provide drilling services (the “DSA”), utilizing a Friede & Goldman designed JU-2000E Jackup Drilling Unit named “Hercules Highlander” (the “Vessel”) to be constructed in Singapore by Jurong Shipyard Pte Ltd (the “Builder”). In addition, on February 12, 2015, Dockwise Shipping B.V. (“Dockwise”) and HBOL entered into a heavy lift contract for the transport of the Vessel from Singapore to the North Sea.

On May 26, 2016, Hercules North Sea, Ltd (“HNS”), Hercules Offshore, Inc. (“HOI” or the “Borrower”) and Hercules British Offshore Limited (“HBOL” and, together with HNS and HOI, the “Hercules Parties”) entered into a series of agreements related to the Vessel, including (i) a tripartite agreement (the “Tripartite Agreement”) with the Builder and Maersk Highlander UK Limited (the “Buyer”) pursuant to which HNS assigned its rights to purchase the Vessel to Buyer and Buyer assumed the obligation to pay USD $195,988,025 to the Builder as the final installment to acquire the Vessel (the “Final Installment”), (ii) HBOL and HOI assigned to Builder all of their rights, title and interest in and to certain equipment, consumables and spares acquired in anticipation of operating the Vessel, including Builder’s assumption of USD $5,098,042 in outstanding accounts payable for such equipment (the “Bill of Sale”), and (iii) HBOL novated the DSA to Buyer (the “DSA Novation”) as well as the transportation contract with Dockwise to mobilize the Vessel to the UK North Sea from Singapore (the “Heavy Lift Novation”).

As a result of the completion of the transactions contemplated in the suite of agreements constituted by the Tripartite Agreement, the Bill of Sale, the DSA Novation and the Heavy Lift Novation (the “Transaction Documents”), the Hercules Parties no longer have any interest in the Vessel or its related equipment, nor do they have any obligation to pay the Final Installment or the outstanding balance on the equipment included with the Bill of Sale. Further, the Hercules Parties have no obligations to provide any drilling services to the Operator. In connection with the execution of the Transaction Documents, several other agreements related to the Vessel


previously entered into by certain of the Hercules Parties were terminated or assigned to Buyer. The Transaction Documents also provide each of the Hercules Parties with a full release of their respective obligations, duties or other rights arising out of or related to the DSA or the Vessel. With respect to the equipment transferred under the Bill of Sale, the Buyer also agreed to indemnify the Hercules Parties against third party payment demands if the actual acquisition costs exceed USD $5,098,042.

This summary of the Tripartite Agreement, the DSA Novation, the Heavy Lift Novation and the Bill of Sale does not purport to be complete, and is qualified in its entirety by reference to the Tripartite Agreement, the DSA Novation, the Heavy Lift Novation and the Bill of Sale, which are filed as Exhibits 2.1, 2.2, 2.3 and 2.4, respectively, to this Current Report on Form 8-K.

Amended and Restated Forbearance Agreement

As previously disclosed, on November 6, 2015, the Borrower and certain of its subsidiaries, as guarantors (together with the Borrower, the “Loan Parties”), entered into the Credit Agreement with Jefferies Finance LLC, as administrative agent and collateral agent (in such capacities, the “Agent”), and the lenders party thereto (as amended, restated, supplemented or otherwise modified from time to time, the “First Lien Credit Agreement”).

As also previously disclosed, on April 18, 2016, the Loan Parties entered into a Forbearance Agreement and First Amendment to the Credit Agreement (the “Forbearance Agreement”), with the Agent for itself and certain lenders designated therein. On April 28, 2016, as previously disclosed, the Loan Parties entered into Amendment No. 1 to Forbearance Agreement and First Amendment to Credit Agreement with the Agent and certain lenders designated therein, which amended the Forbearance Agreement.

On May 26, 2016, the Loan Parties entered into an Amended and Restated Forbearance Agreement (the “A&R Forbearance Agreement”) with the Agent and certain lenders designated therein (the “Ad Hoc Group Members” and collectively, the “Ad Hoc Group”), which amends and restates the Forbearance Agreement, as amended. Pursuant to the A&R Forbearance Agreement, each member of the Ad Hoc Group (severally and not jointly) shall, among other things, (i) forbear from exercising certain of their respective default-related rights and remedies against the Loan Parties with respect to certain defaults under the First Lien Credit Agreement specified in the A&R Forbearance Agreement (other than, among other things, the acceleration of the loans under the First Lien Credit Agreement and the delivery of a written direction instructing the Agent to deliver a written instruction to Wilmington Trust, National Association, as escrow agent (in such capacity, the “Escrow Agent”) to distribute all funds in the Escrow Account (as defined in the First Lien Credit Agreement) to the Agent to prepay the loans under the First Lien Credit Agreement) , (ii) consent to the release of all liens and security interests in any assets or property subject to the transactions contemplated in the Tripartite Agreement, the DSA Novation, the Heavy Lift Novation and the Bill of Sale and grant related releases and (iii) upon the request of HOI, consent to the release of the Loan Parties who are not filing voluntary petitions under Chapter 11 (as defined below) from their guarantees under the First Lien Credit Agreement and the release of all liens and security interests in any assets or property of the Loan Parties who are not filing voluntary petitions under Chapter 11 upon the Effective Date (as defined below).

Pursuant to the A&R Forbearance Agreement, the Borrower received written notice from the Agent that the commitments under the First Lien Credit Agreement are terminated and the outstanding loans under the First Lien Credit Agreement are declared due and payable, in whole, including, without limitation the principal of the loans under the First Lien Credit Agreement, together with accrued interest thereon, unpaid accrued fees, the Applicable Premium (as defined in the First Lien Credit Agreement) and all other obligations of the Borrower accrued under the First Lien Credit Agreement and any other Loan Document (as defined under the First Lien Credit Agreement). Further, pursuant to the A&R Forbearance Agreement, the lenders party to the A&R Forbearance Agreement directed the Agent to deliver a written instruction to the Escrow Agent to distribute all the funds in the Escrow Account in the amount of $200 million to the Agent to prepay the loans under the First Lien Credit Agreement pursuant to the terms of the Escrow Agreement (as defined in the First Lien Credit Agreement) and the Credit Agreement.

The foregoing description of the A&R Forbearance Agreement is qualified in its entirety by reference to the A&R Forbearance Agreement, attached hereto as Exhibit 10.1, and incorporated herein by reference.


Restructuring Support Agreement

On May 26, 2016, HOI and certain of its U.S. domestic direct and indirect subsidiaries (together with HOI, the “Debtors”) entered into an agreement (the “Restructuring Support Agreement”) with the Ad Hoc Group, representing approximately 99% of the obligations outstanding under the First Lien Credit Agreement.

The Restructuring Support Agreement sets forth, subject to certain conditions, the commitment to and obligations of, on the one hand, the Debtors, and on the other hand, each of the Ad Hoc Group Members (and any successors or permitted assigns that become party thereto) in connection with a controlled wind down of HOI’s operations pursuant to a pre-packaged plan (the “Plan”) to be filed under Chapter 11 (“Chapter 11”) of the United States Bankruptcy Code. The Plan will be based on the plan term sheet (the “Term Sheet”) attached as Exhibit A to the Restructuring Support Agreement. Under the terms of the Restructuring Support Agreement, HOI is required to commence solicitation of votes to accept or reject the Plan by May 31, 2016, and thereafter, to commence cases under Chapter 11 by June 6, 2016.

Under the Plan, which requires Bankruptcy Court approval, the Debtors’ trade creditors and vendors are expected to be paid in full in cash.

Pursuant to the terms of the Restructuring Support Agreement, each of the Ad Hoc Group Members agreed, among other things, and subject to certain conditions: (a) not to support any plan or sale process that is inconsistent with the Restructuring Support Agreement, the Term Sheet or the Plan; (b) not to instruct the Agent under the First Lien Credit Agreement to take any action inconsistent with the terms and conditions of the Restructuring Support Agreement; (c) to vote to accept the Plan; and (d) contemporaneously with the execution of the Restructuring Support Agreement, enter into (and direct the Agent to enter into) the A&R Forbearance Agreement.

The Debtors have agreed, among other things and subject to certain conditions: (a) to cause the sale process for the Debtors’ assets and the assets of HOI’s non-Debtor subsidiaries to continue during the bankruptcy proceedings; (b) to take no action materially inconsistent with the Restructuring Support Agreement, the Term Sheet or the Plan; and (c) not to support any alternative plan or transaction other than the Plan.

The Restructuring Support Agreement and the Term Sheet contemplate that the Debtors will monetize their remaining assets and the assets of HOI’s non-Debtor subsidiaries and implement a controlled wind down of their business and operations. Specifically, the material terms of the Plan are expected to effect, among other things, subject to certain conditions and as more particularly set forth in the Term Sheet, upon the Effective Date, the transfer of the remaining assets of the Debtors and the non-Debtor subsidiaries to a liquidating trust (the “Wind Down Entity”), which Wind Down Entity will be responsible for marketing and selling the Debtors’ remaining assets and the assets of the non-Debtor subsidiaries and distributing the proceeds from such asset sales to the holders of claims arising under the First Lien Credit Agreement (the “First Lien Lenders”) and the holders of outstanding common shares of HERO (the “HERO Common Stock”) in accordance with the terms of the Plan. Certain principal terms of the Term Sheet are outlined below:

 

    If the class of holders of HERO Common Stock votes to accept the Plan, the First Lien Lenders shall receive their pro rata share of (i) a non-interest bearing senior claim against the Wind Down Entity in the amount of USD $510 million, less the Escrow Release Payment (as defined in the Term Sheet) and any amounts previously distributed to the First Lien Lenders during the chapter 11 cases and (ii) 100% of Class A interests in the Wind Down Entity, which shall represent 85% of the Acceptance Wind Down Entity Interests (as defined in the Term Sheet).

 

    If the class of holders of HERO Common Stock votes to reject the Plan, the First Lien Lenders shall receive their pro rata share of a non-interest bearing senior claim against the Wind Down Entity in the amount of USD $579 million, less the Escrow Release Payment and any amounts previously distributed to the First Lien lenders during the chapter 11 cases (the “Rejection Lender Wind Down Claim”).


    The Wind Down Entity shall establish certain reserves in an amount or amounts reasonably acceptable to the Debtors and the Requisite Consenting Lenders (as defined in the Term Sheet) and approved by the Bankruptcy Court for the administration and distribution on account of certain claims, including general unsecured claims that are disputed as of the effective date of the Plan (the “Effective Date”).

If the Plan is consummated as contemplated by the Term Sheet, and if the class of holders of HERO Common Stock votes in favor of the Plan, the class of holders of HERO Common Stock will receive: (a) USD $12.5 million of cash on the Effective Date (subject to reduction by USD $450,000 for each full calendar day following the seventy-second day after the Petition Date if the Confirmation Order is not a final order to the extent such delay is the result of actions taken directly or indirectly by holders of HERO Common Stock, their representatives, and/or any other persons acting in concert with the holders of HERO Common Stock) and (b) 100% of the Class B interests in the Wind Down Entity, which shall represent 15% of the Acceptance Wind Down Entity Interests. If the class of holders of HERO Common Stock votes to reject the Plan, the holders of HERO Common Stock will receive 100% of the Rejection Wind Down Entity Interests (as defined in the Term Sheet).

The Restructuring Support Agreement may be terminated upon the occurrence of certain events, including the failure to meet specified milestones related to filing, confirmation and consummation of the Plan, among other requirements, and in the event of certain breaches by the parties under the Restructuring Support Agreement. There can be no assurance that the transactions contemplated by the Restructuring Support Agreement, the Term Sheet and the Plan will be consummated.

The information in the Form 8-K is not intended to be, and should not in any way be construed as, a solicitation of votes on the Plan, nor should the information contained herein or in the Restructuring Support Agreement be relied on for any purpose with respect to the Plan. The foregoing description of the Restructuring Support Agreement and the Term Sheet is qualified in its entirety by reference to the Restructuring Support Agreement attached hereto as Exhibit 10.2 and incorporated herein by reference.

Cautionary Statement Regarding Forward-Looking Statements

This Form 8-K and the exhibits hereto contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are subject to a number of risks, uncertainties and assumptions, including the factors described in our most recent periodic reports and other documents filed with the Securities and Exchange Commission (the “SEC”), which are available free of charge on HOI’s website at www.herculesoffshore.com. Forward-looking statements are based on current expectations and include any statement that does not directly relate to a current or historical fact. In this context, forward-looking statements address the monetization of HOI’s remaining assets and implementation of a controlled wind down of HOI’s business and operations, the amount of money received by the holders of HERO Common Stock under the Plan, and the transactions contemplated by the Restructuring Support Agreement, the Term Sheet and the Plan being consummated, and often contain words such as “anticipate,” “believe,” “intend,” “expect,” “plan,” “will” or other similar words. These forward-looking statements involve certain risks and uncertainties that ultimately may not prove to be accurate. Actual results and future events could differ materially from those anticipated in such statements. For further discussion of risks and uncertainties, individuals should refer to HOI’s other filings with the SEC. HOI undertakes no obligation and does not intend to update these forward-looking statements to reflect events or circumstances occurring after this Current Report on Form 8-K, other than as required by law. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Current Report on Form 8-K. All forward-looking statements are qualified in their entirety by this cautionary statement.

Press Release

On May 27, 2016, HOI issued a press release announcing that it had entered into the Tripartite Agreement, the DSA Novation, the Heavy Lift Novation, the Bill of Sale, the A&R Forbearance Agreement and the Restructuring Support Agreement. A copy of the press release is filed with this report as Exhibit 99.1 and incorporated herein by reference.


Item  9.01. Financial Statements and Exhibits.

 

(d) Exhibits.

 

Exhibit
Number

  

Description

2.1#    Tripartite Agreement, dated as of May 26, 2016, by and among Jurong Shipyard Pte Ltd, Hercules North Sea, Ltd, Hercules Offshore, Inc., Hercules British Offshore Limited and Maersk Highlander UK Limited.
2.2#    Novation and Amendment Agreement in respect of Contract No. NO 173756 for the Provision of a Harsh Environment Jack-Up Drilling Unit for Culzean, dated as of May 26, 2016, by and among Hercules British Offshore Limited, Maersk Oil North Sea UK Limited and Maersk Highlander UK Limited.
2.3#    Novation and Amendment Agreement in respect of a Standard Heavylift Charter Party Relating to the Transport of m.v. Hercules Highlander, dated as of May 26, 2016, by and among Hercules British Offshore Limited, Dockwise Shipping B.V. and Maersk Highlander UK Limited.
2.4#    Bill of Sale and Assignment, dated as of May 26, 2016, by and among Hercules Offshore, Inc., Hercules British Offshore Limited and Jurong Shipyard Pte Ltd.
10.1    Amended and Restated Forbearance Agreement, dated as of May 26, 2016, by and among Hercules Offshore, Inc., as borrower, the subsidiary guarantors named therein, Jefferies Finance LLC, as administrative agent and collateral agent, and the lenders named therein.
10.2    Restructuring Support Agreement, dated as of May 26, 2016, by and among Hercules Offshore, Inc. and certain of its U.S. domestic direct and indirect subsidiaries and certain lenders therein.
99.1    Press release, dated May 27, 2016.

 

# Exhibits and Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. HOI agrees to furnish a supplemental copy of any such omitted Exhibit or Schedule to the SEC upon request.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  HERCULES OFFSHORE, INC.
Date: May 27, 2016   By:  

/s/ Beau M. Thompson

    Beau M. Thompson
    Senior Vice President, General Counsel
    and Secretary


Item 9.01. Financial Statements and Exhibits.

 

(d) Exhibits.

 

Exhibit

Number

  

Description

2.1#    Tripartite Agreement, dated as of May 26, 2016, by and among Jurong Shipyard Pte Ltd, Hercules North Sea, Ltd, Hercules Offshore, Inc., Hercules British Offshore Limited and Maersk Highlander UK Limited.
2.2#    Novation and Amendment Agreement in respect of Contract No. NO 173756 for the Provision of a Harsh Environment Jack-Up Drilling Unit for Culzean, dated as of May 26, 2016, by and among Hercules British Offshore Limited, Maersk Oil North Sea UK Limited and Maersk Highlander UK Limited.
2.3#    Novation and Amendment Agreement in respect of a Standard Heavylift Charter Party Relating to the Transport of m.v. Hercules Highlander, dated as of May 26, 2016, by and among Hercules British Offshore Limited, Dockwise Shipping B.V. and Maersk Highlander UK Limited.
2.4#    Bill of Sale and Assignment, dated as of May 26, 2016, by and among Hercules Offshore, Inc., Hercules British Offshore Limited and Jurong Shipyard Pte Ltd.
10.1    Amended and Restated Forbearance Agreement, dated as of May 26, 2016, by and among Hercules Offshore, Inc., as borrower, the subsidiary guarantors named therein, Jefferies Finance LLC, as administrative agent and collateral agent, and the lenders named therein.
10.2    Restructuring Support Agreement, dated as of May 26, 2016, by and among Hercules Offshore, Inc. and certain of its U.S. domestic direct and indirect subsidiaries and certain lenders therein.
99.1    Press release, dated May 27, 2016.

 

# Exhibits and Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. HOI agrees to furnish a supplemental copy of any such omitted Exhibit or Schedule to the SEC upon request.

Exhibit 2.1

THIS DEED (this Deed) is made this 26 day of May 2016 by and among

 

(1) JURONG SHIPYARD PTE LTD, a corporation organised under the laws of Singapore, having its registered office at 29 Tanjong Kling Road, Singapore 628054 (the Builder);

 

(2) HERCULES NORTH SEA, LTD, an exempted company incorporated under the laws of the Cayman Islands and having its office at P.O. Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands (the Original Purchaser);

 

(3) HERCULES OFFSHORE INC, a company organised under the laws of Delaware and having its office at 1675 S State Street STE B, Dover, DE, 19901, United States of America (HOI);

 

(4) HERCULES BRITISH OFFSHORE LIMITED, a company organised under the laws of England and Wales and having its registered office at International House, 1 St. Katherine’s Way, London E1W 1AY, United Kingdom (HBOL); and

 

(5) MAERSK HIGHLANDER UK LIMITED, a company incorporated under the laws of England and Wales (company registration number 10195411) whose registered office is at Maersk House, Braham Street, London E1 8EP (the New Purchaser),

(each a Party and together the Parties).

BACKGROUND

 

(A) The Builder and the Original Purchaser entered into that certain construction contract dated 19 May 2014 (as amended and supplemented) (the Contract), whereby the Builder agreed to build, sell and deliver the Friede & Goldman Design JU2000E heavy duty jack-up rig bearing hull number 11-1118 and IMO 9745249, as more particularly described in the Contract (the Vessel).

 

(B) The Parties have agreed, among other things, that in consideration for the New Purchaser making payment of the Final Installment under the Contract the Builder is agreeing to (among other things) perform the Contract in favour of the New Purchaser and grant a full release of any claims, obligations, duties or other rights that it may have against the Original Purchaser, HOI and HBOL and their corresponding Related Parties (together the Hercules Parties) on the terms set out in this Deed.

NOW IT IS HEREBY AGREED AS FOLLOWS:

 

1 Interpretation

 

1.1 Capitalised words and expressions used but not defined in this Deed shall have the meanings they are given in the Contract.

 

1.2 In this Deed, unless the context otherwise requires:

Bill of Sale has the meaning given to it in clause 5.2

Builder Indemnified Claim has the meaning given to it in clause 5.8

Completion Deliverables means each of the documents, evidence and/or circumstances set out in Schedule 1;

Construction Management Agreement means that certain agreement dated 11 August 2014 between the Original Purchaser and HOI, whereby HOI agreed to provide management services related to the construction of the Vessel;

Collateral Agent means the collateral agent under the First Lien Credit Agreement

 

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Debenture means the debenture dated 6 November 2015 executed by (among others) HBOL, Hercules Offshore UK Limited and Hercules North Sea Driller Limited as chargors in favour of the Collateral Agent

Direct Agreement means the direct agreement dated 22 May 2015 between the Builder, the Original Purchaser and the Culzean Operator

Drilling Contract means the drilling contract dated 19 May 2014 between HBOL and the Culzean Operator in relation to the drilling services to be conducted by HBOL

Drilling Contract Novation Agreement means the agreed form novation and amendment agreement dated on or around the date of this Deed between HBOL, the Culzean Operator and the New Purchaser transferring by novation the rights and obligations of HBOL under the Drilling Contract to the New Purchaser

Equipment with Transferred Obligations means the equipment and services more particularly described in Schedule 3

Effective Date has the meaning given to it in clause 5.5

Export Controls means the export control laws and regulations of any jurisdiction, including without limitation the Export Administration Regulations (15 C.F.R. Parts 730 – 776), the US Arms Export Control Act (22 U.S.C. 2778) and the International Traffic in Arms Regulations (22 C.F.R. Parts 120 – 130), the UK Export Control Act 2002 and UK Export Control Order 2008 together with all subordinate legislation made thereunder, Council Regulation (EC) No 428/2009, all as amended, together with any licence, authorisation, approval, exemption or exception, decision, order, advisory opinion, official guidance, classification or rating made, granted or established pursuant to any of the above

First Lien Credit Agreement means that certain credit agreement by and among HOI, as borrower, and Jefferies Finance LLC, as administrative agent and collateral agent, dated as of November 6, 2015 (as amended, modified or supplemented from time to time)

First Lien Lenders means the lenders from time to time party to the First Lien Credit Agreement

Heavy Lift Contract means the heavy lift charter party dated 12 February 2015 between Dockwise Shipping B.V. and HBOL

Heavy Lift Contract Novation Agreement means the agreed form novation and amendment agreement dated on or around the date of this Deed between Dockwise Shipping B.V., the New Purchaser and HBOL transferring by novation the rights and obligations of HBOL under the Heavy Lift Contract to the New Purchaser

HOI Intercompany Liability means the intercompany payables owed by the Original Purchaser to HOI

HOSL Intercompany Liability means the intercompany payables owed by the Original Purchaser to HOSL

HOSL means Hercules Oilfield Services, Ltd an exempted company incorporated in the Cayman Islands (company number 174579) whose registered office is at c/o Maples Corporate Services Limited, P.O. Box 309, Ugland House, South Church Street, George Town, Grand Cayman KY1-1104, Cayman Islands

Indemnification Cap has the meaning given to it in clause 5.9

Indemnities has the meaning given to it in clause 5.7

 

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Lender Consent means the written consent from the requisite First Lien Lenders under the First Lien Credit Agreement providing consent to the transactions contemplated by this Deed and any documents referred to herein

Novated Contract means the Contract as the same has been amended, supplemented and novated pursuant to the terms of this Deed

Operational Handover Documents means:

 

  (a) the rig and site-team computer system (servers, switches, modems, deck top computer, printers etc.) together with all files, programs, codes, directions and systems associated with such; or

 

  (b) to the extent not provided via (a) above and to the extent it exists, hard copy or electronic copies of the following:

 

  (i) records of all purchase orders, payment details and delivery status;

 

  (ii) maintenance system including records and documentation;

 

  (iii) vendor documentation, manuals, original certificates, MRB, approval letters etc;

 

  (iv) documents from Builder and third part surveys, inspection, analysis, verification and assurances activities;

 

  (v) meeting records for meeting with the Culzean Operator, the Classification Society, authorities, the Builder and vendors;

 

  (vi) all class and authorities certificates and statement of completed including approval letters; and

 

  (vii) all engineering reports covering; analysis, studies and surveys

Post Effective Date Indemnified Claim has the meaning given to it in clause 5.5

Purchased Equipment means the equipment and services more particularly described in Schedule 2

Related Parties has the meaning given to it in clause 5.1

Released Claims has the meaning given to it in clause 5.1

Security Agreement means the security agreement dated 6 November 2015 executed by, inter alia, the HOI as borrower in favour of the Collateral Agent

Security Discharge means the agreed form Deed(s) of partial release of the Security Documents, together with any notices, consents, certificates or other documents required to be delivered thereunder

Security Documents means the Debenture and the Security Agreement

Service Agreements means:

 

  (a) Contract No TMS HO001 Provision of Training Management Services dated 11 March 2015 between Hercules Offshore UK Limited and Survivex Limited;

 

  (b) Agreement for Catering and Cleaning Services between Hercules British Offshore Limited and ESS Support Services Worldwide dated 1 May 2016; and

 

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  (c) Medical Services Agreement between Abermed Limited and Hercules Britannia Holdings Ltd.

Supplier Indemnified Claim has the meaning given to it in clause 5.6

 

2 Effect of this Deed

 

2.1 The Parties hereby agree that this Deed shall immediately be fully and effectively binding on them.

 

2.2 To the extent of any conflict between the terms of this Deed and the Contract, the terms of this Deed shall prevail.

 

3 Benefit of the Contract

 

3.1 With effect from the date hereof and in respect of the period from the date hereof:

 

  (a) the Original Purchaser releases the Builder from the Builder’s obligations, duties and liabilities under the Contract and the Builder agrees that it has no further rights against the Original Purchaser arising out of or relating to the Contract;

 

  (b) the Builder releases the Original Purchaser from the Original Purchaser’s obligations, duties and liabilities arising out of or relating to the Contract, and the Original Purchaser agrees that it has no further rights or claims against the Builder under the Contract;

 

  (c) the New Purchaser agrees to assume the rights and obligations, duties and liabilities of the “Purchaser” under the Contract (as amended and novated hereby) and to perform the obligations of the “Purchaser” under the Novated Contract;

 

  (d) the Builder consents to and accepts the assumption by the New Purchaser of the rights, obligations, duties and liabilities of the “Purchaser” under the Contract (as amended and novated hereby) and the New Purchaser’s agreement to perform the obligations of the “Purchaser” under the Novated Contract; and

 

  (e) the Builder acknowledges that its obligations, duties and liabilities under the Novated Contract are owed to the New Purchaser, and agrees with the New Purchaser to perform the obligations of the “Builder” under the Novated Contract.

 

3.2 The Builder agrees that it shall not exercise any claims in respect of any losses, liabilities or claims against the New Purchaser which arose or are attributable to the period prior to the date of this Deed and for the avoidance of doubt this shall not preclude the Builder being able to rely on any defences, limitations and exclusions which it would have had if the New Purchaser had been the “Purchaser” under the Contract.

 

3.3 The definition of Vessel in the Contract shall be amended to include the Purchased Equipment, and the Purchased Equipment shall be treated as if it were Materials under the Contract purchased by the Builder from a supplier on the Maker’s list, save that:

 

  (a) The Makers in relation to the Purchased Equipment shall refer to the Hercules Parties and the original suppliers; and

 

  (b) The title and intellectual property licences of the Purchased Equipment shall be transferred to the New Purchaser to the extent the Builder has received them from the Hercules Parties and/or the original suppliers,

and title and rights to the Purchased Equipment which is not Equipment with Transferred Obligations shall be transferred by way of an agreed form bill of sale in favour of the New Purchaser.

 

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3.4 Without limitation, clauses 16.9 and 16.11 of the Contract shall apply to the Purchased Equipment.

 

3.5 It is acknowledged and agreed that the Builder will pay the amounts due and payable to the suppliers of the Equipment with Transferred Obligations for purchase of the Equipment with Transferred Obligations, as they fall due up to the amount of USD$6,723,695. The Builder will transfer title to the Equipment with Transferred Obligations by delivering such Equipment with Transferred Obligations to the New Purchaser or as it may direct, along with a bill of sale upon transfer of title of that item of Equipment with Transferred Obligations to the Builder from the relevant supplier, which shall be as soon as practicable after the date of this Deed and in any event by the date reasonably required by the New Purchaser, having regard to the date of delivery by the original supplier.

 

3.6 The Builder agrees that it will obtain all export controls necessary or desirable for the movement of the Vessel, the Purchased Equipment and/or the Equipment with Transferred Obligations out of Singapore and, to the extent delivery is required into the United Kingdom, use reasonable endeavours to obtain export/import controls of which it is notified by the New Purchaser for the movement of the Equipment with Transferred Obligations into UK waters.

 

3.7 Upon reasonable request of the New Purchaser, the Builder agrees to use reasonable endeavours to work together with the New Purchaser to obtain from the Hercules Parties and/or the original suppliers such rights, title, and interest in and to the Purchased Equipment as it can obtain.

 

3.8 New Purchaser’s licence of its rights under clause 19.3 of the Contract and sub-license of any rights from suppliers and vendors referred to in clause 19.2 of the Contract (which shall include, for the avoidance of doubt, the Purchased Equipment and the Equipment with Transferred Obligations) shall include the right to sub-license such rights and disclose any related Confidential Information pursuant to clause 29.3 of the Contract to any person which is an affiliate of the New Purchaser for the time being (whether on or after the date of this Deed), a customer of the New Purchaser or any of such affiliates, or any subsequent owner of the Vessel, the Purchased Equipment and/or the Equipment with Transferred Obligations and their affiliates or customers.

 

3.9 The New Purchaser agrees that within five (5) days after the date of this Deed, it will agree to take a novation of the Service Contracts.

 

4 Final Instalment and Payments

 

4.1 The New Purchaser shall have received each of the Completion Deliverables prior to, or simultaneously with, payment of the Final Instalment. To the extent that the New Purchaser has not received a Completion Deliverable and it proceeds to make payment of the Final Instalment, unless otherwise agreed in writing, such Completion Deliverable shall have been waived by the New Purchaser.

 

4.2 The Builder hereby acknowledges and agrees that notwithstanding anything to the contrary in the Contract, the Novated Contract or otherwise, upon receipt of USD$195,988,025 from the New Purchaser, it will treat such amount as the Final Instalment for all purposes of the Contract and the Builder will immediately proceed with Delivery of the Vessel and the Purchased Equipment in favour of the New Purchaser pursuant to the Novated Contract.

 

4.3 Upon Delivery, the Builder will invoice New Purchaser for fifty per cent (50%) of the Equipment with Transferred Obligations in the amount of USD$500,000 and the New Purchaser shall pay such amount due in accordance with the provisions of the Novated Contract.

 

4.4 On the date that the delivery and transfer of title to one hundred per cent (100%) of the Equipment with Transferred Obligations has been made to the New Purchaser, the Builder will invoice New Purchaser for fifty per cent (50%) of the Equipment with Transferred Obligations in the amount of USD$500,000 and the New Purchaser shall pay such amount due in accordance with the provisions of the Novated Contract.

 

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4.5 The Builder and the New Purchaser agree that upon Delivery and acceptance of the Vessel, the New Purchaser shall have the right to keep the Vessel, Purchased Equipment and/or Equipment with Transferred Obligations at the Builder’s Shipyard at no additional cost to the New Purchaser for a period of up to five (5) weeks after Delivery of the Vessel, and the Builder will provide all necessary assistance and access, together with all necessary resources for the running of the Vessel (including, without limitation, water, waste handling and power), to the New Purchaser, its Related Parties and subcontractors in order to keep the Vessel by the quayside during such period.

 

5 Release

 

5.1 By this Deed, each of the Builder and the New Purchaser for themselves, their affiliates and representatives, and their successors and assigns, hereby releases and forever discharges the Hercules Parties from any and all actions, claims, liens, encumbrances, rights, demands and set-offs, whether in this jurisdiction or any other, whether or not presently known to the Builder, the New Purchaser or to the law, and whether in law or equity, that the Builder, its parent, subsidiaries, assigns, transferees, representatives, principals, agents, officers and directors (together, the Related Parties), the New Purchaser and its Related Parties or any of them ever had, may have or hereafter can, shall or may have against the Hercules Parties arising out of or in connection with the Contract, the Purchased Equipment, the Equipment with Transferred Obligations, the Vessel and/or the Direct Agreement (the Released Claims). Notwithstanding the foregoing release, the Original Purchaser, HOI and HBOL agree to continue to comply with the provisions of clause 12 after the date hereof.

