-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JWhPT+3MrICjuclVx6uTGay9Oyu8RwUSO9YocAVlQkB2Z9AueewYiXwTPgFL/fo8 FCatybFyeueStRIjHAUQIg== 0000890566-99-001556.txt : 19991210 0000890566-99-001556.hdr.sgml : 19991210 ACCESSION NUMBER: 0000890566-99-001556 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 121 FILED AS OF DATE: 19991208 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMETHYST FINANCIAL CO LTD CENTRAL INDEX KEY: 0001100315 STANDARD INDUSTRIAL CLASSIFICATION: FILING VALUES: FORM TYPE: F-4 SEC ACT: SEC FILE NUMBER: 333-92385 FILM NUMBER: 99771065 BUSINESS ADDRESS: STREET 1: ARIAS FABREGA & FABREGA TRUST CO BVI LTD STREET 2: 325 WATERFRONT DR 2ND FL ROAD TOWN CITY: TORTOLA BVI BUSINESS PHONE: 2844944977 MAIL ADDRESS: STREET 1: ARIAS FABREGA & FABREGA TRUST CO BVI LTD STREET 2: 325 WATERFRONT DR 2ND FL ROAD TOWN CITY: TORTOLA BVI FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRIDE INTERNATIONAL INC CENTRAL INDEX KEY: 0000833081 STANDARD INDUSTRIAL CLASSIFICATION: 1389 IRS NUMBER: 760069030 STATE OF INCORPORATION: LA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-92385-01 FILM NUMBER: 99771066 BUSINESS ADDRESS: STREET 1: 5847 SAN FELIPE ST ST 3300 CITY: HOUSTON STATE: TX ZIP: 77057 BUSINESS PHONE: 7137891400 MAIL ADDRESS: STREET 1: 1500 CITY WEST BLVD STREET 2: SUITE 400 CITY: HOUSTON STATE: TX ZIP: 77042 FORMER COMPANY: FORMER CONFORMED NAME: PRIDE PETROLEUM SERVICES INC DATE OF NAME CHANGE: 19920703 F-4 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON December 8, 1999 REGISTRATION NO. 333- NO. 333- -01 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORMS F-4 AND S-4* REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ AMETHYST FINANCIAL COMPANY LTD. PRIDE INTERNATIONAL, INC. (Exact name of each Registrant as specified in its charter) BRITISH VIRGIN ISLANDS 1389 NONE LOUISIANA 1389 76-0069030 (State or other (Primary Standard Industrial (I.R.S. Employer jurisdiction Classification Code Number) Identification No.) of incorporation or organization) AMETHYST FINANCIAL COMPANY LTD. CT CORPORATION SYSTEM C/O ARIAS FABREGA & FABREGA TRUST CO. 111 EIGHTH AVENUE BVI LIMITED NEW YORK, NEW YORK 10011 325 WATERFRONT DRIVE (800) 624-0909 OMAR HODGE BLDG., SECOND FLOOR WICKHAM'S CAY, ROAD TOWN TORTOLA, BRITISH VIRGIN ISLANDS (284) 494-4977 PRIDE INTERNATIONAL, INC. ROBERT W. RANDALL, SECRETARY 5847 SAN FELIPE, SUITE 3300 PRIDE INTERNATIONAL, INC. HOUSTON, TEXAS 77057 5847 SAN FELIPE, SUITE 3300 (713) 789-1400 HOUSTON, TEXAS 77057 (713) 789-1400 (Address, including zip code, (Name, address, including and telephone number, zip code, telephone number, including area code, of Registrant's including area code, of each principal executive offices) Registrant's agent for service) APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE PUBLIC: As soon as practicable following the effectiveness of this Registration Statement. If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the "Securities Act"), check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] ----------------------- CALCULATION OF REGISTRATION FEE - - -------------------------------------------------------------------------------- PROPOSED MAXIMUM PROPOSED TITLE OF EACH CLASS OFFERING MAXIMUM AGGREGATE AMOUNT OF OF SECURITIES TO BE AMOUNT TO BE PRICE PER OFFERING PRICE REGISTRATION REGISTERED REGISTERED UNIT (1) (1) FEE - - -------------------------------------------------------------------------------- 11 3/4% New Senior Secured Notes due 2001 .............. $53,000,000 100% $53,000,000 $13,992 - - -------------------------------------------------------------------------------- Pride Limited Guarantee of 11 3/4% New Senior Secured Notes due 2001 .... $30,000,000 -- -- -- - - -------------------------------------------------------------------------------- (1)Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(f) under the Securities Act. ----------------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. ----------------------- *This Registration Statement constitutes a filing on Form F-4 by Amethyst Financial Company Ltd. and a filing on Form S-4 by Pride International, Inc. ================================================================================ Subject to Completion, Dated December 8, 1999 PRELIMINARY PROSPECTUS $53,000,000 AMETHYST FINANCIAL COMPANY LTD. OFFER TO EXCHANGE $53,000,000 11 3/4% OUTSTANDING SENIOR SECURED NOTES DUE 2001 FOR $53,000,000 REGISTERED 11 3/4% SENIOR SECURED NOTES DUE 2001 THE OLD AND NEW NOTES ARE GUARANTEED IN AN AGGREGATE AMOUNT OF UP TO $30,000,000 BY PRIDE INTERNATIONAL, INC. AND BACKED BY A $23,000,000 LETTER OF CREDIT ISSUED BY REPUBLIC NATIONAL BANK OF NEW YORK. THE NEW NOTES - - - will be freely tradeable and otherwise substantially identical to the old notes - - - will accrue interest at the same rate per annum as the old notes, payable semi-annually in cash in arrears on June 30 and December 30 of each year, commencing June 30, 2000 - - - will be our senior secured obligations which will rank equally with the old notes and all our existing senior unsecured debt and will have priority over our senior unsecured debt to the extent of the collateral securing the new notes - - - will not be listed on any securities exchange or on any automated dealer quotation system THE EXCHANGE OFFER - - - expires at 5:00 p.m., New York City time, on , 2000, unless extended - - - is not conditioned upon any minimum aggregate principal amount of old notes being tendered YOU SHOULD NOTE THAT - - - we will exchange all old notes that are validly tendered and not validly withdrawn for an equal principal amount of new notes that we have registered under the Securities Act of 1933 - - - you may withdraw tenders of old notes at any time prior to the expiration of the exchange offer - - - the exchange of old notes for new notes in the exchange offer will not be a taxable event for U.S. federal income tax purposes YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 12 OF THIS PROSPECTUS BEFORE PARTICIPATING IN THE EXCHANGE OFFER. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE NEW NOTES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE DATE OF THIS PROSPECTUS IS , 1999. The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. TABLE OF CONTENTS
About this Prospectus....................1 The Exchange Offer..........................56 Forward-Looking Statements...............1 Description of New Notes....................64 Prospectus Summary.......................2 Book Entry; Delivery, Form and Transfer of Risk Factors............................12 the New Notes.............................98 Use of Proceeds.........................28 Tax Considerations.........................101 Capitalization..........................28 Plan of Distribution.......................102 Selected Historical Financial Data......29 Legal Matters..............................103 Management's Discussion and Analysis of Experts....................................103 Financial Condition and Results of Independent Public Accountants.............103 Operation.............................30 Independent Engineers......................103 Business................................32 Where You Can Find More Information........103 Management..............................52 Index to Consolidated Financial Statements F-1 Executive and Board Compensation and Appendix A--Pride International, Inc.......A-1 Benefits..............................53 Appendix B--Republic National Bank of New Certain Relationships and Related York.....................................B-1 Transactions..........................53
ABOUT THIS PROSPECTUS THIS PROSPECTUS IS PART OF A REGISTRATION STATEMENT WE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. YOU SHOULD RELY ONLY ON THE INFORMATION WE HAVE PROVIDED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH ADDITIONAL OR DIFFERENT INFORMATION. WE ARE NOT MAKING AN OFFER OF THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD ASSUME THAT THE INFORMATION IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE ON THE FRONT OF THIS PROSPECTUS AND THAT ANY INFORMATION WE HAVE INCORPORATED BY REFERENCE IS ACCURATE ONLY AS OF THE DATE OF THE DOCUMENT INCORPORATED BY REFERENCE. In this prospectus, references to "U.S. dollars," "dollars" or "$" are to United States dollars and references to a "REAL," "REAIS" or "R$" are to a Brazilian REAL or Brazilian REAIS. For your convenience, we have translated some amounts stated in this prospectus in U.S. dollars from Brazilian REAIS at the commercial market rate in effect on September 30, 1999. On that date, the commercial market rate reported by the Brazilian Central Bank was R$1.92 per U.S. dollar. You should not construe these translations as a representation that REAIS could have been converted at such rate on such date or any other date or will be able to be converted at such rate on any future date. You should read the discussion on Brazilian exchange rate fluctuations under the heading "Risk Factors" beginning on page __ for further information. FORWARD-LOOKING STATEMENTS This prospectus, including the information we incorporate by reference, includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You can identify our forward-looking statements by the words "anticipate," "believe," "expect," "plan," "intend," "estimate," "project," "budget," "forecast," "will," "could," "should" and "may" and similar expressions. These statements address activities, events or developments that we expect, believe, anticipate or estimate will or may occur in the future and are based on assumptions and analyses that we have made and believe are reasonable. We caution you, however, that these assumptions and analyses are dependent on a variety of uncertain factors, many of which are beyond our control, so our actual results may differ materially from those anticipated or projected in our forward-looking statements. These differences could result from various risks and uncertainties, including the following: o prices of and demand for crude oil and natural gas o the level of petroleum industry exploration and production activity and expenditures o the level of drilling activity o the effect of competition o world economic conditions o weather o governmental policy in Brazil and other countries o Petrobras o Organisation of Petroleum Exporting Countries (OPEC) policy o conflict in the Middle East and other major petroleum producing or consuming regions o the development of technology that affects overall finding and development costs o the condition of the capital and equity markets 1 PROSPECTUS SUMMARY THIS SUMMARY HIGHLIGHTS INFORMATION FROM THIS PROSPECTUS BUT DOES NOT CONTAIN ALL THE INFORMATION THAT IS IMPORTANT TO YOU. THIS PROSPECTUS INCLUDES SPECIFIC TERMS OF THE EXCHANGE OFFER, INFORMATION ABOUT OUR BUSINESS, INFORMATION ABOUT THE BUSINESS OF PRIDE AND DETAILED FINANCIAL DATA. WE ENCOURAGE YOU TO READ THE DETAILED INFORMATION AND THE FINANCIAL STATEMENTS AND RELATED NOTES APPEARING ELSEWHERE IN THIS PROSPECTUS IN THEIR ENTIRETY. ABOUT AMETHYST FINANCIAL COMPANY LTD. We were formed in 1998 to construct, own and operate four enhanced Amethyst-class drilling rigs consisting of the AMETHYST 4, AMETHYST 5, AMETHYST 6 and AMETHYST 7. Each rig is a dynamically positioned, self-propelled, fourth-generation semi-submersible rig capable of performing drilling and subsea well intervention and maintenance services in water depths of up to 5,000 feet. By owning and operating the rigs, we expect to become a significant provider of deepwater (depths greater than 1,300 feet) drilling and related services in the Brazilian market, one of the largest deepwater drilling markets in the world. Each rig is currently under construction and, once completed, will be owned by one of our four wholly owned subsidiaries. The subsidiaries have entered into contracts denominated in U.S. dollars to charter the rigs to Petroleo Brasileiro S.A.--Petrobras, the Brazilian national oil company, for initial terms ranging from six to eight years. (You should read the discussion under the heading "--Threatened Cancellation of Our Charters" beginning on page 4 for information relating to the threatened cancellation of our charters.) Our four rigs represent approximately 18% of the deepwater, dynamically positioned units currently contracted by Petrobras to conduct exploration, development and well service activities offshore Brazil. The Amethyst design incorporates state-of-the-art technology for deepwater drilling to create a compact, multi-functional rig that we believe offers a cost-effective alternative to larger, more costly rigs and vessels. Our rigs will be enhanced versions of the first Amethyst-class rig, the AMETHYST 1, which, since 1996, has been conducting subsea well intervention and maintenance services for Petrobras in the Campos Basin under a long-term contract that expires in 2001. Our registered office is located at Amethyst Financial Company Ltd., c/o Arias Fabrega & Fabrega Trust Co. BVI Limited, 325 Waterfront Drive, Omar Hodge Building, 2nd Floor, Wickham's Cay, Road Town, Tortola, British Virgin Islands. ABOUT OUR OWNERS We are owned 61.7% by affiliates of Maritima Petroleo e Engenharia Ltda., a limited liability quota company established under the laws of Brazil, 26.4% by an indirect wholly owned subsidiary of Pride International, Inc., a Louisiana corporation, and 11.9% by two investment partnerships managed by First Reserve Corporation. Maritima and Pride, directly or through affiliates, have primary contractual responsibility for our operations. Both Maritima and Pride have significant experience in the construction, operation, management and marketing of offshore drilling rigs, vessels and related offshore equipment. MARITIMA Maritima is a privately owned company headquartered in Rio de Janeiro. It provides a range of services and equipment to companies participating in the oil and gas exploration and production sector in Brazil. Maritima's development has been marked by its relationship with Petrobras. Since 1981, Maritima and its affiliates have participated in approximately 30 major projects for Petrobras, ranging from rig and vessel acquisitions, upgrades and conversions to providing local support services for offshore rig operations. Maritima and its affiliates have typically participated in these projects through joint ventures, consortiums and joint operating and agency relationships with leading international drilling and marine construction companies such as: o Pride o Diamond Offshore Drilling, Inc. o Falcon Drilling Company, Inc. (now part of R&B Falcon Corporation) o Stena Offshore Ltd. o Mitsui Offshore Development and Engineering Company (MODEC) Inc. o Astilleros Espanoles S.A. Maritima currently provides shore-based facilities and local logistical support for the AMETHYST 1 and the NYMPHEA, a third-generation semi-submersible drilling rig. Like the AMETHYST 1, the NYMPHEA currently operates offshore Brazil under a long-term contract with Petrobras. In addition, Maritima and its affiliates currently are managing or recently have completed the conversion of four vessels or semi-submersible platforms for Petrobras to be used as floating production and storage units offshore Brazil. These projects are expected to represent approximately 480,000 barrels per day of new production capacity for Petrobras. 2 PRIDE Pride is a public company listed on the New York Stock Exchange headquartered in Houston, Texas. It is a leading international provider of contract drilling and related services, operating both offshore and on land. Pride has focused its growth strategy on the higher margin offshore and international drilling markets. Pride is one of the largest and most diversified drilling contractors in the world. It operates a global fleet of 320 rigs, including two drillships, three semi-submersible rigs and 52 other offshore drilling and workover rigs. Pride's deepwater fleet includes the semi-submersibles AMETHYST 1, NYMPHEA and SOUTH SEAS DRILLER and, through a 51%-owned joint venture, the PRIDE AFRICA and the PRIDE ANGOLA, each of which is an ultra-deepwater dynamically positioned drillship. Through its subsidiary Pride-Foramer S.A., Pride has participated in the design and construction of four drillships and two semi-submersible rigs in addition to the PRIDE AFRICA, PRIDE ANGOLA and the four new Amethyst-class rigs and has drilled 47 wells in water depths greater than 1,300 feet. Pride-Foramer has extensive experience operating offshore Brazil, having drilled at least 15 wells offshore Brazil in water depths ranging between 1,900 and 3,300 feet and having participated in several major discoveries in the Campos Basin. FIRST RESERVE First Reserve is a private equity firm specializing in the energy industry. Founded in 1980, the firm has offices in Houston, Texas, Greenwich, Connecticut and Denver, Colorado and manages a portfolio of energy holdings with a market value in excess of $1.5 billion. First Reserve has significant experience as a principal investor in oilfield service companies. Its portfolio companies include Pride, CalDive International, Weatherford International, Inc., and National Oilwell, Inc. Two investment partnerships managed by First Reserve invested an aggregate $12.5 million in cash in our common equity in September 1999 in exchange for an 11.9% interest. Such investment will be exchangeable after three years (or earlier in certain circumstances), at First Reserve's option, for shares of Pride common stock and Pride, in turn, will have the option to acquire the First Reserve interest for cash or Pride common stock once such interest becomes exchangeable for Pride stock. If either of such options is exercised, Maritima will have the right to purchase from Pride such portion of the First Reserve interest as will enable Maritima to maintain ownership of 70% of the combined interests of Maritima and Pride. OWNER GUARANTEE AND LETTER OF CREDIT Pride will issue in respect of the new notes, and has issued in respect of the old notes, a senior unsecured corporate guarantee for repayment of up to an aggregate of $30.0 million of the new and old notes. In addition, our obligation to repay the new and old notes will be backed by a $23.0 million irrevocable standby letter of credit arranged by Maritima and issued by Republic National Bank of New York. FINANCING OF OUR RIGS MITSUBISHI FINANCING In December 1998, affiliates of Mitsubishi Corporation agreed to fund, through two separate credit facilities, up to an aggregate $340.0 million of the cost (including accrued interest) of constructing, equipping and mobilizing the AMETHYST 6 and AMETHYST 7. The credit facility governing the AMETHYST 6 permits drawings of up to $160.0 million and the credit facility covering the AMETHYST 7 permits drawings of up to $180.0 million. As of November 30, 1999, $66.0 million remained available under the AMETHYST 6 credit facility and $47.0 million remained available under the AMETHYST 7 credit facility. On November 1, 1999, we issued $53 million principal amount of 11 3/4% senior secured notes due 2001 that were not registered under the Securities Act of 1933. We used the net proceeds from the sale of those old notes, cash on hand and additional funds provided by Pride and Maritima to purchase the fully drawn first tranches of the Mitsubishi credit facilities (representing $47.0 million in the case of the AMETHYST 6 facility and $53.0 million in the case of the AMETHYST 7 facility). A 53% undivided interest in the participations purchased by us, including the right to receive payments of principal and interest and all rights as a secured party in respect of such interest in those participations, was irrevocably assigned to Wilmington Trust Company as collateral agent to secure our obligation to repay the old and new notes. MARAD FINANCING In April 1999, Citibank, N.A. and its affiliate Govco Incorporated agreed to fund, through two separate credit facilities, up to an aggregate $299.8 million of the cost (including construction period interest) of constructing and equipping the AMETHYST 4 and AMETHYST 5. The credit facility covering the AMETHYST 4 permits drawings of up to $149.6 million and the credit facility covering the AMETHYST 5 permits drawings of up to $150.2 million. The United States of America (through the Maritime Administration or MARAD) has guaranteed repayment of the borrowings under each credit facility up to 87.5% of the actual cost of each rig to the extent the other 12.5% of the actual cost has been funded outside of such credit facility. The lenders are not 3 obligated to advance funds not covered by the MARAD guarantee. As of November 30, 1999, $92.2 million remained available under the AMETHYST 4 credit facility and $106.0 million remained available under the AMETHYST 5 credit facility. THREATENED CANCELLATION OF OUR CHARTERS If the shipyards deliver our rigs on the construction contract delivery dates and our mobilization time to Brazil does not exceed our allowance for mobilization, we will deliver our rigs to Petrobras between 263 and 433 days after the delivery dates set forth under their respective charters with Petrobras. (We currently anticipate that the AMETHYST 6 and AMETHYST 7 will be delivered by Daewoo Heavy Industries Ltd. on or before the delivery dates set forth in their construction contracts, but that the AMETHYST 4 and AMETHYST 5 may be delivered by TDI-Halter, L.P. up to two months later than the delivery dates set forth in their construction contracts.) While each charter states that it may be canceled by Petrobras if the chartered rig is not delivered within 180 days after the delivery date specified, Petrobras, on May 28, 1998, provided a letter waiving its right to cancel the charters and related service rendering contracts on the basis of late delivery unless the delay exceeds 540 days and, even then, only if best endeavors to make delivery are not being made. On October 13, 1999, Maritima received a letter from Petrobras stating that Petrobras will cancel the charters and service rendering contracts for our rigs when delay in delivery exceeds 180 days as specified in the charters. In its letter, Petrobras also reserved its right to seek compensation for damages. By threatening to cancel the charters if delay in delivery exceeds 180 days, Petrobras indicated an intent contrary to its May 1998 letter. Our Brazilian counsel, Pedro Calmon Filho & Associados, has informed us that Petrobras' May 1998 letter extending the permitted delay in delivery is an enforceable obligation of Petrobras; however, specific performance of Petrobras' obligations under the charters may, as a practical matter, not be an available remedy, and our rights against Petrobras could be limited to a lawsuit for damages. The result of any such lawsuit is uncertain, the amount of damages may be limited and any recovery may be subject to extensive delays. If Petrobras follows through with its threat and cancels the charters for our rigs, such cancellation would constitute an event of default under the credit facilities that are providing substantially all of the financing for construction of our rigs. Since being informed of Petrobras' October 13 letter, the credit facility lenders have continued to fund our construction draws. Based on Petrobras' October 13 letter, however, the credit facility lenders may, at their discretion, cease funding construction, in which event we would not be able to complete construction of the rigs unless we obtain new funding from other sources or an agreement of the credit facility lenders to resume funding on terms acceptable to them. Based on its announced deepwater drilling program and the performance characteristics of the Amethyst design, we believe that Petrobras has significant needs for our rigs. We further believe that, while Petrobras may seek to renegotiate certain of the terms of our charters as part of a settlement of the claims described below in respect of charters for two other Amethyst-class rigs, there is significant likelihood that Petrobras will not ultimately cancel our charters. There can be no assurance, however, that this will be the case. We believe Petrobras' letter of October 13, 1999 threatening cancellation of the charters for our rigs was sent in response to claims made by Maritima and our construction manager, Petrodrill Engineering N.V., in connection with the cancellation by Petrobras of the charters for two other rigs, the AMETHYST 2 and AMETHYST 3, that were being constructed concurrently with our rigs. Petrobras initially awarded Maritima charters for six Amethyst-class rigs, the AMETHYST 2 and AMETHYST 3 and our four rigs. Maritima and Pride organized a joint venture company, Petrodrill Offshore Inc., with six subsidiaries to own and charter the rigs to Petrobras. The AMETHYST 2 and AMETHYST 3 were to have commenced operations in the Campos Basin in late 1999 and early 2000, but the construction contracts for those two rigs were terminated in November 1998 after the shipyard at which the rigs were to be constructed filed for protection from its creditors. In May 1999, Petrobras canceled the charters and service rendering contracts for the AMETHYST 2 and AMETHYST 3 based on alleged late delivery. Maritima and Petrodrill Engineering submitted letters to Petrobras alleging that Petrobras' termination of the charters and service rendering contracts for the AMETHYST 2 and AMETHYST 3 was wrongful. Petrodrill Engineering's letter asserts that, because of Petrobras' May 1998 letter, Petrobras had waived its right to cancel the charters and service rendering contracts unless the delay in delivery exceeded at least 540 days. In addition, Maritima's letter asserts that the work stoppage resulting from the bankruptcy of the shipyard for the AMETHYST 2 and AMETHYST 3 was a FORCE MAJEURE event that did not permit termination and, further, that the joint venture was prepared to fulfill the contracts by contracting other available rigs to replace the AMETHYST 2 and AMETHYST 3. The letters to Petrobras specify damages of approximately $95 million, none of which involve claims made by us or on our behalf. Following termination of the construction contracts for the AMETHYST 2 and AMETHYST 3, Petrodrill Offshore transferred the shares of each of its six subsidiaries to us for nominal consideration, and we transferred the shares of the subsidiaries that held the charters for the AMETHYST 2 and AMETHYST 3 to a separate joint venture company owned by Maritima and Pride. Petrodrill Offshore has reached agreement with the prime contractor and its affiliates for the settlement of all claims relating to the construction contracts for the AMETHYST 2 and AMETHYST 3 and their termination. Neither we nor any of our subsidiaries were or are a party to any of the claims or disputes relating to termination of these construction contracts. 4 SUMMARY OF THE EXCHANGE OFFER On November 1, 1999, we completed a private offering of the old notes. In connection with the private offering, we entered into an exchange and registration rights agreement with the initial purchaser of the old notes. We agreed to deliver to you this prospectus and to complete the exchange offer for the old notes within 180 days after the date of the private offering. In the exchange offer, you are entitled to exchange your old notes for new notes with substantially identical terms. You should read the discussion under the headings "--Summary of Terms of the New Notes" beginning on page 7 and "Description of New Notes" beginning on page 64 for further information about the new notes. We summarize the terms of the exchange offer below. You should read the discussion under the heading "The Exchange Offer" beginning on page 56 for further information about the exchange offer and the resale of the new notes.
Expiration Date............. The exchange offer will expire at 5:00 p.m., New York City time, on ______________,2000, or such later date and time to which we extend the expiration date. Withdrawal of Tenders....... You may withdraw your tender of old notes at any time prior to the expiration date. We will return to you, without charge, promptly after the expiration or termination of the exchange offer, any old notes that you tendered but were not accepted for exchange. Conditions to the Exchange We will not be required to accept old notes for Offer.................... exchange: o if the exchange offer would be unlawful or would violate any interpretation of the staff of the SEC o if any legal action has been instituted or threatened that would impair our ability to proceed with the exchange offer The exchange offer is not conditioned upon any minimum aggregate principal amount of old notes being tendered. You should read the discussion under the heading "The Exchange Offer--Conditions to the Exchange Offer" beginning on page 57 for more information about the conditions to the exchange offer. Procedures for Tendering If your old notes are held through The Depository Old Notes................ Trust Company (or DTC) and you wish to participate in the exchange offer, you may do so through DTC's automated tender offer program. If you tender under this program, you will agree to be bound by the letter of transmittal that we are providing with this prospectus as though you had signed the letter of transmittal. By signing or agreeing to be bound by the letter of transmittal, you will represent to us that, among other things: o any new notes that you receive will be acquired in the ordinary course of your business o you have no arrangement or understanding with any person to participate in the distribution of the old notes or the new notes o you are not our "affiliate," as defined in Rule 405 of the Securities Act of 1933, or, if you are our affiliate, you will comply with any applicable registration and prospectus delivery requirements of the Securities Act of 1933 o if you are not a broker-dealer, you are not engaged in and do not intend to engage in the distribution of the new notes o if you are a broker-dealer that will receive new notes for your own account in exchange for old notes that you acquired as a result of market-making activities or other trading activities, you will deliver a prospectus in connection with any resale of such new notes
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Special Procedures for If you own a beneficial interest in old notes Beneficial Owners........ that are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and you wish to tender the old notes in the exchange offer, you should contact the registered holder as soon as possible and instruct the registered holder to tender on your behalf and to comply with our instructions described in this prospectus. Guaranteed Delivery You must tender your old notes according to the Procedures............... guaranteed delivery procedures described in "The Exchange Offer-- Guaranteed Delivery Procedures" beginning on page 60 if any of the following apply: o you wish to tender your old notes but they are not immediately available o you cannot deliver your old notes, the letter of transmittal or any other required documents to the exchange agent prior to the expiration date o you cannot comply with the applicable procedures under DTC's automated tender offer program prior to the expiration date U.S. Federal Income The exchange of old notes for new notes in the exchange Tax Considerations....... offer will not be a taxable event for U.S. federal income tax purposes. You should read the discussion under the heading "Tax Considerations-Material United States Federal Income Tax Considerations" beginning on page 101 for futher information. Use of Proceeds............. We will not receive any cash proceeds from the issuance of new notes in the exchange offer.
THE EXCHANGE AGENT We have appointed Wilmington Trust Company as exchange agent for the exchange offer. You should direct questions, requests for assistance, requests for additional copies of this prospectus or the letter of transmittal and requests for the notice of guaranteed delivery to the exchange agent. If you are not tendering under DTC's automated tender offer program, you should send the letter of transmittal and any other required documents to the exchange agent as follows: WILMINGTON TRUST COMPANY (302) 651-1562 BY MAIL (REGISTERED OR CERTIFIED MAIL RECOMMENDED): BY COURIER OR BY HAND: Wilmington Trust Company Wilmington Trust Company Rodney Square North Rodney Square North 1100 North Market Street 1105 North Market Street Wilmington, Delaware 19890-0001 Wilmington, Delaware 19890-0001 Attn: Corporate Trust Operations Attn: Corporate Trust Operations BY FACSIMILE TRANSMISSION (ELIGIBLE INSTITUTIONS ONLY): (302) 651-1079 Attn: Corporate Trust Administration CONFIRM BY TELEPHONE: (302) 651-1562 6 SUMMARY OF TERMS OF THE NEW NOTES Unlike the old notes, the new notes, with limited exceptions, will be freely tradeable and will not have registration rights or provisions for additional interest. Otherwise, the new notes are substantially identical to the old notes. The new notes will evidence the same debt as the old notes, and the old notes and the new notes will be governed by the same indenture. EXCEPT WHEN USED AS PART OF THE TERM "NEW NOTES" OR "OLD NOTES," THE TERM "NOTES" IN THIS SUMMARY DESCRIPTION REFERS TO THE OLD NOTES THAT WILL BE OUTSTANDING UNTIL THE EXCHANGE OFFER IS CONSUMMATED AND, AFTER GIVING EFFECT TO THE EXCHANGE OFFER, COLLECTIVELY TO THE OUTSTANDING NEW NOTES AND ANY REMAINING UNEXCHANGED OLD NOTES.
ISSUER............................. Amethyst Financial Company Ltd., a company with limited liability organized under the laws of the British Virgin Islands. SECURITIES OFFERED................. $53,000,000 principal amount of registered Senior Secured Notes due 2001. MATURITY DATE...................... November 1, 2001. INTEREST PAYMENT DATES............. June 30 and December 30 of each year, commencing June 30, 2000, and at maturity. PRIDE GUARANTEE.................... Our obligation to repay the notes is guaranteed up to $30.0 million by Pride on a senior unsecured basis. Pride's guarantee will rank equally with Pride's other senior unsecured debt. LETTER OF CREDIT................... Our obligation to repay the notes is backed by a $23.0 million irrevocable standby letter of credit issued by Republic National Bank of New York. REDEMPTION UPON A SALE OR LOSS OF Upon a sale of either the AMETHYST 6 or A MORTGAGED RIG.................... AMETHYST 7, we will redeem one half of the then outstanding notes at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest to the redemption date plus a make-whole premium which is described in "Description of New Notes--Redemptions" beginning on page 65. Upon a loss of either the AMETHYST 6 or AMETHYST 7, we will redeem one half of the then outstanding notes at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest to the redemption date. OPTIONAL REDEMPTION................ We may redeem the notes, in whole or in part, at any time or from time to time, at a price equal to 100% of the principal amount plus accrued and unpaid interest to the redemption date plus a make-whole premium described in "Description of New Notes--Redemptions" beginning on page 65. SUBSIDIARY GUARANTEES.............. Any subsidiary that guarantees any of our indebtedness will be required to guarantee the notes. PAYMENT OF ADDITIONAL AMOUNTS...... All payments of principal and interest made on our behalf under or with respect to the notes will be made free and clear of, and without withholding or deduction for or on account of, any taxes, duties, levies, imposts, assessments or governmental charges of whatever nature imposed or established by or on behalf of the British Virgin Islands, Brazil, the United States or any other jurisdiction from or through which payment is made or in which we are located or doing business or in which the rigs are located or any province or territory of any such jurisdiction or by any authority or agency in or of any such jurisdiction having power to tax, unless that withholding or deduction is required by law or by regulation or governmental policy having the force of law. In the event that any such withholding or deduction is so required, subject to certain exceptions, we will pay such additional amounts as will result in receipt by holders of the new notes of such amounts as would have been received by them had no
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such withholding or deduction been required. You should read the discussion under the heading "Description of New Notes--Payment of Additional Amounts and Redemption" beginning on page 66 for futher information regarding the payment of additional amounts. REDEMPTION FOR TAX REASONS......... Upon the occurrence of specified changes in British Virgin Islands, Brazilian or United States tax law or the tax law of other specified jurisdictions requiring the payment of additional amounts (as described under "Description of New Notes--Payment of Additional Amounts and Redemption" beginning on page 66), we may redeem the notes, in whole but not in part, at 100% of the principal amount plus accrued and unpaid interest to the date of redemption. You should read the discussion under the heading "Description of New Notes--Payment of Additional Amounts and Redemption" beginning on page 66 for futher information regarding our right to redeem the notes for tax reasons. CHANGE OF CONTROL.................. Upon a change of control, you will have the right to require us to purchase your notes at a purchase price equal to 101% of the principal amount plus accrued and unpaid interest to the date of purchase. A change of control will occur if, among other things, any of the following events occur: o Pride ceases to own at least 26.4% of our voting stock o a change in control of Pride occurs that results in a lower credit rating for any outstanding debt of Pride o any person (other than our current shareholders and their affiliates) owns more than 26.4% of our voting stock You should read the discussion under the heading "Description of New Notes--Change of Control" beginning on page 69 for futher information regarding your right to require us to redeem your notes upon a change of control. RANKING............................ The notes are our senior secured obligations, which will rank equally with all of our existing unsecured senior debt and will have priority over our unsecured senior debt to the extent of the collateral securing the notes. The collateral securing the participations in the Mitsubishi credit facilities purchased with the net proceeds of the private offering will be shared by the holders of the notes ratably with the lenders under the Mitsubishi credit facilities (other than us). The notes will be effectively subordinated to the claims of any creditors of our subsidiaries that will own the AMETHYST 4 and AMETHYST 5. The claims the lenders under the Mitsubishi credit facilities will rank equally with the claims of the other creditors of our subsidiaries that will own the AMETHYST 6 and AMETHYST 7 with respect to indebtedness or other liabilities not expressly subordinated to the loans under those credit facilities but will rank ahead of the claims of such other creditors to the extent of the value, priority and validity of the liens on the collateral securing those loans. SECURITY........................... Our obligation to repay the notes is secured by the following collateral: o an irrevocable assignment of a 53% undivided interest in the $100 million of participations in the Mitsubishi credit facilities purchased by us on November 1, 1999, which participations are themselves secured by, among other things, security interests over: - the construction contracts, major service contracts, charters and related service rendering contracts for the AMETHYST 6 and AMETHYST 7 8 - the shares of capital stock of our subsidiaries that will own the AMETHYST 6 and AMETHYST 7 - all of the business and assets of those subsidiaries - the insurance proceeds and all other amounts received in respect of the AMETHYST 6 and AMETHYST 7
- the refund guarantees issued by The Export-Import Bank of Korea related to the construction contracts for the AMETHYST 6 and AMETHYST 7 - the management and reserve accounts holding amounts received in respect of the AMETHYST 6 and AMETHYST 7 limited guarantees by Maritima and Pride and a first priority ship mortgage on each of the AMETHYST 6 and AMETHYST 7 o a reserve account for the benefit of the holders of the notes to be funded with 53% of all principal payments made in respect of the credit facility participations purchased by us and a portion of each interest payment on such participations sufficient to fund the next succeeding scheduled payment of interest on the notes The collateral agent will exercise remedies with respect to the collateral, including the sale or other disposition of the collateral and the enforcement of the security documents relating to the Mitsubishi credit facilities, subject to the rights of the other lenders under the Mitsubishi credit facilities, upon receipt of notice of an occurrence of an event of default under the indenture governing the notes. COVENANTS.......................... The indenture, among other things, restricts our ability, and the ability of our subsidiaries, to: o borrow money o pay dividends on stock or purchase stock or make payments on subordinated indebtedness o make investments o incur liens o engage in sale/leaseback transactions o amend security documents o sell substantially all of our assets or merge or consolidate with other companies o consummate certain sales of assets o enter into certain transactions with affiliates o sell or issue stock of subsidiaries These limitations are subject to important qualifications and exceptions. 9 ABSENCE OF MARKET FOR THE NEW NOTES There is no existing market for the new notes. We cannot provide any assurance about: o the liquidity of any markets that may develop for the new notes o your ability to sell your new notes o the prices at which you will be able to sell your new notes Further, trading prices of the new notes will depend on many factors, including: o prevailing interest rates o our operating results o ratings of the new notes o the market for similar securities We do not intend to apply for listing of the new notes on any securities exchange or for quotation of the new notes in any automated dealer quotation system. BOOK-ENTRY SYSTEM.................. The old notes initially offered and sold in the United States to qualified institutional buyers in reliance on Rule 144A under the Securities Act are, and the new notes will be, represented by one or more global notes in registered form and deposited with a custodian for, and registered in the name of, The Depository Trust Company or its nominee. Except in specified limited circumstances, definitive notes will not be issued in exchange for beneficial interests in a global note.
10 SUMMARY CONSOLIDATED FINANCIAL DATA The following tables set forth our summary historical consolidated financial information as of the dates and for the periods indicated:
INCEPTION NINE MONTHS (MARCH 27, 1998) ENDED TO DECEMBER 31, 1998 SEPTEMBER 30, 1999 -------------------- -------------------- (IN THOUSANDS) Consolidated Statement of Income Data: Interest income ............................. $ 167 $ 939 Other (income) expense ...................... (109) 11 -------------------- -------------------- Income before taxes ......................... 58 950 Provision for income taxes .................. -- -- -------------------- -------------------- Net income .................................. $ 58 $ 950 ==================== ==================== Other Data: Capital expenditures ........................ $ 210,526 $ 125,798 Consolidated Balance Sheet Data (at end of period): Working capital (deficit) ................... $ (18,325) $ (21,915) Construction in progress .................... 220,666 344,949 Total assets ................................ 343,080 447,945 Long-term debt .............................. 94,738 235,624 Accrued contract penalties .................. 77,885 41,242 Shareholders' equity ........................ 59 106,008 Consolidated Statement of Cash Flows Data: Investing Activities ........................ $ (210,526) $ (125,798) Financing Activities ........................ 228,640 119,969
We have no operating history and no operating revenue and have been in the development stage since formation. No ratio of earning to fixed charges has been computed since it would not be meaningful. 11 RISK FACTORS IN ADDITION TO THE OTHER MATTERS DESCRIBED IN THIS PROSPECTUS, YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS BEFORE PARTICIPATING IN THE EXCHANGE OFFER. IN PARTICULAR, YOU SHOULD PAY CLOSE ATTENTION TO THE SPECIAL FACTORS APPLICABLE TO BRAZIL AND TO OUR LACK OF OPERATING HISTORY. IN GENERAL, INVESTING IN SECURITIES DEPENDENT ON CASH FLOWS FROM BRAZIL OR OTHER DEVELOPING COUNTRIES INVOLVES A HIGHER DEGREE OF RISK THAN INVESTING IN SECURITIES OF ISSUERS IN THE UNITED STATES. FOR PURPOSES OF EVALUATING THE CREDITWORTHINESS OF PRIDE'S SENIOR UNSECURED GUARANTEE OF THE REPAYMENT OF UP TO AN AGGREGATE $30.0 MILLION OF THE OLD AND NEW NOTES, YOU SHOULD ALSO CONSIDER THE INFORMATION ABOUT PRIDE PROVIDED IN APPENDIX A TO THIS PROSPECTUS. RISK FACTORS RELATING TO THE NEW NOTES AND THE EXCHANGE OFFER IF YOU FAIL TO EXCHANGE YOUR OLD NOTES, THE EXISTING TRANSFER RESTRICTIONS WILL REMAIN IN EFFECT; THE MARKET VALUE OF YOUR OLD NOTES MAY BE ADVERSELY AFFECTED BECAUSE OF A SMALLER FLOAT. If you do not exchange your old notes for new notes under the exchange offer, you will continue to be subject to the existing transfer restrictions on the old notes. In general, the old notes may not be offered or sold unless they are registered or exempt from registration under the Securities Act of 1933 and from applicable state securities laws. We do not intend to register resales of the old notes. The tender of old notes under the exchange offer will reduce the aggregate principal amount of the old notes outstanding. This may have an adverse effect upon, and increase the volatility of, the market price of any old notes that you continue to hold due to a reduction in liquidity. THERE IS NO PUBLIC MARKET FOR THE NEW NOTES, AND WE DO NOT INTEND TO LIST THEM ON ANY SECURITIES EXCHANGE OR AUTOMATED QUOTATION SYSTEM; AN ACTIVE TRADING MARKET FOR THE NEW NOTES MAY NOT DEVELOP. There is no existing public market for the new notes. We cannot provide any assurance about o the liquidity of any markets that may develop for the new notes o your ability to sell your new notes o the prices at which you will be able to sell your new notes The liquidity of any market for the new notes will depend on the number of holders of the new notes, the interest of securities dealers in making a market in the new notes and various other factors. Future trading prices of the new notes will depend on many factors, including prevailing interest rates, our operating results, ratings of the new notes and the market for similar securities. Historically, the market for noninvestment grade debt (like the new notes) has been subject to disruptions that have caused substantial volatility in the prices of securities similar to the new notes. The market, if any, for the new notes may be subject to disruptions that create price volatility. These disruptions could adversely impact you. We do not intend to apply for listing of the new notes on any securities exchange or for quotation of the new notes in any automated dealer quotation system. EXCEPT TO THE EXTENT OF PRIDE'S LIMITED GUARANTEE, NONE OF OUR AFFILIATES WILL HAVE ANY LIABILITY FOR PAYMENTS OF PRINCIPAL OR INTEREST ON THE NEW NOTES, AND YOU WILL HAVE NO RIGHT TO RECOVER AGAINST THEM. Our consolidated cash flow from the charters for the AMETHYST 6 and AMETHYST 7 will be the principal source of repayment of the indebtedness under the Mitsubishi credit facilities and the principal source of payment of interest on the old and new notes. We currently do not intend to conduct any business other than the construction and chartering of our four rigs and do not expect to own any material assets other than our four rigs. Our subsidiaries have contracted with service providers, several of which are affiliated special purpose entities, for construction management of our rigs, supplies, technical services, staffing and operation of our rigs. You are not a beneficiary of and have no right to enforce any of the arrangements between our subsidiaries and their service providers. Our obligations in respect of the old and new notes will be secured solely by the limited guarantee of Pride, the letter of credit from Republic National Bank of New York and an assignment of a 53% undivided interest in the participations we purchased in the Mitsubishi credit facilities, including the right to receive payments of principal and interest on such undivided interest that will be deposited as received in the note reserve account. Our subsidiaries' ability to make required payments under the Mitsubishi and MARAD credit facilities and our ability to make required payments under the old and new notes will be a function of the availability of sufficient revenues derived from the charters, or, if the charters are terminated or expire, any replacement charters, after the payment of operating expenses and other obligations. (You should read the discussion under the heading "Business--Threatened Cancellation of Our Charters" beginning on page 33 for information regarding the threatened cancellation of our charters.) Upon the enforcement of remedies available to you following an event of default, including the 12 remedies afforded by the limited guarantee of Pride and the letter of credit from Republic National Bank of New York and the foreclosure by the note collateral agent on the collateral securing our obligations in respect of the old and new notes, the resulting proceeds will be shared by the holders of old and new notes. We cannot assure that a foreclosure or exercise of the other remedies available to you will produce proceeds in an amount that will be sufficient to repay you and the other holders of old and new notes in full. Except to the extent of Pride's limited guarantee, you will not have the right to recover against any of our affiliates. You should read Appendix A beginning on page A-1 for a discussion of risk factors affecting Pride's senior unsecured limited guarantee. WE WILL BE REQUIRED TO REFINANCE MOST OF THE OUTSTANDING PRINCIPAL AMOUNT OF THE OLD AND NEW NOTES AT MATURITY; IF WE ARE UNABLE TO EFFECT SUCH REFINANCING, THE REPAYMENT OF THE OLD AND NEW NOTES WILL BE DELAYED AND YOU COULD INCUR A LOSS. We will not have sufficient cash from the scheduled payments on the participations in the Mitsubishi credit facilities purchased by us to repay the old and new notes in full at maturity (including by acceleration or mandatory redemption), so we will be required to refinance most of the outstanding principal amount of the old and new notes at that time. Our ability to refinance the old and new notes at that time will depend upon our financial condition and results of operations, our business operation and prospects and conditions in the financial markets. Our ability to raise funds may be adversely affected by many of the risk factors described in this prospectus and there can be no assurance that we will be able to refinance the old and new notes at maturity on satisfactory terms. If we are unable to refinance the old and new notes, we may attempt to sell assets or seek equity investments or contributions for such purpose, but there can be no assurance that these efforts will not be adversely affected by the same risk factors or market conditions that affect our refinancing efforts. If we are unsuccessful in these efforts, payments on the old and new notes will be delayed and you could incur a loss. THE 53% UNDIVIDED INTEREST IN OUR PARTICIPATIONS IN THE MITSUBISHI CREDIT FACILITIES SECURING THE OLD AND NEW NOTES WILL BE THE PRINCIPAL SOURCE OF PAYMENT OF INTEREST ON, AND THE PRINCIPAL COLLATERAL FOR, THE OLD AND NEW NOTES; HOWEVER, OUR ABILITY AND, CONSEQUENTLY, THE ABILITY OF THE NOTE COLLATERAL AGENT ON YOUR BEHALF TO AFFECT DETERMINATIONS MADE BY THE LENDERS UNDER THE MITSUBISHI CREDIT FACILITIES ARE SEVERELY LIMITED. The 53% undivided interest in our participations in the Mitsubishi credit facilities securing the old and new notes will be the principal source of payment of interest on, and the principal collateral for, the old and new notes. We own less than a majority of the loans outstanding under the Mitsubishi facilities. The remainder of the loans under these credit facilities are currently held by affiliates of Mitsubishi Corporation. Under the Mitsubishi credit facilities, the lenders holding two thirds of the loans have the right to control most determinations to be made by the lenders under the credit facilities. The Mitsubishi Corporation affiliates, which will, by completion, collectively hold more than two thirds of the loans, will have the exclusive right to amend most provisions of the credit facility documents, waive borrower defaults, declare an event of default and direct the enforcement of rights against the borrowers. OUR ABILITY AND, CONSEQUENTLY, THE ABILITY OF THE NOTE COLLATERAL AGENT ON YOUR BEHALF TO TRANSFER OUR PARTICIPATIONS UNDER THE MITSUBISHI CREDIT FACILITIES ARE LIMITED; THE INABILITY OF THE NOTE COLLATERAL AGENT TO TRANSFER OUR PARTICIPATIONS UNDER THE MITSUBISHI CREDIT FACILITIES IN THE EVENT OF OUR DEFAULT UNDER THE OLD OR NEW NOTES WOULD SIGNIFICANTLY LIMIT THE VALUE OF THE COLLATERAL SECURING THE OLD AND NEW NOTES. The Mitsubishi credit facilities permit lenders to assign their rights under the credit facilities only to a first class international bank incorporated in an Organisation for Economic Co-operation and Development (OECD) country or a person approved by an affiliate of Mitsubishi Corporation, which approval will not be unreasonably withheld. This provision restricts our ability to transfer our participations under the Mitsubishi credit facilities and limits the note collateral agent's ability to transfer the participations if there is an event of default and foreclosure under the old or new notes. AN EVENT OF DEFAULT UNDER A MITSUBISHI CREDIT FACILITY OR MARAD CREDIT FACILITY THAT DOES NOT RESULT IN AN EVENT OF DEFAULT UNDER THE OLD AND NEW NOTES COULD HAVE AN ADVERSE EFFECT ON THE MARKET FOR THOSE NOTES. An event of default under a Mitsubishi credit facility or MARAD credit facility will not cause an event of default under the old or new notes unless it is a payment default, results in an acceleration of such credit facility or, in the case of either Mitsubishi credit facility, persists for 120 days without being cured or waived. Such a default under the Mitsubishi credit facilities, which provide the principal source of payment of interest on, and the principal collateral for, the old and new notes, would likely have an adverse effect on the market for the old and new notes and, if such default occurred prior to completion of the AMETHYST 6 or AMETHYST 7, would result in an inability to fund the completion of these rigs. Such a default under the MARAD credit facilities could have an adverse effect on the market for the old and new notes even though neither the MARAD credit facilities nor the rigs being financed with them are a principal source of payment for the old or new notes. The MARAD credit facilities do not provide for funding of owner-furnished equipment prior to delivery, so we have advanced approximately $22.0 million and expect to advance an additional $9.0 million to fund owner-furnished equipment for the AMETHYST 4 and AMETHYST 5 prior to delivery. If an 13 event of default occurs prior to delivery and the MARAD credit facilities cease funding, we will not be reimbursed for these amounts as currently anticipated. If we are not reimbursed, we would have less cash available to make principal and interest payments on the old and new notes and to complete our rigs. This unavailability of cash could have an adverse effect on the market for the old and new notes. IF THERE IS AN EVENT OF DEFAULT UNDER THE OLD OR NEW NOTES THAT DOES NOT CAUSE AN EVENT OF DEFAULT UNDER THE MITSUBISHI CREDIT FACILITIES, THE NOTE COLLATERAL AGENT WILL NOT BE ABLE TO PURSUE, ON YOUR BEHALF, REMEDIES AGAINST THE COLLATERAL FOR THE MITSUBISHI CREDIT FACILITIES. An event of default under the MARAD credit facilities or other event which causes an event of default under the old or new notes may not cause an event of default under the Mitsubishi credit facilities. In this event, the note trustee may enforce remedies on your behalf against Pride's limited guarantee, the letter of credit from Republic National Bank of New York and the note reserve account, but neither it nor the note collateral agent nor the lenders under the Mitsubishi credit facilities will have any right to pursue remedies under the Mitsubishi credit facilities against the collateral for such credit facilities, including the AMETHYST 6 and AMETHYST 7, or the related subsidiaries. THE GUARANTEES PROVIDED BY US AND OUR AFFILIATES IN CONNECTION WITH THE MITSUBISHI CREDIT FACILITIES AND THE OLD AND NEW NOTES COULD BE SUBORDINATED OR VOIDED IF DETERMINED TO BE FRAUDULENT; SUCH DETERMINATION WOULD SIGNIFICANTLY LIMIT THE GUARANTEES SECURING THE MITSUBISHI CREDIT FACILITIES AND, CONSEQUENTLY, THE COLLATERAL SECURING THE OLD AND NEW NOTES AND, IF MADE IN RESPECT OF PRIDE, PRIDE'S LIMITED GUARANTEE OF THE OLD AND NEW NOTES. The obligations under the Mitsubishi credit facilities are guaranteed by us and are cross-guaranteed by our subsidiaries that will own the AMETHYST 6 and AMETHYST 7. In addition, Maritima and Pride have provided limited guarantees on both a several and joint basis in connection with the Mitsubishi credit facilities and, in the case of Pride, the repayment of the old and new notes. We believe that the indebtedness incurred and to be incurred under the Mitsubishi credit facilities and the old and new notes, whether directly or by virtue of these guarantees, was incurred and is being incurred for proper purposes and in good faith, and that, based on present forecasts, asset valuations and other financial information, each of the guarantors will be solvent, will have sufficient capital for carrying on its business and will be able to pay its debts as they mature. Notwithstanding our belief, however, if a court of competent jurisdiction in a suit by an unpaid creditor or a representative of creditors (such as a trustee in bankruptcy or a debtor-in-possession) were to find that, at the time of the incurrence of such indebtedness, any of the following was true of any guarantor: o the guarantor was insolvent o the guarantor was rendered insolvent by reason of such incurrence o the guarantor was engaged in a business or transaction for which their remaining assets constituted unreasonably small capital o the guarantor intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they matured o the guarantor intended to hinder, delay or defraud its creditors and that the indebtedness was incurred for less than reasonably equivalent value, then such court could, among other things: o void all or a portion of such guarantor's obligations, the effect of which would be that you and the lenders under the Mitsubishi credit facilities may not be repaid in full o subordinate such guarantor's obligations to other existing and future indebtedness of such guarantor to a greater extent than would otherwise be the case, the effect of which would be to entitle such other creditors to be paid in full before any payment could be made on the Mitsubishi credit facilities or on the old and new notes A legal challenge to a guarantor on these grounds may focus on, among other things, the benefits, if any, realized by such guarantor as a result of our issuance of the old and new notes. The measure of insolvency for purposes of the foregoing considerations will vary depending on the law applied in any such proceeding. Generally, however, an entity may be considered insolvent if the sum of its debts, including contingent liabilities, is greater than the fair market value of all its assets at a fair valuation or if the present fair market value of its assets is less than the 14 amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature. THE ENFORCEMENT OF THE MORTGAGES ON THE AMETHYST 6 AND AMETHYST 7 MAY BE DIFFICULT AND EXPENSIVE; THE INABILITY TO REALIZE SIGNIFICANT VALUE UPON ENFORCEMENT OF THOSE MORTGAGES WOULD SIGNIFICANTLY LIMIT THE COLLATERAL SECURING THE MITSUBISHI CREDIT FACILITIES AND, CONSEQUENTLY, THE COLLATERAL SECURING THE OLD AND NEW NOTES. The principal collateral securing the Mitsubishi credit facilities will be, upon completion of our rigs, Bahamian first priority ship mortgages on the AMETHYST 6 and AMETHYST 7. In the event of default under a Mitsubishi credit facility, the collateral agent under such credit facility may enforce the corresponding mortgage for the benefit of the lenders under such credit facility. We have assigned to the note collateral agent, for your benefit, a 53% undivided interest in the portion of the proceeds of such enforcement to which we are entitled as a result of our participation in each Mitsubishi credit facility. Rig mortgages generally are subordinate to maritime liens that arise by operation of law. The priority that such mortgages would have against the claims of other lien creditors in an enforcement proceeding generally is determined by, and will vary in accordance with, the laws of the country where the proceeding is brought. Bahamian law provides that the following liens and claims shall take priority over rig mortgages registered in the Bahamas and that no other claim shall take priority over such mortgages: o any sum awarded by a court as costs arising out of any proceedings in respect of the arrest of a rig or the subsequent sale thereof, including such charges or expenses incurred in effecting the arrest or sale o wages and other sums due to the master, officers and other members of the rig's complement in respect of their employment on the rig o port, canal and other waterway dues and pilotage dues and any outstanding fees payable under the Bahamian Merchant Shipping Act in respect of the rig o claims against the owner in respect of loss of life or personal injury occurring, whether on land or on water, in direct connection with the operation of the rig o claims against the owner, based on tort and not capable of being based on contract, in respect of loss of or damage to property occurring, whether on land or on water, in direct connection with the operation of the rig o claims for salvage, wreck removal and contribution in general average o any lien exercisable by a rig builder or repairer over a rig or the appurtenance thereof in his possession shall take priority over all claims arising after such possession was taken but shall be subordinated to those claims which were created before the time of taking such possession The AMETHYST 6 and AMETHYST 7 will be used and operated in international waters and jurisdictions other than the Bahamas. We cannot assure that, if enforcement proceedings must be commenced against a particular rig, such rig will be located in a jurisdiction having the same procedures and lien priorities as the Bahamas or that the relative lien priority against other maritime liens will be as favorable as in the Bahamas. During the terms of the charters for the AMETHYST 6 and AMETHYST 7, such rigs will be located in Brazilian waters. Brazilian courts would have jurisdiction over any legal action where: o the defendant, regardless of nationality, is domiciled in Brazil o the obligation to be enforced must be performed in Brazil o the lawsuit arises from an occurrence or action in Brazil The Brazilian courts, therefore, would accept jurisdiction over any action for possession of a rig while located in Brazilian territorial waters, the exclusive economic zone of Brazil or the continental shelf of Brazil and any claim arising under the Petrobras contracts. Any action brought against Petrobras under the Petrobras contracts, moreover, would have to be filed in the Brazilian courts. The Brazilian courts will recognize first priority ship mortgages on the Amethyst 6 and AMETHYST 7 duly registered in the Bahamas in accordance with their terms to the extent that they do not offend Brazilian national sovereignty, public order or good morals. Proceedings in the Brazilian courts to enforce a rig mortgage would be subject to a lengthy delay that could result in increased custodial costs, deterioration in the condition of the rig and substantial reduction in the value of the rig. Other jurisdictions may provide no legal remedy for the enforcement of the mortgages securing the Mitsubishi credit facilities, or a remedy dependent on court proceedings may be so expensive and time consuming as to be impracticable. Furthermore, certain 15 jurisdictions, unlike the Bahamas, may not permit a rig to be sold prior to entry of a judgment, resulting in a lengthy delay that could result in increased custodial costs, deterioration in the condition of the rig and substantial reduction in the value of the rig. Since borrowings under the Mitsubishi credit facilities are also secured by pledges of all the stock of owners of the AMETHYST 6 and AMETHYST 7, enforcement of these pledges, including foreclosure, may provide in effect an alternative method to realize upon the rig owned by the related subsidiary and included in the collateral. However, enforcement by means of foreclosure on the stock of such subsidiary will not affect the claims of existing creditors of such subsidiary, which claims would survive any sale of such stock and would adversely affect the value of such stock. THE MARKET VALUES OF THE AMETHYST 6 AND AMETHYST 7 WILL FLUCTUATE; THE COLLATERAL SECURING THE OLD AND NEW NOTES MAY NOT BE SUFFICIENT TO REPAY THE OLD AND NEW NOTES. The market value of our rigs can be expected to fluctuate depending upon general demand for various types of drilling rigs. We cannot assure that the proceeds from the sale of either the AMETHYST 6 or AMETHYST 7 upon exercise of remedies following an event of default under either Mitsubishi credit facility will be sufficient to pay the required principal amount under such facility. We are not required under the Mitsubishi credit facilities to maintain any minimum value of any rig, and we cannot assure that the future value of a rig will not be considerably less than its acquisition cost. Furthermore, in certain circumstances, the extent to which the mortgage may be enforced and the extent to which the mortgage will have priority over the claims of other creditors is limited. If your share of the proceeds from foreclosure and sale of the collateral pledged to secure repayment of borrowings under the Mitsubishi credit facilities, enforcement of the Pride limited guarantee and draws on the Republic National Bank of New York letter of credit, together with accumulated cash and cash equivalents held by the note collateral agent, are not sufficient to make all payments due on the old and new notes, you will have only unsecured claims against our remaining assets, if any. RISK FACTORS RELATING TO OUR BUSINESS OUR OPERATIONS ARE DEPENDENT ON THE SUCCESSFUL CONSTRUCTION OF OUR RIGS; CONSTRUCTION OF OUR RIGS INVOLVES RISKS THAT COULD GIVE RISE TO DELAYS, COST OVERRUNS, PERFORMANCE DEFICIENCIES OR OTHER CONDITIONS THAT COULD RESULT IN THE CANCELLATION OF OUR CHARTERS OR OTHERWISE ADVERSELY AFFECT OUR ABILITY TO REPAY THE OLD AND NEW NOTES. We currently have no operational rigs. We have contracted to provide our four rigs to Petrobras as described in this prospectus. Construction of our rigs commenced in the second quarter of 1998. Each shipyard has agreed to complete the construction, sea trials and delivery of two rigs meeting specified performance criteria no later than dates ranging from June 9, 2000 to August 9, 2000. As with any major construction effort, construction of our rigs involves risks, including the following events which could give rise to delays, cost overruns or performance deficiencies or otherwise adversely affect the design or operation of one or more of our rigs: o shortages of equipment, materials and labor o delays in delivery of equipment and materials o labor disputes o political events, including local or political opposition to our construction efforts o blockades or embargoes o litigation o adverse weather conditions o unavailability of permits o unanticipated increases in costs o natural disasters and accidents o unforeseen engineering, design or environmental problems o other unforeseen circumstances beyond our control or the control of our vendors and subcontractors In particular, the construction of each rig requires a significant amount of steel. In addition, during the construction process, we must procure significant amounts of sophisticated equipment in order to equip our rigs to satisfy the specifications of the charters, which procurement must be coordinated with the work under the construction contracts. Delays, cost overruns or deficiencies in performance may result if deliveries of steel or equipment are significantly delayed or fail to meet the required specifications or if funding for construction under the MARAD or Mitsubishi credit facilities is not available. Delays, cost overruns or performance deficiencies for any of the causes enumerated above or for any other cause may materially adversely affect our ability to repay the old and new notes. During the period of any delay, we will continue to accrue 16 financing costs while delaying the commencement of operations and the receipt of revenues. The period for delivery for the rigs under the charters will not be extended and delays may result in penalties and possibly termination of the Petrobras charters. Delays, cost overruns or performance deficiencies could, in addition, result in a default under the MARAD or Mitsubishi credit facilities. Finally, performance deficiencies could result in reduced income and cash flow. We currently expect that each rig will be delivered to Petrobras a significant number of days after the delivery date under its charter. Delays in meeting a charter's delivery schedule could result in fines of up to 30% of a rig's daily operating rate (and, in addition, up to 30% of the mobilization fee in the case of the AMETHYST 5) and the loss of significant revenue during the period of delay. In addition, each charter states that it may be canceled by Petrobras if the chartered rig is not delivered within 180 days after the delivery date specified although Petrobras, on May 28, 1998, provided a letter waiving its right to cancel the charters and related service rendering contracts on the basis of late delivery unless the delay exceeds 540 days and, even then, only if best endeavors to make delivery are not being made. On October 13, 1999, Maritima received a letter from Petrobras stating that Petrobras will cancel the charters and service rendering contracts for our rigs when delay in delivery exceeds 180 days as specified in the charters. In its letter, Petrobras also reserved its right to seek compensation for damages. By threatening to cancel the charters if delay in delivery exceeds 180 days, Petrobras indicated an intent contrary to its May 1998 letter. Our Brazilian counsel, Pedro Calmon Filho & Associados, has informed us that Petrobras' May 1998 letter extending the permitted delay in delivery is an enforceable obligation of Petrobras; however, specific performance of Petrobras' obligations under the charters may not, as a practical matter, be an available remedy, and our rights against Petrobras could be limited to a lawsuit for damages. The result of any such lawsuit is uncertain, the amount of damages may be limited and any recovery may be subject to extensive delays. If Petrobras follows through with its threat and cancels the charters for our rigs, such cancellation would constitute an event of default under the credit facilities that are providing substantially all of the financing for construction of our rigs. Since being informed of Petrobras' October 13 letter, the credit facility lenders have continued to fund our construction draws. Based on Petrobras' October 13 letter, however, the credit facility lenders may, at their discretion, cease funding construction, in which event we would not be able to complete construction of the rigs unless we obtain new funding from other sources or an agreement of the credit facility lenders to resume funding on terms acceptable to them. You should read the discussion under the heading "Business--Threatened Cancellation of Our Charters" beginning on page 33 for further information regarding the effects of the threatened cancellation of our charters. Deficiencies in the actual performance of our rigs from the levels specified in the construction contracts or the charters, whether caused by fault of the shipyards, design deficiencies or otherwise, could result in any of the following: o reduced revenue as a consequence of reduced rates or increased rig down time under the charters o increased operating expenses as a consequence of reduced rig efficiency or increased rig down time o termination of one or more of the charters if the minimum performance standards for acceptance of our rigs set forth in the charters are not timely achieved We cannot assure that our rigs will be successfully constructed, equipped and completed on time. If our rigs are not completed on time or are not capable of operating according to their respective design specifications, the termination of the applicable construction contract may be our sole remedy for such failure. The loss of, or any significant reduction in, the rates payable by Petrobras under one or more of the charters, delays in commencement of operations or a default under a MARAD or Mitsubishi credit facility could adversely affect our ability to repay the old and new notes and our subsidiaries' ability to meet their debt obligations. We have attempted to mitigate any cost overruns, cash flow deficiencies and late delivery penalties resulting from construction risks and delays by budgeting a contingency amount of $46.8 million for the rigs and obtaining, subject to certain exclusions and limitations, insurance to protect against various casualty and completion risks during construction and mobilization including, in certain circumstances: o failure of the shipyards to meet the agreed-upon delivery schedules o failure of our rigs to meet the performance criteria established in the charters o certain other delays in completion and delivery of our rigs Our insurance covers only insured events such as traditional fire hazards and marine peril and there can be no assurance that the contingency funds or insurance will be sufficient or that insurance proceeds will be available to pay significant cost overruns, compensate us for any penalties, lost revenues or cancellation of the charters or to provide sufficient funds to make scheduled payments on the old and new notes or our other debt obligations. 17 THE SUCCESSFUL CONSTRUCTION OF OUR RIGS IS DEPENDENT ON THE ABILITY OF THE SHIPYARDS TO PERFORM UNDER THE CONSTRUCTION CONTRACTS. The timely construction of our rigs in accordance with specifications depends upon the ability of Daewoo Heavy Industries Ltd. to perform under the construction contracts for the AMETHYST 6 and AMETHYST 7 and TDI-Halter, L.P. to perform under the construction contracts for the AMETHYST 4 and AMETHYST 5. Daewoo forms part of an integrated South Korean operation that is substantially dependent on the South Korean economy. Like any emerging market, the South Korean economy is subject to the following: o frequent and occasionally drastic government intervention o extreme inflation o changes in trade policy o currency devaluations o social instability o interest rate fluctuations o other political, economic or diplomatic developments South Korea experienced an economic crisis following the December 1997 announcement of financial assistance by the International Monetary Fund (IMF) in response to a severe foreign currency liquidity shortage. The Korean economy suffered a 100% increase in the exchange rate in the first month following the IMF announcement, along with increases during early and mid 1998 in interest rates, unemployment and inflation. The Korean economy stabilized during 1998 with usable foreign currency reserves increasing from under $6 billion to over $50 billion. In January 1999, Standard & Poor's Ratings Group raised its credit rating for Korea's sovereign credit from "stable" to "positive." We cannot assure, however, that another economic crisis in Korea will not occur that will disrupt Daewoo's construction of our rigs. In April 1999, Daewoo announced its intention to divest most of its non-automotive businesses by the end of the year, indicating that the Mitsui Engineering & Shipbuilding Company of Japan might buy the shipbuilding division. Following the Daewoo sell-off announcement, the Korea Stock Price Index (KOPSI) suffered a massive price drop and workers at the shipbuilding division went on strike. The KOPSI recovered after the South Korean government and Daewoo's creditors announced new supports for Daewoo, including new loans. The strike was settled with Daewoo agreeing that it would not sell the shipbuilding division but would instead seek to attract foreign investment in the shipbuilding division through a joint venture. In addition, Daewoo guaranteed job security for the shipyard workers. We do not expect that these recent developments affecting Daewoo will have any negative effect on the construction of the AMETHYST 6 or AMETHYST 7, but we can give no assurances to that effect. In November 1999, Halter Marine Group, Inc., the parent of TDI-Halter, merged with Friede Goldman International Inc. The events relating to the integration of the two companies might distract management or otherwise disrupt the normal business activities of TDI-Halter. Any distraction or disruption could result in delays in completing the AMETHYST 4 or AMETHYST 5. We have obtained performance bonds, performance guarantees and refund guarantees to back the shipyards' obligations under the construction contracts. We cannot assure, however, that recovery under such bonds or guarantees will be available or sufficient to compensate us for any penalties, lost revenues or cancellation of the charters that could result from a shipyard's default or to redeem a sufficient principal amount of the old and new notes in the event a shipyard does not perform and a suitable replacement construction contract cannot be obtained. In particular, Daewoo's obligations under its construction contracts and related owner-furnished equipment supply contracts are secured by refund guarantees from the Export-Import Bank of Korea. Being a South Korean governmental agency, the Export-Import Bank of Korea is subject to governmental control and influence, as well as the South Korean economy. We cannot assure that such governmental control and influence or effects of the South Korean economy will not materially and adversely affect our ability to collect on the refund guarantees. Our inability to collect from a performance bond, performance guarantee or refund guarantee in the event of default by a shipyard would materially and adversely affect our ability to complete the rigs and, therefore, our ability to repay the old and new notes and our subsidiaries' ability to meet their debt obligations. PETROBRAS COULD IMPOSE LATE DELIVERY PENALTIES ON OUR SUBSIDIARIES AT THE TIME OF DELIVERY OF OUR RIGS; WE CURRENTLY DO NOT HAVE A SOURCE OF FUNDS AVAILABLE TO PAY SUCH PENALTIES IF IMPOSED; OUR FAILURE TO PAY SUCH PENALTIES IF IMPOSED COULD RESULT IN THE TERMINATION OF OUR CHARTERS AND, CONSEQUENTLY, ADVERSELY AFFECT OUR ABILITY TO REPAY THE OLD AND NEW NOTES. If the shipyards deliver our rigs on the construction contract delivery dates and our mobilization time to Brazil does not exceed our allowance for mobilization, we expect to be up to 433 days late in delivering the AMETHYST 4 and AMETHYST 5 and up to 293 days late in delivering the AMETHYST 6 and AMETHYST 7 for commencement of operations under their respective charters. Petrobras is entitled to impose daily fines for late delivery of up to 30% of a rig's operating rate (and, in addition, up to 30% of the 18 mobilization fee in the case of the AMETHYST 5). Under these expected delivery schedules for our rigs, the approximate expected penalties are set forth in the table below: EXPECTED NUMBER OF DAYS LATE PENALTY --------------------- (IN THOUSANDS) AMETHYST 4 ............................. 392 $11,147 AMETHYST 5 ............................. 433 12,669 AMETHYST 6 ............................. 293 8,997 AMETHYST 7 ............................. 263 8,429 ----- TOTAL ............................. $41,242 ======= We do not currently anticipate further delays with respect to the AMETHYST 6 or AMETHYST 7, but believe that delays may occur under the construction contracts for the AMETHYST 4 and AMETHYST 5. Although the charters permit Petrobras to impose these penalties at the time of late delivery of our rigs, Petrobras has indicated to us in writing that it has been its policy to negotiate other forms of payment, such as an agreed installment plan or the discount of the penalties from the end of the contract. This policy could change, however, given that Petrobras' board of directors has recently been replaced by new members. Furthermore, we cannot assure that Petrobras will not impose such penalties at the time of delivery of our rigs. We currently do not have a source of funds available to pay such penalties. If we are unable to pay the penalties as imposed, Petrobras would have a claim against us and the right to terminate the charters. The imposition of the penalties at delivery and/or the termination of the charters could have a material adverse effect on our ability to pay the new notes and other debt obligations. FOLLOWING CONSTRUCTION AND DELIVERY OF OUR RIGS, OUR REVENUES WILL BE DEPENDENT ON THE PERFORMANCE BY PETROBRAS UNDER THE CHARTERS. Following construction and delivery of our rigs, the source of revenue for payment of the old and new notes and our and our subsidiaries' other debt obligations will be the payments made by Petrobras under the charters. Any of the following events could have a material adverse effect on our or our subsidiaries' ability to meet our respective debt service obligations: o the material failure by Petrobras to fulfill its obligations under the charters o the suspension of Petrobras' obligations under the charters o termination of the charters upon the occurrence of events specified in the charters, including delays in delivery, delays or interruptions in operation of our rigs for specified periods as a result of specified causes, including FORCE MAJEURE events, necessary repairs, failure of our rigs to perform in accordance with minimum requirements or our failure to comply with requirements imposed by Petrobras inspectors (You should read the discussions under the headings "Threatened Cancellation of Our Charters" and "The Petrobras Contracts" under "Business" for further information regarding the threatened cancellation of our charters and Petrobras' rights and obligations under the charters.) Similarly, the ability of Petrobras to interpose defenses to, or avoid its obligation to perform under, the charters could have a material adverse effect on our ability to repay the old and new notes and our and our subsidiaries' abilities to repay our respective other debt service obligations. Any action brought against Petrobras under the Petrobras contracts would have to be filed in the Brazilian courts. Petrobras has no obligation to renew the charters after their initial terms and, if renewed, the charter rates upon renewal will depend on market conditions at the time and may be substantially lower. Petrobras has significant cash requirements to service its outstanding indebtedness and to fund its proposed capital expenditure budget. As described under the heading "Business--Petrobras," Petrobras must make significant progress in exploiting its acreage in order to retain exploration and production rights under recent Brazilian oil and gas sector privatization legislation. Petrobras' ability to incur indebtedness to meet its funding needs is limited by the Brazilian government's intent to limit debt of Brazilian state controlled companies. Petrobras is financing some activities through joint ventures and other off balance sheet arrangements. Limitations on Petrobras' ability to finance its capital needs may have an adverse affect on Petrobras and on its desire to utilize our rigs. PETROBRAS MAY SEEK TO CANCEL OR RENEGOTIATE CONTRACTS DURING DEPRESSED MARKET CONDITIONS. During depressed market conditions like those the deepwater drilling market is currently experiencing, a customer such as Petrobras may no longer need a rig or may be able to obtain a comparable rig at a lower daily rate. As a result, Petrobras may 19 pressure us to renegotiate the terms of existing contracts. In addition, Petrobras may seek to avoid their obligations under existing contracts. Since December 1998, a number of contracts have been canceled in the drilling industry, including the Petrobras contracts for the AMETHYST 2 and AMETHYST 3. If Petrobras cancels one or more of the charters, particularly those for the AMETHYST 6 and AMETHYST 7, it could have a material adverse effect on our financial condition and our ability to meet our obligations under the old and new notes and our subsidiaries' ability to meet their debt obligations. You should read the discussion under the heading "Business--Threatened Cancellation of Our Charters" beginning on page 33 for information relating to the threatened cancellation of our charters. WE HAVE NO OPERATING HISTORY AND ARE SUBJECT TO ALL OF THE RISKS INHERENT IN THE ESTABLISHMENT OF A NEW BUSINESS ENTERPRISE. We were organized in 1998 and have no operating history. We are subject to all of the risks inherent in the establishment of a new business enterprise. The development of our business, including construction of our rigs, will require significant capital expenditures, virtually all of which will be incurred before the realization of revenue. WE ARE SUBJECT TO THE HAZARDS OF THE OFFSHORE DRILLING INDUSTRY; OUR INSURANCE AND INDEMNIFICATIONS MAY NOT BE SUFFICIENT TO COVER ALL OF THESE HAZARDS. The operation of our rigs involves many risks, including, among other things, the following: o loss, breakdown or failure of our rigs or other equipment o problems of production, rig technology and drilling techniques o deficiencies in the performance of our rigs o labor disputes o delays in obtaining or the inability to obtain necessary permits o blowouts and well fires o capsizing, sinking, grounding, collision and damage from severe weather conditions o other events, such as fires, hurricanes, storms, unforeseen environmental or geological problems and changes in applicable laws The occurrence of any of these events could significantly reduce or eliminate revenues generated by a rig or significantly increase the expenses of operating a rig or result in the termination of a rig's charter, thereby (particularly in the case of the AMETHYST 6 and AMETHYST 7) adversely impacting our ability to make payments of principal or interest on the old and new notes and our subsidiaries' ability to meet their debt obligations. While we intend to maintain insurance to mitigate the effects of various operating risks, not all risks are insured and the proceeds of such insurance may not be adequate to cover lost revenues or increased expenses. We and our affiliates are obligated under the Petrobras charters, the Mitsubishi and MARAD credit facilities and other documents to obtain and keep in full force and effect insurance providing coverage for physical damage to our rigs, liability for bodily injury or property damage to employees, customers and third parties, business interruptions and other risks inherent in the operation of our rigs. Under the charters, Petrobras has agreed, in specified circumstances, to hold harmless our subsidiaries that will own the rigs for any damages to reservoirs and any damages arising from pollution at the well as a result of kick or blowout. Petrobras has also agreed to limit the liability of our subsidiaries for spills of petroleum, oil and other residues, other than when caused by events arising from kick, blowout, surgings or formation testing, and for direct losses and damages to the equipment of Petrobras and third parties and damages to wells. We cannot assure that such insurance coverages will be available in the future on commercially reasonable terms or that the amounts for which we are insured or indemnified or which we receive under such coverages or indemnifications will cover all losses or increased expenses. We cannot assure that we would not be held jointly liable with Petrobras for environmental liabilities arising as a result of the operation of our rigs. The occurrence of a significant environmental or other event against which we are not fully insured or indemnified or a number of lesser events against which we are insured but subject to substantial deductibles could materially and adversely affect our ability to repay the old and new notes and our subsidiaries' ability to meet their debt obligations. OUR OPERATIONS ARE DEPENDENT ON HIGHLY SOPHISTICATED, COMPLEX TECHNOLOGY THAT HAS BEEN DEVELOPED RELATIVELY RECENTLY; THE NEWLY ENHANCED AMETHYST DESIGN HAS NEVER BEEN UTILIZED FOR DRILLING UNDER ACTUAL OPERATING CONDITIONS AND MAY NOT PERFORM AS INTENDED. Our rigs are being constructed using an enhanced Amethyst design for ultra-deepwater operations in water depths of up to 5,000 feet and will incorporate various items of specialized drilling and subsea well intervention and maintenance equipment. Drilling in ultra-deep waters involves highly sophisticated, complex technology which has been developed relatively recently and accounts for a relatively small percentage of worldwide petroleum production. We cannot assure that ultra-deepwater drilling technology will be economic over time or that it will receive broad application. In particular, the newly enhanced Amethyst design 20 has never been utilized for drilling under actual operating conditions. As with any newly enhanced design, we cannot guarantee that such equipment will function properly as a whole when employed on a rig and we cannot fully predict the performance of each rig under actual operating conditions. Our business and operating results could be materially and adversely affected if any of our rigs do not perform as intended under actual operating conditions. WE DEPEND AND WILL CONTINUE TO DEPEND ON SERVICE PROVIDERS FOR THE CONSTRUCTION MANAGEMENT, OPERATION AND MAINTENANCE OF OUR RIGS; WE HAVE NO EMPLOYEES AND DO NOT EXPECT TO HIRE EMPLOYEES. We will be dependent on Maritima and Pride, directly or through affiliates, and a third party for the construction management, operation and maintenance of our rigs. While we may terminate a service contract in the event of substandard performance by a service provider, we cannot assure that, upon termination, we will be able to obtain replacement services without significant delays or at comparable prices. Maritima will provide some services related to our rigs under the service rendering contracts with Petrobras and will be entitled to payment of the daily rate payable under the service rendering contracts. We have no ability to replace Maritima as the service provider under the service rendering contracts without the consent of Petrobras. A default by Maritima under a service rendering contract triggers a default under, and a right of termination of, at Petrobras' option, the corresponding charter. In addition, the substandard performance by any service provider or the extended unavailability of services could adversely impact performance of the charters and entitle Petrobras to terminate the charters. While we will maintain insurance to mitigate the effects of business interruption, such insurance may not be sufficient to compensate for lost revenues, increased costs or loss of hire. Any material breach by the service providers of their respective obligations could adversely affect our ability to make payments on the old and new notes and our subsidiaries' ability to make payment under their debt obligations. We have no employees and do not expect to hire our own employees for the foreseeable future. We have contracted with the service providers to provide experienced construction management personnel, ship crews, base personnel and oil drilling employees. Some but not all of the oil drilling employees, base personnel and ship crews have been identified, assembled and hired. Once our rigs become operational, the service providers expect to employ more than 350 people, including employees directly hired and contracted and, in the case of service providers that are affiliates of Maritima and Pride, employees seconded from Maritima and Pride. We cannot assure that there will be an adequate source of trained personnel available to man our rigs. All seconded and direct employees of the service providers are expected to be exempt personnel and only contracted employees are expected to be covered by one or more collective bargaining agreements. While there is currently no reason to expect the labor relations of the service providers to be adverse to or disruptive of our operations, labor conflicts could arise and have a negative impact on our ability to meet our obligations under the old and new notes and our subsidiaries' ability to meet their debt service obligations. OUR OPERATIONS ARE DEPENDENT ON THE OIL AND GAS INDUSTRY AND, SPECIFICALLY, OFFSHORE DRILLING INDUSTRY. We expect our rigs to be initially operated under long-term charters. (You should read the discussion under the heading "Business--Threatened Cancellation of Our Charters" beginning on page 33 for information relating to the threatened cancellation of our charters.) Petrobras' continued ability to perform its obligations under the charters is substantially dependent upon conditions in the oil and gas industry, including the following: o oil and gas prices o expectations about future prices o the cost of producing and delivering oil and gas o government regulations o local and international political and economic conditions, including the ability of the Organisation of Petroleum Exporting Countries (OPEC) to set and maintain production levels and prices, the level of production by non-OPEC countries and the policies of the various governments regarding exploration and development of their oil and gas reserves. In the event of termination or expiration of the initial term of the charters, our ability to obtain renewals or replacement charters and the rates received in respect of such charters is also substantially dependent upon conditions in the oil and gas industry and, specifically, the exploration and production expenditures of oil and gas companies, the level of offshore oil and gas drilling activity and the supply of suitable offshore drilling rigs. Until recently when OPEC imposed more restrictive production quotas on its members, the offshore contract drilling industry was negatively impacted by lower world-wide oil prices, the principal effects of which were reduced budgets for exploration and development, lower utilization of offshore drilling rigs and lower daily rates. Even with the increased prices that have accompanied OPEC's action, oil and gas exploration and production activity and capital expenditures for offshore drilling have not returned to the levels achieved in 1997 and 1998. We anticipate prices for oil and natural gas will continue to be volatile and affect the demand for and pricing of our services after the terms of the charters. A material decline in oil or natural gas prices or activities could materially adversely affect the demand for our services and, therefore, our results of operations and financial condition. 21 Historically, the offshore contract drilling market has been a highly competitive and cyclical business characterized by high capital costs, long lead time for construction of new rigs and numerous industry participants, none of which has a dominant market share. Several drilling contractors are upgrading existing rigs or constructing new rigs that will be capable of competing with our rigs. During periods when the supply of rigs exceeds demand, as it currently does, this competition results in significant downward pressure on the daily rates at which rigs can be contracted. Offshore drilling rigs have few alternative uses and, because of their nature and the environment in which they work, have relatively high costs, whether or not operating. Because rig operating costs cannot be materially reduced, any reduction in daily rates adversely affects a drilling contractor's results of operations. Even if there is an increase in drilling activity, construction of new rigs could continue the current oversupply of rigs and adversely affect daily rates. Drilling contracts are usually awarded on a competitive bid basis and, while a customer may consider factors such as quality of service and type and location of equipment, as well as the ability to provide ancillary services, price is generally the primary factor in determining which contractor is awarded a job. Many of our competitors have greater financial resources and less leverage than we have, which will enable them to better withstand periods of low rig utilization and to compete more effectively on the basis of price. Although our rigs are being built pursuant to Petrobras' specifications, there can be no assurance that, upon the termination of the charters, then-current market conditions will be favorable, comparable utilization rates or daily rates will continue or our rigs will be competitive for Petrobras' needs. GOVERNMENTAL REGULATIONS AND ENVIRONMENTAL LIABILITIES MAY ADVERSELY AFFECT OUR OPERATIONS. We and our service providers must comply with the applicable laws, regulations and statutory and regulatory standards of Brazil and other jurisdictions relating to offshore oilfield services and will be subject to their ongoing application and enforcement. The operation of our rigs will routinely involve the handling of waste materials, some of which are classified as hazardous substances. The operation of our rigs will be subject to various requirements such as laws and regulations that: o control the containment, disposal and discharge of hazardous oilfield waste and other nonhazardous waste material into the environment o require removal and cleanup relating to the protection of the environment o mandate certification, licensing and other requirements imposed by treaties, laws, regulations and conventions in the jurisdictions in which our rigs operate These laws, regulations and requirements potentially expose us to civil penalties, criminal sanctions and closure orders for non-compliance. Some of these laws impose joint and several liability, without regard to fault, upon owners of the related mineral interests and the drilling operator for environmental damage. We will make substantial expenditures to comply with these environmental laws. We cannot assure that future environmental costs will not have a material adverse effect on our results of operations or financial condition. Since environmental laws are becoming more stringent in Brazil, our environmental capital expenditures and costs for environmental compliance may be significant in the future. Also, due to the possibility of unanticipated regulatory or other developments, the amount and timing of future environmental expenditures may vary widely from those currently anticipated. The application of these laws, regulations and requirements or the adoption of new laws, regulations and requirements could have a material adverse effect on our cash flow and thus our ability to meet our debt service obligations. In addition, many permits and regulatory approvals are required for the operation of our rigs under the laws and regulations applicable to such operation. Many of these permits are not now required and have not yet been obtained. Of those permits and approvals which have been obtained, some are subject to certain conditions. Permits and approvals that are still outstanding may, when issued, similarly be subject to conditions. Delay in receipt of, or failure to obtain, these permits or approvals and/or failure to satisfy the conditions of any permit could delay a rig's construction, restrict its operation or result in additional costs or additional taxes. WE HAVE SIGNIFICANT DEBT LEVELS AND DEBT COVENANTS THAT LIMIT OUR ABILITY TO OBTAIN ADDITIONAL FINANCING AND RESTRICT OUR OPERATIONS. We are highly leveraged. Our high degree of leverage will have important consequences, including: o a substantial portion of net cash provided by operations will be committed to the payment of our indebtedness, including the old and new notes o net cash flow after debt service will be more sensitive to fluctuations in the prices of its services than a less leveraged company o we will be more leveraged than most of our competitors in the offshore contract drilling business 22 o our debt covenants restrict the scope of our business o our ability to obtain additional financing is limited You should read the discussions under the headings "Capitalization" and "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources" for information regarding our capitalization and liquidity. OUR OPERATIONS GENERALLY DEPEND ON TWO OF OUR OWNERS, MARITIMA AND PRIDE, EITHER DIRECTLY OR THROUGH AFFILIATES; MARITIMA, PRIDE AND THEIR AFFILIATES MAY HAVE INTERESTS THAT CONFLICT WITH OUR INTERESTS. We have numerous contractual relationships with two of our owners, Maritima and Pride, directly or through affiliates. There can be no assurance that any of these arrangements provide terms that are as favorable to us as those that might be obtained from unaffiliated third parties. These arrangements include but are not limited to the agreements described under "Certain Relationships and Related Transactions" beginning on page 53. In addition to their investment in us, Maritima and Pride and their affiliates currently participate in, and have significant investments in other entities engaged in, the oil and gas services industry and may in the future participate in and/or invest in other entities engaged in, the oil and gas services industry or in related businesses (including entities engaged in business in areas in which we operate). As a result, Maritima and Pride have, and may develop, relationships with businesses that are or may be competitive with us. In addition, Maritima and Pride are under no obligation to offer us any investment or business opportunities of which they become aware, even if such opportunities are within our primary objectives. It is not, however, our present intention to pursue any investment or business opportunities other than the construction, equipping, mobilization and chartering of the four Amethyst-class semi-submersible drilling rigs described in this prospectus. WE ARE A HOLDING COMPANY, SO WE DERIVE ALL OF OUR OPERATING INCOME AND CASH FLOW FROM PAYMENTS, ADVANCES AND DIVIDENDS FROM OUR SUBSIDIARIES; THE ABILITY OF OUR SUBSIDIARIES TO MAKE SUCH PAYMENTS, ADVANCES AND DIVIDENDS TO PERMIT US TO REPAY THE OLD AND NEW NOTES MAY BE LIMITED; THE CLAIMS OF CREDITORS OF OUR SUBSIDIARIES GENERALLY HAVE PRIORITY OVER YOUR CLAIMS ON THE ASSETS AND EARNINGS OF OUR SUBSIDIARIES. We are a holding company. We will derive substantially all of our operating income and cash flow from payments, advances and dividends from our subsidiaries. In paying the principal of, premium, if any, and interest on the old and new notes, we will rely principally on our proportionate share of payments made in respect of our participations in the Mitsubishi credit facilities and to a lesser extent on income from dividends or other distributions from our subsidiaries. The ability of our subsidiaries to make any such distributions or to repay the Mitsubishi credit facilities may be limited by their financial condition and requirements for cash to conduct their operations. The ability of our subsidiaries to pay dividends or make distributions are restricted under the Mitsubishi and MARAD credit facilities and may be subject to, among other things, applicable laws and, under certain circumstances, restrictions contained in joint venture agreements and debt instruments to be entered into in the future. In the event of any insolvency, liquidation or reorganization of any of our subsidiaries, any creditors of the subsidiary, including trade creditors and tort claimants, would be entitled to payment in full from the assets of the subsidiary before we, as a stockholder, would be entitled to receive any dividends or other distributions. The claims of all creditors of our subsidiaries, including trade creditors and tort claimants, effectively have priority on the assets and earnings of our subsidiaries over your claims except to the extent of your claim to the assets securing our participations in the Mitsubishi credit facilities. IN THE EVENT OF A LIMITED MARKET FOR OUR RIGS, WE MAY SUCCESSFULLY REMARKET THE AMETHYST 4 AND AMETHYST 5 BUT MAY NOT BE ABLE TO REMARKET THE AMETHYST 6 AND AMETHYST 7. In the event of a limited market for our rigs following the termination or expiration of the Petrobras charters, we may not be able to successfully remarket all of our rigs. If we successfully remarket either or both of the AMETHYST 4 and AMETHYST 5 but are not able to remarket either or both of the AMETHYST 6 and AMETHYST 7, the value of the collateral securing the Mitsubishi credit facilities (which indirectly secure the old and new notes until the borrowings under those credit facilities are fully repaid) could be materially diminished (both in absolute terms and relative to the value of the collateral securing the MARAD credit facilities). Because the old and new notes rank junior to all debt of our subsidiaries that own the AMETHYST 4 and AMETHYST 5, we may not have sufficient funds to repay the old and new notes even though we are successful in marketing the AMETHYST 4 and AMETHYST 5 and repay all indebtedness related to those rigs in full. YOUR ABILITY TO ENFORCE CIVIL LIABILITIES IN BRAZIL, THE BAHAMAS AND THE BRITISH VIRGIN ISLANDS MAY BE LIMITED. We and our subsidiaries are incorporated under the laws of the British Virgin Islands and Petrobras is organized under the laws of Brazil. The charters and certain other documents related to our rigs, including the service rendering contracts with Maritima, are governed by the laws of Brazil. Our rigs and the mortgages on our rigs are or will be registered in the Bahamas. 23 Some of our directors and officers, as well as those of our subsidiaries and of Petrobras, and some of the advisors named in this prospectus reside outside of the United States. Substantially all of the assets of these individuals and companies are located outside of the United States. As a result, it may not be possible for investors to effect service of process within the United States upon such persons or entities or to enforce judgments against them predicated upon the federal securities laws of the United States in United States courts. Bahamian counsel, Higgs & Johnson, British Virgin Islands counsel, Dancia Penn & Co, and Brazilian counsel, Pinheiro Neto - Advogados (Rio de Janeiro), have advised that there is uncertainty as to the enforceability (1) in original actions in Bahamian, British Virgin Islands and Brazilian courts, of liabilities predicated solely upon the federal securities laws of the United States and (2) in Bahamian, British Virgin Islands and Brazilian courts, of judgments of United States courts obtained in actions predicated upon the civil liability provisions of the federal securities laws of the United States. You should read the discussion under the heading "Description of New Notes--Enforceability of Judgments" beginning on page __ for further information regarding the enforceability of judgments not collectible in the United States. THE BRAZILIAN GOVERNMENT CONTROLS AND REGULATES PETROBRAS; THROUGH ITS INFLUENCE OVER PETROBRAS, THE BRAZILIAN GOVERNMENT COULD MATERIALLY AFFECT OUR OPERATIONS. Petrobras, whose payment obligations under the charters will be the principal source of funds to pay interest on the old and new notes and our subsidiaries' debt obligations, is engaged in the petroleum industry, which is important to the Brazilian economy. Traditionally, the Brazilian government has exerted considerable influence over its domestic petroleum industry and Petrobras in particular. We cannot assure that such influence of the Brazilian government will not have a materially adverse affect on our operations and our ability to repay the old and new notes. As of October 29, 1999, the Brazilian federal government owned 84.0% of the voting shares and 52.9% of the total shares of Petrobras. Petrobras' shares have not been placed into the Brazilian federal government's privatization program, and Brazilian law requires the Brazilian federal government to maintain over 50% of the voting shares of Petrobras. The sale of Petrobras shares is a sensitive political issue in Brazil, and any such sale likely would be opposed by various interested parties. The members of the Petrobras board of directors, who are responsible for the daily management of Petrobras, are appointed by the President of Brazil. The board of directors of Petrobras has recently announced that it will adopt a new strategic plan for Petrobras. No assurance can be given as to the contents of such plan, which may include the sale for cash of Petrobras' interests in some shallow water and on-land leases. Petrobras' operations are subject to supervision and regulation by Brazil's National Petroleum Agency, the government department that, pursuant to the Brazilian Petroleum Law, is responsible for implementing the Brazilian government's policies on oil and gas. The National Petroleum Agency holds the power to award exploration, development and production concessions in Brazil and regulates all aspects of Petrobras' operations, including imports, exports, profit margins, payment conditions and prices. Petrobras is required to submit its annual budget to the Minister of Mines and Energy through the National Petroleum Agency. Such budget then is submitted to the Brazilian National Congress for approval. In this way, the Brazilian government regulates the total level of Petrobras' financing and investment, but specific application of such funds is left in Petrobras' discretion. The Ministry of Planning, however, supervises Petrobras' strategic objectives and planning. In addition, although Petrobras' monopoly on the oil and gas industry has been terminated, Petrobras continues to be responsible for ensuring that the supply of oil and oil products in Brazil is sufficient to meet all of Brazil's consumption requirements until the Brazilian government introduces regulations for the oil and gas industry. The Brazilian government currently restricts the export of petroleum from Brazil but announced in May 1999 that it expects to lift these restrictions in the future. In the first Brazil exploration license auction round held by the National Petroleum Agency on June 15 and 16, 1999, 12 out of 27 available blocks were awarded to foreign exploration companies, including Unocal, Texaco, Exxon, BP Amoco, Amerada Hess, Kerr McGee and Shell, or to their Brazilian subsidiaries. Several of these concessions involved partnerships between foreign companies and Petrobras. The National Petroleum Agency plans to hold a second auction of offshore oil exploration leases for additional blocks in May 2000. The bidding rounds implement the National Petroleum Agency's stated policy of terminating the Petrobras monopoly in oil and gas exploration in Brazil and opening the industry to foreign investors. The National Petroleum Agency auctions and subsequent foreign investment are expected to decrease significantly the dependence of Brazil's offshore exploration market on Petrobras. In addition, concessions granted by the National Petroleum Agency to Petrobras expire three years following the grant date unless drilling operations have commenced within such three-year period. The rights of Petrobras to the mineral interests that our rigs will be exploiting and, consequently, the utility of our charters to Petrobras, are subject to political, economic and other uncertainties, including expropriation, nationalization, renegotiation or nullification of existing contracts, currency exchange restrictions and international monetary fluctuations. Neither the indenture governing the old and new notes nor the instruments governing the Mitsubishi and MARAD credit facilities require us or our operating subsidiaries, and we do not intend, to maintain insurance against such risks. 24 OUR OPERATIONS WILL BE SUBJECT TO BRAZILIAN GOVERNMENTAL AND ECONOMIC UNCERTAINTY. The Brazilian economy has been characterized by frequent and occasionally drastic intervention by the Brazilian government. The Brazilian government often has changed monetary, credit, tariff and other policies to influence Brazil's economy and politics. The Brazilian government's actions to control inflation and implement other policies have often involved wage and price controls and other measures, such as freezing bank accounts and imposing capital controls. Changes in policies affecting tariffs, foreign ownership or operation of property, exchange controls, ownership of oil and gas interests, remittances, and other matters could adversely affect the ability of Petrobras to pay its obligations under the charters which, in turn, would adversely affect our ability to repay the old and new notes, as well as the market value and liquidity of the old and new notes. Similar effects could result from inflation, changes in trade policy, devaluations of Brazilian currency, social instability, fluctuations in interest rates and other political, economic or diplomatic developments and the Brazilian government's response to such developments. EXTREME INFLATION IN BRAZIL COULD ADVERSELY AFFECT PETROBRAS' ABILITY TO MAKE PAYMENTS UNDER THE CHARTERS AND, CONSEQUENTLY, OUR ABILITY TO REPAY THE OLD AND NEW NOTES. Brazil has historically experienced extremely high rates of inflation. Inflation and certain governmental measures to combat inflation have in the past had significant negative effects on the Brazilian economy. Inflation, actions taken to combat inflation and public speculation about possible future actions have also contributed significantly to economic uncertainty in Brazil and heightened volatility in the Brazilian securities markets. Recurrence of such events could adversely affect Petrobras' ability to make payments under the charters and, in turn, our ability to repay the old and new notes. The Real Plan, which was adopted in 1994, is an economic stabilization plan designed to reduce inflation by reducing certain public expenditures, collecting liabilities owed to the Brazilian government, increasing tax revenues, continuing the privatization program and introducing a new currency. On July 1, 1994, as part of the Real Plan, the Brazilian government introduced the REAL. Since the REAL's introduction, Brazil's inflation rate has been substantially reduced (although Brazil has experienced some increased inflationary pressure since abandonment of the REAL exchange rate band in January 1999). Inflation, as measured by the INPC/IBGE--National Index of Consumer Prices, was approximately 1,149% and 2,489% in 1992 and 1993, respectively, 759% in the first half of 1994 (an annual rate of 7,281%), 19.8% in the second half of 1994 (an annual rate of 43.5%), 22.0% in 1995, 9.1% in 1996, 4.3% in 1997, 2.5% in 1998 and 7.3% in the first ten months of 1999. Although the payments by Petrobras under the charters are to be made in U.S. dollars, there can be no assurance that any future increase in inflation in Brazil will not adversely affect Petrobras' ability to make such payments. BRAZILIAN EXCHANGE RATE FLUCTUATIONS COULD ADVERSELY AFFECT PETROBRAS' FINANCIAL CONDITION AND ITS ABILITY TO MAKE PAYMENTS UNDER THE CHARTERS AND, CONSEQUENTLY, ADVERSELY AFFECT YOUR INVESTMENTS IN THE OLD AND NEW NOTES. The relationship of Brazil's currency to the U.S. dollar and of rates of devaluation of Brazil's currency to prevailing rates of inflation in Brazil may affect Petrobras' financial condition and its ability to make payments under the charters. There can be no assurance, therefore, that exchange rate movements will not adversely affect an investment in the old and new notes. There are two legal foreign exchange markets in Brazil: o the commercial rate exchange market o the floating rate exchange market The commercial market is reserved primarily for foreign trade transactions and transactions that generally require prior approval from Brazilian monetary authorities, such as the purchase and sale of registered investments by foreign persons and related remittances of funds abroad. Purchases of foreign exchange in the commercial market may be carried out only through a financial institution in Brazil authorized to buy and sell currency in that market. The rate in the floating market generally applies to transactions to which the rate in the commercial market does not apply. Prior to the implementation of the Real Plan by the Brazilian government the commercial market rate and the floating market rate differed significantly at times. Since the introduction of the REAL, the two rates have not differed significantly, although there could be substantial differences between the two rates in the future. Both the commercial market rate and the floating market rate are freely negotiated but are strongly influenced by the Brazilian Central Bank. Both the commercial market rate and the floating market rate are reported by the Brazilian Central Bank on a daily basis. On August 1, 1993, the CRUZEIRO REAL replaced the CRUZEIRO as the unit of Brazilian currency, with each CRUZEIRO REAL being equal to 1,000 CRUZEIROS. In December 1993, the Brazilian government began implementation of the Real Plan, which was intended to reduce inflation. On July 1, 1994, the REAL replaced the CRUZEIRO REAL as the unit of Brazilian currency, with each REAL being equal to 2,750 CRUZEIROS REAIS and having an exchange rate of R$1.00 to $1.00. According to Brazilian law, the issuance of REAIS is controlled by quantitative limits backed by a corresponding amount of U.S. dollars in reserves, but the Brazilian government 25 subsequently expanded those quantitative limits and allowed the REAL to float, with parity between the REAL and the U.S. dollar (R$1.00 to $1.00) as a ceiling. From its introduction through March 1995, the REAL appreciated against the U.S. dollar. On March 6, 1995, in an effort to address concerns about the overvaluation of the REAL relative to the U.S. dollar, the Brazilian Central Bank introduced new exchange rate policies that established a band within which the REAL/U.S. dollar exchange rate could fluctuate and announced that it would intervene in the market and buy or sell U.S. dollars whenever rates approached the upper or lower limit of the band. Until January 1999, the Brazilian Central Bank had periodically adjusted the exchange rate band to permit the gradual devaluation of the REAL against the U.S. dollar. The Brazilian Central Bank abandoned the exchange rate band in January 1999 and introduced a floating exchange rate mechanism. Since then, the Brazilian Central Bank has periodically intervened in the foreign exchange market by buying and selling U.S. dollars to prevent extreme exchange rate fluctuations. The following table sets forth information on the Commercial Market Rate for U.S. dollars for the periods and dates indicated. Amounts expressed in REAIS have been translated from the predecessor currencies in effect during the relevant period at the rates of exchange at the time the successor currency took effect. EXCHANGE RATES OF BRAZILIAN CURRENCY PER DOLLAR(1) - - -------------------------------------------------- YEAR ENDED DECEMBER 31, PERIOD END AVERAGE(2) LOW HIGH - - ----------------------- ---------- ---------- --- ---- 1992............................ 0.0045 0.0016 0.0001 0.0045 1993............................ 0.1165 0.0325 0.0045 0.1168 1994............................ 0.8452 0.6419 0.1203 1.0000 1995............................ 0.9720 0.9171 0.8332 0.9790 1996............................ 1.0391 1.0047 0.9712 1.0411 1997............................ 1.1160 1.0778 1.0391 1.1161 1998............................ 1.2082 1.1604 1.1160 1.2082 1999 (through September 30, 1999) 1.9223 1.7833 1.2072 2.1850 - - ----------- (1) The information set forth above is based on information published by Factset Data Systems. (2) Simple daily average for the period. THE BRAZILIAN GOVERNMENT MAY RESTRICT THE REMITTANCE OF U.S. DOLLARS FROM BRAZIL FOR THE PURPOSE OF MAKING PAYMENTS UNDER THE CHARTERS OR THE CONVERSION OF BRAZILIAN CURRENCY INTO U.S. DOLLARS; THESE RESTRICTIONS WOULD ADVERSELY AFFECT OUR ABILITY TO REPAY THE OLD AND NEW NOTES. Brazilian law provides that whenever there is a serious imbalance in Brazil's balance of payments or reason to foresee a serious imbalance, the Brazilian government may impose temporary restrictions on the remittance to foreign investors of proceeds from their Brazilian investments (as it did for approximately six months in 1989 and early 1990) and the conversion of Brazilian currency into foreign currencies. Such restrictions may hinder or prevent the conversion of Brazilian currency into U.S. dollars and the remittance of U.S. dollars for the purpose of making payments under the charters. These restrictions would adversely affect our ability to repay the old and new notes. You could be adversely affected by such restrictions and any delay in, or refusal to grant, any required governmental approval for conversion of Brazilian currency payments and remittances abroad. Pursuant to Brazilian law, the charters must be approved by, and the scheduled payments to be made under the charters must be registered with, the Central Bank to permit the remittances outside Brazil of U.S. dollars. It will thus be necessary for the Central Bank to issue a Certificate of Registration authorizing each of the scheduled payments under the charters, pursuant to which Petrobras will, assuming the availability of foreign exchange, be able to convert Brazilian currency into U.S. dollars and remit such U.S. dollars to the restricted accounts established under the Mitsubishi and MARAD credit facilities. There can be no assurance that we will be able to obtain such Certificate of Registration from the Central Bank, or, if such Certificate of Registration is obtained, that foreign exchange will be available for Petrobras to make payments under the charters in U.S. dollars. In addition, there can be no assurance that this procedure for converting Brazilian currency into U.S. dollars will not be affected by future legislative changes or that additional Brazilian restrictions adversely affecting you will not be imposed in the future, and there can be no assessment of the duration or impact of such restrictions if they are imposed. THE MARKET FOR THE OLD AND NEW NOTES AND OUR ABILITY TO REPAY THE OLD AND NEW NOTES COULD BE ADVERSELY AFFECTED BY DEVELOPMENTS IN EMERGING-MARKET COUNTRIES. The market for securities of issuers dependent on the Brazilian economy is, to varying degrees, affected by economic and market conditions in other emerging-market countries. Although economic conditions are different in each country, investors' 26 reactions to developments in one country can affect the creditworthiness of other countries, including Brazil, or issuers relying on payments from others that hold assets in such countries, such as us. For example, in December 1994, the Mexican government sharply devalued the peso and allowed its value to float, thereby setting off an economic crisis in Mexico. The Mexican currency devaluation negatively affected the securities markets in many Latin American countries, including Brazil. Similarly, the Brazilian financial and securities markets also experienced significant disruptions, U.S. dollar outflows and volatility as a result of the recent turmoil in the Asian markets. The Brazilian government responded with a package of austerity measures for fiscal adjustment, including public spending cuts and tax increases, and the Central Bank increased domestic interest rates, which has substantially increased the cost of credit to Brazilian companies. We cannot assure that similar or other disruptions in other emerging markets will not cause a recurrence of such volatility in Brazilian markets or that such volatility will not be accompanied by adverse effects on the Brazilian economy, the ability of Petrobras to pay its obligations under the charters, our subsidiaries' ability to repay borrowings under the Mitsubishi and MARAD credit facilities and our ability to repay the old and new notes and/or the market value or liquidity of the old and new notes. 27 USE OF PROCEEDS We will not receive any cash proceeds from the issuance of the new notes. In consideration for issuing the new notes, we will receive in exchange an equal principal amount of the old notes. The old notes surrendered in exchange for the new notes will be retired and canceled and cannot be reissued. The issuance of the new notes, therefore, will not result in any change in our capitalization. We used the $50.9 million of net proceeds from the sale of the old notes, cash on hand and additional funds provided by Pride and Maritima to purchase an aggregate $100.0 million of fully drawn participations in the Mitsubishi credit facilities, consisting of a $47.0 million participation in the AMETHYST 6 credit facility and a $53.0 million participation in the AMETHYST 7 credit facility. CAPITALIZATION The following table sets forth our consolidated capitalization as of September 30, 1999 and as adjusted to give effect to the issuance of the old notes and the application of the net proceeds from the sale of the old notes, cash on hand and additional funds provided by Pride and Maritima. The issuance of the new notes will not result in any change in our capitalization. You should read this table in conjunction with "Summary Consolidated Financial Data," "Use of Proceeds," "Selected Historical Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operation," the financial statements and related notes and other financial and operating data included elsewhere in this prospectus. AS OF SEPTEMBER 30, 1999 ----------------------------- ACTUAL AS ADJUSTED ------------- -------------- (IN THOUSANDS) Cash, Cash Equivalents and Restricted Cash....... $ 40,599 $ 599 ======== ======== Related Party Advances........................... $ 29,191 $ 38,291(1) Long-Term Debt: Senior Secured Notes.......................... - 53,000 Mitsubishi Financing.......................... 154,300 54,300(2) MARAD Financing............................... 81,324 81,324 -------- -------- Total Long-Term Debt............................. 235,624 188,624 Shareholders' Equity Common Stock, 10,500 shares, par value $1.00 per share..................................... 11 11 Additional Paid-in Capital.................... 104,989 104,989 Surplus Accumulated in the Development Stage.. 1,008 1,008 -------- -------- Total Shareholders Equity........................ 106,008 106,008 -------- -------- Total Capitalization............................. $370,823 $332,923 ======== ======== - - ---------------------------------- (1) Represents advances by Pride and Maritima. The as adjusted amount reflects an increase of $9.1 million utilized, together with cash on hand, to acquire the balance of participations in the Mitsubishi credit facilities not funded by the net proceeds from the sale of the old notes. (2) The as adjusted amount reflects the issuance of the old notes and the application of the net proceeds from the sale of the old notes, cash on hand and additional funds provided by Pride and Maritima to purchase fully drawn participations in the Mitsubishi credit facilities in the amount of $100.0 million. 28 SELECTED HISTORICAL FINANCIAL DATA The following selected consolidated financial information as of the dates and for the periods indicated has been derived from our December 31, 1998 consolidated financial statements and our September 30, 1999 unaudited interim consolidated financial statements included elsewhere in this prospectus. It is not complete and may not contain all of the information that you should consider. You should read this information in conjunction with the entire prospectus, including the discussion under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and related notes included elsewhere in this prospectus. We have no operating history and no operating revenue, and we have been in the development stage since our formation. No ratio of earnings to fixed charges has been computed since it would not be meaningful. INCEPTION NINE MONTHS (MARCH 27, 1998) ENDED TO DECEMBER 31, 1998 SEPTEMBER 30, 1999 -------------------- ------------------ (IN THOUSANDS) Consolidated Statement of Income Data: Net income $ 58 $ 950 Other Data: Capital expenditures $ 210,526 $ 125,798 Consolidated Balance Sheet Data (at end of period): Cash and cash equivalents $ 18,172 $ 13,293 Restricted cash - 27,306 Total assets. 343,080 447,945 Long-term debt 94,738 235,624 Shareholders' equity. 59 106,008 Consolidated Statement of Cash Flows Data: Investing Activities $ (210,526) $ (125,798) Financing Activities 228,640 119,969 29 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion and analysis in conjunction with the consolidated financial statements and related notes included elsewhere in this prospectus. OVERVIEW We were organized in 1998 to construct, equip, own and charter our rigs. Since inception, we have been in the development stage and have had no operating revenues. An aggregate of approximately $336.3 million had been expended on construction and equipping of our rigs through September 30, 1999. We estimate that the total cost of constructing, equipping and mobilizing our rigs will be approximately $655.8 million, including contingencies but excluding late delivery penalties and financing costs. We had a consolidated net worth of approximately $106.0 million as of September 30, 1999. Each of our subsidiaries has been formed as a British Virgin Islands company with limited liability to construct, equip, own and operate one of our rigs. As of the date of this prospectus, none of our subsidiaries have any operating history. We have entered into service agreements with Maritima and Pride, two of our owners, their affiliates and Workships for the construction management, operation and maintenance of our rigs. You should read the discussion under the headings "Business--Construction Management," "Business--Operating Management" and "Certain Relationships and Related Transactions" for a description of these agreements. RESULTS OF OPERATIONS Since our inception, we have engaged in no operations other than managing construction of our rigs and related matters. To date, we have not generated any operating revenues. Owing to our lack of operating history, our historical results of operations are not meaningful or indicative of future results. Our results of operations in the future will depend on the construction of and earnings from our rigs and our level of operating expenses. During the last quarter of 1997, 1998 and the first three quarters of 1999, Maritima and Pride, their affiliates and we have focused our efforts on the following: o completing basic engineering, design and financing for our rigs o designing implementation strategies for constructing, equipping and mobilizing our rigs o developing basic policies and operating procedures to govern the start-up of operations o structuring our organization and management o selecting shipyards o placing orders for owner-furnished equipment o managing the construction of our rigs LIQUIDITY AND CAPITAL RESOURCES As of September 30, 1999, we had cash on hand (including restricted cash) of $40.6 million. Of such amount, $40.0 million, together with the $50.9 million net proceeds of the sale of the old notes and an additional $9.1 million provided by Maritima and Pride, were used to purchase an aggregate $100.0 million of participations in the Mitsubishi credit facilities. The indenture for the old and new notes, the Mitsubishi credit facilities and the MARAD credit facilities place significant limitations on the use of funds that we now hold and that we may generate in the future. We estimate that the total cost of constructing, equipping and mobilizing our rigs will be approximately $714.3 million, including $46.8 million for contingencies and $58.5 million for construction period interest but excluding aggregate late delivery penalties currently estimated to be approximately $41.2 million. As of September 30, 1999, an aggregate of $336.3 million had been expended on construction and equipping of our rigs, including aggregate payments to shipyards of $152.4 million and aggregate payments to suppliers of owner-furnished equipment of $108.8 million. As of such date, $81.3 million had been drawn on the MARAD credit facilities and $154.3 had been drawn on the Mitsubishi credit facilities, leaving us additional borrowing capacity of $218.5 million under the MARAD credit facilities and $185.7 million under the Mitsubishi credit facilities. The total additional borrowing capacity under the MARAD and Mitsubishi 30 credit facilities of $404.2 million, together with the $336.3 million expended to date, yields a total of $740.5 million, representing an excess of $26.2 million over the total estimated cost of constructing, equipping and mobilizing our rigs. This excess may be applied toward our working capital needs. We currently contemplate that our current sources of funds will be sufficient to fund the remaining development, construction, equipment, mobilization and financing costs of our rigs and any working capital needs during the construction, mobilization and start-up periods, based on the assumption that any penalties which may be imposed by Petrobras under the charters for late delivery of our rigs will not be imposed at the time of delivery of our rigs. We currently have no other source of funds to pay such penalties unless such funds are contributed by our owners in their sole discretion. Following delivery of our rigs to Petrobras and commencement of operations under the charters, our subsidiaries are to receive the operating rates and other amounts payable under the charters. In addition, Maritima is to receive and make available to us the operating rates and other amounts payable under the service rendering contracts, which have been committed entirely to pay local currency expenses incurred in operating our rigs. You should read the discussion under the heading "Business--Threatened Cancellation of Our Charters" beginning on page 33 for information about contingencies related to the commencement of operations under the charters. In the event we lack sufficient funds to carry out our current operating plan, we may seek to raise additional capital, either from our owners or other public or private capital markets. We may also seek additional funding through strategic partnerships and other financing mechanisms. We cannot assure that such funding will be available on terms acceptable to us or allowable under the indenture. If adequate funds are not available, we may be required to curtail significantly the construction of one or more of our rigs or to obtain funds on terms which are not optimal. Moreover, we may choose to raise additional capital due to market conditions or strategic considerations even if we continue to have sufficient funds for our current operating plan. You should read the discussion under the heading "Description of New Notes--Certain Covenants--Limitations on Indebtedness" for information regarding some of the limitations on our ability to incur additional debt. We anticipate that we will be required to refinance the old and new notes at maturity through the issuance of new indebtedness. We cannot assure that such refinancing will be available on terms acceptable to us. We analyzed our year 2000 compliance and we do not expect to incur business interruptions or material costs in this regard. 31 BUSINESS ABOUT AMETHYST FINANCIAL COMPANY LTD. AND SUBSIDIARIES We were formed in 1998 to construct, own and operate four enhanced Amethyst-class drilling rigs consisting of the AMETHYST 4, AMETHYST 5, AMETHYST 6 and AMETHYST 7. Each rig is a dynamically positioned, self-propelled, fourth-generation semi-submersible rig capable of performing drilling and subsea well intervention and maintenance services in water depths of up to 5,000 feet. By owning and operating the rigs, we expect to become a significant provider of deepwater (depths greater than 1,300 feet) drilling and related services in the Brazilian market, one of the largest deepwater drilling markets in the world. Each rig is currently under construction and, once completed, will be owned by one of our four wholly owned subsidiaries. The subsidiaries have entered into contracts denominated in U.S. dollars to charter the rigs to Petroleo Brasileiro S.A.--Petrobras, the Brazilian national oil company, for initial terms ranging from six to eight years. (You should read the discussion under the heading "--Threatened Cancellation of Our Charters" beginning on page 33 for information relating to the threatened cancellation of our charters.) Our four rigs represent approximately 18% of the deepwater, dynamically positioned units currently contracted by Petrobras to conduct exploration, development and well service activities offshore Brazil. Our registered office is located at Amethyst Financial Company Ltd., c/o Arias Fabrega & Fabrega Trust Co. BVI Limited, 325 Waterfront Drive, Omar Hodge Building, 2nd Floor, Wickham's Cay, Road Town, Tortola, British Virgin Islands. ABOUT OUR OWNERS We are owned 61.7% by affiliates of Maritima, 26.4% by an indirect wholly owned subsidiary of Pride and 11.9% by two investment partnerships managed by First Reserve Corporation. Maritima and Pride, directly or through affiliates, have primary contractual responsibility for our operations. Both companies have significant experience in the construction, operation, management and marketing of offshore drilling rigs, vessels and related offshore equipment. The following chart depicts our ownership structure and the principal agreements relating to the construction and operation of our rigs:
------------ ------------ ------------ | Maritima | | Pride | | First | |Affiliates| |Affiliates| | Reserve | ------------ ------------ | Funds | 61.7% | | 26.4% ------------ | | | 11.9% | | | ----------------------------------------------- | Amethyst Financial | | Company Limited | ----------------------------------------------- | 4 Licensing Agreements ---------------- | --------------------------------------- |Maritima/Pride|--| 2 Marine | 100% | 4 Construction Management Agreements |Affiliates | | and | |-------------------------------------- ---------------- | Nautical --------------------------| 4 Management Agreements ----------- |Agreements | Four Special Purpose |-------------------------------------- |Workships|-------- | Companies |2 Marine & Nautical Service Agreements ----------- - - ----------- 4 Construction Contracts |are constructing and will|-------------------------------------- ---------- |Shipyards|--------------------------| own and operate the rigs| 4 Charters |Petrobas| - - ----------- --------------------------|-------------------------------------- ---------- | 4 Service |Rendering Contracts ----------- | Maritima| -----------
MARITIMA Maritima is a privately owned company headquartered in Rio de Janeiro. It provides a range of services and equipment to companies participating in the oil and gas exploration and production sector in Brazil. Maritima's development has been marked by its relationship with Petrobras. Since 1981, Maritima and its affiliates have participated in approximately 30 major projects for Petrobras, ranging from rig and vessel acquisitions, upgrades and conversions to providing local support services for offshore rig operations. Maritima and its affiliates have typically participated in these projects through joint ventures, consortiums and joint operating and agency relationships with leading international drilling and marine construction companies such as: o Pride o Diamond Offshore Drilling, Inc. 32 o Falcon Drilling Company, Inc. (now part of R&B Falcon Corporation) o Stena Offshore Ltd. o Mitsui Offshore Development and Engineering Company (MODEC) Inc. o Astilleros Espanoles S.A. Maritima currently provides shore-based facilities and local logistical support for the AMETHYST 1 and the NYMPHEA, a third-generation semi-submersible drilling rig. Like the AMETHYST 1, the NYMPHEA currently operates offshore Brazil under a long-term contract with Petrobras. In addition, Maritima and its affiliates currently are managing or recently have completed the conversion of four vessels or semi-submersible platforms for Petrobras to be used as floating production and storage units offshore Brazil. These projects are expected to represent approximately 480,000 barrels per day of new production capacity for Petrobras. PRIDE Pride is a public company listed on the New York Stock Exchange headquartered in Houston, Texas. It is a leading international provider of contract drilling and related services, operating both offshore and on land. Pride has focused its growth strategy on the higher margin offshore and international drilling markets. Pride is one of the largest and most diversified drilling contractors in the world. It operates a global fleet of 320 rigs, including two drillships, three semi-submersible rigs and 52 other offshore drilling and workover rigs. Pride's deepwater fleet includes the semi-submersibles AMETHYST 1, NYMPHEA and SOUTH SEAS DRILLER and, through a 51%-owned joint venture, the PRIDE AFRICA and the PRIDE ANGOLA, each of which is an ultra-deepwater dynamically positioned drillship. Through its subsidiary Pride-Foramer S.A., Pride has participated in the design and construction of four drillships and two semi-submersible rigs in addition to the PRIDE AFRICA, PRIDE ANGOLA and the four new Amethyst-class rigs and has drilled 47 wells in water depths greater than 1,300 feet. Pride-Foramer has extensive experience operating offshore Brazil, having drilled at least 15 wells offshore Brazil in water depths ranging between 1,900 and 3,300 feet and having participated in several major discoveries in the Campos Basin. FIRST RESERVE First Reserve is a private equity firm specializing in the energy industry. Founded in 1980, the firm has offices in Houston, Texas, Greenwich, Connecticut and Denver, Colorado and manages a portfolio of energy holdings with a market value in excess of $1.5 billion. First Reserve has significant experience as a principal investor in oilfield service companies. Its portfolio companies include Pride, CalDive International, Weatherford International, Inc., and National Oilwell, Inc. Two investment partnerships managed by First Reserve invested an aggregate $12.5 million in cash in our common equity in September 1999 in exchange for an 11.9% interest. Such investment will be exchangeable after three years (or earlier in certain events), at First Reserve's option, for shares of Pride common stock and Pride, in turn, will have the option to acquire the First Reserve interest for cash or Pride common stock once such interest becomes exchangeable for Pride stock. If either of such options is exercised, Maritima will have the right to purchase from Pride such portion of the First Reserve interest as will enable Maritima to maintain ownership of 70% of the combined interests of Maritima and Pride. THREATENED CANCELLATION OF OUR CHARTERS If the shipyards deliver our rigs on the construction contract delivery dates and our mobilization time to Brazil does not exceed our allowance for mobilization, we will deliver our rigs to Petrobras between 263 and 433 days after the delivery dates set forth under their respective charters with Petrobras. (We currently anticipate that the AMETHYST 6 and AMETHYST 7 will be delivered by Daewoo on or before the delivery dates set forth in the Daewoo construction contracts, but that the AMETHYST 4 and AMETHYST 5 may be delivered by TDI-Halter up to two months later than the delivery dates set forth in the TDI-Halter construction contracts.) While each charter states that it may be canceled by Petrobras if the chartered rig is not delivered within 180 days after the delivery date specified, Petrobras, on May 28, 1998, provided a letter waiving its right to cancel the charters and related service rendering contracts on the basis of late delivery unless the delay exceeds 540 days and, even then, only if best endeavors to make delivery are not being made. On October 13, 1999, Maritima received a letter from Petrobras stating that Petrobras will cancel the charters and service rendering contracts for our rigs when delay in delivery exceeds 180 days as specified in the charters. In its letter, Petrobras also reserved its right to seek compensation for damages. By threatening to cancel the charters if delay in delivery exceeds 180 days, Petrobras indicated an intent contrary to its May 1998 letter. Our Brazilian counsel, Pedro Calmon Filho & Associados, has informed us that Petrobras' May 1998 letter extending the permitted delay in delivery is an enforceable obligation of Petrobras; however, specific performance of Petrobras' obligations under the charters may not, as a practical matter, be an available remedy, and our rights against Petrobras could be limited to a lawsuit for damages. The result of any such lawsuit is uncertain, the amount of damages may be limited and any recovery may be subject to extensive delays. If Petrobras follows through with its threat and cancels the charters for our rigs, such cancellation would constitute an event of default under the credit facilities that are providing substantially all of the financing for construction of our rigs. Since being informed of Petrobras' October 13 letter, the credit facility lenders have continued to fund our construction draws. Based on 33 Petrobras' October 13 letter, however, the credit facility lenders may, at their discretion, cease funding construction, in which event we would not be able to complete construction of the rigs unless we obtain new funding from other sources or an agreement of the credit facility lenders to resume funding on terms acceptable to them. Based on its announced deepwater drilling program and the performance characteristics of the Amethyst design, we believe that Petrobras has significant needs for our rigs. We further believe that, while Petrobras may seek to renegotiate certain of the terms of our charters as part of a settlement of the claims described below in respect of charters for two other Amethyst-class rigs, there is significant likelihood that Petrobras will not ultimately cancel our charters. There can be no assurance, however, that this will be the case. We believe Petrobras' letter of October 13, 1999 threatening cancellation of the charters for our rigs was sent in response to claims made by Maritima and our construction manager, Petrodrill Engineering N.V., in connection with the cancellation by Petrobras of the charters for two other rigs, the AMETHYST 2 and AMETHYST 3, that were being constructed concurrently with our rigs. Petrobras initially awarded Maritima charters for six Amethyst-class rigs, the AMETHYST 2 and AMETHYST 3 and our four rigs. Maritima and Pride organized a joint venture company, Petrodrill Offshore Inc., with six subsidiaries to own and charter the rigs to Petrobras. The AMETHYST 2 and AMETHYST 3 were to have commenced operations in the Campos Basin in late 1999 and early 2000, but the construction contracts for those two rigs were terminated in November 1998 after the shipyard at which the rigs were to be constructed filed for protection from its creditors. In May 1999, Petrobras canceled the charters and service rendering contracts for the AMETHYST 2 and AMETHYST 3 based on alleged late delivery. Maritima and Petrodrill Engineering submitted letters to Petrobras alleging that Petrobras' termination of the charters and service rendering contracts for the AMETHYST 2 and AMETHYST 3 was wrongful. Petrodrill Engineering's letter asserts that, because of Petrobras' May 1998 letter, Petrobras had waived its right to cancel the charters and service rendering contracts unless the delay in delivery exceeded at least 540 days. In addition, Maritima's letter asserts that the work stoppage resulting from the bankruptcy of the shipyard for the AMETHYST 2 and AMETHYST 3 was a FORCE MAJEURE event that did not permit termination and, further, that the joint venture was prepared to fulfill the contracts by contracting other available rigs to replace the AMETHYST 2 and AMETHYST 3. The letters to Petrobras specify damages of approximately $95 million, none of which involve claims made by us or on our behalf. Following termination of the construction contracts for the AMETHYST 2 and AMETHYST 3, Petrodrill Offshore transferred the shares of each of its six subsidiaries to us for nominal consideration, and we transferred the shares of the subsidiaries that held the charters for the AMETHYST 2 and AMETHYST 3 to a separate joint venture company owned by Maritima and Pride. Petrodrill Offshore has reached agreement with the prime contractor and its affiliates for the settlement of all claims relating to the construction contracts for the AMETHYST 2 and AMETHYST 3 and their termination. Neither we nor any of our subsidiaries were or are a party to any of the claims or disputes relating to termination of these construction contracts. PETROBRAS Petrobras, the Brazilian national oil company, is a mixed-capital but state-controlled integrated oil and gas corporation. As measured by the Petroleum Intelligence Weekly composite index, which includes reserves, output, refinery capacity and product sales by volume, Petrobras ranked 14th among all oil and gas companies in the world based on 1997 data. Petrobras is among the world's leading users of deepwater technology for oil and gas production. In 1999, Petrobras estimates that it will produce an average of 1.3 million barrels of oil equivalent per day increasing to 2.5 million barrels of oil equivalent per day in 2005. Much of the increase is attributable to deepwater reserves. Petrobras has estimated that the proportion of its proven oil reserves located in deep water (depths greater than 1,300 feet) is approximately 77% of its total proven oil reserves in December 1998. Petrobras' ultra-deepwater (depths greater than 3,300 feet) proven reserve base composes 30% of its total proven oil reserves at December 1998. Petrobras expects that its planned deepwater exploration and development activities will give rise to further growth in demand for drilling and subsea well intervention and maintenance services offshore Brazil as these proven oil reserves become on-line production. Brazil's oil and gas operations were closed to foreign participants from the 1950's until recently. Brazil's new Petroleum Law, however, required Petrobras to relinquish to the National Petroleum Agency exploration and production rights on any acreage on which Petrobras had not achieved production, made commercial discoveries or made exploration investments to the extent that Petrobras did not have the investment and financing capacity to develop such assets. In January 1999, Brazil's National Petroleum Agency announced a plan to auction licenses to exploration and development blocks offshore Brazil. Those blocks have begun to be and will continue to be auctioned to participating international bidders. In addition, the new Brazilian Petroleum Law has limited Petrobras to a three-year exploration and development period for retained undeveloped acreage, after which, only if successful, Petrobras will be allowed to maintain its rights to such acreage and proceed with production. Petrobras expects that it will need to increase the number of offshore drilling rigs that it has operating under contract in order to be able to drill such acreage successfully within the three-year exploration period. To increase its development capacity, Petrobras has, in addition, entered into more than 20 joint venture contracts with partners such as Exxon, Texaco, YPF (Repsol), Santa Fe Energy, Coastal, Unocal, British Borneo, Amerada Hess, Kerr McGee, Shell and Mobil. 34 OUR RIGS Our rigs will be enhanced Amethyst-class, dynamically positioned, self-propelled, fourth-generation semi-submersible rigs capable of performing drilling and subsea well intervention and maintenance services in water depths of up to approximately 5,000 feet. Our rigs are being constructed using the enhanced Amethyst design, which incorporates state-of-the-art technology for deepwater drilling to create a compact, multi-functional, self-propelled rig that we believe offers a cost-effective alternative to larger, more costly rigs and vessels. Our rigs will be enhanced versions of the AMETHYST 1, which since 1996 has been conducting subsea well intervention and maintenance services for Petrobras under a contract that expires in 2001. Semi-submersible rigs are large floating platforms supported by a number of columns. At the bottom of the columns, the rigs typically have two ship-shaped hulls, or pontoons. When the rigs are in motion, the columns are raised, so that only the hulls are in the water, thereby maximizing transit speeds. Upon reaching their operating location, the hulls are filled with ballast, and the rigs sink down, so approximately half the columns are in the water. At this point, the rigs are said to be "semi-submerged," remaining afloat in a position where the lower hull is below the water line, and the upper deck protrudes well above the surface. This semi-submerged position provides stability to the rigs, allowing drilling operations to be carried out in winds of significant force and wave heights of significant magnitude. Semi-submersible rigs can be used in areas where weather conditions are poor and water is too deep for jack-up rigs. While some larger dynamically positioned semi-submersibles are capable of working in water depths greater than 5,000 feet, the majority of existing semi-submersibles are conventionally moored and are limited to a working water depth of no more than 3,000 feet. Being "dynamically positioned," our rigs will not require a fixed mooring system to stay in position while drilling in the seabed but will, instead, rely on eight 2,100 horsepower omnidirectional thrusters mounted on the bottom of its pontoons to remain in position. The dynamic positioning control system will be fully redundant and will meet all current class requirements for dynamically positioned operations. Our rigs are designed to be able to conduct drilling operations in winds of up to 47 knots and wave heights of up to 42 feet when semi-submersed. Our rigs' dynamic positioning capability will offer them an advantage over moored rigs that require anchor chains and heavy anchors to remain on location. The weight of anchors and anchor chains limits a moored rig's water depth operating capability. In addition, in some areas, like offshore Brazil, moored units may not be practical due to the presence of extensive subsea production networks that could be damaged by anchors. The main working platform of each rig will measure approximately 240 by 160 feet. When in operation, each rig's four columns will support the rig's platform at approximately 23 feet above the water level. When the rig moves on its twin pontoons, which will be approximately 250 feet long and 48 feet wide, the rig's platform will remain approximately 60 feet above water. Each rig will be self-propelled, capable of moving at speeds of up to 9 knots, and will weigh approximately 11,000 tons. We believe that these characteristics will enable our rigs to move between jobs more readily and efficiently than more typical larger, heavier units that require a tow. In addition, we expect that the smaller size and weight of our rigs will make them less costly to construct and operate than traditional, large-displacement semi-submersible rigs. We expect that our rigs' ability to stay on location and operate in inclement wind and wave conditions despite their compact size and light weight will enable them to operate in most offshore oil and gas producing regions in the world. The AMETHYST 4, AMETHYST 6 and AMETHYST 7 initially will be equipped to conduct drilling and subsea well intervention and maintenance services while the AMETHYST 5, in accordance with its charter, will be initially equipped to conduct subsea well intervention and maintenance services only. We expect that the cost of equipping the AMETHYST 5 for drilling services would total approximately $2.5 million based on current cost. Our rigs will be equipped to operate in up to 4,000 feet of water. We estimate that the cost of equipping our rigs to operate in 5,000 feet rather than 4,000 feet would be approximately $2.0 million each based on current cost. Each rig will be equipped with engines having approximately 28,000 aggregate horsepower to drive the thrusters and operate the drilling and other equipment. This power will permit our rigs to conduct drilling and subsea well intervention and maintenance operations at depths of up to approximately 20,000 feet. In addition, each rig will be able to carry a minimum of 3,200 tons of equipment for drilling or subsea well intervention and maintenance operations in its columns and on the main deck and will be able to accommodate an operating crew of up to 115 people in one and two-man cabins. Although they are being constructed by two different shipyards, all of our rigs (other than the AMETHYST 5, which will not initially be outfitted for drilling) and their owner-furnished equipment will be substantially identical, with many of the major components being supplied by the same vendors under joint purchase agreements with all of the shipyards. Accordingly, three of our rigs may be readily substituted for one another if necessary in order to meet a specified delivery date or during operations. 35 CONSTRUCTION, MOBILIZATION AND DELIVERY TO PETROBRAS We have contracted with two shipyards to construct our rigs pursuant to fixed-price construction contracts. We selected the shipyards based on their track records, technical capabilities, commitment to delivery schedules, competitive pricing and financial backing. In addition, we have entered into firm fixed-price procurement contracts or letters of intent with leading international suppliers to purchase all major high-specification owner-furnished equipment that requires relatively long lead times for delivery. Construction of our rigs commenced in the second quarter of 1998. Completion of our rigs and delivery to Petrobras are expected to occur at various times in 2000. We estimate that total cost of constructing, equipping and mobilizing our rigs, excluding late delivery penalties and financing costs, will be approximately $655.8 million, classified as follows: ESTIMATED COST --------- (IN MILLIONS) Shipyard and Basic Design Engineering ........................... $ 346.4 Owner-Furnished Equipment ....................................... 184.2 Spare Parts, Manuals & Training ................................. 17.7 Project Team, Reimbursables and Commission ...................... 36.2 Contingencies ................................................... 46.8 Construction Insurance/Transaction Costs ........................ 24.5 --------- Total ................................................... $ 655.8 ========= THE SHIPYARDS The AMETHYST 6 and AMETHYST 7 are being built in Okpo, South Korea by Daewoo Heavy Industries Ltd. The AMETHYST 4 and AMETHYST 5 are being built in the United States by TDI-Halter, L.P., a wholly owned subsidiary of Halter Marine Group, Inc. We believe that each of Daewoo and TDI-Halter has the expertise and resources to construct the rigs in accordance with the specifications set forth in the construction contracts. We currently anticipate that the AMETHYST 6 and AMETHYST 7 will be delivered by Daewoo on or before the delivery dates set forth in the Daewoo construction contracts, but that the AMETHYST 4 and AMETHYST 5 may be delivered by TDI-Halter up to two months later than the delivery dates set forth in the TDI-Halter construction contracts. DAEWOO GENERAL. Daewoo operates a 1,000-plus acre shipbuilding facility in Okpo, South Korea. The Okpo site includes 86 acres of covered workshops, two drydocks, one which can accommodate super tankers weighing up to one million tons, and two floating docks. Daewoo's covered panel lines, 3D block assembly shops and new panel block shops are among the largest in the world. In addition, the Okpo site has state-of-the-art automated panel lines, plasma cutters and paint shops which can accommodate 200-ton modules. Daewoo's extensive facilities and labor force, which exceeds 11,000, has given Daewoo the reputation of being one of the world's most productive shipyards. Daewoo has significant expertise in the offshore rig market. Since 1983, Daewoo has constructed over 30 offshore drilling structures and vessels. RECENT DEVELOPMENTS. In April 1999, the Daewoo group announced its intention to divest most of its non-automotive businesses by the end of the year, indicating that the Mitsui Engineering & Shipbuilding Company of Japan might buy the shipbuilding division. Following a strike in the shipbuilding division in response to the announcement, however, Daewoo agreed not to sell the shipbuilding division and stated that it intends to attract foreign investment through a joint venture. While we can give no assurances, we do not expect that these recent developments affecting Daewoo will have any negative effect on the construction of the AMETHYST 6 or AMETHYST 7. CONSTRUCTION CONTRACTS. Each Daewoo construction contract provides for the design, construction, launching, equipping, completion, testing and loading out of a rig for a contract price of $85.0 million, excluding the cost of owner-furnished equipment and any credits for the cost of builder's risk insurance. The contract price may be adjusted for modifications to the specifications of our rigs and will be paid in five installments falling due at various times throughout the construction period based on specified milestones, with approximately 20% being due on delivery. DELIVERY. The AMETHYST 6 has a contractual delivery date of July 30, 2000 and the AMETHYST 7 has a contractual delivery date of June 30, 2000, each of which may be extended for permissible delays, including force majeure, modifications to the rig specifications and delays in the delivery of and defects in owner-furnished equipment. If a delay occurs in the delivery of a rig, Daewoo will become obligated to pay $42,500 per day in liquidated damages for the first 150 days after the delivery date. 36 TERMINATION. In the event that Daewoo has not delivered our rigs prior to either 90 days from the contractual delivery date, as extended by permissible delays, or 180 days from the contractual delivery date extended by such days of permissible delay as are attributable to our fault, a construction contract may be terminated at our option. We also have the right to terminate a construction contract in the event that: o Daewoo fails, without legal justification, to meet two consecutive milestones within 90 days of the dates agreed for those milestones o Daewoo commits a material breach of the construction contract not remedied within five business days of written notice thereof o Daewoo is wound up or becomes bankrupt Daewoo has the right to terminate a construction contract in the event that: o we fail to make the installment payments due under the construction contract o we fail, without legal justification, to take delivery of our rigs in accordance with the construction contract o we are wound up or become bankrupt and any such default continues for 30 days. DEVIATIONS FROM TARGET WEIGHT. The Daewoo construction contracts have been structured to create incentives for Daewoo to meet established target weights. In the event Daewoo fails to meet the target weight for any rig, Daewoo will be required to pay liquidated damages up to a maximum amount of 5% of the construction price. In the event that Daewoo builds a rig significantly below its target weight, Daewoo will be entitled to a bonus. SHIPYARD WARRANTY. Daewoo has guaranteed our rigs for twelve months after delivery against all defects, whether attributable to materials, workmanship, construction or detail design, and against all physical damage caused to our rigs thereby. Such guarantee does not extend to owner-furnished equipment but does extend to defects in materials, workmanship or design and physical damage caused by Daewoo's installation of owner-furnished equipment. REFUND GUARANTEE. The Export-Import Bank of Korea has issued a refund guarantee for 100% of the contract price (which includes the cost of owner-furnished equipment) under each Daewoo construction contract. Under each Daewoo construction contract, we are entitled, either upon termination of the construction contract or upon a total loss of the rig prior to delivery, to repayment of the installments of the contract price paid by us prior to such event, plus interest on such installments at a fixed rate of 10%. Pursuant to the refund guarantee, if we provide written notice that Daewoo has not made such repayment within 30 days after our demand for repayment, the Export-Import Bank of Korea shall be obligated to make such repayment. TDI-HALTER GENERAL. TDI-Halter, a wholly owned subsidiary of Halter Marine Group, Inc., has based construction of our rigs in Halter Marine's 88-acre site in Pascagoula, Mississippi. The Pascagoula site recently underwent a $21.0 million improvement with the primary aim of upgrading equipment for offshore rig construction. In addition to the Pascagoula site, TDI-Halter will use six other sites in constructing our rigs, the principal secondary site being Halter Marine's Gulfport, Mississippi site, which has over ten acres of covered facilities on its 113 acres. These covered facilities include modern panel lines and paint shops. TDI-Halter, which specializes in the construction and repair of offshore drilling units, has eight shipyards and a labor force of 2,300. In addition, TDI-Halter has access to Halter Marine's 14 other shipyards and over 4,200 employees. Halter Marine has built more than 2,600 vessels in the past 40 years. RECENT DEVELOPMENTS. In November 1999, Halter Marine Group, Inc. merged with Friede Goldman International Inc. We cannot assure that the merger will not have any negative effects on the construction of the AMETHYST 4 and AMETHYST 5. CONSTRUCTION CONTRACTS. Each TDI-Halter construction contract provides for the engineering, construction, launching, equipping, completion and testing of a rig for a contract price of $84.0 million, excluding the cost of owner-furnished equipment and any credits for the cost of builder's risk insurance. The contract price may be adjusted for modifications to the specifications of our rigs and will be paid in eleven installments falling due at various times throughout the construction period based on specified milestones, with approximately 7.5% being due on delivery. DELIVERY. The AMETHYST 4 has a contractual delivery date of June 9, 2000 and the AMETHYST 5 has a contractual delivery date of August 9, 2000, each of which may be extended for permissible delays, including force majeure, modifications to the rig 37 specifications and delays in the delivery of and defects in owner-furnished equipment. If a delay occurs in the delivery of a rig, TDI-Halter will become obligated to pay $20,000 per day in liquidated damages for the first 30 days after the delivery date and $40,000 per day in liquidated damages beginning on the 31st day after the delivery date until actual delivery. TDI-Halter's liability for such liquidated damages is limited to $2.0 million per rig. TERMINATION. In the event that TDI-Halter does not deliver a rig within 135 days after the contractual delivery date, as extended by permissible delays, the applicable construction contract may be terminated at our option. We also have the right to terminate a TDI-Halter construction contract in the event that: o TDI-Halter fails, without legal justification, to meet two consecutive milestones within 135 days of the dates agreed for those milestones, as extended by permissible delays o TDI-Halter commits a material breach of the construction contract not remedied within five business days of written notice thereof o TDI-Halter is wound up or becomes bankrupt TDI-Halter has the right to terminate a construction contract in the event that: o we fail to make the installment payments due under the construction contract o we fail, without legal justification, to take delivery of our rigs in accordance with the construction contract o we are wound up or become bankrupt and any such default continues for 30 days. DEVIATIONS FROM TARGET WEIGHT. The TDI-Halter construction contracts contain incentives for TDI-Halter to meet established target weights. In the event TDI-Halter fails to meet the target weight for any rig, TDI-Halter will be required to pay liquidated damages up to a maximum amount of $2.5 million. In the event that TDI-Halter builds a rig significantly below its target weight, TDI-Halter will be entitled to a bonus up to a maximum amount of $3.0 million. SHIPYARD WARRANTY. TDI-Halter has guaranteed our rigs for twelve months after delivery against all defects attributable to the labor and workmanship of TDI-Halter and its subcontractors. Such guarantee does not extend to owner-furnished equipment but does extend to defects caused by TDI-Halter's installation of owner-furnished equipment (the approval of the installation by a supplier or manufacturer's representative on-site being conclusive evidence of proper installation). PERFORMANCE BOND AND PERFORMANCE GUARANTEE. Fireman's Fund Insurance Company has issued a performance bond on a joint and several basis with TDI-Halter for 100% of the contract price under each TDI-Halter construction contract. Fireman's Fund also has issued a labor and material payment bond, jointly and severally with TDI-Halter, which covers suits for non-payment by TDI-Halter filed by claimants having a direct contract with TDI-Halter or with a subcontractor of TDI-Halter for labor, material or both used or reasonably required for use in the performance of the TDI-Halter construction contract. In addition, Halter Marine has unconditionally and irrevocably guaranteed to us prompt and faithful performance of, and compliance with, all obligations, covenants, terms, conditions and undertakings of TDI-Halter under its construction contracts. OWNER-FURNISHED EQUIPMENT During construction, we will purchase from numerous vendors and furnish to the shipyards various items of specialized drilling and subsea well intervention and maintenance equipment for our rigs. This equipment includes for each rig, as appropriate, a drilling derrick, mud pumps, drawworks, a rotary table, blowout preventers and risers. We also will provide to the shipyards certain marine and ship system items, including cranes and electrical distribution units for the drilling equipment. In addition, we will furnish some items outside of the shipyard package, including drillpipe and handling tools. We estimate that all of this owner-furnished equipment will represent approximately $184.2 million of the aggregate $655.8 million budgeted to construct, equip and mobilize our rigs, including contingencies but excluding financing costs and late delivery penalties. We have obtained commitments from leading international suppliers to provide $166.7 million, or approximately 90.5%, of the budgeted owner-furnished equipment. As of October 31, 1999, we had paid approximately $112.9 million to such suppliers and had received delivery of approximately 55% of the owner-furnished equipment for our rigs. These suppliers will be providing all of the major high-specification owner-furnished equipment that require relatively long lead times for delivery. The remainder of the owner-furnished equipment consists of standard, readily available items. Of the total budgeted owner-furnished equipment, $130.2 million, or approximately 71%, will be provided by five major suppliers that have made commitments to us. The following table lists these five suppliers, the equipment that they will be supplying and the cost of such equipment: 38 COST SUPPLIER EQUIPMENT (in thousands) -------- --------- -------------- Maritime Hydraulics A/S Derrick Package $35,498 ABB Vetco Gray U.K. Ltd. Risers and Buoyancy System $31,999 Cooper Cameron Corporation Blowout Preventers and $27,489 Multiplex Control Systems Huisman Special Lifting Cranes and Substructures $22,033 Equipment B.V. Continental Emsco Company Drawworks, Mud Pumps and Rotary Table $13,206 Timely completion of our rigs will depend, among other things, on timely delivery of the owner-furnished equipment. We believe that our owner-furnished equipment suppliers have the expertise and capacity to deliver owner-furnished equipment on time and according to specifications. We do not anticipate any significant delays in delivery of the owner-furnished equipment that would materially delay overall construction. CONSTRUCTION MANAGEMENT We believe that active management of the construction process is an important factor in reducing construction risks and avoiding delays. Construction of our rigs is being managed by Petrodrill Engineering N.V., a Netherlands Antilles corporation owned 70% by affiliates of Maritima and 30% by an indirect subsidiary of Pride. (You should read the discussion under the heading "Certain Relationships and Related Transactions" beginning on page 53 for further information regarding the ownership of Petrodrill Engineering.) Petrodrill Engineering has agreed to provide the management services described below in an efficient manner and to protect and promote the interests of each of our subsidiaries in all matters relating to the construction of its rig. Petrodrill Engineering will, among other things: o coordinate with each subsidiary and its representatives regarding any design modification o obtain all necessary permits, consents and authorizations with respect to the design drawings from the relevant classification society or other relevant agencies o coordinate with each shipyard throughout the construction period o monitor each shipyard for compliance with the terms of its construction contract o inform each subsidiary of any change in existing laws, rules or regulations that may require any alteration to the specifications or drawings of its rig and assess the effects of such changes o advise each subsidiary whether its rig has been completed in accordance with the specifications provided in the construction contract and is ready for delivery o procure the owner-furnished equipment on behalf of each subsidiary o prepare monthly budgets for each rig o ensure that each rig is insured adequately throughout the construction period Petrodrill Engineering is being paid by each subsidiary only for actual expenses incurred by it in rendering the construction management services, including the full salaries of its personnel and other overhead costs. The construction management agreement with each subsidiary may be terminated early in the event of a material breach by either party of its obligations under such agreement. Each subsidiary and Petrodrill Engineering have agreed to indemnify Petrodrill Engineering's subcontractors and their personnel from all actions or liabilities that may be brought against or incurred by them or their personnel for matters arising out of such subcontracts unless such actions or liabilities arise from the gross negligence or willful misconduct of such subcontractors or their personnel. Petrodrill Engineering has procured the personnel necessary to manage the construction of our rigs. For this purpose, Petrodrill Engineering has assembled a central management team based in the Netherlands and separate project teams that are present at each shipyard to supervise construction and ensure that our rigs meet the specifications required by Petrobras and applicable classification societies. A portion of Petrodrill Engineering's personnel has been, and until completion of all of our rigs 39 will be, seconded from Pride-Foramer S.A., an affiliate of Pride, Maritima and Workships Contractors B.V., an integrated offshore vessel management company whose personnel were involved in the design and construction of the AMETHYST 1. Such personnel has been provided to Petrodrill Engineering by Pride-Foramer, Maritima and Workships at agreed-upon fixed prices that approximate each such company's cost. In addition, Workships will receive a fee of $2,083.33 per month per rig. Petrodrill Engineering's personnel consists of 50 professionals with highly specialized experience in rig construction who are dedicated exclusively on a full-time basis to the construction of our rigs. The members of the central management team, consisting of a project director, deputy project director, chief financial officer and central construction manager, have extensive experience in most aspects of the oil and gas industry and, in particular, in rig and vessel construction and repair. You should read the descriptions under the heading "Management" beginning on page 52 for biographical information on the central management team. We believe that the experience of the Petrodrill Engineering central management team, combined with the experience of specialists from Maritima, Pride-Foramer, Workships and other third parties, will provide a high level of specialized expertise for the construction of our rigs that will enhance the ability of the shipyards to make timely delivery of our rigs and reduce the likelihood of cost overruns. In addition, Petrobras technicians and engineers have periodically monitored the construction of our rigs at each shipyard. Lloyds, the classification society and representative of the Bahamian Ship Registry, has been involved in the approval of the design and detailed engineering for the rigs during its regular shipyard visits. Recently, Petrobras contracted ModuSpec USA, Inc., an independent engineering and construction consultant, to review the construction of our rigs at the Daewoo and TDI-Halter shipyards as part of a more extensive review of all of Petrobras' upcoming rig deliveries. Since receiving the audit report from ModuSpec, Petrobras has made no comments to us about the report, except to state that ModuSpec concluded, as we acknowledge and expect, that our rigs will not be delivered by the delivery dates specified in their respective charters. INSURANCE We have obtained insurance from a syndicate of international insurance companies led by London underwriters to insure against certain risks related to the construction of our rigs in accordance with their specifications and design and the timely completion, mobilization and delivery of our rigs to Petrobras pursuant to the charters. In general, the insurance covers: o traditional fire, casualty and marine perils causing damage to our rigs during construction and mobilization o delays caused by damage to the shipyards or their facilities from such perils o damage to our rigs, owner-furnished equipment or other rig components from such perils o losses and delays attributable to specified force majeure events In addition, the insurance provides coverage for faulty materials, parts, workmanship or design that would delay the delivery of a rig or cause physical loss or damage to the rig or its equipment. In the event that there is a delay in the delivery of a rig from its shipyard resulting from an insured event or events lasting more than an aggregate of 21 days, the insurance will pay $100,000 per day, beginning after the 21-day waiting period, for a maximum of 365 days. In the event Petrobras terminates a charter as a result of an insured event, including faulty construction or design defect discovered during a 24-month discovery period following delivery by the shipyard and late delivery to Petrobras caused by an insured event, loss of hire coverage entitles us to payment of the relevant rig's operating rate for a maximum of 365 days, subject to a 21-day waiting period. In the event of a successful remarketing of the relevant rig, the loss of hire coverage will pay any daily charter rate differential between the canceled charter and the replacement charter and any mobilization, towing, reoutfitting or similar expenses incurred in recontracting the rig. Total recovery under the loss of hire coverage is limited to the value of the relevant rig's operating rate for 365 days. The late delivery and loss of hire coverage does not contemplate any deductible other than amounts foregone during the 21-day waiting periods. The insurance in respect of construction risks expires upon completion of the construction of each rig, subject to a discovery period of 24 months after delivery by the shipyard. The builder's risk property coverage generally is limited in aggregate to the value of each rig, and a $100.0 million limit applies per event in respect of third-party liabilities. In addition, a $100,000 deductible per event is generally applicable, except that no deductible applies in the event of a total or constructive total loss. All rights to insurance proceeds have been assigned to Wilmington Trust Company to secure the old and new notes. The insurers have waived their right of subrogation against us, our owners or any of their affiliates, the shipyards, Wilmington Trust Company and holders of the old and new notes, each of which is named as a co-insured. 40 FINANCING OF OUR RIGS MITSUBISHI FINANCING In December 1998, affiliates of Mitsubishi Corporation agreed to fund, through two separate credit facilities, up to an aggregate $340.0 million of the cost (including accrued interest) of constructing, equipping and mobilizing the AMETHYST 6 and AMETHYST 7. The credit facility governing the AMETHYST 6 permits drawings of up to $160.0 million and the credit facility covering the AMETHYST 7 permits drawings of up to $180.0 million. On November 1, 1999, we used the net proceeds from the sale of the old notes, cash on hand and additional funds provided by Pride and Maritima to purchase the fully drawn first tranches of the Mitsubishi credit facilities (representing $47.0 million in the case of the AMETHYST 6 facility and $53.0 million in the case of the AMETHYST 7 facility). A 53% undivided interest in the participations purchased by us, including the right to receive payments of principal and interest and all rights as a secured party in respect of such interest in those participations, was irrevocably assigned to Wilmington Trust Company as collateral agent to secure our obligation to repay the old and new notes. FUNDS AVAILABILITY. Drawings under each Mitsubishi credit facility may be made to pay construction costs under the construction contract for each respective rig, interest under that credit facility and, subject to certain limitations, selected operating costs and other construction and mobilization costs for that rig. In addition, pursuant to an intercompany agreement, up to $10.0 million of borrowings under the AMETHYST 7 facility may be on-loaned, without interest, for the completion and mobilization of the AMETHYST 6. The obligation of the lenders to make advances under each credit facility is subject to customary drawdown conditions, including the condition that, as of the date of drawdown, no event of default or potential event of default shall have occurred and be continuing under the credit facility or any major project document related to the corresponding rig and that all such project documents continue to be in full force and effect. As of November 30, 1999, $66.0 million remained available under the AMETHYST 6 credit facility and $47.0 million remained available under the AMETHYST 7 credit facility. INTEREST. Borrowings under each of the Mitsubishi credit facilities bear interest at 12.5% per year until delivery of the rig at the shipyard and 11.0% per year thereafter. Interest is accrued as principal until commencement of the rig's charter, except to the extent that such interest and drawings exceed the total facility amount; provided that interest payable in respect of the participations purchased by us will not be accrued but will be payable every six months in arrears until commencement of each rig's charter. Until commencement of a rig's charter, drawings may be made on the unused portion of the relevant credit facility in order to pay interest to us in respect of our participations. REPAYMENT. Repayment of 85% of the borrowings under each credit facility is to be made in equal monthly installments over a seven-year period beginning on the second month following commencement of the applicable rig's charter. The remaining 15% will be due and payable on the final day of such seven-year period. Repayments in respect of the 53% undivided interest in the participations purchased by us will be made directly to the collateral agent to be invested in short-term U.S. government obligations that will be held as security for payments of interest on and principal of the old and new notes. Scheduled repayments of principal on such participations to the maturity date of the notes will be significantly less than the principal amount of the notes that will then become due. We will thus be required to rely on a partial refinancing of the notes or other sources of cash. PREPAYMENTS; TOTAL LOSS. Either subsidiary may, by notice of at least 90 days, prepay all or any part of the loans made pursuant to its credit facility by paying the principal and accrued and unpaid interest on such prepaid loans to the date of prepayment, plus all other amounts that may be payable on such prepaid loans and any further amount that may be necessary to indemnify the lenders against all costs incurred as a result of the prepayment. If a rig becomes a total loss, the insurance proceeds or other compensation received as a result of such total loss will be applied toward prepayment of the loans made under the credit facility corresponding to such rig in accordance with the immediately preceding sentence and any excess will be paid to the subsidiary that owns such rig. In the event the insurance proceeds and other compensation received as a result of such total loss is less than the indebtedness outstanding under the lost rig's credit facility, the subsidiary that owns such rig will be responsible for the shortfall. PRIMARY OBLIGORS AND GUARANTORS. Petrodrill Six Limited, which will own the AMETHYST 6, is the primary obligor under the credit facility covering the AMETHYST 6. Petrodrill Seven Limited, which will own the AMETHYST 7, is the primary obligor under the credit facility covering the AMETHYST 7. Both primary obligors are incorporated in the British Virgin Islands and are wholly owned by us. Petrodrill Six Limited and Petrodrill Seven Limited have provided cross-guarantees in respect of each other's obligations, and we have, in turn, guaranteed each of their obligations. In addition, Maritima and Pride have guaranteed: o payments of construction, equipping and mobilization costs for each rig to the extent that the funds available under such rig's credit facility are insufficient for completion of such rig up to a total for both credit facilities of $14.0 million by Maritima and $6.0 million by Pride 41 o payments of 70% by Maritima and 30% by Pride of any amounts that are required by Petrodrill Six Limited and Petrodrill Seven Limited to perform their respective obligations under the Petrobras charters and related service rendering contracts Maritima and Pride have also jointly and severally guaranteed: o repayment of the amounts by which the outstanding indebtedness under either rig's credit facility exceeds amounts recoverable under such rig's construction contract, refund guarantee and builder's risk insurance in the event the construction contract is terminated or rescinded, payments under the construction contract are otherwise refunded or there is a total loss of the rig prior to completion o payment of the deductibles under the delay-in-delivery insurance policies and under the loss-of-hire insurance policies upon the occurrence of an event that gives right to a claim under the applicable policy o payment or performance of certain other financial and operating undertakings of Petrodrill Six Limited and Petrodrill Seven Limited For the benefit of the Mitsubishi-affiliated lenders only, Maritima and Pride have guaranteed, from commencement of each rig's charter, repayment of the total borrowings under such rig's Mitsubishi credit facility up to a total for both credit facilities of $75.6 million by Maritima and $32.4 million by Pride. Neither we nor the holders of the old or new notes will share in the benefit of this guarantee. The obligations of Petrodrill Six Limited and Petrodrill Seven Limited to repay funds advanced pursuant to any of the foregoing guarantees are expressly subordinated to their remaining repayment obligations as primary obligors under their respective credit facilities. COLLATERAL ACCOUNTS. Until repayment of outstanding amounts due under each credit facility, all amounts paid pursuant to the applicable rig's charter or otherwise in respect of such rig must be deposited into a management account. The owner of each rig is also required to fund outside of the credit facility, and to deposit into the management account, the amount of any deductions from insurance claims made by the insurers for such rig (such funding, in the case of deductibles for delay-in-delivery and loss-of-hire, being jointly and severally guaranteed by Maritima and Pride). The funds in the management account will be applied FIRST to pay the rig's operating and administrative expenses (subject to certain limitations), SECOND to debt service and to other amounts payable under the applicable credit facility, and THIRD to fund a reserve account. Subject to prior withdrawals, the funds in the reserve account will be used to cover cash shortages in the management account. Funds may be withdrawn from the reserve account to the extent that, immediately following such withdrawal, the combined reserve accounts under both credit facilities contain an aggregate amount at least equal to the next six installment payments due under both credit facilities. SECURITY. In addition to the guarantees described above, repayment and performance of all obligations under the Mitsubishi credit facilities are secured by, among other things, security interests over: o the construction contracts, major service contracts, charters and related service rendering contracts for the AMETHYST 6 and AMETHYST 7 o the shares of capital stock of Petrodrill Six Limited and Petrodrill Seven Limited o the business and assets of Petrodrill Six Limited and Petrodrill Seven Limited o guarantees issued by the Korean Export-Import Bank in respect of Daewoo's obligations to refund installment payments made under the construction contracts upon Daewoo's failure to perform o insurance proceeds received in respect of either the AMETHYST 6 or AMETHYST 7 o the intercompany agreement under which up to $10.0 million of borrowings under the AMETHYST 7 facility may be on-loaned for purposes of completing and mobilizing the AMETHYST 6 o any amounts payable in respect of the two rigs, including requisition compensation, remuneration for salvage and towage services, demurrage and detention compensation and damages for breach (or payments for variation or termination) of any charter or other contract for the employment of either rig 42 o the management accounts and reserve accounts created under each credit facility and a first priority ship mortgage on each rig. COVENANTS. Each of the Mitsubishi credit facilities contains covenants that are customary for such financings, including limitations on the nature and scope of the businesses of Petrodrill Six Limited and Petrodrill Seven Limited, the incurrence of additional debt and the distribution of dividends. EVENTS OF DEFAULT. Each Mitsubishi credit facility contains customary events of default, including, among others, failure to make payments when due, breach by us or our affiliates of any term of the credit facilities or related agreements, cross default to other indebtedness in excess of $500,000, threatened or actual suspension of operation, threatened or actual substantial disposition of business, property or assets, change in ownership of either subsidiary and specified events of bankruptcy, insolvency and reorganization. In addition, each credit facility contains the following events of default, among others: o cross-default to a default by any party to the rig construction contract, the refund guarantee issued by the Korean Export-Import Bank, the charter and related service rendering contract and the major service contracts and subcontracts for construction management and operation of the rig o failure to obtain, or revocation of, governmental permits or approvals required for the operation of the rig, the performance by us or our affiliates of our or their obligations under the credit facility and related agreements or the performance by any party of its obligations under any document listed in the immediately preceding paragraph o non-delivery of the rig from the shipyard within 365 days after its contractual delivery date under its construction contract o non-delivery of the rig to Petrobras within 365 days after its contractual delivery date under its charter o termination of the rig construction contract, the refund guarantee issued by the Korean Export-Import Bank, the charter or the related service rendering contract o failure to maintain required insurance (including for reason of unavailability) o any default under the other subsidiary's credit facility The occurrence of an event of default entitles the facility agent, acting on behalf of the lender group (which includes us), to declare immediately due and payable the entire amount outstanding under the applicable credit facility and to apply the funds in the applicable management account and reserve account toward the outstanding balance owing under such facility. In addition, the lenders would not be obligated to fund during an event of default or potential event of default. GOVERNING LAW AND JURISDICTION. The Mitsubishi credit facilities, including the security documents, are governed by English law and the parties have agreed to submit any disputes to the courts of England. MARAD FINANCING In April 1999, Citibank, N.A. and its affiliate Govco Incorporated agreed to fund, through two separate credit facilities, up to an aggregate $299.8 million of the cost (including construction period interest) of constructing and equipping the AMETHYST 4 and AMETHYST 5. The credit facility covering the AMETHYST 4 permits drawings of up to $149.6 million and the credit facility covering the AMETHYST 5 permits drawings of up to $150.2 million. The United States of America (through the Maritime Administration or MARAD) has guaranteed repayment of the borrowings under each credit facility up to 87.5% of the actual cost of each rig to the extent the other 12.5% of the actual cost has been funded outside of such credit facility. In addition, Petrodrill Four Limited, which will own, and is the primary obligor under the credit facility for, the AMETHYST 4, and Petrodrill Five Limited, which will own, and is the primary obligor under the credit facility for, the AMETHYST 5, have provided cross-guarantees in respect of each other's obligations, and Maritima and Pride have each guaranteed payment of up to $20.5 million for late arrival penalties to Petrobras and Brazilian ad valorem taxes pertaining to the AMETHYST 4 and AMETHYST 5. Each of Petrodrill Four Limited and Petrodrill Five Limited is a British Virgin Islands corporation and our wholly owned subsidiary. FUNDS AVAILABILITY. Drawings under each MARAD credit facility may be made to pay construction costs under the construction contract for the corresponding rig, interest under the credit facility and guarantee fees to the United States of America. These drawings may be funded by Govco through the issuance of commercial paper or directly by Citibank. The lenders are not 43 obligated to advance funds not covered by the MARAD guarantee. As of November 30, 1999, $92.2 million remained available under the AMETHYST 4 credit facility and $106.0 million remained available under the AMETHYST 5 credit facility. INTEREST. Borrowings under each MARAD credit facility funded through the issuance of commercial paper bear interest at Govco's weighted average cost of issuing such commercial paper plus 0.40% during construction and plus 0.45% thereafter. Except in specified circumstances, borrowings under each MARAD credit facility funded directly by Citibank bear interest at the London interbank rate plus 0.30%. Interest under each MARAD credit facility is accrued as principal until February 15, 2001 in the case of the AMETHYST 4 or March 15, 2001 in the case of the AMETHYST 5, except to the extent that such interest and other drawings exceed the total facility amount. Prior to the first to occur of August 15, 2002 in the case of the AMETHYST 4 or September 15, 2002 in the case of the AMETHYST 5 and completion of the second year following commencement of the corresponding rig's charter, the interest rate must be fixed. On the last interest payment date, the interest rate applicable to borrowings was approximately 5.05% under the AMETHYST 4 credit facility and approximately 5.15% under the AMETHYST 5 credit facility. REPAYMENT. The borrowings under each credit facility are required to be repaid in semiannual installments representing over a 12-year period beginning February 15, 2001 in the case of the AMETHYST 4 credit facility and March 15, 2001 in the case of the AMETHYST 5 credit facility. In addition, the borrowings may be prepaid with no premium on any semi-annual interest payment date prior to conversion to a fixed rate or with a premium on any semi-annual interest payment date after conversion to a fixed rate. The borrowings are required to be prepaid under specified circumstances. COLLATERAL ACCOUNT AND SECURITY. The repayment of any amounts advanced under the guarantee of the United States of America in respect of each credit facility is secured by first priority security interests in substantially all of the assets of Petrodrill Four Limited and Petrodrill Five Limited, including each subsidiary's reserve fund. COVENANTS. Each MARAD credit facility contains covenants that are customary for such financings, including limitations on the nature and scope of the business of Petrodrill Four Limited and Petrodrill Five Limited, the incurrence of additional debt and the distribution of dividends. EVENTS OF DEFAULT. Each MARAD credit facility contains customary events of default and additional events of default relating to ownership, construction, operation, maintenance, insuring and chartering of the corresponding rig, including default under such rig's charter. Upon the occurrence of an event of default under a credit facility, the amounts outstanding under such credit facility may be declared immediately due and payable. In addition, the lenders would not be obligated to fund during an event of default. GOVERNING LAW. The MARAD credit facilities are governed by New York law, and the parties to such credit facilities have consented to the jurisdiction of the federal courts in the State of New York. REPORT OF INDEPENDENT ENGINEERS THE FOLLOWING SUMMARY OF CERTAIN PROVISIONS OF THE REPORT OF BENNETT & ASSOCIATES, L.L.C., INDEPENDENT ENGINEERS, IS NOT COMPLETE AND IS SUBJECT TO, AND QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, ALL PROVISIONS OF THE REPORT OF BENNETT & ASSOCIATES, COPIES OF WHICH MAY BE OBTAINED BY PROSPECTIVE INVESTORS UPON WRITTEN REQUEST TO US. The initial purchaser of the old notes contracted Bennett & Associates to perform an independent review of the current technical plans for our rigs, the technical capability of the shipyards to deliver our rigs on time and the construction budget. Bennett & Associates concluded that the current technical plans for our rigs are capable of satisfying the design specifications set forth in their charters. In addition, Bennett & Associates concluded that Daewoo has the technical capability to complete the AMETHYST 6 and AMETHYST 7 on the schedule set forth in their construction contracts. Bennett & Associates reported that TDI-Halter experienced delays in the initial stages of construction of the AMETHYST 4 and AMETHYST 5 primarily as a result of issues relating to TDI-Halter project management. Bennett & Associates expects that these issues will be addressed in the events following the merger of Halter Marine Group, Inc. with Friede Goldman International Inc. but that the AMETHYST 4 and AMETHYST 5 will be at least two months behind the schedule set forth in their construction contracts. Bennett & Associates has concluded that our construction budget is in order, subject to potential cost overruns resulting from delays on the AMETHYST 4 and AMETHYST 5. THE PETROBRAS CONTRACTS OVERVIEW Our subsidiaries have entered into contracts denominated in U.S. dollars to charter the rigs to Petrobras for offshore drilling and subsea well intervention and maintenance operations. Maritima has entered into related Brazilian REAL-denominated service rendering contracts with Petrobras. Each subsidiary has entered into a charter that applies exclusively to its rig, and 44 Maritima has entered into a separate service rendering contract for each rig. These contracts, which are governed by Brazilian law, have initial terms ranging from six to eight years from the date each rig has been delivered to and accepted by Petrobras. Each contract may be renewed for successive periods by prior agreement of the parties. The charters represent approximately 93% of the aggregate estimated value of the Petrobras contracts. The amounts payable under the service rendering contracts in Brazilian REAIS will be used entirely to defray Brazilian REAL-denominated operating expenses of our rigs. The amounts payable under the charters will be available to pay additional operating expenses and to service our debt and the debt of our subsidiaries. The Petrobras contracts were awarded to Maritima following four separate public offers to bid. Each of eight major international bidders, including Falcon Drilling Co. Inc., Diamond Offshore Drilling, Sedco Forex and Queiroz Galvao, participated in at least one of the four public offers to bid. Maritima assigned its rights and obligations under the charters to our subsidiaries on July 10, 1998 with Petrobras' consent. In addition, Petrobras consented to the collateral assignment of the charters by our subsidiaries and the service rendering contracts by Maritima to secure the Mitsubishi and MARAD credit facilities. The Petrobras contracts provide for the payment of operating rates, plus, for the AMETHYSTS 4, 6 and 7, bonuses based generally on availability for operation, for each day our rigs operate. In addition, the Petrobras contracts provide for payments of 95% of the operating rate, plus such performance-based bonuses, for each day during specified periods when operations are suspended. This 95% rate applies, for example, during time spent moving our rigs to a new job location and during suspension of operations resulting from force majeure, bad weather and other specified causes beyond our control. The bonus, however, does not apply during force majeure events. There will be no compensation during suspension of operations for other reasons, including suspension for repairs or maintenance on a rig or due to unavailability of rig crews or supplies. The charter for the AMETHYST 5 provides for payment of a flat fee for mobilization. Subject to specified grace periods, the charters permit Petrobras to impose penalties of up to 30% of a rig's operating rate, and, in addition, up to 30% of the mobilization fee in the case of the AMETHYST 5, if such rig is not timely delivered. Based on construction contract delivery dates plus an allowance for mobilization, the aggregate penalties would be approximately $41.2 million. Although the charters permit Petrobras to impose these penalties at the time of late delivery of our rigs, Petrobras has indicated to us in writing that it has been its policy to negotiate other forms of payment, such as an agreed installment plan or the discount of the penalties from the end of the contract. This policy could change, however, given that Petrobras' board of directors has recently been replaced by new members. We expect our rigs to be delivered to Petrobras during the third and fourth quarters of 2000. The delivery date of each rig will occur after the delivery date required under its charter as a result of delays we experienced in commencing construction of our rigs due to design changes requested by Petrobras, delays in finalizing construction contracts with qualified shipyards and delays in obtaining construction financing. While each charter states that it may be canceled by Petrobras if the chartered rig is not delivered within 180 days after the delivery date specified, Petrobras, on May 28, 1998, provided a letter waiving its right to cancel the charters and related service rendering contracts on the basis of late delivery unless the delay exceeds 540 days and, even then, only if best endeavors to make delivery are not being made. On October 13, 1999, Maritima received a letter from Petrobras stating that Petrobras will cancel the charters and service rendering contracts for our rigs when delay in delivery exceeds 180 days as specified in the charters. By threatening to cancel the charters if delay in delivery exceeds 180 days, Petrobras indicated an intent contrary to its May 1998 letter. Our Brazilian counsel, Pedro Calmon Filho & Associados, has informed us that Petrobras' May 1998 letter extending the permitted delay in delivery is an enforceable obligation of Petrobras; however, specific performance of Petrobras' obligations under the charters may not, as a practical matter, be an available remedy, and our rights against Petrobras could be limited to a lawsuit for damages. You should read the discussion under the heading "--Threatened Cancellation of Our Charters" beginning on page 33 for further information regarding the effects of the threatened cancellation of our charters. 45 The following table summarizes the principal financial and certain other terms of the charters and service rendering contracts and sets forth our expectations regarding the timing, capital cost and late delivery penalties associated with the delivery of our rigs to Petrobras:
AMETHYST 4 AMETHYST 5 AMETHYST 6 AMETHYST 7 ---------- ---------- ---------- ---------- Initial Term (years)........................... 6 8 7 7 Daily Charter Operating Rate................... $114,600 $97,200 $120,000 $129,000 Daily Service Rendering Contract Operating Rate(1)........................................ $7,164 $5,989 $7,578 $8,182 Total Daily Rate............................... $121,764 $103,189 $127,578 $137,182 Maximum Bonus(2)............................... 10.0% 0.0% 10.0% 10.0% Mobilization Fee............................... None $6,479,900 None None Charter Delivery Date.......................... June 17, 1999 July 6, 1999 Dec 29, 1999 Dec 29, 1999 Construction Contract Delivery Date Plus Allowance for Mobilization..................... July 13, 2000 Sep 11, 2000 Oct 17, 2000 Sep 17, 2000 Number of Days of Late Delivery to Petrobras Based on Construction Contract Delivery Date Plus Allowance for Mobilization................ 392 433 293 263 Projected Late Delivery Penalties Based on Construction Contract Delivery Date Plus Allowance for Mobilization..................... $11,147,000 $12,669,000 $8,997,000 $8,429,000 Projected Capitalized Interest................. $7,800,000 $7,800,000 $21,500,000 $21,400,000 Projected Capital Cost(3)...................... $164,200,000 $164,200,000 $163,700,000 $163,700,000
