Vessel Construction Contract

EXHIBIT 10.10


VESSEL CONSTRUCTION
CONTRACT


March 30, 2000 Page 1 of 23 2


Table of Contents


Article Page No. - ------- -------- 1. SUBJECT MATTER....................................................3


2. PERFORMANCE BOND..................................................4


3. CONSIDERATION AND PROGRESS PAYMENTS...............................4


4. MASTER CONSTRUCTION SCHEDULE......................................5


5. INVOICING.........................................................5


6. INSPECTION, ACCESS, AND TESTS.....................................5


7. TIME FOR COMPLETION...............................................6


8. DELIVERY AND RISK OF LOSS.........................................7


9. ALTERATIONS OR CHANGES............................................9


10. INSURANCE AND INDEMNITY..........................................10


11. TITLE TO THE VESSEL..............................................12


12. DEFAULT..........................................................12


13. PAYMENT OF SUPPLIERS AND WORKMEN.................................15


14. ASSIGNMENT.......................................................15


15. REPRESENTATIONS ABOUT COMMISSIONS................................15


16. REGARDING WARRANTIES AND RELATED MATTERS.........................15


17. ARBITRATION PROVISION............................................17


18. NOTICES..........................................................17


19. OWNER-FURNISHED EQUIPMENT........................................17


20. TAXES............................................................17


21. EFFECT OF WAIVER.................................................18


22. CONTRACT EMBODIES ALL AGREEMENTS.................................18


23. PATENTS..........................................................18


24. USE OF PLANS AND SPECIFICATIONS..................................18


25. CONSTRUCTION OF AGREEMENT........................................18


26. CONTRACT EFFECTIVE DATE..........................................19


27. APPENDIX A - TECHNICAL SPECIFICATIONS AND PLANS..................20


28. APPENDIX B - MASTER CONSTRUCTION SCHEDULE........................21


29. APPENDIX C - MODEL PERFORMANCE BOND..............................22


30. APPENDIX D - UNIT RATES..........................................23


March 30, 2000 Page 2 of 23


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THIS VESSEL CONSTRUCTION CONTRACT(hereinafter referred to as "the Contract") is made and executed this __ day of ________; 2000, by and between BENDER SHIPBUILDING & REPAIR CO. INC. whose address is 265 S. Water St. Mobile Alabama 36601, (hereinafter called "Builder"), and Torch Deepwater Inc. whose address is 401 Whitney Avenue. Suite 400, Gretna. LA 70056, (hereinafter called "Owner").


WITNESSETH:


1. SUBJECT MATTER


Builder agrees to construct, complete, test and deliver the "Midnight Warrior" (hereinafter referred to as "Vessel" or the "Work") at its yard in Mobile, Alabama to Owner at Builder's dock. The Vessel is to be constructed in accordance with final detailed construction plans prepared by the Builder, based on Owner's specifications, preliminary drawings and appendices thereof, dated March 30th, 2000, which are made a part hereof, and approved by Owner. The final construction plans are hereinafter referred to as the "Plans", and the Technical Specifications are hereinafter referred to as the "Specifications". The Plans and Specifications are identified by the initials of the designated representatives of Builder and Owner. Any conflict between the requirements of the Contract, the Specifications, or the Plans shall be resolved by giving preference first to the terms of the Contract, and then to the Specifications, and then to the Plans.


Builder agrees to furnish at its expense all plant, labor, tools, equipment, and materials, all naval architecture, engineering and detailed working plans and drawings, and to obtain all licenses, permits, inspections, surveys, and approvals necessary for the construction of the Vessel.


The Vessel, when delivered, shall have the certificates listed in the Specifications under "Regulatory, Approvals and Certifications", as appropriate, all of which shall be procured by Builder at Builder's expense.


All certificates shall be procured in Owner's name.


March 30, 2000 Page 3 of 23 4 2. PERFORMANCE BOND


Builder agrees to furnish, at its own expense, a performance bond of an amount up to 100% of the Contract Price in favor of Owner, in form and substance, and with such surety as may be approved by Owner, MarAd or any other financial institution, as it may apply, as per model in Appendix C. The Contract Price mentioned in Article 3 here below includes the cost of such performance bond equal to 100% of the Contract Price.