 

5.2 Without prejudice to any and all rights of the Hercules Parties under the bill of sale by and between HBOL and HOI as assignors, and the Builder as assignee (the Bill of Sale), by this Deed, each of the Hercules Parties hereby releases and forever discharges the Builder and the New Purchaser from any and all actions, claims, liens, encumbrances, rights, demands and set-offs, whether in this jurisdiction or any other, whether or not presently known to the Hercules Parties or to the law, and whether in law or equity, that the Hercules Parties or any of them ever had, may have or hereafter can, shall or may have against the Builder and the New Purchaser or its Related Parties arising out of or in connection with the Contract, the Purchased Equipment, the Equipment with Transferred Obligations, the Vessel and/or the Direct Agreement.

 

5.3 Without prejudice to any and all rights and obligations of the New Purchaser or the Hercules Parties under this Deed, the Bill of Sale or the Novation Agreements included in the Completion Deliverables, each of the Original Purchaser, HOI, HBOL and its Related Parties hereby confirms that it will release and forever discharge, all and/or any actions, claims, liens, encumbrances, rights, demands and set-offs, whether in this jurisdiction or any other, whether or not presently known to it or to the law, and whether in law or equity, that it or any of them ever had, may have or hereafter can, shall or may have against the Vessel, the Purchased Equipment and/or the Equipment with Transferred Obligations.

 

5.4 Each of HOI and the Original Purchaser hereby release each other in full from the rights and obligations under the Construction Management Agreement and the Construction Management Agreement is hereby terminated.

 

5.5 The New Purchaser agrees to indemnify, defend and hold harmless the Hercules Parties from and against any and all losses, claims, demands, damages, liability, charges, judgments, settlements or expenses (including but not limited to reasonable attorney’s fees and costs), involving a third party claim (that is to say a party other than any of the Hercules Parties or a First Lien Lender) against a Hercules Party, arising solely as a result of any act or omission of any party (other than a Hercules Party) after the date of this Deed (Effective Date) arising out of or related to the Contract, the Novated Contract, the Bill of Sale, the Novation Agreements, the Vessel, the Purchased Equipment and/or the Equipment with Transferred Obligations (a Post Effective Date Indemnified Claim). 

 

5.6

The New Purchaser agrees to indemnify, defend and hold harmless the Hercules Parties from and against any and all losses, claims, demands, damages, liability, charges, judgments,

 

6


  settlements or expenses (including but not limited to reasonable attorney’s fees and costs), related to a third party equipment supplier payment claim (that is to say a party other than any of the Hercules Parties relating to the supply of equipment for or in respect of the Vessel before the Effective Date) (a Supplier Indemnified Claim).

 

5.7 The indemnities for any Post Effective Date Indemnified Claim and any Supplier Indemnified Claim (together Indemnities) shall apply whether or not the Hercules Parties was or is claimed to be passively, concurrently or actively negligent, and regardless of whether liability without fault is imposed or sought to be imposed on the Hercules Parties. The Hercules Parties shall give prompt notice to New Purchaser of any claim under either of the Indemnities, and New Purchaser shall have the right to conduct, manage and direct the defence and resolution of any such claim, at its sole cost and expense. The Hercules Parties shall be required to take such action and give such as assistance as the New Purchaser may reasonably require in respect of the defence and resolution of any claim (and may not agree any settlement or compromise of a claim without New Purchaser’s written consent) but if the New Purchaser fails to undertake the defence of any Hercules Parties as provided herein within thirty (30) Days following any written notice from such Hercules Party asserting such failure, then the Hercules Parties shall have the right to defend, at the sole cost and expense of the New Purchaser, against any such claims.

 

5.8 The Builder agrees to indemnify, defend and hold harmless the New Purchaser from and against any and all losses, claims, demands, damages, liability, charges, judgments, settlements or expenses (including but not limited to reasonable attorney’s fees and costs), related to a third party equipment supplier payment claim (that is to say a party other than any of the Hercules Parties relating to the supply of equipment for or in respect of the Vessel before the Effective Date) (a Builder Indemnified Claim).

 

5.9 The Builder’s aggregate liability for any Builder Indemnified Claim shall be limited to the maximum sum of USD$6,723,695 in aggregate which maximum amount shall be reduced by any amounts that the Builder actually pays to suppliers of Purchased Equipment and/or Equipment with Transferred Obligations, after the Effective Date and any payment made in accordance with clause 12.1 of this Deed (the Indemnification Cap). The indemnity for any Builder Indemnified Claim (Indemnity) shall apply whether or not the Hercules Parties or the New Purchaser was or is claimed to be passively, concurrently or actively negligent, and regardless of whether liability without fault is imposed or sought to be imposed on the Hercules Parties or the New Purchaser. The New Purchaser shall give prompt notice to the Builder of any claim under the Indemnity, and the Builder shall have the right to conduct, manage and direct the defence and resolution of any such claim, at its sole cost and expense. The New Purchaser shall be required to take such action and give such as assistance as the Builder may reasonably require in respect of the defence and resolution of any claim (and may not agree any settlement or compromise of a claim without the Builder’s written consent) but if the Builder fails to undertake the defence of the New Purchaser as provided herein within thirty (30) Days following any written notice from such the New Purchaser asserting such failure, then the New Purchaser shall have the right to defend, at the sole cost and expense of the Builder, against any such claims.

 

5.10 If at any time, the Indemnification Cap has been reached and/or exceeded, the Builder and the New Purchaser shall co-operate with each other to obtain novations of such of those documents as the Builder may select relating to the Purchased Equipment with Transferred Obligations from the Builder to the New Purchaser. In any event, once such Indemnification Cap has been reached, should a supplier refuse such a foregoing novation, the New Purchaser shall make any payments owed to such supplier on behalf of the Builder, as if the novation had been accepted.

 

5.11 Notwithstanding the foregoing releases and indemnities, each of the Parties agree to continue to comply with the provisions of clause 12 after the date hereof.

 

6 Agreement not to sue

 

6.1 Each of the Builder and the New Purchaser agrees, on behalf of itself and on behalf of its Related Parties not to sue, commence, voluntarily aid in any way, prosecute or cause to be commenced or prosecuted against the Hercules Parties any action, suit or other proceeding concerning the Released Claims, in this jurisdiction or any other.

 

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6.2 Each of the Hercules Parties agrees, on behalf of itself and on behalf of its Related Parties not to sue, commence, voluntarily aid in any way, prosecute or cause to be commenced or prosecuted against the Builder or the New Purchaser any action, suit or other proceeding concerning the Released Claims, in this jurisdiction or any other.

 

6.3 Notwithstanding the foregoing agreements in this clause, each of the Parties agree to continue to comply with the provisions of clause 12 after the date hereof.

 

7 Assignment

 

7.1 Subject to the releases and covenants in clauses 5 and 6, the New Purchaser may assign the benefit of this Deed to an affiliate and for that purpose, such affiliate shall be an Authorised Person pursuant to clause 29 of the Contract.

 

7.2 No other party may assign or transfer the benefit of this Deed to another person without the prior written consent of the other Parties.

 

8 Governing Law and Jurisdiction

 

8.1 This Deed and any dispute or claim (including non-contractual disputes or claims) arising out of or in connection with it or its subject matter or formation shall be governed by and construed in accordance with the law of England and Wales.

 

8.2 Clause 28 of the Contract shall be incorporated in this Deed as if set out in full herein, mutatis mutandis, provided however, that references to “Parties” in clause 28.2 thereof shall only include the Builder and the New Purchaser.

 

9 Entire Agreement

 

     This Deed, the Bill of Sale and the Novation Agreements constitutes the entire understanding and agreement between the Parties in relation to the subject matter of this Deed.

 

10 Counterparts

 

     This Deed may be executed in any number of counterparts, each of which when executed and delivered shall constitute a duplicate original, but all the counterparts shall together constitute the one Deed.

 

11 Confidentiality

 

     Clause 29 of the Contract shall be incorporated in this Deed, as if set out in full herein, mutatis mutandis, provided however that the First Lien Lenders and their professional advisers shall be Authorised Persons for the purposes of disclosing this Deed and the documents relating hereto.

 

12 Further Assurance

 

12.1

Each Party shall (at its own cost but without incurring cost to the Hercules Parties) promptly do all such acts or execute all such documents (including assignments, transfers, notices and instructions) as any other Party may reasonably specify to give effect to, facilitate, complete, enable, create, maintain and/or perfect the transactions contemplated hereby and/or referred to herein or for the exercise of any rights, powers and remedies of the Parties or by law and/or to confer on the Parties to the fullest extent the rights intended to be conferred by this Deed, and in respect of the Hercules Parties only (at the cost of the Builder but limited by and only up to an amount of the Indemnification Cap, after which it shall be at the cost of the New Purchaser), to transfer whatever right, title or interest (including in respect of warranties and intellectual

 

8


  property rights) it may have in the Purchased Equipment or Equipment with Transferred Obligations, or equipment, spare gear, spare parts, consumable or other stores, belongings and appurtenances purchased exclusively for the Vessel, in each case, to the Builder, which the Builder then transfers to the New Purchaser.

 

12.2 The Hercules Parties shall (without incurring cost to the Hercules Parties) make available any and all Operational Handover Documents to the New Purchaser as reasonably required or reasonably requested after the date of this Deed, for up to ninety (90) days after the Effective Date.

 

13 Notices

 

     Clause 26 of the Contract shall be incorporated in this Deed as if set out in full herein, mutatis mutandis, with the New Purchaser’s notice details being:

 

  Address:      Maersk House, Braham Street, London E1 8EP and with effect from Friday 27th May to 13th Floor, Aldgate Tower, 2 Leman Street, London E1 8FA
  Phone:      02077125007
  Email:      [email protected]

 

14 Miscellaneous

 

14.1 No waiver by any Party of any breach of any provision of this Deed shall be deemed to be a waiver of any preceding or succeeding breach of the same or any other provision of this Deed.

 

14.2 In the case that any one or more of the provisions contained in this Deed should be held to be invalid, illegal or unenforceable in any respect under any law, the validity, legality and enforceability of the remaining provisions in this Deed shall not in any way be affected or limited.

 

14.3 All modifications of and changes to this Deed are only valid if executed in writing and signed by the Parties, provided however that to the extent that such modifications or changes do not relate to HOI, HBOL and/or Original Purchaser’s rights under this Deed, the consent of the Builder and the New Purchaser only are required.

This document has been executed as a Deed and is delivered and takes effect on the date stated at the beginning of it.

 

9


Executed as a deed by      
JURONG SHIPYARD PTE LTD acting by: William Gu Weiguang      
In the presence of: /s/ Patrick Tan Lyemoch       /s/ William Gu Weiguang
Name of Witness: Patrick Tan Lyemoch       General Manager

Address: 2423 Pasir Panjang Road #05-13 117490 Singapore, SG

     
Executed as a deed by      
HERCULES NORTH SEA, LTD acting by: Claus E. Feyling      
In the presence of: /s/ Thrine Seglem      

/s/ Claus E. Feyling

Name of Witness: Thrine Seglem       Director
Address: Ludvig Feyling SGT 18, 4370 Egersund, Norway      
Executed as a deed by      
HERCULES OFFSHORE INC. acting by: Troy Carson      
In the presence of: /s/ Charles Lestage      

/s/ Troy Carson

Name of Witness: Charles Lestage       Senior Vice President & CFO
Address: 9 Gray Plaza, Houston, TX 77046      

 

10


Executed as a deed by      

HERCULES BRITISH OFFSHORE LIMITED acting by: Claus E. Feyling

     

In the presence of: /s/ Thrine Seglem

      /s/ Claus E. Feyling
Name of Witness: Thrine Seglem       Director

Address: Ludvig Feyling SGT 18, 4370 Egersund, Norway

     
Executed as a deed by      
MAERSK HIGHLANDER UK LIMITED acting by: Morton Nordund-Poulson      
In the presence of: /s/ Jan Holm      

/s/ Morton Nordund-Poulson

Name of Witness: Jan Holm       Director

Address: 70 Lean Way 0525 098370 Singapore, SG

     

 

11

Exhibit 2.2

 

CONFIDENTIAL    Execution version

Dated 26 May 2016

 

 

HERCULES BRITISH OFFSHORE LIMITED

as Existing Contractor

MAERSK OIL NORTH SEA UK LIMITED

as Operator

and

MAERSK HIGHLANDER UK LIMITED

as New Contractor

Novation and amendment agreement in

respect of CONTRACT NO 173756 for the

provision of a harsh environment jack-up drilling unit for Culzean


Contents

 

Clause    Page  
1    Definitions and Interpretation      1   
2    Effective Time      3   
3    Direct Agreement      3   
4    Novation and Release of Obligations      3   
5    Indemnity      4   
6    Confidentiality      4   
7    Drilling Contract Amendments      4   
8    Confirmations      5   
9    Notices      5   
10    Miscellaneous      7   
Schedule 1 Novated Drilling Contract Amendments      8   
Schedule 2 Drilling Contract      9   


THIS NOVATION AND AMENDMENT AGREEMENT (this Agreement) is dated 26 May 2016 and made BY and AMONG:

 

(1)    Existing Contractor:    Hercules British Offshore Limited, a company incorporated under the laws of England and Wales
(company number 09033092), whose registered office is at Ince & Co LLP, Aldgate Tower, 2 Leman
Street, London, E1 8QN
(2)    Operator:    Maersk Oil North Sea UK Limited, a company incorporated under the laws of England and Wales (company number 03682299), whose registered office is at Maersk House, Braham Street, London, E1 8EP
(3)    New Contractor:    Maersk Highlander UK Limited., a company incorporated under the laws of laws of England and Wales (company registration number 10195411) whose registered office is at Maersk House, Braham Street, London E1 8EP

RECITALS:

 

(A) The Existing Contractor and the Operator entered into that certain drilling services agreement (Contract No. 173756) dated 19 May 2014 (as amended by all amendments and change orders thereto to date, the Drilling Contract), as further described in Schedule 2 and as further amended from time to time, whereby the Existing Contractor agreed to provide drilling services to the Operator with the Friede & Goldman design JU2000E heavy duty jack-up rig known as “Hercules Highlander” with IMO number 9745249 (the Drilling Unit) which is currently being fabricated by Jurong Shipyard Pte Ltd. (Jurong) for Hercules North Sea, Limited (HNSL);

 

(B) HNSL, the Existing Contractor, the New Contractor and Jurong (among others) entered into that certain tripartite agreement to be dated on or about the date of this Agreement (the Tripartite Agreement), whereby the New Contractor has agreed to purchase the Drilling Unit from Jurong and Jurong has agreed to release HNSL from its obligation to purchase the Drilling Unit; and

 

(C) the Parties have agreed that (i) the New Contractor will assume all rights, interests, and claims (collectively, the Drilling Rights) together with all liabilities, obligations, and duties (collectively, the Drilling Obligations) of the Existing Contractor arising out of or related to the Drilling Contract, (ii) the Operator will terminate and release Hercules International Holdings, Ltd. from the Parent Guarantee (as defined below), and (iii) the Operator will release the Existing Contractor, its affiliates, and its or their employees, agents or representatives (collectively, the Hercules Parties), from any and all claims, obligations, duties or liabilities arising out of or related to the Drilling Contract, the Parent Guarantee and the Direct Agreement (as defined below) (collectively, the Hercules Obligations).

NOW IT IS HEREBY AGREED AS FOLLOWS:

 

1 Definitions and Interpretation

 

1.1 Capitalised words and expressions used but not defined in this Agreement shall have the meanings they are given in the Drilling Contract.

 

1.2 In this Agreement, unless the context otherwise requires:

Business Day means any day (other than a Saturday or Sunday) on which banks are open for business in London and New York;

New Contractor Group means the New Contractor and each undertaking which is for the time being a Related Undertaking of the New Contractor;

 

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Novated Drilling Contract means the Drilling Contract as the same has been amended, supplemented and novated pursuant to the terms of this Agreement;

Parties means the Existing Contractor, the Operator and the New Contractor and “Party” means any of them (as the context requires); and

Related Undertaking means, in respect of a person, any other person that is:

 

  (a) a parent undertaking or subsidiary undertaking of that person; or

 

  (a) a subsidiary undertaking of a parent undertaking of that person,

(and for these purposes “subsidiary undertaking” and “parent undertaking” shall have the meanings given to them in the Companies Act 2006).

 

1.3 Notwithstanding the provisions of Clause 1.5(b), references herein to the “Drilling Contract” shall (unless otherwise specified in this Agreement) be deemed not to include the amendment, supplement and novation thereof constituted by this Agreement.

 

1.4 Clause headings are inserted for convenience of reference only, have no legal effect and shall be ignored in the interpretation of this Agreement.

 

1.5 In this Agreement, unless a contrary indication appears:

 

  (a) references to Clauses and the Schedules are to be construed as references to the Clauses of, and the Schedules to, this Agreement and references to this Agreement include the Schedules;

 

  (b) subject as provided in Clause 1.3, references to (or to any specified provision of) this Agreement or any other document shall include this Agreement, that document or the relevant provision as it may from time to time be amended but so that the above is without prejudice to any requirement in this Agreement or any other document that the prior consent of any party be obtained;

 

  (c) a reference to an “amendment” includes a supplement, novation, restatement or re-enactment and “amended” will be construed accordingly;

 

  (d) words importing the plural shall include the singular and vice versa, and words importing a gender include every gender;

 

  (e) references to a person shall be construed as including references to an individual, firm, company, corporation, unincorporated association or body of persons and any government entity, whether or not having separate legal personality and references to any Party shall be construed so as to include the successors, permitted assignees and permitted transferees of the relevant person;

 

  (f) references to any provision of law is a reference to such provision as applied, amended, extended or re-enacted and includes any subordinate legislation;

 

  (g) a reference to an “approval” shall be construed as a reference to any approval, consent, authorisation, exemption, permit, licence, registration, filing or enrolment by or with any competent authority; and

 

  (h) a reference to “including” shall be construed as a reference to “including without limitation”, so that any list of items or matters appearing after the word “including” shall be deemed not to be an exhaustive list, but shall be deemed rather to be a representative list, of those items or matters forming a part of the category described prior to the word “including”.

 

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1.6 Clause 26.5 of the Section II of the Drilling Contract is incorporated herein as if set out in full herein, as if all references to “Contract” were a reference to this Agreement.

 

2 Effective Time

 

2.1 The novation and release contemplated by this Agreement shall be effective as of the date hereof (the Effective Time) when signed by the Parties.

 

3 Direct Agreement

 

3.1 The Operator hereby agrees and covenants that it will not (i) serve a Step-In Notice (as such term is defined in that certain direct agreement by and among the Operator, HNSL and Jurong, dated 22 May 2015 (the Direct Agreement), (ii) exercise its option to step into HNSL’s place, as provided under that certain construction contract by and between HNSL and Jurong dated 19 May 2014 (the Construction Contract), or (iii) assert any actions, claims, liens, encumbrances, rights, demands and set-offs it may have or have had against HNSL arising out of or related to the Construction Contract and/or the Direct Agreement.

 

4 Novation and Release of Obligations

Novation

 

4.1 As of and with immediate effect from the Effective Time:

 

  (a) the Existing Contractor releases the Operator from the Operator’s Drilling Obligations under the Drilling Contract, and the Operator agrees that it has no further Drilling Rights against the Existing Contractor arising out of or relating to the Drilling Contract;

 

  (b) the Operator releases the Existing Contractor from any and all of the Existing Contractor’s Drilling Obligations arising out of or relating to the Drilling Contract;

 

  (c) the Existing Contractor agrees that it has no further Drilling Rights against the Operator under the Drilling Contract and shall cease to be a party to the Drilling Contract;

 

  (d) the New Contractor agrees to assume the Drilling Rights and Drilling Obligations of the “Contractor” under the Drilling Contract (as amended and novated hereby) and to perform the Drilling Obligations of the “Contractor” under the Novated Drilling Contract;

 

  (e) the Operator consents to and accepts the assumption by the New Contractor of the Drilling Rights and the Drilling Obligations of the “Contractor” under the Drilling Contract (as amended and novated hereby), and the New Contractor’s agreement to perform the Drilling Obligations of the “Contractor” under the Novated Drilling Contract;

 

  (f) the Operator acknowledges that its obligations, duties and liabilities under the Novated Drilling Contract are owed to the New Contractor, and agrees with the New Contractor to perform the obligations of the “Company” under the Novated Drilling Contract; and

 

  (g) all references to the Existing Contractor in the Drilling Contract shall be read and construed as references to the New Contractor.

Release of Obligations

 

4.2 As of and with immediate effect from the Effective Time:

 

  (a)

Each of the Operator and the New Contractor, on behalf of themselves, their successors, their affiliates and representatives and their successors and assigns (i) releases, acquits, waives and forever discharges the Hercules Parties from any and all actions, liabilities, claims, liens, encumbrances, rights, demands and set-offs arising out of, or in connection with, the Hercules Obligations, whether in this jurisdiction or any other, and from all (if

 

3


  any) liability to the Operator (whether in contract, tort, equity or otherwise), including without limitation claims arising in tort or under contract, arising from, or in connection with any act or omission of the Hercules Parties in the discharge or purported discharge of all or any of the Existing Contractor’s obligations to the Operator under the Drilling Contract or the Direct Agreement, whether arising before, on or after the Effective Time and in each case whether presently known or unknown to the Operator or the New Contractor or the law, and (ii) agrees and acknowledges that it has no further rights against the Hercules Parties under the Drilling Contract, the Parent Guarantee or the Direct Agreement; and

 

  (b) each of the Operator and New Contractor shall have the right to enforce the Drilling Contract and pursue any claims or demands under the Drilling Contract against the other with respect to matters arising before, or after the date hereof as though the New Contractor were the original party to the Drilling Contract instead of the Existing Contractor; and

 

  (c) the Operator irrevocably (i) terminates that certain parent guarantee dated 19 May 2014 granted by Hercules International Holdings, Ltd. (HIHL) in favour of the Operator (the Parent Guarantee), (ii) forever releases acquits, waives and forever discharges HIHL and its Related Parties from any and all its obligation, duties and liabilities of whatever nature arising out of or related to the Parent Guarantee, and (iii) agrees that it has no further rights or claims against HIHL arising out of or related to the Drilling Contract, the Direct Agreement or the Parent Guarantee.

 

4.3 Each of the New Contractor and the Operator agrees, on behalf of itself and on behalf of its parents, subsidiaries, assigns, transferees, representatives, principals, agents, officers and directors, not to sue, commence, voluntarily aid in any way, prosecute or cause to be commenced or prosecuted against the Hercules Parties or HIHL any action, suit or other proceeding concerning the Hercules Obligations, in this jurisdiction or any other.

 

4.4 Notwithstanding the foregoing releases, the Existing Contractor agrees to continue to comply with the provisions of clause 10.6 after the Effective Time.

 

5 Indemnity

 

5.1 The New Contractor shall indemnify, defend and hold harmless the Existing Contractor from any and all claims, demands, liabilities, costs, expenses, damages and losses (including but not limited to any direct, indirect, or consequential losses, loss of profit, loss of reputation and all interest, penalties and legal costs) that the Existing Contractor suffers or incurs arising out of or in connection whatsoever with the Drilling Rights or the Drilling Obligations in respect of the period after the Effective Time, or any breach, act or omission by the New Contractor in the discharge or purported discharge of all or any of the New Contractor’s obligations to the Operator under the Drilling Contract in respect of the period after the Effective Time.

 

6 Confidentiality

Notwithstanding the provisions contained in Clause 4, the Existing Contractor shall be bound by this Clause 6, which shall take effect as an agreement separate and independent from the Drilling Contract, to observe and perform such duties of confidentiality and non-disclosure owed to such persons as would have been applicable to it under the Drilling Contract had it continued to be a party to such document.

 

7 Drilling Contract Amendments

 

7.1 Save as constituted by this Agreement, various change orders, Amendment No. 1 dated 29 October 2014 and the Direct Agreement, there have been no amendments to the Drilling Contract and the Drilling Contract and the Direct Agreement represents all of the documents to which the Operator and the Existing Contractor are a party and which have been entered into prior to the Effective Time relating to the Drilling Unit and the Work.

 

4


7.2 With immediate effect from the Effective Time the Drilling Contract shall be and is amended as set out in Schedule 1 and as so amended shall constitute the Novated Drilling Contract.

 

7.3 With immediate effect from the Effective Time, all references to the Drilling Contract contained in any documents delivered under or pursuant to the Drilling Contract shall be construed as references to the Novated Drilling Contract.

 

8 Confirmations

 

8.1 With effect from the date hereof and immediately prior to the Effective Time, the Operator and the New Contractor acknowledges and agrees that pursuant to the change orders listed in Schedule 2, the amounts due and owing from the Operator to the Existing Contractor are, in aggregate, $6,233,390. Notwithstanding anything to the contrary in the Drilling Contract, as of and with effect from the Effective Time, the Operator shall pay (promptly upon receipt of an invoice) the New Contractor $6,233,390 in satisfaction of such obligations under and pursuant to the Novated Drilling Contract.

 

8.2 So far as the Operator is aware, the Existing Contractor has complied in full with all of its obligations owed to the Operator under the terms of the Drilling Contract.

 

8.3 The Operator has not exercised any option to extend the Term of the Drilling Contract. The Operator has not terminated the Drilling Contract.

 

8.4 So far as the Operator is aware, no right to terminate the Drilling Contract in accordance with Clause 22.1 therein has occurred which is continuing.

 

8.5 The mobilisation fee referred to in Clause 1.6 of Appendix III of the Drilling Contract has not yet been invoiced or paid.

 

8.6 The Operator confirms that it has performed all inspections as it requires prior to the Drilling Unit’s delivery to the New Contractor and forming part of the Shipyard Inspection and Commissioning Procedures (as defined in the Project Supervision Agreement and referenced in Clause 4.9 of the Drilling Contract) and, without prejudice to any action item, corrective item or punch list that may be outstanding and arising otherwise than in relation to these Operator inspections, including in relation to the PVIAT, no Action Items arising out of these same Operator inspections have been identified.

 

9 Notices

Communications in writing

 

9.1 Any communication to be made under or in connection with this Agreement shall be made in writing and, unless otherwise stated, may be made by fax or letter.

Addresses

 

9.2 The address or fax number (and the department or officer, if any, for whose attention the communication is to be made) of each Party for any communication or document to be made or delivered under or in connection with this Agreement is that identified with the name of the relevant Party below or any substitute address, fax number or department or officer as the relevant Party may notify to the other by not less than five Business Days’ notice.

 

  (a) the Existing Contractor at:

 

Address:    Claus Feyling, c/o Ince & Co. LLP, Aldgate Tower, 2 Leman Street, London E1 8QN
Phone:    +1-7130349-3115

 

5


Email:    [email protected]
Copy to:    Hercules Offshore, Inc.
   9 Greenway Plaza, Suite 2200
   Houston, TX 77046
   Attn: Beau M. Thompson
   Fax: +1-713-350-5109
   Email: [email protected]

 

  (a) the New Contractor at:

 

Address:    Maersk House, Braham Street, London E1 8EP and with effect from Friday 27th May to 13th Floor, Aldgate Tower, 2
Leman Street, London E1 8FA
Phone:    02077125007
Email:    [email protected]

 

  (b) the Operator at:

 

Address:    Maersk House, Crawpeel Road, Altens, Aberdeen AB12 3LG
Attention:    Legal Director
Fax:    +44 (0) 1224 242116

Delivery

 

9.3 Any communication or document made or delivered by one person to another under or in connection with this Agreement will only be effective:

 

  (a) if by way of fax, when received in legible form; or

 

  (b) if by way of letter, when it has been left at the relevant address or five Business Days after being deposited in the post postage prepaid in an envelope addressed to it at that address;

and, if a particular department or officer is specified as part of its address details provided under Clause 9.2 (Addresses), if addressed to that department or officer.

Notification of address or fax number

 

9.4 Each Party shall notify the other promptly of changing its own address or fax number.

Electronic communication

 

9.5 Any communication to be made between the Parties under or in connection with the Drilling Contract and/or this Agreement may be made by electronic mail or other electronic means, if the Parties:

 

  (a) agree that, unless and until notified to the contrary, this is to be an accepted form of communication;

 

  (b) notify each other in writing of their electronic mail address and/or any other information required to enable the sending and receipt of information by that means; and

 

  (c) notify each other of any change to their address or any other such information supplied by them.

 

6


9.6 Any electronic communication made between the Parties will be effective only when actually received in readable form.

 

10 Miscellaneous

Governing law

 

10.1 This Agreement and any non-contractual obligations connected with it are governed by English law.

Jurisdiction

 

10.2 The courts of England have exclusive jurisdiction to settle any dispute arising out of, or in connection with, this Agreement or any non-contractual obligations connected with it (including a dispute regarding the existence, validity or termination of the Agreement) (a Dispute).

 

10.3 The Parties agree that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly no Party will dispute to the contrary.

 

10.4 Without prejudice to Clause 26.5 of the Drilling Contract (as incorporated herein pursuant to Clause 1.6) and save for HNSL, no term of this Agreement is enforceable under the Contracts (Rights of Third Parties) Act 1999 by a person who is not a party to it.

 

10.5 If any provision of this Agreement shall be found by any court or administrative body of competent jurisdiction to be invalid or unenforceable, the invalidity or unenforceability shall not affect the remaining provisions of this Agreement and all provisions not affected by such invalidity or unenforceability shall remain in full force and effect. The Parties agree to attempt to substitute, for any invalid or unenforceable provision, a valid or enforceable provision which achieves to the greatest possible extent, the economic, legal and commercial objectives of the invalid or unenforceable provision.

Further Assurances

 

10.6 Each Party to this Agreement shall, at its own cost, but without incurring cost to the Hercules parties, promptly do all such acts or execute all such documents (including assignments, transfers, notices and instructions) as any other Party may reasonably specify to give effect to, facilitate, complete, enable, create, maintain and/or perfect the transactions contemplated hereby and/or referred to herein or for the exercise of any rights, powers and remedies of the Parties or by law and/or to confer on the Parties to the fullest extent the rights intended to be conferred by this Agreement.

Counterparts

 

10.7 This Agreement may be executed in any number of counterparts as necessary but all such counterparts shall together constitute one legal instrument.

Amendments

 

10.8 No amendments to this Agreement shall be effective unless evidenced in writing and signed by the Parties to the Agreement.

THIS AGREEMENT has been executed as a deed and it has been delivered and takes effect on the date stated at the beginning of this Agreement.

 

7


EXECUTION PAGE

 

Executed as a deed by

       )      

HERCULES BRITISH OFFSHORE LIMITED

     )      

acting by:

 

Claus E. Feyling

     )      

/s/ Claus E. Feyling

        Director

in the presence of:

 

/s/ Thrine Seglem

     
       

Name of witness:

 

Thrine Seglem

     

Address:

 

Ludvig Feyling SGT 18, 4370

     
 

Egersund, Norway

     
Executed as a deed by        )      
MAERSK HIGHLANDER UK LIMITED      )      

acting by:

 

John Kilby

     )      

/s/ John Kilby

        Director

in the presence of:

 

/s/ Michael Youseman

     
       

Name of witness:

 

Michael Youseman

     

Address:

 

c/o The Maersk Company Ltd.

