Vessel Construction Agreement

KFELS


_______ ATWOOD


VESSEL CONSTRUCTION AGREEMENT


BY AND BETWEEN


ATWOOD OCEANICS PACIFIC LIMITED


AND


KEPPEL FELS LIMITED


Dated: 24 JULY 2001


TABLE OF CONTENTS


PREAMBLE


ARTICLE 1. DEFINITIONS


ARTICLE 2. PERFORMANCE OF WORK


ARTICLE 3. OWNER'S REPRESENTATIVE, INVITEES AND
OTHER CONTRACTORS


ARTICLE 4. AUTHORIZED WORK; VARIATIONS/ CHANGES


ARTICLE 5. CONTRACT PRICE


ARTICLE 6. PLANNING, PROGRESS REPORTS AND MEETINGS


ARTICLE 7. PROJECT PLANS AND DRAWINGS, COMMUNICATION WITH
CLASSIFICATION SOCIETY


ARTICLE 8. 'AS BUILT' DOCUMENTATION


ARTICLE 9. QUALITY ASSURANCE REQUIREMENTS


ARTICLE 10. SAFETY REGULATIONS


ARTICLE 11. OWNER FURNISHED EQUIPMENT
AND/OR INFORMATION


ARTICLE 12. INSPECTION, TESTING AND TRIALS


ARTICLE 13. DELAYS AND EXTENSION OF TIME FOR DELIVERY


ARTICLE 14. DELIVERY OF THE VESSEL


ARTICLE 15. WARRANTY


ARTICLE 16. INDUSTRY AND INTELLECTUAL PROPERTY RIGHTS


ARTICLE 17. TITLE TO AND RISK OF THE VESSEL AND OWNER-FURNISHED
EQUIPMENT.


ARTICLE 18. LIABILITY AND INDEMNIFICATION


ARTICLE 19. BUILDER'S SUBCONTRACTORS AND SUPPLIERS


ARTICLE 20. TERMINATION / CANCELLATION


ARTICLE 21. TAXES AND DUTIES


ARTICLE 22. SUPPLIES AND SERVICES FROM THIRD PARTIES


ARTICLE 23. AUDIT AND RECORDS


ARTICLE 24. LIENS


ARTICLE 25. CONFIDENTIALITY


ARTICLE 26. ASSIGNMENT


ARTICLE 27. NOTICES


ARTICLE 28. MISCELLANEOUS


ARTICLE 29. GOVERNING LAW: COURTS: LANGUAGE


VESSEL CONSTRUCTION AGREEMENT


ATWOOD OCEANICS PACIFIC LIMITED, a corporation organized under the laws of the Cayman Islands, having its registered address at: P.O. Box 309, Ugland House, George Town, Grand Cayman, Cayman Islands, British West Indies, (hereinafter referred to as "OWNER") and Keppel FELS Limited, a corporation organized under the laws of Singapore, having its registered address at: 31 Shipyard Road, Jurong Town, Singapore 628130 (hereinafter referred to as "BUILDER"), have entered into this Vessel Construction Agreement, including the attached Annexes (hereinafter, collectively, the "Agreement") this 24th of July, 2001 (the "Effective Date").


RECITALS


WHEREAS, the BUILDER agrees to construct, equip, complete, sell and deliver the Vessel to OWNER at the Shipyard; and


WHEREAS, the OWNER agrees to purchase and take delivery of the Vessel from BUILDER at the Shipyard and to pay for the same, all upon the terms and conditions hereinafter set forth.


NOW, THEREFORE, OWNER AND BUILDER, IN CONSIDERATION OF THE COVENANTS AND AGREEMENTS HEREINAFTER STATED, DO HEREBY DECLARE TO HAVE AGREED AS FOLLOWS:


1. DEFINITIONS


In this Agreement the following words and phrases shall have the following meanings:


1.1 "Annexes" shall mean the Annexes attached to this Agreement which shall
be negotiated and agreed to by OWNER and BUILDER, which may, in part,
define the "Work" to be performed, the "Specifications",
"OWNER-Furnished Equipment," etc.; references to Annex "A", "B", "C",
etc. shall refer to the specific division of Annexes as intended by
this Agreement.


1.2 "Business Day" shall, for purposes of this Agreement, mean any day in
which commercial banks are open for business in Houston and Singapore.


1.3 "Certificate of Acceptance" shall mean the certificate referred to and
to be issued in accordance with Article 12, headed "INSPECTION, TESTING
AND TRIALS", and shall be in the form as set out in Annex "B" hereto.