(1)This rate has been translated into U.S. dollars but will be payable in REAIS. You should read the discussion under the heading "About this Prospectus" beginning on page 1 for information regarding the translation of REAIS into U.S. dollars. (2) Percentage of total daily rate. (3)Consists of construction, equipment and mobilization costs, including owner-furnished equipment, contingencies, construction management and commissioning but excluding financing costs and late delivery penalties. Each rig (other than the AMETHYST 5) will be equipped initially to conduct drilling and subsea well intervention and maintenance services. In accordance with the requirements of its charter, the AMETHYST 5 will be equipped initially only for subsea well intervention and maintenance services. The daily rates payable by Petrobras will be reduced or payment will be excused in the case of specified events, including, among others: o suspension of operations for various prescribed reasons, including inspection or docking and measures imposed by insurers o a total or partial failure or malfunction of any equipment which delays or hinders operations o low efficiency of drilling operations, as determined in accordance with preset parameters o specified occurrences arising as a result of the gross negligence of our subsidiary (in the case of a charter) or Maritima (in the case of a service rendering contract) Petrobras may also levy fines of up to 30% of the operating rate for non-compliance with the contract. Under current Brazilian tax law, the daily rate payments made to our subsidiaries pursuant to the charters will be subject to Brazilian withholding taxes; however, the Brazilian withholding tax rate that would be currently applicable to such payments equals 0%. Changes to Brazilian tax law in the future may increase such rate. If any Brazilian withholding tax is imposed upon and must be deducted from such a payment because of such a change in law, there are provisions in the charters that require Petrobras to adjust the amount of such payments such that, after taking such withholding taxes into account, our subsidiaries will receive the same net amount they would have received had no Brazilian withholding tax been imposed upon or deducted from such payment. PERFORMANCE TESTS Prior to commencement of operations, each rig must pass a general performance test, to be completed over three days, to ensure that its equipment works properly. A rig may begin operations if the performance test demonstrates the good operating condition of the rig's main systems, including those that provide and control energy generation and distribution, dynamic positioning, industrial safety, liquid and bulk storage, fluid circulation and processing, safety and wellhead, column elevation, rotation and handling, columns, instrumentation, formation test equipment and communications. 46 INSURANCE AND INDEMNIFICATION The Petrobras contracts require each of our subsidiaries (in the case of the charters) and Maritima (in the case of the service rendering contracts) to maintain all-risk and civil liability insurance in amounts sufficient to cover the risks inherent in the operation of our rigs. The terms and conditions of such insurance must comply with applicable Brazilian law and certain standard forms used in the London insurance market. Formaritima Ltd., our operating manager, is responsible for the procurement of such insurance. In addition, each charter and service rendering contract includes mutual indemnities for claims arising out of the parties' respective gross negligence. We have obtained all-risk insurance for physical loss and damage to each rig due to insured events, such as traditional fire, casualty and marine perils, force majeure, terrorism, confiscation, expropriation, nationalization and deprivation. Specified limits and a $250,000 deductible per event apply. In the event Petrobras terminates a Petrobras contract as a result of an insured event, loss of hire coverage entitles us to payment of the relevant rig's operating rate for a maximum of 365 days, subject to a 21-day waiting period. In the event of a successful remarketing of the relevant rig, the insurance will pay any daily charter rate differential between the canceled charter and the replacement charter and any mobilization, towing, reoutfitting or similar expenses incurred in recontracting the rig. Total recovery under the loss of hire coverage is limited to the value of the relevant rig's operating rate for 365 days. The loss of hire coverage does not contemplate any deductible other than amounts foregone during the 21-day waiting periods. TERMINATION Petrobras may terminate a Petrobras contract as a result of any of the following: o non-performance or irregular performance of its terms and conditions o the total or partial subcontracting of the responsibilities of our subsidiary or Maritima, as the case may be, under such Petrobras contract o an interruption in operations without cause and notice to Petrobras for more than 60 days o the bankruptcy or dissolution of our subsidiary party to such Petrobras contract or Maritima, as the case may be o the ordering of a suspension of operations by applicable authorities that lasts for more than 60 days o the maximum amount of fines, being 10% of the total estimated contract value, having been levied o delay in the performance of operations as a result of which Petrobras can prove the impossibility of completing such operations within established time limits o non-compliance with the conclusions and instructions of a Petrobras inspector o a change in the corporate purposes or capital structure of our subsidiary party to such Petrobras contract or Maritima, as the case may be, either of which, in Petrobras' opinion, hinders such subsidiary's or Maritima's ability to perform its obligations o delay in delivery of the relevant rig or commencement of the initial term exceeding 540 days unless our subsidiary party to such Petrobras contract or Maritima, as the case may be, can demonstrate that it is using its "best endeavors" to make delivery o the termination of the corresponding service rendering contract or charter, as applicable o the interruption of operations for maintenance, repairs and certain other work for a period totaling more than 30% of any six-month period o other suspensions of operations for protracted periods Petrobras may choose to suspend payment under the relevant contract until the circumstances triggering a termination event have been cured. 47 SERVICES PROVIDED Our rigs will conduct offshore drilling and subsea well intervention and maintenance operations for Petrobras pursuant to the charters. (You should read the discussion under the heading "--Threatened Cancellation of Our Charters" beginning on page 33 for information regarding the threatened cancellation of our charters.) In order to perform these services, we will provide our rigs, equipment and crews and generally will be responsible for the payment of operating and maintenance expenses. Our rigs will require crews of approximately 55 persons whom we will procure through contracts with affiliates of our owners and Workships. (You should read the discussion under the heading "--Operating Management" beginning on page 48 for a description of these contracts.) The AMETHYST 4, AMETHYST 6 and AMETHYST 7 are contracted and have been equipped to provide offshore drilling services to Petrobras pursuant to their charters. The AMETHYST 5 is contracted and has been equipped initially to provide only subsea well intervention and maintenance services to Petrobras pursuant to its charter. OFFSHORE CONTRACT DRILLING SERVICES Offshore contract drilling services involve the drilling of wells for oil and gas located beneath the seabed. Such services are generally provided by drillships, jack-ups or semi-submersible rigs. The level of demand for offshore contract drilling services is highly cyclical and is influenced by many factors, including the current and anticipated prices for oil and gas and the availability of drilling units. Our rigs can carry out rotary drilling services for exploratory and development wells in water depths of up to approximately 5,000 feet. MAINTENANCE SERVICES Maintenance services are required on producing oil and gas wells to ensure efficient, continuous operation. These services consist of mechanical repairs necessary to maintain production from the well, such as repairing parted sucker rods and replacing defective downhole pumps in an oil well or replacing defective tubing in a gas well. Maintenance services may be performed on both oil and gas wells but are more often required on oil wells. Maintenance services generally are required throughout the life of a well. The need for these services does not depend on the level of drilling activity and generally is independent of short-term fluctuations in oil and gas prices. For these reasons, the demand for maintenance services generally is more stable than for other well servicing activities. The general level of maintenance, however, is affected by changes in the total number of producing oil and gas wells in a region. WELL INTERVENTION SERVICES In addition to periodic maintenance, producing oil and gas wells occasionally require major repairs or modifications called well interventions. Well intervention services include the opening of new producing zones in an existing well, recompletion of a well in which production has declined, drilling out plugs and packers and conversion of a producing well to an injection well during enhanced recovery operations. Well intervention operations normally are performed by a well servicing rig with additional specialized accessory equipment, which may include rotary drilling equipment, mud pumps, mud tanks and blowout preventers, depending upon the particular type of well intervention operation. Our rigs are designed and equipped to handle the more complex well intervention operations. A well intervention may last from a few days to several weeks. OPERATING MANAGEMENT OVERALL MANAGEMENT Formaritima Ltd., a British Virgin Islands corporation owned 50% by a subsidiary of Pride and 50% by affiliates of Maritima, will provide the overall management of our rigs during and after their operation under the charters. Formaritima has agreed to manage and maintain our rigs in accordance with good oil industry practice, efficiently and economically, to the best of its professional ability with respect to performance, safety and shipshape appearance, and to arrange, at all times, technical supervision to ensure that our rigs are kept in a seaworthy condition and with valid certificates. Formaritima's services will include mobilization of our rigs to Brazil, the operation and maintenance of our rigs under the charters, the remarketing of our rigs upon termination of the charters, the maintenance of adequate insurance on our rigs and related equipment at all times and the preparation of budgets and reports and the performance of other administrative tasks. Formaritima will maintain at all times all-risk hull and machinery insurance in amounts equal to the full market value of each rig and third-party liability insurance covering our subsidiaries and Formaritima. Premiums for such insurance and deductibles will be paid by each subsidiary. Formaritima will perform its responsibilities with the support of, and personnel seconded from, Pride-Foramer and Maritima. A number of drilling employees, base personnel and ship crews that will operate our rigs have been identified and are currently being trained using simulation in Maritima's Macae operating base and on Pride's NYMPHEA, a moored, third-generation semi-submersible drilling rig currently operating offshore Brazil for Petrobras. 48 The management agreement of each subsidiary with Formaritima may be terminated by such subsidiary if: o it is dissatisfied for sound reasons with the performance of Formaritima and Formaritima fails to remedy the matters complained of within 90 days after receiving written notice thereof o Formaritima is bankrupt o Formaritima ceases or threatens to cease to carry on its business Formaritima may terminate the management agreement with a subsidiary if such subsidiary fails to pay the fees due Formaritima within 30 days after the due date and Formaritima gives such subsidiary 30 days' prior notice. The management agreement in respect of a rig terminates in the event of the total loss of such rig. Each subsidiary has agreed to indemnify Formaritima for any actions or liabilities brought by or incurred by Formaritima in connection with its performance under such subsidiary's management agreement, except to the extent such actions or liabilities result from the gross negligence or willful misconduct of Formaritima, in which case Formaritima's liability is limited to the aggregate amount of management fees received by Formaritima in the preceding 12 months with respect to each rig. Pursuant to technical services agreements, Pride-Foramer will provide to Formaritima certain personnel, including, among others, for each rig as applicable, the general manager, rig manager, site manager, chief engineer, chief electrician, chief mechanic, blowout preventer engineer, electronic technician and hydraulic technician. In addition, Pride-Foramer has agreed to furnish certain technical services to Formaritima, including but not limited to: o support in provision of non-local insurance and settlement of non-local insurance disputes o international freight forwarding o marketing advice and services o international procurement services o head office technical assistance and support for the operation of each rig o preparation of monthly budgets on a semi-annual basis Pursuant to local services agreements, Maritima will provide to Formaritima Brazilian personnel, including, among others, drill engineer, driller, barge engineer, bosun and chief mechanic. In addition, Maritima has agreed to provide certain Brazilian local services that include but are not limited to the provision of: o local rig and base personnel o commercial services o offices o customs clearances for our rigs, equipment and spare parts o local insurance o marketing advice and service o visas and work permit applications o legal assistance concerning rig and base operational health, safety and environmental issues o local freight forwarding o assistance and advice to minimize the impact of customs duties and import taxes The technical services agreement and local services agreement in respect of a rig terminates in the event of the total loss of such rig. Formaritima may terminate a technical services agreement or local services agreement if Formaritima is not satisfied for sound reasons with the performance of the applicable service provider and such service provider fails to correct such deficiencies within 15 days or such service provider is bankrupt. Formaritima and each subsidiary have agreed to indemnify Pride-Foramer and Maritima for any actions or liabilities brought by or incurred by them in connection with their performance under the technical services agreement and local services agreement, respectively, except to the extent such actions or liabilities arise from their gross negligence or willful misconduct. You should read the discussion under the heading "Certain Relationships and Related Transactions--Compensation of Owner-Related Parties" beginning on page 54 for information regarding the compensation of Maritima and Pride-Foramer pursuant to the technical services agreements and local services agreements. MARINE AND NAUTICAL MANAGEMENT Each subsidiary (directly or through Formaritima) has retained Workships to manage the marine and nautical operations of its rig, including its mobilization to Brazil. Workships has agreed to manage and maintain each rig in accordance with good marine practice, efficiently and economically, to the best of its professional ability in regard to performance, safety and shipshape 49 appearance, and to arrange, at all times, technical supervision to ensure that each rig is kept in a seaworthy condition and with valid certificates. Workships will: o arrange for the marine operations of each rig and all marine equipment used on or from each rig o procure the supply of all equipment and materials required in connection with the marine operation and maintenance of each rig o provide for technical supervision, repairs, classification and customary maintenance of each rig o take out and maintain workmen's compensation insurance policies, comprehensive general liability insurance policies and insurance policies required to cover Workships' equipment and materials and those belonging to any service companies for which Workships is responsible o prepare and submit budgets and reports and perform other administrative duties As compensation for its services, Workships will be entitled to reimbursement for any costs incurred by it plus a management fee of $1,250 per day per rig. If a rig is sold and Workships' services are terminated with respect to that rig, Workships will be entitled to a lump sum termination payment equal to the net present value of its management fees over the remaining term of such rig's charter, calculated using a discount factor of 10% per annum. Each marine and nautical services agreement may be terminated by the relevant subsidiary or Formaritima, as applicable, if such subsidiary or Formaritima, as applicable, is dissatisfied for sound reasons with the performance of Workships and Workships fails to remedy the matters complained of within 30 days after receiving written notice thereof, Workships is bankrupt or Workships ceases to carry on its business. Workships may terminate a marine and nautical services agreement if the fees due Workships remain unpaid within 30 days after the due date. The marine and nautical services agreement in respect of a rig terminates in the event of the total loss of such rig. Each subsidiary or Formaritima, as applicable, has agreed to indemnify Workships for any actions or liabilities brought by or incurred by Workships in connection with its performance under the corresponding marine and nautical services agreement, except to the extent such actions or liabilities result solely from the gross negligence or willful misconduct of Workships, in which case Workships' liability is limited to the aggregate of the management fees received by Workships in the preceding 12 months. Workships has significant experience in providing offshore vessel marine management services that include vessel financing, purchasing, insurance and maintenance, general management of hardware and software, vessel engineering and the procurement of marine personnel. Since its inception in 1988, Workships has managed vessels throughout the world and presently manages vessels in Brazil, the Far East, Mexico and the North Sea. Workships' experience includes the marine management of the AMETHYST 1. REMARKETING Formaritima will be the agent for each of our subsidiaries in remarketing its rig after the expiration of its charter. Formaritima's duties will include, among others, ensuring the best possible remarketing of each rig upon expiration of its charter in order to keep it in suitable employment as long as possible and presenting proposals and conducting negotiations for contracts for the further employment of each rig. Formaritima will take advantage of the significant experience of Maritima and Pride in remarketing our rigs. PERMITS AND REGULATION We must comply with the applicable laws, regulations and statutory and regulatory standards of Brazil and other jurisdictions relating to offshore oilfield services and will be subject to their ongoing application and enforcement. In addition, many permits and regulatory approvals are required for the operation of our rigs under applicable laws and regulations, although a few of these permits are not currently required and have not yet been obtained. Of those permits and approvals which have been obtained, some are subject to certain conditions. Permits and approvals that are still outstanding may, when issued, similarly be subject to conditions. Delay in receipt of, or failure to obtain, required permits or approvals and/or failure to satisfy the conditions of any permit could delay a rig's construction, restrict its operation or result in additional costs or additional taxes. Our rigs will be constructed in compliance with the rules and regulations of Lloyds Registry of London. We expect that compliance with these rules and regulations will allow our rigs to operate with unrestricted service on a worldwide basis. In addition, our rigs are required under the charters to comply with the Petrobras safety rules and will be outfitted accordingly. 50 Each rig will be registered in the Bahamas. The Bahamian Registry will be responsible for carrying out the inspections that will allow our rigs to comply with their class requirements. In this regard, the Bahamian Registry recognizes a valid certificate from Lloyds Registry of London. ENVIRONMENTAL MATTERS The operation of our rigs will routinely involve the handling of waste materials, some of which are classified as hazardous substances. The laws, regulations and requirements that will be applicable to the operation of our rigs include, but are not limited to, laws and regulations controlling the containment, disposal and discharge of hazardous oilfield waste and other nonhazardous waste material into the environment, laws and regulations requiring removal and cleanup under certain circumstances or otherwise relating to the protection of the environment, and certification, licensing and other requirements imposed by treaties, laws, regulations and conventions in Brazil. These laws, regulations and requirements potentially expose us to civil penalties, criminal sanctions and closure orders for non-compliance. Some of these laws impose joint and several liability (without regard to fault) on owners of the related mineral interests and drilling operators (like us) for environmental damage. We will make substantial expenditures to comply with these environmental laws. We cannot assure that future environmental costs will not have a material adverse effect on our results of operations or financial condition. Since environmental laws are becoming more stringent in Brazil, our environmental capital expenditures and costs for environmental compliance may be significant in the future. In addition, due to the possibility of unanticipated regulatory or other developments, the amount and timing of future environmental expenditures may vary widely from those currently anticipated. Our management does not believe that compliance with existing environmental laws will have a material adverse effect on our financial condition or results of operations. We are obligated under the documents relating to the old and new notes and the Mitsubishi and MARAD financings and various other documents to obtain and keep in full force and effect insurance providing coverage for risks inherent in the operation of our rigs. Under the charters, Petrobras has agreed, under specified circumstances, to hold our subsidiaries harmless for any damages to reservoirs and any damages arising from pollution at the well as a result of kick or blowout and to limit the liability of our subsidiaries for spills of petroleum, oil and other residues, other than when caused by events arising from kick, blowout, surgings or formation testing, and direct losses and damages to the equipment of Petrobras and third parties and damages to wells. We cannot assure that insurance coverages will be available in the future on commercially reasonable terms or that the amounts for which we are insured or indemnified or which we receive under such coverages or indemnifications will cover all losses or increased expenses. The occurrence of a significant event against which we are not fully insured or indemnified or a number of lesser events against which we are insured but subject to substantial deductibles could materially and adversely affect our ability to repay the new notes. EMPLOYEES We have no employees and do not expect to hire our own employees for the foreseeable future. Instead, each subsidiary has contracted with Petrodrill Engineering, Formaritima and Workships to provide experienced construction management personnel, ship crews, base personnel and oil drilling employees. You should read the discussion under the headings "--Construction, Mobilization and Delivery to Petrobras--Construction Management" and "--The Petrobras Contracts--Operating Management" for further information regarding these arrangements. Maritima and Pride are undertaking to train the rig crews in advance of the completion of the construction of our rigs. Some but not all of the oil drilling employees, base personnel and ship crews have been identified, assembled and hired. The drilling employees, base personnel and ship crews that have been identified currently are being trained in Maritima's Macae, Brazil operating base and on Pride's NYMPHEA. Once our rigs become operational, Formaritima and Workships will employ more than 350 people, including employees directly hired and contracted in the case of Workships and employees seconded from Maritima, Pride and their affiliates in the case of Formaritima. All seconded and direct employees of Petrodrill Engineering, Formaritima and Workships are expected to be exempt personnel and only contracted employees are expected to be covered by one or more collective bargaining agreements. We do not expect labor relations to be materially adverse or disruptive of our operations. 51 MANAGEMENT The following table sets forth the names, ages and positions of our directors and executive officers and the executive officers of Petrodrill Engineering and Formaritima. NAME AGE POSITION - - ---- --- -------- German Efromovich....... 49 Our Director and President John O'Leary............ 43 Our Director and Vice President Hamylton Padilha........ 39 Our Director and Vice President Ricardo Szpigel......... 27 Our Director Earl W. McNiel.......... 41 Our Treasurer Robert W. Randall....... 57 Our Secretary Derek Leach............. 49 Project Director of Petrodrill Engineering Peter Hickson........... 50 Deputy Project Director of Petrodrill Engineering Steve Assiter........... 42 Financial Director and Chief Financial Officer of Petrodrill Engineering Peter Jeffrey........... 52 Construction Manager of Petrodrill Engineering Jacques Stokking........ 50 General Manager of Formaritima German Efromovich has been our Director and President since March 1998 and is a founder and has been President of Maritima since 1981. Mr. Efromovich has been involved in the oil and gas business for over 20 years and holds significant interests in various service companies, including Brasitest S.A., which provides inspection services and non-destructive testing. John O'Leary has been our Director and Vice President since March 1998 and Pride's Vice President--Worldwide Marketing since March 1997. Mr. O'Leary was Manager, Marketing and Business Development of Forasol S.A. from June 1993 to March 1997 (when Forasol S.A. was acquired by Pride), with primary responsibility for worldwide business development. Mr. O'Leary joined Forasol S.A. in August 1985. Hamylton Padilha has been our Vice President since March 1998, our Director since October 1999 and Maritima's Director--Drilling and Floating Production Projects since January 1995. Mr. Padilha was Marketing Director for the Drilling Division of Odebrecht Perfuracoes Ltda., one of Brazil's largest drilling contractors, from 1990 to 1995. Ricardo Szpigel has been our Director since October 1999 and Maritima's Financial Manager since May 1996. Prior to joining Maritima, Mr. Szpigel had been International Trade Manager for REM--Industria e Comercio Ltda., a supplier of medical and industrial products and an affiliate of Maritima, since 1994. Mr. Szpigel received his Masters degree in Business Administration from Universidade Paulista in 1994. Earl W. McNiel has been our Treasurer since March 1998 and Pride's Vice President and Chief Financial Officer since February 1997. He joined Pride in September 1994 as its Chief Accounting Officer. From 1990 to 1994, Mr. McNiel served as Chief Financial Officer of several publicly owned waste management companies. Robert W. Randall has been our Secretary since March 1998 and Pride's Vice President and General Counsel since May 1991. He was elected Secretary of Pride in 1993. Prior to 1991, he was Senior Vice President, General Counsel and Secretary for Tejas Gas Corporation, a natural gas transmission company. Derek Leach has been Project Director of Petrodrill Engineering since February 1998. Mr. Leach has 23 years of experience in the subsea construction business during which time he has worked for Coflexip Stena Offshore, Whartom Williams Taylor and Vickers Oceanics. From 1996 to 1998, Mr. Leach was the Senior Executive Vice President of Coflexip Stena Offshore responsible for worldwide subsea construction activity and offshore vessel and equipment operations. From 1995 to 1996, Mr. Leach was Coflexip Stena's Senior Vice President--North Sea Operations and Offshore Resources. Prior to the merger of 52 Coflexip S.A. and Stena Offshore, Mr. Leach had been General Manager of Stena Offshore N.V. in charge of western hemisphere and offshore resources since 1989. Peter Hickson has been Deputy Project Director of Petrodrill Engineering since February 1998. Mr. Hickson has 27 years of experience in the oil and gas and contract drilling industry. From 1982 to 1990, Mr. Hickson was the Managing Director of Houlder Offshore. During this period, Mr. Hickson negotiated and managed the construction of seven offshore drilling rigs in five different shipyards. Since 1990, Mr. Hickson has been an independent consultant for oil and gas companies seeking to establish overseas operations or undertake rig construction projects. Steve Assiter has been Petrodrill Engineering's Financial Director and Chief Financial Officer since March 30, 1998. Previously, Mr. Assiter spent three years as Vice President and Group Controller for Coflexip Stena Offshore. Prior to the merger of Coflexip S.A. and Stena Offshore, Mr. Assiter had been Financial Director/CFO of Stena Offshore N.V. since 1986. Peter Jeffrey has been the Construction Manager of Petrodrill Engineering since April 1998. Prior to April 1998, Mr. Jeffrey was New Building and Conversions Manager for Coflexip Stena Offshore. Mr. Jeffrey has 35 years experience in the marine, shipbuilding, offshore exploration and construction industries. This experience includes 21 years of construction, conversion and technical and project management experience for dynamically positioned vessels and semi-submersible drilling rigs with Coflexip Stena Offshore, Stena Offshore, Houlder Offshore and Offshore International. Jacques Stokking was appointed General Manager of Formaritima in August 1999. Mr. Stokking has 23 years of experience in the oil and gas industry. From 1994 to 1999, he was Human Resources Manager for Forasol S.A., which is based in Paris and was acquired by Pride in March 1997. From 1986 to 1994 he was Worldwide Operations Manager for Forasol S.A. From 1984 to 1986 he was District Manager for Forasol's joint venture in Brazil operating dynamically positioned drillships and semi-submersibles. EXECUTIVE AND BOARD COMPENSATION AND BENEFITS Our directors and officers receive no compensation from us. Our operations are conducted through management agreements with Petrodrill Engineering, Formaritima and Workships. The compensation structure for such service providers are set forth in their respective management agreements. You should read the discussion under the heading "Certain Relationships and Related Transactions--Compensation of Owner-Related Parties" below for information regarding the compensation of Petrodrill Engineering and Formaritima and the discussion under the heading "Business--Operating Management--Marine and Nautical Management" beginning on page 48 for information regarding the compensation of Workships. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS OWNERSHIP OF AMETHYST FINANCIAL COMPANY LTD. AND AFFILIATED SERVICE PROVIDERS Maritima's interest in us is held by Drillpetro Inc., which owns 48.5% of our outstanding capital stock, and Techdrill Inc., which owns 13.2% of such stock. Drillpetro and Techdrill are special purpose affiliates of Maritima incorporated in the Bahamas and created by Maritima to contribute equity to us. Rainier Engineering Ltd., a company incorporated in the Bahamas, owns all of the stock of Drillpetro and Techdrill and 40% of the stock of Maritima. Rainier's shareholders directly own the remainder of the stock of Maritima. Westville Management Corporation, a British Virgin Islands corporation and wholly owned subsidiary of Pride, owns 26.4 % of our outstanding capital stock. The remainder of our outstanding capital stock is held by two of First Reserve's investment partnerships, First Reserve Fund VII, which owns 1.4% of our outstanding stock, and First Reserve Fund VIII, which owns 10.5% of our outstanding stock. First Reserve owns approximately 9.5% of the capital stock of Pride. The outstanding capital stock of each of Petrodrill Engineering (see "Business--Construction, Mobilization and Delivery to Petrobras--Construction Management" beginning on page 39 for information regarding the role of Petrodrill Engineering) and BiGem Holdings N.V. (see "--Compensation of Owner-Related Parties--Licensing Agreement" beginning on page 54 for information regarding the role of BiGem) are owned 55% by Drillpetro, 15% by Techdrill and 30% by Westville. Formaritima (see "Business--The Petrobras Contracts--Operating Management" beginning on page 48 for information regarding the role of Formaritima) is owned 50% by Maritima and 50% by Westville. We have been capitalized with initial equity contributions by our owners aggregating approximately $105.0 million. Petrodrill Engineering, Formaritima, and BiGem (together with us, the companies of the Amethyst group) have been capitalized with relatively modest equity contributions. The owners of the Amethyst group that are affiliates of Maritima and Pride have agreed to contribute, in proportion to their respective ownership interests, to each member of the Amethyst group the amounts needed to fund the agreed capital and operating budgets and any cost overruns. Any amounts so contributed will be treated as subordinated loans repayable only following amortization of any amounts due and outstanding in respect of any outside financing obtained by the relevant member of the Amethyst group, including the financing provided by the old and new notes; provided that 53 if any owner fails to comply with its obligations to make such further contributions, make-up contributions by the remaining owners will be treated as equity contributions, entitling the remaining owners to additional shares in the relevant Amethyst group member. COMPENSATION OF OWNER-RELATED PARTIES CONSTRUCTION AND OPERATING MANAGEMENT. The construction management services being provided to each of our subsidiaries by Petrodrill Engineering and to Petrodrill Engineering by Pride-Foramer and Maritima (see "Business--Construction, Mobilization and Delivery to Petrobras--Construction Management" beginning on page 39 for a description of those services) are being provided at agreed-upon fixed prices that approximate each such service provider's cost, including the full salaries of personnel engaged full time as employees of Petrodrill Engineering and a pro rata share of the salaries and other overhead costs for personnel who are seconded from Pride-Foramer and Maritima. For the operating management services that will be provided to each of our subsidiaries by Formaritima and to Formaritima by Pride-Foramer and Maritima (see "Business--The Petrobras Contracts--Operating Management" beginning on page 48 for a description of those services), each of the service providers will be entitled to a management fee of $1,250 per day per rig, beginning on the first day of sea trials, and reimbursement of all costs. The reimbursables payable by each subsidiary to Formaritima will include the management fees and reimbursables payable by Formaritima to Pride-Foramer and Maritima. LICENSING AGREEMENT Rights to the Amethyst design were purchased for $9.5 million in October 1997 from Scheepswerf de Hoop Lobith B.V. by BiGem Holdings N.V. BiGem has granted each of our four subsidiaries an irrevocable, non-exclusive, perpetual license to construct or procure the construction of one dynamically positioned semi-submersible drilling rig based on the Amethyst design. The licensing agreement provides that BiGem will furnish all necessary documentation pertaining to the Amethyst design. As consideration for the license, BiGem will receive $1,583,333 per rig, payable in six installments, the first and second installments having previously been paid and each of the last four installments becoming due semi-annually beginning on delivery of the relevant rig. OTHER COMPENSATION PAYABLE TO AFFILIATES OF MARITIMA Drillpetro is entitled to a lump-sum amount of $2.5 million (payable in installments of $500,000, $1.0 million and $1.0 million for the AMETHYST 5, 6 AND 7, respectively, within three days of receipt of the corresponding mobilization payments under the relevant Petrobras charter or, in the event of no mobilization fee, within 45 days of delivery and acceptance of the relevant rig) for services rendered in connection with the development of conceptual and design engineering, shipyard negotiations and technical negotiations with Petrobras. In addition, Drillpetro will be paid the following fees: (i) $4,000 in the case of AMETHYSTS 6 and 7 and (ii) $2,000 in the case of AMETHYSTS 4 and 5, for each day the relevant rig works under its charter, plus (i) in the case of the AMETHYST 4, 1% of the daily rate paid under its charter (excluding bonuses) and (ii) in the case of the AMETHYST 6 and AMETHYST 7, 2% of the daily rates paid under their charters (excluding bonuses). Further, two other affiliates of Maritima will receive agency fees of 3% and 2% of the full operating rates under the Petrobras contracts (excluding bonuses), respectively, payable monthly upon receipt of payments from Petrobras, for their assistance in negotiating the Petrobras contracts and certain amendments thereto. GOVERNANCE The following discussion summarizes the shareholders' agreement among Drillpetro, Techdrill and Westville relating to our governance: RESTRICTIONS ON ASSIGNMENT OR TRANSFER Except as described below under "Transfers to Third Parties," each shareholder generally is prohibited from selling, mortgaging, charging, assigning, transferring or otherwise disposing of its interest in us without the approval of the other shareholders. A shareholder may transfer to an affiliate all of its rights, duties and obligations under certain agreements, provided the assigning shareholder remains primarily liable for performance by its affiliate. EXIT MECHANISMS There are four exit mechanisms by which the shareholders may monetize their investments after September 2001, subject to the restriction under "Description of New Notes--Change of Control." Such mechanisms are: 54 o the sale of our rigs and/or all of our outstanding shares to a third party o the purchase by Westville or its nominee of Maritima's beneficial interests in any rig or in us o a public offering of our stock o the exchange of Maritima's beneficial interests in us for shares of common stock of Pride on terms to be agreed and based on industry practice SHAREHOLDER MEETINGS No business may be transacted at a meeting of our shareholders unless one representative of each shareholder is present, provided that the representatives present may reconvene the meeting at a later date and, at such date, transact business noted on the agenda for such reconvened meeting by vote of a majority of issued shares. In lieu of meeting, the shareholders may act by unanimous written consent, which consent will have the same effect as an action duly taken at a meeting. BOARD OF DIRECTORS Our board of directors consists of four directors. Two directors may be appointed by Drillpetro and one each are appointed by Westville and Techdrill. A quorum at a meeting of the board of directors requires the attendance of all four directors or their alternates, but a director will not be eligible to vote at a validly held meeting unless the shareholder whom he represents has complied with all capital contribution requirements. Decisions of the board of directors must be made by vote of directors representing a majority of the shares issued and outstanding, subject to certain exceptions requiring unanimity. Our board of directors is required to meet at least once every two months during the construction of our rigs and at least once every three months thereafter. DEADLOCK AT BOARD LEVEL In the event that our directors are unable to reach a unanimous decision on a matter requiring unanimity or unable to establish a quorum for a meeting to discuss such a matter within 10 days after such a meeting has initially been called (either of these events constituting a deadlock), and senior management cannot resolve such deadlock, any shareholder may initiate standard buy-sell procedures. MANAGEMENT COMMITTEE The shareholders may form a management committee consisting of one representative of each shareholder to supervise the construction of our rigs and subsequent operations. Decisions of such management committee must be unanimous. In the event deadlock exists in the management committee, the matter will be referred to the board of directors for resolution. TRANSFERS TO THIRD PARTIES After September 2001 and subject to any restrictions imposed by the instruments governing our indebtedness, a shareholder may transfer all, but not part, of its interest in us (including any subordinated loans) to a non-affiliate to the extent such non-affiliate agrees to be bound by all the terms of the related governance agreements. Such transfer will be subject to the rights of first refusal of the other shareholders allowing them to purchase the interests of the selling shareholder under the same terms offered by the non-affiliate, pro rata in proportion to their existing interests. 55 THE EXCHANGE OFFER PURPOSE OF THE EXCHANGE OFFER In connection with the sale of the old notes, we entered into a registration rights agreement with the initial purchaser of the old notes. In that agreement, we agreed to file a registration statement relating to an offer to exchange the old notes for new notes and to use our reasonable best efforts to complete the exchange offer within 180 days after November 1, 1999. We are offering the new notes under this prospectus to satisfy our obligations under the registration rights agreement. RESALE OF NEW NOTES Based on interpretations of the SEC staff in "no action letters" issued to third parties, we believe that each new note issued in the exchange offer may be offered for resale, resold and otherwise transferred by you without compliance with the registration and prospectus delivery provisions of the Securities Act if all of the following are true: o you are not our "affiliate" within the meaning of Rule 405 under the Securities Act o you acquire such new notes in the ordinary course of your business o you do not intend to participate in the distribution of new notes However, the SEC has not considered this exchange offer in the context of a no-action letter, so there can be no assurance that the staff of the SEC would make a similar determination with respect to this exchange offer. If you tender your old notes in the exchange offer with the intention of participating in any manner in a distribution of the new notes, you: o cannot rely on such interpretations by the SEC staff o must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction Unless an exemption from registration is otherwise available, the resale by any securityholder intending to distribute new notes should be covered by an effective registration statement under the Securities Act containing the selling securityholder's information required by Item 507 or Item 508, as applicable, of Regulation S-K under the Securities Act. This prospectus may be used for an offer to resell, resale or other retransfer of new notes only as specifically described in this prospectus. Only those broker-dealers that acquired the old notes as a result of market-making activities or other trading activities may participate in the exchange offer. Each broker-dealer that receives new notes for its own account in exchange for old notes, where that broker-dealer acquired such old notes as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such new notes. You should read the discussion under the heading "Plan of Distribution" beginning on page __ for more details regarding the transfer of new notes. TERMS OF THE EXCHANGE OFFER Upon the terms and subject to the conditions described in this prospectus and in the letter of transmittal, we will accept for exchange any old notes properly tendered and not withdrawn prior to the expiration date of the exchange offer for new notes. We will issue $1,000 principal amount of new notes in exchange for each $1,000 principal amount of old notes surrendered under this exchange offer. Old notes may be tendered only in integral multiples of $1,000. This exchange offer is not conditioned upon any minimum aggregate principal amount of old notes being tendered for exchange. As of this date, $53 million principal amount of 11 3/4% Senior Secured Notes due 2001 are outstanding. This prospectus and the letter of transmittal are being sent to all registered holders of old notes. There will be no fixed record date for determining registered holders of old notes entitled to participate in the exchange offer. We intend to conduct the exchange offer in accordance with the provisions of the registration rights agreement, the applicable requirements of the Securities Act of 1933 and the Securities Exchange Act of 1934 and the rules and regulations of the SEC. Old notes that are not tendered for exchange in the exchange offer: o will remain outstanding o will continue to accrue interest o will be entitled to the rights and benefits that holders have under the indenture relating to the notes and the registration rights agreement 56 We will be deemed to have accepted for exchange properly tendered old notes when we have given oral or written notice of the acceptance to the exchange agent and complied with the applicable provisions of the registration rights agreement. The exchange agent will act as agent for the tendering holders for the purposes of receiving the new notes from us. If you tender old notes in the exchange offer, you will not be required to pay brokerage commissions or fees or, subject to the instructions in the letter of transmittal, transfer taxes with respect to the exchange of old notes. We will pay all charges and expenses, other than certain applicable taxes described below, in connection with the exchange offer. It is important that you read the section labeled "--Fees and Expenses" for more details about fees and expenses incurred in the exchange offer. We will return any old notes that we do not accept for exchange for any reason without expense to the tendering holder as promptly as practicable after the expiration or termination of the applicable exchange offer. EXPIRATION DATE Each exchange offer will expire at 5:00 p.m., New York City time, on , 2000, unless, in our sole discretion, we extend the expiration date. EXTENSIONS, DELAY IN ACCEPTANCE, TERMINATION OR AMENDMENT We expressly reserve the right, at any time or at various times, to extend the period of time during which this exchange offer is open. We may delay acceptance of any old notes for exchange by giving oral or written notice of the extension to holders of old notes. During any such extensions, all old notes you have previously tendered will remain subject to the exchange offer, and we may accept them for exchange. To extend an exchange offer, we will notify the exchange agent orally or in writing of any extension. We also will make a public announcement of the extension no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date. If any of the conditions described below under "Conditions to the Exchange Offer" have not been satisfied with respect to the exchange offer, we reserve the right, in our sole discretion: o to delay accepting for exchange any old notes o to extend that exchange offer o to terminate that exchange offer by giving oral or written notice of such delay, extension or termination to the exchange agent. Subject to the terms of the registration rights agreement, we also reserve the right to amend the terms of that exchange offer in any manner. Any delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by oral or written notice thereof to the registered holders of old notes. If we amend the exchange offer in a manner that we determine to constitute a material change, we will promptly disclose that amendment by means of a prospectus supplement. We will distribute the supplement to the registered holders of the old notes. Depending upon the significance of the amendment and the manner of disclosure to the registered holders, we will extend the exchange offer if the exchange offer would otherwise expire during such period. Without limiting the manner in which we may choose to make public announcements of any delay in acceptance, extension, termination or amendment of the exchange offer, we have no obligation to publish, advertise or otherwise communicate any such public announcement, other than by making a timely release to an appropriate news agency. CONDITIONS TO THE EXCHANGE OFFER Despite any other term of the exchange offer, we will not be required to accept for exchange, or to exchange any new notes for any old notes, and we may terminate the exchange offer as provided in this prospectus before accepting any old notes for exchange, if, in our reasonable judgment, either of the following is true: o the exchange offer, or the making of any exchange by a holder of old notes, would violate applicable law or any applicable interpretation of the staff of the SEC o any action or proceeding has been instituted or threatened in any court or by or before any governmental agency with respect to the exchange offer that, in our judgment, would reasonably be expected to impair our ability to proceed with that exchange offer 57 In addition, we will not be obligated to accept for exchange the old notes of any holder that has not made to us both of the following: o the representations described under "--Procedures for Tendering" and "Plan of Distribution" o such other representations as may be reasonably necessary under applicable SEC rules, regulations or interpretations to make available to us an appropriate form for registering the new notes under the Securities Act We expressly reserve the right to amend or terminate each exchange offer, and to reject for exchange any old notes not previously accepted for exchange in that exchange offer, upon the occurrence of any of the conditions to the exchange offer specified above. We will give oral or written notice of any extension, amendment, non-acceptance or termination to the holders of the old notes affected as promptly as practicable. These conditions are for our sole benefit, and we may assert them or waive them in whole or in part at any time or at various times in our sole discretion. Our failure at any time to exercise any of these rights will not mean that we have waived our rights. Each right will be deemed an ongoing right that we may assert at any time or at various times. In addition, we will not accept for exchange any old notes tendered, and will not issue new notes in exchange for any such old notes, if at such time any stop order has been threatened or is in effect with respect to the registration statement of which this prospectus constitutes a part or the qualification of the indenture relating to the notes under the Trust Indenture Act of 1939. PROCEDURES FOR TENDERING HOW TO TENDER GENERALLY Only a holder of old notes may tender such old notes in the exchange offer. To tender in the exchange offer, a holder must either (1) comply with the procedures for physical tender or (2) comply with the automated tender offer program procedures of The Depository Trust Company, or DTC, described below. To complete a physical tender, a holder must do all of the following: o complete, sign and date the letter of transmittal or a facsimile of the letter of transmittal o have the signature on the letter of transmittal guaranteed if the letter of transmittal so requires o mail or deliver the letter of transmittal or facsimile to the exchange agent prior to the expiration date o deliver the old notes to the exchange agent prior to the expiration date or comply with the guaranteed delivery procedures described below To be tendered effectively, the exchange agent must receive any physical delivery of the letter of transmittal and other required documents at its address provided above under "Prospectus Summary--The Exchange Agent" prior to the expiration date. To complete a tender through DTC's automated tender offer program, the exchange agent must receive, prior to the expiration date, a timely confirmation of book-entry transfer of such old notes into the exchange agent's account at DTC according to the procedure for book-entry transfer described below or a properly transmitted agent's message. The tender by a holder that is not withdrawn prior to the expiration date and our acceptance of that tender will constitute an agreement between the holder and us in accordance with the terms and subject to the conditions described in this prospectus and in the letter of transmittal. THE METHOD OF DELIVERY OF OLD NOTES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT YOUR ELECTION AND RISK. RATHER THAN MAIL THESE ITEMS, WE RECOMMEND THAT YOU USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. YOU SHOULD NOT SEND THE LETTER OF TRANSMITTAL OR OLD NOTES TO US. YOU MAY REQUEST YOUR BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE TO EFFECT THE ABOVE TRANSACTIONS FOR YOU. HOW TO TENDER IF YOU ARE A BENEFICIAL OWNER If you beneficially own old notes that are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and you wish to tender those notes, you should contact the registered holder as soon as possible and instruct the registered holder to tender on your behalf. If you are a beneficial owner and wish to tender on your own behalf, you must, prior to completing and executing the letter of transmittal and delivering your old notes, do either of the following: o make appropriate arrangements to register ownership of the old notes in your name 58 o obtain a properly completed bond power from the registered holder of your old notes The transfer of registered ownership may take considerable time and may not be completed prior to the expiration date. SIGNATURES AND SIGNATURE GUARANTEES You must have signatures on a letter of transmittal or a notice of withdrawal described below guaranteed by an "eligible institution" unless the old notes are tendered: o by a registered holder who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on the letter of transmittal o for the account of an eligible institution An "eligible institution" is a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States, or an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, that is a member of one of the recognized signature guarantee programs identified in the letter of transmittal. WHEN ENDORSEMENTS OR BOND POWERS ARE NEEDED If a person other than the registered holder of any old notes signs the letter of transmittal, the old notes must be endorsed or accompanied by a properly completed bond power. The registered holder must sign the bond power as the registered holder's name appears on the old notes. An eligible institution must guarantee that signature. If the letter of transmittal or any old notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, those persons should so indicate when signing. Unless we waive this requirement, they also must submit evidence satisfactory to us of their authority to deliver the letter of transmittal. TENDERING THROUGH DTC'S AUTOMATED TENDER OFFER PROGRAM The exchange agent and DTC have confirmed that any financial institution that is a participant in DTC's system may use DTC's automated tender offer program to tender. Accordingly, participants in the program may, instead of physically completing and signing the letter of transmittal and delivering it to the exchange agent, transmit their acceptance of the exchange offer electronically. They may do so by causing DTC to transfer the old notes to the exchange agent in accordance with its procedures for transfer. DTC will then send an agent's message to the exchange agent. An "agent's message" is a message transmitted by DTC to and received by the exchange agent and forming part of the book-entry confirmation, stating that: o DTC has received an express acknowledgment from a participant in DTC's automated tender offer program that is tendering old notes that are the subject of such book-entry confirmation o the participant has received and agrees to be bound by the terms of the letter of transmittal or, in the case of an agent's message relating to guaranteed delivery, the participant has received and agrees to be bound by the applicable notice of guaranteed delivery o we may enforce the agreement against such participant DETERMINATIONS UNDER THE EXCHANGE OFFER We will determine in our sole discretion all questions as to the validity, form, eligibility, time of receipt, acceptance of tendered old notes and withdrawal of tendered old notes. Our determination will be final and binding. We reserve the absolute right to reject any old notes not properly tendered or any old notes our acceptance of which, in the opinion of our counsel, might be unlawful. We also reserve the right to waive any defects, irregularities or conditions of the exchange offer as to particular old notes. Our interpretation of the terms and conditions of the exchange offer, including the instructions in the letter of transmittal, will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of old notes must be cured within such time as we determine. Neither we, the exchange agent nor any other person will be under any duty to give notification of defects or irregularities with respect to tenders of old notes, nor will we or those persons incur any liability for failure to give such notification. Tenders of old notes will not be deemed made until such defects or 59 irregularities have been cured or waived. Any old notes received by the exchange agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned to the tendering holder, unless otherwise provided in the letter of transmittal, as soon as practicable following the expiration date. WHEN WE WILL ISSUE NEW NOTES In all cases, we will issue new notes for old notes that we have accepted for exchange in the exchange offer only after the exchange agent timely receives both of the following: o old notes or a timely book-entry confirmation of such old notes into the exchange agent's account at DTC o a properly completed and duly executed letter of transmittal and all other required documents or a properly transmitted agent's message RETURN OF OLD NOTES NOT ACCEPTED OR EXCHANGED If we do not accept any tendered old notes for exchange for any reason described in the terms and conditions of the exchange offer or if old notes are submitted for a greater principal amount than the holder desires to exchange, we will return the unaccepted or non-exchanged old notes without expense to their tendering holder. In the case of old notes tendered by book-entry transfer into the exchange agent's account at DTC according to the procedures described below, such non-exchanged old notes will be credited to an account maintained with DTC. These actions will occur as promptly as practicable after the expiration or termination of the exchange offer. YOUR REPRESENTATIONS TO US By signing or agreeing to be bound by the letter of transmittal, you will represent to us that, among other things: o any new note you receive will be acquired in the ordinary course of your business o you have no arrangement or understanding with any person to participate in the distribution of the new notes or the old notes within the meaning of the Securities Act o you are not our "affiliate," as defined in Rule 405 under the Securities Act or, if you are our affiliate, that you will comply with the applicable registration and prospectus delivery requirements of the Securities Act o if you are not a broker-dealer, you are not engaged in and do not intend to engage in the distribution of the new notes o if you are a broker-dealer that will receive new notes for your own account in exchange for old notes that you acquired as a result of market-making activities, you will deliver a prospectus in connection with any resale of such new notes BOOK-ENTRY TRANSFER The exchange agent will make a request to establish an account with respect to the old notes at DTC for purposes of the exchange offer promptly after the date of this prospectus. Any financial institution participating in DTC's system may make book-entry delivery of old notes by causing DTC to transfer such old notes into the exchange agent=s account at DTC in accordance with DTC's procedures for transfer. If you are unable to deliver confirmation of the book-entry tender of your old notes into the exchange agent's account at DTC or all other documents required by the letter of transmittal to the exchange agent on or prior to the expiration date, you must tender your old notes according to the guaranteed delivery procedures described below. GUARANTEED DELIVERY PROCEDURES If you wish to tender your old notes, but they are not immediately available or if you cannot deliver your old notes, the letter of transmittal or any other required documents to the exchange agent or comply with the applicable procedures under DTC's automated tender offer program prior to the expiration date, you may tender if: o the tender is made through a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States, or an eligible guarantor institution 60 o prior to the expiration date, the exchange agent receives from such member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., commercial bank or trust company having an office or correspondent in the United States, or eligible guarantor institution either a properly completed and duly executed notice of guaranteed delivery by facsimile transmission, mail or hand delivery or a properly transmitted agent's message and notice of guaranteed delivery: - stating your name and address, the registered number(s) of your old notes and the principal amount of old notes tendered - stating that the tender is being made thereby - guaranteeing that, within three New York Stock Exchange trading days after the expiration date, the letter of transmittal or facsimile thereof or agent's message in lieu thereof, together with the old notes or a book-entry confirmation, and any other documents required by the letter of transmittal will be deposited by the eligible guarantor institution with the exchange agent o the exchange agent receives such properly completed and executed letter of transmittal or facsimile or agent's message, as well as all tendered old notes in proper form for transfer or a book-entry confirmation, and all other documents required by the letter of transmittal, within three New York Stock Exchange trading days after the expiration date Upon request to the exchange agent, the exchange agent will send a notice of guaranteed delivery to you if you wish to tender your old notes according to the guaranteed delivery procedures described above. WITHDRAWAL OF TENDERS Except as otherwise provided in this prospectus, you may withdraw your tender at any time prior to 5:00 p.m., New York City time, on the expiration date. For a withdrawal to be effective, either of the following must occur: o the exchange agent must receive a written notice of withdrawal at one of the addresses listed above under "Prospectus Summary-The Exchange Agent" o the withdrawing holder must comply with the appropriate procedures of DTC's automated tender offer program Any notice of withdrawal must: o specify the name of the person who tendered the old notes to be withdrawn o identify the old notes to be withdrawn, including the registration number or numbers and the principal amount of such old notes o be signed by the person who tendered the old notes in the same manner as the original signature on the letter of transmittal used to deposit those old notes (or be accompanied by documents of transfer sufficient to permit the trustee to register the transfer into the name of the person withdrawing the tender) o specify the name in which such old notes are to be registered, if different from that of the person who tendered the old notes If old notes have been tendered under the procedure for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawn old notes and otherwise comply with the procedures of DTC. We will determine all questions as to the validity, form, eligibility and time of receipt of notice of withdrawal, and our determination shall be final and binding on all parties. We will deem any old notes so withdrawn not to have been validly tendered for exchange for purposes of the exchange offer. Any old notes that have been tendered for exchange but that are not exchanged for any reason will be returned to their holder without cost to the holder or, in the case of old notes tendered by book-entry transfer into the exchange agent's account at DTC according to the procedures described above, such old notes will be credited to an account maintained with DTC for the old 61 notes. This return or crediting will take place as soon as practicable after withdrawal, rejection of tender or termination of the exchange offer. You may retender properly withdrawn old notes by following one of the procedures described under "--Procedures for Tendering" above at any time on or prior to the expiration date. FEES AND EXPENSES We will bear the expenses of soliciting tenders. The principal solicitation is being made by mail; however, we may make additional solicitation by facsimile, email, telephone or in person by our officers and regular employees and those of our affiliates. We have not retained any dealer-manager in connection with the exchange offer and will not make any payments to broker-dealers or others soliciting acceptances of the exchange offer. We will, however, pay the exchange agent reasonable and customary fees for its services and reimburse it for its related reasonable out-of-pocket expenses. We may also pay brokerage houses and other custodians, nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding copies of this prospectus, letters of transmittal and related documents to the beneficial owners of the old notes and in handling or forwarding tenders for exchange. We will pay the cash expenses to be incurred in connection with the exchange offer. They include: o SEC registration fees o fees and expenses of the exchange agent and trustee o accounting and legal fees and printing costs o related fees and expenses TRANSFER TAXES If you tender your old notes for exchange, you will not be required to pay any transfer taxes. We will pay all transfer taxes, if any, applicable to the exchange of old notes in the exchange offer. The tendering holder will, however, be required to pay any transfer taxes, whether imposed on the registered holder or any other person, if any of the following are true: o certificates representing new notes or old notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be issued in the name of, any person other than the registered holder of old notes tendered o tendered old notes are registered in the name of any person other than the person signing the letter of transmittal o a transfer tax is imposed for any reason other than the exchange of old notes in the exchange offer If satisfactory evidence of payment of any transfer taxes payable by a note holder is not submitted with the letter of transmittal, the amount of such transfer taxes will be billed directly to that tendering holder. The exchange agent will retain possession of new notes with a face amount equal to the amount of the transfer taxes due until it receives payment of the taxes. CONSEQUENCES OF FAILURE TO EXCHANGE If you do not exchange your old notes for new notes in the exchange offer, you will remain subject to the existing restrictions on transfer of the old notes. In general, you may not offer or sell the old notes unless either they are registered under the Securities Act or the offer or sale is exempt from or not subject to registration under the Securities Act and applicable state securities laws. Except as required by the registration rights agreement, we do not intend to register resales of the old notes under the Securities Act. The tender of old notes in the exchange offer will reduce the principal amount of the old notes outstanding. The corresponding reduction in liquidity may have an adverse effect upon, and increase the volatility of, the market price of any old notes that you continue to hold. ACCOUNTING TREATMENT We will amortize our expenses of each exchange offer over the term of the new notes under generally accepted accounting principles. OTHER Participation in the exchange offer is voluntary, and you should carefully consider whether to accept. You are urged to consult your financial and tax advisors in making your decision on what action to take. 62 EXCHANGE AGENT We have appointed Wilmington Trust Company as exchange agent for the exchange offer. You should direct questions, requests for assistance, requests for additional copies of this prospectus or the letter of transmittal and requests for the notice of guaranteed delivery to the exchange agent. If you are not tendering under DTC's automated tender offer program, you should send the letter of transmittal and any other required documents to the exchange agent as follows: WILMINGTON TRUST COMPANY (302) 651-1562 BY MAIL (REGISTERED OR CERTIFIED MAIL RECOMMENDED): BY COURIER OR BY HAND: Wilmington Trust Company Wilmington Trust Company Rodney Square North Rodney Square North 1100 North Market Street 1105 North Market Street Wilmington, Delaware 19890-0001 Wilmington, Delaware 19890-0001 Attn: Corporate Trust Operations Attn: Corporate Trust Operations BY FACSIMILE TRANSMISSION (ELIGIBLE INSTITUTIONS ONLY): (302) 651-1079 Attn: Corporate Trust Administration CONFIRM BY TELEPHONE: (302) 651-1562 63 DESCRIPTION OF NEW NOTES GENERAL We will issue the new notes, and we have issued the old notes, pursuant to an indenture dated as of November 1, 1999 entered into by us, Pride, Maritima and Wilmington Trust Company, as Trustee. The form and terms of the new notes are the same as the form and terms of the old notes they will replace, except that, when the exchange offer is consummated, o we will have registered the new notes under the Securities Act of 1933 o the new notes generally will not be subject to transfer restrictions The new notes will be issued solely in exchange for an equal principal amount of old notes. As of the date of this prospectus, $53 million aggregate principal amount of 11 3/4% Senior Secured Notes are outstanding. See "The Exchange Offer." The old notes and the new notes will together constitute a single class of debt securities under the indenture. If the exchange offer is consummated, holders of old notes who do not exchange their old notes for new notes in the exchange offer will vote together with holders of new notes for all relevant purposes under the indenture. Accordingly, in determining whether the required holders have given any notice, consent or waiver or taken any other action permitted under the indenture, any old notes that remain outstanding after the exchange offer will be aggregated with the new notes, and the holders of the old notes and new notes will vote together as a single class. All references in this summary description to specified percentages in aggregate principal amount of the outstanding notes means, at any time after the exchange offer is consummated, the percentages in aggregate principal amount of the applicable old notes and new notes then outstanding. EXCEPT WHEN USED AS PART OF THE TERM "NEW NOTES" OR "OLD NOTES," THE TERM "NOTES" IN THIS SUMMARY DESCRIPTION REFERS TO THE OLD NOTES THAT WILL BE OUTSTANDING UNTIL THE EXCHANGE OFFER IS CONSUMMATED AND, AFTER GIVING EFFECT TO THE EXCHANGE OFFER, COLLECTIVELY TO THE OUTSTANDING NEW NOTES AND ANY REMAINING UNEXCHANGED OLD NOTES. We have summarized below selected material provisions of the indenture, the notes and the security documents. For a complete description, you should read the indenture, the security documents and the notes because such documents, and not this description, define your rights as holders of the notes. The Trustee will furnish you copies of the indenture, the security documents and the notes upon your request to its Corporate Trust Administration department by telephone at (302) 651-1000 or by mail at Wilmington Trust Company, Rodney Square North, 1100 N. Market Street, Wilmington, Delaware 19890, Attn: Corporate Trust Administration. Capitalized terms used herein and not otherwise defined have the meanings set forth below under "--Certain Definitions." Capitalized terms defined in this section have the definitions ascribed to them in this section for purposes of this section only. As used in this section, references to the "Company" exclude the Company's Subsidiaries. TERMS OF THE NOTES The notes mature on November 1, 2001 and are senior secured obligations of the Company. The notes bear interest at the rate per annum shown on the cover page hereof from the date of original issuance, or from the most recent date to which interest has been paid or provided for, payable semiannually to Holders of record at the close of business on the June 15 or December 15 immediately preceding the interest payment date on June 30 and December 30 of each year. Interest will also be payable on maturity to Holders of record as of October 15, 2001. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The new notes will be issued only in fully registered form, without coupons, in denominations of $1,000 and any integral multiple of $1,000. No service charge shall be made for any registration of transfer or exchange of notes, but the Company may require payment of a sum sufficient to cover any transfer tax or other similar governmental charge payable in connection therewith. The Company's Subsidiaries have no direct obligation to pay amounts due on the notes as of the date of this prospectus; however, if a Restricted Subsidiary guarantees any Indebtedness of the Company, such Restricted Subsidiary will be obligated to guarantee (a "Subsidiary Guarantee") the notes outstanding, if any. The Company's obligations to repay the notes have been guaranteed up to $30.0 million by Pride (the "Pride Guarantee"). The Pride Guarantee is on a senior unsecured basis and is pari passu with Pride's other senior unsecured debt. In addition, the 64 Company's obligation to repay the notes is also backed by a $23.0 million irrevocable standby letter of credit arranged by Maritima and issued by Republic National Bank of New York (the "Letter of Credit"). REDEMPTIONS REDEMPTION UPON LOSS OF A RIG If an Event of Loss occurs at any time with respect to a Mortgaged Rig, the Company shall redeem 50% of the notes (or 100% of the notes in the case of an Event of Loss with respect to both Mortgaged Rigs) on the earlier to occur of o 30 days after the receipt of the related Event of Loss Proceeds by the applicable Rig Owner; or o 180 days after the date on which such Event of Loss occurred, at a redemption price equal to 100% of their principal amount, plus accrued and unpaid interest (including Additional Amounts, if any), to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on an interest payment date that is on or prior to the redemption date). REDEMPTION UPON SALE OF A MORTGAGED RIG If a Mortgaged Rig or the Capital Stock of a Restricted Subsidiary then owning a Mortgaged Rig is sold in compliance with the terms of the Indenture, the Company shall redeem 50% of the notes (or 100% of the notes in the case of a sale of both Mortgaged Rigs or the Capital Stock of both Restricted Subsidiaries then owning Mortgaged Rigs) on the earlier to occur of (A) 30 days after the receipt of the Net Available Cash from such sale and (B) 60 days after the date of such sale, at a redemption price equal to 100% of their principal amount, plus accrued and unpaid interest (including Additional Amounts, if any), to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on an interest payment date that is on or prior to the redemption date), plus the Make-Whole Premium. In no event will the redemption price ever be less than 100% of the principal amount of the notes being redeemed plus accrued and unpaid interest (including Additional Amounts, if any) to the redemption date. The amount of the Make-Whole Premium with respect to any notes (or portion thereof) to be redeemed will be equal to the excess, if any, of o the sum of the present values, calculated as of the redemption date, of: (a) each interest payment that, but for such redemption, would have been payable on the notes (or portion thereof) being redeemed on each interest payment date occurring after the redemption date (excluding any accrued and unpaid interest for the period prior to the redemption date); and (b) the principal amount that, but for such redemption, would have been payable at the final maturity of the notes (or portion thereof) being redeemed; over o the principal amount of the notes (or portion thereof) being redeemed. The present values of interest and principal payments referred to in clause (a) above will be determined in accordance with generally accepted principles of financial analysis. Such present values will be calculated by discounting the amount of each payment of interest or principal from the date that each such payment would have been payable, but for the redemption, to the redemption date at a discount rate equal to the Treasury Rate (as defined below) plus 50 basis points. The Make-Whole Premium will be calculated by the Independent Investment Banker. For purposes of determining the Make-Whole Premium, the following definitions apply: o "Treasury Rate" is defined to mean, with respect to any redemption date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date. o "Comparable Treasury Issue" is defined to mean the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the weighted average maturity of the remaining term of the notes outstanding that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to such weighted average maturity of such Notes. "Independent Investment Banker" means the Reference Treasury Dealer appointed by the Trustee after consultation with the Company. 65 o "Comparable Treasury Price" is defined to mean, with respect to any redemption date, the average of the Reference Treasury Dealer Quotations for such redemption date. The "Reference Treasury Dealer Quotations" means, with respect to the Reference Treasury Dealer and any redemption date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by the Reference Treasury Dealer at 5:00 p.m. (New York City time) on the third business day preceding such redemption date. o "Reference Treasury Dealer" is defined to mean Donaldson, Lufkin & Jenrette Securities Corporation and its successors; provided, however, that if Donaldson, Lufkin & Jenrette Securities Corporation shall cease to be a primary U.S. Government securities dealer in New York City (a "Primary Treasury Dealer"), the Company shall substitute therefor another Primary Treasury Dealer. OTHER REDEMPTIONS The notes will be redeemable, at the Company's option, in whole or in part, at any time or from time to time, upon not less than 30 nor more than 60 days' prior notice mailed by first-class mail to each Holder's registered address, at a price equal to 100% of the principal amount thereof plus accrued and unpaid interest (including Additional Amounts, if any), to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on an interest payment date that is on or prior to the redemption date) plus the Make-Whole Premium. In no event will the redemption price ever be less than 100% of the principal amount of the notes being redeemed plus accrued and unpaid interest (including Additional Amounts, if any) to the redemption date. SELECTION OF NOTES FOR REDEMPTION In the case of any partial redemption provided for in "Other Redemptions," selection of the notes for redemption will be made by the Trustee on a pro rata basis, by lot or by such other method as the Trustee in its sole discretion shall deem to be fair and appropriate, although no note of $1,000 in then outstanding principal amount or less shall be redeemed in part. If any note is to be redeemed in part only, the notice of redemption relating to such note shall state the portion of the principal amount thereof to be redeemed. A replacement note in principal amount equal to the unredeemed portion thereof will be issued in the name of the holder thereof upon cancellation of the original note. Partial Redemptions provided for in "--Redemption Upon Loss of a Rig" and "--Redemption Upon Sale of a Mortgaged Rig" will be applied to all notes on a pro rata basis, although no note of $1,000 in then outstanding principal amount shall be redeemed in part. PAYMENT OF ADDITIONAL AMOUNTS AND REDEMPTION Except to the extent required by any applicable law, regulation or governmental policy, any and all payments of, or in respect of, any note shall be made free and clear of and without deduction for or on account of any and all present or future taxes, levies, imposts, deduction, charges or withholdings and all liabilities with respect thereto imposed by the British Virgin Islands, Brazil, the United States of America or any other jurisdiction with which the Company, Pride or any Subsidiary Guarantor has some connection (including any jurisdiction from or through which payments under the notes, the Pride Guarantee or the Subsidiary Guarantees (if any) are made or in which the Mortgaged Rigs are located) or any political subdivision of or any taxing authority in any such jurisdiction (collectively, "Taxes" and any such jurisdiction or political subdivision or taxing authority, a "Tax Jurisdiction"). If the Company, Pride or any Subsidiary Guarantor shall be required by law to withhold or deduct any Taxes, from or in respect of any sum payable under the notes, the Pride Guarantee or a Subsidiary Guarantee, the Company shall pay the amount ("Additional Amounts") necessary so that, after making all required withholdings and deductions, the Holder or beneficial owner of a note shall receive an amount equal to the sum that it would have received had not such withholdings and deductions been made; provided that any such sum shall not be paid to a Holder (an "Excluded Holder"): o in respect of any Taxes resulting from the beneficial owner of such note carrying on business or being deemed to carry on business in or through a permanent establishment or fixed base in the relevant taxing jurisdiction or having any other connection with the relevant taxing jurisdiction or any political subdivision thereof or any taxing authority therein other than the mere holding or owning of such note, being a beneficiary of the Pride Guarantee or any applicable Subsidiary Guarantee, the receipt of any income or payments in respect of such note, the Pride Guarantee or any applicable Subsidiary Guarantee or the enforcement of such note, the Pride Guarantee or any applicable Subsidiary Guarantee, o in respect of any Taxes that would not have been imposed but for the presentation (where presentation is required) of such note for payment more than 180 days after the date such payment became due and payable or was duly provided for, whichever occurs later, or 66 o in respect of U.S. federal income Taxes, if such Holder fails to provide to the Company, within 30 days of a request by the Company, a complete and valid IRS Form W-8 or other form establishing an exemption from U.S. withholding Taxes. The Company, Pride or the Subsidiary Guarantors, as applicable, will also: o make such withholding or deduction and o remit the full amount deducted or withheld to the relevant authority in accordance with applicable law, and, in any such case, the Company will furnish to each Holder on whose behalf an amount was so remitted, within 30 calendar days after the date the payment of any Taxes is due pursuant to applicable law, certified copies of tax receipts evidencing such payment by the Company, Pride or the Subsidiary Guarantors, as applicable. The Company will, upon written request of each Holder (other than an Excluded Holder), reimburse each such holder for the amount of: o any Taxes so levied or imposed and paid by such Holder as a result of payments made under or with respect to any Notes, and o any Taxes so levied or imposed with respect to any reimbursement under the foregoing clause so that the net amount received by such Holder (net of payments made under or with respect to such Notes, the Pride Guarantee or the applicable Subsidiary Guarantees) after such reimbursement will not be less than the net amount the Holder would have received if Taxes on such reimbursement had not been imposed. At least 30 calendar days prior to each date on which any payment under or with respect to the notes is due and payable, if the Company will be obligated to pay Additional Amounts with respect to such payment, the Company will deliver to the Trustee an Officer's Certificate stating the fact that such Additional Amounts will be payable and the amounts so payable and will set forth such other information necessary to enable the Trustee to pay such Additional Amounts to Holders on the payment date. If any Holder or beneficial owner of any note receives a refund of Taxes after the Company, Pride or any Subsidiary Guarantor has paid any Additional Amounts, such Holder or beneficial owner shall reimburse the Company, Pride or such Subsidiary Guarantor for any amount of such refund. At the date of this prospectus, no Taxes are imposed, and therefore no Additional Amounts would be payable in respect of such taxes, in respect of any sum payable by the Company as principal of, premium or interest on the notes. The notes may be redeemed, at the option of the Company, at any time as a whole but not in part, upon not less than 30 nor more than 60 days' prior notice, at a purchase price equal to 100% of the principal amount thereof plus accrued and unpaid interest thereon to the date of redemption and all Additional Amounts, if any, (subject to the right of the Holders of record on the relevant record date to receive interest due on the relevant payment date), in the event the Company has become or would become obligated to pay (and the Company cannot avoid such obligation by taking reasonable measures available to it), on the next date on which any amount would be payable with respect to the notes, any Additional Amounts as a result of a change in or an amendment to the laws (including any regulations promulgated thereunder) of a Tax Jurisdiction or any change in or amendment to any official position regarding the application or interpretation of such laws or regulations which change or amendment is announced or becomes effective on or after the issue date of the notes; provided, however, that such redemption shall be conditioned upon the Company being actually obligated to pay such Additional Amounts on the relevant payment date. Prior to the giving of the notice of redemption described in the preceding paragraph, the Company shall deliver to the Trustee an Officer's Certificate (together with a copy of an opinion of counsel independent of the Company to the effect that the Company will be or will become obligated to pay Additional Amounts), stating that the Company is entitled to effect such redemption in accordance with the terms set forth in the indenture and setting forth in reasonable detail a statement of the facts relating thereto. In addition, the Company will pay any present or future stamp, issue, registration, documentary or other similar taxes and duties, including interest and penalties, in respect of the creation, issue and offering of the notes payable in the United States, the British Virgin Islands, Brazil or any political subdivision thereof or taxing authority of or in the foregoing. The Company will also pay and indemnify the Trustee and the Holders from and against all court fees and taxes or other taxes and duties, including interest and penalties, paid by any of them in any jurisdiction in connection with any action permitted to be taken by the Holders or the Trustee to create Liens on the Collateral or to enforce the Obligations of the Company, Pride or the Subsidiary Guarantors under the notes, the indenture, the Pride Guarantee, the Subsidiary Guarantees, the Company Loans or the Security Documents. 67 Whenever there is mentioned, in any context, the payment of principal, premium or interest in respect of any note or the net proceeds received on the sale or exchange of any note, that mention shall be deemed to include the payment of Additional Amounts provided for in the indenture to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof pursuant to the indenture. THE SUBSIDIARY GUARANTEES If a Restricted Subsidiary is required to become a Subsidiary Guarantor, it will irrevocably and unconditionally guarantee on a joint and several, senior unsecured basis the Company's obligations for payment of the principal of, and premium, if any and interest (including Additional Amounts, if any) on the notes, the other Subsidiary Guarantors' obligations for payment of all sums of money payable under the Subsidiary Guarantees and/or the Company's and Subsidiary Guarantor's respective obligations under the Security Documents and performance of all other provisions contained in the indenture and the Security Documents (collectively, the "Obligations"). See "--Certain Covenants--Future Subsidiary Guarantees." Each Subsidiary Guarantee will be limited in amount to an amount not to exceed the maximum amount that can be guaranteed by the applicable Subsidiary Guarantor without rendering the applicable Subsidiary Guarantee voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally or otherwise being void, voidable or unenforceable under any bankruptcy, reorganization, insolvency, liquidation or other similar legislation or legal principles under any applicable foreign law. Each Subsidiary Guarantor that makes a payment or a distribution under its Subsidiary Guarantee shall be entitled to a contribution from each other Subsidiary Guarantor in a pro rata amount based upon the Adjusted Net Assets of each such other Subsidiary Guarantor. If a Subsidiary Guarantee were to be rendered voidable, it could be subordinated by a court to all other indebtedness, including guarantees and other contingent liabilities, of the applicable Subsidiary Guarantor, and, depending on the amount of such indebtedness, a Subsidiary Guarantor's liability on its Subsidiary Guarantee could be reduced to zero. Upon the sale or other disposition, by merger or otherwise, of all the Capital Stock of a Subsidiary Guarantor or the sale or disposition of all or substantially all the assets of a Subsidiary Guarantor (in each case other than to the Company or an Affiliate of the Company) permitted by the indenture and the redemption of notes as described under "--Redemptions--Redemptions upon Sale of a Mortgaged Rig" that Subsidiary Guarantor will be released and relieved from all its obligations under its Subsidiary Guarantee. Any Subsidiary Guarantee will be senior unsecured obligations of the Subsidiary Guarantors and will rank o pari passu in priority of payment with all other Indebtedness and other liabilities of such Subsidiary Guarantor that are not subordinated by their express terms to such Subsidiary Guarantee and o senior in priority of payment to all other Indebtedness of such Subsidiary Guarantor that by its terms is subordinated or junior in right of payment to such Subsidiary Guarantee. PRIDE GUARANTEE AND LETTER OF CREDIT The notes have the benefit of the Pride Guarantee and the Letter of Credit. Pursuant to the indenture, Pride has irrevocably and unconditionally guaranteed the due and punctual payment of the principal of, premium, if any, and interest on, and all other amounts payable under, the notes (including any Additional Amounts in respect thereof) when and as the same shall become due and payable, whether at stated maturity, by declaration of acceleration or otherwise, up to a maximum amount of $30.0 million. Pursuant to the indenture, Pride may not consolidate or merge with any Person, or sell, lease or otherwise dispose of all or substantially all of the assets of Pride and its Subsidiaries, taken as a whole, to any Person, unless (i) Pride is the continuing Person, or the surviving Person (if other than Pride) under any of the foregoing transactions expressly assumes the due and punctual payment and performance of Pride's covenants and obligations under the indenture, including the Pride Guarantee; and (ii) the surviving Person is a permitted successor to Pride under the indenture dated as of May 1, 1997, between Pride and The Chase Manhattan Bank, as amended and supplemented. The Pride Guarantee is a senior unsecured obligation of Pride and ranks o pari passu in priority of payment with all other Indebtedness and other liabilities of Pride that are not subordinated by their express terms to the Pride Guarantee and o senior in priority of payment to all other Indebtedness of Pride that by its terms is subordinated or junior in right of payment to the Pride Guarantee. 68 The Company's obligations to repay the notes also is backed by a $23.0 million irrevocable standby letter of credit issued by Republic National Bank of New York. The letter of credit may be drawn to make any payment due on the notes to the extent the Trustee has not received sufficient funds from the Company to make such payment. OTHER COLLATERAL In order to secure its obligations under the indenture, the notes and applicable Security Documents, the Company has pledged in favor of the Trustee a 53% undivided interest in all the Company Loans (together with a collateral assignment of all Liens securing such undivided interest). Neither the Company nor the Holders will share in the benefit of the Mitsubishi Floor Guarantee. In addition, as the principal of the Company Loans is amortized in accordance with the Mitsubishi Credit Facilities, all amounts received by the Company in respect of those principal and interest payments will be held in the Reserve Account for the benefit of the Holders, except that 47% of all such payments in respect of principal shall be released to the Company immediately upon receipt and any such payments in respect of interest not required to pay interest on the notes on the next succeeding interest payment date will also be released to the Company. RANKING The indebtedness evidenced by the notes is a senior secured obligation of the Company, ranks pari passu in right of payment with all existing and future indebtedness and other liabilities of the Company that are not expressly subordinated by their express terms to the notes and is senior in right of payment to all Indebtedness of the Company that is so subordinated. The notes are secured by Liens on a 53% undivided interest in the Company Loans (and a collateral assignment of the Liens securing such undivided interest) and on the other Collateral; thus, claims of the Holders will rank ahead of claims of creditors of the Company to the extent of the value, priority and validity of the Liens securing the notes in such Collateral. Claims of the Company under the Company Loans will rank pari passu with claims of the other creditors of the applicable Mortgaged Rig Owner holding indebtedness or other liabilities that are not expressly subordinated by their express terms to such Company Loans, but will rank ahead of such claims to the extent of the value, priority and validity of the Liens on the Collateral securing the Company Loans. Although the Company should be entitled to payment of the applicable Company Loan out of the proceeds of the Mortgaged Rig and the other Collateral prior to the Holders of any general unsecured obligations of the Mortgaged Rig Owner, any claim attributable to a Company Loan which is not paid out of the proceeds of the Mortgaged Rig and the other Collateral will be an unsecured senior obligation of the Mortgaged Rig Owner. To the extent that any Mortgaged Rig and the other Collateral has a value in excess of the Company Loan secured thereby, such additional value is not security for any obligations of the Mortgaged Rig Owner, the Company or a Subsidiary Guarantor. In the event that the assets and cash flow of the Mortgaged Rig Owner are insufficient to meet the obligations under the Company Loans, claims of the Company will be effectively subordinated to the claims of creditors (including trade creditors, tort claimants, taxing authorities and other creditors) of Subsidiaries. Although the indenture limits the incurrence of Indebtedness by the Company or any Restricted Subsidiary, that limitation is subject to a number of significant qualifications. Moreover, the indenture does not impose any limitation on the incurrence by the Company or its Restricted Subsidiaries of liabilities that are not considered Indebtedness under the indenture. Under certain circumstances, the Company will be able to designate additional Subsidiaries as Unrestricted Subsidiaries. Unrestricted Subsidiaries will not be subject to many of the restrictive covenants set forth in the indenture. CHANGE OF CONTROL Upon the occurrence of any of the following events (each a "Change of Control"), the Company shall make an offer to repurchase all outstanding notes at a purchase price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest and Additional Amounts, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest (including Additional Amounts, if any) due on the relevant interest payment date): (1) any "person" or "group" (as such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable) other than a Shareholder (or any Affiliate thereof) is or becomes the "beneficial owner" (as defined in Section 13(d) of the Exchange Act, except that a person will be deemed to have "beneficial ownership" of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 26.4% of the total voting power of the Voting Stock of the Company, PROVIDED, HOWEVER, for purposes of this clause (1) there shall not be a Change of Control with respect to Pride International, Inc.'s "beneficial ownership" of the Voting Stock of the Company unless o any "person" or "group" (as such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable) is or becomes the "beneficial owner" (as defined in Section 13(d) of the Exchange Act, 69 except that a person will be deemed to have "beneficial ownership" of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the total voting power of the Voting Stock of Pride International, Inc. and o within 25 days after the closing of any such transaction either Moody's or S&P lowers the credit ratings for any outstanding debt of Pride International, Inc., or in the event Pride International, Inc. has no outstanding rated debt, the ratings of Pride International, Inc.; (2) individuals who on the Issue Date constituted the board of directors of the Company (together with any new directors whose election by such board of directors or whose nomination for election by the shareholders of the Company was approved by a vote of 66 2/3 % of the directors of the Company, then still in office who were either directors on the Issue Date or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the board of directors of the Company then in office; (3) the adoption of a plan relating to the liquidation or dissolution of the Company; (4) the merger or consolidation of any Shareholder or the Company with or into another Person (other than in the case of a Shareholder, a Person controlled by a Permitted Holder) or the merger of another Person (other than in the case of a Shareholder, a Person controlled by a Permitted Holder) with or into any Shareholder or the Company, as the case may be, or the sale of all or substantially all the assets of any Shareholder or the Company to another Person (other than in the case of a Shareholder, a Person controlled by a Permitted Holder), and, in the case of any such merger or consolidation, the securities of such Shareholder or the Company, as the case may be, that are outstanding immediately prior to such transaction and which represent 100% of the aggregate voting power of the Voting Stock of such Shareholder or the Company, as the case may be, are changed into or exchanged for cash, securities or property, unless pursuant to such transaction such securities are changed into or exchanged for, in addition to any other consideration, securities of the surviving corporation that represent immediately after such transaction, at least a majority of the aggregate voting power of the Voting Stock of the surviving corporation; or (5) prior to any Public Equity Offering of the Company, Pride International, Inc. or a Qualified Substitute Owner ceases for any reason for more than 10 days to be the beneficial owner, directly or indirectly, of at least 26.4% of the total voting power of the Voting Stock of the Company. Within 30 days following any Change of Control, the Company (with a copy to the Trustee) or the Trustee shall mail a notice to each Holder stating among other things: (1) that a Change of Control has occurred and that such Holder has the right to require the Company to purchase such Holder's notes at a purchase price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest, and Additional Amounts, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest, and Additional Amounts, if any, on the relevant interest payment date); (2) the circumstances and relevant facts regarding that Change of Control (including information with respect to pro forma historical income, cash flow and capitalization after giving effect to that Change of Control); (3) the repurchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed); and (4) the instructions determined by the Company, consistent with the covenant described hereunder, that a Holder must follow in order to have its notes purchased. The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of notes pursuant to this covenant described hereunder. To the extent that the provisions of any securities laws or regulations conflict with the provisions of the covenant described hereunder, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the covenant described hereunder by virtue thereof. The Change of Control purchase feature is solely a result of negotiations between the Company and the initial purchaser of the old notes. The Company does not have any present intention to engage in a transaction involving a Change of Control, although it is possible that the Company could decide to do so in the future. Subject to the limitations discussed below, the Company could, in the future, enter into certain transactions, including acquisitions, refinancings or other recapitalizations, that would not constitute a Change of Control under the indenture, but that could increase the amount of Indebtedness outstanding at such time or otherwise affect the Company's capital structure or credit ratings. Restrictions on the ability of the Company and its 70 Restricted Subsidiaries to incur additional Indebtedness are contained in the covenants described under "--Certain Covenants--Limitation on Indebtedness," "--Limitation on Liens" and "--Limitation on Sale/Leaseback Transactions." Those restrictions can only be waived with the consent of the Holders of a majority in aggregate principal amount of the notes then outstanding. Those provisions may not necessarily afford the Holders protection in the event of a highly leveraged transaction, including a reorganization, restructuring, merger or other similar transaction involving the Company, that may adversely affect the Holders because such transactions may not involve a shift in voting power or beneficial ownership or, even if they do, may not involve a shift of the magnitude required under the definition of Change of Control to require the Company to make a Change of Control offer. In addition, the existence of the Holder's right to require the Company to repurchase such Holder's notes upon the occurrence of a Change of Control may or may not deter a third party from seeking to acquire the Company in a transaction that would constitute a Change of Control. The Company's ability to repurchase notes pursuant to a Change of Control offer may be limited by a number of factors. Future Indebtedness of the Company or its Restricted Subsidiaries may contain prohibitions on the occurrence of certain events that would constitute a Change of Control or require such Indebtedness to be repurchased upon a Change of Control. Moreover, the exercise by the Holders of their right to require the Company to repurchase the notes could cause a default under such Indebtedness, even if the Change of Control itself does not, due to the financial effect of such repurchase on the Company nd its Subsidiaries. There can be no assurance that sufficient funds will be available when necessary to make any required repurchases. In the event that a Change of Control offer occurs at a time when the Company does not have sufficient available funds to pay the purchase price for all notes validly tendered pursuant to such an offer, an Event of Default would occur under the Indenture. The failure by the Company to purchase tendered notes would constitute a breach of the Indenture which could, in turn, constitute a default under other Indebtedness and could lead to the acceleration of such other Indebtedness. One of the events that constitutes a Change of Control under the Indenture is a sale, conveyance, lease or transfer of all or substantially all of the assets of the Company. The Indenture is governed by New York law, and there is no established quantitative definition under New York law of "substantially all" of the assets of a corporation. Accordingly, if the Company were to engage in a transaction in which it disposed of less than all of the assets of the Company a question of interpretation could arise as to whether such disposition was of "substantially all" of its assets and whether the Company was required to make a Change of Control offer. CERTAIN COVENANTS LIMITATION ON INDEBTEDNESS (a) The Company will not, and will not permit any Restricted Subsidiary to, Incur, directly or indirectly, any Indebtedness; provided, however, that the Company may Incur Indebtedness if the Consolidated EBITDA Coverage Ratio at the date of such Incurrence and after giving effect thereto exceeds 2.25 to 1.0. (b) Notwithstanding paragraph (a), the following Indebtedness may be Incurred: (1) Indebtedness of the Company or a Restricted Subsidiary owed to and held by a Restricted Subsidiary or Indebtedness of a Restricted Subsidiary owed to and held by the Company; provided, however, that (a) any subsequent issuance or transfer of any Capital Stock that results in such Restricted Subsidiary to whom Indebtedness is owed ceasing to be a Restricted Subsidiary or any transfer of such Indebtedness (other than to the Company or another Restricted Subsidiary) shall be deemed, in each case, to constitute the Incurrence of such Indebtedness and (b) if the Company is the obligor on such Indebtedness, such Indebtedness is expressly subordinated to the prior payment in full in cash of all obligations with respect to the notes; (2) the old notes and the new notes; (3) the Company Loans, the Subsidiary Guarantees, if any, and Indebtedness incurred in exchange for, or the proceeds of which are used to Refinance any Indebtedness permitted by this clause (3); provided, however, that: o the principal amount of the Indebtedness so Incurred shall not exceed the principal amount of the Indebtedness so Refinanced (plus the amount of reasonable fees and expenses incurred in connection therewith, including any premium or defeasance costs) and o the Indebtedness so Incurred - shall not mature prior to the Stated Maturity of the Indebtedness so Refinanced and - shall have an Average Life equal to or greater than the remaining Average Life of the Indebtedness so Refinanced; 71 (4) Indebtedness of the Company or any Restricted Subsidiary (other than Indebtedness described in clause (1), (2) or (3) above) Outstanding on the Issue Date and Indebtedness Incurred in exchange for, or the proceeds of which are used to Refinance, any Indebtedness permitted by this clause (4) or permitted by clause (a) above; provided, however, that: o the principal amount of the Indebtedness so Incurred shall not exceed the principal amount of the Indebtedness Refinanced (plus the amount of reasonable fees and expenses incurred in connection therewith, including any premium or defeasance costs); and o the Indebtedness so Incurred - shall not mature prior to the Stated Maturity of the Indebtedness so Refinanced and - shall have an Average Life equal to or greater than the remaining Average Life of the Indebtedness so Refinanced; (5) Obligations of the Company or a Restricted Subsidiary under performance or surety bonds relating to building contracts for the construction, repair or improvement of drilling rigs, drillships or similar vessels or contracts for the installation of related equipment; (6) Hedging Obligations; (7) Indebtedness of the Company or any Restricted Subsidiary under the Mitsubishi Credit Facilities or the MARAD Documents; and (8) Indebtedness of the Company or any Restricted Subsidiary in an aggregate principal amount which, together with all other Indebtedness of the Company then outstanding (other than Indebtedness permitted by clauses (1) through (7) of this paragraph (b) or paragraph (a)) does not exceed $20.0 million. (c) Notwithstanding paragraphs (a) and (b), the Company shall not issue any Indebtedness if the proceeds thereof are used, directly or indirectly, to pay, prepay, redeem, defease, retire, refund or refinance any Subordinated Obligations unless such Indebtedness shall be subordinated to the notes to at least the same extent as such Subordinated Obligations. (d) For purposes of determining compliance with the foregoing covenant, in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described above, the Company, in its sole discretion, will classify such item of Indebtedness and only be required to include the amount and type of such Indebtedness in one of the above clauses and an item of Indebtedness may be divided and classified in more than one of the types of Indebtedness described above. LIMITATION ON INDEBTEDNESS OWED TO SHAREHOLDERS The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, Incur or permit to exist any Indebtedness of the Company or any Restricted Subsidiary owed to a Shareholder unless o such Indebtedness is subordinated to the notes, in the case of the Company, or the Company Loans, in the case of a Restricted Subsidiary, and o all payments of principal, premium, if any, and interest in respect of the notes or the Company Loans, as applicable, is required to be paid before any amounts shall be payable in respect of such Indebtedness and, prior to such time, the holder of such Indebtedness shall not have any claim against the Company or such Restricted Subsidiary in respect of such Indebtedness, provided that payments and prepayments under such Indebtedness may be made as Restricted Payments to the extent permitted by the covenant described under "--Certain Covenants--Limitation on Restricted Payments." LIMITATION ON LIENS The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, Incur or permit to exist any Lien of any nature whatsoever on any of its properties (including Capital Stock of a Restricted Subsidiary), whether owned at the Issue Date or thereafter acquired unless, in the case of property or assets not consisting of Collateral, contemporaneously therewith effective provision is made to secure the notes equally and ratably with (or prior to) the obligations so secured for so long as such obligations are so secured. 72 The foregoing restriction does not, however, apply to Permitted Liens. LIMITATION ON RESTRICTED PAYMENTS (a) The Company will not, and will not permit any Restricted Subsidiary, directly or indirectly, to make a Restricted Payment defined as: o declaring or paying any dividend or make any distribution on or in respect of its Capital Stock (including any payment in connection with any merger or consolidation involving the Company) or to the direct or indirect holders of its Capital Stock, except: - dividends or distributions payable solely in its Non-Convertible Capital Stock or in options, warrants or other rights to purchase its Non-Convertible Capital Stock, - dividends or distributions payable to the Company or a Restricted Subsidiary, and - pro rata dividends or distributions on the Capital Stock of a Restricted Subsidiary held by minority stockholders; o purchasing, redeeming or otherwise acquiring or retiring for value any Capital Stock of the Company or of any direct or indirect parent of the Company, or any Restricted Subsidiary (except Capital Stock held by the Company or a Restricted Subsidiary); o purchasing, repurchasing, redeeming, defeasing or otherwise acquiring or retiring for value, prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment, any Subordinated Obligation (other than the purchase, repurchase or other acquisition of Subordinated Obligations purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of acquisition); or o making any Investment other than a Permitted Investment. If at the time the Company or such Restricted Subsidiary makes such Restricted Payment: (1) a Default shall have occurred and be continuing (or would result therefrom); or (2) the Company would not be permitted to Incur an additional $1.00 of Indebtedness pursuant to paragraph (a) under "--Limitation on Indebtedness" after giving pro forma effect to such Restricted Payment; or (3) the aggregate amount of such Restricted Payment and all other Restricted Payments since the Issue Date would exceed the sum of: (A) 50% of the Consolidated Net Income accrued during the period (treated as one accounting period) from the beginning of the fiscal quarter during which the notes were originally issued to the end of the most recent fiscal quarter ending at least 45 days prior to the date of such Restricted Payment (or, in case such Consolidated Net Income shall be a deficit, minus 100% of such deficit); (B) 100% of the aggregate net proceeds (including the fair market value of non-cash proceeds, which shall be determined in good faith by the Board of Directors of the Company) received by the Company from the issue or sale of its Capital Stock (other than Redeemable Stock or Exchangeable Stock) subsequent to the Issue Date (other than an issuance or sale to a Restricted Subsidiary or an employee stock ownership plan or similar trust); (C) the amount by which Indebtedness of the Company is reduced on the Company's balance sheet upon the conversion or exchange (other than by a Restricted Subsidiary) subsequent to the Incurrence of any Indebtedness of the Company convertible or exchangeable for Capital Stock (other than Redeemable Stock or Exchangeable Stock) of the Company (less the amount of any cash, or other property, distributed by the Company upon such conversion or exchange); and (D) to the extent not otherwise included in Consolidated Net Income, the net reduction in Investments in Unrestricted Subsidiaries resulting from dividends, repayments of loan or advances, or other transfers of assets, in each case to the Company or any Restricted Subsidiary after the Issue Date from any Unrestricted Subsidiary or from the redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary (valued in each case as provided in the 73 definition of Investment), not to exceed in the case of any Restricted Subsidiary the total amount of Investments (other than Permitted Investments) in such Restricted Subsidiary made by the Company and its Restricted Subsidiaries in such Unrestricted Subsidiary after the Issue Date. (b) The provisions of Section (a) shall not prohibit: (1) any purchase or redemption of Capital Stock or Subordinated Obligations of the Company made by exchange for, or out of the proceeds of the substantially concurrent sale of, Capital Stock of the Company (other than Redeemable Stock or Exchangeable Stock and other Capital Stock issued or sold to a Restricted Subsidiary or an employee stock ownership plan); provided, however, that o such purchase or redemption shall be excluded in the calculation of the amount of Restricted Payments and o the Net Cash Proceeds from such sale shall be excluded from clauses (3)(B) and (3)(C) of Section (a); (2) any purchase or redemption of Subordinated Obligations of the Company made by exchange for, or out of the proceeds of the substantially concurrent sale of, Indebtedness of the Company which is permitted to be issued pursuant to the provision of "--Limitation on Indebtedness" above; provided, however, that such purchase or redemption shall be excluded in the calculation of the amount of Restricted Payments; and (3) dividends paid within 60 days after the date of declaration if at such date of declaration such dividend would have complied with this provision; provided, however, that at the time of payment of such dividend, no other Default shall have occurred and be continuing (or would result therefrom); provided further, however, that such dividend shall be included in the calculation of the amount of Restricted Payments (unless already included in determining the amount of Restricted Payments previously made upon the declaration of such dividend). LIMITATION ON SALE/LEASEBACK TRANSACTIONS The Company will not, and will not permit any Restricted Subsidiary to, enter into any Sale/Leaseback Transaction with any Person (other than the Company or a Restricted Subsidiary) unless: o the Company or such Restricted Subsidiary would be entitled to incur Indebtedness, in a principal amount equal to the Attributable Indebtedness with respect to such Sale/Leaseback Transaction, secured by a Lien on the property subject to such Sale/Leaseback Transaction pursuant to the covenant described under "Limitation on Liens" above without equally and ratably securing the notes pursuant to such covenant; o the net proceeds received by the Company or any Restricted Subsidiary in connection with such Sale/Leaseback Transaction are at least equal to the fair value (as determined by the Board of Directors) of such property; and o the Company applies the proceeds of such transaction in compliance with the covenant described under "--Limitation on Asset Sales." Notwithstanding the foregoing, the Company shall not, and shall not permit any Restricted Subsidiary to, enter into or otherwise become liable with respect to any Sale/Leaseback Transaction involving any Restricted Collateral. LIMITATIONS ON MERGERS AND CONSOLIDATIONS Neither the Company nor any Subsidiary Guarantor (other than any Subsidiary Guarantor that shall have been released from its Subsidiary Guarantee pursuant to the provisions of the Indenture) will consolidate with or merge into any Person, continue in another jurisdiction, or sell, lease, convey, transfer or otherwise dispose of all or substantially all of its assets to any Person, unless: (1) the Person formed by or surviving such consolidation or merger (if other than the Company or such Subsidiary Guarantor, as the case may be), or to which such sale, lease, conveyance, transfer or other disposition shall be made (collectively, the "Successor"), is a corporation organized and existing under the laws of the Bahamas, the British Virgin Islands or Panama (such jurisdiction of organization, the "Relevant Jurisdiction") and the Successor assumes by supplemental indenture in a form satisfactory to the Trustee all of the applicable Obligations of the Company or such Subsidiary Guarantor, as the case may be, under the Indenture, the Subsidiary Guarantees, the notes and the Security Documents; (2) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; 74 (3) in the case of the Company, immediately after giving effect to such transactions, the resulting, surviving or transferee Person would be able to incur at least $1.00 of Indebtedness pursuant to paragraph (a) of the "Limitation on Indebtedness" covenant; (4) immediately after giving effect to such transaction, the Successor shall have Consolidated Net Worth in an amount that is not less than the Consolidated Net Worth of the Company or Subsidiary Guarantor, as the case may be, immediately prior to such transaction; (5) the Company shall have delivered to the Trustee an Officer's Certificate and an opinion of counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with the Indenture; (6) the Company shall have delivered to the Trustee an opinion of counsel to the effect that the Holders will not recognize income, gain or loss for U.S. Federal income tax purposes as a result of such transaction and will be subject to U.S. Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such transaction had not occurred; and (7) an opinion of counsel in the Relevant Jurisdiction to the effect that any payment of interest, principal or premium (if any) on the notes by the Company to a Holder or by a Subsidiary Guarantor on its Subsidiary Guarantee, as applicable, will, after the consolidation, merger, conveyance, transfer or lease of assets, be exempt from withholding tax in the Relevant Jurisdiction and no other taxes on income (including taxable capital gains) will be payable under the law of the Relevant Jurisdiction by a Holder who is or who is deemed to be a non-resident of the Relevant Jurisdiction in respect of the acquisition, ownership or disposition of the notes, including the receipt of interest, principal or premium thereon. The Successor shall be the successor to the Company or the Subsidiary Guarantor, as the case may be, and shall succeed to, and be substituted for, and may exercise every right and power of, the Company or the Subsidiary Guarantor, as the case may be, under the Indenture, but the predecessor in the case of a conveyance, transfer or lease shall not be released from the obligation to pay the principal of and interest on the notes. SEC REPORTS Notwithstanding that the Company may not be required to remain subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company shall file with the SEC and provide the Trustee and Holders with such annual reports and such information, documents and other reports specified in Sections 13 and 15(d) of the Exchange Act. In addition, whether or not required by the rules and regulations of the Commission, the Company will file a copy of all such information and reports with the Commission for public availability (unless the Commission will not accept such filing). In addition, the Company shall furnish to the Holders and to prospective investors, upon the requests of such Holders, any information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act so long as there are notes outstanding which are not freely transferable under the Securities Act. LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED SUBSIDIARIES The Company shall not, and shall not permit any Restricted Subsidiary to, create or otherwise cause or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to o pay dividends or make any other distributions, in cash or otherwise, on its Capital Stock to the Company or any Restricted Subsidiary or pay any Indebtedness owed to the Company or any Restricted Subsidiary, o make any loans or advances to the Company or any Restricted Subsidiary or o transfer any of its property or assets to the Company or any Restricted Subsidiary, except: (1) any encumbrance or restriction pursuant to an agreement in effect or entered into on the Issue Date; (2) any encumbrance or restriction with respect to a Restricted Subsidiary pursuant to an agreement relating to any Acquired Indebtedness or Preferred Stock Incurred by such Restricted Subsidiary on or prior to the date on which such Restricted Subsidiary became a Restricted Subsidiary or was acquired by the Company (other than Indebtedness or Preferred Stock Incurred as consideration in, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was acquired by the Company or other Incurred in anticipation of such acquisition) and outstanding on such date; 75 (3) any encumbrance or restriction relating to any assets acquired after the Issue Date, so long as such encumbrance or restriction relates only to the assets so acquired and is not or was not created in anticipation of such acquisition; (4) any encumbrance or restriction pursuant to an agreement affecting a Refinancing of Indebtedness or Preferred Stock Incurred pursuant to an agreement referred to in clause (1), (2) or (3) of this covenant or this clause (4) or contained in any amendment to an agreement referred to in clause (1), (2) or (3) of this covenant or this clause (4); provided, however, that the encumbrances and restrictions with respect to such Restricted Subsidiary contained in any such refinancing agreement or amendment are in the aggregate no less favorable to the Holders than the encumbrances and restrictions with respect to such Restricted Subsidiary contained in such predecessor agreements; (5) any such encumbrance or restriction consisting of customary nonassignment provisions in leases governing leasehold interests or in license agreements to the extent such provisions restrict the assignment of such agreement and any rights granted or property leased thereunder; (6) in the case of clause (3) above, restrictions contained in security agreements or mortgages securing Indebtedness of a Restricted Subsidiary to the extent such restrictions restrict the transfer of the property subject to such security agreements or mortgages; and (7) any temporary encumbrance or restriction with respect to a Restricted Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all the Common Stock or assets of such Restricted Subsidiary pending the closing of such sale or disposition. LIMITATION ON ASSET SALES The Company shall not, and shall not permit any Restricted Subsidiary to, sell, assign, convey, transfer or otherwise dispose of a Mortgaged Rig or any other portion of the Collateral (other than an Incidental Asset or Temporary Cash Investments in the Reserve Account and other than a transfer of a Mortgaged Rig to a Wholly Owned Restricted Subsidiary that becomes a Subsidiary Guarantor); provided, however, that the Company or a Restricted Subsidiary may sell a Mortgaged Rig or the Company may sell all the Capital Stock of a Subsidiary owning a Mortgaged Rig (any such asset proposed to be sold is referred to herein as a "Mortgaged Rig Asset") if such sale of a Mortgaged Rig Asset shall be made in compliance with each of the following conditions: (1) no Default shall have occurred and be continuing; (2) the sale shall be effected in a commercially reasonable manner as determined by the Board of Directors and evidenced by a board resolution; (3) the entire consideration for such sale shall be at least equal to the fair market value of the Mortgaged Rig Asset (as determined in good faith by the Company's Board of Directors); (4) at least 85% of the consideration received should be in the form of cash or Temporary Cash Equivalents; and (5) the Company shall have complied with the other provisions of the Indenture applicable to such sale. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, engage in any Asset Sales (other than Asset Sales permitted by the preceding paragraph and foreclosures, deeds-in-lieu of foreclosure or similar transactions) unless the Company or the applicable Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the fair market value of the assets sold or otherwise disposed of (as determined in good faith by the Company's Board of Directors), and at least 85% of the consideration received by the Company or the Restricted Subsidiary, as the case may be, from such Asset Sale at the time of such disposition shall be in the form of cash or Temporary Cash Equivalents. If the Company or a Restricted Subsidiary engages in an Asset Sale in compliance with the previous sentence or a foreclosure, deed-in-lieu-of-foreclosure or similar transaction, then the Company shall or shall cause a Restricted Subsidiary to apply an amount equal to such excess Net Available Cash within 360 days of the Asset Sale either o to repay Senior Indebtedness of the Company or of a Restricted Subsidiary (other than in each case Indebtedness owed to an Affiliate of the Company), o to invest in Additional Assets or o deposit (no later than the end of such 360-day period) such excess Net Available Cash (to the extent not applied pursuant to the preceding clauses) into the Reserve Account. 76 Pending application of Net Available Cash pursuant to this covenant, such Net Available Cash shall be invested in Permitted Investments or to temporarily reduce Indebtedness. LIMITATION ON ASSET SWAPS The Company will not, and will not permit any Restricted Subsidiary to, engage in any Asset Swaps, unless: o at the time of entering into the agreement with respect thereto and immediately after giving effect to the proposed Asset Swap, no Default shall have occurred and be continuing; o the aggregate fair market values of the Additional Assets and other consideration to be received by the Company or the applicable Restricted Subsidiary is, at the time the Asset Swap is agreed to, substantially equal to the aggregate fair market value of the property being disposed of by the Company or the applicable Restricted Subsidiary (to be determined in good faith by the Board of Directors of the Company and to be evidenced by a resolution of such Board set forth in an Officer's Certificate delivered to the Trustee); and o the cash payments, if any, received by the Company or such Restricted Subsidiary in connection with that Asset Swap are treated as Net Available Cash received from an Asset Sale. LIMITATION ON AFFILIATE TRANSACTIONS The Company shall not, and shall not permit any Restricted Subsidiary to, enter into any transaction (including the purchase, sale, lease or exchange of any property, employee compensation arrangements or the rendering of any service) with any Affiliate of the Company (an "Affiliate Transaction") unless the terms thereof: o are no less favorable to the Company or such Restricted Subsidiary than those that could be obtained at the time of such transaction in arm's-length dealings with a Person who is not such an Affiliate; o for Affiliate Transactions involving an amount in excess of $500,000, are set forth in writing and have been approved by a majority of the members of the Board of Directors of the Company having no personal stake in such Affiliate Transaction; and o for Affiliate Transaction involving an amount in excess of $10.0 million, have been determined by an investment banking firm of national reputation or, in the case of the sale or transfer of assets subject to valuation, an appropriate independent qualified appraiser of national reputation, given the size and nature of the transaction, to be fair, from a financial standpoint, to the Company and its Restricted Subsidiaries. The provisions of the preceding paragraph shall not prohibit: o any Restricted Payment permitted to be paid pursuant to the covenant described under "--Limitation on Restricted Payments," o any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements of the Company, stock options, stock ownership and other employee benefit plans approved by the Board of Directors of the Company, o the grant of stock options or similar rights to employees, officers and directors of the Company pursuant to plans approved by its Board of Directors, o the payment of reasonable fees to directors of the Company and in Restricted Subsidiaries who are not employees of the Company or its Restricted Subsidiaries, o any Affiliate Transaction between the Company and a Wholly Owned Restricted Subsidiary or between Wholly Owned Restricted Subsidiaries, o the arrangements and transactions provided for in the Service Agreements and other agreements described under "Certain Relationships and Related Transactions" as in effect on the Issue Date and 77 o transactions pursuant to agreements in effect on the Issue Date and disclosed in the Offering Memorandum pursuant to which the old notes were originally sold (all of which are disclosed in this prospectus). LIMITATION ON THE SALE OR ISSUANCE OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES The Company shall not sell or otherwise dispose of any Capital Stock of a Restricted Subsidiary, and shall not permit any such Restricted Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of any of its Capital Stock except: o to the Company or a Wholly Owned Restricted Subsidiary, o if, immediately after giving effect to such issuance, sale or other disposition, neither the Company nor any of its Subsidiaries owns any Capital Stock of such Restricted Subsidiary, o directors' qualifying shares or o other than with respect to shares of Capital Stock of a Restricted Subsidiary which owns a Mortgaged Rig, if, immediately after giving effect to such issuance, sale or other disposition, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary and any Investment in such Person remaining after giving effect thereto would have been permitted to be made under the covenant described under "--Limitation on Restricted Payments" if made on the date of such issuance, sale or other disposition. FUTURE SUBSIDIARY GUARANTORS The Indenture provides that the Company may not permit any Restricted Subsidiary, directly or indirectly, to guarantee any Indebtedness of the Company ("Guaranteed Indebtedness") or any other Obligor unless: o such Restricted Subsidiary simultaneously executes and delivers a supplemental indenture to the Indenture providing for a Subsidiary Guarantee of payment of the notes by that Restricted Subsidiary and o such Restricted Subsidiary waives and will not in any manner whatsoever claim or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against the Company or any other Restricted Subsidiary as a result of any payment by such Restricted Subsidiary under its Subsidiary Guarantee. IMPAIRMENT OF LIENS The Company shall not, and the Company shall not permit any Restricted Subsidiary to, take or omit to take, any action which action or omission might or would have the result of materially impairing the security interest with respect to the Collateral for the benefit of the Trustee and the Holders, and except as permitted by the indenture and the Security Documents, the Company shall not, and shall not permit any Restricted Subsidiary to, grant to any Person other than the Trustee, for the benefit of the Trustee and the Holders, any interest whatsoever in any of the Collateral. INSURANCE The Company shall, or shall cause the Mortgaged Rig Owner owning a Mortgaged Rig to, carry and maintain with respect to each Mortgaged Rig owned by it insurance payable in United States Dollars in amounts, against risks and in a form which is substantially equivalent to the coverage carried by other responsible and experienced companies engaged in the operation of drilling rigs similar to the Mortgaged Rigs and with insurance companies, underwriters, funds, mutual insurance associations or clubs of recognized standing. Total property insurance for the Mortgaged Rigs shall be in an aggregate amount not less than the sum of the aggregate outstanding principal amount, subject to customary deductibles, retentions or self-insurance, of the notes and other obligations under the indenture. AMENDMENTS TO SECURITY DOCUMENTS The Company shall not, and the Company shall not permit any of its Restricted Subsidiaries to, amend, modify or supplement, or permit or consent to any amendment, modification or supplement of, the Security Documents in any way that would be adverse to the Holders of the relevant notes. SEPARATE CORPORATE ENTITIES The Company shall, and shall cause each of its Subsidiaries to, and each Shareholder shall, conduct its business in its own name so as to avoid the appearance of conducting its business on behalf of any other Person or that the assets of the Company or any such Subsidiaries or any Shareholder (the "Applicable Entities") are available to pay the creditors of any of the other Applicable Entities. Without limiting the generality of the foregoing, Each Applicable Entity shall: 78 o maintain corporate records and books of account separate from those of the other Applicable Entities; o shall comply with its constitutive documents, including by obtaining proper authorization from its board of directors of all corporate action requiring such authorization and holding meetings of its board of directors as required by its constitutive documents; o refrain from paying the operating expenses and liabilities of other Applicable Entities except to the extent such funds have been contributed as equity or constitute loans and, in each case, documented appropriately; o maintain an arm's length relationship with the other Applicable Entities and shall not hold itself out as being liable for the debts of the other Applicable Entities; and o keep its assets and its liabilities wholly separate from the other Applicable Entities except that operating assets may be pooled in the ordinary course of the Applicable Entity's drilling business. The indenture, the Subsidiary Guarantees or the Security Documents or any permitted Indebtedness or permitted Lien under the Indenture shall not be considered violations of the above-listed provisions. The Company shall cause each Unrestricted Subsidiary to provide in any Indebtedness Incurred by such Unrestricted Subsidiary that the holder of such Indebtedness will not have any recourse to the Company or any of its Restricted Subsidiaries with respect to such Indebtedness. DEFAULTS An Event of Default is defined in the Indenture as: (1) a default in the payment of interest (including Additional Amounts, if any) on the notes or a Company Loan when due, continued for 30 days; (2) a default in the payment of principal of, or premium, if any, on any note or Company Loan when due at its Stated Maturity, upon redemption, required repurchase, declaration of acceleration or otherwise, or the failure to redeem or purchase notes or the Company Loans when required pursuant to the Indenture or the Mitsubishi Loan Agreements; (3) the failure by the Company to comply with its obligations under "--Certain Covenants--Limitation on Mergers and Consolidations," "--Redemptions--Redemption upon Loss of a Mortgaged Rig," and "--Redemptions--Redemption upon Sale of a Mortgaged Rig" or in the covenants described above under "--Change of Control" or "--Certain Covenants--Limitation on Asset Sales;" (4) the failure by the Company and the Subsidiary Guarantors to comply with its other agreements contained in the Indenture or in the Security Documents and such failure or event of default continues for 60 days after notice; (5) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the date of the Indenture, which default o is caused by a failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default unless being contested in good faith by appropriate proceedings (a "Payment Default"), o results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $10.0 million or more or o occurs under the Mitsubishi Credit Facilities or the Mitsubishi Loan Collateral Documents, is not a Payment Default and is not cured or waived within 120 days; 79 (6) failure by the Company or any of its Restricted Subsidiaries to pay final judgments aggregating in excess of $10.0 million, which judgments are not paid, discharged or stayed for a period of 30 days; (7) certain events of bankruptcy or insolvency with respect to the Company, Pride or any of the Company's Significant Subsidiaries or group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements for the Company and its Subsidiaries), would constitute a Significant Subsidiary; (8) any Subsidiary Guarantee ceases to be in full force and effect (other than in accordance with the terms of the Indenture and such Subsidiary Guarantee) or a Subsidiary Guarantor denies or disaffirms its obligations under its Subsidiary Guarantee; or (9) the Pride Guarantee ceases to be in full force and effect (other than in accordance with the terms of the Indenture) or Pride denies or disaffirms its obligations under the Pride Guarantee; (10) the Letter of Credit ceases to be in full force and effect or the issuer thereof denies or disaffirms its obligations under the Letter of Credit; or (11) the Liens under the Security Documents shall, at any time, cease to be in full force and effect for any reason (other than by operation of the provisions of the Indenture and the Security Documents) other than the satisfaction in full of all obligations under the Indenture and discharge of the Indenture, or any Lien created thereunder shall be declared invalid or unenforceable or the Company or any Mortgaged Rig Owner shall assert, in any pleading in any court of competent jurisdiction, that any such lien is invalid or unenforceable. However, a default under clauses (4) and (5) will not constitute an Event of Default until the Trustee provides a written notice to the Company, or the Holders of 25% in aggregate principal amount of any notes outstanding pursuant to the Indenture provide a written notice to the Company and the Trustee, of the default and, in the case of a default under clause (4), the Company does not cure such default within the time specified after receipt of such notice. If an Event of Default occurs and is continuing with respect to the Indenture (other than certain events of bankruptcy, insolvency, or reorganization), the Trustee or the Holders of not less than 25% in principal amount of any notes outstanding pursuant to the Indenture may declare the principal of and premium, if any, and accrued but unpaid interest (including Additional Amounts, if any) on all the notes to be due and payable. Upon such a declaration, such principal, premium, if any, and interest (including Additional Amounts, if any) will be due and payable immediately. If an Event of Default relating to certain event of bankruptcy, insolvency or reorganization occurs and is continuing, the principal of and premium, if any, and interest (including Additional Amounts, if any) on the notes will become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holders. The amount due and payable on the acceleration of any note will be equal to 100% of the principal amount of that note, plus accrued and unpaid interest (including Additional Amounts, if any) to the date of payment. Under certain circumstances, the Holders of a majority in principal amount of all outstanding notes pursuant to the Indenture may rescind any such acceleration with respect to the notes and its consequences. A Holder of a note may pursue any remedy under the Indenture only if: o the Trustee has received written notice of a continuing Event of Default; o the Trustee has received a request from Holders of at least 25% in principal amount of notes to pursue that remedy, o the Trustee has been offered indemnity reasonably satisfactory to it and o the Trustee has failed to act for a period of 60 days after receipt of such notice and offer of indemnity; however, such provision does not affect the right of a Holder of a note to sue for enforcement of any overdue payment thereon. Subject to certain restrictions, the Holders of a majority in aggregate principal amount of the outstanding notes are given the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to follow any direction that conflicts with law or the indenture or that the Trustee determines is unduly prejudicial to the rights of any other Holder or that would involve the Trustee in personal liability. Subject to the provisions of the indenture relating to the duties of the Trustee in case an Event of Default occurs and is continuing, the Trustee will be under no obligation to exercise any of the rights or powers under the 80 indenture at the request or direction of any of the Holders unless such Holders have offered to the Trustee reasonable indemnity or security against any loss, liability or expense. The indenture provides that if a Default occurs and is continuing and is known to the Trustee, the Trustee must mail to each Holder notice of the Default within 90 days after it occurs. Except in the case of a Default in the payment of principal of or interest on any note, the Trustee may withhold notice if and so long as a committee of its trust officers determines that withholding notice is not opposed to the interest of the Holders. In addition, the Company is required to deliver to the Trustee, within 120 days after the end of each fiscal year, a certificate indicating whether the signers thereof know of any Default that occurred during the previous year. The Company also is required to deliver to the Trustee, within five Business Days after the occurrence thereof, written notice of any event which would constitute a Default or an Event of Default, its status and what action the Company is taking or proposes to take in respect thereof. AMENDMENTS AND WAIVERS Subject to certain exceptions, the Company and the Trustee may amend the indenture and the Security Documents with the consent of the Holders of a majority in aggregate principal amount of the notes then outstanding (including consents obtained in connection with a tender offer or exchange for the notes) and any past Default or Event of Default or compliance with any provisions may also be waived with the consent of the Holders of a majority in aggregate principal amount of the notes then outstanding. However, without the consent of each Holder of an outstanding note affected thereby, no amendment may, among other things, (1) reduce the amount of notes whose Holders must consent to an amendment, (2) reduce the rate of or extend the time for payment of interest on any note or any Company Loan, (3) reduce the principal of or extend the Stated Maturity of any note or any Company Loan, (4) modify the obligations of Company to make mandatory redemptions or otherwise reduce the premium payable upon the redemption of any note or change the time at which any note may be or is required to be redeemed as described under "--Redemptions" above, (5) modify the obligations of Pride to make payments under the Pride Guarantee or modify the obligations of the issuer of the Letter of Credit under the Letter of Credit, (6) make any note payable in money other than that stated in the note, (7) impair the right of any Holder to receive payment of principal of and interest on such Holder's notes on or after the due date therefor or to institute suit for the enforcement of any payment on or with respect to such Holder's notes, (8) make any change in the amendment provisions which require each Holder's consent or in the waiver provisions, (9) make any change in any Security Document or the Mitsubishi Credit Facilities (in the case of the Mitsubishi Documents, if the Company has the right to consent to any such change) that would materially adversely affect the Holders or terminate the Lien of the Indenture or any Security Document (other than in accordance with the terms thereof) on any property at any time subject thereto or deprive the Holder of the security afforded by the Lien of the Indenture or the Security Documents or the Company of the Liens securing the Company Loans. Without the consent of any Holder, the Company and Trustee may amend the indenture and the Security Documents to cure any ambiguity, omission, defect or inconsistency, to provide for the assumption by a successor corporation of the obligations of the Company under the indenture, the Mitsubishi Credit Facilities and the Security Documents, to provide for uncertificated notes in addition to or in place of certificated notes (provided that the uncertificated notes are issued in registered form for purposes of Section 163(f) of the Code, or in a manner such that the uncertificated notes are described in Section 163(f)(2)(B) of the Code), to add additional guarantees with respect to the notes, to provide additional security for the notes, to add to the covenants of the Company for the benefit of a Holder or to surrender any right or power conferred upon the Company, to make any change that does not adversely affect the rights of any Holder of the notes or to comply with any requirement of the SEC in connection with the qualification of the indenture under the Trust Indenture Act. The consent of the Holders is not necessary under the indenture to approve the particular form of any proposed amendment. It is sufficient if such consent approves the substance of the proposed amendment. After an amendment under the indenture or the Security Documents becomes effective, the Company is required to mail to Holders a notice briefly describing such amendment. However, the failure to give such notice to all Holders, or any defect therein, will not impair or affect the validity of the amendment. 81 ABILITY TO REALIZE ON COLLATERAL The proceeds resulting from the enforcement of remedies available to the Holders, including the remedies afforded by the Pride Guarantee and the Letter of Credit, and the sale of the Collateral in whole pursuant to the Indenture, the Mitsubishi Credit Facilities and the Security Documents (including accumulated cash and cash equivalents from payments received by the collateral agent under the Mitsubishi Credit Facilities), following an Event of Default under the indenture will be shared by the Holders and also, in case of the Mitsubishi Loan Collateral Documents, by the other lenders under the Mitsubishi Credit Facilities. Such proceeds may not be in an amount that will be sufficient to repay the notes in full. In addition, the ability of the Holder to realize upon the Collateral may be limited in the event of a bankruptcy or Insolvency or pursuant to applicable laws, including securities laws. The Company's portion of the Mitsubishi Credit Facilities will be the principal source of payment of interest on, and the principal collateral for, the notes. The Company will own less than a majority of the loans outstanding under the Mitsubishi Credit Facilities. The remainder of the loans under the Mitsubishi Credit Facilities are currently held by affiliates of the Mitsubishi Corporation. The majority lenders have the right to control determinations to be made by the lenders under the Mitsubishi Credit Facilities. Accordingly, Mitsubishi, as the majority lender, will have the exclusive right to amend the Mitsubishi Documents, waive borrower defaults under the Mitsubishi Credit Facilities, declare an event of default under the Mitsubishi Credit Facilities and direct the enforcement of rights against the borrowers. The Mitsubishi Credit Facilities only permit lenders to assign their rights under the Mitsubishi Credit Facilities to a first class international bank incorporated in an OECD country or a person approved by an affiliate of Mitsubishi Corporation, which approval will not be unreasonably withheld. This provision restricts the Company's ability to transfer its portion of the Mitsubishi Credit Facilities and limits the collateral agent's ability to transfer the Company Loans if there is an Event of Default and foreclosure under the notes. If an Event of Default occurs and is continuing and the Company Loans and the notes become payable in full, the Trustee, on behalf of the Holders, in addition to any other rights or remedies available to it under the Indenture and the Security Documents, may take such action as it deems advisable to protect and enforce its rights in the Collateral, including the institution of sale or foreclosure proceedings. The proceeds received by the Trustee from any such sale or foreclosure will be applied by the Trustee first to pay the expenses of such sale or foreclosure and fees and other amounts then payable to the Trustee under the indenture, and thereafter to pay amounts due and payable with respect to the notes. The right of the Trustee and/or the Company to repossess and, dispose of the Collateral upon acceleration of the notes and/or the Company Loans is likely to be significantly impaired by applicable bankruptcy or insolvency law if a bankruptcy or insolvency proceeding were to be commenced by or against a Mortgaged Rig Owner, the Company or any Subsidiary Guarantor prior to or possibly even after such Trustee has repossessed and disposed of the Collateral. Under the United States Bankruptcy Code, to the extent applicable, a secured creditor such as the Trustee is prohibited from repossessing its security from a debtor in a bankruptcy case, or from disposing of security repossessed from such debtor, without bankruptcy court approval. Moreover, applicable U.S. bankruptcy law generally permits the debtor to continue to retain and to use collateral (and the proceeds, products, offspring, rents or profits of such collateral) even though the debtor is in default under the applicable debt instruments, provided generally that the secured creditor is given "adequate protection." The meaning of the term "adequate protection" may vary according to circumstances, but it is intended in general to protect the value of the secured creditor's interest in the collateral and may include, if approved by the court, cash payments or the granting of additional or replacement security for any diminution in the value of the collateral as a result of the stay of repossession or disposition or any use of the collateral by the debtor during the pendency of the bankruptcy case. In view of the lack of a precise definition of the term "adequate protection" and the broad discretionary powers of a bankruptcy court, it is impossible to predict how long payments under the notes, the Mitsubishi Credit Facilities or any Subsidiary Guarantees could be delayed following commencement of a bankruptcy case, whether or when the Trustee would repossess or dispose of the Collateral or whether or to what extent Holders would be compensated for any delay in payment or loss of value of the Collateral through the requirements of "adequate protection." Furthermore, in the event that the bankruptcy court determines that the value of the Collateral is not sufficient to repay all amounts due on the Company Loans or the notes, the Company or Holders, as applicable, would have "undersecured claims." Applicable U.S. bankruptcy laws do not permit the payment and/or accrual of interest, costs and attorneys' fees for "undersecured claims" during the debtor's bankruptcy case. DEFEASANCE The Company at any time may terminate all its obligations under the notes, the Indenture and the Security Documents ("legal defeasance"), except for certain obligations, including those respecting the defeasance trust and obligations, to register the transfer or exchange of the notes, to replace mutilated, destroyed, lost or stolen notes and to maintain a registrar and paying agent in respect of the notes and except for its optional redemption rights. The Company at any time may terminate its mandatory redemption and repurchase obligations under "--Redemptions," "--Change of Control" and under the covenants described under "--Certain Covenants" (other than the covenant described under "--Limitation on Mergers and Consolidations"), the operation of the cross acceleration provision, the bankruptcy provisions with respect to Significant Subsidiaries and the judgment default provision described under "--Defaults" above and the limitations contained in clause (3) of the first paragraph under, and the second paragraph under "--Certain Covenants--Limitation on Mergers and Consolidations" above ("covenant defeasance"). 82 The Company may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option. If the Company exercises its legal defeasance option, payment of the notes may not be accelerated because of an Event of Default with respect thereto. If the Company exercises its covenant defeasance option, payment of the notes may not be accelerated because of an Event of Default specified in clause (3) (other than the covenant described under "--Limitation on Mergers and Consolidations") or (5) under "--Defaults" above or because of the failure of the Company to comply with clause (3) of the first paragraph under, and the second paragraph under "--Certain Covenants-Limitation on Mergers and Consolidations" above. If the Company exercises its legal defeasance option, the Company and each Subsidiary Guarantor will be released from all its obligations with respect to the Subsidiary Guarantees and the Security Documents, as applicable. In order to exercise either defeasance option, the Company must irrevocably deposit in trust (the "defeasance trust") with the Trustee money or U.S. Government Obligations for the payment of principal, premium, if any, and interest (including Additional Amounts, if any) on the notes to redemption or maturity, as the case may be, and must comply with certain other conditions, including delivery to the Trustee of an opinion of counsel to the effect that Holders will not recognize income, gain or loss for federal income tax purposes as a result of such deposit and defeasance and will be subject to federal income tax on the same amounts and in the same manner and at the same time as would have been the case if such deposit and defeasance had not occurred (and, in the case of legal defeasance only, such opinion of counsel must be based on a ruling of the Internal Revenue Service or other change in applicable federal income tax law). CONCERNING THE TRUSTEE Wilmington Trust Company is the Trustee under the Indenture and the collateral agent under certain Security Documents and has been appointed by the Company as registrar and paying agent with regard to the notes. The Holders of a majority in aggregate principal amount of the outstanding notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. The Indenture provides that if an Event of Default occurs (and is not cured), the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent Person in the conduct of its own affairs. Subject to those provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request of any Holder, unless that Holder shall have offered to the Trustee, security and indemnity satisfactory to it against any loss, liability or expense and then only to the extent required by the terms of the Indenture. GOVERNING LAW The Indenture provides that the Indenture and the notes are governed by, and construed in accordance with the laws of the State of New York without giving effect to applicable principles of conflicts of law, except to the extent that the application of the law of another jurisdiction would be required thereby. The Mitsubishi Credit Facilities and the Mitsubishi Loan Collateral Documents are governed by English law. CONSENT TO JURISDICTION AND SERVICE Pursuant to the Indenture, each of the Company, Pride, Maritima and each Subsidiary Guarantor has appointed CT Corporation System, New York, New York as its Agent for actions brought under federal or state securities laws brought in any federal or state court located in the Borough of Manhattan in the City of New York and will submit to such jurisdiction. ENFORCEABILITY OF JUDGMENTS Since all the operating assets of the Company and its Subsidiaries are outside the United States, any judgment obtained in the United States against the Company, a Mortgaged Rig Owner or a Subsidiary Guarantor, including judgments with respect to the payment of principal, interest, Additional Amounts, redemption price and any purchase price with respect to the notes, may not be collectible within the United States. British Virgin Islands counsel, Dancia Penn & Co, has advised that, in such counsel's opinion, the laws of the British Virgin Islands applicable therein permit an action to be brought in a court of competent jurisdiction in the British Virgin Islands on a final and conclusive judgment in personam of a United States federal court or in a New York Court, respecting the enforcement of the notes or the Indenture (including the Security Documents), that is not impeachable as void or voidable under the laws of the State of New York and that is for a sum certain in money if 83 o the New York Court that rendered such judgment has jurisdiction over the judgment debtor, as recognized by the courts of the British Virgin Islands and in accordance with the conflict of laws rules of the British Virgin Islands (and submission by the Company in the indenture to the jurisdiction of the New York Court will be sufficient for this purpose); o such judgment was not obtained by fraud or in a manner contrary to natural justice and the enforcement thereof would not be inconsistent with public policy, as such term is understood under the laws of the British Virgin Islands applicable therein; o the enforcement of such judgment does not constitute, directly or indirectly, the enforcement of foreign revenue, expropriator, public or penal laws; o no new admissible evidence relevant to the action is discovered prior to the rendering of judgment by the court in the British Virgin Islands; and o the action to enforce such judgment is commenced within six years after the date of such judgment. In addition, such counsel has advised that a final and conclusive judgment for a definite sum of money obtained against the Company or its Subsidiaries in the courts of England and/or the Bahamas in respect of any of the Mitsubishi Documents that is governed by English or Bahamian law, as applicable, may be registered and enforced as a judgment of the High Court of the British Virgin Islands if application is made within twelve months of the date of the judgment (or such longer period as the High Court may allow) and if the High Court considers it just and convenient that the judgment be so enforced or, in the alternative, such judgment may be treated as a separate cause of action and may be sued upon in the High Court of the British Virgin Islands within six years of the date of the judgment without re-examination or re-litigation of the matters adjudicated upon so that no retrial of such matters would be necessary, provided, in each case, that o the English court or Bahamian court, as applicable, had jurisdiction in the matter and the judgment debtor either submitted to such jurisdiction or was a resident or carrying on business within such jurisdiction and was duly served with process, o the judgment given by the English court or Bahamian court, as applicable, was not in respect of penalties, fines, taxes or similar fiscal or revenue obligations of the Company or its Subsidiaries, o recognition or enforcement of such judgment in the British Virgin Islands does not contravene British Virgin Islands public policy, o the judgment was not obtained by fraud, o the judgment is not inconsistent with a British Virgin Islands judgment in respect of the same matter and o the proceedings pursuant to which the judgment was obtained were not contrary to the principles of natural justice. The courts of the British Virgin Islands may refuse to enforce obligations or liabilities on any of the parties incorporated under the laws of the British Virgin Islands otherwise than for payment of money by way of such equitable remedies as injunction or specific performance. Bahamian counsel, Higgs & Johnson, has advised that, in such counsel's opinion, the laws of the Bahamas (where the first priority ship mortgages will be registered) applicable therein permit an action to be brought in a court of competent jurisdiction in the Bahamas on a final and conclusive judgment in personam of a United States federal court or a court of the State of New York sitting in the Borough of Manhattan in The City of New York (the "New York Court") in respect of the enforcement of the notes or the Indenture (including the Security Documents) that is not impeachable as void or voidable under the laws of the State of New York, or of a superior court of the United Kingdom in respect of any of the Mitsubishi Documents that are governed by English law that is not impeachable as void or voidable under the laws of England, or of a superior court of the British Virgin Islands that is not impeachable as void or voidable under the laws of the British Virgin Islands, and that, in each case, is for a sum certain in money if: 84 o the New York Court, English court or British Virgin Islands court that rendered such judgment has jurisdiction over the judgment debtor, as recognized by the courts of the Bahamas and in accordance with the conflict of laws rules of the Bahamas (and submission by the Company in the Indenture to the jurisdiction of the New York Court or by the Company or its Subsidiaries in the Mitsubishi Documents to the English court will be sufficient for this purpose); o such judgment was not obtained by fraud or in a manner contrary to natural justice and the enforcement thereof would not be inconsistent with public policy, as such term is understood under the laws of the Bahamas applicable therein; o the enforcement of such judgment does not constitute, directly or indirectly, the enforcement of foreign revenue, expropriator, public or penal laws; o no new admissible evidence relevant to the action is discovered prior to the rendering of judgment by the court in the Bahamas; and o the action to enforce such judgment is commenced within six years after the date of such judgment. Brazilian counsel, Pinheiro Neto - Advogados (Rio de Janeiro), has advised that, in such counsel's opinion, any judgment of a non-Brazilian court will be enforceable in the courts of Brazil if previously confirmed by the Federal Supreme Court of Brazil, without reconsideration of the merits, and such confirmation is only given if such judgment o fulfills all formalities required for its enforceability under the laws of the country where it was issued; o is issued by a competent court after service of process in the relevant action was made personally on the Brazilian party, or on a properly appointed agent for service for process; o is not subject to appeal; o is authenticated by a Brazilian Consulate in the country in which it was issued and is accompanied by a public sworn translation into Portuguese; and o does not offend Brazilian national sovereignty, public policy or morality. In addition, the ability of a judgment creditor to satisfy a judgment by attaching certain assets located in Brazil is limited by Brazilian law. A plaintiff (whether Brazilian or non-Brazilian) who resides outside of Brazil during the course of litigation in Brazil must provide a bond to guarantee court costs and legal fees if the plaintiff owns no real property in Brazil that would ensure such payment except if the plaintiff is seeking to enforce foreign judgments that have been fully confirmed by the Brazilian Federal Supreme Court. This bond must have a value sufficient to satisfy the payment of court fees and the defendant's attorneys' fees, as determined by the Brazilian judge. CERTAIN DEFINITIONS The following is a summary of certain defined terms to be used in the Indenture. Reference is made to the Indenture for the full definition of all these terms and for the definitions of other capitalized terms used in this description of the notes and not defined below. "Acquired Indebtedness" means, with respect to any specified Person: (1) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, whether or not such Indebtedness is incurred in connection with, or in contemplation of, such other Person merging with or into, or becoming a Subsidiary of such specified Person; and (2) Indebtedness secured by a lien encumbering any asset acquired by such specified Person. 85 "Additional Assets" means (i) any property or assets (other than Indebtedness and Capital Stock) in a Related Business; (ii) the Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or another Restricted Subsidiary or (iii) Capital Stock constituting a minority interest in any Person that at such time is a Restricted Subsidiary; provided, however, that any such Restricted Subsidiary described in clause (ii) or (iii) above is primarily engaged in a Related Business. "Adjusted Net Assets" of a Subsidiary Guarantor at any date means the amount by which the fair value of the assets and property of such Subsidiary Guarantor exceeds the total amount of liabilities, including, without limitation, contingent liabilities (after giving affect to all other fixed and contingent liabilities incurred or assumed on such date), but excluding liabilities under its Subsidiary Guarantee, of such Subsidiary Guarantor at such date. "Affiliate" of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purpose of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of Voting Stock, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing; provided, however, that "Affiliate" shall also mean any beneficial owner of Capital Stock representing 5% or more of the total voting power of the Voting Stock (on a fully diluted basis) of such a Person or of rights or warrants to purchase such Capital Stock (whether or not currently exercisable) and any Person who would be an Affiliate of any such beneficial owner pursuant to the first sentence hereof. "Asset Sale" means any direct or indirect sale, capital leases, transfer or other disposition (or series of related sales, capital leases, transfers or dispositions) by the Company or any Restricted Subsidiary, including any disposition by means of a merger, consolidation or similar transaction (each referred to for the purposes of this definition as a "disposition") in one transaction or a series of related transactions, of (i) any shares of Capital Stock of a Restricted Subsidiary (other than directors' qualifying shares or shares required by applicable law to be held by a Person other than the Company or a Restricted Subsidiary), (ii) any drillship or drilling rig or all or substantially all the assets of any division or line of business of the Company or any Restricted Subsidiary or (iii) any other assets of the Company or any Restricted Subsidiary outside of the ordinary course of business of the Company or such Restricted Subsidiary (other than, in the case of (i), (ii) and (iii) above, (u) a disposition by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Wholly Owned Restricted Subsidiary, (v) for purposes of the covenant described under "--Certain Covenants--Limitation on Asset Sales" only, a disposition that constitutes a Restricted Payment permitted by the covenant described under "--Certain Covenants-Limitation on Restricted Payments," (w) Asset Swaps permitted under "--Certain Covenants-Limitation on Asset Swaps," (x) dispositions of Incidental Assets, (y) dispositions of Temporary Cash Investments and (z) a disposition of assets with a fair market value of less than $100,000). "Asset Swap" means a substantially concurrent purchase and sale, or exchange, of assets constituting Additional Assets described in clause (i) of the definition thereof between the Company or any Restricted Subsidiary and another Person or group of Persons; provided, however, that the cash and other assets to be received by the Company or such Restricted Subsidiary which do not constitute Additional Assets do not constitute more than 25% of the total consideration to be received by the Company or such Restricted Subsidiary in such Asset Swap. "Attributable Indebtedness," when used with respect to any Sale/Leaseback Transaction, means, as at the time of determination, the present value (discounted at the rate set forth or implicit in the terms of the lease included in such transaction) of the total obligations of the lessee for rental payments (other than amounts required to be paid on account of property taxes, maintenance, repairs, insurance, assessments, utilities, operating and labor costs and other items which do not constitute payments for property rights) during the remaining term of the lease included in such Sale/Leaseback Transaction (including any period for which such lease has been extended). "Average Life" means, as of the date of determination, with respect to any indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum of the products of numbers of years from the date of determination to the dates of each successive scheduled principal payment of such Indebtedness or redemption or similar payment with respect to such Preferred Stock multiplied by the amount of such payment by (ii) the sum of all such payments. "Board of Directors" means the Board of Directors of a Person or any committee thereof duly authorized to act on behalf of such Board. "Business Day" means each day which is not a Legal Holiday. "Capitalized Lease Obligation" of any Person means any obligation of such Person to pay rent or other amounts under a lease of property, real or person, that is required to be capitalized for financial reporting purposes in accordance with generally 86 accepted accounting principles and the amount of such obligation shall be the capitalized amount thereof determined in accordance with GAAP. "Capital Stock" means, with respect to any Person, any and all shares, interests, rights to purchase, warrants or options (whether or not currently exercisable), participations or other equivalents of or interests in (however designated) the equity (which includes, but is not limited to, common stock, preferred stock and partnership and joint venture interests) of such Person (excluding any debt securities that are convertible into, or exchangeable for, such equity). "Code" means the Internal Revenue Code of 1986, as amended. "Collateral" means all the collateral subject to the Security Documents. "Company Loans" means loans under the Mitsubishi Credit Facilities purchased by the Company. "Consolidated EBITDA Coverage Ratio" as of any date of determination means the ratio of (a) the aggregate amount of EBITDA for the period of the most recent four consecutive fiscal quarters ending at least 45 days prior to the date of such determination to (b) Consolidated Interest Expense for such four fiscal quarters; provided, however, that: (1) If the Company or any Restricted Subsidiary has incurred any Indebtedness since the beginning of such period that remains outstanding or if the transaction giving rise to the need to calculate the Consolidated EBITDA Coverage Ratio is an issuance of Indebtedness, or both, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been issued on the first day of such period and the discharge of any other Indebtedness repaid, repurchased, defeased or otherwise discharged with the proceeds of such new Indebtedness as if such discharge had occurred on the first day of such period, (2) if since the beginning of such period the Company or any Restricted Subsidiary shall have made any asset disposition, the EBITDA for such period shall be reduced by an amount equal to the EBITDA (if positive) directly attributable to the assets which are the subject of such asset disposition for such period, or increased by an amount equal to the EBITDA (if negative), directly attributable thereto for such period, and Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased, defeased of otherwise discharged with respect to the Company and its continuing Subsidiaries in connection with such asset dispositions for such period (or, if the Capital Stock of any Restricted Subsidiary is sold, the Consolidated Interest Expense for such period directly attributable to the Indebtedness of such Restricted Subsidiary to the extent the Company and its continuing Subsidiaries are no longer liable for such Indebtedness after such sale), (3) if since the beginning of such period the Company or any Restricted Subsidiary (by merger or otherwise) shall have made an Investment in any Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary) or an acquisition of assets, including any acquisition of assets occurring in connection with a transaction causing a calculation to be made hereunder, which constitutes all or substantially all of an operating unit of a business (which shall include the acquisition or construction of a vessel or drilling rig, provided the Company has paid 75% or more of the cost thereof and such vessel or drilling rig is reasonably expected to be delivered within 90 days), EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto (including the issuance of any Indebtedness) as if such Investment or acquisition occurred on the first day of such period, and (4) if since the beginning of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such period) shall have made any asset disposition or any Investment that would have required an adjustment pursuant to clause (2) or (3) above if made by the Company or a Restricted Subsidiary during such period, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto as if such asset disposition or Investment occurred on the first day of such period. For purposes of this definition, whenever pro forma effect is to be given to an acquisition of assets, the amount of income or earnings relating thereto, and the amount of Consolidated Interest Expense associated with any Indebtedness issued in connection therewith, the pro forma calculations shall be determined in good faith by a responsible financial or accounting officer of the Company. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest of such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Interest Rate Protection Agreement applicable to such Indebtedness if such Interest Rate Protection Agreement has a remaining term in excess of 12 months). 87 For purposes of this definition, in the case of the acquisition since the beginning of such period of a drilling rig or drillship (or of a Restricted Subsidiary owning same) by the Company or by a Restricted Subsidiary pursuant to a binding purchase agreement or the delivery at the beginning of such period of a drilling rig or drillship to the Company or a Restricted Subsidiary pursuant to a binding construction contract, which drilling rig or drillship has been subject for at least one full fiscal quarter to a binding drilling contract constituting a Qualifying Contract, then, for purposes of making the pro forma calculations provided for in the first sentence of the preceding paragraph, the financial or accounting officer of the Company shall give pro forma effect to the earnings (losses) of such drilling rig or drillship as if such drilling rig or drillship were acquired on the first day of such period, by basing such earnings (losses) on the annualized (x) historical revenues actually earned from such Qualifying Contract and (y) actual expenses related thereto, in each case for each quarter during such period in which the Qualifying Contract is in effect. "Consolidated Interest Expense" means, for any period, the total interest expense of the Company and its consolidated Restricted Subsidiaries, plus, to the extent not included in such interest expenses: (1) interest expense attributable to Capitalized Lease Obligations, (2) amortization of debt discount and debt issuance cost, (3) capitalized interest, (4) non-cash interest payments, (5) commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing, (6) net costs under Interest Rate Protection Agreements (including amortization of fees), (7) dividends in respect of any Redeemable Stock held by Persons other than the Company or a Restricted Subsidiary, (8) interest expense attributable to deferred payment obligations, and (9) interest expense on Indebtedness of another Person to the extent that such Indebtedness is guaranteed by the Company or a Restricted Subsidiary. "Consolidated Net Income" means, for any period, the net income of the Company and its consolidated subsidiaries; provided, however, that there shall not be included in such Consolidated Net Income: (a) any net income of any Person if such Person is not a Restricted Subsidiary, except that (1) the Company's equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Company or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution to a Restricted Subsidiary, to the limitations contained in clause (c) below) and (2) the Company's equity in a net loss of any such Person for such period shall be included in determining such Consolidated Net Income; (b) any net income of any Person acquired by the Company or a Restricted Subsidiary in a pooling of interests transaction for any period prior to the date of such acquisition; (c) any net income of any Restricted Subsidiary to the extent such Restricted Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Restricted Subsidiary, directly or indirectly, to the Company, except that (1) the net income of a Restricted Subsidiary shall be included to the extent such net income could be paid to the Company or a Restricted Subsidiary by loans, advances, intercompany transfers, principal repayments or otherwise; (2) the Company's equity in the net income of any such Restricted Subsidiary for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Restricted Subsidiary during such period to the Company or another Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution to another Restricted Subsidiary, to the limitation contained in this clause) and (3) the Company's equity in a net loss of any such Restricted Subsidiary for such period shall be included in determining such Consolidated Net Income; (d) any gain (but not loss) realized upon the sale or other disposition of any property, plant or equipment of the Company or its consolidated subsidiaries (including pursuant to any sale/leaseback arrangement) which is not sold or otherwise disposed of in the ordinary course of business and any gain (but not loss) realized upon the sale or other disposition of any Capital Stock of any Person; 88 (e) extraordinary, unusual or nonrecurring charges; and (f) the cumulative effect of a change in accounting principles. "Consolidated Net Worth" of a Person means the consolidated stockholders' equity of such Person and its Subsidiaries, as determined in accordance with GAAP. "Default" means any act, event or condition which is, or after notice or passage of time or both would be, an Event of Default. "EBITDA" for any period means the Consolidated Net Income for such period, plus the following (but without duplication) to the extent deducted in calculating such Consolidated Net Income for such period: (a) income tax expense, (b) Consolidated Interest Expense, (c) depreciation expense and (d) amortization expense. "Event of Loss" is defined to mean any of the following events: (i) the actual loss of a Mortgaged Rig; (ii) the agreed, arranged or constructive total loss of a Mortgaged Rig; (iii) requisition for title or other compulsory acquisition of title of a Mortgaged Rig by any governmental or other competent authority, agency or instrumentality otherwise than by requisition for hire; or (iv) capture, seizure, arrest, detention or confiscation of a Mortgaged Rig by any government or person acting or purporting to act on behalf of any government unless such Mortgaged Rig is released and restored to the Mortgaged Rig Owner from such capture, seizure, arrest or detention within six months after the occurrence thereof or such other period as may be specified in the insurance policies taken out or entered into in respect of the Mortgaged Rig. "Event of Loss Proceeds" is defined to mean all compensation, damages and other payments (including insurance proceeds) received by the Mortgaged Rig Owner, the Company, any Restricted Subsidiary, the Security Agent under the Mitsubishi Loan Collateral Documents or the Trustee, jointly or severally, from any Person, including any governmental authority, with respect to or in connection with an Event of Loss. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchangeable Stock" means any Capital Stock which is exchangeable or convertible into another security (other than Capital Stock of the Company which is neither Exchangeable nor Redeemable Stock). "GAAP" means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States, as in effect from time to time. "guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any other Person and any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of such Indebtedness or other obligation of such other Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take-or-pay or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, however, that the term "guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "guarantee" used as a verb has a corresponding meaning. The term "guarantor" shall mean any Person guaranteeing any obligation. "Hedging Obligations" of any Person means the net obligation (not the notional amount) of such Person pursuant to any interest rate swap agreement, foreign currency exchange agreement, interest rate collar agreement, option or futures contract or other similar agreement or arrangement relating to interest rates or foreign exchange rates. "Holder" or "Noteholder" means the Person in whose name an old note or a new note is registered on the Registrar's books. 89 "Incidental Asset" is defined to mean any equipment, outfit, furniture, furnishings, appliances, spare or replacement parts or stores owned by the Company or a Restricted Subsidiary that have become obsolete or unfit for use or no longer useful, necessary or profitable in the conduct of the business of the Company or such Restricted Subsidiary, as the case may be. In no event shall the term "Incidental Asset" include a drilling rig or a drillship or a Mortgaged Rig. "Incur" means issue, assume, guarantee, incur or otherwise become liable for; provided, however, that any Indebtedness or Capital Stock of a Person existing at the time such Person becomes a Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when used as a noun shall have a correlative meaning. "Indebtedness" of any Person at any date means, without duplication: (1) all indebtedness of such Person for borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof), (2) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (3) all obligations of such Person in respect of letters of credit or other similar instruments (or reimbursement obligations with respect thereto), other than standby letters of credit and performance bonds issued by such Person in the ordinary course of business, to the extent not drawn or, to the extent drawn, if such drawing is reimbursed not later than the third Business Day following demand for reimbursement, (4) all obligations of such Person to pay the deferred and unpaid purchase price of property or services, except trade payables and accrued expenses incurred in the ordinary course of business, (5) all Capitalized Lease Obligations of such Person, (6) all Indebtedness of others secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person, to the extent of the fair market value of all the assets of such Person subject to such Lien, (7) all Indebtedness of others guaranteed by such Person to the extent of such guarantee, (8) Redeemable Stock, and (9) all Hedging Obligations of such Person. For purposes of clause (8) of the preceding sentence, Redeemable Stock shall be valued at the maximum fixed redemption, repayment or repurchase price, which shall be calculated in accordance with the terms of such Redeemable Stock as if such Redeemable Stock were repurchased on any date on which Indebtedness shall be required to be determined pursuant to the Indenture; provided, however, that if such Redeemable Stock is not then permitted to be redeemed, repaid or repurchased, the redemption, repayment or repurchase price shall be the book value of such Redeemable Stock. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability of any guarantees at such date; provided that for purposes of calculating the amount of any non-interest bearing or other discount security, such Indebtedness, shall be deemed to be the principal amount thereof that would be shown on the balance sheet of the issuer thereof dated such date prepared in accordance with GAAP but that such security shall be deemed to have been Incurred only on the date of the original issuance thereof. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date. "Interest Rate Protection Agreement" means any interest rate swap agreement, interest rate cap agreement or other financial agreement or arrangement designed to protect the Company or any Restricted Subsidiary against fluctuations in interest rates. "Investment" in any Person means any direct or indirect advance, loan (other than advances to customers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of the lender) or other extensions of credit (including by way of guarantee or similar arrangement) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by such Person. For purposes of the definition of "Unrestricted Subsidiary," the definition of "Restricted Payment" and the covenant described under the "Limitation on Restricted Payments" covenant (i) "Investment" shall include the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of any Subsidiary of the Company at the time that such Subsidiary is designated an Unrestricted Subsidiary; provided, however, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue to have a permanent "Investment" in such Subsidiary at the time of such redesignation in the amount of such Investment immediately prior to such redesignation less (y) the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of such Subsidiary at the time of such redesignation; and (ii) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer, in each case as determined in good faith by the Company's Board of Directors. 90 "Investment Grade Rating" means BBB- or above, in the case of S&P (or its equivalent under any successor rating categories of S&P), Baa3 or above, in the case of Moody's (or its equivalent under any successor rating categories of Moody's), and the equivalent in respect of the ratings categories of any Rating Agencies substituted for S&P or Moody's. "Issue Date" means November 1, 1999, the date on which the old notes were originally issued. "Legal Holiday" means a Saturday, Sunday or other day on which commercial banks in The City of New York, Brazil, the Bahamas, the British Virgin Islands or the city in which the corporate trust office of the Trustee is located are authorized by law to close. "Lien" means any mortgage, pledge, hypothecation, charge, assignment, deposit arrangement, encumbrance, security interest, lien (statutory or other), or preference, priority or other security or similar agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any agreement to give or grant a Lien or any lease, conditional sale or other title retention agreement having substantially the same economic effect as any of the foregoing). For the purposes of the Indenture, the Company or any of its Subsidiaries shall be deemed to own subject to a Lien any asset which the Company has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, Capitalized Lease Obligation or other title retention agreement relating to such asset. "MARAD Documents" means the credit facilities provided by Citibank, N.A. and Govco Incorporated with respect to the AMETHYST 4 and AMETHYST 5. "Mitsubishi Credit Facilities" means the loan agreements providing for the AMETHYST 6 and AMETHYST 7 credit facilities. "Mitsubishi Documents" means, collectively, the Mitsubishi Credit Facilities and the Mitsubishi Loan Collateral Documents. "Mitsubishi Floor Guarantee" means the guarantee provided by Maritima and Pride, for the benefit of the Mitsubishi-affiliated lenders only, of repayment, from commencement of each Mortgaged Rig's Charter, of the total borrowings under such Mortgaged Rig's Mitsubishi Credit Facility up to a total for both Mitsubishi Credit Facilities of $75.6 million by Maritima and $32.4 million by Pride. "Mitsubishi Loan Collateral Documents" means the security documents relating to, and providing security for, the Mitsubishi Credit Facilities, but excluding the Mitsubishi Floor Guarantee. "Moody's" is defined to mean Moody's Investor Service, Inc. and its successors. "Mortgaged Rig" means any Rig subject to the Lien of the Security Documents. "Net Available Cash" from an Asset Sale means cash payments or Temporary Cash Equivalents received therefrom (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise and proceeds from the sale or other disposition of any securities received as consideration, but only as and when received, but excluding any other consideration received in the form of assumption by the acquiring Person of Indebtedness or other obligations relating to such properties or assets or received in any other noncash form), in each case net of (i) all legal, title and recording tax expenses, commissions and other fees and expenses incurred, and all federal, state, provincial, foreign and local taxes required to be accrued as a liability under GAAP, as a consequence of such Asset Sale, (ii) all payments made on any Indebtedness which is secured by any assets subject to such Asset Sale, in accordance with the terms of any Lien upon or other security agreement of any Lien with respect to such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Sale, or by Applicable law, be repaid out of the proceeds from such Asset Sale, (iii) all distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures as a result of such Asset Sale and (iv) the deduction of appropriate amounts provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the property or other assets disposed in such Asset Sale and retained by the Company or any Restricted Subsidiary after such Asset Sale. 91 "Net Cash Proceeds" means, with respect to any issuance or sale of Capital Stock, the cash proceeds of such issuance or sale net of attorneys' fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. "Non-Convertible Stock" means, with respect to any Person, any non-convertible Capital Stock of such Person and any Capital Stock of such Person convertible solely into non-convertible common stock of such Person; provided, however, that Non-Convertible Capital Stock shall not include any Redeemable Stock or Exchangeable Stock. "Pari Passu Indebtedness" means any Indebtedness of the Company, whether outstanding on the date on which the notes are originally issued or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall be subordinated in right of payment to the notes. "Permitted Holder" means any Shareholder or any Affiliate of a Shareholder. "Permitted Investments" means: (a) certificates of deposit, bankers acceptances, time deposits, Eurocurrency deposits and similar types of Investments routinely offered by commercial banks with final maturities of one year or less issued by commercial banks, having capital and surplus in excess of $100.0 million; (b) commercial paper issued by any corporation, if such commercial paper has credit ratings of at least "A-1" by S&P and at least "P-1" by Moody's; (c) U.S. Government Obligations with a maturity of three years or less; (d) repurchase obligations of instruments of the type described in clause (c); (e) shares of money market mutual or similar funds having assets in excess of $100.0 million; (f) payroll advances in the ordinary course of business; (g) other advances and loans to officers and employees of the Company or any Restricted Subsidiary, so long as the aggregate principal amount of such advances and loans does not exceed $1.0 million at any one time outstanding; (h) Investments in any Person in the form of a capital contribution of the Company's common stock; (i) Investments made by the Company in its Restricted Subsidiaries (or any Person that will be a Restricted Subsidiary as a result of such Investment) or by a Restricted Subsidiary in the Company or in one or more Restricted Subsidiaries (or any Person that will be a Restricted Subsidiary as a result of such Investment); (j) Investments in stock, obligations or securities received in settlement of debts owing to the Company or any Restricted Subsidiary as a result of bankruptcy or insolvency proceedings or upon the foreclosure, perfection or enforcement of any Lien in favor of the Company or any Restricted Subsidiary, in each case as to debt owing to the Company or any Restricted Subsidiary that arose in the ordinary course of business of the Company or any such Restricted Subsidiary; (k) Investments made in exchange for Indebtedness permitted by Section (b)(4) of the "Limitation of Indebtedness" covenant; (l) Investments in a Person other than a Restricted Subsidiary for the purpose of financing the construction or upgrade of new drilling rigs, drillships or similar vessels and related equipment, in an aggregate amount not to exceed at any time outstanding $100 million; provided, however, that at the time of such Investment; the Company or such Person has entered into a Qualifying Contract with respect thereto; and (m) Investments represented by that portion of the proceeds from Asset Sales that is not required to be cash or Temporary Cash Equivalents by the covenant described in "--Certain Covenants--Limitation on Asset Sales." "Permitted Liens" means, with respect to any Person, 92 (a) pledges or deposits by such Person under worker's compensation laws, unemployment insurance laws or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Indebtedness) or leases to which such Person is a party, or deposits to secure public or statutory obligations of such Person or deposits of cash or United States government bonds to secure surety or appeal bonds to which such person is a party, or deposits as security for contested taxes or import duties or for the payment of rent, in each case Incurred in the ordinary course of business; (b) Liens imposed by law, such as maritime, carriers', warehousemen's and mechanics' Liens, in each case for sums not yet due or being contested in good faith by appropriate proceedings or other Liens arising out of judgments or awards against such Person with respect to which such Person shall then be proceeding with an appeal or other proceedings for review; (c) Liens for property taxes not yet subject to penalties for non-payment or which are being contested in good faith and by appropriate proceedings; (d) Liens in favor of issuers of surety bonds or letters of credit issued pursuant to the request of and for the account of such Person in the ordinary course of its business; PROVIDED, HOWEVER, that such letters of credit do not constitute Indebtedness; (e) minor survey exceptions, minor encumbrances, easements or reservations of, or rights of others for, licenses, rights-of-way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real property or Liens incidental to the conduct of the business of such Person or to the ownership of its properties which were not Incurred in connection with Indebtedness and which do not in the aggregate materially adversely affect the value of said properties or materially impair their use in the operation of the business of such Person; (f) Liens securing Indebtedness Incurred to finance the construction, equipping, mobilization, transportation, installation, purchase or lease of, or repairs, upgrades, improvements or additions to, property of such Person; PROVIDED, HOWEVER, that the Lien may not extend to any property owned by such Person or any of its Subsidiaries at the time the Lien is Incurred (other than the property affected), and the Indebtedness (other than any interest thereon) secured by the Lien may not be Incurred more than 180 days after the later of the purchase, acquisition, completion of construction, equipping, mobilization, transportation, installation, repair, improvement, addition or commencement of full operation of the property subject to the Lien; (g) Liens existing on the Issue Date; (h) Liens on property or shares of Capital Stock of another Person at the time such other Person becomes a Subsidiary of such Person; PROVIDED, however, that such Liens are not created, incurred or assumed in connection with, or in contemplation of, such other Person becoming such a Subsidiary; PROVIDED FURTHER, however, that such Lien may not extend to any other property owned by such Person or any of its Subsidiaries; (i) Liens on property at the time such Person or any of its Subsidiaries acquires the property, including any acquisition by means of a merger or consolidation with or into such Person or a Subsidiary of such Person; PROVIDED, HOWEVER, that such Liens are not created, incurred or assumed in connection with, or in contemplation of such acquisition; PROVIDED FURTHER, however, that the Liens may not extend to any other property owned by such Person or any of its Subsidiaries; (j) Liens securing Indebtedness or other obligations of a Subsidiary of such Person owing to such Person or a wholly owned Subsidiary of such Person; (k) Liens securing Hedging Obligations so long as such Hedging Obligations relate to Indebtedness that is, and is permitted to be under the Indenture, secured by a Lien on the same property securing such Hedging Obligations; (l) any charter or Qualifying Contract; (m) judgment liens not giving rise to an Event of Default; (n) rights of off-set of banks and other Persons; (o) deposits made to obtain insurance; (p) Liens or equitable encumbrances deemed to exist by reason of a negative pledge or other arrangements to refrain from permitting Liens or fraudulent transfer law; (q) Liens to secure any Refinancing (or successive Refinancings) as a whole, or in part, of any Indebtedness secured by any Lien referred to as in the foregoing clauses (f), (g), (h) and (i); PROVIDED, HOWEVER, that 93 (x) such new Lien shall be limited to all or part of the same property that secured the original Lien (plus improvements to or on such property); and (y) the Indebtedness secured by such Lien at such time is not increased to any amount greater than the sum of (A) the outstanding principal amount or, if greater, committed amount of the Indebtedness described under clauses (f), (g), (h) and (i) at the time the original Lien became a Permitted Lien and (B) an amount necessary to pay any fees and expenses, including premiums, related to such refinancing, refunding, extension, renewal or replacement; and (r) Liens created under the MARAD Documents or the Mitsubishi Documents. Notwithstanding the foregoing, "Permitted Liens" will not include any Lien described in clauses (f), (h) or (i) above to the extent such Lien applies to any Additional Assets acquired directly or indirectly from Net Available Cash pursuant to the covenant described under "--Certain Covenants--Limitation on Asset Sales." For purposes of this definition, the term "Indebtedness" shall be deemed to include interest on such Indebtedness. "Person" means any individual, corporation, limited liability company, limited or general partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Preferred Stock", as applied to the Capital Stock of any Person, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of Capital Stock of any other class of such Person. "Public Equity Offering" means an underwritten primary public offering of common stock of the Company or a Shareholder pursuant to an effective registration statement under the Securities Act or pursuant to applicable laws of any jurisdiction outside the United States but, in the case of a Shareholder, only to the extent the net cash proceeds therefrom are contributed as equity capital to the Company. "Qualified Substitute Owner" means, as of the date of acquisition of beneficial ownership, directly or indirectly, of at least 26.4% of the total voting power of the Voting Stock of the Company, a corporation (x) whose long term senior unsecured debt has an investment grade rating by either Moody's or S&P and (y) which derived at least 50% of its revenue during the most recent 12 month period for which financial statements are publicly available from offshore drilling operations. "Qualifying Contract" with respect to a Rig means the charters or any other contract for the use of such Rig (i) between the Company or a Restricted Subsidiary and a counterparty that, as certified in an Officer's Certificate delivered to the Trustee in connection therewith, is, or has a performance guarantee from a third party that is, (a) a company that is either generally recognized as a major oil company, (b) an oil company, a gas producer or an oil and gas service company, in each case at the time such contract is executed having a Total Equity Market Capitalization of at least $1.0 billion if such entity is a public company, or if such entity is not a public company, having a consolidated net worth of $500.0 million or (c) a company that has an investment grade rating on its long-term debt from Moody's or S&P, (ii) having a minimum term of three years and (iii) containing a minimum day rate for such Rig. "Rating Agencies" means (a) S&P and Moody's or (b) if S&P or Moody's or both of them are not making ratings of the notes publicly available, a nationally recognized U.S. rating agency or agencies, as the cases may be, selected by the Company, which will be substituted for S&P or Moody's or both, as the case may be. "Redeemable Stock" means, with respect to the notes, any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date on which the notes mature. Notwithstanding the preceding sentence, any Capital Stock that would constitute Redeemable Stock solely because the holders thereof have the right to require the Company to repurchase such Capital Stock upon the occurrence of a change of control or an asset sale shall not constitute Redeemable Stock if the terms of such Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with the covenants described above under the caption "--Change of Control," "--Certain Covenants--Limitation on Asset Sales," "Redemptions" and "--Certain Covenants--Limitation on Restricted Payments." "Related Business" means any business related, ancillary or complementary to the businesses of the Company and the Restricted Subsidiaries on the Issue Date. "Reserve Account" means the account established and designated as such pursuant to the Reserve Account Agreement. 94 "Reserve Account Agreement" means the Reserve Account Agreement among the Company, the Trustee and the Reserve Account Agent named therein. "Restricted Collateral" means (1) any Rig made subject to the Lien of the Security Documents, (2) the Capital Stock of each Restricted Subsidiary owning a Mortgaged Rig, (3) each Qualifying Contract subject to the Lien of the Security Documents and (4) the Reserve Account and the cash and investments credited thereto. "Restricted Subsidiary" means any Subsidiaries other than an Unrestricted Subsidiary. "Rig Owner" means any of Petrodrill Four Limited, Petrodrill Five Limited, Petrodrill Six Limited or Petrodrill Seven Limited. "S&P" is defined to mean Standard & Poor's Ratings Group, a division of McGraw-Hill Companies, Inc. and its successors. "Sale/Leaseback Transaction" means any arrangement with any Person providing for the leasing by the Company of any of its Restricted Subsidiaries, for a period of more than three years, of any real or tangible personal property, which property has been or is to be sold or transferred by the Company or such Restricted Subsidiary to such Person in contemplation of such leasing. "SEC" or "Commission" means the Securities and Exchange Commission. "Security Documents" means, collectively, the Mitsubishi Loan Collateral Documents, the Reserve Account Agreement, and the Security Agreement between the Company, the Trustee and the collateral agent named therein. "Senior Indebtedness" of any Person means (i) Indebtedness of such Person, whether outstanding on the Issue Date or thereafter Incurred, and (ii) accrued and unpaid interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company to the extent post-filing interest is allowed in such proceeding) in respect of (A) indebtedness for money borrowed and (B) Indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable unless, in the case of (i) and (ii), in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such obligations are subordinate in right of payment to the notes, the Company Loans or the Subsidiary Guarantees, as applicable; provided, however, that Senior Indebtedness shall not include (1) any obligation of such Person to any Subsidiary of such Person, (2) any liability for federal, state, local, foreign or other taxes owed or owing by such Person, (3) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including guarantees thereof or instruments evidencing such liabilities), (4) any Indebtedness of such Person (and any accrued and unpaid interest in respect thereof) which is subordinate or junior in any respect to any other Indebtedness or other obligation of such Person or (5) that portion of any Indebtedness which at the time of Incurrence is Incurred in violation of the Indenture. "Shareholder" means any one of the Shareholders. "Shareholders" means Drillpetro Inc., a company organized under the laws of the Bahamas, Techdrill Inc., a company organized under the laws of the Bahamas (each of the foregoing an affiliate of Maritima Petroleo e Engenharia Ltda., a company organized under the laws of Brazil), Westville Management Corporation Inc., a company organized under the laws of the British Virgin Islands (an indirect wholly owned subsidiary of Pride International, Inc., a company organized under the laws of Louisiana), and First Reserve Corporation, individually or collectively as the context requires. "Significant Subsidiary" means any Subsidiary Guarantor and any other Restricted Subsidiary that would be a "Significant Subsidiary" of the Company within the meaning of Rule 1.02 under Regulation S-X promulgated by the SEC. "Stated Maturity" means, with respect to any security, the date specified in such security as the fixed date on which the final payment of principal of which security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency unless such contingency has occurred). "Subordinated Obligation" means any Indebtedness of the Company or a Subsidiary Guarantor, as the case may be (whether outstanding on the Issue Date or thereafter Incurred) which is subordinate or junior in right of payment to the notes, the Company Loans or the Subsidiary Guarantee, as applicable, whether pursuant to a written agreement to that effect or by operation of law. "Subsidiary" means, with respect to any Person: 95 (1) any corporation of which more than 50% of the total voting power of all classes of the capital stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors is owned by such Person directly or through one or more other Subsidiaries of such Person, and (2) any entity other than a corporation of which at least a majority of the capital stock or other equity interest (however designated) entitled (without regard to the occurrence of any contingency) or vote in the election of the governing body, partners, managers or others that will control the management of such entity is owned by such Person directly or through one or more other Subsidiaries of such Person. "Subsidiary Guarantor" means each Subsidiary of the Company, whether now owned or hereafter formed, which shall be required to execute and deliver a Subsidiary Guarantee as described under "--Certain Covenants--Future Subsidiary Guarantors". "Subsidiary Guarantee" means a guarantee of the Company's obligations with respect to the notes issued by a Subsidiary of the Company. "Tangible Property" means all land, buildings, machinery and equipment and leasehold interests and improvements which would be reflected on a balance sheet of the Company prepared in accordance with GAAP, excluding (a) all rights, contracts and other intangible assets of any nature whatsoever and (b) all inventories and other current assets. "Temporary Cash Investments" means Investments described in clauses (a), (b), (c) and (d) of the definition of "Permitted Investments." "Total Equity Market Capitalization" of any Person means, as of any day of determination, the sum of (i) the product of (A) the aggregate number of outstanding primary shares of common stock of such Person on such day (which shall not include any options or warrants on, or securities convertible or exchangeable into, shares of common stock of such person) multiplied by (B) the average closing price of such common stock over the 20 consecutive Business Days immediately preceding such day, plus (ii) the liquidation value of any outstanding shares of preferred stock of such Person on such day. "Unrestricted Subsidiary" means: (a) any Subsidiary of the Company that at the time of, determination will be designated an Unrestricted Subsidiary by the Board of Directors of the Company as provided below and (b) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors of the Company may designate any Subsidiary of the Company as an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries (x) owns any Capital Stock or Indebtedness of, or holds any Lien on any property of, the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated or (y) owns any of the Collateral; provided, however, that either (A) the Subsidiary to be so designated has total assets of $10,000 or less or (B) if such Subsidiary has assets greater than $10,000, such designation would be permitted under the covenant described under "--Certain Covenants--Limitation on Restricted Payments." Any such designation by the Board of Directors of the Company shall be evidenced to the Trustee by filing a resolution of the Board of Directors with the Trustee giving effect to such designation. The Board of Directors of the Company may designate any Unrestricted Subsidiary as a Restricted Subsidiary if, immediately after giving effect to such designation, (A) no Default or Event of Default shall have occurred and be continuing and (B) the Company could incur $1.00 of additional Indebtedness under paragraph (a) of the "Limitation on Indebtedness" covenant. "U.S. Government Obligations" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable at the issuer's option. "Voting Stock" of a Person means all classes of Capital Stock or other interests (including partnership interests) of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof. "Wholly Owned Restricted Subsidiary" means a Restricted Subsidiary all the Capital Stock of which (other than directors' qualifying shares) is owned by the Company or one or more Wholly Owned Restricted Subsidiaries. 96 BOOK-ENTRY; DELIVERY, FORM AND TRANSFER OF THE NEW NOTES The new notes initially will be in the form of one or more registered global notes without interest coupons (collectively, the "Global Notes") deposited with the Trustee, as custodian for DTC, in New York, New York, and registered in the name of DTC or its nominee, in each case for credit to the accounts of DTC's Direct and Indirect Participants (as defined below). Transfer of beneficial interests in any Global Notes will be subject to the applicable rules and procedures of DTC and its Direct or Indirect Participants (including, if applicable, those of Euroclear and Cedel), which may change from time to time. The Global Notes may be transferred, in whole and not in part, only to another nominee of DTC or to a successor of DTC or its nominee in certain limited circumstances. Beneficial interests in the Global Notes may be exchanged for notes in certificated form in certain limited circumstances. See "--Transfer of Interests in Global Notes for Certificated Notes." Initially, the Trustee will act as Paying Agent and Registrar. The new notes may be presented for registration of transfer and exchange at the offices of the Registrar. DEPOSITARY PROCEDURES DTC has advised the Company that DTC is a limited-purpose trust company created to hold securities for its participating organizations (collectively, the "Direct Participants") and to facilitate the clearance and settlement of transactions in those securities between Direct Participants through electronic book-entry changes in accounts of Participants. The Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations, including Euroclear and Cedel. Access to DTC's system is also available to other entities that clear through or maintain a direct or indirect, custodial relationship with a Direct Participant (collectively, the "Indirect Participants"). DTC has advised the Company that, pursuant to DTC's procedures: (1) DTC will credit the accounts of the Direct Participants with portions of the principal amount of the Global Notes allocated to such Direct Participants, and (2) DTC will maintain records of the ownership interests of Direct Participants in the Global Notes and the transfer of ownership interests by and between Direct Participants. DTC will not maintain records of the ownership interests of, or the transfer of ownership interests by and between, Indirect Participants or other owners of beneficial interests in the Global Notes. Direct Participants and Indirect Participants must maintain their own records of the ownership interests of, and the transfer of ownership interests by and between, Indirect Participants and other owners of beneficial interests in the Global Notes. The laws of some states in the United States require that certain persons take physical delivery in definitive, certificated form, of securities that they own. This may limit or curtail the ability to transfer beneficial interests in a Global Note to such persons. Because DTC can act only on behalf of Direct Participants, which in turn act on behalf of Indirect Participants and others, the ability of a person having a beneficial interest in a Global Note to pledge that interest to persons or entities that are not Direct Participants in DTC, or to otherwise take actions in respect of those interests, may be affected by the lack of physical certificates evidencing those interests. For certain other restrictions on the transferability of the new notes see "--Transfers of Interests in Global Notes for Certificated Notes." Except as described in "--Transfer of Interests in Global Notes for Certificated Notes," owners of beneficial interests in the Global Notes will not have notes registered in their names, will not receive physical delivery of notes in certificated form and will not be considered the registered owners or Holders thereof under the indenture for any purpose. Under the terms of the indenture, the Company and the Trustee will treat the persons in whose names the new notes are registered (including new notes represented by Global Notes) as the owners thereof for the purpose of receiving payments and for any and all other purposes whatsoever. Payments in respect of the principal, premium, Additional Amounts, if any, and interest on Global Notes registered in the name of DTC or its nominee will be payable by the Trustee to DTC or its nominee as the registered holder under the indenture. Consequently, neither the Company, the Trustee nor any agent of the Company or the Trustee has or will have any responsibility or liability for: (1) any aspect of DTC's records or any Direct Participant's or Indirect Participant's records relating to or payments made on account of beneficial ownership interests in the Global Notes or for maintaining, supervising or reviewing any of DTC's records or any Direct Participant's or Indirect Participant's records relating to the beneficial ownership interests in any Global Note; or 98 (2) any other matter relating to the actions and practices of DTC or any of its Direct Participants or Indirect Participants. DTC has advised the Company that its current payment practice (for payments of principal, interest and the like) with respect to securities such as the notes is to credit the accounts of the relevant Direct Participants with such payment on the payment date in amounts proportionate to such Participant's respective ownership interests in the Global Notes as shown on DTC's records. Payments by Direct Participants and Indirect Participants to the beneficial owners of the new notes will be governed by standing instructions and customary practices between them and will not be the responsibility of DTC, the Trustee or the Company. Neither the Company nor the Trustee will be liable for any delay by DTC or its Direct Participants or Indirect Participants in identifying the beneficial owners of the new notes and the Company and the Trustee may conclusively rely on and will be protected in relying on instructions from DTC or its nominee as the registered owner of the new notes for all purposes. The Global Notes will trade in DTC's Same-Day Funds Settlement System and, therefore, transfers between Direct Participants in DTC will be effected in accordance with DTC's procedures, and will be settled in immediately available funds. Transfers between Indirect Participants (other than Indirect Participants who hold an interest in the notes through Euroclear or Cedel) who hold an interest through a Direct Participant will be effected in accordance with the procedures of that Direct Participant but generally will settle in immediately available funds. Transfers between and among Indirect Participants who hold interests in the new notes through Euroclear and Cedel will be effected in the ordinary way in accordance with their respective rules and operating procedures. Cross-market transfers between Direct Participants in DTC, on the one hand, and Indirect Participants who hold interests in the new notes through Euroclear or Cedel, on the other hand, will be effected by Euroclear's or Cedel's respective nominee through DTC in accordance with DTC's rules on behalf of Euroclear or Cedel; however, delivery of instructions relating to cross-market transactions must be made directly to Euroclear or Cedel, as the case may be, by the counterparty in accordance with the rules and procedures of Euroclear or Cedel and within their established deadlines (Brussels time for Euroclear and UK time for Cedel). Indirect Participants who hold interests in the new notes through Euroclear and Cedel may not deliver instructions directly to Euroclear's or Cedel's nominee. Euroclear or Cedel will, if the transaction meets its settlement requirements, deliver instructions to its respective nominee to deliver or receive interests on Euroclear's or Cedel's behalf in the relevant Global Note in DTC, and make or receive payment in accordance with normal procedures for same-day fund settlement applicable to DTC. Because of time zone differences, the securities accounts of an Indirect Participant who holds an interest in the new notes through Euroclear or Cedel purchasing an interest in a Global Note from a Direct Participant in DTC will be credited, and any such crediting will be reported to Euroclear or Cedel during the European business day immediately following the settlement date of DTC in New York. Although recorded in DTC's accounting records as of DTC's settlement date in New York, Euroclear and Cedel customers will not have access to the cash amount credited to their accounts as a result of a sale of an interest in a Global Note to a DTC Participant until the European business day of Euroclear or Cedel immediately following DTC's settlement date. DTC has advised the Company that it will take any action permitted to be taken by a Holder only at the direction of one or more Direct Participants to whose accounts interests in the Global Notes are credited and only in respect of such portion of the aggregate principal amount of the notes as to which such Direct Participant or Direct Participants has or have given direction. However, if there is an Event of Default under the notes, DTC reserves the right to exchange Global Notes (without the direction of one or more of its Direct Participants) for notes in certificated form, and to distribute such certificated notes to its Direct Participants. See "--Transfers of Interests in Global Notes for Certificated Notes." Although DTC, Euroclear and Cedel have agreed to the foregoing procedures to facilitate transfers of interests in the U.S. Global Notes among Direct Participants, Euroclear and Cedel, they are under no obligation to perform or to continue to perform such procedures, and such procedures may be discontinued at any time. Neither the Company nor the Trustee will have any responsibility for the performance by DTC, Euroclear and Cedel or their respective Direct and Indirect Participants of their respective obligations under the rules and procedures governing any of their operations. The information in this section concerning DTC, Euroclear and Cedel and their book-entry systems has been obtained from sources the Company believes to be reliable, but the Company takes no responsibility for the accuracy thereof. TRANSFERS OF INTERESTS IN GLOBAL NOTES FOR CERTIFICATED NOTES An entire Global Note may be exchanged for definitive notes in registered certificated form without interest coupons ("Certificated Notes") if: (1) DTC notifies the Company that it is unwilling or unable to continue as depositary for the Global Notes and the Company thereupon fails to appoint a successor depositary within 90 days or has ceased to be a clearing agency registered under the Exchange Act; 99 (2) the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of Certificated Notes; or (3) there shall have occurred and be continuing a Default or an Event of Default with respect to the notes. In any such case, the Company will notify the Trustee in writing that, upon surrender by the Direct and Indirect Participants of their interest in such Global Note, Certificated Notes will be issued to each person that such Direct and Indirect Participants and the DTC identify as being the beneficial owner of the related notes. Beneficial interests in Global Notes held by any Direct or Indirect Participant may be exchanged for Certificated Notes upon request to DTC, by such Direct Participant (for itself or on behalf of an Indirect Participant), to the Trustee in accordance with customary DTC procedures. Certificated Notes delivered in exchange for any beneficial interest in any Global Note will be registered in the names, and issued in any approved denominations, requested by DTC on behalf of such Direct and Indirect Participate (in accordance with DTC's customary procedures). Neither the Company nor the Trustee will be liable for any delay by the Holder of the notes or the DTC in identifying the beneficial owner of notes, and the Company and the Trustee may conclusively rely on, and will be protected in relying on, instructions from the holder of the Global Note or DTC for all purposes. SAME DAY SETTLEMENT AND PAYMENT The indenture will require that payments in respect of the notes represented by the Global Notes (including principal, premium, if any, and interest) be made by wire transfer of immediately available same day funds to the accounts specified by the holder of interests in such Global Note. With respect to Certificated Notes, the Company will make all payments of principal, premium, if any, interest, and Additional Amounts, by wire transfer of immediately available same day funds to the accounts specified by the holders thereof or, if no such account is specified, by mailing a check to each such holder's registered address. The Company expects that secondary trading in the Certificated Notes will also be settled in immediately available funds. CERTIFICATED NOTES The notes represented by the Global Notes are exchangeable for Certificated Notes in definitive form of like tenor as such notes in denominations of $1,000 and integral multiples thereof if: (1) the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for the Global Notes or if at any time the Depositary ceases to be a clearing agency registered under the Exchange Act, and the Company fails to appoint a successor Depository within 90 days of such notice; (2) the Company in its discretion at any time determines not to have all the notes represented by the Global Notes; or (3) an Event of Default entitling the Holders of the notes to accelerate the maturity thereof has occurred and is continuing. Any Global Note that is exchangeable pursuant to the preceding sentence is exchangeable for Certificated Notes issuable in authorized denominations and registered in such names as the Depositary shall direct. Subject to the foregoing, a Global Note is not exchangeable for Certificated Notes, except for a Global Note of the same aggregate denomination to be registered in the name of the Depositary or its nominee. Upon the transfer of a note in definitive form, such note will, unless the Global Note has previously been exchanged for notes in definitive form, be exchanged for an interest in the Global Note representing the principal amount of notes being transferred. SAME-DAY PAYMENT The indenture requires that payments in respect of notes (including principal, premium, if any, interest, and Additional Amounts, if any) be made by wire transfer of immediately available funds to the accounts specified by the Holders thereof or, if no such account is specified, by mailing a check to each such Holder's registered address. 100 TAX CONSIDERATIONS MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS Baker & Botts, L.L.P. is our special U.S. tax counsel. The following discussion is Baker & Botts, L.L.P.'s opinion concerning all material U.S. federal income tax consequences of the exchange of old notes for new notes pursuant to the exchange offer. This discussion is based upon the provisions of the Internal Revenue Code of 1986, as amended, Treasury Regulations promulgated under the Code and judicial and administrative interpretations thereof, all as in effect and available as of the date of this prospectus and all of which are subject to change, possibly retroactively, or different interpretation. The opinion of Baker & Botts, L.L.P. is not binding on the Internal Revenue Service. We cannot assure you that the Internal Revenue Service will not challenge one or more of the tax consequences described in this prospectus. We have not obtained, nor do we intend to obtain, a ruling from the Internal Revenue Service with respect to the U.S. federal income tax consequences of the exchange offer. This discussion does not purport to address all aspects of U.S. federal income taxation that may be relevant to particular Holders in light of their specific circumstances or to Holders subject to special treatment under the Code. This discussion does not address the effect of any applicable U.S. federal estate and gift tax laws or state, local or foreign tax laws. INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE EXCHANGE OFFER UNDER U.S. FEDERAL AND APPLICABLE STATE, LOCAL AND OTHER TAX LAWS. The exchange of old notes for new notes pursuant to the exchange offer will not be a taxable event for U.S. federal income tax purposes. A holder will not recognize gain or loss upon the receipt of new notes in the exchange offer, and a holder who is otherwise subject to U.S. federal income tax will be subject to such tax on the same amount and in the same manner and at the same times as such holder would have been under the old notes. A cash-basis exchanging holder will not recognize in income any accrued and unpaid interest on the old notes by reason of the exchange. The basis and holding period of a new note will be the same as the basis and holding period of the corresponding old note. YOU SHOULD CONSULT WITH YOUR OWN TAX ADVISOR CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OFFER WITH RESPECT TO YOUR PARTICULAR SITUATION, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS. MATERIAL BRITISH VIRGIN ISLANDS TAX CONSIDERATIONS Dancia Penn & Co is our special British Virgin Islands tax counsel. The following discussion is Dancia Penn & Co's opinion concerning all material British Virgin Islands tax consequences of the exchange of old notes for new notes pursuant to the exchange offer. This discussion is based upon the tax laws of the British Virgin Islands and interpretations of such tax laws by the relevant tax authorities that are in effect as of the date of this prospectus and is subject to any changes therein that may occur after such date. HOLDERS OF OLD NOTES ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE BRITISH VIRGIN ISLANDS TAX CONSEQUENCES OF THE OWNERSHIP AND DISPOSITION OF THOSE NOTES THAT ARE APPLICABLE IN THEIR PARTICULAR TAX SITUATIONS, INCLUDING THE EFFECTS OF POSSIBLE FUTURE CHANGES IN THE APPLICABLE TAX LAWS. The mere exchange of old notes for new notes in the exchange offer will not be a taxable event for British Virgin Islands income tax purposes. A holder will not recognize gain or loss upon the receipt of new notes in the exchange offer. A holder who is subject to British Virgin Islands income tax will be subject to such tax on the same amount, in the same manner and at the same times as such holder would have been under the old notes. 101 PLAN OF DISTRIBUTION Based on interpretations by the staff of the SEC in no action letters issued to third parties, we believe that you may transfer new notes issued under the exchange offer in exchange for the old notes if you both o acquire the new notes in the ordinary course of your business o are not engaged in, and do not intend to engage in, and have no arrangement or understanding with any person to participate in, a distribution of new notes Broker-dealers receiving new notes in the exchange offers will be subject to a prospectus delivery requirement with respect to resales of the new notes. The letter of transmittal states that by acknowledging and delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker dealer in connection with resales of new notes received in exchange for old notes where the old notes were acquired by the broker-dealer as a result of market-making activities or other trading activities. We believe that you may not transfer new notes issued under the exchange offer in exchange for the old notes if you are either o our "affiliate" within the meaning of Rule 405 under the Securities Act o a broker-dealer that acquired old notes directly from us o a broker-dealer that acquired old notes as a result of market-making or other trading activities without compliance with the registration and prospectus delivery provisions of the Securities Act To date, the staff of the SEC has taken the position that participating broker-dealers may fulfill their prospectus delivery requirements with respect to transactions involving an exchange of securities such as this exchange offer, other than a resale of an unsold allotment from the original sale of the old notes, with the prospectus contained in the exchange offer registration statement. Broker-dealers who acquired the old notes from us may not rely on SEC staff interpretations. They must comply with the registration and prospectus delivery requirements of the Securities Act, including being named as selling noteholders, in order to resell the old notes or the new notes. In the registration rights agreement, we have agreed to permit participating broker-dealers' use of this prospectus in connection with the resale of new notes. We have agreed that, for a period up to 180 days after the expiration of the exchange offer, we will make this prospectus, and any amendment or supplement to this prospectus, available to any broker-dealer that requests these documents in the letter of transmittal. In addition, until , 2000, all dealers effecting transactions in the new notes may be required to deliver a prospectus. If you wish to exchange your old notes for new notes in the exchange offer, you will be required to make representations to us as described in "The Exchange Offer--Purpose of the Exchange Offer" and "The Exchange Offers--Procedures of Tendering--Your Representations to Us" of this prospectus and in the letter of transmittal. In addition, if you are a broker-dealer who receives new notes for your own account in exchange for old notes that were acquired by you as a result of market-making activities or other trading activities, you will be required to acknowledge that you will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale by you of new notes. We will not receive any proceeds from any sale of new notes by broker-dealers. Broker-dealers who receive new notes for their own account in the exchange offer may sell them from time to time in one or more transactions either o in the over-the-counter market o in negotiated transactions o through the writing of options on the new notes or a combination of methods of resale o at market prices prevailing at the time of resale o at prices related to prevailing market prices or negotiated prices Any resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any broker-dealer or the purchasers of any new notes. Any broker-dealer that resells new notes it received for its own account in the exchange offers and any broker or dealer that participates in a distribution of new notes may be deemed to be an "underwriter" within the meaning of the Securities Act. Any profit on any resale of new notes and any commissions or concessions received by any persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. 102 We have agreed to pay all expenses incidental to the exchange offers other than commissions and concessions of any brokers or dealers. We will indemnify holders of the old notes, including any broker-dealers, against some liabilities, including liabilities under the Securities Act, as provided in the registration rights agreement. LEGAL MATTERS Baker & Botts, L.L.P., Houston, Texas, our special U.S. counsel and counsel for Pride International, Inc., has issued an opinion about the legality of the new notes and the Pride guarantee. EXPERTS Our financial statements as of December 31, 1998 and for the period from inception (March 27, 1998) to December 31, 1998 included in this prospectus have been so included in reliance on the report (which contains an explanatory paragraph relating to our ability to continue as a going concern as described in Notes 1 and 5 to the financial statements) of PricewaterhouseCoopers N.V., independent accountants, given on the authority of said firm as experts in auditing and accounting. INDEPENDENT PUBLIC ACCOUNTANTS With respect to our unaudited consolidated financial information for the nine months ended September 30, 1999 included in this prospectus, PricewaterhouseCoopers N.V. reported that they have applied limited procedures in accordance with professional standards for a review of such information. However, their separate report dated October 15, 1999 (not included herein) states that they did not audit and do not express an opinion on our unaudited consolidated financial information. Accordingly, you should limit your reliance on their report on such information in light of the limited nature of the review procedures applied. PricewaterhouseCoopers N.V. is not subject to the liability provisions of Section 11 of the Securities Act of 1933 for their report on our unaudited consolidated financial information because that report is not a "report" or a "part" of the registration statement in which this prospectus is included prepared or certified by PricewaterhouseCoopers N.V. within the meaning of Sections 7 and 11 of the Securities Act. INDEPENDENT ENGINEERS The references to the report (and the opinions contained therein) of Bennett & Associates, L.L.C., independent engineers located in New Orleans, Louisiana, are made herein in reliance upon the authority of such firm as experts in respect of such matters. WHERE YOU CAN FIND MORE INFORMATION Neither we nor our subsidiaries are required to file reports with the SEC under the Securities Exchange Act of 1934. In connection with the effectiveness of the registration statement in which this prospectus is included, we will become subject to the reporting requirements of the Securities Exchange Act of 1934 that apply to foreign private issuers. We will file reports, including annual reports on Form 20-F, and other information with the SEC. Those reports and other information may be obtained, upon written request, from Wilmington Trust Company, as the note trustee. You can read and copy any materials we file with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You can also obtain copies of filed documents, at prescribed rates, by mail by writing the SEC Public Reference Section in Washington D.C. at the address listed above or by calling the SEC at 1-800-SEC-0330 or electronically through the SEC's Web Site at http://www.sec.gov. 103 AMETHYST FINANCIAL COMPANY LTD. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Accountants....................................................F-2 Consolidated Balance Sheet as of September 30, 1999 and December 31, 1998............F-3 Consolidated Statement of Income for the period from inception (March 27, 1998) to September 30, 1999, for the nine months ended September 30, 1999 and for the period from inception (March 27, 1998) to December 31, 1998........................F-4 Consolidated Statement of Shareholders' Equity for the period from inception (March 27, 1998) to September 30, 1999, for the nine months ended September 30, 1999 and for the period from inception (March 27, 1998) to December 31, 1998.......F-5 Consolidated Statement of Cash Flows for the period from inception (March 27, 1998) to September 30, 1999, for the nine months ended September 30, 1999 and for the period from inception (March 27, 1998) to December 31, 1998................F-6 Notes to the Consolidated Financial Statements ......................................F-7
F-1 REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders and Board of Directors of Amethyst Financial Company Ltd.: In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income, shareholders' equity and cash flows present fairly, in all material respects, the consolidated financial position of Amethyst Financial Company Ltd. as of December 31, 1998 and the consolidated results of their operations and their cash flows for the period from inception (March 27, 1998) to December 31, 1998 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these financial statements in accordance with auditing standards generally accepted in the United States of America which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion expressed above. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company is currently constructing four offshore drilling rigs pursuant to contracts with Petrobras. As discussed in Note 5 to the financial statements, Petrobras has threatened to cancel the Charters for the rigs should delay in delivery exceed 180 days. If Petrobras follows through with its threat and cancels the Charters, such cancellation would constitute an event of default under the Company's credit facilities. The Company's ability to realize the carrying value of its assets is dependent on its ability to successfully complete construction of the offshore drilling rigs and obtain contracts that provide cash flows sufficient to meet its obligations as they become due. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are described in Notes 1 and 5 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. PricewaterhouseCoopers N.V. Rotterdam, The Netherlands October 15, 1999 F-2 AMETHYST FINANCIAL COMPANY LTD. (A DEVELOPMENT-STAGE COMPANY) CONSOLIDATED BALANCE SHEET (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
SEPTEMBER 30, DECEMBER 31, 1999 1998 --------------- --------------- (UNAUDITED) ASSETS CURRENT ASSETS Cash and cash equivalents ................................ $ 13,293 $ 18,172 Prepaid expenses ......................................... 672 -- --------------- --------------- Total current assets .................................. 13,965 18,172 RESTRICTED CASH ............................................. 27,306 -- ACCOUNTS RECEIVABLE ......................................... 4,177 10,200 RELATED PARTY RECEIVABLE .................................... 16,306 16,157 CONSTRUCTION IN PROGRESS .................................... 344,949 220,666 DEFERRED COSTS .............................................. 41,242 77,885 --------------- --------------- $ 447,945 $ 343,080 =============== =============== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable ......................................... $ 18,118 $ 32,570 Accrued liabilities ...................................... 17,762 3,927 --------------- --------------- Total current liabilities ............................. 35,880 36,497 RELATED PARTY ADVANCES ...................................... 29,191 133,901 LONG-TERM DEBT .............................................. 235,624 94,738 ACCRUED CONTRACT PENALTIES .................................. 41,242 77,885 --------------- --------------- Total liabilities ..................................... 341,937 343,021 --------------- --------------- COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Common stock, $1.00 par value; 15,000 shares authorized; 10,500 and 1,000 shares issued and outstanding, respectively ..................... 11 1 Additional paid-in capital ............................... 104,989 -- Surplus accumulated in the development stage ............. 1,008 58 --------------- --------------- Total shareholders' equity ............................ 106,008 59 --------------- --------------- $ 447,945 $ 343,080 =============== ===============
The accompanying notes are an integral part of these consolidated financial statements. F-3 AMETHYST FINANCIAL COMPANY LTD. (A DEVELOPMENT-STAGE COMPANY) CONSOLIDATED STATEMENT OF INCOME (IN THOUSANDS)
INCEPTION NINE MONTHS INCEPTION (MARCH 27, 1998) ENDED (MARCH 27, 1998) TO SEPTEMBER 30, SEPTEMBER 30, TO DECEMBER 31, 1999 1999 1998 -------------------- -------------------- -------------------- (UNAUDITED) (UNAUDITED) INCOME AND EXPENSES: Interest income ............................... $ 1,106 $ 939 $ 167 Other income (expense) ........................ (98) 11 (109) -------------------- -------------------- -------------------- Total income and expenses .................. 1,008 950 58 -------------------- -------------------- -------------------- INCOME BEFORE TAXES .............................. 1,008 950 58 PROVISION FOR INCOME TAXES ....................... -- -- -- -------------------- -------------------- -------------------- NET INCOME ....................................... $ 1,008 $ 950 $ 58 ==================== ==================== ====================
The accompanying notes are an integral part of these consolidated financial statements. F-4 AMETHYST FINANCIAL COMPANY LTD. (A DEVELOPMENT-STAGE COMPANY) CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (IN THOUSANDS EXCEPT SHARE AMOUNTS)
SURPLUS ACCUMULATED IN ADDITIONAL THE TOTAL PAID-IN DEVELOPMENT SHAREHOLDERS' SHARES CAPITAL STAGE EQUITY ------ ------ --------- --------- --------- NUMBER PAR VALUE Inception (March 27, 1998) to December 31, 1998: Issuance of common stock at inception ($1.00 per share). 1,000 $ 1 $ 1 Net income..................... $ 58 58 --------- --------- BALANCE AS OF DECEMBER 31, 1998 1,000 1 58 59 Conversion of related party advances to capital ($11.21 per share) 8,250 9 $ 92,490 92,499 Issuance of common stock ($1.00 per share) 1,250 1 12,499 12,500 Net income..................... 950 950 --------- --------- --------- BALANCE AS OF SEPTEMBER 30, 1999 (UNAUDITED).................... 10,500 $ 11 $ 104,989 $ 1,008 $ 106,008 ====== ====== ========= ========= =========
The accompanying notes are an integral part of these consolidated financial statements. F-5 AMETHYST FINANCIAL COMPANY LTD. (A DEVELOPMENT-STAGE COMPANY) CONSOLIDATED STATEMENT OF CASH FLOWS (IN THOUSANDS OF DOLLARS)
INCEPTION NINE MONTHS INCEPTION (MARCH 27, 1998) ENDED (MARCH 27, 1998) TO SEPTEMBER SEPTEMBER 30, TO DECEMBER 30, 1999 1999 31, 1998 --------------- --------------- --------------- (UNAUDITED) (UNAUDITED) OPERATING ACTIVITIES Net income .............................. $ 1,008 $ 950 $ 58 --------------- --------------- --------------- Net cash provided by operating activities 1,008 950 58 --------------- --------------- --------------- INVESTING ACTIVITIES Capital expenditures for construction in progress ............................. (336,324) (125,798) (210,526) --------------- --------------- --------------- Net cash used in investing activities ... (336,324) (125,798) (210,526) --------------- --------------- --------------- FINANCING ACTIVITIES Proceeds from long-term borrowings ...... 227,224 132,486 94,738 Issuance of common stock ................ 12,501 12,500 1 Restricted cash ......................... (27,306) (27,306) -- Related party advances .................. 136,190 2,289 133,901 --------------- --------------- --------------- Net cash provided by financing activities 348,609 119,969 228,640 --------------- --------------- --------------- NET INCREASE (DECREASE) IN CASH ............... 13,293 (4,879) 18,172 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ........................ -- 18,172 -- --------------- --------------- --------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD .............................. $ 13,293 $ 13,293 $ 18,172 =============== =============== ===============