     
 

Maersk House, London E1 8EP

     
Executed as a deed by        
MAERSK OIL NORTH SEA UK LIMITED      
acting by:   Glenn Corr      

/s/ Glenn Corr

        Director

in the presence of:

 

/s/ Scott Smith

     
       

Name of witness:

 

Scott John Smith

     

Address:

 

c/o Maersk House

     
 

Crawpeel Road

Alten S Aberdeen

     

 

8

Exhibit 2.3

 

CONFIDENTIAL    Execution Version

Dated 26 May 2016

 

 

HERCULES BRITISH OFFSHORE LIMITED

as Existing Charterers

DOCKWISE SHIPPING B.V.

as Owner

and

MAERSK HIGHLANDER UK LIMITED

as New Charterers

Novation and amendment agreement in

respect of a HEAVYCON 2007 - Standard

Heavylift Charter Party relating to the

transport of m.v. Maersk Highlander


Contents

 

Clause         Page  
1    Definitions and Interpretation      1   
2    Effective Time      3   
3    Novation and Release of Obligations      3   
4    Indemnity      4   
5    Confidentiality      4   
6    Charter Amendments      4   
7    Confirmations      4   
8    Notices      4   
9    Miscellaneous      6   
Schedule 1 Novated Charter Amendments      8   
Schedule 2 Charter      9   


THIS NOVATION AND AMENDMENT AGREEMENT (this Agreement) is dated 26 May 2016 and made BY and AMONG:

 

(1)    Existing Charterers:

   Hercules British Offshore Limited, a company incorporated under the laws of England and Wales (company number 09033092), whose registered office is at Ince & Co LLP, Aldgate Tower, 2 Leman Street, London, E1 8QN

(2)    Owner:

   Dockwise Shipping B.V., a company incorporated under the laws of the Netherlands (company number 20100832), whose registered office is at Rosmolenweg 20, 3356 LK Papenddrecht, The Netherlands (previously of Lage Mosten 21, 4822 NJ Breda, The Netherlands)

(3)    New Charterers:

   Maersk Highlander UK Limited., a company incorporated under the laws of laws of England and Wales (company registration number 10195411) whose registered office is at Maersk House, Braham Street, London E1 8EP

RECITALS:

 

(A) The Existing Charterers and the Owner entered into that certain Standard Heavylift Charter Party (Heavycon 2007) on 12 February 2015 (as amended from time to time, the Charter) as more particularly described in Schedule 2, whereby the Owner agreed to transport the Friede & Goldman design JU2000E heavy duty jack-up rig known as “Hercules Highlander” with IMO number 9745249 (the Cargo) currently under construction to be delivered to Hercules North Sea, Limited (HNSL), together with some third party equipment, on the M.V. “Treasure” from Singapore to the United Kingdom, as more particularly set out in Schedule 2 (the Heavylift Services);

 

(B) Jurong Shipyard Pte Ltd. (Jurong), HNSL, the Existing Charterers and the New Charterers (among others) entered into that certain tripartite agreement to be dated on or about the date of this Agreement (the Tripartite Agreement), whereby the New Charterers has agreed to purchase the Cargo from Jurong and Jurong has agreed to release HNSL from its obligation to purchase the Cargo; and

 

(C) the Parties have agreed that (i) the New Charterers shall assume all rights, interests, and claims (collectively, the Charter Rights) together with all liabilities, obligations, and duties (collectively, the Charter Obligations) of the Existing Charterers, both Charter Rights and Charter Obligations arising out of or related to the Charter, and (ii) the Owner will release the Existing Charterers, its Affiliates, and its and their employees, agents or representatives (collectively, the Hercules Parties), from any and all claims, obligations, duties or liabilities arising out of or related to the Charter (collectively, the Hercules Obligations).

NOW IT IS HEREBY AGREED AS FOLLOWS:

 

1 Definitions and Interpretation

 

1.1 Capitalised words and expressions used but not defined in this Agreement shall have the meanings they are given in the Charter (including definitions incorporated in the Charter by reference to another document).

 

1.2 In this Agreement, unless the context otherwise requires:

Affiliate means any company or entity under common control with, controlling or controlled by a Party;

 

1


Business Day means any day (other than a Saturday or Sunday) on which banks are open for business in London and New York;

New Charterers Group means the New Charterers, their Affiliates and their contractors, sub-Contractors of any tier, co-venturers and customers (having a contractual relationship with the New Charterers, always with respect to the job or project on which the Vessel is employed), and employees of any of the foregoing;

Novated Charter means the Charter as the same has been amended, supplemented and novated pursuant to the terms of this Agreement; and

Parties means the Existing Charterers, the Owner and the New Charterers and “Party” means any of them (as the context requires).

 

1.3 Notwithstanding the provisions of clause 1.5(b), references herein to the “Charter” shall (unless otherwise specified in this Agreement) be deemed not to include the amendment, supplement and novation thereof constituted by this Agreement.

 

1.4 Clause headings are inserted for convenience of reference only, have no legal effect and shall be ignored in the interpretation of this Agreement.

 

1.5 In this Agreement, unless a contrary indication appears:

 

  (a) references to clauses and the Schedules are to be construed as references to the clauses of, and the Schedules to, this Agreement and references to this Agreement include the Schedules;

 

  (b) subject as provided in clause 1.3, references to (or to any specified provision of) this Agreement or any other document shall include this Agreement, that document or the relevant provision as it may from time to time be amended but so that the above is without prejudice to any requirement in this Agreement or any other document that the prior consent of any party be obtained;

 

  (c) a reference to an “amendment” includes a supplement, novation, restatement or re-enactment and “amended” will be construed accordingly;

 

  (d) words importing the plural shall include the singular and vice versa, and words importing a gender include every gender;

 

  (e) references to a person shall be construed as including references to an individual, firm, company, corporation, unincorporated association or body of persons and any government entity, whether or not having separate legal personality and references to any Party shall be construed so as to include the successors, permitted assignees and permitted transferees of the relevant person;

 

  (f) references to any provision of law is a reference to such provision as applied, amended, extended or re-enacted and includes any subordinate legislation;

 

  (g) a reference to an “approval” shall be construed as a reference to any approval, consent, authorisation, exemption, permit, licence, registration, filing or enrolment by or with any competent authority; and

 

  (h) a reference to “including” shall be construed as a reference to “including without limitation”, so that any list of items or matters appearing after the word “including” shall be deemed not to be an exhaustive list, but shall be deemed rather to be a representative list, of those items or matters forming a part of the category described prior to the word “including”.

 

2


2 Effective Time

 

2.1 The novation and release contemplated by this Agreement shall be effective as of the date hereof (the Effective Time) when signed by the Parties.

 

3 Novation and Release of Obligations

Novation

 

3.1 As of and with immediate effect from the Effective Time:

 

  (a) the Existing Charterers releases the Owner from the Owner’s Charter Obligations under the Charter, and the Owner agrees that it has no further rights or claims against the Existing Charterers arising out of or related to the Charter;

 

  (b) the Owner releases the Existing Charterers from the Existing Charterers’ Charter Obligations arising out of or relating to the Charter;

 

  (c) the Existing Charterers agrees that it has no further Charter Rights against the Owner under the Charter and shall cease to be a party to the Charter;

 

  (d) the New Charterers agrees to assume the Charter Rights and Charter Obligations of the “Charterer” under the Charter (as amended and novated hereby) and to perform the Charter Obligations of the “Charterer” under the Novated Charter;

 

  (e) the Owner consents to and accepts the assumption by the New Charterers of the Charter Rights and the Charter Obligations of the “Charterer” under the Charter (as amended and novated hereby), and the New Charterers’s agreement to perform the Charter Obligations of the “Charterer” under the Charter;

 

  (a) the Owner acknowledges that its obligations, duties and liabilities under the Novated Charter are owed to the New Charterers, and agrees with the New Charterers to perform the obligations of the “Owners” under the Novated Charter; and

 

  (b) all references to the Existing Charterers in the Charter shall be read and construed as references to the New Charterers.

Release of Obligations

 

3.2 As of and with immediate effect from the Effective Time:

 

  (a) Each of the Owner and the New Charterer on behalf of themselves, their affiliates and representatives, and their successors and assigns (i) releases, acquits, waives and forever discharges the Hercules Parties from any and all actions, liabilities, claims, liens, encumbrances, rights, demands and set-offs arising out of, or in connection with, the Hercules Obligations, whether in this jurisdiction or any other, and from all (if any) liability to the Owner or the New Charterers (whether in contract, tort, equity or otherwise), including without limitation claims arising in tort or under contract, arising from, or in connection with any act or omission of the Hercules Parties in the discharge or purported discharge of all or any of the Existing Charterers’ obligations to the Owner under the Charter, whether arising before, on or after the Effective Time and in each case whether presently known or unknown to the Owner, the New Charterers or the law, and (ii) agrees and acknowledges that it has no further rights against the Hercules Parties under the Charter; and

 

  (b) Each of the Owner and the New Charterers shall have the right to enforce the Charter, and pursue any claims or demands under the Charter against the other with respect to matters arising before, or after the date hereof as though the New Charterers were the original party to the Charter instead of the Existing Charterers.

 

3


3.3 Each of the Owner and the New Charterers agrees, on behalf of itself and on behalf of its parents, subsidiaries, assigns, transferees, representatives, principals, agents, officers and directors, not to sue, commence, voluntarily aid in any way, prosecute or cause to be commenced or prosecuted against the Hercules Parties any action, suit or other proceeding concerning the Hercules Obligations, in this jurisdiction or any other.

 

3.4 Notwithstanding the foregoing releases, the Existing Charterer agrees to comply with the provisions of clause 9.6 after the date of this Deed.

 

4 Indemnity

 

4.1 The New Charterers shall indemnify, defend and hold harmless the Hercules Parties from and against any and all claims, demands, liabilities, costs, expenses, damages, judgments, settlements, injury, charges or losses (including but not limited to any direct, indirect, or consequential losses, loss of profit, loss of reputation and all interest, penalties and legal costs) whether or not involving third party claims, that the Existing Charterers suffers or incurs arising out of or in connection whatsoever with the Charter Rights or the Charter Obligations in respect of the period after the Effective Time, or any breach, act or omission by the New Charterers in the discharge or purported discharge of all or any of the New Charterers’ obligations to the Owner under the Charter in respect of the period after the Effective Time.

 

5 Confidentiality

Notwithstanding the provisions contained in clause 4, the Existing Charterers shall be bound by this clause 5, which shall take effect as an agreement separate and independent from the Charter, to observe and perform such duties of confidentiality and non-disclosure owed to such persons as would have been applicable to it under the Charter had it continued to be a party to such document.

 

6 Charter Amendments

 

6.1 Save as constituted by this Agreement, there have been no amendments to the Charter and the Charter represents all of the documents to which the Owner and the Existing Charterers are party and which have been entered into prior to the date of this Agreement relating to the Heavylift Services.

 

6.2 With immediate effect from the Effective Time, the Charter shall be and is amended as set out in Schedule 1 and as so amended shall constitute the Novated Charter.

 

6.3 With immediate effect from the Effective Time, all references to the Charter contained in any documents delivered under or pursuant to the Charter shall be construed as references to the Novated Charter.

 

7 Confirmations

 

7.1 No right to terminate the Charter in accordance with clause 21 therein has occurred, which means that the Charter is continuing.

 

8 Notices

Communications in writing

 

8.1 Any communication to be made under or in connection with this Agreement shall be made in writing and, unless otherwise stated, may be made by fax or letter.

Addresses

 

8.2

The address or fax number (and the department or officer, if any, for whose attention the communication is to be made) of each Party for any communication or document to be made or

 

4


  delivered under or in connection with this Agreement is that identified with the name of the relevant Party below or any substitute address, fax number or department or officer as the relevant Party may notify to the other by not less than five Business Days’ notice.

 

  (a) the Existing Charterers at:

 

Address:      Claus Feyling, c/o Ince & Co. LLP, Aldgate Tower, 2 Leman Street, London E1 8QN
Phone:      +1-7130349-3115
Email:      [email protected]
Copy to:      Hercules Offshore, Inc.
     9 Greenway Plaza, Suite 2200
     Houston, TX 77046
     Attn: Beau M. Thompson
     Fax: +1-713-350-5109
     Email: [email protected]

 

  (b) the New Charterers at:

 

Address:    Maersk House, Braham Street, London E1 8EP and with effect from Friday 27th May to 13th Floor, Aldgate Tower, 2 Leman Street, London E1 8FA
Phone:    02077125007
Email:    [email protected]

 

  (c) the Owner at:

 

Address:    Boskalis Offshore Legal Department
   Rosmolenweg 20, 3356 LK, Papendrecht
   The Netherlands

Delivery

 

8.3 Any communication or document made or delivered by one person to another under or in connection with this Agreement will only be effective:

 

  (a) if by way of fax, when received in legible form; or

 

  (b) if by way of letter, when it has been left at the relevant address or five Business Days after being deposited in the post postage prepaid in an envelope addressed to it at that address;

and, if a particular department or officer is specified as part of its address details provided under clause 8.2 (Addresses), if addressed to that department or officer.

 

5


Notification of address or fax number

 

8.4 Each Party shall notify the other promptly of changing its own address or fax number.

Electronic communication

 

8.5 Any communication to be made between the Parties under or in connection with the Charter and/or this Agreement may be made by electronic mail or other electronic means, if the Parties:

 

  (a) agree that, unless and until notified to the contrary, this is to be an accepted form of communication;

 

  (b) notify each other in writing of their electronic mail address and/or any other information required to enable the sending and receipt of information by that means; and

 

  (c) notify each other of any change to their address or any other such information supplied by them.

 

8.6 Any electronic communication made between the Parties will be effective only when actually received in readable form.

 

9 Miscellaneous

Governing law

 

9.1 This Agreement and any non-contractual obligations connected with it are governed by English law.

Jurisdiction

 

9.2 The courts of England have exclusive jurisdiction to settle any dispute arising out of, or in connection with, this Agreement or any non-contractual obligations connected with it (including a dispute regarding the existence, validity or termination of the Agreement) (a Dispute).

 

9.3 The Parties agree that the High Court of Justice of London are the most appropriate and convenient courts to settle Disputes and accordingly no Party will dispute to the contrary.

 

9.4 Save in respect of HNSL, no term of this Agreement is enforceable under the Contracts (Rights of Third Parties) Act 1999 by a person who is not a party to it.

 

9.5 If any provision of this Agreement shall be found by any court or administrative body of competent jurisdiction to be invalid or unenforceable, the invalidity or unenforceability shall not affect the remaining provisions of this Agreement and all provisions not affected by such invalidity or unenforceability shall remain in full force and effect. The Parties agree to attempt to substitute, for any invalid or unenforceable provision, a valid or enforceable provision which achieves to the greatest possible extent, the economic, legal and commercial objectives of the invalid or unenforceable provision.

Further Assurances

 

9.6 Each Party to this Agreement shall, at its own cost, but without incurring cost to the Hercules Parties, promptly do all such acts or execute all such documents (including assignments, transfers, notices and instructions) as any other Party may reasonably specify to give effect to, facilitate, complete, enable, create, maintain and/or perfect the transactions contemplated hereby and/or referred to herein or for the exercise of any rights, powers and remedies of the Parties or by law and/or to confer on the Parties to the fullest extent the rights intended to be conferred by this Agreement.

 

6


Counterparts

 

9.7 This Agreement may be executed in any number of counterparts as necessary but all such counterparts shall together constitute one legal instrument.

Amendments

 

9.8 No amendments to this deed shall be effective unless evidenced in writing and signed by the Parties to the Agreement.

THIS AGREEMENT has been executed as a deed and it has been delivered an takes effect on the date stated at the beginning of this Deed.

 

7


EXECUTION PAGE

 

Executed as a deed by   )   
HERCULES BRITISH OFFSHORE LIMITED   )   
acting by:    Claus E. Feyling   )   

/s/ Claus E. Feyling

        Director
in the presence of:   

/s/ Thrine Seglem

    
Name of witness:    Thrine Seglem     
Address:    Ludvig Feyling SGT 18, 4370     
   Egersund, Norway     
Executed as a deed by   )   
MAERSK HIGHLANDER UK LIMITED   )   
acting by:    John Kilby   )   

/s/ John Kilby

        Director
in the presence of:   

/s/ Michael Youseman

    
Name of witness:    Michael Youseman     
Address:    c/o The Maersk Company Ltd.     
   Maersk House, London E1 8EP     
Executed as a deed by     
DOCKWISE SHIPPING B.V.     
acting by:    H.J. van Raadhorst     

/s/ H.J. van Raadhorst

        Director
in the presence of:   

/s/ T.C. Kreunen

    
Name of witness:    T.C. Kreunen     
Address:    Rosmolen wey 20     
   3356 LK Papendrecht     
   The Netherelands     

 

8

Exhibit 2.4

Execution Version

BILL OF SALE AND ASSIGNMENT

THIS BILL OF SALE AND ASSIGNMENT (this Bill of Sale) is dated May 26, 2016 (the Execution Date), from Hercules Offshore Inc., a Delaware corporation, whose registered office is at 1675 S. State Street STE B, Dover, DE 99001, United States of America (HOI) and Hercules British Offshore Limited, a company organised under the laws of England and Wales and having its registered office at International House, 1 St. Katherine’s Way, London E1W 1AY, United Kingdom (HBOL) to Jurong Shipyard Pte Ltd., a company registered in Singapore, whose registered office is at 29 Tanjong Kling Road, Singapore 628054 (the Buyer). Hereinafter, where the context dictates, depending on the contract counterparty to the relevant Rig Equipment contract, HOI or HBOL are sometimes referred to individually herein as Seller. Hereinafter, Seller and Buyer may each be referred to as “Party” and together as “Parties”.

WHEREAS, Buyer and Hercules North Sea, Ltd. (HNSL) entered into that certain Construction Contract dated 19 May 2014 (the Construction Contract), whereby Buyer agreed to build, sell and deliver the Friede & Goldman Design JU2000E heavy duty jack-up rig bearing hull number 11-1118 and IMO 9745249 (the Drilling Unit);

WHEREAS, HOI and HNSL entered into that certain Construction Management Agreement dated 11 August 2014 (the Management Agreement), whereby the HOI agreed to provide certain management services related to the construction of the Drilling Unit, and Seller, during its performance thereunder;

WHEREAS, HOI and HNSL each (i) procured and purchased certain equipment and services relating to, connected with, or purchased for future operations associated with the Drilling Unit, all of which is identified and described in more detail in Schedule 1 attached hereto (the Purchased Equipment); and (ii) a portion of the Purchase Equipment that has not been fully paid for or has other outstanding obligations on the part of HOI or HNSL, which are identified and described in more detail in Schedules 2-A, 2-B and 2-C attached hereto (collectively, the Transferred Obligations, and together with Purchased Equipment, the Rig Equipment);

WHEREAS, Maersk Highlander UK Limited (Maersk), Buyer and Seller (among others) entered into that certain tripartite agreement to be dated on or about the date of this Bill of Sale

 

1


(the Tripartite Agreement), whereby Maersk has agreed to purchase the Drilling Unit from Buyer and Buyer has agreed to release HNSL from its obligation to purchase the Drilling Unit; and

WHEREAS, Seller desires to sell, transfer and assign to Buyer, and Buyer desires to receive, purchase, and acquire from Seller, the rights, title, interests and claims to the Rig Equipment as provided below.

NOW, THEREFORE, for good and valuable consideration paid by Buyer, the receipt and sufficiency of which are hereby acknowledged by Seller, Seller does hereby bargain, sell, transfer and assign to Buyer, one hundred percent (100%) of all its rights, title, interests and claims in and to the Rig Equipment, TO HAVE AND TO HOLD the Rig Equipment unto Buyer, its successors and assigns, subject to the following:

1. The Seller hereby transfers and assigns absolutely all of its right, title and interest (whether contractual, proprietary or of any other kind and including the right to sue for damages) under or in connection with (a) the Purchased Equipment specified in Schedule 1 and (b) the Transferred Obligations specified in Schedule 2.

2. The Buyer hereby accepts the Rig Equipment and agrees and acknowledges liability in respect of the Rig Equipment passes to Buyer on the Execution Date. Buyer is liable for unpaid purchase amounts for the Rig Equipment.

3. Other than the Transferred Obligations, Seller believes that it has good legal and beneficial title to the Purchased Equipment and it intends to transfer same to Buyer hereunder. Notwithstanding the foregoing, the Rig Equipment is transferred “AS IS,” “WHERE IS,” and “WITH ALL FAULTS,” and Seller gives no warranty as to condition of or title to same. All other warranties or conditions (whether express or implied) as to quality, condition, description, compliance with sample or fitness for purpose (whether statutory or otherwise) other than those expressly set out in this agreement are excluded from this agreement to the fullest extent permitted by law.

 

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4. The Seller agrees to give written notice of the assignment specified herein to each person which sold or transferred Rig Equipment to it, substantially in the form attached hereto as Schedule 3.

5. Each Party shall (but without incurring cost to Seller) promptly do all such acts or execute all such documents (including assignments, transfers, notices and instructions) as any other Party may reasonably specify to give effect to, facilitate, complete, enable, create, maintain and/or perfect the transactions contemplated hereby and/or referred to herein or for the exercise of any rights, powers and remedies of the Parties or by law and/or to confer on the Parties to the fullest extent the rights intended to be conferred by this Bill of Sale, and in respect of the Seller, to transfer whatever right, title or interest it may have in the Rig Equipment to Buyer. Seller’s sole liability for any failure to transfer title to or rights in the Rig Equipment shall be to comply with this clause 5.

6. The courts of England have exclusive jurisdiction to settle any dispute arising out of, or in connection with, this Bill of Sale or any non-contractual obligations connected with it (including a dispute regarding the existence, validity or termination of the Bill of Sale) (a Dispute). This Bill of Sale, and any Dispute arising out of or related hereto, shall be governed by English law.

7. The Parties agree that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly no Party will dispute to the contrary.

8. No term of this Bill of Sale is enforceable under the Contracts (Rights of Third Parties) Act 1999 by a person who is not a party to it.

9. If any provision of this Bill of Sale shall be found by any court or administrative body of competent jurisdiction to be invalid or unenforceable, the invalidity or unenforceability shall not affect the other provisions of this Bill of Sale and all provisions not affected by such invalidity or unenforceability shall remain in full force and effect. The Parties shall substitute, for any invalid or unenforceable provision, a valid or enforceable provision which achieves to the greatest possible extent, the economic, legal and commercial objectives of the invalid or unenforceable provision.

 

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10. This Bill of Sale may be executed in any number of counterparts, each of which shall be deemed valid and binding with respect to the signatories thereto, and all of which together shall constitute one and the same bill of sale.

(signatures in following page)

 

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IN WITNESS WHEREOF, the Parties have duly executed and delivered this Bill of Sale and Assignment on May     , 2016.

 

SELLER:
  HERCULES BRITISH OFFSHORE LIMITED
  By:   /s/ Claus E. Feyling
  Name: Claus E. Feyling
  Title: Director
  HERCULES OFFSHORE, INC.
  By:   /s/ Troy Carson
  Name: Troy Carson
  Title: Senior Vice President & CFO

 

Bill of Sale – Signature Page (Seller)


IN WITNESS WHEREOF, the Parties have duly executed and delivered this Bill of Sale and Assignment on May     , 2016.

 

BUYER:

 

JURONG SHIPYARD PTE LTD.

 

By:

 

/s/ William Lu Weiguang

 

Name: William Lu Weiguang

 

Title: General Manager

 

Bill of Sale – Signature Page (Buyer)

Exhibit 10.1

EXECUTION VERSION

AMENDED AND RESTATED FORBEARANCE AGREEMENT

This Amended and Restated Forbearance Agreement (this “Agreement”) is entered into as of May 26, 2016, by and among Hercules Offshore, Inc., a Delaware corporation (the “Borrower”), the Subsidiary Guarantors, Jefferies Finance LLC, as administrative agent (in such capacity, the “Administrative Agent”) and collateral agent (in such capacity, the “Collateral Agent”) and the Lenders signatory hereto. Any capitalized terms not specifically defined herein will have the meaning ascribed to them in the Credit Agreement.

RECITALS

A. WHEREAS, the Borrower, the Administrative Agent, the Collateral Agent, the Subsidiary Guarantors, and the Lenders party thereto entered into that certain Credit Agreement, dated as of November 6, 2015 (as may be amended, restated, modified or supplemented prior to the date hereof, the “Credit Agreement”);

B. WHEREAS, the Borrower, the Subsidiary Guarantors, certain Lenders, the Administrative Agent and the Collateral Agent are parties to that certain Forbearance Agreement and First Amendment to Credit Agreement, dated as of April 18, 2016, as amended by that certain Amendment No. 1 to Forbearance Agreement and First Amendment, dated as of April 28, 2016 (the “Existing Forbearance Agreement”);

C. WHEREAS, certain Lenders have asserted (but have not given notice under the Credit Agreement or any other Loan Document to the Borrower) that (i) an Event of Default has occurred based on the Borrower’s failure to be in compliance with the affirmative covenant set forth in Section 5.15 of the Credit Agreement with respect to causing Hercules Offshore Nigeria Limited to deliver the certificate of registration of the vessel mortgage at the NIMASA by April 15, 2016 (the “Specified Post-Closing Collateral Default”) and (ii) a Default has occurred based on the Borrower’s failure to be in compliance with the affirmative covenant set forth in Section 5.18 of the Credit Agreement with respect to using best efforts to cause the Gibraltar Guarantor to dissolve, merge or consolidate with or into another Loan Party within 120 days after the Closing Date (or such later date as the Administrative Agent shall agree in its sole discretion) (the “Specified Gibraltar Default”);

D. WHEREAS, (i) the Borrower, Hercules British Offshore Limited (“HBOL”) and Hercules North Sea, Ltd. (“HNS”) agreed with Jurong Shipyard Pte. Ltd. (“Jurong”) and Maersk Highlander UK Limited (“Maersk Highlander”) that Jurong will perform the obligations under the Highlander Construction Contract in favor of Maersk Highlander and Maersk Highlander is entitled to exercise any right, benefit and/or interest in, to, under or in connection with, the Highlander Construction Contract as if it were the “Purchaser” under the Highlander Construction Contract, to the exclusion of HNS, pursuant to that certain Deed, dated as the date hereof, between the Borrower, HBOL, HNS, Jurong and Maersk Highlander attached hereto as Exhibit C-1 (including, without limitation, all schedules and exhibits attached thereto, the “Tripartite Agreement”) (ii) HBOL agreed to assign and novate the Highlander Drilling Contract to Maersk Highlander pursuant to that certain Novation and amendment agreement in respect of a Drilling Contract relating to m.v. Hercules Highlander, dated as of the date hereof, between HBOL, Maersk Oil North Sea UK Limited and Maersk Highlander attached hereto as Exhibit C-2 (the “Highlander Drilling Contract Novation”), (iii) HBOL agreed to assign and novate that certain Standard Heavylift Charter Party (Heavycon 2007), dated as of February 12, 2015, by and among Dockwise Shipping B.V. and HBOL, as charterer to Maersk Highlander pursuant to that certain Novation and amendment agreement in respect of a Standard Heavylift Charter Party relating to the transport of m.v. Hercules Highlander, dated as the date hereof, between HBOL, Dockwise Shipping B.V.


and Maersk Highlander attached hereto as Exhibit C-3 (the “Heavy Lift Contract Novation”), (iv) the Borrower and HBOL agreed to sell or transfer (x) certain equipment, spares and consumables to be included on the Hercules Highlander prior to the commencement of the drilling operations pursuant to the Highlander Drilling Contract, which was procured by HBOL and other Affiliates prior to the date of this Release and (y) service agreements and training contracts related to the Hercules Highlander to Jurong pursuant to that certain Bill of Sale and Assignment, dated as of the date hereof, between the Borrower, HBOL and Jurong attached hereto as Exhibit C-4 (the “Bill of Sale” and, together with the Tripartite Agreement, Highlander Drilling Contract Novation and Heavy Lift Contract Novation, the “Transaction Documents”), (v) HNS and the Borrower shall terminate that certain Construction Management Agreement, dated as of August 11, 2014, between HNS and the Borrower (the “Construction Management Agreement Termination”), (vi) HNS shall terminate that certain Direct Agreement relating to the Construction Contract, dated as of May 19, 2014, by and among Hercules North Sea, Ltd., Maersk Oil North Sea UK Limited and Jurong Shipyard Pte Ltd. in respect of a Friede & Goldman Design JU2000E Jack Up Drilling Rig with Maersk Oil North Sea UK Limited on May 22, 2015 (the “Direct Agreement Termination”), and (vii) Hercules International Holdings, Ltd. (“HIHL”) shall terminate that certain parent guarantee, dated as of May 19, 2014, granted by HIHL in favor of Maersk Oil North Sea UK Limited (the “Parent Guarantee Termination” and, together with the Construction Management Agreement Termination and the Direct Agreement Termination, the “Terminations”);

E. WHEREAS, as of the date hereof, Events of Default have occurred under Sections 8.01(d), (e), (m), (n) and (o) of the Credit Agreement arising from the consummation of the transactions contemplated by the Transaction Documents and the Terminations (the “Transaction Events of Default”);

F. WHEREAS, as a result of the Transaction Events of Default, the Lenders party hereto, which constitute the Required Lenders, hereby direct the Administrative Agent to declare the Loans outstanding to be forthwith due and payable, in whole or in part, whereupon the principal of the Loans so declared due and payable, together with accrued interest thereon, unpaid accrued fees, the Applicable Premium, and all other Obligations of the Borrower accrued under the Credit Agreement and any other Loan Document shall forthwith become due and payable without presentment, demand, protest or any other notice of any kind pursuant to Section 8.01 of the Credit Agreement (the “Acceleration of Loans”);

G. WHEREAS, at the direction of the Required Lenders, the Administrative Agent hereby declares the Loans outstanding to be due and payable, in whole, including, without limitation the principal of the Loans, together with accrued interest thereon, unpaid accrued fees, the Applicable Premium, and all other Obligations of the Borrower accrued under the Credit Agreement and any other Loan Document;

H. WHEREAS, as a result of the Transaction Events of Default, the Lenders party hereto which constitute the Required Lenders, hereby direct the Administrative Agent to deliver a written instruction to the Escrow Agent to distribute all the funds in the Escrow Account to the Administrative Agent to prepay the Loans pursuant to Section III(d) of the Escrow Agreement and Section 2.10(a)(i) of the Credit Agreement;

I. WHEREAS, the Borrower, certain other Loan Parties party thereto and certain Lenders party thereto entered into that certain Restructuring Support Agreement, dated as of the date hereof (as amended, restated, modified or supplemented from time to time the “Restructuring Support Agreement”);

J. WHEREAS, pursuant to the Restructuring Support Agreement, the Borrower and certain of its Subsidiaries, other than the Non-Debtor Loan Parties (as hereinafter defined) (the “Debtor Loan Parties”) will file voluntary petitions for relief under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Delaware (the “Chapter 11 Cases”);

 

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K. WHEREAS, as of the date hereof, the Events of Default listed on Exhibit A hereto may have occurred, have occurred, are expected to occur or may occur prior to the expiration of the Forbearance Period (as hereinafter defined) (collectively, the “Specified Defaults”);

L. WHEREAS, subject to the terms and conditions set forth herein and without any waiver of the Specified Defaults, the Lenders party hereto, which Lenders constitute the Required Lenders, have agreed to (i) forbear from exercising certain of their default-related rights and remedies against the Loan Parties with respect to the Specified Defaults (other than (w) the giving of written notice of the Specified Gibraltar Default pursuant to Sections 8.01(e) and 10.01 of the Credit Agreement, (x) the acceleration of the Loans pursuant to Section 8.01 of the Credit Agreement, (y) the delivery of a written direction instructing the Administrative Agent to deliver a written instruction to the Escrow Agent to distribute all the funds in the Escrow Account to the Administrative Agent to prepay the Loans pursuant to Section III(d) of the Escrow Agreement and Section 2.10(a)(i) of the Credit Agreement during the Forbearance Period (as defined hereinafter) and (z) the delivery by the Administrative Agent of a written instruction to the Escrow Agent to distribute all of the funds in the Escrow Account to the Administrative Agent to prepay the Loans pursuant to Section III(d) of the Escrow Agreement and Section 2.10(a)(i) of the Credit Agreement, (ii) consent to the release of all Liens on and security interests in any and all assets and property under the Loan Documents subject to the transactions contemplated by the Transaction Documents and the Terminations and (iii) upon the request of the Borrower after the Forbearance Effective Date, consent to the release of the Non-Debtor Loan Parties from their Guarantee and release the Liens on and security interest in any and all assets and property of the Non-Debtor Loan Parties upon the effective date of the Plan (as defined in the Restructuring Support Agreement) (the “Specified Consent”);

M. WHEREAS, the Required Lenders are willing, on the terms and subject to the conditions set forth below, and without any waiver of the Specified Defaults, to agree to the forbearance and the other agreements provided for herein and consent to the release of all Liens on and security interests in any and all assets and property under the Loan Documents subject to the transactions contemplated by the Transaction Documents and the Terminations; and

N. WHEREAS, each Lender under the Credit Agreement that executes and delivers this Agreement will, by the fact of such execution and delivery, be deemed to have agreed to the forbearance and the other agreements provided for herein and consent to the release of all Liens on and security interests in any and all assets and property under the Loan Documents subject to the transactions contemplated by the Transaction Documents and the Terminations provided for herein, on the terms set forth herein and subject to the conditions set forth in this Agreement without any waiver of the Specified Defaults.