1.4 "Classification Society" shall mean the American Bureau of Shipping
("ABS").


1.5 "OWNER-Designated Contractor" shall mean a contractor selected by the
OWNER to perform certain works or services as contemplated under
Article 3.6 hereof.


1.6 "OWNER-Designated Equipment" shall mean all equipment, materials and
services designated by the OWNER (excluding any BUILDER-Furnished
Equipment specified by OWNER as described in the Specifications) to be
purchased for the OWNER through the intermediary of the BUILDER for
incorporation into the Vessel.


1.7 "OWNER-Furnished Equipment" shall mean all equipment, materials and
services furnished directly to the BUILDER by the OWNER for
incorporation into the Vessel as well as all engineering data and
information relating to this equipment, materials and services, as set
forth in Annex "D" hereto.


1.8 "OWNER's Personnel" shall mean all employees, agents or representatives
of OWNER and its subsidiary or affiliated companies, as well as the
employees, agents and representatives of OWNER's other contractors
(excluding BUILDER), subcontractors or invitees.


1.9 "OWNER's Representative" shall mean the fully authorized representative
of the OWNER, who shall act in such capacity for the purposes of this
Agreement.


1.10 "Contract Documents" shall mean, collectively, this Agreement, the
Annexes, the Rules, and any Variation Orders, all as herein defined.


1.11 "Contract Price" shall means the aggregate amount in the United States
Dollars specified in Article 5 of this Agreement, subject only to
adjustments in accordance with the terms of this Agreement, payable by
the OWNER to the BUILDER for construction and delivery of the Vessel.


1.12 "BUILDER's Personnel" shall mean all employees, agents and
representatives of BUILDER and its subsidiary or affiliated companies,
as well as the employees, agents and representatives of BUILDER's other
contractors, subcontractors or invitees.


1.13 "BUILDER's Representative" shall mean the fully authorized
representative of the BUILDER, who shall act in such capacity for
purposes of this Agreement.


1.14 "BUILDER-Furnished Equipment" shall mean all equipment, materials and
services furnished by the BUILDER to the OWNER under this Agreement,
including that required by the "Specifications", as hereinafter
provided in the relevant Annexes.


1.15 "Days" shall mean consecutive running days, Saturdays, Sundays and
holidays included.


1.16 "Delivery Date" shall have the meaning ascribed to such term as set
forth in Article 14.3


1.17 "Force Majeure" shall mean any and all occurrences and/or causes not
within the control of the BUILDER that delay or hinder the performance
of BUILDER and which BUILDER, by the exercise of due diligence, would
not have been able to avoid or overcome including, without limitation,
acts of God, acts of public enemies, wars, blockades, insurrections,
riots, epidemics, landslides, earthquakes, floods, adverse weather
conditions (including only weather conditions not to be expected for
the time of the year according to Singapore Meteorological Department),
but specifically excluding financial or commercial difficulties or
ordinary business risks of BUILDER and absenteeism, strikes and labor
disputes of BUILDER's Personnel.


1.18 "Project" shall mean all activities involved in the construction of the
Vessel, whether set forth in the Specifications or Variations, and
shall include the Work (all as hereinafter defined).


1.19 "Protocol of Delivery and Acceptance" shall mean that form of document
attached to this Agreement as Annex "G", whereby BUILDER and OWNER
shall confirm the date, time and location that BUILDER delivers and
OWNER accepts the Vessel in accordance with the provisions of Article
14.


1.20 "Regulatory Bodies" shall mean the governmental authorities specified
in Annex "A" hereto.


1.21 "Rules" shall mean the rules and requirements, as officially published
on the Effective Date, of the Classification Society and the Regulatory
Bodies as specified in the Specifications, insofar as the same are
applicable to the Work.


1.22 "Shipyard" shall mean BUILDER's shipyard facilities located at
either 31 Shipyard Road or 50 Gul Road, Jurong Town, Republic of
Singapore 628130.


1.23 "Specifications" shall mean, collectively, the specifications,
standards, pricing provisions, procedures and the drawings (including
such drawings furnished or to be furnished by or on behalf of OWNER)
detailing the Work to be performed as recorded in Annex "A".


1.24 "Variations" shall mean any and all changes, additions, alterations or
deletions to the Specifications, as agreed between the OWNER and the
BUILDER in accordance with Article 4, headed "AUTHORIZED WORK;
VARIATIONS/CHANGES".