3. CONSIDERATION AND PROGRESS PAYMENTS


Owner agrees to pay Builder for the construction of the Vessel covered by this Contract the total sum of $36,258,856.00 (U.S. Dollars) (the "Contract Price"), payable as per Article 5.


Percentage complete is to be established through mutual agreement of Builder's Representative, and Owner's Representative.


Owner shall deduct 5% from each progress payment as "Retention" and deposit this amount in a bank mutually agreed between Owner and Builder. Any interest on this account shall be payable to Builder. Upon completion of the Work according to the Specifications and approval of the Classification Society, the Owner shall release this "Retention" in full to the Builder prior to the delivery of the Vessel. If a dispute arises, Article 17 ? Arbitration Provision shall apply.


It is agreed that progress payments shall be made by Owner to Builder within thirty (30) days of the Builder submitting an invoice to the Owner.


All payments shall be made by bank wire to Builder's bank account, or check as specified by Builder upon Contract execution.


It is specifically understood and agreed that the Contract Price will only be increased or decreased in strict accordance with the provisions of Article 9 hereof.


Owner's obligation to pay the aggregate sum set forth above shall be absolute, and not in any way dependent upon whatever financial commitments, Owner may have from others, whether or not the Vessel is lost or destroyed after delivery and acceptance, and regardless of any occurrence, happening or event of whatsoever nature which occurs after delivery of said Vessel. Builder shall not suffer or permit any liens, claims or encumbrances to be made or asserted against the Vessel in connection with the Work provided that Owner pays for the Work as contemplated hereby.


Builder will invoice Owner, and Owner will pay Builder a 10% down payment upon Contract execution. Progress Payments shall be made by Owner to Builder based on approved progress reports as per Master Construction Schedule.


March 30, 2000 Page 4 of 23


5 Additional payments to the Contract Price may be due for Changes and Additions to the Work as defined in Article 7, hereunder.


Billing of approved Change Orders by Builder, and payment by Owner, shall be made monthly and payment by Owner will be made as mentioned herein. Article 3, for the Contract Price Progress Payments.


4. MASTER CONSTRUCTION SCHEDULE


The Master Construction Schedule has been established by Builder and is attached at Appendix B of the Contract. This Master Construction Schedule is primarily a GANT chart of the Vessel construction including about 300 tasks in the Master Construction Schedule and shows "critical path" tasks. Builder and Owner acknowledge that the Master Construction Schedule is based on information available as of the execution date of this Contract. As drawings are produced information available as of the execution date of this Contract. The Master Construction Schedule will evolve into a more comprehensive CPM schedule. The CPM schedule will be updated periodically during the course of the Work and the "critical path" tasks will change as the Work progresses, subject to Article 7 and 9. Attached to the Master Construction Schedule is a spreadsheet that allocates the Contract Price for each of the tasks in the Master Construction Schedule over 10,000 points. Each task is broken down between labor and material (material includes equipment and subcontractors). The point value of one point equals the Contract Price divided by 10,000.


At the end of each month Builder and Owner will agree on the progress achieved for each task component and derive the cumulative number of points earned by Builder.


5. INVOICING


The monthly invoice amount will equal the difference between the current month's cumulative points earned less the cumulative number of points earned at the end of the previous month. The points earned during the month will be multiplied by the point value calculated in accordance with Article 4 above, less 10% thereof.


6. INSPECTION, ACCESS, AND TESTS.


The detailed manner and method of performing the Work hereunder shall be under the control of Builder, Owner being interested only in the result obtained. Notwithstanding, Owner and its designated representatives shall be given a reasonable opportunity to inspect the Work and perform all tests it deems appropriate at all times during normal business hours. Builder will, upon notice in writing by Owner or its representative, correct any deficiencies or defects in the Work, irrespective of possible ABS/USCG prior acceptance of same. No inspection or testing shall affect in any manner any of the


March 30, 2000 Page 5 of 23


6 thereof by Owner; provided, however, that Builder shall not be required to delay Work because of the absence of such representative.


Builder shall provide fully furnished offices, within walking distance from the Vessel, with communications and computer facilities for up to four (4) Owner Representatives and two (2) Standard Pick-up Trucks to be utilized within shipyard facilities at no cost to Owner.


7. TIME FOR COMPLETION


Builder shall deliver the Vessel on or before eighteen (18) months after Contract Effective Date as defined in Article 26 below.