NOW, THEREFORE, in consideration of the parties’ mutual promises in this Agreement, and for other good and valuable consideration, the sufficiency of which is hereby acknowledged, Maersk Highlander (solely with respect to and for the purposes of receiving the releases set forth in Section 16) and the other parties hereto agree that the Existing Forbearance Agreement is hereby amended and restated in its entirety as follows:

 

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AGREEMENT

1. Definitions. As used herein, the following terms shall have the respective meanings set forth below:

Claims” shall mean claims, actions, causes of action, suits, debts, accounts, interests, liens, promises, warranties, damages and consequential damages, demands, agreements, bonds, bills, specialties, covenants, controversies, variances, trespasses, judgments, executions, costs, expenses or any other claims whatsoever (including, without limitation, crossclaims, counterclaims, rights of set-off and recoupment).

Forbearance Default” shall mean (i) the occurrence of any Event of Default other than the Specified Defaults; (ii) the failure of any Loan Party to comply timely with any term, condition, or covenant set forth in this Agreement; (iii) the failure of any representation or warranty made by any Loan Party under or in connection with this Agreement to be true and complete as of the date when made; (iv) the failure of the Administrative Agent to receive a voluntary prepayment of the Loans within 3 Business Days after the delivery of the written instruction by the Administrative Agent to the Escrow Agent to distribute all of the funds in the Escrow Account to the Administrative Agent to prepay the Loans pursuant to Section III(d) of the Escrow Agreement in an amount equal to $200,000,000 due on such prepaid Loans and all accrued and unpaid interest due on such prepaid Loans; (v) the termination of the Restructuring Support Agreement; or (vi) there is a change, modification, supplement or amendment to the Restructuring Support Agreement or any version of the Plan in connection with the Chapter 11 Cases (including, without limitation, any change to the expense reimbursement obligations or general releases contemplated by the Restructuring Support Agreement as in effect on the date hereof) that is (A) materially adverse to the benefits and rights of the Administrative Agent and the Collateral Agent (it being understood and agreed that any change, modification or supplement to the scope of the expense reimbursement obligations or general releases in favor of the Administrative Agent and Collateral Agent contemplated by the Restructuring Support Agreement that is adverse in any respect to the Administrative Agent or the Collateral Agent shall be deemed to be materially adverse to the benefits and rights of the Administrative Agent and Collateral Agent) and (B) treats the Administrative Agent and the Collateral Agent materially inconsistent with the treatment of the Lenders, without the written consent of the Administrative Agent and the Collateral Agent.

Forbearance Effective Date” shall mean the date on which all of the conditions precedent set forth in Section 6 hereof (each of which (other than Section 7(a) and Section 7(b); provided, that the payment condition set forth in Section 7(b) may be extended by the Administrative Agent in its sole discretion) may be waived by the Required Lenders in their sole discretion) have been met to the satisfaction of the Required Lenders.

Forbearance Period” shall mean (a) prior to the commencement of the Chapter 11 Cases, the period beginning on the Forbearance Effective Date and ending on the earlier to occur of, unless otherwise mutually agreed in writing by the Borrower and the Required Lenders (with written notice to the Administrative Agent and the Collateral Agent and, solely in the case of clause (vi) in the definition of Forbearance Default, with the written consent of the Administrative Agent and the Collateral Agent): (i) the termination of the Forbearance Period as a result of any Forbearance Default and (ii) 11:59 p.m. (New York City time) on June 6, 2016 and (b) on or after the commencement of the Chapter 11 Cases, (x) with respect to the Debtor Loan Parties, the period beginning on the Forbearance Effective Date and ending on the earlier to occur of, unless otherwise mutually agreed in writing by the Borrower and the Required Lenders (with written notice to the Administrative Agent and the Collateral Agent and, solely in the case of clause (vi) in the definition of Forbearance Default, with the written consent of the Administrative Agent and the Collateral Agent): (i) the termination of the Forbearance Period as a result of any Forbearance Default and (ii) the date that is one Business Day after the Petition Date with respect to each Debtor Loan Party and (y) with respect to the Non-Debtor Loan Parties, the period beginning on the Forbearance Effective Date and ending on the earlier to occur of, unless otherwise mutually agreed in writing by the Borrower and the Required Lenders (with written notice to the Administrative Agent and the Collateral Agent): (i) the Plan Effective Date, (ii) the termination of the Restructuring Support Agreement and (iii) the termination of the Forbearance Period with respect to the Debtor Loan Parties under the foregoing clause (b)(x)(i) as a result of any Forbearance Default.

 

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Lender Parties” shall mean (a) the Lenders, (b) the Administrative Agent, (c) the Collateral Agent, and (d) the successors and assigns of each of the foregoing.

Lender Party Releasors” shall mean each Lender Party, on behalf of itself and on behalf of its agents, representatives, officers, directors, advisors, employees, subsidiaries, affiliates, successors and assigns.

Non-Debtor Loan Parties” shall mean the Loan Parties that will not file voluntary petitions for relief under the chapter 11 of the Bankruptcy Code pursuant to the Restructuring Support Agreement listed in Exhibit B hereto.

Petition Date” shall mean the date on which the Chapter 11 Cases are commenced.

Plan Effective Date” shall mean the effective date of the Plan.

Releasees” shall mean each of the Lender Parties in its capacity as a Lender, Administrative Agent or Collateral Agent and their respective affiliates, subsidiaries, shareholders and “controlling persons” (within the meaning of the federal securities laws), and their respective successors and assigns and each and all of the officers, directors, employees, agents, attorneys and other representatives of each of the foregoing in their capacities as such.

Releasors” shall mean each Loan Party, on behalf of itself and on behalf of its agents, representatives, officers, directors, advisors, employees, subsidiaries, affiliates, successors and assigns.

2. Acknowledgment. The Borrower hereby acknowledges and agrees that: (a) the certificate of registration of the vessel mortgage at the NIMASA was not delivered by April 15, 2016; (b) the Gibraltar Guarantor was not dissolved, merged or consolidated with or into another Loan Party as of the date which is 120 days after the Closing Date, (c) each Lender Party may or may not have certain default-related rights, powers and remedies under the Credit Agreement, any other Loan Document or applicable law with respect to the Specified Defaults (including, without limitation, the Specified Post-Closing Default and Specified Gibraltar Default), which shall not be impaired in any way and shall be fully preserved after the Forbearance Period by the Lender Parties as such default-related rights, powers and remedies under the Credit Agreement, any other Loan Document or applicable law, if any, (x) with respect to the Specified Post-Closing Collateral Default, existed as of April 16, 2016, notwithstanding the Borrower causing Hercules Offshore Nigeria Limited to deliver subsequent to April 15, 2016 the certificate of registration of the vessel mortgage at the NIMASA and (y) with respect to the Specified Gibraltar Default, existed as of the date which is 120 days after the Closing Date, subject to the Borrower causing the Gibraltar Guarantor to dissolve, merge or consolidate with or into another Loan Party within the cure period set forth in Section 8.01(e) of the Credit Agreement; (d) during the Forbearance Period it shall not be able to (i) deliver the Officer’s Certificate pursuant to Section III(a) of the Escrow Agreement to the Administrative Agent certifying the completion of the “Escrow Conditions” (as defined in the Escrow Agreement) or (ii) receive any funds on deposit in the Escrow Account; (e) the Transaction Events of Default have occurred and are continuing; (f) Events of Default will immediately occur upon the commencement of the Chapter 11 Cases; (g) upon the Acceleration of Loans, the Lenders are entitled to the Applicable Premium on the Called Principal pursuant to Section 2.10(a)(ii) of the Credit Agreement and (h) the Lenders are entitled to the Applicable Premium on any voluntary prepayment of the Loans with funds from the Escrow Account pursuant to Section III(d) of the Escrow Agreement as required by Section 2.10(a)(ii) of the Credit Agreement. No Lender Party has waived or presently intends to waive

 

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the Specified Defaults, and nothing contained herein or the transactions contemplated hereby shall be deemed to constitute any such waiver. The Loan Parties reserve all of their rights, powers and remedies under the Credit Agreement, the other Loan Documents and applicable law.

3. Forbearance; Forbearance Default Rights and Remedies.

(a) Effective on the Forbearance Effective Date, each Lender Party agrees, without any waiver of the Specified Defaults, that until the expiration or termination of the Forbearance Period, it will forbear from exercising the rights and remedies available to it (if any) under Article VIII of the Credit Agreement (other than (w) the giving of written notice of the Specified Gibraltar Default pursuant to Sections 8.01(e) and 10.01 of the Credit Agreement, (x) the acceleration of the Loans pursuant to Section 8.01 of the Credit Agreement, (y) the delivery of a written direction instructing the Administrative Agent to deliver a written instruction to Escrow Agent to distribute all the funds in the Escrow Account to the Administrative Agent to prepay the Loans pursuant to Section III(d) of the Escrow Agreement and Section 2.10(a)(i) of the Credit Agreement and (z) the delivery by the Administrative Agent of a written instruction to the Escrow Agent to distribute all of the funds in the Escrow Account to the Administrative Agent to prepay the Loans pursuant to III(d) of the Escrow Agreement and Section 2.10(a)(i) of the Credit Agreement), under the other Loan Documents and/or under applicable law, in each case against any Loan Party or the Collateral solely with respect to the Specified Defaults; provided, however, that (i) nothing herein shall restrict, impair or otherwise affect any Lender Party’s rights and remedies under any agreements containing subordination provisions in favor of any or all of the Lender Parties (including, without limitation, any rights or remedies available to the Lender Parties as a result of the occurrence or continuation of the Specified Defaults) or amend or modify any provision thereof, (ii) nothing herein shall restrict, impair or otherwise affect the Administrative Agent’s or any Lender’s right to file, record, publish or deliver a notice of default or document of similar effect under any state foreclosure law upon the expiration or termination of the Forbearance Period. Any Forbearance Default shall constitute an immediate Event of Default under this Agreement, the Credit Agreement, and the other Loan Documents without the requirement of any demand, presentment, protest, or notice of any kind to any Loan Party (all of which each Loan Party waives) and (iii) nothing herein shall restrict, impair or otherwise affect the Administrative Agent’s ability to comply with instructions from the Required Lenders as contemplated by herein and apply the funds in the Escrow Account to prepay the Loans pursuant to Section III(d) of the Escrow Agreement and Section 2.10(a)(i) of the Credit Agreement to the extent that the Administrative Agent is directed by the Required Lenders in accordance with the terms herein, the Escrow Agreement and the other Loan Documents. Notwithstanding anything herein to the contrary, any statement or provision contained in this Agreement (other than the statements and provisions contained clauses (a), (b), (c), (e) and (f) in the first sentence of Section 2 of this Agreement) or action taken by the Loan Parties with respect to the Specified Defaults (including, without limitation, the occurrence thereof, but excluding the fact that the certificate of registration of the vessel mortgage at the NIMASA was not delivered by April 15, 2016 and the Gibraltar Guarantor was not dissolved, merged or consolidated with or into another Loan Party as of the date which is 120 days after the Closing Date) shall not be, or shall not be deemed to be an admission or waiver of any rights of the Loan Parties with respect to the Specified Defaults (including, without limitation, the occurrence thereof, but excluding the fact the certificate of registration of the vessel mortgage at the NIMASA was not delivered by April 15, 2016 and the Gibraltar Guarantor was not dissolved, merged or consolidated with or into another Loan

 

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Party as of the date which is 120 days after the Closing Date) under the Credit Agreement, any other Loan Document or applicable law. The parties hereto (other than Maersk Highlander) agree that the principal of or interest on any Loan or any other amount payable under the Loan Documents shall not bear interest at the Default Rate during the Forbearance Period, except as may otherwise be provided in the Restructuring Support Agreement, the Plan or any order entered in the Chapter 11 Cases (including any order entered in the Chapter 11 Cases authorizing the use of the Lender Parties’ Collateral). The Required Lenders hereby instruct the Administrative Agent and the Collateral Agent that, during the Forbearance Period, neither the Administrative Agent nor the Collateral Agent shall exercise any rights or remedies available to either such Person under Article VIII of the Credit Agreement (other than (x) the giving of written notice of the Specified Gibraltar Default pursuant to Sections 8.01(e) and 10.01 of the Credit Agreement, (y) the acceleration of the Loans pursuant to Section 8.01 of the Credit Agreement, and (z) the delivery of a written instruction to Escrow Agent (after the receipt of written instruction from the Required Lenders) to distribute all the funds in the Escrow Account to the Administrative Agent to prepay the Loans pursuant to Section III(d) of the Escrow Agreement and Section 2.10(a)(i) of the Credit Agreement, and upon receipt of such funds, to prepay the Loans), under the other Loan Documents and/or under applicable law.

 

  (b) Upon the occurrence of a Forbearance Default (other than with respect to the Non-Debtor Loan Parties on or after the commencement of the Chapter 11 Cases) or the expiration or termination of the Forbearance Period, the agreement of the Lender Parties hereunder to forbear from exercising their respective default-related rights and remedies (if any) shall immediately terminate without the requirement of any demand, presentment, protest, or notice of any kind to any Loan Party (all of which each Loan Party waives). Without limiting the generality of the foregoing, upon the occurrence of a Forbearance Default (other than with respect to the Non-Debtor Loan Parties on or after the commencement of the Chapter 11 Cases) or the expiration or termination of the Forbearance Period, the Lender Parties, subject to the terms of any order entered in the Chapter 11 Cases, may, in their sole discretion and without the requirement of any demand, presentment, protest, or notice of any kind to any Loan Party (but subject to applicable law and the rights and remedies of any Loan Party): (i) suspend or terminate any commitment to provide Loans or other extensions of credit under any Loan Document or declare the Loans then outstanding to be forthwith due and payable in whole or in part; (ii) commence any legal or other action to collect any or all of the obligations under the Loan Documents from any Loan Party; (iii) foreclose or otherwise realize on any or all of the Collateral; (iv) set off or apply to the payment of any or all of the obligations under the Loan Documents any property belonging to any Loan Party that is held by any Lender Party; and (v) take any other enforcement action or otherwise exercise any or all rights and remedies provided for by any Loan Document or applicable law, all of which rights and remedies are fully reserved by the Lender Parties.

 

  (c)

Any agreement by the Lender Parties to extend the Forbearance Period or to waive a Forbearance Default or any condition to the effectiveness hereof must be set forth in writing and signed by a duly authorized signatory of each party required to consent pursuant to Section 10.02 of the Credit Agreement. None of the Administrative Agent, the Collateral Agent nor any Lender is obligated to extend the Forbearance Period or waive a Forbearance Default, and may decide to do so (or not do so) in its sole discretion (or, with respect to the Administrative Agent and the Collateral Agent, at the written direction of the Required Lenders (except with respect to a Forbearance Default under

 

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  clause (vi) of the definition thereof). Each of the Loan Parties acknowledges that the Lender Parties have not made any assurances concerning any extension of the Forbearance Period or waiver of any Forbearance Defaults.

 

  (d) The parties hereto (other than Maersk Highlander) agree that the running of all statutes of limitation or doctrine of laches or estoppel applicable to all claims or causes of action that any Lender Party may be entitled to take or bring in order to enforce its rights and remedies against any Loan Party is, to the fullest extent permitted by law, tolled and suspended during the Forbearance Period.

 

  (e) Any misrepresentation of a Loan Party, or any failure of a Loan Party to comply with the covenants, conditions and agreements contained in any agreement, document or instrument executed or delivered by any Loan Party with, to or in favor of any Lender Party (other than this Agreement) which would cause an Event of Default (other than the Specified Defaults) to occur under the Loan Documents shall constitute a Forbearance Default hereunder. Any misrepresentation of a Loan Party, or any failure of a Loan Party to comply with the covenants, conditions and agreements contained in this Agreement shall constitute a Forbearance Default hereunder. For the avoidance of doubt, the occurrence of the Specified Defaults in and of itself shall not constitute a Forbearance Default.

4. Consents. Notwithstanding anything to the contrary contained in the Credit Agreement or any other Loan Document, the Lenders party hereto (which constitute the requisite consent required under the Credit Agreement or any other Loan Document) hereby consent, without any waiver of the Specified Defaults, to the release, discharge and termination of all Liens on and security interests in any and all assets and property under the Loan Documents subject to the transactions contemplated by the Transaction Documents and the Terminations; provided, that the Loan Parties and the Lenders party hereto agree and acknowledge that the consummation of the transactions contemplated by the Transaction Documents and the Terminations shall constitute an Event of Default under Section 8.01 of the Credit Agreement regardless of the foregoing consent given by the Lenders and such Event of Default entitles the Administrative Agent and the Lenders to exercise all rights and remedies against the Loan Parties, including the Acceleration of Loans, subject to Section 3 but always without prejudice to the above mentioned releases.

5. Acknowledgment and Agreement to Negotiate in Good Faith. During the Forbearance Period, the Loan Parties and the Lenders parties hereto hereby agree to negotiate in good faith with respect to the Definitive Documents (as defined in the Restructuring Support Agreement) and the transaction contemplated by the Restructuring Support Agreement in accordance with Section 3 of the Restructuring Support Agreement.

6. Representations and Warranties. The Loan Parties represent and warrant to each of the Lenders party hereto, the Administrative Agent and the Collateral Agent that, after giving effect to this Agreement:

 

  (a)

The representations and warranties set forth in Article III of the Credit Agreement and in each other Loan Document are true and correct in all material respects ((i) except that any representation and warranty that is qualified as to “materiality” or “Material Adverse Effect” shall be true and correct in all respects and (ii) other than the representations and warranties set forth in (w) the third sentence of Section 3.08 of the Credit Agreement with respect to the Specified Defaults, (x) the second and third sentences of Section 3.09 of the Credit Agreement with respect to the Highlander Construction Contract,

 

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  Highlander Drilling Contract, the Terminations or any other contract or agreement related to the Hercules Highlander, (y) Section 3.16 of the Credit Agreement and (z) Section 3.21 of the Credit Agreement) on and as of the Forbearance Effective Date to the same extent as if made on and as of the Forbearance Effective Date, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects (except that any representation and warranty that is qualified as to “materiality” or “Material Adverse Effect” shall be true and correct in all respects) on and as of such earlier date.

 

  (b) Other than the Specified Defaults, no Default or Event of Default has occurred or will result from the consummation of the transactions contemplated by this Agreement.

7. Condition Precedent. This Agreement shall become effective on the Forbearance Effective Date whereupon this Agreement shall become effective as to all Lenders and Loan Parties in accordance with Section 10.02 of the Credit Agreement, provided that all of the following conditions precedent have been satisfied (or (x) in the case of Section 7(b), waived by the Administrative Agent or (y) in the case of Section 7(c), waived by the Required Lenders):

 

  (a) The Administrative Agent shall have received counterparts of this Agreement that, when taken together, bear the signatures of (x) each Loan Party, (y) the Administrative Agent and the Collateral Agent, and (z) the Lenders constituting the Required Lenders under the Credit Agreement.

 

  (b) The Borrower shall have paid the Administrative Agent for all reasonable and documented out-of-pocket fees and reimbursement of all reasonable and documented out-of-pocket costs and expenses required to be paid by the Borrower in connection with the transactions contemplated hereunder, under any other Loan Document or as separately agreed to by the Borrower to the extent invoiced at least one (1) day prior to the Forbearance Effective Date.

 

  (c) The representations and warranties set forth in Section 6 of this Agreement shall be true and correct on and as of the Forbearance Effective Date.

8. Ratification.

(a) All of the terms and conditions of the Credit Agreement and the other Loan Documents remain in full force and effect and none of such terms and conditions are, or shall be construed as, otherwise amended, waived, or modified, except as specifically set forth herein. Without limiting the generality of the foregoing, the Security Documents and all of the Collateral described therein shall continue to secure the payment of all Obligations of the Loan Parties, other than as amended by or as set forth in this Agreement. Without limiting the generality of the releases contained herein (including, without limitation, Section 14 hereof), the parties hereto (other than Maersk Highlander) hereby expressly acknowledge, ratify and reaffirm all of the exculpatory provisions in favor of the Administrative Agent and the Collateral Agent contained in the Credit Agreement and any other Loan Document, including, without limitation, Section 9.03 of the Credit Agreement.

(b) The Borrower and each of the Subsidiary Guarantors hereby ratifies and reaffirms the Obligations and the Guaranteed Obligations, as applicable, the Credit Agreement as amended hereby, each of the other Loan Documents to which it is a party and all of the covenants, duties, indebtedness and liabilities under the Credit Agreement as amended hereby and the other Loan Documents to which it is a party.

 

9


(c) The execution, delivery and effectiveness of this Agreement shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or the Administrative Agent or the Collateral Agent under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents. On and after the effectiveness of this Agreement, this Agreement shall for all purposes constitute a Loan Document.

(d) On and after the Forbearance Effective Date, each reference in the Credit Agreement to “this Agreement,” “hereunder,” “hereof,” “herein” or words of like import, and each reference to the Credit Agreement, “thereunder”, “thereof”, “therein” or words of like import in any other Loan Document, shall be deemed a reference to the Credit Agreement as amended hereby.

9. Direction. The Lenders party hereto hereby (i) direct the Administrative Agent and the Collateral Agent to execute and deliver this Agreement and, in connection therewith, to grant the releases set forth in Section 16 hereof, (ii) direct the Administrative Agent and the Collateral Agent to release, discharge and terminate any Liens on and any security interest in any and all assets or property under the Loan Documents subject to the transactions contemplated by the Transaction Documents and the Terminations, (iii) direct the Administrative Agent and the Collateral Agent to execute, deliver and file (at the sole expense of the Loan Parties) or authorize the Loan Parties or their respective counsel (or a Person designated by the Loan Parties or their counsel) to file (in consultation with the Administrative Agent, the Collateral Agent and the Required Lenders) the documents set forth on Exhibit D (the “Release Documents”) and any other documents that may be necessary to give effect to the release, discharge and termination of any Liens on and security interest in any and all assets or property under the Loan Documents, as and to the extent reasonably requested by the Loan Parties in connection with the transactions contemplated by the Transaction Documents and Terminations, (iv) direct the Administrative Agent to declare the Loans outstanding to be forthwith due and payable, in whole or in part, whereupon the principal of the Loans so declared due and payable, together with accrued interest thereon, unpaid accrued fees, the Applicable Premium, and all other Obligations of the Borrower accrued under the Credit Agreement and any other Loan Document shall forthwith become due and payable without presentment, demand, protest or any other notice of any kind pursuant to Section 8.01 of the Credit Agreement, (v) direct the Administrative Agent to deliver a written instruction to the Escrow Agent to distribute all the funds in the Escrow Account to the Administrative Agent to prepay the Loans pursuant to Section III(d) of the Escrow Agreement and Section 2.10(a)(i) of the Credit Agreement, and (vi) ratify and reaffirm (a) their several obligations to indemnify the Administrative Agent and the Collateral Agent, each in its capacity as such, pursuant to, and in accordance with, Section 9.08 of the Credit Agreement and (b) the exculpatory provisions of Section 9.03 of the Credit Agreement.

10. Notice of Acceleration. Pursuant to Section 8.01 of the Credit Agreement and at the request of the Required Lenders pursuant to Section 9 herein, the Administrative Agent hereby gives notice to the Borrower that (i) the Commitments under the Credit Agreement are terminated and (ii) the outstanding Loans are hereby declared due and payable, in whole, including, without limitation the principal of the Loans, together with accrued interest thereon, unpaid accrued fees, the Applicable Premium, and all other Obligations of the Borrower accrued under the Credit Agreement and any other Loan Document.

11. Notice of Voluntary Prepayment. Pursuant to Section 2.10(i) of the Credit Agreement, the Borrower hereby gives notice to the Administrative Agent of its election to make a voluntary prepayment pursuant to Section 2.10(a)(i) of the Credit Agreement in a principal amount equal to $200,000,000 on the date on which the Administrative Agent receives funds in the Escrow Account (or, if

 

10


the Administrative Agent receives the funds in the Escrow Account after 3:00 p.m. (New York City time), on the next succeeding Business Day). The Lenders party hereto and the Administrative Agent hereby waive any required notice period pursuant to Section 2.10(i) of the Credit Agreement.

12. Signatures. This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page of this Agreement by telecopy or other electronic imaging (including in .pdf format) means shall be effective as delivery of a manually executed counterpart of this Agreement.

13. Miscellaneous. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. Sections 10.09 and 10.10 of the Credit Agreement are incorporated by reference herein mutatis mutandis. The provisions of this Agreement shall be binding upon and inure to the benefit of the Loan Parties, Administrative Agent, the Collateral Agent, and the Lenders and their respective successors and permitted assigns.

14. General Release. IN CONSIDERATION OF, AMONG OTHER THINGS, ADMINISTRATIVE AGENT’S, COLLATERAL AGENT’S AND REQUIRED LENDERS’ EXECUTION AND DELIVERY OF (OR CONSENT TO DELIVERY AND EXECUTION OF) THIS AGREEMENT, EACH OF THE RELEASORS HEREBY FOREVER AGREES AND COVENANTS NOT TO SUE OR PROSECUTE AGAINST ANY RELEASEE AND HEREBY FOREVER WAIVES, RELEASES AND DISCHARGES, TO THE FULLEST EXTENT PERMITTED BY LAW, EACH RELEASEE FROM ANY AND ALL CLAIMS (OTHER THAN ANY CLAIMS (IF ANY) THAT RELATE TO, ARISE OUT OF OR OTHERWISE ARE IN CONNECTION WITH THE SPECIFIED POST-CLOSING DEFAULT, SPECIFIED GIBRALTAR DEFAULT OR THE PREPAYMENT OF THE LOANS FROM THE FUNDS IN THE ESCROW ACCOUNT AS A PREFERENTIAL TRANSFER UNDER SECTION 547 OF THE BANKRUPTCY CODE) THAT SUCH RELEASOR NOW HAS OR HEREAFTER MAY HAVE, OF WHATEVER NATURE AND KIND, WHETHER KNOWN OR UNKNOWN, WHETHER NOW EXISTING OR HEREAFTER ARISING, WHETHER ARISING AT LAW OR IN EQUITY, AGAINST THE RELEASEES, BASED IN WHOLE OR IN PART ON FACTS, WHETHER OR NOT NOW KNOWN, EXISTING ON OR BEFORE THE FORBEARANCE EFFECTIVE DATE, THAT RELATE TO, ARISE OUT OF OR OTHERWISE ARE IN CONNECTION WITH: (I) ANY OR ALL OF THE LOAN DOCUMENTS OR TRANSACTIONS CONTEMPLATED THEREBY OR ANY ACTIONS OR OMISSIONS IN CONNECTION THEREWITH OR (II) ANY ASPECT OF THE DEALINGS OR RELATIONSHIPS BETWEEN OR AMONG THE LOAN PARTIES, ON THE ONE HAND, AND ANY OR ALL OF THE LENDER PARTIES, ON THE OTHER HAND, RELATING TO ANY OR ALL OF THE DOCUMENTS, TRANSACTIONS, ACTIONS OR OMISSIONS REFERENCED IN CLAUSE (I) HEREOF. WITHOUT LIMITING THE EFFECT OF THE FOREGOING, THE RECEIPT BY ANY LOAN PARTY OF ANY LOANS OR OTHER FINANCIAL ACCOMMODATIONS MADE BY ANY LENDER PARTY AFTER THE DATE HEREOF SHALL CONSTITUTE A RATIFICATION, ADOPTION, AND CONFIRMATION BY SUCH PARTY OF THE FOREGOING GENERAL RELEASE OF ALL CLAIMS AGAINST THE RELEASEES WHICH ARE BASED IN WHOLE OR IN PART ON FACTS, WHETHER OR NOT NOW KNOWN OR UNKNOWN, EXISTING ON OR PRIOR TO THE DATE OF RECEIPT OF ANY SUCH LOANS OR OTHER FINANCIAL ACCOMMODATIONS. IN ENTERING INTO THIS AGREEMENT, EACH LOAN PARTY CONSULTED WITH, AND HAS BEEN REPRESENTED BY, LEGAL COUNSEL AND EXPRESSLY DISCLAIMS ANY RELIANCE ON ANY REPRESENTATIONS, ACTS OR OMISSIONS BY ANY OF THE RELEASEES AND HEREBY AGREES AND ACKNOWLEDGES THAT THE VALIDITY AND EFFECTIVENESS OF THE RELEASES SET FORTH ABOVE DO NOT DEPEND IN ANY

 

11


WAY ON ANY SUCH REPRESENTATIONS, ACTS OR OMISSIONS OR THE ACCURACY, COMPLETENESS OR VALIDITY HEREOF. THE PROVISIONS OF THIS SECTION SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT, ANY LOAN DOCUMENT, AND PAYMENT IN FULL OF THE OBLIGATIONS UNDER THE LOAN DOCUMENTS.