1.25 "Vessel" shall mean BUILDER's hull number B252 approximate dimensions:
234 feet long; 208 feet wide; and 25 feet deep at the side; which shall
be based upon the KFELS MOD V Enhanced B-CLASS design, as described in
the Specifications attached hereto as Annex "A".


1.26 "Work" shall mean any and all works, services, deliveries, supplies,
labor and equipment, including OWNER-Designated Equipment,
OWNER-Furnished Equipment (to the extent the same is installed by
BUILDER), and BUILDER-Furnished Equipment, to be performed or supplied
under this Agreement and as specified in the Specifications or in any
approved Variation Order.


2. PERFORMANCE OF THE WORK


2.1 The BUILDER shall perform the Work and furnish (or cause to be
furnished) all equipment, materials and labor necessary for the
construction and delivery of the Vessel in accordance with the terms of
this Agreement. In the event of a conflict between the body of this
Agreement and any Annex hereto, the body of this Agreement shall
control and govern. In the event of a conflict between the body of the
Annex and its attachments (including drawings), the body of the Annex
shall control and govern.


2.2 The BUILDER agrees to perform the Work at its Shipyard, all in a good
and workmanlike manner, in accordance with that degree of skill, care
and diligence ordinarily and reasonably exercised by skilled and
experienced operators of shipyard facilities engaged in similar
operations, and further, in accordance with:


(a) the Specifications, including any Variations; (b) the Rules; (c) the Contract Price and any Variation Orders; and (d) this Agreement.


2.3 The Vessel shall be constructed in accordance with the American Bureau
of Shipping "Rules for Building and Classing Mobile Offshore Drilling
Units", for classification of the Vessel as a "Maltese Cross A1 +
Self-Elevating Drilling Unit". In addition, construction shall be in
compliance with the International Maritime Organization's 1989 IMO MODU
Code, as amended. The Vessel shall also meet the rules, regulations and
requirements of the International Loadline Convention 1966. For the
avoidance of doubt, all fees and charges related to the classification
of the Vessel and the satisfaction of the Classification Society Rules,
as well as the rules, regulations and requirements of other Regulatory
Bodies, shall be for the account of the BUILDER. Furthermore, unless
otherwise provided in the Specifications, the rules, regulations and
requirements of the Classification Society, IMO MODU Code and
International Loadline Convention, as referred to in this Article 2.3,
shall be those in effect as of the Effective Date of this Agreement.
The BUILDER shall apply for the classification of the Vessel within one
(1) month from the Effective Date.


2.4 The Contract Documents shall constitute the entire agreement between
the Parties. Any and all previous agreements and/or arrangements
between the Parties with respect to works, services and supplies shall
be superseded and become null and void unless incorporated into the
Contract Documents, either by specific reference thereto or by
attachment to this Agreement as an Annex hereto.


2.5 All provisions or requirements contained in the Specifications and the
Rules are intended to amplify, explain and implement each other and the
requirements of this Agreement. In the event of any conflict or
inconsistency between the Contract Documents, the order of precedence
shall be as follows:


(a) the Rules; (b) this Agreement; and (c) the Specifications, including any Variations.


2.6 It is specifically agreed that the BUILDER shall, at all times during
the term of this Project, including Saturdays and Sundays, but
excluding Government Gazetted Public Holidays, have sufficient
qualified labor available to perform all aspects of the Work.
Additionally, at a minimum, the following project dedicated full time
personnel shall be assigned to this Project:


(a) a Project Manager and Deputy Project Manager / Project Superintendent; (b) an Engineering Co-ordinator / Project Engineer; and (c) a Scheduler.


All of the personnel listed above shall be made available in sufficient
numbers and with sufficient relief personnel to allow for the Work to
be carried out in accordance with the agreed Project schedule.


2.7 OWNER shall have the right at anytime to object to and to require
BUILDER to remove as soon as reasonably possible, at its own cost and
expense, any member of BUILDER's Personnel, including those described
in Article 2.6 above who are proven to be incompetent or negligent in
the performance of his duties or guilty of misconduct or otherwise
reasonably considered by OWNER to be unsuitable. Any person so removed
shall promptly be replaced by BUILDER, at its sole cost and expense,
with a suitable skilled and competent substitute.


2.8 BUILDER shall promptly advise OWNER in writing of and shall thereafter
consult regularly with OWNER regarding any labor disputes or unrest or
any anticipated labor disputes or unrest which affect or may be
reasonably expected to affect the performance of the Work under this
Agreement.