The accompanying notes are an integral part of these consolidated financial statements. F-6 AMETHYST FINANCIAL COMPANY LTD. (A DEVELOPMENT-STAGE COMPANY) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND BASIS OF PRESENTATION Amethyst Financial Company Ltd. ("AFCL" and together with its wholly owned subsidiaries for purposes of these financial statements only, the "Company") was incorporated in the British Virgin Islands on March 27, 1998 to construct, own and operate offshore drilling rigs which, upon their completion, will be contracted to Petroleo Brasileiro S.A. ("Petrobras"), a Brazilian oil and gas company, pursuant to chartering agreements (the "Charters"). In December 1998, ownership of the six subsidiary companies (Petrodrill 2 through 7) was acquired from an affiliated common-controlled company, Petrodrill Offshore Inc. ("POINC"), at historical cost. The Charters between the subsidiary companies and Petrobras set out the terms for the renting and operating of the drilling rigs. In May 1999, two of the subsidiaries (Petrodrill 2 and 3) were transferred to another affiliate company at historical cost (see Note 4). As of September 30, 1999, AFCL is owned 61.7% by affiliates of Maritima Petroleo e Engenharia Ltda. ("Maritima"), 26.4% by a wholly-owned subsidiary of Pride International, Inc. ("Pride"), and 11.9% by affiliates of First Reserve Corporation ("First Reserve") (such owners of AFCL collectively, the "Shareholders"). Maritima and Pride, either directly or through affiliates or subsidiaries, have primary contractual responsibility for the operations of the Company. During 1999, there were changes in the relative percentages of ownership interests due to capital contributions and share purchases by First Reserve (see Note 8). The Company has operated as a development-stage company since its inception, devoting substantially all of its efforts to designing, engineering and contracting with shipyards and vendors for the offshore drilling rigs and in raising financing. In order to exit the development stage, begin operations and begin to realize the carrying value of its rigs under construction and deferred costs, the Company must obtain substantial additional capital, complete construction of its drilling rigs in a timely manner, including procuring owner-furnished equipment and equipping the rigs in a manner acceptable to Petrobras, mobilize the rigs to Brazilian waters and successfully begin drilling operations. The Company does not expect to commence commercial operations until the third quarter of 2000. Accordingly, it does not expect to generate significant revenues until 2000, after the rigs have been completed. The unaudited consolidated financial statements included herein have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto of AFCL included in these financial statements for the year ended December 31, 1998. In the opinion of management, all adjustments, consisting only of normal, recurring adjustments considered necessary for a fair presentation, have been included. 2. SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of AFCL and its wholly owned subsidiaries and have been prepared in conformity with accouting principles generally accepted in the United States of America using the U.S. dollar as the reporting currency. All material intercompany balances and transactions have been eliminated. DEVELOPMENT-STAGE COMPANY The Company is a development-stage company as defined in Statement of Financial Accounting Standards No. 7, "Accounting and Reporting by Development Stage Enterprises," and will continue to be so until it commences commercial operations of the offshore drilling rigs, which is currently anticipated to occur in the third quarter of 2000. Future operating results will be subject to significant business, economic, regulatory, technical and competitive uncertainties and contingencies. The construction of the offshore drilling rigs is a complex undertaking and there can be no assurance that cost overruns or a further delay in delivery of the rigs will not occur. Depending on their extent and timing, these factors, individually or in the aggregate, could have an adverse effect on the Company. F-7 AMETHYST FINANCIAL COMPANY LTD. (A DEVELOPMENT-STAGE COMPANY) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED CASH AND CASH EQUIVALENTS The Company considers all highly liquid financial instruments purchased with an original maturity of three months or less to be cash equivalents. ACCOUNTS RECEIVABLE Accounts receivable consist of advances to shipyards for which terms of repayment have been agreed. The Company provides allowances for potential credit losses when necessary. However, management considers such credit risk to be limited. CONSTRUCTION IN PROGRESS Construction in progress represents all costs incurred for the construction of the enhanced Amethyst-class, dynamically positioned, self-propelled, fourth-generation semi-submersible drilling rigs. IMPAIRMENT of LONG-LIVED ASSETS The Company assesses the impairment of long-lived assets in accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of". SFAS No. 121 prescribes that an impairment loss is recognized in the event facts and circumstances indicate that the carrying amount of an asset may not be recoverable. Management reviews long-lived assets for impairment whenever events or changes in circumstances indicate the assets may be impaired. DEFERRED COSTS AND ACCRUED CONTRACT PENALTIES Contract penalties represent amounts contractually required to be paid to Petrobras and are expected to be amortized on a straight-line basis over the term of the applicable Charters. CAPITALIZED INTEREST Interest costs related to debt incurred during the construction projects are capitalized. Total interest costs capitalized amounted to $13.8 million at September 30, 1999 and $0.2 million at December 31, 1998. INCOME TAXES The Company is not subject to income tax in the British Virgin Islands. Accordingly, no income taxes are included in the consolidated statement of income for the reported periods. Under current Brazilian law, payments made to the Company after delivery of the rigs will be subject to Brazilian withholding tax. Such withholding tax, as provided in the Charters, will be covered by Petrobras, resulting in an effective tax rate to the Company of 0%. Deferred income taxes are accounted for using the asset/liability method for temporary differences between the accounting and tax measurements and liabilities. Valuation allowances are established on deferred tax assets when management estimates that it is more likely than not that the related benefit will not be realized. The Company does not have any deferred tax assets and liabilities. REPORTING CURRENCY The functional currency of the Company is the U.S. dollar as the majority of its transactions are denominated in U.S. dollars. When there are transactions in foreign currencies, exchange gains and losses resulting from foreign currency transactions are recognized in earnings. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, if any, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. While it is believed that such estimates are reasonable, actual results could differ from these estimates. F-8 AMETHYST FINANCIAL COMPANY LTD. (A DEVELOPMENT-STAGE COMPANY) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amount of cash and cash equivalents, trade receivables and payables approximates fair values because of the short maturity of those instruments. The carrying value of the Company's long-term debt is considered to approximate the fair value of those instruments based on the borrowing rates currently available to the Company for loans with similar terms and maturities. COMPREHENSIVE INCOME The Company has adopted Statement of Financial Accounting Standard No. 130, "Reporting Comprehensive Income", which establishes standards for reporting and display of comprehensive income and its components in a full set of financial statements. Comprehensive income includes all changes in a company's equity, except those resulting from investments by and distributions to owners. There was no difference between comprehensive income and net income for the reported periods. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", which requires that companies recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. The FASB has subsequently issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities--Deferral of the Effective Date of FASB Statement No. 133," that defers the requirements of SFAS No. 133 for one additional year. The Company did not hold any derivative or hedging instruments during the reported periods. 3. RESTRICTED CASH The Company deposited approximately $27.3 million with a financial institution. The deposit was placed as collateral for the Mitsubishi financing related to the AMETHYST 6 and 7. Such deposit was returned to the Company and has been used in meeting the Company's obligation to obtain additional capital by October 29, 1999 (see Note 7). 4. CONSTRUCTION IN PROGRESS Construction in progress as of December 31, 1998 included $18.7 million of costs relating to the construction of the AMETHYST 2 and 3, the charters which were subsequently canceled by Petrobras. In May 1999, AFCL and its shareholders transferred the ownership of the two wholly owned subsidiaries to a related party which is not part of the Company. In connection with the transfer and cancellation of the related charters, the Company transferred $36.6 million of deferred costs and accrued contract penalties relating to the AMETHYST 2 and 3. 5. PETROBRAS CONTRACTS The Charters have initial terms ranging from six to eight years from the date the drilling rigs are accepted by Petrobras. The Charters are renewable thereafter by agreement of both the Company and Petrobras. The Charters provide for payment of daily operating or non-operating rates based on the terms. The Charters also provide for penalties in the event of late delivery of the drilling rigs to the operator and include cancellation and termination clauses. Based on the scheduled delivery dates and the current project completion, each drilling rig will be delivered to Petrobras approximately 345 (ranging from 263-433) days on average beyond the date of delivery under their respective Charters. As a result of these delays, Petrobras, in accordance with the Charter, is permitted to impose penalties of up to 30% of the drilling rigs' operating rates (and, in addition, up to 30% of the mobilization fee in the case of one rig). If the penalties were imposed in full at the commencement of each chartering agreement, the penalties would aggregate approximately $41.2 million in 2000. If paid equally over the initial term of the chartering agreements, penalties would aggregate approximately $1.5 million in 2000, $5.9 million in 2001, 2002, 2003, 2004 and 2005, $5.2 million in 2006, $3.7 million in 2007 and $1.3 million in 2008. Although the Company expects to pay the penalties over the life of the Charters, the timing of payment could be accelerated. There is no assurance that further delays and related penalties will not occur. These costs have been recorded as deferred costs and accrued as penalties. As costs will not become payable before the fourth quarter of 2000, the respective asset and liability has been classified as long-term. After delivery of the rigs to Petrobras, and if these penalties are imposed by Petrobras, they will be amortized on a straight-line basis over the terms of the applicable charter agreements. F-9 AMETHYST FINANCIAL COMPANY LTD. (A DEVELOPMENT-STAGE COMPANY) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED While each Charter states that it may be canceled by Petrobras if the chartered rig is not delivered within 180 days after the delivery date specified, Petrobras, on May 28, 1998, provided a letter waiving its right to cancel the Charters and related service rendering contracts on the basis of late delivery unless the delay exceeds 540 days and, even then, only if best endeavors to make delivery are not being made. On October 13, 1999, Maritima received a letter from Petrobras stating that Petrobras will cancel the Charters and related service rendering contracts for the rigs when delay in delivery exceeds 180 days as specified in the Charters. In its letter, Petrobras also reserved its right to seek compensation for damages. The Company's Brazilian counsel, Pedro Calmon Filho & Associados, has informed the Company that Petrobras' May 1998 letter extending the permitted delay in delivery is an enforceable obligation of Petrobras; however, specific performance of Petrobras' obligations under the Charters may, as a practical matter, not be an available remedy, and the Company's rights against Petrobras could be limited to a lawsuit for damages. The result of any such lawsuit is uncertain, the amount of damages may be limited and any recovery may be subject to extensive delays. If Petrobras cancels the Charters for the rigs, such cancellation would constitute an event of default under the credit facilities that are providing substantially all of the financing for construction of the rigs. Since being informed of Petrobras' October 13 letter, the credit facility lenders have continued to fund our construction draws. Based on Petrobras' October 13 letter, however, the credit facility lenders may, at their discretion, cease funding construction, in which event the Company would not be able to complete construction of the rigs unless the Company obtains new funding from other sources or an agreement of the credit facility lenders to resume funding on terms acceptable to them. Based on Petrobras' announced deepwater drilling program and the performance characteristics of the Amethyst design, AFCL believes that Petrobras has significant needs for AFCL's rigs. AFCL further believes that, while Petrobras may seek to renegotiate certain of the terms of the Charters, there is significant likelihood that Petrobras will not ultimately cancel the Charters. There can be no assurance, however, that this will be the case. In order to continue as a going concern, the Company must complete construction of the rigs on a timely basis and within budget and either Petrobras must honor its present Charters or the Company must obtain similar contracts for its rigs and remain in compliance with its debt agreements. The financial statements do not contain any adjustments to the carrying amounts of assets or the recorded amounts of liabilities as a result of these uncertainties. 6. ACCRUED LIABILITIES Accrued liabilities as of September 30, 1999 and December 31, 1998 consist of the following (in thousands): SEPTEMBER 30, DECEMBER 31, 1999 1998 ---------- ----------- (UNAUDITED) Accrued financing costs......... $ 3,600 $ 3,600 Accrued interest................ 5,616 327 Other accrued expenses.......... 8,546 - ---------- -------- Total accrued liabilities $ 17,762 $ 3,927 ========== =========== During 1999, and in accordance with the financing arrangements, the Company converted $8.2 million of accrued interest to long-term debt. 7. LONG-TERM DEBT On December 16, 1998, the Company completed two financing packages with Mitsubishi Corporation, which provide financing for the construction of the drilling rigs AMETHYST 6 and 7. The facilities allow the Company to draw down the required funds over the period of the rigs' construction when the specified goals set out in the contract have been reached. After delivery of the rigs, the loans will be paid in eighty-four equal monthly installments totaling 85% of the outstanding loans. The payments begin on the 5th day of the second month after the Charters with Petrobras commence. A final balloon payment of 15% is payable with the 84th installment. The Mitsubishi financing agreement includes a stipulation that the Company obtain an additional $100.0 million of capital by October 29, 1999 from another source. Maritima and Pride have guaranteed to Mitsubishi that they will either arrange for or provide such additional capital. The facilities provide for interest, calculated at 12.5% on a 360-day basis during the construction period. After delivery of the rigs, interest is at 11%. Interest is payable monthly with the loan payments. The facilities contain various debt covenants customary for such financings, including limitations on the scope of the businesses of Petrodrill 6 and 7. F-10 AMETHYST FINANCIAL COMPANY LTD. (A DEVELOPMENT-STAGE COMPANY) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED On April 9, 1999, the Company received two financing packages supported by guarantees from the United States of America Maritime Administration or MARAD to fund the construction of the drilling rigs AMETHYST 4 and 5. The facilities allow the Company to draw down the required funds over the period of the rigs' construction when the specified goals set out in the contract have been reached; however, only 87.5% of the construction project has been financed. The loans will be paid in twenty-four equal semi-annual installments starting in 2001. The facilities provide for interest on a floating rate basis during construction and for a maximum of two years after delivery. After this time, the interest rate is fixed. The MARAD agreements contain various debt covenants customary for such financings. Both the Mitsubishi and MARAD facilities include security, which provide the lenders, in certain cases, with an assignment over the rig construction contracts, the Petrobras Charters, the insurance and a first priority ship mortgage on the vessels. The Company's long-term debt as of September 30, 1999 and December 31, 1998 is as follows (in thousands): SEPTEMBER 30, DECEMBER 31, 1999 1998 ------------- ------------- (UNAUDITED) Mitsubishi financing ................ $ 154,300 $ 94,738 MARAD financing ..................... 81,324 -- ------------- ------------- Total long-term debt ..... $ 235,624 $ 94,738 ============= ============= Remaining maturities of long-term debt as of September 30, 1999 are summarized as follows (in thousands): SEPTEMBER 30, 1999 ---------- (UNAUDITED) 2001 .................................................. $ 44,930 2002 .................................................. 47,330 2003 .................................................. 50,030 Thereafter ............................................ 93,334 ---------- Total long-term debt ....................... $ 235,624 ========== As noted in Note 5, Petrobras has threatened to cancel the Charters, which could lead to an event of default under the Company's financing arrangements. 8. SHAREHOLDERS' EQUITY At inception, AFCL was owned 70% by Maritima and 30% by an indirect wholly owned subsidiary of Pride which, either directly or through affiliates or subsidiaries, had primary contractual responsibility for the operations of the Company. In accordance with a shareholders' agreement, at inception the shareholders were required to make initial equity contributions to the Company, in proportion to their respective interests, of approximately 10% of the total construction budget of the drilling rigs. On September 14, 1999, the Company's existing shareholders entered into an agreement with First Reserve Fund VII and First Reserve Fund VIII, whereby the existing shareholders agreed to proportionally recapitalize the Company by converting $92.5 million of their related party advances to the Company into additional equity consisting of 8,250 shares. On the same date, First Reserve Fund VII and First Reserve Fund VIII agreed to pay $11.0 million for 1,100 shares and $1.5 million for 150 shares, respectively. As a result of the completion of the agreement, the Company's share capital increased to $105,000. Based on the above transaction, the proportional ownership interest of the shareholders changed to 61.7% - affiliates of Maritima, 26.4% - subsidiary of Pride, and 11.9% - affiliates of First Reserve Corporation. F-11 AMETHYST FINANCIAL COMPANY LTD. (A DEVELOPMENT-STAGE COMPANY) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED Pride has entered into a "Put and Exchange Agreement" with First Reserve, and granted repurchase rights to Maritima, the consummation of which could result in the original shareholders resuming their original ownership interests. 9. RELATED PARTIES RECEIVABLE As of September 30, 1999 and December 31, 1998, the Company has a receivable from a related party, POINC, of $16.3 million. The shareholders of the Company have provided a letter that in the event that POINC is unable to repay such amount, the shareholders would allow such amount to be offset against amounts advanced by the related parties. ADVANCES Related party advances are composed of advances received from shareholders. In connection with the obtaining of additional capital as discussed in Note 7, the advances have become subordinated to the financing arranged to obtain such additional capital. CONTRACTS In early 1998, POINC entered into contractual agreements with three shipyards for the construction, sale and delivery of six drilling rigs for a total estimated cost of approximately $489.0 million, payable in installments under the terms set forth in the construction contracts. During August 1998, POINC terminated two of the construction contracts with the Canadian Shipyard, Davie Industries, as a result of the yard and its parent company Dominion Bridge filing for protection under Canadian Bankruptcy laws and being in breach of the contract. The operating companies associated with the construction of these two rigs were transferred from AFCL to a related party (see Note 4). Furthermore, the remaining four construction contracts, for a total estimated cost of approximately $338 million, with the Korean Shipyard, Daewoo Heavy Industries, and the USA Shipyard, TDI-Halter L.P., were transferred by POINC to the Company under novation agreements during December 1998. It is estimated that these four drilling rigs will be delivered to the Company over a period between July and October 2000. The construction contracts contain penalties for late completion and delivery of the drilling rigs and, in certain cases, incentives for early completion and delivery. MANAGEMENT AGREEMENT In connection with the design, engineering, construction and management of the drilling rigs, the subsidiaries have entered into various agreements for services with related parties. Licensing of the Amethyst design and services related to the design, engineering and construction of the drilling rigs are provided under agreements with BiGem Holdings N.V. and Petrodrill Engineering N.V., corporations incorporated in the Netherlands Antilles, owned 70% by affiliates of Maritima and 30% by a wholly owned subsidiary of Pride. The licensing agreement provides for a one-time licensing fee to BiGem Holdings of approximately $1.6 million for each drilling rig. Engineering and construction services provided under the construction management agreement are required to be charged to the Company at actual cost incurred by Petrodrill Engineering N.V. (which includes a management fee to a third party under a related subcontract aggregating approximately $0.1 million per year). Management services, including operation support and other technical services, will be provided by Formaritima Ltd., a company incorporated in the British Virgin Islands, owned equally by Maritima and by a wholly owned subsidiary of Pride. In addition to reimbursements for actual costs incurred, the operating management agreement and related subcontracts provide for daily management fees (excluding management fees to be paid pursuant to the marine and nautical agreements discussed in Note 10) aggregating approximately $5.5 million per year, commencing upon the delivery of the drilling rigs to the Company by the shipyards. Unless otherwise provided by the terms of the agreements, the construction management agreement remains in effect until the drilling rigs have been delivered to the Company by the shipyards, and the operating management agreements commence on delivery of the drilling rigs to the Company by the shipyards and remain in effect through the terms of the applicable Charters. The costs of certain of these services are being capitalized during the construction period. As of September 30, 1999, rigs under construction include capitalized cost of services from related parties as follows (in thousands): F-12 AMETHYST FINANCIAL COMPANY LTD. (A DEVELOPMENT-STAGE COMPANY) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED Petrodrill Engineering N.V............................ $12,985 BiGem Holdings N.V.................................... 4,500 ------- $17,485 ======= 10. COMMITMENTS AND CONTINGENCIES SUPPLIER COMMITMENTS The Company has entered into purchase commitments and letters of intent with various equipment vendors, to supply drilling equipment, for a total cost of approximately $164.6 million. MARINE AND NAUTICAL AGREEMENT The Company (either directly or through Formaritima Ltd.) entered into agreements with a third party to provide marine and nautical services to the drilling rigs beginning upon delivery of the drilling rigs to the Company by the shipyards and continuing through the terms of the Charters. Such agreements provide for daily management fees aggregating approximately $1.8 million per year. If a rig is sold and the corresponding marine and nautical services agreement is terminated, the third party will be entitled to a lump sum termination payment equal to the net present value of its management fees over the remaining term of such rig's charter, calculated using a discount factor of 10% per annum. LICENSING AGREEMENTS AND CONTINGENCY PAYMENT The Company has entered into licensing agreements for the design of the drilling rigs with BiGem Holding N.V., which bought the design from De Hoop, a third party Netherlands shipyard. BiGem Holdings N.V. is in dispute with De Hoop over the contract deliverables and has withheld payments of $2.3 million and furthermore does not intend to make further payments. This dispute is now in arbitration and BiGem Holding N.V. firmly believes that no further payments will need to be made. The Company has deemed the probability of payment as remote. The Company has not recorded the above costs in its accounts. OTHER COMPENSATION Affiliates of Maritima shall be entitled to the fees and compensation from the Company as follows. The Company will pay to an affiliate of Maritima a lump-sum amount of $2.5 million (payable in three installments of $0.5 million, $1.0 million, $1.0 million for the AMETHYST 5, 6 and 7, respectively) within three days of receipt of the corresponding mobilization payments under the relevant Charter or, in the event of no mobilization fee, within 45 days of delivery to and acceptance of the relevant drilling rigs, for services rendered in connection with the development of conceptual and design engineering, shipyard negotiations and technical negotiations with Petrobras. In addition, in consideration of the assignment of the Charters to the Company, an affiliate of Maritima will be paid the following fees: (a) $4,000 in the case of the AMETHYST 6 and 7 and (b) $2,000 in the case of the AMETHYST 4 and 5, for each day the relevant drilling rig works under its Charter, plus (c) in the case of the AMETHYST 4, 1% of the daily rate paid under its Charter and (d) in the case of the AMETHYST 6 and 7, 2% of the daily rates under their Charters. In addition, additional affiliates of Maritima will receive agency fees of 3% and 2% of the full operating rates under the Charters, respectively, payable monthly upon receipt of payments from Petrobras, for their assistance to the Company in negotiating the Charters and certain amendments thereto. In the ordinary course of its business affairs and operations, the Company is subject to possible loss contingencies arising from federal, state and local environmental, health and safety laws and regulations and third party litigation. There are no matters, which, in the opinion of management, will have a material adverse effect on the financial position or results of operations of the Company. 11. CONSOLIDATING FINANCIAL INFORMATION (UNAUDITED) The following summarizes certain consolidating financial information of the Company as of September 30, 1999 and December 31, 1998: F-13 AMETHYST FINANCIAL COMPANY LTD. (A DEVELOPMENT-STAGE COMPANY) CONSOLIDATING BALANCE SHEET SEPTEMBER 30, 1999 (UNAUDITED)
AFCL AFCL PETRODRILL 4 PETRODRILL 5 PETRODRILL 6 PETRODRILL 7 ELIMINATIONS CONSOLIDATED --------- ----------- ----------- ----------- ----------- ------------ ------------ Current assets: Cash and cash equivalents $ 13,293 -- -- -- -- -- $ 13,293 Prepaid expenses ......... 672 -- -- -- -- -- 672 --------- ----------- ----------- ----------- ----------- ------------ ------------ Total current assets ..... 13,965 -- -- -- -- -- 13,965 Restricted cash .............. 27,306 -- -- -- -- -- 27,306 Accounts receivable .......... -- -- -- $ 3,925 $ 252 4,177 Related party receivable ..... 40,836 -- -- -- -- $ (24,530) 16,306 Construction in progress ..... 456 $ 93,038 $ 81,417 82,979 87,059 -- 344,949 Deferred costs ............... -- 11,147 12,669 8,997 8,429 -- 41,242 Investments in subsidiaries .. 52,912 -- -- -- -- (52,912) -- --------- ----------- ----------- ----------- ----------- ------------ ------------ $ 135,475 $ 104,185 $ 94,086 $ 95,901 $ 95,740 $ (77,442) $ 447,945 ========= =========== =========== =========== =========== ============ ============ Current liabilities: Accounts payable ......... $ 277 $ 5,048 $ 5,639 $ 4,005 $ 3,149 -- $ 18,118 Accrued liabilities ...... -- 4,416 2,982 5,451 4,913 -- 17,762 --------- ----------- ----------- ----------- ----------- ------------ ------------ Total current liabilities 277 9,464 8,621 9,456 8,062 35,880 Related party advances ....... 29,190 11,655 10,482 1,999 395 $ (24,530) 29,191 Long-term debt ............... -- 45,464 35,859 75,448 78,853 -- 235,624 Accrued contract penalties ... -- 11,147 12,669 8,997 8,429 -- 41,242 --------- ----------- ----------- ----------- ----------- ------------ ------------ Total liabilities ........ 29,467 77,730 67,631 95,900 95,739 (24,530) 341,937 --------- ----------- ----------- ----------- ----------- ------------ ------------ Shareholders' equity: Common stock ............. 11 1 1 1 1 (4) 11 Additional paid-in capital 104,989 26,454 26,454 -- -- (52,908) 104,989 Surplus accumulated in the development stage ............ 1,008 -- -- -- -- -- 1,008 --------- ----------- ----------- ----------- ----------- ------------ ------------ Total shareholders' equity 106,008 26,455 26,455 1 1 (52,912) 106,008 ========= =========== =========== =========== =========== ============ ============ $ 135,475 $ 104,185 $ 94,086 $ 95,901 $ 95,740 $ (77,442) $ 447,945 ========= =========== =========== =========== =========== ============ ============
F-14 AMETHYST FINANCIAL COMPANY LTD. (A DEVELOPMENT-STAGE COMPANY) CONSOLIDATING BALANCE SHEET DECEMBER 31, 1998 (UNAUDITED)
AFCL Petrodrill 2 Petrodrill 3 Petrodrill 4 Petrodrill 5 Petrodrill 6 ------------ ------------- ------------- ------------- -------------- ------------- Current assets: Cash and cash equivalents.......... $ 18,172 --------- Total current assets........... 18,172 Accounts receivable.................... - $ 5,100 Related party receivable............... 115,591 - Construction in progress............... 458 $ 11,988 $ 6,749 $ 51,946 $ 35,089 55,266 Deferred costs......................... - 19,546 20,239 9,070 11,077 9,269 Investment in subsidiaries............. 6 - - - - - ------------ ------------- ------------- ------------- -------------- ------------- $ 134,227 $ 31,534 $ 26,988 $ 61,016 $ 46,166 $ 69,635 ========== =========== ========== ============ ============ ========= Current liabilities Accounts advanced.................. $ 198 $ 4,811 $ 728 $ 8,796 $ 6,185 $ 4,117 Accrued liabilities................ - 9 9 9 9 1,909 ------------ ------------- ------------- ------------- -------------- ------------- Total current liabilities...... 198 4,820 737 8,805 6,194 6,026 Related party advances................. 133,970 7,167 6,011 43,140 28,894 8,851 Long-term debt......................... - - - - - 45,488 Accrued contract penalties............. - 19,546 20,239 9,070 11,077 9,269 ------------ ------------- ------------- ------------- -------------- ------------- Total liabilities.............. 134,168 31,533 26,987 61,015 46,165 69,634 ------------ ------------- ------------- ------------- -------------- ------------- Commitments and contingencies.......... Shareholders' equity: Common stock....................... 1 1 1 1 1 1 Additional paid-in capital......... - - - - - - Surplus accumulated in the development stage.................. 58 - - - - - ------------ ------------- ------------- ------------- -------------- ------------- Total shareholders' equity..... 59 1 1 1 1 1 ------------ ------------- ------------- ------------- -------------- ------------- $134,227 $31,534 $26,988 $61,016 $46,166 $69,635 ------------ ------------- ------------- ------------- -------------- -------------
AFCL Petrodrill 7 Eliminations Consolidated ------------- ------------- -------------- Current assets: Cash and cash equivalents.......... $ 18,172 ----------- Total current assets........... 18,172 Accounts receivable.................... $ 5,100 10,200 Related party receivable............... - $ (99,434) 16,157 Construction in progress............... 59,170 - 220,666 Deferred costs......................... 8,684 - 77,885 Investment in subsidiaries............. _ - (6) __ - ------------- ------------- -------------- $ 72,954 $ (99,440) $ 343,080 ========= ============= =========== Current liabilities Accounts advanced.................. $ 7,735 $ 32,570 Accrued liabilities................ 1,982 3,927 ------------- ------------- -------------- Total current liabilities...... 9,717 36,497 Related party advances................. 5,302 $ (99,434) 133,901 Long-term debt......................... 49,250 - 94,738 Accrued contract penalties............. 8,684 - 77,885 ------------- ------------- -------------- Total liabilities.............. 72,953 (99,434) 343,021 ------------- ------------- -------------- Commitments and contingencies.......... Shareholders' equity: Common stock....................... 1 (6) 1 Additional paid-in capital......... - - - Surplus accumulated in the development stage.................. - - 58 ------------- ------------- -------------- Total shareholders' equity..... 1 (6) 59 ------------- ------------- -------------- $72,954 $(99,440) $343,080 ------------- ------------- --------------
F-15 APPENDIX A PRIDE INTERNATIONAL, INC. WHERE YOU CAN FIND MORE INFORMATION This prospectus incorporates important business and financial information about Pride International, Inc. that we have not included in or delivered with this prospectus. This information is available without charge upon written or oral request. You should make any request to Robert W. Randall, Vice President and General Counsel, 5847 San Felipe, Suite 3300, Houston, Texas 77057, telephone number (713) 789-1400. To ensure timely delivery, you should request the information no later than , 2000. Pride files annual, quarterly and special reports, proxy statements and other information with the SEC. You can read and copy any materials Pride files with the SEC at the SEC's Public Reference Room 450 Fifth Street, N.W., Washington, D.C. 20549. You can obtain information about the operation of the SEC's Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a Web Site that contains information Pride files electronically with the SEC. You can access the SEC's Web Site over the Internet at HTTP://WWW.SEC.GOV. You can also obtain information about Pride at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005. We are "incorporating by reference" information Pride files with the SEC, which means that we are disclosing important information to you by referring you to those documents. The information we incorporate by reference is an important part of this prospectus, and later information that Pride files with the SEC automatically will update and supersede this information. We incorporate by reference the documents listed below and any future filings Pride makes with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 (file no. 1-13289) until the offering made by this prospectus terminates: o Pride's annual report on Form 10-K for the year ended December 31, 1998 o Pride's quarterly report on Form 10-Q for the quarters ended March 31, 1999, June 30, 1999 and September 30, 1999 o Pride's current reports on Form 8-K dated January 12, 1999 and May 25, 1999 You may request a copy of these filings (other than an exhibit to these filings unless we have specifically incorporated that exhibit by reference into this filing), at no cost, by writing or telephoning Pride at the following address: Pride International, Inc. 5847 San Felipe, Suite 3300 Houston, Texas 77057 Attn: Robert W. Randall Vice President and General Counsel Telephone (713) 789-1400 PricewaterhouseCoopers LLP has audited the financial statements of Pride included in Pride's annual report on Form 10-K for the year ended December 31, 1998, which we incorporate by reference in this prospectus. We have incorporated by reference those financial statements in reliance upon the opinion of PricewaterhouseCoopers LLP appearing in Pride's annual report, which opinion was given upon the authority of that firm as experts in accounting and auditing. RISK FACTORS RELATED TO PRIDE IN CONSIDERING THE CREDITWORTHINESS OF PRIDE'S SENIOR UNSECURED CORPORATE GUARANTEE OF THE REPAYMENT OF UP TO $30.0 MILLION OF THE OLD NOTES AND NEW NOTES, YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS DESCRIBED BELOW. LOW OIL AND GAS PRICES HAVE NEGATIVELY AFFECTED PRIDE'S FINANCIAL RESULTS, WILL RESULT IN A LOSS FOR 1999 AND MAY CONTINUE TO AFFECT PRIDE'S RESULTS IN 2000 AND BEYOND. Depressed market conditions may adversely affect Pride's results of operations and its liquidity and thus its ability to make payments on its limited guarantee of the notes. The profitability of Pride's operations depends significantly upon conditions in the oil and gas industry and, specifically, the level of ongoing exploration and production expenditures of oil and gas company customers. The demand for contract drilling and related services is directly influenced by many factors beyond Pride's control, including: o oil and gas prices o expectations about future prices o the cost of producing and delivering oil and gas A-1 o government regulations o local and international political and economic conditions o the ability of the Organisation of Petroleum Exporting Countries (OPEC) to set and maintain production levels and prices o the level of production by non-OPEC countries o the policies of various governments regarding exploration and development of their oil and gas reserves In spite of increased prices that have accompanied OPEC's recent imposition of more restrictive production quotas on its members, both offshore drilling activity, particularly in the U.S. Gulf of Mexico, and international land-based activity have been relatively depressed. During 1999, a significant number of companies exploring for oil and gas have curtailed or canceled some of their drilling programs, thereby reducing demand for drilling services. This reduction in demand has significantly eroded daily rates and utilization of Pride's rigs, particularly in offshore Gulf of Mexico and onshore South American operations. This erosion in daily rates and utilization is currently having a negative impact on Pride's financial results. In addition, there are a number of deepwater rigs currently under construction, some of which are not under contract. If demand for deepwater drilling services does not increase to meet this increased capacity, Pride could face competition from these and other rigs for future deepwater contracts. As of September 30, 1999, five of Pride's 11 mat-supported jackup rigs in the Gulf of Mexico were idle, and nearly all of the remainder were working under contracts that expire by the end of the year. Approximately 60% of Pride's platform rigs in that area were idle, with the remainder working at substantially lower daily rates than during 1998. Pride is also continuing to experience weakness in land drilling and workover operations in South America, particularly Venezuela where private-sector exploration and production activity levels have been reduced. As a result, Pride's EBITDA in the first six months of 1999 was insufficient to cover its interest expense in that quarter, and its earnings (consisting of earnings before income taxes plus fixed charges less capitalized interest) were insufficient to cover its fixed charges (consisting of interest expense, capitalized interest and that portion of operating lease rental expense deemed to represent the interest factor) for the quarter. Pride expects to realize substantially less revenue from the assets working in these areas in the near term than in recent periods. Pride's operating costs will not, however, decrease proportionately. This revenue decrease will adversely affect results of operations for at least the near term, substantially reducing revenues, cash flows, EBITDA and earnings and resulting in losses for 1999 and potentially beyond. In addition, earnings in future quarters may be insufficient to cover fixed charges in those quarters, and further deterioration in market conditions may result in EBITDA being insufficient to cover interest expense in those quarters. INTERNATIONAL EVENTS MAY HURT PRIDE'S OPERATIONS. Pride derives a significant portion of its revenues from operations in South America, the Middle East, Southeast Asia and other international areas. Risks associated with operating in international markets include the following: o foreign exchange restrictions and currency fluctuations o changes in foreign tax rates o political instability o foreign and domestic monetary and tax policies o expropriation o nationalization o nullification or modification of contracts o war and civil disturbances Additionally, Pride's ability to compete in international contract drilling markets may be adversely affected by foreign governmental regulations that favor or require the awarding of contracts to local contractors or by regulations requiring foreign contractors to employ citizens of, or purchase supplies from, a particular jurisdiction. Furthermore, Pride's foreign subsidiaries may face governmentally imposed restrictions from time to time on their ability to transfer funds to Pride. DELAYS OR COST OVERRUNS IN CONSTRUCTION AND REFURBISHMENT PROJECTS COULD MATERIALLY AFFECT PRIDE'S RESULTS OF OPERATIONS. Pride has expended, and in 1999 will continue to expend, significant amounts to complete construction of new rigs, including two drillships, and, to a lesser extent, to upgrade and refurbish other rigs. In addition, Pride has made and may continue to make equity contributions to us. All of these construction projects are subject to the risks of delay or cost overruns inherent in construction projects. These risks include: o unforeseen engineering problems o work stoppages A-2 o weather interference o unanticipated cost increases o delays in receipt of necessary equipment o inability to obtain the requisite permits or approvals Significant construction cost overruns could have a material adverse effect on Pride's financial position and cash flows. Significant delays could also have a material adverse effect on contract commitments for such rigs. Petrobras has recently cancelled contracts with another contract drilling company that experienced significant delays in a major rig construction project. PRIDE'S CUSTOMERS MAY SEEK TO CANCEL OR RENEGOTIATE SOME DRILLING CONTRACTS DURING DEPRESSED MARKET CONDITIONS OR IF PRIDE EXPERIENCES OPERATIONAL DIFFICULTIES. During depressed market conditions, a customer may no longer need a rig that is currently under contract or may be able to obtain a comparable rig at a lower daily rate. As a result, customers may seek to renegotiate the terms of their existing drilling contracts or avoid their obligations under those contracts. In addition, customers may seek to terminate existing contracts if Pride experiences operational problems. The deepwater markets in which Pride operates require the use of floating rigs with sophisticated positioning, subsea and related systems designed for drilling in deep water. If this equipment fails to function properly, the rig cannot engage in drilling operations, and customers may have the right to terminate the drilling contracts. The likelihood that a customer may seek to terminate a contract for operational difficulties is increased during market downturns like the one currently being experienced. The cancellation of a number of Pride's drilling contracts could adversely affect Pride's results of operations. PRIDE'S SIGNIFICANT DEBT LEVELS AND DEBT AGREEMENT RESTRICTIONS MAY LIMIT PRIDE'S FLEXIBILITY IN OBTAINING ADDITIONAL FINANCING AND IN PURSUING OTHER BUSINESS OPPORTUNITIES. As of September 30, 1999, Pride had approximately $1,188.5 million in long-term debt and capital lease obligations. Excluded from this amount are certain financial and other guarantees, including the limited guarantee of the notes, and certain other obligations relating to Pride's 26.4% equity interest in the Amethyst joint venture. This joint venture has significant indebtedness that is nonrecourse to Pride and thus is not reflected on Pride's balance sheet. The level of Pride's indebtedness will have several important effects on future operations, including: o a significant portion of Pride's cash flow from operations will be dedicated to the payment of interest and principal on debt and will not be available for other purposes o covenants contained in some of Pride's existing debt arrangements require Pride to meet certain financial tests, which may affect Pride's flexibility in planning for, and reacting to, changes in its business and may limit its ability to fund capital expenditures, dispose of assets, withstand current or future economic or industry downturns and compete with others in the industry for strategic opportunities o Pride's ability to obtain additional financing for working capital, capital expenditures, acquisitions, general corporate and other purposes may be limited Pride's ability to meet its debt service obligations and to reduce its total indebtedness will be dependent upon its future performance, which will be subject to general economic conditions, industry cycles and financial, business and other factors affecting operations, may of which are beyond Pride's control. PRIDE'S LIMITED GUARANTEE OF THE NOTES WILL BE EFFECTIVELY SUBORDINATED TO ALL OF PRIDE'S EXISTING AND FUTURE SECURED DEBT AND ALL OF THE DEBT OF ITS SUBSIDIARIES Pride's limited guarantee of the notes will be effectively subordinated in right of payment to all of its existing and future secured debt, including debt Pride may incur under its credit facilities. If Pride is involved in any dissolution, liquidation or reorganization, its secured debt holders would be paid before there are payments of any amounts due under Pride's limited guarantee of the notes to the extent of the value of the assets securing its debt. In that event, holders of the notes may not be able to recover any amounts due under Pride's limited guarantee of the notes. In addition, Pride's limited guarantee of the notes is effectively subordinated to all of the creditors, including trade creditors and tort claimants, of its subsidiaries. Pride conducts substantially all of its operations through both U.S. and foreign subsidiaries, and substantially all of its assets consist of equity in such subsidiaries. Accordingly, Pride is and will be dependent on its ability to obtain funds from its subsidiaries to service its debt. Financing arrangements to which Pride's subsidiaries are parties impose restrictions on Pride's ability to gain access to the cash flow or assets of its subsidiaries. In addition, Pride's foreign subsidiaries may face governmentally imposed restrictions on their ability to transfer funds to Pride. A-3 As of September 30, 1999, Pride had $169.8 million of secured debt and its subsidiaries had $324.0 million of debt and other liabilities outstanding to creditors other than Pride. In addition, Pride had another $36.5 million of borrowing availability under its revolving credit facility. PRIDE IS SUBJECT TO HAZARDS CUSTOMARY IN THE OILFIELD SERVICE INDUSTRY AND TO THOSE MORE SPECIFIC TO MARINE OPERATIONS. PRIDE MAY NOT HAVE INSURANCE TO COVER ALL THESE HAZARDS. Pride's operations are subject to the many hazards customary in the oilfield services industry. Contract drilling and well servicing require the use of heavy equipment and exposure to hazardous conditions, which may subject Pride to liability claims by employees, customers and third parties. These hazards can cause personal injury or loss of life, severe damage to or destruction of property and equipment, pollution or environmental damage and suspension of operations. Pride's offshore fleet is also subject to hazards inherent in marine operations, either while on site or during mobilization, such as capsizing, sinking and damage from severe weather conditions. In certain instances, contractual indemnification of customers or others is required of Pride. Pride maintains workers' compensation insurance for its employees and other insurance coverage for normal business risks, including general liability insurance. Although Pride believes its insurance coverage to be adequate and in accordance with industry practice against normal risks in its operations, any insurance protection may not be sufficient or effective under all circumstances or against all hazards to which Pride may be subject. The occurrence of a significant event against which Pride is not fully insured, or of a number of lesser events against which Pride is insured, but subject to substantial deductibles, could materially and adversely affect Pride's operations and financial condition. Moreover, Pride may not be able to maintain adequate insurance in the future at rates or on terms Pride considers reasonable or acceptable. GOVERNMENTAL REGULATIONS AND ENVIRONMENTAL LIABILITIES MAY ADVERSELY AFFECT PRIDE'S OPERATIONS. Many aspects of Pride's operations are subject to numerous governmental regulations that may relate directly or indirectly to the contract drilling and well servicing industries, including those relating to the protection of the environment. Laws and regulations protecting the environment have become more stringent in recent years and may impose strict liability, rendering Pride liable for environmental damage without regard to negligence or fault on Pride's part. These laws and regulations may expose Pride to liability for the conduct of, or conditions caused by, others or for acts that were in compliance with all applicable laws at the time the acts were preformed. The application of these requirements or the adoption of new requirements could have a material adverse effect on Pride. In addition, the modification of existing laws or regulations or the adoption of new laws or regulations curtailing exploratory or development drilling for oil and gas could have a material adverse effect on Pride's operations by limiting future contract drilling opportunities. From time to time, certain of Pride's foreign subsidiaries operate in countries such as Libya and Iran that are subject to sanctions and embargoes imposed by the U.S. Government. Although these sanctions and embargoes do not prohibit those subsidiaries from completing existing contracts or from entering into new contracts to provide drilling services in such countries, they do prohibit Pride and its domestic subsidiaries, as well as employees of Pride's foreign subsidiaries who are U.S. citizens, from participating in or approving any aspect of the business activities in those countries. These constraints on Pride's ability to have U.S. persons provide managerial oversight and supervision may adversely affect the financial or operating performance of such business activities. A-4 APPENDIX B REPUBLIC NATIONAL BANK OF NEW YORK THE INFORMATION CONTAINED IN THIS APPENDIX TO THIS PROSPECTUS HAS BEEN OBTAINED FROM SOURCES MADE PUBLICLY AVAILABLE BY REPUBLIC NATIONAL BANK OF NEW YORK AND REPUBLIC NEW YORK CORPORATION AND IS NOT TO BE CONSTRUED AS A REPRESENTATION BY AMETHYST FINANCIAL COMPANY LTD. OR ITS AFFILIATES. Republic National Bank of New York is a wholly owned subsidiary and the principal asset of Republic New York Corporation. Based on Republic New York Corporation's annual report on Form 10-K for the year ended December 31, 1998, Republic National Bank and its consolidated subsidiaries had, at December 31, 1998, total deposits of approximately $33.5 billion, total assets of approximately $46.5 billion and stockholder's equity of approximately $3.1 billion and accounted for approximately 90% of the consolidated assets, approximately 90% of the consolidated revenues and more than 100% of the consolidated net income of Republic New York Corporation for the year ended December 31, 1998. Republic New York Corporation has entered into an agreement to be acquired by HSBC Holdings, plc for approximately $9.85 billion. The stockholders of Republic New York Corporation approved the transaction on November 30, 1999, but the transaction remains subject to regulatory approval. The recent death of Republic New York Corporation founder Edmond Safra may, but is not expected to, affect the transaction. WHERE YOU CAN FIND MORE INFORMATION Republic New York Corporation files reports and other information with the SEC. You can read and copy any materials Republic New York Corporation files with the SEC at the SEC's Public Reference Room 450 Fifth Street, N.W., Washington, D.C. 20549. You can obtain information about the operation of the SEC's Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a Web Site that contains information Republic New York Corporation files electronically with the SEC. You can access the SEC's Web Site over the Internet at HTTP://WWW.SEC.GOV. Republic National Bank files reports and other information with the Federal Financial Institution Examination Council. You can obtain the publicly available portions of those reports and other information by writing to the Federal Deposit Insurance Corporation's Disclosure Group at FDIC, Department 0691, Washington, D.C. 20073-0691 or by calling the Federal Deposit Insurance Corporation at 1-800-945-2186. The Federal Financial Institution Examination Council also maintains a Web Site that contains the publicly available portions of those reports and other information. You can access the Federal Financial Institution Examination Council's Web Site over the Internet at HTTP://WWW.FFIEC.GOV. We refer you to the documents listed below and any future filings Republic New York Corporation makes with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 (file no. 1-7436) or Republic National Bank makes with the Federal Financial Institution Examination Council until the offering made by this prospectus terminates: o Republic New York Corporation's annual report on Form 10-K for the year ended December 31, 1998, which includes, on page 61, the December 31, 1997 and 1998 audited Consolidated Statements of Condition of Republic National Bank o Republic New York Corporation's quarterly reports on Form 10-Q for the quarters ended March 31, 1999, June 30, 1999 and September 30, 1999 o Republic New York Corporation's current reports on Form 8-K dated May 11, 1999 (as amended by Republic New York Corporation's current report on Form 8-K/A May 14, 1999), August 5, 1999, September 3, 1999, September 7, 1999, September 27, 1999, October 1, 1999, October 22, 1999 and November 8, 1999 o the publicly available portions of the Consolidated Reports of Condition of Republic National Bank and Consolidated Reports of Income of Republic National Bank as of and for the years ended December 31, 1997 and 1998 and for each subsequent quarter for which such a report has been prepared, in each case, as submitted to the Federal Financial Institution Examination Council B-1 PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 57 of the British Virgin Islands International Business Corporations Ordinance provides as follows: 1. Subject to Subsection 2 and any limitations in its memorandum or articles, a company incorporated under this Ordinance may indemnify against all expenses, including legal fees, and against all judgments, fines and amounts paid in settlement and reasonably incurred in connection with legal, administrative or investigative proceedings any person who: a. is or was a party or is threatened to be made a party to any threatened, pending or completed proceedings, whether civil, criminal, administrative or investigative by reason of the fact that the person is or was a director, an officer or a liquidator of the company; or b. is or was, at the request of the company, serving as a director, officer or liquidator of, or in any other capacity is or was acting for, another company or a partnership, joint venture, trust or other enterprise. 2. Subsection 1 only applies to a person referred to in that subsection if the person acted honestly and in good faith with a view to the best interests of the company and, in the case of criminal proceedings, the person has no reasonable cause to believe that his conduct was unlawful. 3. The decision of the directors as to whether the person acted honestly and in good faith and with a view to the best interests of the company and as to whether the person had no reasonable cause to believe that his conduct was unlawful is in the absence of fraud, sufficient for purposes of this section, unless a question of law is involved. 4. The termination of any proceedings by any judgment, order, settlement, conviction or the entering of a nolle prosequi does not, by itself, create a presumption that the person did not act honestly and in good faith with a view to the best interests of the company or that the person had no reasonable cause to believe that his conduct was unlawful. 5. If the person referred to in Subsection 1 has been successful in defense of any proceedings referred to in Subsection 1, the person is entitled to be indemnified against all expenses, including legal fees, and against all judgments, fines and amounts paid in settlement and reasonably incurred by the person in connection with the proceedings. In addition, Section 58 of the British Virgin Islands International Business Corporations Ordinance provides as follows: A company incorporated under this Ordinance may purchase and maintain insurance in relation to any person who is or was a director, an officer or a liquidator of the company, or who at the request of the company is or was serving as a director, an officer or a liquidator of, or in any other capacity is or was acting for, another company or a partnership, joint venture, trust or other enterprise, against any liability asserted against the person and incurred by the person in that capacity, whether or not the company has or would have had the power to indemnify the person against the liability under Subsection 1 of Section 57. Regulations 90 through 95 of the Articles of Association of Amethyst Financial Company Ltd. provide as follows: 90. Subject to Regulation 91 the Company shall indemnify against all expenses, including legal fees, and against all judgments, fines and amounts paid in settlement and reasonably incurred in connection with legal, administrative or investigative proceedings any person who (a) is or was a party or is threatened to be made a party to any threatened, pending or completed proceedings, whether civil, criminal, administrative or investigative by reason of the fact that the person is or was a director, an officer or a liquidator of the Company; or (b) is or was, at the request of the Company, serving as a director, officer or liquidator of, or in any other capacity is or was acting for, another company or a partnership, joint venture, trust or other enterprise. 91. Regulation 90 only applies to a person referred to in that Regulation if the person acted honestly and in good faith with a view to the best interests of the Company and, in the case of criminal proceedings, the person has no reasonable cause to believe that his conduct was unlawful. II-1 92. The decision of the directors as to whether the person acted honestly and in good faith and with a view to the best interests of the Company and as to whether the person had no reasonable cause to believe that his conduct was unlawful is in the absence of fraud, sufficient for purposes of these Articles, unless a question of law is involved. 93. The termination of any proceedings by any judgment, order, settlement, conviction or the entering of a nolle prosequi does not, by itself, create a presumption that the person did not act honestly and in good faith with a view to the best interests of the Company or that the person had no reasonable cause to believe that his conduct was unlawful. 94. If the person referred to in Regulation 90 has been successful in defense of any proceedings referred to in that Regulation, the person is entitled to be indemnified against all expenses, including legal fees, and against all judgments, fines and amounts paid in settlement and reasonably incurred by the person in connection with the proceedings. 95. The Company may purchase and maintain insurance in relation to any person who is or was a director, an officer or a liquidator of the Company, or who at the request of the Company is or was serving as a director, an officer or a liquidator of, or in any other capacity is or was acting for, another company or a partnership, joint venture, trust or other enterprise, against any liability asserted against the person and incurred by the person in that capacity, whether or not the Company has or would have had the power to indemnify the person against the liability under Regulation 90. Section 83 of the Business Corporation Law of the State of Louisiana gives corporations the power to indemnify officers and directors under certain circumstances. Article IX of Pride International's Amended and Restated Articles of Incorporation and Section 13 of Pride International's Bylaws contain provisions that provide for indemnification of certain persons (including officers and directors). ITEM 21. EXHIBITS AND FINANCIAL SCHEDULES (a) EXHIBITS. The following instruments and documents are included as Exhibits to this Registration Statement. Exhibits incorporated by reference are so indicated by parenthetical information. EXHIBIT NO. EXHIBIT - - ----------- ------- 3.1 Memorandum of Association of Amethyst Financial Company Ltd. 3.2 Articles of Association of Amethyst Financial Company Ltd. 4.1 A/B Exchange Registration Rights Agreement dated October 28, 1999 among Amethyst Financial Company Ltd., Pride International, Inc., Maritima Petroleo e Engenharia Ltda. and Donaldson, Lufkin & Jenrette Securities Corporation. 4.2 Purchase Agreement dated October 28, 1999 between Amethyst Financial Company Ltd. and Donaldson, Lufkin & Jenrette Securities Corporation relating to $53 million aggregate principal amount of 11 3/4% Senior Secured Notes due 2001. 4.3 Indenture dated November 1, 1999 among Amethyst Financial Company Ltd., Pride International, Inc., Maritima Petroleo e Engenharia Ltda. and Wilmington Trust Company. *4.3(a) First Supplemental Indenture dated , 2000 among Amethyst Financial Company Ltd., Pride International, Inc., Maritima Petroleo e Engenharia Ltda. and Wilmington Trust Company. *4.4 Form of New Note (attached to the First Supplemental Indenture dated , 2000 among Amethyst Financial Company Ltd., Pride International, Inc., Maritima Petroleo e Engenharia Ltda. and Wilmington Trust Company filed as Exhibit 4.3(a) to this Registration Statement). 4.5 Senior Secured Note Security and Pledge Agreement dated November 1, 1999 between Amethyst Financial Company Ltd. and Wilmington Trust Company. II-2 4.6 Reserve Account Agreement dated November 1, 1999 between Amethyst Financial Company Ltd. and Wilmington Trust Company. 4.7 Deed of Consent dated November 1, 1999 among Amethyst Financial Company Ltd., Petrodrill Six Limited, Petrodrill Seven Limited, Pride International, Inc., Maritima Petroleo e Engenharia Ltda., Petro Dia Three S.A., Petro Dia Four S.A., Mitsubishi Corporation (UK) PLC and Wilmington Trust Company. 4.8 Loan Agreement dated December 1998 among Petrodrill Seven Limited, Petro Dia Three S.A., Petro Dia Four S.A. and Mitsubishi Corporation (UK) PLC. 4.9 Loan Agreement dated December 19, 1998 among Petrodrill Six Limited, Petro Dia Three S.A., Petro Dia Four S.A. and Mitsubishi Corporation (UK) PLC. 4.10 Deed of Guarantee and Undertaking dated December 19, 1998 among Petrodrill Seven Limited, Pride International, Inc., Maritima Petroleo e Engenharia Ltda., Petro Dia Three S.A., Petro Dia Four S.A. and Mitsubishi Corporation (UK) PLC. 4.11 Deed of Guarantee and Undertaking dated December 19, 1998 among Petrodrill Six Limited, Pride International, Inc., Maritima Petroleo e Engenharia Ltda., Petro Dia Three S.A., Petro Dia Four S.A. and Mitsubishi Corporation (UK) PLC. 4.12 Floor Guarantee dated December 19, 1998 among Pride International, Inc., Maritima Petroleo e Engenharia Ltda., Petro Dia Three S.A. and Petro Dia Four S.A. 4.13 Inter-Company Cross Guarantee dated December 19, 1998 among Amethyst Financial Company Ltd., Petrodrill Six Limited, Petrodrill Seven Limited and Mitsubishi Corporation (UK) PLC. 4.14 Transfer Certificate dated November 1, 1999 among Amethyst Financial Company Ltd., Petro Dia Three S.A., Petro Dia Four S.A. and Mitsubishi Corporation (UK) PLC, relating to the Limited Loan Agreement dated December 19, 1998 among Petrodrill Seven Limited, Petro Dia Three S.A., Petro Dia Four S.A. and Mitsubishi Corporation (UK) PLC. 4.15 Transfer Certificate dated November 1, 1999 among Amethyst Financial Company Ltd., Petro Dia Three S.A., Petro Dia Four S.A. and Mitsubishi Corporation (UK) PLC, relating to the Loan Agreement dated December 19, 1998 among Petrodrill Six Limited, Petro Dia Three S.A., Petro Dia Four S.A. and Mitsubishi Corporation (UK) PLC. 4.16 Commitment to Guarantee Obligation by the United States of America accepted by Petrodrill Five Limited dated April 9, 1999. 4.17 Commitment to Guarantee Obligation by the United States of America accepted by Petrodrill Four Limited dated April 9, 1999. 4.18 Credit Agreement dated April 9, 1999 among Petrodrill Five Limited, Govco Inc., Citibank, N.A., Citibank International PLC and Citicorp North America, Inc. 4.19 Credit Agreement dated April 9, 1999 among Petrodrill Four Limited, Govco Inc., Citibank, N.A., Citibank International PLC and Citicorp North America, Inc. 4.20 Security Agreement dated April 9, 1999 between Petrodrill Five Limited and the United States of America. II-3 4.21 Security Agreement dated April 9, 1999 between Petrodrill Four Limited and the United States of America. 4.22 Trust Indenture dated April 9, 1999 between Petrodrill Five Limited and FMB Trust Company, National Association. 4.23 Trust Indenture dated April 9, 1999 between Petrodrill Four Limited and FMB Trust Company, National Association. 4.24 Guaranty Agreement dated April 9, 1999 in favor of the United States by Petrodrill Five Limited. 4.25 Guaranty Agreement dated April 9, 1999 in favor of the United States by Petrodrill Four Limited. 4.26 Guaranty Agreement dated April 9, 1999 in favor of the United States by Pride International, Inc. 4.27 Payment Undertaking in Favor of the United States dated April 9, 1999 by Maritima Petroleo e Engenharia Ltda. 4.28 Interguarantor Agreement dated April 9, 1999 between Pride International, Inc. and Maritima Petroleo e Engenharia Ltda. 4.29 Title XI Reserve Fund and Financial Agreement dated April 9, 1999 between Petrodrill Five Limited and the United States of America. 4.30 Title XI Reserve Fund and Financial Agreement dated April 9, 1999 between Petrodrill Four Limited and the United States of America. 4.31 Amended and Restated Credit Agreement dated as of December 22, 1997 among Pride International, Inc., each of the banks that are or may be a party thereto, Bank One, Louisiana, N.A. (formerly named First National Bank of Commerce), as arranger and syndication agent, and Wells Fargo Bank (Texas), National Association, as administrative agent and documentation agent (incorporated by reference to Exhibit 4.8 to Pride International, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1997, File No. 1-13289). 4.32 First Amendment to Credit Agreement dated as of April 24, 1998 among Pride International, Inc., certain of its subsidiaries, Bank One, Louisiana, N.A. (formerly named First National Bank of Commerce), as arranger and syndication agent, Wells Fargo Bank (Texas), National Association, as administrative and documentation agent, and the lenders named therein (incorporated by reference to Exhibit 4.2 to Pride International, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1998, File No. 1-13289). 4.33 Second Amendment to Credit Agreement dated as of September 17, 1998 among Pride International, Inc., certain of its subsidiaries, Bank One, Louisiana, N.A. (formerly named First National Bank of Commerce), as arranger and syndication agent, Wells Fargo Bank (Texas), National Association, as administrative and documentation agent, and the lenders named therein (incorporated by reference to Exhibit 4.3 to Pride International, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1998, File No. 1-13289). 4.34 Third Amendment to Credit Agreement dated as of December 21, 1998 among Pride International, Inc., certain of its subsidiaries, Bank One, Louisiana, N.A. (formerly named First National Bank of Commerce), as arranger and syndication agent, Wells Fargo Bank (Texas), National Association, as administrative and documentation agent, and the lenders named therein (incorporated by reference to Exhibit 4.6 to Pride International, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998, File No. 1-13289). II-4 4.35 Indenture, dated as of May 1, 1997, by and between Pride International, Inc. and The Chase Manhattan Bank, as trustee (incorporated by reference to Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997, File Nos. 0-16961 and 1-13289). 4.36 First Supplemental Indenture, dated as of May 1, 1997, by and between Pride International, Inc. and The Chase Manhattan Bank, as trustee, relating to $325,000,000 principal amount of 9 3/8% Senior Notes due 2007 (incorporated by reference to Exhibit 4.2 to Pride International Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 1997, File Nos. 0-16961 and 1-13289). 4.37 Indenture, dated as of April 1, 1998, between Pride International, Inc. and Marine Midland Bank, as trustee, relating to subordinated debt securities (incorporated by reference to Exhibit 4.1 to Pride International, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1998, File No. 1-13289). 4.38 First Supplemental Indenture, dated as of April 24, 1998, between Pride International, Inc. and Marine Midland Bank, as trustee, relating to Zero Coupon Convertible Subordinated Debentures Due 2018 (incorporated by reference to Exhibit 4.2 to Pride International, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1998, File No. 1-13289). Pride International, Inc. is a party to several debt instruments under which the total amount of securities authorized does not exceed 10% of the total assets of Pride International, Inc. and its subsidiaries on a consolidated basis. Pursuant to paragraph 4(iii)(A) of Item 601(b) of Regulation S-K, Pride International, Inc. agrees to furnish a copy of such instruments to the SEC upon request. *5 Opinion of Baker & Botts, L.L.P. as to the legality of the new notes and the Pride guarantee. 8.1 Opinion of Baker & Botts, L.L.P. regarding U.S. tax matters. 8.2 Opinion of Dancia Penn & Co. regarding British Virgin Islands tax matters. 10.1 Chartering Contract for the AMETHYST 7 (Contract No. 101.2.155.97-9) between Maritima Navegacao e Engenharia Ltda. and Petroleo Brasileiro S.A.--Petrobras. 10.1(a) Rider No. 1 to the Chartering Contract for the AMETHYST 7 (Contract No. 101.2.155.97-9) dated July 10, 1998 among Maritima Petroleo e Engenharia Ltda., Petroleo Brasileiro S.A.--Petrobras and Petrodrill Seven Limited. 10.2 Service Rendering Contract for the AMETHYST 7 (Contract No. 101.0.156.97-1) between Maritima Navegacao e Engenharia Ltda. and Petroleo Brasileiro S.A.--Petrobras. 10.2(a) Rider No. 1 to the Service Rendering Contract for the AMETHYST 7 (Contract No. 101.2.156.97-1) dated August 21, 1998 among Maritima Petroleo e Engenharia Ltda., Petroleo Brasileiro S.A.--Petrobras and Petrodrill Seven Limited. 10.3 Letter Agreement dated January 15, 1998 between Maritima Navegacao e Engenharia Ltda. and Petroleo Brasileiro S.A.--Petrobras relating to the Chartering Contract for the AMETHYST 7 (Contract No. 101.2.155.97-9) and the Service Rendering Contract for the AMETHYST 7 (Contract No. 101.2.156.97-1). II-5 10.4 Letter Agreement dated January 15, 1998 between Maritima Petroleo e Engenharia Ltda. and Petroleo Brasileiro S.A.--Petrobras relating to the Chartering Contract for the AMETHYST 7 (Contract No. 101.2.155.97-9) and the Service Rendering Contract for the AMETHYST 7 (Contract No. 101.2.156.97-1). 10.5 Chartering Contract for the AMETHYST 6 (Contract No. 101.2.159.97-1) dated January 12, 1998 between Maritima Navegacao e Engenharia Ltda. and Petroleo Brasileiro S.A.--Petrobras. 10.5(a) Rider No. 1 to the Chartering Contract for the AMETHYST 6 (Contract No. 101.2.159.97-1) dated July 10, 1998 among Maritima Petroleo e Engenharia Ltda., Petroleo Brasileiro S.A.--Petrobras and Petrodrill Six Limited. 10.6 Service Rendering Contract for the AMETHYST 6 (Contract No. 101.2.160.97-0) dated January 12, 1998 between Maritima Navegacao e Engenharia Ltda. and Petroleo Brasileiro S.A.--Petrobras. 10.6(a) Rider No. 1 to the Service Rendering Contract for the AMETHYST 6 (Contract No. 101.2.160.97-0) dated August 21, 1998 among Maritima Petroleo e Engenharia Ltda., Petroleo Brasileiro S.A.--Petrobras and Petrodrill Six Limited. 10.7 Letter Agreement dated January 15, 1998 between Maritima Navegacao e Engenharia Ltda. and Petroleo Brasileiro S.A.--Petrobras relating to the Chartering Contract for the AMETHYST 6 (Contract No. 101.2.159.97-1) and the Service Rendering Contract for the AMETHYST 6 (Contract No. 101.2.160.97-0). 10.8 Letter Agreement dated January 15, 1998 between Maritima Petroleo e Engenharia Ltda. and Petroleo Brasileiro S.A.--Petrobras relating to the Chartering Contract for the AMETHYST 6 (Contract No. 101.2.159.97-1) and the Service Rendering Contract for the AMETHYST 6 (Contract No. 101.2.160.97-0). 10.9 Chartering Contract for the AMETHYST 5 (Contract No. 101.2.100.97-8) dated December 5, 1997 between Maritima Navegacao e Engenharia Ltda. and Petroleo Brasileiro S.A.--Petrobras. 10.9(a) Rider No. 1 to the Chartering Contract for the AMETHYST 5 (Contract No. 101.2.100.97-8) dated July 10, 1998 among Maritima Petroleo e Engenharia Ltda., Petroleo Brasileiro S.A.--Petrobras and Petrodrill Five Limited. 10.10 Service Rendering Contract for the AMETHYST 5 (Contract No. 101.2.101.97-0) between Maritima Navegacao e Engenharia Ltda. and Petroleo Brasileiro S.A.--Petrobras. 10.10(a) Rider No. 1 to the Service Rendering Contract for the AMETHYST 5 (Contract No. 101.2.101.97-0) dated August 21, 1998 among Maritima Petroleo e Engenharia Ltda., Petroleo Brasileiro S.A.--Petrobras and Petrodrill Five Limited. 10.11 Letter Agreement dated December 5, 1997 between Maritima Navegacao e Engenharia Ltda. and Petroleo Brasileiro S.A.--Petrobras relating to the Chartering Contract for the AMETHYST 5 (Contract No. 101.2.100.97-8) and the Service Rendering Contract for the AMETHYST 5 (Contract No. 101.2.101.97-0). II-6 10.12 Letter Agreement dated January 15, 1998 between Maritima Petroleo e Engenharia Ltda. and Petroleo Brasileiro S.A.--Petrobras relating to the Chartering Contract for the AMETHYST 5 (Contract No. 101.2.100.97-8) and the Service Rendering Contract for the AMETHYST 5 (Contract No. 101.2.101.97-0). 10.13 Chartering Contract for the AMETHYST 4 (Invitation to Bid No. 101.2.063.97-8) between Maritima Navegacao e Engenharia Ltda. and Petroleo Brasileiro S.A.--Petrobras. 10.13(a) Rider No. 1 to the Chartering Contract for the AMETHYST 4 (Invitation to Bid No. 101.2.063.97-8) dated July 10, 1998 among Maritima Petroleo e Engenharia Ltda., Petroleo Brasileiro S.A.--Petrobras and Petrodrill Four Limited. 10.14 Service Rendering Contract for the AMETHYST 4 (Invitation to Bid No. 101.2.064.97-0) between Maritima Navegacao e Engenharia Ltda. and Petroleo Brasileiro S.A.--Petrobras. 10.14(a) Rider No. 1 to the Service Rendering Contract for the AMETHYST 4 (Invitation to Bid No. 101.2.064.97-0) dated August 21, 1998 among Maritima Petroleo e Engenharia Ltda., Petroleo Brasileiro S.A.--Petrobras and Petrodrill Four Limited. 10.15 Letter Agreement dated December 5, 1997 between Maritima Navegacao e Engenharia Ltda. and Petroleo Brasileiro S.A.--Petrobras relating to the Chartering Contract for the AMETHYST 4 (Contract No. 101.2.063.97-2) and the Service Rendering Contract for the AMETHYST 4 (Invitation to Bid No. 101.2.064.97-0). 10.16 Letter dated May 28, 1998 from Petroleo Brasileiro S.A.--Petrobras to Maritima Navegacao e Engenharia Ltda. regarding the Chartering Contracts and Service Rendering Contracts. 10.17 Shipbuilding Contract dated April 9, 1998 among Daewoo Corporation, Daewoo Heavy Industries Ltd. and Petrodrill Construction Inc. for Hull No. 3015 (AMETHYST 7). 10.17(a) Side Letter No. 1 dated April 9, 1998 among Daewoo Corporation, Daewoo Heavy Industries Ltd. and Petrodrill Construction Inc. for Hull No. 3015 (AMETHYST 7). 10.17(b) Side Letter No. 2 dated April 9, 1998 among Daewoo Corporation, Daewoo Heavy Industries Ltd. and Petrodrill Construction Inc. for Hull No. 3015 (AMETHYST 7). 10.17(c) Novation Agreement dated December 4, 1998 among Daewoo Corporation, Daewoo Heavy Industries Ltd., Petrodrill Offshore Inc. and Petrodrill Seven Limited for Hull No. 3015 (AMETHYST 7). 10.17(d) Main Contract Amendment dated December 1998 among Daewoo Corporation, Daewoo Heavy Industries Ltd. and Petrodrill Seven Limited for Hull No. 3015 (AMETHYST 7). 10.17(e) Main Contract Amendment II dated January 28, 1999 among Daewoo Corporation, Daewoo Heavy Industries Ltd. and Petrodrill Seven Limited for Hull No. 3015 (AMETHYST 7). II-7 10.18 Refund Guarantee issued by The Export-Import Bank of Korea to Petrodrill Construction Inc. dated April 16, 1998 for Hull No. 3015 (AMETHYST 7). 10.18(a) Novation Agreement in respect of the Refund Guarantee dated December 4, 1998 among The Export-Import Bank of Korea, Petrodrill Offshore Inc. and Petrodrill Seven Limited for Hull No. 3015 (AMETHYST 7). 10.18(b) Letter of Amendment of Refund Guarantee issued by The Export-Import Bank of Korea to Petrodrill Seven Limited dated April 6, 1999 for Hull No. 3015 (AMETHYST 7). 10.19 Shipbuilding Contract dated April 9, 1998 among Daewoo Corporation, Daewoo Heavy Industries Ltd. and Petrodrill Construction Inc. for Hull No. 3016 (AMETHYST 6). 10.19(a) Side Letter No. 1 dated April 9, 1998 among Daewoo Corporation, Daewoo Heavy Industries Ltd. and Petrodrill Construction Inc. for Hull No. 3016 (AMETHYST 6). 10.19(b) Side Letter No. 2 dated April 9, 1998 among Daewoo Corporation, Daewoo Heavy Industries Ltd. and Petrodrill Construction Inc. for Hull No. 3016 (AMETHYST 6). 10.19(c) Novation Agreement dated December 4, 1998 among Daewoo Corporation, Daewoo Heavy Industries Ltd., Petrodrill Offshore Inc. and Petrodrill Six Limited for Hull No. 3016 (AMETHYST 6). 10.19(d) Main Contract Amendment dated December 1998 among Daewoo Corporation, Daewoo Heavy Industries Ltd. and Petrodrill Six Limited Inc. for Hull No. 3016 (AMETHYST 6). 10.19(e) Main Contract Amendment II dated January 28, 1999 among Daewoo Corporation, Daewoo Heavy Industries Ltd. and Petrodrill Six Limited for Hull No. 3016 (AMETHYST 6). 10.20 Refund Guarantee issued by The Export-Import Bank of Korea to Petrodrill Construction Inc. dated April 16, 1998 for Hull No. 3016 (AMETHYST 6). 10.20(a) Novation Agreement in respect of the Refund Guarantee dated December 4, 1998 among The Export-Import Bank of Korea, Petrodrill Offshore Inc. and Petrodrill Six Limited for Hull No. 3016 (AMETHYST 6). 10.20(b) Letter of Amendment of Refund Guarantee issued by The Export-Import Bank of Korea to Petrodrill Six Limited dated April 6, 1999 for Hull No. 3016 (AMETHYST 6). 10.21 Shipbuilding Contract dated April 9, 1998 between TDI-Halter, L.P. and Petrodrill Construction Inc. for Hull No. 1829 (AMETHYST 5). 10.21(a) Side Letter No. 1 dated April 9, 1998 between TDI-Halter, L.P. and Petrodrill Construction Inc. for Hull No. 1829 (AMETHYST 5). 10.21(b) Side Letter No. 2 dated April 9, 1998 between TDI-Halter, L.P. and Petrodrill Construction Inc. for Hull No. 1829 (AMETHYST 5). 10.21(c) Side Letter No. 3 dated April 9, 1998 between TDI-Halter, L.P. and Petrodrill Construction Inc. for Hull No. 1829 (AMETHYST 5). 10.21(d) Side Letter No. 4 dated April 9, 1998 between TDI-Halter, L.P. and Petrodrill Construction Inc. for Hull No. 1829 (AMETHYST 5). II-8 10.21(e) Side Letter No. 5 dated April 9, 1998 between TDI-Halter, L.P. and Petrodrill Construction Inc. for Hull No. 1829 (AMETHYST 5). 10.21(f) Novation Agreement dated December 9, 1998 between TDI-Halter, L.P., Petrodrill Offshore Inc. and Petrodrill Five Limited for Hull No. 1829 (AMETHYST 5). 10.21(g) Amendment No. 1 to Semi-Submersible Drilling Vessel Construction Contract dated April 9, 1999 between TDI-Halter, L.P. and Petrodrill Five Limited for Hull No. 1829 (AMETHYST 5). 10.22 Performance Bond dated April 13, 1998 between TDI-Halter, L.P. and Fireman's Fund Insurance Company in connection with the construction of Hull No. 1829 (AMETHYST 5). 10.23 Labor and Material Payment Bond dated April 13, 1998 between TDI-Halter, L.P. and Fireman's Fund Insurance Company in connection with the construction of Hull No. 1829 (AMETHYST 5). 10.24 Parent Guarantee dated April 15, 1998 by Halter Marine Group, Inc. in connection with the construction of Hull No. 1829 (AMETHYST 5). 10.25 Shipbuilding Contract dated April 9, 1998 between TDI-Halter, L.P. and Petrodrill Construction Inc. for Hull No. 1828 (AMETHYST 4). 10.25(a) Side Letter No. 1 dated April 9, 1998 between TDI-Halter, L.P. and Petrodrill Construction Inc. for Hull No. 1828 (AMETHYST 4). 10.25(b) Side Letter No. 2 dated April 9, 1998 between TDI-Halter, L.P. and Petrodrill Construction Inc. for Hull No. 1828 (AMETHYST 4). 10.25(c) Side Letter No. 3 dated April 9, 1998 between TDI-Halter, L.P. and Petrodrill Construction Inc. for Hull No. 1828 (AMETHYST 4). 10.25(d) Side Letter No. 4 dated April 9, 1998 between TDI-Halter, L.P. and Petrodrill Construction Inc. for Hull No. 1828 (AMETHYST 4). 10.25(e) Side Letter No. 5 dated April 9, 1998 between TDI-Halter, L.P. and Petrodrill Construction Inc. for Hull No. 1828 (AMETHYST 4). 10.25(f) Novation Agreement dated December 9, 1998 between TDI-Halter, L.P., Petrodrill Offshore Inc. and Petrodrill Four Limited for Hull No. 1828 (AMETHYST 4). 10.25(g) Amendment No. 1 to Semi-Submersible Drilling Vessel Construction Contract dated April 9, 1999 between TDI-Halter, L.P. and Petrodrill Four Limited for Hull No. 1828 (AMETHYST 4). 10.26 Performance Bond dated April 13, 1998 between TDI-Halter, L.P. and Fireman's Fund Insurance Company in connection with the construction of Hull No. 1828 (AMETHYST 4). 10.27 Labor and Material Payment Bond dated April 13, 1998 between TDI-Halter, L.P. and Fireman's Fund Insurance Company in connection with the construction of Hull No. 1828 (AMETHYST 4). 10.28 Parent Guarantee dated April 15, 1998 by Halter Marine Group, Inc. in connection with the construction of Hull No. 1828 (AMETHYST 4). II-9 10.29 Construction Management Agreement dated November 5, 1998 between Petrodrill Seven Limited and Petrodrill Engineering N.V. for the AMETHYST 7. **10.30 Construction Management Agreement dated November 5, 1998 between Petrodrill Six Limited and Petrodrill Engineering N.V. for the AMETHYST 6. **10.31 Construction Management Agreement dated January 25, 1999 between Petrodrill Five Limited and Petrodrill Engineering N.V. for the AMETHYST 5. **10.32 Construction Management Agreement dated January 25, 1999 between Petrodrill Four Limited and Petrodrill Engineering N.V. for the AMETHYST 4. 10.33 Supply Agreement for the AMETHYST 7 dated November 5, 1998 between Pride-Foramer S.A. and Petrodrill Engineering N.V. ***10.34 Supply Agreement for the AMETHYST 6 dated November 5, 1998 between Pride-Foramer S.A. and Petrodrill Engineering N.V. ***10.35 Supply Agreement for the AMETHYST 5 dated January 25, 1999 between Pride-Foramer S.A. and Petrodrill Engineering N.V. ***10.36 Supply Agreement for the AMETHYST 4 dated January 25, 1999 between Pride-Foramer S.A. and Petrodrill Engineering N.V. 10.37 Supply Agreement for the AMETHYST 7 dated November 5, 1998 between Maritima Petroleo e Engenharia Ltda. and Petrodrill Engineering N.V. ***10.38 Supply Agreement for the AMETHYST 6 dated November 5, 1998 between Maritima Petroleo e Engenharia Ltda. and Petrodrill Engineering N.V. ***10.39 Supply Agreement for the AMETHYST 5 dated January 25, 1999 between Maritima Petroleo e Engenharia Ltda. and Petrodrill Engineering N.V. ***10.40 Supply Agreement for the AMETHYST 4 dated January 25, 1999 between Maritima Petroleo e Engenharia Ltda. and Petrodrill Engineering N.V. 10.41 Supply Agreement for the AMETHYST 7 dated November 5, 1998 between Workships Contractors B.V. and Petrodrill Engineering N.V. ***10.42 Supply Agreement for the AMETHYST 6 dated November 5, 1998 between Workships Contractors B.V. and Petrodrill Engineering N.V. ***10.43 Supply Agreement for the AMETHYST 5 between Workships Contractors B.V. and Petrodrill Engineering N.V. ***10.44 Supply Agreement for the AMETHYST 4 between Workships Contractors B.V. and Petrodrill Engineering N.V. 10.45 Management Agreement for the AMETHYST 7 dated November 5, 1998 between Petrodrill Seven Limited and Formaritima Ltd. **10.46 Management Agreement for the AMETHYST 6 dated November 5, 1998 between Petrodrill Six Limited and Formaritima Ltd. II-10 **10.47 Management Agreement for the AMETHYST 5 dated January 25, 1999 between Petrodrill Five Limited and Formaritima Ltd. **10.48 Management Agreement for the AMETHYST 4 dated January 25, 1999 between Petrodrill Four Limited and Formaritima Ltd. 10.49 Technical Services Agreement for the AMETHYST 7 dated November 5, 1998 between Formaritima Ltd. and Pride-Foramer S.A. ***10.50 Technical Services Agreement for the AMETHYST 6 dated November 5, 1998 between Formaritima Ltd. and Pride-Foramer S.A. ***10.51 Technical Services Agreement for the AMETHYST 5 dated January 25, 1999 between Formaritima Ltd. and Pride-Foramer S.A. ***10.52 Technical Services Agreement for the AMETHYST 4 dated January 25, 1999 between Formaritima Ltd. and Pride-Foramer S.A. 10.53 Local Services Agreement for the AMETHYST 7 dated November 5, 1998 between Formaritima Ltd. and Maritima Petroleo e Engenharia Ltda. ***10.54 Local Services Agreement for the AMETHYST 6 dated November 5, 1998 between Formaritima Ltd. and Maritima Petroleo e Engenharia Ltda. ***10.55 Local Services Agreement for the AMETHYST 5 dated January 25, 1999 between Formaritima Ltd. and Maritima Petroleo e Engenharia Ltda. ***10.56 Local Services Agreement for the AMETHYST 4 dated January 25, 1999 between Formaritima Ltd. and Maritima Petroleo e Engenharia Ltda. 10.57 Marine and Nautical Services Agreement for the AMETHYST 7 dated November 5, 1998 between Formaritima Ltd. and Workships Contractors B.V. ***10.58 Marine and Nautical Services Agreement for the AMETHYST 6 dated November 5, 1998 between Formaritima Ltd. and Workships Contractors B.V. **10.59 Marine and Nautical Services Agreement for the AMETHYST 5 dated November 5, 1998 between Petrodrill Five Limited and Workships Contractors B.V. **10.60 Marine and Nautical Services Agreement for the AMETHYST 4 dated November 5, 1998 between Petrodrill Four Limited and Workships Contractors B.V. 10.61 Licensing Agreement for the AMETHYST 7 dated November 5, 1998 between BiGem Holdings N.V. and Petrodrill Seven Limited. **10.62 Licensing Agreement for the AMETHYST 6 dated November 5, 1998 between BiGem Holdings N.V. and Petrodrill Six Limited. **10.63 Licensing Agreement for the AMETHYST 5 dated January 25, 1999 between BiGem Holdings N.V. and Petrodrill Five Limited. **10.64 Licensing Agreement for the AMETHYST 4 dated January 25, 1999 between BiGem Holdings N.V. and Petrodrill Four Limited. 10.65 Amethyst Financial Company Ltd.'s Shareholders' Agreement dated November 5, 1998 among Drillpetro Inc., Techdrill Inc. and Westville Management Corporation. II-11 10.66 Agency and Brokerage Agreement for the AMETHYST 7 dated April 30, 1998 among Petrodrill Seven Limited, U.K. Guaranty & Bonding Corp. Limited and Rapisardi Investment Limited. **10.67 Agency and Brokerage Agreement for the AMETHYST 6 dated April 30, 1998 among Petrodrill Six Limited, U.K. Guaranty & Bonding Corp. Limited and Rapisardi Investment Limited. **10.68 Agency and Brokerage Agreement for the AMETHYST 5 dated April 30, 1998 among Petrodrill Five Limited, U.K. Guaranty & Bonding Corp. Limited and Rapisardi Investment Limited. **10.69 Agency and Brokerage Agreement for the AMETHYST 4 dated April 30, 1998 among Petrodrill Four Limited, U.K. Guaranty & Bonding Corp. Limited and Rapisardi Investment Limited. 10.70 Minutes of Agreement Relating to the Petrobras Contracts dated July 2, 1998 among Drillpetro Inc., Techdrill Inc. and Westville Management Corporation. 15 Awareness Letter of PricewaterhouseCoopers LLP. 21 Subsidiaries of Amethyst Financial Company Ltd. 23.1 Consent of PricewaterhouseCoopers N.V. 23.2 Consent of PricewaterhouseCoopers LLP. 23.3 Consent of Baker & Botts, L.L.P. (contained in Exhibit 8.1). 23.4 Consent of Pedro Calmon Filho & Associados. *23.5 Consent of Pinheiro Neto - Advogados (Rio de Janeiro). 23.6 Consent of Dancia Penn & Co. (contained in Exhibit 8.2). 23.7 Consent of Higgs & Johnson. 23.8 Consent of Bennett & Associates, L.L.C. 24.1 Power of Attorney for Amethyst Financial Company Ltd. (included on the signature page of this Registration Statement). 24.2 Power of Attorney for Pride International, Inc. (included on its signature page of this Registration Statement) *25 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939, as amended, of Wilmington Trust Company under the Indenture, on Form T-1. 99.1 Form of Letter to Clients for Tender of Notes. 99.2 Form of Letter to The Depository Trust Company Participants for Tender of Notes. 99.3 Form of Notice of Guaranteed Delivery. 99.4 Form of Transmittal Letter for Tender of Notes. * To be filed by amendment. ** Substantially identical to the corresponding document for the AMETHYST 7 except as to the parties and the rig. *** Substantially identical to the corresponding document for the AMETHYST 7 except as to the rig. II-12 (b) FINANCIAL STATEMENT SCHEDULES Not applicable. (c) REPORTS OR APPRAISALS Not applicable. ITEM 22. UNDERTAKINGS (a) Each of the undersigned registrants hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this to this Registration Statement: (i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) of the Securities Act if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective Registration Statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the registration statement is on Form S-3 or Form S-8 and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (4) To file a post-effective amendment to the registration statement to include any financial statements required by Rule 3-19 of Regulation S-X at the start of any delayed offering or throughout a continuous offering. Financial statements and information otherwise required by Section 10(a)(3) of the Securities Act need not be furnished, provided that the registrant includes in the prospectus, by means of a post-effective amendment, financial statements required pursuant to this paragraph (a)(4) and other information necessary to ensure that all other information in the prospectus is at least as current as the date of those financial statements. Notwithstanding the foregoing, with respect to registration statements on Form F-3, a post-effective amendment need not be filed to include financial statements and information required by Section 10(a)(3) of the Securities Act or Rule 3-19 of Regulation S-X if such financial statements and information are contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the Form F-3. (b) Each of the undersigned registrants hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrants' annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-13 (c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. (d) Each of the undersigned registrants hereby undertakes: (i) to respond to requests for information that is incorporated by reference into the Prospectus pursuant to Item 4, 10(b), 11, or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means; and (ii) to arrange or provide for a facility in the U.S. for the purpose of responding to such requests. The undertaking in subparagraph (i) above includes information contained in documents filed subsequent to the effective date of the Registration Statement through the date of responding to the request. (e) Each of the undersigned registrants hereby undertakes to supply by means of a post-effective amendment all information concerning the Exchange Offer, that was not the subject of and included in the Registration Statement when it became effective. II-14 POWER OF ATTORNEY Each person whose signature appears below appoints Paul A. Bragg, Earl W. McNiel and Robert W. Randall, and each of them severally, each of whom may act without joinder of the others, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments (including pre- and post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully and for all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, and each of them, or the substitute or substitutes of any or all of them, may lawfully do or cause to be done by virtue hereof. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the undersigned registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil, on December 8, 1999. AMETHYST FINANCIAL COMPANY LTD. By /s/ GERMAN EFROMOVICH German Efromovich President Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on December 8, 1999. SIGNATURE TITLE /s/ GERMAN EFROMOVICH President and Director German Efromovich (Principal Executive Officer) Treasurer /s/ EARL W. MCNIEL (Principal Financial and Earl W. McNiel Accounting Officer) /s JOHN C.G. O'LEARY John C.G. O'Leary Vice President and Director /s/ HAMYLTON PADILHA Hamylton Padilha Vice President and Director Secretary /s/ ROBERT W. RANDALL (Authorized Representative in Robert W. Randall the United States) /s/ RICARDO SZPIGEL Ricardo Szpigel Director II-15 POWER OF ATTORNEY Each person whose signature appears below appoints Paul A. Bragg, Earl W. McNiel and Robert W. Randall, and each of them severally, each of whom may act without joinder of the others, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments (including pre- and post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully and for all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, and each of them, or the substitute or substitutes of any or all of them, may lawfully do or cause to be done by virtue hereof. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the undersigned registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Houston, State of Texas, on December __, 1999. PRIDE INTERNATIONAL, INC. By /s/ PAUL A. BRAGG Paul A. Bragg Chief Executive Officer and President Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on December __, 1999. SIGNATURE TITLE Chief Executive Officer, President /s/ PAUL A. BRAGG and Director Paul A. Bragg (Principal Executive Officer) Vice President, Chief Financial Officer /s/ EARL W. MCNIEL and Treasurer Earl W. McNiel (Principal Financial Officer) /s/ ROBERT W. RANDALL Vice President Robert W. Randall and General Counsel /s/ TERRY VANDAL Controller Terry Vandal (Principal Accounting Officer) /s/ JAMES B. CLEMENT James B. Clement Chairman of the Board /s/ RALPH D. MCBRIDE Ralph D. McBride Vice Chairman of the Board ________________________ Christian J. Boon-Falleur Director II-16 SIGNATURE TITLE /s/ REMI DORVAL Remi Dorval Director /s/ JORGE E. ESTRADA MORA Jorge E. Estrada Mora Director /s/ WILLIAM E. MACAULAY William E. Macaulay Director ________________________ James T. Sneed Director II-17 EXHIBIT INDEX EXHIBIT NO. EXHIBIT - - ----------- ------- 3.1 Memorandum of Association of Amethyst Financial Company Ltd. 3.2 Articles of Association of Amethyst Financial Company Ltd. 4.1 A/B Exchange Registration Rights Agreement dated October 28, 1999 among Amethyst Financial Company Ltd., Pride International, Inc., Maritima Petroleo e Engenharia Ltda. and Donaldson, Lufkin & Jenrette Securities Corporation. 4.2 Purchase Agreement dated October 28, 1999 between Amethyst Financial Company Ltd. and Donaldson, Lufkin & Jenrette Securities Corporation relating to $53 million aggregate principal amount of 11 3/4% Senior Secured Notes due 2001. 4.3 Indenture dated November 1, 1999 among Amethyst Financial Company Ltd., Pride International, Inc., Maritima Petroleo e Engenharia Ltda. and Wilmington Trust Company. *4.3(a) First Supplemental Indenture dated , 2000 among Amethyst Financial Company Ltd., Pride International, Inc., Maritima Petroleo e Engenharia Ltda. and Wilmington Trust Company. *4.4 Form of New Note (attached to the First Supplemental Indenture dated , 2000 among Amethyst Financial Company Ltd., Pride International, Inc., Maritima Petroleo e Engenharia Ltda. and Wilmington Trust Company filed as Exhibit 4.3(a) to this Registration Statement). 4.5 Senior Secured Note Security and Pledge Agreement dated November 1, 1999 between Amethyst Financial Company Ltd. and Wilmington Trust Company. II-18 4.6 Reserve Account Agreement dated November 1, 1999 between Amethyst Financial Company Ltd. and Wilmington Trust Company. 4.7 Deed of Consent dated November 1, 1999 among Amethyst Financial Company Ltd., Petrodrill Six Limited, Petrodrill Seven Limited, Pride International, Inc., Maritima Petroleo e Engenharia Ltda., Petro Dia Three S.A., Petro Dia Four S.A., Mitsubishi Corporation (UK) PLC and Wilmington Trust Company. 4.8 Loan Agreement dated December 1998 among Petrodrill Seven Limited, Petro Dia Three S.A., Petro Dia Four S.A. and Mitsubishi Corporation (UK) PLC. 4.9 Loan Agreement dated December 19, 1998 among Petrodrill Six Limited, Petro Dia Three S.A., Petro Dia Four S.A. and Mitsubishi Corporation (UK) PLC. 4.10 Deed of Guarantee and Undertaking dated December 19, 1998 among Petrodrill Seven Limited, Pride International, Inc., Maritima Petroleo e Engenharia Ltda., Petro Dia Three S.A., Petro Dia Four S.A. and Mitsubishi Corporation (UK) PLC. 4.11 Deed of Guarantee and Undertaking dated December 19, 1998 among Petrodrill Six Limited, Pride International, Inc., Maritima Petroleo e Engenharia Ltda., Petro Dia Three S.A., Petro Dia Four S.A. and Mitsubishi Corporation (UK) PLC. 4.12 Floor Guarantee dated December 19, 1998 among Pride International, Inc., Maritima Petroleo e Engenharia Ltda., Petro Dia Three S.A. and Petro Dia Four S.A. 4.13 Inter-Company Cross Guarantee dated December 19, 1998 among Amethyst Financial Company Ltd., Petrodrill Six Limited, Petrodrill Seven Limited and Mitsubishi Corporation (UK) PLC. 4.14 Transfer Certificate dated November 1, 1999 among Amethyst Financial Company Ltd., Petro Dia Three S.A., Petro Dia Four S.A. and Mitsubishi Corporation (UK) PLC, relating to the Limited Loan Agreement dated December 19, 1998 among Petrodrill Seven Limited, Petro Dia Three S.A., Petro Dia Four S.A. and Mitsubishi Corporation (UK) PLC. 4.15 Transfer Certificate dated November 1, 1999 among Amethyst Financial Company Ltd., Petro Dia Three S.A., Petro Dia Four S.A. and Mitsubishi Corporation (UK) PLC, relating to the Loan Agreement dated December 19, 1998 among Petrodrill Six Limited, Petro Dia Three S.A., Petro Dia Four S.A. and Mitsubishi Corporation (UK) PLC. 4.16 Commitment to Guarantee Obligation by the United States of America accepted by Petrodrill Five Limited dated April 9, 1999. 4.17 Commitment to Guarantee Obligation by the United States of America accepted by Petrodrill Four Limited dated April 9, 1999. 4.18 Credit Agreement dated April 9, 1999 among Petrodrill Five Limited, Govco Inc., Citibank, N.A., Citibank International PLC and Citicorp North America, Inc. 4.19 Credit Agreement dated April 9, 1999 among Petrodrill Four Limited, Govco Inc., Citibank, N.A., Citibank International PLC and Citicorp North America, Inc. 4.20 Security Agreement dated April 9, 1999 between Petrodrill Five Limited and the United States of America. II-19 4.21 Security Agreement dated April 9, 1999 between Petrodrill Four Limited and the United States of America. 4.22 Trust Indenture dated April 9, 1999 between Petrodrill Five Limited and FMB Trust Company, National Association. 4.23 Trust Indenture dated April 9, 1999 between Petrodrill Four Limited and FMB Trust Company, National Association. 4.24 Guaranty Agreement dated April 9, 1999 in favor of the United States by Petrodrill Five Limited. 4.25 Guaranty Agreement dated April 9, 1999 in favor of the United States by Petrodrill Four Limited. 4.26 Guaranty Agreement dated April 9, 1999 in favor of the United States by Pride International, Inc. 4.27 Payment Undertaking in Favor of the United States dated April 9, 1999 by Maritima Petroleo e Engenharia Ltda. 4.28 Interguarantor Agreement dated April 9, 1999 between Pride International, Inc. and Maritima Petroleo e Engenharia Ltda. 4.29 Title XI Reserve Fund and Financial Agreement dated April 9, 1999 between Petrodrill Five Limited and the United States of America. 4.30 Title XI Reserve Fund and Financial Agreement dated April 9, 1999 between Petrodrill Four Limited and the United States of America. 4.31 Amended and Restated Credit Agreement dated as of December 22, 1997 among Pride International, Inc., each of the banks that are or may be a party thereto, Bank One, Louisiana, N.A. (formerly named First National Bank of Commerce), as arranger and syndication agent, and Wells Fargo Bank (Texas), National Association, as administrative agent and documentation agent (incorporated by reference to Exhibit 4.8 to Pride International, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1997, File No. 1-13289). 4.32 First Amendment to Credit Agreement dated as of April 24, 1998 among Pride International, Inc., certain of its subsidiaries, Bank One, Louisiana, N.A. (formerly named First National Bank of Commerce), as arranger and syndication agent, Wells Fargo Bank (Texas), National Association, as administrative and documentation agent, and the lenders named therein (incorporated by reference to Exhibit 4.2 to Pride International, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1998, File No. 1-13289). 4.33 Second Amendment to Credit Agreement dated as of September 17, 1998 among Pride International, Inc., certain of its subsidiaries, Bank One, Louisiana, N.A. (formerly named First National Bank of Commerce), as arranger and syndication agent, Wells Fargo Bank (Texas), National Association, as administrative and documentation agent, and the lenders named therein (incorporated by reference to Exhibit 4.3 to Pride International, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1998, File No. 1-13289). 4.34 Third Amendment to Credit Agreement dated as of December 21, 1998 among Pride International, Inc., certain of its subsidiaries, Bank One, Louisiana, N.A. (formerly named First National Bank of Commerce), as arranger and syndication agent, Wells Fargo Bank (Texas), National Association, as administrative and documentation agent, and the lenders named therein (incorporated by reference to Exhibit 4.6 to Pride International, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998, File No. 1-13289). II-20 4.35 Indenture, dated as of May 1, 1997, by and between Pride International, Inc. and The Chase Manhattan Bank, as trustee (incorporated by reference to Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997, File Nos. 0-16961 and 1-13289). 4.36 First Supplemental Indenture, dated as of May 1, 1997, by and between Pride International, Inc. and The Chase Manhattan Bank, as trustee, relating to $325,000,000 principal amount of 9 3/8% Senior Notes due 2007 (incorporated by reference to Exhibit 4.2 to Pride International Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 1997, File Nos. 0-16961 and 1-13289). 4.37 Indenture, dated as of April 1, 1998, between Pride International, Inc. and Marine Midland Bank, as trustee, relating to subordinated debt securities (incorporated by reference to Exhibit 4.1 to Pride International, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1998, File No. 1-13289). 4.38 First Supplemental Indenture, dated as of April 24, 1998, between Pride International, Inc. and Marine Midland Bank, as trustee, relating to Zero Coupon Convertible Subordinated Debentures Due 2018 (incorporated by reference to Exhibit 4.2 to Pride International, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1998, File No. 1-13289). Pride International, Inc. is a party to several debt instruments under which the total amount of securities authorized does not exceed 10% of the total assets of Pride International, Inc. and its subsidiaries on a consolidated basis. Pursuant to paragraph 4(iii)(A) of Item 601(b) of Regulation S-K, Pride International, Inc. agrees to furnish a copy of such instruments to the SEC upon request. *5 Opinion of Baker & Botts, L.L.P. as to the legality of the new notes and the Pride guarantee. 8.1 Opinion of Baker & Botts, L.L.P. regarding U.S. tax matters. 8.2 Opinion of Dancia Penn & Co. regarding British Virgin Islands tax matters. 10.1 Chartering Contract for the AMETHYST 7 (Contract No. 101.2.155.97-9) between Maritima Navegacao e Engenharia Ltda. and Petroleo Brasileiro S.A.--Petrobras. 10.1(a) Rider No. 1 to the Chartering Contract for the AMETHYST 7 (Contract No. 101.2.155.97-9) dated July 10, 1998 among Maritima Petroleo e Engenharia Ltda., Petroleo Brasileiro S.A.--Petrobras and Petrodrill Seven Limited. 10.2 Service Rendering Contract for the AMETHYST 7 (Contract No. 101.0.156.97-1) between Maritima Navegacao e Engenharia Ltda. and Petroleo Brasileiro S.A.--Petrobras. 10.2(a) Rider No. 1 to the Service Rendering Contract for the AMETHYST 7 (Contract No. 101.2.156.97-1) dated August 21, 1998 among Maritima Petroleo e Engenharia Ltda., Petroleo Brasileiro S.A.--Petrobras and Petrodrill Seven Limited. 10.3 Letter Agreement dated January 15, 1998 between Maritima Navegacao e Engenharia Ltda. and Petroleo Brasileiro S.A.--Petrobras relating to the Chartering Contract for the AMETHYST 7 (Contract No. 101.2.155.97-9) and the Service Rendering Contract for the AMETHYST 7 (Contract No. 101.2.156.97-1). II-21 10.4 Letter Agreement dated January 15, 1998 between Maritima Petroleo e Engenharia Ltda. and Petroleo Brasileiro S.A.--Petrobras relating to the Chartering Contract for the AMETHYST 7 (Contract No. 101.2.155.97-9) and the Service Rendering Contract for the AMETHYST 7 (Contract No. 101.2.156.97-1). 10.5 Chartering Contract for the AMETHYST 6 (Contract No. 101.2.159.97-1) dated January 12, 1998 between Maritima Navegacao e Engenharia Ltda. and Petroleo Brasileiro S.A.--Petrobras. 10.5(a) Rider No. 1 to the Chartering Contract for the AMETHYST 6 (Contract No. 101.2.159.97-1) dated July 10, 1998 among Maritima Petroleo e Engenharia Ltda., Petroleo Brasileiro S.A.--Petrobras and Petrodrill Six Limited. 10.6 Service Rendering Contract for the AMETHYST 6 (Contract No. 101.2.160.97-0) dated January 12, 1998 between Maritima Navegacao e Engenharia Ltda. and Petroleo Brasileiro S.A.--Petrobras. 10.6(a) Rider No. 1 to the Service Rendering Contract for the AMETHYST 6 (Contract No. 101.2.160.97-0) dated August 21, 1998 among Maritima Petroleo e Engenharia Ltda., Petroleo Brasileiro S.A.--Petrobras and Petrodrill Six Limited. 10.7 Letter Agreement dated January 15, 1998 between Maritima Navegacao e Engenharia Ltda. and Petroleo Brasileiro S.A.--Petrobras relating to the Chartering Contract for the AMETHYST 6 (Contract No. 101.2.159.97-1) and the Service Rendering Contract for the AMETHYST 6 (Contract No. 101.2.160.97-0). 10.8 Letter Agreement dated January 15, 1998 between Maritima Petroleo e Engenharia Ltda. and Petroleo Brasileiro S.A.--Petrobras relating to the Chartering Contract for the AMETHYST 6 (Contract No. 101.2.159.97-1) and the Service Rendering Contract for the AMETHYST 6 (Contract No. 101.2.160.97-0). 10.9 Chartering Contract for the AMETHYST 5 (Contract No. 101.2.100.97-8) dated December 5, 1997 between Maritima Navegacao e Engenharia Ltda. and Petroleo Brasileiro S.A.--Petrobras. 10.9(a) Rider No. 1 to the Chartering Contract for the AMETHYST 5 (Contract No. 101.2.100.97-8) dated July 10, 1998 among Maritima Petroleo e Engenharia Ltda., Petroleo Brasileiro S.A.--Petrobras and Petrodrill Five Limited. 10.10 Service Rendering Contract for the AMETHYST 5 (Contract No. 101.2.101.97-0) between Maritima Navegacao e Engenharia Ltda. and Petroleo Brasileiro S.A.--Petrobras. 10.10(a) Rider No. 1 to the Service Rendering Contract for the AMETHYST 5 (Contract No. 101.2.101.97-0) dated August 21, 1998 among Maritima Petroleo e Engenharia Ltda., Petroleo Brasileiro S.A.--Petrobras and Petrodrill Five Limited. 10.11 Letter Agreement dated December 5, 1997 between Maritima Navegacao e Engenharia Ltda. and Petroleo Brasileiro S.A.--Petrobras relating to the Chartering Contract for the AMETHYST 5 (Contract No. 101.2.100.97-8) and the Service Rendering Contract for the AMETHYST 5 (Contract No. 101.2.101.97-0). II-22 10.12 Letter Agreement dated January 15, 1998 between Maritima Petroleo e Engenharia Ltda. and Petroleo Brasileiro S.A.--Petrobras relating to the Chartering Contract for the AMETHYST 5 (Contract No. 101.2.100.97-8) and the Service Rendering Contract for the AMETHYST 5 (Contract No. 101.2.101.97-0). 10.13 Chartering Contract for the AMETHYST 4 (Invitation to Bid No. 101.2.063.97-8) between Maritima Navegacao e Engenharia Ltda. and Petroleo Brasileiro S.A.--Petrobras. 10.13(a) Rider No. 1 to the Chartering Contract for the AMETHYST 4 (Invitation to Bid No. 101.2.063.97-8) dated July 10, 1998 among Maritima Petroleo e Engenharia Ltda., Petroleo Brasileiro S.A.--Petrobras and Petrodrill Four Limited. 10.14 Service Rendering Contract for the AMETHYST 4 (Invitation to Bid No. 101.2.064.97-0) between Maritima Navegacao e Engenharia Ltda. and Petroleo Brasileiro S.A.--Petrobras. 10.14(a) Rider No. 1 to the Service Rendering Contract for the AMETHYST 4 (Invitation to Bid No. 101.2.064.97-0) dated August 21, 1998 among Maritima Petroleo e Engenharia Ltda., Petroleo Brasileiro S.A.--Petrobras and Petrodrill Four Limited. 10.15 Letter Agreement dated December 5, 1997 between Maritima Navegacao e Engenharia Ltda. and Petroleo Brasileiro S.A.--Petrobras relating to the Chartering Contract for the AMETHYST 4 (Contract No. 101.2.063.97-2) and the Service Rendering Contract for the AMETHYST 4 (Invitation to Bid No. 101.2.064.97-0). 10.16 Letter dated May 28, 1998 from Petroleo Brasileiro S.A.--Petrobras to Maritima Navegacao e Engenharia Ltda. regarding the Chartering Contracts and Service Rendering Contracts. 10.17 Shipbuilding Contract dated April 9, 1998 among Daewoo Corporation, Daewoo Heavy Industries Ltd. and Petrodrill Construction Inc. for Hull No. 3015 (AMETHYST 7). 10.17(a) Side Letter No. 1 dated April 9, 1998 among Daewoo Corporation, Daewoo Heavy Industries Ltd. and Petrodrill Construction Inc. for Hull No. 3015 (AMETHYST 7). 10.17(b) Side Letter No. 2 dated April 9, 1998 among Daewoo Corporation, Daewoo Heavy Industries Ltd. and Petrodrill Construction Inc. for Hull No. 3015 (AMETHYST 7). 10.17(c) Novation Agreement dated December 4, 1998 among Daewoo Corporation, Daewoo Heavy Industries Ltd., Petrodrill Offshore Inc. and Petrodrill Seven Limited for Hull No. 3015 (AMETHYST 7). 10.17(d) Main Contract Amendment dated December 1998 among Daewoo Corporation, Daewoo Heavy Industries Ltd. and Petrodrill Seven Limited for Hull No. 3015 (AMETHYST 7). 10.17(e) Main Contract Amendment II dated January 28, 1999 among Daewoo Corporation, Daewoo Heavy Industries Ltd. and Petrodrill Seven Limited for Hull No. 3015 (AMETHYST 7). II-23 10.18 Refund Guarantee issued by The Export-Import Bank of Korea to Petrodrill Construction Inc. dated April 16, 1998 for Hull No. 3015 (AMETHYST 7). 10.18(a) Novation Agreement in respect of the Refund Guarantee dated December 4, 1998 among The Export-Import Bank of Korea, Petrodrill Offshore Inc. and Petrodrill Seven Limited for Hull No. 3015 (AMETHYST 7). 10.18(b) Letter of Amendment of Refund Guarantee issued by The Export-Import Bank of Korea to Petrodrill Seven Limited dated April 6, 1999 for Hull No. 3015 (AMETHYST 7). 10.19 Shipbuilding Contract dated April 9, 1998 among Daewoo Corporation, Daewoo Heavy Industries Ltd. and Petrodrill Construction Inc. for Hull No. 3016 (AMETHYST 6). 10.19(a) Side Letter No. 1 dated April 9, 1998 among Daewoo Corporation, Daewoo Heavy Industries Ltd. and Petrodrill Construction Inc. for Hull No. 3016 (AMETHYST 6). 10.19(b) Side Letter No. 2 dated April 9, 1998 among Daewoo Corporation, Daewoo Heavy Industries Ltd. and Petrodrill Construction Inc. for Hull No. 3016 (AMETHYST 6). 10.19(c) Novation Agreement dated December 4, 1998 among Daewoo Corporation, Daewoo Heavy Industries Ltd., Petrodrill Offshore Inc. and Petrodrill Six Limited for Hull No. 3016 (AMETHYST 6). 10.19(d) Main Contract Amendment dated December 1998 among Daewoo Corporation, Daewoo Heavy Industries Ltd. and Petrodrill Six Limited Inc. for Hull No. 3016 (AMETHYST 6). 10.19(e) Main Contract Amendment II dated January 28, 1999 among Daewoo Corporation, Daewoo Heavy Industries Ltd. and Petrodrill Six Limited for Hull No. 3016 (AMETHYST 6). 10.20 Refund Guarantee issued by The Export-Import Bank of Korea to Petrodrill Construction Inc. dated April 16, 1998 for Hull No. 3016 (AMETHYST 6). 10.20(a) Novation Agreement in respect of the Refund Guarantee dated December 4, 1998 among The Export-Import Bank of Korea, Petrodrill Offshore Inc. and Petrodrill Six Limited for Hull No. 3016 (AMETHYST 6). 10.20(b) Letter of Amendment of Refund Guarantee issued by The Export-Import Bank of Korea to Petrodrill Six Limited dated April 6, 1999 for Hull No. 3016 (AMETHYST 6). 10.21 Shipbuilding Contract dated April 9, 1998 between TDI-Halter, L.P. and Petrodrill Construction Inc. for Hull No. 1829 (AMETHYST 5). 10.21(a) Side Letter No. 1 dated April 9, 1998 between TDI-Halter, L.P. and Petrodrill Construction Inc. for Hull No. 1829 (AMETHYST 5). 10.21(b) Side Letter No. 2 dated April 9, 1998 between TDI-Halter, L.P. and Petrodrill Construction Inc. for Hull No. 1829 (AMETHYST 5). 10.21(c) Side Letter No. 3 dated April 9, 1998 between TDI-Halter, L.P. and Petrodrill Construction Inc. for Hull No. 1829 (AMETHYST 5). 10.21(d) Side Letter No. 4 dated April 9, 1998 between TDI-Halter, L.P. and Petrodrill Construction Inc. for Hull No. 1829 (AMETHYST 5). II-24 10.21(e) Side Letter No. 5 dated April 9, 1998 between TDI-Halter, L.P. and Petrodrill Construction Inc. for Hull No. 1829 (AMETHYST 5). 10.21(f) Novation Agreement dated December 9, 1998 between TDI-Halter, L.P., Petrodrill Offshore Inc. and Petrodrill Five Limited for Hull No. 1829 (AMETHYST 5). 10.21(g) Amendment No. 1 to Semi-Submersible Drilling Vessel Construction Contract dated April 9, 1999 between TDI-Halter, L.P. and Petrodrill Five Limited for Hull No. 1829 (AMETHYST 5). 10.22 Performance Bond dated April 13, 1998 between TDI-Halter, L.P. and Fireman's Fund Insurance Company in connection with the construction of Hull No. 1829 (AMETHYST 5). 10.23 Labor and Material Payment Bond dated April 13, 1998 between TDI-Halter, L.P. and Fireman's Fund Insurance Company in connection with the construction of Hull No. 1829 (AMETHYST 5). 10.24 Parent Guarantee dated April 15, 1998 by Halter Marine Group, Inc. in connection with the construction of Hull No. 1829 (AMETHYST 5). 10.25 Shipbuilding Contract dated April 9, 1998 between TDI-Halter, L.P. and Petrodrill Construction Inc. for Hull No. 1828 (AMETHYST 4). 10.25(a) Side Letter No. 1 dated April 9, 1998 between TDI-Halter, L.P. and Petrodrill Construction Inc. for Hull No. 1828 (AMETHYST 4). 10.25(b) Side Letter No. 2 dated April 9, 1998 between TDI-Halter, L.P. and Petrodrill Construction Inc. for Hull No. 1828 (AMETHYST 4). 10.25(c) Side Letter No. 3 dated April 9, 1998 between TDI-Halter, L.P. and Petrodrill Construction Inc. for Hull No. 1828 (AMETHYST 4). 10.25(d) Side Letter No. 4 dated April 9, 1998 between TDI-Halter, L.P. and Petrodrill Construction Inc. for Hull No. 1828 (AMETHYST 4). 10.25(e) Side Letter No. 5 dated April 9, 1998 between TDI-Halter, L.P. and Petrodrill Construction Inc. for Hull No. 1828 (AMETHYST 4). 10.25(f) Novation Agreement dated December 9, 1998 between TDI-Halter, L.P., Petrodrill Offshore Inc. and Petrodrill Four Limited for Hull No. 1828 (AMETHYST 4). 10.25(g) Amendment No. 1 to Semi-Submersible Drilling Vessel Construction Contract dated April 9, 1999 between TDI-Halter, L.P. and Petrodrill Four Limited for Hull No. 1828 (AMETHYST 4). 10.26 Performance Bond dated April 13, 1998 between TDI-Halter, L.P. and Fireman's Fund Insurance Company in connection with the construction of Hull No. 1828 (AMETHYST 4). 10.27 Labor and Material Payment Bond dated April 13, 1998 between TDI-Halter, L.P. and Fireman's Fund Insurance Company in connection with the construction of Hull No. 1828 (AMETHYST 4). 10.28 Parent Guarantee dated April 15, 1998 by Halter Marine Group, Inc. in connection with the construction of Hull No. 1828 (AMETHYST 4). II-25 10.29 Construction Management Agreement dated November 5, 1998 between Petrodrill Seven Limited and Petrodrill Engineering N.V. for the AMETHYST 7. **10.30 Construction Management Agreement dated November 5, 1998 between Petrodrill Six Limited and Petrodrill Engineering N.V. for the AMETHYST 6. **10.31 Construction Management Agreement dated January 25, 1999 between Petrodrill Five Limited and Petrodrill Engineering N.V. for the AMETHYST 5. **10.32 Construction Management Agreement dated January 25, 1999 between Petrodrill Four Limited and Petrodrill Engineering N.V. for the AMETHYST 4. 10.33 Supply Agreement for the AMETHYST 7 dated November 5, 1998 between Pride-Foramer S.A. and Petrodrill Engineering N.V. ***10.34 Supply Agreement for the AMETHYST 6 dated November 5, 1998 between Pride-Foramer S.A. and Petrodrill Engineering N.V. ***10.35 Supply Agreement for the AMETHYST 5 dated January 25, 1999 between Pride-Foramer S.A. and Petrodrill Engineering N.V. ***10.36 Supply Agreement for the AMETHYST 4 dated January 25, 1999 between Pride-Foramer S.A. and Petrodrill Engineering N.V. 10.37 Supply Agreement for the AMETHYST 7 dated November 5, 1998 between Maritima Petroleo e Engenharia Ltda. and Petrodrill Engineering N.V. ***10.38 Supply Agreement for the AMETHYST 6 dated November 5, 1998 between Maritima Petroleo e Engenharia Ltda. and Petrodrill Engineering N.V. ***10.39 Supply Agreement for the AMETHYST 5 dated January 25, 1999 between Maritima Petroleo e Engenharia Ltda. and Petrodrill Engineering N.V. ***10.40 Supply Agreement for the AMETHYST 4 dated January 25, 1999 between Maritima Petroleo e Engenharia Ltda. and Petrodrill Engineering N.V. 10.41 Supply Agreement for the AMETHYST 7 dated November 5, 1998 between Workships Contractors B.V. and Petrodrill Engineering N.V. ***10.42 Supply Agreement for the AMETHYST 6 dated November 5, 1998 between Workships Contractors B.V. and Petrodrill Engineering N.V. ***10.43 Supply Agreement for the AMETHYST 5 between Workships Contractors B.V. and Petrodrill Engineering N.V. ***10.44 Supply Agreement for the AMETHYST 4 between Workships Contractors B.V. and Petrodrill Engineering N.V. 10.45 Management Agreement for the AMETHYST 7 dated November 5, 1998 between Petrodrill Seven Limited and Formaritima Ltd. **10.46 Management Agreement for the AMETHYST 6 dated November 5, 1998 between Petrodrill Six Limited and Formaritima Ltd. II-26 **10.47 Management Agreement for the AMETHYST 5 dated January 25, 1999 between Petrodrill Five Limited and Formaritima Ltd. **10.48 Management Agreement for the AMETHYST 4 dated January 25, 1999 between Petrodrill Four Limited and Formaritima Ltd. 10.49 Technical Services Agreement for the AMETHYST 7 dated November 5, 1998 between Formaritima Ltd. and Pride-Foramer S.A. ***10.50 Technical Services Agreement for the AMETHYST 6 dated November 5, 1998 between Formaritima Ltd. and Pride-Foramer S.A. ***10.51 Technical Services Agreement for the AMETHYST 5 dated January 25, 1999 between Formaritima Ltd. and Pride-Foramer S.A. ***10.52 Technical Services Agreement for the AMETHYST 4 dated January 25, 1999 between Formaritima Ltd. and Pride-Foramer S.A. 10.53 Local Services Agreement for the AMETHYST 7 dated November 5, 1998 between Formaritima Ltd. and Maritima Petroleo e Engenharia Ltda. ***10.54 Local Services Agreement for the AMETHYST 6 dated November 5, 1998 between Formaritima Ltd. and Maritima Petroleo e Engenharia Ltda. ***10.55 Local Services Agreement for the AMETHYST 5 dated January 25, 1999 between Formaritima Ltd. and Maritima Petroleo e Engenharia Ltda. ***10.56 Local Services Agreement for the AMETHYST 4 dated January 25, 1999 between Formaritima Ltd. and Maritima Petroleo e Engenharia Ltda. 10.57 Marine and Nautical Services Agreement for the AMETHYST 7 dated November 5, 1998 between Formaritima Ltd. and Workships Contractors B.V. ***10.58 Marine and Nautical Services Agreement for the AMETHYST 6 dated November 5, 1998 between Formaritima Ltd. and Workships Contractors B.V. **10.59 Marine and Nautical Services Agreement for the AMETHYST 5 dated November 5, 1998 between Petrodrill Five Limited and Workships Contractors B.V. **10.60 Marine and Nautical Services Agreement for the AMETHYST 4 dated November 5, 1998 between Petrodrill Four Limited and Workships Contractors B.V. 10.61 Licensing Agreement for the AMETHYST 7 dated November 5, 1998 between BiGem Holdings N.V. and Petrodrill Seven Limited. **10.62 Licensing Agreement for the AMETHYST 6 dated November 5, 1998 between BiGem Holdings N.V. and Petrodrill Six Limited. **10.63 Licensing Agreement for the AMETHYST 5 dated January 25, 1999 between BiGem Holdings N.V. and Petrodrill Five Limited. **10.64 Licensing Agreement for the AMETHYST 4 dated January 25, 1999 between BiGem Holdings N.V. and Petrodrill Four Limited. 10.65 Amethyst Financial Company Ltd.'s Shareholders' Agreement dated November 5, 1998 among Drillpetro Inc., Techdrill Inc. and Westville Management Corporation. II-27 10.66 Agency and Brokerage Agreement for the AMETHYST 7 dated April 30, 1998 among Petrodrill Seven Limited, U.K. Guaranty & Bonding Corp. Limited and Rapisardi Investment Limited. **10.67 Agency and Brokerage Agreement for the AMETHYST 6 dated April 30, 1998 among Petrodrill Six Limited, U.K. Guaranty & Bonding Corp. Limited and Rapisardi Investment Limited. **10.68 Agency and Brokerage Agreement for the AMETHYST 5 dated April 30, 1998 among Petrodrill Five Limited, U.K. Guaranty & Bonding Corp. Limited and Rapisardi Investment Limited. **10.69 Agency and Brokerage Agreement for the AMETHYST 4 dated April 30, 1998 among Petrodrill Four Limited, U.K. Guaranty & Bonding Corp. Limited and Rapisardi Investment Limited. 10.70 Minutes of Agreement Relating to the Petrobras Contracts dated July 2, 1998 among Drillpetro Inc., Techdrill Inc. and Westville Management Corporation. 15 Awareness Letter of PricewaterhouseCoopers LLP. 21 Subsidiaries of Amethyst Financial Company Ltd. 23.1 Consent of PricewaterhouseCoopers N.V. 23.2 Consent of PricewaterhouseCoopers LLP. 23.3 Consent of Baker & Botts, L.L.P. (contained in Exhibit 8.1). 23.4 Consent of Pedro Calmon Filho & Associados. *23.5 Consent of Pinheiro Neto - Advogados (Rio de Janeiro). 23.6 Consent of Dancia Penn & Co. (contained in Exhibit 8.2). 23.7 Consent of Higgs & Johnson. 23.8 Consent of Bennett & Associates, L.L.C. 24.1 Power of Attorney for Amethyst Financial Company Ltd. (included on the signature page of this Registration Statement). 24.2 Power of Attorney for Pride International, Inc. (included on its signature page of this Registration Statement) *25 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939, as amended, of Wilmington Trust Company under the Indenture, on Form T-1. 99.1 Form of Letter to Clients for Tender of Notes. 99.2 Form of Letter to The Depository Trust Company Participants for Tender of Notes. 99.3 Form of Notice of Guaranteed Delivery. 99.4 Form of Transmittal Letter for Tender of Notes. * To be filed by amendment. ** Substantially identical to the corresponding document for the AMETHYST 7 except as to the parties and the rig. *** Substantially identical to the corresponding document for the AMETHYST 7 except as to the rig. II-28 EX-3.1 2 EXHIBIT 3.1 1 TERRITORY OF THE BRITISH VIRGIN ISLANDS THE INTERNATIONAL BUSINESS COMPANIES ORDINANCE (NO. 8 OF 1984 AS AMENDED) MEMORANDUM OF ASSOCIATION OF AMETHYST FINANCIAL COMPANY, LTD. NAME 1. The name of the Company is Amethyst Financial Company Ltd. REGISTERED OFFICE 2. The Registered Office of the Company will be at Arias Fabrega & Fabrega Trust Co. BVI Limited, 325 Waterfront Drive, Omar Hodge Building 2nd Floor, Wickhams Cay, Road Town, Tortola, British Virgin Islands. REGISTERED AGENT 3. The Registered Agent of the Company will be Arias Fabrega & Fabrega Trust Co. BVI Limited, 325 Waterfront Drive, Omar Hodge Building 2nd Floor Wickhams Cay, Road Town, Tortola, British Virgin Islands. GENERAL OBJECTS AND POWERS 4. (1) The object of the Company is to engage in any act or activity that is not prohibited under any law for the time being in force in the British Virgin Islands. (2) The Company shall have all such powers as are permitted by law for the time being in force in the British Virgin Islands, irrespective of corporate benefit, to perform all acts and engage in all activities necessary or conducive to the conduct, promotion or attainment of the object of the Company. (3) The Company may not (a) carry on business with persons resident in the British Virgin Islands; (b) own an interest in real property situated in the British Virgin Islands, other than a lease referred to in paragraph (e) of subclause (4); (c) carry on banking or trust business unless it is licensed to do so under the Banks and Trust Companies Act, 1990; (d) carry on business as an insurance or reinsurance company, insurance broker or insurance agent, unless it is licensed under an enactment authorising it to carry on that business; (e) carry on the business of company management unless it is licensed under the Company Management Act, 1990; or [REGISTRAR OF INTERNATIONAL BUSINESS COMPANIES GOVERNMENT OF THE BRITISH VIRGIN ISLANDS SEAL] 2 (f) carry on the business of providing the registered office or the registered agent for companies incorporated in the British Virgin Islands. (4) For purposes of paragraph (a) of subclause (3), the Company shall not be treated as carrying on business with persons resident in the British Virgin Islands by reason only that (a) it makes or maintains deposits with a person carrying on banking business within the British Virgin Islands; (b) it makes or maintains professional contact with solicitors, barristers, accountants, bookkeepers, trust companies, administration companies, investment advisors or other similar persons carrying on business within the British Virgin Islands; (c) it prepares or maintains books and records within the British Virgin Islands; (d) it holds, within the British Virgin Islands, meetings of its directors or members; (e) it holds a lease of property for use as an office from which to communicate with members or where books and records of the Company are prepared or maintained; (f) it holds shares, debt obligations or other securities in a company incorporated under the International Business Companies Ordinance or under the Companies Act; or (g) shares, debt obligations or other securities in the Company are owned by any person resident in the British Virgin Islands or by any company incorporated under the International Business Companies Ordinance or under the Companies Act. CURRENCY 5. Shares in the Company shall be issued in the currency of the United States of America. AUTHORISED CAPITAL 6. The authorised capital of the Company is $1,000.00 CLASSES, NUMBER AND PAR VALUE OF SHARES 7. The authorised capital is made up of one class of shares divided into 1,000 shares of $1.00 par value with one vote for each share. DESIGNATIONS, POWERS, PREFERENCES, ETC. OF SHARES 8. The designations, powers, preferences, rights, qualifications, limitations and restrictions of each class and series of shares that the Company is authorised to issue shall be fixed by resolution of directors, but the directors shall not allocate different rights as to voting, dividends, redemption or distribution on liquidation unless the Memorandum of Association shall have been amended to create separate classes of shares and all the [REGISTRAR OF INTERNATIONAL BUSINESS COMPANIES GOVERNMENT OF THE BRITISH VIRGIN ISLANDS SEAL] 3 aforesaid rights as to voting, dividends, redemption and distribution shall be identical in each separate class. VARIATION OF CLASS RIGHTS 9. If at any time the authorised capital is divided into different classes or series of shares, the rights attached to any class or series unless otherwise provided by the terms of issue of the shares of the class or series) may, whether or not the Company is being wound up, be varied with the consent in writing of the holders of not less than three-fourths of the issued shares of that class or series and of the holders of not less than three-fourths of the issued shares of any other class or series of shares which may be affected by such variation. RIGHTS NOT VARIED BY THE ISSUE OF SHARES PARI PASSU 10. The rights conferred upon the holders of the shares of any class issued with preferred or other rights shall not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith. REGISTERED SHARES AND BEARER SHARES 11. Shares may be issued as registered shares or to bearer as may be determined by resolution of directors. EXCHANGE OF REGISTERED SHARES AND BEARER SHARES 12. Registered shares may be exchanged for bearer shares and bearer shares may be exchanged for registered shares. TRANSFER OF REGISTERED SHARES 13. Registered shares in the Company may be transferred subject to the prior or subsequent approval of the Company as evidenced by a resolution of directors or by a resolution of members. SERVICE OF NOTICE ON HOLDERS OF BEARER SHARES 14. Where shares are issued to bearer, the bearer, identified for this purpose by the number of the share certificate, shall be requested to provide the Company with the name and address of an agent for service of any notice, information or written statement required to be given to members, and service upon such agent shall constitute service upon the bearer of such shares until such time as a new name and address for service is provided to the Company. In the absence of such name and address being provided it shall be sufficient for the purposes of service for the Company to publish the notice, information or written statement in one or more newspapers published or circulated in the British Virgin Islands and in such other place, if any, as the Company shall from time to time by a resolution of directors or resolution of members determine. The directors of the Company must give sufficient notice of meetings to members holding shares issued to bearer to allow a reasonable opportunity for them to secure or exercise the right or privilege, other than the right or privilege to vote, that is the subject of the notice. What amounts to sufficient notice is a matter of fact to be determined after having regard to all the circumstances. [REGISTRAR OF INTERNATIONAL BUSINESS COMPANIES GOVERNMENT OF THE BRITISH VIRGIN ISLANDS SEAL] 4 AMENDMENT OF MEMORANDUM AND ARTICLES OF ASSOCIATION 15. The Company may amend its Memorandum of Association and Articles of Association by a resolution of members or by a resolution of directors. DEFINITIONS 16. The meanings of words in this Memorandum of Association are defined in the Articles of Association annexed hereto. We, ARIAS FABREGA & FABREGA TRUST CO. BVI LTD., of Wickhams Cay, Road Town, Tortola, British Virgin Islands for the purpose of incorporating an International Business Company under the laws of the British Virgin Islands hereby subscribe our name to this Memorandum of Association the 27th day of March, 1998 in the presence of: Subscriber /s/ Illegible ARIAS FABREGA & FABREGA TRUST CO. BVI LTD. Witness Nadia Harrigan /s/ NADIA HARRIGAN Wickhams Cay Road Town, Tortola [REGISTRAR OF INTERNATIONAL BUSINESS COMPANIES GOVERNMENT OF THE BRITISH VIRGIN ISLANDS SEAL] EX-3.2 3 EXHIBIT 3.2 1 TERRITORY OF THE BRITISH VIRGIN ISLANDS THE INTERNATIONAL BUSINESS COMPANIES ORDINANCE (NO. 8 OF 1984 AS AMENDED) ARTICLES OF ASSOCIATION OF AMETHYST FINANCIAL COMPANY LTD. PRELIMINARY 1. In these Articles, if not inconsistent with the subject or context, the words and expressions standing in the first column of the following table shall bear the meanings set opposite them respectively in the second column thereof. WORDS MEANINGS - - --------------------------------------------------------------------- capital The sum of the aggregate par value of all outstanding shares with par value of the Company and shares with par value held by the Company as treasury shares plus (a) the aggregate of the amounts designated as capital of all outstanding shares without par value of the Company and shares without par value held by the Company as treasury shares, and (b) the amounts as are from time to time transferred from surplus to capital by a resolution of directors. member A person who holds shares in the Company. person An individual, a corporation, a trust, the estate of a deceased individual, a partnership or an unincorporated association of persons. resolution of directors (a) A resolution approved at a duly constituted meeting of directors or of a committee or directors of the Company by the affirmative vote of a simple majority of the directors present who voted and did not abstain where the meeting was called on proper notice or, if on short notice, if those directors not present have waived notice; or (b) a resolution consented to in writing by all directors or by all members of the committee, as the case may be. resolution of members (a) a resolution approved at a duly constituted meeting of the members of the Company by the affirmative vote of: 2 (i) a simple majority of the votes of the shares which were present at the meeting and were voted and not abstained, or (ii) a simple majority of the votes of each class or series of shares which were present at the meeting and entitled to vote thereon as a class or series and were voted and not abstained and of a simple majority of the votes of the remaining shares entitled to vote thereon which were present at the meeting and were voted and not abstained; or (b) a resolution consented to in writing by (i) an absolute majority of the votes of shares entitled to vote thereon, or (ii) an absolute majority of the votes of each class or series of shares entitled to vote thereon as a class or series and of an absolute majority of the votes of the remaining shares entitled to vote thereon. securities Shares and debt obligations of every kind, and options, warrants and rights to acquire shares, or debt obligations. surplus The excess, if any, at the time of the determination of the total assets of the Company over the aggregate of its total liabilities, as shown in its books of account, plus the Company's capital. the Memorandum The Memorandum of Association of the Company as originally framed or as from time to time amended. the Ordinance The International Business Companies Ordinance (No. 8 of 1984 as amended). the Seal The Common Seal of the Company. these Articles The Articles of Association as originally framed or as from time to time amended. regulation The reference to any individual paragraph within these Articles or as from time to time amended. treasury shares Shares in the Company that were previously issued but were repurchased, redeemed or otherwise acquired by the Company and not canceled. "Written" or any term of like import includes words typewritten, printed, painted, engraved, lithographed, photographed or represented or reproduced by any mode of representing or reproducing words in a visible form, including telex, telegram, cable or other form of writing produced by electronic communication. Save as foresaid any words or expressions defined in the Ordinance shall bear the same meaning in these Articles. [REGISTRAR OF INTERNATIONAL BUSINESS COMPANIES GOVERNMENT OF THE BRITISH VIRGIN ISLANDS SEAL] 3 Whenever the singular or plural number, or the masculine, feminine or neuter gender is used in these Articles, it shall equally, where the context admits, include the others. A reference in these Articles to voting in relation to shares shall be construed as a reference to voting by members holding the shares except that it is the votes allocated to the shares that shall be counted and not the number of members who actually voted and a reference to shares being present at a meeting shall be given a corresponding construction. A reference to money in these Articles is a reference to the currency of the United States of America unless otherwise stated. REGISTERED SHARES 2. The Company shall issue to every member holding registered shares in the Company a certificate signed by at least a director and an officer of the Company or if under Seal signed by either a director or an officer specifying the share or shares held. The signature of the director or officer and the Seal may be facsimiles. 3. Any member receiving a share certificate for registered shares shall indemnify and hold the Company and its directors and officers harmless from any loss or liability which it or they may incur by reason of wrongful or fraudulent use or representation made by any person by virtue of the possession thereof. If a share certificate for registered shares is worn out or lost it may be renewed on production of the worn out certificate or on satisfactory proof of its loss together with such indemnity as may be required by a resolution of directors. 4. If several persons are registered as joint holders of any shares, any one of such persons may give an effectual receipt for any dividend payable in respect of such shares. BEARER SHARES 5. Subject to a request for the issue of bearer shares and to the payment of the appropriate consideration for the shares to be issued, the Company may, to the extent authorised by the Memorandum, issue bearer shares to, and at the expense of, such person as shall be specified in the request. The Company may also upon receiving a request in writing accompanied by the share certificate for the shares in question, exchange registered shares for bearer shares or may exchange bearer shares for registered shares. Such request served on the Company by the holder of bearer shares shall specify the name and address of the person to be registered and unless the request is delivered in person by the bearer shall be authenticated as hereinafter provided. Such request served on the Company by the holder of bearer shares shall also be accompanied by any coupons or talons which at the date of such delivery have not become due for payment of dividends or any other distribution by the Company to the holders of such shares. Following such exchange the share certificate relating to the exchanged shares shall be delivered as directed by the member requesting the exchange. 6. Bearer share certificates shall be signed by at least a director and an officer of the Company or if under Seal signed by either a director or an officer and shall state that the bearer is the owner of the shares therein specified and may provide by coupons, talons or otherwise for the payment of dividends or other moneys on the shares included therein. 7. Subject to the provisions of the Ordinance and of these Articles the bearer of a bearer share certificate shall be deemed to be a member of the Company and shall be entitled to the same rights and privileges as he would have had if his name had been included in the share register of the Company as the holder of the shares. [REGISTRAR OF INTERNATIONAL BUSINESS COMPANIES GOVERNMENT OF THE BRITISH VIRGIN ISLANDS SEAL] 4 8. Subject to any specific provisions in these Articles, in order to exercise his rights as a member of the Company, the bearer of a bearer share certificate shall produce the bearer share certificate as evidence of his membership in the Company. Without prejudice to the generality of the foregoing, the following rights may be exercised in the following manner: (a) for the purpose of exercising his voting rights at a meeting, the bearer of a bearer share certificate shall produce such certificate to the chairman of the meeting; (b) for the purpose of exercising his vote on a resolution in writing, the bearer of a bearer share certificate shall cause his signature to any such resolution to be authenticated as hereinafter set forth; (c) for the purpose of requisitioning a meeting of members, the bearer of a bearer share certificate shall address his requisition to the directors and his signature thereon shall be duly authenticated as hereinafter provided; and (d) for the purpose of receiving dividends, the bearer of the bearer share certificate shall present at such places as may be designated by the directors any coupons or talons issued for such purpose, or shall present the bearer share certificate to any paying agent authorised to pay dividends. 9. The signature of the bearer of a bearer share certificate shall be deemed to be duly authenticated if the bearer of the bearer share certificate shall produce such certificate to a notary public or a bank manager or a director or officer of the Company (herein referred to as an "authorised person") and if the authorised person shall endorse the document bearing such signature with a statement: (a) identifying the bearer share certificate produced to him by number and date and specifying the number of shares and the class of shares (if appropriate) comprised therein; (b) confirming that the signature of the bearer share certificate was subscribed in his presence and that if the bearer is representing a body corporate he has so acknowledged and has produced satisfactory evidence of authority thereof as provided in Regulation 12; and (c) specifying the capacity in which he is qualified as an authorised person and, if a notary public, affixing his seal thereto or, if a bank manager, attaching an identifying stamp of the bank of which is is a manager. 10. Notwithstanding any other provisions of these Articles, at any time, the bearer of a bearer share certificate may deliver the certificate for such shares into the custody of the Company at its registered office, whereupon the Company shall issue a receipt therefor under the Seal signed by a director or officer identifying by name and address the person delivering such certificate and specifying the date and number of the bearer share certificate so deposited and the number of shares comprised therein. Any such receipt may be used by the person named therein for the purpose of exercising the rights vested in the shares represented by the bearer share certificate so deposited including the right to appoint a proxy. Any bearer share certificate so deposited shall be returned to the person named in the receipt upon request by the person mentioned in the receipt or to his personal representative if such person be dead and thereupon the receipt issued therefor shall be of no further effect whatsoever and shall be returned to the Company for cancellation or, if it has been lost or mislaid such indemnity as may be required by resolution of directors shall be given to the Company. [REGISTRAR OF INTERNATIONAL BUSINESS COMPANIES GOVERNMENT OF THE BRITISH VIRGIN ISLANDS SEAL] 5 11. The bearer of a bearer share certificate shall for all purposes be deemed to be the owner of the shares comprised in such certificate and in no circumstances shall the Company or the Chairman of any meeting of members or the Company's registrars or any director or officer of the Company or any authorised person be obliged to inquire into the circumstances whereby a bearer share certificate came into the hands of the bearer thereof, or to question the validity or authenticity of any action taken by the bearer of a bearer share certificate whose signature has been authenticated as provided herein. 12. If the bearer of a bearer share certificate shall be a corporation, then all the rights exercisable by virtue of such shareholding may be exercised by an individual duly authorised to represent the corporation but unless such individual shall acknowledge that he is representing a corporation and shall produce upon request satisfactory evidence that he is duly authorised to represent the corporation, the individual shall for all purposes hereof be regarded as the holder of the shares in any bearer share certificate held by him. 13. The directors may provide for payment of dividends to the holders of bearer shares by coupons or talons and in such event the coupons or talons shall be in such form and payable at such time and in such place or places as the directors shall resolve. The Company shall be entitled to recognise the absolute right of the bearer of any coupon or talon issued as aforesaid to payment of the dividend to which it relates and delivery of the coupon or talon to the Company or its agents shall constitute in all respects a good discharge of the Company in respect of such dividend. 14. If any bearer share certificate, coupon or talon be worn out or defaced, the directors may, upon the surrender thereof for cancellation, issue a new one in its stead, and if any bearer share certificate, coupon or talon be lost or destroyed, the directors may upon the loss or destruction being established to their satisfaction, and upon such indemnity being given to the Company as it shall by resolution of directors determine, issue a new bearer share certificate in its stead, and in either case on payment of such sum as the Company may from time to time by resolution of directors require. In case of loss or destruction the person to whom such new bearer share certificate, coupon or talon is issued shall also bear and pay to the Company all expenses incidental to the investigation by the Company of the evidence of such loss or destruction and to such indemnity. SHARES, AUTHORISED CAPITAL AND CAPITAL 15. Subject to the provisions of these Articles and any resolution of members the unissued shares of the Company shall be at the disposal of the directors who may without prejudice and without limiting or affecting any rights previously conferred on the holders of any existing shares or class or series of shares, offer, allot, grant options over or otherwise dispose of shares to such persons, at such times and upon such terms and conditions as the Company may by resolution of directors determine. 16. Shares in the Company shall be issued for money, services rendered, personal property, an estate in real property, a promissory note or other binding obligation to contribute money or property or any combination of the foregoing as shall be determined by a resolution of directors. However, shares for which payment is not made pursuant to a promissory note or other written binding obligation for payment of a debt may upon resolution of directors, be forfeited and canceled. Prior to such forfeiture, the Company must give written notice to the member who defaults in making payment pursuant to a promissory note or other written binding obligation to pay a debt. Such notice shall name a further date not earlier than the expiration of 14 days from the date of service of the notice on or before which the payment required by the notice is to be made and shall contain a statement that in the event of non-payment at or before the time named in the notice the shares, or any of them, in respect of [REGISTRAR OF INTERNATIONAL BUSINESS COMPANIES GOVERNMENT OF THE BRITISH VIRGIN ISLANDS SEAL] 6 which payment is not made will be liable to be forfeited. Where a notice has been issued and the requirements of the notice have been complied with, the directors may, at any time before tender of payment, by resolution of directors forfeit and cancel the shares to which the notice relates. The Company is under no obligation to refund any moneys to the member whose shares have been canceled under this situation and that member shall be discharged from any further obligation to the Company. 17. Shares in the Company may be issued for such amount of consideration as the directors may from time to time by resolution of directors determine, except that in the case of shares with par value, the amount shall not be less than the par value, and in the absence of fraud the decision of the directors as to the value of the consideration received by the Company in respect of the issue is conclusive unless a question of law is involved. The consideration in respect of the shares constitutes capital to the extend of the par value and the excess constitutes surplus. 18. A share issued by the Company upon conversion of, or in exchange for, another share or debt obligation or other security in the Company, shall be treated for all purposes as having been issued for money equal to the consideration received or deemed to have been received by the Company in respect of the other share, debt obligation or security. 19. Treasury shares may be disposed of by the Company on such terms and conditions (not otherwise inconsistent with these Articles) as the Company may by resolution of directors determine. 20. The Company may issue fractions of a share and a fractional share shall have the same corresponding fractional liabilities, limitations, preferences, privileges, qualifications, restrictions, rights and other attributes of a whole share of the same class or series of shares. 21. Upon the issue by the Company of a share without par value, the consideration in respect of the share constitutes capital to the extent designated by the directors and the excess constitutes surplus, except that the directors must designate as capital an amount of the consideration that is at least equal to the amount that the share is entitled to as a preference, if any, in the assets of the Company upon liquidation of the Company. 22. The Company may purchase, redeem or otherwise acquire and hold its own shares but no purchase, redemption or other acquisition which shall constitute a reduction in capital shall be made otherwise than in compliance with Regulations 36 and 37. 23. Shares that the Company purchases, redeems or otherwise acquires pursuant to Regulation 22 may be canceled or held as treasury shares unless the shares are purchased, redeemed or otherwise acquired out of capital and would otherwise infringe upon the requirements of Regulations 36 and 37, or to the extent that such shares are in excess of 80 percent of the issued shares of the Company, in which case they shall be canceled but they shall be available for reissue. Upon the cancellation of a share, the amount included as capital of the Company with respect to that share shall be deducted from the capital of the Company. 24. Where shares in the Company are held by the Company as treasury shares or are held by another company of which the Company holds, directly or indirectly, shares having more than 50 percent of the votes in the election of directors of the other company, such shares of the company are not entitled to vote or to have dividends paid thereon and shall not be treated as outstanding for any purpose except for purposes of determining the capital of the Company. [REGISTRAR OF INTERNATIONAL BUSINESS COMPANIES GOVERNMENT OF THE BRITISH VIRGIN ISLANDS SEAL] 7 25. Notice of a trust, expressed, implied or constructive, may be entered in the share register. TRANSFER OF SHARES 26. Subject to any limitations in the Memorandum, registered shares in the Company may be transferred by a written instrument of transfer signed by the transferor and containing the name and address of the transferee, but in the absence of such written instrument of transfer the directors may accept such evidence of a transfer of shares as they consider appropriate. 27. The Company shall not be required to treat a transferee of a registered share in the Company as a member until the transferee's name has been entered in the share register. 28. Subject to any limitations in the the Memorandum, the Company must on the application of the transferor or transferee of a registered share in the Company enter in the share register the name of the transferee of the share save that the registration of transfers may be suspended and the share register closed at such times and for such periods as the Company may from time to time by resolution of directors determine provided always that such registration shall not be suspended and the share register closed for more than 60 days in any period of 12 months. TRANSMISSION OF SHARES 29. The executor or administration of a deceased member, the guardian of an incompetent member or the trustee of a bankrupt member shall be the only person recognized by the Company as having any title to his share but they shall not be entitled to exercise any rights as a member of the Company until they have proceeded as set forth in the next two regulations. 30. Any person becoming entitled by operation of law or otherwise to a share or shares in consequence of the death, incompetence or bankruptcy of any member may be registered as a member upon such evidence being produced as may reasonably be required by the directors. An application by any such person to be registered as a member shall for all purposes be deemed to be a transfer of shares of the deceased, incompetent or bankrupt member and the directors shall treat it as such. 31. Any person who has become entitled to a share or shares in the consequence of the death, incompetence or bankruptcy of any member may, instead of being registered himself, request in writing that some person be named by him be registered as the transferee of such share or shares and such request shall likewise be treated as if it were a transfer. 32. What amounts to incompetence on the part of a person is a matter to be determined by the court having regard to all the relevant evidence and the circumstances of the case. REDUCTION OR INCREASE IN AUTHORISED CAPITAL OR CAPITAL 33. The Company may by a resolution of members or by resolution of directors amend the Memorandum to increase or reduce its authorised capital and in connection therewith the Company may in respect of any unissued shares increase or reduce the number of such shares, increase or reduce the par value of any such shares or effect any combination of the foregoing. 34. The Company may amend the Memorandum to [REGISTRAR OF INTERNATIONAL BUSINESS COMPANIES GOVERNMENT OF THE BRITISH VIRGIN ISLANDS SEAL] 8 (a) divide the shares, including issued shares, of a class or series into a large number of shares of the same class or series; or (b) combine the shares, including issued shares, of a class or series into a smaller number of shares of the same class or series; provided, however, that where shares are divided or combined under (a) or (b) of this Regulation, the aggregate par value of the new shares must be equal to the aggregate par value of the original shares. 35. The capital of the Company may by a resolution of members or by resolution of directors be increased by transferring an amount of the surplus of the Company to capital, and, subject to the provisions of Regulations 36 and 37, the capital of the Company may be reduced by transferring an amount of the capital of the Company to surplus. 36. No reduction of capital shall be effected that reduces the capital of the Company to an amount that immediately after the reduction is less than the aggregate par value of all outstanding shares with par value and all shares with par value held by the Company as treasury shares and the aggregate of the amounts designated as capital of all outstanding shares without par value and all shares without par value held by the Company as treasury shares that are entitled to a preference, if any, in assets of the Company upon liquidation of the Company. 37. No reduction of capital shall be effected unless the directors determine that immediately after the reduction the Company will be able to satisfy its liabilities as they become due in the ordinary course of its business and that the realizable assets of the Company will not be less than its total liabilities, other than deferred taxes, as shown in the books of the Company and its remaining capital, and, in the absence of fraud, the decision of the directors as to the realizable value of the assets of the Company is conclusive, unless a question of law is involved. 38. Where the Company reduces its capital the Company may (a) return to its members any amount received by the Company upon the issue of any of its shares; (b) purchase, redeem or otherwise acquire its shares out of capital; or (c) cancel any capital that is lost or not represented by assets having a realizable value. MEETINGS AND CONSENTS OF MEMBERS 39. The directors of the Company may convene meetings of the members of the Company at such times and in such manner and place within or outside the British Virgin Islands as the directors consider necessary or desirable. 40. Upon the written request of members holding 10 percent or more of the outstanding voting shares in the Company the directors shall convene a meeting of members. 41. The directors shall give not less than 7 days notice of meetings of members to those persons whose names on the date the notice is given appear as members in the share register of the Company. 42. A meeting of members held in contravention of the requirement in Regulation 41 is valid [REGISTRAR OF INTERNATIONAL BUSINESS COMPANIES GOVERNMENT OF THE BRITISH VIRGIN ISLANDS SEAL] 9 (a) if members holding not less than 90 percent of the total number of shares entitled to vote on all matters to be considered at the meeting, or 90 percent of the votes of each class or series of shares where members are entitled to vote thereon as a class or series together with not less than a 90 percent majority of the remaining votes, have agreed to shorter notice of the meeting; or (b) if all members holding shares entitled to vote on all or any matters to be considered at the meeting have waived notice of the meeting and for this purpose presence at the meeting shall be deemed to constitute waiver. 43. The inadvertent failure of the directors to give notice of a meeting to a member, or the fact that a member has not received notice, does not invalidate the meeting. 44. A member may be represented at a meeting of members by a proxy who may speak and vote on behalf of the member. 45. The instrument appointing a proxy shall be produced at the place appointed for the meeting before the time for holding the meeting at which the person named in such instrument proposes to vote. 46. An instrument appointing a proxy shall be in substantially the following form or such other form as the Chairman of the meeting shall accept as properly evidencing the wishes of the member appointing the proxy. (Name of Company) I/We being a member of the above Company with shares HEREBY APPOINT of or failing him of to be my/our proxy to vote for me/us at the meeting of members to be held on the day of and at any adjournment thereof. (Any restrictions on voting to be inserted here). Signed this day of - - -------------------------------------- Member 47. The following shall apply in respect of joint ownership of shares: (a) if two or more persons hold shares jointly each of them may be present in person or by proxy at a meeting of members and may speak as a member; (b) if only one of the joint owners is present in person or by proxy he may vote on behalf of all joint owners; and (c) if two or more of the joint owners are present in person or by proxy they must vote as one. [REGISTRAR OF INTERNATIONAL BUSINESS COMPANIES GOVERNMENT OF THE BRITISH VIRGIN ISLANDS SEAL] 10 48. A member shall be deemed to be present at a meeting of members if he participates by telephone or other electronic means and all members participating in the meeting are able to hear each other. 49. A meeting of members is duly constituted if, at the commencement of the meeting, there are present in person or by proxy not less than 50 percent of the votes of the shares of class or series of shares entitled to vote on resolutions of members considered at the meeting. If a quorum be present, notwithstanding the fact that such quorum may be represented by only one person, then such person may resolve any matter and a certificate signed by such person accompanied by a copy of the proxy form where such person be a proxy, shall constitute a valid resolution of members. 50. If within two hours from the time appointed for the meeting a quorum is not present, the meeting, if convened upon the requisition of members, shall be dissolved; in any other case it shall stand adjourned to the next business day at the same time and place or to such other time and place as the directors may determine, and if at the adjourned meeting there are present within one hour from the time appointed for the meeting in person or by proxy not less than one third of the votes of the shares of each class or series of shares entitled to vote on the resolution to be considered by the meeting, those present shall constitute a quorum but otherwise the meeting shall be dissolved. 51. At every meeting of members, the Chairman of the Board of Directors shall preside as chairman of the meeting. If there is no Chairman of the Board of Directors or if the Chairman of the Board of Directors is not present at the meeting, the members present shall choose some one of their number to be the chairman. If the members are unable to choose a chairman for any reason, then the person representing the greatest number of voting shares present in person or by prescribed form of proxy at the meeting shall preside as chairman failing which the oldest individual member or representative of a member present shall take the chair. 52. The chairman may, with the consent of the meeting, adjourn any meeting from time to time, and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. 53. At the meeting of the members the chairman shall be responsible for deciding in such manner as he shall consider appropriate whether any resolution has been carried or not and the result of his decision shall be announced to the meeting and recorded in the minutes thereof. If the chairman shall have any doubt as to the outcome of any resolution put to the vote, he shall cause a poll to be taken of all votes cast upon such resolution, but if the chairman shall fail to take a poll then any member present in person or by proxy who disputes the announcement by the chairman of the result of any vote may immediately following such announcement demand that a poll be taken and the chairman shall thereupon cause a poll to be taken. If a poll is taken at any meeting, the results thereof shall be duly recorded in the minutes of that meeting by the chairman. 54. Any person other than an individual shall be regarded as one member and subject to Regulation 55 the right of any individual to speak for or represent such member shall be determined by the law of the jurisdiction where, and by the documents by which, the person is constituted or derives its existence. In case of doubt, the directors may in good faith, seek legal advice from any qualified person and unless and until a court of competent jurisdiction shall otherwise rule, the directors may rely and act upon such advice without any liability to any member. [REGISTRAR OF INTERNATIONAL BUSINESS COMPANIES GOVERNMENT OF THE BRITISH VIRGIN ISLANDS SEAL] 11 55. Any person other than an individual which is a member of the Company may by resolution of its directors or other governing body authorise such person as it thinks fit to act as its representative at any meeting of the Company or of any class of members of the Company, and the person so authorised shall be entitled to exercise the same powers on behalf of the person which he represents as that person could exercise if it were an individual member of the Company. 56. The chairman of any meeting at which a vote is cast by proxy or on behalf of any person other than an individual may call for a notarially certified copy of such proxy or authority which shall be produced within 7 days of being so requested or the votes cast by such proxy or on behalf of such person shall be disregarded. 57. Directors of the Company may attend and speak at any meeting of members of the Company and at any separate meeting of the holders of any class or series of shares in the Company DIRECTORS 58. The first director or directors of the Company shall be elected by the subscriber(s) to the Memorandum and these Articles; and, save as provided in Regulation 63 hereof, thereafter, the directors shall be elected by the members for such term as the members determine. 59. The minimum number of directors shall be one and the maximum number shall be 10. 60. Each director shall hold office for the term, if any, fixed by resolution of members or until his earlier death, resignation or removal. 61. A director may be removed from office, with or without cause, only by a resolution of members. 62. A director may resign his office by giving written notice of his resignation to the Company and the resignation shall have effect from the date the notice is received by the Company or from such later date as may be specified in the notice. 63. A vacancy in the Board of Directors may be filled by a resolution of members or by a resolution of a majority of the remaining directors. In addition, the directors, by resolution, may appoint new directors, resign and specify that their resignations will become effective following the appointment of their replacements. 64. With prior or subsequent approval by a resolution of members, the directors may, by a resolution of directors, fix the emoluments of directors with respect to services to be rendered in any capacity to the Company. 65. A director shall not require a share qualification, and may be an individual or a company. POWER OF DIRECTORS 66. The business and affairs of the Company shall be managed by the directors who may pay all expenses incurred preliminary to and in connection with the formation and registration of the Company and may exercise all such powers of the Company as are not by the Ordinance or by the Memorandum or these Articles required to be exercised by the members of the Company, subject to any delegation of such powers as may be authorised by these Articles and to such requirements as may be prescribed by a resolution of members; but no requirement made by a resolution of members shall prevail if it be [REGISTRAR OF INTERNATIONAL BUSINESS COMPANIES GOVERNMENT OF THE BRITISH VIRGIN ISLANDS SEAL] 12 inconsistent with these Articles nor shall such requirements invalidate any prior act of the directors which would have been valid if such requirement had not been made. 67. The directors may, by a resolution of directors, appoint any person, including a person who is a director, to be an officer or agent of the Company. 68. Every officer or agent of the Company has such powers and authority of the directors, including the power and authority to affix the Seal, as are set forth in these Articles or in the resolution of directors appointing the officer or agent, except that no officer or agent has any power or authority with respect to fixing the emoluments of directors. 69. Any director which is a body corporate may appoint any person its duly authorised representative for the purpose of representing it at meetings of the Board of Directors or with respect to unanimous written consents or with respect to any other actions of directors in accordance with these Articles. 70. The continuing directors may act notwithstanding any vacancy in their body, save that if their number is reduced below the number fixed by or pursuant to these Articles as the necessary quorum for a meeting of directors, the continuing directors or director may act only for the purpose of appointing directors to fill any vacancy that has arisen or summoning a meeting of members. 71. All cheques, promissory notes, drafts, bills of exchange and other negotiable instruments and all receipts for moneys paid to the Company shall be signed, drawn, accepted, endorsed or otherwise executed, as the case may be, in such manner as shall from time to time be determined by resolution of directors. PROCEEDINGS OF DIRECTORS 72. The directors of the Company or any committee thereof may meet at such times and in such manner and places within or outside the British Virgin Islands as the directors may determine to be necessary or desirable. 73. A director shall be deemed to be present at a meeting of directors if he participates by telephone or other electronic means and all directors participating in the meeting are able to hear each other. 74. A director shall be given not less than 3 days notice of meetings of directors, but a meeting of directors held without 3 days notice having been given to all directors shall be valid if all the directors entitled to vote at the meeting who do not attend waive notice of the meeting; and for this purpose the presence of a director at the meeting shall be deemed to constitute waiver on his part. The inadvertent failure to give notice of a meeting to a director, or the fact that a director has not received the notice, does not invalidate the meeting. 75. A director may be written instrument appoint an alternate who need not be a director and an alternate is entitled to attend meetings in the absence of the director who appointed him and to vote or consent in place of the director. 76. A meeting of directors is duly constituted for all purposes if at the commencement of the meeting there are present in person or by alternate not less than one half of the total number of directors then in office, unless there are only 2 directors in which case the quorum shall be 2. [REGISTRAR OF INTERNATIONAL BUSINESS COMPANIES GOVERNMENT OF THE BRITISH VIRGIN ISLANDS SEAL] 13 77. If the Company shall have only one director the provisions herein contained for meetings of the directors shall not apply but such sole director shall have full power to represent and act for the Company in all matters as are not by the Ordinance or the Memorandum or these Articles required to be exercised by the members of the Company and in lieu of minutes of a meeting such sole director shall record in writing and sign a note or memorandum of all matters requiring a resolution of directors. Such a note of memorandum shall constitute sufficient evidence of such resolution for all purposes. 78. At every meeting of the directors the Chairman of the Board of Directors shall preside as chairman of the meeting. If there is no Chairman of the Board of Directors or if the Chairman of the Board of Directors is not present at the meeting the Vice Chairman of the Board of Directors shall preside. If there is no Vice Chairman of the Board of Directors or if the Vice Chairman of the Board of Directors is not present at the meeting the directors present shall choose some one of their number to be chairman of the meeting. 79. The directors shall cause the following corporate records to be kept: (a) minutes of all meetings of directors, members, committees of directors, committees of officers and committees of members; (b) copies of all resolutions consented to by directors, members, committees of directors, committees of officers and committees of members; and (c) such other accounts and records as the directors by resolution of directors consider necessary or desirable in order to reflect the financial position of the Company. 80. The books, records and minutes shall be kept at the registered office of the Company or at such other place as the directors determine. 81. The directors may, by a resolution of directors, designate one or more committees, each consisting of one or more directors. 82. Each committee of directors has such powers and authorities of the directors, subject to prior consent of the shareholders, including the powers and authority to affix the seal. No committee has any power or authority to either amend the Memorandum or these Articles or to act in respect to matters requiring a resolution of directors under Regulation 63, 64 and 67. 83. The meetings and proceedings of each committee of directors consisting of 2 or more directors shall be governed mutatis mutandis by the provisions of these Articles regulating the proceedings of directors so far as the same are not superseded by any provisions in the resolution establishing the committee. OFFICERS 84. The Company may by resolution of directors appoint officers of the Company at such times as shall be considered necessary or expedient. Such officers, who need not be directors or members of the Company, may consist of the Chairman of the Board of Directors, a Vice Chairman of the Board of Directors, a President and one or more Vice Presidents, Secretaries and Treasurers and such other officers as may from time to time be deemed desirable. Any number of offices may be held by the same person. 85. The officers shall perform such duties as shall be prescribed at the time of their appointment subject to any modification in such duties as may be prescribed thereafter by resolution of [REGISTRAR OF INTERNATIONAL BUSINESS COMPANIES GOVERNMENT OF THE BRITISH VIRGIN ISLANDS SEAL] 14 directors or resolution of members, but in the absence of any specific allocation of duties it shall be the responsibility of the Chairman of the Board of Directors to preside at meetings of directors and members, the Vice Chairman to act in the absence of the Chairman, the President to manage the day to day affairs of the Company, the Vice Presidents to act in order of seniority in the absence of the President but otherwise to perform such duties as may be delegated to them by the President, the Secretaries to maintain the share register, minute books and records (other than financial records) of the Company and to ensure compliance with all procedural requirements imposed on the Company by applicable law, and the Treasurer to be responsible for the financial affairs of the Company. 86. The emoluments of all officers shall be fixed by resolution of directors. 87. The officers of the Company shall hold office until their successors are duly elected and qualified, but any officer elected or appointed by the directors may be removed at any time, with or without cause, by resolution of directors. Any vacancy occurring in any office of the Company may be filled by resolution of directors. CONFLICT OF INTERESTS 88. No agreement or transaction between the Company and one or more of its directors or any person in which any director has a financial interest or to whom any director is related, including as a director of that other person, is void or voidable for this reason only or by reason only that the director is present at the meeting of directors or at the meeting of the committee of directors that approves the agreement or transaction or that the vote or consent of the director is counted for that purpose if the material facts of the interest of each director in the agreement or transaction and his interest in or relationship to any other party to the agreement or transaction are disclosed in good faith or are known by the other directors. Such agreement or transaction is valid even if at the time the agreement or transaction was authorized, approved or ratified by resolution of directors or by resolution of members the agreement or transaction was unfairly prejudicial to one or more members of the company or the creditors of the company except that no person who voted in favor of the resolution authorizing, approving or ratifying the agreement or transaction shall be capable subsequently of impugning or objecting to the agreement or transaction. 89. A director who has an interest in any particular business to be considered at a meeting of directors or members may be counted for purposes of determining whether the meeting is duly constituted. INDEMNIFICATION 90. Subject to Regulation 91 the Company shall indemnify against all expenses, including legal fees, and against all judgements, fines and amounts paid in settlement and reasonably incurred in connection with legal, administrative or investigative proceedings any person who (a) is or was a party or is threatened to be made a party to any threatened, pending or completed proceedings, whether civil, criminal, administrative or investigative, by reason of the fact that the person is or was a director, an officer or a liquidator of the Company; or (b) is or was, at the request of the Company, serving as a director, officer or liquidator of or in any capacity is or was acting for, another company or a partnership, joint venture, trust or other enterprise. [REGISTRAR OF INTERNATIONAL BUSINESS COMPANIES GOVERNMENT OF THE BRITISH VIRGIN ISLANDS SEAL] 15 91. Regulation 90 only applies to a person referred to in that Regulation if the person acted honestly and in good faith with a view to the best interests of the Company and, in the case of criminal proceedings, the person had no reasonable cause to believe that his conduct was unlawful. 92. The decision of the directors as to whether the person acted honestly and in good faith and with a view to the best interests of the Company and as to whether the person had no reasonable cause to believe that his conduct was unlawful, is, in the absence of fraud, sufficient for the purpose of these Articles, unless a question of law is involved. 93. The termination of any proceedings by any judgment, order, settlement, conviction or the entering of a nolle prosequi does not, by itself, create a presumption that the person did not act honestly and in good faith and with a view to the best interests of the Company or that the person had reasonable cause to believe that his conduct was unlawful. 94. If a person referred to in Regulation 90 has been successful in defence of any proceedings referred to in that Regulation the person is entitled to be indemnified against all expenses, including legal fees, and against all judgments, fines and amounts paid in settlement and reasonably incurred by the person in connection with the proceedings. 95. The Company may purchase and maintain insurance in relation to any person who is or was a director, an officer or a liquidator of the Company, or who at the request of the Company is or was serving as a director, an officer or a liquidator of, or in any other capacity is or was acting for, another company or a partnership, joint venture, trust or another enterprise, against any liability asserted against the person and incurred by the person in that capacity, whether or not the Company has or would have had the power to indemnify the person against the liability under Regulation 90. PERSONAL LIABILITY 96. No member, director, officer, agent or liquidator of the Company is liable for any debt, obligation or default of the Company in the execution of the duties of his office or otherwise in relation thereto except in so far as he may be liable for his own conduct or acts. If, however, at any time there is no member of the Company, any person doing business in the name or on behalf of the Company is personally liable for the payment of all debts of the Company contracted during that time and the person may be sued therefor without joinder in the proceedings of any other person. SEAL 97. The directors shall provide for the safe custody of the Seal. The Seal when affixed to any written instrument shall be witnessed by a director or any other person so authorised from time to time by resolution of directors. The directors may provide for a facsimile of the Seal and of the signature of any director or authorised person which may be reproduced by printing or other means on any instrument and it shall have the same force and validity as if the Seal had been affixed to such instrument and the same had been signed and hereinbefore described. AUTHENTICATION OF DOCUMENTS 98. Subject to the provisions of the Ordinance and these Articles the company is bound by any document signed on its behalf in accordance with the resolution of directors or the resolution of members, as the case may be, authorizing the execution of such document or in accordance with any general or special powers of attorney granted by the company, and [REGISTRAR OF INTERNATIONAL BUSINESS COMPANIES GOVERNMENT OF THE BRITISH VIRGIN ISLANDS SEAL] 16 need not be under its common seal. If any authentication or attestation is required, the signature of the person(s) executing the document may be certified by the Registered Agent of the Company, any notary public, any official department or consulate of any country, any major bank or other financial institution, or as otherwise requested. DIVIDENDS 99. The Company may by a resolution of directors declare and pay dividends in money, shares, or other property but dividends shall only be declared and paid out of surplus. In the event that dividends are paid in specie the directors shall have the responsibility for establishing and recording in the resolution of directors authorising the dividends a fair and proper value for the assets to be distributed. The directors may from time to time pay to the members such interim dividends as appear to the directors to be justified by the profits of the Company. The directors may, before declaring any dividend, set aside out of the profits of the Company such sum as they think proper as a reserve fund, and may invest the sum so set apart as a reserve fund upon such securities as they may select. 100. No dividend shall be declared and paid unless the directors determine that immediately after the payment of the dividend the Company will be able to satisfy its liabilities as they become due in the ordinary course of its business and the realizable value of the assets of the Company will not be less than the sum of its total liabilities, other than deferred taxes, as shown in its books of account, and its capital. In the absence of fraud, the decision of the directors as to the realizable value of the assets of the Company is conclusive, unless a question of law is involved. 101. Notice of any dividend that may have been declared shall be given to each member in the manner hereinafter mentioned and all dividends unclaimed for 3 years after having been declared may be forfeited by resolution of directors for the benefit of the Company. 102. No dividend shall bear interest as against the Company and no dividend shall be paid on shares described in Regulation 24. 103. A share issued as a dividend by the Company shall be treated for all purposes as having been issued for money equal to the surplus that is transferred to capital upon the issue of the share. 104. In the case of a dividend of authorised but unissued shares with par value, an amount equal to the aggregate par value of such shares shall be transferred from surplus to capital at the time of the distribution. 105. In the case of a dividend of authorised but unissued shares without par value, the amount designated by the directors shall be transferred from surplus to capital at the time of the distribution, except that the directors must designate as capital an amount that is at least equal to the amount that such shares are entitled to as a preference, if any, in the assets of the Company upon liquidation of the Company. 106. A division of the issued and outstanding shares of a class or series of shares into a larger number of shares of the same class or series having a proportionately smaller par value does not constitute a dividend of shares. ACCOUNTS 107. The Company shall keep such accounts and records as the directors consider necessary or desirable in order to reflect the financial position of the Company. [REGISTRAR OF INTERNATIONAL BUSINESS COMPANIES GOVERNMENT OF THE BRITISH VIRGIN ISLANDS SEAL] 17 108. The members may, but are not bound to, require the directors to prepare profit and loss accounts and balance sheet and, unless so required, the directors shall not be bound to prepare such profit and loss accounts and balance sheet. 109. A copy of such profit and loss account and balance sheet, if prepared, shall be served on every member in the manner and with similar notice to that prescribed herein for calling a meeting of members or upon such shorter notice as the members may agree to accept. 110. The Company may by a resolution of directors include in the computation of surplus for any purpose the unrealized appreciation of the assets of the Company, and, in the absence of fraud, the decision of the directors as to the value of the assets is conclusive, unless a question of law is involved. AUDIT 111. The Company may by resolution of members call for the accounts to be examined by auditors. 112. The first auditors may be appointed by resolution of directors; subsequent auditors may be appointed by resolution of members. 113. The auditors may be members of the Company but no director or other officer shall be eligible to be an auditor of the Company during his continuance in office. 114. The remuneration of the auditors of the Company (a) in the case of auditors appointed by the directors, may be fixed by resolution of directors; (b) subject to the foregoing, shall be fixed by resolution of members or in such manner as the Company may by resolution of members determine. 115. The auditors shall examine each profit and loss account and balance sheet, if required, to be served on every member of the Company or laid before a meeting of the members of the Company and shall state in a written report whether or not (a) in the opinion the profit and loss account and balance sheet give a true and fair view respectively of the profit and loss for the period covered by the accounts, and of the state of affairs of the Company at the end of that period; (b) all the information and explanations required by the auditors have been obtained. 116. The report of the auditors shall be annexed to the accounts and shall be read at the meeting of members at which the accounts are laid before the Company or shall be served on the members. 117. Every auditor of the Company shall have the right of access at all times to the books of account and vouchers of the Company, and shall be entitled to require from the directors and officers of the Company such information and explanations as he thinks necessary for the performance of his duties. 118. The auditors of the Company shall be entitled to receive notice of and attend any meetings of members of the Company at which the Company's profit and loss account and balance sheet are to presented. [REGISTRAR OF INTERNATIONAL BUSINESS COMPANIES GOVERNMENT OF THE BRITISH VIRGIN ISLANDS SEAL] 18 NOTICES 119. Any notice, information or written statement to be given by the Company to members must be served in the case of members holding registered shares by mail addressed to each member at the address shown in the share register and in the case of members holding shares issued to bearer, in the manner provided in the Memorandum. 120. Any summons, notice, order, document, process, information or written statement to be served on the Company may be served by leaving it, or by sending it by registered mail addressed to the Company, at its Registered Office, or by leaving it with, or by sending it by registered mail to, the Registered Agent of the Company. 121. Service of any summons, notice, order, document, process, information or written statement to be served on the Company may be proved by showing that the summons, notice, order, document, process, information or written statement was mailed in such time as to admit to its being delivered in the normal course of delivery within the period prescribed for service and was correctly addressed and the postage was prepaid. PENSION AND SUPERANNUATION FUNDS 122. The directors may establish and maintain or procure the establishment and maintenance of any non-contributory or contributory pension or superannuation funds for the benefit of, and give or procure the giving of donations, gratuities, pensions, allowances or emoluments to any persons who are or were at any time in the employment or service of the Company or any company which is a subsidiary of the Company or is allied to or associated with the Company or with any such subsidiary, or who are or were at any time directors or officers of the Company or of any such other company as aforesaid or who hold or held any salaried employment or office in the Company or such other company, or any persons in whose welfare the Company or any such other company as aforesaid is or has been at any time interested, and to the wives, widows, families and dependents of any such person, and may make payments for or towards the insurance of any such persons as aforesaid, and may do any of the matters aforesaid either alone or in conjunction with any such other company as aforesaid. Subject always to the proposals being approved by resolution of members, a director holding any such employment, or office shall be entitled to participate in and retain for his own benefit any such donation, gratuity, pension, allowance or emolument. ARBITRATION 123. Whenever any difference arises between the Company on the one hand and any of the members or their executors, administrators or assigns on the other hand, touching the true intent and construction of the incidence or consequences of these Articles or of the Ordinance, touching anything done or executed, omitted or suffered in pursuance of the Ordinance or touching any breach or alleged breach or otherwise relating to the premises or to these Articles, or to any Act or Ordinance affecting the Company or to any of the affairs of the Company such difference shall, unless the parties agree to refer the same to a single arbitrator, be referred to 2 arbitrators one to be chosen by each of the parties to the difference and the arbitrators shall before entering on the reference appoint an umpire. 124. If either party to the reference makes default in appointing an arbitrator either originally or by way of substitution (in the event that an appointed arbitrator shall die, be incapable of acting or refuse to act) for 10 days after the other party has given him notice to appoint the same, such other party may appoint an arbitrator to act in the place of the arbitrator of the defaulting party. [REGISTRAR OF INTERNATIONAL BUSINESS COMPANIES GOVERNMENT OF THE BRITISH VIRGIN ISLANDS SEAL] 19 VOLUNTARILY WINDING UP AND DISSOLUTION 125. The Company may voluntarily commence to wind up and dissolve by a resolution of members or a resolution of directors but if the Company has never issued shares it may voluntarily commence to wind up and dissolve by a resolution of directors. CONTINUATION 126. The Company may by resolution of members or by a resolution passed unanimously by all directors of the Company continue as a company incorporated under the laws of a jurisdiction outside the British Virgin Islands in the manner provided under those laws. We, Arias Fabrega & Fabrega Trust Co. BVI Limited of Wickhams Cay, Road Town, Tortola, British Virgin Islands for the purpose of incorporating an International Business Company under the laws of the British Virgin Islands hereby subscribe our name to these Articles of Association the 27th day of March, 1998 in the presence of: Subscriber /s/ Illegible Arias Fabrega & Fabrega Trust Co. BVI Limited Witness Nadia Harrigan /s/ NADIA HARRIGAN Wickhams Cay Road Town, Tortola [REGISTRAR OF INTERNATIONAL BUSINESS COMPANIES GOVERNMENT OF THE BRITISH VIRGIN ISLANDS SEAL] EX-4.1 4 EXHIBIT 4.1 EXECUTION COPY A/B EXCHANGE REGISTRATION RIGHTS AGREEMENT Dated as of October 28, 1999 by and among Amethyst Financial Company Limited Pride International, Inc. Maritima Petroleo e Engenharia Ltda. and Donaldson, Lufkin & Jenrette Securities Corporation This Registration Rights Agreement (this "AGREEMENT") is made and entered into as of October 28, 1999, by and among Amethyst Financial Company Limited, a limited liability company incorporated in the British Virgin Islands (the "COMPANY"), Pride International, Inc. ("PRIDE"), Maritima Petroleo e Engenharia Ltda. ("MARITIMA", and together with Pride, the "GUARANTORS"), and Donaldson, Lufkin & Jenrette Securities Corporation (the "INITIAL PURCHASER"), who has agreed to purchase the Company's 11 3/4% Senior Secured Notes due 2001 (the "INITIAL NOTES") pursuant to the Purchase Agreement (as defined below). This Agreement is made pursuant to the Purchase Agreement, dated October 28, 1999 (the "PURCHASE AGREEMENT"), by and among the Company, the Guarantors and the Initial Purchaser. In order to induce the Initial Purchaser to purchase the Initial Notes, the Company has agreed to provide the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the obligations of the Initial Purchaser set forth in Section 9 of the Purchase Agreement. Capitalized terms used herein and not otherwise defined shall have the meaning assigned to them the Indenture, dated November 1, 1999, between the Company and Wilmington Trust Company, as Trustee, relating to the Initial Notes and the Exchange Notes (the "INDENTURE") or the Purchase Agreement, as the case may be. The parties hereby agree as follows: SECTION 1. DEFINITIONS As used in this Agreement, the following capitalized terms shall have the following meanings: ACT: The Securities Act of 1933, as amended. AFFILIATE: As defined in Rule 144 of the Act. BROKER-DEALER: Any broker or dealer registered under the Exchange Act. CERTIFICATED SECURITIES: Definitive Notes, as defined in the Indenture. CLOSING DATE: The date hereof. COMMISSION: The Securities and Exchange Commission. CONSUMMATE: An Exchange Offer shall be deemed "Consummated" for purposes of this Agreement upon the occurrence of (a) the filing and effectiveness under the Act of the Exchange Offer Registration Statement relating to the Exchange Notes to be issued in the Exchange Offer, (b) the maintenance of such Exchange Offer Registration Statement continuously effective and the keeping of the Exchange Offer open for a period not less than the period required pursuant to Section 3(b) hereof and (c) the delivery by the Company to the Registrar under the Indenture of Exchange Notes in the same aggregate principal amount as the aggregate principal amount of Initial Notes tendered by Holders thereof pursuant to the Exchange Offer. CONSUMMATION DEADLINE: As defined in Section 3(b) hereof. EFFECTIVENESS DEADLINE: As defined in Sections 3(a) and 4(a) hereof. EXCHANGE ACT: The Securities Exchange Act of 1934, as amended. EXCHANGE NOTES: The Company's 11 3/4% Senior Secured Exchange Notes due 2001 and the related Pride Guarantee to be issued pursuant to the Indenture: (i) in the Exchange Offer or (ii) as contemplated by Section 4 hereof. EXCHANGE OFFER: The exchange and issuance by the Company and Pride of a principal amount of Exchange Notes and related Pride Guarantee (each of which shall be registered pursuant to the Exchange Offer Registration Statement) equal to the outstanding principal amount of Initial Notes that are tendered by such Holders in connection with such exchange and issuance. EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement relating to the Exchange Offer, including the related Prospectus. EXEMPT RESALES: The transactions in which the Initial Purchaser proposes to sell the Initial Notes to certain "qualified institutional buyers," as such term is defined in Rule 144A under the Act and pursuant to Regulation S under the Act. FILING DEADLINE: As defined in Sections 3(a) and 4(a) hereof. HOLDERS: As defined in Section 2 hereof. PROSPECTUS: The prospectus included in a Registration Statement at the time such Registration Statement is declared effective, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus. RECOMMENCEMENT DATE: As defined in Section 6(d) hereof. REGISTRATION DEFAULT: As defined in Section 5 hereof. 3 REGISTRATION STATEMENT: Any registration statement of the Company and Pride relating to (a) an offering of Exchange Notes pursuant to an Exchange Offer or (b) the registration for resale of Transfer Restricted Securities pursuant to the Shelf Registration Statement, in each case, (i) that is filed pursuant to the provisions of this Agreement and (ii) including the Prospectus included therein, all amendments and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein. REGULATION S: Regulation S promulgated under the Act. RULE 144: Rule 144 promulgated under the Act. SHELF REGISTRATION STATEMENT: As defined in Section 6(b) hereof. SUSPENSION NOTICE: As defined in Section 6(d) hereof. TIA: The Trust Indenture Act of 1939 as in effect on the date of the Indenture. TRANSFER RESTRICTED SECURITIES: Each Initial Note, until the earliest to occur of (a) the date on which such Initial Note is exchanged in the Exchange Offer for an Exchange Note which is entitled to be resold to the public by the Holder thereof without complying with the prospectus delivery requirements of the Act, (b) the date on which such Initial Note has been disposed of in accordance with a Shelf Registration Statement (and the purchasers thereof have been issued Exchange Notes), or (c) the date on which such Initial Note is distributed to the public pursuant to Rule 144 under the Act (and purchasers thereof have been issued Exchange Notes) and each Exchange Note until the date on which such Exchange Note is disposed of by a Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the Exchange Offer Registration Statement (including the delivery of the Prospectus contained therein). SECTION 2. HOLDERS A Person is deemed to be a holder of Transfer Restricted Securities (each, a "HOLDER") whenever such Person owns Transfer Restricted Securities. SECTION 3. REGISTERED EXCHANGE OFFER (a) Unless the Exchange Offer shall not be permitted by applicable federal law (after the procedures set forth in Section 6(a)(i) below have been complied with), the Company and the Guarantors shall (i) cause the Exchange Offer Registration Statement to be filed with the Commission as soon as practicable after the Closing Date, but in no event later than 60 days after 4 the Closing Date (such 60th day being the "FILING DEADLINE"), (ii) use their best efforts to cause such Exchange Offer Registration Statement to become effective at the earliest possible time, but in no event later than 150 days after the Closing Date (such 150 days being the "EFFECTIVENESS DEADLINE"), (iii) in connection with the foregoing, (A) file all pre-effective amendments to such Exchange Offer Registration Statement as may be necessary in order to cause it to become effective, (B) file, if applicable, a posteffective amendment to such Exchange Offer Registration Statement pursuant to Rule 430A under the Act and (C) cause all necessary filings, if any, in connection with the registration and qualification of the Exchange Notes to be made under the Blue Sky laws of such jurisdictions as are necessary to permit Consummation of the Exchange Offer, and (iv) upon the effectiveness of such Exchange Offer Registration Statement, commence and Consummate the Exchange Offer. The Exchange Offer shall be on the appropriate form permitting (i) registration of the Exchange Notes to be offered in exchange for the Initial Notes that are Transfer Restricted Securities and (ii) resales of Exchange Notes by Broker-Dealers that tendered into the Exchange Offer Initial Notes that such Broker-Dealer acquired for its own account as a result of market making activities or other trading activities (other than Initial Notes acquired directly from the Company or any of its Affiliates) as contemplated by Section 3(c) below. (b) The Company and the Guarantors shall use their best efforts to cause the Exchange Offer Registration Statement to be effective continuously, and shall keep the Exchange Offer open for a period of not less than the minimum period required under applicable federal and state securities laws to Consummate the Exchange Offer; PROVIDED, HOWEVER, that in no event shall such period be less than 30 days. The Company and the Guarantors shall cause the Exchange Offer to comply with all applicable federal and state securities laws. No securities other than the Exchange Notes and the related Pride Guarantee shall be included in the Exchange Offer Registration Statement. The Company and the Guarantors shall use their best efforts to cause the Exchange Offer to be Consummated on the earliest practicable date after the Exchange Offer Registration Statement has become effective, but in no event later than 30 business days thereafter (such 30th day being the "CONSUMMATION DEADLINE"). (c) The Company and the Guarantors shall include a "Plan of Distribution" section in the Prospectus contained in the Exchange Offer Registration Statement and indicate therein that any Broker-Dealer who holds Transfer Restricted Securities that were acquired for the account of such Broker-Dealer as a result of market-making activities or other trading activities (other than Initial Notes acquired directly from the Company or any Affiliate of the Company), may exchange such Transfer Restricted Securities pursuant to the Exchange Offer. Such "Plan of Distribution" section shall also contain all other information with respect to such sales by such Broker-Dealers that the Commission may require in order to permit such sales pursuant thereto, but such "Plan of Distribution" shall not name any such Broker-Dealer or disclose the amount of Transfer Restricted Securities held by any such Broker-Dealer, except to the extent required by the Commission as a result of a change in policy, rules or regulations after the date of this Agreement. See the Shearman & Sterling no-action letter (available July 2, 1993). 5 Because such Broker-Dealer may be deemed to be an "underwriter" within the meaning of the Act and must, therefore, deliver a prospectus meeting the requirements of the Act in connection with its initial sale of any Exchange Notes received by such Broker-Dealer in the Exchange Offer, the Company and the Guarantors shall permit the use of the Prospectus contained in the Exchange Offer Registration Statement by such Broker-Dealer to satisfy such prospectus delivery requirement. To the extent necessary to ensure that the prospectus contained in the Exchange Offer Registration Statement is available for sales of Exchange Notes by Broker-Dealers, the Company and the Guarantors agree to use their best efforts to keep the Exchange Offer Registration Statement continuously effective, supplemented, amended and current as required by and subject to the provisions of Sections 6(a) and (c) hereof and in conformity with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of one year from the Consummation Deadline or such shorter period as will terminate when all Transfer Restricted Securities covered by such Registration Statement have been sold pursuant thereto. The Company shall provide sufficient copies of the latest version of such Prospectus to such Broker-Dealers, promptly upon request, and in no event later than one day after such request, at any time during such period. SECTION 4. SHELF REGISTRATION (a) SHELF REGISTRATION. If (i) the Exchange Offer is not permitted by applicable law (after the Company and the Guarantors have complied with the procedures set forth in Section 6(a)(i) below), (ii) for any reason the Exchange Offer is not consummated within 180 days of the date of this Agreement, (iii) the Initial Purchaser so requests in writing to the Company with respect to Initial Notes not eligible to be exchanged for Exchange Notes in the Exchange Offer or (iv) any Holder of Transfer Restricted Securities shall notify the Company within 20 Business Days following the Consummation Deadline that (A) such Holder was prohibited by law or Commission policy from participating in the Exchange Offer or (B) such Holder may not resell the Exchange Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by such Holder or (C) such Holder is a Broker-Dealer and holds Initial Notes acquired directly from the Company or any of its Affiliates, then the Company shall, at their cost: (x) cause to be filed, on or prior to 30 days after the earliest of (i) the date on which the Company determines that the Exchange Offer Registration Statement cannot be filed as a result of clause (a)(i) above, (ii) the 180th day after the date of this Agreement if for any reason the Exchange Offer is not then consummated and (iii) the date on which the Company receives the notice specified in clause (a)(iii) or (iv) above (such earliest date, the "FILING DEADLINE"), a shelf registration statement pursuant to Rule 415 under the Act (which may be an amendment to the Exchange Offer Registration Statement (the "SHELF REGISTRATION STATEMENT")), relating to all Transfer Restricted Securities, and 6 (y) shall use their best efforts to cause such Shelf Registration Statement to become effective on or prior to 60 days after the Filing Deadline for the Shelf Registration Statement (such 60th day the "EFFECTIVENESS DEADLINE"). If, after the Company and the Guarantors have filed an Exchange Offer Registration Statement that satisfies the requirements of Section 3(a) above, the Company and the Guarantors are required to file and make effective a Shelf Registration Statement solely because the Exchange Offer is not permitted under applicable federal law (i.e., clause (a)(i) above), then the filing of the Exchange Offer Registration Statement shall be deemed to satisfy the requirements of clause (x) above; PROVIDED that, in such event, the Company and the Guarantors shall remain obligated to meet the Effectiveness Deadline set forth in clause (y). To the extent necessary to ensure that the Shelf Registration Statement is available for sales of Transfer Restricted Securities by the Holders thereof entitled to the benefit of this Section 4(a) and the other securities required to be registered therein pursuant to Section 6(b)(ii) hereof, the Company and the Guarantors shall use their best efforts to keep any Shelf Registration Statement required by this Section 4(a) continuously effective, supplemented, amended and current as required by and subject to the provisions of Sections 6(b) and (c) hereof and in conformity with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of at least two years (as extended pursuant to Section 6(d)) following the Closing Date, or such shorter period as will terminate when all Transfer Restricted Securities covered by such Shelf Registration Statement have been sold pursuant thereto. (b) PROVISION BY HOLDERS OF CERTAIN INFORMATION IN CONNECTION WITH THE SHELF REGISTRATION STATEMENT. No Holder of Transfer Restricted Securities may include any of its Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishes to the Company in writing, within 20 days after receipt of a request therefor, the information specified in Item 507 or 508 of Regulation S-K, as applicable, of the Act for use in connection with any Shelf Registration Statement or Prospectus or preliminary Prospectus included therein. No Holder of Transfer Restricted Securities shall be entitled to liquidated damages pursuant to Section 5 hereof unless and until such Holder shall have provided all such information. Each selling Holder agrees to promptly furnish additional information required to be disclosed in order to make the information previously furnished to the Company by such Holder not materially misleading. SECTION 5. LIQUIDATED DAMAGES If (i) any Registration Statement required by this Agreement is not filed with the Commission on or prior to the applicable Filing Deadline, (ii) any such Registration Statement has not been declared effective by the Commission on or prior to the applicable Effectiveness Deadline, (iii) the Exchange Offer has not been Consummated on or prior to the Consummation Deadline or (iv) any 7 Registration Statement required by this Agreement is filed and declared effective but shall thereafter cease to be effective or fail to be usable for its intended purpose without being succeeded within 2 days by a post-effective amendment to such Registration Statement that cures such failure and that is itself declared effective within 5 days of filing such post-effective amendment to such Registration Statement (each such event referred to in clauses (i) through (iv), a "REGISTRATION DEFAULT"), then the Company hereby agrees to pay to each Holder of Transfer Restricted Securities affected thereby liquidated damages in an amount equal to $.05 per week per $1,000 in principal amount of Transfer Restricted Securities held by such Holder for each week or portion thereof that the Registration Default continues for the first 90-day period immediately following the occurrence of such Registration Default. The amount of the liquidated damages shall increase by an additional $.05 per week per $1,000 in principal amount of Transfer Restricted Securities with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of liquidated damages of $.50 per week per $1,000 in principal amount of Transfer Restricted Securities; PROVIDED that the Company shall in no event be required to pay liquidated damages for more than one Registration Default at any given time. Notwithstanding anything to the contrary set forth herein, (1) upon filing of the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement), in the case of (i) above, (2) upon the effectiveness of the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement), in the case of (ii) above, (3) upon Consummation of the Exchange Offer, in the case of (iii) above, or (4) upon the filing of a post-effective amendment to the Registration Statement or an additional Registration Statement that causes the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement) to again be declared effective or made usable in the case of (iv) above, the liquidated damages payable with respect to the Transfer Restricted Securities as a result of such clause (i), (ii), (iii) or (iv), as applicable, shall cease. All accrued liquidated damages shall be paid to the Holders entitled thereto, in the manner provided for the payment of interest in the Indenture, on each Interest Payment Date, as more fully set forth in the Indenture and the Notes. Notwithstanding the fact that any securities for which liquidated damages are due cease to be Transfer Restricted Securities, all obligations of the Company to pay liquidated damages with respect to securities shall survive until such time as such obligations with respect to such securities shall have been satisfied in full. SECTION 6. REGISTRATION PROCEDURES (a) EXCHANGE OFFER REGISTRATION STATEMENT. In connection with the Exchange Offer, the Company and the Guarantors shall (x) comply with all applicable provisions of Section 6(c) below, (y) use their best efforts to effect such exchange and to permit the resale of Exchange Notes by Broker-Dealers that tendered in the Exchange Offer Initial Notes that such Broker-Dealer acquired for its own account as a result of its market making activities or other trading activities (other than Initial Notes acquired directly from the Company or any of its Affiliates) being sold in accordance with the intended method or methods of distribution thereof, and (z) comply with all of the following 8 provisions: (i) If, following the date hereof there has been announced a change in Commission policy with respect to exchange offers such as the Exchange Offer, that in the reasonable opinion of counsel to the Company or the Guarantors raises a substantial question as to whether the Exchange Offer is permitted by applicable federal law, the Company and the Guarantors hereby agree to seek a no-action letter or other favorable decision from the Commission allowing the Company and the Guarantors to Consummate an Exchange Offer for such Transfer Restricted Securities. The Company and the Guarantors hereby agree to pursue the issuance of such a decision to the Commission staff level. In connection with the foregoing, the Company and the Guarantors hereby agree to take all such other actions as may be requested by the Commission or otherwise required in connection with the issuance of such decision, including without limitation (A) participating in telephonic conferences with the Commission, (B) delivering to the Commission staff an analysis prepared by counsel to the Company setting forth the legal bases, if any, upon which such counsel has concluded that such an Exchange Offer should be permitted and (C) diligently pursuing a resolution (which need not be favorable) by the Commission staff. (ii) As a condition to its participation in the Exchange Offer, each Holder of Transfer Restricted Securities (including, without limitation, any Holder who is a Broker Dealer) shall furnish, upon the request of the Company or the Guarantors, prior to the Consummation of the Exchange Offer, a written representation to the Company or the Guarantors (which may be contained in the letter of transmittal contemplated by the Exchange Offer Registration Statement) to the effect that (A) it is not an Affiliate of the Company or the Guarantors, (B) it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any person to participate in, a distribution of the Exchange Notes to be issued in the Exchange Offer and (C) it is acquiring the Exchange Notes in its ordinary course of business. As a condition to its participation in the Exchange Offer each Holder using the Exchange Offer to participate in a distribution of the Exchange Notes shall acknowledge and agree that, if the resales are of Exchange Notes obtained by such Holder in exchange for Initial Notes acquired directly from the Company or an Affiliate thereof, it (1) could not, under Commission policy as in effect on the date of this Agreement, rely on the position of the Commission enunciated in MORGAN STANLEY AND CO., INC. (available June 5, 1991) and EXXON CAPITAL HOLDINGS CORPORATION (available May 13, 1988), as interpreted in the Commission's letter to SHEARMAN & STERLING dated July 2, 1993, and similar no-action letters (including, if applicable, any no-action letter obtained pursuant to clause (i) above), and (2) must comply with the registration and prospectus delivery requirements of the Act in connection with a secondary resale transaction and that such a secondary resale transaction must be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K. (iii) Prior to effectiveness of the Exchange Offer Registration Statement, the Company shall provide a supplemental letter to the Commission (A) stating that the Company and the Guarantors are registering the Exchange Offer in reliance on the position of the Commission 9 enunciated in EXXON CAPITAL HOLDINGS CORPORATION (available May 13, 1988), MORGAN STANLEY AND CO., INC. (available June 5, 1991) as interpreted in the Commission's letter to SHEARMAN & STERLING dated July 2, 1993, and, if applicable, any no-action letter obtained pursuant to clause (i) above, (B) including a representation that the Company has not entered into any arrangement or understanding with any Person to distribute the Exchange Notes to be received in the Exchange Offer and that, to the best of the Company's and the Guarantors' information and belief, each Holder participating in the Exchange Offer is acquiring the Exchange Notes in its ordinary course of business and has no arrangement or understanding with any Person to participate in the distribution of the Exchange Notes received in the Exchange Offer and (C) any other undertaking or representation required by the Commission as set forth in any no-action letter obtained pursuant to clause (i) above, if applicable. (b) SHELF REGISTRATION STATEMENT. In connection with the Shelf Registration Statement, the Company and the Guarantors shall: (i) comply with all the provisions of Section 6(c) below and use their best efforts to effect such registration to permit the sale of the Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof (as indicated in the information furnished to the Company pursuant to Section 4(b) hereof), and pursuant thereto the Company and the Guarantors will prepare and file with the Commission a Registration Statement relating to the registration on any appropriate form under the Act, which form shall be available for the sale of the Transfer Restricted Securities in accordance with the intended method or methods of distribution thereof within the time periods and otherwise in accordance with the provisions hereof. (ii) issue, upon the request of any Holder or purchaser of Initial Notes covered by any Shelf Registration Statement contemplated by this Agreement, Exchange Notes having an aggregate principal amount equal to the aggregate principal amount of Initial Notes sold pursuant to the Shelf Registration Statement and surrendered to the Company for cancellation; the Company and the Guarantors shall register Exchange Notes on the Shelf Registration Statement for this purpose and issue the Exchange Notes to the purchaser(s) of securities subject to the Shelf Registration Statement in the names as such purchaser(s) shall designate. (c) GENERAL PROVISIONS. In connection with any Registration Statement and any related Prospectus required by this Agreement, the Company and the Guarantors shall: (i) use their best efforts to keep such Registration Statement continuously effective and provide all requisite financial statements for the period specified in Section 3 or 4 of this Agreement, as applicable. Upon the occurrence of any event that would cause any such Registration Statement or the Prospectus contained therein (A) to contain an untrue statement of material fact or omit to state any material fact necessary to make the statements therein not misleading or (B) not to be effective and usable for resale of Transfer Restricted Securities during the period required by this Agreement, the Company and the Guarantors shall file promptly an appropriate amendment to such 10 Registration Statement curing such defect, and, if Commission review is required, use their best efforts to cause such amendment to be declared effective as soon as practicable. (ii) prepare and file with the Commission such amendments and posteffective amendments to the applicable Registration Statement as may be necessary to keep such Registration Statement effective for the applicable period set forth in Section 3 or 4 hereof, as the case may be; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Act, and to comply fully with Rules 424, 430A and 462, as applicable, under the Act in a timely manner; and comply with the provisions of the Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus; (iii) advise each Holder promptly and, if requested by such Holder, confirm such advice in writing, (A) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to any applicable Registration Statement or any post-effective amendment thereto, when the same has become effective, (B) of any request by the Commission for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (C) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement under the Act or of the suspension by any state securities commission of the qualification of the Transfer Restricted Securities for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes, and (D) of the existence of any fact or the happening of any event that makes any statement of a material fact made in the Registration Statement, the Prospectus, any amendment or supplement thereto or any document incorporated by reference therein untrue, or that requires the making of any additions to or changes in the Registration Statement in order to make the statements therein not misleading, or that requires the making of any additions to or changes in the Prospectus in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Transfer Restricted Securities under state securities or Blue Sky laws, the Company shall use their best efforts to obtain the withdrawal or lifting of such order at the earliest possible time; (iv) subject to Section 6(c)(i), if any fact or event contemplated by Section 6(c)(iii)(D) above shall exist or have occurred, prepare a supplement or post-effective amendment to the Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of Transfer Restricted Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; 11 (v) furnish to each Holder in connection with such exchange or sale, if any, before filing with the Commission, copies of any Registration Statement or any Prospectus included therein or any amendments or supplements to any such Registration Statement or Prospectus (including all documents incorporated by reference after the initial filing of such Registration Statement), which documents will be subject to the review and comment of such Holders in connection with such sale, if any, for a period of at least five Business Days, and the Company will not file any such Registration Statement or Prospectus or any amendment or supplement to any such Registration Statement or Prospectus (including all such documents incorporated by reference) to which such Holders shall reasonably object within five Business Days after the receipt thereof. A Holder shall be deemed to have reasonably objected to such filing if such Registration Statement, amendment, Prospectus or supplement, as applicable, as proposed to be filed, contains an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading or fails to comply with the applicable requirements of the Act; (vi) promptly prior to the filing of any document that is to be incorporated by reference into a Registration Statement or Prospectus, provide copies of such document to each Holder in connection with such exchange or sale, if any, make the Company's and the Guarantors' representatives available for discussion of such document and other customary due diligence matters, and include such information in such document prior to the filing thereof as such Holders may reasonably request; (vii) make available, at reasonable times, for inspection by each Holder and any attorney or accountant retained by such Holders, all financial and other records, pertinent corporate documents of the Company and the Guarantors and cause the Company's and the Guarantors' officers, directors and employees to supply all information reasonably requested by any such Holder, attorney or accountant in connection with such Registration Statement or any post-effective amendment thereto subsequent to the filing thereof and prior to its effectiveness; (viii) if requested by any Holders in connection with such exchange or sale, promptly include in any Registration Statement or Prospectus, pursuant to a supplement or post-effective amendment if necessary, such information as such Holders may reasonably request to have included therein, including, without limitation, information relating to the "Plan of Distribution" of the Transfer Restricted Securities; and make all required filings of such Prospectus supplement or post-effective amendment as soon as practicable after the Company is notified of the matters to be included in such Prospectus supplement or post-effective amendment; (ix) furnish to each Holder in connection with such exchange or sale, without charge, at least one copy of the Registration Statement, as first filed with the Commission, and of each amendment thereto, including all documents incorporated by reference therein and all exhibits (including exhibits incorporated therein by reference); (x) deliver to each Holder without charge, as many copies of the Prospectus 12 (including each preliminary prospectus) and any amendment or supplement thereto as such Persons reasonably may request; the Company and the Guarantors hereby consent to the use (in accordance with law) of the Prospectus and any amendment or supplement thereto by each selling Holder in connection with the offering and the sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto; (xi) upon the request of any Holder, enter into such agreements (including underwriting agreements) and make such representations and warranties and take all such other actions in connection therewith in order to expedite or facilitate the disposition of the Transfer Restricted Securities pursuant to any applicable Registration Statement contemplated by this Agreement as may be reasonably requested by any Holder in connection with any sale or resale pursuant to any applicable Registration Statement. In such connection, the Company shall: (A) upon request of any Holder, furnish (or in the case of paragraphs (2) and (3), use its best efforts to cause to be furnished) to each Holder, upon Consummation of the Exchange Offer or upon the effectiveness of the Shelf Registration Statement, as the case may be: (1) a certificate, dated such date, signed on behalf of the Company and each Guarantor by (x) the President or any Vice President and (y) a principal financial or accounting officer of the Company and such Guarantor, confirming, as of the date thereof, the matters set forth in Sections 6(y), 9(a) and 9(b) of the Purchase Agreement and such other similar matters as such Holders may reasonably request; (2) an opinion, dated the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, of counsel for the Company and the Guarantors covering matters similar to those set forth in paragraph (e) of Section 9 of the Purchase Agreement and such other matter as such Holder may reasonably request, and in any event including a statement to the effect that such counsel has participated in conferences with officers and other representatives of the Company and the Guarantors, representatives of the independent public accountants for the Company and the Guarantors and have considered the matters required to be stated therein and the statements contained therein, although such counsel has not independently verified the accuracy, completeness or fairness of such statements; and that such counsel advises that, on the basis of the foregoing (relying as to materiality to the extent such counsel deems appropriate upon the statements of officers and other representatives of the Company and the Guarantors and without independent check or verification), no facts came to such counsel's attention that caused such counsel to believe that the applicable Registration Statement, at the time such Registration Statement or any posteffective amendment thereto became effective and, in the case of the Exchange Offer Registration Statement, as of the date of Consummation of the Exchange Offer, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus contained in such Registration Statement as of its date and, in the case of the opinion dated the date of Consummation of the Exchange Offer, as of the date of Consummation, contained an untrue 13 statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. Without limiting the foregoing, such counsel may state further that such counsel assumes no responsibility for, and has not independently verified, the accuracy, completeness or fairness of the financial statements, notes and schedules and other financial data included in any Registration Statement contemplated by this Agreement or the related Prospectus; and (3) a customary comfort letter, dated the date of Consummation of the Exchange Offer, or as of the date of effectiveness of the Shelf Registration Statement, as the case may be, from the Company's and Pride's independent accountants, in the customary form and covering matters of the type customarily covered in comfort letters to underwriters in connection with underwritten offerings, and affirming the matters set forth in the comfort letters delivered pursuant to Section 9(h) of the Purchase Agreement; and (B) deliver such other documents and certificates as may be reasonably requested by the selling Holders to evidence compliance with the matters covered in clause (A) above and with any customary conditions contained in any agreement entered into by the Company and the Guarantors pursuant to this clause (xi); (xii) prior to any public offering of Transfer Restricted Securities, cooperate with the selling Holders and their counsel in connection with the registration and qualification of the Transfer Restricted Securities under the securities or Blue Sky laws of such jurisdictions as the selling Holders may request and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Transfer Restricted Securities covered by the applicable Registration Statement; PROVIDED, HOWEVER, that the Company shall not be required to register or qualify as a foreign corporation where it is not now so qualified or to take any action that would subject it to the service of process in suits or to taxation, other than as to matters and transactions relating to the Registration Statement, in any jurisdiction where it is not now so subject; (xiii) in connection with any sale of Transfer Restricted Securities that will result in such securities no longer being Transfer Restricted Securities, cooperate with the Holders to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends; and to register such Transfer Restricted Securities in such denominations and such names as the selling Holders may request at least two Business Days prior to such sale of Transfer Restricted Securities; (xiv) use their best efforts to cause the disposition of the Transfer Restricted Securities covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof to consummate the disposition of such Transfer Restricted Securities, subject to the proviso contained in clause (xii) above; 14 (xv) provide a CUSIP number for all Transfer Restricted Securities not later than the effective date of a Registration Statement covering such Transfer Restricted Securities and provide the Trustee under the Indenture with printed certificates for the Transfer Restricted Securities which are in a form eligible for deposit with the Depository Trust Company; (xvi) otherwise use their best efforts to comply with all applicable rules and regulations of the Commission, and make generally available to its security holders with regard to any applicable Registration Statement, as soon as practicable, a consolidated earnings statement meeting the requirements of Rule 158 (which need not be audited) covering a twelve-month period beginning after the effective date of the Registration Statement (as such term is defined in paragraph (c) of Rule 158 under the Act); (xvii) cause the Indenture to be qualified under the TIA not later than the effective date of the first Registration Statement required by this Agreement and, in connection therewith, cooperate with the Trustee and the Holders to effect such changes to the Indenture as may be required for such Indenture to be so qualified in accordance with the terms of the TIA; and execute and use its best efforts to cause the Trustee to execute, all documents that may be required to effect such changes and all other forms and documents required to be filed with the Commission to enable such Indenture to be so qualified in a timely manner; and (xviii) provide promptly to each Holder, upon request, each document filed with the Commission pursuant to the requirements of Section 13 or Section 15(d) of the Exchange Act. (d) RESTRICTIONS ON HOLDERS. Each Holder agrees by acquisition of a Transfer Restricted Security that, upon receipt of the notice referred to in Section 6(c)(iii)(C) or any notice from the Company of the existence of any fact of the kind described in Section 6(c)(iii)(D) hereof (in each case, a "SUSPENSION NOTICE"), such Holder will forthwith discontinue disposition of Transfer Restricted Securities pursuant to the applicable Registration Statement until (i) such Holder has received copies of the supplemented or amended Prospectus contemplated by Section 6(c)(iv) hereof, or (ii) such Holder is advised in writing by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus (in each case, the "RECOMMENCEMENT DATE"). Each Holder receiving a Suspension Notice hereby agrees that it will either (i) destroy any Prospectuses, other than permanent file copies, then in such Holder's possession which have been replaced by the Company with more recently dated Prospectuses or (ii) deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in such Holder's possession of the Prospectus covering such Transfer Restricted Securities that was current at the time of receipt of the Suspension Notice. The time period regarding the effectiveness of such Registration Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended by a number of days equal to the number of days in the period from and including the date of delivery of the Suspension Notice to the date of delivery of the Recommencement Date. 15 SECTION 7. REGISTRATION EXPENSES (a) All expenses incident to the Company's and the Guarantors' performance of or compliance with this Agreement will be borne by the Company and the Guarantors, regardless of whether a Registration Statement becomes effective, including without limitation: (i) all registration and filing fees and expenses; (ii) all fees and expenses of compliance with federal securities and state Blue Sky or securities laws; (iii) all expenses of printing (including printing certificates for the Exchange Notes to be issued in the Exchange Offer and printing of Prospectuses), messenger and delivery services and telephone; (iv) all fees and disbursements of counsel for the Company and the Holders of Transfer Restricted Securities; (v) all application and filing fees in connection with listing the Exchange Notes on a national securities exchange or automated quotation system pursuant to the requirements hereof; and (vi) all fees and disbursements of independent certified public accountants of the Company and the Guarantors (including the expenses of any special audit and comfort letters required by or incident to such performance). The Company and the Guarantors will, in any event, bear its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by the Company or the Guarantors. (b) In connection with any Registration Statement required by this Agreement (including, without limitation, the Exchange Offer Registration Statement and the Shelf Registration Statement), the Company and the Guarantors severally will reimburse the Initial Purchaser and the Holders of Transfer Restricted Securities who are tendering Initial Notes in the Exchange Offer and/or selling or reselling Initial Notes or Exchange Notes pursuant to the "Plan of Distribution" contained in the Exchange Offer Registration Statement or the Shelf Registration Statement, as applicable, for the reasonable fees and disbursements of not more than one counsel, who shall be Cravath, Swaine & Moore, unless another firm shall be chosen by the Holders of a majority in principal amount of the Transfer Restricted Securities for whose benefit such Registration Statement is being prepared. SECTION 8. INDEMNIFICATION (a) The Company and the Guarantors agree severally to indemnify and hold harmless each Holder, its directors, officers and each Person, if any, who controls such Holder (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act), from and against any and all losses, claims, damages, liabilities, judgments, (including without limitation, any legal or other expenses incurred in connection with investigating or defending any matter, including any action that could give rise to any such losses, claims, damages, liabilities or judgments) caused by any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement, preliminary prospectus or Prospectus (or any amendment or supplement thereto) provided by the Company to any Holder or any prospective purchaser of Exchange Notes or registered Initial Notes, 16 or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or judgments are caused by an untrue statement or omission or alleged untrue statement or omission that is based upon information relating to any of the Holders furnished in writing to the Company by any of the Holders. (b) Each Holder of Transfer Restricted Securities agrees, severally and not jointly, to indemnify and hold harmless the Company and the Guarantors, and their respective directors and officers, and each person, if any, who controls (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act) the Company or the Guarantors to the same extent as the foregoing indemnity from the Company and the Guarantors set forth in Section 8(a) above, but only with reference to information relating to such Holder furnished in writing to the Company by such Holder expressly for use in any Registration Statement. In no event shall any Holder, its directors, officers or any Person who controls such Holder be liable or responsible for any amount in excess of the amount by which the total amount received by such Holder with respect to its sale of Transfer Restricted Securities pursuant to a Registration Statement exceeds (i) the amount paid by such Holder for such Transfer Restricted Securities and (ii) the amount of any damages that such Holder, its directors, officers or any Person who controls such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. (c) In case any action shall be commenced involving any person in respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the "INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person against whom such indemnity may be sought (the "INDEMNIFYING PERSON") in writing and the indemnifying party shall assume the defense of such action, including the employment of counsel reasonably satisfactory to the indemnified party and the payment of all fees and expenses of such counsel, as incurred (except that in the case of any action in respect of which indemnity may be sought pursuant to both Sections 8(a) and 8(b), a Holder shall not be required to assume the defense of such action pursuant to this Section 8(c), but may employ separate counsel and participate in the defense thereof, but the fees and expenses of such counsel, except as provided below, shall be at the expense of the Holder). Any indemnified party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the indemnified party unless (i) the employment of such counsel shall have been specifically authorized in writing by the indemnifying party, (ii) the indemnifying party shall have failed to assume the defense of such action or employ counsel reasonably satisfactory to the indemnified party or (iii) the named parties to any such action (including any impleaded parties) include both the indemnified party and the indemnifying party, and the indemnified party shall have been advised by such counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying party (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of the indemnified party). In any such case, the indemnifying party shall not, in connection with any one action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the fees and 17 expenses of more than one separate firm of attorneys (in addition to any local counsel) for all indemnified parties and all such fees and expenses shall be reimbursed as they are incurred. Such firm shall be designated in writing by a majority of the Holders, in the case of the parties indemnified pursuant to Section 8(a), and by the Company and Guarantors, in the case of parties indemnified pursuant to Section 8(b). The indemnifying party shall indemnify and hold harmless the indemnified party from and against any and all losses, claims, damages, liabilities and judgments by reason of any settlement of any action (i) effected with its written consent or (ii) effected without its written consent if the settlement is entered into more than twenty business days after the indemnifying party shall have received a request from the indemnified party for reimbursement for the fees and expenses of counsel (in any case where such fees and expenses are at the expense of the indemnifying party) and, prior to the date of such settlement, the indemnifying party shall have failed to comply with such reimbursement request. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement or compromise of, or consent to the entry of judgment with respect to, any pending or threatened action in respect of which the indemnified party is or could have been a party and indemnity or contribution may be or could have been sought hereunder by the indemnified party, unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability on claims that are or could have been the subject matter of such action and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of the indemnified party. (d) To the extent that the indemnification provided for in this Section 8 is unavailable to an indemnified party in respect of any losses, claims, damages, liabilities or judgments referred to therein, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or judgments (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Guarantors, on the one hand, and the Holders, on the other hand, from their sale of Transfer Restricted Securities or (ii) if the allocation provided by clause 8(d)(i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause 8(d)(i) above but also the relative fault of the Company and the Guarantors, on the one hand, and of the Holder, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or judgments, as well as any other relevant equitable considerations. The relative fault of the Company and the Guarantors, on the one hand, and of the Holder, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or such Guarantor, on the one hand, or by the Holder, on the other hand, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, the Guarantors and each Holder agree that it would not be just and equitable if contribution pursuant to this Section 8(d) were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. 18 The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or judgments referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses incurred by such indemnified party in connection with investigating or defending any matter, including any action that could have given rise to such losses, claims, damages, liabilities or judgments. Notwithstanding the provisions of this Section 8, no Holder, its directors, its officers or any Person, if any, who controls such Holder shall be required to contribute, in the aggregate, any amount in excess of the amount by which the total received by such Holder with respect to the sale of Transfer Restricted Securities pursuant to a Registration Statement exceeds (i) the amount paid by such Holder for such Transfer Restricted Securities and (ii) the amount of any damages which such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Holders' obligations to contribute pursuant to this Section 8(d) are several in proportion to the respective principal amount of Transfer Restricted Securities held by each Holder hereunder and not joint. SECTION 9. RULE 144A AND RULE 144 The Company agrees with each Holder, for so long as any Transfer Restricted Securities remain outstanding and during any period in which the Company (i) is not subject to Section 13 or 15(d) of the Exchange Act, to make available, upon request of any Holder, to such Holder or beneficial owner of Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities designated by such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A, and (ii) is subject to Section 13 or 15 (d) of the Exchange Act, to make all filings required thereby in a timely manner in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144. SECTION 10. MISCELLANEOUS (a) REMEDIES. The Company and the Guarantors acknowledge and agree that any failure by the Company or the Guarantors to comply with its obligations under Sections 3 and 4 hereof may result in material irreparable injury to the Initial Purchaser or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Purchaser or any Holder may obtain such relief as may be required to specifically enforce the Company's and the Guarantors' obligations under Sections 3 and 4 hereof. The Company and the Guarantors further agree to waive the defense in any action for specific performance that a remedy at law would be adequate. 19 (b) NO INCONSISTENT AGREEMENTS. Neither the Company nor the Guarantors will, on or after the date of this Agreement, enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. The Company has not previously entered into any agreement granting any registration rights with respect to its securities to any Person. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's or the Guarantors' securities under any agreement in effect on the date hereof. (c) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given unless (i) in the case of Section 5 hereof and this Section 10(c)(i), the Company has obtained the written consent of Holders of all outstanding Transfer Restricted Securities and (ii) in the case of all other provisions hereof, the Company has obtained the written consent of Holders of a majority of the outstanding principal amount of Transfer Restricted Securities (excluding Transfer Restricted Securities held by the Company or its Affiliates). Notwithstanding the foregoing, a waiver or consent to departure from the provisions hereof that relates exclusively to the rights of Holders whose Transfer Restricted Securities are being tendered pursuant to the Exchange Offer, and that does not affect directly or indirectly the rights of other Holders whose Transfer Restricted Securities are not being tendered pursuant to such Exchange Offer, may be given by the Holders of a majority of the outstanding principal amount of Transfer Restricted Securities subject to such Exchange Offer. (d) THIRD PARTY BENEFICIARY. The Holders shall be third party beneficiaries to the agreements made hereunder between the Company and the Guarantors, on the one hand, and the Initial Purchaser, on the other hand, and shall have the right to enforce such agreements directly to the extent they may deem such enforcement necessary or advisable to protect its rights or the rights of Holders hereunder. (e) NOTICES. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail (registered or certified, return receipt requested), telex, telecopier, or air courier guaranteeing overnight delivery: (i) if to a Holder, at the address set forth on the records of the Registrar under the Indenture, with a copy to the Registrar under the Indenture; and (ii) if to the Company, to Amethyst Financial Company Limited, c/o Arias Fabrega and Fabrega Trust Co. BVI Limited, 325 Waterfront Drive, Omar Hodge Building, 2nd Floor, Wickham's Cay Road, Tortola, British Virgin Islands; (iii) if to Pride, to Pride International, Inc., 5847 San Felipe, Suite 3300, Houston, TX 77057, (713) 789-1400; 20 (iv) if to Maritima, to Maritima Petroleo e Engenharia Ltda., Avenido Almirante Borraso, 52 Grupo 3400, 20031-000 Centro Rio de Janeiro, Brazil; and (v) if to the Initial Purchaser, Donaldson, Lufkin & Jenrette Securities Corporation, 277 Park Avenue, New York, New York 10172, Attention: Syndicate Department, or in any case to such other address as the person to be notified may have requested in writing. All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and on the next business day, if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address specified in the Indenture. (f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders; PROVIDED, that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Transfer Restricted Securities in violation of the terms hereof or of the Purchase Agreement or the Indenture. If any transferee of any Holder shall acquire Transfer Restricted Securities in any manner, whether by operation of law or otherwise, such Transfer Restricted Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Transfer Restricted Securities such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement, including the restrictions on resale set forth in this Agreement and, if applicable, the Purchase Agreement, and such Person shall be entitled to receive the benefits hereof. (g) COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) HEADINGS. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF. (j) SEVERABILITY. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining 21 provisions contained herein shall not be affected or impaired thereby. (k) ENTIRE AGREEMENT. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted with respect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. 22 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. AMETHYST FINANCIAL COMPANY LIMITED By /s/ EARL W. MCNIEL Name: Earl W. McNiel Title: Treasurer PRIDE INTERNATIONAL, INC. By /s/ EARL W. MCNIEL Name: Earl W. McNiel Title: Treasurer MARITIMA PETROLEO E ENGENHARIA LTDA. By /s/ GERMAN EFROMOVICH Name: German Efromovich Title: President DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION By: /s/ C. MITCHELL COX Name: C. Mitchell Cox Title: Senior Vice President 23 EXHIBIT A NOTICE OF FILING OF A/B EXCHANGE OFFER REGISTRATION STATEMENT To: Donaldson, Lufkin & Jenrette Securities Corporation 277 Park Avenue New York, New York 10172 Attention: Louise Guarneri (Compliance Department) Fax: (212) 892-7272 From: Amethyst Financial Company Limited 11 3/4% Senior Secured Notes due 2001 Date: ___, 199_ For your information only (NO ACTION REQUIRED): Today, ______, 199_, we filed [an A/B Exchange Registration Statement/a Shelf Registration Statement] with the Securities and Exchange Commission. We currently expect this registration statement to be declared effective within __ business days of the date hereof. 24 EX-4.2 5 EXHIBIT 4.2 EXECUTION COPY AMETHYST FINANCIAL COMPANY LIMITED $53,000,000 11 3/4% Senior Secured Notes Due 2001 Guaranteed in an amount up to $30,000,000 by PrideInternational, Inc. and Backed by a $23,000,000 Letter of Credit Issued by Republic National Bank of New York Purchase Agreement October 28, 1999 DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION $53,000,000 11 3/4% SENIOR SECURED NOTES DUE 2001 of AMETHYST FINANCIAL COMPANY LIMITED Guaranteed in an amount up to $30,000,000 by Pride International, Inc. and Backed by a $23,000,000 Letter of Credit Issued by Republic National Bank of New York PURCHASE AGREEMENT October 28, 1999 DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION 277 Park Avenue New York, New York 10172 Dear Sirs: Amethyst Financial Company Limited, a limited liability company incorporated in the British Virgin Islands (the "COMPANY"), proposes to issue and sell to Donaldson, Lufkin & Jenrette Securities Corporation (the "INITIAL PURCHASER") an aggregate of $53,000,000 in principal amount of its 11 3/4% Senior Secured Notes due 2001 (the "INITIAL NOTES"), subject to the terms and conditions set forth herein. The Initial Notes are to be issued pursuant to the provisions of an indenture (the "INDENTURE"), to be dated as of the Closing Date (as defined below), among the Company, the Guarantors (as defined below) and Wilmington Trust Company, as trustee (the "TRUSTEE"). The Initial Notes and the Exchange Notes (as defined below) issuable in exchange therefor are collectively referred to herein as the "NOTES." The Notes will be guaranteed in an amount up to $30,000,000 (the "PRIDE GUARANTEE") by one of the indirect owners of the Company, Pride International, Inc. ("PRIDE"), and will be backed by a $23,000,000 irrevocable standby letter of credit (the "LETTER OF CREDIT") issued by Republic National Bank of New York and arranged by another of the Company's indirect owners, Maritima Petroleo e Engenharia Ltda. ("MARITIMA", and together with Pride, the "GUARANTORS"). Capitalized terms used but not defined herein shall have the meanings given to such terms in the Indenture. 1. OFFERING MEMORANDUM. The Initial Notes will be offered and sold to the Initial Purchaser pursuant to one or more exemptions from the registration requirements under the Securities Act of 1933, as amended (the "ACT"). The Company and the Guarantors have prepared preliminary offering memoranda, dated October 21 , 1999 and October 26, 1999 (such preliminary offering memoranda, including the information with respect to Pride incorporated therein, the "PRELIMINARY OFFERING MEMORANDUM") and a final offering memorandum, dated October 28, 1999 (such final offering memorandum, including the information with respect to Pride incorporated therein, the "OFFERING MEMORANDUM"), relating to the Initial Notes, the Pride Guarantee and the Letter of Credit. Upon original issuance thereof, and until such time as the same is no longer required pursuant to the Indenture, the Initial Notes (and all securities issued in exchange therefor, in substitution thereof or upon conversion thereof) shall bear the following legend: "THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER: (1) REPRESENTS THAT (I) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE ACT)(A "QIB"), (II) IT HAS ACQUIRED THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE ACT OR (III) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE ACT (AN "IAI"), (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (I) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (II) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (III) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF THE ACT, (IV) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE ACT, (V) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE ACT, (VI) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (VII) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. 2 AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING." 2. AGREEMENTS TO SELL AND PURCHASE. On the basis of the representations, warranties and covenants contained in this Agreement, and subject to the terms and conditions contained herein, the Company agrees to issue and sell to the Initial Purchaser, and the Initial Purchaser agrees to purchase from the Company, an aggregate principal amount of $53,000,000 of Initial Notes at a purchase price equal to 99.5% of the principal amount thereof less a gross spread of 3.0%, for a net purchase price of 96.0% of the principal amount thereof (the "PURCHASE PRICE"). 3. TERMS OF OFFERING. The Initial Purchaser has advised the Company that the Initial Purchaser will make offers (the "EXEMPT RESALES") of the Initial Notes purchased hereunder on the terms set forth in the Offering Memorandum, as amended or supplemented, solely to (i) persons whom the Initial Purchaser reasonably believe to be "qualified institutional buyers" as defined in Rule 144A under the Act ("QIBS"), and (ii) persons permitted to purchase the Initial Notes in offshore transactions in reliance upon Regulation S under the Act (each, a "REGULATION S PURCHASER") (such persons specified in clauses (i) and (ii) being referred to herein as the "ELIGIBLE PURCHASERS"). The Initial Purchaser will offer the Initial Notes to Eligible Purchasers initially at a price equal to 99.5% of the principal amount thereof. Such price may be changed at any time without notice. Holders (including subsequent transferees) of the Notes will have the registration rights set forth in the registration rights agreement (the "REGISTRATION RIGHTS AGREEMENT"), to be dated the Closing Date, in substantially the form of Exhibit A hereto, for so long as such Initial Notes constitute "TRANSFER RESTRICTED SECURITIES" (as defined in the Registration Rights Agreement). Pursuant to the Registration Rights Agreement, the Company and the Guarantor will agree to file with the Securities and Exchange Commission (the "COMMISSION") under the circumstances set forth therein, (i) a registration statement under the Act (the "EXCHANGE OFFER REGISTRATION STATEMENT") relating to the Company's 11 3/4% Senior Secured Exchange Notes dUE 2001 (the "EXCHANGE NOTES"), to be offered in exchange for the Initial Notes (such offer to exchange being referred to as the "EXCHANGE OFFER"), the Pride Guarantee and the Letter of Credit and (ii) a shelf registration statement pursuant to Rule 415 under the Act (the "SHELF REGISTRATION STATEMENT" and, together with the Exchange Offer Registration Statement, the "REGISTRATION STATEMENTS") relating to the resale by certain holders of the Initial Notes and to use its best efforts to cause such Registration Statements to be declared and remain effective and usable for the periods specified in the Registration Rights Agreement and to consummate the Exchange Offer. This Agreement, the Indenture, the Notes, the Security Agreement, the Pride Guarantee, the Letter of Credit, the Transfer Certificates executed pursuant to Sections 15.3 and 15.4 of the Mitsubishi Loan Agreements, the Deed of Consent and Undertaking of Mitsubishi relating to the collateral assignment by the Company in favor of the Trustee of a 53% undivided interest in the Tranche A facilities of the Mitsubishi Loan Agreements and the related collateral, and the Registration Rights Agreement are hereinafter sometimes referred to collectively as the "OPERATIVE DOCUMENTS." 3 4. DELIVERY AND PAYMENT. (a) Delivery of, and payment of the Purchase Price for, the Initial Notes shall be made at the offices of Cravath, Swaine & Moore, 825 Eighth Avenue, New York, NY 10019, or such other location as may be mutually acceptable. Such delivery and payment shall be made at 9:00 a.m. New York City time, on November 1, 1999 or at such other time on the same date or such other date as shall be agreed upon by the Initial Purchaser and the Company in writing. The time and date of such delivery and the payment for the Initial Notes are herein called the "CLOSING DATE." (b) One or more of the Initial Notes in definitive global form, registered in the name of Cede & Co., as nominee of the Depository Trust Company ("DTC"), having an aggregate principal amount corresponding to the aggregate principal amount of the Notes (collectively, the "GLOBAL NOTE"), shall be delivered by the Company to the Initial Purchaser (or as the Initial Purchaser directs) in each case with any transfer taxes thereon duly paid by the Company against payment by the Initial Purchaser of the Purchase Price thereof by wire transfer in same day funds to the order of the Company. The Global Note shall be made available to the Initial Purchaser for inspection not later than 9:30 a.m., New York City time, on the business day immediately preceding the Closing Date. 5. AGREEMENTS OF THE COMPANY AND THE GUARANTOR. Each of the Company and the Guarantors hereby agrees with the Initial Purchaser as follows: (a) To advise the Initial Purchaser promptly and, if requested by the Initial Purchaser, confirm such advice in writing, (i) of the issuance by any state securities commission of any stop order suspending the qualification or exemption from qualification of any Initial Notes for offering or sale in any jurisdiction designated by the Initial Purchaser pursuant to Section 5(e) hereof, or the initiation of any proceeding by any state securities commission or any other federal or state regulatory authority for such purpose and (ii) of the happening of any event during the period referred to in Section 5(c) below that makes any statement of a material fact made in the Preliminary Offering Memorandum or the Offering Memorandum untrue or that requires any additions to or changes in the Preliminary Offering Memorandum or the Offering Memorandum in order to make the statements therein not misleading. The Company and the Guarantor shall use their best efforts to prevent the issuance of any stop order or order suspending the qualification or exemption of any Notes under any state securities or Blue Sky laws and, if at any time any state securities commission or other federal or state regulatory authority shall issue an order suspending the qualification or exemption of any Notes under any state securities or Blue Sky laws, the Company and the Guarantor shall use their best efforts to obtain the withdrawal or lifting of such order at the earliest possible time. (b) To furnish the Initial Purchaser and those persons identified by the Initial Purchaser to the Company as many copies of the Preliminary Offering Memorandum and the Offering Memorandum, and any amendments or supplements thereto, as the Initial Purchaser may reasonably request for the time period specified in Section 5(c). Subject to the Initial Purchaser's compliance with its representations and warranties and agreements set forth in Section 7 hereof, the Company consents to the use of the Preliminary Offering Memorandum and the Offering Memorandum, and any amendments and supplements thereto required pursuant hereto, by the Initial Purchaser in connection with Exempt Resales. 4 (c) During such period as in the opinion of counsel for the Initial Purchaser an Offering Memorandum is required by law to be delivered in connection with Exempt Resales by the Initial Purchaser and in connection with market-making activities of the Initial Purchaser for so long as any Initial Notes are outstanding, (i) not to make any amendment or supplement to the Offering Memorandum of which the Initial Purchaser shall not previously have been advised or to which the Initial Purchaser shall reasonably object after being so advised and (ii) to prepare promptly upon the Initial Purchaser's reasonable request, any amendment or supplement to the Offering Memorandum which may be necessary or advisable in connection with such Exempt Resales or such market-making activities. (d) If, during the period referred to in Section 5(c) above, any event shall occur or condition shall exist as a result of which, in the opinion of counsel to the Initial Purchaser, it becomes necessary to amend or supplement the Offering Memorandum in order to make the statements therein, in the light of the circumstances when such Offering Memorandum is delivered to an Eligible Purchaser, not misleading, or if, in the opinion of counsel to the Initial Purchaser, it is necessary to amend or supplement the Offering Memorandum to comply with any applicable law, forthwith to prepare an appropriate amendment or supplement to such Offering Memorandum so that the statements therein, as so amended or supplemented, will not, in the light of the circumstances when it is so delivered, be misleading, or so that such Offering Memorandum will comply with applicable law, and to furnish to the Initial Purchaser and such other persons as the Initial Purchaser may designate such number of copies thereof as the Initial Purchaser may reasonably request. (e) Prior to the sale of all Initial Notes pursuant to Exempt Resales as contemplated hereby, to cooperate with the Initial Purchaser and counsel to the Initial Purchaser in connection with the registration or qualification of the Initial Notes for offer and sale to the Initial Purchaser and pursuant to Exempt Resales under the securities or Blue Sky laws of such jurisdictions as the Initial Purchaser may request and to continue such registration or qualification in effect so long as required for Exempt Resales and to file such consents to service of process or other documents as may be necessary in order to effect such registration or qualification; PROVIDED, HOWEVER, that neither the Company nor the Guarantors shall be required in connection therewith to qualify as a foreign corporation in any jurisdiction in which it is not now so qualified or to take any action that would subject it to general consent to service of process or taxation other than as to matters and transactions relating to the Preliminary Offering Memorandum, the Offering Memorandum or Exempt Resales, in any jurisdiction in which it is not now so subject. (f) So long as the Notes are outstanding, (i) to mail and make generally available as soon as practicable after the end of each fiscal year to the record holders of the Notes a financial report of the Company and its subsidiaries on a consolidated basis (and a similar financial report of all unconsolidated subsidiaries, if any), all such financial reports to include a consolidated balance sheet, a consolidated statement of operations, a consolidated statement of cash flows and a consolidated statement of shareholders' equity as of the end of and for such fiscal year, together with comparable information as of the end of and for the preceding year, certified by the Company's independent public accountants and (ii) to mail and make generally available as soon as practicable after the end of each quarterly period (except for the last quarterly period of each fiscal year) to such holders, a consolidated balance sheet, a consolidated statement of operations and a consolidated statement of cash flows (and similar financial reports of all unconsolidated subsidiaries, if any) as of the end of and for 5 such period, and for the period from the beginning of such year to the close of such quarterly period, together with comparable information for the corresponding periods of the preceding year. (g) As soon as practicable, Pride will make generally available to its security holders and to the Initial Purchaser an earnings statement or statements of Pride and its subsidiaries which will satisfy the provisions of Section 11(a) of the Act and Rule 158 under the Act. (h) So long as the Notes are outstanding, to furnish to the Initial Purchaser as soon as available copies of all reports or other communications furnished by the Company or any of the Guarantors to its security holders or furnished to or filed with the Commission or any national securities exchange on which any class of securities of the Company or any of the Guarantors is listed and such other publicly available information concerning the Company and/or its subsidiaries as the Initial Purchaser may reasonably request. (i) So long as any of the Initial Notes remain outstanding and during any period in which the Company and the Guarantors are not subject to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), to make available to any holder of Initial Notes in connection with any sale thereof and any prospective purchaser of such Initial Notes from such holder, the information ("RULE 144A INFORMATION") required by Rule 144A(d)(4) under the Act. (j) Whether or not the transactions contemplated in this Agreement are consummated or this Agreement is terminated, to pay or cause to be paid all expenses incident to the performance of the obligations of the Company and the Guarantors under this Agreement, including: (i) the fees, disbursements and expenses of counsel to the Company and the Guarantors and accountants of the Company and the Guarantors in connection with the sale and delivery of the Initial Notes to the Initial Purchaser and pursuant to Exempt Resales, and all other fees and expenses in connection with the preparation, printing, filing and distribution of the Preliminary Offering Memorandum, the Offering Memorandum and all amendments and supplements to any of the foregoing (including financial statements), including the mailing and delivering of copies thereof to the Initial Purchaser and persons designated by it in the quantities specified herein, (ii) all costs and expenses related to the transfer and delivery of the Initial Notes to the Initial Purchaser and pursuant to Exempt Resales, including any transfer or other taxes payable thereon, (iii) all costs of printing or producing this Agreement, the other Operative Documents and any other agreements or documents in connection with the offering, purchase, sale or delivery of the Initial Notes, (iv) all expenses in connection with the registration or qualification of the Initial Notes and the Pride Guarantee for offer and sale under the securities or Blue Sky laws of the several states and all costs of printing or producing any preliminary and supplemental Blue Sky memoranda in connection therewith (including the filing fees and fees and disbursements of counsel for the Initial Purchaser in connection with such registration or qualification and memoranda relating thereto), (v) the cost of printing certificates representing the Initial Notes and the Pride Guarantee, (vi) all expenses and listing fees in connection with the application for quotation of the Initial Notes in the National Association of Securities Dealers, Inc. ("NASD") Automated Quotation System - PORTAL ("PORTAL"), (vii) the fees and expenses of the Trustee and the Trustee's counsel in connection with the Indenture, the Notes, the Pride Guarantee and the Letter of Credit, (viii) the costs and charges of any transfer agent, registrar and/or depositary (including DTC), (ix) any fees charged by rating agencies for the rating of the Notes, (x) all costs and expenses of the Exchange Offer and any Registration Statement, 6 as set forth in the Registration Rights Agreement, and (xi) and all other costs and expenses incident to the performance of the obligations of the Company and the Guarantors hereunder for which provision is not otherwise made in this Section. (k) To use its best efforts to effect the inclusion of the Initial Notes in PORTAL and to maintain the listing of the Initial Notes on PORTAL for so long as the Initial Notes are outstanding. (l) To obtain the approval of DTC for "book-entry" transfer of the Notes, and to comply with all of its agreements set forth in the representation letters of the Company and the Guarantors to DTC relating to the approval of the Notes by DTC for "book-entry" transfer. (m) During the period beginning on the date hereof and continuing to and including the Closing Date, not to offer, sell, contract to sell or otherwise transfer or dispose of any debt securities of the Company or Pride or any warrants, rights or options to purchase or otherwise acquire debt securities of the Company or Pride substantially similar to the Notes and the Pride Guarantee (other than (i) the Notes and the Pride Guarantee and (ii) commercial paper issued in the ordinary course of business), without the prior written consent of the Initial Purchaser. (m) Not to sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in the Act) that would be integrated with the sale of the Initial Notes to the Initial Purchaser or pursuant to Exempt Resales in a manner that would require the registration of any such sale of the Initial Notes under the Act. (n) Not to voluntarily claim, and to actively resist any attempts to claim, the benefit of any usury laws against the holders of any Notes and the related Pride Guarantee. (o) To cause the Exchange Offer to be made in the appropriate form to permit Exchange Notes and guarantees thereof by the Guarantors registered pursuant to the Act to be offered in exchange for the Initial Notes, the Pride Guarantee and the Letter of Credit and to comply with all applicable federal and state securities laws in connection with the Exchange Offer. (p) To comply with all of its agreements set forth in the Registration Rights Agreement. (q) To use its best efforts to do and perform all things required or necessary to be done and performed under this Agreement by it prior to the Closing Date and to satisfy all conditions precedent to the delivery of the Initial Notes, the Pride Guarantee and the Letter of Credit. 5A. AGREEMENT OF THE COMPANY. The Company agrees that in the event the Company determines to pursue any Transaction (as hereinafter defined) during the two year period commencing on the date of this Agreement, Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") shall have the right to act as the Company's sole placement agent, sole initial purchaser or sole managing underwriter, as the case may be, with respect to each such Transaction. For purposes of this covenant, the term "Transaction" shall include each of the following: any sale of securities of the Company effected pursuant to a private sale or an underwritten public offering. If the Company determines to pursue any such Transaction, DLJ and the Company will enter into an agreement 7 appropriate to the circumstances, containing provisions for, among other things, compensation, indemnification, contribution, and representations and warranties, which are usual and customary for similar agreements entered into by DLJ and other investment banks of international standing acting in similar transactions. DLJ shall have no obligation to act as placement agent, initial purchaser, underwriter, or dealer manager to the Company or to place or purchase any securities of the Company, except to the extent that such obligations arise out of a placement agent agreement, purchase agreement, underwriting agreement, as the case may be, with respect to a particular Transaction executed and delivered by both DLJ and the Company. 6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY AND THE GUARANTORS. As of the date hereof, each of the Company and the Guarantors represents and warrants to, and agrees with, the Initial Purchaser that: (a) The Preliminary Offering Memorandum and the Offering Memorandum do not, and any supplement or amendment to them will not, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the representations and warranties contained in this paragraph (a) shall not apply to statements in or omissions from the Preliminary Offering Memorandum or the Offering Memorandum (or any supplement or amendment thereto) based upon information relating to the Initial Purchaser furnished to the Company in writing by the Initial Purchaser expressly for use therein. No stop order preventing the use of the Preliminary Offering Memorandum or the Offering Memorandum, or any amendment or supplement thereto, or any order asserting that any of the transactions contemplated by this Agreement are subject to the registration requirements of the Act, has been issued. (b) Each of the Company and its subsidiaries and Pride and its subsidiaries has been duly incorporated, is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation and has the corporate power and authority to carry on its business as described in the Preliminary Offering Memorandum and the Offering Memorandum and to own, lease and operate its properties, and each is duly qualified and is in good standing as a foreign corporation authorized to do business in each jurisdiction in which the nature of its business or its ownership or leasing of property requires such qualification, except where the failure to be so qualified would not have a material adverse effect on (i) the business, prospects, financial condition or results of operations of the Company and its subsidiaries, taken as a whole, (ii) the business, prospects, financial condition or results of operations of Pride and its subsidiaries, taken as a whole, or (iii) the Notes or any of the other Operative Documents (a "MATERIAL ADVERSE EFFECT"). (c) All outstanding shares of capital stock of the Company have been duly authorized and validly issued and are fully paid, nonassessable and not subject to any preemptive or similar rights. (d) The entities listed on Schedule A hereto are the only subsidiaries, direct or indirect, of the Company. All of the outstanding shares of capital stock of each of the Company's subsidiaries have been duly authorized and validly issued and are fully paid and nonassessable, and are owned by the Company, directly or indirectly through one or more subsidiaries, free and clear of any security interest, claim, lien, encumbrance or adverse interest of any nature (each, a "LIEN"), except for 8 the pledge of the shares of the Company's subsidiaries pledged in connection with the Mitsubishi Loan Documents. (e) This Agreement has been duly authorized, executed and delivered by the Company and each of the Guarantors. (f) The Indenture has been duly authorized by the Company and each of the Guarantors and, on the Closing Date, will have been validly executed and delivered by the Company and each of the Guarantors. When the Indenture has been duly executed and delivered by the Company and each of the Guarantors, the Indenture will be a valid and binding agreement of the Company and each Guarantor, enforceable against the Company and each Guarantor in accordance with its terms except as (i) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and (ii) rights of acceleration and the availability of equitable remedies may be limited by equitable principles of general applicability. On the Closing Date, the Indenture will conform in all material respects to the requirements of the Trust Indenture Act of 1939, as amended (the "TIA" or "TRUST INDENTURE ACT"), and the rules and regulations of the Commission applicable to an indenture which is qualified thereunder. (g) The Initial Notes have been duly authorized and, on the Closing Date, will have been validly executed and delivered by the Company. When the Initial Notes have been issued, executed and authenticated in accordance with the provisions of the Indenture and delivered to and paid for by the Initial Purchaser in accordance with the terms of this Agreement, the Initial Notes will be entitled to the benefits of the Indenture and will be valid and binding obligations of the Company, enforceable in accordance with their terms except as (i) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and (ii) rights of acceleration and the availability of equitable remedies may be limited by equitable principles of general applicability. On the Closing Date, the Initial Notes will conform as to legal matters to the description thereof contained in the Offering Memorandum. (h) On the Closing Date, the Exchange Notes will have been duly authorized by the Company. When the Exchange Notes are issued, executed and authenticated in accordance with the terms of the Exchange Offer and the Indenture, the Exchange Notes will be entitled to the benefits of the Indenture and will be the valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as (i) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and (ii) rights of acceleration and the availability of equitable remedies may be limited by equitable principles of general applicability. (i) The Pride Guarantee to be endorsed on the Initial Notes by Pride has been duly authorized by Pride and, on the Closing Date, will have been duly executed and delivered by Pride. When the Initial Notes have been issued, executed and authenticated in accordance with the Indenture and delivered to and paid for by the Initial Purchaser in accordance with the terms of this Agreement, the pride Guarantee endorsed thereon will be entitled to the benefits of the Indenture and will be the valid and binding obligation of Pride, enforceable against Pride in accordance with its terms, except as (i) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and (ii) rights of acceleration and the availability of equitable remedies may be limited by equitable principles of general applicability. On the Closing Date, the Pride Guarantee to be 9 endorsed on the Initial Notes will conform as to legal matters to the description thereof contained in the Offering Memorandum. (j) The Pride Guarantee to be endorsed on the Exchange Notes by Pride has been duly authorized by Pride and, when issued, will have been duly executed and delivered by Pride. When the Exchange Notes have been issued, executed and authenticated in accordance with the terms of the Exchange Offer and the Indenture, the Pride Guarantee endorsed thereon will be entitled to the benefits of the Indenture and will be the valid and binding obligation of Pride, enforceable against Pride in accordance with its terms, except as (i) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and (ii) rights of acceleration and the availability of equitable remedies may be limited by equitable principles of general applicability. When the Exchange Notes are issued, authenticated and delivered, the Pride Guarantee to be endorsed on the Exchange Notes will conform as to legal matters to the description thereof in the Offering Memorandum. (k) The Registration Rights Agreement has been duly authorized by the Company and each of the Guarantors and, on the Closing Date, will have been duly executed and delivered by the Company and each of the Guarantors. When the Registration Rights Agreement has been duly executed and delivered, the Registration Rights Agreement will be a valid and binding agreement of the Company and each of the Guarantors, enforceable against the Company and each Guarantor in accordance with its terms except as (i) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and (ii) rights of acceleration and the availability of equitable remedies may be limited by equitable principles of general applicability. On the Closing Date, the Registration Rights Agreement will conform as to legal matters to the description thereof in the Offering Memorandum. (l) Neither the Company nor any of its subsidiaries is in violation of its respective charter or by-laws or in default in the performance of any obligation, agreement, covenant or condition contained in any indenture, loan agreement, mortgage, lease or other agreement or instrument that is material to the Company and its subsidiaries, taken as a whole, to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or their respective property is bound. (m) The execution, delivery and performance of this Agreement and the other Operative Documents by the Company and each of the Guarantors, compliance by the Company and each of the Guarantors with all provisions hereof and thereof and the consummation of the transactions contemplated hereby and thereby will not (i) require any consent, approval, authorization or other order of, or qualification with, any court or governmental body or agency (except such as may be required under the securities or Blue Sky laws of the various states), (ii) conflict with or constitute a breach of any of the terms or provisions of, or a default under, the charter or by-laws of the Company, either Guarantor or any of their respective subsidiaries, any of the Mitsubishi Documents, any of the MARAD Documents or any indenture, loan agreement, mortgage, lease or other agreement or instrument that is material to (x) the Company and its subsidiaries, taken as a whole, to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or their respective property is bound, or (y) either Guarantor and its subsidiaries, taken as a whole, to which such Guarantor or any of its subsidiaries is a party or by which either Guarantor or any of its subsidiaries or their respective property is bound, (iii) violate or conflict with any applicable law or any rule, regulation, 10 judgment, order or decree of any court or any governmental body or agency having jurisdiction over the Company, either Guarantor, any of their respective subsidiaries or their respective property, (iv) result in the imposition or creation of (or the obligation to create or impose) a Lien under, any agreement or instrument to which the Company, either Guarantor or any of their respective subsidiaries is a party or by which the Company, either Guarantor or any of their respective subsidiaries or their respective property is bound, or (v) result in the termination, suspension or revocation of any Authorization (as defined below) of the Company, either Guarantor or any of their respective subsidiaries or result in any other impairment of the rights of the holder of any such Authorization. (n) There are no legal or governmental proceedings pending or threatened to which the Company, any Guarantor or any of their respective subsidiaries is or could be a party or to which any of their respective property is or could be subject, which might result, singly or in the aggregate, in a Material Adverse Effect. (o) Neither the Company, any Guarantor nor any of their respective subsidiaries has violated any foreign, federal, state or local law or regulation relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS"), any provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or any provisions of the Foreign Corrupt Practices Act or the rules and regulations promulgated thereunder (THE "FCPA"), except for such violations which, singly or in the aggregate, would not have a Material Adverse Effect. None of the Company, any Guarantor, any of their respective affiliates or subsidiaries, or any director, officer, agent, employee, representative or other person acting on their behalf, directly or indirectly, has taken any action in connection with the award or retention of any of the Petrobras charters (as described in the Offering Memorandum) which violated any provision of the FCPA or would have violated the FCPA if such actions had been taken by persons or entities who were subject to the FCPA. (p) There are no costs or liabilities associated with Environmental Laws (including, without limitation, any capital or operating expenditures required for cleanup, closure of properties or compliance with Environmental Laws or any Authorization, any related constraints on operating activities and any potential liabilities to third parties) which would, singly or in the aggregate, have a Material Adverse Effect. (q) Each of the Company, the Guarantors and their respective subsidiaries has such permits, licenses, consents, exemptions, franchises, authorizations and other approvals (each, an "AUTHORIZATION") of, and has made all filings with and notices to, all governmental or regulatory authorities and self-regulatory organizations and all courts and other tribunals, including without limitation, under any applicable Environmental Laws, as are necessary to own, lease, license and operate its respective properties and to conduct its business, except where the failure to have any such Authorization or to make any such filing or notice would not, singly or in the aggregate, have a Material Adverse Effect. Each such Authorization is valid and in full force and effect and each of the Company and its subsidiaries is in compliance with all the terms and conditions thereof and with the rules and regulations of the authorities and governing bodies having jurisdiction with respect thereto; and no event has occurred (including, without limitation, the receipt of any notice from any authority or governing body) which allows or, after notice or lapse of time or both, would allow, revocation, suspension or 11 termination of any such Authorization or results or, after notice or lapse of time or both, would result in any other impairment of the rights of the holder of any such Authorization; and such Authorizations contain no restrictions that are burdensome to the Company or any of its subsidiaries, except where such failure to be valid and in full force and effect or to be in compliance, the occurrence of any such event or the presence of any such restriction would not, singly or in the aggregate, have a Material Adverse Effect. (r) The accountants, PricewaterhouseCoopers LLP, that have certified the financial statements and supporting schedules included in the Preliminary Offering Memorandum and the Offering Memorandum are independent public accountants with respect to the Company and the Guarantors, as required by the Act and the Exchange Act. The historical financial statements, together with related schedules and notes, set forth in the Preliminary Offering Memorandum and the Offering Memorandum comply as to form in all material respects with the requirements applicable to registration statements on Form S-1 under the Act. (s) The historical financial statements, together with related schedules and notes forming part of the Offering Memorandum (and any amendment or supplement thereto, including the supplemental consolidating balance sheet), present fairly the consolidated financial position, results of operations and changes in financial position of the Company and its subsidiaries on the basis stated in the Offering Memorandum at the respective dates or for the respective periods to which they apply; such statements and related schedules and notes have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods involved, except as disclosed therein; and the other financial and statistical information and data set forth in the Offering Memorandum (and any amendment or supplement thereto) are, in all material respects, accurately presented and prepared on a basis consistent with such financial statements and the books and records of the Company. (t) The consolidated financial statements, together with related schedules and notes, of Pride incorporated by reference in the Offering Memorandum (and any amendment or supplement thereto), present fairly in all material respects the consolidated financial position, results of operations and cash flows of Pride and its subsidiaries on the basis stated in the Offering Memorandum at the respective dates or for the respective periods to which they apply; such statements and related schedules and notes have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods involved, except as disclosed therein; and the other financial and statistical information and data incorporated by reference in the Offering Memorandum (and any amendment or supplement thereto) are in all material respects accurately presented and prepared on a basis consistent with such financial statements and the books and records of Pride and its subsidiaries. (u) The Company is not and, after giving effect to the offering and sale of the Initial Notes and the application of the net proceeds thereof as described in the Offering Memorandum, will not be, an "investment company," as such term is defined in the Investment Company Act of 1940, as amended. (v) There are no contracts, agreements or understandings between the Company or any Guarantor and any person granting such person the right to require the Company to file a registration statement under the Act with respect to any securities of the Company or to require the Company or such Guarantor to include such securities with the Notes and the Pride Guarantee registered pursuant to any Registration Statement. 12 (w) Neither the Company nor any of its subsidiaries nor any agent thereof acting on the behalf of them has taken, and none of them will take, any action that might cause this Agreement or the issuance or sale of the Initial Notes to violate Regulation G (12 C.F.R. Part 207), Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of the Board of Governors of the Federal Reserve System. (x) No "nationally recognized statistical rating organization" as such term is defined for purposes of Rule 436(g)(2) under the Act (i) has imposed (or has informed the Company or any Guarantor that it is considering imposing) any condition (financial or otherwise) on the Company's or any Guarantor's retaining any rating assigned to the Company or any Guarantor, any securities of the Company or any Guarantor or (ii) has indicated to the Company or any Guarantor that it is considering (a) the downgrading, suspension, or withdrawal of, or any review for a possible change that does not indicate the direction of the possible change in, any rating so assigned or (b) any change in the outlook for any rating of the Company, any Guarantor or any securities of the Company or any Guarantor. (y) Since the respective dates as of which information is given in the Offering Memorandum other than as set forth in the Offering Memorandum (exclusive of any amendments or supplements thereto subsequent to the date of this Agreement), (i) there has not occurred any material adverse change or any development involving a prospective material adverse change in the condition, financial or otherwise, or the earnings, business, management or operations of the Company and its subsidiaries, taken as a whole, or Pride and its subsidiaries, taken as a whole, (ii) there has not been any material adverse change or any development involving a prospective material adverse change in the capital stock or in the long-term debt of the Company or any of its subsidiaries or Pride or any of its subsidiaries and (iii) neither the Company nor any of its subsidiaries, nor Pride nor any of its subsidiaries, has incurred any material liability or obligation, direct or contingent. (z) Each of the Preliminary Offering Memorandum and the Offering Memorandum, as of its date, contains all the information specified in, and meeting the requirements of, Rule 144A(d)(4) under the Act. (aa) When the Initial Notes and the Pride Guarantee are issued and delivered pursuant to this Agreement, neither the Initial Notes nor the Pride Guarantee will be of the same class (within the meaning of Rule 144A under the Act) as any security of the Company or Pride that is listed on a national securities exchange registered under Section 6 of the Exchange Act or that is quoted in a United States automated inter-dealer quotation system. (bb) No form of general solicitation or general advertising (as defined in Regulation D under the Act) was used by the Company, the Guarantors or any of their respective representatives (other than the Initial Purchaser, as to whom the Company and the Guarantors make no representation) in connection with the offer and sale of the Initial Notes contemplated hereby, including, but not limited to, articles, notices or other communications published in any newspaper, magazine, or similar medium or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. No securities of the same class as the Initial Notes have been issued and sold by the Company within the six-month period immediately prior to the date hereof. 13 (cc) Prior to the effectiveness of any Registration Statement, the Indenture is not required to be qualified under the TIA. (dd) None of the Company, the Guarantors nor any of their respective affiliates or any person acting on its or their behalf (other than the Initial Purchaser, as to whom the Company and the Guarantors make no representation) has engaged or will engage in any directed selling efforts within the meaning of Regulation S under the Act ("REGULATION S") with respect to the Initial Notes or the Pride Guarantee. (ee) The Initial Notes offered and sold in reliance on Regulation S have been and will be offered and sold only in offshore transactions. (ff) The sale of the Initial Notes pursuant to Regulation S is not part of a plan or scheme to evade the registration provisions of the Act. (gg) No registration under the Act of the Initial Notes or the Pride Guarantee is required for the sale of the Initial Notes and the Pride Guarantee to the Initial Purchaser as contemplated hereby or for the Exempt Resales assuming the accuracy of the Initial Purchaser's representations and warranties and agreements set forth in Section 7 hereof. (hh) Each certificate signed by any officer of the Company or any Guarantor and delivered to the Initial Purchaser or counsel for the Initial Purchaser shall be deemed to be a representation and warranty by the Company or such Guarantor to the Initial Purchaser as to the matters covered thereby. (ii) Each of the Security Agreements has been duly authorized by the Company and each of the Guarantors (to the extent they are a party thereto) and, on the Closing Date, will have been duly executed and delivered by the Company and each of the Guarantors (to the extent they are a party thereto). When each Security Agreement has been duly executed and delivered, each such Security Agreement will be a valid and binding agreement of the Company and each of the Guarantors (to the extent they are a party thereto), enforceable against the Company and each Guarantor (to the extent they are a party thereto) in accordance with its terms except as (i) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and (ii) rights of acceleration and the availability of equitable remedies may be limited by equitable principles of general applicability. On the Closing Date, each of the Security Agreements will conform as to legal matters to the description thereof in the Offering Memorandum. (jj) The Letter of Credit has been duly authorized by the Letter of Credit Provider and, on the Closing Date, will have been duly executed and delivered by the Letter of Credit Provider. When the Letter of Credit has been duly executed and delivered, the Letter of Credit will be a valid and binding agreement of the Letter of Credit Provider, enforceable against the Letter of Credit Provider in accordance with its terms except as (i) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and (ii) rights of acceleration and the availability of equitable remedies may be limited by equitable principles of general applicability. On the Closing Date, the Letter of Credit will conform as to legal matters to the description thereof in the Offering Memorandum. 14 (kk) On the Closing Date, upon due execution of the Security Agreements, the Collateral Agent will have a valid first priority perfected security interest in the Collateral, free and clear of all liens, except those liens created by or pursuant to the Security Agreements. (ll) The Company and its subsidiaries and each of the Guarantors have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its subsidiaries or such Guarantor, as the case may be, in each case free and clear of all Liens and defects, except such as are described in the Offering Memorandum, Exchange Act filings or such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and its subsidiaries or such Guarantor; and any real property and buildings held under lease by the Company and its subsidiaries or such Guarantor are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries, in each case except as described in the Offering Memorandum or Exchange Act filings. (mm) The Company and its subsidiaries own or possess, or can acquire on reasonable terms, all patents, patent rights, licenses, inventions, copyrights, knowhow (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks and trade names ("INTELLECTUAL PROPERTY") currently employed by them in connection with the business now operated by them except where the failure to own or possess or otherwise be able to acquire such intellectual property would not, singly or in the aggregate, have a Material Adverse Effect; and neither the Company nor any of its subsidiaries has received any notice of infringement of or conflict with asserted rights of others with respect to any of such intellectual property which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a Material Adverse Effect. (nn) The Company and each of its subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which they are engaged; and neither the Company nor any of its subsidiaries (i) has received notice from any insurer or agent of such insurer that substantial capital improvements or other material expenditures will have to be made in order to continue such insurance or (ii) has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers at a cost that would not have a Material Adverse Effect. (oo) Except as disclosed in the Offering Memorandum, no relationship, direct or indirect, exists between or among the Company or any of its subsidiaries on the one hand, and the directors, officers, stockholders, customers or suppliers of the Company or any of its subsidiaries on the other hand, which would be required by the Act to be described in the Offering Memorandum if the Offering Memorandum were a prospectus included in a registration statement on Form S-1 filed with the Commission. (pp) The Company and each of its subsidiaries maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations; (ii) transactions are recorded as 15 necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (qq) All material tax returns required to be filed by the Company and each of its subsidiaries in any jurisdiction have been filed, other than those filings being contested in good faith, and all material taxes, including withholding taxes, penalties and interest, assessments, fees and other charges due pursuant to such returns or pursuant to any assessment received by the Company or any of its subsidiaries have been paid, other than those being contested in good faith and for which adequate reserves have been provided. (rr) The indebtedness represented by the Initial Notes is being incurred for proper purposes and in good faith and each of the Company and the Guarantors will be on the Closing Date (after giving effect to the application of the proceeds from the issuance of the Initial Notes) solvent, and will have on the Closing Date (after giving effect to the application of the proceeds from the issuance of the Initial Notes) sufficient capital for carrying on their respective business and will be on the Closing Date (after giving effect to the application of the proceeds from the issuance of the Initial Notes) able to pay their respective debts as they mature. (ss) No action has been taken and no law, statute, rule or regulation or order has been enacted, adopted or issued by any governmental agency or body which prevents the execution, delivery and performance of any of the Operative Documents, the issuance of the Initial Notes or the Pride Guarantee, or suspends the sale of the Initial Notes or the Pride Guarantee in any jurisdiction referred to in Section 5(e); and no injunction, restraining order or other order or relief of any nature by a federal or state court or other tribunal of competent jurisdiction has been issued with respect to the Company or any of its subsidiaries or Pride which would prevent or suspend the issuance or sale of the Initial Notes or the Pride Guarantee in any jurisdiction referred to in Section 5(e). (tt) Each of the Mitsubishi Documents and the MARAD Documents is and, as of the Closing Date, will be a legal, valid and binding obligation of each of the parties thereto, and there does not exist and, as of the Closing Date, there will not exist any default (or event which with the giving of notice or lapse of time would constitute a default) under any of the Mitsubishi Documents. The Company acknowledges that the Initial Purchaser and, for purposes of the opinions to be delivered to the Initial Purchaser pursuant to Section 9 hereof, counsel to the Company and the Guarantors and counsel to the Initial Purchaser will rely upon the accuracy and truth of the foregoing representations and hereby consents to such reliance. 7. INITIAL PURCHASER'S REPRESENTATIONS AND WARRANTIES. The Initial Purchaser represents and warrants to, and agrees with, the Company and the Guarantors: (a) The Initial Purchaser is either a QIB or an Accredited Institution, in either case, with such knowledge and experience in financial and business matters as is necessary in order to evaluate the merits and risks of an investment in the Initial Notes. 16 (b) The Initial Purchaser (A) is not acquiring the Initial Notes with a view to any distribution thereof or with any present intention of offering or selling any of the Initial Notes in a transaction that would violate the Act or the securities laws of any state of the United States or any other applicable jurisdiction and (B) will be reoffering and reselling the Initial Notes only to (x) QIBs in reliance on the exemption from the registration requirements of the Act provided by Rule 144A and (y) in offshore transactions in reliance upon Regulation S under the Act. (c) The Initial Purchaser agrees that no form of general solicitation or general advertising (within the meaning of Regulation D under the Act) has been or will be used by such Initial Purchaser or any of its representatives in connection with the offer and sale of the Initial Notes pursuant hereto, including, but not limited to, articles, notices or other communications published in any newspaper, magazine or similar medium or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. (d) The Initial Purchaser agrees that, in connection with Exempt Resales, such Initial Purchaser will solicit offers to buy the Initial Notes only from, and will offer to sell the Initial Notes only to, Eligible Purchasers. The Initial Purchaser further agrees that it will offer to sell the Initial Notes only to, and will solicit offers to buy the Initial Notes only from (A) Eligible Purchasers that the Initial Purchaser reasonably believes are QIBs, and (B) Regulation S Purchasers, in each case, that agree that (x) the Initial Notes purchased by them may be resold, pledged or otherwise transferred within the time period referred to under Rule 144(k) (taking into account the provisions of Rule 144(d) under the Act, if applicable) under the Act, as in effect on the date of the transfer of such Initial Notes, only (I) to the Company or any of its subsidiaries, (II) to a person whom the seller reasonably believes is a QIB purchasing for its own account or for the account of a QIB in a transaction meeting the requirements of Rule 144A under the Act, (III) in an offshore transaction (as defined in Rule 902 under the Act) meeting the requirements of Rule 904 of the Act, (IV) in a transaction meeting the requirements of Rule 144 under the Act, (V) to an Accredited Institution that, prior to such transfer, furnishes the Trustee a signed letter containing certain representations and agreements relating to the registration of transfer of such Initial Note and, if such transfer is in respect of an aggregate principal amount of Initial Notes less than $250,000, an opinion of counsel acceptable to the Company that such transfer is in compliance with the Act, (VI) in accordance with another exemption from the registration requirements of the Act (and based upon an opinion of counsel acceptable to the Company) or (VII) pursuant to an effective registration statement and, in each case, in accordance with the applicable securities laws of any state of the United States or any other applicable jurisdiction and (y) they will deliver to each person to whom such Initial Notes or an interest therein is transferred a notice substantially to the effect of the foregoing. (e) The Initial Purchaser and its affiliates or any person acting on its or their behalf have not engaged or will not engage in any directed selling efforts within the meaning of Regulation S with respect to the Initial Notes or the Pride Guarantee. (f) The Initial Notes offered and sold by such Initial Purchaser pursuant hereto in reliance on Regulation S have been and will be offered and sold only in offshore transactions. (g) The sale of the Initial Notes offered and sold by such Initial Purchaser pursuant hereto in reliance on Regulation S is not part of a plan or scheme to evade the registration provisions of the Act. 17 Such Initial Purchaser acknowledges that the Company and the Guarantors and, for purposes of the opinions to be delivered to the Initial Purchaser pursuant to Section 9 hereof, counsel to the Company and the Guarantors and counsel to the Initial Purchaser will rely upon the accuracy and truth of the foregoing representations and the Initial Purchaser hereby consents to such reliance. 8. INDEMNIFICATION (a) The Company and each Guarantor agree, jointly and severally, to indemnify and hold harmless the Initial Purchaser, its directors, its officers and each person, if any, who controls such Initial Purchaser within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, from and against any and all losses, claims, damages, liabilities and judgments (including, without limitation, any legal or other expenses incurred in connection with investigating or defending any matter, including any action, that could give rise to any such losses, claims, damages, liabilities or judgments) caused by any untrue statement or alleged untrue statement of a material fact contained in the Offering Memorandum (or any amendment or supplement thereto), the Preliminary Offering Memorandum or any Rule 144A Information provided by the Company or any Guarantor to any holder or prospective purchaser of Initial Notes pursuant to Section 5(h) or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or judgments are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to the Initial Purchaser furnished in writing to the Company by such Initial Purchaser; provided, however, that the foregoing indemnity agreement with respect to any Preliminary Offering Memorandum shall not inure to the benefit of the Initial Purchaser if it failed to deliver a Final Offering Memorandum, as then amended or supplemented, (so long as the Final Offering Memorandum and any amendment or supplement thereto was provided by the Company to the Initial Purchaser in the requisite quantity and on a timely basis to permit proper delivery on or prior to the Closing Date) to the person asserting any losses, claims, damages, liabilities or judgements caused by any untrue statement or alleged untrue statement of a material fact contained in any Preliminary Offering Memorandum, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, if such material misstatement or omission or alleged material misstatement or omission was cured in the Final Offering Memorandum, as so amended or supplemented. (b) The Initial Purchaser agrees to indemnify and hold harmless the Company and the Guarantors, and their respective directors and officers and each person, if any, who controls (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act) the Company or the Guarantors, to the same extent as the foregoing indemnity from the Company and the Guarantors to the Initial Purchaser but only with reference to information relating to the Initial Purchaser furnished in writing to the Company by the Initial Purchaser expressly for use in the Preliminary Offering Memorandum or the Offering Memorandum. (c) In case any action shall be commenced involving any person in respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the "INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person against whom such indemnity may be sought (the "INDEMNIFYING PARTY") in writing and the indemnifying party shall assume the defense of such action, including the employment of counsel reasonably satisfactory to the indemnified party and the payment of all fees and expenses of such counsel, as incurred (except that in the case of any action in respect of 18 which indemnity may be sought pursuant to both Sections 8(a) and 8(b), the Initial Purchaser shall not be required to assume the defense of such action pursuant to this Section 8(c), but may employ separate counsel and participate in the defense thereof, but the fees and expenses of such counsel, except as provided below, shall be at the expense of the Initial Purchaser). Any indemnified party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the indemnified party unless (i) the employment of such counsel shall have been specifically authorized in writing by the indemnifying party, (ii) the indemnifying party shall have failed to assume the defense of such action or employ counsel reasonably satisfactory to the indemnified party or (iii) the named parties to any such action (including any impleaded parties) include both the indemnified party and the indemnifying party, and the indemnified party shall have been advised by such counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying party (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of the indemnified party). In any such case, the indemnifying party shall not, in connection with any one action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) for all indemnified parties and all such fees and expenses shall be reimbursed as they are incurred. Such firm shall be designated in writing by Donaldson, Lufkin & Jenrette Securities Corporation, in the case of the parties indemnified pursuant to Section 8(a), and by the Company, in the case of parties indemnified pursuant to Section 8(b). The indemnifying party shall indemnify and hold harmless the indemnified party from and against any and all losses, claims, damages, liabilities and judgments by reason of any settlement of any action (i) effected with its written consent or (ii) effected without its written consent if the settlement is entered into more than twenty business days after the indemnifying party shall have received a request from the indemnified party for reimbursement for the fees and expenses of counsel (in any case where such fees and expenses are at the expense of the indemnifying party) and, prior to the date of such settlement, the indemnifying party shall have failed to comply with such reimbursement request. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement or compromise of, or consent to the entry of judgment with respect to, any pending or threatened action in respect of which the indemnified party is or could have been a party and indemnity or contribution may be or could have been sought hereunder by the indemnified party, unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability on claims that are or could have been the subject matter of such action and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of the indemnified party. (d) To the extent the indemnification provided for in this Section 8 is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages, liabilities or judgments referred to therein, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities and judgments (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Guarantors, on the one hand, and the Initial Purchaser on the other hand from the offering of the Initial Notes or (ii) if the allocation provided by clause 8(d)(i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause 8(d)(i) above but also the relative fault of the Company and the Guarantors, on the one hand, and the Initial Purchaser, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or judgments, as well as any other 19 relevant equitable considerations. The relative benefits received by the Company and the Guarantors, on the one hand and the Initial Purchaser, on the other hand, shall be deemed to be in the same proportion as the total net proceeds from the offering of the Initial Notes (after underwriting discounts and commissions, but before deducting expenses) received by the Company, and the total discounts and commissions received by the Initial Purchaser bear to the total price to investors of the Initial Notes, in each case as set forth in the table on the cover page of the Offering Memorandum. The relative fault of the Company and the Guarantors, on the one hand, and the Initial Purchaser, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Guarantors, on the one hand, or the Initial Purchaser, on the other hand, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Guarantors, and the Initial Purchaser agree that it would not be just and equitable if contribution pursuant to this Section 8(d) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or judgments referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses incurred by such indemnified party in connection with investigating or defending any matter, including any action, that could have given rise to such losses, claims, damages, liabilities or judgments. Notwithstanding the provisions of this Section 8, the Initial Purchaser shall not be required to contribute any amount in excess of the amount by which the total discounts and commissions received by such Initial Purchasers exceeds the amount of any damages which the Initial Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. (e) The remedies provided for in this Section 8 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. 9. CONDITIONS OF INITIAL PURCHASER'S OBLIGATIONS. The obligations of the Initial Purchaser to purchase the Initial Notes under this Agreement are subject to the satisfaction of each of the following conditions: (a) All the representations and warranties of the Company and the Guarantors contained in this Agreement shall be true and correct on the Closing Date with the same force and effect as if made on and as of the Closing Date. (b) On or after the date hereof, (i) there shall not have occurred any downgrading, suspension or withdrawal of, nor shall any notice have been given of any potential or intended downgrading, suspension or withdrawal of, or of any review (or of any potential or intended review) for a possible change that does not indicate the direction of the possible change in, any rating of the Company or any Guarantor or any securities of the Company or any Guarantor (including, without 20 limitation, the placing of any of the foregoing ratings on credit watch with negative or developing implications or under review with an uncertain direction) by any "nationally recognized statistical rating organization" as such term is defined for purposes of Rule 436(g)(2) under the Act, (ii) there shall not have occurred any change, nor shall any notice have been given of any potential or intended change, in the outlook for any rating of the Company or any Guarantor or any securities of the Company or any Guarantor by any such rating organization and (iii) no such rating organization shall have given notice that it has assigned (or is considering assigning) a lower rating to the Notes than that on which the Notes were marketed. (c) Since the respective dates as of which information is given in the Offering Memorandum other than as set forth in the Offering Memorandum (exclusive of any amendments or supplements thereto subsequent to the date of this Agreement), (i) there shall not have occurred any change or any development involving a prospective change in the condition, financial or otherwise, or the earnings, business, management or operations of the Company and its subsidiaries, taken as a whole, or Pride and its subsidiaries, taken as a whole, (ii) there shall not have been any change or any development involving a prospective change in the capital stock or in the long-term debt of the Company or any of its subsidiaries or Pride or any of its subsidiaries and (iii) neither the Company nor any of its subsidiaries, nor Pride nor any of its subsidiaries, shall have incurred any liability or obligation, direct or contingent, the effect of which, in any such case described in clause 9(c)(i), 9(c)(ii) or 9(c)(iii), in your judgment, is material and adverse and, in your judgment, makes it impracticable to market the Initial Notes on the terms and in the manner contemplated in the Offering Memorandum. (d) You shall have received on the Closing Date a certificate dated the Closing Date, signed by the President and the Chief Financial Officer of the Company and each of the Guarantors, confirming the matters set forth in Sections 6(y), 9(a) and 9(b) and stating that each of the Company and the Guarantors has complied with all the agreements and satisfied all of the conditions herein contained and required to be complied with or satisfied on or prior to the Closing Date. (e) You shall have received on the Closing Date an opinion (satisfactory to you and counsel for the Initial Purchaser), dated the Closing Date, of counsel for the Company, portions of which may be given by Baker & Botts, L.L.P., outside counsel for the Company, portions of which may be given by Dancia Penn & Co., the Company's British Virgin Island's counsel, and portions of which may be given by other special counsel for the Company (provided that Baker & Botts, L.L.P. will provide the opinion specified in clause (xix) below) , to the effect that: (i) each of the Company and its subsidiaries has been duly incorporated, is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation and has the corporate power and authority to carry on its business as described in the Offering Memorandum and to own, lease and operate its properties; (ii) each of the Company and its subsidiaries is duly qualified and is in good standing as a foreign corporation authorized to do business in each jurisdiction in which the nature of its business or its ownership or leasing of property requires such qualification, except where the failure to be so qualified would not have a Material Adverse Effect; (iii) all the outstanding shares of capital stock of the Company have 21 been duly authorized and validly issued and are fully paid, nonassessable and not subject to any preemptive or similar rights; (iv) all of the outstanding shares of capital stock of each of the Company's subsidiaries have been duly authorized and validly issued and are fully paid and nonassessable, and are owned by the Company, free and clear of any Lien other than Liens created under the Mitsubishi Documents; (v) the Initial Notes have been duly authorized and, when executed and authenticated in accordance with the provisions of the Indenture and delivered to and paid for by the Initial Purchaser in accordance with the terms of this Agreement, will be entitled to the benefits of the Indenture and will be valid and binding obligations of the Company, enforceable in accordance with their terms except as (x) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and (y) rights of acceleration and the availability of equitable remedies may be limited by equitable principles of general applicability; (vi) the Indenture has been duly authorized, executed and delivered by the Company and is a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms except as (x) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and (y) rights of acceleration and the availability of equitable remedies may be limited by equitable principles of general applicability; (vii) this Agreement has been duly authorized, executed and delivered by the Company; (viii) the Registration Rights Agreement has been duly authorized, executed and delivered by the Company and is a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except as (x) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and (y) rights of acceleration and the availability of equitable remedies may be limited by equitable principles of general applicability; (ix) the Exchange Notes have been duly authorized; (x) the statements under the captions "Business - Construction and Permanent Financing", "Business - The Petrobras Contracts", "Business - The Shipyards", "Description of Notes", "Description of the Security for the Notes", "Plan of Distribution" and "Certain Tax Considerations" in the Offering Memorandum, insofar as such statements constitute a summary of the legal matters, documents or proceedings referred to therein, fairly present in all material respects such legal matters, documents and proceedings; (xi) neither the Company nor any of its subsidiaries is in violation of its respective charter or bylaws and, to the best of such counsel's knowledge after due inquiry, neither the Company nor any of its subsidiaries is in default in the performance of any obligation, agreement, covenant or condition contained in any indenture, loan agreement, mortgage, lease or other agreement or instrument that is material to the Company and its subsidiaries, taken as a whole, to which the Company 22 or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or their respective property is bound; (xii) the execution, delivery and performance of this Agreement and the other Operative Documents by the Company and each of the Guarantors, the compliance by the Company and each of the Guarantors with all provisions hereof and thereof and the consummation of the transactions contemplated hereby and thereby will not (i) require any consent, approval, authorization or other order of, or qualification with, any court or governmental body or agency (except such as may be required under the securities or Blue Sky laws of the various states), (ii) conflict with or constitute a breach of any of the terms or provisions of, or a default under, the charter or by-laws of the Company or any of its subsidiaries, any of the Mitsubishi Documents, any of the MARAD Documents or any indenture, loan agreement, mortgage, lease or other agreement or instrument that is material to the Company and its subsidiaries, taken as a whole, to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or their respective property is bound, (iii) violate or conflict with any applicable law or any rule, regulation, judgment, order or decree of any court or any governmental body or agency having jurisdiction over the Company, any of its subsidiaries or their respective property, (iv) result in the imposition or creation of (or the obligation to create or impose) a Lien under, any agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or their respective property is bound, or (v) result in the termination, suspension or revocation of any Authorization (as defined below) of the Company or any of its subsidiaries or result in any other impairment of the rights of the holder of any such Authorization; (xiii) after due inquiry, such counsel does not know of any legal or governmental proceedings pending or threatened to which the Company or any of the Company's subsidiaries is or could be a party or to which any of their respective property is or could be subject, which might result, singly or in the aggregate, in a Material Adverse Effect; (xiv) the Company is not and, after giving effect to the offering and sale of the Initial Notes and the application of the net proceeds thereof as described in the Offering Memorandum, will not be, an "investment company" as such term is defined in the Investment Company Act of 1940, as amended; (xv) to the best of such counsel's knowledge after due inquiry, there are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Act with respect to any securities of the Company or to require the Company to include such securities with the Notes registered pursuant to any Registration Statement; (xvi) the Indenture complies as to form in all material respects with the requirements of the TIA, and the rules and regulations of the Commission applicable to an indenture which is qualified thereunder. It is not necessary in connection with the offer, sale and delivery of the Initial Notes to the Initial Purchaser in the manner contemplated by this Agreement or in connection with the Exempt Resales to qualify the Indenture under the TIA. (xvii) no registration under the Act of the Initial Notes is required for 23 the sale of the Initial Notes to the Initial Purchaser as contemplated by this Agreement or for the Exempt Resales assuming that (i) the Initial Purchaser is a QIB, or a Regulation S Purchaser, (ii) the accuracy of, and compliance with, the Initial Purchaser's representations and agreements contained in Section 7 of this Agreement, and (iii) the accuracy of the representations of the Company and the Guarantors set forth in Sections 6(dd), (ee) and (ff) of this Agreement; (xiii) such counsel has no reason to believe that, as of the date of the Offering Memorandum or as of the Closing Date, the Offering Memorandum, as amended or supplemented, if applicable (except for the financial statements and other financial data included therein, as to which such counsel need not express any belief) contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (xix) each of the Security Agreements has been duly authorized, executed and delivered by the Company and each is a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms except as (i) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and (ii) rights of acceleration and the availability of equitable remedies may be limited by equitable principles of general applicability; (xx) the Collateral Agent has a valid first priority perfected security interest in the Collateral, free and clear of all liens, except those liens created by or pursuant to the Security Agreements; (xxi) the Company and its subsidiaries own or possess, or can acquire on reasonable terms, all patents, patent rights, licenses, inventions, copyrights, knowhow (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks and trade names ("INTELLECTUAL PROPERTY") currently employed by them in connection with the business now operated by them except where the failure to own or possess or otherwise be able to acquire such intellectual property would not, singly or in the aggregate, have a Material Adverse Effect; and neither the Company nor any of its subsidiaries has received any notice of infringement of or conflict with asserted rights of others with respect to any of such intellectual property which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a Material Adverse Effect; (xxii) to the best of such counsel's knowledge, after due inquiry, no action has been taken and no law, statute, rule or regulation or order has been enacted, adopted or issued by any governmental agency or body which prevents the execution, delivery and performance of any of the Operative Documents or the issuance of the Initial Notes, or suspends the sale of the Initial Notes in any jurisdiction referred to in Section 5(e); and no injunction, restraining order or other order or relief of any nature by a federal or state court or other tribunal of competent jurisdiction has been issued with respect to the Company or any of its subsidiaries which would prevent or suspend the issuance or sale of the Initial Notes in any jurisdiction referred to in Section 5(e). The opinions described in Section 9(e) above shall be rendered to you at the request of the Company and shall so state therein. In giving such opinion with respect to the matters covered by 24 Section 9(e)(xviii), such counsel may state that their opinion and belief are based upon their participation in the preparation of the Offering Memorandum and any amendments or supplements thereto and review and discussion of the contents thereof, but are without independent check or verification except as specified. (f) You shall have received on the Closing Date opinions (satisfactory to you and counsel for the Initial Purchaser), dated the Closing Date, of counsel for Pride, portions of which may be given by Baker & Botts, L.L.P., outside counsel for Pride, portions of which may be given by Robert W. Randall, Vice President and General Counsel for Pride, and portions of which may be given by other special counsel for the Company, to the effect that: (i) each of Pride and Pride Offshore, Inc. and Pride International Holdings, Inc. (the "U.S. SUBSIDIARIES") has been duly incorporated, is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation and has the corporate power and authority to carry on its business as described in the Offering Memorandum and to own, lease and operate its properties; (ii) each of Pride and the U.S. Subsidiaries is duly qualified and is in good standing as a foreign corporation authorized to do business in each jurisdiction in which the nature of its business or its ownership or leasing of property requires such qualification, except where the failure to be so qualified would not have a Material Adverse Effect; (iii) all of the outstanding shares of capital stock of each of Pride's subsidiaries have been duly authorized and validly issued and are fully paid and nonassessable, and are owned by Pride, free and clear of any Lien; (iv) the Pride Guarantee has been duly authorized and, when the Initial Notes are executed and authenticated in accordance with the provisions of the Indenture and delivered to and paid for by the Initial Purchaser in accordance with the terms of this Agreement, the Pride Guarantee endorsed thereon will be entitled to the benefits of the Indenture and will be valid and binding obligations of Pride, enforceable in accordance with their terms except as (x) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and (y) rights of acceleration and the availability of equitable remedies may be limited by equitable principles of general applicability; (v) the Indenture has been duly authorized, executed and delivered by Pride and is a valid and binding agreement of Pride, enforceable against Pride in accordance with its terms except as (x) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and (y) rights of acceleration and the availability of equitable remedies may be limited by equitable principles of general applicability; (vi) this Agreement has been duly authorized, executed and delivered by Pride; (vii) the Registration Rights Agreement has been duly authorized, executed and delivered by Pride and is a valid and binding agreement of Pride, enforceable against Pride 25 in accordance with its terms, except as (x) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and (y) rights of acceleration and the availability of equitable remedies may be limited by equitable principles of general applicability; (viii) neither Pride nor any of the U.S. Subsidiaries is in violation of its respective charter or bylaws and, to the best of such counsel's knowledge after due inquiry, neither Pride nor any of the U.S. Subsidiaries is in default in the performance of any obligation, agreement, covenant or condition contained in any indenture, loan agreement, mortgage, lease or other agreement or instrument that is material to Pride and the U.S. Subsidiaries, taken as a whole, to which Pride or any of the U.S. Subsidiaries is a party or by which Pride or any of the U.S. Subsidiaries or their respective property is bound; (ix) the execution, delivery and performance of this Agreement and the other Operative Documents by the Company and each of the Guarantors, the compliance by the Company and each of the Guarantors with all provisions hereof and thereof and the consummation of the transactions contemplated hereby and thereby will not (i) require any consent, approval, authorization or other order of, or qualification with, any court or governmental body or agency (except such as may be required under the securities or Blue Sky laws of the various states), (ii) conflict with or constitute a breach of any of the terms or provisions of, or a default under, the charter or by-laws of Pride or any of the U.S. Subsidiaries, any of the Mitsubishi Documents, any of the MARAD Documents or any indenture, loan agreement, mortgage, lease or other agreement or instrument that is material to Pride and the U.S. Subsidiaries, taken as a whole, to which Pride or any of the U.S. Subsidiaries is a party or by which Pride or any of the U.S. Subsidiaries or their respective property is bound, (iii) violate or conflict with any applicable law or any rule, regulation, judgment, order or decree of any court or any governmental body or agency having jurisdiction over Pride, any of the U.S. Subsidiaries or their respective property, (iv) result in the imposition or creation of (or the obligation to create or impose) a Lien under, any agreement or instrument to which Pride or any of the U.S. Subsidiaries is a party or by which Pride or any of the U.S. Subsidiaries or their respective property is bound, or (v) result in the termination, suspension or revocation of any Authorization (as defined below) of Pride or any of the U.S. Subsidiaries or result in any other impairment of the rights of the holder of any such Authorization; (x) such counsel does not know of any legal or governmental proceedings pending or threatened to which Pride or any of its subsidiaries is or could be a party or to which any of their respective property is or could be subject, which might result, singly or in the aggregate, in a Material Adverse Effect; (xi) Pride is not and, after giving effect to the offering and sale of the Initial Notes, the Pride Guarantee and the application of the net proceeds thereof as described in the Offering Memorandum, will not be, an "investment company" as such term is defined in the Investment Company Act of 1940, as amended; (xii) to the best of such counsel's knowledge after due inquiry, there are no contracts, agreements or understandings between Pride and any person granting such person the right to require Pride to file a registration statement under the Act with respect to any securities of Pride or to require Pride to include such securities with the Pride Guarantee registered pursuant to any Registration Statement; 26 (xiii) each of the Security Agreements to which Pride is party has been duly authorized, executed and delivered by Pride and each is a valid and binding agreement of Pride, enforceable against Pride in accordance with its terms except as (i) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and (ii) rights of acceleration and the availability of equitable remedies may be limited by equitable principles of general applicability; (xiv) no action has been taken and no law, statute, rule or regulation or order has been enacted, adopted or issued by any governmental agency or body which prevents the execution, delivery and performance of the Pride Guarantee, or suspends the sale of the Pride Guarantee in any jurisdiction referred to in Section 5(e); and no injunction, restraining order or other order or relief of any nature by a federal or state court or other tribunal of competent jurisdiction has been issued with respect to Pride which would prevent or suspend the issuance or sale of the Pride Guarantee in any jurisdiction referred to in Section 5(e). The opinions described in Section 9(f) above shall be rendered to you at the request of Pride and shall so state therein. (g) You shall have received on the Closing Date an opinion (satisfactory to you and counsel for the Initial Purchaser), dated the Closing Date, of Pedro Calmon Advogados Associados, counsel for Maritima, to the effect that: (i) the Indenture has been duly authorized, executed and delivered by Maritima and is a valid and binding agreement of Maritima, enforceable against Maritima in accordance with its terms except as (x) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and (y) rights of acceleration and the availability of equitable remedies may be limited by equitable principles of general applicability; (ii) this Agreement has been duly authorized, executed and delivered by Maritima; (iii) the Registration Rights Agreement has been duly authorized, executed and delivered by Maritima and is a valid and binding agreement of Maritima, enforceable against Maritima in accordance with its terms, except as (x) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and (y) rights of acceleration and the availability of equitable remedies may be limited by equitable principles of general applicability; (iv) the execution, delivery and performance of this Agreement and the other Operative Documents by the Company and each of the Guarantors, the compliance by the Company and each of the Guarantors with all provisions hereof and thereof and the consummation of the transactions contemplated hereby and thereby will not (i) require any consent, approval, authorization or other order of, or qualification with, any court or governmental body or agency (except such as may be required under the securities or Blue Sky laws of the various states), (ii) conflict with or constitute a breach of any of the terms or provisions of, or a default under, the charter or by-laws of Maritima or any of its subsidiaries, any of the Mitsubishi Documents, any of the MARAD Documents or any indenture, 27 loan agreement, mortgage, lease or other agreement or instrument that is material to Maritima and its subsidiaries, taken as a whole, to which Maritima or any of its subsidiaries is a party or by which Maritima or any of its subsidiaries or their respective property is bound, (iii) violate or conflict with any applicable law or any rule, regulation, judgment, order or decree of any court or any governmental body or agency having jurisdiction over Maritima, any of its subsidiaries or their respective property, (iv) result in the imposition or creation of (or the obligation to create or impose) a Lien under, any agreement or instrument to which Maritima or any of its subsidiaries is a party or by which Maritima or any of its subsidiaries or their respective property is bound, or (v) result in the termination, suspension or revocation of any Authorization (as defined below) of Maritima or any of its subsidiaries or result in any other impairment of the rights of the holder of any such Authorization; (v) each of the Security Agreements to which Maritima is party has been duly authorized, executed and delivered by Maritima and each is a valid and binding agreement of Maritima, enforceable against Maritima in accordance with its terms except as (i) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and (ii) rights of acceleration and the availability of equitable remedies may be limited by equitable principles of general applicability. The opinions described in Section 9(g) above shall be rendered to you at the request of Maritima and shall so state therein. (h) You shall have received on the Closing Date an opinion (satisfactory to you and counsel for the Initial Purchaser), dated the Closing Date, of counsel for the Letter of Credit Provider, to the effect that the Letter of Credit has been duly authorized, executed and delivered by the Letter of Credit Provider and is a valid and binding agreement of the Letter of Credit Provider, enforceable against the Letter of Credit Provider in accordance with its terms except as (i) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and (ii) rights of acceleration and the availability of equitable remedies may be limited by equitable principles of general applicability. (i) You shall have received on the Closing Date opinions (satisfactory in form and substance to you and counsel for the Initial Purchasers), dated the Closing Date, of United Kingdom, British Virgin Islands, Bahamian and Brazilian counsel for the Company. (j) The Initial Purchaser shall have received on the Closing Date an opinion, dated the Closing Date, of Cravath, Swaine & Moore, counsel for the Initial Purchaser, in form and substance reasonably satisfactory to the Initial Purchaser. (k) The Initial Purchaser shall have received, at the time this Agreement is executed and at the Closing Date, letters dated the date hereof or the Closing Date, as the case may be, in form and substance satisfactory to the Initial Purchaser from PricewaterhouseCoopers LLP, independent public accountants, containing the information and statements of the type ordinarily included in accountants' "comfort letters" to the Initial Purchaser with respect to the financial statements and certain financial information contained in the Offering Memorandum. (l) The Initial Notes shall have been approved by the NASD for trading and 28 duly listed in PORTAL. (m) The Initial Purchaser shall have received a counterpart, conformed as executed, of the Indenture which shall have been entered into by the Company, the Guarantors and the Trustee. (n) The Company and the Guarantors shall have executed the Registration Rights Agreement and the Initial Purchaser shall have received an original copy thereof, duly executed by the Company and the Guarantors. (o) Each of the parties to each of the Security Agreements shall have executed such Security Agreements and the Initial Purchaser shall have received an original copy thereof, duly executed by the parties thereto. (p) Each of the parties to the Letter of Credit shall have executed the Letter of Credit and the Initial Purchaser shall have received an original copy thereof, duly executed by such parties. (q) Each of the parties to the Transfer Certificates executed pursuant to Sections 15.3 and 15.4 of the Mitsubishi Loan Agreements shall have executed such Transfer Certificates and the Initial Purchaser shall have received an original copy thereof, duly executed by such parties; and the Company shall have acquired all of the rights and assumed all of the liabilities of Petro Dia Four SA in respect of the Tranche A facilities under each of the Mitsubishi Loan Agreements. (r) Neither the Company nor the Guarantors shall have failed at or prior to the Closing Date to perform or comply with any of the agreements herein contained and required to be performed or complied with by the Company or the Guarantors, as the case may be, at or prior to the Closing Date. 10. EFFECTIVENESS OF AGREEMENT AND TERMINATION. This Agreement shall become effective upon the execution and delivery of this Agreement by the parties hereto. This Agreement may be terminated at any time on or prior to the Closing Date by the Initial Purchaser by written notice to the Company if any of the following has occurred: (i) any outbreak or escalation of hostilities or other national or international calamity or crisis or change in economic conditions or in the financial markets of the United States or elsewhere that, in the Initial Purchaser's judgment, is material and adverse and, in the Initial Purchaser's judgment, makes it impracticable to market the Initial Notes on the terms and in the manner contemplated in the Offering Memorandum, (ii) the suspension or material limitation of trading in securities or other instruments on the New York Stock Exchange, the American Stock Exchange, the Chicago Board of Options Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade or the Nasdaq National Market or limitation on prices for securities or other instruments on any such exchange or the Nasdaq National Market, (iii) the suspension of trading of any securities of the Company or any Guarantor on any exchange or in the over-the-counter market, (iv) the enactment, publication, decree or other promulgation of any federal or state statute, regulation, rule or order of any court or other governmental authority which in your opinion materially and adversely affects, or will materially and adversely affect, the business, prospects, financial 29 condition or results of operations of the Company and its subsidiaries, taken as a whole, (v) the declaration of a banking moratorium by either federal or New York State authorities or (vi) the taking of any action by any federal, state or local government or agency in respect of its monetary or fiscal affairs which in your opinion has a material adverse effect on the financial markets in the United States. 11. MISCELLANEOUS. Notices given pursuant to any provision of this Agreement shall be addressed as follows: (i) if to the Company, to Amethyst Financial Company Limited, c/o Arias Fabrega and Fabrega Trust Co. BVI Limited, 325 Waterfront Drive, Omar Hodge Building, 2nd Floor, Wickham's Cay Road, Tortola, British Virgin Islands, (ii) if to Pride, to Pride International, Inc., 5847 San Felipe, Suite 3300, Houston, TX 77057, (713) 789-1400; (iii) if to Maritima, to Maritima Petroleo e Engenharia Ltda., Avenido Almirante Borraso, 52 Grupo 3400, 20031-000 Centro Rio de Janeiro, Brazil and (iv) if to the Initial Purchaser, Donaldson, Lufkin & Jenrette Securities Corporation, 277 Park Avenue, New York, New York 10172, Attention: Syndicate Department, or in any case to such other address as the person to be notified may have requested in writing. The respective indemnities, contribution agreements, representations, warranties and other statements of the Company, the Guarantors and the Initial Purchaser set forth in or made pursuant to this Agreement shall remain operative and in full force and effect, and will survive delivery of and payment for the Initial Notes, regardless of (i) any investigation, or statement as to the results thereof, made by or on behalf of the Initial Purchaser, the officers or directors of the Initial Purchaser, any person controlling the Initial Purchaser, the Company, any Guarantor, the officers or directors of the Company or any Guarantor, or any person controlling the Company or any Guarantor, (ii) acceptance of the Initial Notes and payment for them hereunder and (iii) termination of this Agreement. If for any reason the Initial Notes are not delivered by or on behalf of the Company as provided herein (other than as a result of any termination of this Agreement pursuant to Section 10), the Company and each Guarantor, jointly and severally, agree to reimburse the Initial Purchaser for all out-of-pocket expenses (including the fees and disbursements of counsel) incurred by them. Notwithstanding any termination of this Agreement, the Company shall be liable for all expenses which it has agreed to pay pursuant to Section 5(j) hereof. The Company and each Guarantor also agree, jointly and severally, to reimburse the Initial Purchaser and its officers, directors and each person, if any, who controls such Initial Purchaser within the meaning of Section 15 of the Act or Section 20 of the Exchange Act for any and all fees and expenses (including without limitation the fees and expenses of counsel) incurred by them in connection with enforcing their rights under this Agreement (including without limitation its rights under Section 8). Except as otherwise provided, this Agreement has been and is made solely for the benefit of and shall be binding upon the Company, the Guarantors, the Initial Purchaser, the Initial Purchaser's directors and officers, any controlling persons referred to herein, the directors of the Company and the Guarantors and their respective successors and assigns, all as and to the extent provided in this Agreement, and no other person shall acquire or have any right under or by virtue of this Agreement. The term "successors and assigns" shall not include a purchaser of any of the Initial Notes from the Initial Purchaser merely because of such purchase. This Agreement shall be governed and construed in accordance with the laws of the State of New York. 30 This Agreement may be signed in various counterparts which together shall constitute one and the same instrument. 31 Please confirm that the foregoing correctly sets forth the agreement among the Company, the Guarantors and the Initial Purchaser. Very truly yours, AMETHYST FINANCIAL COMPANY LIMITED By: /s/ EARL W. MCNIEL Name: Earl W. McNiel Title: Treasurer PRIDE INTERNATIONAL, INC. By: /s/ EARL W. MCNIEL Name: Earl W. McNiel Title: Vice President MARITIMA PETROLEO E ENGENHARIA LTDA. By: /s/ GERMAN EFROMOVICH Name: German Efromovich Title: President DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION By: /s/ C. MITCHELL COX Name: C. Mitchell Cox Title: Senior Vice President 32 SCHEDULE A SUBSIDIARIES 1. Petrodrill Four Limited 2. Petrodrill Five Limited 3. Petrodrill Six Limited 4. Petrodrill Seven Limited S-2 EX-4.3 6 EXHIBIT 4.3 EXECUTION COPY ================================================================================ INDENTURE AMETHYST FINANCIAL COMPANY LIMITED as Issuer $53,000,000 11 3/4% Senior Secured Notes due 2001 ------------------------ WILMINGTON TRUST COMPANY as Trustee PRIDE INTERNATIONAL, INC. as Guarantor MARITIMA PETROLEO e ENGENHARIA LTDA., as procurer of a Letter of Credit Dated as of November 1, 1999 ================================================================================ TABLE OF CONTENTS PAGE ----- ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions.......................... 1 SECTION 1.02. Other Definitions.................... 32 SECTION 1.03. Incorporation by Reference of Trust Indenture Act...................... 33 SECTION 1.04. Rules of Construction................ 33 ARTICLE II THE SECURED NOTES SECTION 2.01. Form and Dating...................... 34 SECTION 2.02. Execution and Authentication......... 38 SECTION 2.03. Registrar and Paying Agent........... 39 SECTION 2.04. Paying Agent to Hold Money in Trust.............................. 40 SECTION 2.05. Holder Lists......................... 40 SECTION 2.06. Transfer and Exchange................ 40 SECTION 2.07. Replacement of Secured Noted......... 53 SECTION 2.08. Outstanding Secured Notes............ 54 SECTION 2.09. Treasury Secured Notes............... 54 SECTION 2.10. Temporary Secured Notes.............. 55 SECTION 2.11. Cancellation......................... 55 SECTION 2.12. Payment of Interest; Interest Rights Preserved.......................... 55 SECTION 2.13. Computation of Interest.............. 57 SECTION 2.14. CUSIP Number......................... 57 ARTICLE III REDEMPTION AND PREPAYMENT SECTION 3.01. Notices to Trustee................... 57 SECTION 3.02. Selection of Secured Notes to be Redeemed........................... 57 SECTION 3.03. Notice of Redemption................. 58 SECTION 3.04. Effect of Notice of Redemption....... 59 SECTION 3.05. Deposit of Redemption Price.......... 59 SECTION 3.06. Secured Notes Redeemed in Part....... 60 SECTION 3.07. Optional Redemptions................. 60 SECTION 3.08. Redemption Upon Loss of a Mortgaged Rig................................ 63 SECTION 3.09. Redemption Upon Sale of a Mortgaged Rig................................ 63 Contents p. 2 PAGE ARTICLE IV COVENANTS SECTION 4.01. Payment of Secured Notes............. 64 SECTION 4.02. Maintenance of Office or Agency...... 65 SECTION 4.03. Corporate Existence.................. 65 SECTION 4.04. Maintenance of Properties and Insurance.......................... 66 SECTION 4.05. Compliance With Laws................. 66 SECTION 4.06. Taxes and Other Claims............... 66 SECTION 4.07. Stay, Extension and Usury Laws....... 67 SECTION 4.08. Change of Control.................... 67 SECTION 4.09. Limitations on Indebtedness.......... 72 SECTION 4.10. Limitation on Liens.................. 74 SECTION 4.11. Limitation on Restricted Payments.... 74 SECTION 4.12. Limitation on Sale/Leaseback Transactions....................... 77 SECTION 4.13. SEC Reports.......................... 77 SECTION 4.14. Limitation on Restrictions on Distributions from Restricted Subsidiaries....................... 78 SECTION 4.15. Limitation on Asset Sales............ 79 SECTION 4.16. Limitation on Asset Swaps............ 81 SECTION 4.17. Limitation on Affiliate Transactions....................... 81 SECTION 4.18. Limitation on the Sale or Issuance of Capital Stock of Restricted Subsidiaries....................... 82 SECTION 4.19. Future Subsidiary Guarantors......... 83 SECTION 4.20. Impairment of Liens.................. 83 SECTION 4.21. Limitation on Issuer Activities...... 83 SECTION 4.22. Insurance............................ 84 SECTION 4.23. Amendments to Security Documents..... 84 SECTION 4.24. Use of Proceeds...................... 84 SECTION 4.25. Separate Corporate Entities.......... 84 SECTION 4.26. Compliance Certificate; Notice of Default or Event of Default........ 85 SECTION 4.27. Prohibition on Issuer Becoming an Investment Company................. 86 SECTION 4.28. Additional Amounts................... 86 ARTICLE V CONSOLIDATION, MERGER, CONVEYANCE, LEASE OR TRANSFER SECTION 5.01. Limitations on Mergers and Consolidations..................... 89 Contents p. 3 PAGE ARTICLE VI DEFAULTS AND REMEDIES SECTION 6.01. Events of Default.................... 91 SECTION 6.02. Acceleration......................... 94 SECTION 6.03. Other Remedies....................... 95 SECTION 6.04. Waiver of Past Defaults.............. 96 SECTION 6.05. Control By Majority.................. 96 SECTION 6.06. Limitation on Suits.................. 97 SECTION 6.07. Rights of Holders of Secured Notes to Receive Payment.................... 97 SECTION 6.08. Collection Suit by Trustee........... 98 SECTION 6.09. Trustee May File Proofs of Claim..... 98 SECTION 6.10. Priorities........................... 100 SECTION 6.11. Undertaking For Costs................ 100 SECTION 6.12. Restoration of Rights and Remedies... 101 SECTION 6.13. Rights and Remedies Cumulative....... 101 SECTION 6.14. Delay or Omission Not Waiver......... 101 ARTICLE VII TRUSTEE SECTION 7.01. Duties of Trustee.................... 101 SECTION 7.02. Rights of Trustee.................... 103 SECTION 7.03. Individual Rights of Trustee......... 105 SECTION 7.04. Trustee's Disclaimer................. 105 SECTION 7.05. Notice of Defaults................... 105 SECTION 7.06. Reports by Trustee to Holders of the Secured Notes...................... 106 SECTION 7.07. Compensation and Indemnity........... 106 SECTION 7.08. Replacement of Trustee............... 107 SECTION 7.09. Successor Trustee by Merger, etc. ... 109 SECTION 7.10. Eligibility; Disqualification........ 110 SECTION 7.11. Preferential Collection of Claims Against the Issuer................. 110 SECTION 7.12. Other Offices........................ 110 ARTICLE VIII SATISFACTION AND DISCHARGE SECTION 8.01. Satisfaction and Discharge........... 111 SECTION 8.02. Application of Trust Money........... 112 SECTION 8.03. Repayment of the Issuer.............. 112 SECTION 8.04. Reinstatement........................ 113 Contents p. 4 PAGE ARTICLE IX DEFEASANCE AND COVENANT DEFEASANCE SECTION 9.01. Option To Effect Defeasance or Covenant Defeasance................ 113 SECTION 9.02. Defeasance and Discharge............. 113 SECTION 9.03. Covenant Defeasance.................. 114 SECTION 9.04. Conditions to Defeasance or Covenant Defeasance......................... 115 SECTION 9.05. Deposited Money and U.S. Government Obligations To Be Held in Trust; Other Miscellaneous Provisions..... 117 SECTION 9.06. Repayment to the Issuer.............. 118 SECTION 9.07. Reinstatement........................ 119 ARTICLE X AMENDMENT, SUPPLEMENT AND WAIVER SECTION 10.01. Without Consent of Holders of Secured Notes.............................. 119 SECTION 10.02. With Consent of Holders of Secured Notes.............................. 120 SECTION 10.03. Effect of Supplemental Indentures.... 123 SECTION 10.04. Compliance with Trust Indenture Act................................ 123 SECTION 10.05. Revocation and Effect of Consents.... 124 SECTION 10.06. Notation on or Exchange of Secured Notes.............................. 124 SECTION 10.07. Trustee To Sign Supplemental Indentures......................... 124 SECTION 10.08. Payment for Consent.................. 126 ARTICLE XI COLLATERAL AND SECURITY; GUARANTEES; LETTER OF CREDIT SECTION 11.01. Security Agreements.................. 126 SECTION 11.02. Recording and Opinions............... 127 SECTION 11.03. Further Assurances and Security...... 128 SECTION 11.04. Possession and Use of Collateral..... 129 SECTION 11.05. Certificates of the Issuer........... 129 SECTION 11.06. Authorization of Actions To Be Taken by the Trustee Under the Security Agreements......................... 129 Contents p. 5 PAGE SECTION 11.07. Authorization of Receipt of Funds by the Trustee Under the Security Agreements......................... 130 SECTION 11.08. Guarantees; Letter of Credit......... 130 ARTICLE XII MISCELLANEOUS SECTION 12.01. Trust Indenture Act Controls......... 130 SECTION 12.02. Notices.............................. 130 SECTION 12.03. Communication By Holders of Secured Notes With Other Holders of Secured Notes.............................. 132 SECTION 12.04. Certificate and Opinion as to Conditions Precedent............... 132 SECTION 12.05. Statements Required in a Certificate or Opinion......................... 134 SECTION 12.06. Acts of Holders...................... 134 SECTION 12.07. Rules by Trustee and Agents.......... 136 SECTION 12.08. No Personal Liability of Directors, Officers, Employees and Stockholders....................... 136 SECTION 12.09. Governing Law........................ 136 SECTION 12.10. Agent for Service; Submission to Jurisdiction; Waiver of Immunities......................... 136 SECTION 12.11. No Adverse Interpretation of Other Agreements......................... 138 SECTION 12.12. Successors........................... 138 SECTION 12.13. Severability......................... 138 SECTION 12.14. Counterpart Originals................ 138 SECTION 12.15. Table of Contents, Headings, etc. ... 138 SECTION 12.16. Judgment Currency.................... 138 ARTICLE XIII PRIDE GUARANTEE SECTION 13.01. Pride Guarantee...................... 139 SECTION 13.02. Limitation on Liability.............. 142 SECTION 13.03. Successors and Assigns............... 142 SECTION 13.04. No Waiver............................ 143 SECTION 13.05. Modification......................... 143 SECTION 13.06. Execution of Supplemental Indenture for Future Subsidiary Guarantors... 144 SECTION 13.07. Nonimpairment........................ 144 SECTION 13.08. Pride Covenants...................... 145 Contents p. 6 EXHIBITS Exhibit A..................... Form of Secured Note Exhibit B-1................... Form of Certificate for Exchange or Registration of Transfer from U.S. Global Note to Regulation S Global Note Exhibit B-2................... Form of Certificate for Exchange or Registration of Transfer from Regulation S Global Note to U.S. Global Note Exhibit B-3................... Form of Certificate for Exchange or Registration of Transfer of Definitive Notes Exhibit B-4................... Form of Certificate for Exchange or Registration of Transfer from U.S. Global Note or Regulation S Permanent Global Note to Definitive Note Exhibit C..................... Form of Certificate From Acquiring Institutional Accredited Investor Exhibit D..................... Form of Subsidiary Guarantee Exhibit E..................... Form of Letter of Credit Schedule A.................... MARAD Documents Schedule B.................... Mitsubishi Loan Agreements Schedule C.................... Mitsubishi Loan Collateral Agreements INDENTURE, dated as of November 1, 1999, among AMETHYST FINANCIAL COMPANY LIMITED, a British Virgin Islands limited liability company (the "Issuer"), PRIDE INTERNATIONAL, INC., a Louisiana corporation ("Pride"), MARITIMA PETROLEO e ENGENHARIA LTDA., a Brazilian company ("Maritima"), and WILMINGTON TRUST COMPANY, as trustee (the "Trustee"). RECITALS The Issuer has duly authorized the creation and issuance of its 11 3/4% Senior Secured Notes due 2001 (the "Initial Secured Notes") of the tenor and amount hereinafter set forth; and to provide therefor and for, if and when issued as further evidence of the Issuer's indebtedness and in substitution for the Initial Secured Notes pursuant to this Indenture and the Registration Rights Agreement (as defined herein), the Issuer's 11 3/4% Senior Secured Notes due 2001 (the "Exchange Secured Notes", and together with the Initial Secured Notes, the "Secured Notes"), the Issuer has duly authorized the execution and delivery of this Indenture. All things necessary to make the Secured Notes, when executed by the Issuer and authenticated and delivered by the Trustee hereunder and duly issued by the Issuer, the valid obligations of the Issuer, and to make this Indenture a valid instrument of the Issuer, Pride and Maritima, in accordance with their respective terms, have been done. NOW, THEREFORE, THIS INDENTURE WITNESSETH, that, for and in consideration of the premises and the purchase of the Initial Secured Notes by the Holders thereof, it is mutually covenanted and agreed, for the equal and 2 proportionate benefit of all Holders of the Secured Notes, as follows: ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. DEFINITIONS. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: 3 "ACQUIRED INDEBTEDNESS" means, with respect to any specified Person: (1) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, whether or not such Indebtedness is incurred in connection with, or in contemplation of, such other Person merging with or into, or becoming a Subsidiary of such specified Person; and (2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "ADDITIONAL ASSETS" means (i) any property or assets (other than Indebtedness and Capital Stock) in a Related Business; (ii) the Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Issuer or another Restricted Subsidiary or (iii) Capital Stock constituting a minority interest in any Person that at such time is a Restricted Subsidiary; PROVIDED, HOWEVER, that any such Restricted Subsidiary described in clause (ii) or (iii) above is primarily engaged in a Related Business. Proceeds of insurance arising from damage for an asset shall be deemed to have been invested in Additional Assets to the extent of the cost of such repairs made to such asset. "ADJUSTED NET ASSETS" of a Subsidiary Guarantor at any date means the amount by which the fair value of the assets and property of such Subsidiary Guarantor exceeds the total amount of liabilities, including, without limitation, contingent liabilities (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date), but excluding liabilities under its Subsidiary Guarantee, of such Subsidiary Guarantor at such date. "AFFILIATE" of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of Voting Stock, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Affiliate" shall also mean any beneficial owner of Capital Stock representing 5% or more of the total voting power of the Voting Stock (on a fully diluted basis) of such a Person or of rights or warrants to purchase such Capital Stock (whether or not 4 currently exercisable) and any Person who would be an Affiliate of any such beneficial owner pursuant to the first sentence of this definition. "AGENT" means any Registrar, Paying Agent or coregistrar. "APPLICABLE PROCEDURES" means, with respect to any transfer or exchange of beneficial interests in a Global Note, the rules and procedures of the Depository and the Trustee that apply to such transfer and exchange. "ASSET SALE" means any direct or indirect sale, capital lease, transfer or other disposition (or series of related sales, capital leases, transfers or dispositions) by the Issuer or any Restricted Subsidiary, including any disposition by means of a merger, consolidation or similar transaction (each referred to for the purposes of this definition as a "disposition") in one transaction or a series of related transactions, of (i) any shares of Capital Stock of a Restricted Subsidiary (other than directors' qualifying shares or shares required by applicable law to be held by a Person other than the Issuer or a Restricted Subsidiary), (ii) any drill ship or drilling rig or all or substantially all the assets of any division or line of business of the Issuer or any Restricted Subsidiary or (iii) any other assets of the Issuer or any Restricted Subsidiary outside of the ordinary course of business of the Issuer or such Restricted Subsidiary (other than, in the case of (i), (ii) and (iii) above, (u) a disposition by a Restricted Subsidiary to the Issuer or by the Issuer or a Restricted Subsidiary to a Wholly Owned Restricted Subsidiary, (v) for purposes of the covenant described under Section 4.15 hereof only, a disposition that constitutes a Restricted Payment permitted by the covenant described under Section 4.11 hereof, (w) Asset Swaps permitted under Section 4.16 hereof, (x) dispositions of Incidental Assets, (y) dispositions of Temporary Cash Investments and (z) a disposition of assets with a fair market value of less than $100,000). "ASSET SWAP" means a substantially concurrent purchase and sale, or exchange, of assets constituting Additional Assets described in clause (i) of the definition thereof between the Issuer or any Restricted Subsidiary and another Person or group of Persons; PROVIDED, HOWEVER, that the cash and other assets to be received by the Issuer or such Restricted Subsidiary which do not constitute Additional Assets do not constitute more than 25% of the total consideration to be received by the Issuer or such Restricted Subsidiary in such Asset Swap. 5 "ATTRIBUTABLE INDEBTEDNESS," when used with respect to any Sale/Leaseback Transaction, means, as at the time of determination, the present value (discounted at the rate set forth or implicit in the terms of the lease included in such transaction) of the total obligations of the lessee for rental payments (other than amounts required to be paid on account of property taxes, maintenance, repairs, insurance, assessments, utilities, operating and labor costs and other items which do not constitute payments for property rights) during the remaining term of the lease included in such Sale/Leaseback Transaction (including any period for which such lease has been extended). "AVERAGE LIFE" means, as of the date of determination, with respect to any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum of the products of numbers of years from the date of determination to the dates of each successive scheduled principal payment of such Indebtedness or redemption or similar payment with respect to such Preferred Stock multiplied by the amount of such payment by (ii) the sum of all such payments. "BOARD OF DIRECTORS" means the Board of Directors of a Person or any committee thereof duly authorized to act on behalf of such Board. "BOARD RESOLUTION" means a copy of a resolution certified by a Secretary or Assistant Secretary of a Person to have been duly adopted by the Board of Directors thereof and to be in full force and effect on the date of such certification and delivered to the Trustee. "BUSINESS DAY" means each day which is not a Legal Holiday. "CAPITALIZED LEASE OBLIGATION" of any Person means any obligation of such Person to pay rent or other amounts under a lease of property, real or person, that is required to be capitalized for financial reporting purposes in accordance with generally accepted accounting principles and the amount of such obligation shall be the capitalized amount thereof determined in accordance with GAAP. "CAPITAL STOCK" means, with respect to any Person, any and all shares, interests, rights to purchase, warrants or options (whether or not currently exercisable), participations or other equivalents of or interests in (however designated) the equity (which includes, but is not limited to, common stock, preferred stock and partnership and joint venture interests) of such Person (excluding any 6 debt securities that are convertible into, or exchangeable for, such equity). "CEDEL" means Cedel Bank, societe anonyme (or any successor securities clearing agency). "CERTIFICATED SECURED NOTES" means Secured Notes that are substantially in the form of the Secured Note attached hereto as Exhibit A that do not include the information or text called for by footnotes 1 and 4 thereto. "CODE" means the Internal Revenue Code of 1986, as amended. "COLLATERAL" shall include, in each case as pledged and assigned to the Collateral Agent, the Trustee or the Issuer, as applicable, pursuant to the Security Agreements, (1) an undivided 53% participation interest in the Issuer Loans, all of the Issuer's right, title and interest in and to (a) the Mitsubishi Documents, (b) the security for the Issuer Loans provided for in the Mitsubishi Loan Collateral Agreements, (c) all cash held by the Collateral Agent and the Trustee pursuant to the Indenture or the Security Agreements and the Reserve Account and all Reserve Account Property held pursuant to the Reserve Account Agreement (including any cash collateral deposited therein by the Issuer); and (2) all proceeds of any of the foregoing, including from any policies and contracts of insurance taken out from time to time in respect each of the Mortgaged Rigs. "COLLATERAL AGENT" means Wilmington Trust Company, as collateral agent under the Issuer Security Agreement until a successor replaces it in accordance with the applicable provisions of the Issuer Security Agreement and thereafter means the successor serving thereunder. "COMMON STOCK" means Capital Stock other than Preferred Stock. "CONSOLIDATED EBITDA COVERAGE RATIO" as of any date of determination means the ratio of (a) the aggregate amount of EBITDA for the period of the most recent four consecutive fiscal quarters ending at least 45 days prior to the date of such determination to (b) Consolidated Interest Expense for such four fiscal quarters; PROVIDED, HOWEVER, that: (a) if the Issuer or any Restricted Subsidiary has Incurred any Indebtedness since the beginning of such period that remains outstanding or if the transaction 7 giving rise to the need to calculate the Consolidated EBITDA Coverage Ratio is an issuance of Indebtedness, or both, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been issued on the first day of such period and the discharge of any other Indebtedness repaid, repurchased, defeased or otherwise discharged with the proceeds of such new Indebtedness as if such discharge had occurred on the first day of such period; (b) if since the beginning of such period the Issuer or any Restricted Subsidiary shall have made any asset disposition, the EBITDA for such period shall be reduced by an amount equal to the EBITDA (if positive) directly attributable to the assets which are the subject of such asset disposition for such period, or increased by an amount equal to the EBITDA (if negative), directly attributable thereto for such period, and Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Indebtedness of the Issuer or any Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to the Issuer and its continuing Subsidiaries in connection with such asset dispositions for such period (or, if the Capital Stock of any Restricted Subsidiary is sold, the Consolidated Interest Expense for such period directly attributable to the Indebtedness of such Restricted Subsidiary to the extent the Issuer and its continuing Subsidiaries are no longer liable for such Indebtedness after such sale); (c) if since the beginning of such period the Issuer or any Restricted Subsidiary (by merger or otherwise) shall have made an Investment in any Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary) or an acquisition of assets, including any acquisition of assets occurring in connection with a transaction causing a calculation to be made hereunder, which constitutes all or substantially all of an operating unit of a business (which shall include the acquisition or construction of a vessel or drilling rig, provided the Issuer has paid 75% or more of the cost thereof and such vessel or drilling rig is reasonably expected to be delivered within 90 days), EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto (including the issuance of any Indebtedness) as if such Investment or 8 acquisition occurred on the first day of such period; and (d) if since the beginning of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Issuer or any Restricted Subsidiary since the beginning of such period) shall have made any asset disposition or any Investment that would have required an adjustment pursuant to clause (2) or (3) above if made by the Issuer or a Restricted Subsidiary during such period, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto as if such asset disposition or Investment occurred on the first day of such period. For purposes of this definition, whenever pro forma effect is to be given to an acquisition of assets, the amount of income or earnings relating thereto, and the amount of Consolidated Interest Expense associated with any Indebtedness issued in connection therewith, the pro forma calculations shall be determined in good faith by a responsible financial or accounting officer of the Issuer. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest of such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Interest Rate Protection Agreement applicable to such Indebtedness if such Interest Rate Protection Agreement has a remaining term in excess of 12 months). For purposes of this definition, in the case of the acquisition since the beginning of such period of a drilling rig or drill ship (or of a Restricted Subsidiary owning same) by the Issuer or by a Restricted Subsidiary pursuant to a binding purchase agreement or the delivery during of such period of a drilling rig or drill ship to the Issuer or a Restricted Subsidiary pursuant to a binding construction contract, which drilling rig or drill ship has been subject for at least one full fiscal quarter to a binding drilling contract constituting a Qualifying Contract, then, for purposes of making the pro forma calculations provided for in the first sentence of the preceding paragraph, the financial or accounting officer of the Issuer shall give pro forma effect to the earnings (losses) of such drilling rig or drill ship as if such drilling rig or drill ship were acquired on the first day of such period, by basing such earnings (losses) on the annualized (x) historical revenues actually earned from such Qualifying Contract and (y) actual expenses related thereto, 9 in each case for each quarter during such period in which the Qualifying Contract is in effect. "CONSOLIDATED INTEREST EXPENSE" means, for any period, the total interest expense of the Issuer and its consolidated Restricted Subsidiaries, plus, to the extent not included in such interest expense: (i) interest expense attributable to Capitalized Lease Obligations; (ii) amortization of debt discount and debt issuance cost; (iii) capitalized interest; (iv) non-cash interest payments; (v) commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing; (vi) net costs under Interest Rate Protection Agreements (including amortization of fees); (vii) dividends in respect of any Redeemable Stock held by Persons other than the Issuer or a Restricted Subsidiary; (viii) interest expense attributable to deferred payment obligations; and (ix) interest expense on Indebtedness of another Person to the extent that such Indebtedness is guaranteed by the Issuer or a Restricted Subsidiary. "CONSOLIDATED NET INCOME" means, for any period, the net income of the Issuer and its consolidated subsidiaries; provided, however, that there shall not be included in such Consolidated Net Income: (a) any net income of any Person if such Person is not a Restricted Subsidiary, except that (1) the Issuer's equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Issuer or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution to a Restricted Subsidiary, to the limitations contained in clause (c) below) and 10 (2) the Issuer's equity in a net loss of any such Person for such period shall be included in determining such Consolidated Net Income; (b) any net income of any Person acquired by the Issuer or a Restricted Subsidiary in a pooling of interests transaction for any period prior to the date of such acquisition; (c) any net income of any Restricted Subsidiary to the extent such Restricted Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Restricted Subsidiary, directly or indirectly, to the Issuer, except that (1) the net income of a Restricted Subsidiary shall be included to the extent such net income could be paid to the Issuer or a Restricted Subsidiary by loans, advances, intercompany transfers, principal repayments or otherwise; (2) the Issuer's equity in the net income of any such Restricted Subsidiary for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Restricted Subsidiary during such period to the Issuer or another Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution to another Restricted Subsidiary, to the limitation contained in this clause) and (3) the Issuer's equity in a net loss of any such Restricted Subsidiary for such period shall be included in determining such Consolidated Net Income; (d) any gain (but not loss) realized upon the sale or other disposition of any property, plant or equipment of the Issuer or its consolidated subsidiaries (including pursuant to any sale-and- leaseback arrangement) which is not sold or otherwise disposed of in the ordinary course of business and any gain (but not loss) realized upon the sale or other disposition of any Capital Stock of any Person; (e) extraordinary, unusual or nonrecurring charges; and (f) the cumulative effect of a change in accounting principles. "CONSOLIDATED NET WORTH" of a Person means the consolidated stockholders' equity of such Person and its Subsidiaries, as determined in accordance with GAAP. 11 "CORPORATE TRUST OFFICE OF THE TRUSTEE" shall be at the address of the Trustee specified in Section 12.02 hereof or such other address as to which the Trustee may give notice to the Issuer. "DEFAULT" means any act, event or condition which is, or after notice or passage of time or both would be, an Event of Default. "DEPOSITARY" means, with respect to the Secured Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03 hereof as the Depositary with respect to the Secured Notes, until a successor shall have been appointed and become such Depositary pursuant to the applicable provision of this Indenture, and thereafter, "Depositary" shall mean or include such successor. "EBITDA" for any period means the Consolidated Net Income for such period, plus the following (but without duplication) to the extent deducted in calculating such Consolidated Net Income for such period: (a) income tax expense, (b) Consolidated Interest Expense, (c) depreciation expense and (d) amortization expense. "EUROCLEAR" means the Euroclear System (or any successor securities clearing agency). "EVENT OF LOSS" is defined to mean any of the following events: (a) the actual loss of a Mortgaged Rig (b) the agreed, arranged or constructive total loss of a Mortgaged Rig, (c) requisition for title or other compulsory acquisition of title of a Mortgaged Rig by any governmental or other competent authority, agency or instrumentality otherwise than by requisition for hire, or (d) capture, seizure, arrest, detention or confiscation of a Mortgaged Rig by any government or Person acting or purporting to act on behalf of any government unless such Mortgaged Rig is released and restored to the Mortgaged Rig Owner from such capture, arrest or detention within six months after the occurrence thereof or such other period as may be specified in the insurance policies taken out or entered into in respect of the Mortgaged Rig. "EVENT OF LOSS PROCEEDS" means all compensation, damages and other payments (including insurance proceeds) received by any Mortgaged Rig Owner, the Issuer, any Restricted Subsidiary, the security agent under the Mitsubishi Loan Collateral Documents, the Collateral Agent or the Trustee, jointly or severally, from any Person, 12 including any governmental authority, with respect to or in connection with an Event of Loss. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "EXCHANGE GLOBAL NOTE" means one or more Global Notes that do not and are not required to bear the Private Placement Legend. "EXCHANGE OFFER" means the offer that may be made by the Issuer pursuant to the Registration Rights Agreement to exchange Exchange Secured Notes for Initial Secured Notes. "EXCHANGE OFFER REGISTRATION STATEMENT" has the meaning set forth in the Registration Rights Agreement. "EXCHANGE SECURED NOTES" has the meaning set forth in the Recitals to this Indenture and more particularly means any Secured Notes authenticated and delivered under this Indenture pursuant to the Exchange Offer. "EXCHANGEABLE STOCK" means any Capital Stock which is exchangeable or convertible into another security (other than Capital Stock of the Issuer which is neither Exchangeable Stock nor Redeemable Stock). "GAAP" means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States, as in effect from time to time. "GLOBAL NOTE" means, individually and collectively, the Regulation S Temporary Global Note, the Regulation S Permanent Note, the U.S. Global Note and the Exchange Global Note. "GUARANTEE" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any other Person and any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation of such other Person (whether arising by virtue of partnership arrangements, or by agreements to keep well, 13 to purchase assets, goods, securities or services, to take or pay or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); PROVIDED, HOWEVER, that the term "guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "guarantee" used as a verb has a corresponding meaning. The term "guarantor" shall mean any Person guaranteeing any obligation. "GUARANTEES" means, collectively, the Pride Guarantee and any Subsidiary Guarantee. "GUARANTOR" means, collectively, Pride and any Subsidiary Guarantor. "HEDGING OBLIGATIONS" of any Person means the net obligation (not the notional amount) of such Person pursuant to any interest rate swap agreement, foreign currency exchange agreement, interest rate collar agreement, option or futures contract or other similar agreement or arrangement relating to interest rates or foreign exchange rates. "HOLDER" or "NOTEHOLDER" means the Person in whose name a Secured Note is registered on the Registrar's books. "INCIDENTAL ASSET" is defined to mean any equipment, outfit, furniture, furnishings, appliances, spare or replacement parts or stores owned by the Issuer or a Restricted Subsidiary that have become obsolete or unfit for use or no longer useful, necessary or profitable in the conduct of the business of the Issuer or such Restricted Subsidiary, as the case may be. In no event shall the term "Incidental Asset" include a drilling rig or a drill ship or a Mortgaged Rig. "INCUR" means issue, assume, guarantee, incur or otherwise become liable for, PROVIDED, HOWEVER, that any Indebtedness or Capital Stock of a Person existing at the time such Person becomes a Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when used as a noun shall have a correlative meaning. 14 "INDEBTEDNESS" of any Person at any date means, without duplication: (a) all indebtedness of such Person for borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof); (b) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (c) all obligations of such Person in respect of letters of credit or other similar instruments (or reimbursement obligations with respect thereto), other than standby letters of credit and performance bonds issued by such Person in the ordinary course of business, to the extent not drawn or, to the extent drawn, if such drawing is reimbursed not later than the third Business Day following demand for reimbursement; (d) all obligations of such Person to pay the deferred and unpaid purchase price of property or services, except trade payables and accrued expenses incurred in the ordinary course of business; (e) all Capitalized Lease Obligations of such Person; (f) all Indebtedness of others secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person, to the extent of the fair market value of all the assets of such Person subject to such Lien; (g) all Indebtedness of others guaranteed by such Person to the extent of such guarantee; (h) Redeemable Stock; and (i) all Hedging Obligations of such Person. For purposes of clause (h) of the preceding sentence, Redeemable Stock shall be valued at the maximum fixed redemption, repayment or repurchase price, which shall be calculated in accordance with the terms of such Redeemable Stock as if such Redeemable Stock were repurchased on any date on which Indebtedness shall be required to be determined pursuant to this Indenture; PROVIDED, HOWEVER, that if such Redeemable Stock is not then permitted to be redeemed, repaid or repurchased, the redemption, repayment or repurchase price shall be the book value of such 15 Redeemable Stock. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability of any guarantees at such date; PROVIDED that for purposes of calculating the amount of any non-interest bearing or other discount security, such Indebtedness shall be deemed to be the principal amount thereof that would be shown on the balance sheet of the issuer thereof dated such date prepared in accordance with GAAP but that such security shall be deemed to have been Incurred only on the date of the original issuance thereof. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date. "INDENTURE" means this Indenture, as amended or supplemented from time to time by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, including for all purposes of this Indenture and any supplemental indenture the provisions of the Trust Indenture Act that are deemed to be a part of and govern this Indenture and any supplemental indenture. "INDIRECT PARTICIPANT" means a Person who holds an interest through a Participant. "INITIAL PURCHASER" means Donaldson, Lufkin & Jenrette Securities Corporation. "INITIAL SECURED NOTES" has the meaning set forth in the Recitals to this Indenture and more particularly means any of the Secured Notes authenticated and delivered under this Indenture other than Exchange Secured Notes. "INSTITUTIONAL ACCREDITED INVESTOR" means an entity which is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "INTEREST RATE PROTECTION AGREEMENT" means any interest rate swap agreement, interest rate cap agreement or other financial agreement or arrangement designed to protect the Issuer or any Restricted Subsidiary against fluctuations in interest rates. "INVESTMENT" in any Person means any direct or indirect advance, loan (other than advances to customers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of the lender) or other extensions of credit (including by way of guarantee or 16 similar arrangement) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by such Person. For purposes of the definition of "Unrestricted Subsidiary", the definition of "Restricted Payment" and Section 4.11, (i) "Investment" shall include the portion (proportionate to the Issuer's equity interest in such Subsidiary) of the fair market value of the net assets of any Subsidiary of the Issuer at the time that such Subsidiary is designated an Unrestricted Subsidiary; PROVIDED, HOWEVER, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Issuer shall be deemed to continue to have a permanent "Investment" in such Subsidiary at the time of such redesignation equal to (x) the amount of such Investment immediately prior to such redesignation less (y) the portion (proportionate to the Issuer's equity interest in such Subsidiary) of the fair market value of the net assets of such Subsidiary at the time of such redesignation; and (ii) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer, in each case as determined in good faith by the Issuer's Board of Directors. "INVESTMENT GRADE RATING" means BBB- or above, in the case of S&P (or its equivalent under any successor rating categories of S&P), Baa3 or above, in the case of Moody's (or its equivalent under any successor rating categories of Moody's), and the equivalent in respect of the ratings categories of any Rating Agencies substituted for S&P or Moody's. "ISSUE DATE" means the date on which the Secured Notes are originally issued. "ISSUER" means the Person named as such in the preamble of this Indenture unless and until a successor replaces it pursuant to the applicable provisions hereof and thereafter means such successor. "ISSUER LOAN" means loans made under the Mitsubishi Loan Documents purchased by the Issuer. "ISSUER ORDER" means a written order or request signed in the name of an Officer of the Issuer and delivered to the Trustee. "ISSUER SECURITY AGREEMENT" means the Senior Secured Note Security and Pledge Agreement of even date 17 herewith among the Issuer, the Trustee and the Collateral Agent. "LEGAL HOLIDAY" means a Saturday, a Sunday or other day on which commercial banks in The City of New York, Brazil, the Bahamas or the British Virgin Islands or in the city of the corporate trust office of the Trustee are authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday, payment may be made on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. "LETTER OF CREDIT" means the standby irrevocable letter of credit issued by the Letter of Credit Provider to the Trustee in substantially the form of Exhibit E. "LETTER OF CREDIT PROVIDER" means Republic National Bank of New York, together with its successors. "LIEN" means any mortgage, pledge, hypothecation, charge, assignment, deposit arrangement, encumbrance, security interest, lien (statutory or other), or preference, priority or other security or similar agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any agreement to give or grant a Lien or any lease, condition sale or other title retention agreement having substantially the same economic effect as any of the foregoing). For the purposes of this Indenture, the Issuer or any of its Subsidiaries shall be deemed to own subject to a Lien any asset which the Issuer or such Subsidiary has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, Capitalized Lease Obligation or other title retention agreement relating to such asset. "MARAD DOCUMENTS" means the documents listed on Schedule A hereto, as the same may be amended or modified or refinanced from time to time. "MARITIMA" means Maritima Petroleo e Engenharia Ltda. "MITSUBISHI DOCUMENTS" means, collectively, the Mitsubishi Loan Agreements and the Mitsubishi Loan Collateral Documents. "MITSUBISHI LOAN AGREEMENTS" means the documents listed on Schedule B hereto, as the same may be amended or modified from time to time. 18 "MITSUBISHI LOAN COLLATERAL DOCUMENTS" means the documents listed on Schedule C hereto, as the same may be amended or modified from time to time. "MATURITY" means the date on which the principal of a Secured Note becomes due and payable as provided therein or in this Indenture, whether at the Stated Maturity or the Change of Control Payment Date or by declaration of acceleration, call for redemption or otherwise. "MOODY'S" means Moody's Investors Service, Inc., or if Moody's Investors Services, Inc. shall cease rating the specified debt securities and such ratings business with respect thereto shall have been transferred to a successor Person, such successor Person. "MORTGAGED RIG" means any Rig subject to the Lien of the Security Documents. "MORTGAGED RIG OWNER" means any owner of a Mortgaged Rig. The "Mortgaged Rig Owners" as of the date of this Indenture are Petrodrill Six Limited and Petrodrill Seven Limited. "NET AVAILABLE CASH" from an Asset Sale means cash payments or Temporary Cash Equivalents received therefrom (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise and proceeds from the sale or other disposition of any securities received as consideration, but only as and when received, but excluding any other consideration received in the form of assumption by the acquiring Person of Indebtedness or other obligations relating to such properties or assets or received in any other noncash form), in each case net of (i) all legal, title and recording tax expenses, commissions and other fees and expenses incurred, and all federal, state, provincial, foreign and local taxes required to be accrued as a liability under GAAP, as a consequence of such Asset Sale, (ii) all payments made on any Indebtedness which is secured by any assets subject to such Asset Sale, in accordance with the terms of any Lien upon or other security agreement of any kind with respect to such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Sale, or by applicable law, be repaid out of the proceeds from such Asset Sale, (iii) all distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures as a result of such Asset Sale and (iv) the deduction of appropriate amounts provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the 19 property or other assets disposed in such Asset Sale and retained by the Issuer or any Restricted Subsidiary after such Asset Sale. "NET CASH PROCEEDS" means, with respect to any issuance or sale of Capital Stock, the cash proceeds of such issuance or sale net of attorneys' fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. "NON-CONVERTIBLE CAPITAL STOCK" means, with respect to any Person, any non-convertible Capital Stock of such Person and any Capital Stock of such Person convertible solely into non-convertible common stock of such person; PROVIDED, HOWEVER, that Non-Convertible Capital Stock shall not include any Redeemable Stock or Exchangeable Stock. "OBLIGATIONS" means, with respect to any Indebtedness, any obligation thereunder, including, without limitation, principal, premium and interest (including post petition interest thereon and, with respect to the Secured Notes, Special Interest and Additional Amounts), penalties, fees, costs, expenses, indemnifications, reimbursements, damages and other liabilities. "OBLIGORS" means the Issuer, Pride and the Subsidiary Guarantors, if any, collectively; "Obligor" means the Issuer, Pride or any Subsidiary Guarantor. "OFFERING MEMORANDUM" means the Offering Memorandum, dated October 28, 1999, relating to the Issuer's offering and placement of the Initial Secured Notes. "OFFERING" means the Offering of the Initial Secured Notes by the Issuer. "OFFICER" means, with respect to any Person, the Chairman of the Board, a Vice Chairman of the Board, the Chief Executive Officer, the President, the Chief Financial Officer, the Chief Accounting Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary, an Assistant Secretary or any Vice President of such person. "OFFICERS' CERTIFICATE" means a certificate signed by the Chairman of the Board, a Vice Chairman of the Board, the President, the Chief Executive Officer or a Vice President, and by the Chief Financial Officer, the Chief Accounting Officer, the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of the Issuer or a 20 Subsidiary and delivered to the Trustee, which shall comply with this Indenture. "OPINION OF COUNSEL" means an opinion from legal counsel who is reasonably acceptable to the Trustee that meets the requirements of Sections 12.04 and 12.05 hereof. The counsel may be an employee of or counsel to the Issuer, any Subsidiary, Pride, Maritima or the Trustee. "PARI PASSU INDEBTEDNESS" means any Indebtedness of the Issuer, whether outstanding on the date on which the Secured Notes are originally issued or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall be subordinated in right of payment to the Secured Notes. "PARTICIPANT" means, with respect to DTC, Euroclear or Cedel, a Person who has an account with DTC, Euroclear or Cedel, respectively (and, with respect to DTC, shall include Euroclear and Cedel). "PERMITTED HOLDER" means any Shareholder or any Affiliate of a Shareholder. "PERMITTED INVESTMENTS" means: (a) certificates of deposit, bankers acceptances, time deposits, Eurocurrency deposits and similar types of Investments routinely offered by commercial banks with final maturities of one year or less issued by commercial banks having capital and surplus in excess of $100,000,000; (b) commercial paper issued by any corporation, if such commercial paper has credit ratings of at least "A-1" by S&P and at least "P-1" by Moody's; (c) U.S. Government Obligations with a maturity of three years or less; (d) repurchase obligations of instruments of the type described in clause (c); (e) shares of money market mutual or similar funds having assets in excess of $100,000,000; (f) payroll advances in the ordinary course of business; 21 (g) other advances and loans to officers and employees of the Issuer or any Restricted Subsidiary, so long as the aggregate principal amount of such advances and loans does not exceed $1,000,000 at any one time outstanding; (h) Investments in any Person in the form of a capital contribution of the Issuer's Common Stock; (i) Investments made by the Issuer in its Restricted Subsidiaries (or any Person that will be a Restricted Subsidiary as a result of such Investment) or by a Restricted Subsidiary in the Issuer or in one or more Restricted Subsidiaries (or any Person that will be a Restricted Subsidiary as a result of such Investment); (j) Investments in stock, obligations or securities received in settlement of debts owing to the Issuer or any Restricted Subsidiary as a result of bankruptcy or insolvency proceedings or upon the foreclosure, perfection or enforcement of any Lien in favor of the Issuer or any Restricted Subsidiary, in each case as to debt owing to the Issuer or any Restricted Subsidiary that arose in the ordinary course of business of the Issuer or any such Restricted Subsidiary; (k) Investments made in exchange for Indebtedness permitted by clause (b)(iv) of Section 4.09; (l) Investments in a Person other than a Restricted Subsidiary for the purpose of financing the construction or upgrade of new drilling rigs, drillships or similar vessels and related equipment, in an aggregate amount not to exceed at any time outstanding $100,000,000; PROVIDED, HOWEVER, that at the time of such Investment, the Issuer or such Person has entered into a Qualifying Contract with respect thereto; and (m) Investment represented by that portion of the proceeds from Asset Sales that is not required to be cash or Temporary Cash Equivalents by the covenant in Section 4.15 hereof. "PERMITTED LIENS" means, with respect to any Person, (a) pledges or deposits by such Person under worker's compensation laws, unemployment insurance laws or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of 22 Indebtedness) or leases to which such Person is a party, or deposits to secure public or statutory obligations of such Person or deposits of cash or United States government bonds to secure surety or appeal bonds to which such Person is a party, or deposits as security for contested taxes or import duties or for the payment of rent, in each case Incurred in the ordinary course of business; (b) Liens imposed by law, such as maritime, carriers', warehousemen's and mechanics' Liens, in each case for sums not yet due or being contested in good faith by appropriate proceedings or other Liens arising out of judgments or awards against such Person with respect to which such Person shall then be proceeding with an appeal or other proceedings for review; (c) Liens for property taxes not yet subject to penalties for non-payment or which are being contested in good faith and by appropriate proceedings; (d) Liens in favor of issuers of surety bonds or letters of credit issued pursuant to the request of and for the account of such Person in the ordinary course of its business; PROVIDED, HOWEVER, that such letters of credit do not constitute Indebtedness; (e) minor survey exceptions, minor encumbrances, easements or reservations of, or rights of others for, licenses, rights-of-way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real property or Liens incidental to the conduct of the business of such Person or to the ownership of its properties which were not Incurred in connection with Indebtedness and which do not in the aggregate materially adversely affect the value of said properties or materially impair their use in the operation of the business of such Person; (f) Liens securing Indebtedness Incurred to finance the construction, equipping, mobilization, transportation, installation, purchase or lease of, or repairs, upgrades, improvements or additions to, property of such Person; PROVIDED, HOWEVER, that the Lien may not extend to any property owned by such Person or any of its Subsidiaries at the time the Lien is Incurred other than the property so constructed, equipped, mobilized, transported, installed, purchased, leased, repaired, upgraded, improved or added to, and the Indebtedness (other than any interest thereon) secured by the Lien may not be Incurred more than 180 days after the later of the purchase, acquisition, completion of construction, equipping, mobilization, transportation, installation, repair, improvement, addition or commencement of full operation of the property subject to the Lien; (g) Liens existing on the Issue Date; (h) Liens on property or shares of Capital Stock of another Person at the time such other Person becomes a Subsidiary of such Person; PROVIDED, HOWEVER, that such Liens are not created, incurred or assumed in connection with, or in contemplation of, such 23 other Person becoming such a Subsidiary; PROVIDED FURTHER, HOWEVER, that such Lien may not extend to any other property owned by such Person or any of its Subsidiaries; (i) Liens on property at the time such Person or any of its Subsidiaries acquires the property, including any acquisition by means of a merger or consolidation with or into such Person or a Subsidiary of such Person; PROVIDED, HOWEVER, that such Liens are not created, incurred or assumed in connection with, or in contemplation of, such acquisition; PROVIDED FURTHER, HOWEVER, that the Liens may not extend to any other property owned by such Person or any of its Subsidiaries; (j) Liens securing Indebtedness or other obligations of a Subsidiary of such Person owing to such Person or a wholly owned Subsidiary of such Person; (k) Liens securing Hedging Obligations so long as such Hedging Obligations relate to Indebtedness that is, and is permitted to be under this Indenture, secured by a Lien on the same property securing such Hedging Obligations; (l) any charter or Qualifying Contract; (m) judgment Liens not giving rise to an Event of Default; (n) rights of off-set of banks and other Persons; (o) deposits made to obtain insurance; (p) Liens or equitable encumbrances deemed to exist by reason of a negative pledge or other arrangements to refrain from permitting Liens or fraudulent transfer law; (q) Liens to secure any Refinancing (or successive Refinancings) as a whole, or in part, of any Indebtedness secured by any Lien referred to in the foregoing clauses (f), (g), (h) and (i); PROVIDED, HOWEVER, that (x) such new Lien shall be limited to all or part of the same property that secured the original Lien (plus improvements to or on such property); and (y) the Indebtedness secured by such Lien at such time is not increased to any amount greater than the sum of (A) the outstanding principal amount or, if greater, committed amount of the Indebtedness described under clauses (f), (g), (h) and (i) at the time the original Lien became a Permitted Lien and (B) an amount necessary to pay any fees and expenses, including premiums, related to such refinancing, refunding, extension, renewal or replacement; and (r) Liens created under the MARAD Documents or the Mitsubishi Documents. Notwithstanding the foregoing, "Permitted Liens" will not include any Lien described in clauses (f), (h) or (i) above to the extent such Lien applies to any Additional Assets acquired directly or indirectly from Net Available Cash pursuant to Section 4.15. For purposes of this definition, the term "Indebtedness" shall be deemed to include interest on such Indebtedness. "PERSON" means any individual, corporation, limited liability company, limited or general partnership, joint venture, association, joint stock company, trust, 24 unincorporated organization, government or any agency or political subdivision thereof or any other entity. "PREFERRED STOCK", as applied to the Capital Stock of any Person, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of Capital Stock of any other class of such Person. "PRIDE" means Pride International, Inc. and its successors. "PRIDE GUARANTEE" means the guarantee of the Secured Notes by Pride pursuant to the provisions described in Article XIII hereof. "PUBLIC EQUITY OFFERING" means an underwritten primary public offering of common stock of the Issuer or a Shareholder pursuant to an effective registration statement under the Securities Act or pursuant to applicable laws of any jurisdiction outside the United States, in the case of a Shareholder, only to the extent the net cash proceeds therefrom are contributed as equity capital to the Issuer. "QUALIFIED INSTITUTIONAL BUYER" or "QIB" shall have the meaning specified in Rule 144A under the Securities Act. "QUALIFIED SUBSTITUTE OWNER" means, as of the date of acquisition of beneficial ownership, directly or indirectly, of at least 26.4% of the total voting power of the Voting Stock of the Issuer, a corporation (x) whose long-term senior unsecured debt has an investment grade rating by either Moody's or S&P and (y) which derived at least 50% of its revenue during the most recent 12-month period for which financial statements are publicly available from offshore drilling operations. "QUALIFYING CONTRACT" with respect to a drilling rig, drillship or similar vessel means the charter or any other contract for the use thereof (i) between the Issuer or a Restricted Subsidiary and a counterparty that, as certified in an Officers' Certificate delivered to the Trustee in connection therewith, is, or has a performance guarantee from a third party that is, (a) a company that is either generally recognized as a major oil company, (b) an oil company, a gas producer or an oil and gas service company, in each case at the time such contract is executed having a Total Equity Market Capitalization of at least 25 $1.0 billion if such entity is a public company, or if such entity is not a public company, having a consolidated net worth of $500.0 million or (c) a company that has an investment grade rating of its long-term debt from Moody's or S&P, (ii) having a minimum term of three years and (iii) containing a minimum day rate for such rig, drillship or similar vessel. "RATING AGENCIES" means (a) S&P and Moody's or (b) if S&P or Moody's or both of them are not making ratings of the Secured Notes publicly available, a nationally recognized United States rating agency or agencies, as the case may be, selected by the Issuer, which will be substituted for S&P or Moody's or both, as the case may be. "RECORD DATE" means, for the interest payment on any Interest Payment Date, the date specified in Section 2.12 hereof. "REDEEMABLE STOCK" means, with respect to any Secured Notes, any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date on which such Secured Notes mature. Notwithstanding the preceding sentence, any Capital Stock that would constitute Redeemable Stock solely because the holders thereof have the right to require the Issuer to repurchase such Capital Stock upon the occurrence of a change of control or an asset sale shall not constitute Redeemable Stock if the terms of such Capital Stock provide that the Issuer may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with the covenants described in Sections 4.08, 4.11 and 4.15. "REDEMPTION DATE" means, when used with respect to any Secured Note or part thereof to be redeemed hereunder, the date fixed for redemption of such Secured Notes pursuant to the terms of the Secured Notes and this Indenture. "REDEMPTION PRICE" means, when used with respect to any Secured Note or part thereof to be redeemed hereunder, the price fixed for redemption of such Secured Note pursuant to the terms of the Secured Notes and this Indenture, plus accrued and unpaid interest, if any, and Additional Amounts, if any, and Special Interest, if any, thereon, to the Redemption Date. 26 "REFINANCE" means, in respect of any Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue other Indebtedness in exchange or replacement for, such indebtedness. "Refinanced" and "Refinancing" shall have correlative meanings. "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement, dated as of the date of this Indenture, by and between the Issuer and the Initial Purchaser, as such agreement may be amended, modified or supplemented from time to time. "REGULATION S" means Regulation S under the Securities Act (including any successor regulation thereto), as it may be amended from time to time. "REGULATION S GLOBAL NOTE" means a Regulation S Temporary Global Note or Regulation S Permanent Global Note, as appropriate. "REGULATION S PERMANENT GLOBAL NOTE" means, collectively, one or more permanent global senior notes that contain the paragraph referred to in footnote 1, the phrase referred to in footnote 4 and the additional schedule referred to in footnote 5 to the form of the Secured Note attached hereto as Exhibit A, and that are deposited with the Secured Note Custodian and registered in the name of the Depositary or its nominee, representing the Initial Secured Notes sold in reliance on Regulation S. "REGULATION S TEMPORARY GLOBAL NOTE" means a single temporary global senior note that contains the paragraphs referred to in footnote 1, the phrase referred to in footnote 4 and the additional schedule referred to in footnote 4 to the form of the Senior Secured Note attached hereto as Exhibit A, in the form of the Secured Note attached hereto as Exhibit A that is deposited with the Secured Note Custodian and registered in the name of the Depositary or its nominee, representing the Initial Secured Notes sold in reliance on Regulation S. "RELATED BUSINESS" means any business related, ancillary or complementary to the businesses of the Issuer and the Restricted Subsidiaries on the Issue Date. "RESERVE ACCOUNT" means the reserve account established pursuant to the Reserve Account Agreement. "RESERVE ACCOUNT AGREEMENT" means the Seniorc Secured Note Reserve Account Agreement of even date herewith 27 among the Issuer, the Trustee and Wilmington Trust Company as reserve account agent. "RESERVE ACCOUNT PROPERTY" means the funds and Investments contained in the Reserve Account. "RESPONSIBLE OFFICER", when used with respect to the Trustee, means any officer of the Trustee with responsibility for the administration of this Indenture and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "RESTRICTED COLLATERAL" means (1) any Rig made subject to the Lien of the Security Agreements, (2) the Capital Stock of each Restricted Subsidiary owning a Mortgaged Rig, (3) each Qualifying Contract subject to the Lien of the Security Agreements and (4) the Reserve Account and the cash and Investments credited thereto. "RESTRICTED SUBSIDIARY" means any Subsidiary other than an Unrestricted Subsidiary. "RULE 144A" means Rule 144A under the Securities Act (including any successor regulation thereto), as it may be amended from time to time. "S&P" is defined to mean Standard & Poors Ratings Group, a division of McGraw-Hill Companies, Inc. and its successors. "SALE/LEASEBACK TRANSACTION" means any arrangement with any Person providing for the leasing by the Issuer or any of its Restricted Subsidiaries, for a period of more than three years, of any real or tangible personal property, which property has been or is to be sold or transferred by the Issuer or such Restricted Subsidiary to such Person in contemplation of such leasing. "SEC" or "COMMISSION" means the Securities and Exchange Commission. "SECURED NOTE CUSTODIAN" means the Trustee, as custodian for the Depositary with respect to the Secured Notes in global form, or any successor entity thereto. "SECURED NOTES" has the meaning set forth in the Recitals of this Indenture and more particularly means any of the Secured Notes authenticated and delivered under this Indenture. 28 "SECURITIES ACT" means the U.S. Securities Act of 1933, as amended. "SECURITY AGREEMENTS" means the Reserve Account Agreement, the Issuer Security Agreement, the Mitsubishi Collateral Documents and any other document that secures the Secured Notes or an Issuer Loan. "SENIOR INDEBTEDNESS" of any Person means (i) Indebtedness of such Person, whether outstanding on the Issue Date or thereafter Incurred, and (ii) accrued and unpaid interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Issuer to the extent post filing interest is allowed in such proceeding) in respect of (A) indebtedness for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such person is responsible or liable unless, in the case of (i) and (ii), in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such obligations are subordinate in right of payment to the Secured Notes, the Issuer Loans or the Subsidiary Guarantees, as applicable; PROVIDED, HOWEVER, that Senior Indebtedness shall not include (1) any obligation of such Person to any Subsidiary of such Person, (2) any liability for federal, state, local, foreign or other taxes owed or owing by such Person, (3) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including guarantees thereof or instruments evidencing such liabilities), (4) any Indebtedness of such Person (and any accrued and unpaid interest in respect thereof) which is subordinate or junior in any respect to any other Indebtedness or other obligation of such Person or (5) that portion of any Indebtedness which at the time of Incurrence is Incurred in violation of this Indenture. "SHAREHOLDER" means any of the Shareholders. "SHAREHOLDERS" means Drillpetro Inc., a company organized under the laws of the Bahamas, Techdrill Inc., a company organized under the laws of the Bahamas (each of the foregoing an Affiliate of Maritima), Westville Management Corporation Inc., a company organized under the laws of the British Virgin Islands (an indirect wholly owned subsidiary of Pride) and First Reserve Corporation, individually or collectively as the context requires. "SIGNIFICANT SUBSIDIARY" means any Subsidiary Guarantor and any other Restricted Subsidiary that would be a Significant Subsidiary of the Issuer within the meaning of 29 Rule 1-02 under Regulation S-X promulgated by the SEC. For purposes of Section 6.01(g) and Section 6.01(h) hereof only, the term "Significant Subsidiary" shall also include any group of Restricted Subsidiaries that, taken as a whole as of the latest audited consolidated financial statements for the Issuer and its Subsidiaries, would constitute a Significant Subsidiary. "SPECIAL INTEREST" means all "special interest" owing pursuant to the Registration Rights Agreement. "SPECIAL RECORD DATE" means a date fixed by the Trustee pursuant to Section 2.12 hereof for the payment of Defaulted Interest. "STATED MATURITY" means, with respect to any security, the date specified in such security as the fixed date on which the final payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency unless such contingency has occurred). "SUBORDINATED OBLIGATION" means any Indebtedness of the Issuer or a Subsidiary Guarantor, as the case may be (whether outstanding on the Issue Date or thereafter Incurred) which is subordinate or junior in right of payment to the Secured Notes, the Issuer Loans or any Subsidiary Guarantee, as applicable, whether pursuant to a written agreement to that effect or by operation of law. "SUBSIDIARY" means, with respect to any Person: (1) any corporation of which more than 50% of the total voting power of all classes of the capital stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors is owned by such Person directly or through one or more other Subsidiaries of such Person, and (2) any entity other than a corporation of which at least a majority of the capital stock or other equity interest (however designated) entitled (without regard to the occurrence of any contingency) to vote in the election of the governing body, partners, managers or others that will control the management of such entity is owned by such Person directly or through one or more other Subsidiaries of such Person. 30 "SUBSIDIARY GUARANTOR" means each Subsidiary of the Issuer, whether now owned or hereafter formed, which shall execute and deliver a Subsidiary Guarantee. "SUBSIDIARY GUARANTEE" means a guarantee in the form of Exhibit D hereto of the Issuer's obligations with respect to the Secured Notes issued by a Subsidiary of the Issuer. "TANGIBLE PROPERTY" means all land, buildings, machinery and equipment and leasehold interests and improvements which would be reflected on a balance sheet of the Issuer prepared in accordance with GAAP, excluding (a) all rights, contracts and other intangible assets of any nature whatsoever and (b) all inventories and other current assets. "TEMPORARY CASH INVESTMENTS" means Investments described in clauses (a), (b), (c) and (d) of the definition of Permitted Investments. "TOTAL EQUITY MARKET CAPITALIZATION" of any Person means, as of any day of determination, the sum of (i) the product of (A) the aggregate number of outstanding primary shares of common stock of such Person on such day (which shall not include any options or warrants on, or securities convertible or exchangeable into, shares of common stock of such Person) multiplied by (B) the average closing price of such common stock over the 20 consecutive Business Days immediately preceding such day, plus (ii) the liquidation value of any outstanding shares of preferred stock of such Person on such day. "TRANSFER RESTRICTED NOTES" means Secured Notes that bear or are required to bear the Private Placement Legend. "TRUST INDENTURE ACT" or "TIA" means the U.S. Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date of this Indenture, PROVIDED that if the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" or "TIA" means, if so required by such amendment, the Trust Indenture Act of 1939, as so amended. "TRUSTEE" means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder. 31 "UNRESTRICTED SUBSIDIARY" means: (a) any Subsidiary of the Issuer that at the time of determination will be designated an Unrestricted Subsidiary by the Board of Directors of the Issuer as provided below; and (b) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors of the Issuer may designate any Subsidiary of the Issuer as an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries (x) owns any Capital Stock or Indebtedness of, or holds any Lien on any property of, the Issuer or any other Subsidiary of the Issuer that is not a Subsidiary of the Subsidiary to be so designated or (y) owns any of the Collateral; PROVIDED, HOWEVER, that either (A) the Subsidiary to be so designated has total assets greater than $10,000 or less or (B) if such Subsidiary has assets greater than $10,000, such designation would be permitted under Section 4.11. Any such designation by the Board of Directors of the Issuer shall be evidenced to the Trustee by filing a resolution of the Board of Directors with the Trustee giving effect to such designation. The Board of Directors of the Issuer may designate any Unrestricted Subsidiary as a Restricted Subsidiary if, immediately after giving effect to such designation, (A) no Default or Event of Default shall have occurred and be continuing and (B) the Issuer could incur $1.00 of additional Indebtedness under Section 4.09(a) hereof. "U.S. GLOBAL NOTE" means, collectively, one or more permanent Global Notes that contain the paragraphs referred to in footnote 1 or footnote 3, in the phrase referred to in footnote 4 and the additional schedule referred to in footnote 5 to the form of the Secured Note attached hereto as Exhibit A, and that are deposited with the Secured Note Custodian and registered in the name of the Depositary or its nominee, representing Secured Notes sold in reliance on Rule 144A or in reliance on another exemption from the registration requirements of the Securities Act. "U.S. GOVERNMENT OBLIGATIONS" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable at the issuer's option. 32 "U.S. PERSON" means (i) any individual resident in the United States, (ii) any partnership or corporation organized or incorporated under the laws of the United States, (iii) any estate of which an executor or administrator is a U.S. person (other than an estate governed by foreign law and of which at least one executor or administrator is a non U.S. Person who has sole or shared investment discretion with respects to its assets), (iv) any trust of which any trustee is a U.S. Person (other than a trust of which at least one trustee is an non-U.S. Person who has sole or shared investment discretion with respect to its assets and no beneficiary of the trust (and no settler, if the trust is revocable) is a U.S. Person), (v) any agency or branch of a foreign entity located in the United States, (vi) any nondiscretionary or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or account of a U.S. Person, (vii) any discretionary or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporated or (if an individual) resident in the United States (other than such an account held for the benefit or account of a non U.S. Person), (viii) any partnership or corporation organized or incorporated under the laws of a foreign jurisdiction and formed by a U.S. Person principally for the purpose of investing in securities not registered under the Securities Act (unless it is organized or incorporated and owned, by "accredited investors" within the meaning of Rule 501(a) under the Securities Act who are not natural persons, estates or trusts); PROVIDED, HOWEVER, that the term "U.S. Person" shall not include (A) a branch or agency of a U.S. Person that is located and operating outside the United States for valid business purposes as a locally regulated branch or agency engaged in the banking or insurance business, (B) any employee benefit plan established and administered in accordance with the law, customary practices and documentation of a foreign country and (C) the international organizations set forth in Section 902(k)(vi) of Regulation S and any other similar international organizations, and their agencies, affiliates and pension plans. "VOTING STOCK OF A PERSON" means all classes of Capital Stock or other interests (including partnership interests) of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof. "WHOLLY OWNED RESTRICTED SUBSIDIARY" means a Restricted Subsidiary all the Capital Stock of which (other 33 than directors' qualifying shares) is owned by the Issuer or one or more Wholly Owned Restricted Subsidiaries. SECTION 1.02. OTHER DEFINITIONS. DEFINED TERM IN SECTION - - ---- ---------- "Act".................................................... 12.06(a) "Additional Amounts"..................................... 4.28(a) "Affiliate Transaction".................................. 4.17(a) "Change of Control"...................................... 4.08(a) "Change of Control Offer"................................ 4.08(a) "Change of Control Purchase Price"....................... 4.08(a) "Change of Control Offer Period"......................... 4.08(b) "Change of Control Payment Date"......................... 4.08(b) "Covenant Defeasance".................................... 9.03 "DTC".................................................... 2.03 "Defaulted Interest"..................................... 2.12 "Defeasance"............................................. 9.02 "Event of Default"....................................... 6.01 "40-day restricted period"............................... 2.01(c) "Guaranteed Indebtedness"................................ 4.19 "Interest Payment Date".................................. 2.12 "Make Whole Premium"..................................... 3.07 "Mortgaged Rig Asset".................................... 4.15(a) "Paying Agent"........................................... 2.03 "Pride Indenture"........................................ 13.03(b) "Private Placement Legend"............................... 2.06(f)(i) "Process Agent".......................................... 12.10 "Registrar".............................................. 2.03 "Restricted Payment"..................................... 4.11(a) "Secured Notes".......................................... 2.01(b) "Securities Register".................................... 2.03 "Successor".............................................. 5.01(a) "Tax Jurisdiction"....................................... 4.28(a) 34 SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever this Indenture refers to a provision of the Trust Indenture Act, the provision is incorporated by reference in and made a part of this Indenture. The following Trust Indenture Act terms used in this Indenture have the following meanings: "indenture securities" means the Secured Notes; "indenture security holder" means a Holder of a Secured Note; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; "obligor" on the Secured Notes means the Issuer or any other Obligor on the Secured Notes. All other terms used in this Indenture that are defined by the Trust Indenture Act, defined by the Trust Indenture Act reference to another statute or defined by Commission rule under the Trust Indenture Act have the meanings so assigned to them therein. SECTION 1.04. RULES OF CONSTRUCTION. Unless the context otherwise requires: (1) the words "herein," "hereof" and "hereunder", and other words of similar import, refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; (2) a term has the meaning assigned to it; (3) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (4) "or" is not exclusive; (5) words in the singular include the plural, and in the plural include the singular; (6) provisions apply to successive events and transactions; (7) references to sections of or rules under the Securities Act shall be deemed to include substitute, 35 replacement of successor sections or rules adopted by the Commission from time to time; (8) the principal amount of any noninterest bearing or other discount security at any date shall be the principal amount thereof that would be shown on a balance sheet of the issuer dated such date prepared in accordance with generally accepted accounting principles; (9) when used with respect to the Secured Notes, the term "principal amount" shall mean the principal amount thereof at Maturity; (10) unless otherwise expressly provided herein, the principal amount of any preferred stock shall be greater of (i) the maximum liquidation value of such preferred stock or (ii) the maximum mandatory redemption or mandatory repurchase price with respect to such preferred stock; and (11) all references to amounts of money or $ mean U.S. Dollars. ARTICLE II THE SECURED NOTES SECTION 2.01. FORM AND DATING. (a) GENERAL. The Secured Notes, together with the Trustee's certificate of authentication and Pride's notation of the Pride Guarantee, shall be substantially in the form set forth in Exhibit A hereto. The Secured Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Secured Note shall be dated the date of its authentication. The Secured Notes shall be issued only in fully registered form, without coupons, in denominations of $1,000 and integral multiples thereof. The Initial Secured Notes and the Exchange Secured Notes will be the same except that the Private Placement Legend and paragraph 21 will be omitted from the Exchange Secured Notes. The terms and provisions contained in the Secured Notes shall constitute, and are hereby expressly made, a part of this Indenture and the Issuer, Pride, Maritima and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. 36 (b) AUTHORIZED PRINCIPAL AMOUNT; TERMS. The aggregate principal amount of Secured Notes which may be authenticated and delivered under this Indenture is $53,000,000 issuable in a single series. All Secured Notes under this Indenture shall in all respects be equally and ratably entitled to the benefits hereof without preference, priority or distinction on account of the actual time of the authentication and delivery of such Secured Notes. There is created a series of Secured Notes with the following terms: The title of the Secured Notes will be 11 3/4% Senior Secured Notes due 2001 (the "Secured Notes"). The Secured Notes will be limited to (A) Initial Secured Notes in an aggregate principal amount not to exceed $53,000,000 (B) Exchange Secured Notes for issue only in the Exchange Offer pursuant to the Exchange Offer Registration Statement for a like principal amount of Initial Secured Notes exchanged in such Exchange Offer, in each case upon the receipt of an Issuer Order directing the Trustee to authenticate such Secured Notes and certifying that all conditions precedent to the issuance of the relevant Secured Notes contained herein have been complied with. The aggregate principal amount of Secured Notes outstanding at any time may not exceed $53,000,000, except as provided in Section 2.07 hereof. The Secured Notes will mature on November 1, 2001. (c) INITIAL SECURED NOTES. Initial Secured Notes, with the notation of the Pride Guarantee endorsed thereon, shall be issued in the form of one or more permanent Global Notes in definitive fully registered form without interest coupons. Secured Notes offered and sold to QIBs in reliance on Rule 144A, shall be issued initially in the form of the U.S. Global Note, which shall be deposited on behalf of the purchasers of the Secured Notes represented thereby with the Secured Note Custodian, and registered in the name of the Depositary or a nominee of the Depositary, duly executed by the Issuer and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the U.S. Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee as hereinafter provided. Initial Secured Notes offered and sold in reliance on Regulation S shall be issued initially in the form of the Regulation S Temporary Global Note, which shall be deposited on behalf of the purchasers of the Secured Notes represented thereby with the Secured Note Custodian, and registered in the name of the Depositary or the nominee of the Depositary 37 for the accounts of designated agents holding on behalf of Euroclear or Cedel, duly executed by the Issuer and authenticated by the Trustee as hereinafter provided. The "40--day restricted period" (as defined in Regulation S) shall be terminated upon the receipt by the Trustee of a written certificate from the Depositary, together with copies of certificates from Euroclear and Cedel certifying that they have received certification of non-United States beneficial ownership of 100% of the aggregate principal amount of the Regulation S Temporary Global Note (except to the extent of any beneficial owners thereof who acquired an interest therein pursuant to another exemption from registration under the Securities Act and who will take delivery of a beneficial ownership interest in a 144A Global Note, all as contemplated by Section 2.06(a)(ii) hereof). Following the termination of the 40--day restricted period, beneficial interests in the Regulation S Temporary Global Note shall be exchanged for beneficial interests in Regulation S Permanent Global Note pursuant to the Applicable Procedures. Simultaneously with the authentication of Regulation S Permanent Global Note, the Trustee shall cancel the Regulation S Temporary Global Note. The aggregate principal amount of the Regulation S Temporary Global Note and the Regulation S Permanent Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depository or its nominee, as the case may be, in connection with transfers of interest as hereinafter provided. Each Global Note shall represent such of the outstanding Secured Notes as shall be specified therein and each shall provide that it shall represent the aggregate amount of outstanding Secured Notes from time to time endorsed on Schedule A thereto and that the aggregate amount of outstanding Secured Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges, redemptions and transfers of interests. Any endorsement of Schedule A of a Global Note to reflect the amount of any increase or decrease in the amount of outstanding Secured Notes represented thereby shall be made by the Trustee or the Secured Note Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof. The provisions of the "Operating Procedures of the Euroclear Clearance System" and "Terms and Conditions Governing Use of Euroclear" and the "Management Regulations" and "Instructions to Participants" of Cedel shall be applicable to interests in the Regulation S Temporary Global Note and the Regulation S Permanent Global Note that are 38 held by Participants through Euroclear or Cedel. The Trustee shall have no obligation to notify Holders of any such procedures or to monitor or enforce compliance with the same. Except as set forth in Section 2.06 hereof, the Global Notes may be transferred, in whole and not in part, only to another nominee of the Depositary or to a successor of the Depositary or its nominee. (d) BOOK-ENTRY PROVISIONS. This Section 2.01(d) shall apply only to Global Notes deposited with or on behalf of the Depositary. The Issuer shall execute and the Trustee shall, in accordance with this Section 2.01(d), authenticate and deliver the Global Secured Notes that (i) shall be registered in the name of the Depositary or the nominee of the Depositary and (ii) shall be delivered by the Trustee to the Depositary or pursuant to the Depositary's instructions or held by the Secured Note Custodian. Participants shall have no rights either under this Indenture with respect to any Global Note held on their behalf by the Depositary or by the Secured Note Custodian as custodian for the Depositary or under such Global Note, and the Depositary may be treated by the Issuer, the Trustee and any agent of the Issuer or the Trustee as the absolute owner of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Issuer, the Trustee or any agent of the Issuer or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Participants, the operation of customary practices of such Depositary governing the exercise of the rights of an owner of a beneficial interest in any Global Note. (e) CERTIFICATED SECURED NOTES. Secured Notes issued in certificated form shall be substantially in the form of Exhibit A attached hereto (but without including the text referred to in footnotes 1 and 4 thereto) and shall be printed, typewritten, lithographed or engraved or produced by any combination of these methods or may be produced by any other method permitted by the rules of any securities exchange on which the Secured Notes may be listed, as evidenced by the execution of such Secured Notes. (f) PROVISIONS APPLICABLE TO FORMS OF SECURED NOTES. The Secured Notes may also have such additional provisions, omissions, variations or substitutions as are 39 not inconsistent with the provisions of this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with this Indenture, any applicable law or with any rules made pursuant thereto or with the rules of any securities exchange or governmental agency or as may be determined consistently herewith by the Officers of the Issuer executing such Secured Notes, as conclusively evidenced by their execution of such Secured Notes. All Secured Notes will be otherwise substantially identical except as provided herein. Subject to the provisions of this Article II, a Holder of a Global Note may grant proxies and otherwise authorize any Person to take any action that a Holder is entitled to take under this Indenture or the Secured Notes. SECTION 2.02. EXECUTION AND AUTHENTICATION. Two Officers shall sign the Secured Notes for the Issuer by manual or facsimile signature; and one officer of Pride shall sign the notation of the Pride Guarantee endorsed thereon for Pride by manual or facsimile signature. All references herein to execution of Secured Notes shall include references to Pride signing the notation of the Pride Guarantee endorsed thereon. If an Officer whose signature is on a Secured Note no longer holds that office at the time a Secured Note is authenticated, the Secured Note shall nevertheless be valid. A Secured Note shall not be valid until authenticated by the manual signature of the Trustee. The signature shall be conclusive evidence that the Secured Note has been authenticated under this Indenture. The form of Trustee's certificate of authentication to be borne by the Secured Notes shall be substantially as set forth in Exhibit A hereto. The Trustee shall authenticate (i) Initial Secured Notes for original issue in an aggregate principal amount not to exceed $53,000,000 and (ii) Exchange Secured Notes for issue only in the Exchange Offer pursuant to the Exchange Offer Registration Statement for a like principal amount of Initial Secured Notes exchanged in such Exchange Offer, in each case upon the receipt of an Issuer Order directing the Trustee to authenticate such Secured Notes and an Officers' Certificate certifying that all conditions precedent to the issuance of the relevant Secured Notes contained herein have been complied with. 40 The aggregate principal amount of Secured Notes outstanding at any time may not exceed $53,000,000, except as provided in Section 2.07 hereof. The Trustee may appoint an authenticating agent acceptable to the Issuer to authenticate Secured Notes. Unless limited by the terms of such appointment, an authenticating agent may authenticate Secured Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with the Issuer or an Affiliate of the Issuer. SECTION 2.03. REGISTRAR AND PAYING AGENT. The Issuer shall maintain (i) an office or agency where Secured Notes may be presented for registration of transfer or for exchange ("Registrar"), (ii) an office or agency where Secured Notes may be presented for payment ("Paying Agent"), and (iii) and an office or agency where notices or demands to or upon the Issuer and any Guarantor in respect of the Secured Notes and this Indenture may be served. The Registrar shall keep a register of the Secured Notes and of their transfer and exchange (the "Securities Register"). The Issuer may appoint one or more co-registrars and one or more additional paying agents except as otherwise provided in this Indenture. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Issuer may change any Paying Agent or Registrar without notice to any Holder. The Issuer shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Issuer fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Issuer or any of its Subsidiaries may act as Paying Agent or Registrar. The Issuer initially appoints The Depository Trust Issuer ("DTC") to act as Depositary with respect to the Global Secured Notes. The Issuer initially appoints the Trustee (at the Corporate Trust Office of the Trustee) to act as the Registrar and Paying Agent and to act as Secured Note Custodian with respect to the Global Notes. SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST. The Issuer shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of 41 principal of, premium, if any, on, interest on, and Special Interest, if any, and Additional Amounts, if any, on, the Secured Notes, and shall notify the Trustee of any default by the Issuer in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Issuer at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Issuer, a Guarantor, or a Subsidiary or Affiliate of any thereof) shall have no further liability for the money. If the Issuer, a Guarantor or a Subsidiary or Affiliate of any thereof acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Issuer, the Trustee shall serve as Paying Agent for the Secured Notes. SECTION 2.05. HOLDER LISTS. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is not the Registrar, the Issuer shall furnish to the Trustee at least seven Business Days before each Interest Payment Date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Secured Notes, and the Issuer shall otherwise comply with TIA Section 312(a). SECTION 2.06. TRANSFER AND EXCHANGE. (a) TRANSFER AND EXCHANGE OF GLOBAL SECURED NOTES. The transfer and exchange of beneficial interests in Global Secured Notes shall be effected through the Depositary, in accordance with this Indenture and the Applicable Procedures, which shall include restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Beneficial interests in a Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Global Note in accordance with the transfer restrictions set forth in subsection (e) of this Section 2.06 and in the legend in subsection (f) of this Section 2.06. Transfers of beneficial interests in the Global Notes to Persons required to take delivery thereof in the form of an interest in another Global Note shall be permitted as follows: (i) U.S. GLOBAL NOTE TO REGULATION S GLOBAL NOTE. Prior to the expiration of the 40-day restricted period, an owner of a beneficial interest in the U.S. 42 Global Note deposited with the Depositary (or the Secured Note Custodian) will not be permitted to transfer its interest to a Person who wishes to take delivery thereof in the form of an interest in the Regulation S Global Note. If, at any time after the expiration of the 40-day restricted period, an owner of a beneficial interest in the U.S. Global Note deposited with the Depositary (or the Secured Note Custodian) wishes to transfer its beneficial interest in the U.S. Global Note to a Person who is required or permitted to take delivery thereof in the form of an interest in the Regulation S Global Note, such owner shall, subject to the Applicable Procedures, exchange or cause the exchange of such interest for an equivalent beneficial interest in the Regulation S Global Note as provided in this Section 2.06(a)(i). Upon receipt by the Trustee of (1) instructions given in accordance with the Applicable Procedures from a Participant directing the Trustee to credit or cause to be credited a beneficial interest in the Regulation S Global Note in an amount equal to the beneficial interest in the U.S. Global Note to be exchanged, (2) a written order given in accordance with the Applicable Procedures containing information regarding the Participant account of the Depositary and the Euroclear or Cedel account to be credited with such increase, and (3) a certificate in the form of Exhibit B-1 hereto given by the owner of such beneficial interest stating that the transfer of such interest has been made in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with Rule 903 or Rule 904 of Regulation S, then the Trustee, as Registrar, shall instruct the Depositary to reduce or cause to be reduced the aggregate principal amount at Maturity of the U.S. Global Note and to increase or cause to be increased the aggregate principal amount at Maturity of the Regulation S Global Note by the principal amount at Maturity of the beneficial interest in the U.S. Global Note to be exchanged or transferred, to credit or cause to be credited to the account of the Person specified in such instructions, a beneficial interest in the Regulation S Global Note equal to the reduction in the aggregate principal amount at Maturity of the U.S. Global Note, and to debit, or cause to be debited, from the account of the Person making such exchange or transfer the beneficial interest in the U.S. Global Note that is being exchanged or transferred. (ii) REGULATION S GLOBAL NOTE TO U.S. GLOBAL NOTE. Prior to the expiration of the 40-day restricted 43 period, an owner of a beneficial interest in the Regulation S Global Note deposited with the Depositary (or the Secured Note Custodian) will not be permitted to transfer its interest to a Person who wishes to take delivery thereof in the form of an interest in the U.S. Global Note. If, at any time, after the expiration of the 40-day restricted period, an owner of a beneficial interest in the Regulation S Global Note deposited with the Depositary or with the Secured Note Custodian wishes to transfer its beneficial interest in the Regulation S Global Note to a Person who is required or permitted to take delivery thereof in the form of an interest in the U.S. Global Note, such owner shall, subject to the Applicable Procedures, exchange or cause the exchange of such interest for an equivalent beneficial interest in the U.S. Global Note as provided in this Section 2.06(a)(ii). Upon receipt by the Trustee of (1) instructions from Euroclear or Cedel, if applicable, and the Depositary, directing the Trustee, as Registrar, to credit or cause to be credited a beneficial interest in the U.S. Global Note equal to the beneficial interest in the Regulation S Global Note to be exchanged, such instructions to contain information regarding the Participant account with the Depositary to be credited with such increase, (2) a written order given in accordance with the Applicable Procedures containing information regarding the Participant account of the Depositary and (3) a certificate in the form of Exhibit B-2 attached hereto given by the owner of such beneficial interest stating (A) if the transfer is pursuant to Rule 144A, that the Person transferring such interest in the Regulation S Global Note reasonably believes that the Person acquiring such interest in the U.S. Global Note is a QIB and is obtaining such beneficial interest in a transaction meeting the requirements of Rule 144A and any applicable blue sky or securities laws of any state of the United States, (B) that the transfer complies with the requirements of Rule 144 under the Securities Act, (C) if the transfer is to an Institutional Accredited Investor that such transfer is in compliance with the Securities Act and that a certificate in the form of Exhibit C attached hereto is attached thereto, together with, if the Issuer should so request or if the transfer is in respect of an aggregate principal amount of Secured Notes less than $250,000, an Opinion of Counsel in form reasonably acceptable to the Issuer and to the Registrar that such transfer is in compliance with the Securities Act or (D) if the transfer is pursuant to any other exemption from the registration requirements of the Securities Act, that 44 the transfer of such interest has been made in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the requirements of the exemption claimed, such statement to be supported by an Opinion of Counsel from the transferee or the transferor in form reasonably acceptable to the Issuer and to the Registrar and, in each case, in accordance with any applicable securities laws of any state of the United States or any other applicable jurisdiction, then the Trustee, as Registrar, shall instruct the Depositary to reduce or cause to be reduced the aggregate principal amount at Maturity of the Regulation S Global Note and to increase or cause to be increased the aggregate principal amount at Maturity of the U.S. Global Note by the principal amount at Maturity of the beneficial interest in the Regulation S Global Note to be exchanged or transferred, and the Trustee, as Registrar, shall instruct the Depositary, concurrently with such redemption, to credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the U.S. Global Note equal to the reduction in the aggregate principal amount at Maturity of the Regulation S Global Note and to debit or cause to be debited from the account of the Person making such transfer the beneficial interest in the Regulation S Global Note that is being exchanged or transferred. (iii) U.S. GLOBAL NOTES TO INSTITUTIONAL ACCREDITED INVESTOR. If, at any time, an owner of a beneficial interest in the U.S. Global Note deposited with the Depositary (or the Secured Note Custodian) wishes to transfer its beneficial interest in such U.S. Global Note to a Person who is an Institutional Accredited Investor, such owner shall, subject to the Applicable Procedures and the other provisions of this Section 2.06, exchange or cause the exchange of such interest for an equivalent beneficial interest in a U.S. Global Note as provided in this Section 2.06(a) (iii). Upon receipt by the Trustee of (1) instructions given in accordance with the Applicable Procedures from a Participant directing the Trustee to credit or cause to be credited a beneficial interest in a U.S. Global Note in an amount equal to the beneficial interest in the U.S. Global Note to be exchanged, (2) a written order given in accordance with the Applicable Procedures containing information regarding the Participant account of the Depositary to be credited with such increase, and (3) a certificate in the form of Exhibit C hereto given by the proposed transferee, 45 and, if the Issuer should so request, an Opinion of Counsel provided by the transferor or the transferee (a copy of which the Transferor attaches to such certificate), in form reasonably acceptable to the Issuer and to the Registrar, to the effect that such transfer is in compliance with the Securities Act, then the Trustee, as Registrar, shall instruct the Depositary to credit or cause to be credited to the account of the Person specified in such instructions, a beneficial interest in the U.S. Global Note equal to the aggregate principal amount being transferred, and to debit, or cause to be debited, from the account of the Person making such exchange or transfer the beneficial interest in the U.S. Global Note that is being exchanged or transferred. (b) TRANSFER AND EXCHANGE OF CERTIFICATED SECURED NOTES. When Certificated Secured Notes are presented by a Holder to the Registrar with a request to register the transfer of the Certificated Secured Notes or to exchange such Certificated Secured Notes for an equal principal amount of Certificated Secured Notes of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested only if the Certificated Secured Notes are presented or surrendered for registration of transfer or exchange, are endorsed and contain a signature guarantee or are accompanied by a written instrument of transfer in form satisfactory to the Registrar duly executed by such Holder or by his attorney and contains a signature guarantee, duly authorized in writing and the Registrar received the following documentation (all of which may be submitted by facsimile): In the case of Certificated Secured Notes that are Transfer Restricted Secured Notes, such request shall be accompanied by the following additional information and documents, as applicable: (i) if such Transfer Restricted Note is being delivered to the Registrar by a Holder for registration in the name of such Holder, without transfer, or such Transfer Restricted Note is being transferred to the Issuer, a certification to that effect from such Holder (in substantially the form of Exhibit B-3 hereto); or (ii) if such Transfer Restricted Note is being transferred to a QIB in accordance with Rule 144A under the Securities Act or pursuant to an exemption from registration in accordance with Rule 144 under the Securities Act or in an 46 offshore transaction pursuant to and in compliance with Rule 904 under the Securities Act or pursuant to an effective registration statement under the Securities Act, a certification to that effect from such Holder (in substantially the form of Exhibit B-3 hereto); or (iii) if such Transfer Restricted Note is being transferred in reliance on any other exemption from the registration requirements of the Securities Act, a certification to that effect from such Holder (in substantially the form of Exhibit B-3 hereto) and an Opinion of Counsel from such Holder or the transferee in form reasonably acceptable to the Issuer and to the Registrar to the effect that such transfer is in compliance with the Securities Act. (c) TRANSFER OF A BENEFICIAL INTERESTS IN GLOBAL NOTES FOR CERTIFICATED SECURED NOTES. (i) The Global Notes that are Transfer Restricted Notes or the Exchange Global Notes, as the case may be, shall be exchanged by the Issuer for one or more Certificated Secured Notes representing Initial Secured Notes or Exchange Secured Notes, as the case may be, if (x) the Depositary (A) has notified the Issuer that it is unwilling or unable to continue as, or ceases to be, a "Clearing Agency" registered under Section 17A of the Exchange Act and (B) a successor to the Depositary registered as a "Clearing Agency" under Section 17A of the Exchange Act is not able to be appointed by the Issuer within 90 calendar days or (y) the Depositary is at any time unwilling or unable to continue as Depositary and a successor to the Depositary is not able to be appointed by the Issuer within 90 calendar days or (C) the Issuer, at its option, delivers a notice in the form of an Officers' Certificate that it elects to cause the issuance of Certificated Secured Notes. If an Event of Default occurs and is continuing, the Issuer shall, at the request of the Holder thereof, exchange all or part of a Global Note that is a Transfer Restricted Note or an Exchange Global Note, as the case may be, for one or more Certificated Secured Notes representing Initial Secured Notes or Exchange Secured Notes, as the case may be; PROVIDED that the principal amount of each of such Certificated Secured Notes, and such Global Note, after such exchange, shall be $1,000 or an integral multiple thereof. Whenever a Global Note is exchanged as a whole for one or more Certificated Secured Notes, it shall be surrendered by the Holder thereof to the 47 Trustee for cancelation. Whenever a Global Note is exchanged in part for one or more Certificated Secured Notes, it shall be surrendered by the Holder thereof to the Trustee and the Trustee shall make the appropriate notations to Schedule A thereof pursuant to Section 2.01 hereof. All Certificated Secured Notes or Exchange Secured Notes, as the case may be, issued in exchange for a Global Note or any portion thereof shall be registered in such names, and delivered, as the Depositary shall instruct the Trustee. Any Certificated Secured Notes issued pursuant to this Section 2.06(c)(i) shall include the Private Placement Legend, except as otherwise provided for by this Section 2.06. Interests in a Global Note may not be exchanged for Certificated Secured Notes other than as provided in this Section 2.06. If a beneficial interest in a Transfer Restricted Note is being transferred, the following additional documents and information must be submitted (including by facsimile): (A) if such beneficial interest is being transferred to the Person designated by the Depositary as being the beneficial owner, a certification to that effect from such Person (in substantially the form of Exhibit B-4 hereto); (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A under the Securities Act or pursuant to an exemption from registration in accordance with Rule 144 under the Securities Act or in an offshore transaction pursuant to and in compliance with Rule 904 under the Securities Act or pursuant to an effective registration statement under the Securities Act, a certification to that effect from the transferor (in substantially the form of Exhibit B-4 hereto); (C) if such beneficial interest is being transferred in reliance on any other exemption from the registration requirements of the Securities Act, a certification to that effect from the transferor (in substantially the form of Exhibit B-4 hereto) and an Opinion of Counsel from the transferee or the transferor in form reasonably acceptable to the Issuer and to the Registrar to the effect that such transfer is in compliance with the Securities Act, in which case the Trustee or the Secured Note Custodian, at the direction of the Trustee, shall, in accordance with the standing instructions and procedures existing between the Depositary and the Secured Note Custodian, cause the aggregate principal amount of the U.S. Global Note or Regulation S Permanent Global Note, as applicable, to be reduced accordingly and, following such reduction, the Issuer shall execute and, the Trustee shall authenticate and deliver to the transferee a 48 Certificated Secured Note in the appropriate principal amount. (ii) Certificated Secured Notes issued in exchange for a beneficial interest in the U.S. Global Note or Regulation S Permanent Global Note, as applicable, pursuant to this Section 2.06(c) shall be registered in such names and in such authorized denominations as the Depositary, pursuant to instructions from its Participants or Indirect Participants or otherwise, shall instruct the Trustee. The Trustee shall deliver such Certificated Secured Notes to the Persons in whose names such Secured Notes are so registered. Following any such issuance of Certificated Secured Notes, the Trustee, as Registrar, shall instruct the Depositary to reduce or cause to be reduced the aggregate principal amount at maturity of the applicable Global Note to reflect the transfer. (d) RESTRICTIONS ON TRANSFER AND EXCHANGE OF GLOBAL NOTES. Notwithstanding any other provision of this Indenture (other than the provisions set forth in subsections (e) and (f) of this Section 2.06), a Global Note may not be transferred as a whole except by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. Any Holder of a beneficial interest in a Global Note shall, by acceptance of such Global Note, agree that transfers of beneficial interests in such Global Note may be effected only through a book-entry system maintained by the Holder of such Global Note (or its agent), and that ownership of a beneficial interest in the Secured Notes represented thereby shall be required to be reflected in book-entry form. Interests of beneficial owners in a Global Note may be transferred in accordance with the rules and procedures of the Depositary (or its successors). (e) CONTINUOUS RESTRICTIONS ON TRANSFER AND EXCHANGE OF SECURED NOTES. Notwithstanding any other provision of this Indenture, the Secured Notes may not at any time, including after consummation of the Exchange Offer, be transferred to, or held by Persons other than QIBs or Institutional Accredited Investors. Any Holder or beneficial owner of a Secured Note shall, by acceptance of such Secured Note, agree that such Holder or owner will deliver to each Person to whom a Secured Note or an interest therein is transferred a notice provided for in the legend 49 specified in subsection (f) of this Section 2.06. No Secured Note may be transferred by the Trustee or the Registrar in violation of the foregoing. (f) LEGENDS. (i) Except as permitted by the following paragraphs (iii), (iv) and (v), each Secured Note certificate evidencing Global Notes and Certificated Secured Notes (and all Secured Notes issued in exchange therefor or substitution thereof) shall bear a legend (the "Private Placement Legend") in substantially the following form: THIS SECURED NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. ACCORDINGLY, THIS SECURED NOTE MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER: (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER REGULATION D UNDER THE SECURITIES ACT (AN "IAI")); (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (I) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (II) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (III) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF THE ACT, (IV) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE ACT, (V) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE ACT, (VI) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (VII) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT 50 AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION; AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING. (ii) After the registration of the Exchange Secured Notes under the Securities Act, the Secured Exchange Notes when issued, will bear a legend to the following effect unless otherwise agreed by the Issuer and the holder thereof. THE HOLDER: (A) REPRESENTS THAT (1) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB") OR (2) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT (AN "IAI"); (B) AGREES THAT IT WILL NOT RESELL, OR OTHERWISE TRANSFER THIS NOTE EXCEPT TO (1) A QIB OR (2) AN IAI; (C) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; (D) THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING. THE INDENTURE ALSO CONTAINS A PROVISION REQUIRING THE ISSUER TO EXERCISE REASONABLE CARE TO ENSURE THAT THE SECURED NOTES ARE RESOLD OR OTHERWISE TRANSFERRED ONLY TO PURCHASERS MEETING THE REQUIREMENTS SPECIFIED IN CLAUSE (B) ABOVE. (iii) Upon any sale or transfer of a Transfer Restricted Note (including any Transfer Restricted Note represented by a Global Note) pursuant to Rule 144 under the 51 Securities Act or pursuant to a effective registration statement under the Securities Act: (a) in the case of any Transfer Restricted Note that is a Certificated Secured Note, the Registrar shall permit the Holder thereof to exchange such Transfer Restricted Note for a Certificated Secured Note that does not bear the legend set forth in (i) above and rescind any restriction on the transfer of such Transfer Restricted Note upon receipt of a certification from the transferring Holder substantially in the form of Exhibit B-4 hereto; and (b) in the case of any Transfer Restricted Note represented by a Global Note, such Transfer Restricted Note shall not be required to bear the legend set forth in (i) above, but shall continue to be subject to the provisions of Section 2.06(a) and (b) hereof; PROVIDED, HOWEVER, that with respect to any request for an exchange of a Transfer Restricted Note that is represented by a Global Note for a Certificated Secured Note that does not bear the legend set forth in (i) above, which request is made in reliance upon Rule 144, the Holder thereof shall certify in writing to the Registrar that such request is being made pursuant to Rule 144 (such certification to be substantially in the form of Exhibit B-4 hereto). (iv) Upon any sale or transfer of a Transfer Restricted Note (including any Transfer Restricted Note represented by a Global Note) in reliance on any exemption from the registration requirements of the Securities Act (other than exemptions pursuant to Rule 144A or Rule 144 under the Securities Act) in which the Holder or the transferee provides an Opinion of Counsel to the Issuer and the Registrar in form and substance reasonably acceptable to the Issuer and the Registrar (which Opinion of Counsel shall also state that the transfer restrictions contained in the legend are no longer applicable): (a) in the case of any Transfer Restricted Note that is a Certificated Secured Note, the Registrar shall permit the Holder thereof to exchange such Transfer Restricted Note for a Certificated Secured Note that does not bear the legend set forth in (i) above and rescind any restriction on the transfer of such Transfer Restricted Note; and (b) in the case of any Transfer Restricted Note represented by a Global Note, such Transfer Restricted Note shall not be required to bear the legend set forth 52 in (i) above, but shall continue to be subject to the provisions of Section 2.06(a) and (b) hereof. (v) By its acceptance of any Initial Secured Note represented by a certificate bearing the Private Placement Legend, each Holder of, and beneficial owner of an interest in, such Initial Secured Note acknowledges the restrictions on transfer of such Initial Secured Note set forth in the Private Placement Legend and the legend specified in paragraph (ii) above and under the heading "Notice to Investors" in the Offering Memorandum and agrees that it will transfer such Initial Secured Note only in accordance with the Private Placement Legend and the restrictions set forth under the heading "Notice to Investors" in the Offering Memorandum. (vi) Notwithstanding the foregoing, upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, the Issuer shall issue and, upon receipt of an authentication order in accordance with Section 2.02 hereof, the Trustee shall authenticate (A) one or more Global Notes in aggregate principal amount equal to the principal amount of the restricted beneficial interests validly tendered and not properly withdrawn by Persons that certify in the letter of transmittal delivered in the Exchange Offer that they are not (x) broker-dealers, (y) persons participating in the distribution of the Exchange Secured Notes or (z) persons who are affiliates (as defined in Rule 144 under the Securities Act) of the Issuer and accepted for exchange in the Exchange Offer and (B) Certificated Secured Notes that do not bear the Private Placement Legend but continue to bear the legend specified in clause (ii) of this Section 2.06(f) in an aggregate principal amount equal to the principal amount of the Certificated Secured Notes that are Transfer Restricted Notes accepted for exchange in the Exchange Offer. Concurrently with the issuance of such Secured Notes, the Trustee shall cause the aggregate principal amount of the applicable Global Notes to be reduced accordingly and the Issuer shall execute and the Trustee shall authenticate and deliver to the Persons designated by the Holders of Certificated Secured Notes so accepted Certificated Secured Notes in the appropriate principal amount. (g) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL NOTES. At such time as all beneficial interests in Global Notes have been exchanged for Certificated Secured Notes, redeemed, repurchased or cancelled, all Global Notes shall be returned to or retained and cancelled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest 53 in a Global Note is exchanged for Certificated Secured Notes, redeemed, repurchased or cancelled, the principal amount of Secured Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note, by the Trustee or the Secured Note Custodian, at the direction of the Trustee, to reflect such reduction. (h) GENERAL PROVISIONS RELATING TO TRANSFERS AND EXCHANGES. (i) To permit registrations of transfers and exchanges, the Issuer shall execute and the Trustee shall authenticate Global Notes and Certificated Secured Notes at the Registrar's request. (ii) No service charge shall be made to a Holder for any registration of transfer or exchange, but the Issuer may require payment of a sum sufficient to cover any stamp or transfer tax or similar governmental charge payable in connection therewith (other than any such stamp or transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 4.08, and 10.06 hereto). (iii) All Global Notes and Certificated Secured Notes issued upon any registration of transfer or exchange of Global Notes or Certificated Secured Notes shall be the valid obligations of the Issuer, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Certificated Secured Notes surrendered upon such registration of transfer or exchange. (iv) The Registrar shall not be required: (A) to issue, to register the transfer of or to exchange Secured Notes during a period beginning at the opening of 15 Business Days before the day of any selection of Secured Notes for redemption under Article III hereof and ending at the close of business on the day of selection, (B) to register the transfer of or to exchange any Secured Note so selected for redemption in whole or in part, except the unredeemed portion of any Secured Note being redeemed in part, or (C) to register the transfer of or to exchange a Secured Note between a Record Date and the next succeeding Interest Payment Date. (v) Prior to due presentment for the registration of a transfer of any Secured Note, the Trustee, any Agent and the Issuer may deem and treat the Person in whose name any Secured Note is registered as the absolute owner of such Secured Note for the purpose of receiving payment of principal of and interest on such Secured Notes and for all other purposes, and neither the Trustee, any Agent nor the Issuer shall be affected by notice to the contrary. 