If, at any time before actual delivery, the construction of the Vessel is delayed due to acts of the U.S. Government, foreign government, princes or rulers; war, blockade, revolution, insurrection, mobilization, civil commotion, or riots; strikes; Acts of God or the public enemy; plague or other epidemic, quarantines; freight embargoes; earthquakes, tidal waves, flood, typhoons, hurricanes or storms that result in damage to the Shipyard or Works of the Builder, or to the Vessel, or any part thereof; fire, flood, or other causes beyond the control of the Builder or its sub-contractors, as the case may be, ("Force Majeure"); then, subject to the next succeeding sentence, the time for delivery of the Vessel under this Contract shall be extended for a period of time which shall not exceed the total cumulated time of all such permissible delays. Force Majeure events giving rise to delay(s) lasting 24 hours or less shall not be considered a permissible delay. If any series of Force Majeure events occurs which are due to a single cause, then, in such case, all such events shall be treated as one event. Builder shall take all reasonable steps to minimize the effects of Force Majeure.


Delays on account of such causes as provided for in the previous paragraph shall be understood to be permissible delays and are to be distinguished from non-permissible delays on account of which the Contract Price of the Vessel is subject to adjustment, as provided for in the last paragraph of this Article.


All reasonable action shall be taken by the party claiming Force Majeure to remove or overcome the cause of Force Majeure and to minimize the effect of Force Majeure on the delivery date, such claiming party to act with all reasonable dispatch. Force Majeure shall not apply, however, to financial obligations otherwise due. Each party claiming Force Majeure shall maintain records thereof which shall be open to inspection by the other and each party claiming Force Majeure shall give notice to the other in writing within two (2) working days of learning of the existence of a Force Majeure event or development. Such notice shall include a new delivery date, which shall be no more distant than the previous delivery date plus the number of day(s) of actual Force Majeure


March 30, 2000 Page 6 of 23 7 delay. It is further agreed by the parties that delays that do not affect the "critical path tasks" cannot be used to increase the price or extend the delivery date.


If and when the completion of the Vessel is delayed by Force Majeure, the stipulated delivery date may be extended by a period equal to the subsequent delay affecting the critical path tasks, unless otherwise agreed to in writing. The delivery date shall automatically be extended to the new delivery date unless the other party, within five (5) working days after receipt of notice of a Force Majeure event or development, shall state its objection in writing to so treating such event or development as Force Majeure, in which event the rights of both parties shall be preserved, and the burden shall be on the party claiming Force Majeure to establish its right to rely on, and its compliance with, the provisions of this section. It is understood and agreed that Builder has included normal rain days in its schedule and that rain days shall not be considered Force Majeure unless the number of rain days exceeds the mean number as established by the National Weather Service for the area of Builder's yard by more than ten (10) days during the period of the Contract.


Within thirty (30) calendar days after the Contract Effective Date hereof, Builder shall furnish Owner with a written schedule specifying the date upon which each item of material and equipment for the Vessel being furnished by someone other than Owner shall be delivered to Builder's yard(s). Permissible delays, as herein above defined, in delivery of material or equipment being furnished for the Vessel by someone other than Owner shall be calculated on the basis of said schedule.


Since time is of the essence for the delivery of the Vessel, should a delay in the delivery of the Vessel be due to causes within the control of Builder and not one of the excusable delays set forth in the paragraphs above, Owner shall not be excused from its obligation to accept and pay for said Vessel, but Owner shall be entitled to Liquidated Damages in the amount of $50.00 per calendar day from the 10th day after the scheduled date for delivery until the actual delivery date. Said Liquidated Damages shall in no event exceed 10% of the Price. It is agreed that the Vessel is considered to be complete in accordance with the Contract and ready for delivery if only minor items remain outstanding and if these items do not adversely affect the commercial utility or efficient and lawful operation of the Vessel (collectively, the "Minor Items") and Builder has agreed to correct such Minor Items in a timely manner.