3. OWNER'S REPRESENTATIVE, INVITEES AND OTHER CONTRACTORS


3.1 Prior to or concurrent with the commencement of the Work, the OWNER
shall assign to the Shipyard a fully authorised OWNER Representative.
Unless otherwise specified by OWNER, the OWNER Representative shall be
authorized to issue and sign and execute on behalf of the OWNER any and
all documents referred to in this Agreement.


The OWNER's Representative, or his designated substitute, shall be and
shall remain at the Shipyard until the Vessel is completed and
delivered to OWNER.


Additionally, the OWNER will endeavour, throughout the term of the
Project, to assign and maintain a technical team of at least two (2)
people at the BUILDER's Shipyard.


3.2 Subject to BUILDER's safety and security requirements, the BUILDER
shall, at all times until the delivery of the Vessel, provide to the
OWNER's Representative and his team full access to the Shipyard for the
purpose of monitoring the progress of, inspecting and/or testing the
Work.


3.3 The BUILDER shall provide the OWNER's Representative and his
supervisory team, consisting of a maximum twenty (20) persons, with
sufficient office space at the Shipyard. Such office space, including
cleaning services and all utilities (electric power, water and heat/air
conditioning as appropriate), shall be furnished free of charge, and
shall be suitably furnished with desks, chairs, worktables, file
cabinets, etc. Furthermore, as described in the Specifications, the
BUILDER shall provide the OWNER's Representative and his team with
other reasonable facilities at the Shipyard, such as telephone,
facsimile, photocopy machines, and internet access, such facilities to
be charged at BUILDER's actual cost plus 10%.


3.4 The OWNER shall not be bound by any instructions, commitments or
agreements given by or entered into with any person other than an
authorized officer of OWNER or OWNER's Representative.


3.5 The OWNER shall have the right to invite persons to visit the Shipyard,
provided always that such visits do not interfere with any Work of the
BUILDER and do not in any way delay or interrupt the BUILDER's
operations, and provided, further such invitees of OWNER shall not be
in conflict with BUILDER's interest and business. BUILDER shall be
provided prior notice of any visits by OWNER's invitees, giving
reasonable details as to the date, time and purpose of the visit.


3.6 Notwithstanding the provisions of Article 2.1, the OWNER shall have the
right to carry out and perform work on the Vessel which is not of a
type offered by BUILDER or is otherwise mutually agreed between BUILDER
and OWNER, provided always, that such work and/or work in progress
shall not interfere with any of the Work of the BUILDER, and OWNER
shall not delay or interrupt the BUILDER's operations. In this regard,
OWNER and BUILDER agree to jointly develop a schedule which will
minimize interference between BUILDER and OWNER-Designated Contractors.
Choice of OWNER-Designated Contractors shall be subject to the approval
of BUILDER, which approval shall not be unreasonably withheld.


3.7 BUILDER shall not be responsible for the performance of
OWNER-Designated Contractors, however, BUILDER is obligated to furnish
full support services to such parties in the same manner as BUILDER
would accommodate and provide support services to its own
subcontractors. Subject to the foregoing provisions of this Article
3.7, all services provided to OWNER-Designated Contractor, as required,
shall be for the OWNER's account, based upon time and materials
supplied.


3.8 OWNER's Personnel shall be on board the Vessel and/or at the Shipyard
at the OWNER's sole expense and shall comply with all safety and
security regulations referred to in the Contract Documents and in
general with all laws and regulations applicable to the Shipyard,
including the laws and regulations of the Republic of Singapore.



4. AUTHORISED WORK; VARIATIONS / CHANGES


4.1 The Work to be performed under this Agreement, without further
instructions from the OWNER, includes all works, services and supplies
as set out in the Specifications. Unless so authorized in writing by
the OWNER, no modifications or changes to the Specifications or the
Work shall be undertaken, nor shall any other work be performed by the
BUILDER. No claim for additional compensation shall be made by the
BUILDER for modifications or changes to the Specifications and/or for
extra work unless such modifications or changes and/or extra work have
been authorized by the OWNER, in writing, by means of a Variation
Order.


4.2 The OWNER shall have the right, at any time, to request that reasonable
change(s) be made to any of the Work and/or the Specifications. No such
changes shall be undertaken or performed until a written Variation
Order, in the form of that attached hereto as Annex "E", has been
executed by the OWNER and the BUILDER, reflecting the agreement of the
parties as to any increase in the Contract Price or extension of the
Delivery Date resulting from any such modifications or changes.