54 (vi) The Trustee shall authenticate Global Notes and Certificated Secured Notes in accordance with the provisions of Section 2.02 hereof. Notwithstanding anything herein to the contrary, as to any certifications or certificates delivered to the Trustee or Registrar pursuant to this Section 2.06, the Trustee's or the Registrar's duties shall be limited to confirming that any such certifications and certificates delivered to it are in the form of Exhibits B-1 through B-4 and C attached hereto. The Trustee or Registrar shall not be responsible for confirming the truth or accuracy of representations made in any such certifications or certificates. SECTION 2.07. REPLACEMENT OF SECURED NOTES. If any mutilated Secured Note is surrendered to the Trustee or the Issuer and the Trustee and the Issuer receive evidence to their satisfaction of the destruction, loss or theft of any Secured Note, the Issuer shall issue, and the Trustee, upon the receipt of an Issuer Order, shall authenticate, a replacement Secured Note if the Trustee's requirements are met. If required by the Trustee or the Issuer, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Issuer to protect the Issuer, each Guarantor, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Secured Note is replaced. The Issuer may charge for its expenses in replacing a Secured Note. Every replacement Secured Note is an additional obligation of the Issuer and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Secured Notes duly issued hereunder. The provisions of this Section 2.07 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement of mutilated, destroyed, lost or stolen Secured Notes. SECTION 2.08. OUTSTANDING SECURED NOTES. The Secured Notes outstanding at any time are all the Secured Notes authenticated by the Trustee except for those cancelled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section as not outstanding. Except as set forth in Section 2.09 hereof, a Secured Note does not cease to be outstanding because the Issuer or an Affiliate of the Issuer holds the Secured Note. 55 If a Secured Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Secured Note is held by a bona fide purchaser. If the principal amount of any Secured Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest (including Special Interest and Additional Amounts, if any), on it ceases to accrue. If the Paying Agent (other than the Issuer, a Guarantor, or a Subsidiary or an Affiliate of any thereof), holds, on a Redemption Date or at Maturity, money sufficient to pay Secured Notes payable on that date, then on and after that date such Secured Notes shall be deemed to be no longer outstanding and shall cease to accrue interest (including Special Interest and Additional Amounts, if any). SECTION 2.09. TREASURY SECURED NOTES. In determining whether the Holders of the required principal amount of Secured Notes have concurred in any direction, waiver or consent, Secured Notes owned by the Issuer, a Subsidiary, a Guarantor, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Issuer, a Subsidiary or any Guarantor, shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Secured Notes that a Responsible Officer knows are so owned shall be so disregarded. SECTION 2.10. TEMPORARY SECURED NOTES. Until definitive Secured Notes are ready for delivery, the Issuer may prepare and the Trustee shall authenticate temporary Secured Notes upon a Issuer Order. Temporary Secured Notes shall be substantially in the form of definitive Secured Notes but may have variations that the Issuer considers appropriate for temporary Secured Notes and as shall be reasonably acceptable to the Trustee. Without unreasonable delay, the Issuer shall prepare and the Trustee shall authenticate definitive Secured Notes in exchange for temporary Secured Notes. Holders of temporary Secured Notes shall be entitled to all of the benefits of this Indenture. SECTION 2.11. CANCELLATION. The Issuer at any time may deliver Secured Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Secured Notes surrendered to them for registration of transfer, exchange or payment. The Trustee 56 and no one else shall cancel all Secured Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall upon the written request of the Issuer, return such cancelled Secured Notes to the Issuer. The Issuer may not issue new Secured Notes to replace Secured Notes that it has paid or that have been delivered to the Trustee for cancellation. SECTION 2.12. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED. Interest (including Additional Amounts, if any, and Special Interest, if any), on any Secured Note which is payable, and is punctually paid or duly provided for, on any June 30 or December 30 or on November 1, 2001 (each an "Interest Payment Date"), commencing on December 30, 1999, shall be paid to the Person in whose name such Secured Note is registered at the close of business on the Record Date for such interest payment, which shall be the June 15 or December 15 or, in the case of the November 1, 2001 Interest Payment Date, October 15, 2001 (in each case, whether or not a Business Day) immediately preceding such Interest Payment Date. Any interest on any Secured Note which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the registered Holder on the relevant Record Date, and, except as hereinafter provided, such Defaulted Interest and any interest payable on such Defaulted Interest may be paid by the Issuer, at its election, as provided in clause (a) or (b) below: (a) The Issuer may elect to make payment of any Defaulted Interest, and any interest payable on such Defaulted Interest, to the Persons in whose names the Secured Notes are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Issuer shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on the Secured Notes and the date of the proposed payment, and at the same time the Issuer shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest (including Additional Amounts, if any, and Special Interest, if any), or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as provided in this clause (a). Thereupon the Trustee shall fix a Special Record Date for the payment 57 of such Defaulted Interest which shall be not more than 15 calendar days and not less than 10 calendar days prior to the date of the proposed payment and not less than 10 calendar days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Issuer of such Special Record Date and, in the name and at the expense of the Issuer, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be sent, first class mail, postage prepaid, to each Holder at such Holder's address as it appears in the Securities Register, not less than 10 calendar days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the Persons in whose names the Secured Notes are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (b). (b) The Issuer may make payment of any Defaulted Interest (including Additional Amounts, if any, and Special Interest, if any), and any interest payable on such Defaulted Interest, on the Secured Notes in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Secured Notes may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Issuer to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section 2.12, each Secured Note delivered under this Indenture upon registration of transfer of, or in exchange for, or in lieu of, or in substitution for, any other Secured Note, shall carry the rights to interest (Additional Amounts, if any, and Special Interest, if any), accrued and unpaid, and to accrue, which were carried by such other Secured Note. SECTION 2.13. COMPUTATION OF INTEREST. Interest on the Secured Notes shall be computed on the basis of a 360-day year comprised of twelve 30-day months. SECTION 2.14. CUSIP NUMBER. The Issuer in issuing the Secured Notes may use a "CUSIP" number, and if it does so, the Trustee shall use the CUSIP number in notices of redemption or exchange as a convenience to Holders; PROVIDED that any such notice may state that no 58 representation is made as to the correctness or accuracy of the CUSIP number printed in the notice or on the Secured Notes and that reliance may be placed only on the other identification numbers printed on the Secured Notes. The Issuer shall promptly notify the Trustee of any change in the CUSIP number. ARTICLE III REDEMPTION AND PREPAYMENT SECTION 3.01. NOTICES TO TRUSTEE. If the Issuer elects to redeem Secured Notes pursuant to the optional redemption provisions of Section 3.07 hereof and of the Secured Notes, it shall furnish to the Trustee, at least 45 days (unless a shorter period is acceptable to the Trustee) but not more than 60 days before a Redemption Date, an Officers' Certificate setting forth (i) the clause of this Indenture pursuant to which the redemption shall occur, (ii) the Redemption Date, (iii) the principal amount of Secured Notes to be redeemed and (iv) the Redemption Price. SECTION 3.02. SELECTION OF SECURED NOTES TO BE REDEEMED. In the case of any partial redemption provided for in Section 3.07 hereof, selection of the Secured Notes for redemption will be made by the Trustee on a pro rata basis, by lot or by such other method as the Trustee in its sole discretion shall deem to be fair and appropriate, although no Secured Note of $1,000 in then outstanding principal amount or less shall be redeemed in part. If any Secured Note is to be redeemed in part only, the notice of redemption relating to such Secured Note shall state the portion of the principal amount thereof to be redeemed. A new Secured Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Secured Note. Partial Redemptions provided for in Section 3.08 and Section 3.09 hereof will be applied to all Secured Notes on a pro rata basis, although no Secured Note of $1,000 in then outstanding principal amount shall be redeemed in part. The Trustee shall promptly notify the Issuer in writing of the Secured Notes selected for redemption and, in the case of any Secured Note selected for partial redemption, the portion of the principal amount thereof to be redeemed. Secured Notes and portions of Secured Notes selected shall be in amounts of $1,000 or integral multiples of $1,000, except that if all of the Secured Notes of a Holder are to be redeemed, the entire outstanding amount of Secured Notes held by such Holder, even if not an integral 59 multiple of $1,000, shall be redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to Secured Notes called for redemption also apply to portions of Secured Notes called for redemption. SECTION 3.03. NOTICE OF REDEMPTION. At least 30 days but not more than 60 days before a Redemption Date, the Issuer shall mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Secured Notes are to be redeemed at its registered address as it appears in the Securities Register. The notice shall identify the Secured Notes to be redeemed including CUSIP number and shall state: (a) the Redemption Date; (b) the Redemption Price and the method of calculating such Redemption Price pursuant to this Indenture; (c) if any Secured Note is being redeemed in part, the portion of the principal amount of such Secured Note to be redeemed and that, after the Redemption Date upon surrender of such Secured Note, a new Secured Note or Secured Notes in principal amount equal to the unredeemed portion shall be issued upon cancellation of the original Secured Note; (d) the name and address of the Paying Agent; (e) that Secured Notes called for redemption (other than a Global Note) must be surrendered to the Paying Agent to collect the Redemption Price; (f) that, unless the Issuer defaults in making such redemption payment, interest (including Additional Amounts, if any, and Special Interest, if any), on Secured Notes (or portions thereof) called for redemption cease to accrue on and after the Redemption Date; (g) the paragraph of the Secured Notes or Section of this Indenture pursuant to which the Secured Notes called for redemption are being redeemed; and (h) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Secured Notes. 60 At the Issuer's request, the Trustee shall give the notice of redemption in the Issuer's name and at its expense; PROVIDED, HOWEVER, that the Issuer shall have delivered to the Trustee, at least 45 days prior to the Redemption Date (unless a shorter time is acceptable to the Trustee), an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph. SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption is mailed in accordance with Section 3.03 hereof, Secured Notes called for redemption become irrevocably due and payable on the Redemption Date at the Redemption Price including interest, including Special Interest, if any, and Additional Amounts, if any, accrued and unpaid on the Redemption Date. Upon surrender to the Paying Agent, such Secured Notes shall be paid at the Redemption Price stated in such notice. Failure to give notice or any defect in the notice to any Holder shall not affect the validity of the notice to any other Holder. A notice of redemption may not be conditional. SECTION 3.05. DEPOSIT OF REDEMPTION PRICE. On or prior to the Redemption Date, the Issuer shall deposit with the Trustee or with the Paying Agent immediately available funds sufficient to pay the Redemption Price of and accrued and unpaid interest, if any, on (and Special Interest, if any, and Additional Amounts, if any), on all Secured Notes to be redeemed on that date. The Trustee or the Paying Agent shall promptly return to the Issuer any money deposited with the Trustee or the Paying Agent by the Issuer in excess of the amounts necessary to pay the Redemption Price of, and accrued interest (including Special Interest, if any, and Additional Amounts, if any), on all Secured Notes to be redeemed. If the Issuer complies with the provisions of the preceding paragraph, on and after the Redemption Date, interest (including Special Interest, if any, and Additional Amounts, if any), shall cease to accrue on the Secured Notes or the portions of Secured Notes called for redemption. If a Secured Note is redeemed on or after a Record Date but on or prior to the related Interest Payment Date, then any accrued and unpaid interest (including Special Interest, if any, and Additional Amounts, if any), shall be paid to the Person in whose name such Secured Note was registered at the close of business on such Record Date. If any Secured Note called for redemption shall not be so paid upon surrender for redemption because of the failure of the Issuer to comply with the preceding paragraph, interest (including Special Interest, if any, and Additional Amounts, if any), 61 shall be paid on the unpaid principal, from the Redemption Date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Secured Notes and in Section 4.01 hereof. SECTION 3.06. SECURED NOTES REDEEMED IN PART. Upon surrender of a Secured Note that is redeemed in part, the Issuer shall issue and, upon the Issuer's written request, the Trustee shall authenticate for the Holder at the expense of the Issuer a new Secured Note equal in principal amount to the unredeemed portion of the Secured Note surrendered. The records of the Registrar and the Depositary shall reflect any partial redemption of any Global Note. SECTION 3.07. OPTIONAL REDEMPTIONS. (a) The Secured Notes will be redeemable, at the Issuer's option, in whole or from time to time in part upon not less than 30 and not more than 60 days' prior notice mailed by first class mail to each Holder's registered address appearing in the Securities Register on any date prior to Maturity at a price equal to 100% of the principal amount thereof plus accrued and unpaid interest (including Special Interest, if any, and Additional Amounts, if any), to the Redemption Date (subject to the right of Holders of record on the relevant Record Date to receive interest due on an Interest Payment Date that is on or prior to the Redemption Date), plus the Make-Whole Premium. In no event will the Redemption Price ever be less than 100% of the principal amount of the Secured Notes to be redeemed plus accrued and unpaid interest (including Special Interest, if any, and Additional Amounts, if any), to the Redemption Date. The amount of the Make-Whole Premium with respect to any Secured Notes (or portion thereof) to be redeemed will be equal to the excess, if any, of: (i) the sum of the present values, calculated as of the Redemption Date, of: (1) each interest payment that, but for such redemption, would have been payable on the Secured Notes (or portion thereof) being redeemed on each Interest Payment Date occurring after the Redemption Date (excluding any accrued and unpaid interest for the period prior to the Redemption Date); and (2) the principal amount that, but for such redemption, would have been payable at the final 62 maturity of the Secured Notes (or portion thereof) being redeemed, over (ii) the principal amount of the Secured Notes (or portion thereof) being redeemed. The present values of interest and principal payments referred to in clause (i) above will be determined in accordance with generally accepted principles of financial analysis. Such present values will be calculated by discounting the amount of each payment of interest or principal from the date that each such payment would have been payable, but for the redemption, to the Redemption Date at a discount rate equal to the Treasury Rate (as defined below) plus 50 basis points. The Make-Whole Premium will be calculated by the Independent Investment Banker. For purposes of this Section 3.07 and Section 3.09, the following definitions apply: "TREASURY RATE" is defined to mean, with respect to any Redemption Date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption Date. "COMPARABLE TREASURY ISSUE" is defined to mean the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the weighted average maturity of the remaining term of the Secured Notes outstanding that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to such weighted average maturity of such Secured Notes. "Independent Investment Banker" means the Reference Treasury Dealer appointed by the Trustee after consultation with the Issuer. "COMPARABLE TREASURY PRICE" is defined to mean, with respect to any Redemption Date, the average of the Reference Treasury Dealer Quotations for such Redemption Date. The "Reference Treasury Dealer Quotations" means, with respect to the Reference Treasury Dealer and any Redemption Date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by the 63 Reference Treasury Dealer at 5:00 p.m. (New York City time) on the third business day preceding such Redemption Date. "REFERENCE TREASURY DEALER" is defined to mean each of Donaldson, Lufkin & Jenrette Securities Corporation and its successors; PROVIDED, HOWEVER, that if Donaldson, Lufkin & Jenrette Securities Corporation shall cease to be a primary U.S. government securities dealer in New York City (a "Primary Treasury Dealer"), the Issuer shall substitute therefor another Primary Treasury Dealer. (b) The Secured Notes may be redeemed, at the option of the Issuer, at any time as a whole but not in part, on not less than 30 nor more than 60 days' prior notice mailed by first class mail to each Holder's registered address appearing in the Securities Register, at a price equal to 100% of the principal amount thereof plus accrued and unpaid interest (including Special Interest, if any, and Additional Amounts, if any), to the Redemption Date (subject to the right of Holders of record on the relevant Record Date to receive interest due on an Interest Payment Date that is on or prior to the Redemption Date), in the event the Issuer has become or would become obligated to pay (and the Issuer cannot avoid such obligation by taking reasonable measures available to it), on the next date on which any amount would be payable with respect to the Secured Notes, any Additional Amounts as a result of a change in or an amendment to the laws (including nay regulations promulgated thereunder) of a Tax Jurisdiction, or any change in or amendment to any official position regarding the application or interpretation of such laws or regulations, which change or amendment is announced or becomes effective on or after the Issue Date; PROVIDED, HOWEVER, that such redemption shall be conditioned upon the Issuer being actually obligated to pay such Additional Amounts on the relevant payment date. Prior to giving of the notice of redemption described in the preceding paragraph, the Issuer shall deliver to the Trustee an Officers' Certificate (together with a copy of an Opinion of Counsel from counsel that is independent from the Issuer to the effect that the Issuer will be or will become obligated to pay Additional Amounts), stating that the Issuer is entitled to effect such redemption in accordance with this Indenture and setting forth in reasonable detail a statement of the facts relating thereto. (c) Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof. 64 SECTION 3.08. REDEMPTION UPON LOSS OF A MORTGAGED RIG. If an Event of Loss occurs at any time with respect to a Mortgaged Rig, the Issuer shall redeem 50% of the Secured Notes (or 100% of the Secured Notes in the case of an Event of Loss with respect to both Mortgaged Rigs or it Secured Notes have previously been redeemed pursuant to this Section 3.08 or Section 3.09) on the earlier to occur of (A) 30 days after the receipt of any Event of Loss Proceeds by the Issuer from the applicable Mortgaged Rig Owner and (B) 180 days after the date on which such Event of Loss occurred, at a Redemption Price equal to 100% of their principal amount, plus accrued and unpaid interest (including Additional Amounts, if any, and Special Interest, if any), to the Redemption Date (subject to the right of Holders of record on the relevant Record Date to receive interest due on an Interest Payment Date that is on or prior to the Redemption Date). SECTION 3.09. REDEMPTION UPON SALE OF A MORTGAGED RIG. If a Mortgaged Rig or the Capital Stock of a Restricted Subsidiary then owning a Mortgaged Rig is sold in compliance with the terms of this Indenture, the Issuer shall redeem 50% of the Secured Notes (or 100% of the Secured Notes in the case of a sale of both Mortgaged Rigs or the Capital Stock of both Restricted Subsidiaries then owning Mortgaged Rigs or if Secured Notes have previously been redeemed pursuant to this Section 3.08 or Section 3.09) on the earlier to occur of (A) 30 days after the receipt by the Issuer of Net Available Cash from such sale and (B) 60 days after the date of such sale at a Redemption Price equal to 100% of their principal amount, plus accrued and unpaid interest (including Additional Amounts, if any, and Special Interest, if any), to the Redemption Date (subject to the right of Holders of record on the relevant Record Date to receive interest due on an Interest Payment Date that is on or prior to the Redemption Date), plus the Make-Whole Premium. In no event will the Redemption Price ever be less than 100% of the principal amount of the Secured Notes to be redeemed plus accrued and unpaid interest (including Special Interest, if any, and Additional Amounts, if any), to the Redemption Date. ARTICLE IV COVENANTS SECTION 4.01. PAYMENT OF SECURED NOTES. The Issuer shall pay or cause to be paid the principal of, premium, if any, and interest (including Special Interest, if any, and Additional Amounts, if any), on the Secured 65 Notes on the dates and in the manner provided in the Secured Notes and in this Indenture. Principal, premium, if any, and interest (including Special Interest, if any, and Additional Amounts, if any), shall be considered paid on the date due if the Trustee or the Paying Agent, if other than the Issuer, a Guarantor or a Subsidiary or Affiliate of any thereof, holds as of noon, New York time, on the due date money deposited by the Issuer in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest (including Special Interest, if any, and Additional Amount, if any), then due. The Issuer shall pay all Special Interest, if any, in the same manner on the dates and in the amounts set forth in the Registration Rights Agreement. The Issuer will promptly notify the Trustee of a Registration Default (as defined in the Registration Rights Agreement) under the Registration Rights Agreement and any cure thereof. The Issuer shall pay interest (including post-petition interest in any proceeding under any applicable Federal, state or foreign bankruptcy law) on Defaulted Interest and Special Interest, if any, and Additional Interest, if any (without regard to any applicable grace period), at the same rate to the extent lawful. SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY. The Issuer shall maintain in the Borough of Manhattan, The City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Secured Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Issuer in respect of the Secured Notes and this Indenture may be served. The Issuer shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Issuer shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee. The Issuer may also from time to time designate one or more other offices or agencies where the Secured Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; PROVIDED, HOWEVER, that no such designation or rescission shall in any manner relieve the Issuer of its obligation to maintain an office or agency in the Borough of Manhattan, The City of New York, for such purposes. The Issuer shall give prompt written notice to the Trustee of 66 any such designation or rescission and of any change in the location of any such other office or agency. The Issuer hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Issuer in accordance with Section 2.03 hereof. SECTION 4.03. CORPORATE EXISTENCE. Subject to the provisions of Article V hereof, the Issuer shall do or cause to be done all things necessary to preserve and keep in full force and effect (i) its company existence, and the company, corporate, partnership or other existence of each of the Restricted Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of each of the Issuer or any such Restricted Subsidiary of the Issuer and (ii) the rights (charter and statutory), licenses and franchises of each of the Issuer and the Restricted Subsidiaries of the Issuer; PROVIDED, HOWEVER, that the Issuer shall not be required to preserve any such right, license or franchise, or the company, corporate, partnership or other existence of any of the Restricted Subsidiaries, if the Board of Directors of the Issuer or the Restricted Subsidiary so concerned, or of an officer (or other agent employed by the Issuer or of the Subsidiary so concerned) of the Issuer or a Restricted Subsidiary having managerial responsibility for any such properties or assets, shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Issuer and the Restricted Subsidiaries taken as a whole and that the loss thereof is not adverse in any material respect to the Holders of the Secured Notes. SECTION 4.04. MAINTENANCE OF PROPERTIES AND INSURANCE. (a) The Issuer shall cause all material properties and assets owned by or leased by it or any of the Restricted Subsidiaries useful and necessary to the conduct of its business or the business of any of its Restricted Subsidiaries to be maintained and kept in good condition, repair and working order (reasonable wear and tear excepted) and shall cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in its judgment may be necessary, so that the business carried on in connection therewith may be properly conducted at all times; PROVIDED, HOWEVER, that nothing in this Section 4.04 shall prevent the Issuer or any of the Restricted Subsidiaries from discontinuing the use, operation or maintenance of any of such properties and assets, or disposing of any of them, if such discontinuance or disposal is, in the judgment of the Board of Directors of the Issuer or the Restricted Subsidiary so concerned, or of an officer (or other agent employed by the Issuer or of the 67 Subsidiary so concerned) of the Issuer or a Restricted Subsidiary having managerial responsibility for any such properties or assets, desirable in the conduct of the business of the Issuer or such Restricted Subsidiary of the Issuer, and if such discontinuance or disposal is not adverse in any material respect to the Holders. (b) To the extent available at commercially reasonable rates, the Issuer shall maintain, and shall cause the Restricted Subsidiaries, to the extent such Restricted Subsidiaries maintain operations, to maintain, insurance with responsible carriers against such risks and in such amounts, and with such deductibles, retentions, self-insured amounts and coinsurance provisions, as are customarily carried by similar businesses of similar size. SECTION 4.05. COMPLIANCE WITH LAWS. The Issuer shall comply, and shall cause each of the Subsidiaries of the Issuer to comply, with all applicable statutes, rules, regulations, orders and restrictions in respect of the conduct of their respective businesses and the ownership of their respective properties, except for such noncompliances as would not in the aggregate have a material adverse effect on the financial condition or results of operations of the Issuer and the Restricted Subsidiaries taken as a whole. SECTION 4.06. TAXES AND OTHER CLAIMS. The Issuer shall pay, and shall cause each of the Restricted Subsidiaries to pay, prior to delinquency, (a) all material taxes, assessments, and governmental charges levied or imposed upon the Issuer or any of the Restricted Subsidiaries or upon the income, profits or property or assets of the Issuer or any of the Restricted Subsidiaries and (b) all lawful claims for labor, materials and supplies, which, if unpaid, might by law become a Lien upon the property or assets of the Issuer or any of the Restricted Subsidiaries, except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders of the Secured Notes and for which adequate reserves in accordance with GAAP or other appropriate provisions have been made. SECTION 4.07. STAY, EXTENSION AND USURY LAWS. The Issuer and each of the Guarantors covenant (to the extent that they may lawfully do so) that they shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Issuer and each of 68 the Guarantors (to the extent that they may lawfully do so) hereby expressly waive all benefit or advantage of any such law, and covenant that they shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted. SECTION 4.08. CHANGE OF CONTROL. (a) Upon the occurrence of any of the following events (each a "Change of Control"), the Issuer shall make an offer to repurchase all outstanding Secured Notes (the "Change of Control Offer") at a purchase price (the "Change of Control Purchase Price") in cash equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon, if any, (including Additional Amounts, if any, and Special Interest, if any), to the date of purchase (subject to the right of Holders of record on the relevant Record Date to receive interest (including Special Interest, if any, and Additional Amounts, if any), due on the relevant Interest Payment Date): (i) any "person" or "group" (as such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable), other than a Shareholder (or any Affiliate thereof) is or becomes the "beneficial owner" (as defined in Section 13(d) of the Exchange Act, except that a person will be deemed to have "beneficial ownership" of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 26.4% of the total voting power of the Voting Stock of the Issuer; PROVIDED, HOWEVER, for purposes of this clause (i) there shall not be a Change of Control with respect to Pride's "beneficial ownership" of the Voting Stock of the Issuer unless (A) any "person" or "group" (as such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable), is or becomes the "beneficial owner" (as defined in Section 13(d) of the Exchange Act, except that a person will be deemed to have "beneficial ownership" of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the total voting power of the Voting Stock of Pride, and (B) within 25 days after the closing of any such transaction either Moody's or S&P lowers the credit ratings for any outstanding debt of Pride or, in the 69 event Pride has no outstanding rated debt, the ratings of Pride; (ii) individuals who on the Issue Date constituted the board of directors of the Issuer (together with any new directors whose election by such board of directors or whose nomination for election by the shareholders of the Issuer was approved by a vote of 66 2/3% of the directors of the Issuer, then still in office who were either directors on the Issue Date or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the board of directors of the Issuer then in office; (iii) the adoption of a plan relating to the liquidation or dissolution of the Issuer; (iv) the merger or consolidation of any Shareholder or the Issuer with or into another Person (other than in the case of a Shareholder, a Person controlled by a Permitted Holder) or the merger of another Person (other than in the case of a Shareholder, a Person controlled by a Permitted Holder) with or into any Shareholder or the Issuer, as the case may be, or the sale of all or substantially all the assets of any Shareholder or the Issuer to another Person (other than in the case of a Shareholder, a Person controlled by a Permitted Holder), and, in the case of any such merger or consolidation, the securities of such Shareholder or the Issuer, as the case may be, that are outstanding immediately prior to such transaction and which represent 100% of the aggregate voting power of the Voting Stock of such Shareholder or the Issuer, as the case may be, are changed into or exchanged for cash, securities or property, unless pursuant to such transaction such securities are changed into or exchanged for, in addition to any other consideration, securities of the surviving corporation that represent immediately after such transaction, at least a majority of the aggregate voting power of the Voting Stock of the surviving corporation; or (v) prior to any Public Equity Offering of the Issuer, (x) Pride or a Qualified Substitute Owner ceases for any reason for more than 10 days to be the beneficial owner, directly or indirectly, of at least 26.4% of the total voting power of the Voting Stock of the Issuer. (b) The Change of Control Offer will remain open for a period of at least 30 days following its commencement 70 but no longer than 60 days, except to the extent that a longer period is required by applicable law (the "Change of Control Offer Period"). On the first Business Day after the termination of the Change of Control Offer Period (the "Change of Control Payment Date"), the Issuer will purchase all Secured Notes validly tendered and not properly withdrawn pursuant to the Change of Control Offer. Payment for any Secured Notes so purchased will be made in the same manner as interest payments are made on the Secured Notes. If the Change of Control Payment Date is on or after a Record Date and on or before the related Interest Payment Date, any accrued and unpaid interest including Special Interest, if any and Additional Amounts, if any (to the extent involving interest that is due and payable on such Interest Payment Date), shall be paid to the Person in whose name a Secured Note is registered at the close of business on such Record Date, and no additional interest (including Additional Amounts, if any, or Special Interest, if any) (to the extent involving interest that is due and payable on such Interest Payment Date), shall be payable to Holders who validly tender Secured Notes pursuant to the Change of Control Offer. (c) Within 30 days following any Change of Control, the Issuer or the Trustee (at the expense of the Issuer) shall mail by first class mail, a notice to each Holder, with a copy of such notice to the Trustee. The notice, which shall govern the terms of the Change of Control Offer, shall state: (i) that a Change of Control has occurred and a Change of Control Offer is being made as provided for herein that each Holder has the right to require the Issuer to purchase such Holder's Secured Notes at the Change of Control Purchase Price, and that, although Holders are not required to tender their Secured Notes, all Secured Notes that are validly tendered shall be accepted for payment; (ii) the circumstances and relevant facts regarding such Change of Control (including information with respect to pro forma historical income, cash flow and capitalization after giving effect to such Change of Control); (iii) the Change of Control Purchase Price and the Change of Control Payment Date, which will be no earlier than 30 days and no later than 60 days after the date such notice is mailed; 71 (iv) that any Secured Note accepted for payment pursuant to the Change of Control Offer (and duly paid for on the Change of Control Payment Date) shall cease to accrue interest (including Special Interest and Additional Amounts, if applicable), after the Change of Control Payment Date; (v) that any Secured Notes (or portions thereof) not validly tendered shall continue to accrue interest, including Special Interest and Additional Amounts, if applicable; (vi) that any Holder electing to have a Secured Note purchased pursuant to any Change of Control Offer shall be required to surrender the Secured Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Secured Note completed, or transfer by book-entry transfer, to the Issuer, a depositary, if appointed by the Issuer, or a Paying Agent at the address specified in the notice at least one Business Day before the Change of Control Purchase Date; (vii) that Holders shall be entitled to withdraw their election if the Issuer, the depositary or the Paying Agent, as the case may be, receives, not later than the expiration of the Change of Control Offer Period, a telegram, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Secured Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Secured Note purchased; and (viii) the instructions and any other information necessary to enable Holders to tender their Secured Notes (or portions thereof) and have such Secured Notes (or portions thereof) purchased pursuant to the Change of Control Offer. (d) On or before the Change of Control Payment Date, the Issuer shall, to the extent lawful, (1) accept for payment all Secured Notes or portions thereof validly tendered and not properly withdrawn pursuant to the Change of Control Offer, (2) deposit by noon, New York City time, on such date with the Paying Agent an amount equal to the Change of Control Purchase Price in respect of all Secured Notes or portions thereof so validly tendered and not properly withdrawn and (3) deliver or cause to be delivered to the Trustee the Secured Notes so accepted together with an Officers' Certificate stating the aggregate principal 72 amount of Secured Notes or portions thereof being purchased by the Issuer. The Paying Agent shall promptly (but in any case not later than five days after the Change of Control Payment Date) mail to each Holder of Secured Notes so validly tendered and not properly withdrawn the Change of Control Purchase Price for such Secured Notes. (e) Upon surrender and cancellation of a Certificated Secured Note that is purchased in part pursuant to the Change of Control Offer, the Issuer shall promptly issue and the Trustee shall authenticate and mail (or cause to be transferred by book entry) to the surrendering Holder of such Certificated Secured Note, a new Certificated Secured Note equal in principal amount to the unpurchased portion of such surrendered Certificated Secured Note; PROVIDED that each such new Certificated Secured Note shall be in a principal amount of $1,000 or an integral multiple thereof. Upon surrender of a Global Note that is purchased in part pursuant to a Change of Control Offer, the Paying Agent shall forward such Global Note to the Trustee who shall make a notation on Schedule A thereof to reduce the principal amount of such Global Note to an amount equal to the unpurchased portion of such Global Note, as provided in Section 2.06 hereof. The Issuer shall publicly announce the results of the Change of Control Offer on the Change of Control Payment Date. For purposes of this Section 4.08, the Trustee shall act as the Paying Agent. (f) The Issuer shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Secured Notes as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the other provisions of this Section 4.08, the Issuer shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the other provisions of this Section 4.08. SECTION 4.09. LIMITATIONS ON INDEBTEDNESS. (a) The Issuer will not, and will not permit any Restricted Subsidiary to, Incur, directly or indirectly, any Indebtedness; PROVIDED, HOWEVER, that the Issuer may Incur Indebtedness if the Consolidated EBITDA Coverage Ratio at the date of such Incurrence and after giving effect thereto exceeds 2.25 to 1.0. 73 (b) Notwithstanding paragraph (a), the following Indebtedness may be Incurred: (i) Indebtedness of the Issuer or a Restricted Subsidiary owed to and held by a Restricted Subsidiary or Indebtedness of a Restricted Subsidiary owed to and held by the Issuer; PROVIDED, HOWEVER, that (a) any subsequent issuance or transfer of any Capital Stock that results in such Restricted Subsidiary to whom Indebtedness is owed ceasing to be a Restricted Subsidiary or any transfer of such Indebtedness (other than to the Issuer or another Restricted Subsidiary) shall be deemed, in each case, to constitute the Incurrence of such Indebtedness and (b) if the Issuer is the obligor on such Indebtedness, such Indebtedness is expressly subordinated to the prior payment in full in cash of all obligations with respect to the Secured Notes; (ii) the Initial Secured Notes and the Exchange Secured Notes; (iii) the Subsidiary Guarantees, if any, the Issuer Loans and Indebtedness incurred in exchange for, or the proceeds of which are used to Refinance any Indebtedness permitted by this clause (iii); PROVIDED, HOWEVER, that (A) the principal amount of the Indebtedness so Incurred shall not exceed the principal amount of the Indebtedness so Refinanced (plus the amount of reasonable fees and expenses incurred in connection therewith, including any premium or defeasance costs) and (B) the Indebtedness so Incurred (1) shall not mature prior to the Stated Maturity of the Indebtedness so Refinanced and (2) shall have an Average Life equal to or greater than the remaining Average Life of the Indebtedness so Refinanced; (iv) Indebtedness of the Issuer or any Restricted Subsidiary (other than Indebtedness described in clause (i), (ii) or (iii) above) (x) outstanding on the Issue Date and (y) Indebtedness Incurred in exchange for, or the proceeds of which are used to Refinance, any Indebtedness permitted by this clause (iv) or permitted by clause (a) above; PROVIDED, HOWEVER, that (A) the principal amount of the Indebtedness so Incurred shall not exceed the principal amount of the Indebtedness Refinanced (plus the amount of reasonable fees and expenses incurred in connection therewith, including any premium or defeasance costs); and (B) the Indebtedness so Incurred (1) shall not mature prior to the Stated Maturity of the Indebtedness so Refinanced 74 and (2) shall have an Average Life equal to or greater than the remaining Average Life of the Indebtedness so Refinanced; (v) Obligations of the Issuer or a Restricted Subsidiary under performance or surety bonds relating to building contracts for the construction, repair or improvement of drilling rigs, drillships or similar vessels or contracts for the installation of related equipment; (vi) Hedging Obligations; (vii) Indebtedness of Restricted Subsidiaries or the Issuer under the Mitsubishi Loan Agreements and the MARAD Documents; and (viii) Indebtedness of the Issuer or any Restricted Subsidiary in an aggregate principal amount which, together with all other Indebtedness of the Issuer then outstanding (other than Indebtedness permitted by clauses (i) through (vii) of this paragraph (b) or paragraph (a)) does not exceed $20,000,000. (c) Notwithstanding paragraphs (a) and (b), neither the Issuer nor any Restricted Subsidiary shall issue any Indebtedness if the proceeds thereof are used, directly or indirectly, to repay, prepay, redeem, defease, retire, refund or refinance any Subordinated Obligations unless such Indebtedness shall be subordinated to the Secured Notes or the Issuer Loans, as applicable, to at least the same extent as such Subordinated Obligations. (d) For purposes of determining compliance with the foregoing covenant, (i) in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described above, the Issuer, in its sole discretion, will classify such item of Indebtedness and only be required to include the amount and type of such Indebtedness in one of the above clauses and (ii) an item of Indebtedness may be divided and classified in more than one of the types of Indebtedness described above. SECTION 4.10. LIMITATION ON LIENS. The Issuer shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, Incur or permit to exist any Lien of any nature whatsoever on any of its properties (including Capital Stock of a Restricted Subsidiary), whether owned at the Issue Date or thereafter acquired unless, in the case of property or assets not consisting of Collateral, contemporaneously therewith effective provision 75 is made to secure the Secured Notes equally and ratably with (or prior to) the obligations so secured for so long as such obligations are so secured; in each case other than Permitted Liens. SECTION 4.11. LIMITATION ON RESTRICTED PAYMENTS. (a) The Issuer will not, and will not permit any Restricted Subsidiary, directly or indirectly, to: (i) declare or pay any dividend or make any distribution on or in respect of its Capital Stock (including any payment in connection with any merger or consolidation involving the Issuer) or to the direct or indirect holders of its Capital Stock, except: (A) dividends or distributions payable solely in its Non-Convertible Capital Stock or in options, warrants or other rights to purchase its Non-Convertible Capital Stock; (B) dividends or distributions payable to the Issuer or a Restricted Subsidiary; and (C) pro rata dividends or distributions on the Capital Stock of a Restricted Subsidiary held by minority stockholders; (ii) purchase, redeem or otherwise acquire or retire for value any Capital Stock of the Issuer or of any direct or indirect parent of the Issuer, or any Restricted Subsidiary (except Capital Stock held by the Issuer or a Restricted Subsidiary); (iii) purchase, repurchase, redeem, defease or otherwise acquire or retire for value, prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment, any Subordinated Obligation (other than the purchase, repurchase or other acquisition of Subordinated Obligations purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of acquisition); or (iv) make any Investment other than a Permitted Investment (any such dividend, distribution, purchase, redemption, repurchase, defeasance, other acquisition, retirement or Investment being herein referred to as a "Restricted Payment"), 76 if at the time the Issuer or such Restricted Subsidiary makes such Restricted Payment: (1) a Default shall have occurred and be continuing (or would result therefrom); or (2) the Issuer would not be permitted to Incur an additional $1 of Indebtedness pursuant to Section 4.09(a) after giving pro forma effect to such Restricted Payment; or (3) the aggregate amount of such Restricted Payment and all other Restricted Payments since the Issue Date would exceed the sum of: (A) 50% of the Consolidated Net Income accrued during the period (treated as one accounting period) from the beginning of the fiscal quarter during which the Secured Notes were originally issued to the end of the most recent fiscal quarter ending at least 45 days prior to the date of such Restricted Payment (or, in case such Consolidated Net Income shall be a deficit, minus 100% of such deficit); (B) 100% of the aggregate net proceeds (including the fair market value of noncash proceeds, which shall be determined in good faith by the Board of Directors of the Issuer) received by the Issuer from the issue or sale of its Capital Stock (other than Redeemable Stock or Exchangeable Stock) subsequent to the Issue Date (other than an issuance or sale to a Restricted Subsidiary or an employee stock ownership plan or similar trust); (C) the amount by which Indebtedness of the Issuer is reduced on the Issuer's balance sheet upon the conversion or exchange (other than by a Restricted Subsidiary) subsequent to the Incurrence of any Indebtedness of the Issuer convertible or exchangeable for Capital Stock (other than Redeemable Stock or Exchangeable Stock) of the Issuer (less the amount of any cash, or other property, distributed by the Issuer upon such conversion or exchange); and (D) to the extent not otherwise included in Consolidated Net Income, the net reduction in Investments in Unrestricted Subsidiaries resulting from dividends, repayments of loans or advances, 77 or other transfers of assets, in each case to the Issuer or any Restricted Subsidiary after the Issue Date from any Unrestricted Subsidiary or from the redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary (valued in each case as provided in the definition of Investment), not to exceed in the case of any Restricted Subsidiary the total amount of Investments (other than Permitted Investments) in such Restricted Subsidiary made by the Issuer and its Restricted Subsidiaries in such Unrestricted Subsidiary after the Issue Date. (b) The provisions of Section (a) shall not prohibit: (i) any purchase or redemption of Capital Stock or Subordinated Obligations of the Issuer made by exchange for, or out of the proceeds of the substantially concurrent sale of, Capital Stock of the Issuer (other than Redeemable Stock or Exchangeable Stock and other Capital Stock issued or sold to a Restricted Subsidiary or an employee stock ownership plan); PROVIDED, HOWEVER, that (A) such purchase or redemption shall be excluded in the calculation of the amount of Restricted Payments and (B) the Net Cash Proceeds from such sale shall be excluded from clauses (3)(B) and (3)(C) of Section (a); (ii) any purchase or redemption of Subordinated Obligations of the Issuer made by exchange for, or out of the proceeds of the substantially concurrent sale of, Indebtedness of the Issuer which is permitted to be issued pursuant to Section 4.09 hereof; PROVIDED, HOWEVER, that such purchase or redemption shall be excluded in the calculation of the amount of Restricted Payments; (iii) dividends paid within 60 days after the date of declaration if at such date of declaration such dividend would have complied with this provision; PROVIDED, HOWEVER, that at the time of payment of such dividend, no other Default shall have occurred and be continuing (or would result therefrom); PROVIDED FURTHER, HOWEVER, that such dividend shall be included in the calculation of the amount of Restricted Payments (unless already included in determining the amount of Restricted Payments previously made upon the declaration of such dividend). 78 SECTION 4.12. LIMITATION ON SALE/LEASEBACK TRANSACTIONS. The Issuer will not, and will not permit any Restricted Subsidiary to, enter into any Sale/Leaseback Transaction with any Person (other than the Issuer or a Restricted Subsidiary) unless: (a) the Issuer or such Restricted Subsidiary would be entitled to incur Indebtedness, in a principal amount equal to the Attributable Indebtedness with respect to such Sale/Leaseback Transaction, secured by a Lien on the property subject to such Sale/Leaseback Transaction pursuant to Section 4.10 above without equally and ratably securing the Secured Notes pursuant to such Section; (b) the net proceeds received by the Issuer or any Restricted Subsidiary in connection with such Sale/Leaseback Transaction are at least equal to the fair value (as determined by the Board of Directors) of such property; and (c) the Issuer applies the proceeds of such transaction in compliance with Section 4.15. Notwithstanding the foregoing, the Issuer shall not and shall not permit any Restricted Subsidiary to enter into or otherwise became liable with respect to any Sale/Leaseback Transaction involving any Restricted Collateral. SECTION 4.13. SEC REPORTS. Notwithstanding that the Issuer may not be required to remain subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Issuer shall file with the SEC and provide the Trustee and Noteholders with such annual reports and such information, documents and other reports specified in Sections 13 and 15(d) of the Exchange Act. In addition, whether or not required by the rules and regulations of the Commission, the Issuer will file a copy of all such information and reports with the Commission for public availability (unless the Commission will not accept such filing). In addition, the Issuer shall furnish to the Noteholders and to prospective investors, upon the requests of such Noteholders, any information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act so long as the Secured Notes are not freely transferable under the Securities Act. SECTION 4.14. LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED SUBSIDIARIES. The Issuer shall not, and shall not permit any Restricted Subsidiary 79 to, create or otherwise cause or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to (a) pay dividends or make any other distributions, in cash or otherwise, on its Capital Stock to the Issuer or any Restricted Subsidiary or pay any Indebtedness owed to the Issuer or any Restricted Subsidiary, (b) make any loans or advances to the Issuer or any Restricted Subsidiary or (c) transfer any of its property or assets to the Issuer or any Restricted Subsidiary, except: (i) any encumbrance or restriction pursuant to an agreement in effect or entered into on the Issue Date; (ii) any encumbrance or restriction with respect to a Restricted Subsidiary pursuant to an agreement relating to any Acquired Indebtedness or Preferred Stock Incurred by such Restricted Subsidiary on or prior to the date on which such Restricted Subsidiary became a Restricted Subsidiary or was acquired by the Issuer (other than Indebtedness or Preferred Stock Incurred as consideration in, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was acquired by the Issuer or otherwise Incurred in anticipation of such acquisition) and outstanding on such date; (iii) any encumbrance or restriction relating to any assets acquired after the Issue Date, so long as such encumbrance or restriction relates only to the assets so acquired and is not or was not created in anticipation of such acquisition; (iv) any encumbrance or restriction pursuant to an agreement effecting a Refinancing of Indebtedness or Preferred Stock Incurred pursuant to an agreement referred to in clause (i), (ii) or (iii) of this Section or this clause (iv) or contained in any amendment to an agreement referred to in clause (i), (ii) or (iii) of this Section or this clause (iv); PROVIDED, HOWEVER, that the encumbrances and restrictions with respect to such Restricted Subsidiary contained in any such refinancing agreement or amendment are in the aggregate no less favorable to the Holders of Secured Notes than the encumbrances and restrictions with respect to such Restricted Subsidiary contained in such predecessor agreements; 80 (v) any such encumbrance or restriction consisting of customary nonassignment provisions in leases governing leasehold interests or in license agreements to the extent such provisions restrict the assignment of such agreement and any rights granted or property leased thereunder; (vi) in the case of clause (iii) above, restrictions contained in security agreements or mortgages securing Indebtedness of a Restricted Subsidiary to the extent such restrictions restrict the transfer of the property subject to such security agreements or mortgages; and (vii) any temporary encumbrance or restriction with respect to a Restricted Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all the Capital Stock or assets of such Restricted Subsidiary pending the closing of such sale or disposition. Nothing contained in this covenant shall prevent the Issuer or any Restricted Subsidiary from entering into any agreement permitting the incurrence of Liens otherwise permitted by Section 4.10 hereof. SECTION 4.15. LIMITATION ON ASSET SALES. (a) The Issuer shall not, and shall not permit any Restricted Subsidiary to, sell, assign, convey, transfer or otherwise dispose of a Mortgaged Rig or any other portion of the Collateral (other than an Incidental Asset or Temporary Cash Investments in the Reserve Account and other than a transfer of a Mortgaged Rig to a Wholly Owned Restricted Subsidiary that becomes a Subsidiary Guarantor); PROVIDED, HOWEVER, that the Issuer or a Restricted Subsidiary may sell a Mortgaged Rig or the Issuer may sell all the Capital Stock of a Restricted Subsidiary owning a Mortgaged Rig (any such asset proposed to be sold is referred to herein as a "Mortgaged Rig Asset") if such sale of a Mortgaged Rig Asset shall be made in compliance with each of the following conditions: (i) no Default shall have occurred and be continuing; (ii) the sale shall be effected in a commercially reasonable manner as determined by the Board of Directors and evidenced by a Board Resolution; (iii) the entire consideration for such sale shall be at least equal to the fair market value of the 81 Mortgaged Rig Asset (as determined in good faith by the Issuer's Board of Directors); (iv) at least 85% of the consideration received shall be in the form of cash or Temporary Cash Equivalents; and (v) the Issuer shall have complied with the other provisions of this Indenture applicable to such sale, including Section 3.09. (b) The Issuer shall not, and shall not permit any of its Restricted Subsidiaries to, engage in any Asset Sales (other than Asset Sales permitted by Section 4.15(a) and foreclosures, deeds-in-lieu of foreclosure or similar transactions) unless (i) the Issuer or the applicable Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the fair market value of the assets sold or otherwise disposed of (as determined in good faith by the Issuer's Board of Directors), and (ii) at least 85% of the consideration received by the Issuer or the Restricted Subsidiary, as the case may be, from such Asset Sale at the time of such disposition shall be in the form of cash or Temporary Cash Equivalents. If the Issuer or a Restricted Subsidiary engages in an Asset Sale in compliance with the previous sentence or a foreclosure, deed-in-lieu of foreclosure or similar transaction, then the Issuer shall or shall cause a Restricted Subsidiary to apply an amount equal to such excess Net Available Cash within 360 days of the Asset Sale either (i) to repay Senior Indebtedness of the Issuer or of a Restricted Subsidiary (other than in each case Indebtedness owed to an Affiliate of the Issuer), (ii) to invest in Additional Assets or (iii) pay (no later than the end of such 360-day period) such excess Net Available Cash (to the extent not applied pursuant to clauses (i) or (ii) above) directly to the Trustee for deposit in the Reserve Account. Pending application of Net Available Cash pursuant to this Section, such Net Available Cash shall be invested in Permitted Investments or to temporarily reduce Indebtedness. SECTION 4.16. LIMITATION ON ASSET SWAPS. The Issuer will not, and will not permit any Restricted Subsidiary to, engage in any Asset Swap, unless: (i) at the time of entering into the agreement with respect thereto and immediately after giving effect to the proposed Asset Swap, no Default shall have occurred and be continuing; 82 (ii) the aggregate fair market values of the Additional Assets and other consideration to be received by the Issuer or the applicable Restricted Subsidiary is, at the time the Asset Swap is agreed to, substantially equal to the aggregate fair market of the property being disposed of by the Issuer or the applicable Restricted Subsidiary (to be determined in good faith by the Board of Directors of the Issuer and to be evidenced by a resolution of such Board set forth in an Officers' Certificate delivered to the Trustee); and (iii) the cash payments, if any, received by the Issuer or such Restricted Subsidiary in connection with such Asset Swap are treated as Net Available Cash received from an Asset Sale. SECTION 4.17. LIMITATION ON AFFILIATE TRANSACTIONS. (a) The Issuer shall not, and shall not permit any Restricted Subsidiary to, enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property, employee compensation arrangements or the rendering of any service) with any Affiliate of the Issuer (an "Affiliate Transaction") unless the terms thereof (i) are no less favorable to the Issuer or such Restricted Subsidiary than those that could be obtained at the time of such transaction in arm's-length dealings with a Person who is not such an Affiliate, (ii) if such Affiliate Transaction involves an amount in excess of $500,000, (A) are set forth in writing and (B) have been approved by a majority of the members of the Board of Directors of the Issuer having no personal stake in such Affiliate Transaction and (iii) if such Affiliate Transaction involves an amount in excess of $10,000,000, have been determined by an investment banking firm of national reputation or, in the case of the sale or transfer of assets subject to valuation, an appropriate independent qualified appraiser of national reputation, given the size and nature of the transaction, to be fair, from a financial standpoint, to the Issuer and its Restricted Subsidiaries. (b) The provisions of the foregoing paragraph (a) shall not prohibit (i) any Restricted Payment permitted to be paid pursuant to the covenant described under Section 4.11 hereof, (ii) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements of the Issuer, stock options, stock ownership and other employee benefit plans approved by the Board of Directors of the Issuer, (iii) the grant of stock options or similar rights to employees, officers and directors of the 83 Issuer pursuant to plans approved by its Board of Directors, (v) the payment of reasonable fees to directors of the Issuer and its Restricted Subsidiaries who are not employees of the Issuer or its Restricted Subsidiaries and any Affiliate Transaction between the Issuer and a Wholly Owned Restricted Subsidiary or between Wholly Owned Restricted Subsidiaries, and (vi) transactions pursuant to agreements in effect on the Issue Date and disclosed in the Offering Memorandum. (c) The Issuer shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, Incur or permit to exist any Indebtedness of the Issuer or any Restricted Subsidiary owed to a Shareholder unless (i) such Indebtedness is subordinated to the Secured Notes, in the case of the Issuer, or the Issuer Loans, in the case of a Restricted Subsidiary, and (ii) all payments of principal, premium, if any, and interest in respect of the Secured Notes or the Issuer Loans, as applicable, is required to be paid before any amounts shall be payable in respect of such Indebtedness and, prior to such time, the holder of such Indebtedness shall not have any claim against the Issuer or such Restricted Subsidiary in respect of such Indebtedness; PROVIDED, HOWEVER, that payments and prepayments thereof may be made if permitted under Section 4.11. SECTION 4.18. LIMITATION ON THE SALE OR ISSUANCE OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES. The Issuer shall not sell or otherwise dispose of any Capital Stock of a Restricted Subsidiary, and shall not permit any such Restricted Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of any of its Capital Stock except (i) to the Issuer or a Wholly Owned Restricted Subsidiary, (ii) if, immediately after giving effect to such issuance, sale or other disposition, neither the Issuer nor any of its Subsidiaries own any Capital Stock of such Restricted Subsidiary, (iii) directors' qualifying shares or (iv) other than with respect to shares of Capital Stock of a Restricted Subsidiary which owns a Mortgaged Rig, if, immediately after giving effect to such issuance, sale or other disposition, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary and any Investment in such Person remaining after giving effect thereto would have been permitted to be made under the covenant described under Section 4.11 if made on the date of such issuance, sale or other disposition. SECTION 4.19. FUTURE SUBSIDIARY GUARANTORS. The Issuer may not permit any Restricted Subsidiary, directly or indirectly, to guarantee any Indebtedness of the Issuer or any other Obligor ("Guaranteed Indebtedness") unless 84 (i) such Restricted Subsidiary simultaneously executes and delivers a supplemental indenture to this Indenture providing for a Subsidiary Guarantee of payment of the Secured Notes by such Restricted Subsidiary and (ii) such Restricted Subsidiary waives and will not in any manner whatsoever claim or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against the Issuer or any other Restricted Subsidiary as a result of any payment by such Restricted Subsidiary under its Subsidiary Guarantee. SECTION 4.20. IMPAIRMENT OF LIENS. The Issuer shall not, and the Issuer shall not permit any Restricted Subsidiary to, take or omit to take, any action which action or omission might or would have the result of materially impairing the Liens with respect to the Collateral for the benefit of the Trustee and the Holders of the Secured Notes or the Liens granted by the Mortgaged Rig Owners pursuant to the Mitsubishi Loan Collateral Documents, and except as permitted by this Indenture and the Security Agreements, the Issuer shall not, and shall not permit any Restricted Subsidiary to, grant to any Person other than the Trustee, for the benefit of the Trustee and the Holders of the Secured Notes, any interest whatsoever in any of the Collateral. SECTION 4.21. LIMITATION ON ISSUER ACTIVITIES. The Issuer will not engage in any business activity or undertake any activity, except any activity (i) relating to the offering, sale or issuance of the Secured Notes or the use of the proceeds of such sale of Secured Notes to acquire the Issuer Loans, or (ii) undertaken with the purpose of, and directly related to, exercising its rights under, and fulfilling the obligations of the Issuer or the Restricted Subsidiaries under, the Secured Notes, this Indenture, the Issuer Loans, the Mitsubishi Documents and Security Agreements. SECTION 4.22. INSURANCE. The Issuer shall, or shall cause the Mortgaged Rig Owner owning a Mortgaged Rig to, carry and maintain with respect to each Mortgaged Rig owned by it insurance payable in United States Dollars in amounts, against risks and in a form which is substantially equivalent to the coverage carried by other responsible and experienced companies engaged in the operation of drilling rigs similar to the Mortgaged Rigs and with insurance companies, underwriters, funds, mutual insurance associations or clubs of recognized standing. Total property insurance for the Mortgaged Rigs shall be in an aggregate amount not less than the sum of the aggregate outstanding principal amount, subject to customary 85 deductibles, retentions or self-insurance, of the Secured Notes and the aggregate principal amount of all other Indebtedness secured by a Lien on the Collateral. SECTION 4.23. AMENDMENTS TO SECURITY DOCUMENTS. The Issuer shall not, and the Issuer shall not permit any of its Restricted Subsidiaries to, amend, modify or supplement, or permit or consent to any amendment, modification or supplement of, the Security Agreements in any way that would be adverse to the Holders of the Notes. SECTION 4.24. USE OF PROCEEDS. The Issuer shall use the net proceeds of the offering of the Secured Notes to acquire the Issuer Loans. SECTION 4.25. SEPARATE CORPORATE ENTITIES. The Issuer shall, and shall cause each of its Subsidiaries to, and each Shareholder shall, conduct its business in its own name so as to avoid the appearance of conducting its business on behalf of any other Person or that the assets of the Issuer or any such Subsidiaries or any Shareholder (the "Applicable Entities") are available to pay the creditors of any of the other applicable Entities. Without limiting the generality of the foregoing, (1) each Applicable Entity shall maintain corporate records and books of account separate from those of the other Applicable Entities; (2) each Applicable Entity shall comply with its constitutive documents, including by obtaining proper authorization from its board of directors of all corporate action requiring such authorization and holding meetings of its board of directors as required by its constitutive documents; (3) operating expenses and liabilities of each Applicable Entity shall not be paid from the funds of the other Applicable Entities except to the extent such funds have been contributed as equity or constitute loans and, in each case, documented appropriately; (4) each Applicable Entity shall maintain an arm's-length relationship with the other Applicable Entities and shall not hold itself out as being liable for the debts of the other Applicable Entities; and (5) each Applicable Entity shall keep its assets and its liabilities wholly separate from the other applicable Entities except that operating assets may be 86 pooled in the ordinary course of the Applicable Entity's drilling business. The foregoing, however, shall not be violated by reason of this Indenture, the Guarantees or the Security Agreements or any permitted Indebtedness or permitted Lien under the Indenture. The Issuer shall cause each Unrestricted Subsidiary to provide in any Indebtedness Incurred by such Unrestricted Subsidiary that the holder of such Indebtedness will not have any recourse to the Issuer or any of its Restricted Subsidiaries with respect to such Indebtedness. SECTION 4.26. COMPLIANCE CERTIFICATE; NOTICE OF DEFAULT OR EVENT OF DEFAULT. (a) The Issuer and each Subsidiary Guarantor shall deliver to the Trustee, within 90 days after the end of each fiscal year, an Officers' Certificate (which shall be signed by Officers satisfying the requirements of Section 314 of the Trust Indenture Act) stating that a review of the activities of the Issuer and the Restricted Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Issuer has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Issuer has kept, observed, performed and fulfilled in all material respects each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Issuer is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of, interest, if any (including Special Interest, if any, and Additional Amounts, if any), on the Secured Notes is prohibited or if such event has occurred, a description of the event and what action the Issuer is taking or proposes to take with respect thereto. (b) The year-end financial statements delivered pursuant to Section 4.13 hereof shall be accompanied by a written statement of the independent public accountants of the Issuer (who shall be a firm of established national reputation) that in making the examination necessary for certification of such financial statements, nothing has come to their attention that would lead them to believe that the 87 Issuer has violated any provisions of Article 4 or Article 5 hereof (except that, such written statement need not address the Issuer's compliance with the provisions of Sections 4.2, 4.5, 4.7, 4.8, 4.17 or 4.27 hereof) or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. (c) The Issuer shall, so long as any of the Secured Notes are outstanding, deliver to the Trustee, forthwith upon, but in any event within five Business Days after any Officer's becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Issuer is taking or proposes to take with respect thereto. (d) For purposes of this Section 4.26, compliance shall be determined without regard to any period of grace or requirement of notice under this Indenture. SECTION 4.27. PROHIBITION ON ISSUER BECOMING AN INVESTMENT COMPANY. The Issuer shall not become an "Investment Company" as defined in the Investment Company Act of 1940, as amended. SECTION 4.28. ADDITIONAL AMOUNTS. (a) Except to the extent required by any applicable law, regulation or governmental policy, any and all payments of, or in respect of, any Secured Note shall be made free and clear of and without deduction for or on account of any and all present or future taxes, levies, imposts, deduction, charges or withholdings and all liabilities with respect thereto imposed by the British Virgin Islands, Brazil, the United States of America or any other jurisdiction with which the Issuer, Pride or any Subsidiary Guarantor has some connection (including any jurisdiction from or through which payments under the Secured Notes, the Pride Guarantee or the Subsidiary Guarantees (if any) are made or in which the Mortgaged Rigs are located) or any political subdivision of or any taxing authority in any such jurisdiction (collectively, "Taxes" and any such jurisdiction or political subdivision or taxing authority, a "Tax Jurisdiction"). If the Issuer, Pride or any Subsidiary Guarantor shall be required by law to withhold or deduct any Taxes from or in respect of any sum payable under the Secured Notes, the Pride Guarantee or a Subsidiary Guarantee, the sum payable by the Issuer under the Secured Notes shall be increased by the amount ("Additional Amounts") necessary so that after making all required withholdings and deductions, the Holder or beneficial owner 88 of a Secured Note shall receive an amount equal to the sum that it would have received had not such withholdings and deductions been made; PROVIDED that any such sum shall not be paid to a Holder (an "Excluded Holder") (i) in respect of any Taxes resulting from the beneficial owner of such Secured Note carrying on business or being deemed to carry on business in or through a permanent establishment or fixed base in the relevant taxing jurisdiction or having any other connection with the relevant taxing jurisdiction or any political subdivision thereof or any taxing authority therein other than the mere holding or owning of such Secured Note, being a beneficiary of the Pride Guarantee or any applicable Subsidiary Guarantee, the receipt of any income or payments in respect of such Secured Note, the Pride Guarantee or any applicable Subsidiary Guarantee or the enforcement of such Secured Note, the Pride Guarantee or any applicable Subsidiary Guarantee, (ii) in respect of any Taxes that would not have been imposed but for the presentation (where presentation is required) of such Secured Note for payment more than 180 days after the date such payment became due and payable or was duly provided for, whichever occurs later, or (iii) in respect of United States federal income Taxes, if such Holder fails to provide to the Issuer, within 30 days of a request by the Issuer, a complete and valid IRS Form W-8 or other form establishing an exemption from United States withholding Taxes. The Issuer, Pride or the Subsidiary Guarantors, as applicable, will also (i) make such withholding or deduction and (ii) remit the full amount deducted or withheld to the relevant authority in accordance with applicable law, and, in any such case, the Issuer will furnish to each Holder on whose behalf an amount was so remitted, within 30 calendar days after the date the payment of any Taxes is due pursuant to applicable law, certified copies of tax receipts evidencing such payment by the Issuer, Pride or the Subsidiary Guarantors, as applicable. The Issuer will, upon written request of each Holder (other than an Excluded Holder), reimburse each such Holder for the amount of (i) any Taxes so levied or imposed and paid by such Holder as a result of payments made under or with respect to any Secured Notes, and (ii) any Taxes so levied or imposed with respect to any reimbursement under the foregoing clause (i) so that the net amount received by such Holder (net of payments made under or with respect to such Secured Notes, the Pride Guarantee or the applicable Subsidiary Guarantees) after such reimbursement will not be less than the net amount the Holder would have received if Taxes on such reimbursement had not been imposed. (b) At least 30 calendar days prior to each date on which any payment under or with respect to the Secured 89 Notes is due and payable, if the Issuer will be obligated to pay Additional Amounts with respect to such payment, the Issuer will deliver to the Trustee an Officers' Certificate stating the fact that such Additional Amounts will be payable and the amounts so payable and will set forth such other information necessary to enable the Trustee to pay such Additional Amounts to Holders on the payment date. (c) If any Holder or beneficial owner of any Secured Note receives a refund of Taxes after the Issuer, Pride or any Subsidiary Guarantor, as applicable, has paid any Additional Amounts, such Holder or beneficial owner shall reimburse the Issuer, Pride or any Subsidiary Guarantor, as applicable, for any amount of such refund. (d) The Issuer will pay any present or future stamp, issue, registration, documentary or other similar taxes and duties, including interest and penalties, in respect of the creation, issue and offering of the Secured Notes payable in the United States, the British Virgin Islands, Brazil or any political subdivision thereof or taxing authority of or in the foregoing. The Issuer will also pay and indemnify the Trustee and the Holders of the Secured Notes from and against all court fees and taxes or other taxes and duties, including interest and penalties, paid by any of them in any jurisdiction in connection with any action permitted to be taken by the Holders or the Trustee to create Liens on the Collateral or to enforce the Obligations of Issuer, Pride or the Subsidiary Guarantors under the Secured Notes, this Indenture, the Pride Guarantee, the Subsidiary Guarantees, the Issuer Loans or the Security Agreements. (e) Whenever there is mentioned, in any context, the payment of principal, premium or interest in respect of any Secured Note or the net proceeds received on the sale or exchange of any Secured Note, such mention shall be deemed to include the payment of Additional Amounts or Special Interest provided for in this Indenture to the extent that, in such context, Additional Amounts or Special Interest are, were or would be payable in respect thereof pursuant to this Indenture. ARTICLE V CONSOLIDATION, MERGER, CONVEYANCE, LEASE OR TRANSFER SECTION 5.01. LIMITATIONS ON MERGERS AND CONSOLIDATIONS. (a) Neither the Issuer nor any Subsidiary Guarantor (other than any Subsidiary Guarantor that shall 90 have been released from its Subsidiary Guarantee pursuant to the provisions of this Indenture) will consolidate with or merge into any Person, continue in another jurisdiction, or sell, lease, convey, transfer or otherwise dispose of all or substantially all of its assets to any Person, unless: (i) the Person formed by or surviving such consolidation or merger (if other than the Issuer or such Subsidiary Guarantor, as the case may be), or to which such sale, lease, conveyance, transfer or other disposition shall be made (collectively, the "Successor"), is a corporation organized and existing under the laws of the Bahamas, the British Virgin Islands or Panama (such jurisdiction of organization, the "Relevant Jurisdiction"), and the Successor assumes by supplemental indenture in a form satisfactory to the Trustee all of the applicable Obligations of the Issuer or such Subsidiary Guarantor, as the case may be, under this Indenture, the Security Agreements, the Subsidiary Guarantees and the Secured Notes; (ii) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; (iii) in the case of the Issuer, immediately after giving effect to such transactions, the resulting, surviving or transferee Person would be able to incur at least $1 of Indebtedness pursuant to Section 4.09(a) hereof; (iv) immediately after giving effect to such transaction, the Successor shall have a Consolidated Net Worth in an amount that is not less than the Consolidated Net Worth of the Issuer or Subsidiary Guarantor as the case may be, immediately prior to such transaction; (v) the Issuer shall have delivered, or caused to be delivered to the Trustee, in form and substance reasonably satisfactory to the Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, continuance, sale, assignment, conveyance or transfer and the supplemental indenture in respect thereto comply with the provisions of this Indenture and that all conditions precedent in this Indenture relating to such transactions have been complied with; (vi) the Issuer shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders 91 will not recognize income, gain or loss for U.S. Federal income tax purposes as a result of such transaction and will be subject to U.S. Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such transaction had not occurred; and (vii) the Issuer shall have delivered to the Trustee an Opinion of Counsel in the Relevant Jurisdiction to the effect that(A) any payment of interest, principal or premiums (if any) on the Secured Notes by the Issuer to a Holder or by a Subsidiary Guarantor on its Subsidiary Guarantee, as applicable, will, after the consolidation, merger, conveyance, transfer or lease of assets be exempt from withholding tax in the Relevant Jurisdiction and (B) no other taxes on income (including taxable capital gains) will be payable under the law of the Relevant Jurisdiction by a Holder who is or who is deemed to be a nonresident of the Relevant Jurisdiction in respect of the acquisition, ownership or disposition of the Secured Notes, including the receipt of interest, principal or premiums thereon. (b) Upon any transaction or series of transactions that are of the type described in, and are effected in accordance with, this Section 5.01, the Successor shall succeed to, and be substituted for, and may exercise every right and power of, the Issuer or Subsidiary Guarantor, as applicable, under this Indenture and the Secured Notes with the same effect as if such Successor had been named as the Issuer or Subsidiary Guarantor, as applicable, in this Indenture; and when a Successor duly assumes all of the Obligations and covenants of the Issuer or a Subsidiary Guarantor pursuant to this Indenture and the Secured Notes, except in the case of a conveyance, transfer or lease, the predecessor Person shall be relieved of all such Obligations. (c) For all purposes of this Indenture and the Secured Notes, Subsidiaries of any Successor will, upon such transaction or series of transactions, become Restricted Subsidiaries or Unrestricted Subsidiaries as provided pursuant to this Indenture and all Indebtedness, and all Liens on the property or assets, of the Successor and its Restricted Subsidiaries immediately prior to such transaction or series of transactions shall be deemed to have been incurred upon such transaction or series of transactions. 92 ARTICLE VI DEFAULTS AND REMEDIES SECTION 6.01. EVENTS OF DEFAULT. Each of the following is an "Event of Default" hereunder: (a) default in the payment of interest (including Special Interest, if any, and Additional Amounts, if any), on the Secured Notes or an Issuer Loan when due, continued for 30 days; (b) (i) default in the payment of principal of, or premium, if any, on, any Secured Note or Issuer Loan when due at its Stated Maturity, upon redemption, required repurchase, declaration of acceleration or otherwise; or (ii) the failure to redeem or purchase Secured Notes or the Issuer Loans when required pursuant to this Indenture or the Mitsubishi Loan Agreements; (c) the failure by the Issuer to comply with its obligations under Sections 3.08, 3.09, 4.08, 4.15 or 5.01; (d) the failure by the Issuer and the Subsidiary Guarantors to comply with its other agreements contained in this Indenture or in the Security Agreements and such failure or event of default continues for 60 days after notice; PROVIDED, HOWEVER, that a default under this clause (d) will not constitute an Event of Default until the Trustee provides written notice to the Issuer, or the Holders of 25% in aggregate principal amount of the outstanding Secured Notes provide a written notice to the Issuer and the Trustee, of the default, and the Issuer does not cure such default within 60 days after receipt of such notice; (e) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness by the Issuer or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Issuer or any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the date of this Indenture, which default (i) is caused by a failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such 93 Indebtedness on the date of such default unless being contested in good faith by appropriate proceedings (a "Payment Default"), (ii) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $10,000,000 or more or (iii) occurs under a Mitsubishi Loan Agreement or Mitsubishi Loan Collateral Agreement, is not a Payment Default and is not cured or waived within 120 days; PROVIDED, HOWEVER, that a default under this clause (e) will not constitute an Event of Default until the Trustee provides a written notice to the Issuer, or the Holders of 25% in aggregate principal amount of the outstanding Secured Notes provide a written notice to the Issuer and the Trustee, of the default; (f) failure by the Issuer or any of its Restricted Subsidiaries to pay final judgments aggregating in excess of $10,000,000, which judgments are not paid, discharged or stayed for a period of 30 days; (g) the entry by a court having jurisdiction in the premises of (i) a decree or order for relief in respect of the Issuer, Pride or any Significant Subsidiary in an involuntary case or proceeding under United States bankruptcy laws, as now or hereafter constituted, or any other applicable Federal, state, or foreign bankruptcy, insolvency, or other similar law or (ii) a decree or order adjudging the Issuer, Pride or any Significant Subsidiary a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Issuer, Pride or any Significant Subsidiary under United States bankruptcy laws, as now or hereafter constituted, or any other applicable Federal, state or foreign bankruptcy, insolvency, or similar law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Issuer, Pride or any Significant Subsidiary or of any substantial part of the property or assets of the Issuer, Pride or any Significant Subsidiary, or ordering the winding up or liquidation of the affairs of the Issuer, Pride or any Significant Subsidiary, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days; 94 (h) (i) the commencement by the Issuer, Pride or any Significant Subsidiary of a voluntary case or proceeding under United States bankruptcy laws, as now or hereafter constituted, or any other applicable Federal, state or foreign bankruptcy, insolvency or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent; or (ii) the consent by the Issuer, Pride or any Significant Subsidiary to the entry of a decree or order for relief in respect of the Issuer, Pride or any Significant Subsidiary in an involuntary case or proceeding under United States bankruptcy laws, as now or hereafter constituted, or any other applicable Federal, state, or foreign bankruptcy, insolvency or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against the Issuer, Pride or any Significant Subsidiary; or (iii) the filing by the Issuer, Pride or any Significant Subsidiary of a petition or answer or consent seeking reorganization or relief under U.S. bankruptcy laws, as now or hereafter constituted, or any other applicable Federal, state or foreign bankruptcy, insolvency or other similar law; or (iv) the consent by the Issuer, Pride or any Significant Subsidiary to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Issuer, Pride or any Significant Subsidiary or of any substantial part of the Property or assets of the Issuer, Pride or any Significant Subsidiary, or the making by the Issuer, Pride or any Significant Subsidiary of an assignment for the benefit of creditors; or (v) the admission by the Issuer, Pride or any Significant Subsidiary in writing of its inability to pay its debts generally as they become due; or (vi) the taking of corporate action by the Issuer, Pride or any Significant Subsidiary in furtherance of any such action; or (i) the Pride Guarantee or any Subsidiary Guarantee ceases to be in full force and effect (other than in accordance with the terms of this Indenture and such Subsidiary Guarantee) or Pride or a Subsidiary Guarantor denies or disaffirms its obligations under the Pride Guarantee or its Subsidiary Guarantee, as applicable; or (j) the Letter of Credit ceases to be in full force and effect or the Letter of Credit Provider denies or disaffirms its obligations under the Letter of Credit; or 95 (k) the Liens under the Security Agreements shall, at any time, cease to be in full force and effect for any reason (other than by operation of the provisions of this Indenture and the Security Agreements) other than the satisfaction in full of all obligations under this Indenture and discharge of this Indenture, or any Lien created thereunder shall be declared invalid or unenforceable or the Issuer or any Mortgaged Rig Owner shall assert, in any pleading in any court of competent jurisdiction, that any such Lien is invalid or unenforceable. SECTION 6.02. ACCELERATION. If any Event of Default (other than an Event of Default specified in clause (g) or (h) of Section 6.01) occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% of the outstanding aggregate principal amount at Stated Maturity of the Secured Notes, may declare the principal amount at Stated Maturity of, premium, if any, and any accrued and unpaid interest (including Additional Amounts, if any, and Special Interest, if any), on all such Secured Notes then outstanding to be immediately due and payable by a notice in writing to the Issuer (and to the Trustee if given by Holders of such Secured Notes), and upon any such declaration all amounts payable in respect of the Secured Notes will become and be immediately due and payable. If any Event of Default specified in clause (g) or (h) of Section 6.01 occurs, the principal amount at Stated Maturity of, premium, if any, and any accrued and unpaid interest (including Additional Amounts, if any, and Special Interest, if any), on, the Secured Notes then outstanding shall become immediately due and payable without any declaration or other act on the part of the Trustee or any Holder of such Secured Notes. After any such acceleration, but before a judgment or decree based on acceleration, Holders of a majority in principal amount at Stated Maturity of the outstanding Secured Notes by notice to the Issuer and the Trustee may rescind an acceleration and its consequences if: (a) the Issuer, Pride or any Subsidiary Guarantor has paid or deposited with the Trustee a sum sufficient to pay (i) all money paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursement and advances of the Trustee, its agents and counsel, and any other amounts due to the Trustee under Section 7.07; 96 (ii) all overdue installments of interest (including Additional Amounts, if any, and Special Interest, if any), on, and any other amounts due in respect of, all Secured Notes; (iii) the principal of (and premium, if any, on) any Secured Notes that have become due otherwise than by such declaration of acceleration and interest thereon at the rate or rates prescribed therefor in the Secured Notes and this Indenture; and (iv) to the extent that payment of such interest is lawful, interest upon Defaulted Interest at the rate or rates prescribed therefor in the Secured Notes and this Indenture; (b) all Events of Default, other than the nonpayment of principal of Secured Notes which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 6.04; (c) the annulment of such acceleration would not conflict with any judgment or decree of a court of competent jurisdiction; and (d) the Issuer has delivered an Officers' Certificate to the Trustee to the effect of clauses (b) and (c) of this sentence. No such rescission shall affect any subsequent Default or impair any right consequent thereto. SECTION 6.03. OTHER REMEDIES. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal of, premium, on, if any, any interest (including Special Interest, if any, and Additional Amounts, if any), on, and any other amounts owing and unpaid on, the Secured Notes or to enforce the performance of any provision of the Secured Notes, the Security Agreements, the Guarantees or this Indenture or may draw under the Letter of Credit. The Trustee may maintain a proceeding even if it does not possess any of the Secured Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. 97 SECTION 6.04. WAIVER OF PAST DEFAULTS. Subject to Section 6.07 hereof, Holders of not less than a majority in aggregate principal amount of the then outstanding Secured Notes by notice to the Trustee may on behalf of the Holders of all of the Secured Notes waive an existing Default or Event of Default and its consequences hereunder, except (i) an existing Default or Event of Default in the payment of the principal of, premium, if any, on, or interest (including Additional Interest and Special Interest, if any), on, the Secured Notes (including in connection with an offer to purchase) or (ii) an existing Default or Event of Default in respect of a provision that under Section 10.02 cannot be amended without the consent of each Holder affected thereby. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture and the Security Agreements; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. SECTION 6.05. CONTROL BY MAJORITY. The Holders of a majority in aggregate principal amount of the Secured Notes then outstanding may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or the Security Agreements or, subject to Section 7.01 hereof, that the Trustee determines may be unduly prejudicial to the rights of other Holders of Secured Notes or that may involve the Trustee in personal liability; PROVIDED that the Trustee may take any other action deemed by the Trustee that is not inconsistent with such direction. Prior to taking any action hereunder, the Trustee shall be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action. SECTION 6.06. LIMITATION ON SUITS. No Holder of any Secured Note shall have the right to institute any proceeding, judicial or otherwise, with respect to this Indenture, the Pride Guarantee, the Subsidiary Guarantees, the Letter of Credit, the Secured Notes or the Security Agreements, or for the appointment of a receiver or a trustee, or for any other remedy, unless: (a) the Holder of a Secured Note has given to the Trustee written notice of a continuing Event of Default; (b) a Holder or Holders of at least 25% in principal amount of the then outstanding Secured Notes 98 make a written request to the Trustee to pursue the remedy; (c) such Holder of a Secured Note or Holders of Secured Notes offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and (e) during such 60-day period the Holders of a majority in principal amount of the Secured Notes then outstanding do not give the Trustee a direction inconsistent with the request; in any event, it being understood and intended that no one or more Holders of Secured Notes shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture or the Security Agreements to affect, disturb or prejudice the rights of any Holders of Secured Notes, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture or the Security Agreements, except in the manner herein provided and for the equal and ratable benefit of all Holders of Secured Notes. A Holder of a Secured Note may not use this Indenture or any Security Agreement to prejudice the rights of another Holder of a Secured Note or to obtain a preference or priority over another Holder of a Secured Note. SECTION 6.07. RIGHTS OF HOLDERS OF SECURED NOTES TO RECEIVE PAYMENT. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal of, premium, if any, on, and interest (including Additional Amounts, if any, and Special Interest, if any), on, the Secured Notes held by such Holder, on or after the respective due dates expressed in the Secured Note or this Indenture (including in connection with an offer to purchase), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder; except that no Holder shall have the right to institute any such suit, if and to the extent that the institution or prosecution thereof or the entry of judgment therein would under applicable law result in the surrender, impairment, 99 waiver, or loss of the Liens of the Security Agreements upon any property or assets subject to the Liens. SECTION 6.08. COLLECTION SUIT BY TRUSTEE. If an Event of Default specified in Section 6.01(a) or (b) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Issuer for the whole amount of principal of, premium, if any, on, interest (including Special Interest, if any, and Additional Amounts, if any), remaining unpaid on, the Secured Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due to the Trustee under Section 7.07. SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee shall be entitled and empowered, without regard to whether the Trustee or any Holder shall have made any demand or performed any other act pursuant to the provisions of this Article and without regard to whether the principal of the Secured Notes shall then be due and payable as therein expressed or by declaration or otherwise, by intervention in any proceedings relative to the Issuer, Pride, any Subsidiary Guarantor, the Letter of Credit Provider or any Obligor upon the Secured Notes, or to the creditors or property or assets of the Issuer, Pride, any Subsidiary Guarantor, the Letter of Credit Provider or any other Obligor or otherwise, to take any and all actions authorized under the Trust Indenture Act in order to have claims of the Holders and the Trustee allowed in any such proceeding. In particular, the Trustee shall be entitled and empowered in such instances: (a) to file and prove a claim or claims for the whole amount of principal (and premium, if any), interest (including Additional Amounts, if any, and Special Interest, if any), and any other amounts owing and unpaid in respect of the Secured Notes, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including all amounts owing to the Trustee and each predecessor Trustee pursuant to Section 7.07 hereof) and of the Holders allowed in any judicial proceedings relative to the Issuer, Pride, any Subsidiary Guarantor, the Letter of Credit Provider or other Obligor upon the Secured Notes, or to the creditors or property of the Issuer, Pride, any Subsidiary 100 Guarantor, the Letter of Credit Provider or any such other Obligor; (b) unless prohibited by applicable law and regulations, to vote on behalf of the Holders of the Secured Notes in any election of a trustee or a standby trustee in arrangement, reorganization, liquidation or other bankruptcy or insolvency proceedings or Person performing similar functions in comparable proceedings; and (c) to collect and receive any moneys or other property or assets payable or deliverable on any such claims, and to distribute all amounts received with respect to the claims of the Holders and of the Trustee on their behalf; and any trustee, receiver, or liquidator, custodian or other similar official is hereby authorized by each of the Holders to make payments to the Trustee, and, in the event that the Trustee shall consent to the making of payments directly to the Holders, to pay to the Trustee such amounts as shall be sufficient to cover all amounts owing to the Trustee and each predecessor Trustee pursuant to Section 7.07 hereof. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Secured Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar person. In any proceedings brought by the Trustee (and also any proceedings involving the interpretation of any provision of this Indenture to which the Trustee shall be a party), the Trustee shall be held to represent all the Holders of the Secured Notes, and it shall not be necessary to make any Holders of the Secured Notes parties to any such proceedings. SECTION 6.10. PRIORITIES. If the Trustee collects any money or property pursuant to this Article (including funds received from collateral agents and escrow agents pursuant to the Security Agreements), it shall pay out the money or property in the following order: First: to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including 101 payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; Second: to Holders of Secured Notes for amounts due and unpaid on the Secured Notes for principal, premium, if any, and interest (including Special Interest, if any, and Additional Amounts, if any), ratably, without preference or priority of any kind, according to the amounts due and payable on the Secured Notes for principal (premium, if any), and interest (including Special Interest, if any, and Additional Amounts, if any), respectively; and Third: to the Issuer, Pride or the Subsidiary Guarantors or to such other party as a court of competent jurisdiction shall direct. The Trustee may fix a record date and payment date for any payment to Holders of Secured Notes pursuant to this Section 6.10. At least 15 days before such record date, the Issuer shall mail to each Holder and the Trustee a notice that states the record date, the payment date and amount to be paid. The Trustee may mail such notice in the name and at the expense of the Issuer. SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the enforcement of any right or remedy under this Indenture and the Security Agreements or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder of a Secured Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in aggregate principal amount of the then outstanding Secured Notes. SECTION 6.12. RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or any Holder of Secured Notes has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case the Issuer, the Trustee and the Holders shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions 102 hereunder, and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding has been instituted. SECTION 6.13. RIGHTS AND REMEDIES CUMULATIVE. Except as otherwise provided in Section 2.07 hereof, no right or remedy conferred herein, or in the Security Agreements, upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 6.14. DELAY OR OMISSION NOT WAIVER. No delay or omission of the Trustee or of any Holder of any Secured Note to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article VI, by the Security Agreements, or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. ARTICLE VII TRUSTEE SECTION 7.01. DUTIES OF TRUSTEE. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent Person would exercise or use under the circumstances in the conduct of such Person's own affairs. (b) Except during the continuance of an Event of Default: (i) the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and the Security Agreements to which it was a party and no others, and no implied covenants or obligations shall 103 be read into this Indenture or such Security Agreements, as the case maybe, against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture or the Security Agreements to which it is a party. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture or such Security Agreements, as the case may be. (c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. (d) Whether or not therein expressly so provided, every provision of this Indenture or the Security Agreements to which the Trustee is a party that in any way relates to the Trustee is subject to paragraphs (a), (b), and (c) of this Section. (e) No provision of this Indenture or the Security Agreements shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee shall be under no obligation to exercise any of its rights and powers under this Indenture or the Security Agreements at the request of any Holders, unless such Holders shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Issuer. Money held in trust by the 104 Trustee need not be segregated from other funds except to the extent required by law. (g) Every provision of this Indenture or the Security Agreements relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section and to the provisions of the Trust Indenture Act. SECTION 7.02. RIGHTS OF TRUSTEE. (a) Subject to the provisions of Section 7.01(a) hereof, the Trustee may rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel and the oral or written advice of such counsel or any Opinion of Counsel with respect to legal matters relating to this Indenture, the Security Agreements, the Secured Notes, the Letter of Credit and any Guarantee shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with the advice or opinion of such counsel. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any attorney or agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture; PROVIDED, HOWEVER, that the Trustee's conduct does not constitute willful misconduct or negligence. (e) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction. 105 (f) Except with respect to Section 4.02 hereof, the Trustee shall have no duty to inquire as to the performance of the Issuer's covenants in Article IV hereof. In addition, the Trustee shall not be deemed to have knowledge of any Default or Event of Default except (i) any Event of Default occurring pursuant to Sections 6.01(a) (except that the Trustee shall not be deemed to have knowledge of a default in the payment of Special Interest or Additional Amounts) or 6.01(b), or (ii) any Default or Event of Default of which a Responsible Officer of the Trustee shall have received written notification from the Issuer, any Guarantor or any Holder; PROVIDED that the Trustee shall comply with the "automatic stay" provisions contained in U.S. bankruptcy laws, if applicable. As used herein, the term "knowledge" means the actual fact or statement of knowing, without any duty to make any investigation with regard thereto. (g) Prior to the occurrence of an Event of Default hereunder and after the curing and waiving of all Events of Default, the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document unless requested in writing to do so by the Holders of not less than a majority in aggregate principal amount of the Secured Notes then outstanding; PROVIDED that if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security afforded to it by the terms of this Indenture, the Trustee may require reasonable indemnity against such expenses or liabilities as a condition to proceeding; the reasonable expenses of every such examination shall be paid by the Issuer or, if advanced by the Trustee, shall be repaid by the Issuer upon demand. The Trustee shall not be bound to ascertain or inquire as to the performance or observance of any covenants, conditions, or agreements on the part of the Issuer, except as otherwise set forth herein, but the Trustee may, in its discretion, make such further inquiry or investigation into such facts or matters as it may see fit and if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Issuer personally or by agent or attorney. (h) The Trustee shall not be required to give any bond or surety in respect of the performance of its powers and duties hereunder. 106 (i) The permissive rights of the Trustee to do things enumerated in this Indenture shall not be construed as a duty. SECTION 7.03 INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its individual or any other capacity may become the owner or pledgee of Secured Notes and may otherwise deal with the Issuer or any Affiliate of the Issuer with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest (as defined in the Trust Indenture Act) it must eliminate such conflict within 90 days, apply to the Commission for permission to continue as Trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof. SECTION 7.04 TRUSTEE'S DISCLAIMER. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture, the Security Agreements, the Pride Guarantee, the Letter of Credit, any Subsidiary Guarantee or the Secured Notes, it shall not be accountable for the Issuer's use of the proceeds from the Secured Notes or any money paid to the Issuer or upon the Issuer's direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Secured Notes or any other document in connection with the sale of the Secured Notes, any Security Agreement or pursuant to this Indenture or the Security Agreements, other than its certificate of authentication. SECTION 7.05 NOTICE OF DEFAULTS. If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to Holders of Secured Notes a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium, if any, or interest on any Secured Note (including payments pursuant to the mandatory repurchase provisions of such Secured Notes, if any), the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders of the Secured Notes. SECTION 7.06 REPORTS BY TRUSTEE TO HOLDERS OF THE SECURED NOTES. Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, and for so long as Secured Notes remain 107 outstanding, the Trustee shall mail to the Holders of the Secured Notes a brief report dated as of such reporting date that complies with TIA Section 313(a) (but if no event described in TIA Section 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA Section 313(b). The Trustee shall also transmit by mail all reports as required by TIA Section 313(c). A copy of each report at the time of its mailing to the Holders of Secured Notes shall be mailed to the Issuer and filed with the Commission and each stock exchange on which the Secured Notes are listed in accordance with TIA Section 313(d). The Issuer shall promptly notify the Trustee whenever the Secured Notes become listed on any stock exchange and of any delisting thereof. SECTION 7.07 COMPENSATION AND INDEMNITY. The Issuer shall pay to the Trustee promptly from time to time such compensation for its acceptance of this Indenture and services hereunder as agreed to by the parties from time to time. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Issuer shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it, including the costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Issuer shall indemnify the Trustee against any and all losses, liabilities or expenses (including reasonable attorneys' fees) incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Issuer (including this Section 7.07) and defending itself against any claim (whether asserted by the Issuer or any Holder or any other Person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its negligence or bad faith. The Trustee shall notify the Issuer promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Issuer shall not relieve the Issuer of its respective obligations hereunder. The Issuer shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Issuer shall pay the reasonable fees and expenses of such counsel. The 108 Issuer need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. The obligations of the Issuer under this Section 7.07 shall survive the resignation or removal of the Trustee and the satisfaction and discharge of this Indenture. To secure the Issuer's payment obligations in this Section, the Trustee shall have a Lien prior to the Secured Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal of, and premium, if any, interest (including Additional Amounts, if any, and Special Interest, if any), on particular Secured Notes. Such Lien shall be a Lien permitted by this Indenture and shall survive the satisfaction and discharge of this Indenture. When the Trustee incurs expenses or renders services after an Event of Default specified in Sections 6.01(g) or 6.01(h) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any applicable bankruptcy laws. The Trustee shall comply with the provisions of TIA Section 313(b)(2) to the extent applicable. SECTION 7.08 REPLACEMENT OF TRUSTEE. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section. The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Issuer. The Holders of Secured Notes of a majority in principal amount of the then outstanding Secured Notes may remove the Trustee by so notifying the Trustee and the Issuer in writing. If at any time: (a) the Trustee shall fail to comply with Section 310(b) of the Trust Indenture Act after written request thereof by the Issuer or by any Holder who has been a bona fide Holder of a Secured Note for at least six months, unless the Trustee's duty to resign is stayed in accordance with the provisions of TIA Section 310(b); or (b) the Trustee shall cease to be eligible under Section 7.10 hereof and shall fail to resign after 109 written request therefor by the Issuer or by any Holder; or (c) the Trustee shall become incapable of acting or a decree or order for relief by a court having jurisdiction in the premises shall have been entered in respect of the Trustee in an involuntary case under the United States bankruptcy laws, as now or hereinafter constituted, or a decree or order by a court having jurisdiction in the premises shall have been entered for the appointment of a receiver, custodian, liquidator, assignee, trustee, sequestrator (or other similar official) of the Trustee or of its property and assets or affairs, or any public officer shall take charge or control of the Trustee or of its property and assets or affairs for the purpose of rehabilitation, conservation, winding-up or liquidation; or (d) the Trustee shall commence a voluntary case under the United States bankruptcy laws, as now or hereafter constituted, or shall consent to the appointment of or taking possession by a receiver, custodian, liquidator, assignee, trustee, sequestrator (or other similar official) of the Trustee or of its property and assets or affairs, or shall make an assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts generally as they become due, or shall take corporate action in furtherance of any such action; or (e) the Trustee becomes incapable of acting, then, in any such case, (i) the Issuer by a Board Resolution may remove the Trustee with respect to the Secured Notes, or (ii) subject to Section 6.11 hereof, any Holder who has been a bona fide Holder of a Secured Note for at least six months may, on behalf of such Holder and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee for the Secured Notes. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Issuer shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Secured Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Issuer. If a successor Trustee does not take office within 60 days after the retiring Trustee notifies the Issuer of 110 its resignation or is removed, the retiring Trustee, the Issuer, or the Holders of Secured Notes of at least 10% in principal amount of the then outstanding Secured Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee, after written request by any Holder of a Secured Note who has been a Holder of a Secured Note for at least six months, fails to comply with Section 7.10, such Holder of a Secured Note may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Issuer. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders of the Secured Notes. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, provided that all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Issuer's obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee. SECTION 7.09 SUCCESSOR TRUSTEE BY MERGER, ETC. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor entity without any further act shall be the successor Trustee. In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture any of the Secured Notes shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Secured Notes so authenticated; and in case at that time any of the Secured Notes shall not have been authenticated, any successor to the Trustee may authenticate such Secured Notes either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Secured Notes or in this Indenture provided that the certificate of the Trustee shall have. 111 SECTION 7.10 ELIGIBILITY; DISQUALIFICATION. There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $75,000,000 as set forth in its most recent published annual report of condition. This Indenture shall always have a Trustee who satisfies the requirements of TIA Section 310(a)(1), (2) and (5). The Trustee shall comply with TIA Section 310(b), subject to the penultimate paragraph thereof; PROVIDED, HOWEVER, that there shall be excluded from the operation of TIA Section 310(b)(1) any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Issuer are outstanding if the requirements for such exclusion set forth in TIA Section 310(b)(1) are met. SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE ISSUER. The Trustee is subject to TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. SECTION 7.12. OTHER OFFICES. The Trustee is hereby authorized to act as Collateral Agent or Reserve Account Agent. ARTICLE VIII SATISFACTION AND DISCHARGE SECTION 8.01SATISFACTION AND DISCHARGE. This Indenture and the Guarantees shall upon the request of the Issuer cease to be of further effect (except as to surviving rights of registration of transfer, substitution or exchange of Secured Notes herein expressly provided for, the Issuer's obligations under Sections 7.07 and 8.04 hereof, the Issuer's rights of optional redemption under Article III hereof, and the Issuer's, the Trustee's and the Paying Agent's obligations under Section 8.03 hereof) and the Trustee, at the expense of the Issuer, shall execute proper 112 instruments acknowledging satisfaction and discharge of this Indenture when: (a) either (i) all outstanding Secured Notes have been delivered to the Trustee for cancellation; or (ii) all such Secured Notes not theretofore delivered to the Trustee for cancellation have become due and payable, will become due and payable within one year or are to be called for redemption within one year under irrevocable arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name and at the expense of the Issuer, and the Issuer has irrevocably deposited or caused to be deposited with the Trustee funds in an amount sufficient to pay and discharge the entire debt on the Secured Notes not theretofore delivered to the Trustee for cancellation, for principal of (premium, if any, on) and interest (including Additional Amounts and Special Interest, if any), to the date of Maturity or date of redemption; (b) the Issuer has paid or caused to be paid all sums then due and payable by the Issuer under this Indenture; and (c) the Issuer has delivered an Officers' Certificate and an Opinion of Counsel relating to compliance with the conditions set forth in this Indenture. Notwithstanding the satisfaction and discharge of this Indenture, the Issuer's obligations in Sections 2.02, 2.04, 2.06, 2.07, 2.11, 2.13, 4.24, 7.07, 7.08, 8.02, 8.03, and 8.04, and the Trustee's and Paying Agent's obligations in Section 8.03 shall survive until the Secured Notes are no longer outstanding. Thereafter, only the Issuer's obligations in Sections 7.07, 8.03 and 8.04 and the Trustee's and Paying Agent's obligations in Section 8.03 shall survive. In order to have money available on a payment date to pay principal (and premium, if any, on) or interest (including Additional Amounts, if any, and Special Interest, if any), on the Secured Notes, the U.S. Government Obligations referred to in Section 8.02 shall be payable as to principal (and premium, if any) or interest (including Additional Amounts, if any, and Special Interest, if any), at least one Business Day before such payment date in such 113 amounts as will provide the necessary money. U.S. Government Obligations shall not be callable at the Issuer's option. SECTION 8.02. APPLICATION OF TRUST MONEY. All money deposited with the Trustee pursuant to Section 8.01 shall be held in trust and, at the written direction of the Issuer, be invested prior to maturity in noncallable U.S. Government Obligations, and applied by the Trustee in accordance with the provisions of the Secured Notes and this Indenture, to the payment, either directly or through any Paying Agent as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest (including Additional Amounts, if any, and Special Interest, if any), for the payment of which money has been deposited with the Trustee; but such money need not be segregated from other funds except to the extent required by law. SECTION 8.03. REPAYMENT OF THE ISSUER. The Trustee and the Paying Agent shall promptly pay to the Issuer upon written request any excess money or securities held by them at any time, such excess to be determined on the related Opinion of Counsel received under Section 8.01(c). The Trustee and the Paying Agent shall pay to the Issuer upon written request any money held by them for the payment of principal or interest that remains unclaimed for two years after the date upon which such payment shall have become due; PROVIDED that the Issuer shall have either caused notice of such payment to be mailed to each Holder of the Secured Notes entitled thereto no less than 30 days prior to such repayment or within such period shall have published such notice in a financial newspaper of widespread circulation published in The City of New York, including, without limitation, The Wall Street Journal (national edition). After payment to the Issuer, Holders entitled to the money must look to the Issuer for payment as general creditors unless an applicable abandoned property law designates another Person, and all liability of the Trustee and such Paying Agent with respect to such money shall cease. SECTION 8.04. REINSTATEMENT. If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with Section 8.02 by reason of any legal proceeding or by reason of any order or judgment of any court of governmental authority enjoining, restraining or otherwise prohibiting such application, the Issuer's, Prime's, Maritima's and Subsidiary Guarantor's obligations under this Indenture, the Secured Notes, the 114 Security Agreements, the Prime Guarantee and the Subsidiary Guarantees shall be revived and reinstated as though no deposit has occurred pursuant to Section 8.01 until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with Section 8.02; PROVIDED, HOWEVER, that if the Issuer, Pride or a Subsidiary Guarantor has made any payment of interest (including Special Interest, if any, and Additional Amounts, if any), on or principal of any Secured Notes because of the reinstatement of their Obligations, the Issuer, Pride or such Subsidiary Guarantor shall be subrogated to the rights of the Holders of such Secured Notes to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE IX DEFEASANCE AND COVENANT DEFEASANCE SECTION 9.01 OPTION TO EFFECT DEFEASANCE OR COVENANT DEFEASANCE. The Issuer may, at the option of its Board of Directors evidenced by a Board Resolution, at any time, elect to have either Section 9.02 or 9.03 hereof be applied to all outstanding Secured Notes upon compliance with the conditions set forth below in this Article IX. SECTION 9.02. DEFEASANCE AND DISCHARGE. Upon the Issuer's exercise under Section 9.01 hereof of the option applicable to this Section 9.02, the Issuer, Pride and the Subsidiary Guarantors, if any, shall, subject to the satisfaction of the conditions set forth in Section 9.04 hereof, be deemed to have been discharged from their respective Obligations with respect to all outstanding Secured Notes, this Indenture, the Pride Guarantee and the Subsidiary Guarantees, if any, on the date the conditions set forth below are satisfied (hereinafter, "Defeasance"). For this purpose, Defeasance means that the Issuer shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Secured Notes and the Issuer, Pride and the Subsidiary Guarantors shall be deemed to have satisfied all of their obligations under such Secured Notes, this Indenture, the Security Agreements and the Subsidiary Guarantees (and the Trustee, at the expense of the Issuer, shall execute proper instruments acknowledging the same), subject to the following which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of such Secured Notes to receive, solely from the trust fund described in Section 9.04 hereof and as more fully set forth in 115 Section 9.04, payments in respect of the principal and of and any premium and interest (including Special Interest, if any, and Additional Amounts, if any), on such Secured Notes when payments are due (but not a Redemption upon an Event of Loss or the Change of Control Purchase Price); (b) the Issuer's obligations with respect to such Secured Notes under Sections 2.06, 2.07, 2.10, and 4.02 hereof; (c) the rights, powers, trusts, duties and immunities of the Trustee under this Indenture; (d) Article III hereof other than Section 3.08 and Section 3.09; and (e) this Article IX. Subject to compliance with this Article IX the Issuer may exercise its option under this Section 9.02 notwithstanding the prior exercise of its option under Section 9.03 hereof. SECTION 9.03 COVENANT DEFEASANCE. Upon the Issuer's exercise under Section 9.01 hereof of the option applicable to this Section 9.03, (i) the Issuer shall, subject to the satisfaction of the conditions set forth in Section 9.04 hereof, be released from its obligations under the covenants contained in Sections 3.08, 3.09, 4.04, 4.06, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16, 4.17, 4.18, 4.19, 4.20, 4.21, 4.22, 4.23, 4.24 and Sections 5.01(a)(iii) and 5.01(a)(iv) hereof and any covenant added to this Indenture subsequent to the Issue Date pursuant to Section 10.01 hereof with respect to the outstanding Secured Notes and (ii) the occurrence of any event specified in Section 6.01(c) or 6.01(d) hereof, with respect to any of Sections 4.04, 4.06, 4.08, 4.09, 4.10, 4.11, 4.12, 4.12, 4.14, 4.15, 4.16, 4.17, 4.18, 4.19, 4.20, 4.21, 4.22, 4.23, 4.24 and Sections 5.01(a)(iii) and 5.01(a)(iv) hereof and any covenant added to this Indenture subsequent to the Issue Date pursuant to Section 10.01 hereof, shall be deemed not to be or result in an Event of Default, in each case with respect to such Secured Notes as provided in this Section 9.03 on and after the date on which the conditions set forth in Section 9.04 hereof are satisfied, and the Secured Notes shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes 116 hereunder (it being understood that such Secured Notes shall not be deemed outstanding for accounting purposes). For this purpose, "Covenant Defeasance" means that, with respect to the outstanding Secured Notes, the Issuer, Pride and the Subsidiary Guarantors may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant (to the extent so specified in the case of Section 6.01(c) or 6.01(d) hereof), whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture, the Security Agreements, the Pride Guarantee, the Subsidiary Guarantees and the Secured Notes shall be unaffected thereby. SECTION 9.04. CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE. The following shall be the conditions to the application of either Section 9.02 or 9.03 hereof to the outstanding Secured Notes: In order to exercise either Defeasance or Covenant Defeasance: (a) the Issuer shall irrevocably have deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to the benefits of the Holders of such Secured Notes, (i) money in an amount, or (ii) U.S. Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than one Business Day before the due date of any payment, money in an amount, or (iii) a combination thereof, in each case sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge the principal of (premium, if any, on) and any installment of interest (including Additional Amounts, if any, and Special Interest, if any), on the Secured Notes at the Maturity thereof or Redemption Date therefor in accordance with the terms of this Indenture and the Secured Notes; (b) in the case of an election under Section 9.02 hereof, the Issuer shall have delivered to the Trustee an Opinion of Counsel confirming that (A) the Issuer 117 has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date of this Indenture, there has been a change in the applicable United States Federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the outstanding Secured Notes will not recognize income, gain or loss for United States Federal income tax purposes as a result of such Defeasance and will be subject to United States federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Defeasance had not occurred; (c) in the case of an election under Section 9.03 hereof, the Issuer shall have delivered to the Trustee an Opinion of Counsel confirming that the Holders of the outstanding Secured Notes will not recognize income, gain or loss for United States Federal income tax purposes as a result of such Covenant Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (d) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the incurrence of Indebtedness all or a portion of the proceeds of which will be used to defease the Secured Notes pursuant to this Article IX concurrently with such incurrence) or insofar as Section 6.01(g) or 6.01(h) hereof is concerned, shall have occurred at any time on or prior to the 91st day after the date of such deposit and be continuing on such 91st day (it being understood that this condition shall not be deemed satisfied until after such 91st day); (e) such Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Issuer or any of the Issuer's Subsidiaries is a party or by which the Issuer, the Issuer or any of the Issuer's Subsidiaries is bound; (f) such Defeasance or Covenant Defeasance shall not cause the Trustee to have a conflicting interest within the meaning of the Trust Indenture Act (assuming for the purpose of this clause (f) that all Secured Notes are in default within the meaning of such Act); 118 (g) such Defeasance or Covenant Defeasance shall not result in the trust arising from such deposit constituting an investment Issuer within the meaning of the Investment Issuer Act of 1940, as amended, unless such trust shall be registered under such Act or exempt from registration thereunder; (h) the Issuer shall have delivered to the Trustee an Opinion of Counsel to the effect that on the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (i) the Issuer shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Issuer with the intent of preferring the Holders over any other creditors of the Issuer or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Issuer; and (j) the Issuer shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for or relating to the Defeasance or the Covenant Defeasance have been complied with. SECTION 9.05. DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS. Subject to Section 9.06 hereof, all money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 9.05, the "Trustee") pursuant to Section 9.04 hereof in respect of the outstanding Secured Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Secured Notes and this Indenture, to the payment, either directly or through any such Paying Agent as the Trustee may determine, to the Holders of such Secured Notes of all sums due and to become due thereon in respect of principal, premium, if any, and interest (including Additional Amounts, if any, and Special Interest, if any), but such money need not be segregated from other funds except to the extent required by law. The Issuer shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or U.S. Government Obligations deposited pursuant to Section 9.04 hereof or the principal and interest received in respect thereof. 119 Anything in this Article IX to the contrary notwithstanding, the Trustee shall deliver or pay to the Issuer from time to time upon the request of the Issuer any money or U.S. Government Obligations held by it as provided in Section 9.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 9.04(a) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Defeasance or Covenant Defeasance. SECTION 9.06. REPAYMENT TO THE ISSUER. Any money deposited with the Trustee or any Paying Agent, or then held by the Issuer, in trust for the payment of the principal of, premium, if any, or interest (including Additional Amounts, if any, and Special Interest, if any), on, any Secured Note and remaining unclaimed for two years after such principal, and premium, if any, or interest on, (including Additional Amounts, if any, and Special Interest, if any), has become due and payable shall be paid to the Issuer on its request or (if then held by the Issuer) shall be discharged from such trust; and the Holder of such Secured Note shall thereafter, as a creditor, look only to the Issuer for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Issuer as trustee thereof, shall thereupon cease; PROVIDED, HOWEVER, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Issuer cause to be published once, in The New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Issuer. SECTION 9.07. REINSTATEMENT. If the Trustee or Paying Agent is unable to apply any United States dollars or U.S. Government Obligations in accordance with Section 9.02 or 9.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Issuer's Obligations under this Indenture and the Secured Notes and the Guarantors' obligations under their respective Guarantees shall be revived and reinstated as though no deposit had occurred pursuant to Section 9.02 or 9.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 9.02 or 9.03 hereof, as the case may be; PROVIDED, HOWEVER, that, if the Issuer makes 120 any payment of principal of, premium, if any, interest, (including Additional Amounts, if any, and Special Interest, if any), on any Secured Note following the reinstatement of its Obligations, the Issuer shall be subrogated to the rights of the Holders of such Secured Notes to receive such payment from the money held by the Trustee or Paying Agent. ARTICLE X AMENDMENT, SUPPLEMENT AND WAIVER SECTION 10.01. WITHOUT CONSENT OF HOLDERS OF SECURED NOTES. Notwithstanding Section 10.02 of this Indenture, the Issuer and the Trustee may amend or supplement this Indenture or the Secured Notes without the consent of any Holder of a Secured Note: (a) to evidence the succession of another Person to the Issuer and the assumption by such successor of the covenants and Obligations of the Issuer under this Indenture and contained in the Secured Notes or the Security Agreements; (b) to add to the covenants of the Issuer, for the benefit of Holders, or to surrender any right or power conferred upon the Issuer by this Indenture or the Security Agreements; (c) to add any additional Events of Default; (d) to provide for uncertificated Secured Notes in addition to or in place of Certificated Secured Notes (provided that the uncertificated Secured Notes are issued in registered form for purposes of Section 163(f) of the Code, or in a manner such that the uncertificated Secured Notes are described in Section 163(f)(2)(B) of the Code); (e) to evidence and provide for the acceptance of appointment under this Indenture by the successor Trustee; (f) to add additional security for the Secured Notes or to secure or add additional security for the Pride Guarantee or the Subsidiary Guarantees; (g) to cure any ambiguity, to correct or supplement any provision in this Indenture or the Security Agreements which may be inconsistent with any other provision herein or therein or to add any other 121 provisions with respect to matters or questions arising under this Indenture or the Security Agreements, provided that such actions will not adversely affect the interests of Holders in any material respect; (h) to add or release any Subsidiary Guarantor pursuant to the terms of this Indenture; or (i) to comply with the requirements of the SEC to effect or maintain the qualification of this Indenture under the Trust Indenture Act. Upon the request of the Issuer accompanied by a Board Resolution authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of the documents described in Section 10.07 hereof, the Trustee shall join with the Issuer in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that affects its own rights, duties or immunities under this Indenture or otherwise. SECTION 10.02. WITH CONSENT OF HOLDERS OF SECURED NOTES. Except as provided below in this Section 10.02, the Issuer and the Trustee may amend or supplement this Indenture and the Secured Notes may be amended or supplemented with the consent of the Holders of at least a majority in aggregate principal amount at Stated Maturity of the Secured Notes then outstanding (including consents obtained in connection with a tender offer or exchange offer for the Secured Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium, if any, or, interest (including Special Interest, if any, and Additional Amounts, if any), on, the Secured Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture, the Security Agreements or the Secured Notes may be waived with the consent of the Holders of a majority in aggregate principal amount at Stated Maturity of the then outstanding Secured Notes (including consents obtained in connection with a tender offer or exchange offer for the Secured Notes). Upon the request of the Issuer accompanied by a Board Resolution authorizing the execution of any such amended or supplemental Indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the 122 consent of the Holders of Secured Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 10.07 hereof, the Trustee shall join with the Issuer in the execution of such amended or supplemental Indenture unless such amended or supplemental Indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental Indenture. It shall not be necessary for the consent of the Holders of Secured Notes under this Section 10.02 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section becomes effective, the Issuer shall mail to the Holders of Secured Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Issuer to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the Secured Notes then outstanding may waive compliance in a particular instance by the Issuer with any provision of this Indenture or the Secured Notes. However, without the consent of each Holder affected, an amendment or waiver may not (with respect to any Secured Notes held by a non-consenting Holder): (a) reduce the amount of Secured Notes whose Holders must consent to an amendment; (b) reduce the rate of or extend the time for payment of interest (including Additional Amounts, if any, and Special Interest, if any), on any Secured Note or any Issuer Loan; (c) reduce the principal of or extend the Stated Maturity of any Secured Note or any Issuer Loan; (d) modify the obligations of Issuer to make mandatory redemptions or otherwise reduce the premium payable upon the redemption of any Secured Note or change the time at which any Secured Note may be or is required to be redeemed as described under Article III; (e) modify the obligations of Pride to make payments under the Pride Guarantee or modify the 123 obligations of the Letter of Credit Provider under the Letter of Credit; (f) make any Secured Note payable in money other than that stated in the Secured Note; (g) impair the right of any Holder of the Secured Notes to receive payment of principal of and interest (including Additional Amounts, if any, and Special Interest, if any), on such Holder's Secured Notes on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder's Secured Notes; (h) make any change in the amendment provisions which require each Holder's consent or in the waiver provisions; (i) (x) make any change in the Pride Guarantee, the Subsidiary Guarantees, if any, the Letter of Credit or any Security Agreement or Mitsubishi Loan Agreement (in the case of the Mitsubishi Documents, if the Issuer has the right to consent to any such change) that would materially adversely affect the Noteholders or (y) terminate the Lien of this Indenture or any Security Agreement (other than in accordance with the terms hereof or thereof) on any property at any time subject thereto or deprive the Holders of the security afforded by the Lien of this Indenture or the Security Agreements or the Issuer of the Liens securing the Issuer Loans; (j) modify the Obligations of the Issuer to make offers to purchase Secured Notes upon a Change of Control; (k) subordinate in right of payment the Secured Notes, the Pride Guarantee or the Subsidiary Guarantees to any other Indebtedness; (l) amend, supplement or otherwise modify the provisions of this Indenture relating to the Pride Guarantee, any Subsidiary Guarantee or the Letter of Credit; or (m) make any change in Sections 6.04 or 6.07 or modify any of the provisions of this Section 10.02 (except to increase any percentage set forth therein or herein). 124 Upon the request of the Issuer accompanied by a Board Resolution of the Issuer authorizing the execution of any such amended or supplemental Indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Secured Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Issuer in the execution of such amended or supplemental Indenture unless such amended or supplemental Indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental Indenture. It shall not be necessary for the consent of the Holders of Secured Notes under this Section 10.02 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof. SECTION 10.03. EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution of any supplemental indenture under this Article X, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Secured Notes theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. After a supplemental indenture becomes effective, the Issuer shall mail to Holders a notice briefly describing such amendment. The failure to give such notice to all Holders, or any defect therein, shall not impair or affect the validity of an amendment under this Section. SECTION 10.04. COMPLIANCE WITH TRUST INDENTURE ACT. Every amendment or supplement to this Indenture or the Secured Notes shall be set forth in an amended or supplemental Indenture that complies with the Trust Indenture Act as then in effect. SECTION 10.05. REVOCATION AND EFFECT OF CONSENTS. (a) Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Secured Note is a continuing consent by the Holder of a Secured Note and every subsequent Holder of a Secured Note or portion of a Secured Note that evidences the same debt as the consenting Holder's Secured Note, even if notation of the consent is not made on any Secured Note. However, any such Holder of a Secured Note or subsequent Holder of a Secured Note may revoke the consent as to its Secured Note if the Trustee receives written notice of revocation before the date the 125 waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder. (b) The Issuer may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding the immediately preceding subsection, those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 120 days after such record date. SECTION 10.06. NOTATION ON OR EXCHANGE OF SECURED NOTES. The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Secured Note thereafter authenticated. The Issuer in exchange for all Secured Notes may issue and the Trustee shall authenticate new Secured Notes that reflect the amendment, supplement or waiver. Failure to make the appropriate notation or issue a new Secured Note shall not affect the validity and effect of such amendment, supplement or waiver. SECTION 10.07. TRUSTEE TO SIGN SUPPLEMENTAL INDENTURES. The Trustee shall sign any supplemental Indenture authorized pursuant to this Article X if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. Neither the Issuer nor any Subsidiary Guarantor may sign a supplemental Indenture until the Board of Directors of such Person approves it. In executing any supplemental indenture, the Trustee shall be entitled to receive indemnity reasonably satisfactory to it and to receive and (subject to Section 7.01) shall be fully protected in relying upon, in addition to the documents required by Section 12.04, an Officers' Certificate and an Opinion of Counsel stating that: (a) such supplemental indenture is authorized or permitted by this Indenture and that all conditions precedent to the execution, delivery and performance of such supplemental indenture have been satisfied; 126 (b) the Issuer and the Subsidiary Guarantors, if any, have all necessary corporate power and authority to execute and deliver the supplemental indenture and that the execution, delivery and performance of such supplemental indenture has been duly authorized by all necessary corporate action of the Issuer and the Subsidiary Guarantors, if any; (c) the execution, delivery and performance of the supplemental indenture do not conflict with, or result in the breach of or constitute a default under any of the terms, conditions or provisions of (i) this Indenture, (ii) the charter documents and By-laws of the Issuer or any Subsidiary Guarantor, or (iii) any material agreement or instrument to which the Issuer or any Subsidiary Guarantor is subject and of which such counsel is aware; (d) to the knowledge of legal counsel writing such Opinion of Counsel, the execution, delivery and performance of the supplemental indenture do not conflict with, or result in the breach of any of the terms, conditions or provisions of (i) any law or regulation applicable to the Issuer or any Subsidiary Guarantor, or (ii) any material order, writ, injunction or decree of any court or governmental instrumentality applicable to the Issuer or any Subsidiary Guarantor; (e) such supplemental indenture has been duly and validly executed and delivered by the Issuer and the Subsidiary Guarantors, if any, and this Indenture together with such supplemental indenture constitutes a legal, valid and binding obligations of the Issuer and the Subsidiary Guarantors, if any, enforceable against the Issuer and the Subsidiary Guarantors, if any, as applicable, in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting the enforcement of creditors' rights generally and general equitable principles (whether considered in a proceeding at law or in equity) and commercial reasonableness; and (f) this Indenture together with such amendment or supplement complies with the Trust Indenture Act. SECTION 10.08. PAYMENT FOR CONSENT. Neither the Issuer, Pride, nor any Affiliate of the Issuer or Pride shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, 127 to any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture, the Secured Notes or the Security Agreements unless such consideration is offered to be paid to all Holders that so consent, waive or agree to amend in the time frame set forth in solicitation documents relating to such consent, waiver or agreement. ARTICLE XI COLLATERAL AND SECURITY; GUARANTEES; LETTER OF CREDIT SECTION 11.01. SECURITY AGREEMENTS. The due and punctual payment of the principal of, premium, if any, interest (including Additional Amounts, if any, and Special Interest, if any) on, and any other amounts due in respect of, the Secured Notes when and as the same shall be due and payable, whether on an Interest Payment Date, at Stated Maturity, by acceleration, call for redemption, upon a Change of Control Offer, purchase or otherwise, and interest on the overdue principal of and interest (including Additional Amounts, if any, and Special Interest, if any) (to the extent permitted by law), on the Secured Notes and performance of all other obligations of the Issuer to the Holders of the Secured Notes or the Trustee under this Indenture, the Secured Notes and the Security Agreements, according to the terms hereunder or thereunder, shall be secured as provided in the Security Agreements, (i) by a pledge to the Collateral Agent in favor of the Trustee for its benefit and the Holders of Secured Notes, of an undivided 53% interest in the Issuer Loans and all the Issuer's right, title and interest in and to the Mitsubishi Documents and the security for the Issuer Loans provided for in the Mitsubishi Loan Collateral Agreements; and (ii) by a pledge to the Reserve Account Agent in favor of the Trustee for its benefit and the benefit of the Holders of Secured Notes, of interest in the Reserve Account and the Reserve Account Property and any other cash of the Issuer that is required by the terms of this Indenture or any Security Agreement to be deposited with the Trustee or the Reserve Account Agent. Each Holder, by its acceptance of a Secured Note, consents and agrees to the terms of the Security Agreements (including, without limitation, the provisions providing for foreclosure and release of Collateral) as the same may be in effect or may be amended from time to time in accordance with the terms thereof and hereof and authorizes and directs the Trustee to enter into each of the Security Agreements to 128 which it is expressed to be a party and to perform its respective obligations and exercise its respective rights thereunder in accordance therewith. The Issuer will do or cause to be done all such acts and things as may be necessary or proper, or as may be required by the provisions of the Security Agreements, to assure and confirm to the Collateral Agent, the Reserve Account Agent and the Trustee the Liens in the Collateral contemplated hereby and by the Security Agreements, as from time to time constituted, so as to render the same available to the fullest extent permitted by law for the security and benefit of this Indenture and of the Secured Notes, as applicable, according to the intent and purposes herein and therein expressed. The Issuer shall to the fullest extent permitted by law take, upon request of the Trustee, any and all actions reasonably required to cause the Security Agreements to create and maintain, as security for the Obligations of the Issuer under this Indenture, the Secured Notes and the Security Agreements to be valid and enforceable, perfected (except as expressly provided herein and therein), Liens in and on all the Collateral in favor of the Trustee, the Reserve Account Agent or a Collateral Agent, as applicable, for the benefit of the Trustee and for the equal and ratable benefit of the Holders of the Secured Notes. SECTION 11.02. RECORDING AND OPINIONS. (a) The Issuer represents that it has caused or will promptly cause to be executed and delivered, filed and recorded and covenants that it will promptly cause to be executed and delivered and filed and recorded, all instruments and documents, and represents that it has done and will do or will cause to be done all such acts and other things, at the Issuer's expense as are necessary to subject the applicable Collateral to valid Liens and to perfect those Liens, all to the fullest extent permitted by law. The Issuer shall, as promptly as practicable, cause to be executed and delivered, filed and recorded all instruments and do all acts and other things as may be required by law to perfect, maintain and protect the Liens under the applicable Security Agreements (except as otherwise expressly provided herein and therein), all to the fullest extent permitted by law. (b) The Issuer shall furnish to the Trustee promptly after the execution and delivery of this Indenture an Opinion of Counsel either (i) stating that in the opinion of such counsel all action has been taken with respect to the recording, registering and filing of this Indenture, financing statements or other instruments or otherwise necessary to make effective the Liens intended to be created by the Security Agreements and reciting the details of such action, or (ii) stating that, in the opinion of such 129 counsel, no such action is necessary to make such Lien effective. Such opinion of counsel shall cover the necessity for recordings, registrations and filings required in all relevant jurisdictions. (c) The Issuer shall furnish to the Trustee within three months after each anniversary of the Issue Date, an Opinion of Counsel, dated as of such date, stating either that (i) in the opinion of such counsel, all action has been taken with respect to the recording, registering, filing, rerecording, reregistering and refiling of all supplemental indentures, financing statements, continuation statements or other instruments of further assurance or otherwise as is necessary to maintain the effectiveness of the Liens intended to be created by the Security Agreements and reciting the details of such action or (ii) in the opinion of such counsel, no such action is necessary to maintain the effectiveness of such Liens. Such opinion of counsel shall cover the necessity of recordings, registrations, filing, rerecordings, reregistrations and refilings in all relevant jurisdictions. (d) The Issuer shall otherwise comply with the provisions of Section 314(b) and, as applicable Sections 314(c), (d) and (e) of the Trust Indenture Act. SECTION 11.03. FURTHER ASSURANCES AND SECURITY. The Issuer will execute, acknowledge and deliver to the Trustee, at the Issuer's expense, at any time and from time to time such further assignments, transfers, assurances or other instruments as may be reasonably required to effectuate the terms of this Indenture and the Security Agreements, and will at any time and from time to time do or cause to be done all such acts and things as may be necessary or proper, or as may be reasonably required by the Trustee, to assure and confirm to the Trustee the Liens in the Collateral contemplated hereby and by the Security Agreements, all to the fullest extent permitted by law. The Trustee shall have no duty to determine whether any filing or recording is necessary hereunder or under any Collateral Document. SECTION 11.04. POSSESSION AND USE OF COLLATERAL. To the extent set forth in the Security Agreements, all funds deposited in the Reserve Account constitute Collateral and will, at the direction of the Issuer except during the continuance of a Default or an Event of Default and at the direction of the Trustee during the continuance of a Default or an Event of Default, be invested in Temporary Cash Equivalents (such cash and Temporary Cash Equivalents, together with interest, dividends and distributions thereof, 130 the "Reserve Account Property"), in the manner provided for in the Reserve Account Agreement. No funds shall be released from the Reserve Account except as provided herein and in the Reserve Account Agreement. The Reserve Account Account and the Reserve Property shall be pledged to, and be under the sole dominion and control of the Trustee acting for its benefit and the benefit of the Holders of Secured Notes. SECTION 11.05. CERTIFICATES OF THE ISSUER. Except as otherwise provided in the Reserve Account Agreement, the Issuer will furnish to the Trustee prior to each proposed release of Collateral pursuant to the Security Agreements all documents required by Section 314(d) of the Trust Indenture Act. The Trustee may, to the extent permitted by Sections 7.01 and 7.02 hereof, accept as conclusive evidence of compliance with the foregoing provisions the appropriate statements contained in such instruments. Any certificate or opinion required by Section 314(d) of the Trust Indenture Act may be made by an Officer of the Issuer, except in cases where Section 314(d) of the Trust Indenture Act requires that such certificate or opinion be made by an independent engineer, appraiser or other expert within the meaning of Section 314(d) of the Trust Indenture Act. SECTION 11.06. AUTHORIZATION OF ACTIONS TO BE TAKEN BY THE TRUSTEE UNDER THE SECURITY AGREEMENTS. The Trustee may, in its sole discretion and without the consent of the Holders, on behalf of the Holders, take all actions it deems necessary or appropriate in order to (a) enforce any of the terms of the Security Agreements and (b) collect and receive any and all amounts payable in respect of the obligations of the Issuer hereunder. The Trustee shall have the power to institute and to maintain such suits and proceedings as it may reasonably deem expedient to prevent any impairment of the Collateral by any acts that may be unlawful or in violation of the Security Agreements, or this Indenture, and such suits and proceedings as the Trustee may deem expedient to preserve or protect its interests and the interests of the Holders in the Collateral (including power to institute and maintain suits or proceedings to restrain the enforcement of or compliance with any legislative or other government enactment, rule or order that may be unconstitutional or otherwise invalid if the enforcement of, or compliance with, such enactment, rule or order would impair the security interest hereunder or be prejudicial to the interests of the Holders or of the Trustee). SECTION 11.07. AUTHORIZATION OF RECEIPT OF FUNDS BY THE TRUSTEE UNDER THE SECURITY AGREEMENTS. The Trustee 131 is authorized to receive any funds for the benefit of the Holders distributed under the Security Agreements, and to make further distributions of such funds to the Holders according to the provisions of this Indenture and the Security Agreements. SECTION 11.08. GUARANTEES; LETTER OF CREDIT. The Trustee shall make demands under the Pride Guarantee and the Subsidiary Guarantees, if any, and make drawings under the Letter of Credit, in such order as the Trustee shall, in its sole discretion, determine, in respect of any amounts due on the Secured Notes or under this Indenture that have not been remitted to the Trustee by or on behalf of the Issuer. ARTICLE XII MISCELLANEOUS SECTION 12.01. TRUST INDENTURE ACT CONTROLS. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by, or with another provision included in this Indenture by operation of Sections 310 to 318, inclusive, of the Trust Indenture Act, such imposed duties or incorporated provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that can be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or excluded, as the case may be. SECTION 12.02. NOTICES. Any notice or communication by the Issuer, Pride, Maritima, any Subsidiary Guarantor or the Trustee to the others is duly given if in writing and delivered in person or mailed by first class mail (registered or certified, return receipt requested), telecopier or overnight air courier guaranteeing next-day delivery, to the others' address: If to the Issuer or any Subsidiary Guarantor: Amethyst Financial Company Limited c/o Arias Fabrega and Fabrega Trust Co. BVI Limited 325 Waterfront Drive, Omar Hodge Building, 2nd Floor Wickham's Lay Road, Tortola, British Virgin Islands Attention: Telephone No.: Telecopier No.: 132 If to Pride: Pride Internationa, Inc. 5847 San Felipe, Suite 3300 Houston, TX 77057 Attention: Telephone No.: (713) 789-1400 Telecopier No.: If to Maritima: Maritima Petroleo e Engenharia Ltda. Avenido Almirante Borraso 52 Grupo 3400 20031-000 Centro Rio de Janeiro, Brazil Attention: Telephone No.: Telecopier No.: If to the Trustee: Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Telephone No.: (302) 651-8856 Telecopier No.: (302) 651-8882 The Issuer, Pride, Maritima, any Subsidiary Guarantor or the Trustee, by notice to the others may designate additional or different addresses for subsequent notices or communications. All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. Any notice or communication to a Holder shall be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the Securities Register kept by the Registrar and shall be given if so sent within the time prescribed. Any notice or communication shall also be so mailed to any Person described in TIA Section 313(c), to the extent required by the Trust Indenture Act. Failure to mail a notice or communication to 133 a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it; a notice or communication, however, shall not be effective unless, in the case of the Issuer, Pride, Maritima, any Subsidiary Guarantor or the Trustee, actually received. If the Issuer mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give notice by mail to Holders, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. SECTION 12.03. COMMUNICATION BY HOLDERS OF SECURED NOTES WITH OTHER HOLDERS OF SECURED NOTES. Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Secured Notes. The Issuer, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any request or application by the Issuer or a Guarantor to the Trustee to take any action under this Indenture, the Letter of Credit, the Guarantees or the Security Agreements, the Issuer or such Guarantor, as the case may be, upon request, shall furnish to the Trustee, to the extent required by this Indenture or the Trust Indenture Act: (a) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and (b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.05 hereof) stating that, in the opinion of such counsel, 134 all such conditions precedent and covenants have been satisfied. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an Officer of the Issuer or any Subsidiary Guarantor may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such Officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, and may state that it is so based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an Officer or Officers of the Issuer, or such Subsidiary Guarantor stating that the information with respect to such factual matters is in the possession of the Issuer or such Subsidiary Guarantor, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. SECTION 12.05. STATEMENTS REQUIRED IN A CERTIFICATE OR OPINION. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of TIA Section 314(e) and shall include: (a) a statement that the Persons making such certificate or opinion have read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the 135 statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of such Persons, they have made such examination or investigation as is necessary to enable them to express an informed opinion as to whether or not such covenant or condition has been satisfied; and (d) a statement as to whether or not, in the opinion of such Persons, such condition or covenant has been satisfied. SECTION 12.06. ACTS OF HOLDERS. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by a specified percentage of Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such specified percentage of Holders in person or by agents duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are received by the Trustee and, where it is hereby expressly required, by the Issuer. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Sections 7.01 and 7.02) conclusive in favor of the Trustee, the Issuer and the Guarantor, if made in the manner provided in this Section. Any electronic or other transmission pursuant to the Applicable Procedures will be considered an instrument executed by the Holder of the Global Notes held by the Depository for purposes of this Section 12.06. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems 136 sufficient, including the execution of such instrument or writing without more. (c) The ownership, principal amount and serial numbers of Secured Notes held by any Person, and the date of holding the same, shall be proved by the Securities Register. (d) If the Issuer shall solicit from the Holders of Secured Notes any request, demand, authorization, direction, notice, consent, waiver or other Act, the Issuer may, at its option, by or pursuant to Board Resolution, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Issuer shall have no obligation to do so. Such record date shall be the record date specified in or pursuant to such Board Resolution, which shall be a date not earlier than the date 30 days prior to the first solicitation is completed. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of outstanding Secured Notes have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the outstanding Secured Notes shall be computed as of such record date; PROVIDED that no such authorization, agreement or consent by the Holders on such record date shall be deemed effective unless it shall become pursuant to the provisions of this Indenture not later than eleven months after the record date. (e) Except to the extent otherwise expressly provided in this Indenture, any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Secured Note in connection with this Indenture, the Security Agreements, the Letter of Credit or the Guarantees shall bind every future Holder of the same Secured Note and the Holder of every Secured Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Issuer in reliance thereon, whether or not notation of such action is made upon such Secured Note. (f) Without limiting the foregoing, a Holder entitled hereunder to give or take any action with regard to any particular Secured Note may do so with regard to all or 137 any part of the principal amount of such Secured Note or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any different part of such principal amount. SECTION 12.07. RULES BY TRUSTEE AND AGENTS. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions; provided that no such rule shall conflict with the terms of this Indenture or the Trust Indenture Act. SECTION 12.08. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS. No director, officer, employee, incorporator or stockholder of the Issuer, Pride, Maritima or any Subsidiary Guarantor, as such, shall have any liability for any obligations of the Issuer, Pride, Maritima or any Subsidiary Guarantor under the Secured Notes, this Indenture, the Pride Guarantee, the Subsidiary Guarantees or for any claim based on, in respect of, or by reason of, such Obligations or their creation. Each Holder by accepting a Secured Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Secured Notes. SECTION 12.09. GOVERNING LAW. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE AND THE SECURED NOTES, WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF. SECTION 12.10. AGENT FOR SERVICE; SUBMISSION TO JURISDICTION; WAIVER OF IMMUNITIES. By the execution and delivery of this Indenture or any amendment or supplement hereto, each of the Issuer, Pride, each Subsidiary Guarantor and Maritima (i) acknowledges that it has, by separate written instrument, designated and appointed CT Corporation System (the "Process Agent") currently located at 1633 Broadway, New York, New York 10019, as its authorized agent upon which process may be served in any suit, action or proceeding with respect to, arising out of, or relating to, this Indenture, the Pride Guarantee, the Subsidiary Guarantees or the Secured Notes or brought under United States Federal or state securities laws, may be instituted in any United States Federal or state court located in The City of New York, New York, and acknowledges that the Process Agent has accepted such designation, (ii) irrevocably submits to the jurisdiction of any such court in any such suit, action or proceeding and irrevocably waives, to the fullest extent that it may effectively and lawfully do so, any obligation to the laying of venue of any such suit, action or proceeding and the defense of an 138 inconvenient forum to the maintenance of any such suit action or proceeding in such court, and (iii) agrees, to the extent permitted by law, that service of process upon the Process Agent shall be deemed in every respect effective service of process upon the Issuer, Pride, such Subsidiary Guarantor or Maritima in any such suit, action or proceeding. The Issuer, Pride, each Subsidiary Guarantor and Maritima further agree to take any and all action, including the execution and filing of any and all such documents and instruments as may be necessary to continue such designation and appointment of the Process Agent in full force and effect so long as this Indenture shall be in full force and effect; PROVIDED that the Issuer, Pride, each Subsidiary Guarantor and Maritima may and shall (to the extent the Process Agent ceases to be able to be served on the basis contemplated herein), by written notice to the Trustee, designate such additional or alternative agents for service of process under this Section 12.10 that (i) maintains an office located in the Borough of Manhattan, The City of New York in the State of New York, (ii) are either (a) counsel for the Issuer, Pride, a Subsidiary Guarantor or Maritima or (b) a corporate service company which acts as agent for service of process for other persons in the ordinary course of its business and for other persons in the ordinary course of its business and (iii) agrees to act as agent for service of process in accordance with this Section 12.10. Such notice shall identify the name of such agent for process and the address of such agent for process in the Borough of Manhattan, The City of New York, State of New York. Upon the request of any Holder of a Secured Note, the Trustee shall deliver such information to such Holder. Notwithstanding the foregoing, there shall, at all times, be at least one agent for service of process for the Issuer, Pride, each Subsidiary Guarantor and Maritima appointed and acting in accordance with this Section 12.10. To the extent that the Issuer, Pride, any Subsidiary Guarantor or Maritima has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service of notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, each of the Issuer, Pride, such Subsidiary Guarantor and Maritima hereby irrevocably waives such immunity in respect of its Obligations under this Indenture, the Pride Guarantee, the Subsidiary Guarantees and the Secured Notes, to the extent permitted by law. SECTION 12.11. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Issuer or the 139 Issuer's Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 12.12. SUCCESSORS. All agreements of the Issuer, Pride, Maritima and the Subsidiary Guarantors in this Indenture, the Secured Notes and the Pride Guarantee and the Subsidiary Guarantees shall bind their respective successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 12.13. SEVERABILITY. In case any provision in this Indenture or in the Secured Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 12.14. COUNTERPART ORIGINALS. The parties may sign any number of copies of this Indenture and by the parties thereto in separate counterparts. Each of which when signed shall be deemed to be an original, but all of them together represent the same agreement. SECTION 12.15. TABLE OF CONTENTS, HEADINGS, ETC. The Table of Contents, Cross-Reference Table and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof. SECTION 12.16. JUDGMENT CURRENCY. The Issuer and the Guarantors agree, to the fullest extent that they may effectively do so under applicable law, that (a) if for the purpose of obtaining judgment in any court it is necessary to convert the sum due in respect of the principal of, or premium, if any, or interest (including Additional Amounts, if any, and Special Interest, if any), on the Secured Notes (the "Required Currency") into a currency in which a judgment will be rendered (the "Judgment Currency"), the rate of exchange used shall be the rate at which in accordance with normal banking procedures the Trustee could purchase in The City of New York the Required Currency with the Judgment Currency on the day on which final unappealable judgment is entered, unless such day is not a New York Banking Day, then, to the extent permitted by applicable law, the rate of exchange used shall be the rate at which in accordance with normal banking procedures the Trustee could purchase in The City of New York the Required Currency with the Judgment Currency on the New York Banking Day preceding the day on which final unappealable judgment is entered and (b) their obligations under this Indenture to make payments 140 in the Required Currency (i) shall not be discharged or satisfied by any tender, or any recovery pursuant to any judgment (whether or not entered in accordance with subsection (a)), in any currency other than the Required Currency, except to the extent that such tender or recovery shall result in the actual receipt, by the payee, of the full amount of the Required Currency expressed to be payable in respect of such payments, (ii) shall be enforceable as an alternative or additional cause of action for the purpose of recovering in the Required Currency the amount, if any, by which such actual receipt shall fall short of the full amount of the Required Currency so expressed to be payable and (iii) shall not be affected by judgment being obtained for any other sum due under this Indenture. For purposes of the foregoing, "New York Banking Day" means any day except a Saturday, Sunday or a legal holiday in The City of New York or a day on which banking institutions in The City of New York are authorized or required by law or executive order to close. ARTICLE XIII PRIDE GUARANTEE SECTION 13.01. PRIDE GUARANTEE. (a) Pride hereby irrevocably and unconditionally guarantees, as a primary obligor and not merely as a surety, to each Holder and to the Trustee and its successors and assigns (i) the full and punctual payment when due, whether at Stated Maturity, by acceleration, by redemption or otherwise, of all obligations of the Issuer under this Indenture (including obligations to the Trustee), the Secured Notes and the Security Agreements, whether for payment of principal of, and premium, if any, and interest (including Additional Amounts, if any, and Special Interest, if any) on, the Secured Notes and all other monetary obligations of the Issuer under this Indenture, the Secured Notes and the Security Agreements and (ii) the full and punctual performance within applicable grace periods of all other obligations of the Issuer whether for fees, expenses, indemnification or otherwise under this Indenture, the Secured Notes and the Security Agreements (all the foregoing being hereinafter collectively called the "Guaranteed Obligations"). Pride further agrees that the Guaranteed Obligations may be extended or renewed, in whole or in part, without notice or further assent from Pride, and that Pride shall remain bound under this Article XIII notwithstanding any extension or renewal of any Guaranteed Obligation. 141 (b) To the extent permitted by applicable law, Pride waives presentation to, demand of payment from and protest to the Issuer of any of the Guaranteed Obligations and also waives notice of protest for nonpayment. Pride waives notice of any default under the Secured Notes, the Security Agreements or the Guaranteed Obligations. To the extent permitted by applicable law, the obligations of Pride hereunder shall not be affected by (i) the failure of any Holder or the Trustee to assert any claim or demand or to enforce any right or remedy against the Issuer or any other Person under this Indenture, the Secured Notes, the Security Agreements or any other agreement or otherwise; (ii) any extension or renewal of any thereof; (iii) any rescission, waiver, amendment or modification of any of the terms or provisions of this Indenture, the Secured Notes, the Security Agreements or any other agreement; (iv) the release of any security held by any Holder or the Trustee for the Guaranteed Obligations or any of them; (v) the failure of any Holder or Trustee to exercise any right or remedy against any other guarantor of the Guaranteed Obligations; or (vi) any change in the ownership of Pride. (c) Pride hereby waives any right to which it may be entitled to have its obligations hereunder divided among Pride and any Subsidiary Guarantors, such that Pride's obligations would be less than the full amount claimed. Pride hereby waives any right to which it may be entitled to have the assets of the Issuer first be used and depleted as payment of the Issuer's or Pride's obligations hereunder prior to any amounts being claimed from or paid by Pride hereunder. Pride hereby waives any right to which it may be entitled to require that the Company be sued prior to an action being initiated against Pride. (d) To the extent permitted by applicable law, Pride further agrees that its Guarantee herein constitutes a guarantee of payment, performance and compliance when due (and not a guarantee of collection) and waives any right to require that any resort be had by any Holder or the Trustee to any security held for payment of the Guaranteed Obligations. (e) The Guarantee of Pride shall rank pari passu with principal of and premium, if any, and interest on all unsecured Senior Indebtedness of Pride. (f) Except as expressly set forth in Section 9.02, to the extent permitted by applicable law, the obligations of Pride hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, 142 alteration or compromise, and shall not be subject to any defense of setoff, counterclaim, recoupment or termination whatsoever or by reason of the invalidity, illegality or unenforceability of the Guaranteed Obligations or otherwise. Without limiting the generality of the foregoing, to the extent permitted by applicable law, the obligations of Pride herein shall not be discharged or impaired or otherwise affected by the failure of any Holder or the Trustee to assert any claim or demand or to enforce any remedy under this Indenture, the Secured Notes, the Security Agreements or any other agreement, by any waiver or modification of any thereof, by any default, failure or delay, wilful or otherwise, in the performance of the obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of Pride or would otherwise operate as a discharge of Pride as a matter of law or equity. (g) Subject to Section 9.02, Pride agrees that its Guarantee shall remain in full force and effect until payment in full of the lesser of the Pride Limit and all the Guaranteed Obligations. Pride further agrees that its Guarantee herein shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal of or interest (including Additional Amounts, if any, and Special Amounts, if any), on, or any other amount in respect of, any Guaranteed Obligation is rescinded or must otherwise be restored by any Holder or the Trustee upon the bankruptcy or reorganization of the Issuer or otherwise. (h) In furtherance of the foregoing and not in limitation of any other right which any Holder or the Trustee has at law or in equity against Pride by virtue hereof, upon the failure of the Company to pay the principal of or interest (including Additional Amounts, if any, and Special Amounts, if any), on any Guaranteed Obligation when and as the same shall become due, whether at maturity, by acceleration, by redemption or otherwise, or to perform or comply with any other Guaranteed Obligation, Pride hereby promises to and shall, upon receipt of written demand by the Trustee, forthwith pay, or cause to be paid, in cash, to the Holders or the Trustee an amount equal to the lesser of (x) the sum of (i) the unpaid principal amount of such Guaranteed Obligations, (ii) accrued and unpaid interest on such Guaranteed Obligations (but only to the extent not prohibited by law) and (iii) all other monetary obligations of the Issuer to the Holders and the Trustee and (y) the Pride Limit. 143 (i) Pride agrees that it shall not be entitled to exercise any right of subrogation in relation to the Holders in respect of any Guaranteed Obligations guaranteed hereby until payment in full of all Guaranteed Obligations. After all the Guaranteed Obligations have been paid in full, the Trustee agrees to execute any documents and to take any actions reasonably requested by Pride to enforce such subrogation. Pride further agrees that, as between it, on the one hand, and the Holders and the Trustee, on the other hand, (i) the maturity of the Guaranteed Obligations guaranteed hereby may be accelerated as provided in Article VI for the purposes of any Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Guaranteed Obligations guaranteed hereby, and (ii) in the event of any declaration of acceleration of such Guaranteed Obligations as provided in Article VI, such Guaranteed Obligations (whether or not due and payable) shall forthwith become due and payable by Pride for the purposes of this Section 13.01. (j) Pride also agrees to pay any and all costs and expenses (including reasonable attorneys' fees and expenses) incurred by the Trustee or any Holder in enforcing any rights under this Section 13.01. (k) Upon request of the Trustee, Pride shall execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture. SECTION 13.02. LIMITATION ON LIABILITY. Any term or provision of this Indenture to the contrary notwithstanding, the maximum aggregate amount of the Guaranteed Obligations guaranteed hereunder by Pride shall not exceed $30,000,000.00 (the "Pride Limit"). SECTION 13.03. SUCCESSORS AND ASSIGNS. (a) This Article XIII shall be binding upon Pride and its successors and assigns and shall inure to the benefit of the successors and assigns of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges conferred upon that party in this Indenture, in the Secured Notes and in the Security Agreements shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions of this Indenture. (b) Pride will not, in any transaction or series of transactions, consolidate with or merge into any other Person (other than a merger of a Subsidiary of Pride into Pride in which Pride is the continuing Person), or sell, 144 convey, assign, transfer, lease or otherwise dispose of all or substantially all of the property and assets of Pride and its Subsidiaries, taken as a whole, to any Person, unless (i) either (x) Pride shall be the continuing Person or (y) the Person (if other than Pride) formed by such consolidation or into which Pride is merged, or the Person which acquires, by sale, assignment, conveyance, transfer, lease or other disposition, all or substantially all of the property and assets of Pride and its Subsidiaries, taken as a whole (such corporation or Person, the "Surviving Entity"), shall expressly assume, by a supplemental Indenture, the due and punctual payment and performance of Pride's covenants and obligations under this Indenture, including the Pride Guarantee; and (ii) the Surviving Entity shall be a permitted successor to Pride under the Indenture dated as of May 1, 1997, as amended and supplemented by the Second Supplemental Indenture thereto dated as of May 26, 1999, between Pride and The Chase Manhattan Bank, as trustee (the "Pride Indenture"). SECTION 13.04. NO WAIVER. Neither a failure nor a delay on the part of either the Trustee or the Holders in exercising any right, power or privilege under this Article XIII shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise of any right, power or privilege. The rights, remedies and benefits of the Trustee and the Holders herein expressly specified are cumulative and not exclusive of any other rights, remedies or benefits which either may have under this Article XIII at law, in equity, by statute or otherwise. SECTION 13.05. MODIFICATION. No modification, amendment or waiver of any provision of this Article XIII, nor the consent to any departure by Pride therefrom, shall in any event be effective unless the same shall be in writing and signed by the Trustee, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on Pride in any case shall entitle Pride to any other or further notice or demand in the same, similar or other circumstances. SECTION 13.06. EXECUTION OF SUPPLEMENTAL INDENTURE FOR FUTURE SUBSIDIARY GUARANTORS. Each Subsidiary which is required to become a Subsidiary Guarantor pursuant to Section 4.19 shall promptly execute and deliver to the 145 Trustee a supplemental indenture in the form of Exhibit D hereto pursuant to which such Subsidiary shall become a Subsidiary Guarantor under this Indenture and shall guarantee the Guaranteed Obligations (as defined in such form of supplemental indenture). Concurrently with the execution and delivery of such supplemental indenture, the Issuer shall deliver to the Trustee an Opinion of Counsel and an Officers' Certificate to the effect that such supplemental indenture has been duly authorized, executed and delivered by such Subsidiary and that, subject to the application of bankruptcy, insolvency, moratorium, fraudulent conveyance or transfer and other similar laws relating to creditors' rights generally and to the principles of equity, whether considered in a proceeding at law or in equity, the Subsidiary Guarantee of such Subsidiary Guarantor is a legal, valid and binding obligation of such Subsidiary Guarantor, enforceable against such Subsidiary Guarantor in accordance with its terms and or to such other matters as the Trustee may reasonably request. SECTION 13.07. NONIMPAIRMENT. The failure to endorse a Guarantee on any Secured Note shall not affect or impair the validity thereof. SECTION 13.08. PRIDE COVENANTS. Pride agrees, for the benefit of the Holders of the Secured Notes, to comply with all its covenants in the Pride Indenture. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the date first written above. AMETHYST FINANCIAL COMPANY LIMITED by /s/ EARL W. MCNIEL Name: Earl W. McNiel Title: Treasurer WILMINGTON TRUST COMPANY by /s/ CARYN M. O'MARA Name: Caryn M. O'Mara Title: Authorized Signer 146 Each of the following entities as Guarantor: PRIDE INTERNATIONAL, INC. by /s/ EARL W. MCNIEL Name: Earl W. McNiel Title: Vice President Each of the following entities as procurer of a Letter of Credit: MARITIMA PETROLEO e ENGENHARIA LTDA. by /s/ GERMAN EFROMOVICH Name: German Efromovich Title: President Exhibit A (Face of Note) [THIS GLOBAL NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE REFERRED TO ON THE REVERSE THEREOF. UNLESS THIS SECURED NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO AMETHYST FINANCIAL COMPANY LIMITED (THE "ISSUER") OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURED NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.06 OF THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. THIS GLOBAL NOTE IS EXCHANGEABLE FOR A SECURED NOTE IN DEFINITIVE, FULLY REGISTERED FORM, WITHOUT INTEREST COUPONS, IF (A) DTC NOTIFIES THE ISSUER THAT IT IS UNWILLING OR UNABLE TO CONTINUE AS DEPOSITORY FOR THIS GLOBAL NOTE OR IF AT ANY TIME DTC CEASES TO BE A "CLEARING AGENCY" REGISTERED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND A SUCCESSOR DEPOSITORY IS NOT APPOINTED BY THE ISSUER WITHIN 90 DAYS OF SUCH NOTICE, (B) THE ISSUER EXECUTES AND DELIVERS TO THE TRUSTEE A NOTICE THAT THIS GLOBAL NOTE SHALL BE SO TRANSFERABLE, REGISTRABLE, AND EXCHANGEABLE, AND SUCH TRANSFER SHALL BE SO REGISTRABLE, OR (C) AN EVENT OF DEFAULT (AS HEREINAFTER DEFINED) HAS OCCURRED AND IS CONTINUING WITH RESPECT TO THE SECURED NOTES.]1 [THIS SECURED NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. ACCORDINGLY, THIS SECURED NOTE MAY NOT BE OFFERED, - - -------- (1) These paragraphs should be included if the Secured Notes are issued in global form. 2 SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER: (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER REGULATION D UNDER THE SECURITIES ACT (AN "IAI")), (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (I) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (II) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (III) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF THE ACT, (IV) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE ACT, (V) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE ACT, (VI) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (VII) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION, AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING.]2 - - -------- (2) These paragraphs (the Private Placement Legend) should be replaced upon the exchange of Initial Secured Notes for Exchange Secured Notes in the Exchange Offer or upon the registration of Initial Secured Notes pursuant to the Registration Rights Agreement by the paragraphs referred to in Footnote 3. 3 [THE HOLDER: (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT (AN "IAI") OR (C) IT IS A PERSON INVOLVED IN THE ORGANIZATION OR OPERATION OF THE ISSUER OR AN AFFILIATE (AS DEFINED IN RULE 405 UNDER THE SECURITIES ACT) OF THE ISSUER, (2) AGREES THAT IT WILL NOT RESELL, OR OTHERWISE TRANSFER THIS NOTE EXCEPT TO (A) A QIB, (B) AN IAI, OR (C) A PERSON INVOLVED IN THE ORGANIZATION OR OPERATION OF THE ISSUER OR AN AFFILIATE (AS DEFINED IN RULE 405 UNDER THE SECURITIES ACT) OF THE ISSUER, AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING. THE INDENTURE ALSO CONTAINS A PROVISION REQUIRING THE ISSUER TO EXERCISE REASONABLE CARE TO ENSURE THAT THE SECURED NOTES ARE RESOLD OR OTHERWISE TRANSFERRED ONLY TO PURCHASERS MEETING THE REQUIREMENTS SPECIFIED IN CLAUSE (2) ABOVE.](3) - - -------- (3) This should be included on all Exchange Secured Notes or upon registration of Initial Secured Notes pursuant to the Registration Rights Agreement. 11 3/4% Secured Notes due 2001 AMETHYST FINANCIAL COMPANY LIMITED No. CUSIP No. $_____________________ AMETHYST FINANCIAL COMPANY LIMITED promises to pay to _______________________ or registered assigns, the principal sum of ___________________ United States Dollars, [or such greater or lesser amount as may from time to time be endorsed on Schedule A hereto]4 on November 1, 2001. Interest Payment Dates: June 30, December 30 and November 1, 2001 Record Dates: June 15 and December 15 or, with respect to the November 1, 2001 Interest Payment Date, October 15, 2001 Reference is hereby made to the further provisions of this Secured Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authorization hereon has been duly executed by the Trustee referred to on the reverse hereof by manual signature, this Secured Note shall not be - - -------- (4) This is included on Global Notes only. 2 entitled to any benefit of this Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly executed as of the date written below. AMETHYST FINANCIAL COMPANY LIMITED by _________________________ Name: Title: by _________________________ Name: Title: Date:___________________ Certificate of Authentication: This is one of the Secured Notes referred to in the within-mentioned Indenture: WILMINGTON TRUST COMPANY, as Trustee, by ___________________________________ Authorized Signatory (Reverse of Note) 11 3/4% Secured Note due 2001 Capitalized terms used herein shall have the meanings assigned to them in this Indenture referred to below unless otherwise indicated. SECTION 1. INTEREST. Amethyst Financial Company Limited, a British Virgin Islands limited liability company (such company, and its successors and assigns under the Indenture hereinafter referred to, being called the "Issuer"), promises to pay interest on the principal amount of this Secured Note at 11 3/4% per annum until Maturity and shall pay Additional Amounts (as defined), if any, and Special Interest, if any, payable pursuant to Section 5 of the Registration Rights Agreement referred to below. The Issuer will pay interest, if any, and Additional Amounts, if any, and Special Interest, if any, semi-annually in arrears on June 30 and December 30 of each year and on November 1, 2001 (each, an "Interest Payment Date"), or if any such day is not a Business Day, on the next succeeding Business Day. Interest on the Secured Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the Issue Date; provided that if there is no existing Default in the payment of interest, and if this Secured Note is authenticated between a Record Date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from the next June 30 or December 30, as the case may be. The Issuer shall pay interest (including post-petition interest in any proceeding under any applicable Federal, State or foreign bankruptcy law) on overdue installments of interest ("Defaulted Interest"), Additional Amounts, if any, and Special Interest, if any (without regard to any applicable grace periods), from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months. SECTION 2. METHOD OF PAYMENT. The Issuer will pay interest on the Secured Notes (except Defaulted Interest), Additional Amounts, if any, and Special Interest, if any, to the Persons who are registered Holders of Secured Notes at the close of business on June 15 or December 15 or, with respect to the November 1, 2001, Interest Payment Date, October 15, 2001 immediately preceding the Interest Payment Date (each, a "Record Date"), even if such Secured Notes are cancelled after such Record Date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to Defaulted Interest. The 2 Secured Notes will be payable as to principal, premium, interest, Additional Amounts and Special Interest at the office or agency of the Issuer maintained for such purpose within the City and State of New York, or, at the option of the Issuer, payment of interest and Additional Amounts and Special Interest may be made by check mailed to the Holders at their addresses set forth in the register of Holders, provided that payment by wire transfer of immediately available funds will be required with respect to principal of and interest, premium, if any, and Additional Amounts, if any, and Special Interest, if any, on, all Global Notes and all other Secured Notes the Holders of which shall have provided wire transfer instructions to the Issuer and the Paying Agent prior to the applicable Record Date for such payment. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. SECTION 3. ADDITIONAL AMOUNTS. Except to the extent required by any applicable law, regulation or governmental policy, any and all payments of, or in respect of, any Secured Note shall be made free and clear of and without deduction for or on account of any and all present or future taxes, levies, imposts, deduction, charges or withholdings and all liabilities with respect thereto imposed by the British Virgin Islands, Brazil, the United States of America or any other jurisdiction with which the Issuer, Pride or any Subsidiary Guarantor has some connection (including any jurisdiction from or through which payments under the Secured Notes, the Pride Guarantee or the Subsidiary Guarantees (if any) are made or in which the Mortgaged Rigs are located) or any political subdivision of or any taxing authority in any such jurisdiction (collectively, "Taxes" and any such jurisdiction or political subdivision or taxing authority, a "Tax Jurisdiction"). If the Issuer, Pride or any Subsidiary Guarantor shall be required by law to withhold any Taxes from or in respect of any sum payable under the Secured Notes, the Pride Guarantee or a Subsidiary Guarantee, the sum payable by the Issuer under the Secured Notes shall be increased by the amount ("Additional Amounts") necessary so that after making all required withholdings and deductions, the Holder or beneficial owner of a Secured Note shall receive an amount equal to the sum that it would have received had not such withholdings and deductions been made; PROVIDED that any such sum shall not be paid to a Holder (an "Excluded Holder") (i) in respect of any Taxes resulting from the beneficial owner of such Secured Note carrying on business or being deemed to carry on business in or through a permanent establishment or fixed base in the relevant taxing jurisdiction or having any other connection with the 3 relevant taxing jurisdiction or any political subdivision thereof or any taxing authority therein other than the mere holding or owning of such Secured Note, being a beneficiary of the Pride Guarantee or any applicable Subsidiary Guarantee, the receipt of any income or payments in respect of such Secured Note, the Pride Guarantee or any applicable Subsidiary Guarantee or the enforcement of such Secured Note, the Pride Guarantee or any applicable Subsidiary Guarantee, (ii) in respect of any Taxes that would not have been imposed but for the presentation (where presentation is required) of such Secured Note for payment more than 180 days after the date such payment became due and payable or was duly provided for, whichever occurs later, or (iii) in respect of United States federal income Taxes, if such Holder fails to provide to the Issuer, within 30 days of a request by the Issuer, complete and valid IRS Form W-8 or other form establishing an exemption from United States withholding Taxes. The Issuer, Pride or the Subsidiary Guarantors, as applicable, will also (i) make such withholding or deduction and (ii) remit the full amount deducted or withheld to the relevant authority in accordance with applicable law, and, in any such case, the Issuer will furnish to each Holder on whose behalf an amount was so remitted, within 30 calendar days after the date the payment of any Taxes, is due pursuant to applicable law, certified copies of tax receipts evidencing such payment by the Issuer, Pride or the Subsidiary Guarantors, as applicable. The Issuer will, upon written request of each Holder (other than an Excluded Holder), reimburse each such holder for the amount of (i) any Taxes so levied or imposed and paid by such holder as a result of payments under or with respect to any Secured Notes, and (ii) any Taxes so levied or imposed with respect to any reimbursement under the foregoing clause (i) so that the net amount received by such Holder (net of payments made under or with respect to such Secured Notes, the Pride Guarantee or the applicable Subsidiary Guarantees after such reimbursement will not be less than the net amount the Holder would have received if Taxes on such reimbursement had not been imposed. At least 30 calendar days prior to each date on which any payment under or with respect to the Secured Notes is due and payable, if the Issuer will be obligated to pay Additional Amounts with respect to such payment, the Issuer will deliver to the Trustee an Officers' Certificate stating the fact that such Additional Amounts will be payable and the amounts so payable and will set forth such other information necessary to enable the Trustee to pay such Additional Amounts to Holders on the payment date. 4 If any Holder or beneficial owner of any Secured Note receives a refund of Taxes after the Issuer, Pride or any Subsidiary Guarantor, as applicable, has paid any Additional Amounts, such Holder or beneficial owner shall reimburse the Issuer, Pride or any Subsidiary Guarantor, as applicable, for any amount of such refund. In addition, the Issuer will pay any present or future stamp, issue, registration, documentary or other similar taxes and duties, including interest and penalties, in respect of the creation, issue and offering of the Secured Notes payable in the United States, the British Virgin Islands, Brazil or any political subdivision thereof or taxing authority of or in the foregoing. The Issuer will also pay and indemnify the Trustee and the Holders of the Secured Notes from and against all court fees and taxes or other taxes and duties, including interest and penalties, paid by any of them in any jurisdiction in connection with any action permitted to be taken by the Holders or the Trustee to create Liens on the Collateral or to enforce the Obligations of the Issuer, Pride or the Subsidiary Guarantors under the Secured Notes, the Indenture, the Pride Guarantee, the Subsidiary Guarantees, the Issuer Loans or the Security Agreements. Whenever there is mentioned, in any context, the payment of principal, premium or interest in respect of any Secured Note or the net proceeds received on the sale or exchange of any Secured Note, such mention shall be deemed to include the payment of Additional Amounts or Special Interest provided for in the Indenture to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof pursuant to the Indenture. SECTION 4. PAYING AGENT AND REGISTRAR. Initially, the Trustee under this Indenture will act as Paying Agent and Registrar. The Issuer may change any Paying Agent or Registrar without notice to any Holder. In certain situations, the Issuer or any of its Subsidiaries may act in any such capacity. SECTION 5. INDENTURE. The Issuer issued the Secured Notes under an Indenture dated as of November 1, 1999 ("Indenture") between the Issuer, Pride International, Inc. ("Pride") acting as guarantor, Maritima Petroleo e Engenharia Ltda. ("Maritima") as procurer of the Letter of Credit and Wilmington Trust Company as trustee (the "Trustee," which term includes any successor trustee under the Indenture). The terms of the Secured Notes include those stated in the Indenture and those made part of the Indenture by reference to the U.S. Trust Indenture Act of 5 1939, as amended (15 U.S. Code ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture. The Secured Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. The Secured Notes are secured obligations of the Issuer issuable in a single series, consisting of 11 3/4% Senior Secured Notes due 2001 (the "Secured Notes") limited to $53,000,000 aggregate principal amount (subject to Section 2.07 of the Indenture). This Secured Note is one of the Secured Notes referred to in the Indenture. SECTION 6. OPTIONAL REDEMPTIONS. (a) Under the terms of the Indenture, the Secured Notes will be redeemable, at the Issuer's option at any time in whole or from time to time in part upon not less than 30 and not more than 60 days' prior notice mailed by first class mail to the Holders of the Secured Notes, on any date prior to Maturity at a price equal to 100% of the principal amount thereof plus accrued and unpaid interest (including Special Interest, if any, and Additional Amounts, if any), to the Redemption Date plus the Make-Whole Premium. (b) Under the terms of the Indenture, the Secured Notes may be redeemed, at the option of the Issuer, at any time as a whole but not in part, on not less than 30 nor more than 60 days' prior notice mailed by first class mail to the Holders of the Secured Notes, at a price equal to 100% of the principal amount thereof plus accrued and unpaid interest (including Special Interest, if any, and Additional Amounts, if any), to the Redemption Date, in the event the Issuer has become or would become obligated to pay (and the Issuer cannot avoid such obligation by taking reasonable measures available to it), on the next date on which any amount would be payable with respect to the Secured Notes, any Additional Amounts as a result of a change in or an amendment to the laws (including any regulations promulgated thereunder) of a Tax Jurisdiction, or any change in or amendment to any official position regarding the application or interpretation of such laws or regulations, which change or amendment is announced or becomes effective on or after the Issue Date; PROVIDED, HOWEVER, that such redemption shall be conditioned upon the Issuer being actually obligated to pay such Additional Amounts on the relevant payment date. Prior to the giving of the notice of redemption described in the preceding paragraph, the Issuer shall deliver to the Trustee an Officers' Certificate (together with a copy of an Opinion of Counsel from counsel that is independent from the Issuer to the effect that the Issuer will be or will become obligated to pay Additional Amounts), 6 stating that the Issuer is entitled to effect such redemption in accordance with the Indenture and setting forth in reasonable detail a statement of the facts relating thereto. (c) Notices of redemption will be mailed by first class mail at least 30 days but not more than 60 days before the Redemption Date to each Holder whose Secured Notes are to be redeemed at its registered address. Secured Notes in denominations larger than $1,000 may be redeemed in part but only in integral multiples of $1,000, unless all of the Secured Notes held by a Holder are to be redeemed. Unless the Issuer defaults in making such redemption payment, on and after the Redemption Date interest (including Special Interest, if any and Additional Amounts, if any), ceases to accrue on Secured Notes or portions thereof called for redemption. SECTION 7. REDEMPTION UPON LOSS OF A RIG. If an Event of Loss occurs at any time with respect to a Mortgaged Rig, the Issuer shall redeem 50% of the Secured Notes (or 100% of the Secured Notes in the case of an Event of Loss with respect to both Mortgaged Rigs or if Secured Notes were previously redeemed pursuant to this section 7 or Section 8) on the earlier to occur of (A) 30 days after the receipt of the related Event of Loss Proceeds by the Issuer from the applicable Mortgaged Rig Owner and (B) 180 days after the date on which such Event of Loss occurred, at a Redemption Price equal to 100% of their principal amount, plus accrued and unpaid interest (including Additional Amounts, if any, and Special Interest, if any), to the Redemption Date, all as provided in the Indenture. SECTION 8. REDEMPTION UPON SALE OF A MORTGAGED RIG. If a Mortgaged Rig or the Capital Stock of a Restricted Subsidiary then owning a Mortgaged Rig is sold in compliance with the terms of the Indenture, the Issuer shall redeem 50% of the Secured Notes (or 100% of the Secured Notes in the case of a sale of both Mortgaged Rigs or the Capital Stock of both Restricted Subsidiaries then owning Mortgaged Rigs or if Secured Notes have previously been redeemed pursuant to this Section 8 or Section 7) on the earlier to occur of (A) 30 days after the receipt by the Issuer of Net Available Cash from such sale and (B) 60 days after the date of such sale at a Redemption Price equal to 100% of their principal amount, plus accrued and unpaid interest (including Additional Amounts, if any, and Special Interest, if any), to the Redemption Date plus the Make- Whole Premium. 7 SECTION 9. REPURCHASE AT OPTION OF HOLDER. Upon the occurrence of a Change of Control, each Holder will have the right to require the Issuer to repurchase such Holder's Secured Notes in whole or in part (the "Change of Control Offer") at a purchase price (the "Change of Control Purchase Price") in cash equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon, if any (including Additional Interest, if any, and Special Amounts, if any), to the Change of Control Payment Date on the terms described in the Indenture. Within 30 days following any Change of Control, the Issuer shall send, or cause to be sent, by first class mail, postage prepaid, a notice regarding the Change of Control Offer to each Holder of Secured Notes. The Holder of this Secured Note may elect to have this Secured Note or a portion hereof in an authorized denomination purchased by completing the form entitled "Option of Holder to Require Purchase" appearing below and tendering this Secured Note pursuant to the Change of Control Offer. Unless the Issuer defaults in the payment of the Change of Control Payment with respect thereto, all Secured Notes or portions thereof accepted for payment pursuant to the Change of Control Offer will cease to accrue interest (including Additional Amounts, if any, and Special Interest, if any), from and after the Change of Control Purchase Date. SECTION 10. DENOMINATIONS; TRANSFER AND EXCHANGE. The Secured Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Secured Notes may be registered and Secured Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents (including, in certain cases, opinions of counsel) and the Issuer may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Issuer need not exchange or register the transfer of any Secured Note or portion of a Secured Note selected for redemption, except for the unredeemed portion of any Secured Note being redeemed in part. Also, it need not exchange or register the transfer of any Secured Notes for a period of 15 days before a selection of Secured Notes to be redeemed or during the period between a Record Date and the corresponding Interest Payment Date. SECTION 11. PERSONS DEEMED OWNERS. The registered Holder of a Secured Note may be treated as its owner for all purposes. 8 SECTION 12. AMENDMENT, SUPPLEMENT AND WAIVER. With the consent of the Holders of not less than a majority in aggregate principal amount of the outstanding Secured Notes (including consents obtained in connection with a tender offer or exchange offer for the Secured Notes), the Issuer and the Trustee may enter into one or more indentures supplemental to the Indenture for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of modifying in any manner the rights of the Holders; PROVIDED that no such supplemental indenture may, among other things, without the consent of the Holder of each outstanding Secured Noted affected thereby, (i) reduce the amount Secured Notes whose Holders must consent to an amendment, (ii) reduce the rate of or extend the time for payment of interest (including Additional Interest, if any, and Special Interest, if any), on any Secured Note or any Issuer Loan, (iii) reduce the principal of or extend the Stated Maturity of any Secured Note or any Issuer Loan, (iv) modify the obligations of Issuer to make mandatory redemptions or otherwise reduce the premium payable upon the redemption of any Secured Note or change the time at which any Secured Note may be or is required to be redeemed as described under the covenants described in paragraphs 7, 8 and 9 above, (v) modify the obligations of Pride to make payments under the Pride Guarantee or the obligations of the Letter of Credit Provider under the Letter of Credit, (vi) make any Secured Note payable in money other than that stated in the Secured Note, (vii) impair the right of any Holder of the Secured Notes to receive payment of principal of and interest (including Additional Interest, if any, and Special Interest, if any), on such Holder's Secured Notes on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder's Secured Notes, (viii) make any change in the amendment provisions which require each Holder's consent or in the waiver provisions, (ix) make any change in the Pride Guarantee, the Subsidiary Guarantees, if any, the Letter of Credit or any Security Agreement or Mitsubishi Loan Agreement (in the case of the Mitsubishi Documents, if the Issuer has the right to consent to any such change) that would materially adversely affect the Noteholders or terminate the Lien of the Indenture or any Security Agreement on any property at any time subject thereto or deprive the Holders of the security afforded by the Lien of the Indenture or the Security Agreements or the Issuer of the Liens securing the Issuer Loans. SECTION 13. DEFAULTS AND REMEDIES. Events of Default include in summary form: (i) default for 30 days in the payment when due of interest (including Special 9 Interest, if any, or Additional Amounts, if any), on the Secured Notes or an Issuer Loan; (ii) default in payment when due of the principal of, or premium, if any, on any Secured Note or Issuer Loan; (iii) failure by the Issuer to comply with Sections 3.08, 3.09, 4.08, 4.15 or 5.01 of the Indenture; (iv) failure by the Issuer and the Subsidiary Guarantors for 60 days after notice to comply with any of its other agreements in the Indenture or the Security Agreements, or the occurrence of an event of default under a Mitsubishi Loan Collateral Document that continues for 60 days after notice; (v) Indebtedness of the Issuer or any Subsidiary is not paid when due within the applicable grace period, if any, or is accelerated by the holders thereof and, in either case, the aggregate principal amount of such unpaid or accelerated Indebtedness exceeds $10,000,000 or a default occurs under a Mitsubishi Document, such default is not a payment default and such default is not cured or waived within 120 days; (vi) failure by the Issuer or any of its Restricted Subsidiaries to pay final judgments aggregating in excess of $10,000,000, which judgments are not paid, discharged or stayed for a period of 30 days; (viii) certain events of bankruptcy or insolvency with respect to the Issuer, Pride or any Significant Subsidiary; (ix) the Pride Guarantee or any Subsidiary Guarantee shall for any reason cease to be, or be asserted by Pride or any Subsidiary Guarantor, as applicable, not to be, in full force and effect (except pursuant to the release of any Subsidiary Guarantee in accordance with the Indenture); (x) the Letter of Credit for any reason cease to be, or be asserted by the Letter of Credit Provider not to be, in full force and effect; and (xi) the Liens under the Security Agreements shall, at any time, cease to be in full force and effect for any reason (other than by operation of the provisions of the Indenture and the Security Agreements) other than the satisfaction in full of all obligations under the Indenture and discharge of the Indenture, or any Lien created thereunder shall be declared invalid or unenforceable or the Issuer or any Mortgaged Rig Owner shall assert, in any pleading in any court of competent jurisdiction, that any such Lien is invalid or unenforceable. Holders of the Secured Notes may not enforce the Indenture or the Secured Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Secured Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Secured Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal, premium, if any, or interest) if it 10 determines that withholding notice is not opposed to the interests of the Holders. Subject to certain limitations, the Holders of a majority in aggregate principal amount of the Secured Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Secured Notes then outstanding waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest on, or the principal of, premium, if any, on, or interest (including Special Interest, if any, and Additional Amounts, if any), on, the Secured Notes. The Issuer is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Issuer is required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. SECTION 14. DEFEASANCE PRIOR TO MATURITY OR REDEMPTION. The Issuer, at its election, shall (a) be deemed to have paid and discharged its debt on the Secured Notes and the Indenture and on Security Agreements, the Pride Guarantee and the Subsidiary Guarantees shall cease to be of further effect as to all outstanding Secured Notes (except as to (i) rights of registration of transfer, substitution and exchange of Secured Notes, (ii) the Issuer's right of optional redemption, (iii) rights of Holders to receive payments of principal of, premium, if any, and interest (including Special Interest, if any, and Additional Amounts, if any), on the Secured Notes (but not the Change of Control Purchase Price) and any rights of the Holders with respect to such amounts, (iv) the rights, obligations and immunities of the Trustee under the Indenture, and (v) certain other specified provisions in the Indenture) or (b) cease to be under any obligation to comply with certain restrictive covenants that are described in the Indenture, after the irrevocable deposit by the Issuer with the Trustee, in trust for the benefit of the Holders, at any time prior to the stated Maturity of the Secured Notes, of (i) money in an amount, (ii) U.S. Government Obligations which through the payment of interest and principal will provide, not later than one Business Day before the due date of payment in respect of such Secured Notes, money in an amount, or (iii) a combination thereof sufficient to pay and discharge the principal of, premium, if any on, and interest (including Additional Amounts, if any, and Special Interest, if any), on, such Secured Notes then outstanding on the dates on which any such payments are due in accordance with the terms of the Indenture and of such Secured Notes. SECTION 15. SECURITY AGREEMENTS. As provided in the Indenture and the Security Agreements and subject to 11 certain limitations set forth therein, the Obligations of the Issuer under the Indenture, the Secured Notes and the Security Agreements are secured by the Collateral as provided in the Security Agreements. Each Holder, by accepting a Secured Note, agrees to be bound to all terms and provisions of the Security Agreements, as the same may be amended from time to time. The Liens created under the Security Agreements shall be released upon the terms and subject to the conditions set forth in the Indenture and the Security Agreements. SECTION 16. TRUSTEE DEALINGS WITH THE ISSUER. Subject to certain limitations imposed by the Trust Indenture Act, the Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Issuer or its Affiliates, and may otherwise deal with the Issuer or its Affiliates, as if it were not the Trustee. SECTION 17. NO RECOURSE AGAINST OTHERS. A director, officer, employee, incorporator or stockholder of the Issuer, Pride, Maritima or any Subsidiary Guarantor, as such, shall not have any liability for any obligations of the Issuer, Pride, Maritima or any Subsidiary Guarantors under the Secured Notes, the Indenture, the Pride Guarantee, the Subsidiary Guarantees or for any claim based on, in respect of, or by reason of, such Obligations or their creation. Each Holder by accepting a Secured Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Secured Notes. SECTION 18. GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SECURED NOTE, WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF. SECTION 19. AUTHENTICATION. This Secured Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. SECTION 20. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/MA (= Uniform Gifts to Minors Act). SECTION 21. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED SECURED NOTES. In addition to the rights provided to Holders of Secured Notes under the 12 Indenture, Holders of Transferred Restricted Secured Notes (as defined in the Registration Rights Agreement) shall have all the rights set forth in the Registration Rights Agreement dated as of the date of the Indenture, between the Issuer and the parties named on the signature pages thereof (the "Registration Rights Agreement"). SECTION 22. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Issuer has caused CUSIP numbers to be printed on the Secured Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Secured Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Issuer will furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: Amethyst Financial Company Limited Amethyst Financial Company Limited c/o Arias Fabrega and Fabrega Trust Co. BVI Limited 325 Waterfront Drive, Omar Hodge Building, 2nd Floor Wickham's Lay Road, Tortola, British Virgin Islands Telephone No.: [ ] Telecopier No.: [ ] GUARANTEE Subject to the limitations set forth in the Indenture, Pride has irrevocably and unconditionally guaranteed (i) the full and punctual payment when due, whether at Stated Maturity, by acceleration, by redemption or otherwise, of all obligations of the Issuer under the Indenture (including obligations to the Trustee), the Secured Notes and the Security Agreements, whether for payment of principal of, premium, if any, on, or interest (including Additional Amounts, if any, and Special Interest, if any), on the Secured Notes and all other monetary obligations of the Issuer under the Indenture, the Secured Notes and the Security Agreements and (ii) the full and punctual performance within applicable grace periods of all other obligations of the Issuer whether for fees, expenses, indemnification or otherwise under the Indenture, the Secured Notes and the Security Agreements (all the foregoing being hereinafter collectively called the "Guaranteed Obligations"). Capitalized terms used herein shall have the same meanings assigned to them in this Indenture unless otherwise indicated. Payment on each Secured Note is guaranteed by Pride pursuant to Article XIII of the Indenture and reference is made to such Indenture for the precise terms of the Pride Guarantee. The Guaranteed Obligations guaranteed by Pride under the Pride Guarantee are limited to $30,000,000. [SIGNATURE PAGE FOLLOWS] 2 PRIDE INTERNATIONAL, INC. By _________________________ Name: Title: ASSIGNMENT FORM To assign this Secured Note, fill in the form below: (I) or (we) assign and transfer this Secured Note to ________________________________________________________________________________ (Insert assignee's Social Security or tax I.D. no.) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint________________________________________________________ to transfer this Secured Note on the books of the Issuer or the agent appointed by the Issuer to maintain such books. The agent appointed hereby may substitute another to act for him. ________________________________________________________________________________ Date:_________________________ Your signature:_________________________________ (Sign exactly as your name appears on the face of this Secured Note) Signature Guarantee: OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Secured Note purchased by the Issuer pursuant to Section 4.08 of the Indenture, check the box below: [ ] Section 4.8 If you want to elect to have only part of the Secured Note purchased by the Issuer pursuant to Section 4.08 of the Indenture, state the amount you elect to have purchased (must be an integral multiple of $1,000): $_________ Your Signature:_________________________________ (Sign exactly as your name appears on the Secured Note) Signature Guarantee: Social Security or Tax Identification No.: SCHEDULE A CHANGES IN PRINCIPAL AMOUNT OF SECURED NOTE5 The following changes in the principal amount of this Global Note have been recorded: AMOUNT OF AMOUNT OF PRINCIPAL AMOUNT DECREASE INCREASE OF THIS GLOBAL SIGNATURE IN PRINCIPAL IN PRINCIPAL NOTE FOLLOWING OF AUTHORIZED DATE OF AMOUNT OF THIS AMOUNT OF THIS SUCH DECREASE OFFICER OF TRANSACTION GLOBAL NOTE GLOBAL NOTE (OR INCREASE) TRUSTEE - - ----------- -------------- -------------- ---------------- ------------- - - -------- 5 This should only be included if the Secured Note is issued in global form. EXHIBIT B-1 FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER FROM U.S. GLOBAL NOTE TO REGULATION S GLOBAL NOTE (PURSUANT TO SECTION 2.06(A)(I) OF THE INDENTURE) Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Re: 11 3/4% Senior Secured Notes due 2001 of AmethyST Financial Company Limited Reference is hereby made to this Indenture, dated as of November 1, 1999 (the "Indenture"), between Amethyst Financial Company Limited (the "Issuer"), Pride International, Inc., Maritima Petroleo e Engenharia Ltda. and Wilmington Trust Company, as trustee (the "Trustee"). Capitalized terms used but not defined herein shall have the meanings given them in the Indenture. This letter relates to U.S.