15. Release of Non-Debtor Loan Parties.

(a) Notwithstanding anything to the contrary contained in the Credit Agreement or any other Loan Document, and subject to the satisfaction of the terms and conditions set forth in Section 15(b), the Lenders party hereto hereby agree to take (and direct the Administrative Agent and Collateral Agent to take) any and all actions reasonably necessary, including the execution and delivery of a written consent upon the request by the Borrower after the Forbearance Effective Date, to (i) the release, discharge and termination of all obligations of the Non-Debtor Loan Parties, as Guarantors, under the Loan Documents upon the Plan Effective Date and (ii) the release, discharge and termination of all Liens on and security interests in any and all assets and property of the Non-Debtor Loan Parties under the Loan Documents upon the Plan Effective Date.

(b) The Non-Debtor Loan Parties hereby agree to take any and all actions reasonably necessary to provide a release of the Releasees upon the release, discharges and terminations described in Section 15(a) in form and substance substantially similar to the releases provided by the Debtor Loan Parties in the Plan.

16. Release of Maersk Releasees.

(a) THE LENDER PARTIES PARTY HERETO AGREE THAT MAERSK HIGHLANDER IS ENTERING INTO THE TRANSACTION DOCUMENTS IN GOOD FAITH AND FOR VALUE AND IT IS HEREBY EXPRESSLY AGREED AND DECLARED BY EACH OF THE LENDER PARTIES PARTY HERETO THAT MAERSK HIGHLANDER SHALL NOT ASSUME ANY LIABILITY UNDER OR IN CONNECTION WITH THIS AGREEMENT. FURTHER IN CONSIDERATION OF, AMONG OTHER THINGS, MAERSK HIGHLANDER’S EXECUTION AND CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND EACH OF THE TRANSACTION DOCUMENTS, EACH OF THE LENDER PARTY RELEASORS HEREBY FOREVER AGREES AND COVENANTS NOT TO SUE OR PROSECUTE, VOLUNTARILY AID OR SUPPORT IN ANY WAY, OR CAUSE TO BE COMMENCED OR PROSECUTED AGAINST MAERSK HIGHLANDER OR ANY OF ITS PARENT, PARENT’S SUBSIDIARIES, ASSIGNS, TRANSFEREES AND EACH OF THEIR OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS AND OTHER REPRESENTATIVES (IN EACH CASE, IN THEIR CAPACITY AS SUCH) (COLLECTIVELY, THE “MAERSK RELEASEES”) AND HEREBY FOREVER RELEASES AND DISCHARGES, TO THE FULLEST EXTENT PERMITTED BY LAW, EACH MAERSK RELEASEE FROM ANY AND ALL CLAIMS, RIGHTS AND DEMANDS THAT SUCH RELEASOR NOW HAS OR HEREAFTER MAY HAVE, OF WHATEVER NATURE AND KIND, WHETHER KNOWN OR UNKNOWN, WHETHER NOW EXISTING OR HEREAFTER ARISING, WHETHER ARISING AT LAW OR IN EQUITY, WHETHER IN THIS JURISDICTION OR ANOTHER AGAINST THE MAERSK RELEASEES, BASED IN WHOLE OR IN PART ON FACTS, WHETHER OR NOT NOW KNOWN, EXISTING ON OR BEFORE THE FORBEARANCE EFFECTIVE DATE, THAT RELATE TO, ARISE OUT OF OR OTHERWISE ARE IN CONNECTION WITH: (I) ANY OR ALL OF THE TRANSACTION DOCUMENTS OR TRANSACTIONS CONTEMPLATED THEREBY OR ANY ACTIONS OR OMISSIONS IN CONNECTION THEREWITH, (II) ANY OR ALL OF THE TERMINATIONS OR ANY ACTIONS OR OMISSIONS IN CONNECTION THEREWITH, AND (III) ANY ASPECT OF THE DEALINGS OR RELATIONSHIPS BETWEEN OR AMONG THE LOAN PARTIES, ON THE ONE HAND, AND

 

12


MAERSK HIGHLANDER, ON THE OTHER HAND, RELATING TO ANY OR ALL OF THE DOCUMENTS, TRANSACTIONS, ACTIONS OR OMISSIONS REFERENCED IN CLAUSES (I) AND (II) HEREOF. THE PROVISIONS OF THIS SECTION SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT AND THE MAERSK RELEASEES MAY ENFORCE THESE RELEASES DIRECTLY OR MAERSK HIGHLANDER MAY ENFORCE THESE RELEASES ON THEIR BEHALF.

(b) Notwithstanding anything to the contrary contained in the Credit Agreement or any other Loan Document, no amendment, modification, waiver, replacement, termination, or cancellation of any provision of this Section 16 will be valid, unless the same shall be in writing and signed by the Lender Parties party hereto and Maersk Highlander.

[Signature Pages to Follow]

 

13


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

 

HERCULES OFFSHORE, INC.
By:  

/s/ Troy L. Carson

Name:   Troy L. Carson
Title:   SVP & CFO
CLIFFS DRILLING COMPANY
FDT LLC
FDT HOLDINGS LLC
HERCULES DRILLING COMPANY, LLC

HERCULES OFFSHORE LIFTBOAT COMPANY LLC

HERO HOLDINGS, INC.
SD DRILLING LLC
THE OFFSHORE DRILLING COMPANY
THE ONSHORE DRILLING COMPANY
TODCO AMERICAS INC.
TODCO INTERNATIONAL INC.
HERCULES LIFTBOAT COMPANY, LLC
HERCULES OFFSHORE SERVICES LLC

HERCULES OFFSHORE INTERNATIONAL, LLC

By:  

/s/ Troy L. Carson

Name:   Troy L. Carson
Title:   Vice President

 

[SIGNATURE PAGE TO AMENDED AND RESTATED FORBEARANCE AGREEMENT]


DISCOVERY OFFSHORE (GIBRALTAR)
LIMITED
By:  

/s/ Troy L. Carson

Name:   Troy L. Carson
Title:   Authorized Signatory
By:  

/s/ Beau M. Thompson

Name:   Beau M. Thompson
Title:   Authorized Signatory

 

[SIGNATURE PAGE TO AMENDED AND RESTATED FORBEARANCE AGREEMENT]


HERCULES OFFSHORE (NIGERIA) LIMITED
By:  

/s/ Troy L. Carson

Name:   Troy L. Carson
Title:   Authorized Signatory

 

[SIGNATURE PAGE TO AMENDED AND RESTATED FORBEARANCE AGREEMENT]


DISCOVERY NORTH SEA LTD.
DISCOVERY OFFSHORE SERVICES LTD.
HERCULES ASSET MANAGEMENT LTD.

HERCULES INTERNATIONAL DRILLING LTD.

HERCULES INTERNATIONAL HOLDINGS, LTD.

HERCULES INTERNATIONAL MANAGEMENT COMPANY LTD.

HERCULES INTERNATIONAL OFFSHORE, LTD.

HERCULES NORTH SEA, LTD.
HERCULES OFFSHORE ARABIA, LTD.
HERCULES OFFSHORE HOLDINGS LTD.
HERCULES OFFSHORE MIDDLE EAST LTD.
HERCULES OILFIELD SERVICES LTD.
TODCO TRINIDAD LTD.
By:  

/s/ Claus E. Feyling

Name:   Claus E. Feyling
Title:   Director

 

[SIGNATURE PAGE TO AMENDED AND RESTATED FORBEARANCE AGREEMENT]


HERCULES OFFSHORE LABUAN CORPORATION

HERCULES TANJUNG ASIA SDN. BHD.
By:  

/s/ Claus E. Feyling

Name:   Claus E. Feyling
Title:   Director

 

[SIGNATURE PAGE TO AMENDED AND RESTATED FORBEARANCE AGREEMENT]


HERCULES BRITANNIA HOLDINGS LIMITED

HERCULES BRITISH OFFSHORE LIMITED
HERCULES NORTH SEA DRILLER LIMITED
HERCULES OFFSHORE UK LIMITED
By:  

/s/ Claus E. Feyling

Name:   Claus E. Feyling
Title:   Director

 

[SIGNATURE PAGE TO AMENDED AND RESTATED FORBEARANCE AGREEMENT]


JEFFERIES FINANCE LLC,
as Administrative Agent and Collateral Agent
By:  

/s/ J. Paul McDonnell

  Name: J. Paul McDonnell
  Title: Managing Director

 

[SIGNATURE PAGE TO AMENDED AND RESTATED FORBEARANCE AGREEMENT]


LUMINUS ENERGY MASTER FUND, LTD., as
Lender
By:  

/s/ Jonathan Barrett

  Name : Jonathan Barrett
  Title:    Director

[SIGNATURE PAGE TO AMENDED AND RESTATED FORBEARANCE AGREEMENT]


CERTAIN FUNDS AND ACCOUNTS EACH
ACTING as Lender, severally and not jointly

By: T. ROWE PRICE ASSOCIATES, INC., as

investment adviser

By:  

/s/ Rodney M. Rayburn

  Name: Rodney M. Rayburn
  Title : Vice President

[SIGNATURE PAGE TO AMENDED AND RESTATED FORBEARANCE AGREEMENT]


NOMURA CORPORATE RESEARCH AND ASSET MANAGEMENT INC., as investment manager on behalf of certain of its clients:
By:  

/s/ Steven Kotsen

  Name: Steven Kotsen
  Title: Portfolio Manager

[SIGNATURE PAGE TO AMENDED AND RESTATED FORBEARANCE AGREEMENT]


SIMPLON INTERNATIONAL LIMITED, as Lender
By:  

/s/ Thomas A. Mckay

  Name: Thomas A. Mckay
  Title: Its Attorney-In-Fact

[SIGNATURE PAGE TO AMENDED AND RESTATED FORBEARANCE AGREEMENT]


BOWERY OPPORTUNITY FUND, L.P., as Lender
By: Bowery Opportunity Management, LLC, its General Partner
By:   /s/ Vladimir Jelisavcic
Name:   Vladimir Jelisavcic
Title:   Manager
BOWERY OPPORTUNITY FUND, Ltd., as Lender
By:   /s/ Vladimir Jelisavcic
Name:   Vladimir Jelisavcic
Title:   Director
BLACKWELL PARTNERS LLC – SERIES A, as Lender
By: Bowery Investment Management, LLC, its Manager
By:   /s/ Vladimir Jelisavcic
Name:   Vladimir Jelisavcic
Title:   Manager
P BOWERY, LTD, as Lender
By: Bowery Investment Management, LLC, its investment manager
By:   /s/ Vladimir Jelisavcic
Name:   Vladimir Jelisavcic
Title:   Manager

 

[SIGNATURE PAGE TO AMENDED AND RESTATED FORBEARANCE AGREEMENT]


THIRD AVENUE TRUST, ON BEHALF OF THIRD AVENUE FOCUSED CREDIT FUND
By: Third Avenue Management, LLC, its investment advisor
By:   /s/ W. James Hall
  Name:   W. James Hall
  Title:   General Counsel

 

[SIGNATURE PAGE TO AMENDED AND RESTATED FORBEARANCE AGREEMENT]


SOUTH DAKOTA RETIREMENT SYSTEM
By:   /s/ Matthew L. Clark
  Name:   Matthew L. Clark
  Title:   State Investment Officer on behalf of the South Dakota Retirement System

 

[SIGNATURE PAGE TO AMENDED AND RESTATED FORBEARANCE AGREEMENT]


WESTERN ASSET MANAGEMENT COMPANY, as investment manager and agent on behalf of certain of its clients
By:   /s/ Adam Wright
  Name:   Adam Wright
  Title:   Manager, U.S. Legal Affairs

 

[SIGNATURE PAGE TO AMENDED AND RESTATED FORBEARANCE AGREEMENT]


QPB HOLDINGS LTD, as Lender
By:   /s/ Thomas L. O’Grady
  Name:   Thomas L. O’Grady
  Title:   Attorney-in-Fact

 

[SIGNATURE PAGE TO AMENDED AND RESTATED FORBEARANCE AGREEMENT]


BANK OF AMERICA, N.A., as Lender
By:   /s/ Michael Lee
  Name:   Michael Lee
  Title:   Managing Director

 

[SIGNATURE PAGE TO AMENDED AND RESTATED FORBEARANCE AGREEMENT]


Accepted and agreed solely as to Section 16:
MAERSK HIGHLANDER UK LIMITED
By:  

/s/ Morten Nordernd-Powelsen

Name:   Morten Nordernd-Powelsen
Title:   Head of New Projects & Technology

 

[SIGNATURE PAGE TO AMENDED AND RESTATED FORBEARANCE AGREEMENT]


Exhibit A

Specified Defaults

 

1. Specified Post-Closing Covenant Default.

 

2. Specified Gibraltar Default.

 

3. Transaction Events of Default.

 

4. Any breach, violation, Default or Event of Default under Section 8.01(e) of the Credit Agreement as a result of non-compliance with Section 5.01(i) of the Credit Agreement.

 

5. Any breach, violation, Default or Event of Default under Section 8.01(o) of the Credit Agreement;

 

6. Any breach, violation, Default or Event of Default arising under Section 8.01(h) as a result of the Chapter 11 Cases.

 

7. Any breach, violation, Default or Event of Default under Section 8.01(m) with respect to any Material Adverse Effect as customarily occurs as a result of events leading up to and following the commencement of a proceeding under Chapter 11 of the Bankruptcy Code.

 

8. Any Defaults or Events of Default that may occur after the commencement of the Chapter 11 Cases.

 

9. The failure to promptly provide (i) notice of the occurrence of the foregoing Defaults and/or Events of Default,(ii) notice of any development that has resulted in, or could reasonably be expected to result in a Material Adverse Effect in connection with the foregoing, (iii) notice of the termination or amendment to any Material Agreement or the Borrower as result of the transactions contemplated by the Transaction Documents or the Terminations, (iv) notice of the occurrence of any event that could materially and adversely affect the value of the Collateral, taken as a whole, as contemplated by this Agreement and (v) notice to the Escrow Agent and Administrative Agent that the conditions set forth in the Escrow Agreement with respect to the release of proceeds of the Escrowed Loans cannot be satisfied.


Exhibit B

Non-Debtor Loan Parties

 

1. Hercules British Offshore Limited

 

2. Hercules International Holdings, Ltd.

 

3. Hercules North Sea, Ltd.

 

4. Discovery North Sea Ltd.

 

5. Discovery Offshore (Gibraltar) Limited

 

6. Discovery Offshore Services Ltd.

 

7. Hercules Asset Management Ltd.

 

8. Hercules Britannia Holdings Limited

 

9. Hercules International Drilling Ltd.

 

10. Hercules International Management Company Ltd.

 

11. Hercules International Offshore, Ltd.

 

12. Hercules North Sea Driller Limited

 

13. Hercules Offshore (Nigeria) Limited

 

14. Hercules Offshore Arabia, Ltd.

 

15. Hercules Offshore Holdings Ltd.

 

16. Hercules Offshore Labuan Corporation

 

17. Hercules Tanjung Asia Sdn. Bhd.

 

18. Hercules Offshore Middle East Ltd.

 

19. Hercules Offshore UK Limited

 

20. Hercules Oilfield Services Ltd.

 

21. TODCO Trinidad Ltd.

 

22. Hercules Offshore International, LLC

 

23. Hercules Liftboat Company, LLC


Exhibit C-1

[See Attached]


Exhibit C-2

[See Attached]


Exhibit C-3

[See Attached]


Exhibit C-4

[See Attached]


Exhibit D

Release Documents

 

  1. Collateral Release, dated as of the date hereof, by and among the Borrower, Hercules British Offshore Limited, Hercules North Sea, Ltd., the Administrative Agent and the Collateral Agent.

 

  2. The Deed of Release, dated as of the date hereof (the “Deed of Release”), by and among, Hercules Britannia Holdings Limited, Hercules Offshore UK Limited, Hercules British Offshore Limited, Hercules North Sea Driller Limited and the Collateral Agent.

 

  3. UCC-3 amendment with respect to the UCC-1 financing statement #2015113878 filed on November 6, 2016 at the District of Columbia Recorder of Deeds.

 

  4. UCC-3 amendment with respect to the UCC-1 financing statement #15-0036041434 filed on November 9, 2016 at the Secretary of State of Texas.

 

  5. UCC-3 amendment with respect to the UCC-1 financing statement #2015113913 filed on November 6, 2016 at the District of Columbia Recorder of Deeds.

 

  6. UCC-3 amendment with respect to the UCC-1 financing statement #15-0036040423 filed on November 9, 2016 at the Secretary of State of Texas.

 

  7. UCC-3 amendment with respect to the UCC-1 financing statement #2015 5197511 filed on November 6, 2016 at the Secretary of State of Delaware.

 

  8. MRO5 form with respect to the Debenture registered in respect of Hercules British Offshore Limited with Companies House of England and Wales.

 

  9. Notices of Reassignment in relation to the Deed of Release.

Exhibit 10.2

EXECUTION VERSION

THIS RESTRUCTURING SUPPORT AGREEMENT IS NOT AN OFFER WITH RESPECT TO ANY SECURITIES OR A SOLICITATION OF VOTES WITH RESPECT TO A CHAPTER 11 PLAN OF REORGANIZATION. ANY SUCH OFFER OR SOLICITATION WILL COMPLY WITH ALL APPLICABLE SECURITIES LAWS AND/OR, AS APPLICABLE, PROVISIONS OF THE BANKRUPTCY CODE.

 

 

RESTRUCTURING SUPPORT AGREEMENT

by and among

HERCULES OFFSHORE, INC. AND ITS SUBSIDIARIES PARTY HERETO

and

THE UNDERSIGNED CREDITOR PARTIES

dated as of May 26, 2016

 

 


RESTRUCTURING SUPPORT AGREEMENT

This RESTRUCTURING SUPPORT AGREEMENT (as the same may be amended, modified or supplemented from time to time in accordance with the terms hereof and including all exhibits annexed hereto which are incorporated by reference herein, this “Agreement”), dated as of May 26, 2016, is entered into by and among (x) Hercules Offshore, Inc., a Delaware corporation (“HERO”), and each of the undersigned direct and indirect subsidiaries of HERO (the “Subsidiaries,” and together with HERO, the “HERO Entities”) and (y) each of the undersigned parties, severally and not jointly (each, together with their respective successors and permitted assigns and any subsequent holder of First Lien Claims (as defined below) that becomes party hereto in accordance with the terms hereof, collectively, an “Ad Hoc Group Member” and collectively, the “Ad Hoc Group”) who are holders of (i) First Lien Claims, and (ii) in certain cases, common shares issued by HERO (the “HERO Common Stock”). Each of the HERO Entities and the Ad Hoc Group Members is referred to herein individually as a “Party” and, collectively, as the “Parties”.

WHEREAS, HERO and its majority-owned subsidiaries provide shallow-water drilling and marine services to the oil and natural gas exploration and production industry globally through its domestic offshore, international offshore, and international liftboats segments;

WHEREAS, on November 6, 2015, the HERO Entities entered into that certain Credit Agreement (as amended, restated, supplemented or otherwise modified from time to time, the “First Lien Credit Agreement”), among HERO, as borrower, the Subsidiaries, as guarantors, Jefferies Finance LLC, as administrative agent and collateral agent (the “First Lien Agent”), and the lenders from time to time party thereto (the “First Lien Lenders”). Claims and Obligations (as defined in the First Lien Credit Agreement) owed under the First Lien Credit Agreement are collectively referred to herein as “First Lien Claims”;

WHEREAS, on April 18, 2016, HERO and certain of its subsidiaries (the “Loan Parties”) entered into that certain Forbearance Agreement and First Amendment to the Credit Agreement (the “Forbearance Agreement”), with the First Lien Agent for itself and certain First Lien Lenders designated therein, pursuant to which, the First Lien Lenders agreed to forbear from exercising their rights and remedies under the First Lien Credit Agreement with respect to the alleged failure by the Loan Parties to comply with certain specified affirmative covenants under the First Lien Credit Agreement through April 28, 2016 (the “Forbearance Period”);

WHEREAS, on April 28, 2016, the Loan Parties (as defined in the First Lien Credit Agreement) entered into Amendment No. 1 to Forbearance Agreement and First Amendment to Credit Agreement (“Amendment No. 1”) with the First Lien Agent and certain First Lien Lenders designated therein, which extended the Forbearance Period until the earliest to occur of: (i) the termination of the Forbearance Period as a result of any default; (ii) 11:59 p.m. (New York City time) on May 31, 2016; and (iii) 11:59 p.m. (New York City time) on the second Business Day following the Required Lenders’ delivery of written notice (which notice shall be effective only if delivered after 11:59 p.m. (New York City time) on May 4, 2016) to the Loan Parties (with a copy to the First Lien Agent and the Collateral Agent) in accordance with Section 10.01(a) of the Credit Agreement terminating the Forbearance Period;


WHEREAS, on the date hereof, the Loan Parties entered into that certain Amended and Restated Forbearance Agreement (the “Amended and Restated Forbearance Agreement”) with the First Lien Agent for itself and certain First Lien Lenders designated therein, pursuant to which, among other things, subject to the terms of the Amended and Restated Forbearance Agreement and without any waiver of the Specified Defaults (as defined in the Amended and Restated Forbearance Agreement), (i) forbear during the Forbearance Period (as defined in the Amended and Restated Forbearance Agreement) from exercising certain of their default-related rights and remedies against the Loan Parties with respect to the Specified Defaults (other than (w) the giving of written notice of the Specified Gibraltar Default (as defined in the Amended and Restated Forbearance Agreement) pursuant to Sections 8.01(e) and 10.01 of the First Lien Credit Agreement, (x) the acceleration of the Loans (as defined in the First Lien Credit Agreement) pursuant to Section 8.01 of the First Lien Credit Agreement, (y) the delivery of a written direction instructing the First Lien Agent to deliver a written instruction to the Escrow Agent (as defined in the First Lien Credit Agreement) to distribute all the funds in the Escrow Account (as defined in the First Lien Credit Agreement) to the First Lien Agent to prepay the Loans pursuant to Section III(d) of the Escrow Agreement during the Forbearance Period and (z) the delivery by the First Lien Agent of a written instruction to the Escrow Agent to distribute all of the funds in the Escrow Account to the First Lien Agent to prepay the Loans pursuant to III(d) of the Escrow Agreement, (ii) consent to release of liens contemplated by the release documents listed on Exhibit C to the Amended and Restated Forbearance Agreement, and (iii) upon the request of HERO after the Forbearance Effective Date (as defined in the Amended and Restated Forbearance Agreement), consent to the release of the Non-Debtor Loan Parties (as defined in the Amended and Restated Forbearance Agreement) from their Guarantee and release the Liens (as defined in the First Lien Credit Agreement) on and security interest in any and all assets and property of the Non-Debtor Loan Parties on the Effective Date of the Plan (as defined below);

WHEREAS, the HERO Entities and the Ad Hoc Group have negotiated, in good faith and at arms’ length, a transaction that will effectuate a financial restructuring of the HERO Entities’ capital structure and financial obligations (the “Restructuring”), on the terms and conditions set forth in this Agreement and the Term Sheet attached hereto as Exhibit A (including any annexes and schedules attached thereto, the “Term Sheet”) that is to be implemented through voluntary cases to be commenced (the date of such commencement, the “Petition Date”) by HERO, each of the Subsidiaries that is a domestic United States entity (other than Hercules Liftboat Company, LLC and Hercules Offshore International, LLC) (collectively, the “Debtors”) under chapter 11 of title 11 of the United States Code, 11 U.S.C. §§ 101, et seq. (the “Bankruptcy Code”), before the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”), on a consensual basis pursuant to a joint “pre-packaged” chapter 11 plan to be confirmed under chapter 11 of the Bankruptcy Code, the terms and conditions of which will be on the terms described in this Agreement and the Term Sheet, and that is otherwise in form and substance reasonably acceptable to the Debtors and the Requisite Consenting Lenders (as defined below) (the “Plan”);

 

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WHEREAS, as of the date hereof and upon the acceleration of the Obligations under the First Lien Credit Agreement but prior to the distribution by the Escrow Agent of all the funds in the Escrow Account to the First Lien Agent to prepay the First Lien Claims pursuant to Section III(d) of the Escrow Agreement and Section 2.10(a)(i) of the First Lien Credit Agreement, the HERO Entities owed $579 million (plus accrued and unpaid interest) under the First Lien Credit Agreement on account of principal indebtedness, unpaid accrued interest, and the Applicable Premium; it being understood that additional Fees (as defined in the First Lien Credit Agreement) and Obligations may also be due and owing;

WHEREAS, the Parties intend to implement the Restructuring contemplated herein through a “pre-packaged” chapter 11 plan, and in connection therewith, the Debtors have agreed, subject to the terms and conditions of this Agreement, (i) to prepare a disclosure statement containing “adequate information” (as that term is used in the Bankruptcy Code) with respect to the Plan and the Term Sheet and otherwise in form and substance reasonably acceptable to the Debtors and the Requisite Consenting Lenders (the “Disclosure Statement”), (ii) to solicit acceptances of the Plan from the First Lien Lenders and holders of HERO Common Stock publicly traded equity interests in accordance with applicable non-bankruptcy law, as permitted under sections 1125(g) and 1126(b) of the Bankruptcy Code, (iii) to prepare and file, in case(s) under chapter 11 of the Bankruptcy Code (the “Chapter 11 Cases”), the Plan and the Disclosure Statement, and (iv) to use commercially reasonably efforts to cause the Plan to be confirmed by the Bankruptcy Court and consummated thereafter, all in accordance with the terms of this Agreement and the Term Sheet;

WHEREAS, the Ad Hoc Group Members, who collectively hold more than 99% of the outstanding loans and commitments under the First Lien Credit Agreement and approximately 27% of the HERO Common Stock, as set forth on Schedule 1 hereto, have agreed, among other things, subject to the receipt of a Disclosure Statement, to vote in favor of, and not oppose, the Restructuring and the Plan on the terms and subject to the conditions set forth in this Agreement and the Term Sheet; and

WHEREAS, the Parties desire to express to each other their mutual support and commitment in respect of the Restructuring pursuant to the Plan on the terms and conditions contained in this Agreement and the attached Term Sheet.

 

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AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each Party, intending to be legally bound hereby, agrees as follows:

1. Incorporation of Term Sheet and Definitions; Interpretation.

The Term Sheet is expressly incorporated herein by reference and is made part of this Agreement. All references herein to this “Agreement” or “herein” shall include the Term Sheet where not expressly stated. The general terms and conditions of the Restructuring, as supplemented by the terms and conditions of this Agreement, are set forth in the Term Sheet. In the event the terms and conditions set forth in the Term Sheet and this Agreement are inconsistent, the terms and conditions set forth in the Term Sheet shall govern. Capitalized terms used and not defined in this Agreement shall have the meaning ascribed to them in the Term Sheet.

In this Agreement, unless the context otherwise requires:

 

  a. words importing the singular also include the plural, and references to one gender include all genders;

 

  b. the headings in this Agreement are inserted for convenience only and do not affect the construction of this Agreement and shall not be taken into consideration in its interpretation;

 

  c. the words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement;

 

  d. the words “include,” “includes,” and “including” shall be deemed to be followed by the phrase “without limitation.” The word “or” is not exclusive; and

 

  e. references to any governmental entity or any governmental department, commission, board, bureau, agency, regulatory authority, instrumentality, or judicial or administrative body, in any jurisdiction shall include any successor to such entity.

2. Effectiveness; Entire Agreement.

 

  a. This Agreement shall become effective as to the HERO Entities and each individual Ad Hoc Group Member upon delivery of counterpart signature pages to (i) this Agreement by and among (x) the Ad Hoc Group Members that together own and hold with the power to vote at least 99% of the aggregate amount of outstanding principal indebtedness under the First Lien Credit Agreement, and (y) the HERO Entities (such date, the “RSA Effective Date”).

 

  b.

Without limiting the rights and remedies of any Party arising from a breach of this Agreement prior to its valid termination, if this Agreement is validly terminated in its entirety in accordance with its terms, then this Agreement shall be null and void and have no further legal effect and none of the Parties shall have any liability or obligation arising under or in connection with this

 

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  Agreement; provided that if this Agreement is validly terminated in its entirety in accordance with its terms as to any Party but not as to all Parties, then this Agreement shall be null and void and have no further legal effect only with respect to such Party.

 

  c. Each of the exhibits attached hereto is expressly incorporated herein and made a part of this Agreement, and all references to this Agreement shall include and incorporate the exhibits, including the Term Sheet. In the event of any inconsistency between this Agreement (without reference to the exhibits) and the exhibits, this Agreement (without reference to the exhibits) shall govern except in the case of the Term Sheet, in which case the terms provided in the Term Sheet shall govern.

 

  d. With the exception of non-disclosure and confidentiality agreements among the Parties and the Amended and Restated Forbearance Agreement, this Agreement (including the Term Sheet) constitutes the entire agreement of the Parties with respect to the subject matter hereof and supersedes all prior agreements (oral and written) and all other prior negotiations.

3. Mutual Covenants of All Parties.

For so long as this Agreement has not been validly terminated in its entirety in accordance with its terms, and subject to the terms and conditions of this Agreement, the Parties agree severally and not jointly (in the case of any Ad Hoc Group Member, so long as it remains the legal owner, beneficial owner and/or investment advisor or manager of or with power and/or authority to bind any First Lien Claims and, if applicable, HERO Common Stock (provided that any transfer of First Lien Claims or, if applicable, HERO Common Stock is made in accordance with Section 10 herein)) to use commercially reasonable efforts to complete the Restructuring through the Plan within the timeframe contemplated by this Agreement and on terms and conditions consistent with those set forth herein and in the Term Sheet. For so long as this Agreement has not been validly terminated in its entirety in accordance with its terms, each Party hereby agrees and covenants severally (but not jointly) to:

 

  a. cooperate with each other in good faith and coordinate their activities in connection with (i) the pursuit and implementation of the Restructuring, (ii) confirmation and consummation of the Plan, and (iii) in the event that the Debtors and the Requisite Consenting Lenders agree on an alternative structure that provides tax efficiencies and lower costs, implementing such an alternative Wind Down Entity structure, in each case as soon as reasonably practicable;

 

  b.

use commercially reasonable efforts and work in good faith to negotiate definitive documents implementing, achieving and relating to the Restructuring, including, but not limited to, (i) the Disclosure Statement, the motion seeking approval of the Disclosure Statement, the Plan, the order of the Bankruptcy Court confirming the Plan (such order, in form and substance reasonably acceptable to the Requisite Consenting Lenders, the “Confirmation

 

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  Order”), the motion seeking entry of the Confirmation Order, the plan supplement and its exhibits, the Solicitation Procedures (as defined below), the motion seeking the entry of orders approving the Debtors’ ability to use cash collateral on interim and final bases (collectively, the “Cash Collateral Orders”), and each of the organizational, governance and exit credit documents contemplated by the Term Sheet; (ii) such other related plan documents and ancillary agreements required to implement the Restructuring, the Plan and Disclosure Statement, each of which are more specifically described in the Term Sheet and shall contain terms and conditions substantially consistent in all respects with the Term Sheet and, if not specified in the Term Sheet, otherwise in form and substance reasonably acceptable to the Requisite Consenting Lenders and the Debtors (collectively, the “Definitive Documents”); and (iii) execute (to the extent they are a party thereto) the Definitive Documents and otherwise support and seek to effect the actions and transactions contemplated thereby, in each case as soon as reasonably practicable, provided that each of the Definitive Documents shall (A) contain terms and conditions consistent in all material respects with this Agreement and the Term Sheet and (B) otherwise be reasonably acceptable in all respects to the Debtors and the Requisite Consenting Lenders, including with respect to any modifications, amendments, or supplements to such Definitive Documents, provided further that each of the organizational, governance and exit credit documents contemplated by the Term Sheet shall be substantially consistent in all material respects with the Term Sheet and this Agreement and reasonably acceptable to the Requisite Consenting Lenders in all respects (it being understood that any objection by the Requisite Consenting Lenders to any provision of the organizational, governance or exit credit documents contemplated by this Agreement and the Term Sheet that would materially and adversely affect the recoveries of the First Lien Lenders contemplated therein, or to have a material and adverse impact on the governance structure of the Wind Down Entity shall be deemed to be reasonable);

 

  c. use their commercially reasonable efforts to negotiate and execute all Definitive Documents reasonably necessary or otherwise required to commence solicitation for the Plan (“Solicitation”) by no later than May 31, 2016;

 

  d. take such action as may be reasonably necessary to carry out the purposes and intent of this Agreement;

 

  e. not take any action that is inconsistent in any material way with, or is intended to frustrate, delay or impede the timely approval and confirmation of the Plan and consummation of the transactions described in the Term Sheet and the Plan;

 

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  f. to the extent any legal or structural impediment arises that would prevent, hinder, or delay the consummation of the transactions contemplated herein, negotiate in good faith appropriate additional or alternative provisions to address any such impediment; provided, that the economic outcome for the Parties and other materials terms of this Agreement are preserved in any such provisions;

 

  g. comply with all of its obligations under this Agreement and the exhibits annexed hereto (which exhibits are incorporated herein by reference) unless compliance is waived in writing by each of the other Parties;

 

  h. comply with all of its obligations under the Amended and Restated Forbearance Agreement; and

 

  i. support and use commercially reasonable efforts to (i) complete the Restructuring and all transactions contemplated under this Agreement, including, without limitation, those described in the Term Sheet (and the Plan) as soon as reasonably practicable, and in any event, not later than in accordance with the deadlines specified in the milestones set forth in the Term Sheet and in the section entitled “Additional Covenants of the Debtors” herein (collectively, as the same may be modified in accordance with the terms of this Agreement, the “Milestones”), (ii) take any and all reasonably necessary actions in furtherance of the Restructuring and the transactions contemplated under this Agreement, including, without limitation, as set forth in the Term Sheet (and once filed, the Plan), and (iii) obtain (solely as it relates to such Party) any and all required regulatory and/or third party approvals necessary to consummate the Restructuring.

