BP Exploration Operating Company Limited (2)

EXHIBIT 10.6


DATED 8th September 1995


READING & BATES (CALEDONIA) LIMITED (1)


BP EXPLORATION OPERATING COMPANY LIMITED (2)


DEED OF COVENANT


=========================================================================== THIS DEED OF COVENANT is made the 8th day of September 1995


BETWEEN:


(1) READING & BATES (CALEDONIA) LIMITED, registered in England (No.
1591065) whose registered office is at Harman House, 1 George
Street, Uxbridge, Middlesex UB8 1QQ ("the Owner" which expression
shall include its successors and permitted assigns); and


(2) BP EXPLORATION OPERATING COMPANY LIMITED, whose registered office is
situate at Britannic House, 1 Finsbury Circus, London EC2M 7BA ("the
Mortgagee" which expression shall include its successors and
permitted assigns.


WHEREAS:


(A) The Owner is the absolute sole legal and beneficial owner of the
Vessel free from all mortgages, liens, charges and incumbrances
whatever (other than the Britoil Mortgage).


(B) The Owner and the Mortgagee have entered into the Sale and Purchase
Agreement for the sale and purchase of the Vessel in terms of which
certain sums remain outstanding by the Owner to the Mortgagee;


(C) This deed is supplemental to a first priority mortgage over the
Vessel and of even date with this deed ("the Mortgage").


NOW THIS DEED WITNESSETH as follows:


1. DEFINITIONS


1.1 In this agreement the words and phrases set out below shall have the
meanings ascribed to them:


"Approved Brokers" means insurance brokers appointed by the
Owner from time to time and approved by the
Mortgagee (such approval not to be
unreasonably withheld or delayed);


"Britoil" means Britoil plc (Company number 77750);


"Britoil Mortgage" means the statutory mortgage over all sixty
four sixty fourth (64/64th) shares of the
Vessel and the deed of covenant both dated
of even date herewith between the Owner and
Britoil;


"Business Day" means any day on which banks in the City of
London are normally open for business (other
than Saturday);


"Default Rate of
Interest" means the Reference Interest Rate (as
defined in the Sale and Purchase Agreement)
plus Two (2) percentage points;


"Excess Risks" means the proportion of claims for general
average and salvage charges and under the
ordinary running down clause not recoverable
in consequence with the value at which a
Vessel is assessed for the purpose of such
claims exceeding her insured value;


"Event of Default" means any event specified in Clause 6 of
this Agreement;


"Indebtedness" means all monies and/or liabilities of
whatsoever nature referred to in Clause 2 of
this deed whensoever and howsoever arising
from time to time;


"the Mortgage" means a first priority/statutory mortgage
over all sixty four sixty fourth (64/64th)
shares of the Vessel dated of even date
herewith mentioned in recital (C);


"Mortgaged Property" includes:-


(a) all sixty four sixty fourth (64/64th)
shares of the Vessel;


(b) Owner's Insurances and all benefits
thereof (including claims of
whatsoever nature and return of
premiums);


(c) Requisition Compensation


"Owner's Insurances" includes all policies and contracts of
insurance (which expression includes all
entries of the Vessel in a protection and
indemnity or War Risks association) which
are from time to time during the Security
Period taken out or entered into by the
Owner in respect of the Vessel or otherwise
in connection with the Vessel and shall
include (without limitation) the benefits of
claims of whatever nature and return of
premiums;


"Protection and
Indemnity Risks" means the usual risks covered by an English
or Norwegian protection and indemnity
association including the proportion not
recoverable in case of a collision and the
ordinary running down clause;


"Reading & Bates
Corporation" means Reading & Bates Corporation a company
incorporated under the laws of Delaware and
having its principal place of business at
901 Threadneedle, Suite 200, Houston, Texas
77079-2902, United States of America;


"Receiver" means a receiver appointed pursuant to the
provisions of Clause 9 of this Deed;


"Required Insurance" means any insurance or entry referred to in
Clause 4.1. of this Agreement;


"Requisition Compensation" means all monies or other compensation
payable during the Security Period by reason
of requisition for title or other compulsory
acquisition of the Vessel otherwise than by
requisition for use or hire not involving
requisition of title;