8. DELIVERY AND RISK OF LOSS


Builder agrees to complete and deliver the Vessel in accordance with the Plans and Specifications, and after completion of reasonable and satisfactory local sea trials, as described in the Specifications and/or required by the Classification Society, and delivery to the specified port, on payment of the balance of the price by Owner to Builder, deliver the Vessel to the Owner free and clear of all liens, claims or other encumbrances, in a seaworthy condition and in accordance with the Plans and Specifications, at a safe berth floating alongside the dock. In the event Owner fails to sign such a written acceptance,


March 30, 2000 Page 7 of 23


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acceptance shall be conclusively presumed when Owner takes possession and control of the Vessel and departs the dock with the Vessel. Risk of loss shall pass to Owner upon documented delivery and acceptance.


Owner shall not unreasonably withhold acceptance of the Vessel, and shall notify Builder, in writing, within three (3) days of the completion of sea trials and inspections, of the exact nature of any defect or fault in construction which constitutes a refusal to accept such Vessel. Owner shall give Builder a reasonable time within which to correct such defect or fault not to exceed 30 days after receipt of written notice of same. Upon satisfactory correction of such defect or fault, Owner shall immediately accept the Vessel.


In the event Owner and Builder are unable to agree that the reason for refusing to accept the Vessel constitutes a fault or defect, Owner shall pay Builder the undisputed amount remaining outstanding, and shall deposit the disputed amount into an escrow account at a mutually acceptable financial institution, and the dispute shall be referred to arbitration as provided in Article 17 hereof.


Builder shall perform Vessel model tank tests to confirm that the ship basic design (hull and propulsion) is adequate to obtain the specified basic design speed. The Vessel motion, hydrodynamic characteristics, sea-keeping capability, stability and dynamic response (all as determined by response amplitude operators - RAOs) will be determined through model testing and non-linear time domain computer simulations. Such model tests and non-linear time domain computer simulations, will have to be undertaken under Builder's responsibility immediately after the Contract Effective Date and upon completion of hull line refinement no later than two (2) months after the Contract Effective Date.


If design confirmation is obtained, then Builder shall guarantee the 13 knots Vessel design speed. In the contrary, Owner will decide whether to accept the reduced speed that will result from the model tests and Builder shall guarantee the same. Alternatively, Owner and Builder will decide the course of action needed to reach the originally required speed and the revised Vessel design will be the subject of a Contract Change (Article 9 of Contract).


(a) If the Vessel makes a speed of at least twelve and eight
tenths (12.8) knots but less than thirteen (13) knots, Builder
shall have the option of making corrections/changes as
required to make the design speed or accepting payment of
ninety nine per cent (99%) of the Price specified above.


(b) If the Vessel makes a speed of at least twelve and one half
(12.5) knots but less than twelve and eight tenths (12.8)
knots, Builder shall have the option of making corrections/
changes as required to make the design speed or accepting
payment of ninety eight per cent (98%) of the Price specified
above.


March 30, 2000 Page 8 of 23


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(c) If the Vessel makes a speed of at least twelve (12.0) knots
but less than twelve and one half (12.5) knots, Builder shall
have the option of making corrections/changes as required to
make the design speed or accepting payment of ninety seven per
cent (97%) of the Price specified above.


(d) If the Vessel makes a speed of at least eleven and one half
(11.5) knots but less than twelve (12.0) knots, Builder shall
have the option of making corrections/ changes as required to
make the design speed or accepting payment of ninety five per
cent (95%) of the Price specified above.


(e) If the Vessel makes a speed of at least eleven (11.0) knots
but less than eleven and one half (11.5) knots, Builder shall
have the option of making corrections/changes as required to
make the design speed or accepting payment of ninety three per
cent (93%) of the Price specified above.


Sea trial procedures will be developed by Builder on the basis of Guido Perla & Associates relevant Standard Specifications and SNAME Technical Research Bulletin 3-47 Guide for Sea Trials.


Furthermore, upon assessment by Owner of the Builder's report on the mentioned model tank tests and non-linear time domain computer simulations, Owner may require certain modifications of the Vessel basic design to alter the Vessel motion, hydrodynamic characteristics, sea-keeping capability, stability or dynamic response. Any such modifications will also be the subject of a Contract Change Order (Article 9 of the Contract).