$_________ principal amount of Secured Notes which are evidenced by one or more U.S. Global Notes and held with the Depositary in the name of ___________ (the "Transferor"). The Transferor has requested a transfer of such beneficial interest in the Secured Notes to a Person who will take delivery thereof in the form of an equal principal amount of Secured Notes evidenced by one or more Regulation S Global Secured Notes, which amount, immediately after such transfer, is to be held with the Depositary through Euroclear or Cedel or both. In connection with such request and in respect of such Secured Notes, the Transferor hereby certifies that such transfer has been effected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with Rule 903 or Rule 904 under the United States Securities Act of 1933, as amended (the "Securities Act"), and accordingly the Transferor hereby further certifies that: (1) The offer of the Secured Notes was not made to a person in the United States and, if the 40-day restricted period has not yet expired and the Transferor is a dealer (as defined in Section 2(12) of the Securities Act), or a person receiving a selling concession, fee or other remuneration in respect of the Secured Notes being sold (collectively, "Dealers"), 2 (i) neither the Transferor or any Person acting on its behalf knows that the transferee is a U.S. Person and (ii) if the Transferor or any person acting on its behalf knows that the transferee is a Dealer, the Transferor or Person acting on its behalf has sent a confirmation or other notice to the transferee stating that the Secured Notes may be offered or sold during the 40-day restricted period only in accordance with the provisions of Regulation S, pursuant to registration under the Securities Act or pursuant to an available exemption from the registration requirements of the Securities Act; (2) either: (a) at the time the buy order was originated, the transferee was outside the United States or the Transferor and any Person acting on its behalf reasonably believed and believes that the transferee was outside the United States; or (b) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither the Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States; (3) no directed selling efforts have been made in contravention of the requirements of Rule 904(b) of Regulation S; (4) the transaction is not part of a plan or scheme to evade the registration provisions of the Securities Act; and (5) upon completion of the transaction, the beneficial interest being transferred as described above is to be held with the Depositary through Euroclear or Cedel or both. Upon giving effect to this request to exchange a beneficial interest in a U.S. Global Note for a beneficial interest in a Regulation S Global Note, the resulting beneficial interest shall be subject to the restrictions on transfer applicable to Regulation S Global Notes pursuant to the Indenture and the Securities Act and, if such transfer occurs prior to the end of the 40-day restricted period associated with the initial offering of Secured Notes, the additional restrictions applicable to transfers of interest in the Regulation S Temporary Global Note. 3 This certificate and the statements contained herein are made for your benefit and the benefit of the Issuer and Donaldson, Lufkin & Jenrette Securities Corporation (the "Initial Purchaser"), the Initial Purchaser of such Secured Notes being transferred. We acknowledge that you, the Issuer and the Initial Purchaser will rely upon our confirmations, acknowledgments and agreements set forth herein, and we agree to notify you promptly in writing if any of our representations or warranties herein ceases to be accurate and complete. Terms used in this certificate and not otherwise defined in the Indenture have the meanings set forth in Regulation S under the Securities Act. [Insert Name of Transferor] By:________________________________________ Name:______________________________________ Title:_____________________________________ Dated:________________________ cc: Amethyst Financial Company Limited Initial Purchaser EXHIBIT B-2 FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER FROM REGULATION S GLOBAL NOTE TO U.S. GLOBAL NOTE (PURSUANT TO SECTION 2.06(A)(II) OF THE INDENTURE) Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Re: 11 3/4% Senior Secured Notes due 2001 of Amethyst Financial Company Limited Reference is hereby made to this Indenture dated as of November 1, 1999 (the "Indenture"), between Amethyst Financial Company Limited (the "Issuer"), Pride International,Inc. and Maritima Petroleo e Engenharia Ltda. and Wilmington Trust Company, as trustee (the "Trustee"). Capitalized terms used but not defined herein shall have the meanings given them in the Indenture. This letter relates to $__________ principal amount of Secured Notes which are evidenced by one or more Regulation S Global Secured Notes and held with the Depositary through Euroclear or Cedel in the name of _____________ (the "Transferor"). The Transferor has requested a transfer of such beneficial interest in the Secured Notes to a Person who will take delivery thereof in the form of an equal principal amount of Secured Notes evidenced by one or more U.S. Global Notes, to be held with the Depositary. In connection with such request and in respect of such Secured Notes, the Transferor hereby certifies that: [CHECK ONE] [ ] such transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act") and, accordingly, the Transferor hereby further certifies that the Secured Notes are being transferred to a Person that the Transferor reasonably believes is purchasing the Secured Notes for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified 2 institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A; OR [ ] such transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; [ ] the surrendered Secured Notes are being transferred to Institutional Accredited Investor pursuant to an exemption under the Securities Act other than Rule 144A, Rule 144 or Rule 904 and the Transferor further certifies that the Transfer complies with the transfer restrictions applicable to beneficial interests in Global Notes and Certificated Secured Notes bearing the Private Placement Legend and the requirements of the exemption claimed, which certification is supported by a certificate attached hereto executed by the Transferee in the form of Exhibit C to the Indenture, and, if the Issuer should so request, an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), in form reasonably acceptable to the Issuer and to the Registrar, to the effect that such transfer is in compliance with the Securities Act to the effect that such Transfer is in compliance with the Securities Act; [ ] such transfer is being effected in an offshore transaction pursuant to and in accordance with Rule 904 under the Securities Act; OR [ ] such transfer is being effected pursuant to an effective registration statement under the Securities Act; OR [ ] such transfer is being effected pursuant to an exemption from the registration requirements of the Securities Act other than those contemplated above, and the Transferor hereby further certifies that the Secured Notes are being transferred in compliance with the transfer restrictions applicable to the Global Notes and in accordance with the requirements of the exemption claimed, which certification is supported by an Opinion of Counsel, provided by the Transferor or 3 the Transferee (a copy of which the Transferor has attached to this certification) in form reasonably acceptable to the Issuer and to the Registrar, to the effect that such transfer is in compliance with the Securities Act; and such Secured Notes are being transferred in compliance with any applicable blue sky or securities laws of any state of the United States or any other applicable jurisdiction. Upon giving effect to this request to exchange a beneficial interest in Regulation S Global Notes for a beneficial interest in U.S. Global Notes, the resulting beneficial interest shall be subject to the restrictions on transfer applicable to U.S. Global Notes pursuant to the Indenture and the Securities Act. This certificate and the statements contained herein are made for your benefit and the benefit of the Issuer and Donaldson, Lufkin & Jenrette Securities Corporation (the "Initial Purchaser"), the Initial Purchaser of such Secured Notes being transferred. We acknowledge that you, the Issuer and the Initial Purchaser will rely upon our confirmations, acknowledgments and agreements set forth herein, and we agree to notify you promptly in writing if any of our representations or warranties herein ceases to be accurate and complete. Terms used in this certificate and not otherwise defined in the Indenture have the meanings set forth in Regulation S under the Securities Act. [Insert Name of Transferor] By:________________________________________ Name:______________________________________ Title:_____________________________________ Dated:________________________ cc: Amethyst Financial Company Limited Initial Purchaser EXHIBIT B-3 FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER OF CERTIFICATED NOTES (PURSUANT TO SECTION 2.06(B) OF THE INDENTURE) Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Re: 11 3/4% Senior Secured Notes due 2001 of Amethyst Financial Company Limited Reference is hereby made to this Indenture dated as of November 1, 1999 (the "Indenture"), between Amethyst Financial Company Limited (the "Issuer"), Pride International, Inc. and Maritima Petroleo e Engenharia Ltda. and Wilmington Trust Company, as trustee (the "Trustee"). Capitalized terms used but not defined herein shall have the meanings given them in the Indenture. This relates to $_______ principal amount of Secured Notes which are evidenced by one or more Certificated Secured Notes in the name of ____________ (the "Transferor"). The Transferor has requested an exchange or transfer of such Certificated Secured Note(s) in the form of an equal principal amount of Secured Notes evidenced by one or more Certificated Secured Notes, to be delivered to the Transferor or, in the case of a transfer of such Secured Notes, to such Person as the Transferor instructs the Trustee. In connection with such request and in respect of the Secured Notes surrendered to the Trustee herewith for exchange (the "Surrendered Secured Notes"), the Holder of such Surrendered Secured Notes hereby certifies that: [CHECK ONE] [ ] the Surrendered Secured Notes are being acquired for the Transferor's own account, without transfer; OR [ ] the Surrendered Secured Notes are being transferred to the Issuer; 2 OR [ ] the Surrendered Secured Notes are being transferred pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the Surrendered Secured Notes are being transferred to a Person that the Transferor reasonably believes is purchasing the Surrendered Secured Notes for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A, in each case in a transaction meeting the requirements of Rule 144A; OR [ ] the Surrendered Secured Notes are being transferred in a transaction permitted by Rule 144 under the Securities Act; OR [ ] the Surrendered Secured Notes are being transferred in an offshore transaction pursuant to and in accordance with Rule 904 under the Securities Act; OR [ ] the Surrendered Secured Notes are being transferred to an Institutional Accredited Investor pursuant to an exemption under the Securities Act other than Rule 144A, Rule 144 or Rule 904 and the Transferor further certifies that the transfer complies with the transfer restrictions applicable to beneficial interests in Global Notes and Certificated Secured Notes bearing the Private Placement Legend and the requirements of the exemption claimed, which certification is supported by a certificate attached hereto executed by the Transferee in the form of Exhibit C to the Indenture, and, if the Issuer should so request, an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), in form reasonably acceptable to the Issuer and to the Registrar, to the effect that such transfer is in compliance with the Securities Act; 3 OR [ ] the Surrendered Secured Notes are being transferred pursuant to an effective registration statement under the Securities Act; OR [ ] such transfer is being effected pursuant to an exemption from the registration requirements of the Securities Act other than those contemplated above, and the Transferor hereby further certifies that the Secured Notes are being transferred in compliance with the transfer restrictions applicable to the Global Notes and in accordance with the requirements of the exemption claimed, which certification is supported by an Opinion of Counsel, provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification) in form reasonably acceptable to the Issuer and to the Registrar, to the effect that such transfer is in compliance with the Securities Act; and the Surrendered Secured Notes are being transferred in compliance with any applicable blue sky or securities laws of any state of the United States or any other applicable jurisdiction. This certificate and the statements contained herein are made for your benefit and the benefit of the Issuer and Donaldson, Lufkin & Jenrette Securities Corporation the "Initial Purchaser"), the Initial Purchaser of such Secured Notes being transferred. We acknowledge that you, the Issuer and the Initial Purchaser will rely upon our confirmations, acknowledgments and agreements set forth herein, and we agree to notify you promptly in writing if any of our representations or warranties herein ceases to be accurate and complete. Terms used in this certificate and not otherwise defined in the Indenture have the meanings set forth in Regulation S under the Securities Act. [Insert Name of Transferor] By:________________________________________ Name:______________________________________ Title:_____________________________________ Dated:________________________ cc: Amethyst Financial Company Limited Initial Purchaser EXHIBIT B-4 FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER FROM U.S. GLOBAL NOTE OR REGULATION S PERMANENT GLOBAL NOTE TO DEFINITIVE NOTE (PURSUANT TO SECTION 2.06(C) OF THE INDENTURE) Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Re: 11 3/4% Senior Secured Notes due 2001 of Amethyst Financial Company Limited Reference is hereby made to this Indenture dated as of November 1, 1999 (the "Indenture"), between Amethyst Financial Company Limited (the "Issuer"), Pride International, Inc. and Maritima Petroleo e Engenharia Ltda. and Wilmington Trust Company, as trustee (the "Trustee"). Capitalized terms used but not defined herein shall have the meanings given them in the Indenture. This letter relates to $___________ principal amount of Secured Notes which are evidenced by a beneficial interest in one or more U.S. Global Secured Notes or Regulation S Permanent Global Notes in the name of _____________ (the "Transferor"). The Transferor has requested an exchange or transfer of such beneficial interest in the form of an equal principal amount of Secured Notes evidenced by one or more Certificated Secured Notes, to be delivered to the Transferor or, in the case of a transfer of such Secured Notes, to such Person as the Transferor instructs the Trustee. In connection with such request and in respect of the Secured Notes surrendered to the Trustee herewith for exchange (the "Surrendered Secured Notes"), the Holder of such surrendered Secured Notes hereby certifies that: [CHECK ONE] [ ] the Surrendered Secured Notes are being transferred to the beneficial owner of such Secured Notes; OR 2 [ ] the Surrendered Secured Notes are being transferred pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the Surrendered Secured Notes are being transferred to a Person that the Transferor reasonably believes is purchasing the Surrendered Secured Notes for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A, in each case in a transaction meeting the requirements of Rule 144A; OR [ ] the Surrendered Secured Notes are being transferred in a transaction permitted by Rule 144 under the Securities Act; OR [ ] such transfer is being effected in an offshore transaction pursuant to and in accordance with Rule 904 under the Securities Act; OR [ ] the Surrendered Secured Notes are being transferred to Institutional Accredited Investor pursuant to an exemption under the Securities Act other than Rule 144A, Rule 144 or Rule 904 and the Transferor further certifies that the transfer complies with the transfer restrictions applicable to beneficial interests in Global Notes and Certificated Secured Notes bearing the Private Placement Legend and the requirements of the exemption claimed, which certification is supported by a certificate attached hereto executed by the Transferee in the form of Exhibit C to this Indenture, and, if the Issuer should so request, an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), in form reasonably acceptable to the Issuer and to the Registrar, to the effect that such transfer is in compliance with the Securities Act; OR [ ] the Surrendered Secured Notes are being transferred pursuant to an effective registration statement under the Securities Act; 3 OR [ ] the Surrendered Secured Notes are being transferred pursuant to an exemption from the registration requirements of the Securities Act other than those contemplated above, and the Transferor hereby further certifies that the Secured Notes are being transferred in compliance with the transfer restrictions applicable to the Global Secured Notes and in accordance with the requirements of the exemption claimed, which certification is supported by an Opinion of Counsel, provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification) in form reasonably acceptable to the Issuer and to the Registrar, to the effect that such transfer is in compliance with the Securities Act; and the Surrendered Secured Notes are being transferred in compliance with any applicable blue sky securities laws of any state of the United States. This certificate and the statements contained herein are made for your benefit and the benefit of the Issuer and Donaldson, Lufkin & Jenrette Securities Corporation (the "Initial Purchaser"), the Initial Purchaser of such Secured Notes being transferred. We acknowledge that you, the Issuer and the Initial Purchaser will rely upon our confirmations, acknowledgments and agreements set forth herein, and we agree to notify you promptly in writing if any of our representations or warranties herein ceases to be accurate and complete. Terms used in this certificate and not otherwise defined in the Indenture have the meanings set forth in Regulation S under the Securities Act. [Insert Name of Transferor] By:________________________________________ Name:______________________________________ Title:_____________________________________ Dated:________________________ cc: Amethyst Financial Company Limited Initial Purchaser EXHIBIT C FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Reference is hereby made to this Indenture, dated as of November 1, 1999 (the "Indenture"), between Amethyst Financial Company Limited, as issuer, Pride International, Inc. and Maritima Petroleo e Engenharia Ltda. and Wilmington Trust Company, as trustee. Capitalized terms used but not defined herein shall have the meanings given them in the Indenture. In connection with our proposed purchase of $____________ aggregate principal amount of: (a) [ ] Beneficial interests, or (b) [ ] Certificated Secured Notes, we confirm that: (i) we are an entity which is an "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the "Securities Act"), or an entity in which all of the equity owners are accredited investors within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act (an "Institutional Accredited Investor"); (ii) any purchase of Secured Notes by us will be for our own account or for the account of one or more other Institutional Accredited Investors; (iii) in the event that we purchase any Secured Notes, we will acquire Secured Notes having a minimum purchase price of at least $250,000 for our own account and for each separate account for which we are acting; (iv) we have such knowledge and experience in financial and business matters that we are capable of evaluating the merits and risks of purchasing Secured Notes; 2 (v) we are not acquiring Secured Notes with a view to any distribution thereof in a transaction that would violate the Securities Act or the securities laws of any State of the United States or any other applicable jurisdiction; provided that the disposition of our property and the property of any accounts for which we are acting as fiduciary shall remain at all times within our control; and (vi) we have received a copy of the Offering Memorandum and acknowledge that we have had access to such financial and other information, and have been afforded the opportunity to ask such questions of representatives of the Issuer and receive answers thereto, as we deem necessary in connection with our decision to purchase Secured Notes. We understand that the Secured Notes are being offered in a transaction not involving any public offering within the meaning of the Securities Act and that the Secured Notes have not been registered under the Securities Act, and we agree, on our own behalf and on behalf of each account for which we acquire any Secured Notes, that (A) such Secured Notes may be offered, resold, pledged or otherwise transferred only (i) to a Person whom we reasonably believe to be a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act) in a transaction meeting the requirements of Rule 144A, in a transaction meeting the requirements of Rule 144 under the Securities Act, outside of the United States in a transaction meeting the requirements of Rule 903 or 904 under the Securities Act or in accordance with another exemption from the registration requirements of the Securities Act (and based upon an opinion of counsel if the Issuer so requests), (ii) to the Issuer or (iii) pursuant to an effective registration statement under the Securities Act, and, in each case, in accordance with any applicable securities laws of any State of the United States or any other applicable jurisdiction and (B) that we will, and each subsequent Holder is required to, notify any subsequent purchaser from it of the resale restrictions set forth in (A) above. We understand that the registrar and transfer agent will not be required to accept for registration of transfer any Secured Notes, except upon presentation of evidence satisfactory to the Issuer that the foregoing restrictions on transfer have been complied with. We further understand that the Secured Notes purchased by us will bear a legend reflecting the substance of this paragraph. 3 This certificate and the statements contained herein are made for your benefit and the benefit of the Issuer and Donaldson, Lufkin & Jenrette Securities Corporation (the "Initial Purchaser"), the Initial Purchaser of such Secured Notes being transferred. We acknowledge that you, the Issuer and the Initial Purchaser will rely upon our confirmations, acknowledgments and agreements set forth herein, and we agree to notify you promptly in writing if any of our representations or warranties herein ceases to be accurate and complete. Terms used in this certificate and not otherwise defined in the Indenture have the meanings set forth in Regulation S under the Securities Act. THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF. ____________________________________ (Name of Purchaser) By:_________________________________ Name:_______________________________ Title:______________________________ Address:____________________________ EXHIBHT D FORM OF SUBSIDIARY GUARANTEE [To be provided] EXHIBIT E FORM OF LETTER OF CREDIT IRREVOCABLE LETTER OF CREDIT NO. [ ] [Date] Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, Delaware 19890-0001 Dear Sirs: We, Republic National Bank of New York (the "L/C Issuer"), hereby establish in your favor our Irrevocable Letter of Credit No. [ ] whereby we irrevocably authorize you, as trustee under the Indenture dated as of November 1, 1999 (as the same may be amended or supplemented, the "Indenture"), between Amethyst Financial Company Limited (the "Issuer"), Pride International,Inc., Maritima Petroleo e Engenharia Ltda.and you, as Trustee (the "Trustee"), to draw hereunder from time to time, from and after the date hereof to and including 3:00 p.m., New York time, on April 30, 2002 (the "L/C Expiration Date") (or such other time as this Letter of Credit shall earlier terminate by its terms), a maximum aggregate amount up to but not exceeding the lesser of (a) the Available L/C Amount on the date of any drawing, and (b) $23,000,000 (the "Stated L/C Amount"), available against the following documents presented at Republic National Bank of New York, 452 Fifth Avenue, 5th Floor, New York, New York 10018, Attention: Letter of Credit Department: 1. A drawing certificate in the form of Annex A attached hereto, which certificate shall be on your letterhead, have all blanks appropriately filled in and shall be signed by a purported officer of beneficiary with an accompanying signature authentication signed by another purported officer of beneficiary. 2. This original Letter of Credit instrument and all amendments hereto, if any, which original Letter of Credit instrument and amendments will be returned to he beneficiary after we endorse the back with the amount of the drawing. 2 If demand for payment is made on a Business Day in strict conformity with the terms and conditions hereof and is received by us prior to 11:00 a.m., New York time, then payment shall be made to you prior to 12:00 noon, New York time, on the next succeeding Business Day. If any such demand for payment is received by us at or after 11:00 a.m., New York time, such demand shall be deemed to have been received prior to 11:00 a.m. on the next Business Day. Drawings made under and in compliance with the terms of this Letter of Credit will be duly honored upon presentation of original documentation at Republic National Bank of New York, 452 Fifth Avenue, 5th Floor, New York, New York 10018, Attention: Letter of Credit Department. Partial drawings under this Letter of Credit shall be permitted. Payment under this Letter of Credit will be made by the L/C Issuer from its own funds by wire transfer of immediately available funds in United States dollars to the account specified in the related drawing certificate. Upon payment pursuant to the terms hereof of the amount specified in a drawing certificate presented hereunder, we shall be fully discharged of our obligation under this Letter of Credit with respect to, and to the extent of the amount, of such drawing certificate. For purposes of this Letter of Credit: "AVAILABLE L/C AMOUNT" shall mean, as of any date of determination, the amount available to be drawn under the Letter of Credit from time to time, which on any date of determination shall be equal to the Stated L/C Amount minus the amount of all drawings under the Letter of Credit made prior to such date of determination, PROVIDED that, with respect to the initial Payment Date, the Available L/C Amount shall be the Stated L/C Amount. "BUSINESS DAY" shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in New York, New York, London, Tokyo and Rio de Janiero are authorized or obligated by law or executive order to be closed. This Letter of Credit is not transferable except to a successor trustee under the Indenture. Such transfer shall be effective upon receipt by us of the original transfer form effecting such transfer signed by the transferor and by the transferee in the form of Annex B hereto (which shall be conclusive evidence of such transfer), and, in such case, the transferee instead of the transferor shall, without the necessity of further action, be entitled to all the benefits of and rights under this 3 Letter of Credit in the transferor's place; PROVIDED, FURTHER, that this original Letter of Credit instrument and all amendments hereto, if any, shall have been presented to us for an appropriate endorsement of transfer (which original Letter of Credit instrument and amendments will be returned to the beneficiary after such endorsement of transfer). To the extent not inconsistent with the express terms hereof, this Letter of Credit shall be governed by, and construed in accordance with, the terms of the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce, Publication No. 500, except for Article 41 and the first sentence of Article 48(g) thereof, and to the extent not governed thereby, shall be governed by and construed in accordance with the laws of the State of New York, including without limitation, Article 5 of the New York Uniform Commercial Code. This Letter of Credit sets forth in full our undertaking, and, except as specifically set forth herein such undertaking shall not in any way be modified, amended, amplified or limited by reference to any other document, instrument or agreement whatsoever. Our obligations under this Letter of Credit are primary, absolute and unconditional (except as expressly provided herein), and neither the failure of you or any successor trustee under the Indenture to perform any covenant or obligations, nor the commencement of any bankruptcy, insolvency or other proceedings by or against you or any successor trustee under the Indenture shall in any way affect or limit our unconditional obligations under this Letter of Credit. We agree to honor and pay in immediately available funds the amount of any drawing certificate if presented as required by and otherwise in compliance with all of the terms of this Letter of Credit. Upon the earlier of (i) the receipt by us of written notice, in the form of Annex C hereto, stating that the Secured Notes have been paid in full (which notice shall be conclusive evidence thereof), signed by you or a successor trustee under the Indenture, as appropriate, and (ii) the L/C Expiration Date, this Letter of Credit shall automatically terminate. Very truly yours, 4 REPUBLIC NATIONAL BANK OF NEW YORK By: _________________________ Name: Title: By: _________________________ Name: Title: ANNEX A TO REPUBLIC NATIONAL BANK OF NEW YORK IRREVOCABLE LETTER OF CREDIT NO. _____________ [Letterhead of Trustee] Republic National Bank of New York 452 Fifth Avenue, 5th Floor New York, New York 10018 Attention: Letter of Credit Department RE: Republic National Bank of New York Irrevocable Letter of Credit No. _____________ DRAWING CERTIFICATE Ladies and Gentlemen: [ ] (the "Trustee") hereby certifies to Republic National Bank of New York (the "L/C Issuer") with reference to Irrevocable Letter of Credit No. _________ (the "Letter of Credit"; capitalized terms contained herein and not otherwise defined herein are used herein as defined in or pursuant to the Letter of Credit) that: 1. The Trustee is the trustee or a successor trustee under the Indenture. 2. The Trustee is making a demand for payment under the Letter of Credit in the amount of U.S.$______________, which represents amounts due on the Issuer's 11 3/4% Senior Secured Notes due 2001 or under the Indenture that have not been remitted to the Trustee by or on behalf of the Issuer. 3. The amount demanded is to be paid in immediately available funds on __________, to the following account: U.S.$______________ to Account No._____________ at ____________________. 4. The Available L/C Amount prior to the drawing requested pursuant to this drawing certificate is U.S. $____________. The Available L/C Amount after the drawing requested pursuant to this drawing certificate will be U.S.$______________. The amount hereby demanded does not exceed the Available L/C Amount. The Available L/C Amount has been computed in strict conformity with the terms and conditions of the Letter of Credit. 2 IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate as of the ________ day of ____________, _____. [ ], as Trustee By: _________________________ Name: Title: SIGNATURE AUTHENTICATION By: _________________________ Name: Title: ANNEX B TO REPUBLIC NATIONAL BANK OF NEW YORK IRREVOCABLE LETTER OF CREDIT NO. ____________ [Letterhead of Trustee] [Date] Republic National Bank of New York 452 Fifth Avenue, 5th Floor New York, New York 10018 Attention: Letter of Credit Department RE: Republic National Bank of New York Irrevocable Letter of Credit No. ____________________ Ladies and Gentlemen: For value received, the undersigned beneficiary hereby irrevocably transfers to: _____________________________ (Name of Transferee) _____________________________ (Address) as successor trustee under the Indenture (as defined in the above-referenced Letter of Credit) all rights of the undersigned beneficiary to draw under the above Letter of Credit. By this transfer, all rights of the undersigned beneficiary in such Letter of Credit are transferred to the undersigned transferee and the undersigned transferee shall have the sole rights as beneficiary thereof including sole rights relating to any amendments, whether increases or extensions or other amendments and whether now existing or hereafter made. All amendments are to be advised directly to the undersigned transferee without necessity of any consent of or notice to the undersigned beneficiary. The original Letter of Credit (and any amendments thereto) is returned herewith, and we ask you to endorse the 2 transfer on the reverse thereof, and forward it directly to the undersigned transferee with your customary notice of transfer. Very truly yours, SIGNATURE AUTHENTICATION [Name of Transferor] By: By: ______________________ _________________________ Name: (Authorized Officer) Title: SIGNATURE AUTHENTICATION [Name of Transferee] By: By: ______________________ _________________________ Name: (Authorized Officer) Title: ANNEX C TO REPUBLIC NATIONAL BANK OF NEW YORK IRREVOCABLE LETTER OF CREDIT NO. ____________ [Letterhead of Trustee] [Date] Republic National Bank of New York 452 Fifth Avenue, 5th Floor New York, New York 10018 Attention: Letter of Credit Department RE: Republic National Bank of New York Irrevocable Letter of Credit No. ____________________ Ladies and Gentlemen: The undersigned, a duly authorized officer of [ ] (the "Trustee"), hereby certifies to Republic National Bank of New York (the "L/C Issuer") with reference to Irrevocable Letter of Credit No. __________ (the "Letter of Credit"; capitalized terms contained herein and not otherwise defined herein are used herein as defined in or pursuant to the Letter of Credit) that: 1. The Trustee is the Trustee or a successor trustee under the Indenture. 2 2. The Secured Notes have been paid in full. The Letter of Credit, which accompanies this Certificate, is hereby surrendered for cancelation. Please acknowledge receipt of this Certificate and confirm that the Letter of Credit has been canceled by signing in the space provided below. IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate this _______ day of __________, - - -----. [ ], as Trustee By: _________________________ Name: Title: SIGNATURE AUTHENTICATION By: _________________________ Name: Title: Acknowledged and confirmed: REPUBLIC NATIONAL BANK OF NEW YORK By: _________________________ Name: Title: SCHEDULE A MARAD DOCUMENTS (unless otherwise expressly specified, all documents are dated as of April 9, 1999) 1. Commitment to Guarantee Obligation by the United States of America accepted by Petrodrill Four Limited ("Petrodrill Four") (as shipowner). 2. Commitment to Guarantee Obligation by the United States of America accepted by Petrodrill Five Limited ("Petrodrill Five") (as shipowner). 3. Credit Agreements among each of Petrodrill Four and Petrodrill Five (as shipowner), and Govco Incorporated (as primary lender), Citibank, N.A. (as alternate lender), Citibank International PLC (as Facility Agent) and Citicorp North America, Inc. (as Administrative Agent for the primary lender and the commercial paper holders of the primary lender) (the "Credit Agreements"). 4. Trust Indentures relating to the United States Government Guaranteed Ship Financing Obligations, between each of Petrodrill Four and Petrodrill Five (as shipowner), and FMB Trust Company, National Association (as indenture trustee). 5. United States Government Guaranteed Export Ship Financing Obligation, Amethyst 5 Series (the "Petrodrill Five Obligations"), consisting of US$150,183,000 aggregate principal amount of Floating Rate Note issued by Petrodrill Five; as well as relevant Guarantee of the United States of America and the Indenture Trustee's Authentication Certificate. 6. United States Government Guaranteed Export Ship Financing Obligation, Amethyst 4 Series (the "Petrodrill Four Obligations"), consisting of US$149,625,000 aggregate principal amount of Floating Rate Note issued by Petrodrill Four; as well as relevant Guarantee of the United States of America and the Indenture Trustee's Authentication Certificate. 7. Authorization Agreement between the United States of America and FMB Trust Company, National Association ("FMB Trust Company") (as indenture trustee under the Trust Indenture dated as of April 9, 1999, between it and Petrodrill Four) (Contract No. MA-13504). 8. Authorization Agreement between the United States of America and FMB Trust Company (as indenture trustee under 2 the Trust Indenture dated as of April 9, 1999, between it and Petrodrill Five) (Contract No. MA-13510). 9. Forms of Secretary Supplemental Indentures to each of the Trust Indenture between each of Petrodrill Four and Petrodrill Five, and FMB Trust Company (Exhibit to Trust Indenture). 10. Security Agreements between each of Petrodril Four ("Petrodrill Four Security Agreement") and Petrodrill Five ("Petrodrill Five Security Agreement" and together with the Petrodrill Four Security Agreement, the "Security Agreements"), and The United States of America (Contracts Nos. MA-13505 and 13511, respectively). 11. Promissory Notes issued by each of Petrodrill Four and Petrodrill Five to the benefit of The United States of America, each in the aggregate amount of US$149,625,000 and US$150,183,000, respectively (the "Promissory Notes"). 12. Forms of mortgage in account current form between each of Petrodrill Four and Petrodrill Five (as mortgagor), and The United States of America (as mortgagee), relating to the mortgage of sixty-four sixty fourth (64/64th) shares, of which each mortgagor is the owner in the Amethyst 4 and Amethyst 5, respectively (the "Mortgages"). 13. Form of Deed of Covenants between each of Petrodrill Four and Petrodrill Five, and The United States of America, supplementing the Security Agreements and the Mortgages. 14. Title XI Reserve Fund and Financial Agreements between each of Petrodrill Four and Petrodrill Five, and The United States of America (Contracts Nos. MA-13507 and MA- 13513, respectively). 15. Consents of Shipyard made by TDI-Halter, Limited Partnership ("TDI-Halter"), to each of Petrodrill Four and Petrodrill Five, and The United States of America, relating to the assignment of, and granting of a security interest in, the the the construction contracts and the rigs t.b.n. Amethyst 4 and Amethyst 5 in favour of The United States of America pursuant to the Security Agreements. 16. Consents of Shipyard made by TDI-Halter to each of Petrodrill Four and Petrodrill Five, and The United States of America, relating to the assignment of, and granting of a security interest in, the the Parent Guarantee dated as of April 15, 1998 in favour of The United States of America pursuant to the Security Agreements. 3 17. Contracts for the construction and sale of Dynamic Positioned Semi-Submersible Drilling Vessels (Hulls Nos. 1828 and 1829) dated as of April 9, 1998, between TDI-Halter and Petrodrill Construction Inc. (the "Construction Contracts"). 18. Novation Agreements dated as of December 9, 1998, between TDI-Halter, Petrodrill Offshore Inc. (formerly Pedrodrill Construction, Inc.), and each of Petrodrill Four and Petrodrill Five. 19. Amendments No. 1 to the Semi-Submersible Drilling Vessel Construction Contract between TDI-Halter and each of Petrodrill Four and Petrodrill Five. 20. Depository Agreements among each of Petrodrill Four and Petrodrill Five (as shipowner), and Citibank, N.A. (as depository) and The United States of America (Contracts Nos. MA-13508 and MA-13514, respectively). 21. Uniform Commercial Code-Financing Statement-Forms UCC-1 between each of Petrodrill Four and Petrodrill Five, and The United States of America, providing a description of the collateral given to The United States of America. 22. Letter-agreement dated as of April 1, 1999, between Citicorp North America, Inc. and Petrodrill Four and Petrodrill Five, providing for the payment of non-refundable fees to Citicorp North America, Inc. in connection with the Credit Agreements. 23. Assignment Agreement between Maritima Petroleo e Engenharia Ltda. ("Maritima") (as assignor) and The United States of America (as assignee), relating to the assignment by Maritima of its rights pursuant to the services rendering contracts entered into with Petrobras in connection with the rigs t.b.n. Amethyst 4 and Amethyst 5. 24. Consent of Petroleo Brasileiro S.A. ("Petrobras") to Maritima and The United States of America, relating to the assignment of, and granting of a security interest in, the services rendering contract entered into with Petrobras in connection with the rig t.b.n. Amethyst 4 by Maritima in favour of The United States of America pursuant to the security agreement entered into between Maritima and The United States of America (the "Maritima Security Agreement"). 25. Consents of Petrobras to each Petrodrill Four and Petrodrill Five and The United States of America, relating 4 to the assignment of, and granting of a security interest in, the charter agreement entered into with Petrobras in connection with the rig t.b.n. Amethyst 4 by Petrodrill Four in favour of The United States of America pursuant to the Petrodrill Four Security Agreement. 26. Consents of Bigem Holdings N.V.to each Petrodrill Four and Petrodrill Five and The United States of America, relating to the assignment of, and granting of a security interest in, the licensing agreement entered into with Bigem Holdings N.V. in connection with the rig t.b.n. Amethyst 4 by Petrodrill Four in favour of The United States of America pursuant to the Petrodrill Four Security Agreement. 27. Consents of Formaritima Ltd. to each Petrodrill Four and Petrodrill Five and The United States of America, relating to the assignment of, and granting of a security interest in, the management agreement entered into with Formaritima Ltd. in connection with the rig t.b.n. Amethyst 4 by Petrodrill Four in favour of The United States of America pursuant to the Petrodrill Four Security Agreement. 28. Consents of Workships Contractors B.V. to each Petrodrill Four and Petrodrill Five and The United States of America, relating to the assignment of, and granting of a security interest in, the marine and nautical services agreement entered into with Workships Contractors B.V. in connection with the rig t.b.n. Amethyst 4 by Petrodrill Four in favour of The United States of America pursuant to the Petrodrill Four Security Agreement. 29. Consents of Petrodrill Engineering N.V. to each Petrodrill Four and Petrodrill Five and The United States of America, relating to the assignment of, and granting of a security interest in, the construction management agreement entered into with Petrodrill Engineering N.V. in connection with the rig t.b.n. Amethyst 4 by Petrodrill Four in favour of The United States of America pursuant to the Petrodrill Four Security Agreement. 30. Performance Bonds dated as of April 13, 1998, between TDI-Halter (as principal) and Fireman's Fund Insurance Company (as surety), regarding the issue of performance bonds in the amount of US$84.0 million each to Petrodrill Construction, Inc. (as obligee) in connection with each of the Construction Contracts. 31. Labor and Material Payment Bonds dated as of April 13, 1998, between TDI-Halter (as principal) and Fireman's Fund Insurance Company (as surety), regarding the issue of labor and material payment bonds in the amount of US$84.0 5 million each to Petrodrill Construction, Inc. (as obligee) in connection with each of the Construction Contracts. 32. Dual Obligee Riders among each of Petrodrill Four and Petrodrill Five, TDI-Halter and Fireman's Fund Insurance Company, adding The United States of America as a co-obligee and as sole loss payee to the joing and several bond executed between TDI-Halter and Fireman's Fund Insurance Company. 33. Guaranty Agreements in Favor of The United States, made by each of Petrodrill Four and Petrodrill Five to The United States of America, providing for a cross-guarantee by each of Petrodrill Four and Petrodrill Five in connection with the obligations assumed under the Promissory Notes. 34. Guaranty Agreement in Favor of The United States, made by Pride International, Inc. ("Pride") (as guarantor) to The United States of America, providing for a guarantee in connection with the payment by both Petrodrill Four and Petrodrill Five of late arrival penalties that might be imposed by Petrobras and ad valorem taxes up to a maximum aggregate amount of US$20.5 million (the "Pride Guaranty Agreement"). 35. Payment Undertaking in Favor of The United States, made by Maritima (as guarantor) to The United States of America, providing for a guarantee in connection with the payment by both Petrodrill Four and Petrodrill Five of late arrival penalties that might be imposed by Petrobras and ad valorem taxes up to a maximum aggregate amount of US$20.5 million (the "Maritima Payment Undertaking"). 36. Interguarantor Agreement between Maritima and Pride, providing for the manner of payment of any amount due under the Pride Guaranty Agreement and the Maritima Payment Undertaking. 37. Any and all exhibits, attachments, annexes and/or schedules to the foregoing MARAD Documents, as well as any and all other agreements, amendments, assignments, deeds and instruments re-stating, supplementing, amending, providing a collateral to, or otherwise pertaining or relating to the above MARAD Documents, together with their relevant exhibits, attachments, annexes and/or schedules. SCHEDULE B MITSUBISHI LOAN AGREEMENTS 1. Loan Agreement dated as of December 19, 1998, among Lenders (Petro Dia Three S.A. ("MC1") and Petro Dia Four S.A. ("MC2) as initial lenders), Petrodrill Six Limited ("Petrodrill Six") (as borrower) and Mitsubishi Corporation (UK) (as Facility Agent and Security Agent), providing for a secured loan facility not exceeding US$160.0 million in connection with the acquisition of a semi-submersible drilling rig t.b.n. "Amethyst 6" (the "Amethyst 6 Mitsubishi Credit Facility"). 2. Loan Agreement dated as of December 19, 1998, among Lenders (MC1 and MC2 as initial lenders), Petrodrill Seven Limited ("Petrodrill Seven") (as borrower) and Mitsubishi Corporation (UK) (as Facility Agent and Security Agent), providing for a secured loan facility not exceeding US$180.0 million in connection with the acquisition of a semi-submersible drilling rig t.b.n. "Amethyst 7" (the "Amethyst 7 Mitsubishi Credit Facility" and together with the Amethyst 6 Mitsubishi Credit Facility, the "Mitsubishi Credit Facilities"). 3. Any and all exhibits, attachments, annexes and/or schedules to the foregoing documents, as well as any and all other agreements, amendments, assignments, deeds and instruments, other than those referred to in items 1 through 22 of Schedule C hereto, re-stating, supplementing, amending, providing a collateral to, or otherwise pertaining or relating to the Mitsubishi Credit Facilities, together with their relevant exhibits, attachments, annexes and/or schedules. SCHEDULE C MITSUBISHI LOAN COLLATERAL DOCUMENTS 1. Fee Agreement dated as of December 19, 1998, among MC1 and MC2 (as initial creditors), and Petrodrill Six and Petrodrill Seven (as borrowers), and Pride International, Inc. ("Pride") and Maritima Petroleo e Engenharia Ltda. ("Maritima") (as sponsors). 2. Deeds of Guarantee and Undertaking dated as of December 19, 1998, each relating to the Amethyst 6 Credit Facility and the Amethyst 7 Credit Facility, among each of Petrodrill Six and Petrodrill Seven (as borrower), and Pride and Maritima (as Sponsors), the Lenders (MC1 and MC2 as initial lenders) and Mitsubishi (as Facility Agent and Security Agent). 3. Subordinated Loan Facility Agreements dated as of December 19, 1998, among each of Petrodrill Six and Petrodrill Seven (as borrower), and Pride and Maritima (as sponsors), the Lenders (MC1 and MC2 as initial lenders) and Mitsubishi (as Facility Agent and Security Agent). 4. Floor Guarantee dated as of December 19, 1998, relating to the Mitsubishi Credit Facilities, among Pride and Maritima (as sponsors) and MC1 and MC2 (as beneficiaries). 5. Share Charges dated as of December 19, 1998, over each of the Petrodrill Six and Petrodrill Seven shares, between Amethyst Financial Company Limited (the "Company") (as shareholder) and Mitsubishi (as Security Agent). 6. Additional Funding and Guarantee Agreement dated as of December 19, 1998, among MC1 and MC2, Pride and Maritima (as sponsors) and Petrodrill Six and Petrodrill Seven, as amended and restated as at July 1, 1999, incorporating amendments made by Deeds of Release dated as of April 15, 1999, May 14, 1999, June 15, 1999 and July 1, 1999. 7. Assignments of Charterparty, Earnings and Requisition Compensation dated as of December 19, 1998, between each of Petrodrill Six and Petrodrill Seven (as assignor), and Mitsubishi (as Security Agent), relating to each of the semi-submersible drilling units having Daewoo Heavy Industries Ltd.'s Hull Nos. 3016 and 3015 t.b.n. "Amethyst 6" and "Amethyst 7", respectively. 8. Assignments of Deed of Guarantee and Undertaking and Subordinated Loan Facility Agreement dated as of December 19, 1998, relating to each of the Credit 2 Facilities, between each of Petrodrill Six and Petrodrill Seven (as assignor), and Mitsubishi (as Security Agent). 9. Assignments of Rig Construction Contract and Refund Guarantee dated as of December 19, 1998, between each of Petrodrill Six and Petrodrill Seven (as assignor), and Mitsubishi (as Security Agent), in respect of each of the semi-submersible drilling units having Hulls Nos. 3016 and 3015 at Daewoo Heavy Industries, Ltd., respectively. 10. Bridging Loan Agreement dated as of December 19, 1998, between MC1 (as funder) and MC2 (as participant), providing for the funding of the participant's participation in the Credit Facilities. 11. Debentures dated as of December 19, 1998, between each of Petrodrill Six and Petrodrill Seven (as borrower), and Mitsubishi (as Security Agent). 12. Deed of Covenants dated as of December 19, 1998, between each of Petrodrill Six and Petrodrill Seven (as owner), and Mitsubishi (as Security Agent), relating to the First Priority Statutory Mortgage over each of the semi- submersible drilling units "Amethyst 6" and "Amethyst 7" (formerly Hulls Nos. 3016 and 3015 at Daewoo Heavy Industries, Ltd., respectively). 13. Insurances Assignments dated as of December 19, 1998, between each of Petrodrill Six and Petrodrill Seven (as assignor), and Mitsubishi (as Security Agent), relating to each of the semi-submersible drilling units having Daewoo Heavy Industries Ltd.'s Hull Nos. 3016 and 3015 t.b.n. "Amethyst 6" and "Amethyst 7", respectively. 14. Inter-Company Cross Guarantee dated as of December 19, 1998, among Petrodrill Six, Petrodrill Seven and the Company (as guarantors), and Mitsubishi (as Security Agent). 15. Loan Agreement dated as of December 19, 1998, between Petrodrill Six (as borrower) and Petrodrill Seven (as lender), providing for a facility of US$10.0 million repayable on demand. 16. Inter-Company Loan Agreement Assignment dated as of December 19, 1998, between Petrodrill Seven (as assignor) and Mitsubishi (as Security Agent), relating to the semi- submersible drilling unit having Daewoo Heavy Industries Ltd.'s Hull No. 3015 t.b.n. "Amethyst 7". 17. Management Account Charges dated as of December 19, 1998, between each of Petrodrill Six and Petrodrill 3 Seven (as chargor), and Mitsubishi (as Security Agent), relating to each of the semi-submersible drilling units having Daewoo Heavy Industries Ltd.'s Hull Nos. 3016 and 3015 t.b.n. "Amethyst 6" and "Amethyst 7", respectively. 18. Omnibus Contract Assignments dated as of December 19, 1998, between each of Petrodrill Six and Petrodrill Seven (as assignor), and Mitsubishi (as Security Agent), relating to each of the semi-submersible drilling units having Daewoo Heavy Industries Ltd.'s Hull Nos. 3016 and 3015 t.b.n. "Amethyst 6" and "Amethyst 7", respectively. 19. Performance Guarantee dated as of December 19, 1998, between Mitsubishi (as guarantor) and Petrodrill Six and Petrodrill Seven (as beneficiaries), relating to two semi-submersible drilling plataforms. 20. Reserve Account Charges dated as of December 19, 1998, between each of Petrodrill Six and Petrodrill Seven (as chargor), and Mitsubishi (as Security Agent), relating to each of the semi-submersible drilling units having Daewoo Heavy Industries Ltd.'s Hull Nos. 3016 and 3015 t.b.n. "Amethyst 6" and "Amethyst 7", respectively. 21. Security Trust Deed dated as of December 19, 1998, among Petrodrill Six and Petrodrill Seven (as borrowers), Pride, Maritima and the Company (as the other security parties), the Lenders (MC1 and MC2 as initial lenders) and Mitsubishi (as Facility Agent and Security Agent). 22. Services Rendering Contract Assignments dated as of December 19, 1998, between Maritima and each of Petrodrill Six and Petrodrill Seven (as assignors), and Mitsubishi (as Security Agent), relating to each of the semi-submersible drilling units having Daewoo Heavy Industries Ltd.'s Hull Nos. 3016 and 3015 t.b.n. "Amethyst 6" and "Amethyst 7", respectively. 23. Any and all exhibits, attachments, annexes and/or schedules to the foregoing documents, as well as any and all other agreements, amendments, assignments, deeds and instruments other than those referred to in items 1 and 2 of Schedule B hereto, re-stating, supplementing, amending, providing a collateral to, or otherwise pertaining or relating to the Mitsubishi Credit Facilities, together with their relevant exhibits, attachments, annexes and/or schedules. CROSS-REFERENCE TABLE* TRUST INDENTURE ACT SECTION INDENTURE SECTION - - --------------- ----------------- 310(a)(1) ................................................... 7.10 (a)(2) ................................................... 7.10 (a)(3) ................................................... N.A. (a)(4) ................................................... N.A. (a)(5) ................................................... 7.10 (b) ................................................... 7.03; 7.08; 7.10 (c) ................................................... N.A. 311(a) ................................................... 7.11 (b) ................................................... 7.11 (c) ................................................... N.A. 312(a) ................................................... 2.05 (b) ................................................... 12.03 (c) ................................................... 12.03 313(a) ................................................... 7.06 (b)(1) ................................................... 7.06 (b)(2) ................................................... 7.06 (c) ................................................... 7.06; 12.02 (d) ................................................... 7.06 314(a) ................................................... 4.13;4.26;12.02 (b) ................................................... 11.02 (c)(1) ................................................... 12.04; 12.05 (c)(2) ................................................... 7.02;12.04;12.05 (c)(3) ................................................... N.A. (d) ................................................... 11.02 (e) ................................................... 11.02 (f) ................................................... N.A. 315(a) ................................................... 7.01 (b) ................................................... 7.05; 12.04 (c) ................................................... 7.01 (d) ................................................... 7.01 (e) ................................................... 6.11 316(a)(last ................................................... sentence) ................................................... 2.09 (a)(1)(A).................................................. 6.05 (a)(1)(B).................................................. 6.04 (a)(2) .................................................. N.A. (b) .................................................. 6.07 (c) .................................................. 2.12 317(a)(1) .................................................. 6.08 (a)(2) .................................................. 6.09 (b) .................................................. 2.04 318(a) .................................................. 12.01 (b) .................................................. N.A. (c) .................................................. 12.01 - - ----------------- N.A. means not applicable. * This Cross-Reference Table is not part of this Indenture. EX-4.5 7 EXHIBIT 4.5 EXECUTION COPY SENIOR SECURED NOTE SECURITY AND PLEDGE AGREEMENT THIS SENIOR SECURED NOTE SECURITY AND PLEDGE AGREEMENT (the "Agreement") is made and entered into as of November 1, 1999, by AMETHYST FINANCIAL COMPANY LIMITED, a British Virgin Islands limited liability company (the "Issuer"), in favor of WILMINGTON TRUST COMPANY, a banking corporation duly organized and existing under the laws of the State of Delaware, as trustee (in such capacity, the "Trustee") under the Indenture (as hereinafter defined), for the holders of the Secured Notes (as hereinafter defined), and WILMINGTON TRUST COMPANY, a banking corporation duly organized and existing under the laws of the State of Delaware, as collateral agent (in such capacity, the "Collateral Agent"). W I T N E S S E T H: WHEREAS, the Issuer, as issuer, the Trustee, Pride International, Inc., as guarantor ("Pride"), and Maritima Petroleo e Engenharia Ltda. have entered into an indenture dated as of November 1, 1999 (as amended, amended and restated, supplemented or otherwise modified from time to time, the "Indenture"), pursuant to which the Issuer is issuing $53,000,000 in aggregate principal amount of its 11 3/4% Senior Secured Notes due 2001 (the "Secured Notes"); WHEREAS, the Issuer will use the proceeds of the Secured Notes to purchase participation interests (each an "ISSUER LOAN") in the Mitsubishi Loan Agreements. The Issuer Loans will be used by Petrodrill Six Limited and Petrodrill Seven Limited to finance all or a portion of certain costs of acquiring, constructing, altering, improving or repairing drilling rigs and drillships or improvements to be used in connection therewith; and WHEREAS, to secure its obligations under the Indenture and the Secured Notes and the Security Agreements (as defined in the Indenture) to which it is a party (the "Obligations"), the Issuer has agreed (i) to grant to the Collateral Agent for the benefit of the Trustee and the equal and ratable benefit of the Holders of the Secured Notes, Liens and security interests in and to the Issuer Loans, the Mitsubishi Loan Agreements, the Mitsubishi Loan Collateral Documents and the other Collateral (as defined herein) and (ii) to execute and deliver this Agreement in order to secure the payment and performance by the Issuer of the 2 Obligations. AGREEMENT NOW, THEREFORE, in consideration of the premises and in order to induce the Holders of the Secured Notes to purchase the Secured Notes, the Issuer hereby agrees with the Collateral Agent and with the Trustee for its benefit and the equal and ratable benefit of the Holders of the Secured Notes as follows: SECTION 1. DEFINITIONS. Capitalized terms used herein and not otherwise defined herein shall have the meaning given to such terms in the Indenture. In addition to any other defined terms used herein, the following term shall constitute a defined term for the purposes of this Agreement: "Permitted Liens" means Liens existing on the date on which the Secured Notes are originally issued or provided for under the terms of agreements existing on such date and listed on Schedule B attached hereto. SECTION 2. CREATION OF SECURITY INTEREST. The Issuer hereby grants to the Collateral Agent for the benefit of the Trustee, and for the equal and ratable benefit of the Holders of the Secured Notes, Liens and a continuing security interest in and to the collateral described in Section 3 hereof (the "Collateral") in order to secure the payment and performance of all Obligations. SECTION 3. COLLATERAL. The Collateral is: (i) an undivided 53% interest in the Issuer Loans and all of the Issuer's right, title and interest in and to the Mitsubishi Documents listed on SCHEDULE A attached hereto (as such may be amended, modified or supplemented from time to time), together with an undivided 53% interest in and to the Issuer's right, title and interest in and to all agreements, documents, notes, collateral documents and instruments relating to such Mitsubishi Documents, and the security for the Issuer Loans provided for in the Mitsubishi Loan Collateral Documents; (ii) all of the Issuer's right, title and interest in and to all replacements, additions, accessions, substitutions, repairs, proceeds and products relating to or from all items described in this Section 3, whether now owned or hereafter at any time acquired by the Issuer and wherever located, and all 3 documents, ledger sheets, files, books and records of the Issuer relating thereto. Proceeds hereunder include (x) whatever is now or hereafter received by the Issuer upon the sale, exchange, collection or other disposition of any item of Collateral; (y) any property of the type or types described in clauses (i) or (ii) now or hereafter acquired by the Issuer with any proceeds of Collateral hereunder; and (z) any payments under any insurance or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Collateral. SECTION 4. DELIVERY OF COLLATERAL. All certificates or instruments representing or evidencing the Collateral shall be delivered to and held by or on behalf of the Collateral Agent pursuant hereto and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to the Collateral Agent, and shall be accompanied by any required transfer tax stamps. Upon the occurrence and during the continuance of an Event of Default, the Collateral Agent shall have the right, at any time in its discretion and without notice to the Issuer, but subject to its compliance with the requirements of applicable law, to transfer to or to register in the name of the Collateral Agent or any of its nominees any or all of the Collateral. In addition, upon the occurrence and during the continuance of an Event of Default, but subject to its compliance with the requirements of applicable law, the Collateral Agent shall have the right at any time to exchange certificates or instruments representing or evidencing any Collateral for certificates or instruments of smaller or larger denominations. SECTION 5. REPRESENTATIONS AND WARRANTIES. The Issuer hereby represents and warrants to the Collateral Agent and Trustee that: (a) LEGAL POWER. The execution, delivery and performance by the Issuer of this Agreement are within the Issuer's legal powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with (except for any filings provided for hereunder), any governmental authority, require no consent of any other Person and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the constitutive documents of the Issuer or of any agreement (after giving effect to the use of proceeds of the issuance of the Secured Notes), 4 judgment, injunction, order, decree or other instrument binding upon the Issuer or result in the creation or imposition of any Lien on any asset of the Issuer (other than the Liens created by this Agreement and the Reserve Account Agreement). (b) TITLE TO COLLATERAL. The Issuer is the legal, record and beneficial owner of the Issuer Loans existing on the Issue Date, free and clear of any Lien or claims of any Person except for the Liens listed on SCHEDULE B attached hereto and the Liens created by this Agreement and the Reserve Account Agreement. (c) ENFORCEABILITY. This Agreement has been duly executed and delivered by the Issuer and constitutes a legal, valid and binding obligation of the Issuer, enforceable against the Issuer in accordance with its terms, except as such enforceability may be limited by the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally or general principles of equity and commercial reasonableness. (d) PERFECTION; PRIORITY. Upon the execution and delivery of this Agreement, and the filing of the UCC-1 financing statements and other documents relating to the Collateral listed on SCHEDULE C attached hereto, to the extent such security interests are created under United States federal or applicable state laws or the law of the British Virgin Islands or England, the security interests in the Collateral created pursuant to this Agreement are valid and perfected first priority security interests, securing the payment of the Obligations for the benefit of the Trustee and the Holders of the Secured Notes, and enforceable as such against all creditors of the Issuer and any Persons purporting to purchase any of the Collateral from the Issuer other than as permitted by the Indenture; as of the date hereof (and after giving effect to the use of proceeds of the issuance of the Secured Notes), there are no other security interests in or Liens on the Collateral or any portion thereof, and no financing statement, pledge, notice of Lien, assignment or collateral assignment, mortgage or deed of trust covering the Collateral or any portion thereof ("Lien Notice") exists or is on file in any public office, except with respect to Liens listed on SCHEDULE B attached hereto and, the Liens created by this Agreement and the Reserve Account Agreement. (e) OFFICES. The Issuer's chief executive office is located at the address listed as such in SCHEDULE D attached 5 hereto ("Chief Executive Office"), and the Issuer has no place of business other than that set forth in such Schedule D, except as permitted hereafter by Section 6(c) hereof. (f) BUSINESS NAMES. The Issuer has not conducted its businesses under any corporate, partnership or fictitious name during the five (5) years preceding the date hereof other than Petrodrill Offshore. (g) NO CONSENTS. No consent of any other Person and no consent, authorization, approval, or other action by, and no notice to or filing with, any governmental authority or regulatory body is required either (i) for the granting of the Liens by the Issuer on the Collateral pursuant to this Agreement or for the execution, delivery or performance of this Agreement by the Issuer (except for filings listed on Schedule C attached hereto, the filings or other actions necessary to maintain the perfection of the Liens on the Issuer Loans and perfect Liens on after-acquired Collateral or the proceeds of the Collateral) or (ii) for the exercise by the Collateral Agent of the remedies in respect of the Collateral pursuant to this Agreement, except, in each case, as may be required under the Mitsubishi Documents or in connection with any such disposition by laws affecting the offering and sale of the Issuer Loans constituting Collateral or the collateral securing such Issuer Loans. (h) ACCURATE INFORMATION. As of the date hereof, all information set forth herein relating to the Collateral is accurate and complete in all material respects. SECTION 6. COVENANTS. (a) LIEN NOTICES. The Issuer will defend its interest in the Collateral against all claims and demands of all Persons at any time claiming the same or any interest therein, and the Issuer will not permit any Lien Notices with respect to the Collateral or any portion thereof to exist or be on file in any public office for more than 10 days after the Issuer shall have notice thereof, except with respect to Permitted Liens. The Issuer will advise the Collateral Agent and the Trustee promptly, in reasonable detail, at the addresses as specified in Section 16(a) of this Agreement, of any Lien (other than Permitted Liens) on, or claim asserted against, any of the Collateral. (b) LOCATION OF COLLATERAL. The Issuer will keep all of the Collateral now held or subsequently acquired by it at the 6 location specified on SCHEDULE D hereto, or at locations hereafter established in compliance with Section 6(c) hereof (except for Collateral held by the Collateral Agent, the Trustee or the Reserve Account Agent), unless the Issuer shall have given the Collateral Agent and the Trustee prior written notice thereof and shall have in advance executed and caused to be filed or delivered to the Collateral Agent and the Trustee any financing statements or other documents required by the Collateral Agent or the Trustee in order to perfect, protect and preserve the Liens and security interest created hereby, all in form and substance satisfactory to the Collateral Agent and the Trustee. (c) LOCATION OF OFFICES; CORPORATION NAME; LEGAL STRUCTURE. The Issuer will not change the location of its Chief Executive Office or establish any place of business other than that set forth on Schedule D attached hereto, or voluntarily or involuntarily change its name, identity or legal structure, including without limitation any continuance, amalgamation, merger, consolidation or sale of substantially all of its assets, unless the Issuer shall have given the Collateral Agent and the Trustee at least 30 days prior written notice thereof and shall have in advance executed and caused to be filed and or delivered to the Collateral Agent and the Trustee any financing statements or other documents required by the Collateral Agent and the Trustee in order to perfect, protect and preserve the Liens and security interest created hereby, all in form and substance reasonably satisfactory to the Collateral Agent and the Trustee. (d) ADDITIONAL COLLATERAL; FURTHER ASSURANCES. The Issuer agrees that immediately upon becoming the beneficial owner of any additional Collateral, it will pledge and deliver to the Collateral Agent for the benefit of the Trustee and the equal and ratable benefit of the Holders of the Secured Notes, the certificates, instruments and documents, if any, representing such Collateral (as well as duly executed instruments of transfer or assignment in blank), and grant to the Collateral Agent for the benefit of the Trustee and the equal and ratable benefit of the Holders of the Secured Notes pursuant to appropriate and necessary Security Agreements, a continuing first priority security interest in and Lien on such other Collateral, all in form and substance reasonably satisfactory to the Trustee. The Issuer shall also promptly (and in any event within five Business Days after receipt thereof), subject to its compliance with the requirements of applicable law, deliver to the Collateral Agent any other documents of title, promissory notes, certificates or instruments representing Collateral which it holds. The Issuer 7 further agrees that it will promptly (and in any event within five Business Days after such acquisition) deliver to the Collateral Agent and the Trustee an amendment, duly executed by the Issuer, in substantially the form of SCHEDULE E hereto (an "Additional Collateral Amendment"), with respect to the additional Collateral that is to be pledged pursuant to this Agreement. The Issuer hereby authorizes the Collateral Agent and the Trustee to attach each Additional Collateral Amendment to this Agreement and agrees that any notes, instruments or other forms of Investment or other property or assets listed on any Additional Collateral Amendment delivered to the Collateral Agent or the Trustee and all proceeds thereof shall for all purposes hereunder be considered Collateral. The Issuer will promptly (i) execute and deliver, cause to be executed and filed, or use its best efforts to give any notices, in all appropriate jurisdictions (including foreign jurisdictions) or procure any financing statements, including continuation statements, assignments, pledges or other documents, (ii) mark any chattel paper constituting Collateral and deliver any certificates, chattel paper or instruments constituting Collateral to the Collateral Agent or the Trustee, (iii) execute and deliver or cause to be executed and delivered all assignments, instruments and other documents, and (iv) take any other actions, in each such case as necessary or, in the reasonable opinion of the Collateral Agent or the Trustee, desirable to perfect or continue the perfection and the priority of the Collateral Agent's security interest and Liens in the Collateral, to protect the Collateral against the rights, claims, or interests of third Persons other than holders of Permitted Liens or to effect the purposes of this Agreement. The Issuer also hereby authorizes the Collateral Agent to file any financing or continuation statements with respect to the Collateral necessary or, in its reasonable opinion desirable, to perfect or continue the perfection or priority of the Collateral Agent's Lien hereunder without the signature of the Issuer to the extent permitted by applicable law. (e) DISPOSITION OF COLLATERAL. The Issuer will not sell, transfer, assign, pledge, collaterally assign, exchange or otherwise dispose of, or grant any option or warrant with respect to, any of the Collateral except as permitted by the Indenture or the Reserve Account Agreement. If the proceeds of any sale of any Collateral are notes, instruments, documents of title, standby letters of credit or chattel paper, such proceeds shall be promptly delivered to the Collateral Agent to be held as Collateral hereunder. If the Collateral, or any part thereof, is 8 sold, transferred, assigned, exchanged, or otherwise disposed of in violation of these provisions, the security interest and Liens of the Collateral Agent shall continue in such Collateral or part thereof notwithstanding such sale, transfer, assignment, exchange or other disposition, and the Issuer will hold the proceeds thereof in an separate account for its benefit and the Holders of the Secured Notes and the benefit of the Trustee and the Holders of the Secured Notes and transfer such proceeds to the Collateral Agent in kind to be held as Collateral hereunder. (f) RESTRICTIVE AGREEMENTS. The Issuer agrees that, except for the Mitsubishi Documents and any other existing agreements set forth on SCHEDULE F attached hereto, it will not (i) enter into any agreement or understanding that purports to or may restrict or inhibit the Collateral Agent's or the Trustee's rights or remedies hereunder, including, without limitation, the Collateral Agent's or the Trustee's right to sell or otherwise dispose of the Collateral or amend or modify in any manner materially adverse to the Trustee the Mitsubishi Documents or (ii) fail to pay or discharge any tax, assessment or levy of any nature not later than five days prior to the date of any proposed sale under any judgment, writ or warrant of attachment with regard to the Collateral. (g) RIGHTS OF COLLATERAL AGENT AND TRUSTEE. Upon the occurrence and during the continuance of an Event of Default, the Collateral Agent and the Trustee shall have the right at any time to make any payments and do any other acts as the Collateral Agent or the Trustee may deem necessary to protect the Liens and security interest of the Collateral Agent in the Collateral, including, without limitation, the rights to pay, purchase, contest or compromise any Lien which, in the judgment of the Collateral Agent or the Trustee, appears to be prior to or superior to the Liens and security interest granted hereunder, and challenge any action or proceeding purporting to affect its Liens and security interest in the Collateral. The Issuer hereby agrees to reimburse the Collateral Agent and the Trustee for all payments made and expenses incurred under this Agreement, including reasonable fees, expenses and disbursements of attorneys acting for the Collateral Agent or the Trustee, including any of the foregoing payments under or acts taken to perfect or protect its Liens and security interest in the Collateral, which amounts shall be secured under this Agreement, and agrees that it shall be bound by any payment made or act taken by the Collateral Agent or the Trustee hereunder. Neither the Collateral Agent nor the Trustee shall have any obligation to 9 make any of the foregoing payments or perform any of the foregoing acts. (h) RECORDS. The Issuer will keep and maintain, at its own cost and expense, satisfactory and complete records of the Collateral. (i) ACCESS. Both the Collateral Agent and the Trustee shall at all times have full and free access during normal business hours, on reasonable notice to the Issuer, except during the continuation of a Default or Event of Default when no such notice shall be required, to all the books, correspondence and records of the Issuer relating to the Collateral, and the Collateral Agent and its representatives and the Trustee and its representatives, may examine the same, take extracts therefrom and make photocopies thereof, and the Issuer agrees to render to each of the Collateral Agent and the Trustee, at the Issuer's cost and expense, such clerical and other assistance, at all times and in such manner as may be requested with regard thereto. The Collateral Agent and its representatives and the Trustee and its representatives shall at all times also have the right on reasonable notice to the Issuer, except during the continuation of a Default or an Event of Default when no such notice shall be required, to enter, during normal business hours, into and upon any premises where any of the Collateral is located for the purpose of inspecting the same, observing its use or otherwise protecting its interests therein. The Issuer shall have the right to have a representative present during any examination or inspection contemplated by this Section, unless an Event of Default has occurred and it continuing. (j) TAXES. The Issuer shall pay all taxes, assessments and government charges and all claims as and to the extent required by Section 4.06 of the Indenture; provided that the Issuer shall in any event pay such taxes, assessments or levies not later than five days prior to the date of any proposed sale under any judgment, writ or warrant of attachment with regard to any Collateral of the Issuer entered or filed against the Issuer as a result of the failure to make such payment. (k) ISSUER LOANS. The Issuer covenants with the Collateral Agent and the Trustee, except as permitted by this Agreement, not to do or permit to be done anything to impair the security of the Mitsubishi Documents; not to execute any other assignment of its interest in the Issuer Loans or the Mitsubishi Documents except as may be otherwise agreed to in writing by the 10 Collateral Agent and the Trustee and except as provided herein, provided that the Issuer may assign its interests in any portion thereof not constituting Collateral if such assignment is permitted by the Indenture and is made subject to the rights of the Trustee and the Collateral Agent under the Indenture, hereunder and under the Reserve Account Agreement, including, without limitation, the rights set forth in Section 7; except as permitted by the Indenture, not to alter, modify or change the terms of the Issuer Loans or the Mitsubishi Documents without the prior written consent of the Trustee, or, except as permitted by the Indenture, cancel or terminate any of the Issuer Loans or any of the security for such Issuer Loans or accept a surrender thereof so as to effect directly or indirectly, proximately or remotely, a cancelation or termination or diminution of the obligations of the parties thereunder; and to execute and deliver, at the request of Collateral Agent or the Trustee, all such further assurances, acknowledgments, and certificates for the purposes hereof as Collateral Agent or the Trustee shall from time to time reasonably require. SECTION 7. VOTING RIGHTS; ISSUER LOAN PAYMENTS; ETC. (a) At all times, whether or not Event of Default shall have occurred and be continuing, only the Collateral Agent on behalf of the Trustee or the Trustee directly shall be entitled to exercise any and all voting and other consensual rights of the Issuer pertaining to the Issuer Loans and Mitsubishi Documents. The Issuer hereby appoints and constitutes the Collateral Agent and the Trustee, whether acting separately or jointly, as the Issuer's attorneys-in-fact to exercise any and all such voting and other consensual rights of the Issuer. This power of attorney is coupled with an interest in the Trustee and the Collateral Agent as agent on behalf of the Trustee and is irrevocable by the Issuer. The Issuer shall execute and deliver (or cause to be executed and delivered) to the Collateral Agent or the Trustee all such proxies, additional powers or attorney and other instruments as the Collateral Agent or the Trustee may reasonably request for the purpose of enabling the Collateral Agent or the Trustee to exercise or cause the exercise of the voting and other rights that it is entitled to exercise pursuant to this Section 7(a). (b) All payments made from time to time on, or with respect to the Issuer Loans or other Collateral Loans received by the Issuer and all other amount received by the Issuer with respect to the Collateral, whether interest, principal, 11 dividends, distributions or otherwise, shall be delivered to the Trustee for deposit in the Reserve Account. The foregoing notwithstanding, the Issuer shall make provision such that all payments made under the Mitsubishi Documents in respect of the Issuer Loans shall be paid directly into the Reserve Account. (c) All interest and principal payments, all distributions and all other payments that are received by the Issuer contrary to the provisions of this Section 7 shall be received in trust for the Collateral Agent for the benefit of the Trustee and the equal and ratable benefit of the Holders of the Secured Notes, shall be segregated from the other property or funds of the Issuer and be forthwith delivered to the Collateral Agent or the Trustee as Collateral in the same form as so received (with any necessary endorsements or other instruments of transfer or assignment in blank), and all such payments shall be deposited in the Reserve Account. (d) So long as no Event of Default shall have occurred and be continuing, neither the Collateral Agent nor the Trustee shall be under any obligation to collect, attempt to collect, protect or enforce the Collateral, which the Issuer agrees and undertakes to do at the Issuer's expense; provided that the Collateral Agent and the Trustee shall cooperate with the Issuer and take all such action as the Issuer may reasonably request to permit the Issuer to collect, protect or enforce the Collateral. All expenses (including, without limitation, reasonable attorneys' fees and legal expenses) actually incurred or paid by the Collateral Agent or the Trustee in connection with or incident to any such collection or attempt to collect, protect or enforce the Collateral shall be borne by the Issuer or reimbursed by the Issuer to the Collateral Agent and the Trustee upon demand. SECTION 8. POWER OF ATTORNEY. In addition to all of the powers granted to the Trustee pursuant to Article VI of the Indenture, the Issuer hereby appoints and constitutes the Collateral Agent and the Trustee, whether acting separately or jointly, as the Issuer's attorneys-in-fact to exercise all of the following powers upon and at any time after the occurrence and during the continuance of an Event of Default: (i) collection of proceeds of any Collateral; (ii) conveyance of any item of Collateral to any purchaser thereof; (iii) giving of any notices or recording of the security interest and the Liens under Section 6(d) hereof; (iv) making of any payments or taking any acts under Section 9 hereof and (v) paying or discharging taxes or Liens 12 levied or placed upon the Collateral, the legality or validity thereof and the amounts necessary to discharge the same to be determined by the Collateral Agent in its sole discretion, and such payments made by the Collateral Agent to become the Obligations of the Issuer to the Collateral Agent, due and payable immediately upon demand. The Collateral Agent's authority hereunder shall include, without limitation, the authority to endorse and negotiate any checks or instruments representing proceeds of Collateral in the name of the Issuer, to execute and give receipt for any certificate of ownership or any document constituting Collateral, to transfer title to any item of Collateral, to sign the Issuer's name on all financing statements (to the extent permitted by applicable law) or any other Security Agreements or other documents deemed necessary or appropriate by the Collateral Agent to preserve, protect or perfect the Liens in the Collateral and to file the same, to prepare, file and sign the Issuer's name on any notice of Lien, and to prepare, file and sign the Issuer's name on a proof of claim in bankruptcy or similar document against any person obligated upon any Collateral to, the Issuer, and to take any other actions arising from or incident to the powers granted to the Collateral Agent in this Agreement. This power of attorney is coupled with an interest in the Trustee and the Collateral Agent as agent on behalf of the Trustee and is irrevocable by the Issuer. SECTION 9. COLLATERAL AGENT OR TRUSTEE MAY PERFORM. If the Issuer fails to perform any covenant or agreement contained herein, the Collateral Agent or the Trustee may, but shall not be obligated to, itself perform, or cause performance of, such covenant or agreement, and the expenses of the Collateral Agent or the Trustee incurred in connection therewith shall be payable by the Issuer under Section 16(o) hereof. SECTION 10. NO ASSUMPTION OF DUTIES; REASONABLE CARE. The rights and powers granted to the Collateral Agent or the Trustee hereunder are being granted in order to preserve and protect the Collateral Agent's Liens and security interest in and to the Collateral granted hereby and shall not be interpreted to, and shall not, impose any duties on the Collateral Agent or the Trustee in connection therewith. Each of the Collateral Agent and the Trustee shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which the Collateral Agent or the Trustee accords its own property, it being understood that neither the Collateral Agent nor the Trustee shall have any responsibility for 13 (i) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Collateral, whether or not the Collateral Agent or the Trustee has or is deemed to have knowledge of such matters, (ii) taking any necessary steps to preserve rights against any parties with respect to any Collateral, or (iii) inquiring into or verifying that the Issuer has complied or will comply with its duty to furnish additional items of Collateral to the Collateral Agent or the Trustee pursuant to Section 6(d) hereof unless reasonably requested by the Issuer to do so at any time before an Event of Default occurs and is continuing. Absent knowledge to the contrary, the Collateral Agent and the Trustee may assume that the items of Collateral actually delivered to it are all items required to be so delivered and may assume that no other such items need be so delivered. SECTION 11. SUBSEQUENT CHANGES AFFECTING COLLATERAL. The Issuer represents to the Collateral Agent and the Trustee and the Holders of the Secured Notes that the Issuer has made its own arrangements for keeping informed of changes or potential changes affecting the Collateral (including, but not limited to, payments of principal, premiums or interest, reorganization, restructuring or other exchanges, tender offers and voting rights), and the Issuer agrees that the Collateral Agent and the Trustee and the Holders of the Secured Notes shall have no responsibility or liability for informing the Issuer of any such changes or partial changes or for taking any action or omitting to take any action with respect thereof. Except as not prohibited by the Indenture, the Issuer covenants that it will not, without the prior written consent of the Trustee, vote to enable, or take any other action to permit, anyone to sell or otherwise dispose of, or grant any option with respect to, any of the Collateral or create or permit to exist any Lien upon or with respect to any of the Collateral, except for Permitted Liens and the Liens granted under this Agreement and the Reserve Account Agreement. The Issuer will defend the right, title and interest of the Collateral Agent and the Trustee and the Holders of the Secured Notes in and to the Collateral against the claims and demands of all Persons, subject, HOWEVER, to the rights of holders of Permitted Liens. SECTION 12. REMEDIES UPON AN EVENT OF DEFAULT. (a) Upon the occurrence and during the continuance of an Event of Default, the Collateral Agent may, subject to the provisions of the Indenture, this Agreement, and the Collateral Agent's and the Trustee's compliance with any requirements of law 14 (including, without limitation, the applicable Uniform Commercial Code or laws of foreign jurisdictions) applicable to the action to be taken, without notice to or demand upon the Issuer except as required by the Indenture, the Reserve Account Agreement, this Agreement or applicable law, do any one or more of the following: (i) exercise any or all of the rights and remedies provided for by the applicable Uniform Commercial Code or laws of foreign jurisdictions specifically including, without limitation, the right to recover the fees and expenses incurred by the Collateral Agent or the Trustee in the enforcement of this Agreement or in connection with the redemption of the Collateral, including reasonable fees, expenses and disbursements of attorneys; (ii) at its option, transfer or register, and the Issuer shall register or cause to be registered upon request therefor by the Collateral Agent or the Trustee, the Collateral or any part thereof on the books of the Persons in whom any Investments constituting Collateral are made, into the name of the Trustee's nominee(s); (iii) personally, or by agents or attorneys, immediately retake possession of the Collateral, or any part thereof, from the Issuer or any other Person who then has possession of any part thereof with or without notice or process of law, and for that purpose may enter upon the Issuer's premises where any of the Collateral is located and remove the same and use in connection with such removal any and all services, supplies, aids and other facilities of the Issuer; (iv) sell, assign or otherwise liquidate, or direct the Issuer to sell, assign or otherwise liquidated, any or all of the Collateral or any part thereof, and take possession of the proceeds of any such sale or liquidation; (v) require the Issuer to assemble the Collateral or any part thereof and make it available at one or more places as the Collateral Agent or the Trustee may designate and to deliver possession of the Collateral or any part thereof to the Collateral Agent or the Trustee; (vi) use, in connection with any assembly, use or disposition of the Collateral, any intellectual property, 15 intangibles or other technical knowledge or process used or utilized from time to time by the Company; (vii) sell or cause the same to be sold at any broker's board or at public or private sale, in one or more sales or lots, at such price or prices as the Collateral Agent may deem best, for cash or on credit or for future delivery, without assumption of any credit; and the purchaser of any or all Collateral so sold shall thereafter hold the same absolutely, free from any claim, encumbrance or right of any kind whatsoever; (viii) enforce one or more remedies hereunder, successively or concurrently, and such action shall not operate to estop or prevent the Collateral Agent from pursuing any other or further remedy which it may have, and any repossession or retaking or sale of the Collateral pursuant to the terms hereof shall not operate to release the Issuer until full and final payment of any deficiency has been made in cash; (ix) in connection with any public or private sale under the applicable Uniform Commercial Code or other applicable legislation, the Collateral Agent shall give the Issuer at least ten Business Days' prior written notice of the time and place of any public sale of its Collateral or of the time after which any private sale or other intended disposition thereof may be made, which shall be deemed to be reasonable notice of such sale or other disposition. Such notice may be given to the Issuer in accordance with the provisions of Section 17(a) hereof; (x) proceed by an action or actions at law or in equity to recover the Obligations or to foreclose this Agreement and sell the Collateral, or any portion thereof, pursuant to a judgment or decree of a court or courts of competent jurisdiction; (xi) exercise any other rights and remedies provided by applicable law and the other Security Agreements; and (xii) if the Collateral Agent recovers possession of all or any part of the Collateral pursuant to a writ of possession or other judicial process, whether prejudgment or otherwise, the Collateral Agent may thereafter retain, sell 16 or otherwise dispose of such Collateral in accordance with this Agreement or the applicable Uniform Commercial Code or other applicable legislation, and following such retention, sale or other disposition, the Collateral Agent may voluntarily dismiss without prejudice the judicial action in which such writ of possession or other judicial process was issued. The Issuer hereby consents to the voluntary dismissal by the Collateral Agent of such judicial action, and the Issuer further consents to the exoneration of any bond that the Collateral Agent files in such action. (b) In view of the fact that federal, state and foreign securities laws may impose certain restrictions on the method by which a sale of the Collateral may be effected after an Event of Default, the Issuer agrees that upon the occurrence and during the continuance of an Event of Default, the Collateral Agent may cause, from time to time, the sale of all or any part of the Collateral by means of a private placement, restricting the prospective purchasers to those who will represent and agree that they are purchasing for investment only and not for distribution. In so doing, the Collateral Agent may solicit, or may cause an investment manager to solicit, offers to buy the Collateral, or any part of it, for cash, from a limited number of investors who might be interested in purchasing the Collateral. The Issuer acknowledges and agrees that any such private sale may result in prices and terms less favorable than if such sale were a public sale and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner. The Collateral Agent shall be under no obligation to delay a sale of any of the Collateral for the period of time necessary to permit the Issuer to cause an issuer or obligor to register such securities for public sale under the Securities Act, or under applicable state or foreign securities laws, even if the Issuer could cause the such issuer or obligor, as the case may be, to do so. (c) The Issuer further agrees to use its best efforts to do or cause to be done all such other acts as may be necessary to make such sale or sales of all or any portion of the Collateral pursuant to this Section 12 valid and binding and in compliance with any and all other applicable requirements of applicable law, PROVIDED, THAT the Issuer shall have no obligation to register the Collateral for sale or other distribution under the securities laws of any jurisdiction. The Issuer further agrees that a breach of any of the covenants contained in this Section 12 will cause irreparable injury to the 17 Trustee and the Holders of the Secured Notes, that the Trustee and the Holders of the Secured Notes have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section 12 shall be specifically enforceable against the Issuer, and the Issuer hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no Event of Default has occurred and is continuing. (d) Any cash held by the Collateral Agent as Collateral and all cash proceeds received by the Trustee in respect of any sale of, collection from, or other realization upon all or any part of the Collateral shall be applied by the Collateral Agent: FIRST, to the payment of the costs and expenses of such sale, including, without limitation, expenses of the Collateral Agent and its agents including the reasonable fees and expenses of its counsel, and all expenses, liabilities and advances made or incurred by the Collateral Agent in connection therewith or pursuant to Section 17(o) hereof; NEXT, to the Trustee, for the payment in full of all amounts due under Section 7.07 of the Indenture; NEXT, to the Trustee, for distribution to the Holders of the Secured Notes for the payment in full of the remaining Obligations; and FINALLY, after payment in full of all of the Obligations, to the Issuer, or its successors or assigns, or to whomsoever may be lawfully entitled to receive the same as a court of competent jurisdiction may direct. (e) If any sale or other disposition of Collateral by the Collateral Agent or any other action of the Collateral Agent or the Trustee hereunder results in reduction of the Obligations, to the extent permitted by applicable law, such action will not release the Issuer from its liability for any unpaid Obligations, including costs, charges and expenses incurred in the liquidation of Collateral, together with interest thereon, and the same shall be immediately due and payable to the Collateral Agent, the Trustee and the Holders of the Secured Notes as provided for in the Indenture. 18 (f) The Collateral Agent may enforce its rights hereunder without prior judicial process or judicial hearing, and to the extent permitted by law the Issuer expressly waives any and all legal rights which might otherwise require the Collateral Agent to enforce its right by judicial process. SECTION 13. IRREVOCABLE AUTHORIZATION AND INSTRUCTIONS TO THE APPLICABLE OBLIGOR. The Issuer hereby authorizes and instructs the applicable obligor or issuer to comply with any instructions received by such obligor or issuer, as the case may be, from the Collateral Agent or the Trustee that (i) states than an Event of Default has occurred and is continuing and (ii) is otherwise in accordance with the terms of this Agreement and applicable law, without any other or further instructions from the Issuer, and the Issuer agrees that the applicable issuers and obligors shall be fully protected in so complying. SECTION 14. RESERVE ACCOUNT. All money received by the Issuer and required to be deposited in the Reserve Account shall be promptly and without commingling remitted to the Reserve Account Agent for deposit therein. SECTION 15. WAIVERS. (a) Except as may be required under the provisions of the Indenture and to the fullest extent permitted under applicable law, neither the Collateral Agent nor the Trustee shall be under any duty whatsoever to make or give any presentment, notice of dishonor, protest, demand for performance, notice of non-performance, notice of intent to accelerate, notice of acceleration, or other notice or demand in connection with any Collateral or the Obligations, or to take any steps reasonably necessary to preserve any rights against any Obligor or other Person. The Issuer waives to the fullest extent permitted under applicable law any right of marshaling in respect of any and all Collateral, and waives to the fullest extent permitted under applicable law any right to require the Collateral Agent or the Trustee to proceed against any Obligor or other Person, exhaust any Collateral or enforce any other remedy which the Collateral Agent or the Trustee now has or may hereafter have against any Obligor or other Person. (b) The Issuer waives to the fullest extent permitted under applicable law (i) any and all notices of acceptance, creation, modification, rearrangement, renewal or extension for any period of any instrument executed by any Obligor in 19 connection with the Obligations and (ii) any defense of any Obligor by reason of disability, lack of authorization, cessation of the liability of any Obligor or for any other reason. The Issuer authorizes the Collateral Agent to the fullest extent permitted under applicable law, without notice or demand and without any reservation of rights against the Issuer and without affecting the Issuer's liability hereunder or on the Obligations, from time to time to (w) take and hold other property, other than the Collateral, as security for the Obligations, and exchange, enforce, waive and release any or all of the Collateral, (x) after the occurrence and during the continuance of an Event of Default and the acceleration of the Secured Notes, apply the Collateral in the manner permitted by this Agreement or the Indenture and (y) renew, extend for any period, accelerate, amend or modify, supplement, enforce, compromise, settle, waive or release the obligations of any obligor on, or any instrument or agreement of such other Person with respect to the Issuer Loans and any or all of any other Collateral. SECTION 16. MISCELLANEOUS PROVISIONS. (a) NOTICES. All notices, approvals, consents or other communications required or desired to be given hereunder shall be in the form and manner, and delivered to the Issuer at its address as set forth in Section 12.02 of the Indenture, to the Trustee at its address as set forth in Section 12.02 of the Indenture, and to the Collateral Agent at Wilmington Trust Company c/o the Trustee at such address. (b) SALES OF COLLATERAL. No sales of Collateral may be made in contravention of the terms of the Indenture and the Mitsubishi Documents and the cash proceeds of the sale of any Collateral shall be promptly and without commingling remitted to the Collateral Agent or the Trustee for deposit in the Reserve Account. (c) NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This Agreement may not be used to interpret another pledge, security or debt agreement of the Issuer or any Affiliate or Subsidiary of the Issuer. No such pledge, security or debt agreement may be used to interpret this Agreement. (d) SEVERABILITY. The provisions of this Agreement are severable, and if any clause or provision shall be held invalid, illegal or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall 20 affect in that jurisdiction only such clause or provision, or part thereof, and shall not in any manner affect such clause or provision in any other jurisdiction or any other clause or provision of this Agreement in any jurisdiction. (e) HEADINGS. The headings in this Agreement have been inserted for convenience of reference only, are not to be considered a part hereof and shall in no way modify or restrict any of the terms or provisions hereof. (f) COUNTERPART ORIGINALS. This Agreement may be signed in two or more counterparts, each of which shall be deemed an original, but all of which shall together constitute one and the same agreement. (g) BENEFITS OF SECURITY AGREEMENT. Nothing in this Agreement, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder and the Holders of the Secured Notes, any benefit or any legal or equitable right, remedy or claim under this Agreement. (h) AMENDMENTS, WAIVERS AND CONSENTS. Any amendment or waiver of any provision of this Agreement and any consent to any departure by the Issuer from any provision of this Agreement shall be effective only if made or given in compliance with all of the terms and provisions of the Indenture, and neither the Collateral Agent nor the Trustee nor any Holder of any Secured Note shall be deemed, by any act, delay, indulgence, omission or otherwise, to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default or in any breach of any of the terms and conditions hereof, except as set forth in such amendment or waiver. Failure of the Collateral Agent or the Trustee to exercise, or delay in exercising, any right, power or privilege hereunder shall not operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Collateral Agent, the Trustee or any Holder of a Secured Note of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy that the Collateral Agent, the Trustee or any such Holder would otherwise have on any future occasion. The right and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any rights or remedies provided by law. (i) INTERPRETATION OF SECURITY AGREEMENT. All terms 21 not defined herein or in the Indenture shall have the meaning set forth in the Uniform Commercial Code of the State of New York, except where the context otherwise requires. To the extent a term or provision of this Agreement conflicts with the Indenture, the Indenture shall control with respect to the subject matter of such term or provision. Acceptance of or acquiescence in a course of performance rendered under this Agreement shall not be relevant in determining the meaning of this Agreement even though the accepting or acquiescing party had knowledge of the nature of the performance and opportunity for objection. (j) CONTINUING SECURITY INTEREST; TRANSFER OF COLLATERAL. This Agreement shall create a continuing Lien and security interest in the Collateral and shall (i) unless otherwise provided in the Indenture or this Agreement remain in full force and effect until payment in full of (A) the Secured Notes under the terms of the Indenture and (B) all Obligations then due and owing under the Indenture and the Security Agreements; PROVIDED, HOWEVER, that after receipt from the Issuer by the Collateral Agent of a request for a release of any Collateral permitted under the Indenture upon the sale, transfer, assignment, exchange or other disposition of such Collateral not prohibited by the Indenture and upon receipt by the Collateral Agent of all proceeds of such sale, transfer, assignment, exchange or other disposition required to be remitted to the Collateral Agent or the Trustee or the Collateral constituting the proceeds of such sale, transfer, assignment, exchange or other disposition being made subject to a Lien and security interest in favor of the Collateral Agent for the benefit of the Trustee and the equal and ratable benefit of the Holders of the Secured Notes, which Lien has the same priority as had the Lien on the Collateral being sold, assigned or otherwise disposed of, such Collateral shall be released from the Lien and security interest created hereunder and no longer constitute Collateral. Upon the payment in full of (A) the Secured Notes under the terms of the Indenture and (B) all Obligations then due and owing under the Indenture and the Security Agreements, the Issuer shall be entitled to the return (and release of any Lien), upon its request and at its expense, of such of the Collateral pledged by it as shall not have been sold or otherwise applied pursuant to the terms hereof. This Agreement shall be binding upon the Issuer, its successors and assigns, and inure, together with the rights and remedies of the Trustee hereunder, to the benefit of the Collateral Agent, the Trustee, the Holders of the Secured Notes and their respective successors, transferees and assigns. 22 (k) REINSTATEMENT. This Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any amount received by the Collateral Agent, the Trustee or any Holder of a Secured Note in respect of the Obligations is rescinded or must otherwise be restored or returned by the Collateral Agent, the Trustee or any Holder of a Security Note upon the insolvency, bankruptcy, dissolution, liquidation or reorganization or the Issuer or upon the appointment of any receiver, intervenor, conservator, trustee or similar official for the Issuer or upon the appointment of any receiver, intervenor, conservator, trustee or similar official for the Issuer or any substantial part of its assets, or otherwise, all as though such payments had not been made. (l) SURVIVAL OF PROVISIONS. All representations, warranties and covenants of the Issuer contained herein shall survive the execution and delivery of this Agreement, and shall terminate only upon the full and final payment and performance by the Issuer of the Obligations. (m) AUTHORITY OF COLLATERAL AGENT AND TRUSTEE. Both the Collateral Agent and Trustee shall have and be entitled to exercise all powers hereunder that are specifically granted to the Collateral Agent and the Trustee by the terms hereof, together with such powers as are reasonably incident thereto. The Collateral Agent and the Trustee may perform any of their respective duties hereunder or in connection with the Collateral by or through agents or employees and shall be entitled to retain counsel and to act in reliance upon the advice of counsel concerning all such matters. None of the Collateral Agent, any director, officer, any attorney or agent of the Collateral Agent, the Trustee, any director, officer, employee, attorney or agent of the Trustee or the Holders of the Secured Notes shall be liable to the Issuer for any action taken or omitted to be taken by it or them hereunder, except for its or their own gross negligence or willful misconduct or a breach of a relevant agreement, nor shall the Collateral Agent or the Trustee be responsible for the validity, effectiveness or sufficiency hereof or of any document or security furnished pursuant hereto. The Collateral Agent and its directors, officers, employees, attorneys and agents, and the Trustee and its directors, officers, employees, attorneys and agents shall be entitled to rely on any communication, instrument or document reasonably in good faith believed by it or them to be genuine and correct and to have been signed or sent by the proper person or persons. Neither the Collateral Agent nor the Trustee shall be required 23 to, and shall not, expend or risk any of its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder. The Issuer acknowledges that the rights and responsibilities of the Trustee under this Agreement with respect to any action taken by the Collateral Agent and the Trustee or the exercise or non-exercise by the Collateral Agent or the Trustee of any option, right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as among the Collateral Agent, the Trustee and the Holders of the Secured Notes, be governed by the Indenture and by such other applicable agreements with respect thereto as may exist from time to time among them, but, as among the Collateral Agent, the Trustee and the Issuer, the Collateral Agent and the Trustee shall be conclusively presumed to be acting as agent for the Holders of the Secured Notes with full and valid authority so to act or refrain from acting, and the Issuer shall not be obligated or entitled to make any inquiry respecting such authority. In any case in which the Collateral Agent shall be required or permitted to make any determination as to the extent to which the security interest or Liens under this Agreement secures any obligations, the Collateral Agent is authorized, without any direction from, or requirement for consent of or authorization by, the Trustee, to institute proceedings in a court of competent jurisdiction for the obtaining of any authoritative determination of such matter. If the Collateral Agent institutes any such proceeding, it shall give prompt written notice thereof to the Trustee and shall afford each of them the opportunity to participate in such proceeding. (n) RELEASE; TERMINATION OF SECURITY AGREEMENT. (i) Subject to the provisions of Section 16(k) hereof, this Agreement shall terminate upon payment in full of (A) the Secured Notes under the terms of the Indenture and (B) all Obligations then due and owing under the Indenture and the Security Agreements, except that the provisions of Section 16(o) hereof shall survive. (ii) The Issuer agrees that it will not sell or dispose of any of the Collateral in violation of the Indenture; PROVIDED, HOWEVER, that if the Issuer shall sell or otherwise dispose of any of the Collateral in accordance with the terms of 24 the Indenture and shall certify such compliance to the Collateral Agent and the Trustee, the Collateral Agent shall, and the Trustee shall cause, at the request of the Issuer, release or cause to be released the Collateral subject to such sale or disposition free and clear of the Liens and security interest under this Agreement. (iii) Upon any termination of this Agreement or release of any Collateral as permitted by the Indenture, the Collateral Agent and the Trustee will, at the expense of the Issuer, execute and deliver to the Issuer such documents and take such other actions as the Issuer shall reasonably request to evidence the termination of this Agreement or the release of such Collateral, as the case may be. Any such action taken by the Collateral Agent or the Trustee shall be without warranty by or recourse to the Collateral Agent or the Trustee, except as to the absence of any prior assignments by the Collateral Agent or the Trustee of its interests in the Collateral, and shall be at the expense of the Issuer. The Collateral Agent and the Trustee may conclusively rely on any certificate delivered to it by the Issuer stating that the execution of such documents and release of the Collateral is in accordance with and permitted by the terms of this Agreement and the Indenture. (o) PAYMENT OF FEES AND EXPENSES AND INDEMNITY. The Issuer will upon demand pay to the Collateral Agent and the Trustee, without duplication, the amount of any and all fees and expenses, including, without duplication, the reasonable fees and disbursements of its counsel, that the Collateral Agent and the Trustee may incur in connection with (i) administration of this Agreement, (ii) the custody, preservation, use or operation of, or the sale of, collection from, or other realization upon, any of the Collateral, (iii) the exercise or enforcement of any of the rights of the Collateral Agent and the Trustee hereunder or (iv) the failure by the Issuer to perform or observe any of the provisions hereof. The Issuer shall be liable for and shall reimburse and indemnify both the Trustee and the Collateral Agent and hold both the Trustee and the Collateral Agent harmless from and against any and all claims, losses, liabilities, costs, damages or expenses (including reasonable attorneys' fees and expenses) (collectively, "Losses") arising from or in connection with or related to this Agreement or being the Trustee or the Collateral Agent hereunder; PROVIDED, HOWEVER, that nothing contained herein shall require the Trustee or the Collateral Agent to be indemnified for Losses caused by their respective gross negligence or willful misconduct or in connection with any 25 breach by the Collateral Agent or the Trustee of the Indenture or any document executed in connection therewith. (p) FINAL EXPRESSION. This Agreement, together with the Indenture, the Security Agreements and any other agreement executed in connection herewith or therewith, is intended by the parties as a final expression of this Agreement and is intended as a complete and exclusive statement of the terms and conditions hereof. (q) ISSUER REMAIN LIABLE. Anything herein to the contrary notwithstanding (a) the Issuer shall remain liable under any contracts and agreements included in the Collateral, to the extent set forth therein, to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by the Collateral Agent or the Trustee of any of the rights hereunder shall not release the Issuer from any of its duties or obligations under the contracts and agreements included in the Collateral and (c) the Collateral Agent and the Trustee shall not have any obligation or liability under any contracts and agreements included in the Collateral by reason of this Agreement, nor shall the Collateral Agent or the Trustee be obligated to perform any of the obligations or duties of the Issuer thereunder or to take any action to collect or enforce any claim for payment assigned hereunder. (r) RIGHTS OF HOLDERS. No Holder of a Secured Note shall have any independent rights hereunder other than those rights granted to individual Holders pursuant to Section 6.07 of the Indenture, provided that nothing in this subsection (s) shall limit any rights granted to the Trustee under the Secured Notes, the Indenture or the Security Agreements. (s) NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS. No past, present or future director, officer, employee, incorporator or stockholder of the Issuer, any Subsidiary of the Issuer or any guarantor of the Notes, as such, shall have any liability for any obligations of the Issuer under this Agreement or for any claim based on, in respect of, or by reason of, such obligations or their creation. (t) GOVERNING LAW; WAIVER OF JURY TRIAL; WAIVER OF DAMAGES. (i) THIS AGREEMENT SHALL BE GOVERNED BY AND 26 INTERPRETED UNDER THE LAWS OF THE STATE OF NEW YORK, AND ANY DISPUTE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THE ISSUER, THE COLLATERAL AGENT, THE TRUSTEE AND THE HOLDERS OF THE SECURED NOTES IN CONNECTION WITH THIS AGREEMENT, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAWS PROVISIONS) AND DECISIONS OF THE STATE OF NEW YORK. (ii) THE ISSUER AGREES THAT WILMINGTON TRUST COMPANY (OR ITS SUCCESSOR AS COLLATERAL AGENT) SHALL, IN ITS CAPACITY AS COLLATERAL AGENT OR IN THE NAME AND ON BEHALF OF THE TRUSTEE AND ANY HOLDERS OF SECURED NOTES, AND THE TRUSTEE SHALL, IN ITS CAPACITY AS TRUSTEE OR IN THE NAME AND ON BEHALF OF ANY HOLDERS OF SECURED NOTES, HAVE THE RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE ISSUER OR ITS PROPERTY IN A COURT IN ANY LOCATION REASONABLY SELECTED IN GOOD FAITH TO ENABLE THE TRUSTEE TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE COLLATERAL AGENT OR THE TRUSTEE. THE ISSUER AGREES THAT IT WILL NOT ASSERT ANY COUNTERCLAIMS, SETOFFS OR CROSS-CLAIMS IN ANY PROCEEDING BROUGHT BY THE COLLATERAL AGENT OR THE TRUSTEE TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE COLLATERAL AGENT OR THE TRUSTEE. TO THE EXTENT PERMITTED BY LAW, THE ISSUER WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH THE TRUSTEE HAS COMMENCED A PROCEEDING DESCRIBED IN THIS PARAGRAPH INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS. (iii) TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE ISSUER, THE COLLATERAL AGENT AND THE TRUSTEE EACH WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT. INSTEAD, ANY DISPUTES RESOLVED IN COURT WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY. (iv) THE ISSUER AGREES THAT NONE OF THE COLLATERAL AGENT, THE TRUSTEE, AND ANY HOLDER OF A SECURED NOTE SHALL HAVE ANY LIABILITY TO THE ISSUER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) FOR LOSSES SUFFERED BY THE ISSUER IN 27 CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO, THE TRANSACTIONS CONTEMPLATED AND THE RELATIONSHIP ESTABLISHED BY THIS AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH, UNLESS IT IS DETERMINED BY A FINAL AND NONAPPEALABLE JUDGMENT OF A COURT THAT IS BINDING ON THE COLLATERAL AGENT, THE TRUSTEE OR SUCH NOTEHOLDER, AS THE CASE MAY BE, THAT SUCH LOSSES WERE THE RESULT OF ACTS OR OMISSIONS ON THE PART OF THE COLLATERAL AGENT, THE TRUSTEE OR SUCH HOLDER OF A SECURED NOTE, AS THE CASE MAY BE, CONSTITUTING NEGLIGENCE OR WILLFUL MISCONDUCT OR A BREACH OF ANY RELEVANT AGREEMENT. (v) THE ISSUER WAIVES ALL RIGHTS OF NOTICE AND HEARING OF ANY KIND PRIOR TO THE EXERCISE BY THE TRUSTEE OR ANY HOLDER OF A SECURED NOTE OF ITS RIGHTS DURING THE CONTINUANCE OF AN EVENT OF DEFAULT TO REPOSSESS THE COLLATERAL WITH JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON THE COLLATERAL OR OTHER SECURITY FOR THE OBLIGATIONS. THE ISSUER WAIVES THE POSTING OF ANY BOND OTHERWISE REQUIRED OF THE COLLATERAL AGENT, THE TRUSTEE OR ANY HOLDER OF A SECURED NOTE IN CONNECTION WITH ANY JUDICIAL PROCESS OR PROCEEDING TO OBTAIN POSSESSION OF, REPLEVY, ATTACH OR LEVY UPON COLLATERAL OR OTHER SECURITY FOR THE OBLIGATIONS, TO ENFORCE ANY JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE COLLATERAL AGENT, THE TRUSTEE OR ANY HOLDER OF A SECURED NOTE OR TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER OR PRELIMINARY OR PERMANENT INJUNCTION THIS AGREEMENT OR ANY OTHER AGREEMENT OR DOCUMENT AMONG THE ISSUER ON THE ONE HAND AND THE COLLATERAL AGENT, THE TRUSTEE AND/OR THE HOLDERS OF THE SECURED NOTES ON THE OTHER HAND. (u) APPOINTMENT OF COLLATERAL AGENT. The Trustee hereby appoints the Collateral Agent, and the Collateral Agent accepts appointment, as collateral agent under the terms of this Agreement. The Collateral Agent may resign at any time by giving written notice thereof to the Trustee and may be removed at any time with or without cause by the Trustee, with the consent of the Issuer (not to be unreasonably withheld)unless an Event of Default has occurred and is continuing. Prior to the effectiveness of any such resignation or removal, the Trustee shall have the right to appoint a successor Collateral Agent (with the consent of the Issuer (not to be unreasonably withheld) unless an Event of Default has occurred and is continuing) which shall be a commercial bank or trust company organized or chartered under the laws of the United States of America or any 28 state thereof having combined capital and surplus of at least $50,000,000. If no successor Collateral Agent shall have been so appointed by the Trustee and shall have accepted such appointment within 30 days after the retiring Collateral Agent's giving of notice of resignation or the Trustee's removal of the retiring Collateral Agent, then the retiring Collateral Agent shall, prior to the effectiveness of its resignation or removal, on behalf of the Trustee and the Holders of the Secured Notes, appoint a successor Collateral Agent, which shall be a commercial bank or trust company organized under the laws of the United States of America or any State thereof having a combined capital and surplus of at least $50,000,000. Upon the acceptance of any appointment as Collateral Agent hereunder by a successor Collateral Agent, such successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Collateral Agent, and the retiring Collateral Agent shall be discharged from its duties and obligations under this Agreement other than for existing claims for wilful misconduct, gross negligence or breaches of the relevant agreements. After any retiring Collateral Agent's resignation or removal hereunder as Collateral Agent, the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Collateral Agent under this Agreement. Any corporation into which the Collateral Agent may be merged, or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Collateral Agent shall be a party, shall be Collateral Agent under this Agreement without the execution or filing of any paper or any further act on the part of the parties hereto. (v) AGENT FOR SERVICE: SUBMISSION TO JURISDICTION: WAIVER OF IMMUNITIES. By the execution and delivery of this Agreement, the Issuer (i) acknowledges that it has, by separate written instrument, irrevocably designated and appointed CT Corporation System, 1633 Broadway, New York, New York 10019 (or any successor), as its authorized agent upon which process may be served in any suit or proceeding arising out of or relating to this Agreement that may be instituted in any federal or state court in the State of New York, or brought under federal or state securities laws, and acknowledges that CT Corporation System has accepted such designation, (ii) submits to the jurisdiction of any such court in any such suit or proceeding, and (iii) agrees that service of process upon CT Corporation System (or any successor) and written notice of said service to the Issuer shall be deemed in every respect effective service of process upon the 29 Issuer in any such suit or proceeding. The Issuer further agrees to take any and all action, including the execution and filing of any and all such documents and instrument, as may be necessary to continue such destination and appointment of CT Corporation System (or any successor) in full force and effect so long as the Secured Notes shall be outstanding. To the extent that the Issuer has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service of notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, the Issuer hereby irrevocably waives such immunity in respect of its obligations under this Agreement, to the extent permitted by law. [SIGNATURE PAGE FOLLOWS] 30 IN WITNESS WHEREOF, the Issuer has caused this Agreement to be duly executed and delivered as of the day and year first above written. AMETHYST FINANCIAL COMPANY LIMITED By: /s/ EARL W. MCNIEL Name: Earl W. McNiel Title: Treasurer By its acceptance hereof, as of the day and year first above written, the Collateral Agent and the Trustee agree to be bound by the provisions hereof. WILMINGTON TRUST COMPANY, as Collateral Agent and Trustee By: /s/ CARYN M. O'MARA Name: Caryn M. O'Mara Title: Authorized Signer SCHEDULE A to Secured Note Security and Pledge Agreement (Section 3(i)) MITSUBISHI DOCUMENTS 1. Loan Agreement dated as of December 19, 1998, among Lenders (Petro Dia Three S.A. ("MC1") and Petro Dia Four S.A. ("MC2) as initial lenders), Petrodrill Six Limited ("Petrodrill Six") (as borrower) and Mitsubishi Corporation (UK) (as Facility Agent and Security Agent), providing for a secured loan facility not exceeding US$160.0 million in connection with the acquisition of a semi-submersible drilling rig t.b.n. "Amethyst 6" (the "Amethyst 6 Mitsubishi Credit Facility"). 2. Loan Agreement dated as of December 19, 1998, among Lenders (MC1 and MC2 as initial lenders), Petrodrill Seven Limited ("Petrodrill Seven") (as borrower) and Mitsubishi Corporation (UK) (as Facility Agent and Security Agent), providing for a secured loan facility not exceeding US$180.0 million in connection with the acquisition of a semi-submersible drilling rig t.b.n. "Amethyst 7" (the "Amethyst 7 Mitsubishi Credit Facility" and together with the Amethyst 6 Mitsubishi Credit Facility, the "Mitsubishi Credit Facilities"). 3. Fee Agreement dated as of December 19, 1998, among MC1 and MC2 (as initial creditors), and Petrodrill Six and Petrodrill Seven (as borrowers), and Pride International, Inc. ("Pride") and Maritima Petroleo e Engenharia Ltda. ("Maritima") (as sponsors). 4. Deeds of Guarantee and Undertaking dated as of December 19, 1998, each relating to the Amethyst 6 Credit Facility and the Amethyst 7 Credit Facility, among each of Petrodrill Six and Petrodrill Seven (as borrower), and Pride and Maritima (as Sponsors), the Lenders (MC1 and MC2 as initial lenders) and Mitsubishi (as Facility Agent and Security Agent). 5. Subordinated Loan Facility Agreements dated as of December 19, 1998, among each of Petrodrill Six and Petrodrill Seven (as borrower), and Pride and Maritima (as sponsors), the Lenders (MC1 and MC2 as initial lenders) and Mitsubishi (as Facility Agent and Security Agent). 2 6. Floor Guarantee dated as of December 19, 1998, relating to the Mitsubishi Credit Facilities, among Pride and Maritima (as sponsors) and MC1 and MC2 (as beneficiaries). 7. Share Charges dated as of December 19, 1998, over each of the Petrodrill Six and Petrodrill Seven shares, between Amethyst Financial Company Limited (the "Company") (as shareholder) and Mitsubishi (as Security Agent). 8. Additional Funding and Guarantee Agreement dated as of December 19, 1998, among MC1 and MC2, Pride and Maritima (as sponsors) and Petrodrill Six and Petrodrill Seven, as amended and restated as at July 1, 1999, incorporating amendments made by Deeds of Release dated as of April 15, 1999, May 14, 1999, June 15, 1999 and July 1, 1999. 9. Assignments of Charterparty, Earnings and Requisition Compensation dated as of December 19, 1998, between each of Petrodrill Six and Petrodrill Seven (as assignor), and Mitsubishi (as Security Agent), relating to each of the semi-submersible drilling units having Daewoo Heavy Industries Ltd.'s Hull Nos. 3016 and 3015 t.b.n. "Amethyst 6" and "Amethyst 7", respectively. 10. Assignments of Deed of Guarantee and Undertaking and Subordinated Loan Facility Agreement dated as of December 19, 1998, relating to each of the Credit Facilities, between each of Petrodrill Six and Petrodrill Seven (as assignor), and Mitsubishi (as Security Agent). 11. Assignments of Rig Construction Contract and Refund Guarantee dated as of December 19, 1998, between each of Petrodrill Six and Petrodrill Seven (as assignor), and Mitsubishi (as Security Agent), in respect of each of the semi-submersible drilling units having Hulls Nos. 3016 and 3015 at Daewoo Heavy Industries, Ltd., respectively. 12. Bridging Loan Agreement dated as of December 19, 1998, between MC1 (as funder) and MC2 (as participant), providing for the funding of the participant's participation in the Credit Facilities. 13. Debentures dated as of December 19, 1998, between each of Petrodrill Six and Petrodrill Seven (as borrower), and Mitsubishi (as Security Agent). 14. Deed of Covenants dated as of December 19, 1998, 3 between each of Petrodrill Six and Petrodrill Seven (as owner), and Mitsubishi (as Security Agent), relating to the First Priority Statutory Mortgage over each of the semi- submersible drilling units "Amethyst 6" and "Amethyst 7" (formerly Hulls Nos. 3016 and 3015 at Daewoo Heavy Industries, Ltd., respectively). 15. Insurances Assignments dated as of December 19, 1998, between each of Petrodrill Six and Petrodrill Seven (as assignor), and Mitsubishi (as Security Agent), relating to each of the semi-submersible drilling units having Daewoo Heavy Industries Ltd.'s Hull Nos. 3016 and 3015 t.b.n. "Amethyst 6" and "Amethyst 7", respectively. 16. Inter-Company Cross Guarantee dated as of December 19, 1998, among Petrodrill Six, Petrodrill Seven and the Company (as guarantors), and Mitsubishi (as Security Agent). 17. Loan Agreement dated as of December 19, 1998, between Petrodrill Six (as borrower) and Petrodrill Seven (as lender), providing for a facility of US$10.0 million repayable on demand. 18. Inter-Company Loan Agreement Assignment dated as of December 19, 1998, between Petrodrill Seven (as assignor) and Mitsubishi (as Security Agent), relating to the semi-submersible drilling unit having Daewoo Heavy Industries Ltd.'s Hull No. 3015 t.b.n. "Amethyst 7". 19. Management Account Charges dated as of December 19, 1998, between each of Petrodrill Six and Petrodrill Seven (as chargor), and Mitsubishi (as Security Agent), relating to each of the semi-submersible drilling units having Daewoo Heavy Industries Ltd.'s Hull Nos. 3016 and 3015 t.b.n. "Amethyst 6" and "Amethyst 7", respectively. 20. Omnibus Contract Assignments dated as of December 19, 1998, between each of Petrodrill Six and Petrodrill Seven (as assignor), and Mitsubishi (as Security Agent), relating to each of the semi-submersible drilling units having Daewoo Heavy Industries Ltd.'s Hull Nos. 3016 and 3015 t.b.n. "Amethyst 6" and "Amethyst 7", respectively. 21. Performance Guarantee dated as of December 19, 1998, between Mitsubishi (as guarantor) and Petrodrill Six and Petrodrill Seven (as beneficiaries), relating to two semi-submersible drilling plataforms. 4 22. Reserve Account Charges dated as of December 19, 1998, between each of Petrodrill Six and Petrodrill Seven (as chargor), and Mitsubishi (as Security Agent), relating to each of the semi-submersible drilling units having Daewoo Heavy Industries Ltd.'s Hull Nos. 3016 and 3015 t.b.n. "Amethyst 6" and "Amethyst 7", respectively. 23. Security Trust Deed dated as of December 19, 1998, among Petrodrill Six and Petrodrill Seven (as borrowers), Pride, Maritima and the Company (as the other security parties), the Lenders (MC1 and MC2 as initial lenders) and Mitsubishi (as Facility Agent and Security Agent). 24. Services Rendering Contract Assignments dated as of December 19, 1998, between Maritima and each of Petrodrill Six and Petrodrill Seven (as assignors), and Mitsubishi (as Security Agent), relating to each of the semi-submersible drilling units having Daewoo Heavy Industries Ltd.'s Hull Nos. 3016 and 3015 t.b.n. "Amethyst 6" and "Amethyst 7", respectively. 25. Any and all exhibits, attachments, annexes and/or schedules to the foregoing documents, as well as any and all other agreements, amendments, assignments, deeds and instruments other than those referred to in Schedule 1 hereto, re-stating, supplementing, amending, providing a collateral to, or otherwise pertaining or relating to the Mitsubishi Credit Facilities, together with their relevant exhibits, attachments, annexes and/or schedules. 1 SCHEDULE B to Secured Note Security and Pledge Agreement (Section 5(b)) LIENS ON COLLATERAL None 1 SCHEDULE C to Secured Note Security and Pledge Agreement (Section 5(d)) FILINGS Secretary of State of New York UCC-1 Financing Statements Secretary of State of Texas UCC-1 Financing Statements Register of Encumbrance (British Virgin Islands) 1 SCHEDULE D to Secured Note Security and Pledge Agreement (Section 5(e) and Section 6(b) CHIEF EXECUTIVE OFFICE AND LOCATION OF COLLATERAL Amethyst Financial Company Limited c/o Arias Fabrega and Fabrega Trust Co. BVI Limited 325 Waterfront Drive, Omar Hodge Building, 2nd Floor Wickham's Lay Road, Tortola, British Virgin Islands 1 SCHEDULE E to Secured Note Security and Pledge Agreement (Section 6(d)) FORM OF ADDITIONAL COLLATERAL AMENDMENT This Additional Collateral Amendment, dated _____________, is delivered pursuant to Section 6(d) of the Security Agreement referred to below. The undersigned hereby pledges to the Collateral Agent for the benefit of the Trustee and the equal and ratable benefit of the Holders of the Secured Notes, and grants to the Collateral Agent for the benefit to the Trustee and the equal and ratable benefit of the Holders of the Secured Notes, continuing Liens and security interest in all of its rights, title and interest in the Collateral listed below. The undersigned hereby agrees that this Additional Collateral Amendment may be attached to the Secured Note Security and Pledge Agreement, dated as of November 1, 1999, between the undersigned and Wilmington Trust Company, as Collateral Agent and as Trustee (the "Security Agreement"); capitalized terms used herein and not otherwise defined herein shall have the meanings given to such terms in the Security Agreement; and the Collateral listed on this Additional Collateral Amendment shall be deemed to be part of the Collateral, and shall become part of the Collateral and shall secure all Obligations. AMETHYST FINANCIAL COMPANY LIMITED By: ____ Name:_____________________________ Title:____________________________ Description of Investment or other Collateral EVIDENCED BY OBLIGOR DATE SCHEDULE F to Secured Note Security and Pledge Agreement (Section 6(f)) RESTRICTIVE AGREEMENTS Mitsubishi Documents EX-4.6 8 EXHIBIT 4.6 EXECUTION COPY This RESERVE ACCOUNT AGREEMENT (the "Agreement"), dated as of November 1, 1999, among WILMINGTON TRUST COMPANY, as reserve account agent (in such capacity, the "Reserve Account Agent"), WILMINGTON TRUST COMPANY, as trustee (in such capacity, the "Trustee") under the Indenture (as defined herein), AMETHYST FINANCIAL COMPANY LIMITED, a British Virgin Islands limited liability company (the "Issuer"). RECITALS A. Pursuant to the Indenture, dated as of November 1, 1999 (as amended, amended and restated, supplemented or otherwise modified from time to time, the "Indenture"), among the Issuer, the Trustee, Pride International, Inc. and Maritima Petroleo e Engenharia Ltda., the Issuer is issuing $53,000,000 aggregate principal amount at Stated Maturity of its 11 3/4% Senior Secured Notes due 2002 (the "Notes"). B. As security for its obligations, among other things, under the Notes and the Indenture, the Issuer is required to enter into a Senior Secured Note Security and Pledge Agreement of even date herewith (the "Security and Pledge Agreement") with Wilmington Trust Company, as Collateral Agent (the "Collateral Agent"), and the Trustee, in which the Issuer is granting Liens on an undivided 53% interest in the Issuer Loans and the Issuer's right, title and interest in and to the Mitsubishi Documents and the security for the Issuer Loans provided for in the Mitsubishi Loan Collateral Documents (the "Secured Note Collateral"). C. Under the terms of the Indenture and the Security and Pledge Agreement, the Issuer is required to pay (or cause to be paid) all amounts of principal, interest and other obligations owed to the Issuer in respect of the Issuer Loans and the Mitsubishi Documents, whether proceeds of the Secured Note Collateral or otherwise, consisting of cash or cash equivalents to the Trustee or the Reserve Account Agent for deposit in the Reserve Account (as defined below). D. The parties have entered into this Agreement in order to set forth the conditions upon which, and the manner in which, funds will be disbursed from the Reserve Account and released from the security interest and Liens created hereby. 2 NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. DEFINED TERMS. Terms used herein and not defined herein shall have the meanings as defined in the Indenture. In addition to any other defined terms used herein, the following terms shall constitute defined terms for purposes of this Agreement and shall have the meanings set forth below: "AVAILABLE FUNDS" means (A) the sum of (i) all amounts deposited in the Reserve Account from time to time and (ii) interest earned or dividends paid on the funds in the Reserve Account (including holdings of Temporary Cash Investments), less (B) the sum of (i) aggregate disbursements previously made or then required to be made pursuant to Section 3(a)(i) or Section 3(a)(ii) of this Agreement and (ii) the aggregate disbursements previously made pursuant to Section 3(a)(iii), 3(a)(iv) or 6(b)(iii) of this Agreement. "COLLATERAL" shall have the meaning given in Section 6(a) hereof. "DISBURSEMENT REQUEST" means a notice sent by the Issuer requesting a disbursement of funds from the Reserve Account, in substantially the form of Exhibit A hereto or Exhibit B hereto, as applicable. Each Disbursement Request shall be signed by the Chairman of the Board, a Vice Chairman of the Board, the Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer or any Vice President of the Issuer. "ISSUE DATE" means November 1, 1999. "RESERVE ACCOUNT" shall have the meaning given in Section 2(b). "RESERVE ACCOUNT AGENT" shall have the meaning set forth in the preamble to this Agreement. "TRUSTEE" shall include any successor Trustee appointed pursuant to the Indenture. 3 2. RESERVE ACCOUNT; RESERVE ACCOUNT AGENT. (a) APPOINTMENT OF RESERVE ACCOUNT AGENT. The Issuer and the Trustee hereby appoint the Reserve Account Agent, and the Reserve Account Agent hereby accepts appointment, as reserve account agent, under the terms and conditions of this Agreement. (b) ESTABLISHMENT OF THE RESERVE ACCOUNT. Concurrent with the execution and delivery hereof, the Reserve Account Agent shall establish and maintain in the name of the Issuer at Bankers Trust Company, a special, segregated and irrevocable reserve account designated "Senior Secured Note Reserve Account pledged by Amethyst Financial Company Limited to Wilmington Trust Company, as Trustee" (the "Reserve Account"). All funds accepted by the Reserve Account Agent pursuant to this Agreement shall be held in the Reserve Account until disbursed in accordance with the terms hereof. The Reserve Account, the funds held therein and any Temporary Cash Investments held by the Reserve Account Agent in which such funds are invested shall be beneficially owned by the Issuer and pledged to and under the sole dominion and control of the Trustee, acting for its benefit and the equal and ratable benefit of the Holders of the Notes. (c) The Issuer shall provide notice to the Reserve Account Agent and the Trustee of the source of any moneys deposited to the Reserve Account by reference to the applicable provisions of the Indenture and the Mitsubishi Documents and by reference to whether any such moneys represent payments of principal of or interest on the Issuer Loans or other amounts and shall keep an ongoing record of the amounts so deposited and disbursed in accordance with this Agreement. It shall be the Issuer's responsibility to satisfy the Trustee as to the accounting for the Reserve Account, with a view to ensuring that the amounts required to be calculated for any disbursement are ascertainable. (d) RESERVE ACCOUNT AGENT COMPENSATION. The Issuer shall pay to the Reserve Account Agent such compensation for services to be performed by it under this Agreement as the Issuer and the Reserve Agent may agree in writing from time to time. The Reserve Agent shall be paid any compensation owed to it directly by the Issuer and shall not disburse from the Reserve Account any such amounts. 4 The Issuer shall reimburse the Reserve Account Agent upon request for all reasonable expenses, disbursements and advances incurred or made by the Reserve Account Agent in implementing any of the provisions of this Agreement, including reasonable compensation and expenses and disbursements of its counsel. The Reserve Agent shall be paid any such expenses owed to it directly by the Issuer and shall not disburse from the Reserve Account any such amounts. The provisions of this Section 2(d) shall survive termination of this Agreement. (e) INVESTMENT OF FUNDS IN THE RESERVE ACCOUNT. Pending release thereof in accordance with this Agreement and the Indenture, funds deposited in the Reserve Account shall be invested and reinvested only upon the following terms and conditions: (i) ACCEPTABLE INVESTMENTS. All funds deposited or held in the Reserve Account at any time shall be invested, at the direction of the Issuer except during the continuance of a Default or an Event of Default, and then only at the direction of the Trustee, by the Reserve Account Agent in Temporary Cash Investments in accordance with the Issuer's or the Trustee's written instructions, as applicable, from time to time to the Reserve Account Agent; PROVIDED, HOWEVER, that any such written instruction shall specify the particular Investment to be made, shall contain the certification referred to in Section 2(e)(ii), if required, and shall be executed by an officer of the Issuer. All Temporary Cash Investments shall be assigned to and held in the possession of, or, in the case of Temporary Cash Investments maintained in book-entry form with the Federal Reserve Bank, transferred to a book entry account in the name of, the Reserve Account Agent, as pledgee, with such guarantees as are customary, except that Temporary Cash Investments maintained in book-entry form with the Federal Reserve Bank shall be transferred to a book entry account in the name of the Reserve Account Agent at the Federal Reserve Bank that includes only Temporary Cash Investments held by the Reserve Account Agent for its customers and segregated by separate recordation in the books and records of the Reserve Account Agent. 5 (ii) SECURITY INTEREST IN AND LIEN ON INVESTMENTS. No investment of funds in the Reserve Account shall be made unless the Issuer has certified to the Reserve Account Agent and the Trustee that, upon such investment, the Trustee will have a first priority perfected Lien and security interest for the benefit of the Trustee and the equal and ratable benefit of the Holders of the Secured Notes in the applicable Investment. A certificate as to a class of investments need not be issued with respect to individual investments in securities in that class if the certificate applicable to the class remains accurate with respect to such individual investments, which continued accuracy the Reserve Account Agent may conclusively assume. Promptly after the Issue Date, and within three months after the anniversary of the Issue Date, until the payment in full of the Notes in accordance with the terms thereof and of the Indenture, and all other Obligations then due and owing under the Notes, the Indenture, this Agreement and the other Security Agreements, the Issuer shall provide to the Trustee and the Reserve Account Agent, an Opinion of Counsel, dated each such date as applicable, which opinion shall meet the requirements of Section 314(b) of the Trust Indenture Act of 1939, as amended (the "TIA"). (iii) INTEREST AND DIVIDENDS. All interest earned and dividends paid on funds invested in Temporary Cash Investments shall be deposited in the Reserve Account as additional Collateral beneficially owned by the Issuer and pledged to the Trustee, acting for its benefit and the equal and ratable benefit of the Holders of the Notes, and shall be reinvested in accordance with the terms hereof. (iv) LIMITATION ON RESERVE ACCOUNT AGENT'S RESPONSIBILITIES. The Reserve Account Agent's sole responsibilities under this Section 2 shall be (A) to retain, or cause its agent in the State of New York to retain, possession of certificated Temporary Cash Investments (except, however, that the Reserve Account Agent may surrender possession of any such Temporary Cash Investments to the issuer thereof for the purpose of effecting assignment, crediting interest, or reinvesting such security or reducing such security to cash) and to be 6 the registered or designated owner of Temporary Cash Investments which are not certificated, (B) to follow the Issuer's or the Trustee's written instructions, as applicable, given in accordance with Section 2(e)(i), (C) to invest and reinvest funds pursuant to this Section 2(e) and (D) to use reasonable efforts to reduce to cash such Temporary Cash Investments as may be required to fund any disbursement or payment in accordance with Section 3. In connection with clause (i) above, the Reserve Account Agent will maintain, or cause its agent in the State of New York to maintain, continuous possession in the State of New York of certificated Temporary Cash Investments and cash included in the Collateral and will cause uncertificated Temporary Cash Investments to be registered in the book-entry system of, and transferred to an account of the Reserve Account Agent or a subagent of the Reserve Account Agent at, the Federal Reserve Bank of New York. Except as set forth below, the Reserve Account Agent shall not be required to reduce to cash any Temporary Cash Investments to fund any disbursement or payment in accordance with Section 3 in the absence of written instructions signed by an officer of the Issuer specifying the particular investment to liquidate, unless a Default or Event of Default has occurred and is continuing, in which case such written instructions shall be signed by a Responsible Officer of the Trustee. If no such written instructions are received, the Reserve Account Agent shall liquidate those Temporary Cash Investments having the lowest interest rate per annum, regardless of maturity, or if none such exist, those having the nearest maturity. The Reserve Account Agent shall have no duty to determine whether or not to file or record any document or instrument in connection with this Agreement, but will follow the instructions of the Trustee. (f) SUBSTITUTION OF RESERVE ACCOUNT AGENT. The Reserve Account Agent may resign by giving not less than 30 days' prior written notice to the Issuer and the Trustee. Such resignation shall take effect upon the later to occur of (i) delivery of all funds and Temporary Cash Investments maintained by the Reserve Account Agent hereunder and copies of all books, records and other documents in the Reserve Account Agent's possession relating to such funds or Temporary Cash 7 Investments or this Agreement to a successor Reserve Account Agent mutually approved by the Issuer and the Trustee (which approvals shall not be unreasonably withheld or delayed) and (ii) the Issuer, the Trustee and such successor Reserve Account Agent entering into this Agreement or any written successor agreement no less favorable to the interests of the Holders of the Notes and the Trustee than this Agreement; and the Reserve Account Agent shall thereupon be discharged of all obligations under this Agreement other than for existing claims for wilful misconduct, gross negligence or breaches of this Agreement and shall have no further duties, obligations or responsibilities in connection herewith, except as set forth in Section 4. If a successor Reserve Account Agent has not been appointed or has not accepted such appointment within 30 days after notice of resignation is given to the Issuer, the Reserve Account Agent may apply to a court of competent jurisdiction for the appointment of a successor Reserve Account Agent. 3. DISBURSEMENTS. (a) DISBURSEMENT REQUEST; DISBURSEMENTS. (i) Not later than three Business Days after any deposit to the Reserve Account in respect of a payment of principal on any Issuer Loan, the Issuer shall submit to the Reserve Account Agent, with a copy to the Trustee, a completed Disbursement Request substantially in the form of Exhibit A hereto requesting payment to the Issuer of funds from the Reserve Account in an amount equal to 47% of the amount of such principal payment. (ii) Not later than three Business Days after the amount on deposit in the Reserve Account representing interest payments on the Issuer Loans first exceeds the amount payable on the Notes in respect of interest (including Additional Amounts, if any, and Special Interest, if any) on the Notes on the next succeeding Interest Payment Date, the Issuer shall submit to the Reserve Account Agent, with a copy to the Trustee, a completed Disbursement Request substantially in the form of Exhibit A hereto requesting payment to the Issuer of funds from the Reserve Account in an amount equal to such excess. (iii) At least two Business Days prior to any date on which a disbursement from the Reserve Account is required for a payment on the Notes, including an Interest Payment Date, a 8 Redemption Date or a Change of Control Payment Date, the Issuer shall submit to the Reserve Account Agent a completed Disbursement Request substantially in the form of Exhibit B hereto requesting payment to the Trustee of Available Funds on deposit in the Reserve Account in an amount equal to the aggregate amount of principal, premium, if any, and interest (including Special Interest, if any, and Additional Amounts, if any), owed on the Notes under the Indenture on such Interest Payment Date, Redemption Date or Change of Control Payment Date, as the case may be, unless the Issuer has disbursed and the Trustee has received funds from the Issuer in such amount on or before such Interest Payment Date, Redemption Date or Change of Control Payment Date. (iv) If an Event of Default under the Indenture has occurred and is continuing, the Trustee shall be entitled unilaterally to initiate withdrawals by executing a Disbursement Request which will be substantially similar to the form of Exhibit A or Exhibit B, as applicable, but which need only to be executed by the Trustee. (b) CONDITIONS PRECEDENT TO DISBURSEMENT. Subject to Section 4 and any mandatory provisions of applicable law, the Reserve Account Agent shall make the payments to be made pursuant to a completed Disbursement Request if (i) the Issuer shall have submitted, in accordance with the provisions of Section 3(a) herein such Disbursement Request to the Reserve Account Agent substantially in the form of Exhibit A or Exhibit B, as applicable, with blanks appropriately filled in and (ii) the Reserve Account Agent shall not have received any notice from the Trustee that as a result of an Event of Default the Indebtedness represented by the Notes has been accelerated and has become due and payable (in which event the Reserve Account Agent shall apply all Available Funds as required by Section 6(b)(iii)). (c) CERTIFICATIONS FOR DISTRIBUTIONS. Provided that no Event of Default has occurred and is continuing, the Issuer shall initiate all requests for withdrawal of funds from the Reserve Account by executing a Disbursement Request and submitting such request to the Trustee. The Trustee shall not, except following an Event of Default, be entitled unilaterally to initiate withdrawals. 9 (d) DEPOSITS IRREVOCABLE. Any deposits made into the Reserve Account hereunder shall be irrevocable and the amount of such deposits and any instrument or security held in the Reserve Account hereunder and all interest thereon shall be held in trust by the Reserve Account Agent and applied solely as provided herein. 4. LIMITATION OF THE RESERVE ACCOUNT AGENT'S LIABILITY: RESPONSIBILITIES OF THE RESERVE ACCOUNT AGENT. The Reserve Account Agent's responsibility and liability under this Agreement shall be limited as follows: (i) the Reserve Account Agent does not represent, warrant or guaranty to the Holders of the Notes from time to time the performance of the Issuer; (ii) the Reserve Account Agent shall have no responsibility to the Issuer or the Holders of the Notes or the Trustee from time to time as a consequence of performance or nonperformance by the Reserve Account Agent hereunder, except for any gross negligence or wilful misconduct of the Reserve Account Agent or its breach of this Agreement; (iii) the Issuer shall remain solely responsible for all aspects of the Issuer's business and conduct; and (iv) the Reserve Account Agent is not obligated to supervise, inspect or inform the Issuer or any third party of any matter referred to above. No implied covenants or obligations shall be inferred from this Agreement against the Reserve Account Agent, nor shall the Reserve Account Agent be bound by the provisions of any agreement beyond the specific terms hereof. Specifically and without limiting the foregoing, the Reserve Account Agent shall in no event have any liability in connection with its investment, reinvestment or liquidation, in good faith and in accordance with the terms hereof, of any funds or Temporary Cash Investments held by it hereunder, including without limitation any liability for any delay not resulting from gross negligence or willful misconduct in such investment, reinvestment or liquidation, or for any loss of principal or income incident to any such delay. The Reserve Account Agent shall be entitled to rely upon any judicial order or judgment, upon any written opinion of counsel or upon any certification, instruction, notice, or other writing delivered to it by the Issuer or the Trustee in compliance with the provisions of this Agreement without being 10 required to determine the authenticity or the correctness of any fact stated therein or the propriety or validity of service thereof. The Reserve Account Agent may act in reliance upon any instrument comporting with the provisions of this Agreement or signature believed by it to be genuine and may assume that any Person purporting to give notice or receipt or advice or make any statement or execute any document in connection with the provisions hereof has been duly authorized to do so. The Reserve Account Agent may act pursuant to the oral or written advice of counsel chosen by it with respect to any matter relating to this Agreement and shall not be liable for any action taken or omitted in accordance with such advice. The Reserve Account Agent shall not be called upon to advise any party as to selling or retaining, or taking or refraining from taking any action with respect to, any securities or other property deposited hereunder. In the event of any ambiguity in the provisions of this Agreement with respect to any funds or property deposited hereunder, the Reserve Account Agent shall be entitled to refuse to comply with any and all claims, demands or instructions with respect to such funds or property, and the Reserve Account Agent shall not be or become liable for its failure or refusal to comply with conflicting claims, demands or instructions. The Reserve Account Agent shall be entitled to refuse to act until either any conflicting or adverse claims or demands shall have been finally determined by a court of competent jurisdiction or settled by agreement between the conflicting claimants as evidenced in a writing, satisfactory to the Reserve Account Agent, or the Reserve Account Agent shall have received security or an indemnity satisfactory to the Reserve Account Agent sufficient to save the Reserve Account Agent harmless from and against any and all loss, liability or expense which the Reserve Account Agent may incur by reason of its acting. In connection with the matters described in this paragraph, the Reserve Account Agent may in addition elect in its sole option to commence an interpleader action or seek other judicial relief or orders as the Reserve Account Agent may deem necessary. No provision of this Agreement shall require the 11 Reserve Account Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder. 5. INDEMNITY. The Issuer shall indemnify, hold harmless and defend the Reserve Account Agent and its directors, officers, agents, employees and controlling persons, from and against any and all claims, actions, obligations, liabilities and expenses, including defense costs, investigative fees and costs, legal fees, and claims for damages, arising from the Reserve Account Agent's performance under this Agreement, except to the extent that such liability, expense or claim is directly attributable to the gross negligence or willful misconduct of any of the foregoing Persons or such Persons' breach of this Agreement. The provisions of this Section shall survive any termination, satisfaction or discharge of this Agreement as well as the resignation or removal of the Reserve Account Agent. The provisions of this paragraph 5 shall survive the termination of this Agreement. 6. GRANT OF LIENS AND SECURITY INTEREST: INSTRUCTIONS TO RESERVE ACCOUNT AGENT. (a) The Issuer hereby irrevocably grants a first priority, subject to the Security and Pledge Agreement, security interest in and Lien on, and pledges, assigns and sets over to the Trustee, for its benefit and the equal and ratable benefit of the Holders of the Notes, all of the Issuer's right, title and interest in the Reserve Account, and all property now or hereafter placed or deposited in, or delivered to the Reserve Account Agent for placement or deposit in, the Reserve Account, including, without limitation, all funds held therein, all Temporary Cash Investments held by (or otherwise maintained in the name of) the Reserve Account Agent pursuant to Section 2, and all proceeds thereof as well as all rights of the Issuer under this Agreement (collectively, the "Collateral"), in order to secure all obligations and indebtedness of the Issuer under the Notes and any other obligation, now or hereafter arising, of every kind and nature, owed by the Issuer under the Indenture or the Security Agreements to the Holders of the Notes or to the Trustee or the Collateral Agent. The Reserve Account Agent hereby acknowledges the Trustee's security interest and Lien as set forth above. The Issuer shall take all actions necessary on its part to insure the continuance of a first 12 priority security interest in and Lien on the Collateral in favor of the Trustee in order to secure all such obligations and indebtedness. (b) The Issuer and the Trustee hereby irrevocably instruct the Reserve Account Agent to, and the Reserve Account Agent shall, (i) (A) at all times maintain sole dominion and control over funds and Temporary Cash Investments in the Reserve Account, acting for the benefit of the Trustee and the Holders of the Notes to the extent specifically required herein, (B) maintain, or cause its agent within the State of New York to maintain, possession of all certificated Temporary Cash Investments purchased hereunder that are physically possessed by the Reserve Account Agent in order for the Trustee to enjoy a continuous perfected first priority security interest therein under the law of the State of New York (the Issuer hereby agreeing that in the event any certificated Temporary Cash Investments are in the possession of the Issuer or a third party, the Issuer shall use its best efforts to deliver all such certificates to the Reserve Account Agent), (C) take all steps specified by the Issuer pursuant to paragraph (a) above to cause the Trustee to enjoy a continuous perfected first priority security interest and Liens under the New York Uniform Commercial Code and any applicable law of the State of New York in all Temporary Cash Investments purchased hereunder that are not certificated and (D) maintain the Collateral free and clear of all Liens, security interests, safekeeping or other charges, demands and claims against the Reserve Account Agent of any nature now or hereafter existing in favor of anyone other than the Trustee; (ii) promptly notify the Trustee if the Reserve Account Agent receives written notice that any Person other than the Trustee has or claims to have a Lien on or security interest in any portion of the Collateral and (iii) upon receipt of written notice from one of the Trustee of the acceleration of the maturity of the Notes, and direction from the Trustee to disburse all Available Funds to the Trustee, as promptly as practicable disburse all Available Funds held in the Reserve Account to the Trustee and transfer title to all Temporary Cash Investments held by the Reserve Account Agent hereunder and constituting Available Funds to the Trustee in the amounts set forth in such notice. The Reserve Account Agent shall not have any right to receive compensation from the Trustee and is without any authority to 13 obligate the Trustee or to compromise or pledge its security interest and Lien hereunder. Accordingly, the Reserve Account Agent is hereby directed to cooperate with the Trustee in the exercise of its rights in the Collateral provided for herein. In addition to the foregoing, the Reserve Account Agent shall take all steps specified by the Issuer pursuant to paragraph (a) above to cause the Trustee to enjoy a continuous perfected first priority security interest in and Liens on the Collateral under any other applicable law. (c) Any money and Temporary Cash Investments collected by the Trustee pursuant to Section 6(b)(iii) shall be applied as provided in Section 6.02 of the Indenture. (d) Upon demand, the Issuer will execute and deliver to the Trustee such instruments and documents as the Trustee may reasonably deem necessary or advisable to confirm or perfect under any applicable law the rights of the Trustee under this Agreement and the Trustee's interest in the Collateral. The Trustee shall be entitled to take all necessary action to preserve and protect the security interest created hereby as a Lien and encumbrance upon the Collateral. (e) The Issuer hereby appoints the Trustee as its attorney-in-fact with full power of substitution, exercisable upon the occurrence and during the continuance of a Default or Event of Default, to do any act which the Issuer is obligated hereto to do, and the Trustee may, but shall not be obligated to, exercise such rights as the Issuer might exercise with respect to the Collateral and take any action in the Issuer's name to protect the Trustee's Lien and security interest hereunder. In addition to the rights provided under Section 6(b)(iii) hereof, upon an Event of Default and for so long as such Event of Default continues, the Trustee may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party under the New York Uniform Commercial Code or other applicable law, and the Trustee may also upon obtaining possession of the Collateral as set forth herein, without notice to the Issuer except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any exchange, broker's board or at any of the Trustee's 14 office or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Trustee may deem commercially reasonable. The Issuer acknowledges and agrees that any such private sale may result in prices and other terms less favorable to the seller than if such sale were a public sale. The Issuer agrees that, to the extent notice of sale shall be required by law, at least ten Business Days' notice to the Issuer of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Trustee shall not be obligated to make any sale regardless of notice of sale having been given. The Trustee may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. 7. TERMINATION. This Agreement shall terminate automatically ten days following disbursement of all funds remaining in the Reserve Account (including Temporary Cash Investments) and the payment in full of the Notes and all other Obligations then due and owing under the Indenture and the Security Agreements, unless sooner terminated by agreement of the parties hereto (in accordance with the terms hereof, not in violation of the Indenture; the Trustee may not earlier terminate this Agreement unless it has received the consent of 100% of the Holders of all of the Notes outstanding); PROVIDED, HOWEVER, that the obligations of the Issuer under Section 2(d) and Section 5 (and any existing claims thereunder) shall survive termination of this Agreement or the resignation of the Reserve Account Agent; PROVIDED, FURTHER, HOWEVER, that until such tenth day, the Issuer will cause this Agreement (or any permitted successor agreement) to remain in effect and will cause there to be a Reserve Account Agent (including any permitted successor thereto) acting hereunder (or under any such permitted successor agreement). 8. MISCELLANEOUS. (a) WAIVER. Any party hereto may specifically waive any breach of this Agreement by any other party, but no such waiver shall be deemed to have been given unless such waiver is in writing, signed by the waiving party and specifically designating the breach waived, nor shall any such waiver constitute a continuing waiver of similar or other breaches. 15 (b) INVALIDITY. If for any reason whatsoever any one or more of the provisions of this Agreement shall be held or deemed to be inoperative, unenforceable or invalid in a particular case or in all cases, such circumstances shall not have the effect of rendering any of the other provisions of this Agreement inoperative, unenforceable or invalid, and the inoperative, unenforceable or invalid provision shall be construed as if it were written so as to effectuate, to the maximum extent possible, the parties' intent. (c) ASSIGNMENT. This Agreement is personal to the parties hereto, and the rights and duties of any party hereunder shall not be assignable except with the prior written consent of the other parties. Notwithstanding the foregoing, this Agreement shall inure to and be binding upon the parties and their successors and permitted assigns. Nothing herein shall restrict the Reserve Account Agent from performing its duties through a subagent. (d) BENEFIT. The parties hereto and their successors and permitted assigns, but no others, shall be bound hereby and entitled to the benefits hereof; PROVIDED, HOWEVER, that the Holders of the Notes and their permitted assigns shall be entitled to the benefits hereof and to enforce this Agreement. (e) TIME. Time is of the essence with respect to each provision of this Agreement. (f) ENTIRE AGREEMENT; AMENDMENTS. This Agreement, the Indenture and the other Security Agreements contain the entire agreement among the parties with respect to the subject matter hereof and supersede any and all prior agreements, understandings and commitments, whether oral or written. This Agreement may be amended only in accordance with Article X of the Indenture and further by a writing signed by a duly authorized representative of each party hereto. (g) NOTICES. All notices, approvals, consents or other communications required or desired to be given hereunder shall be in the form and manner, and shall be delivered to the Issuer at its address as set forth in Section 12.02 of the Indenture, to the Trustee at its address as set forth in Section 12.02 of the Indenture, and to the Reserve Account Agent 16 at Wilmington Trust Company c/o the Trustee at such address. (h) COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. (i) CAPTIONS. Captions in this Agreement are for convenience only and shall not be considered or referred to in resolving questions of interpretation of this Agreement. (j) CHOICE OF LAW: WAIVER OF JURY TRIAL. The existence, validity, construction, operation and effect of any and all terms and provisions of this Agreement shall be determined in accordance with and governed by the laws of the State of New York, without regard to principles of conflicts of law. The parties to this Agreement hereby agree that jurisdiction over such parties and over the subject matter of any action or proceeding arising under this Agreement may be exercised by a competent Court of the State of New York, or by a United States sitting in The City of New York. The Issuer hereby submits to the personal jurisdiction of such courts, hereby waives personal service of process upon it and hereby waives, to the extent permitted by applicable law, the right to a trial by jury in any action or proceeding with the Reserve Account Agent. The Issuer waives any objection that it may have to the location of the court in which the Reserve Account Agent has commenced a proceeding described in this paragraph including, without limitation, any objection to the laying of venue or based on the grounds of forum non conveniens. (k) AUTHORITY OF THE ISSUER; VALID AND BINDING AGREEMENT. The Issuer hereby represents and warrants that this Agreement has been duly authorized, executed and delivered on its behalf and constitutes the legal, valid and binding obligation of the Issuer, subject as to enforceability to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally or general principles of equity and commercial reasonableness. The execution, delivery and performance of this Agreement by the Issuer does not violate any applicable law or regulation to which the Issuer is subject and does not require the consent of any 17 governmental or other regulatory body to which the Issuer is subject, except for such consents and approvals as have been obtained and are in full force and effect. (l) AUTHORITY OF THE RESERVE ACCOUNT AGENT AND THE TRUSTEE VALID AND BINDING AGREEMENT. Each of the Reserve Account Agent and the Trustee hereby represents and warrants that this Agreement has been duly authorized, executed and delivered on its behalf and constitutes its legal, valid and binding obligation, subject as to enforceability to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally or general principles of equity and commercial reasonableness. The execution, delivery and performance of this Agreement by the Reserve Account Agent and the Trustee does not violate any applicable law or regulation to which the Reserve Account Agent or the Trustee is subject and does not require the consent of any governmental or other regulatory body to which the Reserve Account Agent or the Trustee is subject, except for such consents and approvals as have been obtained and are in full force and effect. (m) AGENT FOR SERVICE: SUBMISSION TO JURISDICTION: WAIVER OF IMMUNITIES. By the execution and delivery of this Agreement, the Issuer (i) acknowledges that it has, by separate written instrument, irrevocably designated and appointed CT Corporation System, 1633 Broadway, New York, New York 10019 (or any successor), as its authorized agent upon which process may be served in any suit or proceeding arising out of or relating to this Agreement that may be instituted in any federal or state court in the State of New York, or brought under federal or state securities laws, and acknowledges that CT Corporation System has accepted such designation, (ii) submits to the jurisdiction of any such court in any such suit or proceeding, and (iii) agrees that service of process upon CT Corporation System (or any successor) and written notice of said service to the Issuer shall be deemed in every respect effective service of process upon the Issuer in any such suit or proceeding. The Issuer further agrees to take any and all action, including the execution and filing of any and all such documents and instrument, as may be necessary to continue such destination and appointment of CT Corporation System (or any successor) in full force and effect so long as any 18 of the Secured Notes shall be outstanding. To the extent that the Issuer has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service of notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, it hereby irrevocably waives such immunity in respect of its obligations under this Agreement, to the extent permitted by law. [Signature Page Follows] 19 IN WITNESS WHEREOF, the parties have executed and delivered this Reserve Account Agreement as of the day first above written. RESERVE ACCOUNT AGENT: WILMINGTON TRUST COMPANY, as Reserve Account Agent by /s/ CARYN M. O'MARA Name: Caryn M. O'Mara Title: Authorized Signer TRUSTEE: WILMINGTON TRUST COMPANY, as Trustee by /s/ CARYN M. O'MARA Name: Caryn M. O'Mara Title: Authorized Signer ISSUER: AMETHYST FINANCIAL COMPANY LIMITED by /s/ EARL W. MCNIEL Name: Earl W. McNiel Title: Treasurer EXHIBIT A Form of Disbursement Request [Letterhead of the Issuer] [Date] Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Re: Disbursement Request No. [indicate whether revised] Ladies and Gentlemen: We refer to the Reserve Account Agreement (the "Reserve Account Agreement"), dated as of November 1, 1999, among you (the "Reserve Account Agent"), Wilmington Trust Company, as Trustee, and Amethyst Financial Company Limited, a British Virgin Islands limited liability company (the "Issuer"). Capitalized terms used herein shall have the meaning given in the Reserve Account Agreement. This letter constitutes a Disbursement Request under Section [3(a)(i)] [3(a)(ii)] of the Reserve Account Agreement. The undersigned Officer of the Issuer hereby notifies you that the Issuer has requested, and has satisfied the conditions contained in Section 11.05 of the Indenture for, the release of $[ ], from the Reserve Account which was deposited therein as a result of [specify source of deposit, i.e., payment of principal or interest made on Issuer Loans] of $[ ]. In connection with the requested disbursement, the undersigned Officer of the Issuer hereby certifies to you that: The Notes have [not], as a result of an Event of Default (as defined in the Indenture), been accelerated and become due and payable. 2 [add wire instructions]. The Reserve Account Agent is entitled to rely on the foregoing in disbursing funds relating to this Disbursement Request. AMETHYST FINANCIAL COMPANY LIMITED by _______________________________ Name: Title: EXHIBIT B Form of Disbursement Request [Letterhead of the Issuer] [Date] Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Re: Disbursement Request No. [indicate whether revised] Ladies and Gentlemen: We refer to the Reserve Account Agreement (the "Reserve Account Agreement"), dated as of November 1, 1999, among you (the "Reserve Account Agent"), Trustee, and Amethyst Financial Company Limited, a British Virgin Islands limited liability company (the "Issuer"). Capitalized terms used herein shall have the meaning given in the Reserve Account Agreement. This letter constitutes a Disbursement Request under Section [3(a)(iii)] [3(a)(iv)] of the Reserve Account Agreement. The undersigned Officer of the Issuer hereby notifies you that the Issuer has requested, and has satisfied the conditions contained in Section 11.05 of the Indenture for, the release of $[ ], from the Reserve Account which was deposited therein as a result of [specify source of deposit, i.e., payment of principal or interest made on Issuer Loans] of $[ ] to be applied as follows: [ ]. In connection with the requested disbursement, the undersigned Officer of the Issuer hereby certifies to you that: 2 The Notes have [not], as a result of an Event of Default (as defined in the Indenture), been accelerated and become due and payable. [add wire instructions]. The Reserve Account Agent is entitled to rely on the foregoing in disbursing funds relating to this Disbursement Request. AMETHYST FINANCIAL COMPANY LIMITED by _______________________________ Name: Title: EX-4.7 9 EXHIBIT 4.7 Date: 1 November 1999 (1) PETRO DIA THREE S.A. (2) PETRO DIA FOUR S.A. (3) MITSUBISHI CORPORATION (UK) PLC (AS FACILITY AGENT) (4) MITSUBISHI CORPORATION (UK) PLC (AS SECURITY AGENT) (5) PETRODRILL SIX LIMITED (6) PETRODRILL SEVEN LIMITED (7) PRIDE INTERNATIONAL, INC. (8) MARITIMA PETROLEO E ENGENHARIA LTDA. (9) AMETHYST FINANCIAL COMPANY LIMITED (10) WILMINGTON TRUST COMPANY (AS TRUSTEE) (11) WILMINGTON TRUST COMPANY (AS COLLATERAL AGENT) DEED OF CONSENT Field Fisher Waterhouse 35 Vine Street London EC3N 2AA THIS DEED OF CONSENT is dated 1 November 1999 and is made BETWEEN: (1) PETRO DIA THREE S.A., a company incorporated under the laws of Panama whose registered office is at 53rd Street, Urbanizacion Obarrio, Torre Swiss Bank, 16th Floor, Panama City, Republic of Panama ("MC1"); and (2) PETRO DIA FOUR S.A., a company incorporated under the laws of Panama whose registered office is at 53rd Street, Urbanizacion Obarrio, Torre Swiss Bank, 16th Floor, Panama City, Republic of Panama ("MC2"); and (3) MITSUBISHI CORPORATION (UK) PLC, a company incorporated in England and Wales (Reg No. 2214224) whose registered office is at Bow Bells House, Bread Street, London EC4M 9BQ, in its capacity as Facility Agent for the Lenders ("FACILITY AGENT"); and (4) MITSUBISHI CORPORATION (UK) PLC, a company incorporated in England and Wales (Reg No. 2214224) whose registered office is at Bow Bells House, Bread Street, London EC4M 9BQ, in its capacity as Security Agent for the Secured Parties ("SECURITY AGENT"); and (5) PETRODRILL SIX LIMITED, a company incorporated under the laws of the British Virgin Islands whose registered office is at Arias Fabrega and Fabrega Trust Co. BVI Limited, 325 Waterfront Drive, Omar Hodge Building, 2nd Floor, Wickham's Cay, Road Town, Tortola, British Virgin Islands ("PETRODRILL SIX"); and (6) PETRODRILL SEVEN LIMITED, a company incorporated under the laws of the British Virgin Islands whose registered office is at Arias Fabrega and Fabrega Trust Co. BVI Limited, 325 Waterfront Drive, Omar Hodge Building, 2nd Floor, Wickham's Cay, Road Town, Tortola, British Virgin Islands ("PETRODRILL SEVEN"); and (7) PRIDE INTERNATIONAL, INC., a company incorporated under the laws of the State of Louisiana, USA, of 5847 San Felipe, Suite 3300, Houston, Texas 77057, USA ("PRIDE"); and (8) MARITIMA PETROLEO E ENGENHARIA LTDA., a company incorporated under the laws of Brazil, of Avenida Almte. Barroso, 52 Gr 3400, Rio de Janeiro, Brazil ("MARITIMA"); and (9) AMETHYST FINANCIAL COMPANY LIMITED, a company incorporated under the laws of the British Virgin Islands whose registered office is at Arias Fabrega and Fabrega Trust Co. BVI Limited, 325 Waterfront Drive, Omar Hodge Building, 2nd Floor, Wickham's Cay, Road Town, Tortola, British Virgin Islands ("AMETHYST"); and (10) WILMINGTON TRUST COMPANY, a company incorporated under the laws of Delaware whose principal place of business is at Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001, in its capacity as trustee for the holders of the Notes (as defined below) (together with its successors and assigns, the "TRUSTEE"); and (11) WILMINGTON TRUST COMPANY, a company incorporated under the laws of Delaware whose principal place of business is at Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001, in its capacity as collateral agent for the Trustee and the holders of the Notes (together with its successors and assigns, the "COLLATERAL Agent"); and SUPPLEMENTAL to (1) two loan agreements (providing for secured loan facilities not exceeding US$160,000,000 and US$180,000,000, respectively, in connection with the construction, equipping and mobilization by Petrodrill Six and Petrodrill Seven of the semi-submersible drilling rigs t.b.n. "Amethyst 6" and "Amethyst 7"), each dated 19 December 1999 and made between (in the case of the US$160,000,000 loan facility) (a) MC1 and MC2, (b) Petrodrill Six, (c) the Facility Agent and (d) the Security Agent and (in the case of the US$180,000,000 loan facility) (w) MC1 and MC2, (x) Petrodrill Seven, (y) the Facility Agent and (z) the Security Agent (such two loan agreements being hereinafter sometimes together called the "LOAN AGREEMENTS") and (2) all other documentation referred to in the Loan Agreements. WHEREAS: A. The Additional Funding and Guarantee Agreement included certain provisions to the following effect: (1) Each Sponsor gave an undertaking to MC1 and MC2 that, on or prior to the Bridging Loan Repayment Date, it would, in its Several Proportion, make Sponsors' Funds available to the Borrowers in the aggregate principal amount of US$100,000,000 (comprising US$47,000,000 to be made available to Petrodrill Six and US$53,000,000 to be made available to Petrodrill Seven). (2) Each Sponsor severally guaranteed to MC1 the due and punctual payment by MC2 of such Sponsor's Several Proportion of the Bridging Loans (in all respects in accordance with the Bridging Loan Agreement) and the payment of all interest in respect thereof (including interest capitalized in accordance with the terms thereof). (3) MC2 gave each of the Sponsors an option (exercisable on the terms and in the manner, and subject to the conditions, specified in the Additional Funding and Guarantee Agreement) to require MC2 to transfer to each Sponsor such Sponsor's Several Proportion of the whole (but, save as provided in the Additional Funding and Guarantee Agreement, not part only) of the MC2 Participations. (4) MC2 gave an undertaking to the Sponsors that any amounts received and retained by MC2 from the Sponsors in respect of the exercise of such options would be applied pro tanto in or towards repayment to MC1 of the Bridging Loans. B. Instead of arranging for a transfer to the Sponsors of the whole of the MC2 Participations (as envisaged by Clause 3 of the Additional Funding and Guarantee Agreement), the Sponsors have made arrangements for the whole of the MC2 Participations to be transferred to Amethyst with effect from 1 November 1999 in consideration of the payment by Amethyst to MC2 of the Transfer Price. NOW IT IS HEREBY AGREED as follows: 1. DEFINITIONS AND INTERPRETATION 1.1 Unless the context otherwise requires or unless otherwise defined in this Deed, words and expressions defined in the Loan Agreements shall have the same meanings when used in this Deed. All of the parties hereto confirm that they have, or have been supplied with, copies of the Loan Agreements. 1.2 Additionally, in this Deed, unless the context otherwise requires: "EXISTING SECURITY AGREEMENT" means the Senior Secured Note Security and Pledge Agreement dated as of 1 November 1999 by Amethyst in favor of the Trustee and the Collateral Agent (attached hereto as Exhibit A). "MC2 PARTICIPATIONS" shall have the same meaning as is given to this expression in the Additional Funding and Guarantee Agreement (as amended and restated as at 1 July 1999) made between MC1, MC2, Pride, Maritima, Petrodrill Six and Petrodrill Seven. "MITSUBISHI DOCUMENTS' means the documents listed on Schedule A to the Existing Security Agreement, as the same may be amended, modified or supplemented from time to time. "NOTES" means the Senior Secured Notes due 2001 issued by Amethyst pursuant to the Indenture dated as of 1 November 1999 among Amethyst, the Trustee, Pride and Maritima. "SECURITY DOCUMENTS" means the collateral documents and other agreements entered into from time to time in connection with the Notes (including, without limitation, the Existing Security Agreement) or the other obligations of Amethyst incurred from time to time to fund, carry, refund or refinance its interest in the MC2 Participations that are secured by liens and security interests on the MC2 Participations, their proceeds or the rights of Amethyst under the Mitsubishi Documents. 2. OPERATIVE PROVISIONS 2.1 This Deed shall take effect on the receipt (on an unconditional basis) by MC1 of US$100,000,000 in cleared funds in its account No. 310-053-463 with Bank of Tokyo-Mitsubishi Trust Company, 360 Madison Avenue, New York, NY 10017 (the "EFFECTIVE DATE"). 2.2 Each of MC1, MC2, the Facility Agent and the Security Agent confirms that: (1) it consents to (A) the pledge by Amethyst in favor of the Trustee and the Collateral Agent, pursuant to the Existing Security Agreement, of (i) an undivided 53% interest in the MC2 Participations and all of Amethyst's right, title and interest in and to the Mitsubishi Documents, together with an undivided 53% interest in and to all of Amethyst's right, title and interest in and to all agreements, documents, notes, collateral documents and instruments relating to the Mitsubishi Documents and the security for the MC2 Participations, and (ii) all of Amethyst's right, title and interest in and to all replacements, additions, accessions, substitutions, repairs, proceeds and products relating to or from all items described in Clause 2.2(1)(A)(i), whether now owned or hereafter at any time acquired by Amethyst and wherever located, and all documents, ledger sheets, files, books and records of Amethyst relating thereto (proceeds hereunder include (a) whatever is now or hereafter received by Amethyst upon the sale, exchange, collection, or other disposition of any item of the collateral described in this Clause 2.2(1)(A), (b) any property of the type described in this Clause 2.2(1)(A) now or hereafter acquired by Amethyst with any proceeds of such collateral hereunder and (c) any payments under any insurance or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the collateral described in this Clause 2.2(1)(A)) and (B) the pledge by Amethyst of all or any portion of the MC2 Participations, their proceeds or the rights of Amethyst under the Mitsubishi Documents pursuant to any other Security Document; (2) notwithstanding Clause 15.3 of the Loan Agreements, the Trustee, the Collateral Agent or any other beneficiary under a Security Document may, after the occurrence (and notification in writing to MC1, MC2, the Facility Agent and the Security Agent by the Trustee, the Collateral Agent or other beneficiary) of an Event of Default under a Security Document (a "SECURITY DOCUMENT EVENT OF DEFAULT") transfer (in accordance with, and subject to, the provisions of Clause 15.4 of the relevant Loan Agreement, except to the extent modified by this Deed to, among other things, eliminate the strict requirement that the transferee be a Qualifying Lender, so that references in such Clause 15.4 to Clause 15.3 of the relevant Loan Agreement or to Qualifying Lender shall be read as so modified) (in the case of the Trustee or Collateral Agent) all or any part of 53% of the MC2 Participations and the other collateral described in Section 2.2(1)(A) and (in the case of any other beneficiary) all or any part of the collateral pledged in accordance with Section 2.2(1)(B) (in either case, the "MITSUBISHI LOAN RIGHTS") to any person that is a Qualifying Lender or to any other financial institution incorporated in or controlled by persons residing in or with a principal place of business in any country which is a member of OECD managing or owning a minimum of $100 million in assets according to its most recent quarterly balance sheet prepared under generally accepted accounting principles applicable to such institution (each, a "PERMITTED LENDER"), and each of MC1, MC2, the Facility Agent and the Security Agent hereby agrees that, in the event that the Trustee, the Collateral Agent or any other beneficiary exercises its remedies under the Security Documents to acquire or dispose of all or any part of the collateral described in Clause 2.2(1) of this Deed to a Permitted Lender, the Facility Agent (on its own behalf and on behalf of the other parties to the relevant Loan Agreement), the Security Agent and MC1 shall counter-sign appropriate Transfer Certificates for such transfer; (3) it will enter into a deed of consent containing terms substantially the same as this Deed in connection with any refinancing of the Notes, any debt extended by a Permitted Lender or any other obligation incurred by Amethyst from time to time to fund, carry, refund or refinance its interest in the MC2 Participations, their proceeds or the rights of Amethyst under the Mitsubishi Documents, in each case, secured by the Security Documents; (4) it hereby acknowledges, understands and agrees that each of the Trustee, the Collateral Agent and any other beneficiary under the Security Documents shall not have any obligation or duty to MC1, MC2, the Facility Agent or the Security Agent under the Mitsubishi Documents, the Security Documents or the other documents and instruments related to the collateral described in Clause 2.2(1) of this Deed and shall not be required to pay or perform any obligation thereunder; and (5) it hereby acknowledges, understands and agrees that all amounts held for the benefit of, or paid directly to, the Trustee, any other beneficiary under the Security Documents or Amethyst in accordance with the Mitsubishi Documents, the other documents and instruments related to the collateral described in Clause 2.2(1) of this Deed, this Deed or the Security Documents (whether subsequently paid by the Trustee to the holders of the Notes, held by the Trustee in escrow or released to Amethyst) shall be held and paid free and clear of all claims (including set-off) of MC1, MC2, the Facility Agent or the Security Agent, whether under the Cross-Guarantee or otherwise; and (6) pursuant to Section 7(a) of the Existing Security Agreement, at all times, whether or not a Security Document Event of Default shall have occurred and be continuing, only the Collateral Agent on behalf of the Trustee or the Trustee directly shall be entitled to exercise any and all voting and other consensual rights of Amethyst pertaining to the MC2 Participations and the Mitsubishi Documents. 2.3 PAYMENT OF THE MC2 PARTICIPATIONS Amethyst hereby notifies MC1, MC2, the Facility Agent and the Security Agent that: (1) subject to Clause 2.3(2), until the Trustee shall have otherwise notified MC1, MC2, the Facility Agent and the Security Agent in writing that all Notes have been paid in full and that all liens and security interests encumbering the MC2 Participations have been released (in which case, payments will be made in the manner directed by Amethyst), all interest, principal and other amounts payable to Amethyst or its successors and assigns in respect of the MC2 Participations shall be paid to the Trustee as such amounts become due at its account number 49870-0 at Bankers Trust Company, New York, New York, ABA number 0210-0002-1, or such other location as the Trustee may notify them in writing; or (2) if the Trustee shall have notified MC1, MC2, the Facility Agent and the Security Agent that a Security Document Event of Default has occurred and is continuing, 53% of all interest, principal and other amounts payable to Amethyst or its successors and assigns in respect of the MC2 Participations shall be paid to such other location in an OECD country as the Trustee may notify them in writing and 47% of such amounts shall be paid to such other location as Amethyst may notify them in writing. 2.4 AGREEMENT TO PAYMENT PROCEDURE The Facility Agent and the Security Agent agree to make payments in the manner described in Clause 2.3 of this Deed. 2.5 BENEFIT OF FLOOR GUARANTEE For the avoidance of doubt, each of the Sponsors and Amethyst hereby confirms and agrees that Amethyst shall not, by virtue of the transfer to Amethyst of the MC2 Participations or otherwise, have or acquire any right or interest in the Floor Guarantee, the entire benefit of which is and will remain vested in MC1 for its own account absolutely. 2.6 NOTICE AND ACKNOWLEDGMENT Amethyst hereby notifies Petrodrill Six and Petrodrill Seven, and each of Petrodrill Six and Petrodrill Seven hereby acknowledge receipt of notice, of the granting by Amethyst in favor of the Trustee and the Collateral Agent, pursuant to the Existing Security Agreement, of the security interest in and to the collateral described in Clause 2.2(1). 2.7 NO BREACH OR EVENT OF DEFAULT For the avoidance of doubt, each of MC1, MC2, the Facility Agent and the Security Agent acknowledges, confirms and agrees that: (1) notwithstanding Clause 11.1(vi) of the Loan Agreements, the releases, discharges, waivers, modifications and amendments to the Security Documents (as defined in the Loan Agreements) effected by this Deed, the Deed of Release dated as of the date hereof among MC1, MC2, Petrodrill Six, Petrodrill Seven, Pride, Maritima and Amethyst, the Transfer Certificates dated as of the date hereof relating to the transfer to Amethyst of the MC2 Participations and all deeds and agreements executed prior to the date hereof with the purpose of effecting releases, discharges, waivers, modifications and amendments to the Additional Funding and Guarantee Agreement are not, do not result in and will not result in a breach or Event of Default under the Loan Agreements; and (2) notwithstanding Clause 15.2 of the Loan Agreements, the collateral assignment of the Deeds of Guarantee and Undertaking and Subordinated Loan Facilities in favor of the Lenders in accordance with the terms of the Mitsubishi Documents is not, does not result in and will not result in a breach or Event of Default under the Loan Agreements. 3. REPRESENTATIONS AND WARRANTIES Each of the parties hereto (other than the Trustee and the Collateral Agent) represents and warrants (severally as to itself) to each of the other parties hereto as follows: 3.1 It is a company with limited liability duly organized and validly existing under the laws specified on page 1 or (as the case may be) page 2 of this Deed, possessing the capacity to sue or be sued in its own name, and it has the power to own its assets and carry on its business as it is now being conducted. 3.2 It has the power to enter into and perform this Deed and the transactions contemplated hereby and has taken all necessary action to authorize the entry into and performance of this Deed and the transactions contemplated hereby in accordance with the terms hereof. 3.3 This Deed constitutes its legal, valid and binding obligations enforceable in accordance with its terms and is in proper form for the enforcement in all the courts of the country (and, where applicable, State) of its incorporation or (as the case may be) establishment or (as the case may be) registration. 3.4 The entry into, and performance of, this Deed and the transactions contemplated hereby do not conflict with: (1) any law or official requirement; (2) its constitutional documents; or (3) any agreement or document to which it is a party or which is binding upon it or any of its assets, and will not result in the creation or imposition of (or enforcement of) any encumbrance on any of its assets. 4. NOTICES, ETC. 4.1 Each communication to be made hereunder shall be made in writing but, unless otherwise stated, may be made by facsimile transmission or by telex or by letter. 4.2 Any communication or document to be made or delivered by one person to any other pursuant to this Deed shall (unless the one has by not less than three (3) days' written notice to the other specified another address) be made or delivered to that other person at the respective addresses and facsimile numbers set out below. (1) MC1: Petro Dia Three S.A. c/o Mitsubishi Corporation 6-3 Marunouchi 2-chome Chiyoda-ku Tokyo Japan Attention: General Manager, Ship & Industrial Project Department Fax No.: +81 3 3210 4446 (2) MC2: Petro Dia Four S.A. c/o Mitsubishi Corporation 6-3 Marunouchi 2-chome Chiyoda-ku Tokyo Japan Attention: General Manager, Ship & Industrial Project Department Fax No.: +81 3 3210 4446 (3) The Facility Agent: Mitsubishi Corporation (UK) PLC Bow Bells House Bread Street London EC4M 9BQ Attention: General Manager, Machinery Department Fax No.: +44 171 822 0184 (4) The Security Agent: Mitsubishi Corporation (UK) PLC Bow Bells House Bread Street London EC4M 9BQ Attention: General Manager, Machinery Department Fax No.: +44 171 822 0184 (5) Petrodrill Six: Petrodrill Six Limited c/o Petrodrill Engineering N.V. K.P. van der Mandelelaan 38 3062 MB Rotterdam (Brainpark) The Netherlands Attention: Steve Assiter Fax No.: +31 10 272 2727 (6) Petrodrill Seven: Petrodrill Seven Limited c/o Petrodrill Engineering N.V. K.P. van der Mandelelaan 38 3062 MB Rotterdam (Brainpark) The Netherlands Attention: Steve Assiter Fax No.: +31 10 272 2727 (7) Pride: Pride International, Inc. 5847 San Felipe Suite 3300 Houston, Texas 77057 USA Attention: Robert Randall Fax No.: +1 713 914 9796 (8) Maritima: Maritima Petroleo e Engenharia Ltda. Avenida Almirante Barroso 52 Grupo 3400 Rio de Janeiro Brazil Attention: German Efromovich Fax No.: +55 21 220 6566 (9) Amethyst: Amethyst Financial Company Limited c/o Petrodrill Engineering N.V. K.P. van der Mandelelaan 38 3062 MB Rotterdam (Brainpark) The Netherlands Attention: Steve Assiter Fax No.: +31 10 272 2727 (10) The Trustee Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Fax No.: (302) 651-8882 (11) The Collateral Agent Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Fax No.: (302) 651-8882 4.3 Any notice given hereunder shall be deemed to have been received: (1) If sent by facsimile transmission or by telex, at the opening of business one (1) Banking Day after the day it was transmitted; (2) In the case of a written notice lodged by hand, at the time of actual delivery; and (3) If posted, on the fifth Banking Day following the day on which it was properly dispatched by first class mail postage prepaid. 5. GOVERNING LAW AND JURISDICTION 5.1 This Agreement shall be governed by and construed in accordance with English law. 5.2 Each of the parties hereto irrevocably agrees that the English courts are to have jurisdiction to settle any disputes which may arise out of or in connection with this Agreement and that accordingly any suit, action or proceedings ("PROCEEDINGS") arising out of or in connection with this Agreement may be brought in such courts. 5.3 Each of the parties hereto hereby irrevocably waives any objection which it may have now or hereafter to the laying of the venue of any Proceedings in any such court as is referred to in Clause 5.2 and any claim that any such Proceedings have been brought in an inconvenient forum, and further irrevocably agrees that a judgment in any Proceedings brought in the English courts shall be conclusive and binding upon the Borrower and may be enforced in the courts of any other jurisdiction. 5.4 Nothing contained in this Clause shall limit the right of any of the parties hereto to take proceedings in any other court of competent jurisdiction, nor shall the taking of Proceedings in any one or more jurisdictions preclude the taking of Proceedings in any other jurisdiction, whether concurrently or not. 5.5 (1) MC1 and MC2 each irrevocably and unconditionally appoints and empowers Mitsubishi Corporation (UK) PLC of Bow Bells House, Bread Street, London EC4M 9BQ to receive for it and on its behalf, service of process issued out of the English courts in any Proceedings arising out of or in connection with this Agreement. (2) Petrodrill Six and Petrodrill Seven each irrevocably and unconditionally appoints and empowers Hackwood Secretaries Limited of One Silk Street, London EC2Y 8HQ to receive for it and on its behalf, service of process issued out of the English courts in any Proceedings arising out of or in connection with this Agreement. (3) Pride, Maritima and Amethyst each irrevocably and unconditionally appoints and empowers Hackwood Secretaries Limited of One Silk Street, London EC2Y 8HQ to receive for it and on its behalf, service of process issued out of the English courts in any Proceedings arising out of or in connection with this Agreement. (4) Each of the parties hereto (other than the Trustee, the Collateral Agent, the Facility Agent and the Security Agent) irrevocably and unconditionally: (a) agrees to maintain in England a duly appointed process agent notified to the other parties to this Agreement for the purposes of paragraphs (1), (2) and (3) above; (b) agrees that failure by any such process agent to give notice of such process to it shall not impair the validity of such service or of any judgment based thereon; (c) consents to the service of process out of any of the said courts in any such Proceedings by the airmailing of copies, postage prepaid, to it at its address for the time being applying for the purposes of Clause 4; and (d) agrees that nothing herein shall affect the right to serve process in any other manner permitted by law. 6. COUNTERPARTS This Deed may be executed in any number of counterparts and by the different parties hereto on different counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument. 7. WAIVER; REMEDIES CUMULATIVE No failure to exercise, and no delay in exercising on the part of any party hereto, any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided are cumulative and not exclusive of any rights or remedies provided by law. 8. LANGUAGE Each document referred to herein or to be delivered hereunder (including financial statements) and each other communication shall be in the English language. IN WITNESS whereof the parties hereto have caused this Deed to be duly executed and delivered as a deed the day and year first above written. EXECUTION EXECUTED and DELIVERED ) /s/ Y. MIYAMOTO as a DEED by PETRO DIA ) THREE S.A. acting by its duly ) authorized signatory/attorney-in-fact ) in the presence of: ) /s/ Illegible EXECUTED and DELIVERED ) /s/ Y. MIYAMOTO as a DEED by PETRO DIA ) FOUR S.A. acting by its duly ) authorized signatory/attorney-in-fact ) in the presence of : ) /s/ Illegible EXECUTED and DELIVERED ) /s/ Y. MIYAMOTO as a DEED by MITSUBISHI ) CORPORATION (UK) PLC (in its ) capacity as Facility Agent) acting ) by its duly authorized signatory/ ) attorney-in-fact in the presence of: ) /s/ Illegible EXECUTED and DELIVERED ) /s/ Y. MIYAMOTO as a DEED by MITSUBISHI ) CORPORATION (UK) PLC (in its ) capacity as Security Agent) acting ) by its duly authorized signatory/ ) attorney-in-fact in the presence of: ) /s/ Illegible EXECUTED and DELIVERED ) /s/ EARL W. MCNIEL as a DEED by PETRODRILL ) SIX LIMITED acting by its duly ) authorized signatory/attorney-in-fact ) in the presence of: ) /s/ ROBERT W. RANDALL EXECUTED and DELIVERED ) /s/ EARL W. MCNIEL as a DEED by PETRODRILL ) SEVEN LIMITED acting by its duly ) authorized signatory/attorney-in-fact ) in the presence of: ) /s/ ROBERT W. RANDALL EXECUTED and DELIVERED ) /s/ EARL W. MCNIEL as a DEED by PRIDE ) INTERNATIONAL INC. acting by ) its duly authorized signatory/ ) attorney-in-fact in the presence of: ) /s/ ROBERT W. RANDALL EXECUTED and DELIVERED ) /s/ GERMAN EFROMOVICH as a DEED by MARITIMA ) PETROLEO E ENGENHARIA ) LTDA. acting by its duly authorized ) signatory/attorney-in-fact in the ) presence of: ) /s/ Illegible EXECUTED and DELIVERED ) /s/ EARL W. MCNIEL as a DEED by AMETHYST ) FINANCIAL COMPANY ) LIMITED acting by its duly ) authorized signatory/attorney-in-fact ) in the presence of: ) /s/ ROBERT W. RANDALL EXECUTED and DELIVERED ) /s/ Illegible as a DEED by WILMINGTON ) TRUST COMPANY (in its ) capacity as Trustee) acting by ) its duly authorized ) signatory/attorney-in-fact in the ) presence of: ) /s/ Illegible EXECUTED and DELIVERED ) /s/ Illegible as a DEED by WILMINGTON ) TRUST COMPANY (in its ) capacity as Collateral Agent) ) acting by its duly authorized ) signatory/attorney-in-fact in the ) presence of: ) /s/ Illegible EX-4.8 10 EXHIBIT 4.8 DATED DECEMBER 1998 THE LENDERS HEREIN REFERRED TO as Lenders -and- PETRODRILL SEVEN LIMITED as Borrower - and - MITSUBISHI CORPORATION (UK) PLC as Facility Agent - and - MITSUBISHI CORPORATION (UK) PLC as Security Agent ------------------------------------------------- LOAN AGREEMENT providing for a secured loan facility not exceeding US$180,000,000 in connection with the acquisition of a semi-submersible drilling rig t.b.n. "AMETHYST 7" ------------------------------------------------- F I E L D - F I S H E R - W A T E R H O U S E 4 1 V I N E S T R E E T L O N D O N E C 3 N 2 A A CONTENTS CLAUSE/HEADING PAGE - - -------------- ---- 1. DEFINITIONS AND INTERPRETATION 2 2. THE FACILITY 17 3. CONDITIONS PRECEDENT 19 4. DISBURSEMENT OF ADVANCES 24 5. INTEREST 26 6. REPAYMENT AND PREPAYMENT 27 7. SECURITY 29 8. REPRESENTATIONS 31 9. PAYMENTS: TAXATION 35 10. EVENTS OF DEFAULT 37 11. COVENANTS 41 12. SECURITY ACCOUNTS 46 13. PROVISIONS RELATING TO SECURITY 48 14. CHANGE IN CIRCUMSTANCES 48 15. TRANSFERS 51 16. FEES AND EXPENSES 52 17. CURRENCY INDEMNITY 53 18. GENERAL INDEMNITIES 54 19. THE AGENTS 55 20. SET-OFF/PRO-RATA SHARING 61 21. NOTICES, ETC. 63 22. COUNTERPARTS 64 23. AGENTS'AND LENDERS'CERTIFICATES 65 24. WAIVER; REMEDIES CUMULATIVE 66 25. LANGUAGE 65 26. SEVERABILITY 65 27. GOVERNING LAW AND JURISDICTION 65 SIGNATORIES 67 SCHEDULES 1 THE LENDERS AND THEIR COMMITMENTS 68 2 THE FORM OF REPAYMENT SCHEDULE 69 3 PART 1: SERVICES CONTRACTS 70 PART 2: OTHER SERVICES CONTRACTS 70 4 DRAWING REQUEST 71 5 DETAILS OF THE HOLDER OF SHARES IN THE BORROWER AND THE SISTER COMPANY 72 6 FORM OF TRANSFER CERTIFICATE 73 7 PART 1 - THE PROJECT DOCUMENTS 76 PART 2 - THE SECURITY DOCUMENTS 77 8 INSURANCES 79 THIS AGREEMENT is made this day of December 1998 BETWEEN (1) THE LENDERS, the respective names and offices of which are set out in Schedule 1, as Lenders; (2) PETRODRILL SEVEN LIMITED, a company incorporated under the laws of the British Virgin Islands having its registered office at 325 Waterfront Drive, Omar Hodge Building, 2nd Floor, Wickhams Cay, Road Town, Tortola, British Virgin Islands, as Borrower; (3) MITSUBISHI CORPORATION (UK) PLC, a company incorporated in England and Wales (Reg No. 2214224) whose registered office is at Bow Bells House, Bread Street, London EC4M 9BQ, in its capacity as facility agent for the Lenders; and (4) MITSUBISHI CORPORATION (UK) PLC, a company incorporated in England and Wales (Reg No. 2214224) whose registered office is Bow Bells House, Bread Street, London EC4M 9BQ, in its capacity as security agent and trustee for the Secured Parties. WHEREAS: (A) This Agreement sets out the terms and conditions upon and subject to which loan facilities will be made available to the Borrower in an aggregate principal amount (including interest capitalised in accordance with the terms hereof) not exceeding US$180,000,000 for the purpose of financing the acquisition of a semi-submersible drilling rig to be constructed by the Builder, comprising a Tranche A Facility of a principal amount (including interest capitalised as aforesaid) not exceeding US$53,000,000, a Tranche B Facility in a principal amount (including interest capitalised as aforesaid) not exceeding US$74,000,000 and a Tranche C Facility in a principal amount (including interest capitalised as aforesaid) not exceeding US$53,000,000. (B) Subject to and upon the terms and conditions contained in this Agreement and the Sister Company Loan Agreement respectively MC1 has agreed to make available to the Borrower and the Sister Company loan facilities in the aggregate principal amount (including interest capitalised as aforesaid) not exceeding US$127,000,000 and of US$113,000,000 respectively. (C) Maritima and Pride have severally and unconditionally agreed with and undertaken to MC1 and MC2 that subject to and in accordance with the terms of the Additional Funding and Guarantee Agreement (referred to in Recital (D)), they will provide or arrange the provision of funding to the Borrower in each case on or before 29 October 1999 and in each case on the terms and conditions of the facilities to be made available under this Agreement and the Sister Company Loan Agreement in the amount (including interest capitalised as aforesaid as at such date) of US$53,000,000 and to the Sister Company in the amount of US$47,000,000 (including interest capitalised in accordance with the terms of the Sister Company Loan Agreement as at such date). - 1 - (D) Accordingly it has been agreed that subject to the terms and conditions contained in this Agreement MC1 will provide a bridging loan to MC2 (an affiliate company of MC1) in an amount (including interest capitalised as hereinafter provided to 29 October 1999) not exceeding US$53,000,000 on terms that it will be repaid to MC1 on or before 29 October 1999 and to give effect to this and to the agreement and undertaking referred to in Recital (C) Pride and Maritima have (INTER ALIA) entered into an Additional Funding and Guarantee Agreement with MC1 and MC2 whereby Pride and Maritima severally guarantee the repayment of the Bridging Loans and MC2 has granted to them an option severally to purchase (subject to and in accordance with the Additional Funding and Guarantee Agreement) from MC2 its Tranche A Commitment and its participation in the Tranche A Advances. (E) It has therefore also been agreed that the Tranche C Facility will only be made available to the Borrower by MC1 conditionally to the extent of the repayment to MC1 of the Bridging Loan and the assumption by Pride and Maritima or another Qualifying Lender of the Tranche A Commitments of MC2 and the assumption by Pride and Maritima or such party of MC2's participation in the Tranche A Advances and the payment by Pride and Maritima to MC2 of the amount thereof all in accordance with the Additional Funding and Guarantee Agreement. NOW IT IS HEREBY AGREED as follows:- 1. DEFINITIONS AND INTERPRETATION 1.1 DEFINED TERMS In this Agreement the following words and expressions shall, except where the context otherwise requires, have the following meanings: "ADDITIONAL FUNDERS" means Elliott Associates LP and Westgate International LP; "ADDITIONAL FUNDING AND GUARANTEE AGREEMENT" means the agreement to be executed in the approved form by MC1, MC2, the Borrower, the Guarantors and the Additional Funders whereby the Guarantors will severally guarantee the performance by MC2 of its obligations under the Bridging Loan Agreement and the Additional Funders guarantee the performance by Maritima of its obligations thereunder (in each case without any right of recourse to MC2); "ADVANCE" means an advance made or to be made or deemed to be by the Lenders under the Facilities or (as the context may require) the principal amount thereof for the time being outstanding and when designated an "A" ADVANCE, a "B" ADVANCE or a "C" ADVANCE means an Advance made or to be made in respect of the Tranche "A" Facility, the Tranche "B" Facility or the Tranche "C" Facility respectively and, additionally, when designated a "PRE-DELIVERY ADVANCE" means an Advance made or to be made prior to the Yard Delivery Date, when designated the "YARD DELIVERY ADVANCE" means the Advance made or to be made on the Yard Delivery Date upon delivery of the Rig by the Builder to the Borrower and when designated a "POST YARD DELIVERY ADVANCE" means an Advance made or to be made after the Yard Delivery Date but prior to the Charterparty Commencement Date; - 2 - "AGENTS" means the Facility Agent and the Security Agent, and "AGENT" means either of them, as the context requires; "ASSIGNMENT OF DEED OF GUARANTEE AND UNDERTAKING AND SUBORDINATED LOAN FACILITY AGREEMENT" means the assignment in the approved form to be executed pursuant to Clause 7.1(xv); "AVAILABLE FACILITY AMOUNT" means on any date in respect of any Facility the Facility Amount of such Facility as reduced by the amount of Advances made or deemed to have been made hereunder in respect of such Facility and as further reduced by the amount of interest which has accrued on the Advances drawn or deemed to have been drawn under such Facility since the Interest Capitalisation Date last preceding such date; "AVAILABILITY PERIOD" means the period commencing on the date of this Agreement and ending on the earlier of 30 April 2001 and the Charterparty Commencement Date; "BALLOON" means the instalment of the Loan repayable by the Borrower on the Final Repayment Date pursuant to Clause 6.3; "BANKING DAY" means a day (not being a Saturday or Sunday) on which banks and foreign exchange markets are open for business in London, New York, Tokyo and Rio de Janeiro and, in respect of the period expiring on (and including) the Yard Delivery Date, Seoul; "BORROWER" means Petrodrill Seven Limited, a company organised and existing under the laws of the British Virgin Islands (Company No. 273701) whose registered office is at 325 Waterfront Drive, Omar Hodge Building, 2nd Floor, Wickhams Cay, Road Town, Tortola, British Virgin Islands; "BRIDGING LOANS" has the meaning assigned to such term in the Bridging Loan Agreement; "BRIDGING LOAN AGREEMENT" means the agreement in the approved form dated the same date as this Agreement between MC1 and MC2 pursuant to which MC1 has agreed to advance to MC2 the amounts of Advances made by MC2 under the Tranche A Facility and the amounts of certain advances made by MC2 pursuant to the Sister Company Loan Agreement; "BRIDGING LOAN REPAYMENT DATE" means the earlier of: (i) 29 October 1999; and (ii) the date on which (the Tranche A Facility having been fully drawn and the Tranche A Facility having been fully drawn under and as defined in the Sister Company Loan Agreement) further Drawings are not available for Drawing under the Tranche B Facility (and further drawings under the Tranche B Facility are not available as defined in and in accordance with the Sister Company Loan Agreement) by reason of the application of Clause 3.6(viii) of the Loan Agreement (or Sister Company Loan Agreement) (because the making of such Drawings would cause the Prospective Final Grossed-up Advances Amount of the Tranche B Facility to exceed US$74,000,000 or (as the case may be) the - 3 - Prospective Final Grossed-up Amount of the Tranche B Facility as defined in and under the Sister Company Loan Agreement to exceed US$66,000,000); "BUILDER" means Daewoo Corporation a company organised and existing under the laws of Korea and Daewoo Heavy Industries Ltd., a company organised and existing under the laws of Korea whose registered offices are at 541 5-GA, Namdaemuro, Jung-Gu, Seoul, Korea, being jointly and severally the builder under the Rig Construction Contract; "CHARTERPARTY" means the time charterparty agreement in respect of the Rig (Contract No. 101.2.155.97-9) dated on or around 12 January 1998 and executed by and between Maritima (as owner) and Petrobras (as charterer) in the approved form, all rights and obligations of Maritima having since been assigned by Maritima to the Borrower with Petrobras' approval by an assignment document made between Petrobras, Maritima and the Borrower dated 10 July 1998; "CHARTERPARTY ASSIGNMENT" means a deed of assignment to be executed by the Borrower in favour of the Security Agent for itself and as trustee for the Secured Parties in accordance with Clause 7.1(iv); "CHARTERPARTY COMMENCEMENT DATE" means the date on which the Rig (having arrived at the Port or in sheltered waters in Macae -RJ) is accepted by Petrobras for the commencement of operations, all in accordance with the Charterparty; "CHARTERPARTY HIRE" means all payments by way of charterhire and any other monies from time to time payable under the Charterparty; "COMMITMENT" in relation to a Lender means the aggregate of its Tranche A Commitment, its Tranche B Commitment and its Tranche C Commitment; "TRANCHE A COMMITMENT" in relation to a Lender means, subject as hereinafter provided, the amount (if any) set opposite its name in the column headed "TRANCHE A COMMITMENT" of Schedule 1 (or, as the case may be, the amount specified as the portion of the Tranche A Facility transferred in the Transfer Certificate pursuant to which such Lender became a party hereto), "TRANCHE B COMMITMENT" in relation to a Lender means, subject as hereinafter provided, the amount (if any) set opposite its name in the column headed "TRANCHE B COMMITMENT" of Schedule 1 (or, as the case may be, the amount specified as the portion of the Tranche B Facility transferred in the Transfer Certificate pursuant to which such Lender became a party hereto) and "TRANCHE C COMMITMENT" in relation to a Lender means, subject as hereinafter provided, the amount (if any) set opposite its name in the column headed "TRANCHE C COMMITMENT" in Schedule 1 (or, as the case may be, the amount specified as the portion of the Tranche C Facility transferred in the Transfer Certificate pursuant to which such Lender became a party hereto) and, in any such case, as reduced from time to time in accordance with the provisions hereof; and "TRANCHE A COMMITMENTS", "TRANCHE B COMMITMENTS" and "TRANCHE C COMMITMENTS" shall be construed accordingly; "CONSTRUCTION AND MOBILISATION COSTS" means the costs, charges and expenses paid or to be paid by the Borrower in respect of spare parts, operating manuals and procedures, training, construction management team costs, commissioning of all equipment, construction insurance and mobilisation costs during transit to Brazil; "CONTRACT PRICE" has the meaning given to it in the Rig Construction Contract; - 4 - "CONTRACTUAL DELIVERY DATE" has the meaning given to it in the Rig Construction Contract; "CORRESPONDING SISTER COMPANY COMMITMENTS", "CORRESPONDING SISTER COMPANY OUTSTANDINGS", "CORRESPONDING SISTER COMPANY FACILITIES" and "CORRESPONDING SISTER COMPANY ADVANCES" means, in relation to any Commitments, Outstandings, Facilities or Advances, the commitments, outstandings, facilities or, as the case may be, advances under the Sister Company Loan Agreement having the same designation as such Commitments, Outstandings, Facilities or Advances under this Agreement; "CROSS GUARANTEE" means the guarantee to be executed by the Borrower, the Sister Company and the Shareholder in favour of the Security Agent for itself and as trustee for the Secured Parties in accordance with Clause 7.1(xii); "DAILY RATE" means after the Charterparty Commencement Date (in respect of the first Year) US$26,753 per day during which the Rig is operating (and during any day during which the Rig is not operating US$9,300) comprising a fixed proportion of US$11,753 (or US$5,000 if non-operational for more than 5 consecutive working days) (the "FIXED PROPORTION") and a variable proportion of US$15,000 (or US$9,300 if non-operational for more than 5 consecutive working days) (the "VARIABLE PROPORTION") and in respect of each subsequent Year an amount equal to the aggregate of (i) the Fixed Proportion (unchanged) and (ii) the Variable Proportion escalated on the first anniversary of the Charterparty Commencement Date and each successive anniversary of the Charterparty Commencement Date thereafter at the rate of 3% per annum); "DEED OF COVENANTS" means the deed of covenants to be executed by the Borrower in favour of the Security Agent for itself and as trustee for the Secured Parties (in conjunction with the Mortgage) in accordance with Clause 7.1(iii); "DEED OF GUARANTEE AND UNDERTAKING" means the deed of guarantee and undertaking to be executed in accordance with Clause 7.2; "DELAYED DELIVERY DEDUCTIBLE" means any amount which is deductible by insurers before amounts become payable or which is deducted from amounts which are payable under the terms of the delayed delivery insurance effected pursuant to Clause 11.3 in the event of a claim being made in respect of such insurance; "DRAWDOWN DATE", in relation to an Advance, means the date on which such Advance is made or deemed to be made hereunder; "DRAWING REQUEST" means the request for drawing an Advance pursuant to any of the Facilities issued by the Borrower pursuant to this Agreement; "EARNINGS" means the aggregate of (i) the Charterparty Hire, (ii) all other moneys whatsoever due or to become due to the Borrower at any time during the Security Period arising out of the use or operation of the Rig and/or out of the provision of related services (including, but not limited to) all hire and other moneys receivable in respect of the Rig (whether receivable directly by the Borrower or by any agent on its behalf), all compensation payable to the Borrower in the event of requisition of the Rig for hire, all remuneration for salvage and towage services and all demurrage and detention moneys - 5 - and (iii) damages for breach (or payments for variation or termination) of the Charterparty or any other charterparty or contract entered into by the Borrower for the employment of the Rig; "ENVIRONMENTAL APPROVALS" means all approvals, licences, permits, exemptions and authorisations required under applicable Environmental Laws; "ENVIRONMENTAL CLAIM" means (1) any claim by, or directive from, any applicable governmental, judicial or other regulatory authority alleging breach of, or non-compliance with, any Environmental Laws or Environmental Approvals or otherwise howsoever relating to or arising out of an Environmental Incident or (2) any claim by any other third party howsoever relating to or arising out of an Environmental Incident (and, in each such case, "CLAIM" shall mean a claim for damages, clean-up costs, compliance, remedial action or otherwise); "ENVIRONMENTAL INCIDENT" means (1) any release (or threatened release) of Environmentally Sensitive Material from the Rig, (2) any incident in which Environmentally Sensitive Material is released (or threatens to be released) from any vessel other than the Rig and which involves collision between the Rig and such other vessel or some other incident of navigation or operation, in either case where the Rig or the Borrower are actually or allegedly at fault or otherwise liable (in whole or in part) or (3) any incident in which Environmentally Sensitive Material is released (or is threatened to be released) from a vessel other than the Rig and where a vessel is actually or potentially liable to be arrested as a result and/or where the Borrower is actually or allegedly at fault or otherwise liable; "ENVIRONMENTAL LAWS" means all laws, regulations, conventions and agreements whatsoever relating to pollution or protection of the environment (including, without limitation, the United States Oil Pollution Act of 1990 and any comparable laws of the individual States of the United States of America); and "ENVIRONMENTALLY SENSITIVE MATERIAL" means oil, oil products, gas or any other substance which is polluting, toxic or hazardous or any substance the release of which into the environment is regulated, prohibited or penalised by or pursuant to any Environmental Law; "EVENT OF DEFAULT" means any of the events specified in Clause 10.1; "FACILITIES" means the Tranche A Facility, the Tranche B Facility and the Tranche C Facility and "FACILITY" means any of them; "FACILITY AGENT" means Mitsubishi Corporation (UK) PLC, in its capacity as facility agent for the Lenders and includes any successor facility agent appointed hereunder; "FACILITY AMOUNT" means in relation to any Facility the amount of such Facility specified in Clause 2; "FINAL REPAYMENT DATE" means the last of the dates specified in the Repayment Schedule; "FINANCING DOCUMENTS" means this Agreement and the Security Documents; - 6 - "FLOOR GUARANTEE" means the guarantee to be executed by the Guarantors in accordance with Clause 7.2(i); "GUARANTEES" means the Floor Guarantee, and the Deed of Guarantee and Undertaking, and "GUARANTEE" means any of them; "GUARANTORS" means each of Maritima and Pride, and "GUARANTOR" means either of them; "INITIAL LENDERS" means MC1 and MC2; "INSURANCES" means all policies and contracts of insurance (which expression includes all entries of the Rig in a protection and indemnity or war risks association) which are from time to time taken out or entered into in respect of the Rig and the Charterparty Hire or otherwise howsoever in connection with the Rig, including (but not limited to) any policies of insurance effected pursuant to the Financing Documents including (without limitation) (i) all insurances taken out by the Builder in respect of the Rig and the Listed Items and the Purchaser's Supplies (as defined in the Rig Construction Contract), and (ii) the Temporary Confirmation of Insurance and (iii) (subject to such insurances being available in the international insurance market) such other insurances as the Facility Agent may from time to time at its discretion require; "INSURANCES ASSIGNMENT" means a deed of assignment to the Insurances executed or to be executed by the Borrower in favour of the Lender in accordance with Clause 7.1(vi); "INTER-COMPANY LOAN" means the loan made or to be made pursuant to the Inter-company Loan Agreement; "INTER-COMPANY LOAN AGREEMENT" means the agreement in the approved form between the Borrower and the Sister Company for the loan by the Borrower to the Sister Company of US$10,000,000; "INTER-COMPANY LOAN ASSIGNMENT" means the assignment of the Inter-company Loan to be executed pursuant to Clause 7.1(ii); "INTEREST CAPITALISATION DATES" means (i)the date falling six months after the date of this Agreement; (ii) each date falling at six monthly intervals between such date and (in the case of Tranche B Advances and Tranche C Advances) the Charterparty Commencement Date; and (iii) (in the case of Tranche A Advances) the Notional Interim A Facility Date and the Charterparty Commencement Date; "LENDERS" means the Initial Lenders and any person who becomes a Lender from time to time pursuant to Clause 15 (Transfers) but excluding any person who ceases to be a Lender pursuant to that Clause; "LENDING OFFICE" means in relation to a Lender, the branch office of such Lender through which such Lender is for the time being acting for the purposes of this Agreement; - 7 - "LISTED ITEMS" means the equipment defined as the "LISTED ITEMS" in the Rig Construction Contract; "LISTED ITEMS PRICE" means the price payable by the Borrower to the Builder in respect of the Listed Items; "LOAN" means the aggregate principal amount advanced by the Lenders hereunder under any of the Facilities or (as the context requires) the amount thereof for the time being outstanding hereunder and shall include interest which has accrued and been capitalised in accordance with Clause 5.2; "MC1" means Petro Dia Three S.A. a company incorporated under the laws of Panama whose registered office is at 53rd Street, Urbanizacion Obarrio, Torre Swiss Bank, 16th Floor, Panama City, Republic of Panama; "MC2" means Petro Dia Four S.A. a company incorporated under the laws of Panama whose registered office is at 53rd Street, Urbanizacion Obarrio, Torre Swiss Bank, 16th Floor, Panama City, Republic of Panama; "MAJORITY LENDERS" means those Lenders the aggregate of whose Outstandings comprise at least 66 2/3% of the Loan or, if an Advance has not then been made, Lenders the aggregate of whose Commitments represent at least 66 2/3% of the Total Commitments; "MANAGEMENT ACCOUNT" means an account to be opened by and in the name of the Borrower with the Management Account Bank and designated as the Facility Agent may specify, and shall include any sub-account forming part of such account and also any such other account or accounts as may, with the agreement from time to time of the Security Agent, be opened and/or designated as the Management Account by the Borrower; "MANAGEMENT ACCOUNT BANK" means The Bank of Tokyo-Mitsubishi Limited, London Branch or such other bank as the Facility Agent may nominate for the purpose of holding and operating the Management Account; "MANAGEMENT ACCOUNT CHARGE" means the charge over the Management Account to be executed by the Borrower in favour of the Security Agent for itself and as trustee for the Secured Parties in accordance with Clause 7.1(vii); "MARITIMA" means Maritima Petroleo e Engenharia Ltda, (formerly Maritima Navegacao e Engenharia Ltda), a company incorporated under the laws of Brazil whose registered office is at Avenida Almte, Barroso, 52 Gr. 3400, 2031-000 Rio de Janeiro, Brazil; "MONTHLY OUTGOINGS" means (in relation to each and every month) the day to day administration and operational costs and expenses incurred or to be incurred by the Borrower in the operation of the Rig for that month exclusive of any such as arise under the provisions of this Agreement, being an amount equal to the aggregate of the Daily Rate applicable for the month in question multiplied by the number of days in that month; "MORTGAGE DEBENTURE" means a first priority mortgage debenture to be executed by the Borrower pursuant to Clause 7.1(x) in favour of the Security Agent for itself and as trustee for the Secured Parties; - 8 - "NOTIONAL FINAL FACILITY DATE" means 31 December 2000; "NOTIONAL INTERIM A FACILITY DATE" means, in relation to the Tranche A Facility, 29 October 1999; "OFF-HIRE DEDUCTIBLE" means any amount which is deductible by insurers before amounts become payable and which is deducted from amounts which are payable under the terms of the off-hire insurance effected pursuant to Clause 11.3 in the event of a claim being made in respect of such insurance; "OMNIBUS CONTRACT ASSIGNMENT" means the assignment to be executed in accordance with Clause 7.1(ix); "ORIGINAL SCHEDULED CHARTERPARTY COMMENCEMENT DATE" means 17 September 2000; "ORIGINAL SCHEDULED YARD DELIVERY DATE" means 30 June 2000; "OTHER SERVICES CONTRACTS" means the contracts specified in Schedule 3 Part 2; "OUTSTANDINGS" means, in relation to a Lender at any time, the aggregate principal amount of its participation in all (if any) Advances outstanding at that time; "OUTSTANDING INDEBTEDNESS" means the Loan and all interest thereon and all other sums of money from time to time owing to the Lenders under this Agreement and/or the Security Documents or any of them; "PETROBRAS" means Petroleo Brasileiro S.A. - Petrobras; "POST-DELIVERY OPEX" means costs incurred by the Borrower in the operation of the Rig during the period between the Yard Delivery Date and the Charterparty Commencement Date; "POTENTIAL EVENT OF DEFAULT" means any event or circumstance which, with the giving of notice, lapse of time or both or the satisfaction of any other applicable condition or the making of any applicable determination, may become an Event of Default; "PRE-DELIVERY OPEX" means costs incurred by the Borrower in respect of crews wages and travelling expenses during the period between the Original Scheduled Yard Delivery Date and the Yard Delivery Date; "PRIDE" means Pride International Inc., a company incorporated under the laws of the State of Louisiana, USA of 5847 San Felipe, Suite 330, Houston, Texas 77057 USA; "PROJECT DOCUMENTS" means the documents specified in Schedule 7 Part 1; "PROJECT PARTIES" means the parties to the Project Documents (including the Security Parties); "PROSPECTIVE FINAL GROSSED-UP ADVANCES AMOUNT" means on any date in respect of any Facility the amount of the Advances which (on the basis of the Advances which have been made or deemed to have been made under such Facility on or prior to such date and - 9 - the Advances which after such date will be deemed to be made pursuant to Clause 4.4 for the purposes of capitalising interest on such Advances) will be outstanding under such Facility on the Notional Final Facility Date on the assumption that no other Advances are made (save only for Advances deemed to be made in accordance with Clause 4.4 for the purposes of capitalising interest) and no payments of interest or repayments of any Advance are made between such date and the Notional Final Facility Date; "PROSPECTIVE INTERIM GROSSED-UP A ADVANCES AMOUNT" means on any date in respect of the Tranche A Facility the amount of the A Advances which (on the basis of the A Advances made or deemed to have been made under the Tranche A Facility on or prior to such date and the A Advances which after such date will be deemed to be made pursuant to Clause 4.4 for the purposes of capitalising interest on such A Advances) will be outstanding under the A Facility on the Notional Interim A Facility Date on the assumption that no other A Advances (save any for A Advances deemed to be made in accordance with Clause 4.4 for the purposes of capitalising interest) are made and no payments of interest or repayments of any Advance are made between such date and the Notional Interim A Facility Date; "PROVISIONAL CONTRACT PRICE" has the meaning ascribed thereto in the Rig Construction Contract; "PURCHASER'S SUPPLIES" has the meaning ascribed to such term in the Rig Construction Contract; "PURCHASER'S SUPPLIES CONTRACTS" means the contracts entered into or novated from time to time by the Borrower for the purchase of Purchaser's Supplies; "PURCHASER'S SUPPLIES PRICE" means the aggregate amount payable by the Borrower to the suppliers of Purchaser's Supplies under the Purchaser's Supplies Contracts; "QUALIFYING LENDER" means Elliott Associates LP, Westgate International LP and/or any person who in accordance with Clause 15.3 becomes a Lender under this Agreement and complies with the requirements of that Clause and being (in the case only of a Transferee to whom a Lender is proposing to transfer or novate any of its Tranche A Commitments), either (i) a bank or other financial institution which is a first class international bank incorporated in any country which is a member of OECD or (ii) a person approved by MC1 such approval not to be unreasonably withheld or delayed; "REFUND GUARANTEE" means the guarantee issued to Petrodrill Construction Inc and novated to the Borrower by The Export-Import Bank of Korea (or such other international bank acceptable to the Lenders) in respect of certain instalments of the Contract Price paid by the Borrower to the Builder pursuant to the Rig Construction Contract; "REPAYMENT DATE" means any of the eighty-four (84) repayment dates specified in the Repayment Schedule; "REPAYMENT INSTALMENT" means each instalment for repayment of the Loan and payment of interest thereon, in each case as provided for in Clauses 6.2 and 6.3; - 10 - "REPAYMENT SCHEDULE" means the schedule substantially in the form set out in Schedule 2 to be prepared by the Facility Agent in accordance with Clause 6.3; "REQUISITION COMPENSATION" means all moneys or other compensation payable during the Security Period by reason of requisition for title or other compulsory acquisition of the Rig otherwise than by requisition for hire; "RESERVE ACCOUNT" means an account to be opened by and in the name of the Borrower with the Reserve Account Bank and designated as the Facility Agent may specify, and includes any sub-account forming part of such account and also any such other account or accounts as may, with the agreement from time to time of the Facility Agent, be opened and/or designated as the Reserve Account by the Borrower; "RESERVE ACCOUNT BANK" means The Bank of Tokyo-Mitsubishi Limited, London Branch or such other bank as the Facility Agent may nominate for the purpose of holding and operating the Reserve Account; "RESERVE ACCOUNT CHARGE" means the charge over the Reserve Account to be executed by the Borrower in favour of the Security Agent for itself and as trustee for the Secured Parties in accordance with Clause 7.1(viii); "RIG" means the semi submersible drilling platform to be built, or (as the case may be) being built or (as the case may be) built and delivered to the Borrower pursuant to the Rig Construction Contract including the Materials, the Listed Items and the Purchaser's Supplies (all as defined in the Rig Construction Contract); "RIG CONSTRUCTION CONTRACT" means the agreement dated 9 April 1998 and executed between the Builder and Petrodrill Construction Inc and novated to the Borrower in the approved form for the construction and delivery of a semi-submersible drilling platform having Builder's Hull No 3015 (as the same may hereafter be amended and supplemented from time to time with the prior approval of the Lender); "RIG CONSTRUCTION CONTRACT AND REFUND GUARANTEE ASSIGNMENT" means the assignment executed or to be executed in accordance with Clause 7.1(i); "RIG MORTGAGE" means a first priority mortgage on the Rig to be executed by the Borrower pursuant to Clause 7.1(iii) (together with the Deed of Covenants supplemental thereto); "SECURED OBLIGATIONS" means all monies, obligations and liabilities of any nature whatsoever which are now or at any time hereafter may be or become due or owing by the Borrower or any of the other Security Parties to either of the Agents or any of the Lenders under or pursuant to any of the Financing Documents (including damages for breaches thereof) and any other liabilities, whether actual or contingent, now existing or hereafter incurred by the Borrower or any of the other Security Parties to either of the Agents or any of the Lenders under or pursuant to any of the Financing Documents or under or pursuant to any of the Sister Company Financing Documents (whether in either case due, owing or incurred by the Borrower or such other Security Parties alone or jointly with any other person(s) and in whatever name, firm or style and whether as principal or surety); - 11 - "SECURED PARTIES" means the Lenders and the Agents and also the Lenders and the Agents (as defined in the Sister Company Loan Agreement); "SECURITY AGENT" means Mitsubishi Corporation (UK) PLC in its capacity as security agent and trustee for the Lenders under the Security Trust Deed and includes any successor security agent and trustee appointed under the terms hereof and thereof; "SECURITY DOCUMENTS" means the agreements, mortgages, deeds and other documents specified in Schedule 7 Part 2 and any other documents (including, as the context may require, this Agreement) that may now or hereafter be executed as security for the Loan or any part thereof but excluding (for the avoidance of doubt) the Floor Guarantee; "SECURITY PARTIES" means the Borrower, the Guarantors, the Shareholder, the Sister Company, and during the period prior to the unconditional and irrevocable performance by each of the Additional Funders of their obligations under the Additional Funding and Guarantee Agreement and unless and until the Additional Funders are no longer under any actual or contingent obligation under the Additional Funding and Guarantee Agreement the Additional Funders or any of them, and "SECURITY PARTY" means any of them; "SECURITY PERIOD" means the period commencing on the date hereof and terminating on the date upon which all moneys payable or to become payable to the Agents and/or the Lenders at any time and from time to time pursuant to the terms hereof and pursuant to the Security Documents and all moneys payable or to become payable to the Agents and/or the Lenders at any time and from time to time pursuant to the Sister Company Financing Documents shall have been paid in full and neither the Agents nor any of the Lenders are under any actual or contingent obligation to the Borrower or the Sister Company under the Financing Documents or the Sister Company Financing Documents; "SECURITY TRUST DEED" means the security trust deed entered into or to be entered into relating to the security granted in favour of the Security Agent by the Borrower; "SERVICES CONTRACTS" means the contracts specified in Schedule 3 Part 1 between the Borrower and the Services Providers; "SERVICES PROVIDERS" means the persons specified in the Service Contracts for the provision of services to the Borrower and the Rig in the course of its operation; "SERVICES RENDERING CONTRACT" means the contract (Contract No. 101.0.156.97-1) which is supplemental to the Charterparty and which provides for services related thereto in relation to the Rig, as executed on or around 12 January 1998 by and between Maritima and Petrobras in the approved form, with the Borrower since being joined as an intervenient party with Petrobras' approval by a document executed by and between Petrobras, Maritima and the Borrower and dated 21 August 1998; "SERVICES RENDERING CONTRACT ASSIGNMENT" means the assignment to be executed in accordance with Clause 7.1(v); "SERVICES RENDERING CONTRACT PAYMENTS" means payments made or to be made by Petrobras to the Borrower pursuant to the Services Rendering Contract; - 12 - "SHARE CHARGE" means the charge over the whole of the issued share capital of the Borrower to be executed by the Shareholder in favour of the Security Agent for itself and as trustee for the Secured Parties in accordance with Clause 7.1(x); "SHAREHOLDER" means Amethyst Financial Company Limited, a company incorporated in the British Virgin Islands as the shareholder in the Borrower; "SISTER COMPANY" means Petrodrill Six Limited a company incorporated under the laws of the British Virgin Islands under Company No. 273686; "SISTER COMPANY FINANCING DOCUMENTS" means all or any of the agreements and documents to be executed by or in favour of the Agents and/or the Lenders for the provision of finance in connection with the acquisition and operation by the Sister Company of the Sister Rig, and shall include all agreements, encumbrances, guarantees and other documents and instruments entered into pursuant to or as contemplated by such agreements whether by the Sister Company or any third party but excluding (for the avoidance of doubt) the Floor Guarantee; "SISTER COMPANY LOAN AGREEMENT" means the loan agreement of the same date as this Agreement between the same parties as the parties to this Agreement for the provision by the Lenders of certain loan facilities to the Sister Company relating to the acquisition of the Sister Rig by the Sister Company; "SISTER RIG" means the semi-submersible drilling rig (Builder's Hull No. 3016) to be built or (as the case may be) being built or (as the case may be) built and delivered to the Sister Company pursuant to the contract between Petrodrill Construction Inc. and the Builder and novated to the Sister Company, to be owned and operated by the Sister Company including the Materials, Listed Items and the Purchaser's Supplies (all as defined in such contract); "SUB-CONTRACTORS' GUARANTEES" means the guarantees or warranties of the Builder's sub-contractors, as referred to in Clause 17.13 of the Rig Construction Contract; "SUBORDINATED LOAN FACILITY AGREEMENT" means the agreement dated the same date as this agreement to be executed in accordance with Clause 7.1(xiv); "SURPLUS EARNINGS" means, at any relevant time, such amount of the Earnings (i) which remains standing to the credit of the Management Account at such time and (ii) which is available for transfer to the Reserve Account pursuant to Clause 12.2 at such time; "TEMPORARY CONFIRMATION OF INSURANCE" means the temporary confirmation of insurance (and described as Temporary Confirmation of Insurance) issued by McGriff, Seibels, bartama & Colvin Inc (as brokers) on 15 December 1998 with Assigned No. MS-S711A-Daewoo; "TOTAL PROJECT COSTS" means the aggregate of the Contract Price, the Listed Items Price, the Pre-delivery Opex, the Construction and Mobilisation Costs, Post-delivery Opex and all other costs and expenditure of any nature which it is necessary for the Borrower to incur in order to perform its obligations under the Rig Construction Contract and to acquire, transport and mobilise the Rig and to have the Rig (having first arrived at the - 13 - port or in sheltered waters in Macae - RJ) accepted by Petrobras, all in accordance with the Charterparty; "TOTAL TRANCHE A COMMITMENTS" means at any time the aggregate of all the Tranche A Commitments of all the Lenders at such time; "TOTAL TRANCHE B COMMITMENTS" means at any time the aggregate of all the Tranche B Commitments of all the Lenders at such time; "TOTAL TRANCHE C COMMITMENTS" means at any time the aggregate of all the Tranche C Commitments of all the Lenders at such time; "TOTAL COMMITMENTS" means at any time the aggregate of all the Commitments of all the Lenders at such time; "TOTAL FACILITIES AMOUNT" means the lesser of (i) US$180,000,000 and (ii) the aggregate of 100% of the Contract Price, the Purchaser's Supplies Price, the Construction and Mobilisation Costs, Pre-delivery Opex, Post-delivery Opex and interest capitalised in accordance with Clause 4.4; "TOTAL LOSS" means:- (i) the actual total loss of the Rig; (ii) the agreed, arranged or constructive total loss of the Rig; (iii) requisition for title or other compulsory acquisition of title of the Rig by any governmental or other competent authority, agency or instrumentality otherwise than by requisition for hire; (iv) capture seizure arrest detention or confiscation of the Rig by any government or person acting or purporting to act on behalf of any government unless the Rig be released and restored to the Borrower from such capture seizure arrest or detention within 6 months after the occurrence thereof or such other period as may be specified in the Rig's Insurances; "TOTAL OUTSTANDINGS" means at any time the Outstandings of all the Lenders at such time; "TRANCHE A FACILITY" means the loan facility referred to in Clause 2.1(a), the terms and conditions of which are set out in this Agreement; "TRANCHE B FACILITY" means the loan facility referred to in Clause 2.1(b), the terms and conditions of which are set out in this Agreement; "TRANCHE C AVAILABILITY COMMENCEMENT DATE" means the date on which the conditions specified in Clause 3.5 (in addition to any other conditions precedent to the availability of the Tranche C Facility) have been satisfied and on which any part of the Tranche C Facility becomes available for drawing; - 14 - "TRANCHE C FACILITY" means the loan facility referred to in Clause 2.1(c), the terms and conditions of which are set out in this Agreement; "TRANSFER CERTIFICATE" means an instrument executed pursuant to and in accordance with Clause 15.4; "TRANCHES" means the tranches into which the Loan is deemed to be divided in accordance with and for the purposes of certain provisions of this Agreement; "TRANSFEREE" means a Qualifying Lender to whom a Lender transfers all or part of such Lender's rights, benefits and obligations under this Agreement, the other Security Documents and the Sister Company Financing Documents subject to and in accordance with Clause 15 and the provisions of the Sister Company Loan Agreement; "US DOLLARS" or "US$" or "$" means the lawful currency from time to time of the United States of America; "YARD DELIVERY DATE" means the date on which the Rig is delivered by the Builder to, and accepted by, the Borrower in accordance with the Rig Construction Contract; and "YEAR" means each successive period of 365 days throughout the Security Period, the first such period to commence on the Charterparty Commencement Date. 1.2 CONSTRUCTION OF PARTICULAR EXPRESSIONS Any reference in this Agreement to:- "APPROVED FORM" means, in relation to any document, the document in question being in such form and having such content as shall have been approved by the Facility Agent; "CALENDAR MONTH" means a period commencing on the first day of the month and ending on the last day of that month (for example, the period 1 January to 31 January shall be a calendar month); "CERTIFIED COPY" means, in relation to any document certified by a company, a copy of such document bearing the endorsement "Certified a true, complete and accurate copy of the original" and signed and dated by a duly authorised officer of the company in question; "CLAIM" has the meaning given to this expression in the definition of "Environmental Claim" in Clause 1.1; "ENCUMBRANCE" means a mortgage, charge, pledge, lien or other encumbrance securing any obligation of any person or any other type of contractual or preferential arrangement (including, without limitation, title transfer and retention of title and set off arrangements) having a similar legal or economic effect, but excluding any encumbrances arising by operation of law or in the ordinary course of business which are discharged in the ordinary course of business unless being contested in good faith and by appropriate proceedings; - 15 - "EXCESS RISKS" means the proportion (if any) of claims for general average, salvage and salvage charges not recoverable under the hull and machinery policies in respect of the Rig in consequence of her insured value being less than the value at which the Rig is assessed for the purpose of such claims; "GOVERNMENTAL AUTHORITY" includes any political sub-division of such governmental authority; "HOLDING COMPANY" has the meaning given to this term in Section 736 of the Companies Act 1985 (or any statutory modification or re-enactment thereof); "INDEBTEDNESS" means, in relation to any person, any obligation of any kind (whether present or future, actual or contingent, whether incurred as principal or surety and whether in respect of interest, principal or otherwise) for the payment or prepayment of money; "MONTH" means a period beginning in one calendar month and ending in the next calendar month on the day numerically corresponding to the day of the calendar month on which it started provided that (i) if the period started on the last Banking Day in a calendar month or if the next calendar month contains no such numerically corresponding day, it shall end on the last Banking Day in the next calendar month and (ii) if such numerically corresponding day is not a Banking Day, the period shall end on the next following Banking Day but if there is no such Banking Day it shall end on the preceding Banking Day, and the terms "MONTHS" and "MONTHLY" shall be construed accordingly; "PERSON" means any person, firm or company (and shall include that person's assignees); "PROTECTION AND INDEMNITY RISKS" (in relation to the Insurances for the Rig) means the usual risks covered by an English protection and indemnity association including the proportion not recoverable in case of collision under the ordinary running down clause; "SAME DAY FUNDS" means freely transferable funds in the currency due hereunder settled for same day value in such manner and through such clearing system (if any) as the Lender shall notify to the Borrower as being customary for the settlement in such currency of international transactions of the type contemplated by this Agreement; "SUBORDINATED INDEBTEDNESS" means any indebtedness of any of the Security Parties which cannot lawfully be repaid prior to such time as all amounts due and/or to become due to the Lender under or in connection with the Financing Documents have been repaid/paid in full; "SUBSIDIARY" means in relation to any company any entity over fifty per cent (50%) of whose capital is owned, directly or indirectly, by such company or which is otherwise effectively controlled directly or indirectly by such company and "control" for this purpose means control by virtue of the direct or indirect ownership of the majority of the voting share capital or the right to appoint management or direct policies by virtue of ownership of share capital, contract or otherwise; "TAXES" means any present or future taxes, levies, duties, charges, fees, deductions or withholdings of any nature now or hereafter imposed, levied, collected, withheld or - 16 - assessed by any country or any political sub-division or taxing authority thereof and "TAX" and "TAXATION" shall be construed accordingly; a TIME OF DAY shall (unless otherwise specified) be construed as a reference to London time; and "WAR RISKS" (in relation to the Insurances for the Rig) includes the risk of mines and all risks excluded from the standard form of English marine policy by Clause 23 of the Lloyd's Institute Time Clauses (Hull) 1/10/83). 