"The Sale and Purchase
Agreement" means a sale and purchase agreement dated of
even date herewith between the Owner and the
Mortgagee in respect of the sale and
purchase of the Vessel;


"Security Period" means the period commencing on the date
hereof and terminating upon whichever shall
be the later of:


(i) the date upon which all monies payable
to the Mortgagee under the Sale and
Purchase Agreement shall have been
paid to the Mortgagee; or


(ii) the date upon which all monies payable
to the Mortgagee under this Deed shall
have been paid to the Mortgagee;


"Total Loss" means:-


(a) actual or constructive or compromised
or arranged total loss of the Vessel;
or


(b) requisition for title or other
compulsory acquisitions of the Vessel
other than by requisition for use or
hire not involving requisition of
title;


"The Vessel" means the semi-submersible emergency support
vessel Iolair registered in Dundee, United
Kingdom, registered number 376461 and
includes any share or interest therein and
her engines, machinery, boats, tackle,
outfit, spare gear, fuel or other stores,
belongings and appurtenances whether on
board or ashore;


"War Risks" includes the risk of mines and all risks
excluded from the standard form of English
or Norwegian marine policy by the "free of
capture and seizure" clause;


2. COVENANT OF THE OWNER


The Owner covenants and agrees with the Mortgagee:-
2.1 to pay to the Mortgagee all sums becoming payable by the Owner
to the Mortgagee in terms of the Sale and Purchase Agreement;


2.2 to pay to the Mortgagee all sums becoming payable in terms of
this deed.


3. CHARGE OF VESSEL


By way of security for payment of the sums and performance of the
other obligations referred to in Clause 2 the Owner mortgages and
charges to and in favour of the Mortgagee with full title guarantee
all its interest present and future in the Mortgaged Property (and
the Owner warrants the Vessel to be free at the date of this deed
from any other charge or incumbrance whatever other than the Britoil
Mortgage) and without prejudice to the generality of the foregoing
the Owner assigns and agrees to assign to the Mortgagee all policies
of insurance that have been or may be taken out in respect of the
Vessel and all the benefits of such policies including (without
limitation) claims of whatever nature and return of premiums.


4. COVENANTS BY OWNER


The Owner further covenants with the Mortgagee that during the
Security Period:-


4.1 it will insure at the Owner's cost, the Vessel:-


4.1.1 in the joint names of the Owner and the Mortgagee (but
without liability on the part of the Mortgagee for
premiums or calls) against all marine risks which are
from time to time insurable (including War Risks and
kindred perils and Excess Risks) on an agreed value
basis for not less than whichever is the greater of
current market value or 110% of all sums payable to the
Mortgagee under the Sale and Purchase Agreement. All
policies taken out and entries made in compliance with
the Owner's obligations under this Clause shall bear a
loss payable clause in the terms set out in Schedule 2
to this deed or in such other terms as the Mortgagee may
reasonably approve in writing; and


4.1.2 in the joint names of the Owner and the Mortgagee (but
without any liability on the part of the Mortgagee for
premiums and calls) and such other names as shall from
time to time be approved in writing by the Mortgagee for
the full value and tonnage of the Vessel against
Protection and Indemnity Risks (including but not
limited to the proportion not recoverable in case of
collision under the ordinary running down clause) and
claims of employees, servants, agents or sub contractors
of the Owner, any charterer of the Vessel, passengers,
or third parties and their respective defendants, and
against such other risks as may be required by statute,
order or regulation of the United Kingdom and of all
other countries to whose jurisdiction the Vessel may
from time to time become subject or of which the
Mortgagee may reasonably direct. All policies taken out
and entries made in compliance with the Owner's
obligations under this clause shall bear a loss payable
clause in their terms set out in Schedule 2 to this deed
or in such other terms as the Mortgagee may reasonably
approve in writing.