4. Actions by the Ad Hoc Group.

Unless otherwise expressly set forth herein, matters herein requiring action by, or the consent of, the Ad Hoc Group shall be subject to the consent of Ad Hoc Group Members holding at least 50.1% of the outstanding, aggregate principal amounts owing under the First Lien Credit Agreement (the “Requisite Consenting Lenders”).

5. Additional Covenants of the Ad Hoc Group Members.

For so long as this Agreement has not been validly terminated in its entirety in accordance with its terms with respect to it, each Ad Hoc Group Member (solely on its own behalf and not on behalf of any other holder of First Lien Claims or, if applicable, HERO Common Stock) hereto agrees and covenants severally (but not jointly), so long as it remains the legal owner, beneficial owner and/or investment advisor or manager of or with power and/or authority to bind any First Lien Claims and, if applicable, HERO Common Stock (provided that any transfer of First Lien Claims or, if applicable, HERO Common Stock is made in accordance with Section 10 herein), to:

 

  a.

not, directly or indirectly, (i) object to, delay, impede, or take any other action to interfere with the acceptance, implementation, confirmation or consummation of the Restructuring and the Plan; (ii) seek, solicit, support, encourage, or vote any claims or equity interests for, consent to, or participate

 

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  in any discussions regarding the negotiation or formulation of any restructuring or reorganization for any of the Debtors that is inconsistent with this Agreement, the Term Sheet or the Plan in any respect; (iii) take any other action that would delay or obstruct the timely approval and consummation of the transactions contemplated by this Agreement, the Term Sheet or the Plan in any respect; (iv) commence or support any action or proceeding to shorten or terminate the period during which only the Debtors may propose and/or seek confirmation of a plan of reorganization; or (v) otherwise support any plan or sale process that is inconsistent with this Agreement, the Term Sheet or the Plan;

 

  b. not instruct the First Lien Agent to take any action that is inconsistent with the terms and conditions of this Agreement or the Amended and Restated Forbearance Agreement and if the First Lien Agent takes or threatens to take any such action, direct the First Lien Agent not to take such action;

 

  c. use commercially reasonable efforts to execute any document and give any notice, order, instruction, or direction necessary or reasonably requested by the Debtors to support, facilitate, implement, or consummate or otherwise give effect to the Restructuring;

 

  d. (i) reasonably support the approval of the Disclosure Statement, the solicitation and the solicitation procedures (such procedures, in form and substance reasonably acceptable to the Requisite Consenting Lenders, the “Solicitation Procedures”), or any of the Definitive Documents by the Bankruptcy Court or any regulatory authority, (ii) reasonably support confirmation and consummation of the Plan, (iii) not oppose, object to or join in or support any objection to the Disclosure Statement, the solicitation and the Solicitation Procedures, or any of the Definitive Documents, or (iv) otherwise commence any proceeding to oppose or alter any of the terms of the Plan or any other document filed by Debtors (to the extent such document is in form and substance reasonably acceptable to the Requisite Consenting Lenders) in connection with the confirmation and consummation of the Plan;

 

  e. (i) subject to receipt of the Disclosure Statement, vote, and cause its controlled affiliates and funds, as appropriate, to vote each of its First Lien Claims and, as applicable, any other voting claims against, or interests in, the Debtors, to accept the Plan by delivering its duly executed and completed ballot accepting the Plan on a timely basis following the commencement of the solicitation and its actual receipt of the Disclosure Statement and related solicitation materials that meet the requirements of applicable law, including sections 1125 and 1126 of the Bankruptcy Code; and (ii) to the extent such election is available, not elect on its ballot to preserve claims, if any, that each Ad Hoc Group Member may own or control that may be affected by any releases expressly contemplated by the Plan;

 

  f. not change or withdraw (or cause to be changed or withdrawn) such vote; and

 

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  g. contemporaneously with the execution of this Agreement, enter into (and direct the First Lien Agent to enter into) the Amended and Restated Forbearance Agreement.

6. Additional Covenants of the Debtors.

For so long as this Agreement and the Amended and Restated Forbearance Agreement have not been validly terminated in their entirety in accordance with their terms, the Debtors agree and covenant to:

 

  a. cause the sale process for the HERO Entities’ assets to continue during the Chapter 11 Cases. Purchase and sale agreements entered into by the HERO Entities contemplating the sale of any of the HERO Entities’ vessels that secure the First Lien Claims shall be subject to the approval of the Requisite Consenting Lenders, whether such agreements are entered into before, or during the Chapter 11 Cases, which consent of the Requisite Consenting Lenders shall not be unreasonably withheld;

 

  b. provide draft copies of all “first day” motions or applications and other documents the Debtors intend to file with the Bankruptcy Court on the Petition Date to counsel to the Ad Hoc Group at least two (2) business days prior to the date on which the Debtors intend to file such documents and to consult in good faith with the Ad Hoc Group regarding the form and substance of any such proposed filing with the Bankruptcy Court. The Debtors will use good faith efforts to provide draft copies of all other material pleadings the Debtors intend to file with the Bankruptcy Court to counsel to the Ad Hoc Group within a reasonable time prior to filing such pleading to the extent practicable and shall consult in good faith with the Ad Hoc Group regarding the form and substance of any such proposed pleading;

 

  c. conclude Solicitation (i) on or before June 3, 2016 for holders of First Lien Claims and (ii) on or before June 28, 2016 for holders of HERO Common Stock;

 

  d. commence the Chapter 11 Cases on or before 7:00 a.m. New York City time on June 6, 2016;

 

  e. file on the Petition Date such first day motions and pleadings as are reasonably acceptable, in form and substance, to the Requisite Consenting Lenders;

 

  f. file the Plan, the motion to approve the use of cash collateral on an interim and final basis, and the Disclosure Statement and the motion to approve the Disclosure Statement with the Bankruptcy Court on the Petition Date;

 

  g. obtain entry by the Bankruptcy Court of the interim Cash Collateral Order in form and substance reasonably acceptable to the Debtors and the Requisite Consenting Lenders on or before the date that is three (3) business days after the Petition Date;

 

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  h. The Bankruptcy Court shall have established a limited claims bar date for specific contingent and unliquidated claims, including, but not limited to, any claims asserting liability for personal injury, and claims in an amount in excess of $300,000 (the “Specified Claims”), in form and substance reasonably acceptable to the Debtors and the Requisite Consenting Lenders, on or before July 29, 2016; provided, however, that the Specified Claims shall specifically not include (i) claims of any taxing authorities, (ii) rejection damages claims, or (iii) any claims of the Executives (as defined below) or other employees who are parties to severance agreements with the Debtors; and the Executives and the other employees who are parties to severance agreements with the Debtors shall not be required to file any proofs of claim unless their applicable employment and/or severance agreements are rejected under the Plan by an order of the Court, which may be the Confirmation Order and such Executive or other employee has not been provided alternative severance compensation pursuant to the terms of the Plan or another agreement with the Debtors (with the consent of the Requisite Consenting Lenders) or the Wind Down Entity;

 

  i. obtain approval by the Bankruptcy Court of the Disclosure Statement and the Solicitation Procedures and entry of the Confirmation Order on or before August 2, 2016, which Confirmation Order shall be a Final Order (as defined in the Term Sheet) on or before August 16, 2016;

 

  j. use commercially reasonable efforts to consummate the Plan on or before August 16, 2016;

 

  k. take no action that is materially inconsistent with this Agreement, the Term Sheet, or the Plan, or that would unreasonably delay approval or ratification, as applicable, of the Disclosure Statement, the solicitation and Solicitation Procedures, or confirmation and consummation of the Plan;

 

  l. not directly or indirectly (A) join in or support any alternative plan or transaction other than the Plan; or (B) take any action to alter in any material respect, unreasonably delay, or impede the approval or ratification, as applicable, of the Disclosure Statement, the solicitation and Solicitation Procedures, and confirmation and consummation of the Plan;

 

  m. object to any motion to approve or confirm, as applicable, any other plan of reorganization, sale transaction, or any motions related thereto, to the extent that the terms of any such motions, documents, or other agreements are inconsistent with this Agreement or the Term Sheet and such inconsistencies were not approved in writing by the Requisite Consenting Lenders;

 

  n. continue to operate its businesses, market assets of the Debtors for sale, and conduct sale processes in accordance with its business judgment, and confer with the Ad Hoc Group, the Requisite Lenders, and their respective representatives, as reasonably requested, to report on operational matters, the asset sale process, and the general status of ongoing operations and dispositions;

 

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  o. use commercially reasonable efforts to provide prompt written notice to the Ad Hoc Group between the date hereof and the effective date of the Plan of (i) the occurrence, or failure to occur, of any event of which John Rynd, Troy Carson, Beau Thompson, Son Vann or Charlie Lestage (or the successors of the any of the foregoing) (the “Senior Executives”) have actual knowledge which occurrence or failure would be reasonably likely to cause (1) any representation or warranty of the Debtors contained in this Agreement to be untrue or inaccurate in any material respect, (2) any material covenant of the Debtors contained in this Agreement not to be satisfied in any material respect or (3) any condition precedent contained in the Plan or this Agreement not to occur or become impossible to satisfy, (ii) receipt of any written notice from any third party alleging that the consent of such party is or may be required as a condition precedent to consummation of the transactions contemplated by the Restructuring, (iii) receipt of any written notice from any governmental body that is material to the consummation of the transactions contemplated by the Restructuring, (iv) receipt of any written notice of any proceeding commenced, or, to the actual knowledge of the Senior Executives, threatened against the Debtors, that, if determined in a manner adverse to the Debtors, would be material to the consummation of the transactions contemplated by the Restructuring, and (v) any failure of the Debtors to comply, in any material respect, with or satisfy any covenant, condition or agreement to be complied with or satisfied by them hereunder hereunder as a condition precedent to the consummation of the transactions contemplated by the Restructuring;

 

  p. use commercially reasonable efforts to obtain the earliest possible date for a hearing on confirmation of the Plan as the Bankruptcy Court may provide;

 

  q. provide to the Ad Hoc Group and/or its professionals, upon reasonable advance notice to the Debtors, (i) reasonable access (without any material disruption to the conduct of the Debtors’ business) during normal business hours to the Debtors’ books, records and facilities, and (ii) reasonable access to the respective management and advisors of the Debtors during normal business hours for the purposes of evaluating the Debtors’ finances and operations and participating in the planning process with respect to the Restructuring; and

 

  r. pay the reasonable and documented fees and expenses of Kirkland & Ellis LLP, as counsel to the Ad Hoc Group, White & Case LLP, as counsel to Luminus Management LLC and Soros Fund Management, LLC, and one local counsel to the Ad Hoc Group, and the reasonable and documented fees and expenses of other professionals retained by the Ad Hoc Group that have executed engagement letters with the Debtors, as well as the reasonable fees and expenses incurred by the First Lien Agent, including King & Spalding LLP, as restructuring counsel, White & Case LLP, as counsel with respect to the administration of the First Lien Credit Agreement and the other Loan Documents (as defined in the First Lien Credit Agreement), special maritime counsel and one local counsel, in each case incurred in connection with the Restructuring.

 

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7. Preservation of Participation Rights. For the avoidance of doubt, nothing in this Agreement shall limit any rights of any Party, subject to applicable law, the Plan, and the Term Sheet, to (a) appear and participate as a party in interest in any contested matter to be adjudicated in the Chapter 11 Cases; (b) initiate, prosecute, appear, or participate as a party in interest in any adversary proceeding in the Bankruptcy Cases, so long as, in the case of each of (a) or (b), such appearance, initiation, prosecution or participation and the positions advocated in connection therewith are not materially inconsistent with this Agreement, the Amended and Restated Forbearance Agreement, the Plan or the Term Sheet, as applicable; (c) object to any motion to approve or confirm, as applicable, any other plan of reorganization or liquidation, sale transaction, or any motions related thereto, to the extent that the terms of any such motions, documents, or other agreements are materially inconsistent with this Agreement, the Plan or the Term Sheet and such inconsistencies were not approved in writing by each other Party; (d) file a copy of this Agreement (including all exhibits hereto) or a description of the matters herein with the Bankruptcy Court or as required under applicable non-bankruptcy law; (e) appear as a party in interest in the Chapter 11 Cases for the purpose of contesting whether any matter or fact is or results in a breach of, or is materially inconsistent with, this Agreement or the Amended and Restated Forbearance Agreement; and (f) as applicable, file any proof of claim.

8. Mutual Representations and Warranties of All Parties. Each Party represents and warrants to each of the other Parties that, as of the date hereof:

 

  a. it has all requisite power and authority to enter into this Agreement and to carry out the transactions contemplated by, and perform its obligations under, this Agreement;

 

  b. the execution and delivery of this Agreement and the performance of its obligations hereunder have been duly authorized by all necessary action on its part; and

 

  c. this Agreement constitutes the legally valid and binding obligation of such Party, enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium, or other similar laws relating to or limiting creditors’ rights generally or by equitable principles relating to enforceability.

9. Additional Representations and Warranties by the Ad Hoc Group Members. Each Ad Hoc Group Member (solely on its own behalf and not on behalf of any other Ad Hoc Group Member) represents and warrants to the best of its knowledge, as of the date hereof that:

 

  a.

Holdings by Ad Hoc Group. As of the date hereof, with respect to the First Lien Claims and, if applicable, HERO Common Stock held by such Ad Hoc Group Member as set forth on Schedule 1 hereto, such Ad Hoc Group Member (A) either (i) is the sole beneficial owner of the principal amount of such First Lien Claims and, if applicable, HERO Common Stock, or (ii) has sole investment or voting discretion with respect to the principal amount of such First Lien Claims and, if applicable, HERO Common Stock as set forth herein and has the power and authority to bind the beneficial owners of such

 

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  First Lien Claims and, if applicable, HERO Common Stock to the terms of this Agreement, and (B) has full power and authority to act on behalf of, vote, and consent to matters concerning such First Lien Claims and, if applicable, HERO Common Stock and to dispose of, exchange, assign, and transfer such First Lien Claims and, if applicable, HERO Common Stock.

 

  b. No Transfers. As of the date hereof, with respect to the First Lien Claims and, if applicable, HERO Common Stock held by such Ad Hoc Group Member as set forth on Schedule 1 hereto, such Ad Hoc Group Member has made no assignment, sale, participation, grant, conveyance, pledge, or other transfer of, and has not entered into any other agreement to assign, sell, use, participate, grant, convey, pledge, or otherwise transfer, in whole in or part, any portion of its right, title, or interests in any such First Lien Claims and, if applicable, HERO Common Stock that are subject to this Agreement that conflict with the representations and warranties of such Ad Hoc Group Member herein or would render such Ad Hoc Group Member otherwise unable to comply with this Agreement and perform its obligations hereunder.

 

  c. Sufficiency of Information Received. Such Ad Hoc Group Member has reviewed, or has had the opportunity to review, with the assistance of professional and legal advisors of its choosing, all information it deems necessary and appropriate for such Ad Hoc Group Member to evaluate the risks inherent in the Restructuring and accept the terms of the Plan as set forth in the Term Sheet.

10. Transfer Restrictions. No Ad Hoc Group Member shall (i) sell, use, pledge, assign, transfer, permit the participation in, or otherwise dispose of any ownership (including any beneficial ownership) in the First Lien Claims and, if applicable, HERO Common Stock set forth on Schedule 1 hereto in whole or in part; or (ii) grant any proxies, deposit any of such Ad Hoc Group Member’s interests in First Lien Claims and, if applicable, HERO Common Stock as set forth on Schedule 1 hereto into a voting trust, or enter into a voting agreement with respect to any such interest (collectively, the actions described in clauses (i) and (ii), a “Transfer”), unless it satisfies the following requirement (a transferee that satisfies such requirements, a “Permitted Transferee,” and such Transfer, a “Permitted Transfer”): The intended transferee executes and delivers to counsel to HERO and counsel to the Ad Hoc Group on the terms set forth below an executed form of the transfer agreement in the form attached hereto as Exhibit B (a “Transfer Agreement”) before such Transfer is effective (it being understood that any Transfer shall not be effective until notification of such Transfer and a copy of the executed Transfer Agreement is received by counsel to HERO and counsel to the Ad Hoc Group, in each case, on the terms set forth herein).

Notwithstanding anything to the contrary herein, (i) the foregoing provisions shall not preclude any Ad Hoc Group Member from transferring First Lien Claims and/or HERO Common Stock to affiliates of such Ad Hoc Group Member (each, a “Creditor Affiliate”), which Creditor Affiliate automatically shall be bound by this Agreement and the Amended and Restated Forbearance Agreement upon the transfer of such First Lien Claims and/or HERO Common Stock, (ii) the foregoing provisions shall not preclude any Party from transferring First

 

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Lien Claims and/or HERO Common Stock to any other Party hereto, and (iii) a Qualified Marketmaker1 that acquires any of the First Lien Claims and/or HERO Common Stock with the purpose and intent of acting as a Qualified Marketmaker for such First Lien Claims and/or HERO Common Stock, shall not be required to execute and deliver to counsel a Transfer Agreement or otherwise agree to be bound by the terms and conditions set forth in this Agreement and the Amended and Restated Forbearance Agreement if such Qualified Marketmaker transfers such First Lien Claims and/or HERO Common Stock (by purchase, sale, assignment, participation, or otherwise) to an Ad Hoc Group Member or Permitted Transferee (including, for the avoidance of doubt, the requirement that such transferee execute a Transfer Agreement) and the transfer otherwise is a Permitted Transfer.

This Agreement shall in no way be construed to preclude any Ad Hoc Group Member or any of its affiliates from acquiring additional First Lien Claims, HERO Common Stock or any other claim against the HERO Entities or equity interest in HERO; provided, however, that (i) if any Ad Hoc Group Member acquires additional or transferred First Lien Claims, any other claims against any of the HERO Entities or HERO Common Stock, as applicable, after the RSA Effective Date, such Ad Hoc Group Member shall notify the other Parties promptly of such acquisition including the amount of such acquisition and (ii) such acquired First Lien Claims, other claims or HERO Common Stock, as the case may be, shall automatically and immediately upon acquisition by an Ad Hoc Group Member, as applicable, be deemed subject to the terms of this Agreement (regardless of when or whether notice of such acquisition is given to in accordance herewith).

Any Transfer made in violation of this provision shall be void ab initio. Any Ad Hoc Group Member that effectuates a Permitted Transfer to a Permitted Transferee shall have no liability under this Agreement arising from or related to the failure of the Permitted Transferee to comply with the terms of this Agreement.

11. Termination of Obligations.

(a) This Agreement shall terminate and all of the obligations of the Parties shall be of no further force or effect in the event that and upon the occurrence of any of the following events: (i) occurrence of the effective date of the Plan, (ii) an order denying confirmation of the Plan is entered, (iii) an order confirming the Plan is reversed or vacated, (iv) any court of competent jurisdiction has entered an order declaring this Agreement to be unenforceable, (v) the Parties mutually agree to termination of this Agreement in writing, (vi) the termination of the Amended and Restated Forbearance Agreement or (vii) this Agreement is terminated pursuant to paragraph (b), (c) or (d) of this Section 11.

(b) The HERO Entities may, in their discretion, terminate this Agreement by written notice to counsel for the Ad Hoc Group, upon the occurrence of any of the following events:

 

1  As used herein, the term “Qualified Marketmaker” means an entity that (a) holds itself out to the public or the applicable private markets as standing ready in the ordinary course of business to purchase from customers and sell to customers Claims of the Debtors (or enter with customers into long and short positions in Claims against the Debtors), in its capacity as a dealer or market maker in claims against the Debtors and (b) is, in fact, regularly in the business of making a market in claims against issuers or borrowers (including debt securities or other debt).

 

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(i) a determination by HERO’s board of directors (the “Board”), in good faith, based on the advice of its outside counsel, that proceeding with the Restructuring and pursuit of confirmation and consummation of the Plan would be inconsistent with the continued exercise of fiduciary duties under applicable law;

(ii) a breach by any Ad Hoc Group Member of its material covenants or other material obligations hereunder, which breach is not cured within three (3) business days after the giving of written notice by HERO of such breach to such Ad Hoc Group Member, provided that so long as non-breaching Ad Hoc Group Members party hereto continue to hold at least 2/3rds of the outstanding First Lien Claims, such termination shall be effective only with respect to such breaching Ad Hoc Group Member;

(iii) any Ad Hoc Group Member shall assert after the RSA Effective Date any claim or cause of action against any Debtor or any of its current directors, officers or advisors relating to the First Lien Credit Agreement, the First Lien Claims, the HERO Common Stock or the Restructuring, except the First Lien Claims themselves or to enforce the terms of this Agreement, provided that so long as non-breaching Ad Hoc Group Members party hereto continue to hold at least 2/3rds of the outstanding First Lien Claims, such termination shall be effective only with respect to such breaching Ad Hoc Group Member;

(iv) any representation or warranty in this Agreement made by any Ad Hoc Group Member shall have been untrue in any material respect when made, and such breach remains uncured for a period of three (3) business days following the breaching Ad Hoc Group Member’s receipt of notice thereof from HERO, provided that so long as non-breaching Ad Hoc Group Members party hereto continue to hold at least two-thirds of the outstanding First Lien Claims, such termination shall be effective only with respect to such breaching Ad Hoc Group Member; or

(v) the Bankruptcy Court (or other court of competent jurisdiction) enters an order (A) invalidating, disallowing, subordinating or limiting the enforceability, priority or validity of any of the First Lien Claims, or (B) the effect of which would render the Plan incapable of consummation on the terms set forth in this Agreement and the Term Sheet;

provided, that upon a termination of this Agreement by the HERO Entities pursuant to this Section 11(b) with respect to any Ad Hoc Group Member or all Ad Hoc Group Members, (x) all obligations of each affected Ad Hoc Group Member hereunder shall immediately terminate without further action or notice by such Ad Hoc Group Member, and (y) the HERO Entities (and each of its directors, officers, employees, advisors, subsidiaries, and representatives) shall not have or incur any liability under this Agreement or otherwise on account of such termination.

(c) This Agreement may be terminated by the Requisite Consenting Lenders upon the occurrence of any of the following events (it being understood that the following termination events are intended solely for the benefit of the Ad Hoc Group) (the “Lender Termination Events”):

(i) filing by the Debtors of a plan (or disclosure statement related thereto) in the Chapter 11 Cases that is materially inconsistent with the terms of the Term Sheet and this Agreement and not otherwise in form and substance reasonably acceptable to the Requisite Consenting Lenders;

 

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(ii) any representation or warranty in this Agreement made by the HERO Entities shall have been untrue in any material respect when made, and such breach remains uncured for a period of three (3) business days following HERO’s receipt of notice thereof from the Requisite Consenting Lenders;

(iii) any of the Debtors or their non-Debtor affiliates shall assert after the RSA Effective Date any claim or cause of action against the First Lien Agent or any First Lien Lender, except to enforce the terms of this Agreement;

(iv) after filing of the Plan, any amendment or modification to the Plan, or the filing of any pleading by any of the HERO Entities that seeks to amend or modify the Plan, which amendment, modification or filing is materially inconsistent with the terms of the Term Sheet or this Agreement and not otherwise in form and substance reasonably acceptable to the Requisite Consenting Lenders;

(v) a breach by any of the HERO Entities of its material covenants or other material obligations under this Agreement or the Term Sheet, which breach is not cured within three (3) business days after the giving of written notice by counsel for the Ad Hoc Group (acting at the direction of the Requisite Consenting Lenders) of such breach;

(vi) the Debtors (A) withdraw the Plan, (B) publicly announce their intention not to support the Plan or the Restructuring, (C) file a motion with the Bankruptcy Court seeking approval of any transaction that is inconsistent with the Restructuring, or (D) agree to pursue (including as may be evidenced by any term sheet, letter of intent or similar document) or publicly announce their intent to pursue any transaction that is inconsistent with the Restructuring;

(vii) the failure of the Debtors to comply with the Milestones within the periods specified therein, unless otherwise agreed in writing with the Requisite Consenting Lenders and the Debtors; it being understood that if a Milestone ends on a weekend or holiday on which the Bankruptcy Court is not open and holding hearings, such Milestone shall be automatically extended to the next business day on which the Bankruptcy Court is open and holding hearings;

(viii) the Bankruptcy Court enters an order modifying or terminating the Debtors’ exclusive right to file and/or solicit acceptances of a plan of reorganization (including the Plan);

(ix) the Bankruptcy Court (or other court of competent jurisdiction) enters an order (A) directing the appointment of an examiner with expanded powers or a trustee in any of the Chapter 11 Cases, (B) converting any of the Chapter 11 Cases to cases under chapter 7 of the Bankruptcy Code, (C) dismissing any of the Chapter 11 Cases, (D) invalidating, disallowing, subordinating or limiting the enforceability, priority or validity of any of the First Lien Claims, or (E) the effect of which would render the Plan incapable of consummation on the terms set forth in this Agreement and the Term Sheet; or

 

16


(x) the First Lien Agent shall not have received all the funds in the Escrow Account to prepay the First Lien Claims in accordance with the terms of the Term Sheet by the date that is three (3) business days after the delivery by the First Lien Agent of a written instruction to the Escrow Agent to distribute all of the funds in the Escrow Account to the First Lien Agent to prepay the Loans pursuant to III(d) of the Escrow Agreement and Section 2.10(a)(i) of the First Lien Credit Agreement.

(d) The HERO Entities or the Ad Hoc Group (by written notice executed by counsel at the direction of the Requisite Consenting Lenders) may terminate this Agreement by written notice to the Parties in the event that the Bankruptcy Court or other governmental authority shall have issued any order, injunction or other decree or take any other action, which restrains, enjoins or otherwise prohibits the implementation of the Restructuring and/or the Plan substantially on the terms and conditions set forth in this Agreement.

(e) This Agreement shall terminate solely as to any Ad Hoc Group Member on the date on which such Ad Hoc Group Member has transferred all (but not less than all) of its First Lien Claims (and HERO Common Stock, if any) in accordance with Section 9 of this Agreement.

(f) If this Agreement is terminated pursuant to this Section 11, all further obligations of the Parties hereunder shall be terminated and without further liability; provided that each Party shall have all rights and remedies available to it under applicable law. Upon a termination of this Agreement in accordance with this Section, no Party hereto shall have any continuing liability or obligation to any other Party hereto and the provisions of this Agreement shall have no further force or effect; provided that no such termination shall relieve any party from liability for its breach or non-performance of its obligations hereunder prior to the date of such termination.

12. Fiduciary Duties. Notwithstanding anything to the contrary herein, nothing in this Agreement shall require HERO, any of the other HERO Entities, or any of their respective officers or directors (in such person’s capacity as such) to take any action, or to refrain from taking any action, to the extent that taking such action or refraining from taking such action would be inconsistent with such person’s or entity’s fiduciary obligations under applicable law. HERO shall give the Ad Hoc Group not less than three (3) business days’ prior written notice before the exercise of rights under this Section 12 or the termination of this Agreement in accordance with Section 11(b)(i) of this Agreement (it being understood that the specific performance provisions of Section 13 of this Agreement shall not be applicable to the Parties with respect to the exercise of rights under this Section 12 or termination of this Agreement in accordance with Section 11(b)(i) of this Agreement). For the avoidance of doubt, the foregoing shall not preclude the Ad Hoc Group from challenging the appropriateness of the exercise of fiduciary duties as the basis for the exercise of rights under this Section 12 or the termination of this Agreement in accordance with Section 11(b)(i) of this Agreement.

13. Specific Performance. It is understood and agreed by the Parties that money damages would be an insufficient remedy for any breach of this Agreement by any Party and each non-breaching Party shall be entitled to specific performance and injunctive or other equitable relief (without the posting of any bond and without proof of actual damages) as a remedy of any such breach, including an order of the Bankruptcy Court or other court of competent jurisdiction requiring any Party to comply promptly with any of its obligations hereunder. The Parties expressly consent to entry of orders by the Bankruptcy Court to enforce this Agreement.

 

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14. Counterparts. This Agreement and any amendments, waivers, consents, or supplements hereto or in connection herewith may be executed in multiple counterparts (including by means of telecopied or electronically transmitted signature pages), all of which taken together shall constitute one and the same Agreement.

15. No Solicitation and Acknowledgements. Each Party acknowledges that (a) no securities of any of the HERO Entities are being offered or sold hereby and this Agreement neither constitutes an offer to sell nor a solicitation of an offer to buy any securities of any of the HERO Entities and (b) this Agreement is not, and shall not be deemed to be, a solicitation of a vote for the acceptance of any chapter 11 plan (including the Plan) pursuant to section 1125 of the Bankruptcy Code. The acceptance of votes from holders of claims against, and interests in, the Debtors, as applicable, will not be solicited until such holders have received the Disclosure Statement and related solicitation materials that meet the requirements of the Bankruptcy Code, including Bankruptcy Code sections 1125 and 1126.