1.3 CONSTRUCTION OF CERTAIN REFERENCES In this Agreement, unless the context otherwise requires: (1) References to this Agreement include the Recitals, Appendices and Schedules to this Agreement and references to Clauses, Appendices and Schedules are to be construed as references to the Clauses of, and Appendices and Schedules to, this Agreement as amended from time to time; (2) References to (or to any specified provisions of) any Financing Document or any other document shall be construed as references to such Financing Document, that provision or that document as amended or novated or supplemented (as the case may be) from time to time; and (3) References to the singular shall include the plural and vice versa; 1.4 HEADINGS Clause headings are inserted for convenience of reference only and shall be ignored in the interpretation of this Agreement. 2. THE FACILITY 2.1 AMOUNT AND CURRENCY The Lenders upon and subject to the terms of this Agreement and in reliance on the representations and warranties by the Borrower herein contained hereby agrees to make available to the Borrower the following facilities: (a) the Tranche A Facility, being a facility in an amount (and including all interest on A Advances capitalised in accordance with this Agreement to the Notional Interim A Facility Date) not exceeding US$53,000,000; (b) the Tranche B Facility, being a facility in an amount (including all interest on B Advances capitalised in accordance with this Agreement) not exceeding US$74,000,000; and (c) the Tranche C Facility, being a facility in an amount (including all interest on C Advances capitalised in accordance with this Agreement) not exceeding US$53,000,000. - 17 - 2.2 PURPOSE The Facilities are made available for, and shall be applied by the Borrower exclusively to: (i) the payment by the Borrower to the Builder of amounts falling due to the Builder in respect of the Contract Price in accordance with the Rig Construction Contract or in reimbursement to the Borrower of the instalments of the Contract Price paid by the Borrower prior to the Drawdown Date of the Advance in question; (ii) as to an amount not exceeding US$10,000,000, in making the Inter-company Loan to the Sister Company; (iii) if the Yard Delivery Date is postponed beyond the Original Scheduled Yard Delivery Date, towards Pre-delivery Opex not exceeding US$20,000 per day; (iv) as to an amount not exceeding US$11,800,000, towards Construction and Mobilisation Costs; (v) Post-delivery Opex; (vi) in the case of Advances deemed to have been made under Clause 4.4, in capitalising interest in accordance with such Clause; and (vii) the payment of interest accrued on Tranche A Advances during the period from the Bridging Loan Repayment Date to the Charterparty Commencement Date. 2.3 OBLIGATIONS OF THE LENDERS Each Lender will participate through its Lending Office: (i) in each Tranche A Advance in the proportion borne by its Tranche A Commitment to the Total Tranche A Commitments on the Drawdown Date of such Tranche A Advance; (ii) in each Tranche B Advance in the proportion borne by its Tranche B Commitment to the Total Tranche B Commitments on the Drawdown Date of such Tranche B Advance; and (iii) in each Tranche C Advance in the proportion borne by its Tranche C Commitment to the Total Tranche C Commitments on the Drawdown Date of such Tranche C Advance. The obligations of each Lender hereunder are several and the failure of any Lender to carry out its obligations hereunder shall not relieve any other Lender, the Agents or the Borrower from any of its or their respective obligations to the parties hereto other than to such Lender which has so failed, and neither shall either of the Agents nor any Lender be responsible for the obligations of any Lender or (as the case may be) any other Lender hereunder. 2.4 INTERESTS OF LENDERS - 18 - Notwithstanding any other term of this Agreement, the interests of the Lenders are several and the aggregate of the amounts outstanding at any time hereunder from the Borrower to any Lender or to the Facility Agent or the Security Agent for its own account is a separate and independent debt. Save as otherwise expressly provided herein or in any other Security Document each of the Agents and every Lender shall each have the right to protect and enforce its rights arising under this Agreement and it shall not be necessary for any Lender or (as the case may be) either of the Agents to be joined as an additional party in any proceedings for this purpose but this is without prejudice to Clause 10.4. 2.5 UNCONDITIONAL OBLIGATIONS The Borrower enters into this Agreement as principal, and the obligations of the Borrower to make payment hereunder and to observe and perform all of its other obligations under this Agreement are absolute, unconditional and irrevocable obligations of the Borrower and are not and shall not be deemed to be in any way conditional or dependent upon the performance of the Rig Construction Contract by the Builder or the performance by Petrobras of its obligations under the Charterparty and/or the Services Rendering Contract, the continued hiring of the Rig under the Charterparty, the availability of funds in the Management Account and/or the Reserve Account or the performance by any other party other than the Lenders of its obligations to the Borrower or the successful delivery or operation of the Rig or any other matter or event of any nature whatsoever save as expressly provided in this Agreement. 3. CONDITIONS PRECEDENT 3.1 INITIAL CONDITIONS None of the Facilities shall be available for drawing until the satisfaction, in a manner in all respects satisfactory to the Facility Agent, of the following conditions and until delivery to the Facility Agent of the following documents, all in form and substance satisfactory to the Facility Agent: (i) a certified copy of each of the Project Documents, certified in each case by the parties thereto; (ii) a certificate signed by the Borrower certifying that each Project Document to which it is a party is in full force and effect and that all conditions precedent to the parties' respective obligations thereunder have been satisfied (or identifying those conditions which have not yet been satisfied) and that all necessary authorisations of governmental and other authorities to which the parties to such documents are subject have been obtained to such documents and the performance by the parties thereto of their respective obligations thereunder other than registration with the Brazilian Central Bank; (iii) the Security Documents other than the Mortgage and the Deed of Covenants duly executed by the parties thereto; (iv) the documents specified in Clause 7.1 (except those specified in Clause 7.1(iii)); - 19 - (v) certified copies of the Articles of Incorporation and By-Laws of each of the Security Parties and the certificate of good standing and certificate of incumbency of each of the Security Parties; (vi) a duly certified copy of the resolutions of the Board of Directors, or such other documents evidencing the completion of corporate authorisation procedures (to the satisfaction of the Facility Agent) of each of the Security Parties authorising the execution, delivery and performance of each of the Financing Documents to which it is a party and, as the case may be, including the incurring of debt obligations hereunder and thereunder, upon the terms hereof and thereof and authorising the person(s) who signed, or will sign, this Agreement, the Security Documents and all other agreements and documents executed or to be executed pursuant hereto and thereto on behalf of the relevant Security Party to do so, and any power of attorney executed in connection therewith; (vii) specimen signature(s) of the person(s) authorised to execute this Agreement, the Security Documents and all other documents to be provided hereunder or thereunder on behalf of the Security Parties; (viii)a duly certified copy of the shareholder's consent to and approval for the actions taken at the Board of Directors' meeting of the Borrower and the Sister Company to give guarantees in respect of, and to charge their assets as security for, each other's liabilities to the Secured Parties under the Financing Documents and the Sister Company Financing Documents; (ix) certified copies of all governmental approvals, authorisations, consents, registrations and confirmations, if any, with respect to this Agreement and the Security Documents shall have been received by the Facility Agent other than registration with the Brazilian Central Bank; (x) a written confirmation from each of the agents for service of process appointed by the Borrower pursuant to this Agreement and the Security Documents irrevocably accepting such appointment shall have been received by the Lender; (xi) a legal opinion from the English legal advisers to the Agents and the Initial Lenders in a form acceptable to the Facility Agent; (xii) a legal opinion from Higgs & Johnson, Bahamian counsel to the Agents and the Initial Lenders, in a form acceptable to the Facility Agent; (xiii)a legal opinion from Tozzini Freise Teixeira e Silva, Brazilian counsel to the Agents and the Initial Lenders, in a form acceptable to the Facility Agent; (xiv) a legal opinion from Dancia Penn & Co, British Virgin Islands counsel to the Agents and the Initial Lenders, in a form acceptable to the Facility Agent; (xv) a legal opinion from Kim & Chang, Korean counsel to the Agents and the Initial Lenders, in a form acceptable to the Facility Agent; - 20 - (xvi) legal opinions from Baker & Botts LLP and from [name of Louisiana Counsel], US counsel to the Agents and the Initial Lenders, in a form acceptable to the Facility Agent; (xvii) a legal opinion from Zevan & Associates, Netherlands Antilles Counsel to the Agents and the Initial Lenders, in a form acceptable to the Facility Agent; (xviii) a legal opinion from Nauta Dutilh, Netherlands Counsel to the Agents and the Initial Lenders, in a form acceptable to the Facility Agent; (xix) a legal opinion from Kleinberg Kaplan Wolff and Cohen, New York Counsel to the Agents and the Initial Lenders, in a form acceptable to the Facility Agent; (xx) a legal opinion from Maples and Calder, Cayman Islands, Counsel to the Agents and the Initial Lenders, in a form acceptable to the Facility Agent; (xxi) the Bridging Loan Agreement having been duly executed in the approved form and having become unconditional in accordance with its terms; (xxii) the Additional Funding and Guarantee Agreement in the approved form having been duly executed by the parties thereto and having become unconditional in accordance with its terms; (xxiii) a letter from Petrobras in the approved form regarding the delivery and acceptance of the Rig under the Charterparty; (xxiv) the completion of all filings, registration or recordings of all of the Security Documents required by the laws of any applicable jurisdiction; and (xxv) evidence satisfactory to the Facility Agent that the Rig Construction Contract, the Charterparty and the Services Rendering Contract are in full force and effect. 3.2 PRE-DELIVERY ADVANCES The making of each Pre-delivery Advance and of each Post Yard Delivery Advance shall be subject to the delivery to the Facility Agent (if the Lender so requests) of such evidence as the Facility Agent may reasonably require that the instalment of the Contract Price to which such Advance is to be applied has been paid or (as the case may be) become due and payable under the Rig Construction Contract or (in the case of an Advance requested in respect of Pre-delivery Opex or Construction and Mobilisation Costs) that the relevant expenditure has been paid or (as the case may be) become due and payable within the requirements of Clause 2.2(iii) or (as the case may be) 2.2(iv). 3.3 YARD DELIVERY ADVANCE AND POST YARD DELIVERY ADVANCES The making of the Yard Delivery Advance and of each Post Yard Delivery Advance shall be conditional upon and (in the case of the Yard Delivery Advance) be made simultaneously with: (i) the Rig having been duly delivered by the Builder to and accepted by the Borrower in accordance with the Rig Construction Contract, and the protocol of - 21 - delivery and acceptance and other delivery documents required by the Rig Construction Contract having been duly executed and delivered in accordance with the terms thereof; (ii) the Rig having been duly registered in the Registry of Bahamian Ships and the Borrower having been registered as the owner of 64/64th shares in the Rig (free of all encumbrances other than the Rig Mortgage and the Mortgage Debenture), and a provisional certificate of registration having been issued by such Registry; (iii) the Rig Mortgage, together with the Deed of Covenants collateral thereto, having been duly executed by the Borrower, received by the Security Agent and registered in the Registry of Bahamian Ships; (iv) the Rig having been insured and entered in the P & I Club (including the Mortgagee's Interest Insurance with Additional Perils (Pollution) Insurance) in accordance with the provisions of the Mortgage and the Deed of Covenants and all requirements therein and in this Agreement and the other Financing Documents in respect of insurance having been complied with; (v) the Insurances Assignment having been duly executed by the parties thereto and consented to, or notified to and acknowledged by, the relevant parties, and copies of all Insurances taken out pursuant to the Mortgage, the Deed of Covenants and this Agreement and the other Financing Documents and an entry certificate in the P & I Club and the original of the letter of undertaking to be issued by the P & I Club having been received by the Security Agent, each in form and substance satisfactory to the Facility Agent; (vi) certified copies of all Korean and Bahamian governmental approvals, authorisations, consents, registrations and confirmations with respect to the delivery and export of the Rig to the Borrower pursuant to the Rig Construction Contract and with respect to registration (whether provisional or permanent) of title to the Rig in the name of the Borrower under the Bahamian flag having been received by the Facility Agent; (vii) a certified copy of the Classification Certificate stating that the Rig has been built according to the class requirements (without recommendations) having been received by the Facility Agent; and (viii)all such other agreements, documents certificates or opinions as the Facility Agent may reasonably request having been received by the Facility Agent. 3.4 TRANCHE B ADVANCES Prior to the Tranche C Availability Commencement Date no Tranche B Advance may be drawn under the Tranche B Facility unless and until the Tranche A Facility (including Advances deemed to have been made in accordance with Clause 4.4) has been drawn to the fullest extent possible without breaching the condition imposed by Clause 3.6(ix). 3.5 TRANCHE C ADVANCES - 22 - The Tranche C Facility shall be made available to the extent that and in the amount that the Bridging Loan has been repaid by MC2 pursuant to the Bridging Loan Agreement and Tranche C Advances from time to time may be drawn PRO TANTO in an aggregate amount not exceeding the amount so repaid. 3.6 ALL ADVANCES The obligations of the Lenders to make any Advance under any of the Facilities shall be subject to the further conditions that as at the Drawdown Date of each such Advance: (i) no Event of Default or Potential Event of Default shall have occurred and be continuing; (ii) each of the Project Documents shall then continue to be in full force and effect and no event of default (howsoever described) and no event or circumstance which with the giving of notice or lapse of time may become such an event has occurred under any Project Document; (iii) the proceeds of the Advance shall, on the Drawdown Date of the Advance, be due from the Borrower to the Builder under the Rig Construction Contract or, as the case may be, the Borrower has provided the Facility Agent with such evidence as the Facility Agent may require that such proceeds will be applied for the purposes specified in Clause 2.2; (iv) the Lender shall have been provided with such further documentation or information in support of the Drawing Request in respect of such Advance as the Facility Agent may reasonably determine to be necessary; (v) the representations and warranties made or deemed made in Clause 8 shall be true in all material respects on and as of the Drawdown Date of such Advance with the same effect as though such representations and warranties had been made on and as of such Drawdown Date; (vi) the making of such Advance not causing the amount outstanding in respect of the Facility under which it is drawn to exceed the Available Facility Amount of such Facility on the Drawdown Date of such Advance; (vii) the making of such Advance not causing the Loan to exceed the Total Facilities Amount; (viii)the making of such Advance under any Facility not causing the Prospective Final Grossed-up Advances Amount of such Facility to exceed the Facility Amount of such Facility; and (ix) in the case of a Tranche A Advance, the making of such Advance not causing the Prospective Interim Grossed-up A Advances Amount of the Tranche A Facility to exceed US$53,000,000. 3.7 NO WAIVER OF CONDITIONS - 23 - The conditions specified in Clause 3 are for the exclusive benefit of the Agents and Lenders and if the Facility Agent in its discretion allows the Borrower to draw any Advance under any Facility notwithstanding that some or all of the conditions specified in Clause 3 have not been satisfied the Agents and the Lenders shall not thereby be deemed to have waived any such condition, and the Borrower covenants with the Agents and the Lenders to satisfy such conditions upon request from the Lenders forthwith or within such time limit as the Facility Agent may agree. 4. DISBURSEMENT OF ADVANCES 4.1 GENERAL Subject to the terms of this Agreement (including, but not limited to, the conditions set forth in Clause 3): (i) subject to sub-paragraph (ii) of this Clause 4.1, Advances under the Tranche A Facility, the Tranche B Facility and the Tranche C Facility may be drawn by the Borrower in a maximum principal amount up to but not exceeding the Available Facility Amount of the relevant Facility on the Drawdown Date of the relevant Advance when requested by the Borrower from time to time during the Availability Period; and (ii) with effect from the Tranche C Availability Commencement Date Advances shall be made under each of the Facilities in the proportions PRO RATA which the Available Facility Amount of each such Facility bears to the Total Available Facility Amounts of all the Facilities on the Drawdown Date of such Advances. 4.2 PROCEDURE When the Borrower wishes to draw any Advance under any of the Facilities, it shall deliver to the Facility Agent a Drawing Request substantially in the form of Schedule 4 appropriately completed, to be received by the Lender not later than 11:00am (London time), seven (7) Banking Days prior to the date of drawing of the Advance, specifying in respect of the proposed Drawing: (a) the date of the Drawing (which must be a Banking Day during the Availability Period); (b) the principal amount of the Advance in US Dollars; and (c) the Facility under which the Drawing is requested. The Borrower may deliver a Drawing Request setting out a schedule of requested Pre-delivery Advances subject to the satisfaction of the conditions specified in this Agreement on the Drawdown Date of such Advances and, in particular, Clause 3.2. Subject to the terms of this Agreement, such Drawing Request shall be irrevocable and the Borrower shall be bound to borrow in accordance with such Drawing Request. The Facility Agent shall promptly notify each Lender of such Drawing Request. The Borrower may not deliver a Drawing Request hereunder until after satisfaction of the other conditions precedent (including those applicable to the relevant Facility) set out in Clause 3. - 24 - 4.3 TRANSFER OF FUNDS Subject as otherwise provided herein each Lender shall on the relevant Drawdown Date make available to the Facility Agent in US Dollars in the manner and to the account provided for in Clause 9.2 the amount of its participation in the relevant Advance in the proportion which its Commitment in respect of the Facility under which such Advance is drawn bears to the Total Commitments in respect of such Facility. The Borrower irrevocably and unconditionally instructs and authorises the Facility Agent to make each Advance upon and subject to the terms hereof: (i) in the case of an Advance made or to be made for the purpose specified in Clause 2.2(i) by paying the proceeds thereof (or such proportion thereof as is not in reimbursement of amounts already paid by the Borrower) by disbursement to the Builder; (ii) in the case of an Advance made or to be made for the purpose specified in Clause 2.2(ii) by disbursement to the Sister Company in accordance with the Inter-Company Loan Agreement; (iii) in the case of an Advance made or to be made for the purposes specified in Clause 2.2(iii), 2.2(iv), 2.2(v), 2.2(vi) or 2.2(vii) by disbursement to the Borrower of amounts paid or payable by the Borrower in respect of the matters specified in such sub-clauses and upon such disbursement of any amount the Lenders shall be deemed in proportion to the respective amounts made available by them to the Facility Agent to have made to the Borrower an Advance in US Dollars in the amount of the amount so disbursed which shall satisfy PRO TANTO the obligations of such Lenders to lend such amount to the Borrower hereunder and shall reduce accordingly the amount of the Commitments and of such Facility available for drawing. 4.4 CAPITALISATION OF INTEREST Subject as provided in Clause 5.2(ii) on each Interest Capitalisation Date the Borrower shall be deemed to have served a Drawing Request requesting an Advance (an "INTEREST CAPITALISATION ADVANCE") in respect of each Advance outstanding on such Interest Capitalisation Date in the amount of interest to be capitalised on such outstanding Advance on such Interest Capitalisation Date in accordance with Clause 5.2. Each Interest Capitalisation Advance shall be deemed to have been requested from those Lenders who have participated in the Advances (or to whom participations in such Advances have been transferred in accordance with the Transfer Certificates pursuant to which they become Lenders hereunder) to which it relates (and shall be deemed to be drawn under the Facility or Facilities under which such Advances were drawn) and (subject to Clause 4.5) such Lenders shall be deemed to have made to the Borrower an Interest Capitalisation Advance in US Dollars in the amount of such interest which shall (i) increase the amount of the Loan by such amount; (ii) satisfy PRO TANTO the obligations of such Lenders PRO RATA in proportion to their respective participations in such Advance to lend such amount to the Borrower hereunder; and (iii) reduce accordingly the amount of their Commitments and of such Facility available for drawing. The Facility Agent - 25 - shall calculate, and notify the relevant Lenders and the Borrower of the amount of each Interest Capitalisation Advance and of such Lenders' respective participations therein. 4.5 FACILITY LIMIT Interest on the Advances will not be capitalised if this would cause the amount of the Loan to exceed the Total Facilities Amount. Accordingly, if on any Interest Capitalisation Date as a result of the application of Clause 4.4 and of Clause 5.2 the aggregate amount of all Advances exceeds (or, if an Interest Capitalisation Advance were made or deemed to be made pursuant to Clause 4.4 the aggregate of all Advances would exceed) the Total Facilities Amount the Borrower shall pay to the Facility Agent for the account of the Lenders by way of a payment of interest the amount of interest which would otherwise have been capitalised by means of such Interest Capitalisation Advance. 4.6 CANCELLATION Any portion of the Total Commitments in respect of any Facility not advanced hereunder on or prior to the last day of the Availability Period shall be reduced automatically to nil immediately thereafter and shall not thereafter be available for drawing. 4.7 FAILURE TO DRAW If for any reason (other than a default by a Lender or a Lender's bank) the Advance is not made hereunder after a Drawing Request therefor has been given pursuant to Clause 4.2, the Borrower will pay to the Facility Agent for the account of the relevant Lenders such amount as the Facility Agent may certify in reasonable detail (such certification to be conclusive in the absence of manifest error) as necessary to compensate it for any resulting loss or expense on account of funds acquired, contracted for or utilised in order to fund the Advance. 5. INTEREST 5.1 RATE Interest shall accrue on the Loan from the respective Drawdown Dates of each Advance comprising the Loan until actual repayment (i) in respect of the period prior to the Yard Delivery Date at the rate of 12.5% per annum and (ii) thereafter, at the rate of 11% per annum. 5.2 CAPITALISATION AND PAYMENT OF INTEREST (i) Subject to paragraph (i) below interest accruing prior to the Charterparty Commencement Date shall be capitalised in accordance with this Clause and the other provisions of this Agreement. On each Interest Capitalisation Date interest which has accrued on the Loan shall be capitalised and added to the amount of the Loan in accordance with Clause 4.4 so that the principal amount of the Loan shall thereafter be deemed for all purposes (including, but not limited to, the calculation of interest) to comprise and to include the principal amount advanced hereunder and the amount of such capitalised interest deemed to have been advanced. - 26 - (ii) Interest accruing on all Tranche A Advances during the period from the Bridging Loan Repayment Date until the Charterparty Commencement Date shall not be capitalised but shall be paid in arrears on each Interest Capitalisation Date. 5.3 DEFAULT RATE Without affecting any other remedy of the Lenders or the Agents hereunder, the Borrower will pay interest on the Loan or any part thereof or interest thereon or other sum due under this Agreement or any of the Security Documents which is not paid on the due date for payment thereof for each day during the period of such default at such annual rate as is conclusively certified by the Facility Agent to the Borrower to be equal to the aggregate of (1) two per cent (2%) per annum and (2) the higher of (a) the rate quoted by the Facility Agent as the arithmetic mean quoted by the Lenders (or, in the absence of such quotation from any Lender determined by the Facility Agent) (weighted by reference to the participations of the Lenders in the overdue payment in question) as being the rates at which each such Lender was (or would have been), at or about 11.00am (London time) on the date of acquisition of the relevant deposits, able in accordance with its usual practices to fund in US Dollars from its principal bankers on an overnight or call basis or for such period or periods as such Lender may determine and in amounts equivalent to, or comparable with, the amount of the Loan or relevant part thereof or interest thereon or other sum due in respect thereof as aforesaid in respect of which default has been made and (b) 11%. Interest payable by the Borrower as aforesaid shall be payable on demand by the Facility Agent and shall be compounded at such intervals as the Facility Agent may determine. 5.4 DAY COUNT FRACTION All interest is respect of Advances and the Loan shall accrue from day to day (after as well as before judgment) on the basis of a year of 360 days and for the actual number of days elapsed. 6. REPAYMENT AND PREPAYMENT 6.1 CONSOLIDATION OF ADVANCES In addition and without prejudice to any other provision of this Agreement, with effect from the Charterparty Commencement Date all Advances drawn under the Facilities and then comprising the Loan shall be consolidated and treated as a single amount for all purposes of this Agreement. 6.2 REPAYMENT INSTALMENTS The Borrower shall repay an amount equal to 85% of the Loan outstanding on the Charterparty Commencement Date after the capitalisation of interest on such date in accordance with Clause 5.2 together with the interest accruing on the Loan during the period of such repayments by means of eighty-four (84) equal payments, one such payment being payable on each Repayment Date in the amount of the Repayment Instalment (comprising a proportion of the principal of the Loan repayable on each such date and the interest element payable on each such date) specified in respect of such Repayment Date in the Repayment Schedule delivered by the Facility Agent pursuant to Clause 6.4. The Repayment Dates shall be the fifth day of the second month next - 27 - following the month during which the Charterparty Commencement Date occurs and the 83 dates falling at consecutive monthly intervals thereafter. 6.3 BALLOON PAYMENT The remaining 15% of the Loan outstanding on the Charterparty Commencement Date as aforesaid shall be repaid by a single payment on the Final Repayment Date. 6.4 REPAYMENT SCHEDULE The Facility Agent shall prepare, within fourteen (14) Banking Days after the Charterparty Commencement Date, a repayment schedule in the form of the Repayment Schedule set out in Schedule 2 setting forth the specific Repayment Dates and the specific amounts of each Repayment Instalment, comprising a proportion of the principal of the Loan repayable on each such date and the interest element payable on each such date, which shall form an integral part hereof upon notification thereof to the Borrower. 6.5 REBORROWING No amount repaid may be reborrowed by the Borrower. 6.6 PREPAYMENT The Borrower may upon giving the Facility Agent not less than 90 days' prior written notice prepay the whole or part of the Loan subject to and in accordance with Clauses 6.8 and 18. Save as expressly permitted or required under the terms of this Agreement the Borrower may not prepay any part of the Loan. 6.7 TOTAL LOSS OF THE RIG In the event that the Rig becomes a Total Loss at any time, the whole of the insurance proceeds or other compensation payable in respect of such Total Loss will be paid to the Security Agent (as assignee(s) and chargee thereof under the Rig Construction Contract and Refund Guarantee Assignment, the Rig Mortgage and associated Deed of Covenants, the Mortgage Debenture and the Insurances Assignment). In the event that any of the said insurance proceeds or other compensation are received in any currency other than US Dollars, the Facility Agent on behalf of the Lenders will be entitled (and is hereby authorised) at the cost of the Borrower to convert the same into US Dollars at the Facility Agent's principal banker's spot rate of exchange applicable at the relevant time. The whole amount of such insurance proceeds or other compensation (converted into US Dollars, if appropriate) will be applied by the Facility Agent in or towards prepayment of the Loan subject to and in accordance with Clauses 6.8 and 18 and any excess shall be paid to the Borrower. If the amount thereof is less than the Outstanding Indebtedness the Borrower shall on demand pay to the Facility Agent for the account of the Lenders the amount of such shortfall. 6.8 CONDITIONS APPLICABLE Prepayment of the Loan made under Clauses 6.6 or 6.7 will be made together with accrued interest to the date of prepayment together with all other amounts which may be payable under this Agreement and the other Security Documents. On any such - 28 - prepayment the Borrower will additionally pay such further amount as will indemnify the Agents and the Lenders against all funding or other fees, costs, charges, losses, demands and expenses sustained or incurred as a consequence of such prepayment, including (but not limited to) any such sustained or incurred in liquidating deposits taken to fund the amount so prepaid or sustained or incurred in connection with the cancellation, reduction or re-arrangement of any interest rate swap, hedge transaction or other funding or financing agreement or arrangement which the Agents and/or any of the Lenders may have arranged or entered into for the purpose of funding the amount so prepaid (and the Borrower hereby acknowledges that the Agents and the Lenders may effect such arrangements as the Agents and/or any of the Lenders may in their discretion consider appropriate), and the certificate of the relevant Agent or Lender as to the amount of such fees, costs, charges, losses, demands, expenses and shall in the absence of manifest error be final and conclusive and binding on the Borrower. 6.9 APPLICATION OF PREPAYMENTS Any prepayment made pursuant to Clauses 6.5, 6.6, 14.3 or any other provision of this Agreement shall (subject always to any appropriation by the Facility Agent under Clause 9.5) be applied in reduction of the Repayment Instalments (including the Balloon) PRO RATA. 7. SECURITY 7.1 LOAN SECURITY DOCUMENTS By way of continuing security for the due and punctual performance by the Borrower of all of its obligations under the Financing Documents, the Borrower shall execute and deliver (or procure the execution and delivery) to the Security Agent of the following (all at the times and in all other respects in accordance with the terms of this Agreement and the Security Documents): (i) an assignment, in the approved form of the benefit of and the Borrower's right and interest in the Rig Construction Contract, the Refund Guarantee, and the Sub-contractors' Guarantees, together with the notices to the Builder and to the issuer(s) of the Refund Guarantee and the acknowledgements and consents specified in such assignment duly executed by the parties thereto; (ii) an assignment, in the approved form of the Inter-company Loan together with the notices to the Sister Company and the acknowledgements and consents specified in such assignment duly executed by the parties thereto; (iii) a first preferred mortgage over the Rig and Deed of Covenants collateral thereto, each being in the approved form; (iv) an assignment, in the approved form of the benefit of and the title and interest of the Borrower in the Charterparty, Earnings and Requisition Compensation, together with the notices to Petrobras and the acknowledgements and consents specified in such assignment duly executed by the parties thereto; - 29 - (v) an assignment, in the approved form of the Services Rendering Contract, together with the notices to Petrobras and the acknowledgements and consents specified in such assignment duly executed by the parties thereto; (vi) an assignment, in the approved form of the Insurances together with the notices, acknowledgement, consents and letters of undertaking in relation to the Insurances and other related documents as may be specified in such assignment and/or as may otherwise be required by this Agreement or any of the other Security Documents; (vii) a charge in the approved form over the Management Account, together with the notices to the Management Account Bank and the acknowledgements and consents and undertakings specified in such agreement duly executed by the parties thereto; (viii)a charge in the approved form over the Reserve Account, together with the notices to the Reserve Account Bank and the acknowledgements and consents and undertakings specified in such agreement duly executed by the parties thereto; (ix) an assignment, in the approved form, of all of the Services Contracts, together with the notices to the Services Providers and the acknowledgements and consents specified in such assignments duly executed by the parties thereto; (x) a mortgage debenture in the approved form creating fixed and floating charges over the business, undertaking and assets of the Borrower; (xi) a charge, in the approved form creating a charge over the Shareholder's shares in the Borrower; (xii) a guarantee, in the approved form by the Borrower, the Sister Company and the Shareholder guaranteeing and securing the obligations of each of the Borrower and the Sister Company to the Agents and the Lenders in accordance with its terms; (xiii)a deed of guarantee and undertaking, in the approved form, between the Borrower, the Guarantors, the Lenders, the Facility Agent and the Security Agent; (xiv) a subordinated loan facility agreement, in the approved form, between the Borrower, the Guarantors, the Facility Agent and the Security Agent; (xv) an assignment of deed of guarantee and undertaking and subordinated loan facility agreement, in the approved form, between the Borrower and the Security Agent; and (xvi) the Sister Company Financing Documents duly executed by all the parties thereto. - 30 - 7.2 GUARANTEES AND UNDERTAKINGS By way of continuing security for the due and punctual performance by the Borrower of its obligations under the Financing Documents and/or any other agreements to which the relevant Guarantee relates, the Borrower will procure the execution by the Guarantors and the delivery to the Security Agent and, in the case of sub-clause 7.2(i) the Initial Lenders of the following guarantees and undertakings: (i) A guarantee, in the approved form whereby the Guarantors guarantee in their several proportions to the Initial Lenders in accordance with the terms therein contained the repayment of the Loan and the Sister Company Loan by the Borrower and the Sister Company respectively in accordance with this Agreement and the Sister Company Loan Agreement up to an amount not exceeding US$108,000,000; (ii) a deed of guarantee and undertaking, in the approved form whereby the Guarantors severally or jointly and severally (in accordance with its terms) give certain guarantees and undertakings. 7.3 SISTER RIG COLLATERAL The security created by the Borrower under or pursuant to the Financing Documents shall also constitute security to the Lender for the obligations of the Sister Company under the Sister Company Financing Documents, and the security created by the Sister Company under the Sister Company Financing Documents shall also constitute security for the Borrower's obligations under the Financing Documents, all in accordance with their respective terms. 7.4 SECURITY AGENT AS TRUSTEE The Secured Obligations shall be secured by the interests and rights granted in favour of the Security Agent as trustee for the Agents and the Lenders under the Security Documents and such interests and rights shall be held by the Security Agent upon trust for the benefit of the Secured Parties without any preference or priority amongst them as security for the Secured Obligations in accordance with the Security Trust Deed. 8. REPRESENTATIONS 8.1 REPRESENTATIONS The Borrower hereby represents and warrants to the Facility Agent and each of the Lenders, that:- (i) each of the Borrower and the Sister Company is duly formed and is validly existing under the laws of the British Virgin Islands, has full power to carry on its business as it is now being conducted and has complied with all statutory and other requirements relative to such business; (ii) the Borrower and each of the other Security Parties and the Project Parties has full power to execute, deliver and perform its obligations under each of the Financing Documents and the Project Documents to which it is or is to be a party - 31 - and (in the case of the Borrower) to borrow hereunder and to repay and service such borrowings in the manner herein provided; all necessary corporate, shareholder and other action has been taken by the Borrower and all other Security Parties and the Project Parties to approve and authorise the execution, delivery and performance of each of the Financing Documents and the Project Documents to which it is or is to be a party; (iii) save for registration of the Charterparty with the Brazilian Central Bank all necessary governmental or other official consents, authorisations and licences for the Borrower and all other Security Parties and the Project Parties to execute, deliver and perform their obligations under each of the Financing Documents and the Project Documents to which it is or is to be a party have been obtained and, as of the date of this Agreement, no further such consents, authorisations or licences are necessary for the performance by the Borrower and the other Security Parties and the Project Parties of their respective obligations under each of the Financing Documents and the Project Documents to which it is or is to be a party; (iv) the Financing Documents and the Project Documents constitute, or will upon due execution as provided herein and therein constitute, the legal, valid and binding obligations of the Borrower and the other Security Parties and the Project Parties as are or are to be parties thereto enforceable in accordance with their respective terms subject to equitable principles and creditors' rights generally; (v) the execution and delivery of, and the performance of the provisions of, the Financing Documents by each of the Borrower and the other Security Parties and of the Project Documents by the other Project Parties do not, and will not during the Security Period, contravene (a) any applicable law or regulation existing at the date hereof or (b) any contractual restriction binding on any of the Borrower and the other Security Parties or any of the Project Parties or (c) any of the constitutional documents of any of the Borrower or the other Security Parties or any of the Project Parties; (vi) no action, suit or proceeding is pending or threatened against any of the Borrower and/or the other Security Parties before any court, board of arbitration or administrative agency which could or might result in any material adverse change in the business or condition (financial or otherwise) of any of the Borrower and/or the other Security Parties; (vii) none of the Borrower or the other Security Parties is in default under any agreement by which it is bound, nor is it in default in respect of any financial commitment or obligation (including obligations under guarantees) which could or might result in any material adverse change in the business or condition (financial or otherwise) of any of the Borrower and/or the other Security Parties; (viii)the financial and other information relative to the Borrower and the other Security Parties and the Project Parties and the Project Documents furnished to the Agents and/or any of the Lenders in connection with the negotiation of this Agreement is, to the best knowledge and belief of the Borrower, true, accurate and complete and neither contains any mis-statement of fact nor omits any material fact or any fact necessary to make any such information not misleading. There has been no - 32 - material adverse change in the position of such person(s) from that set forth in the relevant aforesaid information; (ix) details of the holders of shares in the Shareholders, the Borrower, the Guarantors and the Sister Company and their respective shareholdings are as set out in Schedule 5 and will so remain throughout the Security Period; (x) the Borrower has no Subsidiaries as at the date hereof; (xi) no Event of Default, nor any Potential Event of Default has occurred and is continuing; (xii) the Rig will upon the Drawdown Date of the Yard Delivery Advance be:- (a) in the absolute and (save for the Rig Mortgage thereon and the other Security Documents) unencumbered ownership of the Borrower; (b) registered in the name of the Borrower under the flag of the Commonwealth of the Bahamas and at the Port of Nassau; (c) properly classed with Lloyds Register of Shipping with the following notation: "Unrestricted Service O.U. + 100A1, + LMC, UMS, DP(AA), PC, DRILL, OIWS with the descriptive notation semi-submersible, self-propelled drilling vessel"; and (d) insured in accordance with the relevant provisions of the Deed of Covenants and this Agreement; (xiii)all applicable Environmental Laws and Environmental Approvals relating to the Rig and its operation and management and the business of the Borrower (as now conducted and as reasonably anticipated to be conducted in the future) have been complied with except to the extent that such failure to so comply would not reasonably be expected to have a material adverse effect; (xiv) no Environmental Claim has been made or threatened against the Borrower or otherwise in connection with the Rig which would be expected to have a material adverse effect; (xv) no Environmental Incident has occurred which would be expected to have a material adverse effect; (xvi) the choice by the Security Parties and the Project Parties of a particular governing law to govern this Agreement and any other Financing Document and the Project Document containing such provisions and the submission by such parties to the jurisdiction of the courts of a particular country in this Agreement and any other Financing Document and the Project Documents containing such provisions are valid and binding; (xvii)the execution and performance by Security Parties and the Project Parties of this Agreement the other Financing Documents and the Project Documents are private commercial acts and neither the Borrower nor any other Security Party or any - 33 - Project Party is entitled to claim any immunity in relation to itself or its assets under any law or in any jurisdiction in connection with any legal proceedings, set-off or counterclaim relating to this Agreement or any other Financing Document or any Project Document, or in connection with the enforcement of any judgment, award, ruling or order arising from such proceedings; (xviii) no Taxes are imposed by withholding or otherwise on any payment to be made by the Borrower or the other Security Parties under this Agreement or any of the other Financing Documents or are imposed on or by virtue of the execution or delivery by the Borrower or the other Security Parties of this Agreement or any of the other Financing Documents or any document or instrument to be executed or delivered under this Agreement or any of the other Financing Documents; (xix) it is not necessary to ensure the legality, validity, enforceability or admissibility in evidence of this Agreement or any other Financing Documents that it or any other instrument be filed, recorded, registered or enrolled in any court, public office or elsewhere in Brazil or that any stamp, registration or similar tax be paid in Brazil on or in relation to this Agreement or any other Financing Documents, which are in proper form for their respective enforcement in the courts of Brazil and the other jurisdictions to which the same are expressed to be subject other than the recording of the relevant Financing Documents and the payment of recording fees; (xx) save as disclosed in writing to the Facility Agent by a letter dated of even date with this Agreement, the Borrower is not party to any agreements, arrangements or contracts (written or oral) other than the Project Agreements, the Security Documents and the Inter Company Loan Agreement; (xxi) the legal opinions furnished pursuant to Clause 3.1(xii) to (xx) are true and correct in all respects; (xxii)save for different charter rates set out in a letter delivered by the Borrower to the Facility Agent and having even date with this Agreement, the Charterparty and the Services Rendering Contracts are in identical terms to the charterparties and services rendering contracts executed between Maritima and Petrobras in respect of the Related Rigs; and (xxiii) Maritima is the same legal entity as the company previously called Maritima Navegacao Engenharia Ltda. 8.2 LENDERS' AND AGENTS' RELIANCE The Borrower acknowledges that it has made the representations and warranties referred to in Clause 8.1 with the intention of persuading the Agents and the Lenders to enter into this Agreement and that the Agents and the Lenders have entered into this Agreement on the basis of, and in full reliance on, each of such representations and warranties. The Borrower warrants to the Agents and the Lenders that each of such representations and warranties is true and correct in all material respects as of the date of this Agreement and that none of them omits any matter the omission of which makes any of such representations and warranties misleading. - 34 - 8.3 KNOWLEDGE OF LENDERS OR AGENTS The rights and remedies of the Agents and the Lenders in relation to any misrepresentations or breach of warranty on the part of the Borrower shall not be prejudiced by any investigation by or on behalf of the Agents and/or the Lenders into the affairs of the Borrower, by the execution or the performance of this Agreement or by any other act or thing which may be done by or on behalf of the Agents and/or the Lenders in connection with this Agreement and which might, apart from this Clause, prejudice such rights or remedies. 8.4 REPETITION The representations set out in Clause 8.1 and the warranty in Clause 8.2 shall survive the execution of this Agreement and the making of the Advances hereunder and shall be deemed to be repeated at the time of the giving of each Drawing Request, on the date for the borrowing of each Advance and on each Repayment Date with reference to the facts and circumstances then subsisting, as if made at each such time. 9. PAYMENTS: TAXATION 9.1 CURRENCY OF ACCOUNT The US Dollar is the currency of account and the currency of payment for each and every sum due from the Borrower hereunder, PROVIDED HOWEVER THAT any amount falling due under Clause 18 (Indemnities) or 16 (Fees and Expenses) shall be payable in the currency in which the corresponding loss, expense, deficiency, duty, tax or other payment has been incurred or suffered. 9.2 ACCOUNTS AND PROCEDURE FOR PAYMENT All payments to be made by the Borrower to the Agents for the account of the Lenders or to Lenders hereunder shall be made on and for value on the due date:- (a) if in US Dollars in freely transferable same day funds to the account of the Facility Agent with the Management Account Bank, , account number to be notified by the Facility Agent or at such other bank as the Facility Agent may designate; and (b) if in any other currency, in same day funds to such account of the Facility Agent with such bank as the Facility Agent may from time to time designate. 9.3 WITHHOLDING; GROSS-UP All payments to be made by or for the account of the Borrower hereunder or under any other Security Document shall be made without set-off or counterclaim and free and clear of and without deduction for or on account of any present or future Taxes of any nature whatsoever imposed by or in any country ("APPLICABLE TAX") unless (i) the Borrower is compelled by law to make payment to or for the account of either Agent or any Lender subject to such Applicable Tax, or (ii) the Security Agent or the Facility Agent is compelled by law to make payment for or for the account of any Lender subject to such Applicable Tax in any such case the Borrower shall promptly pay such Applicable Tax - 35 - and the amount of the relevant payment by the Borrower hereunder or (as the case may be) under the relevant other Security Document shall be increased to the extent necessary to ensure that the relevant Agent or (as the case may be) the relevant Lender actually receives an amount, free and clear of and after deduction for all such Applicable Tax, equal to the full amount which would have been received if no such withholding or deduction had been made. The Borrower shall pay and indemnify and keep indemnified the Agents and each of the Lenders against all such Applicable Tax. The Borrower shall promptly deliver to the Facility Agent copies of official Tax receipts evidencing payment of any such Applicable Tax imposed as aforesaid. The obligations of the Borrower under this Clause 9.3 shall survive the repayment of the Loan and the payment of all other sums payable hereunder and under the other Security Documents. 9.4 BANKING DAY CONVENTION Whenever any payment hereunder would otherwise become due on a day which is not a Banking Day, the due date thereof shall instead be the next succeeding Banking Day unless such Banking Day falls in the next calendar month in which case payment shall be made on the immediately preceding Banking Day. 9.5 APPROPRIATION Notwithstanding any other provision of this Agreement and/or of the Security Documents (express or implied), at any time after the occurrence and during the continuance of an Event of Default the Facility Agent shall have an absolute and unfettered right to appropriate any payments received from the Borrower and/or from any other Security Party and any monies received in respect of all or any of the other Security Documents to such of the Borrower's obligations hereunder and/or under the Security Documents and/or under the Sister Rig Financing Documents (whether to the Loan or any part thereof, or the Sister Company Loan or any part thereof interest or any other sums payable hereunder or thereunder) as the Facility Agent may determine, to the exclusion of any right on the part of the Borrower to make any appropriation in respect of such payment(s) and/or monies. 9.6 CONTROL ACCOUNT The Facility Agent will maintain a control account showing the Loan and other sums owing by the Borrower under this Agreement and the other Financing Documents and all payments in respect thereof made by the Borrower from time to time. The control account shall in the absence of manifest error be conclusive as to the amount from time to time owing by the Borrower under this Agreement and the other Financing Documents. 9.7 REIMBURSEMENT OF FACILITY AGENT (i) Unless the Facility Agent shall have been notified by a Lender not later than one Banking Day prior to the Drawdown Date of any Advance that such Lender will not make available its portion of such Advance the Facility Agent may assume that such Lender has made its portion available to the Facility Agent. If the Facility Agent makes an amount available to the Borrower which has not (but should have) been made available to the Facility Agent by a Lender, the Facility Agent shall be entitled to recover the relevant amount from such Lender on demand, or failing this, the Borrower shall on request made by the Facility Agent - 36 - to the Borrower refund such amount, together with interest thereon at the rate determined by the Facility Agent to be equal to the cost to the Facility Agent of funding such amount for the period until receipt by the Facility Agent thereof. (ii) If the Facility Agent makes an amount available to a Lender which has not (but should have) been made available to the Facility Agent by the Borrower, such Lender shall on request refund such amount to the Facility Agent together with interest thereon at the rate determined by the Facility Agent to be equal to the cost to the Facility Agent of making available such amount for the period from the date on which such amount was so made available until receipt by the Facility Agent thereof. 10. EVENTS OF DEFAULT 10.1 EVENTS Each of the following events (whether or not arising as a result of events or circumstances beyond the Borrower's control) shall constitute an Event of Default, if:- (i) any principal of or interest on the Loan or any other amount becoming payable under this Agreement and/or the Security Documents is not paid on the due date for payment thereof or (in the case only of sums expressed to be payable upon demand) within a period of five (5) Banking Days after demand is made therefor; or (ii) the Borrower shall make default under, or in the due and punctual observance and performance of, Clause 11.1(xi) and shall fail to remedy the same within one (1) Banking Day after written notice from the Facility Agent to the Borrower requiring such default to be remedied; or (iii) the Borrower or any other Security Party makes default under, or in the due and punctual observance and performance of, any other provision of this Agreement and/or the Security Documents and/or any of the Project Documents which default (in the reasonable opinion of the Facility Agent) is not capable of remedy and/or imperils the security created by the Security Documents and/or any of the Project Documents or any of them, or any such default arises which (in the reasonable opinion of the Facility Agent) is capable of remedy and does not imperil the security created by the Security Documents and/or any of the Project Documents or any of them and is not remedied within thirty (30) days after written notice from the Facility Agent to the Borrower requiring remedial action; or (iv) any indebtedness of any Security Party (being indebtedness in excess of US$500,000 (or the equivalent in any other currency) is not paid on its due date or within any period of grace specified in the contract evidencing the original terms of such indebtedness or becomes due or capable of being declared due prior to its stated date of payment; or (v) any party to a Project Document (other than the Borrower or another Security Party) defaults in the due performance or observance of any of its covenants, undertakings or obligations under such Project Document which default could be - 37 - material in the context of the transactions contemplated by the Financing Documents and (if such default is capable of remedy) the same is not remedied to the satisfaction of the Facility Agent within the period (if any) allowed for remedy thereof under the Project Documents or a period of thirty (30) days after the Facility Agent gives notice to the Borrower requiring the same to be remedied; or (vi) any representation or warranty made pursuant to Clause 8.1 or any other provision of this Agreement or made pursuant to any provision of any of the Security Documents proves to have been materially incorrect or becomes materially incorrect in any respect as of the date on which such representation or warranty is made or repeated (or deemed to be repeated); or (vii) any governmental licence, authorisation, consent or approval at any time necessary to enable the Borrower and/or any of the Security Parties and/or any of the Project Parties to comply with its or their respective obligations hereunder or under the Security Documents or under the Project Documents or any of them or to enable the operation of the Rig is revoked or withheld or modified or is otherwise not granted or fails to remain in full force and effect or (but without prejudice to the generality of the foregoing) the Charterparty and other related documents which require registration are not registered with the Central Bank of Brazil in accordance with Clause 11.1(f) within the period of four weeks after the Charterparty Commencement Date; or (viii)the Borrower and/or any other Security Party or any Project Party other than a Security Party becomes insolvent or bankrupt or suspends payment of its debts generally as they fall due, or any steps are taken by any person or by any government authority for the winding up, liquidation or dissolution of the Borrower and/or any other Security Party or any Project Party other than a Security Party or for the making of an administration order (including, without limitation, the presentation of a petition for an administration order) or for the re-arrangement, re-organisation or reconstruction of the Borrower and/or any other Security Party or any Project Party other than a Security Party, or if an encumbrancer takes possession of or if a receiver or trustee is appointed of, or if any distress or execution is levied against, any of the assets of the Borrower and/or any other Security Party or any Project Party other than a Security Party, or if any process or proceeding similar to any of the foregoing shall be instituted under the laws of any relevant jurisdiction; or (ix) the Borrower and/or any other Security Party suspends or threatens to suspend its operations or (without the prior written consent of the Facility Agent) disposes or threatens to dispose of all or substantially all of its business, property or assets, or if all or substantially all of the same is seized or appropriated; or (x) any change occurs in the shareholders and the respective shareholdings in the Borrower or the Sister Company from those specified in Schedule 5; or (xi) save as may be permitted under this Agreement or any of the Security Documents any Charterparty Hire and/or any other Earnings are paid otherwise than to the Management Account; or - 38 - (xii) the Rig becomes a Total Loss and the Facility Agent does not, within a period of one hundred and eighty (180) days following the occurrence of such Total Loss, receive for the account of the Lenders the insurance proceeds or other compensation relating to such Total Loss in an amount not less than the amount for which the Rig shall have been required to be insured at the time of such Total Loss pursuant to the Mortgage and Deed of Covenants and the other Financing Documents; or (xiii)this Agreement or any of the Security Documents or any of the Project Documents ceases at any time to be the legal, valid and binding obligation of the Borrower or, as the case may be, any other Security Party or, as the case may be, Project Party being a party thereto, or if it becomes impossible or unlawful for any of the material obligations of the Borrower and/or any other Security Party and/or any Project Party to be performed or for any of the rights given to the Agents or the Lenders hereunder and/or under any of the Security Documents to be exercised or the Borrower or any other Security Party or any Project Party disaffirms or repudiates any such obligations; or (xiv) the Rig is not delivered to and accepted by the Borrower in all material respects in accordance with the provisions of the Rig Construction Contract prior to the date falling 365 days after the Original Scheduled Yard Delivery Date; or (xv) the Rig has not arrived at the Port or in sheltered waters in Macae-RJ) and accepted by Petrobras for the commencement of operations in all respects in accordance with the Charterparty prior to the date falling 365 days after the Original Scheduled Charterparty Commencement Date; or (xvi) the Rig Construction Contract is terminated or any event or circumstance arises thereunder which entitles either party thereunder to terminate the same pursuant to Clauses 18 or 19 thereof or otherwise pursuant to the terms thereof or either party repudiates its obligations thereunder or commits any other breach which would entitle the other party to treat its obligations thereunder as terminated; or (xvii)the Refund Guarantee is terminated or the issuer thereof repudiates its obligations thereunder; or (xviii) the Charterparty is terminated or any event or circumstance arises thereunder which entitles either party thereto to terminate the same or either party repudiates its obligations thereunder or commits any other breach which would entitle the other party to treat its obligations thereunder as terminated; or (xix) the Services Rendering Contract is terminated or any event or circumstance arises thereunder which entitles either party thereto to terminate the same or either party repudiates its obligations thereunder or commits any other breach which would entitle the other party to treat its obligations thereunder as terminated; or (xx) there is any breach or non observance on the part of Pride and/or Maritima of their respective obligations under the Additional Funding and Guarantee Agreement; or - 39 - (xxi) the Bridging Loan is not repaid to MC1 on the Bridging Loan Repayment Date (otherwise than by reason of a default by MC2 in the performance of its obligations under the Additional Funding and Guarantee Agreement to remit to MC1 amounts received from the Transferees to whom MC2 transfers its participation in the Tranche A Facility in accordance with the Additional Funding and Guarantee Agreement; or (xxii)it is not possible to maintain the Insurances throughout the Security Period for any reason (including, without limitation, by reason of any relevant Insurances not being available in the international insurance market); or (xxiii) any of the events or circumstances specified in the foregoing paragraphs (i) to (xx) (MUTATIS MUTANDIS) occur under the Sister Company Financing Documents. 10.2 RIGHTS ON EVENT OF DEFAULT At any time after the occurrence of an Event of Default and while the same is continuing (and in addition and without prejudice to any other rights of the Agents or the Lenders): (i) the Facility Agent may and shall if so directed by the Majority Lenders by notice in writing to the Borrower declare that the Loan and all other amounts outstanding from the Borrower under this Agreement and/or the Security Documents are immediately due and payable and such declaration shall be effective from the date of such occurrence or such other later date as the Facility Agent may specify in the said notice, and (at the same time as or at any time subsequent to the service of such notice and the same shall be immediately due and payable and the Lenders' obligation to make available or to continue to make available the Facilities, or any part thereof, to the Borrower shall immediately cease); and/or (ii) either of the Agents or any of the Lenders may terminate or otherwise rearrange (at the discretion of such Agents or Lenders) any interest rate or currency swap, hedging or other currency or interest rate management agreement or arrangements which the Agents or any of the Lenders may have taken out or entered into in relation to the Loan or any part thereof. 10.3 SURVIVAL OF RIGHTS The termination of this Agreement for any cause whatsoever shall not affect the right of the Agents and the Lenders to recover from the Borrower any amounts due to the Agents and the Lenders on or before the termination or in consequence thereof or the right of the Agents and the Lenders to recover any damages for breach of this Agreement and/or the Security Documents or any of them. 10.4 NO INDEPENDENT ACTION No Lender may, except with the prior consent of the Majority Lenders (and, where a Lender may, it may only do so through the Security Agent): (a) enforce any encumbrance created or evidenced by any Security Document or require the Security Agent to enforce any such encumbrance; - 40 - (b) sue for or institute any creditor's process (including a Mareva injunction, garnishment, execution or levy, whether before or after judgment) in respect of any obligation (whether or not for the payment of money) owing to it under or in respect of any Financing Document; (c) take any step (including petition, application, notice of meeting or proposal to creditors) for the winding-up, or administration of, or any insolvency proceeding in relation to, the Borrower, or for a voluntary arrangement or scheme or arrangement in relation to the Borrower; or (d) apply for any order for an injunction or specified performance in respect of the Borrower in relation to any of the Financing Documents. Provided that for the avoidance of doubt that nothing herein contained shall restrict the rights of the Beneficiaries under (and as defined in) the Floor Guarantee to enforce or refrain from enforcing their rights thereunder at such times and in such manner as they may think fit. 11. COVENANTS 11.1 GENERAL COVENANTS The Borrower hereby covenants and undertakes with the Agents and each of the Lenders that throughout the Security Period:- (i) it will obtain and promptly renew (or require the other Project Parties where applicable to obtain and promptly renew) from time to time and comply with the terms of all consents which may be required under any applicable law in connection with or for the execution, delivery or due performance by the Security Parties and the Project Parties of this Agreement, the Security Documents or the Project Documents or for the validity or enforceability of this Agreement or the Security Documents or the Project Documents (or procure such obtaining, renewal or compliance); (ii) it will pay or cause to be paid all of its obligations, ents, rates, taxes, assessments, impositions, calls and outgoings whatsoever (whether governmental, municipal or otherwise) imposed upon or payable in respect of its property or assets as and when the same shall become payable save for any of the same which are being contested in good faith and by appropriate proceedings and which could not reasonably be expected to have a material adverse effect on the business or operation of the Borrower; (iii) it will deliver to the Facility Agent in sufficient copies for each of the Lenders: (a) as soon as the same are available (and in any event within one hundred and twenty (120) days) after the end of each of its financial years ending after the date hereof, its accounts for such financial year (including the profit and loss account for the financial year ended on the last day of such financial year and the balance sheet as of the end of such financial year) having ensured that such accounts were prepared on such basis as is - 41 - reasonably acceptable to the Facility Agent and were prepared in accordance with accounting principles and practices generally accepted in the United States of America ("GAAP") and consistently applied and give (in conjunction with the notes thereto) a fair presentation in accordance with GAAP of (i) the financial condition of the Borrower as at the date as of which they were prepared, and (ii) the results of the operations of the Borrower for the period to which they relate and were audited by auditors acceptable to the Facility Agent and were certified by its duly authorised officer as giving (in conjunction with the notes thereto) a true and fair view of its financial condition as at the end of such financial year and of the results of its operations during such financial year; (b) simultaneously with the delivery of each of its accounts in accordance with sub-clause (iii)(a), a certificate signed by a duly authorised director or officer of the Borrower confirming that as of the date of such certificate (which must be dated not more than ten (10) days prior to the date on which it is delivered to the Facility Agent) no Event of Default or Potential Event of Default has occurred at any time after the date of the last such certificate delivered pursuant to this sub-clause (iii)(b) (or the date of this Agreement, in the case of the initial such certificate); (c) as soon as reasonably practicable following receipt from the Builder, a certified true copy of each progress report given by the Builder pursuant to the Rig Construction Contract and each notice of anticipated delivery date given by the Builder pursuant to the Rig Construction Contract and a certified true copy of each other notice or report given to it by the Builder pursuant to or in connection with the Rig Construction Contract which could reasonably be considered to be material in the context of the transactions contemplated by the Security Documents and the Project Documents; (d) simultaneously with delivery to Petrobras of each progress report given by the Borrower to Petrobras pursuant to the Charterparty and each other notice or report so delivered by the Borrower pursuant to the Charterparty which could reasonably be considered to be material in the context of the transactions contemplated by the Security Documents and the Project Documents, a certified true copy of such notice or report; (e) from time to time promptly upon request by the Lender, such other information as the Security Agent may reasonably require in the context of this Agreement and any of the Security Documents and the Project Documents; and (f) evidence satisfactory to the Security Agent that it has registered the Charterparty and any other documents requiring registration with the Central Bank of Brazil within 4 weeks of the Charterparty Commencement Date, - 42 - (iv) promptly upon becoming aware of the same, it will notify the Security Agent of: (a) any dispute between the Borrower and (A) the Builder in relation to the Rig Construction Contract, (B) Petrobras in relation to the Charterparty or any of the other Project Documents which, in any case, could reasonably be considered to be material in the context of the transactions contemplated by this Agreement and any of the other Security Documents or could reasonably be expected to have a material adverse effect on the Borrower; (b) any breach by any party to any Security Document or any Project Document of any party's obligations thereunder which could reasonably be considered to be material in the context of the transactions contemplated by this Agreement and any other Security Document or could reasonably be expected to have a material adverse effect on the Borrower and provide the Security Agent with details of the nature and extent of such breach and the steps which it intends to take in respect thereof; (c) any event which could materially adversely affect the completion and delivery of the Rig under the Rig Construction Contract Date; and (d) the occurrence of any Event of Default or any Potential Event of Default; (v) it will immediately upon delivery of the Rig by the Builder register itself as the owner of 64/64th shares in the Rig at the Registry of Bahamian Ships free from any encumbrance (save only for the Mortgage and the Mortgage Debenture) and will deliver to the Facility Agent a certified copy of the certificate of registration of the Rig immediately it is issued; (vi) it will perform all of its obligations under each of the Security Documents and the Project Documents to which it is a party in accordance with the respective terms thereof and not terminate or amend, or offer to terminate or amend, any of the Security Documents or Project Documents to which it is a party or waive any of its rights thereunder which, in the case of any amendment or waiver, could be material in the context of this Agreement and the Security Documents or Project Documents and the transactions contemplated hereby or thereby and without prejudice to the generality of the foregoing it will use all reasonable endeavours to procure that all payments are made by Petrobras pursuant to the Project Documents without any withholding, set-off, counterclaim or other deduction of any kind; (vii) it will permit representatives of the Facility Agent (or any accountants, engineers or other experts or specialists designated by the Facility Agent) to visit or inspect, or procure that any such representatives are able to visit or inspect, the Rig during its construction and after the Yard Delivery Date and the Borrower's books of account, at such times and as often as may be reasonably required by the Facility Agent subject to the Facility Agent first giving reasonable prior written notice and in exercising such rights the Facility Agent's representative will comply with the reasonable instructions of the Borrower's crew; - 43 - (viii)it will at its own cost and expense promptly execute, acknowledge, deliver, file and register all such additional documents, instruments, agreements, certificates, consents and assurances and do all such other acts and things as may be legally required for the Borrower to do and as may be necessary or as the Facility Agent may reasonably request from time to time in order to effectuate the purposes of this Agreement or any of the Security Documents or the Project Documents or to perfect the security interest intended to be constituted by any of the Security Documents or to enable the Agents and the Lenders to obtain the full benefits of this Agreement or any of the Security Documents or the Project Documents and to exercise and enforce the rights and remedies under this Agreement or any of the Security Documents or the Project Documents; (ix) it will not, without the prior written consent of the Facility Agent:- (a) (save and except as envisaged in this Agreement) create, assume or permit to exist any encumbrance upon any of its property or other assets, real or personal, tangible or intangible, whether now owned or hereafter acquired, other than any lien on the Rig arising as a result of any necessary salvage or arising in the ordinary course of operation of the Rig; or (b) engage in any business or activity except the ownership of the Rig, its chartering to Petrobras in accordance with the Charterparty and its operation and activities incidental thereto or pursuant to any subsequent charter or drilling service contract; or (c) save and except as envisaged by this Agreement make any loans to any person(s), make any investments of any kind (including but not limited to (i) the acquisition of any shares in or debentures of any company and/or (ii) the purchase, or acquisition on finance lease, hire purchase or similar terms, of any fixed asset(s) premises/office equipment for the Borrower's own use, including charters out), or authorise or enter into any capital commitments otherwise than in the ordinary course of business; or (d) (save and except as envisaged in this Agreement or agreed by the Facility Agent in writing) borrow any money or permit any such borrowing to continue, or enter into any agreement for payment on deferred terms (otherwise than on customary suppliers' credit terms) or any equipment lease or contract hire agreement (other than in respect of necessary machinery and/or equipment for the Rig or otherwise in the ordinary course of business); or (e) (save and except as envisaged in this Agreement) assume, guarantee or endorse or otherwise become or remain liable in connection with any obligation of any person (otherwise than in the ordinary course of operating of the Rig); or (f) at any time during the Security Period purchase or otherwise acquire for value any shares of its capital stock, and will not in any financial year during the Security Period declare or pay any dividend on any of such shares or make any distribution to the holder(s) of any such shares except - 44 - as provided in Clause 12.4 and it will not issue any new shares of its capital stock. (x) it will maintain the Management Account and the Reserve Account (and any other account(s) opened by the Borrower for the purposes of this Agreement; (xi) in the event that, and whenever, the Facility Agent shall issue any certificate for the purposes of Clause 9.2 of the Deed of Guarantee and Undertaking and shall supply a certified copy thereof to the Borrower, the Borrower will, unless the Guarantors shall have made the relevant payment by way of subscription for equity share capital in the Borrower pursuant to Clause 9.1 of the Deed of Guarantee and Undertaking within seven (7) Banking Days immediately following the day on which it is supplied by the Facility Agent with a certified copy of such certificate, deliver to the Sponsors (and will not purport to revoke) a duly completed request for a drawing under the Subordinated Loan Facility Agreement in an amount equal to the amount specified in said certificate, and will simultaneously deliver a certified copy of such certificate to the Facility Agent; (xii) it will ensure that Formaritima Ltd and Petrodrill Engineering N.V. will not (without the prior written consent of the Facility Agent, such consent not to be unreasonably withheld or delayed) cancel, vary or amend any of the Other Services Contracts and that Formaritima Ltd and Petrodrill Engineering N.V. will (unless the Facility Agent otherwise agrees) take all appropriate steps to enforce performance by all parties (other than Formaritima Ltd and Petrodrill Engineering N.V.) of their respective obligations under the Other Services Contracts; and (xiii)it will do or cause to be done all things necessary to preserve in full force its corporate existence, rights, franchises or authorities necessary for the conduct of its business. 11.2 COST OVERRUNS Without prejudice to any other provision of this Agreement or any other Security Documents, the Borrower will perform its obligations under the Rig Construction Contract and any Purchaser's Supplies Contract. 11.3 INSURANCES The Borrower will take out and effect and maintain throughout the Security Period the Insurances meeting the requirements specified in Schedule 8 with such insurers as are acceptable to the Facility Agent. The terms and conditions of such insurances shall be subject to the prior approval of the Facility Agent (such approval not to be unreasonably withheld or delayed) and duplicates of all cover notes, policies and certificates of entry shall be provided to the Security Agent for its approval and retention. The Borrower will renew all such insurances at least fourteen (14) days before the relevant policies or contracts or certificates of entry expire and the Borrower will punctually pay all premiums, calls, contributions or other sums payable in respect of such insurances. 11.4 INSURANCE PROCEEDS AND DEDUCTIBLES The Borrower shall: - 45 - (i) procure that the insurance proceeds, received or to be received by the Borrower shall be paid to the Facility Agent in accordance with the Insurances Assignment and are paid into the Management Account; (ii) pay to the Facility Agent and remit to the Management Account an amount equal to the deductions made for deductibles or excess applied by insurers in respect of any claim, such payments to be funded by the Borrower (without recourse to the Lenders). 11.5 LIQUIDATED DAMAGES; REFUNDS The Borrower shall procure that all amounts payable by the Builder under the Rig Construction Contract and the Export-Import Bank of Korea under the Refund Guarantee received or to be received by the Borrower are paid to the Security Agent and credited to the Management Account. 12. SECURITY ACCOUNTS 12.1 REMITTANCE OF EARNINGS The Borrower shall, throughout the Security Period, procure and ensure that all monies payable under the Charterparty and any other Earnings are paid to the Management Account unless and until such time as the Lender shall, following the occurrence of an Event of Default and whilst the same is continuing, require that the Charterparty Hire and any other Earnings of the Rig and all the Services Rendering Contract Payments are paid to the Facility Agent or as it may direct (whereafter the Borrower shall procure and ensure that the Charterparty Hire and any other Earnings and all the Services Rendering Contract Payments are paid in accordance with the directions of the Facility Agent). 12.2 USE OF MANAGEMENT ACCOUNT Subject to the provisions of Clause 12.1 and unless and until an Event of Default shall have occurred and be continuing (whereupon the provisions of Clause 12.4 shall be and become applicable) and subject in all respects to the provisions of Clause 9.5, monies from time to time credited to, or standing to the credit of, the Management Account shall be applied in accordance with the following provisions:- (i) Subject to no Event of Default or Potential Event of Default having occurred, and be continuing the Facility Agent and the Borrower shall on the 5th day of each month (commencing on the 5th of the month following the month during when the first payment of Charterparty Hire is paid to the Management Account) release to the Borrower an amount not exceeding the Monthly Outgoings incurred by the Borrower during the preceding month. (ii) All other monies from time to time standing to the credit of the Management Account shall be applied by the Facility Agent in or towards payment of the Repayment Instalments and otherwise in or towards amounts of principal of, and interest accrued on, the Loan from time to time payable by the Borrower hereunder and other amounts from time to time falling due and payable hereunder and/or under any of the Security Documents (and such application by the Facility - 46 - Agent, which the Facility Agent is hereby irrevocably authorised by the Borrower to do, shall constitute PRO tanto satisfaction of the corresponding obligations of the Borrower hereunder). (iii) Subject to the payments made in accordance with sub-clauses (i) or (ii) Surplus Earnings shall be transferred to the Reserve Account on the 5th day of each month. 12.3 USE OF RESERVE ACCOUNT All monies transferred to the Reserve Account in accordance with Clause 12.2(iii) shall during the Security Period remain credited to the Reserve Account unless withdrawn pursuant to Clause 12.4 in accordance with and subject to the Reserve Account Charge. If at the time the amount for the time being credited to the Management Account is insufficient to discharge the Monthly Outgoings and/or payments to the Agents and the Lenders in accordance with Clause 12.2(i) and/or 12.2 (ii), then subject to no Event of Default and no Potential Event of Default having occurred, the Facility Agent shall apply any amounts credited to the Reserve Account in or towards the Monthly Outgoings and/or payments to the Agents and the Lenders and the provisions of Clause 12.2(i) and (ii) shall (MUTATIS MUTANDIS) apply. 12.4 WITHDRAWAL Subject to there being credited to the Reserve Account and the Sister Company Reserve Account immediately following such withdrawal an amount equal to the aggregate of the next six (6) Repayment Instalments and the next six (6) Repayment Instalments under and as defined in the Sister Company Loan Agreement the Borrower may from time to time withdraw monies from the Reserve Account. 12.5 FOLLOWING EVENT OF DEFAULT Without prejudice to the provisions of the Management Account Charge and the Reserve Account Charge, upon the occurrence of an Event of Default and whilst the same is continuing the Facility Agent shall forthwith be and become entitled then or at any time thereafter to apply all moneys standing to the credit of, or from time to time credited to, the Management Account and the Reserve Account in or towards payment of amounts due to the Agents and the Lenders under this Agreement and/or the other Security Documents. 12.6 INTEREST Amounts for the time being standing to the credit of the Management Account and the Reserve Account shall bear interest at the rates from time to time paid by the Management Account Bank or (as the case may be) the Reserve Account Bank to its customers for US Dollar deposits of like amounts for like periods (but having regard to payments which are scheduled to fall due to be made from time to time from such accounts), such interest to accrue from day to day, to be calculated on the actual number of days elapsed and on the basis of a three hundred and sixty (360) day year and to be credited to the relevant account at such intervals as the Facility Agent and the Borrower shall agree. - 47 - 13. PROVISIONS RELATING TO SECURITY 13.1 CONTINUING SECURITY It is declared and agreed that: (i) the security created or to be created by or pursuant to this Agreement and the other Security Documents shall be held by the Security Agent as a continuing security for the payment and discharge of the Secured Obligations; (ii) the security so created shall not be satisfied by any intermediate payment or satisfaction of any part of the amount hereby and thereby secured; (iii) the security so created shall be in addition to and shall not in any way be prejudiced or affected by any collateral or other security now or hereafter held by the Agents or any of the Lenders for all or any part of the moneys hereby and thereby secured; (iv) every power and remedy given to the Agents or any of the Lenders hereunder or under any of the Security Documents shall be in addition to, and not a limitation of, any and every other power or remedy vested in the Lender hereunder or thereunder; and (v) all the powers so vested in the Agents or any of the Lenders may be exercised from time to time and as often as the Lender may deem expedient. 13.2 CLAIMS AGAINST SECURITY PARTIES Notwithstanding any other provision of this Agreement and/or of the Security Documents (express or implied), the Agents and the Lenders shall have an absolute and unfettered right to make, enforce or seek to enforce any claim against the Borrower and/or against any other Security Party and/or against any security or other asset(s) or document(s), agreement(s) or arrangement(s) simultaneously and/or in such order or sequence as any of the Agents or the Lenders may in their sole and absolute discretion see fit. 14. CHANGE IN CIRCUMSTANCES 14.1 ILLEGALITY In the event that by reason of change subsequent to the date hereof in any applicable law, regulation or regulatory requirement or in the interpretation thereof it shall appear to any Lender that it has become unlawful for such Lender to maintain or give effect to its obligations as contemplated by this Agreement, such Lender shall inform the Facility Agent who shall thereupon give notice to the Borrower to that effect, whereafter the liability of such Lender to make or to maintain Commitments and its participation in the Loan shall cease, and if any of the Facilities in which such Lender is participating has already been drawn down the Borrower shall prepay such Lender's participation in the Loan to such Lender either immediately or, on the latest date permitted by such law, regulation or regulatory requirement, in accordance with and subject to the provisions of Clause 18. In any such event, but without prejudice to the aforesaid obligations of the Borrower to prepay such Lender's participation in the Loan, the Borrower and the Lender - 48 - so affected and the Facility Agent shall negotiate in good faith for a period of 30 days next succeeding the giving of such notice with a view to agreeing terms for making such Lender's participation in the Loan available from another jurisdiction, or for establishing a mutually acceptable basis for funding from alternative sources, or for restructuring the Facilities on a basis which is not unlawful. 14.2 INCREASED COSTS (i) If by reason of the introduction of, or any change in, any applicable law, treaty, regulation or regulatory requirement or any change in the interpretation or application of any of the foregoing by any judicial, governmental or other competent body or authority or if by reason of compliance by any Lender or either of the Agents with any applicable directive, request or requirement (whether or not having the force of law) of any central bank or governmental, fiscal or other authority (including, but not limited to, a directive, request or requirement relating to any Lender's allocation of capital for the purpose of its business) any Secured Party incurs an increased cost (as defined in paragraph (ii)), the Borrower shall promptly on demand made by the Facility Agent on behalf of such Secured Party pay to the Facility Agent for the account of such Secured Party the amount of such increased cost:- (ii) In this Agreement "INCREASED COST" means: (a) any Taxation to which any Secured Party is subjected with respect to the Loan or any part thereof (other than corporate Taxation on such Secured Party's overall net income); or (b) an additional cost incurred by a Secured Party as a result of it having entered into, or performing, maintaining or funding its obligations under, this Agreement or any other Financing Documents; or (c) that portion of any additional cost incurred by a Secured Party in making, funding or maintaining all or any advances or commitments comprised in a class of advances or commitments formed by or including its participations in the Loans made available or to be made available under this Agreement, as is attributable to it making, funding or maintaining those participations; or (d) a reduction in any amount payable to a Secured Party or in the effective return to a Secured Party under this Agreement or on its capital which is attributable to the funding of this Agreement or its commitment to make funds available hereunder; or (e) the amount of any payment made by a Secured Party, or the amount of any interest or other return foregone by a Secured Party, calculated by reference to any amount received or receivable by that Secured Party from any other party under this Agreement. (iii) Any demand made by the Facility Agent under sub-paragraph (i) above shall contain reasonable details of the increased cost and the event(s) giving rise to it, - 49 - but no Secured Party need disclose any information which is confidential or disclosure of which would be contrary to its recognised banking policies. (iv) The obligation under paragraph (i) to pay increased costs does not apply to any increased cost: (a) compensated for by the operation of Clause 9.2; or (b) attributable to any change in the rate of tax on the overall net income of a Secured Party (or the overall net income of a division or branch of a Secured Party) imposed in the jurisdiction in which its principal office for the time being is situate or in which it is resident for tax purposes or is carrying on business and by virtue thereof is subject to such tax in that jurisdiction; or (c) attributable to any law or regulation relating to any of the matters set out in the report of the Basle Committee on Banking Regulations and Supervisory Practices dated July 1988 and entitled "INTERNATIONAL CONVERGENCE OF CAPITAL MEASUREMENT AND CAPITAL STANDARDS" as the same are in force and applied and interpreted at the date of this Agreement. (iv) In the case of a demand made by or on behalf of a Lender, the Borrower shall be at liberty at any time after the receipt of such notice, so long as the circumstances giving rise to such increased cost continue, on giving not less than five Banking Days' irrevocable notice to the Facility Agent and such Lender, to prepay all (but not part only) of such Lender's participation in the Loan in accordance with and subject to the provisions of Clause 14.3. (v) In any such event, but without prejudice to the obligations of the Borrower as aforesaid, the Borrower and the Lender will negotiate in good faith with a view to mitigating the effects on the Borrower. 14.3 PREPAYMENT Where any Lender's participation in the Loan is to be prepaid by the Borrower pursuant to any of the provisions of this Clause 14, the Borrower shall simultaneously with such prepayment pay to the Facility Agent for the account of such Lender all accrued interest on any sum prepaid to the date of prepayment and all other sums payable by the Borrower to or for the account of such Lender pursuant to this Agreement and/or the Security Documents together with such amounts as may be certified by such Lender to be necessary to satisfy the indemnity obligations of the Borrower as provided for in Clause 18. 14.4 FACILITY AGENT'S AND LENDER'S DETERMINATION The certificate or determination of the Facility Agent or (as the case may be) any Lender, as to any of the matters referred to in this Clause 14 shall, save for any manifest error, be conclusive and binding on the Borrower. - 50 - 15. TRANSFERS 15.1 AGREEMENT BINDING ON SUCCESSORS This Agreement and the other Financing Documents shall benefit and bind the parties, any transferee or assignee in respect of which an assignment or novation becomes effective in accordance with Clause 15.3(iii), and their respective successors as if they were named as parties and had executed this Agreement. Any reference in any Financing Document to any party shall be construed accordingly. 15.2 BORROWER'S ASSIGNMENT The Borrower may not assign or transfer all or any part of its rights or obligations under any Financing Document. 15.3 TRANSFER A Lender (an "EXISTING LENDER") may at any time assign, transfer or novate any of its rights and/or obligations under this Agreement (and the other Financing Documents to the extent possible as a matter of law) only if:- (i) such assignment, transfer or novation is to a Qualifying Lender (a "NEW LENDER"); (ii) such Existing Lender simultaneously assigns, transfers or novates to such New Lender the proportion of its Corresponding Sister Company Commitments and of its Corresponding Sister Company Outstandings so that such New Lender becomes a Lender (as defined in and in accordance with the Sister Company Loan Agreement) which is the same as the proportion of its Commitments and Outstandings which it is assigning, transferring or novating hereunder; (iii) either such assignment, transfer or novation is effected pursuant to Clause 15.4 or such New Lender executes an undertaking in form and substance satisfactory to the Facility Agent that it is bound by the terms of the Financing Documents. 15.4 NOVATION Subject to Clause 15.3 any Existing Lender may at any time novate all or part of its Commitments and/or transfer all or part of its Outstandings and its rights and benefits under the Financing Documents by delivering to the Facility Agent a duly completed and executed Transfer Certificate substantially in the form of Schedule 6. On receipt of such a Transfer Certificate, the Facility Agent shall countersign it for and on behalf of itself and the other parties to this Agreement and with effect from the date specified in the Transfer Certificate to the extent that they are expressed to be the subject of transfer and/or novation in the Transfer Certificate:- (i) the Existing Lender and the other Parties (the "EXISTING PARTIES") will be released from their obligations to each other (the "DISCHARGED OBLIGATIONS"); - 51 - (ii) the New Lender and the existing Parties will assume obligations towards each other which differ from the discharged obligations only insofar as they are owed to or assumed by the New Lender instead of the Existing Lender; (iii) the rights of the Existing Lender against the existing Parties and vice versa (the "DISCHARGED RIGHTS") will be cancelled; and (iv) the New Lender and the existing Parties will acquire rights against each other which differ from the discharged rights only insofar as they are exercisable by or against the New Lender instead of the Existing Lender, 15.5 NEW LENDERS Each New Lender shall, by its execution of a Transfer Certificate, accept that none of the other parties hereto is in any way responsible for: (a) the accuracy and/or completeness of any information supplied to the New Lender in connection herewith; (b) the financial condition, creditworthiness, condition, affairs, status and nature of the Borrower or any of the Guarantors or any other Security Party or the observance by the Borrower, any of the Guarantors or any other Security Party of any of their respective obligations under the Financing Documents or any document relating thereto; or (c) the legality, validity, effectiveness, adequacy or enforceability of this Agreement or any document relating hereto and, save as otherwise expressly provided herein, none of such parties shall, or shall be deemed to be, the agent or trustee of such New Lender in connection herewith. 15.6 LENDING OFFICES The initial Lending Office(s) of each Lender has/have been notified by that Lender to the Facility Agent. Any Lender may at any time change any of its Lending Office(s) in relation to all or a specified part of any of its Commitments and/or Outstandings by notifying the Facility Agent and the Borrower of the fax number, telex number and address of its new Lending Office(s). 15.6 DISCLOSURE OF INFORMATION The Lender may disclose information regarding the Borrower or the Guarantors and the transactions entered into pursuant to this Agreement to any actual or potential, assignee or sub-participant, subject to such recipients of information agreeing to keep it confidential. 16. FEES AND EXPENSES 16.1 FEES AND DISBURSEMENTS The Borrower will pay to each of the Agents on demand, all costs, charges and expenses (including all out-of-pocket expenses and legal fees and VAT thereon) incurred by each - 52 - of the Agents in connection with the preservation of its rights under and enforcement or attempted enforcement of this Agreement and the Security Documents or otherwise in connection with the Loan or any part thereof. 16.2 TAXES AND DUTIES The Borrower will pay to the Facility Agent and the Lenders on demand, all stamp, registration and other duties (including any such duties payable by the Lender) imposed by any relevant jurisdiction (or any taxing authority therein or thereof) on this Agreement and/or any of the Security Documents or otherwise in connection with the Loan or any part thereof. 17. CURRENCY INDEMNITY 17.1 CURRENCY INDEMNITY (i) If, for any reason, any payment due from the Borrower under or in connection with any Security Document is made or is satisfied in a currency (the "OTHER CURRENCY") other than the currency in which the relevant payment under this Agreement is due (the "CONTRACTUAL CURRENCY"), then to the extent that the payment (when converted into the Contractual Currency at the rate of exchange on the date of payment or, in the case of the liquidation or insolvency of the Borrower, at the rate of exchange on the latest date permitted by applicable law for the determination of liabilities in such liquidation or insolvency) actually received by the party entitled thereto falls short of the amount expressed to be due under the terms of this Agreement or, as the case may be, such other Security Document, the Borrower shall, as a separate and independent obligation, indemnify the party entitled thereto and hold such party harmless against the amount of such shortfall. (ii) If on any occasion the Contractual Currency so purchased exceeds the amount payable hereunder in the Contractual Currency to the party entitled thereto then, subject to the Borrower having no further obligation, actual or contingent, to such party under this Agreement, such party shall refund to the Borrower the excess amount of the Contractual Currency so purchased. (iii) For the purpose of this Clause "RATE OF EXCHANGE" means the rate at which the party entitled thereto is able on the relevant date to purchase the Contractual Currency with the Other Currency and shall take into account any premium and other costs of exchange. 17.2 INDEPENDENT OBLIGATIONS The indemnities in Clause 17.1 shall constitute separate and independent obligations of the Borrower from the other respective obligations under this Agreement, shall give rise to a separate and independent cause of action against the Borrower and shall apply irrespective of any indulgence granted by the Lenders or by the Agents from time to time. - 53 - 18. GENERAL INDEMNITIES 18.1 UNSCHEDULED REPAYMENTS Without prejudice to the provisions of Clause 16.2, the Borrower shall indemnify each Agent and each Lender against all funding and other fees, costs, charges, losses, demand and expenses incurred or sustained as a consequence of the Lender receiving (including any receipt in respect of a repayment or prepayment made with the consent or at the request of or as required by the Agents or any Lender including, but not limited to, any prepayment under Clauses 6.5, 6.6 or 14.3) or recovering all or any part of the Loan or any other amount due hereunder on a day other than at the times and otherwise in accordance with the Repayment Schedule. 18.2 EVENT OF DEFAULT The Borrower undertakes to indemnify each of the Agents and the Lenders against any and all liabilities losses costs, demands, charges, liabilities and expenses (including, without limitation, legal fees) which the Agents or such Lender may incur or sustain as a consequence of any default by the Borrower in the performance of the obligations expressed to be assumed by it in this Agreement and/or the Security Documents. 18.3 FINANCING COSTS The liability of the Borrower under Clauses 18.1 and 18.2 shall include but not be limited to all funding or other fees, costs, charges, losses, demands and expenses sustained or incurred by either of the Agents or each of the Lenders including (but not limited to) any sustained or incurred in liquidating deposits taken to fund the amount so prepaid or sustained or incurred in connection with the cancellation, reduction or re-arrangement of any interest rate swap, hedge transaction or other funding or financing agreement or arrangement which the Agents or such Lender may have arranged or entered into for the purpose of funding the amount so prepaid (and the Borrower hereby acknowledges that either of the Agents or each of the Lenders may in its discretion enter into any such agreements or arrangements as it considers appropriate). 18.4 OPERATION OF RIG The Borrower shall indemnify each of the Agents and each of the Lenders upon demand against all costs, expenses, claims, liabilities and losses of any nature whatsoever sustained or incurred as a result of or in connection with any the ownership or operation of the Rig and/or claims by any third party or any Environmental Claim being made against the Lender or otherwise howsoever arising out of any Environmental Incident. If the Lender shall become aware of any claim for the purposes of this Clause 18.4 it shall give notice thereof to the Borrower as soon as reasonably practicable (but not as a condition precedent to the liability of the Borrower under this Clause 18.4) and shall (if the Borrower shall indemnify and secure each of the Agents and each of the Lenders to such Agents or (as the case may be) such Lender's reasonable satisfaction against any liability costs damages and expenses which may reasonably be incurred thereby and/or in relation thereto) take such action as the Borrower may reasonably and promptly by notice request to avoid, resist or compromise the claim, provided that: - 54 - (1) If either Agent or (as the case may be) the Lender receives instructions to appeal against or otherwise resist any claim, it may thereafter give notice to the Borrower to provide such Agent or (as the case may be) such Lender with a written opinion of legal advisers (to be approved by the Agent or (as the case may be) such Lender, such approval not to be unreasonably withheld) to the effect that there are reasonable and proper grounds for appealing against or resisting such claim, and if no such opinion is received by such Agent or (as the case may be) such Lender within 21 days after the service of such notice such Agent or (as the case may be) such Lender shall thereupon be released from any obligations which it would otherwise have under this Clause and (notwithstanding any other provision hereof) shall be entitled to immediate indemnification by the Borrower in respect of such claim, and if such an opinion is so received but there is a change in the basis on which it is given then such Agent or (as the case may be) such Lender may give further notice under this Clause. (2) Neither Agent nor any Lender shall be required to appeal against or otherwise resist or to compromise any claim if in the reasonable opinion of such Agent or Lender doing so could have adverse long term or consequential implications for such Agent or Lender. (3) All communications pertaining to any claim with the person authority or body whatsoever making the claim as are made by the Borrower (if any) shall first be approved by the Agent or (as the case may be) such Lender (such approval not to be unreasonably withheld). 18.5 AGENT'S OR LENDER'S CERTIFICATE A certificate of either Agent or a Lender of the amount of any such loss or expense as is mentioned in Clauses 18.1, 18.2 and 18.3 and specifying the basis upon which such loss, expense or amount is computed shall, in the absence of manifest error, be final and conclusive and binding on the parties hereto. 19. THE AGENTS 19.1 APPOINTMENT Each Lender irrevocably appoints the Facility Agent to act as its agent for the purpose of this Agreement and irrevocably authorises it to take such action and exercise such rights, powers and discretions as are specifically delegated to it by this Agreement or the other Security Documents and such other action, rights, powers and discretions as are reasonably incidental thereto. However, the Facility Agent may not begin any legal action or proceeding in the name of a Lender without its consent. The relationship between the Facility Agent and the Lenders is of agent and principal only. The Facility Agent shall not be a trustee for any Lender, nor an agent or trustee for the Borrower or either Guarantor, under or in relation to any Security Document. - 55 - 19.2 DUTIES OF FACILITY AGENT The Facility Agent shall:- (i) promptly send to each Lender details of each communication received by it from the Borrower and/or either of the Guarantors under this Agreement (except that details of any communication relating to a particular Lender shall be sent to that Lender only), details of any Transfer Certificate executed by any other Lender and provide such other information relating to the Facility as any Lender may reasonably request; (ii) promptly send to each Lender a copy of any document or information received by it under Clause 4 (Availability and Drawing); (iii) subject to the other provisions of this Clause 19, act in accordance with any instructions from the Majority Lenders or, if so instructed by the Majority Lenders, refrain from exercising a right, power or discretion vested in it under this Agreement; and (iv) have only those duties, obligations and responsibilities of a solely mechanical and administrative nature, expressly specified in this Agreement. 19.3 PERFORMANCE OF DUTIES The Facility Agent:- (i) may perform any of its duties, obligations and responsibilities under the Security Documents by or through its personnel or any sub-contractor or agents; (ii) may refrain from exercising any right, power or discretion vested in it under the Security Documents until it has received instructions from the Majority Lenders or (provided that instructions have been requested) as to whether (and, if it is to be, the way in which) it is to be exercised and shall in all cases be fully protected when acting, or (if so instructed) refraining from acting, in accordance with instructions from the Majority Lenders; (iii) may treat (a) the Lender which makes available any share of the Loan as the person entitled to repayment of that share unless all or part of it has been assigned or transferred (and the Facility Agent has received notice of that assignment or transfer) in accordance with Clause 15; and (b) the office(s) notified by a Lender to the Facility Agent for this purpose before the signing of this Agreement (or, as the case may be, in the relevant Transfer Certificate or notice of assignment) as its Lending Office(s) unless the Facility Agent has received from that Lender a notice of change of Lending Office in accordance with Clause 15. The Facility Agent may act on any such assignment and/or notice until it is superseded by a further assignment and/or notice; (iv) shall not be required to do anything which would or might in its reasonable opinion be contrary to any law or directive or otherwise render it liable to any person which is not a party to the Security Documents and may do anything which is in its reasonable opinion necessary to comply with any law or directive; - 56 - (v) shall not be required to make any enquiry as to default by the Borrower or either of the Guarantors (unless specifically so instructed by the Majority Lenders) in the performance or observance of any of the provisions of the Security Documents or as to the existence of any Event of Default or Potential Event of Default unless that Facility Agent acquires actual knowledge to the contrary or has been notified in writing thereof by a Lender; and (vi) may refrain from taking any step (or further step) to protect or enforce the rights of any person under the Security Documents until it has been indemnified (or received confirmation that it will be so indemnified) and/or secured to its satisfaction against any and all actions, charges, costs, losses, expenses or liabilities (including legal, accountants' and other professional fees) which would or might be brought, made or preferred against or suffered, sustained or incurred by it as a result. 19.4 AGENTS' DISCRETIONS The Facility Agent may:- (i) assume that any representation made by the Borrower or either of the Guarantors in connection with the Security Documents is true; (ii) assume that no Event of Default has occurred and that the Borrower is not in breach of or default under the Security Documents; (iii) assume that any right, power, authority or discretion vested in this Agreement upon the Majority Lenders or any other person has not been exercised; (iv) rely on any communication, certificate, legal opinion or other document reasonably believed by it to be genuine; (v) rely as to any matter of fact which might reasonably be expected to be within the knowledge of any person, on a written statement by that person and on any communication or document believed by it to be genuine; (vi) obtain and pay for the advice or services of any lawyers, accountants, surveyors or other experts in relation to the negotiation, preparation, execution and enforcement of the Security Documents as may to it seem necessary or desirable and rely on any such advice; (vii) retain for its own benefit and without liability to account any fee or other sum receivable by it in connection with its agency and subject always to Clause 20 (Set Off/Pro-Rata Sharing) for its account; and (viii)accept deposits from, lend money to, provide any advisory or other services or engage in any kind of banking or other business with, any party to any Security Document or related company of any party (and, in each case, may do so without liability to account to any Lender). - 57 - 19.5 LIMITATION OF RESPONSIBILITIES Neither the Facility Agent nor any of its personnel, sub-contractors or agents shall be:- (i) responsible for the adequacy, accuracy, completeness or reasonableness of any representation, warranty, statement, projection, assumption or information provided by the Borrower or either of the Guarantors to any Lender, or contained in any Security Document or any notice or other document delivered under or in connection with any Security Document; (ii) responsible for the execution, delivery, validity, legality, adequacy, enforceability or admissibility in evidence of any Security Document or any such notice or other document or for the satisfaction or failure by the Borrower to satisfy any condition precedent to the utilisation of the Facility; or (iii) responsible for the collectability of amounts payable under any Security Documents; (iv) responsible for the accuracy of any statements (whether written or oral) made in or in connection with any Security Documents; or (v) liable for anything done or not done by it or any of them under or in connection with any Security Document save in the case of its or their own negligence or wilful misconduct (but so that this Clause 19.5(v) shall not be construed to impose any liability in respect of any matter for which liability is under any other provision of this Clause excluded). 19.6 THE FACILITY AGENT AS LENDER The Facility Agent shall with respect to its own participation in the Facilities (if any) have the same rights and powers under the Financing Documents as any other Lender and may exercise them as though it were not also acting as agent for the Lenders. The Facility Agent and its associates and affiliates may, without liability to disclose or account, engage in any kind of financial, trust or commercial business with, or acquire or dispose of any kind of security of, the Borrower, any Guarantor, any other Security Party, any of their respective associates or affiliates and none of the Facility Agent, nor any of its associates or affiliates shall have any obligation to disclose or account for any dealings with the Borrower, any Guarantor, any other Security Party, any of their respective associates or affiliates prior to the date of this Agreement. The agency department of the Facility Agent will be treated as a separate entity from any other department of the Facility Agent and any information received by the Facility Agent in any other capacity may be treated as confidential by them. 19.7 NO RELIANCE ON THE FACILITY AGENT Without affecting the responsibility of the Borrower for information supplied by it or on its behalf in connection with any Security Document, each Lender confirms that it has itself been, and will at all times continue to be, solely responsible for making its own independent investigation and appraisal of the business, financial condition, prospects, creditworthiness, status and affairs of the Borrower, the Guarantors or any other person - 58 - and has not relied, and will not at any time rely, on the Facility Agent or any other Lender:- (i) to provide it with any information relating to the business, financial condition, prospects, creditworthiness, status or affairs of the Borrower, the Guarantors or any other person, whether coming into its possession before or after the drawing of the Facility (except as stated in Clause 19.2 or as provided otherwise in this Agreement); or (ii) to check or enquire into the adequacy, accuracy, completeness or reasonableness of any representation, warranty, valuation, statement, projection, assumption or information at any time provided by or on behalf of the Borrower, the Guarantors or any other person under or in connection with any Security Document (whether or not that information has been or is at any time circulated to it by the Facility Agent); or (iii) to assess or keep under review the business, financial condition, prospects, creditworthiness, status or affairs of the Borrower, the Guarantors or any other person. 19.8 LENDERS' INDEMNITY To the extent that the Borrower or either of the Guarantors do not do so on demand or are not obliged to do so, each Lender shall on demand indemnify the Facility Agent in the proportion borne by its Outstandings to all the Outstandings at the relevant time (or, if there are then no Outstandings, in the proportion borne by its Commitments to the Total Commitments) against any cost, expense or liability mentioned in Clause 16 (Fees and Expenses) or sustained or incurred by the Facility Agent in complying with any instructions from the Majority Lenders or otherwise sustained or incurred by it (in its capacity as an Agent) in connection with its duties, obligations and responsibilities under the Security Documents except routine administrative costs and expenses of the Facility Agent or to the extent that they are sustained or incurred as a result of the gross negligence or wilful misconduct of the Facility Agent or any of its personnel or agents. 19.9 CHANGE OF AGENTS Notwithstanding the irrevocable appointments in Clause 19.1, the Facility Agent may resign at any time if it gives at least 30 days' notice in writing to the Borrower and the Lenders and the Facility Agent may at any time be removed by the Majority Lenders giving not less than 30 days' notice to the Facility Agent. However, no resignation or removal shall be effective until the successor has been appointed and accepted its appointment in accordance with this Clause 19.9. The Majority Lenders may appoint a successor to the resigning or removed Facility Agent but, if the successor has not been so appointed and accepted its appointment within 15 days after the date of the notice of resignation or, as the case may be, removal, the resigning Facility Agent and the Majority Lenders may appoint a successor Facility Agent. Any appointment of a successor must be in writing, signed by the person(s) appointing that successor and delivered to that successor. Any acceptance of such appointment must be in writing, signed by the person appointed and delivered to the person(s) appointing that successor. The other parties to this Agreement shall be promptly informed of the acceptance by a successor Facility Agent. Upon the successor accepting its appointment, the resigning or, as the case may - 59 - be, the removed facility Agent shall be automatically discharged from any further obligation under the Security Documents and its successor and each of the other parties to the Security Documents shall have the same rights and obligations among themselves as they would have had if the successor had been the original Facility Agent party to this Agreement and the other Security Documents. The resigning or, as the case may be, the removed Facility Agent shall provide its successor with (or with copies of) such records as its successor requires to carry out its duties under the Security Documents. 19.10 SIGNING OF TRANSFER CERTIFICATES The Borrower, the Security Agent and each Lender (except for the Existing Lender and the New Lender seeking the relevant assignment and/or novation) irrevocably authorises the Facility Agent to sign each Transfer Certificate on their behalf. 19.11 ACCEPTANCE OF TITLE The Facility Agent may accept without investigation, requisition or objection such title as any person may have to the undertakings, property and assets which are subject to the Security Documents and shall not be bound or concerned to examine or enquire into nor be liable to any other Secured Party or any other person for any defect or failure in the title of any person whether such defect or failure was known to the Facility Agent or might have been discovered upon examination or enquiry and whether capable of remedy or not nor for any failure on the part of the Facility Agent to give notice to any third party of the Security Documents to which it is party or otherwise perfect or register the security thereby created. 19.12 THE BORROWER AND THE FACILITY AGENT The Borrower shall be entitled to rely on any direction, instruction, certificate, document or other communication made by the Facility Agent and shall not be required to enquire whether it is made with the authority of the Lenders, and performance of any obligation arising under this Agreement or the Security Documents in reliance on any such shall be deemed to be proper performance of the obligation in question. 19.13 AGENT OF THE LENDERS Save as expressly provided in the Security Documents, the Facility Agent is appointed hereunder and thereunder solely as the agent of the Lenders, and the foregoing provisions of this Clause 19 (The Agents) apply solely to the Facility Agent in their capacity as agent for the Lenders. 19.14 AGENT'S KNOWLEDGE Information obtained by the Facility Agent in any capacity other than in its capacity as Facility Agent and or through any department other than the department having specific responsibility for the administration of the Loan and the Security Documents shall not be imputed to the Facility Agent. - 60 - 19.15 AMENDMENTS The Facility Agent may (except where any other authority is required for the same by the express provisions of the Financing Documents) grant waivers or consents or vary the terms of the Financing Documents only if the same has been authorised by the Majority Lenders. Any such waiver, consent or variation so authorised and effected by the Facility Agent shall be binding on all the Lenders and the Facility Agent shall be under no liability whatsoever in respect of any such wavier, consent or variation. This Clause 19.15 shall not authorise, except with the prior consent of all the Lenders: (a) any change in the manner in which interest is calculated or paid under this Agreement in respect of the Loan; (b) any extension of the date for, or alteration in the amount or currency of, any payment of principal, interest, fee, commission or any other amount payable under the Financing Documents in respect of the Loan; (c) any increase in any Lender's Commitment in respect of the Facilities; (d) any extension of a date on which a payment of principal must be paid in respect of the Loan; or (e) any variation of the definition of Majority Lenders, and this Clause 19.15 shall not authorise, except with the prior consent of all the Lenders; (g) any variation of: (i) Clause 14.1 (ILLEGALITY), 20.2 (PRO RATA SHARING); or (ii) this Clause 19.17, (h) any extension of the Availability Period; or (i) any amendment of any provision of the Financing Documents which contemplates the need for the consent or approval of each Lender. 19.16 THE SECURITY AGENT The Lenders will appoint the Security Agent to act as security agent in accordance with the Security Trust Deed. 20. SET-OFF/PRO-RATA SHARING 20.1 SET OFF The Borrower authorises the Facility Agent and each of the Lenders to apply (without prior notice) any credit balance (whether or not then due) to which the Borrower is at any time beneficially entitled on any account at, any sum held to its order by and/or any liability or obligation (whether or not matured) of, any office of the Facility Agent or such Lender in or towards satisfaction of any sum then due and payable by it to the Facility Agent or such Lender under the Security Documents and unpaid and, for that - 61 - purpose, to convert one currency into another (provided that nothing in this Clause 20.1 shall be effective to create a charge, and provided further that any credit balance, sum and/or liability or obligation as aforesaid shall be held by the Facility Agent or, as the case may be, such Lender pursuant to or in connection with the Security Documents). No party shall be obliged to exercise any of its rights under this Clause 20.1, which shall be without prejudice and in addition to any right of set-off, combination of accounts, lien or other right (including the benefit of the Security Documents) to which it is at any time otherwise entitled (whether by operation of law, contract or otherwise). Each Lender shall notify the Facility Agent and the Borrower forthwith upon the exercise or purported exercise of any right of set-off giving full details in relation thereto and the Facility Agent shall inform the other Lenders forthwith. 20.2 PRO-RATA SHARING If at any time the proportion received or recovered (whether by direct payment, by exercise of any right of set-off, combination of accounts or lien, or otherwise) by any Lender in respect of the total sum which has become due to it from the Borrower or either of the Guarantors under the Security Documents before that time exceeds the proportion received or recovered by the Lender(s) receiving or recovering the smallest proportion (if any), then:- (i) such Lender shall promptly notify the Facility Agent and within 2 Banking Days after receiving a request from the Facility Agent, that Lender shall pay to the Facility Agent an amount equal to the excess and the Facility Agent shall notify the Borrower or the relevant Guarantor, as the case may be, of the receipt of such amount; (ii) the Facility Agent shall promptly distribute that payment as if it were made by the Borrower or the relevant Guarantor, as the case may be; and (iii) as between the Borrower and the Lenders, that excess amount shall be treated as having been paid to the Lenders to which (and in the proportions in which) it is distributed under (ii) above, rather than as having been paid to that Lender. Within 2 Banking Days after any Lender receives or recovers any such sum otherwise than by payment through the Facility Agent, that Lender shall notify the Facility Agent of the amount and currency so received or recovered, how it was received or recovered and whether it represents principal, interest or other sums. If all or part of any amount so received or recovered by that Lender (the "RELEVANT LENDER") required thereafter to be repaid to the Borrower or another obligor, as the case may be, has to be refunded by it (with or without interest), each Lender to whom any part of that amount has been distributed shall repay to the Facility Agent for the account of the Relevant Lender (within 2 Banking Days after receiving a request from the Facility Agent on behalf of the Relevant Lender) its proportionate share of the amount to be repaid to the Borrower or, as the case may be, other obligor and of any interest required to be paid by the Relevant Lender on that amount in respect of all or any part of the period from the date of the relevant distribution to the date of that payment to the Relevant Lender. Any amount received or recovered by a Lender under a novation, assignment, sub-participation or the like shall be ignored for the purpose of this Clause 20.2. Furthermore, a Lender shall not be obliged to share any amount which it has (i) alone - 62 - received on its own account under Clause 14 (Changes in Circumstances) or (ii) received or recovered as a result of taking legal proceedings with any other Lender which had an opportunity to participate in those legal proceedings but did not do so and did not take separate legal proceedings. The provisions of this Clause 20.2 shall not, and shall not be construed so as to, constitute a charge by a Lender over all or any part of a sum received or recovered by it in the circumstances mentioned in Clause 20.2. 20.3 FLOOR GUARANTEE For the avoidance of doubt, nothing contained in this Clause 20 shall in any way restrict the Initial Lenders or other Beneficiaries under (and as defined in) the Floor Guarantee from recovering and retaining for their own exclusive benefit amounts received or recovered by them under or in respect of the Floor Guarantee. 21. NOTICES, ETC. 21.1 METHOD OF SENDING Each communication to be made hereunder shall be made in writing but, unless otherwise stated, may be made by facsimile transmission or by telex or by letter. 21.2 ADDRESSES FOR NOTICES Any communication or document to be made or delivered by one person to another pursuant to this Agreement shall (unless the one has by not less than three (3) days' written notice to the other specified another address) be made or delivered to that other person at the respective addresses set out below. (1) The Borrower (Petrodrill Seven Limited):- PETRODRILL ENGINEERING NV K.P. van der Mandalelaan 38 3062 MB Rotterdam (Brainpark) The Netherlands Attention: Steve Assiter Facsimile: Telex: (2) The Initial Lenders:- PETRO DIA THREE S.A. c/o MITSUBISHI CORPORATION 6-3 Marunouchi 2-chome Chiyoda-ku Tokyo Japan Attention: General Manager, Ship & Industrial Project Department -63- PETRO DIA FOUR S.A. c/o MITSUBISHI CORPORATION 6-3 Marunouchi 2-chome Chiyoda-ku Tokyo Japan Attention: General Manager, Ship & Industrial Project Department Facsimile: Telex: (3) The Facility Agent:- MITSUBISHI CORPORATION (UK) PLC Bow Bells House Bread Street London EC4M 9BQ Attention: General Manager, Machinery Department Facsimile: 0171 822 0184 Telex: (4) The Security Agent:- MITSUBISHI CORPORATION (UK) PLC Bow Bells House Bread Street London EC4M 9BQ Attention: General Manager, Machinery Department Facsimile: 0171 822 0184 Telex: 21.3 DEEMED RECEIPT Any notice given hereunder shall be deemed to have been received: (i) If sent by facsimile transmission or by telex, at the opening of business one (1) Banking Day after the day it was transmitted; (ii) In the case of a written notice lodged by hand, at the time of actual delivery; and (iii) If posted, on the fifth Banking Day following the day on which it was properly despatched by first class mail postage prepaid. 22. COUNTERPARTS - 64 - This Agreement may be executed in any number of counterparts and by the different parties hereto on different counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument. 23. AGENTS' AND LENDERS' CERTIFICATES A certificate of either of the Agents or of any Lender (i) stating the amount of any sum due to such Agent or Lender hereunder (and specifying the provision hereof under which such sum became due and reasonable details of the manner of calculation thereof), and/or (ii) stating the determination by either Agent or any Lender as to any matter to be determined by such Agent or Lender hereunder (including but not limited to rate of interest and currency exchange), shall be conclusive as to the subject matter thereof in the absence of manifest error. 24. WAIVER; REMEDIES CUMULATIVE No failure to exercise and no delay in exercising on the part of the Lender any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof, or the exercise of any other right, power or privilege. The rights and remedies herein provided are cumulative and not exclusive of any rights or remedies provided by law. 25. LANGUAGE Each document referred to herein or to be delivered hereunder and under the Security Documents (including financial statements) and each other communication shall be in the English language. In the event of any conflict between the version in English and any version in any other language of any document (including this Agreement) the version in English shall prevail. 26. SEVERABILITY Any provision in this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. 27. GOVERNING LAW AND JURISDICTION 27.1 GOVERNING LAW This Agreement shall be governed by and construed in accordance with English law. 27.2 SUBMISSION TO JURISDICTION For the benefit of the Agents and the Lenders, the Borrower irrevocably agrees that the English courts are to have jurisdiction to settle any disputes which may arise out of or in connection with this Agreement and the other Financing Documents and that accordingly any suit, action or proceedings ("PROCEEDINGS") arising out of or in connection with this Agreement and the other Financing Documents may be brought in such courts. - 65 - 27.3 WAIVER OF OBJECTION The Borrower irrevocably waives any objection which it may have now or hereafter to the laying of the venue of any Proceedings in any such court as is referred to in Clause 27.2 and any claim that any such Proceedings have been brought in an inconvenient forum and further irrevocably agrees that a judgment in any Proceedings brought in the English courts shall be conclusive and binding upon the Borrower and may be enforced in the courts of any other jurisdiction. 27.4 OTHER JURISDICTIONS Nothing contained in this Clause 27 shall limit the right of the Agents or any Lender to take proceedings against the Borrower in any other court of competent jurisdiction, nor shall the taking of Proceedings in any one or more jurisdictions preclude the taking of Proceedings in any other jurisdiction, whether concurrently or not. 27.5 SERVICE OF PROCESS The Borrower irrevocably and unconditionally: (a) designates, and appoints and empowers Hackwood Secretaries Limited of One Silk Street, London EC2Y 8HQ to receive for it and on its behalf, service of process issued out of the English courts to receive for it and on its behalf service of process issued out of the Japanese courts in any Proceedings arising out of or in connection with this Agreement; (b) agrees to maintain in England a duly appointed process agent notified to the Facility Agent, for the purposes of paragraph (a) above; (c) agrees that failure by any such process agent to give notice of such process to it shall not impair the validity of such service or of any judgment based thereon; (d) consents to the service of process out of any of the said courts in any such Proceedings by the airmailing of copies, postage prepaid, to it at its address for the time being applying for the purposes of Clause 19; and (e) agrees that nothing herein shall affect the right to serve process in any other manner permitted by law. IN WITNESS whereof the parties hereto have caused this Agreement to be duly executed by their authorised officers or other representatives the day and year first above written - 66 - SIGNATORIES EXECUTED on behalf of ) /s/ Illegible PETRODRILL SEVEN LIMITED ) by its duly authorised signatory/ ) attorney-in-fact: ) /s/ Illegible EXECUTED on behalf of PETRO ) /s/ H. MIYAMOTO DIA THREE S.A. by its duly ) authorised signatory/attorney-in-fact: ) /s/ Illegible EXECUTED on behalf of PETRO ) /s/ H. MIYAMOTO DIA FOUR S.A. by its duly ) authorised signatory/attorney-in-fact: ) /s/ Illegible EXECUTED on behalf of ) /s/ Illegible MITSUBISHI CORPORATION ) (UK) PLC (in its capacity as Facility ) Agent) a by its duly authorised ) signatory/attorney-in-fact: ) /s/ Illegible EXECUTED on behalf of ) /s/ Illegible MITSUBISHI CORPORATION ) (UK) PLC (in its capacity as Security ) Agent) by its duly authorised ) signatory/attorney-in-fact: ) /s/ Illegible - 67 - SCHEDULE 1 THE LENDERS AND THEIR COMMITMENTS TRANCHE A FACILITY NAME OF LENDER AMOUNT OF TRANCHE A COMMITMENT US$ (INCLUDING INTEREST TO BE CAPITALISED PRIOR TO THE NOTIONAL INTERIM A FACILITY DATE) Petro Dia Four SA 53,000,000 TRANCHE B FACILITY NAME OF LENDER AMOUNT OF TRANCHE B COMMITMENT US$ (INCLUDING INTEREST TO BE CAPITALISED PRIOR TO THE NOTIONAL INTERIM A FACILITY DATE) Petro Dia Three SA 74,000,000 TRANCHE C FACILITY NAME OF LENDER AMOUNT OF TRANCHE C COMMITMENT US$ (INCLUDING INTEREST TO BE CAPITALISED PRIOR TO THE NOTIONAL INTERIM A FACILITY DATE) Petro Dia Three SA 53,000,000 - 68 - SCHEDULE 2 THE FORM OF REPAYMENT SCHEDULE REPAYMENT DATE AMOUNT OF REPAYMENT INSTALMENT - 69 - SCHEDULE 3 PART 1: SERVICES CONTRACTS 1. Management Agreement between the Borrower and Formaritima Ltd relating to the Rig and dated as of 5 November 1998. 2. Licensing Agreement between Bigem Holdings NV and the Borrower relating to the design of the Rig and dated as of 5 November 1998. 3. Construction Management Agreement between the Borrower and Petrodrill Engineering BV relating to the Rig and dated as of 5 November 1998. PART 2: OTHER SERVICES CONTRACTS 1. Technical Services Agreement between Formaritima Ltd and Pride-Foramer S.A. relating to the Rig and dated as of 5 November 1998. 2. Marine and Nautical Services Agreement between Formaritima Ltd and Workships Contractors B.V. relating to the Rig and dated as of 5 November 1998. 3. Supply Agreement between Petrodrill Engineering N.V. and Maritima relating to the Rig and dated as of 5 November 1998. 4. Local Services Agreement between Formaritima Ltd and Maritima relating to the Rig and dated as of 5 November 1998. 5. Supply Agreement between Petrodrill Engineering N.V. and Pride-Foramer S.A. relating to the Rig and dated as of 5 November 1998. 6. Supply Agreement between Petrodrill Engineering N.V. and Workships Contractors B.V. - 70 - SCHEDULE 4 DRAWING REQUEST FROM: Petrodrill Seven Limited [DATE] TO: Mitsubishi Corporation (UK) PLC as Facility Agent Dear Sirs LOAN AGREEMENT We refer to the Loan Agreement dated [ ] December 1998 (the "LOAN AGREEMENT") and made between the Lenders (as defined therein) (1) ourselves (as Borrower), Mitsubishi Corporation (UK) PLC (as Facility Agent) and Mitsubishi Corporation (UK) PLC (as Security Agent). Terms defined in the Loan Agreement shall have the same meaning when used herein. We hereby give you irrevocable Notice: (a) that we wish to make a Drawing on [INSERT DATE OF PROPOSED drawing] (being a Banking Day during the Availability Period)*; (b) that the Advance will be in the principal amount of US$[ ]; and (c) that the Facility under which the Drawing is requested is the: [Tranche A Facility] [Tranche B Facility] [Tranche C Facility], upon the terms and subject to the conditions of the Loan Agreement. We confirm that the representations and warranties set out in Clause 8 of the Loan Agreement are true and that, no event which is or, with the giving of notice or the passage of time or both, would become an Event of Default has occurred and is continuing. Please pay the proceeds of the Advance to the credit of the Management Account. Yours faithfully _________________________________ Authorised signatory for and on behalf of PETRODRILL SEVEN LIMITED _________________________________ * or attached schedule of requested Pre-delivery Advances. - 71 - SCHEDULE 5 DETAILS OF THE HOLDER OF SHARES IN THE BORROWER AND THE SISTER COMPANY Amethyst Financial Company Limited is the registered holder and beneficial owner of the entire issued share capital in the Borrower. - 72 - SCHEDULE 6 FORM OF TRANSFER CERTIFICATE To: [Insert name of Facility Agent] [Insert address of Facility Agent] Attention: [ ] PETRODRILL SEVEN LIMITED US$180,000,000 LOAN AGREEMENT DATED [ ] 1998 1. This Transfer Certificate relates to the above loan agreement (the "LOAN AGREEMENT", which term shall include any amendments or supplements thereto), and the other Security Documents referred to therein. Terms defined in the Loan Agreement have the same meaning in this Transfer Certificate. In this Transfer Certificate : "EXISTING LENDER" means [ ]; and "TRANSFEREE" means [ ]. 2. The Existing Lender (i) confirms that the details in the Schedule to this Transfer Certificate under the heading "RIGHTS TO BE ASSIGNED AND/OR OBLIGATIONS TO BE NOVATED" accurately summarises the Outstandings which are to be assigned and/or Commitments which are to be novated by this Transfer Certificate and (ii) requests the Transferee to accept and procure the transfer to the Transferee of the portion specified in the Schedule hereto of, as the case may be, such Outstandings and/or its Commitment by counter-signing and delivering this Transfer Certificate to the Facility Agent at its address for the service of notices specified in the Loan Agreement. 3. The Transferee hereby requests the Facility Agent to accept this Transfer Certificate as being delivered to the Facility Agent pursuant to and for the purposes of Clause 15 (Transfers) of the Loan Agreement so as to take effect in accordance with the terms thereof on the Transfer Date or on such later date as may be determined in accordance with the terms thereof. 4. The Transferee: (a) confirms that it has received a copy of the Loan Agreement together with such other documents and information as it has requested in connection with this transaction; (b) confirms that it has not relied and will not rely on the Existing Lender to check or enquire on its behalf into the legality, validity, effectiveness, adequacy or completeness of any such documents or information; - 73 - (c) confirms and agrees that it has not relied and will not rely on any of the Existing Lender, the Agents, or the other Lenders to assess or keep under review on its behalf the financial condition, creditworthiness, condition, affairs, status or nature of the Borrower or any other party to the Security Documents, and has not relied and will not rely on any of the Existing Lender, the Agent or the other Lenders to ensure that the Borrower or any other party to the Security Documents are not in breach of or default under any of the same; and (d) if not already a Lender, appoints the Agents to act as its agents as provided in the Loan Agreement and the Security Trustee Deed and agrees to be bound by the Loan Agreement (including, but not limited to, Clause 15 (Transfer)). 5. The Transferee undertakes with the Existing Lender and each of the other parties to the Loan Agreement that it will perform, in accordance with their terms, all those obligations which, by the terms of the Loan Agreement, will be assumed by it upon delivery of the executed copy of this Transfer Certificate to the Facility Agent. 6. On execution of this Transfer Certificate by the Facility Agent on their behalf, the Borrower, the Lenders and the Agents accept the Transferee as a party to the Loan Agreement in substitution for the Existing Lender with respect to all those rights and obligations which, by the terms of the Loan Agreement and other Security Documents, will be transferred to or assumed by the Transferee after delivery of the executed copy of this Transfer Certificate to the Facility Agent. 7. None of the Existing Lender, the other Lenders or the Agents: (a) makes any representation or warranty or assumes any responsibility with respect to the legality, validity, effectiveness, adequacy or enforceability of any of the Loan Agreement and the Security Documents or the Project Documents, or with respect to whether the Borrower, the Guarantors or any other party to the Security Documents or the Project Documents has complied with its obligations thereunder (under Clause 3 (Conditions Precedent) of the Loan Agreement); or (b) assumes any responsibility for the financial condition of the Borrower, the Guarantors or any other party to any Security Document or Project Document or any other document or for the performance and observance by the Borrower, the Guarantors or any other party to the Security Documents or Project Documents or any other document of its or their obligations and any and all conditions and warranties, whether express or implied by law or otherwise, are hereby excluded. 8. The Existing Lender hereby gives notice that nothing herein or in the Loan Agreement (or any document relating thereto) shall oblige the Existing Lender to (i) accept a re-transfer from the Transferee of the whole or any part of its rights, benefits and/or obligations under the Loan Agreement transferred pursuant hereto or (ii) support any losses directly or indirectly sustained or incurred by the Transferee for any reason whatsoever including, without limitation, the non-performance by the Borrower, the Guarantors or any other party to the Security Documents (or any document relating thereto) of its obligations under any such document. The Transferee hereby acknowledges the absence of any such obligation as is referred to in (i) or (ii) above. - 74 - 9. This Transfer Certificate and the rights and obligations of the parties hereunder shall be governed by and construed in accordance with English law. 10. The Transferee warrants and represents to the Facility Agent and each of the Lenders that it is a Qualifying Lender as defined in Clause 1.1 of the Loan Agreement. THE SCHEDULE 1. Existing Lender: 2. Transferee: 3. Transfer Date: 4. Commitment: Lender's Commitment Facility (Tranche A, Portion Transferred (US$) B or C) (US$) 5. Outstandings: Amount of Lender's Facility (Tranche A, Drawdown Date Portion Participation (US$) B or C) Transferred 6. Transferee's Lending Office details: Address: Telephone Number: Telex No: Fax No: 7. Rights to be Assigned and/or Obligations to be Novated. ___________________________ ___________________________ [Existing Lender] [Transferee] __________________________________ Facility Agent for itself and on behalf of the Security Trustee and the Borrower - 75 - SCHEDULE 7 PART 1 - THE PROJECT DOCUMENTS 1. (a) Shipbuilding Contract dated 9 April 1998 the "SHIPBUILDING CONTRACT" between Daewoo Corporation and Daewoo Heavy Industries Ltd. (collectively, the "BUILDER") and Petrodrill Offshore Inc. (formerly called Petrodrill Construction Inc.) (the "OWNER") for the purchase of a Dynamic Positioned Semi-Submersible Drilling Vessel having the Hull No. 3015. (b) Side Letter No. 1 dated as of 9 April 1998 between the Owner and the Builder, whereby the Owner has agreed to certain amendments to the Shipbuilding Contract as set forth therein. (c) Side Letter No. 2, dated as of 9 April 1998 between the Owner and the Builder, whereby the Owner has agreed to consider certain proposals of the Builder as set forth therein. (d) Main Contract Amendment Agreement dated 8 October 1998. (e) Novation Agreement in respect of the Shipbuilding Contract dated 4 December 1998 between the Builder, the Owner and the Borrower. (f) Letter of Confirmation as to continued validity of the Rig Construction Contract. 2. (a) Refund Guarantee (the "REFUND GUARANTEE") issued by The Export-Import Bank of Korea (the "REFUND GUARANTOR"). (b) Novation Agreement in respect of the Refund Guarantee dated 4 December 1998. (c) Consent in respect of (f) above. 3. Chartering Contract (Contract No. [101.2.159.97-1] between Maritima Navigacao e Engenharia Ltda (whose successor is Maritima) and Petrobras. 4. Services Rendering Contract (Contract no. [101.2.156.97-0] between Maritima Navigacao e Engenharia Ltda (whose successor is Maritima) and Petrobras. 5. Letter of Agreement dated 15 January 1998, relative to the aforesaid Chartering Contract and Services Rendering Contract, between Maritima and Petrobras. 6. A further Letter of Agreement dated 15 January 1998, relative to the aforesaid Chartering Contract and Services Rendering Contract, between Maritima and Petrobras. 7. Rider No. 01 for the assignment of rights and obligations arising from the aforesaid Chartering Contract, dated 10 July 1998 and made between Petrobras, Maritima and Petrodrill Seven Limited. 8. Rider No. 1 to the aforesaid Services Rendering Contract, dated 21 August 1998 and made between Maritima, Petrobras and Petrodrill Seven Limited. - 76 - 9. Letter dated 28 May 1998 from Petrobras to Maritima reference E&P/SUEX-SSE-048-98. 10. Amethyst Seven Technical Services Agreement between Formaritima Ltd. and Pride-Foramer S.A.; 11. Amethyst Seven Marine and Nautical Services Agreement between Formaritima Ltd. and Workships Contractors BV; 12. Amethyst Seven Management Agreement between Petrodrill Seven Limited and Formaritima Ltd.; 13. Amethyst Seven Supply Agreement between Petrodrill Engineering N.V. and Maritima Petroleo e Engenharia Ltda; 14. Amethyst Seven Local Services Agreement between Formaritima Ltd. and Maritima Petroleo e Engenharia Ltda; 15. Licensing Agreement between Bigem Holdings N.V. and Petrodrill Seven Limited; 16. Amethyst Seven Supply Agreement between Petrodrill Engineering N.V. and Pride-Foramer S.A; 17. Amethyst Seven Supply Agreement between Petrodrill Engineering N.V. and Workships Contractors B.V.; 18. Amethyst Seven Construction Management Agreement between Petrodrill Seven Limited and Petrodrill Engineering N.V.; and 19. Amethyst Financial Company Ltd's Shareholders' Agreement between Drillpetro Inc., Techdrill Inc., and Westville Management Corporation. 20. Local Services Agreement between Maritima and Formaritima Ltd. 21. Technical Services Agreement between Pride-Foramer SA and Formaritima Ltd. 22. Supply Agreement between Pride-Foramer SA and Petrodrill Engineering Ltd. 23. Supply Agreement between Maritima and Petrodrill Engineering Ltd. 24. Supply Agreement between Workships Contractors BV and Petrodrill Engineering Ltd. PART 2 - THE SECURITY DOCUMENTS 1. Rig Construction Contract and Refund Guarantees Assignment 2. Rig Mortgage 3. Deed of Covenants 4. Charterparty Assignment 5. Services Rendering Contract Assignment - 77 - 6. Insurances Assignment 7. Management Account Charge 8. Reserve Account Charge 9. Services Contracts Assignment 10. Share Charge 11. Cross Guarantee 12. Deed of Guarantee and Undertaking 13. Assignment of Deed of Guarantee and Undertaking and Subordinated Loan Facility Agreement 14. Mortgage Debenture 15. Security Trust Deed 16. The Additional Funding and Guarantee Agreement referred to in Clause 7.5 17. Inter-company Loan Assignment 18. The subordinated loan facility agreement referred to in Clause 7.1(xiii) - 78 - SCHEDULE 8 INSURANCES The Insurances to be effected and maintained throughout the Security Period shall be effected and maintained (with the Security Agent, the Facility Agent and each of the Lenders being named as a principal assured) with insurers acceptable to the Facility Agent providing insurance cover against such risks as are insured by the Temporary Confirmation of Insurance and on terms and conditions no less favourable than are provided for by the Temporary Confirmation of Insurance and (subject to such insurance being available in the international insurance markets) otherwise as the Facility Agent may from time to time at its discretion require. - 79 - EX-4.9 11 EXHIBIT 4.9 DATED 19 DECEMBER 1998 THE LENDERS HEREIN REFERRED TO as Lenders -and- PETRODRILL SIX LIMITED as Borrower - and - MITSUBISHI CORPORATION (UK) PLC as Facility Agent - and - MITSUBISHI CORPORATION (UK) PLC as Security Agent ------------------------------------------------- LOAN AGREEMENT providing for a secured loan facility not exceeding US$160,000,000 in connection with the acquisition of a semi-submersible drilling rig t.b.n. "AMETHYST 6" ------------------------------------------------- FIELD - FISHER - WATERHOUSE 41 VINE STREET LONDON EC3N 2AA CONTENTS CLAUSE/HEADING PAGE - - -------------- ---- 1. DEFINITIONS AND INTERPRETATION 2 2. THE FACILITY 18 3. CONDITIONS PRECEDENT 20 4. DISBURSEMENT OF ADVANCES 24 5. INTEREST 27 6. REPAYMENT AND PREPAYMENT 28 7. SECURITY 30 8. REPRESENTATIONS 32 9. PAYMENTS: TAXATION 36 10. EVENTS OF DEFAULT 38 11. COVENANTS 42 12. SECURITY ACCOUNTS 47 13. PROVISIONS RELATING TO SECURITY 49 14. CHANGE IN CIRCUMSTANCES 49 15. TRANSFERS 52 16. FEES AND EXPENSES 54 17. CURRENCY INDEMNITY 54 18. GENERAL INDEMNITIES 55 19. THE AGENTS 56 20. SET-OFF/PRO-RATA SHARING 63 21. NOTICES, ETC. 64 22. COUNTERPARTS 66 23. AGENTS'AND LENDERS'CERTIFICATES 66 24. WAIVER; REMEDIES CUMULATIVE 66 25. LANGUAGE 67 26. SEVERABILITY 67 27. GOVERNING LAW AND JURISDICTION 67 SIGNATORIES 69 SCHEDULES 1 THE LENDERS AND THEIR COMMITMENTS 70 2 THE FORM OF REPAYMENT SCHEDULE 71 3 PART 1: SERVICES CONTRACTS 72 PART 2: OTHER SERVICES CONTRACTS 72 4 DRAWING REQUEST 73 5 DETAILS OF THE HOLDER OF SHARES IN THE BORROWER AND THE SISTER COMPANY 74 6 FORM OF TRANSFER CERTIFICATE 75 7 PART 1 - THE PROJECT DOCUMENTS 78 PART 2 - THE SECURITY DOCUMENTS 79 8 INSURANCES 81 THIS AGREEMENT is made this 19th day of December 1998 BETWEEN (1) THE LENDERS, the respective names and offices of which are set out in the First Schedule, as Lenders; (2) PETRODRILL SIX LIMITED, a company incorporated under the laws of the British Virgin Islands having its registered office at 325 Waterfront Drive, Omar Hodge Building, 2nd Floor, Wickhams Cay, Road Town, Tortola, British Virgin Islands, as Borrower; (3) MITSUBISHI CORPORATION (UK) PLC, a company incorporated in England and Wales (Reg No. 2214224) whose registered office is at Bow Bells House, Bread Street, London EC4M 9BQ, in its capacity as facility agent for the Lenders; and (4) MITSUBISHI CORPORATION (UK) PLC, a company incorporated in England and Wales (Reg No. 2214224) whose registered office is Bow Bells House, Bread Street, London EC4M 9BQ, in its capacity as security agent and trustee for the Secured Parties. WHEREAS: (A) This Agreement sets out the terms and conditions upon and subject to which loan facilities will be made available to the Borrower in an aggregate principal amount (including interest capitalised in accordance with the terms hereof) not exceeding US$160,000,000 for the purpose of financing the acquisition of a semi-submersible drilling rig to be constructed by the Builder, comprising a Tranche A Facility of a principal amount (including interest capitalised as aforesaid) not exceeding US$47,000,000, a Tranche B Facility in a principal amount (including interest capitalised as aforesaid) not exceeding US$66,000,000 and a Tranche C Facility in a principal amount (including interest capitalised as aforesaid) not exceeding US$47,000,000. (B) Subject to and upon the terms and conditions contained in this Agreement and the Sister Company Loan Agreement respectively MC1 has agreed to make available to the Borrower and the Sister Company loan facilities in the aggregate principal amount (including interest capitalised as aforesaid) not exceeding US$113,000,000 and of US$127,000,000 respectively. (C) Maritima and Pride have severally and unconditionally agreed with and undertaken to MC1 and MC2 that subject to and in accordance with the terms of the Additional Funding and Guarantee Agreement (referred to in Recital (D)), they will provide or arrange the provision of funding to the Borrower in each case on or before 29 October 1999 and in each case on the terms and conditions of the facilities to be made available under this Agreement and the Sister Company Loan Agreement in the amount (including interest capitalised as aforesaid as at such date) of US$47,000,000 and to the Sister Company in the amount of US$53,000,000 (including interest capitalised in accordance with the terms of the Sister Company Loan Agreement as at such date). - 1 - (D) Accordingly it has been agreed that subject to the terms and conditions contained in this Agreement MC1 will provide a bridging loan to MC2 (an affiliate company of MC1) in an amount (including interest capitalised as hereinafter provided to 29 October 1999) not exceeding US$47,000,000 on terms that it will be repaid to MC1 on or before 29 October 1999 and to give effect to this and to the agreement and undertaking referred to in Recital (C) Pride and Maritima have (INTER ALIA) entered into an Additional Funding and Guarantee Agreement with MC1 and MC2 whereby Pride and Maritima severally guarantee the repayment of the Bridging Loans and MC2 has granted to them an option severally to purchase (subject to and in accordance with the Additional Funding and Guarantee Agreement) from MC2 its Tranche A Commitment and its participation in the Tranche A Advances. (E) It has therefore also been agreed that the Tranche C Facility will only be made available to the Borrower by MC1 conditionally to the extent of the repayment to MC1 of the Bridging Loan and the assumption by Pride and Maritima or another Qualifying Lender of the Tranche A Commitments of MC2 and the assumption by Pride and Maritima or such party of MC2's participation in the Tranche A Advances and the payment by Pride and Maritima to MC2 of the amount thereof all in accordance with the Additional Funding and Guarantee Agreement. NOW IT IS HEREBY AGREED as follows:- 1. DEFINITIONS AND INTERPRETATION 1.1 DEFINED TERMS In this Agreement the following words and expressions shall, except where the context otherwise requires, have the following meanings: "ADDITIONAL FUNDERS" means Elliott Associates LP and Westgate International LP; "ADDITIONAL FUNDING AND GUARANTEE AGREEMENT" means the agreement to be executed in the approved form by MC1, MC2, the Borrower, the Guarantors and the Additional Funders whereby the Guarantors will severally guarantee the performance by MC2 of its obligations under the Bridging Loan Agreement and the Additional Funders guarantee the performance by Maritima of its obligations thereunder (in each case without any right of recourse to MC2); "ADVANCE" means an advance made or to be made or deemed to be by the Lenders under the Facilities or (as the context may require) the principal amount thereof for the time being outstanding and when designated an "A" ADVANCE, a "B" ADVANCE or a "C" ADVANCE means an Advance made or to be made in respect of the Tranche "A" Facility, the Tranche "B" Facility or the Tranche "C" Facility respectively and, additionally, when designated a "PRE-DELIVERY ADVANCE" means an Advance made or to be made prior to the Yard Delivery Date, when designated the "YARD DELIVERY ADVANCE" means the Advance made or to be made on the Yard Delivery Date upon delivery of the Rig by the Builder to the Borrower and when designated a "POST YARD DELIVERY ADVANCE" means an Advance made or to be made after the Yard Delivery Date but prior to the Charterparty Commencement Date; - 2 - "AGENTS" means the Facility Agent and the Security Agent, and "AGENT" means either of them, as the context requires; "ASSIGNMENT OF DEED OF GUARANTEE AND UNDERTAKING AND SUBORDINATED LOAN FACILITY AGREEMENT" means the assignment in the approved form to be executed pursuant to Clause 7.1(xiv); "AVAILABLE FACILITY AMOUNT" means on any date in respect of any Facility the Facility Amount of such Facility as reduced by the amount of Advances made or deemed to have been made hereunder in respect of such Facility and as further reduced by the amount of interest which has accrued on the Advances drawn or deemed to have been drawn under such Facility since the Interest Capitalisation Date last preceding such date; "AVAILABILITY PERIOD" means the period commencing on the date of this Agreement and ending on the earlier of 30 April 2001 and the Charterparty Commencement Date; "BALLOON" means the instalment of the Loan repayable by the Borrower on the Final Repayment Date pursuant to Clause 6.3; "BANKING DAY" means a day (not being a Saturday or Sunday) on which banks and foreign exchange markets are open for business in London, New York, Tokyo and Rio de Janeiro and, in respect of the period expiring on (and including) the Yard Delivery Date, Seoul; "BORROWER" means Petrodrill Six Limited, a company organised and existing under the laws of the British Virgin Islands (Company No. 273701) whose registered office is at 325 Waterfront Drive, Omar Hodge Building, 2nd Floor, Wickhams Cay, Road Town, Tortola, British Virgin Islands; "BRIDGING LOANS" has the meaning assigned to such term in the Bridging Loan Agreement and "BRIDGING LOAN" means the Bridging Loan made for the purpose of funding Tranche A Advances under the Tranche A Facility; "BRIDGING LOAN AGREEMENT" means the agreement in the approved form dated the same date as this Agreement between MC1 and MC2 pursuant to which MC1 has agreed to advance to MC2 the amounts of Advances made by MC2 under the Tranche A Facility and the amounts of certain advances made by MC2 pursuant to the Sister Company Loan Agreement; "BRIDGING LOAN REPAYMENT DATE" means the earlier of: (i) 29 October 1999; and (ii) the date on which (the Tranche A Facility having been fully drawn and the Tranche A Facility having been fully drawn under and as defined in the Sister Company Loan Agreement) further Drawings are not available for Drawing under the Tranche B Facility (and further drawings under the Tranche B Facility are not available as defined in and in accordance with the Sister Company Loan Agreement) by reason of the application of Clause 3.6(viii) of the Loan Agreement (or Sister Company Loan Agreement) (because the making of such Drawings would cause the Prospective Final Grossed-up Advances Amount of the - 3 - Tranche B Facility to exceed US$66,000,000 or (as the case may be) the Prospective Final Grossed-up Amount of the Tranche B Facility as defined in and under the Sister Company Loan Agreement to exceed US$74,000,000); "BUILDER" means Daewoo Corporation a company organised and existing under the laws of Korea and Daewoo Heavy Industries Ltd., a company organised and existing under the laws of Korea whose registered offices are at 541 5-GA, Namdaemuro, Jung-Gu, Seoul, Korea, being jointly and severally the builder under the Rig Construction Contract; "CHARTERPARTY" means the time charterparty agreement in respect of the Rig (Contract No. 101.2.159.97-1) dated on or around 12 January 1998 and executed by and between Maritima (as owner) and Petrobras (as charterer) in the approved form, all rights and obligations of Maritima having since been assigned by Maritima to the Borrower with Petrobras' approval by an assignment document made between Petrobras, Maritima and the Borrower dated 10 July 1998; "CHARTERPARTY ASSIGNMENT" means a deed of assignment to be executed by the Borrower in favour of the Security Agent for itself and as trustee for the Secured Parties in accordance with Clause 7.1(iii); "CHARTERPARTY COMMENCEMENT DATE" means the date on which the Rig (having arrived at the Port or in sheltered waters in Macae -RJ) is accepted by Petrobras for the commencement of operations, all in accordance with the Charterparty; "CHARTERPARTY HIRE" means all payments by way of charterhire and any other monies from time to time payable under the Charterparty; "COMMITMENT" in relation to a Lender means the aggregate of its Tranche A Commitment, its Tranche B Commitment and its Tranche C Commitment; "TRANCHE A COMMITMENT" in relation to a Lender means, subject as hereinafter provided, the amount (if any) set opposite its name in the column headed "TRANCHE A COMMITMENT" of Schedule 1 (or, as the case may be, the amount specified as the portion of the Tranche A Facility transferred in the Transfer Certificate pursuant to which such Lender became a party hereto), "TRANCHE B COMMITMENT" in relation to a Lender means, subject as hereinafter provided, the amount (if any) set opposite its name in the column headed "TRANCHE B COMMITMENT" of Schedule 1 (or, as the case may be, the amount specified as the portion of the Tranche B Facility transferred in the Transfer Certificate pursuant to which such Lender became a party hereto) and "TRANCHE C COMMITMENT" in relation to a Lender means, subject as hereinafter provided, the amount (if any) set opposite its name in the column headed "TRANCHE C COMMITMENT" in Schedule 1 (or, as the case may be, the amount specified as the portion of the Tranche C Facility transferred in the Transfer Certificate pursuant to which such Lender became a party hereto) and, in any such case, as reduced from time to time in accordance with the provisions hereof; and "TRANCHE A COMMITMENTS", "TRANCHE B COMMITMENTS" and "TRANCHE C COMMITMENTS" shall be construed accordingly; "CONSTRUCTION AND MOBILISATION COSTS" means the costs, charges and expenses paid or to be paid by the Borrower in respect of spare parts, operating manuals and procedures, training, construction management team costs, commissioning of all equipment, construction insurance and mobilisation costs during transit to Brazil; - 4 - "CONTRACT PRICE" has the meaning given to it in the Rig Construction Contract; "CONTRACTUAL DELIVERY DATE" has the meaning given to it in the Rig Construction Contract; "CORRESPONDING SISTER COMPANY COMMITMENTS", "CORRESPONDING SISTER COMPANY OUTSTANDINGS", "CORRESPONDING SISTER COMPANY FACILITIES" and "CORRESPONDING SISTER COMPANY ADVANCES" means, in relation to any Commitments, Outstandings, Facilities or Advances, the commitments, outstandings, facilities or, as the case may be, advances under the Sister Company Loan Agreement having the same designation as such Commitments, Outstandings, Facilities or Advances under this Agreement; "CROSS GUARANTEE" means the guarantee to be executed by the Borrower, the Sister Company and the Shareholder in favour of the Security Agent for itself and as trustee for the Secured Parties in accordance with Clause 7.1(xi); "DAILY RATE" means after the Charterparty Commencement Date (in respect of the first Year) US$27,805 per day during which the Rig is operating (and during any day during which the Rig is not operating US$14,300) comprising a fixed proportion of US$12,805 (or US$5,000 if non-operational for more than 5 consecutive working days) (the "FIXED PROPORTION") and a variable proportion of US$15,000 (or US$9,300 if non-operational for more than 5 consecutive working days) (the "VARIABLE PROPORTION") and in respect of each subsequent Year an amount equal to the aggregate of (i) the Fixed Proportion (unchanged) and (ii) the Variable Proportion escalated on the first anniversary of the Charterparty Commencement Date and each successive anniversary of the Charterparty Commencement Date thereafter at the rate of 3% per annum); "DEED OF COVENANTS" means the deed of covenants to be executed by the Borrower in favour of the Security Agent for itself and as trustee for the Secured Parties (in conjunction with the Mortgage) in accordance with Clause 7.1; "DEED OF GUARANTEE AND UNDERTAKING" means the deed of guarantee and undertaking to be executed in accordance with Clause 7.2(ii); "DELAYED DELIVERY DEDUCTIBLE" means any amount which is deductible by insurers before amounts become payable or which is deducted from amounts which are payable under the terms of the delayed delivery insurance effected pursuant to Clause 11.3 in the event of a claim being made in respect of such insurance; "DRAWDOWN DATE", in relation to an Advance, means the date on which such Advance is made or deemed to be made hereunder; "DRAWING REQUEST" means the request for drawing an Advance pursuant to any of the Facilities issued by the Borrower pursuant to this Agreement; "EARNINGS" means the aggregate of (i) the Charterparty Hire, (ii) all other moneys whatsoever due or to become due to the Borrower at any time during the Security Period arising out of the use or operation of the Rig and/or out of the provision of related services (including, but not limited to) all hire and other moneys receivable in respect of the Rig (whether receivable directly by the Borrower or by any agent on its behalf), all compensation payable to the Borrower in the event of requisition of the Rig for hire, all - 5 - remuneration for salvage and towage services and all demurrage and detention moneys and (iii) damages for breach (or payments for variation or termination) of the Charterparty or any other charterparty or contract entered into by the Borrower for the employment of the Rig; "ENVIRONMENTAL APPROVALS" means all approvals, licences, permits, exemptions and authorisations required under applicable Environmental Laws; "ENVIRONMENTAL CLAIM" means (1) any claim by, or directive from, any applicable governmental, judicial or other regulatory authority alleging breach of, or non-compliance with, any Environmental Laws or Environmental Approvals or otherwise howsoever relating to or arising out of an Environmental Incident or (2) any claim by any other third party howsoever relating to or arising out of an Environmental Incident (and, in each such case, "CLAIM" shall mean a claim for damages, clean-up costs, compliance, remedial action or otherwise); "ENVIRONMENTAL INCIDENT" means (1) any release (or threatened release) of Environmentally Sensitive Material from the Rig, (2) any incident in which Environmentally Sensitive Material is released (or threatens to be released) from any vessel other than the Rig and which involves collision between the Rig and such other vessel or some other incident of navigation or operation, in either case where the Rig or the Borrower are actually or allegedly at fault or otherwise liable (in whole or in part) or (3) any incident in which Environmentally Sensitive Material is released (or is threatened to be released) from a vessel other than the Rig and where a vessel is actually or potentially liable to be arrested as a result and/or where the Borrower is actually or allegedly at fault or otherwise liable; "ENVIRONMENTAL LAWS" means all laws, regulations, conventions and agreements whatsoever relating to pollution or protection of the environment (including, without limitation, the United States Oil Pollution Act of 1990 and any comparable laws of the individual States of the United States of America); and "ENVIRONMENTALLY SENSITIVE MATERIAL" means oil, oil products, gas or any other substance which is polluting, toxic or hazardous or any substance the release of which into the environment is regulated, prohibited or penalised by or pursuant to any Environmental Law; "EVENT OF DEFAULT" means any of the events specified in Clause 10.1; "FACILITIES" means the Tranche A Facility, the Tranche B Facility and the Tranche C Facility and "FACILITY" means any of them; "FACILITY AGENT" means Mitsubishi Corporation (UK) PLC, in its capacity as facility agent for the Lenders and includes any successor facility agent appointed hereunder; "FACILITY AMOUNT" means in relation to any Facility the amount of such Facility specified in Clause 2; "FINAL REPAYMENT DATE" means the last of the dates specified in the Repayment Schedule; - 6 - "FINANCING DOCUMENTS" means this Agreement and the Security Documents; "FLOOR GUARANTEE" means the guarantee to be executed by the Guarantors in accordance with Clause 7.2(i); "GUARANTEES" means the Floor Guarantee, and the Deed of Guarantee and Undertaking, and "GUARANTEE" means any of them; "GUARANTORS" means each of Maritima and Pride, and "GUARANTOR" means either of them; "INITIAL LENDERS" means MC1 and MC2; "INSURANCES" means all policies and contracts of insurance (which expression includes all entries of the Rig in a protection and indemnity or war risks association) which are from time to time taken out or entered into in respect of the Rig and the Charterparty Hire or otherwise howsoever in connection with the Rig, including (but not limited to) any policies of insurance effected pursuant to the Financing Documents including (without limitation) (i) all insurances taken out by the Builder in respect of the Rig and the Listed Items and the Purchaser's Supplies (as defined in the Rig Construction Contract), and (ii) the Temporary Confirmation of Insurance and (iii) (subject to such insurances being available in the international insurance market) such other insurances as the Facility Agent may from time to time at its discretion require; "INSURANCES ASSIGNMENT" means a deed of assignment to the Insurances executed or to be executed by the Borrower in favour of the Lender in accordance with Clause 7.1(v); "INTER-COMPANY LOAN" means the loan made or to be made pursuant to the Inter-company Loan Agreement; "INTER-COMPANY LOAN AGREEMENT" means the agreement in the approved form between the Borrower and the Sister Company for the loan by the Sister Company to the Borrower of US$10,000,000; "INTEREST CAPITALISATION DATES" means (i)the date falling six months after the date of this Agreement; (ii) each date falling at six monthly intervals between such date and (in the case of Tranche B Advances and Tranche C Advances) the Charterparty Commencement Date; and (iii) (in the case of Tranche A Advances) the Notional Interim A Facility Date and the Charterparty Commencement Date; "LENDERS" means the Initial Lenders and any person who becomes a Lender from time to time pursuant to Clause 15 (Transfers) but excluding any person who ceases to be a Lender pursuant to that Clause; "LENDING OFFICE" means in relation to a Lender, the branch office of such Lender through which such Lender is for the time being acting for the purposes of this Agreement; "LISTED ITEMS" means the equipment defined as the "LISTED ITEMS" in the Rig Construction Contract; - 7 - "LISTED ITEMS PRICE" means the price payable by the Borrower to the Builder in respect of the Listed Items; "LOAN" means the aggregate principal amount advanced by the Lenders hereunder under any of the Facilities or (as the context requires) the amount thereof for the time being outstanding hereunder and shall include interest which has accrued and been capitalised in accordance with Clause 5.2; "MC1" means Petro Dia Three S.A. a company incorporated under the laws of Panama whose registered office is at 53rd Street, Urbanizacion Obarrio, Torre Swiss Bank, 16th Floor, Panama City, Republic of Panama; "MC2" means Petro Dia Four S.A. a company incorporated under the laws of Panama whose registered office is at 53rd Street, Urbanizacion Obarrio, Torre Swiss Bank, 16th Floor, Panama City, Republic of Panama; "MAJORITY LENDERS" means those Lenders the aggregate of whose Outstandings comprise at least 66 2/3% of the Loan or, if an Advance has not then been made, Lenders the aggregate of whose Commitments represent at least 66 2/3% of the Total Commitments; "MANAGEMENT ACCOUNT" means an account to be opened by and in the name of the Borrower with the Management Account Bank and designated as the Facility Agent may specify, and shall include any sub-account forming part of such account and also any such other account or accounts as may, with the agreement from time to time of the Security Agent, be opened and/or designated as the Management Account by the Borrower; "MANAGEMENT ACCOUNT BANK" means The Bank of Tokyo-Mitsubishi Limited, London Branch or such other bank as the Facility Agent may nominate for the purpose of holding and operating the Management Account; "MANAGEMENT ACCOUNT CHARGE" means the charge over the Management Account to be executed by the Borrower in favour of the Security Agent for itself and as trustee for the Secured Parties in accordance with Clause 7.1(vi); "MARITIMA" means Maritima Petroleo e Engenharia Ltda, (formerly Maritima Navegacao e Engenharia Ltda), a company incorporated under the laws of Brazil whose registered office is at Avenida Almte, Barroso, 52 Gr. 3400, 2031-000 Rio de Janeiro, Brazil; "MONTHLY OUTGOINGS" means (in relation to each and every month) the day to day administration and operational costs and expenses incurred or to be incurred by the Borrower in the operation of the Rig for that month exclusive of any such as arise under the provisions of this Agreement, being an amount equal to the aggregate of the Daily Rate applicable for the month in question multiplied by the number of days in that month; "MORTGAGE DEBENTURE" means a first priority mortgage debenture to be executed by the Borrower pursuant to Clause 7.1(ix) in favour of the Security Agent for itself and as trustee for the Secured Parties; "NOTIONAL FINAL FACILITY DATE" means 31 December 2000; - 8 - "NOTIONAL INTERIM A FACILITY DATE" means, in relation to the Tranche A Facility, 29 October 1999; "OFF-HIRE DEDUCTIBLE" means any amount which is deductible by insurers before amounts become payable and which is deducted from amounts which are payable under the terms of the off-hire insurance effected pursuant to Clause 11.3 in the event of a claim being made in respect of such insurance; "OMNIBUS CONTRACT ASSIGNMENT" means the assignment to be executed in accordance with Clause 7.1(viii); "ORIGINAL SCHEDULED CHARTERPARTY COMMENCEMENT DATE" means 18 October 2000; "ORIGINAL SCHEDULED YARD DELIVERY DATE" means 31 July 2000; "OTHER SERVICES CONTRACTS" means the contracts specified in Schedule 3 Part 2; "OUTSTANDINGS" means, in relation to a Lender at any time, the aggregate principal amount of its participation in all (if any) Advances outstanding at that time; "OUTSTANDING INDEBTEDNESS" means the Loan and all interest thereon and all other sums of money from time to time owing to the Lenders under this Agreement and/or the Security Documents or any of them; "PETROBRAS" means Petroleo Brasileiro S.A. - Petrobras; "POST-DELIVERY OPEX" means costs incurred by the Borrower in the operation of the Rig during the period between the Yard Delivery Date and the Charterparty Commencement Date; "POTENTIAL EVENT OF DEFAULT" means any event or circumstance which, with the giving of notice, lapse of time or both or the satisfaction of any other applicable condition or the making of any applicable determination, may become an Event of Default; "PRE-DELIVERY OPEX" means costs incurred by the Borrower in respect of crews wages and travelling expenses during the period between the Original Scheduled Yard Delivery Date and the Yard Delivery Date; "PRIDE" means Pride International Inc., a company incorporated under the laws of the State of Louisiana, USA of 5847 San Felipe, Suite 330, Houston, Texas 77057 USA; "PROJECT DOCUMENTS" means the documents specified in Schedule 7 Part 1; "PROJECT PARTIES" means the parties to the Project Documents (including the Security Parties); "PROSPECTIVE FINAL GROSSED-UP ADVANCES AMOUNT" means on any date in respect of any Facility the amount of the Advances which (on the basis of the Advances which have been made or deemed to have been made under such Facility on or prior to such date and the Advances which after such date will be deemed to be made pursuant to Clause 4.4 for the purposes of capitalising interest on such Advances) will be outstanding under such - 9 - Facility on the Notional Final Facility Date on the assumption that no other Advances are made (save only for Advances deemed to be made in accordance with Clause 4.4 for the purposes of capitalising interest) and no payments of interest or repayments of any Advance are made between such date and the Notional Final Facility Date; "PROSPECTIVE INTERIM GROSSED-UP A ADVANCES AMOUNT" means on any date in respect of the Tranche A Facility the amount of the A Advances which (on the basis of the A Advances made or deemed to have been made under the Tranche A Facility on or prior to such date and the A Advances which after such date will be deemed to be made pursuant to Clause 4.4 for the purposes of capitalising interest on such A Advances) will be outstanding under the A Facility on the Notional Interim A Facility Date on the assumption that no other A Advances (save any for A Advances deemed to be made in accordance with Clause 4.4 for the purposes of capitalising interest) are made and no payments of interest or repayments of any Advance are made between such date and the Notional Interim A Facility Date; "PROVISIONAL CONTRACT PRICE" has the meaning ascribed thereto in the Rig Construction Contract; "PURCHASER'S SUPPLIES" has the meaning ascribed to such term in the Rig Construction Contract; "PURCHASER'S SUPPLIES CONTRACTS" means the contracts entered into or novated from time to time by the Borrower for the purchase of Purchaser's Supplies; "PURCHASER'S SUPPLIES PRICE" means the aggregate amount payable by the Borrower to the suppliers of Purchaser's Supplies under the Purchaser's Supplies Contracts; "QUALIFYING LENDER" means Elliott Associates LP, Westgate International LP and/or any person who in accordance with Clause 15.3 becomes a Lender under this Agreement and complies with the requirements of that Clause and being (in the case only of a Transferee to whom a Lender is proposing to transfer or novate any of its Tranche A Commitments), either (i) a bank or other financial institution which is a first class international bank incorporated in any country which is a member of OECD or (ii) a person approved by MC1 such approval not to be unreasonably withheld or delayed; "REFUND GUARANTEE" means the guarantee issued to Petrodrill Construction Inc and novated to the Borrower by The Export-Import Bank of Korea (or such other international bank acceptable to the Lenders) in respect of certain instalments of the Contract Price paid by the Borrower to the Builder pursuant to the Rig Construction Contract; "REPAYMENT DATE" means any of the eighty-four (84) repayment dates specified in the Repayment Schedule; "REPAYMENT INSTALMENT" means each instalment for repayment of the Loan and payment of interest thereon, in each case as provided for in Clauses 6.2 and 6.3; "REPAYMENT SCHEDULE" means the schedule substantially in the form set out in Schedule 2 to be prepared by the Facility Agent in accordance with Clause 6.3; - 10 - "REQUISITION COMPENSATION" means all moneys or other compensation payable during the Security Period by reason of requisition for title or other compulsory acquisition of the Rig otherwise than by requisition for hire; "RESERVE ACCOUNT" means an account to be opened by and in the name of the Borrower with the Reserve Account Bank and designated as the Facility Agent may specify, and includes any sub-account forming part of such account and also any such other account or accounts as may, with the agreement from time to time of the Facility Agent, be opened and/or designated as the Reserve Account by the Borrower; "RESERVE ACCOUNT BANK" means The Bank of Tokyo-Mitsubishi Limited, London Branch or such other bank as the Facility Agent may nominate for the purpose of holding and operating the Reserve Account; "RESERVE ACCOUNT CHARGE" means the charge over the Reserve Account to be executed by the Borrower in favour of the Security Agent for itself and as trustee for the Secured Parties in accordance with Clause 7.1(vii); "RIG" means the semi submersible drilling platform to be built, or (as the case may be) being built or (as the case may be) built and delivered to the Borrower pursuant to the Rig Construction Contract including the Materials, the Listed Items and the Purchaser's Supplies (all as defined in the Rig Construction Contract); "RIG CONSTRUCTION CONTRACT" means the agreement dated 9 April 1998 and executed between the Builder and Petrodrill Construction Inc and novated to the Borrower in the approved form for the construction and delivery of a semi-submersible drilling platform having Builder's Hull No 3016 (as the same may hereafter be amended and supplemented from time to time with the prior approval of the Lender); "RIG CONSTRUCTION CONTRACT AND REFUND GUARANTEE ASSIGNMENT" means the assignment executed or to be executed in accordance with Clause 7.1(i); "RIG MORTGAGE" means a first priority mortgage on the Rig to be executed by the Borrower pursuant to Clause 7.1(ii) (together with the Deed of Covenants supplemental thereto); "SECURED OBLIGATIONS" means all monies, obligations and liabilities of any nature whatsoever which are now or at any time hereafter may be or become due or owing by the Borrower or any of the other Security Parties to either of the Agents or any of the Lenders under or pursuant to any of the Financing Documents (including damages for breaches thereof) and any other liabilities, whether actual or contingent, now existing or hereafter incurred by the Borrower or any of the other Security Parties to either of the Agents or any of the Lenders under or pursuant to any of the Financing Documents or under or pursuant to any of the Sister Company Financing Documents (whether in either case due, owing or incurred by the Borrower or such other Security Parties alone or jointly with any other person(s) and in whatever name, firm or style and whether as principal or surety); "SECURED PARTIES" means the Lenders and the Agents and also the Lenders and the Agents (as defined in the Sister Company Loan Agreement); - 11 - "SECURITY AGENT" means Mitsubishi Corporation (UK) PLC in its capacity as security agent and trustee for the Lenders under the Security Trust Deed and includes any successor security agent and trustee appointed under the terms hereof and thereof; "SECURITY DOCUMENTS" means the agreements, mortgages, deeds and other documents specified in Schedule 7 Part 2 and any other documents (including, as the context may require, this Agreement) that may now or hereafter be executed as security for the Loan or any part thereof but excluding (for the avoidance of doubt) the Floor Guarantee; "SECURITY PARTIES" means the Borrower, the Guarantors, the Shareholder, the Sister Company, and during the period prior to the unconditional and irrevocable performance by each of the Additional Funders of their obligations under the Additional Funding and Guarantee Agreement and unless and until the Additional Funders are no longer under any actual or contingent obligation under the Additional Funding and Guarantee Agreement the Additional Funders or any of them, and "SECURITY PARTY" means any of them; "SECURITY PERIOD" means the period commencing on the date hereof and terminating on the date upon which all moneys payable or to become payable to the Agents and/or the Lenders at any time and from time to time pursuant to the terms hereof and pursuant to the Security Documents and all moneys payable or to become payable to the Agents and/or the Lenders at any time and from time to time pursuant to the Sister Company Financing Documents shall have been paid in full and neither the Agents nor any of the Lenders are under any actual or contingent obligation to the Borrower or the Sister Company under the Financing Documents or the Sister Company Financing Documents; "SECURITY TRUST DEED" means the security trust deed entered into or to be entered into relating to the security granted in favour of the Security Agent by the Borrower; "SERVICES CONTRACTS" means the contracts specified in Schedule 3 Part 1 between the Borrower and the Services Providers; "SERVICES PROVIDERS" means the persons specified in the Service Contracts for the provision of services to the Borrower and the Rig in the course of its operation; "SERVICES RENDERING CONTRACT" means the contract (Contract No. 101.0.160.97-1) which is supplemental to the Charterparty and which provides for services related thereto in relation to the Rig, as executed on or around 12 January 1998 by and between Maritima and Petrobras in the approved form, with the Borrower since being joined as an intervenient party with Petrobras' approval by a document executed by and between Petrobras, Maritima and the Borrower and dated 21 August 1998; "SERVICES RENDERING CONTRACT ASSIGNMENT" means the assignment to be executed in accordance with Clause 7.1(iv); "SERVICES RENDERING CONTRACT PAYMENTS" means payments made or to be made by Petrobras to the Borrower pursuant to the Services Rendering Contract; "SHARE CHARGE" means the charge over the whole of the issued share capital of the Borrower to be executed by the Shareholder in favour of the Security Agent for itself and as trustee for the Secured Parties in accordance with Clause 7.1(ix); - 12 - "SHAREHOLDER" means Amethyst Financial Company Limited, a company incorporated in the British Virgin Islands as the shareholder in the Borrower; "SISTER COMPANY" means Petrodrill Seven Limited a company incorporated under the laws of the British Virgin Islands; "SISTER COMPANY FINANCING DOCUMENTS" means all or any of the agreements and documents to be executed by or in favour of the Agents and/or the Lenders for the provision of finance in connection with the acquisition and operation by the Sister Company of the Sister Rig, and shall include all agreements, encumbrances, guarantees and other documents and instruments entered into pursuant to or as contemplated by such agreements whether by the Sister Company or any third party but excluding (for the avoidance of doubt) the Floor Guarantee; "SISTER COMPANY LOAN AGREEMENT" means the loan agreement of the same date as this Agreement between the same parties as the parties to this Agreement for the provision by the Lenders of certain loan facilities to the Sister Company relating to the acquisition of the Sister Rig by the Sister Company; "SISTER RIG" means the semi-submersible drilling rig (Builder's Hull No. 3015) to be built or (as the case may be) being built or (as the case may be) built and delivered to the Sister Company pursuant to the contract between Petrodrill Construction Inc. and the Builder and novated to the Sister Company, to be owned and operated by the Sister Company including the Materials, Listed Items and the Purchaser's Supplies (all as defined in such contract); "SUB-CONTRACTORS' GUARANTEES" means the guarantees or warranties of the Builder's sub-contractors, as referred to in Clause 17.13 of the Rig Construction Contract; "SUBORDINATED LOAN FACILITY AGREEMENT" means the agreement dated the same date as this agreement to be executed in accordance with Clause 7.1(xii); "SURPLUS EARNINGS" means, at any relevant time, such amount of the Earnings (i) which remains standing to the credit of the Management Account at such time and (ii) which is available for transfer to the Reserve Account pursuant to Clause 12.2 at such time; "TEMPORARY CONFIRMATION OF INSURANCE" means the temporary confirmation of insurance (and described as Temporary Confirmation of Insurance) issued by McGriff, Seibels, bartama & Colvin Inc (as brokers) on 15 December 1998 with Assigned No. MS-S711A-Daewoo; "TOTAL PROJECT COSTS" means the aggregate of the Contract Price, the Listed Items Price, the Pre-delivery Opex, the Construction and Mobilisation Costs, Post-delivery Opex and all other costs and expenditure of any nature which it is necessary for the Borrower to incur in order to perform its obligations under the Rig Construction Contract and to acquire, transport and mobilise the Rig and to have the Rig (having first arrived at the port or in sheltered waters in Macae - RJ) accepted by Petrobras, all in accordance with the Charterparty; - 13 - "TOTAL TRANCHE A COMMITMENTS" means at any time the aggregate of all the Tranche A Commitments of all the Lenders at such time; "TOTAL TRANCHE B COMMITMENTS" means at any time the aggregate of all the Tranche B Commitments of all the Lenders at such time; "TOTAL TRANCHE C COMMITMENTS" means at any time the aggregate of all the Tranche C Commitments of all the Lenders at such time; "TOTAL COMMITMENTS" means at any time the aggregate of all the Commitments of all the Lenders at such time; "TOTAL FACILITIES AMOUNT" means the lesser of (i) US$160,000,000 and (ii) the aggregate of 100% of the Contract Price, the Purchaser's Supplies Price, the Construction and Mobilisation Costs, Pre-delivery Opex, Post-delivery Opex and interest capitalised in accordance with Clause 4.4; "TOTAL LOSS" means:- (i) the actual total loss of the Rig; (ii) the agreed, arranged or constructive total loss of the Rig; (iii) requisition for title or other compulsory acquisition of title of the Rig by any governmental or other competent authority, agency or instrumentality otherwise than by requisition for hire; (iv) capture seizure arrest detention or confiscation of the Rig by any government or person acting or purporting to act on behalf of any government unless the Rig be released and restored to the Borrower from such capture seizure arrest or detention within 6 months after the occurrence thereof or such other period as may be specified in the Rig's Insurances; "TOTAL OUTSTANDINGS" means at any time the Outstandings of all the Lenders at such time; "TRANCHE A FACILITY" means the loan facility referred to in Clause 2.1(a), the terms and conditions of which are set out in this Agreement; "TRANCHE B FACILITY" means the loan facility referred to in Clause 2.1(b), the terms and conditions of which are set out in this Agreement; "TRANCHE C AVAILABILITY COMMENCEMENT DATE" means the date on which the conditions specified in Clause 3.5 (in addition to any other conditions precedent to the availability of the Tranche C Facility) have been satisfied and on which any part of the Tranche C Facility becomes available for drawing; "TRANCHE C FACILITY" means the loan facility referred to in Clause 2.1(c), the terms and conditions of which are set out in this Agreement; - 14 - "TRANSFER CERTIFICATE" means an instrument executed pursuant to and in accordance with Clause 15.4; "TRANCHES" means the tranches into which the Loan is deemed to be divided in accordance with and for the purposes of certain provisions of this Agreement; "TRANSFEREE" means a Qualifying Lender to whom a Lender transfers all or part of such Lender's rights, benefits and obligations under this Agreement, the other Security Documents and the Sister Company Financing Documents subject to and in accordance with Clause 15 and the provisions of the Sister Company Loan Agreement; "US DOLLARS" or "US$" or "$" means the lawful currency from time to time of the United States of America; "YARD DELIVERY DATE" means the date on which the Rig is delivered by the Builder to, and accepted by, the Borrower in accordance with the Rig Construction Contract; and "YEAR" means each successive period of 365 days throughout the Security Period, the first such period to commence on the Charterparty Commencement Date. 1.2 CONSTRUCTION OF PARTICULAR EXPRESSIONS Any reference in this Agreement to:- "APPROVED FORM" means, in relation to any document, the document in question being in such form and having such content as shall have been approved by the Facility Agent; "CALENDAR MONTH" means a period commencing on the first day of the month and ending on the last day of that month (for example, the period 1 January to 31 January shall be a calendar month); "CERTIFIED COPY" means, in relation to any document certified by a company, a copy of such document bearing the endorsement "Certified a true, complete and accurate copy of the original" and signed and dated by a duly authorised officer of the company in question; "CLAIM" has the meaning given to this expression in the definition of "Environmental Claim" in Clause 1.1; "ENCUMBRANCE" means a mortgage, charge, pledge, lien or other encumbrance securing any obligation of any person or any other type of contractual or preferential arrangement (including, without limitation, title transfer and retention of title and set off arrangements) having a similar legal or economic effect, but excluding any encumbrances arising by operation of law or in the ordinary course of business which are discharged in the ordinary course of business unless being contested in good faith and by appropriate proceedings; "EXCESS RISKS" means the proportion (if any) of claims for general average, salvage and salvage charges not recoverable under the hull and machinery policies in respect of the Rig in consequence of her insured value being less than the value at which the Rig is assessed for the purpose of such claims; - 15 - "GOVERNMENTAL AUTHORITY" includes any political sub-division of such governmental authority; "HOLDING COMPANY" has the meaning given to this term in Section 736 of the Companies Act 1985 (or any statutory modification or re-enactment thereof); "INDEBTEDNESS" means, in relation to any person, any obligation of any kind (whether present or future, actual or contingent, whether incurred as principal or surety and whether in respect of interest, principal or otherwise) for the payment or prepayment of money; "MONTH" means a period beginning in one calendar month and ending in the next calendar month on the day numerically corresponding to the day of the calendar month on which it started provided that (i) if the period started on the last Banking Day in a calendar month or if the next calendar month contains no such numerically corresponding day, it shall end on the last Banking Day in the next calendar month and (ii) if such numerically corresponding day is not a Banking Day, the period shall end on the next following Banking Day but if there is no such Banking Day it shall end on the preceding Banking Day, and the terms "MONTHS" and "MONTHLY" shall be construed accordingly; "PERSON" means any person, firm or company (and shall include that person's assignees); "PROTECTION AND INDEMNITY RISKS" (in relation to the Insurances for the Rig) means the usual risks covered by an English protection and indemnity association including the proportion not recoverable in case of collision under the ordinary running down clause; "SAME DAY FUNDS" means freely transferable funds in the currency due hereunder settled for same day value in such manner and through such clearing system (if any) as the Lender shall notify to the Borrower as being customary for the settlement in such currency of international transactions of the type contemplated by this Agreement; "SUBORDINATED INDEBTEDNESS" means any indebtedness of any of the Security Parties which cannot lawfully be repaid prior to such time as all amounts due and/or to become due to the Lender under or in connection with the Financing Documents have been repaid/paid in full; "SUBSIDIARY" means in relation to any company any entity over fifty per cent (50%) of whose capital is owned, directly or indirectly, by such company or which is otherwise effectively controlled directly or indirectly by such company and "control" for this purpose means control by virtue of the direct or indirect ownership of the majority of the voting share capital or the right to appoint management or direct policies by virtue of ownership of share capital, contract or otherwise; "TAXES" means any present or future taxes, levies, duties, charges, fees, deductions or withholdings of any nature now or hereafter imposed, levied, collected, withheld or assessed by any country or any political sub-division or taxing authority thereof and "TAX" and "TAXATION" shall be construed accordingly; a TIME OF DAY shall (unless otherwise specified) be construed as a reference to London time; and - 16 - "WAR RISKS" (in relation to the Insurances for the Rig) includes the risk of mines and all risks excluded from the standard form of English marine policy by Clause 23 of the Lloyd's Institute Time Clauses (Hull) 1/10/83). 1.3 CONSTRUCTION OF CERTAIN REFERENCES In this Agreement, unless the context otherwise requires: (1) References to this Agreement include the Recitals, Appendices and Schedules to this Agreement and references to Clauses, Appendices and Schedules are to be construed as references to the Clauses of, and Appendices and Schedules to, this Agreement as amended from time to time; (2) References to (or to any specified provisions of) any Financing Document or any other document shall be construed as references to such Financing Document, that provision or that document as amended or novated or supplemented (as the case may be) from time to time; and (3) References to the singular shall include the plural and vice versa; 1.4 HEADINGS Clause headings are inserted for convenience of reference only and shall be ignored in the interpretation of this Agreement. 2. THE FACILITY 2.1 AMOUNT AND CURRENCY The Lenders upon and subject to the terms of this Agreement and in reliance on the representations and warranties by the Borrower herein contained hereby agrees to make available to the Borrower the following facilities: (a) the Tranche A Facility, being a facility in an amount (and including all interest on A Advances capitalised in accordance with this Agreement to the Notional Interim A Facility Date) not exceeding US$47,000,000; (b) the Tranche B Facility, being a facility in an amount (including all interest on B Advances capitalised in accordance with this Agreement) not exceeding US$66,000,000; and (c) the Tranche C Facility, being a facility in an amount (including all interest on C Advances capitalised in accordance with this Agreement) not exceeding US$47,000,000. 2.2 PURPOSE The Facilities are made available for, and shall be applied by the Borrower exclusively to: - 17 - (i) the payment by the Borrower to the Builder of amounts falling due to the Builder in respect of the Contract Price in accordance with the Rig Construction Contract or in reimbursement to the Borrower of the instalments of the Contract Price paid by the Borrower prior to the Drawdown Date of the Advance in question; (ii) if the Yard Delivery Date is postponed beyond the Original Scheduled Yard Delivery Date, towards Pre-delivery Opex not exceeding US$20,000 per day; (iii) as to an amount not exceeding US$11,800,000, towards Construction and Mobilisation Costs; (iv) Post-delivery Opex; (v) in the case of Advances deemed to have been made under Clause 4.4, in capitalising interest in accordance with such Clause; and (vi) the payment of interest accrued on Tranche A Advances during the period from the Bridging Loan Repayment Date to the Charterparty Commencement Date. 2.3 OBLIGATIONS OF THE LENDERS Each Lender will participate through its Lending Office: (i) in each Tranche A Advance in the proportion borne by its Tranche A Commitment to the Total Tranche A Commitments on the Drawdown Date of such Tranche A Advance; (ii) in each Tranche B Advance in the proportion borne by its Tranche B Commitment to the Total Tranche B Commitments on the Drawdown Date of such Tranche B Advance; and (iii) in each Tranche C Advance in the proportion borne by its Tranche C Commitment to the Total Tranche C Commitments on the Drawdown Date of such Tranche C Advance. The obligations of each Lender hereunder are several and the failure of any Lender to carry out its obligations hereunder shall not relieve any other Lender, the Agents or the Borrower from any of its or their respective obligations to the parties hereto other than to such Lender which has so failed, and neither shall either of the Agents nor any Lender be responsible for the obligations of any Lender or (as the case may be) any other Lender hereunder. 2.4 INTERESTS OF LENDERS Notwithstanding any other term of this Agreement, the interests of the Lenders are several and the aggregate of the amounts outstanding at any time hereunder from the Borrower to any Lender or to the Facility Agent or the Security Agent for its own account is a separate and independent debt. Save as otherwise expressly provided herein or in any other Security Document each of the Agents and every Lender shall each have the right to protect and enforce its rights arising under this Agreement and it shall not be necessary - 18 - for any Lender or (as the case may be) either of the Agents to be joined as an additional party in any proceedings for this purpose but this is without prejudice to Clause 10.4. 2.5 UNCONDITIONAL OBLIGATIONS The Borrower enters into this Agreement as principal, and the obligations of the Borrower to make payment hereunder and to observe and perform all of its other obligations under this Agreement are absolute, unconditional and irrevocable obligations of the Borrower and are not and shall not be deemed to be in any way conditional or dependent upon the performance of the Rig Construction Contract by the Builder or the performance by Petrobras of its obligations under the Charterparty and/or the Services Rendering Contract, the continued hiring of the Rig under the Charterparty, the availability of funds in the Management Account and/or the Reserve Account or the performance by any other party other than the Lenders of its obligations to the Borrower or the successful delivery or operation of the Rig or any other matter or event of any nature whatsoever save as expressly provided in this Agreement. 3. CONDITIONS PRECEDENT 3.1 INITIAL CONDITIONS None of the Facilities shall be available for drawing until the satisfaction, in a manner in all respects satisfactory to the Facility Agent, of the following conditions and until delivery to the Facility Agent of the following documents, all in form and substance satisfactory to the Facility Agent: (i) a certified copy of each of the Project Documents, certified in each case by the parties thereto; (ii) a certificate signed by the Borrower certifying that each Project Document to which it is a party is in full force and effect and that all conditions precedent to the parties' respective obligations thereunder have been satisfied (or identifying those conditions which have not yet been satisfied) and that all necessary authorisations of governmental and other authorities to which the parties to such documents are subject have been obtained to such documents and the performance by the parties thereto of their respective obligations thereunder other than registration with the Brazilian Central Bank; (iii) the Security Documents other than the Mortgage and the Deed of Covenants duly executed by the parties thereto; (iv) the documents specified in Clause 7.1 (except those specified in Clause 7.1(ii)); (v) certified copies of the Articles of Incorporation and By-Laws of each of the Security Parties and the certificate of good standing and certificate of incumbency of each of the Security Parties; (vi) a duly certified copy of the resolutions of the Board of Directors, or such other documents evidencing the completion of corporate authorisation procedures (to the satisfaction of the Facility Agent) of each of the Security Parties authorising the execution, delivery and performance of each of the Financing Documents to - 19 - which it is a party and, as the case may be, including the incurring of debt obligations hereunder and thereunder, upon the terms hereof and thereof and authorising the person(s) who signed, or will sign, this Agreement, the Security Documents and all other agreements and documents executed or to be executed pursuant hereto and thereto on behalf of the relevant Security Party to do so, and any power of attorney executed in connection therewith; (vii) specimen signature(s) of the person(s) authorised to execute this Agreement, the Security Documents and all other documents to be provided hereunder or thereunder on behalf of the Security Parties; (viii)a duly certified copy of the shareholder's consent to and approval for the actions taken at the Board of Directors' meeting of the Borrower and the Sister Company to give guarantees in respect of, and to charge their assets as security for, each other's liabilities to the Secured Parties under the Financing Documents and the Sister Company Financing Documents; (ix) certified copies of all governmental approvals, authorisations, consents, registrations and confirmations, if any, with respect to this Agreement and the Security Documents shall have been received by the Facility Agent other than registration with the Brazilian Central Bank; (x) a written confirmation from each of the agents for service of process appointed by the Borrower pursuant to this Agreement and the Security Documents irrevocably accepting such appointment shall have been received by the Lender; (xi) a legal opinion from the English legal advisers to the Agents and the Initial Lenders in a form acceptable to the Facility Agent; (xii) a legal opinion from Higgs & Johnson, Bahamian counsel to the Agents and the Initial Lenders, in a form acceptable to the Facility Agent; (xiii)a legal opinion from Tozzini Freise Teixeira e Silva, Brazilian counsel to the Agents and the Initial Lenders, in a form acceptable to the Facility Agent; (xiv) a legal opinion from Dancia Penn & Co, British Virgin Islands counsel to the Agents and the Initial Lenders, in a form acceptable to the Facility Agent; (xv) a legal opinion from Kim & Chang, Korean counsel to the Agents and the Initial Lenders, in a form acceptable to the Facility Agent; (xvi) legal opinions from Baker & Botts LLP and from [name of Louisiana Counsel], US counsel to the Agents and the Initial Lenders, in a form acceptable to the Facility Agent; (xvii)a legal opinion from Zevan & Associates, Netherlands Antilles Counsel to the Agents and the Initial Lenders, in a form acceptable to the Facility Agent; (xviii)a legal opinion from Nauta Dutilh, Netherlands Counsel to the Agents and the Initial Lenders, in a form acceptable to the Facility Agent; - 20 - (xix) a legal opinion from Kleinberg Kaplan Wolff and Cohen, New York Counsel to the Agents and the Initial Lenders, in a form acceptable to the Facility Agent; (xx) a legal opinion from Maples and Calder, Cayman Islands, Counsel to the Agents and the Initial Lenders, in a form acceptable to the Facility Agent; (xxi) the Sister Company Financing Documents having been duly executed and having become unconditional in accordance with their terms; (xxii)the Bridging Loan Agreement having been duly executed in the approved form and having become unconditional in accordance with its terms; (xxiii)the Additional Funding and Guarantee Agreement in the approved form having been duly executed by the parties thereto and having become unconditional in accordance with its terms; (xxiv)a letter from Petrobras in the approved form regarding the delivery and acceptance of the Rig under the Charterparty; (xxv) the completion of all filings, registration or recordings of all of the Security Documents required by the laws of any applicable jurisdiction; and (xxvi)evidence satisfactory to the Facility Agent that the Rig Construction Contract, the Charterparty and the Services Rendering Contract are in full force and effect. 3.2 PRE-DELIVERY ADVANCES The making of each Pre-delivery Advance and of each Post Yard Delivery Advance shall be subject to the delivery to the Facility Agent (if the Lender so requests) of such evidence as the Facility Agent may reasonably require that the instalment of the Contract Price to which such Advance is to be applied has been paid or (as the case may be) become due and payable under the Rig Construction Contract or (in the case of an Advance requested in respect of Pre-delivery Opex or Construction and Mobilisation Costs) that the relevant expenditure has been paid or (as the case may be) become due and payable within the requirements of Clause 2.2(ii) or (as the case may be) 2.2(iii). 3.3 YARD DELIVERY ADVANCE AND POST YARD DELIVERY ADVANCES The making of the Yard Delivery Advance and of each Post Yard Delivery Advance shall be conditional upon and (in the case of the Yard Delivery Advance) be made simultaneously with: (i) the Rig having been duly delivered by the Builder to and accepted by the Borrower in accordance with the Rig Construction Contract, and the protocol of delivery and acceptance and other delivery documents required by the Rig Construction Contract having been duly executed and delivered in accordance with the terms thereof; (ii) the Rig having been duly registered in the Registry of Bahamian Ships and the Borrower having been registered as the owner of 64/64th shares in the Rig (free - 21 - of all encumbrances other than the Rig Mortgage and the Mortgage Debenture), and a provisional certificate of registration having been issued by such Registry; (iii) the Rig Mortgage, together with the Deed of Covenants collateral thereto, having been duly executed by the Borrower, received by the Security Agent and registered in the Registry of Bahamian Ships; (iv) the Rig having been insured and entered in the P & I Club (including the Mortgagee's Interest Insurance with Additional Perils (Pollution) Insurance) in accordance with the provisions of the Mortgage and the Deed of Covenants and all requirements therein and in this Agreement and the other Financing Documents in respect of insurance having been complied with; (v) the Insurances Assignment having been duly executed by the parties thereto and consented to, or notified to and acknowledged by, the relevant parties, and copies of all Insurances taken out pursuant to the Mortgage, the Deed of Covenants and this Agreement and the other Financing Documents and an entry certificate in the P & I Club and the original of the letter of undertaking to be issued by the P & I Club having been received by the Security Agent, each in form and substance satisfactory to the Facility Agent; (vi) certified copies of all Korean and Bahamian governmental approvals, authorisations, consents, registrations and confirmations with respect to the delivery and export of the Rig to the Borrower pursuant to the Rig Construction Contract and with respect to registration (whether provisional or permanent) of title to the Rig in the name of the Borrower under the Bahamian flag having been received by the Facility Agent; (vii) a certified copy of the Classification Certificate stating that the Rig has been built according to the class requirements (without recommendations) having been received by the Facility Agent; and (viii)all such other agreements, documents certificates or opinions as the Facility Agent may reasonably request having been received by the Facility Agent. 3.4 TRANCHE B ADVANCES Prior to the Tranche C Availability Commencement Date no Tranche B Advance may be drawn under the Tranche B Facility unless and until the Tranche A Facility (including Advances deemed to have been made in accordance with Clause 4.4) has been drawn to the fullest extent possible without breaching the condition imposed by Clause 3.6(ix). 3.5 TRANCHE C ADVANCES The Tranche C Facility shall be made available to the extent that and in the amount that the Bridging Loan has been repaid by MC2 pursuant to the Bridging Loan Agreement and Tranche C Advances from time to time may be drawn PRO TANTO in an aggregate amount not exceeding the amount so repaid. - 22 - 3.6 ALL ADVANCES The obligations of the Lenders to make any Advance under any of the Facilities shall be subject to the further conditions that as at the Drawdown Date of each such Advance: (i) no Event of Default or Potential Event of Default shall have occurred and be continuing; (ii) each of the Project Documents shall then continue to be in full force and effect and no event of default (howsoever described) and no event or circumstance which with the giving of notice or lapse of time may become such an event has occurred under any Project Document; (iii) the proceeds of the Advance shall, on the Drawdown Date of the Advance, be due from the Borrower to the Builder under the Rig Construction Contract or, as the case may be, the Borrower has provided the Facility Agent with such evidence as the Facility Agent may require that such proceeds will be applied for the purposes specified in Clause 2.2; (iv) the Lender shall have been provided with such further documentation or information in support of the Drawing Request in respect of such Advance as the Facility Agent may reasonably determine to be necessary; (v) the representations and warranties made or deemed made in Clause 8 shall be true in all material respects on and as of the Drawdown Date of such Advance with the same effect as though such representations and warranties had been made on and as of such Drawdown Date; (vi) the making of such Advance not causing the amount outstanding in respect of the Facility under which it is drawn to exceed the Available Facility Amount of such Facility on the Drawdown Date of such Advance; (vii) the making of such Advance not causing the Loan to exceed the Total Facilities Amount; (viii)the making of such Advance under any Facility not causing the Prospective Final Grossed-up Advances Amount of such Facility to exceed the Facility Amount of such Facility; and (ix) in the case of a Tranche A Advance, the making of such Advance not causing the Prospective Interim Grossed-up A Advances Amount of the Tranche A Facility to exceed US$47,000,000. 3.7 NO WAIVER OF CONDITIONS The conditions specified in Clause 3 are for the exclusive benefit of the Agents and Lenders and if the Facility Agent in its discretion allows the Borrower to draw any Advance under any Facility notwithstanding that some or all of the conditions specified in Clause 3 have not been satisfied the Agents and the Lenders shall not thereby be deemed to have waived any such condition, and the Borrower covenants with the Agents - 23 - and the Lenders to satisfy such conditions upon request from the Lenders forthwith or within such time limit as the Facility Agent may agree. 4. DISBURSEMENT OF ADVANCES 4.1 GENERAL Subject to the terms of this Agreement (including, but not limited to, the conditions set forth in Clause 3): (i) subject to sub-paragraph (ii) of this Clause 4.1, Advances under the Tranche A Facility, the Tranche B Facility and the Tranche C Facility may be drawn by the Borrower in a maximum principal amount up to but not exceeding the Available Facility Amount of the relevant Facility on the Drawdown Date of the relevant Advance when requested by the Borrower from time to time during the Availability Period; and (ii) with effect from the Tranche C Availability Commencement Date Advances shall be made under each of the Facilities in the proportions PRO RATA which the Available Facility Amount of each such Facility bears to the Total Available Facility Amounts of all the Facilities on the Drawdown Date of such Advances. 4.2 PROCEDURE When the Borrower wishes to draw any Advance under any of the Facilities, it shall deliver to the Facility Agent a Drawing Request substantially in the form of Schedule 4 appropriately completed, to be received by the Lender not later than 11:00am (London time), seven (7) Banking Days prior to the date of drawing of the Advance, specifying in respect of the proposed Drawing: (a) the date of the Drawing (which must be a Banking Day during the Availability Period); (b) the principal amount of the Advance in US Dollars; and (c) the Facility under which the Drawing is requested. The Borrower may deliver a Drawing Request setting out a schedule of requested Pre-delivery Advances subject to the satisfaction of the conditions specified in this Agreement on the Drawdown Date of such Advances and, in particular, Clause 3.2. Subject to the terms of this Agreement, such Drawing Request shall be irrevocable and the Borrower shall be bound to borrow in accordance with such Drawing Request. The Facility Agent shall promptly notify each Lender of such Drawing Request. The Borrower may not deliver a Drawing Request hereunder until after satisfaction of the other conditions precedent (including those applicable to the relevant Facility) set out in Clause 3. 4.3 TRANSFER OF FUNDS Subject as otherwise provided herein each Lender shall on the relevant Drawdown Date make available to the Facility Agent in US Dollars in the manner and to the account - 24 - provided for in Clause 9.2 the amount of its participation in the relevant Advance in the proportion which its Commitment in respect of the Facility under which such Advance is drawn bears to the Total Commitments in respect of such Facility. The Borrower irrevocably and unconditionally instructs and authorises the Facility Agent to make each Advance upon and subject to the terms hereof: (i) in the case of an Advance made or to be made for the purpose specified in Clause 2.2(i) by paying the proceeds thereof (or such proportion thereof as is not in reimbursement of amounts already paid by the Borrower) by disbursement to the Builder; (ii) in the case of an Advance made or to be made for the purposes specified in Clause 2.2(ii), 2.2(iii), 2.2(iv), 2.2(v) or 2.2(vi) by disbursement to the Borrower of amounts paid or payable by the Borrower in respect of the matters specified in such sub-clauses and upon such disbursement of any amount the Lenders shall be deemed in proportion to the respective amounts made available by them to the Facility Agent to have made to the Borrower an Advance in US Dollars in the amount of the amount so disbursed which shall satisfy PRO TANTO the obligations of such Lenders to lend such amount to the Borrower hereunder and shall reduce accordingly the amount of the Commitments and of such Facility available for drawing. 4.4 CAPITALISATION OF INTEREST Subject as provided in Clause 5.2(ii) on each Interest Capitalisation Date the Borrower shall be deemed to have served a Drawing Request requesting an Advance (an "INTEREST CAPITALISATION ADVANCE") in respect of each Advance outstanding on such Interest Capitalisation Date in the amount of interest to be capitalised on such outstanding Advance on such Interest Capitalisation Date in accordance with Clause 5.2. Each Interest Capitalisation Advance shall be deemed to have been requested from those Lenders who have participated in the Advances (or to whom participations in such Advances have been transferred in accordance with the Transfer Certificates pursuant to which they become Lenders hereunder) to which it relates (and shall be deemed to be drawn under the Facility or Facilities under which such Advances were drawn) and (subject to Clause 4.5) such Lenders shall be deemed to have made to the Borrower an Interest Capitalisation Advance in US Dollars in the amount of such interest which shall (i) increase the amount of the Loan by such amount; (ii) satisfy PRO TANTO the obligations of such Lenders PRO RATA in proportion to their respective participations in such Advance to lend such amount to the Borrower hereunder; and (iii) reduce accordingly the amount of their Commitments and of such Facility available for drawing. The Facility Agent shall calculate, and notify the relevant Lenders and the Borrower of the amount of each Interest Capitalisation Advance and of such Lenders' respective participations therein. 4.5 FACILITY LIMIT Interest on the Advances will not be capitalised if this would cause the amount of the Loan to exceed the Total Facilities Amount. Accordingly, if on any Interest Capitalisation Date as a result of the application of Clause 4.4 and of Clause 5.2 the aggregate amount of all Advances exceeds (or, if an Interest Capitalisation Advance were made or deemed to be made pursuant to Clause 4.4 the aggregate of all Advances would - 25 - exceed) the Total Facilities Amount the Borrower shall pay to the Facility Agent for the account of the Lenders by way of a payment of interest the amount of interest which would otherwise have been capitalised by means of such Interest Capitalisation Advance. 