4.3 If any modification or change necessitates an increase or decrease in
the quantity or quality of the services, equipment, or labor to be
furnished by the BUILDER under this Agreement, then the Contract Price
shall be increased or decreased accordingly and confirmed in a
Variation Order.


4.4 If any modification or change necessitates an increase or decrease in
the quantity or quality of the materials to be furnished by the BUILDER
under this Agreement, then the Contract Price shall be increased or
decreased equivalent to the increase in the price of such materials.
Any adjustment of the Contract Price resulting from an increase in the
quantity or quality of materials to be furnished by BUILDER shall be
confirmed by Variation Order.


4.5 If any modification or change necessitates an adjustment or change in
the time agreed for completion of the Work, then the Delivery Date
shall be re-assessed and adjusted accordingly. Changes, if any, to the
Delivery Date shall be made by mutual agreement between the OWNER and
the BUILDER and confirmed in a Variation Order.


4.6 All Variation Orders shall include, but will not necessarily be limited
to, the following details:-


(a) a description of the work to be performed; (b) specification of the materials and equipment to be supplied and./or
used; (c) a detailed schedule for the performance of the work; (d) subject to the Work having been performed on a time and materials
basis, the cost, including copies of the applicable subcontractor's
quotations; (e) the effect on the Contract Price, if any; (f) the additional time required, if any; and (g) subject to the work having been performed on a lump sum or fixed price
basis, the timing or schedule for payments.


4.7 In the event that, subsequent to the Effective Date, any amendments,
modifications or revisions are enacted or adopted to the Classification
Society Rules or the rules and regulations of any other Regulatory Body
which may affect the class or construction of the Vessel, the following
shall apply:


(a) If such amendments, modifications or revisions are compulsory for the
Vessel and its class, either party hereto, upon receipt of such
information from the Classification Society or such other
Regulatory Body, shall promptly transmit notice of the same in
writing to the other party, and the BUILDER shall thereupon
incorporate such alterations or changes into the Specifications
and/or the Work, subject to the execution of a Variation Order.
Any changes required by the Classification Society or Regulatory
Bodies arising as a result of revisions to Classification
Society or Regulatory Body requirements published up to the date
that the BUILDER applies to ABS to class the Vessel shall be for
BUILDER'S account.


(b) If such amendments, modifications or revisions are not
compulsory for the Vessel or its class, but the OWNER desires
to incorporate such amendments, modifications or revisions
into the Specifications or the Work, then the OWNER shall
notify the BUILDER and the BUILDER shall proceed to perform
such amendments, modifications, or revisions, subject to the
execution of a Variation Order addressing appropriate
adjustments (if any) to the Contract Price, Delivery Date
and/or any other provisions of this Agreement.


5. CONTRACT PRICE


5.1 In consideration for BUILDER carrying out the Work and constructing the
Vessel in accordance with the terms of this Agreement, and subject only
to adjustments agreed to pursuant to Variation Order(s), the OWNER
agrees to pay to BUILDER a contract price of UNITED STATES DOLLARS
EIGHTY-ONE MILLION NINE HUNDRED THOUSAND ONLY (US$81,900,000.00); the
foregoing being herein referred to as the "Contract Price".


5.2 Unless otherwise provided in this Agreement, it is specifically agreed
that all goods, services, supplies, materials and/or labor provided by
BUILDER in the performance of the Work shall be included in the
Contract Price. The Contract Price may only be changed or adjusted by a
Variation Order executed by OWNER and BUILDER in accordance with the
provisions of Article 4 of this Agreement.


5.3 Subject to Article 5.4, amounts due BUILDER in respect to the Contract
Price shall be payable in installments in accordance with the following
schedule: (a) An amount equivalent to twenty percent (20%) of the Contract
Price, shall be paid to BUILDER within three (3) business days
of the Effective Date;


(b) An amount equivalent to ten percent (10%) Contract Price,
shall be paid to BUILDER within three (3) business days
following striking of steel;


(c) An amount equivalent to fifteen percent (15%) Contract Price,
shall be paid to BUILDER within three (3) business days
following laying of the keel of the Vessel;


(d) An amount equivalent to fifteen percent (15%) of the Contract
Price, shall be paid to BUILDER within three (3) business days
following placement of first leg ...