16. Relationship Among Ad Hoc Group Members. The obligations of each Ad Hoc Group Member under this Agreement are several and not joint with the obligations of any other Ad Hoc Group Member, and no Ad Hoc Group Member shall be responsible in any way for the performance of the obligations of any other Ad Hoc Group Member under this Agreement. Each of the Ad Hoc Group Members, on the one hand, and the Debtors, on the other hand, acknowledge that they are in privity with each other and that no Ad Hoc Group Member is in privity with any other Ad Hoc Group Member in connection with this Agreement or any of the transactions contemplated hereby. It is understood and agreed that no Ad Hoc Group Member has any duty of trust or confidence of any kind or form with any other Ad Hoc Group Member, and, except as expressly provided in this Agreement, there are no commitments among or between them. In this regard, it is understood and agreed that any Ad Hoc Group Member may trade in and vote the First Lien Claims, or other debt or equity securities of the HERO Entities, including without limitation the HERO Equity Interests, without the consent of the HERO Entities or any other Ad Hoc Group Member, subject to the terms of this Agreement and applicable securities laws. Nothing contained in this Agreement, and no action taken by any Ad Hoc Group Member pursuant hereto shall be deemed to constitute the Ad Hoc Group as, and the Debtors agree that the Ad Hoc Group does not so constitute, a partnership, an association, a joint venture or any other kind of entity, or create a presumption that any Ad Hoc Group Member is in any way acting in concert or as a group, and the Debtors will not assert any such claim and the Debtors agree that the Ad Hoc Group Members are not acting in concert or as a group with respect to the transactions contemplated by this Agreement. The Debtors acknowledge and each Ad Hoc Group Member confirms that it has independently participated in the negotiation of the transaction contemplated hereby with the advice of its own counsel and advisors. Each Ad Hoc Group Member shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement, and it shall not be necessary for any other Ad Hoc Group Member to be joined as an additional party in any proceeding for such purpose. No prior history, pattern or practice of sharing confidences among or between the Ad Hoc Group Members shall in any way affect or negate the understandings and agreements set forth in this Section 16.

 

18


17. Confidentiality. Other than as may be required by applicable law and regulation or by any governmental or regulatory authority or as may be required to comply with the terms of this Agreement, no Party shall make any public announcement regarding this Agreement without the consent of the other Parties, and each Party shall coordinate with the other Parties regarding communications with the press with respect to this Agreement; for the avoidance of doubt, each Party shall have the right, without any obligation to any other Party, to decline to comment to the press with respect to this Agreement.

18. Time is of the Essence. The Parties acknowledge and agree that time is of the essence, and that they must each use best efforts to effectuate and consummate the Restructuring as soon as reasonably practicable.

19. Governing Law; Consent to Jurisdiction; Waiver of Jury Trial.

THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ANY CONFLICTS OF LAW PROVISION WHICH WOULD REQUIRE THE APPLICATION OF THE LAW OF ANY OTHER JURISDICTION.

(a) By its execution and delivery of this Agreement, each of the Parties hereto irrevocably and unconditionally agrees for itself that any legal action, suit, or proceeding against it with respect to any matter under or arising out of or in connection with this Agreement or for recognition or enforcement of any judgment rendered in any such action, suit, or proceeding, shall be brought, to the extent possible, in either the United States District Court for the Southern District of New York or any New York State Court sitting in New York City or following the Petition Date, the Bankruptcy Court (the “Chosen Courts”). By execution and delivery of this Agreement, each of the Parties irrevocably accepts and submits itself to the exclusive jurisdiction of the Chosen Courts, generally and unconditionally, with respect to any such action, suit, or proceeding, and waives any objection it may have to venue or the convenience of the forum.

(b) Each Party hereby waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in any legal proceeding arising out of, or relating to, this Agreement or the transactions contemplated hereby (whether based on contract, tort, or any other theory). Each Party (i) certifies that no representative, agent, or attorney of any other Party has represented, expressly or otherwise, that such other Party would not, in the event of litigation, seek to enforce the foregoing waiver and (ii) acknowledges that it and the other Parties have been induced to enter into this Agreement by, among other things, the mutual waivers and certifications in this Section 19.

 

19


20. Independent Analysis. Each Party hereby confirms that it has made its own decision to execute this Agreement based upon its own independent assessment of documents and information available to it, as it has deemed appropriate.

21. Third-Party Beneficiaries.

Unless expressly stated herein, this Agreement shall be solely for the benefit of the Parties hereto and no other person or entity shall be a third party beneficiary hereof.

22. Notices. Any notice, request, instruction or other document to be given hereunder by any party to the others shall be in writing and delivered personally or sent by registered or certified mail, postage prepaid, by email or overnight courier.

 

(a) If to the Ad Hoc Group, to:

Brian S. Lennon

Robert A. Britton

Kirkland & Ellis LLP

601 Lexington Avenue

New York, New York 10022

[email protected]

[email protected]

 

(b) If to any of the HERO Entities, to:

Beau M. Thompson

Senior Vice President, General Counsel and Secretary

Hercules Offshore, Inc.

9 Greenway Plaza, Suite 2200

Houston, Texas 77046

[email protected]

With a copy to:

Michael S. Stamer

Philip C. Dublin

Akin Gump Strauss Hauer & Feld LLP

One Bryant Park

Bank of America Tower

New York, New York 10036

[email protected]

[email protected]

23. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the

 

20


remainder of such provision or the remaining provisions of this Agreement. In the event that any part of this Agreement is declared by any court or other judicial or administrative body to be null, void or unenforceable, said provision survives to the extent it is not so declared, and all of the other provisions of this Agreement remain in full force and effect only if, after excluding the portion deemed to be unenforceable, the remaining terms provide for the consummation of the transactions contemplated hereby in substantially the same manner as originally set forth at the later of the date this Agreement was executed or last amended.

24. Mutual Drafting. This Agreement is the result of the Parties’ joint efforts, and each of them and their respective counsel have reviewed this Agreement and each provision hereof has been subject to the mutual consultation, negotiation, and agreement of the Parties, and the language used in this Agreement shall be deemed to be the language chosen by the Parties to express their mutual intent, and therefore there shall be no construction against either Party based on any presumption of that Party’s involvement in the drafting thereof.

25. Headings. The headings used in this Agreement are for convenience of reference only and do not constitute a part of this Agreement and shall not be deemed to limit, characterize, or in any way affect any provision of this Agreement, and all provisions of this Agreement shall be enforced and construed as if no headings had been used in this Agreement.

26. Amendments. Notwithstanding anything to the contrary contained herein, this Agreement may not be modified, amended, or supplemented, nor shall any provision or requirement hereof be waived, without the prior written agreement signed by both (a) the HERO Entities and (b) the Requisite Consenting Lenders; provided, that notwithstanding the foregoing, any modifications, amendments, or supplements or waivers to the Agreement, including any exhibits hereto (including any provision in the Term Sheet), to (i) the sub-provision entitled “First Lien Claims” in the provision entitled “Treatment of Claims and Interests” in the Term Sheet, (ii) the sub-provisions entitled “HERO Common Stock” and “Other Equity Interests” in the provisions entitled “Treatment of Claims and Interests” in the Term Sheet, (iii) any documentation with regard to (i) through (ii) above, (iv) any change to this Section 26, and (v) any proposed modification, amendment or supplement to, or waiver of, any provision of the Agreement that would, or would reasonably be expected to, materially and adversely affect any Ad Hoc Group Member in a manner that is disproportionate to any other Ad Hoc Group Member or the Ad Hoc Group as a whole, may not be made without the prior written consent of the HERO Entities and each member of the Ad Hoc Group (or, in the case of “subsection (v)”, by such Ad Hoc Group Member that would be so affected); provided further that with regard to the obligations of any Ad Hoc Group Member to vote its HERO Equity Interests pursuant to the terms of this Agreement, including, without limitation, any obligations in Section 5 of this Agreement, such provisions may be modified, amended or supplemented by any Ad Hoc Group Member, with respect to itself, and the Debtors, without the participation of, or consent of, any other Ad Hoc Group Member.

 

21


27. Several, Not Joint, Claims. The agreements, representations, warranties, and obligations of the Parties under this Agreement are, in all respects, several and not joint.

[Signature Pages Follow]

 

22


IN WITNESS WHEREOF, this Agreement has been duly executed as of the date first above written.

 

HERCULES OFFSHORE, INC.
By:   /s/ Troy Carson
Name: Troy Carson
Title: SVP & CFO

CLIFFS DRILLING COMPANY

FDT LLC

FDT HOLDINGS LLC
HERCULES DRILLING COMPANY, LLC

HERCULES OFFSHORE LIFTBOAT COMPANY

LLC

HERO HOLDINGS, INC.
SD DRILLING LLC
THE OFFSHORE DRILLING COMPANY
THE ONSHORE DRILLING COMPANY
TODCO AMERICAS INC.
TODCO INTERNATIONAL INC.
HERCULES LIFTBOAT COMPANY, LLC
HERCULES OFFSHORE SERVICES LLC

HERCULES OFFSHORE INTERNATIONAL,

LLC

By:   /s/ Troy Carson
Name: Troy Carson
Title: Vice President


HERCULES OFFSHORE (NIGERIA) LIMITED
By:   /s/ Troy Carson
Name: Troy Carson
Title: Authorized Signatory


DISCOVERY OFFSHORE (GIBRALTAR) LIMITED
By:   /s/ Troy Carson
Name: Troy Carson
Title: Authorized Signatory
By:   /s/ Beau Thompson
Name: Beau Thompson
Title: Authorized Signatory


DISCOVERY NORTH SEA LTD.
DISCOVERY OFFSHORE SERVICES LTD.
HERCULES ASSET MANAGEMENT LTD.
HERCULES INTERNATIONAL DRILLING LTD.
HERCULES INTERNATIONAL HOLDINGS, LTD.
HERCULES INTERNATIONAL MANAGEMENT

COMPANY LTD.

HERCULES INTERNATIONAL OFFSHORE,

LTD.

HERCULES NORTH SEA, LTD.
HERCULES OFFSHORE ARABIA, LTD.
HERCULES OFFSHORE HOLDINGS LTD.
HERCULES OFFSHORE MIDDLE EAST LTD.
HERCULES OILFIELD SERVICES LTD.
TODCO TRINIDAD LTD.
By:  

/s/ Claus E. Feyling

Name: Claus E. Feyling
Title: Director


HERCULES OFFSHORE LABUAN CORPORATION
By:  

/s/ Claus E. Feyling

Name: Claus E. Feyling
Title: Director


HERCULES BRITANNIA HOLDINGS LIMITED
HERCULES BRITISH OFFSHORE LIMITED
HERCULES NORTH SEA DRILLER LIMITED
HERCULES OFFSHORE UK LIMITED
By:  

/s/ Claus E. Feyling

Name: Claus E. Feyling
Title: Director


LUMINUS ENERGY MASTER FUND, LTD., as
Lender
By:  

/s/ Jonathan Barrett

  Name : Jonathan Barrett
  Title :   Director

[SIGNATURE PAGE TO RESTRUCTURING SUPPORT AGREEMENT]


CERTAIN FUNDS AND ACCOUNTS EACH ACTING as Lender, severally and not jointly
By: T. ROWE PRICE ASSOCIATES, INC., as investment adviser
By:  

/s/ Rodney M. Rayburn

  Name: Rodney M. Rayburn
  Title: Vice President

[SIGNATURE PAGE TO RESTRUCTURING SUPPORT AGREEMENT]


NOMURA CORPORATE RESEARCH AND ASSET MANAGEMENT INC., as investment manager on behalf of certain of its clients:
By:  

/s/ Steven Kotsen

  Name: Steven Kotsen
  Title: Portfolio Manager

[SIGNATURE PAGE TO RESTRUCTURING SUPPORT AGREEMENT]


SIMPLON INTERNATIONAL LIMITED, as Lender
By:  

/s/ Thomas A. Mckay

  Name: Thomas A. Mckay
  Title: Its Attorney-In-Fact

[SIGNATURE PAGE TO RESTRUCTURING SUPPORT AGREEMENT]


BOWERY OPPORTUNITY FUND, L.P., as Lender
By: Bowery Opportunity Management, LLC, its General Partner
By:  

/s/ Vladimir Jelisavcic

  Name: Vladimir Jelisavcic
  Title: Manager
BOWERY OPPORTUNITY FUND, LTD., as Lender
By:  

/s/ Vladimir Jelisavcic

  Name: Vladimir Jelisavcic
  Title: Director
BLACKWELL PARTNERS LLC – SERIES A, as Lender
By: Bowery Opportunity Management, LLC, its General Partner
By:  

/s/ Vladimir Jelisavcic

  Name: Vladimir Jelisavcic
  Title: Manager
P BOWERY, LTD, as Lender
By: Bowery Investment Management, LLC, its investment manager
By:  

/s/ Vladimir Jelisavcic

  Name: Vladimir Jelisavcic
  Title: Manager

[SIGNATURE PAGE TO RESTRUCTURING SUPPORT AGREEMENT]


THIRD AVENUE TRUST, ON BEHALF OF     THIRD AVENUE FOCUSED CREDIT FUND
By: Third Avenue Management, LLC, its investment     advisor
By:  

/s/ W. James Hall

  Name: W. James Hall
  Title: General Counsel

[SIGNATURE PAGE TO RESTRUCTURING SUPPORT AGREEMENT]


SOUTH DAKOTA RETIREMENT SYSTEM
By:   /s/ Matthew L. Clark
  Name:   Matthew L. Clark
  Title:   State Investment Officer on behalf of the South Dakota Retirement System

[SIGNATURE PAGE TO RESTRUCTURING SUPPORT AGREEMENT]


WESTERN ASSET MANAGEMENT COMPANY,

as investment manager and agent on behalf of certain of its clients

By:   /s/ Adam Wright
  Name:   Adam Wright
  Title:   Manager, U.S. Legal Affairs

[SIGNATURE PAGE TO RESTRUCTURING SUPPORT AGREEMENT]


QPB HOLDING LTD, as Lender
By:   /s/ THOMAS L. O’GRADY
  Name:   THOMAS L. O’GRADY
  Title:   Attorney-in-Fact

[SIGNATURE PAGE TO RESTRUCTURING SUPPORT AGREEMENT]


IN WITNESS WHEREOF, this Agreement has been duly executed as of the date first above written.

 

QUANTUM PARTNERS LP, as holder of HERO Equity Interests

 

By: QP GP LLC, its General Partner

By:   /s/ THOMAS L. O’GRADY
Name:   THOMAS L. O’GRADY
Title:   Attorney-in-Fact

[SIGNATURE PAGE TO RESTRUCTURING SUPPORT AGREEMENT]


BANK OF AMERICA, N.A., as Lender
By:   /s/ Michael Lee
  Name: Michael Lee
  Title: Managing Director

[SIGNATURE PAGE TO RESTRUCTURING SUPPORT AGREEMENT]


EXHIBIT A

Term Sheet


EXECUTION VERSION

THIS TERM SHEET IS NOT AN OFFER WITH RESPECT TO ANY SECURITIES OF HERCULES OFFSHORE, INC. OR ANY OF ITS AFFILIATES OR A SOLICITATION OF ACCEPTANCES OR REJECTIONS OF A CHAPTER 11 PLAN WITHIN THE MEANING OF SECTION 1125 OF THE BANKRUPTCY CODE, IT BEING UNDERSTOOD THAT SUCH A SOLICITATION WILL ONLY BE MADE IN COMPLIANCE WITH APPLICABLE PROVISIONS OF SECURITIES, BANKRUPTCY AND/OR OTHER APPLICABLE LAWS. NOTHING CONTAINED IN THIS TERM SHEET IS AN ADMISSION OF FACT OR LIABILITY OR SHALL BE DEEMED BINDING ON ANY OF THE HERO ENTITIES OR ANY MEMBER OF THE AD HOC GROUP, SUBJECT TO THE EXECUTION OF THE RSA.

HERCULES OFFSHORE, INC., ET AL.

PLAN TERM SHEET

This term sheet (the “Term Sheet”) describes the material terms of a proposed “pre-packaged” chapter 11 plan for the Debtors (as defined below). This Term Sheet is subject in all respects to the negotiation, execution and delivery of Definitive Documents1 subject to the terms of the restructuring support agreement (the “RSA”) between the HERO Entities and the members of the Ad Hoc Group (as defined below). This Term Sheet does not include a description of all the relevant terms and conditions of the transactions contemplated herein.

This Term Sheet shall not constitute an offer to buy, sell or exchange for any of the securities or instruments described herein. It also shall not constitute a solicitation of the same. Further, nothing herein constitutes a commitment to exchange any debt or lend funds to any of the HERO Entities.

This Term Sheet is proffered in the nature of a settlement proposal in furtherance of settlement discussions and is intended to be entitled to the protections of Rule 408 of the Federal Rules of Evidence and all other applicable statutes or doctrines protecting the use or disclosure of confidential information and information exchanged in the context of settlement discussions.

 

1  Capitalized terms used herein but not otherwise defined shall have the meanings ascribed to them in the RSA.

 

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EXECUTION VERSION

SUMMARY OF PRINCIPAL TERMS AND CONDITIONS

 

Transaction Overview   
Parties:    Hercules Offshore, Inc. (“HERO”) and its subsidiaries that are party to the First Lien Credit Agreement (as defined below), each of which shall be a party to the RSA (collectively with HERO, the “HERO Entities”).
   The ad hoc group (the “Ad Hoc Group”) comprised of certain First Lien Lenders (as defined below) and listed on the signature pages attached to the RSA.
Transaction Summary:   

Subject to the terms and conditions of this Term Sheet, the RSA and Definitive Documentation, HERO, each of the other HERO Entities that is a domestic United States entity (other than Hercules Liftboat Company, LLC and Hercules Offshore International, LLC) (collectively, the “Debtors”) shall restructure and implement a process to monetize their assets and wind-down their operations through a “pre-packaged” chapter 11 plan (the “Plan”), which shall be filed with the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”), in cases (the “Chapter 11 Cases”) commenced by the Debtors by no later than June 6, 2016 (the date on which the Chapter 11 Cases are commenced, the “Petition Date”) under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”).

 

Agreements entered into or terminated by the HERO Entities contemplating the sale of any of the HERO Entities’ vessels that secure the First Lien Claims shall be subject to the approval of the Requisite Consenting Lenders, whether entered into before, or during the Chapter 11 Cases, which consent of the Requisite Consenting Lenders shall not be unreasonably withheld.

 

In connection with that certain Amended and Restated Forbearance Agreement, dated May 26, 2016, by and between the HERO Entities, the Administrative Agent, and certain of the First Lien Lenders (the “Amended and Restated Forbearance Agreement”), the Escrow Agent (as defined in the First Lien Credit Agreement (as defined below)) shall distribute all the funds in the Escrow Account (as defined in the First Lien Credit Agreement) to the First Lien Agent to prepay amounts due under the First Lien Credit Agreement pursuant to Section III(d) of the Escrow Agreement (as defined in the First Lien Credit Agreement) and Section 2.10(a)(i) of the First Lien Credit Agreement (the “Escrow Release Payment”). If the First Lien Agent shall not have received the Escrow Release Payment by the date that is 3 business days after the delivery by the First Lien Agent of a written instruction to the Escrow Agent to distribute all of the funds in the Escrow Account to the First Lien Agent to prepay the Loans, the RSA shall be terminable by the Requisite Consenting Lenders.

 

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EXECUTION VERSION

 

   The Plan and the other Definitive Documents shall be substantially consistent in all respects with this Term Sheet and otherwise reasonably acceptable to the HERO Entities and the Requisite Consenting Lenders.
Current Capital Structure   
First Lien Debt:   

Indebtedness under that certain Credit Agreement, dated as of November 6, 2015 (as amended, modified or supplemented from time to time, the “First Lien Credit Agreement”), among HERO, as borrower, Jefferies Finance LLC, as administrative agent and collateral agent (the “First Lien Agent”), and the lenders from time to time party thereto (the “First Lien Lenders”), comprised of loans on the closing date of the First Lien Credit Agreement in an aggregate principal amount equal to $450 million. The indebtedness under the First Lien Credit Agreement is secured by a first priority security interest and lien upon substantially all of the HERO Entities’ personal and real property.

 

The claims arising under the First Lien Credit Agreement (the “First Lien Claims”) shall be scheduled as of the Petition Date and shall be deemed allowed claims (i) under the interim and final Cash Collateral Order (as defined below) and (ii) as of the Effective Date (as defined below) against the Debtors in an amount equal to the outstanding principal, plus interest (including post-petition interest), fees and other expenses and the Applicable Premium (as defined in the First Lien Credit Agreement) due thereon. As of the RSA Effective Date, the aggregate amount of First Lien Claims is $579 million (plus accrued and unpaid interest), prior to taking into account any prepayments thereon contemplated by the Amended and Restated Forbearance Agreement. Neither the First Lien Agent nor any of the First Lien Lenders shall be required to file proofs of claim in the Chapter 11 Cases on account of the First Lien Claims.

General Unsecured Claims:    Trade and other general unsecured ordinary course obligations of the Debtors, which are neither secured nor entitled to priority under the Bankruptcy Code or any order of the Bankruptcy Court, in an estimated aggregate amount of approximately $43 million as of the Petition Date (collectively, the “General Unsecured Claims”).
HERO Equity Interests:    Any “equity security” (as such term is defined in Bankruptcy Code section 101(16)) in HERO, including any issued or authorized but unissued share of common stock, preferred stock, or other instrument evidencing an ownership interest in HERO, whether or not transferable, and any option, warrant, or right, contractual or otherwise, to acquire any such interest in HERO (including any stock-based performance award, incentive stock option, restricted stock, restricted stock unit, stock appreciation right, dividend equivalent, or other stock based award) that existed immediately prior to the Effective Date, and any claim against HERO subordinated pursuant to Bankruptcy Code section 510(b) (collectively, the “HERO Equity Interests”). “HERO Common Stock” shall refer to the approximately 20 million of outstanding common shares that are publicly traded on the NASDAQ under the HERO ticker.

 

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EXECUTION VERSION

 

Other Equity Interests:    Any HERO Equity Interests other than the HERO Common Stock.
Treatment of Claims and Interests   

Administrative Claims:

 

Unclassified – Non-Voting

  

Administrative Claim” shall mean: a claim for costs and expenses of administration during the Chapter 11 Cases pursuant to sections 328, 330, 363, 364(c)(1), 365, 503(b) or 507(a)(2) of the Bankruptcy Code, including, (a) the actual and necessary costs and expenses incurred after the Petition Date and through the Effective Date of preserving the Debtors’ estates and winding down the businesses of the Debtors (such as wages, salaries or commissions for services, and payments for goods and other services and leased premises); (b) Fee Claims (as defined below); and (c) all fees and charges assessed against the Debtors’ estates pursuant to sections 1911 through 1930 of chapter 123 of title 28 of the United States Code, 28 U.S.C. §§1-1401.

 

On or as soon as reasonably practicable after the effective date of the Plan (the “Effective Date”), each holder of an allowed Administrative Claim shall (i) receive cash equal to the full allowed amount of its claim, (ii) be paid in the ordinary course of business, or (iii) receive such other less favorable terms as may otherwise be agreed to by the holder of such Administrative Claim and the Debtors, in consultation with the Ad Hoc Group.

 

Fee Claim” shall mean: a claim for professional services rendered or costs incurred on or after the Petition Date and on or prior to the Effective Date by professional persons retained by the Debtors pursuant to sections 327, 328, and/or 363 of the Bankruptcy Code in the Chapter 11 Cases.

Priority Tax Claims:

 

Unclassified – Non-Voting

  

Priority Tax Claim” shall mean: any secured or unsecured claim of a governmental unit of the kind entitled to priority in payment as specified in sections 502(i) and 507(a)(8) of the Bankruptcy Code.

 

On or as soon as reasonably practicable after the Effective Date, each holder of an allowed Priority Tax Claim shall be treated in accordance with section 1129(a)(9)(C) of the Bankruptcy Code.

Priority Non-Tax Claims:

 

Unimpaired – Deemed to Accept:

  

Priority Non-Tax Claim” shall mean: any claim other than an Administrative Expense Claim or a Priority Tax Claim that is entitled to priority in payment as specified in section 507(a) of the Bankruptcy Code.

 

On or as soon as reasonably practicable after the Effective Date, each holder of an allowed Priority Non-Tax Claim shall receive cash equal to the full allowed amount of its claim or otherwise be left unimpaired, or receive such lesser treatment as may otherwise be agreed to by such holder, the Debtors, in consultation with the Ad Hoc Group.

 

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EXECUTION VERSION

 

Other Secured Claims:

 

Unimpaired - Deemed to Accept

   To the extent any other secured claims exist, on or as soon as practicable after the Effective Date, all such secured claims allowed as of the Effective Date, if not previously paid, shall, at the option of the Debtors and with the consent of the Requisite Consenting Lenders (which consent shall not be unreasonably withheld) be satisfied by either (i) payment in full in cash, (ii) reinstatement pursuant to section 1124 of the Bankruptcy Code, or (iii) such other recovery as may be necessary to satisfy section 1129 of the Bankruptcy Code.

First Lien Claims:

 

Impaired – Entitled to Vote

  

If the class of HERO Common Stock votes to accept the Plan, each holder of a First Lien Claim shall receive its pro rata share of:

 

•      a non-interest bearing senior claim against the Wind Down Entity (as defined below) in the amount of $510 million plus accrued and unpaid interest on the First Lien Claims as of the Effective Date, less the Escrow Release Payment and any payments of principal or Applicable Premium under the First Lien Credit Agreement previously made to the First Lien Lenders during the Chapter 11 Cases (the “Acceptance Lender Wind Down Claim”); and

 

•      100% of the Class A interests (the “Class A Wind Down Entity Interests”) in the Wind Down Entity, which shall represent 85% of the Acceptance Wind Down Entity Interests (as defined below).

 

If the class of HERO Common Stock votes to reject the Plan, each holder of a First Lien Claim shall receive its pro rata share of:

 

a non-interest bearing senior claim against the Wind Down Entity in the amount of $579 million plus accrued and unpaid interest on the First Lien Claims as of the Effective Date, less the Escrow Release Payment and any payments of principal or Applicable Premium under the First Lien Credit Agreement previously made to the First Lien Lenders during the Chapter 11 Cases (the “Rejection Lender Wind Down Claim”). The “Lender Wind Down Claim” shall refer to whichever of the Acceptance Lender Wind Down Claim or the Rejection Lender Wind Down Claim arises based on the acceptance or rejection of the Plan by the class of HERO Common Stock.

General Unsecured Claims:

 

Unimpaired – Deemed to Accept

   Each holder of an allowed General Unsecured Claim, to the extent such holder’s claim has not been previously paid in the ordinary course of business pursuant to an order of the Bankruptcy Court, or otherwise, shall receive payment in full in cash on the later of (a) the Effective Date and (b) the date upon which such claim becomes due and owing.

 

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EXECUTION VERSION

 

Intercompany Claims:

 

Unimpaired – Non-Voting

   On or as soon as reasonably practicable after the Effective Date, all intercompany claims shall be adjusted, continued, or discharged to the extent agreed upon by the Debtors and the Requisite Consenting Lenders in their reasonable discretion.

HERO Common Stock:

 

Impaired – Entitled to Vote

  

On the Effective Date, all existing HERO Common Stock shall be cancelled and of no further force and effect, whether surrendered for cancellation or otherwise. If the class of HERO Common Stock votes to accept the Plan, each holder of HERO Common Stock shall receive its pro rata share (calculated based on the total number of shares of HERO Common Stock) of:

 

(i)      $12.5 million of cash (the “Shareholder Effective Date Cash Distribution”) (subject to reduction by $450,000 for each full calendar day following the seventy-second (72nd) day after the Petition Date if the Confirmation Order is not a Final Order to the extent such delay is the result of actions taken directly or indirectly by holders of HERO Equity Interests, their representatives, and/or any other persons (including any HERO Entity) acting in concert with the holders of HERO Equity Interests, as reasonably determined by the Debtors and Requisite Consenting Lenders); and

 

(ii)     100% of the Class B interests (the “Class B Wind Down Entity Interests” and, together with the Class A Wind Down Entity Interests, the “Acceptance Wind Down Entity Interests”), which shall represent 15% of the Acceptance Wind Down Entity Interests.

 

If the class of HERO Common Stock votes to reject the Plan, each holder of HERO Common Stock shall receive its pro rata share (calculated based on the total number of shares of HERO Common Stock), of 100% of the Rejection Wind Down Entity Interests. The “Wind Down Entity Interests” shall refer to whichever of the Acceptance Wind Down Entity Interests or the Rejection Wind Down Entity Interests arise based on the acceptance or rejection of the Plan by the class of HERO Common Stock.

Other Equity Interests    On the Effective Date, all existing Other Equity Interests shall be cancelled and of no further force and effect, whether surrendered for cancellation or otherwise.

Intercompany Equity Interests:

 

Impaired – Non-Voting

  

Intercompany Equity Interest” shall mean an equity interest in a Debtor other than HERO.

 

On the Effective Date, Intercompany Equity Interests shall be cancelled and all assets of the Debtors shall vest in the Wind Down Entity.

 

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EXECUTION VERSION

 

Disputed Claim Reserve    One or more reserves shall be established in an amount or amounts reasonably acceptable to the Debtors and the Requisite Consenting Lenders and approved by the Bankruptcy Court for the administration and distribution on account of (i) Administrative Claims, (ii) Priority Tax Claims, (iii) Priority Non-Tax Claims, (iv) Other Secured Claims, or (v) General Unsecured Claims that are disputed as of the Effective Date (the “Disputed Claims Reserve”). The resolution of disputed Claims and payment of other post Effective Date Claims will be included in the duties and obligations of the Wind Down Entity. Any amounts remaining in the Disputed Claims Reserve or any other reserve upon the satisfaction of all relevant claims shall revest in the Wind Down Entity and shall be deemed as included in the Post-Effective Date Assets.
Release, Exculpation and Related Provisions   
Releases:   

To the fullest extent permitted by applicable law, the Plan shall include a full mutual release from liability in favor of (a) the Debtors, (b) the Wind Down Entity, (c) the non-Debtor subsidiaries, (d) the Ad Hoc Group and its members, (e) the First Lien Agent, (f) the First Lien Lenders, (g) each holder of HERO Common Stock that votes in favor of the Plan, (h) (i) if the class of HERO Common Stock votes to accept the Plan, each holder of HERO Common Stock or (ii) if the class of HERO Common Stock votes to reject the Plan, each Holder of HERO Common Stock except any Holder of HERO Common Stock that (A) votes to reject the Plan and submits a ballot indicating a decision to not participate in the releases, or (B) does not vote to accept or reject the Plan but timely submits a ballot indicating a decision to not participate in the releases; and (i) with respect to each of the foregoing entities in clauses (a) through (h), such entity’s respective current and former officers, directors, professionals, advisors, accountants, attorneys, investment bankers, consultants, employees, agents and other representatives, from any claims and causes of action related to or in connection with the HERO Entities and their subsidiaries, arising on or prior to the Effective Date (collectively, the “Releases”); provided, however, that no party shall be released from any claim or cause of action that was a result of such party’s gross negligence or willful misconduct as determined by a Final Order (as defined in the Plan).

 

Notwithstanding that the ballots provided to holders of HERO Common Stock will include an opt-out election with respect to the Releases by Holders of HERO Common Stock that vote against the Plan, the Debtors will use commercially reasonable efforts to obtain entry of the Confirmation Order which Confirmation Order shall provide that the Releases bind all holders of claims and interests to the Releases.