4.2 each policy or entry taken out or effected in compliance with
the terms of clause 4.1 above shall be effected through such
brokers and with such insurance companies, underwriters or War
Risks or protection and indemnity associations as the
Mortgagee may reasonably approve and shall be in such form and
upon such terms as the Mortgagee shall from time to time
reasonably approve in writing. The Owner shall forthwith give
or cause the Approved Brokers to give notice of the assignment
of the Owner's Insurances in the form set out in Schedule 1 to
this deed or in such other form as the Mortgagee may require
to all insurers, underwriters, clubs and associations
providing insurance in connection with the Vessel and similar
notice shall be given from time to time to any further
insurers, underwriters, clubs and associations providing
insurance in connection with the Vessel.


4.3 it will punctually pay all such premiums, calls,
contributions or other sums as may be required in order to
insure and enter the Vessel in accordance with the terms of
this deed, and to keep the vessel so insured and entered, and
it will produce to the Mortgagee the receipts (or other
evidence of payment) for such premiums, calls, contributions
or other sums within 14 days of such payment. The owner shall
not take credit in respect of the payment of premiums or calls
or contributions without the prior approval of the Mortgagee
and the Owner shall procure that the Approved Brokers and any
insurance companies or underwriters with which the Vessel is
insured and any protection and indemnity association and/or
war risk association in which the Vessel is entered shall
waive any lien for premiums or calls except in relation to
premiums or calls attributable to the Vessel.


4.4 it will renew all Required Insurances at least fourteen (14)
days before the relevant policies or contracts expire and
procure that the Approved Brokers shall promptly confirm in
writing to the Mortgagee as and when each such renewal is
effected;


4.5 it will arrange for the execution of such guarantees as may
from time to time be required by any protection and indemnity
or War Risks association;


4.6 it will procure that the interest of the Mortgagee as
mortgagee of the Vessel and assignee of the Required Insurance
is duly indorsed or noted on all slips, cover, notes,
policies, certificates of entry or other instruments of
insurance issued in connection with any Owners Insurances;


4.7 it will procure that all slips, cover notes, policies,
certificates of entry or other instruments of insurance
relating to a Required Insurance shall be deposited with the
Approved Brokers and that the Approved Brokers shall if at any
time reasonably required, allow representatives of the
Mortgagee access during normal office hours and upon the
giving of reasonable notice to inspect such slip, cover note,
policy, certification of entry or other instrument of
insurance to the Mortgagee;


4.8 it will procure that the Approved Brokers and any associations
or clubs through whom the Required Insurance are placed
furnish the Mortgagee a letter or letters of undertaking in
such form as may be reasonably required by the Mortgagee;


4.9 it will deliver to the Mortgagee duplicates or certified
copies of all policies relating to the Required Insurances and
it will assign to the Mortgagee all sums insured by or to
become payable under such policies or any of them and the full
benefit of them and do all such things and execute all such
documents as shall create legal title in such policies or the
proceeds of them in the Mortgagee;


4.10 it will not (without the prior written consent of the
Mortgagee such consent not to be unreasonably withheld or
delayed) alter any Required Insurance nor do anything nor
suffer anything to be done whereby any Required Insurance on
the Vessel or any cover afforded by the rules of any mutual
association in which the Vessel is entered may be or become
void or unenforceable or whereby any sum paid out under any
Required Insurance may be or become payable;


4.11 it will keep the Vessel registered as a British Vessel at the
port of registry in a United Kingdom (without the prior
written consent of the Mortgagee which consent may be refused
by the Mortgagee at its sole discretion or granted subject to
conditions) and not do or suffer to be done anything whereby
such registration may be forfeited or imperilied;


4.12 it will not employ or permit the Vessel to be employed in any
illicit trade or in carrying any illicit or prohibited goods;


4.13 it will not without the prior written consent of the Mortgagee
(and then only subject to such terms as the Mortgagee may
impose) (and save as permitted under the Services Agreements)
let or employ the Vessel:


4.13.1 on demise charter for any period; or


4.13.2 on any charterparty contract of affreightment or
other contract of employment for a period which
exceeds, or which by virtue of any optional
extensions may exceed, 6 months; or


4.13.3 below the market rate prevailing when the Vessel
is fixed for such letting or employment.


4.14 it will maintain the Vessel in a good and efficient state or
repair so to maintain her present class namely +OU100A and
keep her at all times in thoroughly good and seaworthy repair
and good order and decorative condition so as to make her
comply wi ...