9. ALTERATIONS OR CHANGES


If during construction of the Vessel, Owner desires to make any additions to, deductions from, or alterations in the Plans and/or Specifications, Owner's representative shall give notice in writing to Builder specifying in detail the changes proposed by Owner. Change Orders proposed by Owner must be mutually agreed upon by Owner and Builder, and Builder shall have no obligation to perform said changes unless a Change Order is signed by the Owner and the Builder and said Change Order must specify:


(a) Details of change proposed, including reference to new Plans
and/or Specifications, if any;


(b) The value of the Change Order, positive or negative; and


(c) The number of days by which the delivery date of the Vessel
shall be increased or decreased as per Change Order. Changes
that do not affect the Master Construction Schedule's critical
path cannot be used to extend the delivery date.


Should the regulatory agencies' rules and regulations referred to in the Technical Specifications, or the interpretation thereof, written and officially published by the following organizations:


International Maritime Organization "IMO", Maritime Safety Committee "MSC", United States Coast Guard NVIC "USCG NVIC", International Association of Classification Societies "IACS", when relevant and applicable, be altered


March 30, 2000 Page 9 of 23


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or changed after the Contract Execution Date, then such change(s) will be the subject of a Change Order to the extent they affect the design and/or construction of the Vessel.


In the event that the parties cannot agree upon the cost of such changes, Owner will pay such changes by application of the Unit Rates for Procurement of Materials, Unit Rates for Itemized Work, Unit Rates for Labor or for Equipment as attached to this Agreement in Appendix D at its discretion.


10. INSURANCE AND INDEMNITY


Risk of loss of the Vessel shall be with the Builder until delivery.


A. Builder shall procure, at its expense, Builder's Risk insurance
covering the Vessel and the Work (including Owner Furnished Equipment
insured while located in Builder's yard) to its full value. The
Builder's Risk policy shall be under the latest full American Institute
Builder's Risk form including the Protection and Indemnity and the SRCC
endorsement. The policy shall name Owner as additional assured and
provide that payment of all losses shall be payable to the Owner, all
progress payments made to Builder and the cost of any losses of Owner
Furnished Equipment or materials destroyed as a result of such loss.


B. Builder hereby agrees to indemnify, defend and hold harmless Owner, its
officers, employees, agents, and affiliates from and against any and
all claims, demands or causes of action, by any and all third parties,
arising out of or in any way connected with, directly or indirectly,
the performance by the Builder of this Contract, for damages for death
or injury to any person or loss of or damage to property, of any and
all third parties, howsoever arising, and whether based in whole or in
part on any negligent act or omission of Owner; provided, however,
Builder shall not be required to defend, hold harmless and indemnify
Owner for any claims caused by the sole negligence of Owner. Provided
further, the foregoing indemnity shall be limited to the insurance
coverages and limits set forth in paragraph C immediately following.


C. Builder further agrees to procure and maintain, at its sole cost and
expense, insurance to fully cover all of its obligations set forth in
this Contract, which shall include, but not be limited to, the
following:


1. Worker's Compensation Insurance at statutory amounts, endorsed
to include the Longshoreman and Harbor Worker's Compensation
Act coverage, with alternate employer and borrowed servant
endorsements in favor of Owner. However, the alternate
employer and the borrowed servant endorsements shall not
operate to grant assured or additional assured status to
Owner.


2. Employers' and Maritime Employers' Liability insurance with
alternate employer and borrowed servant endorsements in favor
of Owner, in the minimum amount of $1,000,000 per occurrence
covering injury to or death of any employee which may be
outside the scope of the workmen's compensation statute in the
area where the Work is performed. However, the alternate
employer and the borrowed


March 30, 2000 Page 10 of 23


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servant endorsements shall not operate to grant assured or
additional assured status to Owner.


3. Comprehensive General Liability insurance, with the watercraft
and care, custody and control exclusions deleted throughout,
in the minimum amount of $1,000,000 per occurrence for bodily
injury, personal injury and property damage and subject to a
$2,000,000 general aggregate. Such insurance shall
specifically cover the contractual liabilities and indemnities
herein assumed by Builder and shall include "Action
Over/Indemnity Buyback", "Products and Completed Operations
Liability" and "Shiprepairer's Liability" provisions or
endorsements.


4. Automobile Liability insurance covering owned, non-owned, and
hired automotive equipment in the minimum amount of $1,000,000
combined single limit for bodily injury or property damage.


5. Excess liability insurance in the amount of $20,000,000 above
the coverages in (2) through (4) above.

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