Exculpation:    To the fullest extent permitted by applicable law, the Plan shall include customary exculpation provisions in favor of the Debtors and their respective current and former officers and directors, professionals, advisors, accountants, attorneys, investment bankers, consultants, employees, agents, and other representatives, with respect to any liability relating to the Debtors or the Chapter 11 Cases arising prior to the Effective Date.

 

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EXECUTION VERSION

 

9019 Settlement    The Plan will incorporate a settlement under Bankruptcy Rule 9019 pursuant to which the Debtors and their estates will, to the fullest extent permitted by law, expressly release any and all claims to avoid, subordinate, setoff, reclassify, recharacterize or disallow in whole or in part the First Lien Claims and the Escrow Release Payment, whether under any provision of chapter 5 of the Bankruptcy Code, any equitable theory (including, without limitation, equitable subordination, equitable disallowance or unjust enrichment), or otherwise, and any other claims that the HERO Entities may be entitled to assert against the First Lien Agent and First Lien Lenders under any applicable law.
Director and Officer Indemnification:    Any obligations of the Debtors pursuant to their organizational documents to indemnify current and former officers, directors, agents, and/or employees (i) shall not be discharged or impaired by confirmation of the Plan and (ii) shall be deemed and treated as executory contracts to be assumed by the Debtors and assigned to the Wind Down Entity under the Plan.
   Director and officer insurance (“D&O Insurance”) will continue in place for the directors and officers of all of the HERO Entities during the Chapter 11 Cases on existing terms. After the Effective Date, the Wind Down Entity shall not terminate or otherwise reduce the coverage under any director and officer insurance policies (including any “tail policy”) then in effect. Directors and officers shall be indemnified by the Wind Down Entity to the extent of such insurance. Any modifications, amendments, or the procuring of D&O Insurance shall require reasonable consent by the Requisite Consenting Lenders.
  
Other Terms and Conditions   
Cash Collateral Order:   

The Debtors shall use commercially reasonable efforts to obtain entry of interim and final cash collateral orders in form and substance reasonably acceptable to the Debtors, the Requisite Consenting Lenders and the First Lien Agent (the “Cash Collateral Order”), which shall be filed concurrently with the commencement of the Chapter 11 Cases.

 

Pursuant to the terms of the interim Cash Collateral Order, and following entry thereof by the Bankruptcy Court, the Debtors shall be authorized to make (i) an adequate protection payment equal to $35 million to the First Lien Agent for the benefit of the First Lien Lenders in partial payment of the principal amount due under the First Lien Credit Agreement, and (ii) monthly adequate protection payments to the First Lien Agent for the benefit of the First Lien

 

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EXECUTION VERSION

 

   Lenders in an amount equal to accrued and unpaid prepetition or postpetition interest on the First Lien Claim calculated at the non-default rate under the First Lien Credit Agreement on the aggregate amount of the First Lien Claims.
Milestones:   

The HERO Entities shall implement the transactions contemplated by this Term Sheet and the RSA on the following timeline:

 

•    The Debtors shall have commenced the solicitation of votes to accept or reject the Plan for holders of First Lien Claims and for holders of HERO Common Stock on or before May 31, 2016;

 

•    The Debtors shall have concluded the solicitation of votes to accept or reject the Plan and tabulated such votes on or before June 3, 2016 for holders of First Lien Claims and June 28, 2016 for holders of HERO Common Stock;

 

•    The Debtors shall have commenced the Chapter 11 Cases on or before 7:00 a.m. New York time on June 6, 2016;

 

•    The Bankruptcy Court shall have entered the interim Cash Collateral Order by the date that is three business days after the Petition Date;

 

•    The Bankruptcy Court shall have entered the final Cash Collateral Order in form and substance reasonably acceptable to the Debtors and the Requisite Consenting Lenders by the date that is thirty days after the Petition Date;

 

The Bankruptcy Court shall have established a limited claims bar date for specific contingent and unliquidated claims, including, but not limited to, any claims asserting liability for personal injury, and claims in an amount in excess of $300,000 (collectively, the “Specified Claims”), in form and substance reasonably acceptable to the Debtors and the Requisite Consenting Lenders, of on or before July 29, 2016; provided, however, that the Specified Claims shall specifically not include (i) claims of any taxing authorities; (ii) rejection damages claims; or (iii) any claims of the Executives (as defined below) or other employees who are parties to severance agreements with the Debtors; and the Executives and the other employees who are parties to severance agreements with the Debtors shall not be required to file any proofs of claim unless their applicable employment and/or severance agreements are rejected under the Plan by an order of the Court, which may be the Confirmation Order and such Executive or other employee has not been provided alternative severance compensation pursuant to the terms of the Plan or another agreement with the Debtors (with the consent of the Requisite Consenting Lenders) or the Wind Down Entity;

 

 

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EXECUTION VERSION

 

  

•    The Bankruptcy Court shall have entered the Disclosure Statement Order and Confirmation Order by August 2, 2016;

 

•    The Plan shall have been consummated by August 16, 2016.

 

For the avoidance of doubt, the Debtors shall use commercially reasonable efforts to obtain the earliest possible date for hearing on confirmation of the Plan as the Bankruptcy Court may provide and the failure by the Debtors to satisfy any of the conditions set forth in this section entitled “Milestones” shall constitute an “Lender Termination Event” under section 11 of the RSA.

Marketing Process:   

Throughout the Chapter 11 Cases, to the extent sale and purchase agreements for the HERO Entities’ assets have not been consummated, the Debtors and the other HERO Entities shall continue to market their vessels and residual assets for sale.

 

Pursuant to the terms of the Cash Collateral Order, all proceeds of sales of assets that secure repayment of amounts due to the First Lien Lenders and the First Lien Agent under the First Lien Credit Agreement during the pendency of the Chapter 11 Cases shall be distributed to the First Lien Agent to repay the First Lien Claims in accordance with the terms of the First Lien Credit Agreement; provided, however, that all proceeds of sales of assets owned by the non-Debtor subsidiaries shall first be used to satisfy the outstanding liabilities of such non-Debtor subsidiaries and the excess, if any, shall thereafter be distributed to the First Lien Agent to repay the First Lien Claims; and provided, further, that, to the extent that $420 million has been paid to the First Lien Lenders (inclusive of the Escrow Release Payment and any payments of principal or Applicable Premium under the First Lien Credit Agreement previously made to the First Lien Lenders during the Chapter 11 Cases, but exclusive of interest and periodic adequate protection payments other than adequate protection payments designated as principal payments or payments of Applicable Premium), subject to the immediately preceding proviso, the next $15 million in proceeds of asset sales shall be reserved by the Debtors for payment of the Shareholder Supplemental Cash Distribution (as defined below) in the event the class of HERO Common Stock has voted to accept the Plan (the “Shareholder Supplemental Cash Distribution Reserve”).

Wind Down Entity:    On the Effective Date, all of the Debtors’ remaining assets (including, but not limited to, HERO’s direct and indirect equity interests in its subsidiaries that do not commence Chapter 11 Cases, the “Post-Effective Date Assets”) shall be transferred to a wind down entity (the “Wind Down Entity”). The Plan shall provide that the Wind Down Entity will be a liquidating trust; provided that

 

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EXECUTION VERSION

 

  

in the event that the Debtors and the Requisite Consenting Lenders agree on an alternative structure that provides tax efficiencies and lower costs, they shall use commercially reasonably efforts to modify the Plan and related documentation and obtain Court approval of the use of such an alternative Wind Down Entity structure. The Wind Down Entity shall be responsible for liquidating the Post-Effective Date Assets and distributing the proceeds of the liquidation of such assets in accordance with the terms provided herein (i.e., first to satisfy in full, in cash, the Lender Wind Down Claim and, thereafter, to the holders of Wind Down Entity Interests subject to the priorities otherwise set forth below if the class of HERO Common Stock votes to accept the Plan, if applicable). The Wind Down Entity shall be responsible for overseeing and administering (i) the termination of the Debtors’ qualified 401(k) retirement plans and any related trusts and the distribution of such plans’ assets to participants and for fulfilling statutory and regulatory requirements related to such plans and (ii) any statutory and regulatory requirements related to any terminated Debtor employee benefit plans. The Wind Down Entity shall establish at least three separate reserve accounts to hold funds in respect of (i) a Fee Claim reserve; (ii) the Disputed Claims Reserve and (iii) amounts necessary to satisfy allowed Administrative Claims, Priority Tax Claims, Priority Non-Tax Claims, Other Secured Claims, and General Unsecured Claims not otherwise paid on the Effective Date (collectively, the “Reserves”). After the Debtors make all payments required to be made on the Effective Date to the holders of Allowed Claims, fund the Reserves and, if applicable, pay the Shareholder Effective Date Distribution, the Debtors shall transfer to the Wind Down Entity 100% of the Debtors’ remaining cash on hand as of the Effective Date (the “Initial Wind Down Funding Amount”); provided, that the Initial Wind Down Funding Amount shall not exceed $85 million, and any cash on hand of the HERO Entities, in the aggregate, in excess of such amount shall be applied to reduce the First Lien Claims (and the original principal amount of the Lender Wind Down Claim) (as defined below) on the Effective Date; provided, further, that, to the extent the class of HERO Common Stock has voted to accept the Plan and payments on the First Lien Claims shall have reached $420 million (inclusive of the Escrow Release Payment and any payments of principal or Applicable Premium under the First Lien Credit Agreement previously made to the First Lien Lenders during the Chapter 11 Cases, but exclusive of interest and periodic adequate protection payments other than adequate protection payments designated as principal payments or payments of Applicable Premium) and the Shareholder Supplemental Cash Distribution Reserve has not already been established, such excess shall be used to fund the Shareholder Supplemental Cash Distribution until such distribution is satisfied in full and thereafter distributions shall be made in accordance with the Wind Down Entity Waterfall.

 

 

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EXECUTION VERSION

 

  

Following the Effective Date, the Wind Down Entity Board (as defined below), in accordance with its fiduciary duties and based on the advice of its advisors, shall establish a budget for (i) the reconciliation of any claims for which funds have been reserved in the Disputed Claims Reserve, (ii) the monetization of the Post-Effective Date Assets, (iii) the wind down of the HERO Entities’ business and operations and (iv) accomplishing all other objectives of the Wind Down Entity (the “Wind Down Budget”) not in excess of $85 million. In establishing the Wind Down Budget, the Wind Down Entity Board shall account for the use of any asset sale proceeds by any non-Debtor subsidiary to satisfy any claims against any HERO Entity during the pendency of the Chapter 11 Cases. In the event that the Initial Wind Down Funding Amount is greater than the cash requirements projected in the Wind Down Budget, the Wind Down Entity Board shall distribute such excess amount pro rata to the holders of the Lender Wind Down Claim. Before making any distributions provided herein, the Wind Down Entity Board shall make a good faith determination that it shall be retaining, after taking into account funds to be distributed, sufficient funding for (i) the reconciliation of any claims for which funds have been reserved in the Disputed Claims Reserve, (ii) the monetization of the Post-Effective Date Assets, (iii) the wind down of the HERO Entities’ business and operations and (iv) accomplishing all other objectives of the Wind Down Entity.

 

Key characteristics of the Wind Down Entity shall include the following:

 

•    The Wind Down Entity shall not be a public entity.

 

•    The Wind Down Entity shall have first-lien, first-priority security interests and liens on the assets of the entities owned directly and indirectly by the Wind Down Entity, as set forth and further described in the organizational and/or trust documents, as applicable, for the Wind Down Entity, which documents shall govern the distributions in respect of the Lender Wind Down Claim and the Wind Down Entity Interests; provided that such lien and security interests may be subject to certain permitted liens that were permitted under the First Lien Credit Agreement.

 

•    Specifically, with respect to the Lender Wind Down Claim: (a) such claim shall be memorialized in a separate instrument apart from the organizational documents of the trust, as applicable, governing the Wind Down Entity, and the organizational documents shall include an obligation to make payments in respect of the Lender Wind Down Claim on a priority basis in accordance with the Wind Down Entity Waterfall; (b) the

 

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EXECUTION VERSION

 

  

Wind Down Entity shall be required to make distributions with respect to such claim to the extent of a sum certain absent a maturity date or remedies (other than the ability to assert a claim against the Wind Down Entity for breach of the organizational and/or trust documents, as applicable, governing the Wind Down Entity); and (c) the claims will be transferable in a manner generally consistent with those for syndicated loans, including that transferees of such claim affirmatively agree to be bound by the terms and conditions of the separate instrument governing the Lender Wind Down Claim.

 

•    The Wind Down Entity Interests shall not be transferable, shall not be certificated and otherwise shall be structured in accordance with applicable non-bankruptcy law such that such Wind Down Entity Interests shall not be deemed to be “securities” under U.S. securities law; provided, however, that, following the Effective Date, the Wind Down Entity Board shall have the discretion to take such steps as necessary to render some or all of the Wind Down Entity Interests transferable.

 

•    The day-to-day operations of the Wind Down Entity shall be run by a Wind Down Entity representative (the “Wind Down Entity Representative”) which may be a liquidating trustee, and which shall be appointed by the Requisite Consenting Lenders in their sole discretion; provided, that if the class of HERO Common Stock votes to reject the Plan the Wind Down Entity Representative shall be reasonably acceptable to the Debtors.

 

•    The Wind Down Entity shall be governed by its governing body, which shall consist of three members (the “Wind Down Entity Board”). If the class of HERO Common Stock votes to accept the Plan, each of the members of the Wind Down Entity Board will be designated by the Ad Hoc Group. If the class of HERO Common Stock votes to reject the Plan, the Wind Down Entity Board shall be comprised of the following members: (i) one member designated by the Requisite Consenting Lenders in their sole discretion; (ii) one member designated by the Requisite Consenting Lenders, who shall be reasonably acceptable to the Debtors; and (iii) one member designated by the Debtors, who shall be reasonably acceptable to the Requisite Consenting Lenders.

 

•    Any actions or decisions of the Wind Down Entity Board shall be approved by a majority of the members of the Wind Down Entity Board.

 

•    The members of the Wind Down Entity Board and the Wind Down Entity Representative shall have fiduciary duties similar to those of an official committee of unsecured creditors in a chapter 11 case; provided, that the Wind Down Entity Board and the Wind Down Entity representative shall exercise their fiduciary duties in such a manner as to cause the Lender Wind Down Claim to be repaid as soon as reasonably practicable under the circumstances.

 

 

13


EXECUTION VERSION

 

  

•    The following shall be the “Wind Down Entity Waterfall”: If the class of HERO Common Stock votes to accept the Plan, the Wind Down Entity shall make distributions to holders of Wind Down Entity Interests as follows: (i) after $420 million has been paid to the First Lien Lenders in the aggregate on (x) the First Lien Claims (inclusive of the Escrow Release Payment and any payments of principal or Applicable Premium under the First Lien Credit Agreement previously made to the First Lien Lenders during the Chapter 11 Cases, but exclusive of interest and periodic adequate protection payments other than adequate protection payments designated as principal payments or payments of Applicable Premium) and (y) the Acceptance Lender Wind Down Claim, to the extent not already paid, the next $15 million shall be paid to holders of the Class B Wind Down Entity Interests (the “Shareholder Supplemental Cash Distribution”); and (ii) after payment in full of the Acceptance Lender Wind Down Claim: (a) until such time as the holders of the Class A Wind Down Entity Interests have received $20 million on account of such Class A Wind Down Entity Interests, distributions shall be made pro rata to the holders of the Acceptance Wind Down Entity Interests; (b) once the holders of the Class A Wind Down Entity Interests have received $20 million on account of such Class A Wind Down Entity Interests, the next $3 million in distributions shall be made to the holders of the Class B Wind Down Entity Interests; (c) after the Class B Wind Down Entity Interests have received such $3 million, the next $3 million in distributions shall be made to the holders of the Class A Wind Down Entity Interests; and (d) after the holders of the Class A Wind Down Entity Interests have received such $3 million, pro rata to the holders of the Acceptance Wind Down Entity Interests.

 

If the class of HERO Common Stock votes to reject the Plan, the Wind Down Entity shall make distributions to holders of Wind Down Entity Interests pro rata after payment in full of the Rejection Lender Wind Down Claim.

 

•    Except as provided herein, unless and until the Lender Wind Down Claim has been paid in full in cash, no distributions shall be made on account of the Wind Down Entity Interests.

 

The organizational and/or trust documents, as applicable, for the Wind Down Entity and a list of the names of the individuals who shall comprise the Wind Down Entity Board and the Wind Down Entity representative shall be filed with the Bankruptcy Court as exhibits in the Plan Supplement (as defined below), the form and substance of which shall be reasonably acceptable to the Debtors and the Requisite Consenting Lenders.

 

 

14


EXECUTION VERSION

 

  

Any amounts remaining in the applicable Reserves after the final satisfaction of the Claims subject thereto, shall be released to the Wind Down Entity and constitute Post-Effective Date Assets.

 

Upon the conclusion of the liquidation of the Post-Effective Date Assets and the dissolution of the Wind Down Entity, the Wind Down Entity shall distribute any remaining proceeds from the sale of the Post-Effective Date Assets and any remaining Wind Down Funding Amount (a) first, to satisfy the remaining amount of the Lender Wind Down Claim, if any, and (b) then, to the holders of the Wind Down Entity Interests in accordance with their respective interests—subject to the priorities otherwise set forth herein if the Class of HERO Common Stock votes to accept the Plan, if applicable.

Severance and Incentive Plan:    The Plan shall provide that upon the Effective Date, each of John Rynd, Troy Carson, Beau Thompson, Son Vann, Charlie Lestage and John Wasmuth (each an “Executive”) will waive his rights and entitlement under his existing employment agreement other than for any unpaid base salary, unpaid benefits and unpaid expense reimbursements due thereunder, and in lieu thereof will be entitled to the following payments, subject to such Executive having continued his employment with the Debtors until the Effective Date, or such Executive having been terminated without Cause (as defined in such Executive’s employment agreement) prior to the Effective Date: (i) on the Effective Date, payment of an amount equal to one times his current annual base salary; (ii) upon the later of (x) the Effective Date, (y) December 31, 2016 or (z) entry into a definitive agreement for the sale of the Hercules Triumph or the Hercules Resilience (the “Second Payment Trigger Date”), payment of an amount of such Executive’s annual bonus in respect of 2015 that was paid in 2016 (the “Bonus Amount”); (iii) so long as an Executive is employed by the Wind Down Entity after the Effective Date, for any period that the Executive is so employed during the period from the Effective Date through December 31, 2016, such Executive shall be compensated for his continued employment at a rate of 150% of his current base salary (with 125% of his current base salary paid current and 25% deferred until the Second Payment Trigger Date (the “Deferral Compensation”)) and for any period of employment from and after December 31, 2016 on such terms as may be agreed to by the Wind Down Entity and the Executive; and (iv) on the Effective Date, payment of an amount equal to $24,000 per Executive, representing an amount equal to one times his current annual cost of benefits; provided, however, that the amounts paid pursuant to the foregoing clauses (i) and (ii) shall in no event exceed $3.6 million in the aggregate. For the avoidance of doubt, in the event an Executive resigns without “Executive Cause” (which shall mean the failure of the Wind Down Entity to pay such

 

15


EXECUTION VERSION

 

   Executive his compensation when due in accordance with the terms hereof or if the Executive is asked to perform any services that are immoral, illegal or unethical) prior to the Effective Date or is terminated for Cause prior to the Effective Date, the Executive shall forfeit his rights to the payments contemplated hereby and, in the event an Executive resigns without Executive Cause or is terminated for Cause prior to the Second Payment Trigger Date, the Executive shall forfeit his rights to the Bonus Amount and the Deferral Compensation, but shall retain his rights to assert claims under his existing employment agreement, subject to, among other things, the provisions of Bankruptcy Code section 502(b)(7). Any employment contract or similar benefits contract between any executive, contractor or other employee that is not an Executive and any Debtor shall be rejected immediately prior to the Effective Date of the Plan unless otherwise agreed among such executive, contractor or other employee and the Requisite Consenting Lenders.
Executory Contracts and Unexpired Leases:    Executory contracts and unexpired leases shall be treated in a manner reasonably acceptable to the Debtors and the Requisite Consenting Lenders.
Conditions to Consummation:   

The Plan shall contain customary conditions to consummation of the Plan and such other conditions as are agreed to by the Debtors and the Requisite Consenting Lenders, including, without limitation, the following:

 

•    Each of the Plan, the disclosure statement with respect to the Plan (the “Disclosure Statement”) and the plan supplement (the “Plan Supplement”) (including any amendments, modifications, supplements, exhibits or schedules related to any of the foregoing) and any other Definitive Documents shall be substantially consistent in all respects with the terms and conditions of this Term Sheet and the RSA, as applicable, and otherwise in form and substance reasonably satisfactory in all respects to the Debtors and the Requisite Consenting Lenders, including with respect to any modifications, amendments, or supplements to such Definitive Documents, provided that each of the organizational, governance and exit credit documents contemplated by this Term Sheet and the RSA shall be substantially consistent in all material respects with this Term Sheet and the RSA and reasonably acceptable to the Requisite Consenting Lenders in all respects (it being understood that any objection by the Requisite Consenting Lenders to any provision of the organizational, governance or exit credit documents contemplated by the RSA and this Term Sheet that would materially and adversely affect the recoveries of the First Lien Lenders contemplated therein, or to have a material and adverse impact on the governance structure of the Wind Down Entity shall be deemed to be reasonable).

 

 

16


EXECUTION VERSION

 

  

•    The order confirming the Plan and approving the Disclosure Statement (the “Confirmation Order”) shall be a Final Order and shall have been entered in a form that is substantially consistent in all respects with the terms and conditions of this Term Sheet and the RSA, as applicable, and otherwise reasonably acceptable to the Debtors and the Requisite Consenting Lenders;

 

•    All actions, documents and agreements necessary to consummate the Plan shall have been effected or executed and delivered to the required parties and, to the extent required, filed with the applicable government units in accordance with applicable law;

 

•    The special claims bar date shall have occurred in accordance with the terms of this Term Sheet, and the aggregate amount of all Specified Claims not otherwise previously estimated by the Debtors in their schedule of Specified Claims shall be (i) as agreed by the Debtors and the relevant claimant, with the consent of the Requisite Consenting Lenders, or (ii) allowed for estimation purposes only (but as an aggregate cap on the amount that may be distributed on account of such Specified Claims) by an order of the Bankruptcy Court (the “Unscheduled Specified Claims”).

 

•    The amount of the Specified Claims estimated by the Debtors in their schedule of Specified Claims filed with the Bankruptcy Court plus the amount of the Unscheduled Specified Claims shall not exceed $33 million; provided that such condition to consummation may be waived by the Requisite Consenting Lenders in their sole discretion;

 

•    The RSA shall not have been terminated in accordance with its terms; and

 

•    The Amended and Restated Forbearance Agreement shall not have been terminated in accordance with its terms.

 

For the avoidance of doubt, failure by the Debtors to satisfy any of the conditions set forth in this section entitled “Conditions to Consummation” shall constitute an “Lender Termination Event” under section 11 of the RSA.

Restructuring Expenses:    The Debtors shall pay all reasonable and documented fees and expenses of Kirkland & Ellis LLP, as counsel to the Ad Hoc Group, White & Case LLP, as counsel to Luminus Management LLC and Soros Fund Management LLC, and one local counsel to the Ad Hoc Group, and reasonable and documented fees and expenses of other

 

17


EXECUTION VERSION

 

   professionals retained by the Ad Hoc Group that have executed engagement letters with the Debtors, as well as reasonable fees and expenses incurred by the First Lien Agent, including King and Spalding LLP, as restructuring counsel, White & Case LLP, as counsel with respect to the administration of the First Lien Credit Agreement and the other Loan Documents (as defined in the First Lien Credit Agreement), special maritime counsel and one local counsel, in each case incurred in connection with the Restructuring.
Reservation of Rights:    Nothing herein shall be deemed an admission of any kind. If the Restructuring is not consummated for any reason, the HERO Entities, the Ad Hoc Group and the First Lien Agent fully reserve any and all of their respective rights.
Definitive Documents and Due Diligence:    This Term Sheet is non-binding and indicative. Any final agreement shall be subject to Definitive Documents, pleadings, court submissions and other documents, as well as additional legal, financial, tax and business due diligence, each substantially consistent in all respects with the terms of this Term Sheet and the RSA. The Definitive Documents shall be substantially consistent in all respects with the terms of this Term Sheet and the RSA and otherwise in form and substance reasonably acceptable in all respects to the Debtors and the Requisite Consenting Lenders, including with respect to any modifications, amendments, or supplements to such Definitive Documents, provided that each of the organizational, governance and exit credit documents contemplated by this Term Sheet and the RSA shall be substantially consistent in all material respects with this Term Sheet and the RSA and reasonably acceptable to the Requisite Consenting Lenders in all respects (it being understood that any objection by the Requisite Consenting Lenders to any provision of the organizational, governance or exit credit documents contemplated by the RSA and this Term Sheet that would materially and adversely affect the recoveries of the First Lien Lenders contemplated therein, or to have a material and adverse impact on the governance structure of the Wind Down Entity shall be deemed to be reasonable).

 

18


EXHIBIT B

Form of Transfer Agreement

 


Transfer Agreement & Joinder

The undersigned (“Transferee”) hereby acknowledges that it has read and understands the (i) Restructuring Support Agreement, dated as of May [        ], 2016 (the “Agreement”), by and among (x) Hercules Offshore, Inc., a Delaware corporation, and each of its direct and indirect subsidiaries party thereto, (y) [TRANSFEROR’S NAME] (“Transferor”) and (z) certain other First Lien Lenders and, in certain cases, holders of HERO Common Stock, party thereto, and (ii) the Amended and Restated Forbearance Agreement and (x) agrees to be bound by the terms and conditions of the Agreement and the Amended and Restated Forbearance Agreement to the extent Transferor was thereby bound, (ii) hereby makes all representations and warranties made in the Agreement and the Amended and Restated Forbearance Agreement by all other Ad Hoc Group Members and Lenders (as defined in the Agreement and the Amended and Restated Forbearance Agreement, respectively), and (iii) shall be deemed an Ad Hoc Group Member under the terms of the Agreement. The Transferee is acquiring First Lien Claims2 from Transferor in the amounts set forth on Schedule 1 hereof. All notices and other communications given or made pursuant to the Agreement and the Amended and Restated Forbearance Agreement shall be sent to the Transferee at the address set forth in the Transferee’s signature below.

 

Date Executed:                           
    [TRANSFEREE]
    By:    
    Name:  
    Title:  
    Address:    
       
       
    Attn:    
    Fax:    
    Email:    

 

2  Note: If Transferee also is acquiring or owns HERO Equity Interests, add a reference to that effect here.

Exhibit 99.1

 

LOGO

Hercules Offshore, Inc. Announces Transfer of Hercules Highlander and Execution

of Restructuring Support Agreement

Orderly Sale Process Seeks to Maximize Value of the Company’s Assets and

Provide Smooth Transition for Employees, Customers and Suppliers

Unsecured Creditors to be Paid in Full Through Voluntary, Pre-Packaged Chapter 11 Case

Company Enters into Agreement to Transfer Former Hercules Highlander

Newbuild Harsh Environment Jack-up Rig

HOUSTON, May 27, 2016 — Hercules Offshore, Inc. (Nasdaq: HERO) (the “Company” or “Hercules”) today announced, following a review of its strategic alternatives led by a Special Committee comprised of all of its independent Board members, that the Company has entered into a Restructuring Support Agreement (“RSA”) with lenders holding approximately 99 percent of the indebtedness under its first lien credit agreement. The agreement seeks to maximize value for the Company’s stakeholders and provide a smooth transition for employees, customers and suppliers through an orderly sale of the Company’s assets.

Under the terms of the RSA, Hercules and certain of its U.S. subsidiaries will solicit acceptances and rejections of its pre-packaged Chapter 11 plan from first lien lenders and shareholders, file voluntary Chapter 11 petitions to compromise the Company’s obligations to its first lien lenders and provide a recovery to its shareholders, and then place all of the Company’s unsold assets into a wind-down vehicle to ensure their continued, safe operation until they can be sold. The Company’s international subsidiaries will not be included as part of the Chapter 11 cases but will be part of the sale process.

Hercules’s Chapter 11 Plan (the “Plan”) provides that unsecured creditors will be paid in full. The Company expects to file the typical First Day Motions to, among other things, maintain employee wages and benefits and insurance throughout the Chapter 11 process and will file a separate First Day Motion to continue paying its suppliers’ pre-petition claims under normal payment terms. If the Company’s shareholders vote as a class to accept the Plan, shareholders will receive cash recoveries over time including a payment of $12.5 million upon the completion of the Chapter 11 process and additional cash distributions thereafter depending on the success of the sale of the Company’s assets through interests in the post-Chapter 11 wind-down vehicle. The secured lenders likewise are projected to receive cash payments largely dependent on the success of the sale process.

As part of the process, Hercules also announced today that it has entered into a definitive agreement to transfer the right to acquire the newbuild harsh environment jack-up rig, formerly named Hercules Highlander, to a subsidiary of Maersk Drilling (CPH: MAERSK). The rig is ready for immediate delivery from Jurong Shipyard Pte Ltd (“Jurong”) in Singapore. According to the agreement, Maersk Highlander UK Ltd. succeeds to the right to take delivery of the rig and will settle the final payment of approximately $196 million with Jurong.

On November 6, 2015, Hercules completed its initial financial restructuring under Chapter 11 of the U.S. Bankruptcy Code with a new $450 million senior secured credit facility in place. Since this time, the ongoing decline in oil prices, the consolidation of its U.S. customer base and the addition of new capacity have negatively impacted dayrates and demand for Hercules’s services. On February 11, 2016, the Company announced a Special Committee comprised of all the independent members of its Board of Directors to explore strategic alternatives. Today’s RSA announcement is the outcome of that process and follows a thorough sale process, which did not yield results that would have been better for stakeholders than what is contemplated by the Plan.


LOGO

 

Additional information regarding the RSA and events leading up to its execution are available at http://www.herculesoffshore.com and will be filed with the Securities Exchange Commission. This information is not an offer or the solicitation of an offer for any transaction and may not be used or relied on in connection with any transaction.

The Company has engaged Akin Gump Strauss Hauer & Feld LLP as its legal counsel, PJT Partners as its financial advisor and FTI Consulting as its restructuring advisor.

About Hercules Offshore, Inc.

Headquartered in Houston, Hercules Offshore, Inc. owns and operates a fleet of jackup rigs and liftboats. The Company offers a range of services to oil and gas producers to meet their needs during drilling, well service, platform inspection, maintenance, and decommissioning operations in several key shallow water provinces around the world. For more information, please visit our website at http://www.herculesoffshore.com.

Statements above that are not historical facts are forward-looking statements, including the status of filing certain motions and the settlement of certain payments. Forward-looking statements by their nature involve substantial risks, uncertainties and assumptions, including without limitation, government and regulatory actions and other factors described in the risks and uncertainties described in our periodic reports filed with the Securities and Exchange Commission. Many of these factors are beyond our ability to control or predict.

SOURCE Hercules Offshore, Inc.

Son P. Vann, Vice President, Corporate Development and Treasurer +1 (713) 350-8508

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