4.6 CANCELLATION Any portion of the Total Commitments in respect of any Facility not advanced hereunder on or prior to the last day of the Availability Period shall be reduced automatically to nil immediately thereafter and shall not thereafter be available for drawing. 4.7 FAILURE TO DRAW If for any reason (other than a default by a Lender or a Lender's bank) the Advance is not made hereunder after a Drawing Request therefor has been given pursuant to Clause 4.2, the Borrower will pay to the Facility Agent for the account of the relevant Lenders such amount as the Facility Agent may certify in reasonable detail (such certification to be conclusive in the absence of manifest error) as necessary to compensate it for any resulting loss or expense on account of funds acquired, contracted for or utilised in order to fund the Advance. 5. INTEREST 5.1 RATE Interest shall accrue on the Loan from the respective Drawdown Dates of each Advance comprising the Loan until actual repayment (i) in respect of the period prior to the Yard Delivery Date at the rate of 12.5% per annum and (ii) thereafter, at the rate of 11% per annum. 5.2 CAPITALISATION AND PAYMENT OF INTEREST (i) Subject to paragraph (i) below interest accruing prior to the Charterparty Commencement Date shall be capitalised in accordance with this Clause and the other provisions of this Agreement. On each Interest Capitalisation Date interest which has accrued on the Loan shall be capitalised and added to the amount of the Loan in accordance with Clause 4.4 so that the principal amount of the Loan shall thereafter be deemed for all purposes (including, but not limited to, the calculation of interest) to comprise and to include the principal amount advanced hereunder and the amount of such capitalised interest deemed to have been advanced. (ii) Interest accruing on all Tranche A Advances during the period from the Bridging Loan Repayment Date until the Charterparty Commencement Date shall not be capitalised but shall be paid in arrears on each Interest Capitalisation Date. 5.3 DEFAULT RATE Without affecting any other remedy of the Lenders or the Agents hereunder, the Borrower will pay interest on the Loan or any part thereof or interest thereon or other sum due under this Agreement or any of the Security Documents which is not paid on the due date for payment thereof for each day during the period of such default at such annual rate as - 26 - is conclusively certified by the Facility Agent to the Borrower to be equal to the aggregate of (1) two per cent (2%) per annum and (2) the higher of (a) the rate quoted by the Facility Agent as the arithmetic mean quoted by the Lenders (or, in the absence of such quotation from any Lender determined by the Facility Agent) (weighted by reference to the participations of the Lenders in the overdue payment in question) as being the rates at which each such Lender was (or would have been), at or about 11.00am (London time) on the date of acquisition of the relevant deposits, able in accordance with its usual practices to fund in US Dollars from its principal bankers on an overnight or call basis or for such period or periods as such Lender may determine and in amounts equivalent to, or comparable with, the amount of the Loan or relevant part thereof or interest thereon or other sum due in respect thereof as aforesaid in respect of which default has been made and (b) 11%. Interest payable by the Borrower as aforesaid shall be payable on demand by the Facility Agent and shall be compounded at such intervals as the Facility Agent may determine. 5.4 DAY COUNT FRACTION All interest is respect of Advances and the Loan shall accrue from day to day (after as well as before judgment) on the basis of a year of 360 days and for the actual number of days elapsed. 6. REPAYMENT AND PREPAYMENT 6.1 CONSOLIDATION OF ADVANCES In addition and without prejudice to any other provision of this Agreement, with effect from the Charterparty Commencement Date all Advances drawn under the Facilities and then comprising the Loan shall be consolidated and treated as a single amount for all purposes of this Agreement. 6.2 REPAYMENT INSTALMENTS The Borrower shall repay an amount equal to 85% of the Loan outstanding on the Charterparty Commencement Date after the capitalisation of interest on such date in accordance with Clause 5.2 together with the interest accruing on the Loan during the period of such repayments by means of eighty-four (84) equal payments, one such payment being payable on each Repayment Date in the amount of the Repayment Instalment (comprising a proportion of the principal of the Loan repayable on each such date and the interest element payable on each such date) specified in respect of such Repayment Date in the Repayment Schedule delivered by the Facility Agent pursuant to Clause 6.4. The Repayment Dates shall be the fifth day of the second month next following the month during which the Charterparty Commencement Date occurs and the 83 dates falling at consecutive monthly intervals thereafter. 6.3 BALLOON PAYMENT The remaining 15% of the Loan outstanding on the Charterparty Commencement Date as aforesaid shall be repaid by a single payment on the Final Repayment Date. 6.4 REPAYMENT SCHEDULE - 27 - The Facility Agent shall prepare, within fourteen (14) Banking Days after the Charterparty Commencement Date, a repayment schedule in the form of the Repayment Schedule set out in Schedule 2 setting forth the specific Repayment Dates and the specific amounts of each Repayment Instalment, comprising a proportion of the principal of the Loan repayable on each such date and the interest element payable on each such date, which shall form an integral part hereof upon notification thereof to the Borrower. 6.5 REBORROWING No amount repaid may be reborrowed by the Borrower. 6.6 PREPAYMENT The Borrower may upon giving the Facility Agent not less than 90 days' prior written notice prepay the whole or part of the Loan subject to and in accordance with Clauses 6.8 and 18. Save as expressly permitted or required under the terms of this Agreement the Borrower may not prepay any part of the Loan. 6.7 TOTAL LOSS OF THE RIG In the event that the Rig becomes a Total Loss at any time, the whole of the insurance proceeds or other compensation payable in respect of such Total Loss will be paid to the Security Agent (as assignee(s) and chargee thereof under the Rig Construction Contract and Refund Guarantee Assignment, the Rig Mortgage and associated Deed of Covenants, the Mortgage Debenture and the Insurances Assignment). In the event that any of the said insurance proceeds or other compensation are received in any currency other than US Dollars, the Facility Agent on behalf of the Lenders will be entitled (and is hereby authorised) at the cost of the Borrower to convert the same into US Dollars at the Facility Agent's principal banker's spot rate of exchange applicable at the relevant time. The whole amount of such insurance proceeds or other compensation (converted into US Dollars, if appropriate) will be applied by the Facility Agent in or towards prepayment of the Loan subject to and in accordance with Clauses 6.8 and 18 and any excess shall be paid to the Borrower. If the amount thereof is less than the Outstanding Indebtedness the Borrower shall on demand pay to the Facility Agent for the account of the Lenders the amount of such shortfall. 6.8 CONDITIONS APPLICABLE Prepayment of the Loan made under Clauses 6.6 or 6.7 will be made together with accrued interest to the date of prepayment together with all other amounts which may be payable under this Agreement and the other Security Documents. On any such prepayment the Borrower will additionally pay such further amount as will indemnify the Agents and the Lenders against all funding or other fees, costs, charges, losses, demands and expenses sustained or incurred as a consequence of such prepayment, including (but not limited to) any such sustained or incurred in liquidating deposits taken to fund the amount so prepaid or sustained or incurred in connection with the cancellation, reduction or re-arrangement of any interest rate swap, hedge transaction or other funding or financing agreement or arrangement which the Agents and/or any of the Lenders may have arranged or entered into for the purpose of funding the amount so prepaid (and the Borrower hereby acknowledges that the Agents and the Lenders may effect such arrangements as the Agents and/or any of the Lenders may in their discretion consider - 28 - appropriate), and the certificate of the relevant Agent or Lender as to the amount of such fees, costs, charges, losses, demands, expenses and shall in the absence of manifest error be final and conclusive and binding on the Borrower. 6.9 APPLICATION OF PREPAYMENTS Any prepayment made pursuant to Clauses 6.5, 6.6, 14.3 or any other provision of this Agreement shall (subject always to any appropriation by the Facility Agent under Clause 9.5) be applied in reduction of the Repayment Instalments (including the Balloon) PRO RATA. 7. SECURITY 7.1 LOAN SECURITY DOCUMENTS By way of continuing security for the due and punctual performance by the Borrower of all of its obligations under the Financing Documents, the Borrower shall execute and deliver (or procure the execution and delivery) to the Security Agent of the following (all at the times and in all other respects in accordance with the terms of this Agreement and the Security Documents): (i) an assignment, in the approved form of the benefit of and the Borrower's right and interest in the Rig Construction Contract, the Refund Guarantee, and the Sub-contractors' Guarantees, together with the notices to the Builder and to the issuer(s) of the Refund Guarantee and the acknowledgements and consents specified in such assignment duly executed by the parties thereto; (ii) a first preferred mortgage over the Rig and Deed of Covenants collateral thereto, each being in the approved form; (iii) an assignment, in the approved form of the benefit of and the title and interest of the Borrower in the Charterparty, Earnings and Requisition Compensation, together with the notices to Petrobras and the acknowledgements and consents specified in such assignment duly executed by the parties thereto; (iv) an assignment, in the approved form of the Services Rendering Contract, together with the notices to Petrobras and the acknowledgements and consents specified in such assignment duly executed by the parties thereto; (v) an assignment, in the approved form of the Insurances together with the notices, acknowledgement, consents and letters of undertaking in relation to the Insurances and other related documents as may be specified in such assignment and/or as may otherwise be required by this Agreement or any of the other Security Documents; (vi) a charge in the approved form over the Management Account, together with the notices to the Management Account Bank and the acknowledgements and consents and undertakings specified in such agreement duly executed by the parties thereto; - 29 - (vii) a charge in the approved form over the Reserve Account, together with the notices to the Reserve Account Bank and the acknowledgements and consents and undertakings specified in such agreement duly executed by the parties thereto; (viii)an assignment, in the approved form, of all of the Services Contracts, together with the notices to the Services Providers and the acknowledgements and consents specified in such assignments duly executed by the parties thereto; (ix) a mortgage debenture in the approved form creating fixed and floating charges over the business, undertaking and assets of the Borrower; (x) a charge, in the approved form creating a charge over the Shareholder's shares in the Borrower; (xi) a guarantee, in the approved form by the Borrower, the Sister Company and the Shareholder guaranteeing and securing the obligations of each of the Borrower and the Sister Company to the Agents and the Lenders in accordance with its terms; (xii) a deed of guarantee and undertaking, in the approved form, between the Borrower, the Guarantors, the Lenders, the Facility Agent and the Security Agent; (xiii)a subordinated loan facility agreement, in the approved form, between the Borrower, the Guarantors, the Facility Agent and the Security Agent; (xiv) an assignment of deed of guarantee and undertaking and subordinated loan facility agreement, in the approved form, between the Borrower and the Security Agent; and (xv) the Sister Company Financing Documents duly executed by all the parties thereto. 7.2 GUARANTEE AND UNDERTAKING By way of continuing security for the due and punctual performance by the Borrower of its obligations under the Financing Documents and/or any other agreements to which the relevant Guarantee relates, the Borrower will procure the execution by the Guarantors and the delivery to the Security Agent and in the case of sub-clause 7.2(i) the Initial Lenders of the following guarantees and undertakings: (i) a guarantee in the approved form whereby the Guarantors guarantee in their several proportions to the Initial Lenders in accordance with the terms therein contained the repayment of the Loan and the Sister Company Loan by the Borrower and the Sister Company respectively in accordance with this Agreement and the Sister Company Loan Agreement up to an amount not exceeding US$108,000,000; (ii) a deed of guarantee and undertaking, in the approved form whereby the Guarantors severally or jointly and severally (in accordance with its terms) give certain guarantees and undertakings. - 30 - 7.3 SISTER RIG COLLATERAL The security created by the Borrower under or pursuant to the Financing Documents shall also constitute security to the Lender for the obligations of the Sister Company under the Sister Company Financing Documents, and the security created by the Sister Company under the Sister Company Financing Documents shall also constitute security for the Borrower's obligations under the Financing Documents, all in accordance with their respective terms. 7.4 SECURITY AGENT AS TRUSTEE The Secured Obligations shall be secured by the interests and rights granted in favour of the Security Agent as trustee for the Agents and the Lenders under the Security Documents and such interests and rights shall be held by the Security Agent upon trust for the benefit of the Secured Parties without any preference or priority amongst them as security for the Secured Obligations in accordance with the Security Trust Deed. 8. REPRESENTATIONS 8.1 REPRESENTATIONS The Borrower hereby represents and warrants to the Facility Agent and each of the Lenders, that:- (i) each of the Borrower and the Sister Company is duly formed and is validly existing under the laws of the British Virgin Islands, has full power to carry on its business as it is now being conducted and has complied with all statutory and other requirements relative to such business; (ii) the Borrower and each of the other Security Parties and the Project Parties has full power to execute, deliver and perform its obligations under each of the Financing Documents and the Project Documents to which it is or is to be a party and (in the case of the Borrower) to borrow hereunder and to repay and service such borrowings in the manner herein provided; all necessary corporate, shareholder and other action has been taken by the Borrower and all other Security Parties and the Project Parties to approve and authorise the execution, delivery and performance of each of the Financing Documents and the Project Documents to which it is or is to be a party; (iii) save for registration of the Charterparty with the Brazilian Central Bank all necessary governmental or other official consents, authorisations and licences for the Borrower and all other Security Parties and the Project Parties to execute, deliver and perform their obligations under each of the Financing Documents and the Project Documents to which it is or is to be a party have been obtained and, as of the date of this Agreement, no further such consents, authorisations or licences are necessary for the performance by the Borrower and the other Security Parties and the Project Parties of their respective obligations under each of the Financing Documents and the Project Documents to which it is or is to be a party; - 31 - (iv) the Financing Documents and the Project Documents constitute, or will upon due execution as provided herein and therein constitute, the legal, valid and binding obligations of the Borrower and the other Security Parties and the Project Parties as are or are to be parties thereto enforceable in accordance with their respective terms subject to equitable principles and creditors' rights generally; (v) the execution and delivery of, and the performance of the provisions of, the Financing Documents by each of the Borrower and the other Security Parties and of the Project Documents by the other Project Parties do not, and will not during the Security Period, contravene (a) any applicable law or regulation existing at the date hereof or (b) any contractual restriction binding on any of the Borrower and the other Security Parties or any of the Project Parties or (c) any of the constitutional documents of any of the Borrower or the other Security Parties or any of the Project Parties; (vi) no action, suit or proceeding is pending or threatened against any of the Borrower and/or the other Security Parties before any court, board of arbitration or administrative agency which could or might result in any material adverse change in the business or condition (financial or otherwise) of any of the Borrower and/or the other Security Parties; (vii) none of the Borrower or the other Security Parties is in default under any agreement by which it is bound, nor is it in default in respect of any financial commitment or obligation (including obligations under guarantees) which could or might result in any material adverse change in the business or condition (financial or otherwise) of any of the Borrower and/or the other Security Parties; (viii)the financial and other information relative to the Borrower and the other Security Parties and the Project Parties and the Project Documents furnished to the Agents and/or any of the Lenders in connection with the negotiation of this Agreement is, to the best knowledge and belief of the Borrower, true, accurate and complete and neither contains any mis-statement of fact nor omits any material fact or any fact necessary to make any such information not misleading. There has been no material adverse change in the position of such person(s) from that set forth in the relevant aforesaid information; (ix) details of the holders of shares in the Shareholders, the Borrower, the Guarantors and the Sister Company and their respective shareholdings are as set out in Schedule 5 and will so remain throughout the Security Period; (x) the Borrower has no Subsidiaries as at the date hereof; (xi) no Event of Default, nor any Potential Event of Default has occurred and is continuing; (xii) the Rig will upon the Drawdown Date of the Yard Delivery Advance be:- (a) in the absolute and (save for the Rig Mortgage thereon and the other Security Documents) unencumbered ownership of the Borrower; - 32 - (b) registered in the name of the Borrower under the flag of the Commonwealth of the Bahamas and at the Port of Nassau; (c) properly classed with Lloyds Register of Shipping with the following notation: "Unrestricted Service O.U. + 100A1, + LMC, UMS, DP(AA), PC, DRILL, OIWS with the descriptive notation semi-submersible, self-propelled drilling vessel"; and (d) insured in accordance with the relevant provisions of the Deed of Covenants and this Agreement; (xiii)all applicable Environmental Laws and Environmental Approvals relating to the Rig and its operation and management and the business of the Borrower (as now conducted and as reasonably anticipated to be conducted in the future) have been complied with except to the extent that such failure to so comply would not reasonably be expected to have a material adverse effect; (xiv) no Environmental Claim has been made or threatened against the Borrower or otherwise in connection with the Rig which would be expected to have a material adverse effect; (xv) no Environmental Incident has occurred which would be expected to have a material adverse effect; (xvi) the choice by the Security Parties and the Project Parties of a particular governing law to govern this Agreement and any other Financing Document and the Project Document containing such provisions and the submission by such parties to the jurisdiction of the courts of a particular country in this Agreement and any other Financing Document and the Project Documents containing such provisions are valid and binding; (xvii)the execution and performance by Security Parties and the Project Parties of this Agreement the other Financing Documents and the Project Documents are private commercial acts and neither the Borrower nor any other Security Party or any Project Party is entitled to claim any immunity in relation to itself or its assets under any law or in any jurisdiction in connection with any legal proceedings, set-off or counterclaim relating to this Agreement or any other Financing Document or any Project Document, or in connection with the enforcement of any judgment, award, ruling or order arising from such proceedings; (xviii)no Taxes are imposed by withholding or otherwise on any payment to be made by the Borrower or the other Security Parties under this Agreement or any of the other Financing Documents or are imposed on or by virtue of the execution or delivery by the Borrower or the other Security Parties of this Agreement or any of the other Financing Documents or any document or instrument to be executed or delivered under this Agreement or any of the other Financing Documents; (xix) it is not necessary to ensure the legality, validity, enforceability or admissibility in evidence of this Agreement or any other Financing Documents that it or any other instrument be filed, recorded, registered or enrolled in any court, public office or elsewhere in Brazil or that any stamp, registration or similar tax be paid in Brazil - 33 - on or in relation to this Agreement or any other Financing Documents, which are in proper form for their respective enforcement in the courts of Brazil and the other jurisdictions to which the same are expressed to be subject other than the recording of the relevant Financing Documents and the payment of recording fees; (xx) save as disclosed in writing to the Facility Agent by a letter dated of even date with this Agreement, the Borrower is not party to any agreements, arrangements or contracts (written or oral) other than the Project Agreements, the Security Documents and the Inter Company Loan Agreement; (xxi) the legal opinions furnished pursuant to Clause 3.1(xii) to (xx) are true and correct in all respects; (xxii)save for different charter rates set out in a letter delivered by the Borrower to the Facility Agent and having even date with this Agreement, the Charterparty and the Services Rendering Contracts are in identical terms to the charterparties and services rendering contracts executed between Maritima and Petrobras in respect of the Related Rigs; and (xxiii)Maritima is the same legal entity as the company previously called Maritima Navegacao Engenharia Ltda. 8.2 LENDERS' AND AGENTS' RELIANCE The Borrower acknowledges that it has made the representations and warranties referred to in Clause 8.1 with the intention of persuading the Agents and the Lenders to enter into this Agreement and that the Agents and the Lenders have entered into this Agreement on the basis of, and in full reliance on, each of such representations and warranties. The Borrower warrants to the Agents and the Lenders that each of such representations and warranties is true and correct in all material respects as of the date of this Agreement and that none of them omits any matter the omission of which makes any of such representations and warranties misleading. 8.3 KNOWLEDGE OF LENDERS OR AGENTS The rights and remedies of the Agents and the Lenders in relation to any misrepresentations or breach of warranty on the part of the Borrower shall not be prejudiced by any investigation by or on behalf of the Agents and/or the Lenders into the affairs of the Borrower, by the execution or the performance of this Agreement or by any other act or thing which may be done by or on behalf of the Agents and/or the Lenders in connection with this Agreement and which might, apart from this Clause, prejudice such rights or remedies. 8.4 REPETITION The representations set out in Clause 8.1 and the warranty in Clause 8.2 shall survive the execution of this Agreement and the making of the Advances hereunder and shall be deemed to be repeated at the time of the giving of each Drawing Request, on the date for the borrowing of each Advance and on each Repayment Date with reference to the facts and circumstances then subsisting, as if made at each such time. - 34 - 9. PAYMENTS: TAXATION 9.1 CURRENCY OF ACCOUNT The US Dollar is the currency of account and the currency of payment for each and every sum due from the Borrower hereunder, PROVIDED HOWEVER THAT any amount falling due under Clause 18 (Indemnities) or 16 (Fees and Expenses) shall be payable in the currency in which the corresponding loss, expense, deficiency, duty, tax or other payment has been incurred or suffered. 9.2 ACCOUNTS AND PROCEDURE FOR PAYMENT All payments to be made by the Borrower to the Agents for the account of the Lenders or to Lenders hereunder shall be made on and for value on the due date:- (a) if in US Dollars in freely transferable same day funds to the account of the Facility Agent with the Management Account Bank, , account number to be notified by the Facility Agent or at such other bank as the Facility Agent may designate; and (b) if in any other currency, in same day funds to such account of the Facility Agent with such bank as the Facility Agent may from time to time designate. 9.3 WITHHOLDING; GROSS-UP All payments to be made by or for the account of the Borrower hereunder or under any other Security Document shall be made without set-off or counterclaim and free and clear of and without deduction for or on account of any present or future Taxes of any nature whatsoever imposed by or in any country ("APPLICABLE TAX") unless (i) the Borrower is compelled by law to make payment to or for the account of either Agent or any Lender subject to such Applicable Tax, or (ii) the Security Agent or the Facility Agent is compelled by law to make payment for or for the account of any Lender subject to such Applicable Tax in any such case the Borrower shall promptly pay such Applicable Tax and the amount of the relevant payment by the Borrower hereunder or (as the case may be) under the relevant other Security Document shall be increased to the extent necessary to ensure that the relevant Agent or (as the case may be) the relevant Lender actually receives an amount, free and clear of and after deduction for all such Applicable Tax, equal to the full amount which would have been received if no such withholding or deduction had been made. The Borrower shall pay and indemnify and keep indemnified the Agents and each of the Lenders against all such Applicable Tax. The Borrower shall promptly deliver to the Facility Agent copies of official Tax receipts evidencing payment of any such Applicable Tax imposed as aforesaid. The obligations of the Borrower under this Clause 9.3 shall survive the repayment of the Loan and the payment of all other sums payable hereunder and under the other Security Documents. 9.4 BANKING DAY CONVENTION Whenever any payment hereunder would otherwise become due on a day which is not a Banking Day, the due date thereof shall instead be the next succeeding Banking Day - 35 - unless such Banking Day falls in the next calendar month in which case payment shall be made on the immediately preceding Banking Day. 9.5 APPROPRIATION Notwithstanding any other provision of this Agreement and/or of the Security Documents (express or implied), at any time after the occurrence and during the continuance of an Event of Default the Facility Agent shall have an absolute and unfettered right to appropriate any payments received from the Borrower and/or from any other Security Party and any monies received in respect of all or any of the other Security Documents to such of the Borrower's obligations hereunder and/or under the Security Documents and/or under the Sister Rig Financing Documents (whether to the Loan or any part thereof, or the Sister Company Loan or any part thereof interest or any other sums payable hereunder or thereunder) as the Facility Agent may determine, to the exclusion of any right on the part of the Borrower to make any appropriation in respect of such payment(s) and/or monies. 9.6 CONTROL ACCOUNT The Facility Agent will maintain a control account showing the Loan and other sums owing by the Borrower under this Agreement and the other Financing Documents and all payments in respect thereof made by the Borrower from time to time. The control account shall in the absence of manifest error be conclusive as to the amount from time to time owing by the Borrower under this Agreement and the other Financing Documents. 9.7 REIMBURSEMENT OF FACILITY AGENT (i) Unless the Facility Agent shall have been notified by a Lender not later than one Banking Day prior to the Drawdown Date of any Advance that such Lender will not make available its portion of such Advance the Facility Agent may assume that such Lender has made its portion available to the Facility Agent. If the Facility Agent makes an amount available to the Borrower which has not (but should have) been made available to the Facility Agent by a Lender, the Facility Agent shall be entitled to recover the relevant amount from such Lender on demand, or failing this, the Borrower shall on request made by the Facility Agent to the Borrower refund such amount, together with interest thereon at the rate determined by the Facility Agent to be equal to the cost to the Facility Agent of funding such amount for the period until receipt by the Facility Agent thereof. (ii) If the Facility Agent makes an amount available to a Lender which has not (but should have) been made available to the Facility Agent by the Borrower, such Lender shall on request refund such amount to the Facility Agent together with interest thereon at the rate determined by the Facility Agent to be equal to the cost to the Facility Agent of making available such amount for the period from the date on which such amount was so made available until receipt by the Facility Agent thereof. - 36 - 10. EVENTS OF DEFAULT 10.1 EVENTS Each of the following events (whether or not arising as a result of events or circumstances beyond the Borrower's control) shall constitute an Event of Default, if:- (i) any principal of or interest on the Loan or any other amount becoming payable under this Agreement and/or the Security Documents is not paid on the due date for payment thereof or (in the case only of sums expressed to be payable upon demand) within a period of five (5) Banking Days after demand is made therefor; or (ii) the Borrower shall make default under, or in the due and punctual observance and performance of, Clause 11.1(xi) and shall fail to remedy the same within one (1) Banking Day after written notice from the Facility Agent to the Borrower requiring such default to be remedied; or (iii) the Borrower or any other Security Party makes default under, or in the due and punctual observance and performance of, any other provision of this Agreement and/or the Security Documents and/or any of the Project Documents which default (in the reasonable opinion of the Facility Agent) is not capable of remedy and/or imperils the security created by the Security Documents and/or any of the Project Documents or any of them, or any such default arises which (in the reasonable opinion of the Facility Agent) is capable of remedy and does not imperil the security created by the Security Documents and/or any of the Project Documents or any of them and is not remedied within thirty (30) days after written notice from the Facility Agent to the Borrower requiring remedial action; or (iv) any indebtedness of any Security Party (being indebtedness in excess of US$500,000 (or the equivalent in any other currency) is not paid on its due date or within any period of grace specified in the contract evidencing the original terms of such indebtedness or becomes due or capable of being declared due prior to its stated date of payment; or (v) any party to a Project Document (other than the Borrower or another Security Party) defaults in the due performance or observance of any of its covenants, undertakings or obligations under such Project Document which default could be material in the context of the transactions contemplated by the Financing Documents and (if such default is capable of remedy) the same is not remedied to the satisfaction of the Facility Agent within the period (if any) allowed for remedy thereof under the Project Documents or a period of thirty (30) days after the Facility Agent gives notice to the Borrower requiring the same to be remedied; or (vi) any representation or warranty made pursuant to Clause 8.1 or any other provision of this Agreement or made pursuant to any provision of any of the Security Documents proves to have been materially incorrect or becomes materially incorrect in any respect as of the date on which such representation or warranty is made or repeated (or deemed to be repeated); or - 37 - (vii) any governmental licence, authorisation, consent or approval at any time necessary to enable the Borrower and/or any of the Security Parties and/or any of the Project Parties to comply with its or their respective obligations hereunder or under the Security Documents or under the Project Documents or any of them or to enable the operation of the Rig is revoked or withheld or modified or is otherwise not granted or fails to remain in full force and effect [or (but without prejudice to the generality of the foregoing) the Charterparty and other related documents which require registration are not registered with the Central Bank of Brazil in accordance with Clause 11.1(f) within the period of four weeks after the Charterparty Commencement Date; or (viii)the Borrower and/or any other Security Party or any Project Party other than a Security Party becomes insolvent or bankrupt or suspends payment of its debts generally as they fall due, or any steps are taken by any person or by any government authority for the winding up, liquidation or dissolution of the Borrower and/or any other Security Party or any Project Party other than a Security Party or for the making of an administration order (including, without limitation, the presentation of a petition for an administration order) or for the re-arrangement, re-organisation or reconstruction of the Borrower and/or any other Security Party or any Project Party other than a Security Party, or if an encumbrancer takes possession of or if a receiver or trustee is appointed of, or if any distress or execution is levied against, any of the assets of the Borrower and/or any other Security Party or any Project Party other than a Security Party, or if any process or proceeding similar to any of the foregoing shall be instituted under the laws of any relevant jurisdiction; or (ix) the Borrower and/or any other Security Party suspends or threatens to suspend its operations or (without the prior written consent of the Facility Agent) disposes or threatens to dispose of all or substantially all of its business, property or assets, or if all or substantially all of the same is seized or appropriated; or (x) any change occurs in the shareholders and the respective shareholdings in the Borrower or the Sister Company from those specified in Schedule 5; or (xi) save as may be permitted under this Agreement or any of the Security Documents any Charterparty Hire and/or any other Earnings are paid otherwise than to the Management Account; or (xii) the Rig becomes a Total Loss and the Facility Agent does not, within a period of one hundred and eighty (180) days following the occurrence of such Total Loss, receive for the account of the Lenders the insurance proceeds or other compensation relating to such Total Loss in an amount not less than the amount for which the Rig shall have been required to be insured at the time of such Total Loss pursuant to the Mortgage and Deed of Covenants and the other Financing Documents; or (xiii)this Agreement or any of the Security Documents or any of the Project Documents ceases at any time to be the legal, valid and binding obligation of the Borrower or, as the case may be, any other Security Party or, as the case may be, Project Party being a party thereto, or if it becomes impossible or unlawful for - 38 - any of the material obligations of the Borrower and/or any other Security Party and/or any Project Party to be performed or for any of the rights given to the Agents or the Lenders hereunder and/or under any of the Security Documents to be exercised or the Borrower or any other Security Party or any Project Party disaffirms or repudiates any such obligations; or (xiv) the Rig is not delivered to and accepted by the Borrower in all material respects in accordance with the provisions of the Rig Construction Contract prior to the date falling 365 days after the Original Scheduled Yard Delivery Date; or (xv) the Rig has not arrived at the Port or in sheltered waters in Macae-RJ) and accepted by Petrobras for the commencement of operations in all respects in accordance with the Charterparty prior to the date falling 365 days after the Original Scheduled Charterparty Commencement Date; or (xvi) the Rig Construction Contract is terminated or any event or circumstance arises thereunder which entitles either party thereunder to terminate the same pursuant to Clauses 18 or 19 thereof or otherwise pursuant to the terms thereof or either party repudiates its obligations thereunder or commits any other breach which would entitle the other party to treat its obligations thereunder as terminated; or (xvii)the Refund Guarantee is terminated or the issuer thereof repudiates its obligations thereunder; or (xviii) the Charterparty is terminated or any event or circumstance arises thereunder which entitles either party thereto to terminate the same or either party repudiates its obligations thereunder or commits any other breach which would entitle the other party to treat its obligations thereunder as terminated; or (xix) the Services Rendering Contract is terminated or any event or circumstance arises thereunder which entitles either party thereto to terminate the same or either party repudiates its obligations thereunder or commits any other breach which would entitle the other party to treat its obligations thereunder as terminated; or (xx) there is any breach or non observance on the part of Pride and/or Maritima of their respective obligations under the Additional Funding and Guarantee Agreement; or (xxi) the Bridging Loan is not repaid to MC1 on the Bridging Loan Repayment Date (otherwise than by reason of a default by MC2 in the performance of its obligations under the Additional Funding and Guarantee Agreement to remit to MC1 amounts received from the Transferees to whom MC2 transfers its participation in the Tranche A Facility in accordance with the Additional Funding and Guarantee Agreement; or (xxii)it is not possible to maintain the Insurances throughout the Security Period for any reason (including, without limitation, by reason of any relevant Insurances not being available in the international insurance market); or (xxiii) any of the events or circumstances specified in the foregoing paragraphs (i) to (xx) (MUTATIS MUTANDIS) occur under the Sister Company Financing Documents. - 39 - 10.2 RIGHTS ON EVENT OF DEFAULT At any time after the occurrence of an Event of Default and while the same is continuing (and in addition and without prejudice to any other rights of the Agents or the Lenders): (i) the Facility Agent may and shall if so directed by the Majority Lenders by notice in writing to the Borrower declare that the Loan and all other amounts outstanding from the Borrower under this Agreement and/or the Security Documents are immediately due and payable and such declaration shall be effective from the date of such occurrence or such other later date as the Facility Agent may specify in the said notice, and (at the same time as or at any time subsequent to the service of such notice and the same shall be immediately due and payable and the Lenders' obligation to make available or to continue to make available the Facilities, or any part thereof, to the Borrower shall immediately cease); and/or (ii) either of the Agents or any of the Lenders may terminate or otherwise rearrange (at the discretion of such Agents or Lenders) any interest rate or currency swap, hedging or other currency or interest rate management agreement or arrangements which the Agents or any of the Lenders may have taken out or entered into in relation to the Loan or any part thereof. 10.3 SURVIVAL OF RIGHTS The termination of this Agreement for any cause whatsoever shall not affect the right of the Agents and the Lenders to recover from the Borrower any amounts due to the Agents and the Lenders on or before the termination or in consequence thereof or the right of the Agents and the Lenders to recover any damages for breach of this Agreement and/or the Security Documents or any of them. 10.4 NO INDEPENDENT ACTION No Lender may, except with the prior consent of the Majority Lenders (and, where a Lender may, it may only do so through the Security Agent): (a) enforce any encumbrance created or evidenced by any Security Document or require the Security Agent to enforce any such encumbrance; (b) sue for or institute any creditor's process (including a Mareva injunction, garnishment, execution or levy, whether before or after judgment) in respect of any obligation (whether or not for the payment of money) owing to it under or in respect of any Financing Document; (c) take any step (including petition, application, notice of meeting or proposal to creditors) for the winding-up, or administration of, or any insolvency proceeding in relation to, the Borrower, or for a voluntary arrangement or scheme or arrangement in relation to the Borrower; or (d) apply for any order for an injunction or specified performance in respect of the Borrower in relation to any of the Financing Documents. - 40 - Provided that for the avoidance of doubt nothing herein contained shall restrict the rights of the Beneficiaries under (and as defined in) the Floor Guarantee to enforce (or refrain from enforcing) their rights thereunder at such times and in such manner as they may think fit. 11. COVENANTS 11.1 GENERAL COVENANTS The Borrower hereby covenants and undertakes with the Agents and each of the Lenders that throughout the Security Period:- (i) it will obtain and promptly renew (or require the other Project Parties where applicable to obtain and promptly renew) from time to time and comply with the terms of all consents which may be required under any applicable law in connection with or for the execution, delivery or due performance by the Security Parties and the Project Parties of this Agreement, the Security Documents or the Project Documents or for the validity or enforceability of this Agreement or the Security Documents or the Project Documents (or procure such obtaining, renewal or compliance); (ii) it will pay or cause to be paid all of its obligations, rents, rates, taxes, assessments, impositions, calls and outgoings whatsoever (whether governmental, municipal or otherwise) imposed upon or payable in respect of its property or assets as and when the same shall become payable save for any of the same which are being contested in good faith and by appropriate proceedings and which could not reasonably be expected to have a material adverse effect on the business or operation of the Borrower; (iii) it will deliver to the Facility Agent in sufficient copies for each of the Lenders: (a) as soon as the same are available (and in any event within one hundred and twenty (120) days) after the end of each of its financial years ending after the date hereof, its accounts for such financial year (including the profit and loss account for the financial year ended on the last day of such financial year and the balance sheet as of the end of such financial year) having ensured that such accounts were prepared on such basis as is reasonably acceptable to the Facility Agent and were prepared in accordance with accounting principles and practices generally accepted in the United States of America ("GAAP") and consistently applied and give (in conjunction with the notes thereto) a fair presentation in accordance with GAAP of (i) the financial condition of the Borrower as at the date as of which they were prepared, and (ii) the results of the operations of the Borrower for the period to which they relate and were audited by auditors acceptable to the Facility Agent and were certified by its duly authorised officer as giving (in conjunction with the notes thereto) a true and fair view of its financial condition as at the end of such financial year and of the results of its operations during such financial year; - 41 - (b) simultaneously with the delivery of each of its accounts in accordance with sub-clause (iii)(a), a certificate signed by a duly authorised director or officer of the Borrower confirming that as of the date of such certificate (which must be dated not more than ten (10) days prior to the date on which it is delivered to the Facility Agent) no Event of Default or Potential Event of Default has occurred at any time after the date of the last such certificate delivered pursuant to this sub-clause (iii)(b) (or the date of this Agreement, in the case of the initial such certificate); (c) as soon as reasonably practicable following receipt from the Builder, a certified true copy of each progress report given by the Builder pursuant to the Rig Construction Contract and each notice of anticipated delivery date given by the Builder pursuant to the Rig Construction Contract and a certified true copy of each other notice or report given to it by the Builder pursuant to or in connection with the Rig Construction Contract which could reasonably be considered to be material in the context of the transactions contemplated by the Security Documents and the Project Documents; (d) simultaneously with delivery to Petrobras of each progress report given by the Borrower to Petrobras pursuant to the Charterparty and each other notice or report so delivered by the Borrower pursuant to the Charterparty which could reasonably be considered to be material in the context of the transactions contemplated by the Security Documents and the Project Documents, a certified true copy of such notice or report; (e) from time to time promptly upon request by the Lender, such other information as the Security Agent may reasonably require in the context of this Agreement and any of the Security Documents and the Project Documents; and (f) evidence satisfactory to the Security Agent that it has registered the Charterparty and any other documents requiring registration with the Central Bank of Brazil within 4 weeks of the Charterparty Commencement Date, (iv) promptly upon becoming aware of the same, it will notify the Security Agent of: (a) any dispute between the Borrower and (A) the Builder in relation to the Rig Construction Contract, (B) Petrobras in relation to the Charterparty or any of the other Project Documents which, in any case, could reasonably be considered to be material in the context of the transactions contemplated by this Agreement and any of the other Security Documents or could reasonably be expected to have a material adverse effect on the Borrower; (b) any breach by any party to any Security Document or any Project Document of any party's obligations thereunder which could reasonably be considered to be material in the context of the transactions contemplated by this Agreement and any other Security Document or could reasonably be expected to have a material adverse effect on the - 42 - Borrower and provide the Security Agent with details of the nature and extent of such breach and the steps which it intends to take in respect thereof; (c) any event which could materially adversely affect the completion and delivery of the Rig under the Rig Construction Contract Date; and (d) the occurrence of any Event of Default or any Potential Event of Default; (v) it will immediately upon delivery of the Rig by the Builder register itself as the owner of 64/64th shares in the Rig at the Registry of Bahamian Ships free from any encumbrance (save only for the Mortgage and the Mortgage Debenture) and will deliver to the Facility Agent a certified copy of the certificate of registration of the Rig immediately it is issued; (vi) it will perform all of its obligations under each of the Security Documents and the Project Documents to which it is a party in accordance with the respective terms thereof and not terminate or amend, or offer to terminate or amend, any of the Security Documents or Project Documents to which it is a party or waive any of its rights thereunder which, in the case of any amendment or waiver, could be material in the context of this Agreement and the Security Documents or Project Documents and the transactions contemplated hereby or thereby and without prejudice to the generality of the foregoing it will use all reasonable endeavours to procure that all payments are made by Petrobras pursuant to the Project Documents without any withholding, set-off, counterclaim or other deduction of any kind; (vii) it will permit representatives of the Facility Agent (or any accountants, engineers or other experts or specialists designated by the Facility Agent) to visit or inspect, or procure that any such representatives are able to visit or inspect, the Rig during its construction and after the Yard Delivery Date and the Borrower's books of account, at such times and as often as may be reasonably required by the Facility Agent subject to the Facility Agent first giving reasonable prior written notice and in exercising such rights the Facility Agent's representative will comply with the reasonable instructions of the Borrower's crew; (viii)it will at its own cost and expense promptly execute, acknowledge, deliver, file and register all such additional documents, instruments, agreements, certificates, consents and assurances and do all such other acts and things as may be legally required for the Borrower to do and as may be necessary or as the Facility Agent may reasonably request from time to time in order to effectuate the purposes of this Agreement or any of the Security Documents or the Project Documents or to perfect the security interest intended to be constituted by any of the Security Documents or to enable the Agents and the Lenders to obtain the full benefits of this Agreement or any of the Security Documents or the Project Documents and to exercise and enforce the rights and remedies under this Agreement or any of the Security Documents or the Project Documents; (ix) it will not, without the prior written consent of the Facility Agent:- - 43 - (a) (save and except as envisaged in this Agreement) create, assume or permit to exist any encumbrance upon any of its property or other assets, real or personal, tangible or intangible, whether now owned or hereafter acquired, other than any lien on the Rig arising as a result of any necessary salvage or arising in the ordinary course of operation of the Rig; or (b) engage in any business or activity except the ownership of the Rig, its chartering to Petrobras in accordance with the Charterparty and its operation and activities incidental thereto or pursuant to any subsequent charter or drilling service contract; or (c) save and except as envisaged by this Agreement make any loans to any person(s), make any investments of any kind (including but not limited to (i) the acquisition of any shares in or debentures of any company and/or (ii) the purchase, or acquisition on finance lease, hire purchase or similar terms, of any fixed asset(s) premises/office equipment for the Borrower's own use, including charters out), or authorise or enter into any capital commitments otherwise than in the ordinary course of business; or (d) (save and except as envisaged in this Agreement or agreed by the Facility Agent in writing) borrow any money or permit any such borrowing to continue, or enter into any agreement for payment on deferred terms (otherwise than on customary suppliers' credit terms) or any equipment lease or contract hire agreement (other than in respect of necessary machinery and/or equipment for the Rig or otherwise in the ordinary course of business); or (e) (save and except as envisaged in this Agreement) assume, guarantee or endorse or otherwise become or remain liable in connection with any obligation of any person (otherwise than in the ordinary course of operating of the Rig); or (f) at any time during the Security Period purchase or otherwise acquire for value any shares of its capital stock, and will not in any financial year during the Security Period declare or pay any dividend on any of such shares or make any distribution to the holder(s) of any such shares except as provided in Clause 12.4 and it will not issue any new shares of its capital stock. (x) it will maintain the Management Account and the Reserve Account (and any other account(s) opened by the Borrower for the purposes of this Agreement; (xi) in the event that, and whenever, the Facility Agent shall issue any certificate for the purposes of Clause 9.2 of the Deed of Guarantee and Undertaking and shall supply a certified copy thereof to the Borrower, the Borrower will, unless the Guarantors shall have made the relevant payment by way of subscription for equity share capital in the Borrower pursuant to Clause 9.1 of the Deed of Guarantee and Undertaking within seven (7) Banking Days immediately following the day on which it is supplied by the Facility Agent with a certified copy of such certificate, deliver to the Sponsors (and will not purport to revoke) a - 44 - duly completed request for a drawing under the Subordinated Loan Facility Agreement in an amount equal to the amount specified in said certificate, and will simultaneously deliver a certified copy of such certificate to the Facility Agent; (xii) it will ensure that Formaritima Ltd and Petrodrill Engineering N.V. will not (without the prior written consent of the Facility Agent, such consent not to be unreasonably withheld or delayed) cancel, vary or amend any of the Other Services Contracts and that Formaritima Ltd and Petrodrill Engineering N.V. will (unless the Facility Agent otherwise agrees) take all appropriate steps to enforce performance by all parties (other than Formaritima Ltd and Petrodrill Engineering N.V.) of their respective obligations under the Other Services Contracts; and (xiii)it will do or cause to be done all things necessary to preserve in full force its corporate existence, rights, franchises or authorities necessary for the conduct of its business. 11.2 COST OVERRUNS Without prejudice to any other provision of this Agreement or any other Security Documents, the Borrower will perform its obligations under the Rig Construction Contract and any Purchaser's Supplies Contract. 11.3 INSURANCES The Borrower will take out and effect and maintain throughout the Security Period the Insurances meeting the requirements specified in Schedule 8 with such insurers as are acceptable to the Facility Agent. The terms and conditions of such insurances shall be subject to the prior approval of the Facility Agent (such approval not to be unreasonably withheld or delayed) and duplicates of all cover notes, policies and certificates of entry shall be provided to the Security Agent for its approval and retention. The Borrower will renew all such insurances at least fourteen (14) days before the relevant policies or contracts or certificates of entry expire and the Borrower will punctually pay all premiums, calls, contributions or other sums payable in respect of such insurances. 11.4 INSURANCE PROCEEDS AND DEDUCTIBLES The Borrower shall: (i) procure that the insurance proceeds, received or to be received by the Borrower shall be paid to the Facility Agent in accordance with the Insurances Assignment and are paid into the Management Account; (ii) pay to the Facility Agent and remit to the Management Account an amount equal to the deductions made for deductibles or excess applied by insurers in respect of any claim, such payments to be funded by the Borrower (without recourse to the Lenders). 11.5 LIQUIDATED DAMAGES; REFUNDS The Borrower shall procure that all amounts payable by the Builder under the Rig Construction Contract and the Export-Import Bank of Korea under the Refund Guarantee - 45 - received or to be received by the Borrower are paid to the Security Agent and credited to the Management Account. 12. SECURITY ACCOUNTS 12.1 REMITTANCE OF EARNINGS The Borrower shall, throughout the Security Period, procure and ensure that all monies payable under the Charterparty and any other Earnings are paid to the Management Account unless and until such time as the Lender shall, following the occurrence of an Event of Default and whilst the same is continuing, require that the Charterparty Hire and any other Earnings of the Rig and all the Services Rendering Contract Payments are paid to the Facility Agent or as it may direct (whereafter the Borrower shall procure and ensure that the Charterparty Hire and any other Earnings and all the Services Rendering Contract Payments are paid in accordance with the directions of the Facility Agent). 12.2 USE OF MANAGEMENT ACCOUNT Subject to the provisions of Clause 12.1 and unless and until an Event of Default shall have occurred and be continuing (whereupon the provisions of Clause 12.4 shall be and become applicable) and subject in all respects to the provisions of Clause 9.5, monies from time to time credited to, or standing to the credit of, the Management Account shall be applied in accordance with the following provisions:- (i) Subject to no Event of Default or Potential Event of Default having occurred, and be continuing the Facility Agent and the Borrower shall on the 5th day of each month (commencing on the 5th of the month following the month during when the first payment of Charterparty Hire is paid to the Management Account) release to the Borrower an amount not exceeding the Monthly Outgoings incurred by the Borrower during the preceding month. (ii) All other monies from time to time standing to the credit of the Management Account shall be applied by the Facility Agent in or towards payment of the Repayment Instalments and otherwise in or towards amounts of principal of, and interest accrued on, the Loan from time to time payable by the Borrower hereunder and other amounts from time to time falling due and payable hereunder and/or under any of the Security Documents (and such application by the Facility Agent, which the Facility Agent is hereby irrevocably authorised by the Borrower to do, shall constitute PRO tanto satisfaction of the corresponding obligations of the Borrower hereunder). (iii) Subject to the payments made in accordance with sub-clauses (i) or (ii) Surplus Earnings shall be transferred to the Reserve Account on the 5th day of each month. 12.3 USE OF RESERVE ACCOUNT All monies transferred to the Reserve Account in accordance with Clause 12.2(iii) shall during the Security Period remain credited to the Reserve Account unless withdrawn pursuant to Clause 12.4 in accordance with and subject to the Reserve Account Charge. If at the time the amount for the time being credited to the Management Account is - 46 - insufficient to discharge the Monthly Outgoings and/or payments to the Agents and the Lenders in accordance with Clause 12.2(i) and/or 12.2 (ii), then subject to no Event of Default and no Potential Event of Default having occurred, the Facility Agent shall apply any amounts credited to the Reserve Account in or towards the Monthly Outgoings and/or payments to the Agents and the Lenders and the provisions of Clause 12.2(i) and (ii) shall (MUTATIS MUTANDIS) apply. 12.4 WITHDRAWAL Subject to there being credited to the Reserve Account and the Sister Company Reserve Account immediately following such withdrawal an amount equal to the aggregate of the next six (6) Repayment Instalments and the next six (6) Repayment Instalments under and as defined in the Sister Company Loan Agreement the Borrower may from time to time withdraw monies from the Reserve Account. 12.5 FOLLOWING EVENT OF DEFAULT Without prejudice to the provisions of the Management Account Charge and the Reserve Account Charge, upon the occurrence of an Event of Default and whilst the same is continuing the Facility Agent shall forthwith be and become entitled then or at any time thereafter to apply all moneys standing to the credit of, or from time to time credited to, the Management Account and the Reserve Account in or towards payment of amounts due to the Agents and the Lenders under this Agreement and/or the other Security Documents. 12.6 INTEREST Amounts for the time being standing to the credit of the Management Account and the Reserve Account shall bear interest at the rates from time to time paid by the Management Account Bank or (as the case may be) the Reserve Account Bank to its customers for US Dollar deposits of like amounts for like periods (but having regard to payments which are scheduled to fall due to be made from time to time from such accounts), such interest to accrue from day to day, to be calculated on the actual number of days elapsed and on the basis of a three hundred and sixty (360) day year and to be credited to the relevant account at such intervals as the Facility Agent and the Borrower shall agree. 13. PROVISIONS RELATING TO SECURITY 13.1 CONTINUING SECURITY It is declared and agreed that: (i) the security created or to be created by or pursuant to this Agreement and the other Security Documents shall be held by the Security Agent as a continuing security for the payment and discharge of the Secured Obligations; (ii) the security so created shall not be satisfied by any intermediate payment or satisfaction of any part of the amount hereby and thereby secured; - 47 - (iii) the security so created shall be in addition to and shall not in any way be prejudiced or affected by any collateral or other security now or hereafter held by the Agents or any of the Lenders for all or any part of the moneys hereby and thereby secured; (iv) every power and remedy given to the Agents or any of the Lenders hereunder or under any of the Security Documents shall be in addition to, and not a limitation of, any and every other power or remedy vested in the Lender hereunder or thereunder; and (v) all the powers so vested in the Agents or any of the Lenders may be exercised from time to time and as often as the Lender may deem expedient. 13.2 CLAIMS AGAINST SECURITY PARTIES Notwithstanding any other provision of this Agreement and/or of the Security Documents (express or implied), the Agents and the Lenders shall have an absolute and unfettered right to make, enforce or seek to enforce any claim against the Borrower and/or against any other Security Party and/or against any security or other asset(s) or document(s), agreement(s) or arrangement(s) simultaneously and/or in such order or sequence as any of the Agents or the Lenders may in their sole and absolute discretion see fit. 14. CHANGE IN CIRCUMSTANCES 14.1 ILLEGALITY In the event that by reason of change subsequent to the date hereof in any applicable law, regulation or regulatory requirement or in the interpretation thereof it shall appear to any Lender that it has become unlawful for such Lender to maintain or give effect to its obligations as contemplated by this Agreement, such Lender shall inform the Facility Agent who shall thereupon give notice to the Borrower to that effect, whereafter the liability of such Lender to make or to maintain Commitments and its participation in the Loan shall cease, and if any of the Facilities in which such Lender is participating has already been drawn down the Borrower shall prepay such Lender's participation in the Loan to such Lender either immediately or, on the latest date permitted by such law, regulation or regulatory requirement, in accordance with and subject to the provisions of Clause 18. In any such event, but without prejudice to the aforesaid obligations of the Borrower to prepay such Lender's participation in the Loan, the Borrower and the Lender so affected and the Facility Agent shall negotiate in good faith for a period of 30 days next succeeding the giving of such notice with a view to agreeing terms for making such Lender's participation in the Loan available from another jurisdiction, or for establishing a mutually acceptable basis for funding from alternative sources, or for restructuring the Facilities on a basis which is not unlawful. 14.2 INCREASED COSTS (i) If by reason of the introduction of, or any change in, any applicable law, treaty, regulation or regulatory requirement or any change in the interpretation or application of any of the foregoing by any judicial, governmental or other competent body or authority or if by reason of compliance by any Lender or either of the Agents with any applicable directive, request or requirement - 48 - (whether or not having the force of law) of any central bank or governmental, fiscal or other authority (including, but not limited to, a directive, request or requirement relating to any Lender's allocation of capital for the purpose of its business) any Secured Party incurs an increased cost (as defined in paragraph (ii)), the Borrower shall promptly on demand made by the Facility Agent on behalf of such Secured Party pay to the Facility Agent for the account of such Secured Party the amount of such increased cost:- (ii) In this Agreement "INCREASED COST" means: (a) any Taxation to which any Secured Party is subjected with respect to the Loan or any part thereof (other than corporate Taxation on such Secured Party's overall net income); or (b) an additional cost incurred by a Secured Party as a result of it having entered into, or performing, maintaining or funding its obligations under, this Agreement or any other Financing Documents; or (c) that portion of any additional cost incurred by a Secured Party in making, funding or maintaining all or any advances or commitments comprised in a class of advances or commitments formed by or including its participations in the Loans made available or to be made available under this Agreement, as is attributable to it making, funding or maintaining those participations; or (d) a reduction in any amount payable to a Secured Party or in the effective return to a Secured Party under this Agreement or on its capital which is attributable to the funding of this Agreement or its commitment to make funds available hereunder; or (e) the amount of any payment made by a Secured Party, or the amount of any interest or other return foregone by a Secured Party, calculated by reference to any amount received or receivable by that Secured Party from any other party under this Agreement. (iii) Any demand made by the Facility Agent under sub-paragraph (i) above shall contain reasonable details of the increased cost and the event(s) giving rise to it, but no Secured Party need disclose any information which is confidential or disclosure of which would be contrary to its recognised banking policies. (iv) The obligation under paragraph (i) to pay increased costs does not apply to any increased cost: (a) compensated for by the operation of Clause 9.2; or (b) attributable to any change in the rate of tax on the overall net income of a Secured Party (or the overall net income of a division or branch of a Secured Party) imposed in the jurisdiction in which its principal office for the time being is situate or in which it is resident for tax purposes or is carrying on business and by virtue thereof is subject to such tax in that jurisdiction; or - 49 - (c) attributable to any law or regulation relating to any of the matters set out in the report of the Basle Committee on Banking Regulations and Supervisory Practices dated July 1988 and entitled "INTERNATIONAL CONVERGENCE OF CAPITAL MEASUREMENT AND CAPITAL STANDARDS" as the same are in force and applied and interpreted at the date of this Agreement. (iv) In the case of a demand made by or on behalf of a Lender, the Borrower shall be at liberty at any time after the receipt of such notice, so long as the circumstances giving rise to such increased cost continue, on giving not less than five Banking Days' irrevocable notice to the Facility Agent and such Lender, to prepay all (but not part only) of such Lender's participation in the Loan in accordance with and subject to the provisions of Clause 14.3. (v) In any such event, but without prejudice to the obligations of the Borrower as aforesaid, the Borrower and the Lender will negotiate in good faith with a view to mitigating the effects on the Borrower. 14.3 PREPAYMENT Where any Lender's participation in the Loan is to be prepaid by the Borrower pursuant to any of the provisions of this Clause 14, the Borrower shall simultaneously with such prepayment pay to the Facility Agent for the account of such Lender all accrued interest on any sum prepaid to the date of prepayment and all other sums payable by the Borrower to or for the account of such Lender pursuant to this Agreement and/or the Security Documents together with such amounts as may be certified by such Lender to be necessary to satisfy the indemnity obligations of the Borrower as provided for in Clause 18. 14.4 FACILITY AGENT'S AND LENDER'S DETERMINATION The certificate or determination of the Facility Agent or (as the case may be) any Lender, as to any of the matters referred to in this Clause 14 shall, save for any manifest error, be conclusive and binding on the Borrower. 15. TRANSFERS 15.1 AGREEMENT BINDING ON SUCCESSORS This Agreement and the other Financing Documents shall benefit and bind the parties, any transferee or assignee in respect of which an assignment or novation becomes effective in accordance with Clause 15.3(iii), and their respective successors as if they were named as parties and had executed this Agreement. Any reference in any Financing Document to any party shall be construed accordingly. 15.2 BORROWER'S ASSIGNMENT The Borrower may not assign or transfer all or any part of its rights or obligations under any Financing Document. - 50 - 15.3 TRANSFER A Lender (an "EXISTING LENDER") may at any time assign, transfer or novate any of its rights and/or obligations under this Agreement (and the other Financing Documents to the extent possible as a matter of law) only if:- (i) such assignment, transfer or novation is to a Qualifying Lender (a "NEW LENDER"); (ii) such Existing Lender simultaneously assigns, transfers or novates to such New Lender the proportion of its Corresponding Sister Company Commitments and of its Corresponding Sister Company Outstandings so that such New Lender becomes a Lender (as defined in and in accordance with the Sister Company Loan Agreement) which is the same as the proportion of its Commitments and Outstandings which it is assigning, transferring or novating hereunder; and (iii) either such assignment, transfer or novation is effected pursuant to Clause 15.4 or such New Lender executes an undertaking in form and substance satisfactory to the Facility Agent that it is bound by the terms of the Financing Documents. 15.4 NOVATION Subject to Clause 15.3 any Existing Lender may at any time novate all or part of its Commitments and/or transfer all or part of its Outstandings and its rights and benefits under the Financing Documents by delivering to the Facility Agent a duly completed and executed Transfer Certificate substantially in the form of Schedule 6. On receipt of such a Transfer Certificate, the Facility Agent shall countersign it for and on behalf of itself and the other parties to this Agreement and with effect from the date specified in the Transfer Certificate to the extent that they are expressed to be the subject of transfer and/or novation in the Transfer Certificate:- (i) the Existing Lender and the other Parties (the "EXISTING PARTIES") will be released from their obligations to each other (the "DISCHARGED OBLIGATIONS"); (ii) the New Lender and the existing Parties will assume obligations towards each other which differ from the discharged obligations only insofar as they are owed to or assumed by the New Lender instead of the Existing Lender; (iii) the rights of the Existing Lender against the existing Parties and vice versa (the "DISCHARGED RIGHTS") will be cancelled; and (iv) the New Lender and the existing Parties will acquire rights against each other which differ from the discharged rights only insofar as they are exercisable by or against the New Lender instead of the Existing Lender, 15.5 NEW LENDERS Each New Lender shall, by its execution of a Transfer Certificate, accept that none of the other parties hereto is in any way responsible for: - 51 - (a) the accuracy and/or completeness of any information supplied to the New Lender in connection herewith; (b) the financial condition, creditworthiness, condition, affairs, status and nature of the Borrower or any of the Guarantors or any other Security Party or the observance by the Borrower, any of the Guarantors or any other Security Party of any of their respective obligations under the Financing Documents or any document relating thereto; or (c) the legality, validity, effectiveness, adequacy or enforceability of this Agreement or any document relating hereto and, save as otherwise expressly provided herein, none of such parties shall, or shall be deemed to be, the agent or trustee of such New Lender in connection herewith. 15.6 LENDING OFFICES The initial Lending Office(s) of each Lender has/have been notified by that Lender to the Facility Agent. Any Lender may at any time change any of its Lending Office(s) in relation to all or a specified part of any of its Commitments and/or Outstandings by notifying the Facility Agent and the Borrower of the fax number, telex number and address of its new Lending Office(s). 15.6 DISCLOSURE OF INFORMATION The Lender may disclose information regarding the Borrower or the Guarantors and the transactions entered into pursuant to this Agreement to any actual or potential, assignee or sub-participant, subject to such recipients of information agreeing to keep it confidential. 16. FEES AND EXPENSES 16.1 FEES AND DISBURSEMENTS The Borrower will pay to each of the Agents on demand, all costs, charges and expenses (including all out-of-pocket expenses and legal fees and VAT thereon) incurred by each of the Agents in connection with the preservation of its rights under and enforcement or attempted enforcement of this Agreement and the Security Documents or otherwise in connection with the Loan or any part thereof. 16.2 TAXES AND DUTIES The Borrower will pay to the Facility Agent and the Lenders on demand, all stamp, registration and other duties (including any such duties payable by the Lender) imposed by any relevant jurisdiction (or any taxing authority therein or thereof) on this Agreement and/or any of the Security Documents or otherwise in connection with the Loan or any part thereof. - 52 - 17. CURRENCY INDEMNITY 17.1 CURRENCY INDEMNITY (i) If, for any reason, any payment due from the Borrower under or in connection with any Security Document is made or is satisfied in a currency (the "OTHER CURRENCY") other than the currency in which the relevant payment under this Agreement is due (the "CONTRACTUAL CURRENCY"), then to the extent that the payment (when converted into the Contractual Currency at the rate of exchange on the date of payment or, in the case of the liquidation or insolvency of the Borrower, at the rate of exchange on the latest date permitted by applicable law for the determination of liabilities in such liquidation or insolvency) actually received by the party entitled thereto falls short of the amount expressed to be due under the terms of this Agreement or, as the case may be, such other Security Document, the Borrower shall, as a separate and independent obligation, indemnify the party entitled thereto and hold such party harmless against the amount of such shortfall. (ii) If on any occasion the Contractual Currency so purchased exceeds the amount payable hereunder in the Contractual Currency to the party entitled thereto then, subject to the Borrower having no further obligation, actual or contingent, to such party under this Agreement, such party shall refund to the Borrower the excess amount of the Contractual Currency so purchased. (iii) For the purpose of this Clause "RATE OF EXCHANGE" means the rate at which the party entitled thereto is able on the relevant date to purchase the Contractual Currency with the Other Currency and shall take into account any premium and other costs of exchange. 17.2 INDEPENDENT OBLIGATIONS The indemnities in Clause 17.1 shall constitute separate and independent obligations of the Borrower from the other respective obligations under this Agreement, shall give rise to a separate and independent cause of action against the Borrower and shall apply irrespective of any indulgence granted by the Lenders or by the Agents from time to time. 18. GENERAL INDEMNITIES 18.1 UNSCHEDULED REPAYMENTS Without prejudice to the provisions of Clause 16.2, the Borrower shall indemnify each Agent and each Lender against all funding and other fees, costs, charges, losses, demand and expenses incurred or sustained as a consequence of the Lender receiving (including any receipt in respect of a repayment or prepayment made with the consent or at the request of or as required by the Agents or any Lender including, but not limited to, any prepayment under Clauses 6.5, 6.6 or 14.3) or recovering all or any part of the Loan or any other amount due hereunder on a day other than at the times and otherwise in accordance with the Repayment Schedule. - 53 - 18.2 EVENT OF DEFAULT The Borrower undertakes to indemnify each of the Agents and the Lenders against any and all liabilities losses costs, demands, charges, liabilities and expenses (including, without limitation, legal fees) which the Agents or such Lender may incur or sustain as a consequence of any default by the Borrower in the performance of the obligations expressed to be assumed by it in this Agreement and/or the Security Documents. 18.3 FINANCING COSTS The liability of the Borrower under Clauses 18.1 and 18.2 shall include but not be limited to all funding or other fees, costs, charges, losses, demands and expenses sustained or incurred by either of the Agents or each of the Lenders including (but not limited to) any sustained or incurred in liquidating deposits taken to fund the amount so prepaid or sustained or incurred in connection with the cancellation, reduction or re-arrangement of any interest rate swap, hedge transaction or other funding or financing agreement or arrangement which the Agents or such Lender may have arranged or entered into for the purpose of funding the amount so prepaid (and the Borrower hereby acknowledges that either of the Agents or each of the Lenders may in its discretion enter into any such agreements or arrangements as it considers appropriate). 18.4 OPERATION OF RIG The Borrower shall indemnify each of the Agents and each of the Lenders upon demand against all costs, expenses, claims, liabilities and losses of any nature whatsoever sustained or incurred as a result of or in connection with any the ownership or operation of the Rig and/or claims by any third party or any Environmental Claim being made against the Lender or otherwise howsoever arising out of any Environmental Incident. If the Lender shall become aware of any claim for the purposes of this Clause 18.4 it shall give notice thereof to the Borrower as soon as reasonably practicable (but not as a condition precedent to the liability of the Borrower under this Clause 18.4) and shall (if the Borrower shall indemnify and secure each of the Agents and each of the Lenders to such Agents or (as the case may be) such Lender's reasonable satisfaction against any liability costs damages and expenses which may reasonably be incurred thereby and/or in relation thereto) take such action as the Borrower may reasonably and promptly by notice request to avoid, resist or compromise the claim, provided that: (1) If either Agent or (as the case may be) the Lender receives instructions to appeal against or otherwise resist any claim, it may thereafter give notice to the Borrower to provide such Agent or (as the case may be) such Lender with a written opinion of legal advisers (to be approved by the Agent or (as the case may be) such Lender, such approval not to be unreasonably withheld) to the effect that there are reasonable and proper grounds for appealing against or resisting such claim, and if no such opinion is received by such Agent or (as the case may be) such Lender within 21 days after the service of such notice such Agent or (as the case may be) such Lender shall thereupon be released from any obligations which it would otherwise have under this Clause and (notwithstanding any other provision hereof) shall be entitled to immediate indemnification by the Borrower in respect of such claim, and if such an opinion is so received but there is a change in the basis on which it is given then such Agent or (as the case may be) such Lender may give further notice under this Clause. - 54 - (2) Neither Agent nor any Lender shall be required to appeal against or otherwise resist or to compromise any claim if in the reasonable opinion of such Agent or Lender doing so could have adverse long term or consequential implications for such Agent or Lender. (3) All communications pertaining to any claim with the person authority or body whatsoever making the claim as are made by the Borrower (if any) shall first be approved by the Agent or (as the case may be) such Lender (such approval not to be unreasonably withheld). 18.5 AGENT'S OR LENDER'S CERTIFICATE A certificate of either Agent or a Lender of the amount of any such loss or expense as is mentioned in Clauses 18.1, 18.2 and 18.3 and specifying the basis upon which such loss, expense or amount is computed shall, in the absence of manifest error, be final and conclusive and binding on the parties hereto. 19. THE AGENTS 19.1 APPOINTMENT Each Lender irrevocably appoints the Facility Agent to act as its agent for the purpose of this Agreement and irrevocably authorises it to take such action and exercise such rights, powers and discretions as are specifically delegated to it by this Agreement or the other Security Documents and such other action, rights, powers and discretions as are reasonably incidental thereto. However, the Facility Agent may not begin any legal action or proceeding in the name of a Lender without its consent. The relationship between the Facility Agent and the Lenders is of agent and principal only. The Facility Agent shall not be a trustee for any Lender, nor an agent or trustee for the Borrower or either Guarantor, under or in relation to any Security Document. 19.2 DUTIES OF FACILITY AGENT The Facility Agent shall:- (i) promptly send to each Lender details of each communication received by it from the Borrower and/or either of the Guarantors under this Agreement (except that details of any communication relating to a particular Lender shall be sent to that Lender only), details of any Transfer Certificate executed by any other Lender and provide such other information relating to the Facility as any Lender may reasonably request; (ii) promptly send to each Lender a copy of any document or information received by it under Clause 4 (Availability and Drawing); (iii) subject to the other provisions of this Clause 19, act in accordance with any instructions from the Majority Lenders or, if so instructed by the Majority Lenders, refrain from exercising a right, power or discretion vested in it under this Agreement; and - 55 - (iv) have only those duties, obligations and responsibilities of a solely mechanical and administrative nature, expressly specified in this Agreement. 19.3 PERFORMANCE OF DUTIES The Facility Agent:- (i) may perform any of its duties, obligations and responsibilities under the Security Documents by or through its personnel or any sub-contractor or agents; (ii) may refrain from exercising any right, power or discretion vested in it under the Security Documents until it has received instructions from the Majority Lenders or (provided that instructions have been requested) as to whether (and, if it is to be, the way in which) it is to be exercised and shall in all cases be fully protected when acting, or (if so instructed) refraining from acting, in accordance with instructions from the Majority Lenders; (iii) may treat (a) the Lender which makes available any share of the Loan as the person entitled to repayment of that share unless all or part of it has been assigned or transferred (and the Facility Agent has received notice of that assignment or transfer) in accordance with Clause 15; and (b) the office(s) notified by a Lender to the Facility Agent for this purpose before the signing of this Agreement (or, as the case may be, in the relevant Transfer Certificate or notice of assignment) as its Lending Office(s) unless the Facility Agent has received from that Lender a notice of change of Lending Office in accordance with Clause 15. The Facility Agent may act on any such assignment and/or notice until it is superseded by a further assignment and/or notice; (iv) shall not be required to do anything which would or might in its reasonable opinion be contrary to any law or directive or otherwise render it liable to any person which is not a party to the Security Documents and may do anything which is in its reasonable opinion necessary to comply with any law or directive; (v) shall not be required to make any enquiry as to default by the Borrower or either of the Guarantors (unless specifically so instructed by the Majority Lenders) in the performance or observance of any of the provisions of the Security Documents or as to the existence of any Event of Default or Potential Event of Default unless that Facility Agent acquires actual knowledge to the contrary or has been notified in writing thereof by a Lender; and (vi) may refrain from taking any step (or further step) to protect or enforce the rights of any person under the Security Documents until it has been indemnified (or received confirmation that it will be so indemnified) and/or secured to its satisfaction against any and all actions, charges, costs, losses, expenses or liabilities (including legal, accountants' and other professional fees) which would or might be brought, made or preferred against or suffered, sustained or incurred by it as a result. 19.4 AGENTS' DISCRETIONS The Facility Agent may:- - 56 - (i) assume that any representation made by the Borrower or either of the Guarantors in connection with the Security Documents is true; (ii) assume that no Event of Default has occurred and that the Borrower is not in breach of or default under the Security Documents; (iii) assume that any right, power, authority or discretion vested in this Agreement upon the Majority Lenders or any other person has not been exercised; (iv) rely on any communication, certificate, legal opinion or other document reasonably believed by it to be genuine; (v) rely as to any matter of fact which might reasonably be expected to be within the knowledge of any person, on a written statement by that person and on any communication or document believed by it to be genuine; (vi) obtain and pay for the advice or services of any lawyers, accountants, surveyors or other experts in relation to the negotiation, preparation, execution and enforcement of the Security Documents as may to it seem necessary or desirable and rely on any such advice; (vii) retain for its own benefit and without liability to account any fee or other sum receivable by it in connection with its agency and subject always to Clause 20 (Set Off/Pro-Rata Sharing) for its account; and (viii)accept deposits from, lend money to, provide any advisory or other services or engage in any kind of banking or other business with, any party to any Security Document or related company of any party (and, in each case, may do so without liability to account to any Lender). 19.5 LIMITATION OF RESPONSIBILITIES Neither the Facility Agent nor any of its personnel, sub-contractors or agents shall be:- (i) responsible for the adequacy, accuracy, completeness or reasonableness of any representation, warranty, statement, projection, assumption or information provided by the Borrower or either of the Guarantors to any Lender, or contained in any Security Document or any notice or other document delivered under or in connection with any Security Document; (ii) responsible for the execution, delivery, validity, legality, adequacy, enforceability or admissibility in evidence of any Security Document or any such notice or other document or for the satisfaction or failure by the Borrower to satisfy any condition precedent to the utilisation of the Facility; or (iii) responsible for the collectability of amounts payable under any Security Documents; (iv) responsible for the accuracy of any statements (whether written or oral) made in or in connection with any Security Documents; or - 57 - (v) liable for anything done or not done by it or any of them under or in connection with any Security Document save in the case of its or their own negligence or wilful misconduct (but so that this Clause 19.5(v) shall not be construed to impose any liability in respect of any matter for which liability is under any other provision of this Clause excluded). 19.6 THE FACILITY AGENT AS LENDER The Facility Agent shall with respect to its own participation in the Facilities (if any) have the same rights and powers under the Financing Documents as any other Lender and may exercise them as though it were not also acting as agent for the Lenders. The Facility Agent and its associates and affiliates may, without liability to disclose or account, engage in any kind of financial, trust or commercial business with, or acquire or dispose of any kind of security of, the Borrower, any Guarantor, any other Security Party, any of their respective associates or affiliates and none of the Facility Agent, nor any of its associates or affiliates shall have any obligation to disclose or account for any dealings with the Borrower, any Guarantor, any other Security Party, any of their respective associates or affiliates prior to the date of this Agreement. The agency department of the Facility Agent will be treated as a separate entity from any other department of the Facility Agent and any information received by the Facility Agent in any other capacity may be treated as confidential by them. 19.7 NO RELIANCE ON THE FACILITY AGENT Without affecting the responsibility of the Borrower for information supplied by it or on its behalf in connection with any Security Document, each Lender confirms that it has itself been, and will at all times continue to be, solely responsible for making its own independent investigation and appraisal of the business, financial condition, prospects, creditworthiness, status and affairs of the Borrower, the Guarantors or any other person and has not relied, and will not at any time rely, on the Facility Agent or any other Lender:- (i) to provide it with any information relating to the business, financial condition, prospects, creditworthiness, status or affairs of the Borrower, the Guarantors or any other person, whether coming into its possession before or after the drawing of the Facility (except as stated in Clause 19.2 or as provided otherwise in this Agreement); or (ii) to check or enquire into the adequacy, accuracy, completeness or reasonableness of any representation, warranty, valuation, statement, projection, assumption or information at any time provided by or on behalf of the Borrower, the Guarantors or any other person under or in connection with any Security Document (whether or not that information has been or is at any time circulated to it by the Facility Agent); or (iii) to assess or keep under review the business, financial condition, prospects, creditworthiness, status or affairs of the Borrower, the Guarantors or any other person. 19.8 LENDERS' INDEMNITY - 58 - To the extent that the Borrower or either of the Guarantors do not do so on demand or are not obliged to do so, each Lender shall on demand indemnify the Facility Agent in the proportion borne by its Outstandings to all the Outstandings at the relevant time (or, if there are then no Outstandings, in the proportion borne by its Commitments to the Total Commitments) against any cost, expense or liability mentioned in Clause 16 (Fees and Expenses) or sustained or incurred by the Facility Agent in complying with any instructions from the Majority Lenders or otherwise sustained or incurred by it (in its capacity as an Agent) in connection with its duties, obligations and responsibilities under the Security Documents except routine administrative costs and expenses of the Facility Agent or to the extent that they are sustained or incurred as a result of the gross negligence or wilful misconduct of the Facility Agent or any of its personnel or agents. 19.9 CHANGE OF AGENTS Notwithstanding the irrevocable appointments in Clause 19.1, the Facility Agent may resign at any time if it gives at least 30 days' notice in writing to the Borrower and the Lenders and the Facility Agent may at any time be removed by the Majority Lenders giving not less than 30 days' notice to the Facility Agent. However, no resignation or removal shall be effective until the successor has been appointed and accepted its appointment in accordance with this Clause 19.9. The Majority Lenders may appoint a successor to the resigning or removed Facility Agent but, if the successor has not been so appointed and accepted its appointment within 15 days after the date of the notice of resignation or, as the case may be, removal, the resigning Facility Agent and the Majority Lenders may appoint a successor Facility Agent. Any appointment of a successor must be in writing, signed by the person(s) appointing that successor and delivered to that successor. Any acceptance of such appointment must be in writing, signed by the person appointed and delivered to the person(s) appointing that successor. The other parties to this Agreement shall be promptly informed of the acceptance by a successor Facility Agent. Upon the successor accepting its appointment, the resigning or, as the case may be, the removed facility Agent shall be automatically discharged from any further obligation under the Security Documents and its successor and each of the other parties to the Security Documents shall have the same rights and obligations among themselves as they would have had if the successor had been the original Facility Agent party to this Agreement and the other Security Documents. The resigning or, as the case may be, the removed Facility Agent shall provide its successor with (or with copies of) such records as its successor requires to carry out its duties under the Security Documents. 19.10 SIGNING OF TRANSFER CERTIFICATES The Borrower, the Security Agent and each Lender (except for the Existing Lender and the New Lender seeking the relevant assignment and/or novation) irrevocably authorises the Facility Agent to sign each Transfer Certificate on their behalf. 19.11 ACCEPTANCE OF TITLE The Facility Agent may accept without investigation, requisition or objection such title as any person may have to the undertakings, property and assets which are subject to the Security Documents and shall not be bound or concerned to examine or enquire into nor be liable to any other Secured Party or any other person for any defect or failure in the title of any person whether such defect or failure was known to the Facility Agent or - 59 - might have been discovered upon examination or enquiry and whether capable of remedy or not nor for any failure on the part of the Facility Agent to give notice to any third party of the Security Documents to which it is party or otherwise perfect or register the security thereby created. 19.12 THE BORROWER AND THE FACILITY AGENT The Borrower shall be entitled to rely on any direction, instruction, certificate, document or other communication made by the Facility Agent and shall not be required to enquire whether it is made with the authority of the Lenders, and performance of any obligation arising under this Agreement or the Security Documents in reliance on any such shall be deemed to be proper performance of the obligation in question. 19.13 AGENT OF THE LENDERS Save as expressly provided in the Security Documents, the Facility Agent is appointed hereunder and thereunder solely as the agent of the Lenders, and the foregoing provisions of this Clause 19 (The Agents) apply solely to the Facility Agent in their capacity as agent for the Lenders. 19.14 AGENT'S KNOWLEDGE Information obtained by the Facility Agent in any capacity other than in its capacity as Facility Agent and or through any department other than the department having specific responsibility for the administration of the Loan and the Security Documents shall not be imputed to the Facility Agent. 19.15 AMENDMENTS The Facility Agent may (except where any other authority is required for the same by the express provisions of the Financing Documents) grant waivers or consents or vary the terms of the Financing Documents only if the same has been authorised by the Majority Lenders. Any such waiver, consent or variation so authorised and effected by the Facility Agent shall be binding on all the Lenders and the Facility Agent shall be under no liability whatsoever in respect of any such wavier, consent or variation. This Clause 19.15 shall not authorise, except with the prior consent of all the Lenders: (a) any change in the manner in which interest is calculated or paid under this Agreement in respect of the Loan; (b) any extension of the date for, or alteration in the amount or currency of, any payment of principal, interest, fee, commission or any other amount payable under the Financing Documents in respect of the Loan; (c) any increase in any Lender's Commitment in respect of the Facilities; (d) any extension of a date on which a payment of principal must be paid in respect of the Loan; or (e) any variation of the definition of Majority Lenders, and this Clause 19.15 shall not authorise, except with the prior consent of all the Lenders; - 60 - (g) any variation of: (i) Clause 14.1 (ILLEGALITY), 20.2 (PRO RATA SHARING); or (ii) this Clause 19.17, (h) any extension of the Availability Period; or (i) any amendment of any provision of the Financing Documents which contemplates the need for the consent or approval of each Lender. 19.16 THE SECURITY AGENT The Lenders will appoint the Security Agent to act as security agent in accordance with the Security Trust Deed. 20. SET-OFF/PRO-RATA SHARING 20.1 SET OFF The Borrower authorises the Facility Agent and each of the Lenders to apply (without prior notice) any credit balance (whether or not then due) to which the Borrower is at any time beneficially entitled on any account at, any sum held to its order by and/or any liability or obligation (whether or not matured) of, any office of the Facility Agent or such Lender in or towards satisfaction of any sum then due and payable by it to the Facility Agent or such Lender under the Security Documents and unpaid and, for that purpose, to convert one currency into another (provided that nothing in this Clause 20.1 shall be effective to create a charge, and provided further that any credit balance, sum and/or liability or obligation as aforesaid shall be held by the Facility Agent or, as the case may be, such Lender pursuant to or in connection with the Security Documents). No party shall be obliged to exercise any of its rights under this Clause 20.1, which shall be without prejudice and in addition to any right of set-off, combination of accounts, lien or other right (including the benefit of the Security Documents) to which it is at any time otherwise entitled (whether by operation of law, contract or otherwise). Each Lender shall notify the Facility Agent and the Borrower forthwith upon the exercise or purported exercise of any right of set-off giving full details in relation thereto and the Facility Agent shall inform the other Lenders forthwith. 20.2 PRO-RATA SHARING If at any time the proportion received or recovered (whether by direct payment, by exercise of any right of set-off, combination of accounts or lien, or otherwise) by any Lender in respect of the total sum which has become due to it from the Borrower or either of the Guarantors under the Security Documents before that time exceeds the proportion received or recovered by the Lender(s) receiving or recovering the smallest proportion (if any), then:- (i) such Lender shall promptly notify the Facility Agent and within 2 Banking Days after receiving a request from the Facility Agent, that Lender shall pay to the Facility Agent an amount equal to the excess and the Facility Agent shall notify - 61 - the Borrower or the relevant Guarantor, as the case may be, of the receipt of such amount; (ii) the Facility Agent shall promptly distribute that payment as if it were made by the Borrower or the relevant Guarantor, as the case may be; and (iii) as between the Borrower and the Lenders, that excess amount shall be treated as having been paid to the Lenders to which (and in the proportions in which) it is distributed under (ii) above, rather than as having been paid to that Lender. Within 2 Banking Days after any Lender receives or recovers any such sum otherwise than by payment through the Facility Agent, that Lender shall notify the Facility Agent of the amount and currency so received or recovered, how it was received or recovered and whether it represents principal, interest or other sums. If all or part of any amount so received or recovered by that Lender (the "RELEVANT LENDER") required thereafter to be repaid to the Borrower or another obligor, as the case may be, has to be refunded by it (with or without interest), each Lender to whom any part of that amount has been distributed shall repay to the Facility Agent for the account of the Relevant Lender (within 2 Banking Days after receiving a request from the Facility Agent on behalf of the Relevant Lender) its proportionate share of the amount to be repaid to the Borrower or, as the case may be, other obligor and of any interest required to be paid by the Relevant Lender on that amount in respect of all or any part of the period from the date of the relevant distribution to the date of that payment to the Relevant Lender. Any amount received or recovered by a Lender under a novation, assignment, sub-participation or the like shall be ignored for the purpose of this Clause 20.2. Furthermore, a Lender shall not be obliged to share any amount which it has (i) alone received on its own account under Clause 14 (Changes in Circumstances) or (ii) received or recovered as a result of taking legal proceedings with any other Lender which had an opportunity to participate in those legal proceedings but did not do so and did not take separate legal proceedings. The provisions of this Clause 20.2 shall not, and shall not be construed so as to, constitute a charge by a Lender over all or any part of a sum received or recovered by it in the circumstances mentioned in Clause 20.2. 20.3 FLOOR GUARANTEE For the avoidance of doubt nothing contained in this Clause 20 shall in any way restrict the Initial Lenders or other Beneficiaries under (and as defined in) the Floor Guarantee from recovering and retaining for their own exclusive benefit all amounts received or recovered by them under or in respect of the Floor Guarantee. 21. NOTICES, ETC. 21.1 METHOD OF SENDING Each communication to be made hereunder shall be made in writing but, unless otherwise stated, may be made by facsimile transmission or by telex or by letter. 21.2 ADDRESSES FOR NOTICES - 62 - Any communication or document to be made or delivered by one person to another pursuant to this Agreement shall (unless the one has by not less than three (3) days' written notice to the other specified another address) be made or delivered to that other person at the respective addresses set out below. (1) The Borrower (Petrodrill Six Limited):- PETRODRILL ENGINEERING NV K.P. van der Mandalelaan 38 3062 MB Rotterdam (Brainpark) The Netherlands Attention: Steve Assiter Facsimile: Telex: (2) The Initial Lenders:- PETRO DIA THREE S.A. c/o MITSUBISHI CORPORATION 6-3 Marunouchi 2-chome Chiyoda-ku Tokyo Japan Attention: General Manager, Ship & Industrial Project Department PETRO DIA FOUR S.A. c/o MITSUBISHI CORPORATION 6-3 Marunouchi 2-chome Chiyoda-ku Tokyo Japan Attention: General Manager, Ship & Industrial Project Department Facsimile: Telex: (3) The Facility Agent:- MITSUBISHI CORPORATION (UK) PLC Bow Bells House Bread Street London EC4M 9BQ Attention: General Manager, Machinery Department Facsimile: 0171 822 0184 Telex: - 63 - (4) The Security Agent:- MITSUBISHI CORPORATION (UK) PLC Bow Bells House Bread Street London EC4M 9BQ Attention: General Manager, Machinery Department Facsimile: 0171 822 0184 Telex: 21.3 DEEMED RECEIPT Any notice given hereunder shall be deemed to have been received: (i) If sent by facsimile transmission or by telex, at the opening of business one (1) Banking Day after the day it was transmitted; (ii) In the case of a written notice lodged by hand, at the time of actual delivery; and (iii) If posted, on the fifth Banking Day following the day on which it was properly despatched by first class mail postage prepaid. 22. COUNTERPARTS This Agreement may be executed in any number of counterparts and by the different parties hereto on different counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument. 23. AGENTS' AND LENDERS' CERTIFICATES A certificate of either of the Agents or of any Lender (i) stating the amount of any sum due to such Agent or Lender hereunder (and specifying the provision hereof under which such sum became due and reasonable details of the manner of calculation thereof), and/or (ii) stating the determination by either Agent or any Lender as to any matter to be determined by such Agent or Lender hereunder (including but not limited to rate of interest and currency exchange), shall be conclusive as to the subject matter thereof in the absence of manifest error. 24. WAIVER; REMEDIES CUMULATIVE No failure to exercise and no delay in exercising on the part of the Lender any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof, or the exercise of any other right, power or privilege. The rights and remedies herein provided are cumulative and not exclusive of any rights or remedies provided by law. - 64 - 25. LANGUAGE Each document referred to herein or to be delivered hereunder and under the Security Documents (including financial statements) and each other communication shall be in the English language. In the event of any conflict between the version in English and any version in any other language of any document (including this Agreement) the version in English shall prevail. 26. SEVERABILITY Any provision in this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. 27. GOVERNING LAW AND JURISDICTION 27.1 GOVERNING LAW This Agreement shall be governed by and construed in accordance with English law. 27.2 SUBMISSION TO JURISDICTION For the benefit of the Agents and the Lenders, the Borrower irrevocably agrees that the English courts are to have jurisdiction to settle any disputes which may arise out of or in connection with this Agreement and the other Financing Documents and that accordingly any suit, action or proceedings ("Proceedings") arising out of or in connection with this Agreement and the other Financing Documents may be brought in such courts. 27.3 WAIVER OF OBJECTION The Borrower irrevocably waives any objection which it may have now or hereafter to the laying of the venue of any Proceedings in any such court as is referred to in Clause 27.2 and any claim that any such Proceedings have been brought in an inconvenient forum and further irrevocably agrees that a judgment in any Proceedings brought in the English courts shall be conclusive and binding upon the Borrower and may be enforced in the courts of any other jurisdiction. 27.4 OTHER JURISDICTIONS Nothing contained in this Clause 27 shall limit the right of the Agents or any Lender to take proceedings against the Borrower in any other court of competent jurisdiction, nor shall the taking of Proceedings in any one or more jurisdictions preclude the taking of Proceedings in any other jurisdiction, whether concurrently or not. 27.5 SERVICE OF PROCESS The Borrower irrevocably and unconditionally: (a) designates, and appoints and empowers Hackwood Secretaries Limited of One Silk Street, London EC2Y 8HQ to receive for it and on its behalf, service of - 65 - process issued out of the English courts to receive for it and on its behalf service of process issued out of the Japanese courts in any Proceedings arising out of or in connection with this Agreement; (b) agrees to maintain in England a duly appointed process agent notified to the Facility Agent, for the purposes of paragraph (a) above; (c) agrees that failure by any such process agent to give notice of such process to it shall not impair the validity of such service or of any judgment based thereon; (d) consents to the service of process out of any of the said courts in any such Proceedings by the airmailing of copies, postage prepaid, to it at its address for the time being applying for the purposes of Clause 19; and (e) agrees that nothing herein shall affect the right to serve process in any other manner permitted by law. IN WITNESS whereof the parties hereto have caused this Agreement to be duly executed by their authorised officers or other representatives the day and year first above written - 66 - SIGNATORIES EXECUTED on behalf of ) /s/ Illegible PETRODRILL SIX LIMITED ) by its duly authorised signatory/ ) attorney-in-fact: ) /s/ Illegible EXECUTED on behalf of PETRO ) /s/ H. MIYAMOTO DIA THREE S.A. by its duly ) authorised signatory/attorney-in-fact: ) /s/ Illegible EXECUTED on behalf of PETRO ) /s/ H. MIYAMOTO DIA FOUR S.A. by its duly ) authorised signatory/attorney-in-fact: ) /s/ Illegible EXECUTED on behalf of ) /s/ Illegible MITSUBISHI CORPORATION ) (UK) PLC (in its capacity as Facility ) Agent) by its duly authorised ) signatory/attorney-in-fact: ) /s/ Illegible EXECUTED on behalf of ) /s/ Illegible MITSUBISHI CORPORATION ) (UK) PLC (in its capacity as Security ) Agent) by its duly authorised ) signatory/attorney-in-fact: ) /s/ Illegible - 67 - SCHEDULE 1 THE LENDERS AND THEIR COMMITMENTS TRANCHE A FACILITY NAME OF LENDER AMOUNT OF TRANCHE A COMMITMENT US$ (INCLUDING INTEREST TO BE CAPITALISED PRIOR TO THE NOTIONAL INTERIM A FACILITY DATE) Petro Dia Four SA 47,000,000 TRANCHE B FACILITY NAME OF LENDER AMOUNT OF TRANCHE B COMMITMENT US$ (INCLUDING INTEREST TO BE CAPITALISED PRIOR TO THE NOTIONAL FINAL FACILITY DATE) Petro Dia Three SA 66,000,000 TRANCHE C FACILITY NAME OF LENDER AMOUNT OF TRANCHE C COMMITMENT US$ (INCLUDING INTEREST TO BE CAPITALISED PRIOR TO THE NOTIONAL FINAL FACILITY DATE) Petro Dia Three SA 47,000,000 - 68 - SCHEDULE 2 THE FORM OF REPAYMENT SCHEDULE REPAYMENT DATE AMOUNT OF REPAYMENT INSTALMENT - 69 - SCHEDULE 3 PART 1: SERVICES CONTRACTS 1. Management Agreement between the Borrower and Formaritima Ltd relating to the Rig and dated as of 5 November 1998. 2. Licensing Agreement between Bigem Holdings NV and the Borrower relating to the design of the Rig and dated as of 5 November 1998. 3. Construction Management Agreement between the Borrower and Petrodrill Engineering BV relating to the Rig and dated as of 5 November 1998. PART 2: OTHER SERVICES CONTRACTS 1. Technical Services Agreement between Formaritima Ltd and Pride-Foramer S.A. relating to the Rig and dated as of 5 November 1998. 2. Marine and Nautical Services Agreement between Formaritima Ltd and Workships Contractors B.V. relating to the Rig and dated as of 5 November 1998. 3. Supply Agreement between Petrodrill Engineering N.V. and Maritima relating to the Rig and dated as of 5 November 1998. 4. Local Services Agreement between Formaritima Ltd and Maritima relating to the Rig and dated as of 5 November 1998. 5. Supply Agreement between Petrodrill Engineering N.V. and Pride-Foramer S.A. relating to the Rig and dated as of 5 November 1998. 6. Supply Agreement between Petrodrill Engineering N.V. and Workships Contractors B.V. - 70 - SCHEDULE 4 DRAWING REQUEST FROM: Petrodrill Six Limited [DATE] TO: Mitsubishi Corporation (UK) PLC as Facility Agent Dear Sirs LOAN AGREEMENT We refer to the Loan Agreement dated [ o ] December 1998 (the "LOAN AGREEMENT") and made between the Lenders (as defined therein) (1) ourselves (as Borrower), Mitsubishi Corporation (UK) PLC (as Facility Agent) and Mitsubishi Corporation (UK) PLC (as Security Agent). Terms defined in the Loan Agreement shall have the same meaning when used herein. We hereby give you irrevocable Notice: (a) that we wish to make a Drawing on [INSERT DATE OF PROPOSED drawing] (being a Banking Day during the Availability Period)*; (b) that the Advance will be in the principal amount of US$[ o ]; and (c) that the Facility under which the Drawing is requested is the: [Tranche A Facility] [Tranche B Facility] [Tranche C Facility], upon the terms and subject to the conditions of the Loan Agreement. We confirm that the representations and warranties set out in Clause 8 of the Loan Agreement are true and that, no event which is or, with the giving of notice or the passage of time or both, would become an Event of Default has occurred and is continuing. Please pay the proceeds of the Advance to the credit of the Management Account. Yours faithfully _________________________________ Authorised signatory for and on behalf of PETRODRILL SIX LIMITED _________________________________ * or attach schedule of requested Pre-delivery Advances. SCHEDULE 5 DETAILS OF THE HOLDER OF SHARES IN THE BORROWER AND THE SISTER COMPANY Amethyst Financial Company Limited is the registered holder and beneficial owner of the entire issued share capital in the Borrower. - 72 - SCHEDULE 6 FORM OF TRANSFER CERTIFICATE To: [Insert name of Facility Agent] [Insert address of Facility Agent] Attention: [ ] PETRODRILL SIX LIMITED US$160,000,000 LOAN AGREEMENT DATED [ o ] 1998 1. This Transfer Certificate relates to the above loan agreement (the "LOAN AGREEMENT", which term shall include any amendments or supplements thereto), and the other Security Documents referred to therein. Terms defined in the Loan Agreement have the same meaning in this Transfer Certificate. In this Transfer Certificate : "EXISTING LENDER" means [ o ]; and "TRANSFEREE" means [ o ]. 2. The Existing Lender (i) confirms that the details in the Schedule to this Transfer Certificate under the heading "RIGHTS TO BE ASSIGNED AND/OR OBLIGATIONS TO BE NOVATED" accurately summarises the Outstandings which are to be assigned and/or Commitments which are to be novated by this Transfer Certificate and (ii) requests the Transferee to accept and procure the transfer to the Transferee of the portion specified in the Schedule hereto of, as the case may be, such Outstandings and/or its Commitment by counter-signing and delivering this Transfer Certificate to the Facility Agent at its address for the service of notices specified in the Loan Agreement. 3. The Transferee hereby requests the Facility Agent to accept this Transfer Certificate as being delivered to the Facility Agent pursuant to and for the purposes of Clause 15 (Transfers) of the Loan Agreement so as to take effect in accordance with the terms thereof on the Transfer Date or on such later date as may be determined in accordance with the terms thereof. 4. The Transferee: (a) confirms that it has received a copy of the Loan Agreement together with such other documents and information as it has requested in connection with this transaction; (b) confirms that it has not relied and will not rely on the Existing Lender to check or enquire on its behalf into the legality, validity, effectiveness, adequacy or completeness of any such documents or information; - 73 - (c) confirms and agrees that it has not relied and will not rely on any of the Existing Lender, the Agents, or the other Lenders to assess or keep under review on its behalf the financial condition, creditworthiness, condition, affairs, status or nature of the Borrower or any other party to the Security Documents, and has not relied and will not rely on any of the Existing Lender, the Agent or the other Lenders to ensure that the Borrower or any other party to the Security Documents are not in breach of or default under any of the same; and (d) if not already a Lender, appoints the Agents to act as its agents as provided in the Loan Agreement and the Security Trustee Deed and agrees to be bound by the Loan Agreement (including, but not limited to, Clause 15 (Transfer)). 5. The Transferee undertakes with the Existing Lender and each of the other parties to the Loan Agreement that it will perform, in accordance with their terms, all those obligations which, by the terms of the Loan Agreement, will be assumed by it upon delivery of the executed copy of this Transfer Certificate to the Facility Agent. 6. On execution of this Transfer Certificate by the Facility Agent on their behalf, the Borrower, the Lenders and the Agents accept the Transferee as a party to the Loan Agreement in substitution for the Existing Lender with respect to all those rights and obligations which, by the terms of the Loan Agreement and other Security Documents, will be transferred to or assumed by the Transferee after delivery of the executed copy of this Transfer Certificate to the Facility Agent. 7. None of the Existing Lender, the other Lenders or the Agents: (a) makes any representation or warranty or assumes any responsibility with respect to the legality, validity, effectiveness, adequacy or enforceability of any of the Loan Agreement and the Security Documents or the Project Documents, or with respect to whether the Borrower, the Guarantors or any other party to the Security Documents or the Project Documents has complied with its obligations thereunder (under Clause 3 (Conditions Precedent) of the Loan Agreement); or (b) assumes any responsibility for the financial condition of the Borrower, the Guarantors or any other party to any Security Document or Project Document or any other document or for the performance and observance by the Borrower, the Guarantors or any other party to the Security Documents or Project Documents or any other document of its or their obligations and any and all conditions and warranties, whether express or implied by law or otherwise, are hereby excluded. 8. The Existing Lender hereby gives notice that nothing herein or in the Loan Agreement (or any document relating thereto) shall oblige the Existing Lender to (i) accept a re-transfer from the Transferee of the whole or any part of its rights, benefits and/or obligations under the Loan Agreement transferred pursuant hereto or (ii) support any losses directly or indirectly sustained or incurred by the Transferee for any reason whatsoever including, without limitation, the non-performance by the Borrower, the Guarantors or any other party to the Security Documents (or any document relating thereto) of its obligations under any such document. The Transferee hereby acknowledges the absence of any such obligation as is referred to in (i) or (ii) above. - 74 - 9. This Transfer Certificate and the rights and obligations of the parties hereunder shall be governed by and construed in accordance with English law. 10. The Transferee warrants and represents to the Facility Agent and each of the Lenders that it is a Qualifying Lender as defined in Clause 1.1 of the Loan Agreement. THE SCHEDULE 1. Existing Lender: 2. Transferee: 3. Transfer Date: 4. Commitment: Lender's Commitment Facility (Tranche A, Portion Transferred (US$) B or C) (US$) 5. Outstandings: Amount of Lender's Facility (Tranche A, Drawdown Date Portion Participation (US$) B or C) Transferred 6. Transferee's Lending Office details: Address: Telephone Number: Telex No: Fax No: 7. Rights to be Assigned and/or Obligations to be Novated. ___________________________ ___________________________ [Existing Lender] [Transferee] __________________________________ Facility Agent for itself and on behalf of the Security Trustee and the Borrower - 75 - SCHEDULE 7 PART 1 - THE PROJECT DOCUMENTS 1. (a) Shipbuilding Contract dated 9 April 1998 the "SHIPBUILDING CONTRACT" between Daewoo Corporation and Daewoo Heavy Industries Ltd. (collectively, the "BUILDER") and Petrodrill Offshore Inc. (formerly called Petrodrill Construction Inc.) (the "OWNER") for the purchase of a Dynamic Positioned Semi-Submersible Drilling Vessel having the Hull No. 3016. (b) Side Letter No. 1 dated as of 9 April 1998 between the Owner and the Builder, whereby the Owner has agreed to certain amendments to the Shipbuilding Contract as set forth therein. (c) Side Letter No. 2, dated as of 9 April 1998 between the Owner and the Builder, whereby the Owner has agreed to consider certain proposals of the Builder as set forth therein. (d) Main Contract Amendment Agreement dated 8 October 1998. (e) Novation Agreement in respect of the Shipbuilding Contract dated 4 December 1998 between the Builder, the Owner and the Borrower. (f) Letter of Confirmation as to continued validity of the Rig Construction Contract. 2. (a) Refund Guarantee (the "REFUND GUARANTEE") issued by The Export-Import Bank of Korea (the "REFUND GUARANTOR"). (b) in respect of the Refund Guarantee dated 4 December 1998. (c) Consent in respect of (f) above. 3. Chartering Contract (Contract No. [101.2.159.97-1] between Maritima Navigacao e Engenharia Ltda (whose successor is Maritima) and Petrobras. 4. Services Rendering Contract (Contract no. [101.2.160.97-0] between Maritima Navigacao e Engenharia Ltda (whose successor is Maritima) and Petrobras. 5. Letter of Agreement dated 15 January 1998, relative to the aforesaid Chartering Contract and Services Rendering Contract, between Maritima and Petrobras. 6. A further Letter of Agreement dated 15 January 1998, relative to the aforesaid Chartering Contract and Services Rendering Contract, between Maritima and Petrobras. 7. Rider No. 01 for the assignment of rights and obligations arising from the aforesaid Chartering Contract, dated 10 July 1998 and made between Petrobras, Maritima and Petrodrill Six Limited. 8. Rider No. 1 to the aforesaid Services Rendering Contract, dated 21 August 1998 and made between Maritima, Petrobras and Petrodrill Six Limited. - 76 - 9. Letter dated 28 May 1998 from Petrobras to Maritima reference E&P/SUEX-SSE-048-98. 10. Amethyst 6 Technical Services Agreement between Formaritima Ltd. and Pride-Foramer S.A.; 11. Amethyst 6 Marine and Nautical Services Agreement between Formaritima Ltd. and Workships Contractors BV; 12. Amethyst 6 Management Agreement between Petrodrill Six Limited and Formaritima Ltd.; 13. Amethyst 6 Supply Agreement between Petrodrill Engineering N.V. and Maritima Petroleo e Engenharia Ltda; 14. Amethyst 6 Local Services Agreement between Formaritima Ltd. and Maritima Petroleo e Engenharia Ltda; 15. Licensing Agreement between Bigem Holdings N.V. and Petrodrill Six Limited; 16. Amethyst 6 Supply Agreement between Petrodrill Engineering N.V. and Pride-Foramer S.A; 17. Amethyst 6 Supply Agreement between Petrodrill Engineering N.V. and Workships Contractors B.V.; 18. Amethyst 6 Construction Management Agreement between Petrodrill Six Limited and Petrodrill Engineering N.V.; and 19. Amethyst Financial Company Ltd's Shareholders' Agreement between Drillpetro Inc., Techdrill Inc., and Westville Management Corporation. 20. Local Services Agreement between Maritima and Formaritima Ltd. 21. Technical Services Agreement between Pride-Foramer SA and Formaritima Ltd. 22. Supply Agreement between Pride-Foramer SA and Petrodrill Engineering Ltd. 23. Supply Agreement between Maritima and Petrodrill Engineering Ltd. 24. Supply Agreement between Workships Contractors BV and Petrodrill Engineering Ltd. PART 2 - THE SECURITY DOCUMENTS 1. Rig Construction Contract and Refund Guarantee Assignment 2. Rig Mortgage 3. Deed of Covenants 4. Charterparty Assignment 5. Services Rendering Contract Assignment - 77 - 6. Insurances Assignment 7. Management Account Charge 8. Reserve Account Charge 9. Services Contracts Assignment 10. Share Charge 11. Cross Guarantee 12. Deed of Guarantee and Undertaking 13. Assignment of Deed of Guarantee and Undertaking and Subordinated Loan Facility Agreement 14. Mortgage Debenture 15. Security Trust Deed 16. The Additional Funding and Guarantee Agreement referred to in Clause 7.5 17. The subordinated loan facility agreement referred to in Clause 7.1(xii). - 78 - SCHEDULE 8 INSURANCES The Insurances to be effected and maintained throughout the Security Period shall be effected and maintained (with the Security Agent, the Facility Agent and each of the Lenders being named as a principal assured) with insurers acceptable to the Facility Agent providing insurance cover against such risks as are insured by the Temporary Confirmation of Insurance and on terms and conditions no less favourable than are provided for by the Temporary Confirmation of Insurance and (subject to such insurance being available in the international insurance markets) otherwise as the Facility Agent may from time to time at its discretion require. - 79 - EX-4.10 12 EXHIBIT 4.10 DATED 19 DECEMBER 1998 PETRODRILL SEVEN LIMITED as Borrower - and - PRIDE INTERNATIONAL INC. and MARITIMA PETROLEO E ENGENHARIA LTDA as Sponsors - and - THE LENDERS herein referred to as Lenders - and - MITSUBISHI CORPORATION (UK) PLC as Facility Agent - and - MITSUBISHI CORPORATION (UK) PLC as Security Agent ------------------------------------------------- DEED OF GUARANTEE AND UNDERTAKING relating to the Loan Agreement in respect of Amethyst 7 ------------------------------------------------- F I E L D - F I S H E R - W A T E R H O U S E 4 1 V I N E S T R E E T L O N D O N E C 3 N 2 A A CONTENTS CLAUSE/HEADING PAGE 1. DEFINITIONS AND INTERPRETATION 2 2. REFUND UNDERTAKING 3 3. COST OVERRUNS UNDERTAKING 4 4. INSURANCE DEDUCTIBLES UNDERTAKING 4 5. OPEX SHORTFALL UNDERTAKING 5 6. CHARTERPARTY AND SERVICES RENDERING CONTRACT PERFORMANCE UNDERTAKING 5 7. MANAGEMENT AGREEMENT PERFORMANCE UNDERTAKING 6 8. MAINTENANCE OF INSURANCES UNDERTAKING 7 9. PAYMENTS TO THE BORROWER 8 10. PAYMENTS TO/LOANS BY LENDERS 9 11. PRESERVATION OF OBLIGATIONS 11 12. PAYMENTS 14 13. TAXATION 15 14. REPRESENTATIONS AND WARRANTIES 15 15. UNDERTAKINGS 16 16. CURRENCY INDEMNITY 18 17. DELEGATION, ASSIGNMENT 19 18. NOTICES, ETC. 19 19. GOVERNING LAW AND JURISDICTION 21 20. COUNTERPARTS 23 21. WAIVER; REMEDIES CUMULATIVE 24 22. LANGUAGE 24 23. SEVERABILITY 24 THIS DEED is made on December 1998 BETWEEN:- (1) PETRODRILL SEVEN LIMITED of Arias Fabrega and Fabrega Trust Co., BVI Limited, 325 Waterfront Drive, Omar Hodge Building, 2nd Floor, Wickham's Cay, Road Town, Tortola, British Virgin Islands (the "BORROWER"); (2) PRIDE INTERNATIONAL INC,. a company incorporated under the laws of the State of Louisiana, USA, of 5847 San Felipe, Suite 3300, Houston, Texas TX77057 ("PRIDE") and MARITIMA PETROLEO E ENGENHARIA LTDA., a company incorporated under the laws of Brazil, of Avenida Almirante Barroso 52, Group 3400, Rio de Janeiro ("MARITIMA") (together, the "SPONSORS" and, individually, a "SPONSOR"); (3) THE LENDERS, the respective names and offices of which are set out in Clause 1.2, as Initial Lenders (the "INITIAL LENDERS"); (4) MITSUBISHI CORPORATION (UK) PLC, a company incorporated in England and Wales (Reg No. 2214224), whose registered office is at Bow Bells House, Bread Street, London EC4M 9BQ, in its capacity as facility agent for the Lenders (the "FACILITY Agent"); and (5) MITSUBISHI CORPORATION (UK) PLC, a company incorporated in England and Wales (Reg No. 2214224), whose registered office is at Bow Bells House, Bread Street, London EC4M 9BQ, as security trustee and agent for the Secured Parties. WHEREAS: (A) By a loan agreement (as amended or supplemented from time to time, the "LOAN AGREEMENT") of even date herewith and made between the Initial Lenders (1), the Borrower (2), the Facility Agent (3) and the Security Agent (4), the Initial Lenders have agreed, upon and subject to the terms and conditions of the Loan Agreement, to make available to the Borrower loan facilities not exceeding US$180,000,000 for the purposes therein specified. (B) By a further loan agreement (the "SISTER COMPANY LOAN AGREEMENT") of even date herewith and made between the Initial Lenders (1), the Sister Company (2), the Facility Agent (3) and the Security Agent (4), the Initial Lenders have agreed to make available to the Sister Company (on substantially identical terms to the Loan Agreement) loan facilities not exceeding US$160,000,000 for the purposes therein specified. (C) The execution and delivery of this Deed of Guarantee and Undertaking is one of the conditions precedent to the Initial Lenders' making their Commitments available under the Loan Agreement and under the Sister Company Loan Agreement. (D) The Sponsors have agreed to execute and deliver this Deed of Guarantee and Undertaking in consideration of the Initial Lenders, at the Sponsors' request, making or continuing loans or advances to, or otherwise giving credit or granting accommodation or time to, the Borrower pursuant to the Loan Agreement and/or the Sister Company Loan Agreement. -1- IT IS AGREED as follows:- 1. DEFINITIONS AND INTERPRETATION 1.1 TERMS DEFINED IN THE LOAN AGREEMENT Unless the context otherwise requires or unless otherwise defined in this Deed of Guarantee and Undertaking, words and expressions defined in the Loan Agreement shall have the same meanings when used in this Deed of Guarantee and Undertaking. 1.2 OTHER DEFINED TERMS In this Deed of Guarantee and Undertaking, unless the context otherwise requires: "EQUITY SHARE CAPITAL" means, in relation to any company, its issued share capital excluding any part of that capital which (neither as regards dividends nor as respects capital) carries any right to participate beyond a specified amount in a distribution. "INITIAL LENDERS" means Petro Dia Three SA and Petro Dia Four SA, each being a company incorporated in the Republic of Panama whose principal place of business is at 53rd Street, Urbanizacion Obarrio, Torre Swiss Bank, 16th Floor, Panama City, Republic of Panama; "LENDERS" means the Initial Lenders and any person who becomes a Lender from time to time pursuant to Clause 15 (TRANSFERS) of the Loan Agreement, but excluding any person who ceases to be a Lender pursuant to that Clause; "SISTER COMPANY GUARANTEE AND UNDERTAKING" means the deed of guarantee and undertaking (in substantially the same terms as this Deed of Guarantee and Undertaking) executed pursuant to the Sister Company Loan Agreement and dated the same date as this Deed of Guarantee and Undertaking; "TAXES" means any present or future taxes, levies, duties, charges, fees, deductions or withholdings of any nature now or hereafter imposed, levied, collected, withheld or assessed by any country or any political sub-division or taxing authority thereof. 1.3 INTERPRETATION This Deed of Guarantee and Undertaking shall be interpreted consistently with the Loan Agreement, and accordingly the provisions of Clauses 1.2 to 1.4 (inclusive) of the Loan Agreement shall apply hereto and (MUTATIS MUTANDIS) shall be deemed to be incorporated into this Deed of Guarantee and Undertaking as if set out in full in this Deed of Guarantee and Undertaking. 1.4 SECURITY AGENT The Security Agent enters into this Deed of Guarantee and Undertaking as security trustee and agent for the Secured Parties in accordance with the Security Trust Deed and all rights and powers conferred on or vested in the Security Agent under this Deed of Guarantee and Undertaking shall be conferred on and vested in the Security Agent in such capacity, and the term "SECURITY AGENT" shall be construed accordingly. -2- 2. REFUND UNDERTAKING 2.1 DEFINITIONS In this Clause 2: "BUILDER'S RISK INSURANCE" means such part of the insurances effected by the Temporary Confirmation of Insurances which relates to the Rig during the period up to the time of delivery to the Borrower in accordance with the Rig Construction Contract; "CONSTRUCTION CONTRACT REPAYMENTS" means the aggregate amount of all payments/repayments and payments in respect of interest payable (in each case whether or not paid) by the Builder pursuant to the Rig Construction Contract and/or by the Export-Import Bank of Korea pursuant to the Refund Guarantee and/or by any insurers pursuant to the Builder's Risk Insurance (in each case to the Security Agent as assignee of the benefit of the Rig Construction Contract, the Refund Guarantee and the Borrower's interest in the Builder's Risk Insurance) (i) following any termination or rescission of the Rig Construction Contract (however arising) or (ii) upon any refund of all or any of the instalments of the Contract Price of the Rig and/or any interest otherwise becoming payable or (iii) following a Total Loss prior to the delivery of the Rig by the Builder; and "TEMPORARY CONFIRMATION OF INSURANCE" means the temporary confirmation of insurance (and described as Temporary Confirmation of Insurance) issued by McGriff, Seibels, Bartama & Colvin Inc (as brokers) on 15 December 1998 with Assigned No. MS-S711A - Daewoo. 2.2 UNDERTAKING The Sponsors hereby jointly and severally and irrevocably and unconditionally undertake to the Borrower and as a separate and independent obligation to the Security Agent in each case as primary obligors that:- (i) in the event of any termination or rescission of the Rig Construction Contract (however arising), or (ii) upon any refund of all of the instalments of the Contract Price becoming payable (whether or not paid), or (iii) following a Total Loss prior to the delivery of the Rig by the Builder, they shall, within 7 Banking Days of first written demand from the Facility Agent, pay to the Borrower in accordance with Clause 9 the amount which is determined by the Facility Agent as being the excess (if any) of the Outstanding Indebtedness over the Construction Contract Repayments. -3- 3. COST OVERRUNS UNDERTAKING 3.1 DEFINITIONS In this Clause 3: "FUNDED AMOUNT" means at any relevant time the aggregate of (i) One Hundred and Eighty Million United States Dollars (US$180,000,000) and (ii) all amounts paid to, and received by, the Borrower by the Sponsors in accordance with Clause 3.2; and "SEVERAL PROPORTIONS" has the same meaning as is given to this expression in Clause 6.1. 3.2 UNDERTAKING If on any date and from time to time the Facility Agent shall determine that the amount of the Total Project Costs incurred as at such date exceeds the Funded Amount at that time, then, without prejudice to or in any way limiting or affecting their other obligations under this Deed of Guarantee and Undertaking, the Sponsors hereby severally and unconditionally and irrevocably agree and undertake with the Borrower and as a separate and independent obligation with the Security Agent that they will, within 7 Banking Days of first written demand from the Facility Agent made from time to time, pay in their Several Proportions to the Borrower in accordance with Clause 9 a sum which is then determined by the Facility Agent as being equal to the amount of such excess. 3.3 LIMITATION The aggregate total liability of the Sponsors under Clause 3 of this Deed of Guarantee and Undertaking shall not exceed US$20,000,000 less the aggregate of all amounts which the Sponsors have, at the date of any payment under Clause 3 of this Deed of Guarantee and Undertaking, paid pursuant to Clause 3 of the Sister Company Guarantee and Undertaking. 4. INSURANCE DEDUCTIBLES UNDERTAKING 4.1 DEFINITIONS In this Clause 4: "DELAY IN DELIVERY INSURANCE" means the insurances referred to in paragraph (A) (DELAY IN DELIVERY) of Section III (BUSINESS INTERRUPTION) of the Conditions to the Temporary Confirmation of Insurance; "INSURANCE DEDUCTIBLE" means any excess or deductible applied in respect of any claim arising under the Delay in Delivery Insurance and/or the Loss of Hire Insurance; and "LOSS OF HIRE INSURANCE" means the insurances referred to in paragraph (B) (LOSS OF HIRE) of Section III (BUSINESS Interruption) of the Conditions to the Temporary Confirmation of Insurance; and "TEMPORARY CONFIRMATION OF INSURANCE" has the same meaning as is given to this expression in Clause 2.1. -4- 4.2 PAYMENT UNDERTAKING The Sponsors hereby jointly and severally and unconditionally and irrevocably undertake to the Borrower and as a separate and independent obligation to the Security Agent that in the event that any incident shall occur in relation to the Rig which gives rise to a right to claim under the Delay in Delivery Insurance or the Loss of Hire Insurance they will, within 7 Banking Days of first written demand from the Facility Agent, pay to the Borrower in accordance with Clause 9 such amount as is determined by the Facility Agent to be equal to the amount of any Insurance Deductible applicable in respect of each such claim. 5. OPEX SHORTFALL UNDERTAKING 5.1 DEFINITIONS In this Clause 5: "MANAGEMENT AGREEMENT" has the same meaning as is given to this expression in Clause 7.1; "MONTHLY OPEX AMOUNT" means all Opex actually incurred in relation to any calendar month during the Security Period; and "OPEX" means the costs of operating the Rig including the costs listed in Clause 4.5.3 of the Management Agreement; 5.2 PAYMENT UNDERTAKING The Sponsors hereby jointly and severally and unconditionally and irrevocably undertake to the Borrower and as a separate and independent obligation to the Security Agent that in the event that in any calendar month the Monthly Opex Amount exceeds the Monthly Outgoings for that calendar month they will, within 7 Banking Days of first written demand from the Facility Agent, pay to the Borrower in accordance with Clause 9 such amount as is determined by the Facility Agent to be equal to the amount of such excess for that calendar month. 6. CHARTERPARTY AND SERVICES RENDERING CONTRACT PERFORMANCE UNDERTAKING 6.1 DEFINITIONS In this Clause 6: "SEVERAL PROPORTIONS" means (in relation to Pride) 30% and (in relation to Maritima) 70%. -5- 6.2 UNDERTAKING If at any time any default is made by the Borrower in the due and punctual performance or observance of any of the obligations on its part to be performed under or in connection with the Charterparty and/or the Services Rendering Contract in all respects in accordance with their respective terms, or if any of such obligations are otherwise not performed or observed by the time or in the manner provided therein, the Sponsors hereby irrevocably and unconditionally undertake to the Borrower and as a separate and independent obligation to the Security Agent:- (i) jointly and severally that they will promptly take all steps (not involving the payment of money) that may be necessary to ensure that the obligations of which the Borrower is in default are performed in accordance with the Charterparty or (as the case may be) the Services Rendering Contract, and (ii) severally that they will, within 7 Banking Days of first written demand from the Facility Agent, pay in their Several Proportions to the Borrower in accordance with Clause 9 such amount as is determined by the Facility Agent to be necessary so as to enable the Borrower to perform (or to fund the performance of)such obligations, PROVIDED THAT (a) this undertaking shall not, and shall not be construed so as to, impose on the Sponsors a liability greater than that which the Borrower has or would have to Petrobras under the Charterparty or (as the case may be) the Services Rendering Contract and (b) in the event of any default , or failure on the part of the Sponsors (or either of them) to honour, the undertaking contained in paragraph (i) above neither of the Sponsors shall have any liability to make any payment(s) to the Borrower and/or to the Security Agent in respect of any lost payments of Charterparty Hire or of the Services Rendering Contract Payments that may (but for such default or failure) have become payable to the Borrower or the Security Agent (as assignee of the Borrower's rights). 7. MANAGEMENT AGREEMENT PERFORMANCE UNDERTAKING 7.1 DEFINITIONS In this Clause 7: "MANAGEMENT AGREEMENT" means the management agreement relating to the Rig dated as of 5 November 1998 by and made between the Borrower and the Manager, a copy of which has been supplied to each of the parties hereto by the Borrower prior to the date hereof;; and "MANAGER" means Formaritima Limited as manager under the Management Agreement. 7.2 UNDERTAKING The Sponsors hereby jointly and severally and irrevocably and unconditionally undertake to the Borrower and as a separate and independent obligation to the Security Agent to procure that the Manager duly and punctually performs and observes all the obligations on its part to be performed under or in connection with the Management Agreement in all respects in accordance with its terms. -6- Without prejudice to the generality of foregoing, if at any time any default is made by the Manager in the performance or observance of any such obligations, or if any of such obligations are otherwise not performed or observed by the time or in the manner provided therein, the Sponsors hereby jointly and severally and irrevocably unconditionally undertake to the Borrower and as a separate and independent obligation to the Security Agent that:- (i) they will promptly take all steps that may be necessary to ensure that the obligations of which the Manager is in default are performed in accordance with the Management Agreement (including, without limitation, the payment of any defaulted amounts); (ii) that they will, within 7 Banking Days of first written demand from the Facility Agent, pay to the Borrower in accordance with Clause 9 any sum which is determined by the Facility Agent to be payable by the Manager to the Borrower as a direct consequence of such default. provided that in the event of any breach of, or failure on the part of the Sponsors (or either of them) to honour, the undertakings contained in paragraphs (i) and (ii) above neither of the Sponsors shall have any liability to make any payment(s) to the Borrower and/or to the Security Agent in respect of any lost payments of Charterparty Hire and/or of the Services Rendering Contract Payments that may (but for such default or failure) have become payable to the Borrower 8. MAINTENANCE OF INSURANCES UNDERTAKING 8.1 DEFINITIONS In this Clause 8: "TEMPORARY CONFIRMATION OF INSURANCE" has the same meaning as is given to this expression in Clause 2.1. 8.2 UNDERTAKING The Sponsors hereby jointly and severally and unconditionally and irrevocably undertake to the Secured Parties that they will throughout the Security Period:- (i) procure that insurances are effected and maintained (with the Security Agent, the Facility Agent and each of the Lenders being named as a principal assured) with insurers acceptable to the Facility Agent providing insurance cover against such risks as are insured by the Temporary Confirmation of Insurance and on terms and conditions no less favourable than are provided for by the Temporary Confirmation of Insurance and (subject to such insurance being available in the international insurance markets) otherwise as the Facility Agent may from time to time at its discretion require; and -7- (ii) procure that the Borrower complies with all its obligations in respect of Insurances as contained in the Loan Agreement and the Deed of Covenants. 8.3 REMEDY FOR BREACH OF UNDERTAKING In the event that the Sponsors shall at any time and for any reason fail to comply in all material respects with their undertaking contained in this Clause 8.2, then the Lenders (or any of them) may at their option (but shall not be obliged to) themselves effect and thereafter maintain insurances to the extent necessary to restore the insurances to the level at which they are required to be maintained. All costs incurred by the relevant Lenders in effecting and/or maintaining any such insurances (including, but not limited to, all premiums, calls, contributions or other sums payable in respect of such insurances) shall be repayable by the Sponsors (who shall be jointly and severally liable in respect thereof) on first demand by the Facility Agent together with interest thereon (which will also be payable upon first demand by the Facility Agent and which shall be compounded at such intervals as the Facility Agent may determine) at such annual rate as is conclusively certified by the Facility Agent to the Sponsors as being equal to the aggregate of (1) two and one half per centum (2.5%) per annum and (2) the higher of (a) the cost to the relevant Lenders of funding such costs by borrowing on arms length terms plus any other expenses or losses which such Lenders may have incurred in respect thereof and (b) 13%. The remedy specified above shall be the sole remedy of the Security Agent for breach by the Sponsors of their undertaking contained in this Clause 8. 9. PAYMENTS TO THE BORROWER 9.1 SUBORDINATED LOANS Simultaneously with the execution of this Deed of Guarantee and Undertaking the Borrower, the Sponsors, the Facility Agent and the Security Agent are executing a Subordinated Loan Facility Agreement in the approved form (the "SUBORDINATED LOAN FACILITY AGREEMENT"). As between the Borrower and the Sponsors, any payment to be made by the Sponsors to the Borrower under any of Clauses 2, 3, 4, 5, 6 and/or 7 shall be made within 7 Banking Days of the Facility Agent's first written demand therefor by remittance to the Management Account and shall be made by way of subordinated loan to the Borrower under the Subordinated Loan Facility Agreement, PROVIDED ALWAYS that the Sponsors shall not be required to make any amount available to the Borrower by way of subordinated loan under the Subordinated Loan Facility Agreement if within 7 Banking Days after the Facility Agent's first written demand therefor the Sponsors shall have made the amount thereof available to the Borrower (and the Borrower shall have received such amount) in cleared funds by way of subscription for equity share capital in the Borrower. -8- 9.2 FACILITY AGENT'S CERTIFICATES A certificate in writing signed on behalf of the Facility Agent which: (i) makes a determination of any amount(s) for the purposes of Clause 2 (REFUND UNDERTAKING), Clause 3 (COST OVERRUNS UNDERTAKING), Clause 4 (INSURANCE DEDUCTIBLES UNDERTAKING), Clause 5 (OPEX SHORTFALL UNDERTAKING), Clause 6 (CHARTERPARTY AND SERVICES RENDERING CONTRACT PERFORMANCE UNDERTAKING) and/or Clause 7 (MANAGEMENT AGREEMENT PERFORMANCE UNDERTAKING), and (ii) specifies the provision(s) of this Deed of Guarantee and Undertaking pursuant to which such amount(s) is/are payable, and (iii) gives reasonable details of the manner of calculation thereof shall (in the absence of manifest error) be conclusive as to the subject matter thereof. 9.3 EQUITABLE REMEDIES It is acknowledged that, without prejudice to any other rights or remedies that the Borrower and/or the Security Agent might have, damages alone will not be an adequate remedy for any breach by the Sponsors of any of their obligations to make any payment(s) to the Borrower under any of Clauses 2, 3, 4, 5, 6 and/or 7 and under the provisions of Clause 9 and that accordingly the Borrower and/or the Security Agent may be entitled without proof of special damage to the remedies of injunction, specific performance or other equitable relief for any threatened or actual breach of the provisions of this Agreement by the Sponsors. 10. PAYMENTS TO/LOANS BY LENDERS 10.1 PAYMENTS BY SPONSORS TO LENDERS Without prejudice to any of the other provisions of this Deed of Guarantee and Undertaking, in the event that for any reason (including, without limitation, any inability or unwillingness on the part of the Borrower to request or make any drawings under the Subordinated Loan Facility Agreement) any amount(s) payable by the Sponsors to the Borrower under any of Clauses 2, 3, 4, 5, 6 and/or 7 has/have not been paid to, and received by, the Borrower in cleared funds within 7 Banking Days of the Facility Agent's first written demand therefor, then the Sponsors will be obliged forthwith upon the Security Agent's first written demand to make payment of such unpaid amount(s) to the Security Agent for the account of the Lenders. 10.2 LOANS BY LENDERS TO BORROWER Without prejudice to the provisions of Clause 10.1 or to any other rights of the Security Agent under this Deed of Guarantee and Undertaking, in the circumstances stipulated in Clause 10.1 and pending the Sponsors complying with their obligations under Clause 9.1 and/or Clause 10.1 the Lenders (or any of them) may at their option (but shall not be obliged to) themselves provide funds to the Borrower by way of loan in an amount or amounts equal to the amount(s) payable (but not paid) by the Sponsors as aforesaid. Any such loans shall (as between the Borrower and the relevant Lenders) bear no interest, but the Sponsors shall be liable to compensate the relevant Lenders by making payment to them of such amount (calculated on a per annum basis) as is equal to interest on the amounts of such loans at such annual rate as is conclusively certified by the Facility -9- Agent to the Sponsors as being equal to the aggregate of (1) two and one half per cent (2.5%) per annum and (2) the higher of (a) the cost to the relevant Lenders of funding such loan(s) plus any other costs, expenses or losses which such Lenders may have incurred in respect thereof and (b) 13%. Such amounts shall be payable upon first demand and if not paid shall bear interest as aforesaid. Any amount(s) so provided by any Lenders by way of loan to the Borrower shall be repayable by the Borrower on first demand by the Security Agent (or as the relevant Lenders may otherwise specify at the time such funds are provided), but in all other respects shall be deemed to have been advanced by the relevant Lenders pursuant to the Loan Agreement, shall rank PARI PASSU with all Advances made or to be made thereunder and shall be secured by the Security Documents accordingly. 10.3 APPLICATION OF PAYMENTS BY SPONSORS In the event that the Sponsors make any payment(s) to the Security Agent for the account of the Lenders pursuant to their obligations under Clause 10.1, then forthwith upon receipt by the Security Agent of such payment(s) in cleared funds: (i) if the amount(s) of such payment(s) received is/are less than, or equal to, the aggregate amount(s) of all (if any) loans made to the Borrower pursuant to Clause 10.2 and not previously waived and released by the Lenders (or, as the case may be, by any relevant Lenders), the Security Agent will pay the amounts to the relevant Lenders for their own account absolutely pro rata in accordance with their loans advanced to the Borrower pursuant to Clause 10.2 and such Lenders will waive and release PRO TANTO the obligations of the Borrower in respect of such loans, and the Sponsors shall be deemed to have complied PRO TANTO with their obligation to make payment of such amount(s) to the Borrower by way of subordinated loan under the Subordinated Loan Facility Agreement (so that the amount(s) in question shall be treated as though they were subordinated loans made available to the Borrower by, and repayable by the Borrower to, the Sponsors in accordance with the provisions of the Subordinated Loan Facility Agreement); (ii) if and to the extent that the amount(s) of such payments received exceed(s) the aggregate amount(s) of all (if any) loans made to the Borrower pursuant to Clause 10.2 and not previously waived and released by the Lenders (or, as the case may be, by any relevant Lenders), the portion thereof which equals the aggregate amount(s) of all (if any) loans made to the Borrower pursuant to Clause 10.2 and not previously waived and released by the Lender (or, as the case may be, by any relevant Lenders) will be applied in accordance with sub-clause (i) above, and the excess shall be applied as follows:- (a) in case an Event of Default or Potential Event of Default shall have occurred and shall be continuing, the Security Agent may (at its option) EITHER pay such monies to the Borrower by remittance to the Management Account (in which event the provisions of sub-paragraph (b) below will apply) OR retain such monies and apply the same in or towards payment of the Secured Obligations in such order of application as the Security Agent shall decide; - - -10- (b) in any other case, the Security Agent shall pay such monies to the Borrower by remittance to the Management Account and the amounts so paid to the Borrower shall be treated as though they were subordinated loans made available to the Borrower by, and repayable by the Borrower to, the Sponsors in accordance with the provisions of the Subordinated Loan Facility Agreement. 10.4 APPLICATION OF PAYMENTS The Borrower hereby irrevocably agrees that any sum received by the Security Agent from the Sponsors pursuant to any of the provisions of this Deed of Guarantee and Undertaking may (to the extent not applied in making good any defaults of the Sponsors in respect of their obligations to the Borrower under this Deed of Guarantee and Undertaking) be applied by the Security Agent in meeting payments due or to become due from the Borrower under the Financing Documents in such order of application as the Security Agent shall decide. 11. PRESERVATION OF OBLIGATIONS 11.1 DURATION OF OBLIGATIONS The Sponsors agree that their respective obligations under this Deed of Guarantee and Undertaking shall remain in full force and effect throughout the Security Period and notwithstanding the enforcement by the Security Agent of any of its rights under the Security Documents (including, without limitation, the appointment of a Receiver) or the taking of possession of any of the assets which stand security for the Secured Obligations or any part of such assets. 11.2 CONTINUING SECURITY ETC. Each of the Sponsors declares and agrees that: (i) this Deed of Guarantee and Undertaking shall be held by the Security Agent as a continuing security and shall not be satisfied by any intermediate payment or satisfaction of any part of the moneys and liabilities hereby agreed to be paid or performed and shall remain in full force and effect until the moneys and liabilities hereby agreed to be paid or performed have been unconditionally and irrevocably paid and discharged in full to the satisfaction of the Security Agent; (ii) it has not received any security from the Borrower or from any other persons for the giving of this Deed of Guarantee and Undertaking and it will not take any such security without the prior written consent of the Security Agent, and the Sponsors will hold any security taken in breach of this provision in trust for the Security Agent; (iii) the Security Agent shall not be bound to enforce any guarantee or security or proceed or take any other steps against the Borrower or any other person before enforcing this Deed of Guarantee and Undertaking; and -11- (iv) this Deed of Guarantee and Undertaking shall be in addition to, and not in substitution for, any other rights which the Secured Parties may now or hereafter have under or by virtue of any guarantee, security, encumbrance or agreement or any lien or by operation of law or under any collateral or other security now or hereafter held by the Security Agent or to which the Security Agent may be entitled. 11.3 AVOIDANCE OF SECURITIES Any settlement or discharge under this Deed of Guarantee and Undertaking between the Security Agent and the Sponsors shall be conditional upon no security or payment to the Security Agent by the Borrower, the Sponsors or any other person being avoided or set aside or ordered to be refunded or reduced by virtue of any provision or enactment relating to bankruptcy, insolvency or liquidation for the time being in force, and if such condition is not satisfied, the Security Agent shall be entitled to recover from the Sponsors on demand the value of such security or the amount of any such payment as if such settlement or discharge had not occurred. 11.4 PRESERVATION OF RIGHTS The obligations of the Sponsors under this Deed of Guarantee and Undertaking shall not be affected by any act, omission, matter or thing which, but for this provision, might operate to release or otherwise exonerate either of the Sponsors from its or their obligations under this Deed of Guarantee and Undertaking in whole or in part, including (without limitation, and whether or not known to or discoverable by the Sponsors, the Borrower, any Secured Party or any other person): (i) any time or waiver granted to or composition with the Borrower, the other Sponsor or any other person; (ii) the taking, variation, compromise, discharge, composition, arrangement, renewal or release of or refusal or neglect to perfect or enforce any rights, remedies or securities against the Borrower, the other Sponsor or any other person; (iii) any legal limitation, disability, incapacity or other circumstances relating to the Borrower, the other Sponsor or any other person; (iv) any amendment or supplement to this Deed of Guarantee and Undertaking, any of the Financing Documents or any other document or security; (v) the dissolution, liquidation, amalgamation, reconstruction or reorganisation of the Borrower, the other Sponsor or any other person; (vi) the unenforceability or invalidity of any obligations of the Borrower, the other Sponsor or any other person under this Deed of Guarantee and Undertaking or any of the other Financing Documents or any other document or security; (vii) the failure of any of the Secured Parties to take any other guarantee or security (whether contemporaneous with this Deed of Guarantee and Undertaking) or otherwise; or (viii) any other act, event or omission which but for the provision would or might operate to impair, discharge or otherwise affect the obligations of the Sponsors (or either of them) under this Deed of Guarantee and Undertaking. -12- 11.5 NON-COMPETITION Until all the Secured Obligations and the Sister Company Obligations and the moneys and liabilities hereby agreed to be paid or performed have been unconditionally and irrevocably paid and discharged in full to the satisfaction of the Security Agent, the Sponsors shall not by virtue of any payment made or performance under this Deed of Guarantee and Undertaking on account of such moneys and liabilities or by virtue of any relationship between, or transaction involving, the Sponsors and the Borrower: (i) exercise any rights of subrogation or otherwise in relation to any rights, security or moneys held or received or receivable by any Secured Party or any other person; (ii) exercise any right of contribution from the other Sponsor or any co-surety or any other person liable in respect of such moneys and liabilities under any other guarantee, security or agreement; (iii) exercise any right of set-off or counterclaim against the Borrower or the other Sponsor or any such co-surety or any other person; (iv) receive, claim or have the benefit of any payment, distribution, security or indemnity from the Borrower or the other Sponsor or any such co-surety or any other person; or (v) unless so directed by the Security Agent (when the Sponsors will prove in accordance with such directions), claim as a creditor of the Borrower or the other Sponsor or any such co-surety in competition with the Security Agent. The Sponsors shall hold in trust for the Security Agent and forthwith pay or transfer (as appropriate) to the Security Agent any such payment (including an amount equal to any such set-off), distribution or benefit of such security, indemnity or claim received by it. 11.6 SUSPENSE ACCOUNTS Until all moneys and liabilities hereby agreed to be paid or performed have been unconditionally and irrevocably paid in full to the satisfaction of the Security Agent, the Security Agent may at any time keep in a separate account (without liability to pay interest thereon) for as long as it may think fit any moneys received, recovered or realised under this Deed of Guarantee and Undertaking or under any other guarantee, security or agreement relating in whole or in part to the moneys and liabilities hereby agreed to be paid and performed without being under any intermediate obligation to apply the same or any part thereof in or towards the discharge of such amount. -13- 12. PAYMENTS 12.1 CURRENCY OF FUNDS All payments to be made by the Sponsors under this Deed of Guarantee and Undertaking shall be made: (i) for value on the due date at such time and in such funds as the Security Agent may specify to the Sponsors as being customary at the time for the settlement of transaction in US Dollars in the place for payment; and (ii) to such account at such office or bank as the Security Agent may notify to the Sponsors for this purpose. 12.2 NO SET-OFF OR COUNTERCLAIMS All amounts due from the Sponsors to the Security Agent under this Deed of Guarantee and Undertaking shall be paid without any form of set-off, counterclaim or condition whatsoever. Any amount due from the Sponsors under this Deed of Guarantee and Undertaking shall not be reduced by any set-off, counterclaim or other claim which the Sponsors may have against the Borrower whether under this Deed of Guarantee and Undertaking, any Project Document, any of the Financing Documents or otherwise. 12.3 UNCONDITIONAL OBLIGATION Nothing in this Deed of Guarantee and Undertaking, nor any matter, fact, act, omission, circumstance or thing whatsoever, including without limitation: (i) the termination (for any cause) of the Charterparty or of the Services Rendering Contract or of any other contract or arrangement for the use or operation of the Rig, (ii) any change in circumstances or political, economic or financial conditions, (iii) the insolvency, dissolution, death, disability or incapacity of any person whatsoever, (iv) the breach by any person of any agreement or understanding, or (v) any of the matters specified in Clause 11.4, shall operate in any way to affect or minimise, or release the Sponsors from any of the Sponsors' obligations under, this Deed of Guarantee and Undertaking, all of which obligations shall subsist in full notwithstanding any such matter, fact, omission, circumstance or thing. -14- 13. TAXATION 13.1 WITHHOLDING; GROSS-UP All payments to be made by or for the account of the Sponsors (or either of them) hereunder shall be made without set-off or counterclaim and free and clear of and without deduction for or on account of any present or future Taxes of any nature whatsoever imposed by or in any country ("APPLICABLE TAX") unless the Sponsors (or either of them) are/is compelled by law to make payment to, or for the account of, the Borrower and/or the Security Agent subject to such Applicable Tax. In any such case the Sponsors (or, as the case may be, the relevant Sponsor) shall promptly pay such Applicable Tax, and the amount of the relevant payment by the Sponsors (or, as the case may be, the relevant Sponsor) hereunder shall be increased to the extent necessary to ensure that the Borrower and/or the Security Agent actually receives an amount, free and clear of and after deduction for all such Applicable Tax, equal to the full amount which would have been received if no such withholding or deduction had been made. The Sponsors (or, as the case may be, the relevant Sponsor) shall pay and indemnify and keep indemnified the Borrower and/or the Security Agent against all such Applicable Tax. The Sponsors (or, as the case may be, the relevant Sponsor) shall promptly deliver to the Facility Agent copies of official receipts for Taxes evidencing payment of any such Applicable Tax imposed as aforesaid. The obligations of the Sponsors (or, as the case may be, the relevant Sponsor) under this Clause 13 shall survive the Security Period. 14. REPRESENTATIONS AND WARRANTIES 14.1 REPRESENTATIONS Each of the Sponsors represents and warrants severally as to itself to each of the Secured Parties on the date of this Deed of Guarantee and Undertaking as follows:- (i) It is a limited liability company duly organised and validly existing under the laws specified on page 1 of this Deed of Guarantee and Undertaking, possessing perpetual corporate existence and the capacity to sue or be sued in its own name, and each of it and its Subsidiaries has the power to own its assets and carry on its business as it is now being conducted. (ii) It has the power to enter into and perform this Deed of Guarantee and Undertaking and each of the other Financing Documents and the Project Documents to which it is a party and the transactions contemplated hereby and thereby and has taken all necessary action to authorise the entry into and performance of this Deed of Guarantee and Undertaking and each of the other Financing Documents and the Project Documents to which it is a party and the transactions contemplated hereby and thereby in accordance with the terms thereof. (iii) This Deed and each of the other Financing Documents and the Project Documents to which it is a party constitute its legal, valid and binding obligations enforceable in accordance with their respective terms and are in proper form for the enforcement in all the courts of the country of incorporation subject in each case to the qualifications and other matters contained or referred to in the legal opinions obtained by the Lenders in respect of the relevant jurisdictions. -15- (iv) The entry into and performance of this Deed of Guarantee and Undertaking and each of the other Financing Documents and Project Documents to which it is a party and the transactions contemplated hereby and thereby do not conflict with: (a) any law or official requirement; (b) its constitutional documents; or (c) any agreement or document to which it or any of its Subsidiaries (if any) is a party or which is binding upon it or any of its Subsidiaries or any of their respective assets, and will not result in the creation or imposition of (or enforcement of) any encumbrance on any of its assets or the assets of any of its Subsidiaries (if any). 14.2 REPETITION The representations and warranties set out in this Clause 14 shall survive the execution of this Deed of Guarantee and Undertaking and the making of each Advance under the Loan Agreement and shall be deemed to be repeated on the date of the giving of each Drawing Request, on each Drawdown Date on each Repayment Date, so long as any amount is or may be outstanding under the Loan Agreement or any Commitment is in force with reference to the facts and circumstances then subsisting, as if made at each such time. 15. UNDERTAKINGS 15.1 DURATION The undertakings in this Clause 15 shall remain in force from and after the date hereof and throughout the Security Period. 15.2 Accounts Each of the Sponsors will furnish, or procure that there is furnished, to the Security Agent, in sufficient copies for each of the Lenders: (i) as soon as practicable: (a) (and in any event within 120 days after the close of each financial year) its audited accounts; (b) (if prepared) the consolidated (audited, if prepared) accounts of those of its Subsidiaries (if any) for that year; (ii) as soon as practicable (and in any event within 45 days after the end of each financial quarter of each of its financial years): (a) its unaudited balance sheet as at the end of such quarter; and (b) its unaudited statement of income and cash-flow statement for that quarter; -16- 15.3 Further general information Each of the Sponsors shall furnish to the Security Agent promptly such further information in its possession or control or in the possession and control of any of its Subsidiaries (if any) regarding its financial condition and operations and that of its Subsidiaries, as the Security Agent may reasonably request. 15.4 LITIGATION Each of the Sponsors shall furnish to the Security Agent details of any litigation, arbitration or administrative proceedings against it or concerning the Rig or the Project Documents which are current or, to its knowledge, threatened or pending, as soon as the same are instituted or so threatened if the same might have a material adverse effect on the financial condition of either of the Sponsors or might have a material effect on either of the Sponsor's respective obligations under the Project Documents. 15.5 NOTIFICATION OF DEFAULTS Each of Sponsors shall notify the Security Agent of any Event of Default or any Potential Event of Default promptly upon becoming aware of its occurrence. 15.6 CONSENTS Each of the Sponsors will obtain and promptly renew from time to time, and will promptly furnish certified copies to the Security Agent of, all consents as may be required under any applicable law to enable it to perform its obligations under this Deed of Guarantee and Undertaking and the other Financing Documents and the Project Documents to which either of the Sponsors is a party or which are required for the validity or enforceability thereof, and the Sponsors shall comply with the terms of the same. 15.7 CONTINUED OWNERSHIP The Sponsors shall procure that Amethyst Financial Company Limited remains throughout the Security Period the registered holder and beneficial owner of the entire issued share capital in the Borrower. 15.8 DISSOLUTION OF THE BORROWER The Sponsors jointly and severally and unconditionally and irrevocably undertake and agree with the Security Agent that throughout the Security Period: (i) they will not institute and will procure that Amethyst Financial Company Ltd does not institute any steps for the winding up or dissolution of the Borrower (or any equivalent process in the country of incorporation of the Borrower); -17- (ii) they will ensure that all votes attaching to any equity share capital which is legally or beneficially owned by themselves and/or by either of them and/or by Amethyst Financial Company Ltd or which is otherwise directly or indirectly under their or its control will be used to vote against any proposal or resolution for the winding-up or dissolution of the Borrower. 15.9 ALTERNATIVE CHARTERER The Sponsors jointly and severally and unconditionally and irrevocably undertake to the Borrower and as a separate and independent obligation to the Security Agent that in the event of any termination of the Charterparty (however arising) during the Security Period the Sponsors will use their respective best endeavours to procure a new charter for the Rig with an independent third party approved by the Facility Agent on arm's length terms no less favourable than the Charterparty and will procure that the benefit of such new charter and the Borrower's right, title and interest therein will be assigned to the Security Agent as agent and trustee for the Lenders by way of security for the Secured Obligations. 16. CURRENCY INDEMNITY 16.1 CURRENCY INDEMNITY (i) If, for any reason, any payment due from the Sponsors (or either of them) under or in connection with this Deed of Guarantee and Undertaking is made or is satisfied in a currency (the "OTHER CURRENCY") other than the currency in which the relevant payment under this Deed of Guarantee and Undertaking is due (the "CONTRACTUAL CURRENCY"), then to the extent that the payment (when converted into the Contractual Currency at the rate of exchange on the date of payment or, in the case of the liquidation or insolvency of the Sponsors (or either of them), at the rate of exchange on the latest date permitted by applicable law for the determination of liabilities in such liquidation or insolvency) actually received by the party entitled thereto falls short of the amount expressed to be due under the terms of this Deed of Guarantee and Undertaking, the Sponsors, or (as the case may be) the relevant Sponsor, shall, as a separate and independent obligation, indemnify the party entitled thereto and hold such party harmless against the amount of such shortfall. (ii) If on any occasion the Contractual Currency so purchased exceeds the amount payable hereunder in the Contractual Currency to the party entitled thereto then, subject to the Sponsors, or (as the case may be) the relevant Sponsor, having no further obligation, actual or contingent, to such party under this Agreement, such party shall refund to the Sponsors, or (as the case may be) the relevant Sponsor, the excess amount of the Contractual Currency so purchased. (iii) For the purpose of this Clause "RATE OF EXCHANGE" means the rate at which the party entitled thereto is able on the relevant date to purchase the Contractual Currency with the Other Currency and shall take into account any premium and other costs of exchange. -18- 16.2 INDEPENDENT OBLIGATIONS The indemnities in Clause 16.1 shall constitute separate and independent obligations of the Sponsors from their other respective obligations under this Deed of Guarantee and Undertaking, shall give rise to a separate and independent cause of action against the Sponsors or (as the case may be) the relevant Sponsor and shall apply irrespective of any indulgence granted by the Secured Parties from time to time. 17. DELEGATION, ASSIGNMENT 17.1 DELEGATION The Security Agent shall be entitled at any time and as often as may be expedient to delegate all or any of the powers and discretions vested in it by the Financing Documents or any of them (including the power vested in it by virtue of this Clause 17.1) in such manner upon such terms and to such persons as the Security Agent in its absolute discretion may think fit. 17.2 ASSIGNMENT The provisions of Clause 15 of the Loan Agreement shall apply hereto and (MUTATIS MUTANDIS) be deemed incorporated herein and, accordingly any Lender may novate and/or assign its rights in respect of this Deed to any person to whom its Commitments and/or Outstandings are novated or assigned in accordance with such Clause, and this Deed shall remain in full force and effect after, and shall continue to secure the Secured Obligations after and resulting from, any novation or assignment in accordance with such Clause 15. 17.3 BENEFIT OF THIS DEED This Deed shall extend to, and enure to the benefit of the Security Agent and its duly appointed successors and assigns 18. NOTICES, ETC. 18.1 METHOD OF SENDING Each communication to be made hereunder shall be made in writing but, unless otherwise stated, may be made by facsimile transmission or by telex or by letter. 18.2 ADDRESSES FOR NOTICES Any communication or document to be made or delivered by one person to another pursuant to this Deed of Guarantee and Undertaking shall (unless the one has by not less than three (3) days' written notice to the other specified another address) be made or delivered to that other person at the respective addresses and facsimile numbers set out below. -19- (1) The Borrower:- PETRODRILL SEVEN LIMITED c/o Petrodrill Engineering NV K.P. van der Mandalelaan 38 3062 MB Rotterdam (Brainpark) The Netherlands Attention: Steve Assister Fax No: 00 31 10 272 2727 (2) The Sponsors PRIDE INTERNATIONAL INC. 5847 San Felipe Suite 3300 Houston Texas, TX77 057 USA Attention: Robert Randall Fax No: 001 713 914 9796 MARITIMA PETROLEO E ENGENHARIA LTDA Avenida Almirante Barroso 52 Group 3400 Rio de Janeiro Brazil Attention: German Efromovich Fax No: 00 55 21 220 6566 (3) The Lenders:- PETRO DIA THREE S.A. c/o MITSUBISHI CORPORATION 6-3 Marunouchi 2-chome Chiyoda-ku Tokyo Japan Attention: General Manager, Ship & Industrial Project Department Fax No: 00 81 3 3210 4446 -20- PETRO DIA FOUR S.A. c/o MITSUBISHI CORPORATION 6-3 Marunouchi 2-chome Chiyoda-ku Tokyo Japan Attention: General Manager, Ship & Industrial Project Department Fax No: 00 81 3 3210 4446 (4) The Facility Agent:- MITSUBISHI CORPORATION (UK) PLC Bow Bells House Bread Street London EC4M 9BQ Attention: General Manager, Machinery Department Fax No: 071 822 0184 (5) The Security Agent:- MITSUBISHI CORPORATION (UK) PLC Bow Bells House Bread Street London EC4M 9BQ Attention: General Manager, Machinery Department Fax No: 071 822 0184 18.3 DEEMED RECEIPT Any notice given hereunder shall be deemed to have been received: (i) If sent by facsimile transmission or by telex, at the opening of business one (1) Banking Day after the day it was transmitted; (ii) In the case of a written notice lodged by hand, at the time of actual delivery; and (iii) If posted, on the fifth Banking Day following the day on which it was properly despatched by first class mail postage prepaid. 19. GOVERNING LAW AND JURISDICTION 19.1 GOVERNING LAW This Agreement shall be governed by and construed in accordance with English law. -21- 19.2 SUBMISSION TO JURISDICTION Each of the parties hereto irrevocably agrees that the English courts are to have jurisdiction to settle any disputes which may arise out of or in connection with this Agreement and/or the other Financing Documents and that accordingly any suit, action or proceedings ("PROCEEDINGS") arising out of or in connection with this Agreement and/or the other Financing Documents may be brought in such courts. 19.3 WAIVER OF OBJECTION Each of the parties hereto hereby irrevocably waives any objection which it may have now or hereafter to the laying of the venue of any Proceedings in any such court as is referred to in Clause 19.2 and any claim that any such Proceedings have been brought in an inconvenient forum, and further irrevocably agrees that a judgment in any Proceedings brought in the English courts shall be conclusive and binding upon the Borrower and may be enforced in the courts of any other jurisdiction. 19.4 OTHER JURISDICTIONS Nothing contained in this Clause 19 shall limit the right of any of the parties hereto to take proceedings in any other court of competent jurisdiction, nor shall the taking of Proceedings in any one or more jurisdictions preclude the taking of Proceedings in any other jurisdiction, whether concurrently or not. 19.5 SERVICE OF PROCESS (1) The Borrower irrevocably and unconditionally: (a) designates, and appoints and empowers Hackwood Secretaries Limited of One Silk Street, London EC2Y 8HQ to receive for it and on its behalf, service of process issued out of the English courts in any Proceedings arising out of or in connection with this Agreement; (b) agrees to maintain in England a duly appointed process agent notified to the other parties to this Agreement, for the purposes of paragraph (a) above; (c) agrees that failure by any such process agent to give notice of such process to it shall not impair the validity of such service or of any judgment based thereon; (d) consents to the service of process out of any of the said courts in any such Proceedings by the airmailing of copies, postage prepaid, to it at its address for the time being applying for the purposes of Clause 18; and (e) agrees that nothing herein shall affect the right to serve process in any other manner permitted by law. -22- (2) The Sponsors irrevocably and unconditionally: (a) designate, and appoint and empower Hackwood Secretaries Limited of One Silk Street, London EC2Y 8HQ to receive for them and on their behalf, service of process issued out of the English courts in any Proceedings arising out of or in connection with this Agreement; (b) agree to maintain in England a duly appointed process agent notified to the other parties to this Agreement, for the purposes of paragraph (a) above; (c) agree that failure by any such process agent to give notice of such process to them shall not impair the validity of such service or of any judgment based thereon; (d) consent to the service of process out of any of the said courts in any such Proceedings by the airmailing of copies, postage prepaid, to them at the address for the time being applying for the purposes of Clause 18; and (e) agree that nothing herein shall affect the right to serve process in any other manner permitted by law. (3) The Lenders irrevocably and unconditionally: (a) designate, and appoint and empower Mitsubishi Corporation (UK) PLC of Bow Bells House, Bread Street, London EC4M 9BQ to receive for them and on their behalf, service of process issued out of the English courts in any Proceedings arising out of or in connection with this Agreement; (b) agree to maintain in England a duly appointed process agent notified to the other parties to this Agreement, for the purposes of paragraph (a) above; (c) agree that failure by any such process agent to give notice of such process to them shall not impair the validity of such service or of any judgment based thereon; (d) consent to the service of process out of any of the said courts in any such Proceedings by the airmailing of copies, postage prepaid, to them at the address for the time being applying for the purposes of Clause 18; and (e) agree that nothing herein shall affect the right to serve process in any other manner permitted by law. 20. COUNTERPARTS This Deed of Guarantee and Undertaking may be executed in any number of counterparts and by the different parties hereto on different counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument. -23- 21. WAIVER; REMEDIES CUMULATIVE No failure to exercise and no delay in exercising on the part of the Borrower and/or any of the Secured Parties any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof, or the exercise of any other right, power or privilege. The rights and remedies herein provided are cumulative and not exclusive of any rights or remedies provided by law. 22. LANGUAGE Each document referred to herein or to be delivered hereunder (including financial statements) and each other communication shall be in the English language. 23. SEVERABILITY Any provision in this Deed of Guarantee and Undertaking which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. IN WITNESS whereof the parties have caused this Deed of Guarantee and Undertaking to be executed and delivered as a deed the day and year first above written. EXECUTED and DELIVERED ) /s/ Illegible as a DEED by PETRODRILL ) SEVEN LIMITED acting by ) its duly authorised signatory ) /attorney-in-fact in the presence of:- ) /s/ Illegible EXECUTED and DELIVERED ) /s/ Illegible as a DEED by PRIDE ) INTERNATIONAL INC acting by ) its duly authorised signatory/ ) attorney-in-fact in the presence of: ) /s/ Illegible EXECUTED and DELIVERED ) /s/ Illegible as a DEED by MARITIMA ) PETROLEO E ENGENHARIA ) LTDA acting by its duly authorised ) signatory/attorney-in-fact in the ) presence of: ) /s/ Illegible -24- EXECUTED and DELIVERED ) /s/ Illegible as a DEED by PETRO DIA THREE ) S.A. acting by its duly authorised ) signatory/attorney-in-fact in ) the presence of: ) /s/ Illegible EXECUTED and DELIVERED ) /s/ Illegible as a DEED by PETRO DIA FOUR ) S.A. acting by its duly authorised ) signatory/attorney-in-fact in ) the presence of: ) /s/ Illegible EXECUTED and DELIVERED ) /s/ Illegible as a DEED by MITSUBISHI ) CORPORATION (UK) PLC (in its ) capacity as Facility Agent) acting by ) its duly authorised signatory/ ) attorney-in-fact in the presence of: ) /s/ Illegible EXECUTED and DELIVERED ) /s/ Illegible as a DEED by MITSUBISHI ) CORPORATION (UK) PLC (in its ) capacity as Security Agent) acting by ) its duly authorised signatory/ ) attorney-in-fact in the presence of: ) /s/ Illegible -25- EX-4.11 13 DATED 19 DECEMBER 1998 PETRODRILL SIX LIMITED as Borrower - and - PRIDE INTERNATIONAL INC. and MARITIMA PETROLEO E ENGENHARIA LTDA as Sponsors - and - THE LENDERS herein referred to as Lenders - and - MITSUBISHI CORPORATION (UK) PLC as Facility Agent - and - MITSUBISHI CORPORATION (UK) PLC as Security Agent ------------------------------------------------- DEED OF GUARANTEE AND UNDERTAKING relating to the Loan Agreement in respect of Amethyst 6 ------------------------------------------------- F I E L D - F I S H E R - W A T E R H O U S E 4 1 V I N E S T R E E T L O N D O N E C 3 N 2 A A CONTENTS CLAUSE/HEADING PAGE 1. DEFINITIONS AND INTERPRETATION 2 2. REFUND UNDERTAKING 3 3. COST OVERRUNS UNDERTAKING 4 4. INSURANCE DEDUCTIBLES UNDERTAKING 4 5. OPEX SHORTFALL UNDERTAKING 5 6. CHARTERPARTY AND SERVICES RENDERING CONTRACT PERFORMANCE UNDERTAKING 5 7. MANAGEMENT AGREEMENT PERFORMANCE UNDERTAKING 6 8. MAINTENANCE OF INSURANCES UNDERTAKING 7 9. PAYMENTS TO THE BORROWER 8 10. PAYMENTS TO/LOANS BY LENDERS 9 11. PRESERVATION OF OBLIGATIONS 11 12. PAYMENTS 14 13. TAXATION 15 14. REPRESENTATIONS AND WARRANTIES 15 15. UNDERTAKINGS 16 16. CURRENCY INDEMNITY 18 17. DELEGATION, ASSIGNMENT 19 18. NOTICES, ETC. 19 19. GOVERNING LAW AND JURISDICTION 21 20. COUNTERPARTS 23 21. WAIVER; REMEDIES CUMULATIVE 24 22. LANGUAGE 24 23. SEVERABILITY 24 THIS DEED is made on 19 December 1998 BETWEEN:- (1) PETRODRILL SIX LIMITED of Arias Fabrega and Fabrega Trust Co., BVI Limited, 325 Waterfront Drive, Omar Hodge Building, 2nd Floor, Wickham's Cay, Road Town, Tortola, British Virgin Islands (the "BORROWER"); (2) PRIDE INTERNATIONAL INC,. a company incorporated under the laws of the State of Louisiana, USA, of 5847 San Felipe, Suite 3300, Houston, Texas TX77057 ("PRIDE") and MARITIMA PETROLEO E ENGENHARIA LTDA., a company incorporated under the laws of Brazil, of Avenida Almirante Barroso 52, Group 3400, Rio de Janeiro ("MARITIMA") (together, the "SPONSORS" and, individually, a "SPONSOR"); (3) THE LENDERS, the respective names and offices of which are set out in Clause 1.2, as Initial Lenders (the "INITIAL LENDERS"); (4) MITSUBISHI CORPORATION (UK) PLC, a company incorporated in England and Wales (Reg No. 2214224), whose registered office is at Bow Bells House, Bread Street, London EC4M 9BQ, in its capacity as facility agent for the Lenders (the "FACILITY Agent"); and (5) MITSUBISHI CORPORATION (UK) PLC, a company incorporated in England and Wales (Reg No. 2214224), whose registered office is at Bow Bells House, Bread Street, London EC4M 9BQ, as security trustee and agent for the Secured Parties. WHEREAS: (A) By a loan agreement (as amended or supplemented from time to time, the "LOAN AGREEMENT") of even date herewith and made between the Initial Lenders (1), the Borrower (2), the Facility Agent (3) and the Security Agent (4), the Initial Lenders have agreed, upon and subject to the terms and conditions of the Loan Agreement, to make available to the Borrower loan facilities not exceeding US$160,000,000 for the purposes therein specified. (B) By a further loan agreement (the "SISTER COMPANY LOAN AGREEMENT") of even date herewith and made between the Initial Lenders (1), the Sister Company (2), the Facility Agent (3) and the Security Agent (4), the Initial Lenders have agreed to make available to the Sister Company (on substantially identical terms to the Loan Agreement) loan facilities not exceeding US$180,000,000 for the purposes therein specified. (C) The execution and delivery of this Deed of Guarantee and Undertaking is one of the conditions precedent to the Initial Lenders' making their Commitments available under the Loan Agreement and under the Sister Company Loan Agreement. (D) The Sponsors have agreed to execute and deliver this Deed of Guarantee and Undertaking in consideration of the Initial Lenders, at the Sponsors' request, making or continuing loans or advances to, or otherwise giving credit or granting accommodation or time to, the Borrower pursuant to the Loan Agreement and/or the Sister Company Loan Agreement. IT IS AGREED as follows:- - 1 - 1. DEFINITIONS AND INTERPRETATION 1.1 TERMS DEFINED IN THE LOAN AGREEMENT Unless the context otherwise requires or unless otherwise defined in this Deed of Guarantee and Undertaking, words and expressions defined in the Loan Agreement shall have the same meanings when used in this Deed of Guarantee and Undertaking. 1.2 OTHER DEFINED TERMS In this Deed of Guarantee and Undertaking, unless the context otherwise requires: "EQUITY SHARE CAPITAL" means, in relation to any company, its issued share capital excluding any part of that capital which (neither as regards dividends nor as respects capital) carries any right to participate beyond a specified amount in a distribution. "INITIAL LENDERS" means Petro Dia Three SA and Petro Dia Four SA, each being a company incorporated in the Republic of Panama whose principal place of business is at 53rd Street, Urbanizacion Obarrio, Torre Swiss Bank, 16th Floor, Panama City, Republic of Panama; "LENDERS" means the Initial Lenders and any person who becomes a Lender from time to time pursuant to Clause 15 (TRANSFERS) of the Loan Agreement, but excluding any person who ceases to be a Lender pursuant to that Clause; "SISTER COMPANY GUARANTEE AND UNDERTAKING" means the deed of guarantee and undertaking (in substantially the same terms as this Deed of Guarantee and Undertaking) executed pursuant to the Sister Company Loan Agreement and dated the same date as this Deed of Guarantee and Undertaking; "TAXES" means any present or future taxes, levies, duties, charges, fees, deductions or withholdings of any nature now or hereafter imposed, levied, collected, withheld or assessed by any country or any political sub-division or taxing authority thereof. 1.3 INTERPRETATION This Deed of Guarantee and Undertaking shall be interpreted consistently with the Loan Agreement, and accordingly the provisions of Clauses 1.2 to 1.4 (inclusive) of the Loan Agreement shall apply hereto and (MUTATIS MUTANDIS) shall be deemed to be incorporated into this Deed of Guarantee and Undertaking as if set out in full in this Deed of Guarantee and Undertaking. 1.4 SECURITY AGENT The Security Agent enters into this Deed of Guarantee and Undertaking as security trustee and agent for the Secured Parties in accordance with the Security Trust Deed and all rights and powers conferred on or vested in the Security Agent under this Deed of Guarantee and Undertaking shall be conferred on and vested in the Security Agent in such capacity, and the term "SECURITY AGENT" shall be construed accordingly. - 2 - 2. REFUND UNDERTAKING 2.1 DEFINITIONS In this Clause 2: "BUILDER'S RISK INSURANCE" means such part of the insurances effected by the Temporary Confirmation of Insurances which relates to the Rig during the period up to the time of delivery to the Borrower in accordance with the Rig Construction Contract; "CONSTRUCTION CONTRACT REPAYMENTS" means the aggregate amount of all payments/repayments and payments in respect of interest payable (in each case whether or not paid) by the Builder pursuant to the Rig Construction Contract and/or by the Export-Import Bank of Korea pursuant to the Refund Guarantee and/or by any insurers pursuant to the Builder's Risk Insurance (in each case to the Security Agent as assignee of the benefit of the Rig Construction Contract, the Refund Guarantee and the Borrower's interest in the Builder's Risk Insurance) (i) following any termination or rescission of the Rig Construction Contract (however arising) or (ii) upon any refund of all or any of the instalments of the Contract Price of the Rig and/or any interest otherwise becoming payable or (iii) following a Total Loss prior to the delivery of the Rig by the Builder; and "TEMPORARY CONFIRMATION OF INSURANCE" means the temporary confirmation of insurance (and described as Temporary Confirmation of Insurance) issued by McGriff, Seibels, Bartama & Colvin Inc (as brokers) on 15 December 1998 with Assigned No. MS-S711A - Daewoo. 2.2 UNDERTAKING The Sponsors hereby jointly and severally and irrevocably and unconditionally undertake to the Borrower and as a separate and independent obligation to the Security Agent in each case as primary obligors that:- (i) in the event of any termination or rescission of the Rig Construction Contract (however arising), or (ii) upon any refund of all of the instalments of the Contract Price becoming payable (whether or not paid), or (iii) following a Total Loss prior to the delivery of the Rig by the Builder, they shall, within 7 Banking Days of first written demand from the Facility Agent, pay to the Borrower in accordance with Clause 9 the amount which is determined by the Facility Agent as being the excess (if any) of the Outstanding Indebtedness over the Construction Contract Repayments. - 3 - 3. COST OVERRUNS UNDERTAKING 3.1 DEFINITIONS In this Clause 3: "FUNDED AMOUNT" means at any relevant time the aggregate of (i) One Hundred and Sixty Million United States Dollars (US$160,000,000) and (ii) all amounts paid to, and received by, the Borrower by the Sponsors in accordance with Clause 3.2; and "SEVERAL PROPORTIONS" has the same meaning as is given to this expression in Clause 6.1. 3.2 UNDERTAKING If on any date and from time to time the Facility Agent shall determine that the amount of the Total Project Costs incurred as at such date exceeds the Funded Amount at that time, then, without prejudice to or in any way limiting or affecting their other obligations under this Deed of Guarantee and Undertaking, the Sponsors hereby severally and unconditionally and irrevocably agree and undertake with the Borrower and as a separate and independent obligation with the Security Agent that they will, within 7 Banking Days of first written demand from the Facility Agent made from time to time, pay in their Several Proportions to the Borrower in accordance with Clause 9 a sum which is then determined by the Facility Agent as being equal to the amount of such excess. 3.3 LIMITATION The aggregate total liability of the Sponsors under Clause 3 of this Deed of Guarantee and Undertaking shall not exceed US$20,000,000 less the aggregate of all amounts which the Sponsors have, at the date of any payment under Clause 3 of this Deed of Guarantee and Undertaking, paid pursuant to Clause 3 of the Sister Company Guarantee and Undertaking. 4. INSURANCE DEDUCTIBLES UNDERTAKING 4.1 DEFINITIONS In this Clause 4: "DELAY IN DELIVERY INSURANCE" means the insurances referred to in paragraph (A) (DELAY IN DELIVERY) of Section III (BUSINESS INTERRUPTION) of the Conditions to the Temporary Confirmation of Insurance; "INSURANCE DEDUCTIBLE" means any excess or deductible applied in respect of any claim arising under the Delay in Delivery Insurance and/or the Loss of Hire Insurance; and "LOSS OF HIRE INSURANCE" means the insurances referred to in paragraph (B) (LOSS OF HIRE) of Section III (BUSINESS Interruption) of the Conditions to the Temporary Confirmation of Insurance; and - 4 - "TEMPORARY CONFIRMATION OF INSURANCE" has the same meaning as is given to this expression in Clause 2.1. 4.2 PAYMENT UNDERTAKING The Sponsors hereby jointly and severally and unconditionally and irrevocably undertake to the Borrower and as a separate and independent obligation to the Security Agent that in the event that any incident shall occur in relation to the Rig which gives rise to a right to claim under the Delay in Delivery Insurance or the Loss of Hire Insurance they will, within 7 Banking Days of first written demand from the Facility Agent, pay to the Borrower in accordance with Clause 9 such amount as is determined by the Facility Agent to be equal to the amount of any Insurance Deductible applicable in respect of each such claim. 5. OPEX SHORTFALL UNDERTAKING 5.1 DEFINITIONS In this Clause 5: "MANAGEMENT AGREEMENT" has the same meaning as is given to this expression in Clause 7.1; "MONTHLY OPEX AMOUNT" means all Opex actually incurred in relation to any calendar month during the Security Period; and "OPEX" means the costs of operating the Rig including the costs listed in Clause 4.5.3 of the Management Agreement; 5.2 PAYMENT UNDERTAKING The Sponsors hereby jointly and severally and unconditionally and irrevocably undertake to the Borrower and as a separate and independent obligation to the Security Agent that in the event that in any calendar month the Monthly Opex Amount exceeds the Monthly Outgoings for that calendar month they will, within 7 Banking Days of first written demand from the Facility Agent, pay to the Borrower in accordance with Clause 9 such amount as is determined by the Facility Agent to be equal to the amount of such excess for that calendar month. 6. CHARTERPARTY AND SERVICES RENDERING CONTRACT PERFORMANCE UNDERTAKING 6.1 DEFINITIONS In this Clause 6: "SEVERAL PROPORTIONS" means (in relation to Pride) 30% and (in relation to Maritima) 70%. - 5 - 6.2 UNDERTAKING If at any time any default is made by the Borrower in the due and punctual performance or observance of any of the obligations on its part to be performed under or in connection with the Charterparty and/or the Services Rendering Contract in all respects in accordance with their respective terms, or if any of such obligations are otherwise not performed or observed by the time or in the manner provided therein, the Sponsors hereby irrevocably and unconditionally undertake to the Borrower and as a separate and independent obligation to the Security Agent:- (i) jointly and severally that they will promptly take all steps (not involving the payment of money) that may be necessary to ensure that the obligations of which the Borrower is in default are performed in accordance with the Charterparty or (as the case may be) the Services Rendering Contract, and (ii) severally that they will, within 7 Banking Days of first written demand from the Facility Agent, pay in their Several Proportions to the Borrower in accordance with Clause 9 such amount as is determined by the Facility Agent to be necessary so as to enable the Borrower to perform (or to fund the performance of)such obligations, PROVIDED THAT (a) this undertaking shall not, and shall not be construed so as to, impose on the Sponsors a liability greater than that which the Borrower has or would have to Petrobras under the Charterparty or (as the case may be) the Services Rendering Contract and (b) in the event of any default , or failure on the part of the Sponsors (or either of them) to honour, the undertaking contained in paragraph (i) above neither of the Sponsors shall have any liability to make any payment(s) to the Borrower and/or to the Security Agent in respect of any lost payments of Charterparty Hire or of the Services Rendering Contract Payments that may (but for such default or failure) have become payable to the Borrower or the Security Agent (as assignee of the Borrower's rights). 7. MANAGEMENT AGREEMENT PERFORMANCE UNDERTAKING 7.1 DEFINITIONS In this Clause 7: "MANAGEMENT AGREEMENT" means the management agreement relating to the Rig dated as of 5 November 1998 by and made between the Borrower and the Manager, a copy of which has been supplied to each of the parties hereto by the Borrower prior to the date hereof;; and "MANAGER" means Formaritima Limited as manager under the Management Agreement. 7.2 UNDERTAKING The Sponsors hereby jointly and severally and irrevocably and unconditionally undertake to the Borrower and as a separate and independent obligation to the Security Agent to procure that the Manager duly and punctually performs and observes all the obligations on its part to be performed under or in connection with the Management Agreement in all respects in accordance with its terms. - 6 - Without prejudice to the generality of foregoing, if at any time any default is made by the Manager in the performance or observance of any such obligations, or if any of such obligations are otherwise not performed or observed by the time or in the manner provided therein, the Sponsors hereby jointly and severally and irrevocably unconditionally undertake to the Borrower and as a separate and independent obligation to the Security Agent that:- (i) they will promptly take all steps that may be necessary to ensure that the obligations of which the Manager is in default are performed in accordance with the Management Agreement (including, without limitation, the payment of any defaulted amounts); (ii) that they will, within 7 Banking Days of first written demand from the Facility Agent, pay to the Borrower in accordance with Clause 9 any sum which is determined by the Facility Agent to be payable by the Manager to the Borrower as a direct consequence of such default. provided that in the event of any breach of, or failure on the part of the Sponsors (or either of them) to honour, the undertakings contained in paragraphs (i) and (ii) above neither of the Sponsors shall have any liability to make any payment(s) to the Borrower and/or to the Security Agent in respect of any lost payments of Charterparty Hire and/or of the Services Rendering Contract Payments that may (but for such default or failure) have become payable to the Borrower 8. MAINTENANCE OF INSURANCES UNDERTAKING 8.1 DEFINITIONS In this Clause 8: "TEMPORARY CONFIRMATION OF INSURANCE" has the same meaning as is given to this expression in Clause 2.1. 8.2 UNDERTAKING The Sponsors hereby jointly and severally and unconditionally and irrevocably undertake to the Secured Parties that they will throughout the Security Period:- (i) procure that insurances are effected and maintained (with the Security Agent, the Facility Agent and each of the Lenders being named as a principal assured) with insurers acceptable to the Facility Agent providing insurance cover against such risks as are insured by the Temporary Confirmation of Insurance and on terms and conditions no less favourable than are provided for by the Temporary Confirmation of Insurance and (subject to such insurance being available in the international insurance markets) otherwise as the Facility Agent may from time to time at its discretion require; and - 7 - (ii) procure that the Borrower complies with all its obligations in respect of Insurances as contained in the Loan Agreement and the Deed of Covenants. 8.3 REMEDY FOR BREACH OF UNDERTAKING In the event that the Sponsors shall at any time and for any reason fail to comply in all material respects with their undertaking contained in this Clause 8.2, then the Lenders (or any of them) may at their option (but shall not be obliged to) themselves effect and thereafter maintain insurances to the extent necessary to restore the insurances to the level at which they are required to be maintained. All costs incurred by the relevant Lenders in effecting and/or maintaining any such insurances (including, but not limited to, all premiums, calls, contributions or other sums payable in respect of such insurances) shall be repayable by the Sponsors (who shall be jointly and severally liable in respect thereof) on first demand by the Facility Agent together with interest thereon (which will also be payable upon first demand by the Facility Agent and which shall be compounded at such intervals as the Facility Agent may determine) at such annual rate as is conclusively certified by the Facility Agent to the Sponsors as being equal to the aggregate of (1) two and one half per centum (2.5%) per annum and (2) the higher of (a) the cost to the relevant Lenders of funding such costs by borrowing on arms length terms plus any other expenses or losses which such Lenders may have incurred in respect thereof and (b) 13%. The remedy specified above shall be the sole remedy of the Security Agent for breach by the Sponsors of their undertaking contained in this Clause 8. 9. PAYMENTS TO THE BORROWER 9.1 SUBORDINATED LOANS Simultaneously with the execution of this Deed of Guarantee and Undertaking the Borrower, the Sponsors, the Facility Agent and the Security Agent are executing a Subordinated Loan Facility Agreement in the approved form (the "SUBORDINATED LOAN FACILITY AGREEMENT"). As between the Borrower and the Sponsors, any payment to be made by the Sponsors to the Borrower under any of Clauses 2, 3, 4, 5, 6 and/or 7 shall be made within 7 Banking Days of the Facility Agent's first written demand therefor by remittance to the Management Account and shall be made by way of subordinated loan to the Borrower under the Subordinated Loan Facility Agreement, PROVIDED ALWAYS that the Sponsors shall not be required to make any amount available to the Borrower by way of subordinated loan under the Subordinated Loan Facility Agreement if within 7 Banking Days after the Facility Agent's first written demand therefor the Sponsors shall have made the amount thereof available to the Borrower (and the Borrower shall have received such amount) in cleared funds by way of subscription for equity share capital in the Borrower. 9.2 FACILITY AGENT'S CERTIFICATES A certificate in writing signed on behalf of the Facility Agent which: - 8 - (i) makes a determination of any amount(s) for the purposes of Clause 2 (REFUND UNDERTAKING), Clause 3 (COST OVERRUNS UNDERTAKING), Clause 4 (INSURANCE DEDUCTIBLES UNDERTAKING), Clause 5 (OPEX SHORTFALL UNDERTAKING), Clause 6 (CHARTERPARTY AND SERVICES RENDERING CONTRACT PERFORMANCE UNDERTAKING) and/or Clause 7 (MANAGEMENT AGREEMENT PERFORMANCE UNDERTAKING), and (ii) specifies the provision(s) of this Deed of Guarantee and Undertaking pursuant to which such amount(s) is/are payable, and (iii) gives reasonable details of the manner of calculation thereof shall (in the absence of manifest error) be conclusive as to the subject matter thereof. 9.3 EQUITABLE REMEDIES It is acknowledged that, without prejudice to any other rights or remedies that the Borrower and/or the Security Agent might have, damages alone will not be an adequate remedy for any breach by the Sponsors of any of their obligations to make any payment(s) to the Borrower under any of Clauses 2, 3, 4, 5, 6 and/or 7 and under the provisions of Clause 9 and that accordingly the Borrower and/or the Security Agent may be entitled without proof of special damage to the remedies of injunction, specific performance or other equitable relief for any threatened or actual breach of the provisions of this Agreement by the Sponsors. 10. PAYMENTS TO/LOANS BY LENDERS 10.1 PAYMENTS BY SPONSORS TO LENDERS Without prejudice to any of the other provisions of this Deed of Guarantee and Undertaking, in the event that for any reason (including, without limitation, any inability or unwillingness on the part of the Borrower to request or make any drawings under the Subordinated Loan Facility Agreement) any amount(s) payable by the Sponsors to the Borrower under any of Clauses 2, 3, 4, 5, 6 and/or 7 has/have not been paid to, and received by, the Borrower in cleared funds within 7 Banking Days of the Facility Agent's first written demand therefor, then the Sponsors will be obliged forthwith upon the Security Agent's first written demand to make payment of such unpaid amount(s) to the Security Agent for the account of the Lenders. 10.2 LOANS BY LENDERS TO BORROWER Without prejudice to the provisions of Clause 10.1 or to any other rights of the Security Agent under this Deed of Guarantee and Undertaking, in the circumstances stipulated in Clause 10.1 and pending the Sponsors complying with their obligations under Clause 9.1 and/or Clause 10.1 the Lenders (or any of them) may at their option (but shall not be obliged to) themselves provide funds to the Borrower by way of loan in an amount or amounts equal to the amount(s) payable (but not paid) by the Sponsors as aforesaid. Any such loans shall (as between the Borrower and the relevant Lenders) bear no interest, but the Sponsors shall be liable to compensate the relevant Lenders by making payment to them of such amount (calculated on a per annum basis) as is equal to interest on the amounts of such loans at such annual rate as is conclusively certified by the Facility - 9 - Agent to the Sponsors as being equal to the aggregate of (1) two and one half per cent (2.5%) per annum and (2) the higher of (a) the cost to the relevant Lenders of funding such loan(s) plus any other costs, expenses or losses which such Lenders may have incurred in respect thereof and (b) 13%. Such amounts shall be payable upon first demand and if not paid shall bear interest as aforesaid. Any amount(s) so provided by any Lenders by way of loan to the Borrower shall be repayable by the Borrower on first demand by the Security Agent (or as the relevant Lenders may otherwise specify at the time such funds are provided), but in all other respects shall be deemed to have been advanced by the relevant Lenders pursuant to the Loan Agreement, shall rank PARI PASSU with all Advances made or to be made thereunder and shall be secured by the Security Documents accordingly. 10.3 APPLICATION OF PAYMENTS BY SPONSORS In the event that the Sponsors make any payment(s) to the Security Agent for the account of the Lenders pursuant to their obligations under Clause 10.1, then forthwith upon receipt by the Security Agent of such payment(s) in cleared funds: (i) if the amount(s) of such payment(s) received is/are less than, or equal to, the aggregate amount(s) of all (if any) loans made to the Borrower pursuant to Clause 10.2 and not previously waived and released by the Lenders (or, as the case may be, by any relevant Lenders), the Security Agent will pay the amounts to the relevant Lenders for their own account absolutely pro rata in accordance with their loans advanced to the Borrower pursuant to Clause 10.2 and such Lenders will waive and release PRO TANTO the obligations of the Borrower in respect of such loans, and the Sponsors shall be deemed to have complied PRO TANTO with their obligation to make payment of such amount(s) to the Borrower by way of subordinated loan under the Subordinated Loan Facility Agreement (so that the amount(s) in question shall be treated as though they were subordinated loans made available to the Borrower by, and repayable by the Borrower to, the Sponsors in accordance with the provisions of the Subordinated Loan Facility Agreement); (ii) if and to the extent that the amount(s) of such payments received exceed(s) the aggregate amount(s) of all (if any) loans made to the Borrower pursuant to Clause 10.2 and not previously waived and released by the Lenders (or, as the case may be, by any relevant Lenders), the portion thereof which equals the aggregate amount(s) of all (if any) loans made to the Borrower pursuant to Clause 10.2 and not previously waived and released by the Lender (or, as the case may be, by any relevant Lenders) will be applied in accordance with sub-clause (i) above, and the excess shall be applied as follows:- (a) in case an Event of Default or Potential Event of Default shall have occurred and shall be continuing, the Security Agent may (at its option) EITHER pay such monies to the Borrower by remittance to the Management Account (in which event the provisions of sub-paragraph (b) below will apply) OR retain such monies and apply the same in or towards payment of the Secured Obligations in such order of application as the Security Agent shall decide; - 10 - (b) in any other case, the Security Agent shall pay such monies to the Borrower by remittance to the Management Account and the amounts so paid to the Borrower shall be treated as though they were subordinated loans made available to the Borrower by, and repayable by the Borrower to, the Sponsors in accordance with the provisions of the Subordinated Loan Facility Agreement. 10.4 APPLICATION OF PAYMENTS The Borrower hereby irrevocably agrees that any sum received by the Security Agent from the Sponsors pursuant to any of the provisions of this Deed of Guarantee and Undertaking may (to the extent not applied in making good any defaults of the Sponsors in respect of their obligations to the Borrower under this Deed of Guarantee and Undertaking) be applied by the Security Agent in meeting payments due or to become due from the Borrower under the Financing Documents in such order of application as the Security Agent shall decide. 11. PRESERVATION OF OBLIGATIONS 11.1 DURATION OF OBLIGATIONS The Sponsors agree that their respective obligations under this Deed of Guarantee and Undertaking shall remain in full force and effect throughout the Security Period and notwithstanding the enforcement by the Security Agent of any of its rights under the Security Documents (including, without limitation, the appointment of a Receiver) or the taking of possession of any of the assets which stand security for the Secured Obligations or any part of such assets. 11.2 CONTINUING SECURITY ETC. Each of the Sponsors declares and agrees that: (i) this Deed of Guarantee and Undertaking shall be held by the Security Agent as a continuing security and shall not be satisfied by any intermediate payment or satisfaction of any part of the moneys and liabilities hereby agreed to be paid or performed and shall remain in full force and effect until the moneys and liabilities hereby agreed to be paid or performed have been unconditionally and irrevocably paid and discharged in full to the satisfaction of the Security Agent; (ii) it has not received any security from the Borrower or from any other persons for the giving of this Deed of Guarantee and Undertaking and it will not take any such security without the prior written consent of the Security Agent, and the Sponsors will hold any security taken in breach of this provision in trust for the Security Agent; (iii) the Security Agent shall not be bound to enforce any guarantee or security or proceed or take any other steps against the Borrower or any other person before enforcing this Deed of Guarantee and Undertaking; and - 11 - (iv) this Deed of Guarantee and Undertaking shall be in addition to, and not in substitution for, any other rights which the Secured Parties may now or hereafter have under or by virtue of any guarantee, security, encumbrance or agreement or any lien or by operation of law or under any collateral or other security now or hereafter held by the Security Agent or to which the Security Agent may be entitled. 11.3 AVOIDANCE OF SECURITIES Any settlement or discharge under this Deed of Guarantee and Undertaking between the Security Agent and the Sponsors shall be conditional upon no security or payment to the Security Agent by the Borrower, the Sponsors or any other person being avoided or set aside or ordered to be refunded or reduced by virtue of any provision or enactment relating to bankruptcy, insolvency or liquidation for the time being in force, and if such condition is not satisfied, the Security Agent shall be entitled to recover from the Sponsors on demand the value of such security or the amount of any such payment as if such settlement or discharge had not occurred. 11.4 PRESERVATION OF RIGHTS The obligations of the Sponsors under this Deed of Guarantee and Undertaking shall not be affected by any act, omission, matter or thing which, but for this provision, might operate to release or otherwise exonerate either of the Sponsors from its or their obligations under this Deed of Guarantee and Undertaking in whole or in part, including (without limitation, and whether or not known to or discoverable by the Sponsors, the Borrower, any Secured Party or any other person): (i) any time or waiver granted to or composition with the Borrower, the other Sponsor or any other person; (ii) the taking, variation, compromise, discharge, composition, arrangement, renewal or release of or refusal or neglect to perfect or enforce any rights, remedies or securities against the Borrower, the other Sponsor or any other person; (iii) any legal limitation, disability, incapacity or other circumstances relating to the Borrower, the other Sponsor or any other person; (iv) any amendment or supplement to this Deed of Guarantee and Undertaking, any of the Financing Documents or any other document or security; (v) the dissolution, liquidation, amalgamation, reconstruction or reorganisation of the Borrower, the other Sponsor or any other person; (vi) the unenforceability or invalidity of any obligations of the Borrower, the other Sponsor or any other person under this Deed of Guarantee and Undertaking or any of the other Financing Documents or any other document or security; (vii) the failure of any of the Secured Parties to take any other guarantee or security (whether contemporaneous with this Deed of Guarantee and Undertaking) or otherwise; or - 12- (viii) any other act, event or omission which but for the provision would or might operate to impair, discharge or otherwise affect the obligations of the Sponsors (or either of them) under this Deed of Guarantee and Undertaking. 11.5 NON-COMPETITION Until all the Secured Obligations and the Sister Company Obligations and the moneys and liabilities hereby agreed to be paid or performed have been unconditionally and irrevocably paid and discharged in full to the satisfaction of the Security Agent, the Sponsors shall not by virtue of any payment made or performance under this Deed of Guarantee and Undertaking on account of such moneys and liabilities or by virtue of any relationship between, or transaction involving, the Sponsors and the Borrower: (i) exercise any rights of subrogation or otherwise in relation to any rights, security or moneys held or received or receivable by any Secured Party or any other person; (ii) exercise any right of contribution from the other Sponsor or any co-surety or any other person liable in respect of such moneys and liabilities under any other guarantee, security or agreement; (iii) exercise any right of set-off or counterclaim against the Borrower or the other Sponsor or any such co-surety or any other person; (iv) receive, claim or have the benefit of any payment, distribution, security or indemnity from the Borrower or the other Sponsor or any such co-surety or any other person; or (v) unless so directed by the Security Agent (when the Sponsors will prove in accordance with such directions), claim as a creditor of the Borrower or the other Sponsor or any such co-surety in competition with the Security Agent. The Sponsors shall hold in trust for the Security Agent and forthwith pay or transfer (as appropriate) to the Security Agent any such payment (including an amount equal to any such set-off), distribution or benefit of such security, indemnity or claim received by it. 11.6 SUSPENSE ACCOUNTS Until all moneys and liabilities hereby agreed to be paid or performed have been unconditionally and irrevocably paid in full to the satisfaction of the Security Agent, the Security Agent may at any time keep in a separate account (without liability to pay interest thereon) for as long as it may think fit any moneys received, recovered or realised under this Deed of Guarantee and Undertaking or under any other guarantee, security or agreement relating in whole or in part to the moneys and liabilities hereby agreed to be paid and performed without being under any intermediate obligation to apply the same or any part thereof in or towards the discharge of such amount. -13 - 12. PAYMENTS 12.1 CURRENCY OF FUNDS All payments to be made by the Sponsors under this Deed of Guarantee and Undertaking shall be made: (i) for value on the due date at such time and in such funds as the Security Agent may specify to the Sponsors as being customary at the time for the settlement of transaction in US Dollars in the place for payment; and (ii) to such account at such office or bank as the Security Agent may notify to the Sponsors for this purpose. 12.2 NO SET-OFF OR COUNTERCLAIMS All amounts due from the Sponsors to the Security Agent under this Deed of Guarantee and Undertaking shall be paid without any form of set-off, counterclaim or condition whatsoever. Any amount due from the Sponsors under this Deed of Guarantee and Undertaking shall not be reduced by any set-off, counterclaim or other claim which the Sponsors may have against the Borrower whether under this Deed of Guarantee and Undertaking, any Project Document, any of the Financing Documents or otherwise. 12.3 UNCONDITIONAL OBLIGATION Nothing in this Deed of Guarantee and Undertaking, nor any matter, fact, act, omission, circumstance or thing whatsoever, including without limitation: (i) the termination (for any cause) of the Charterparty or of the Services Rendering Contract or of any other contract or arrangement for the use or operation of the Rig, (ii) any change in circumstances or political, economic or financial conditions, (iii) the insolvency, dissolution, death, disability or incapacity of any person whatsoever, (iv) the breach by any person of any agreement or understanding, or (v) any of the matters specified in Clause 11.4, shall operate in any way to affect or minimise, or release the Sponsors from any of the Sponsors' obligations under, this Deed of Guarantee and Undertaking, all of which obligations shall subsist in full notwithstanding any such matter, fact, omission, circumstance or thing. - 14 - 13. TAXATION 13.1 WITHHOLDING; GROSS-UP All payments to be made by or for the account of the Sponsors (or either of them) hereunder shall be made without set-off or counterclaim and free and clear of and without deduction for or on account of any present or future Taxes of any nature whatsoever imposed by or in any country ("APPLICABLE TAX") unless the Sponsors (or either of them) are/is compelled by law to make payment to, or for the account of, the Borrower and/or the Security Agent subject to such Applicable Tax. In any such case the Sponsors (or, as the case may be, the relevant Sponsor) shall promptly pay such Applicable Tax, and the amount of the relevant payment by the Sponsors (or, as the case may be, the relevant Sponsor) hereunder shall be increased to the extent necessary to ensure that the Borrower and/or the Security Agent actually receives an amount, free and clear of and after deduction for all such Applicable Tax, equal to the full amount which would have been received if no such withholding or deduction had been made. The Sponsors (or, as the case may be, the relevant Sponsor) shall pay and indemnify and keep indemnified the Borrower and/or the Security Agent against all such Applicable Tax. The Sponsors (or, as the case may be, the relevant Sponsor) shall promptly deliver to the Facility Agent copies of official receipts for Taxes evidencing payment of any such Applicable Tax imposed as aforesaid. The obligations of the Sponsors (or, as the case may be, the relevant Sponsor) under this Clause 13 shall survive the Security Period. 14. REPRESENTATIONS AND WARRANTIES 14.1 REPRESENTATIONS Each of the Sponsors represents and warrants severally as to itself to each of the Secured Parties on the date of this Deed of Guarantee and Undertaking as follows:- (i) It is a limited liability company duly organised and validly existing under the laws specified on page 1 of this Deed of Guarantee and Undertaking, possessing perpetual corporate existence and the capacity to sue or be sued in its own name, and each of it and its Subsidiaries has the power to own its assets and carry on its business as it is now being conducted. (ii) It has the power to enter into and perform this Deed of Guarantee and Undertaking and each of the other Financing Documents and the Project Documents to which it is a party and the transactions contemplated hereby and thereby and has taken all necessary action to authorise the entry into and performance of this Deed of Guarantee and Undertaking and each of the other Financing Documents and the Project Documents to which it is a party and the transactions contemplated hereby and thereby in accordance with the terms thereof. (iii) This Deed and each of the other Financing Documents and the Project Documents to which it is a party constitute its legal, valid and binding obligations enforceable in accordance with their respective terms and are in proper form for the enforcement in all the courts of the country of incorporation subject in each case - 15 - to the qualifications and other matters contained or referred to in the legal opinions obtained by the Lenders in respect of the relevant jurisdictions. (iv) The entry into and performance of this Deed of Guarantee and Undertaking and each of the other Financing Documents and Project Documents to which it is a party and the transactions contemplated hereby and thereby do not conflict with: (a) any law or official requirement; (b) its constitutional documents; or (c) any agreement or document to which it or any of its Subsidiaries (if any) is a party or which is binding upon it or any of its Subsidiaries or any of their respective assets, and will not result in the creation or imposition of (or enforcement of) any encumbrance on any of its assets or the assets of any of its Subsidiaries (if any). 14.2 REPETITION The representations and warranties set out in this Clause 14 shall survive the execution of this Deed of Guarantee and Undertaking and the making of each Advance under the Loan Agreement and shall be deemed to be repeated on the date of the giving of each Drawing Request, on each Drawdown Date on each Repayment Date, so long as any amount is or may be outstanding under the Loan Agreement or any Commitment is in force with reference to the facts and circumstances then subsisting, as if made at each such time. 15. UNDERTAKINGS 15.1 DURATION The undertakings in this Clause 15 shall remain in force from and after the date hereof and throughout the Security Period. 15.2 Accounts Each of the Sponsors will furnish, or procure that there is furnished, to the Security Agent, in sufficient copies for each of the Lenders: (i) as soon as practicable: (a) (and in any event within 120 days after the close of each financial year) its audited accounts; (b) (if prepared) the consolidated (audited, if prepared) accounts of those of its Subsidiaries (if any) for that year; (ii) as soon as practicable (and in any event within 45 days after the end of each financial quarter of each of its financial years): (a) its unaudited balance sheet as at the end of such quarter; and - 16 - (b) its unaudited statement of income and cash-flow statement for that quarter; 15.3 Further general information Each of the Sponsors shall furnish to the Security Agent promptly such further information in its possession or control or in the possession and control of any of its Subsidiaries (if any) regarding its financial condition and operations and that of its Subsidiaries, as the Security Agent may reasonably request. 15.4 LITIGATION Each of the Sponsors shall furnish to the Security Agent details of any litigation, arbitration or administrative proceedings against it or concerning the Rig or the Project Documents which are current or, to its knowledge, threatened or pending, as soon as the same are instituted or so threatened if the same might have a material adverse effect on the financial condition of either of the Sponsors or might have a material effect on either of the Sponsor's respective obligations under the Project Documents. 15.5 NOTIFICATION OF DEFAULTS Each of Sponsors shall notify the Security Agent of any Event of Default or any Potential Event of Default promptly upon becoming aware of its occurrence. 15.6 CONSENTS Each of the Sponsors will obtain and promptly renew from time to time, and will promptly furnish certified copies to the Security Agent of, all consents as may be required under any applicable law to enable it to perform its obligations under this Deed of Guarantee and Undertaking and the other Financing Documents and the Project Documents to which either of the Sponsors is a party or which are required for the validity or enforceability thereof, and the Sponsors shall comply with the terms of the same. 15.7 CONTINUED OWNERSHIP The Sponsors shall procure that Amethyst Financial Company Limited remains throughout the Security Period the registered holder and beneficial owner of the entire issued share capital in the Borrower. 15.8 DISSOLUTION OF THE BORROWER The Sponsors jointly and severally and unconditionally and irrevocably undertake and agree with the Security Agent that throughout the Security Period: (i) they will not institute and will procure that Amethyst Financial Company Ltd does not institute any steps for the winding up or dissolution of the Borrower (or any equivalent process in the country of incorporation of the Borrower); - 17 - (ii) they will ensure that all votes attaching to any equity share capital which is legally or beneficially owned by themselves and/or by either of them and/or by Amethyst Financial Company Ltd or which is otherwise directly or indirectly under their or its control will be used to vote against any proposal or resolution for the winding-up or dissolution of the Borrower. 15.9 ALTERNATIVE CHARTERER The Sponsors jointly and severally and unconditionally and irrevocably undertake to the Borrower and as a separate and independent obligation to the Security Agent that in the event of any termination of the Charterparty (however arising) during the Security Period the Sponsors will use their respective best endeavours to procure a new charter for the Rig with an independent third party approved by the Facility Agent on arm's length terms no less favourable than the Charterparty and will procure that the benefit of such new charter and the Borrower's right, title and interest therein will be assigned to the Security Agent as agent and trustee for the Lenders by way of security for the Secured Obligations. 16. CURRENCY INDEMNITY 16.1 CURRENCY INDEMNITY (i) If, for any reason, any payment due from the Sponsors (or either of them) under or in connection with this Deed of Guarantee and Undertaking is made or is satisfied in a currency (the "OTHER CURRENCY") other than the currency in which the relevant payment under this Deed of Guarantee and Undertaking is due (the "CONTRACTUAL CURRENCY"), then to the extent that the payment (when converted into the Contractual Currency at the rate of exchange on the date of payment or, in the case of the liquidation or insolvency of the Sponsors (or either of them), at the rate of exchange on the latest date permitted by applicable law for the determination of liabilities in such liquidation or insolvency) actually received by the party entitled thereto falls short of the amount expressed to be due under the terms of this Deed of Guarantee and Undertaking, the Sponsors, or (as the case may be) the relevant Sponsor, shall, as a separate and independent obligation, indemnify the party entitled thereto and hold such party harmless against the amount of such shortfall. (ii) If on any occasion the Contractual Currency so purchased exceeds the amount payable hereunder in the Contractual Currency to the party entitled thereto then, subject to the Sponsors, or (as the case may be) the relevant Sponsor, having no further obligation, actual or contingent, to such party under this Agreement, such party shall refund to the Sponsors, or (as the case may be) the relevant Sponsor, the excess amount of the Contractual Currency so purchased. (iii) For the purpose of this Clause "RATE OF EXCHANGE" means the rate at which the party entitled thereto is able on the relevant date to purchase the Contractual Currency with the Other Currency and shall take into account any premium and other costs of exchange. - 18 - 16.2 INDEPENDENT OBLIGATIONS The indemnities in Clause 16.1 shall constitute separate and independent obligations of the Sponsors from their other respective obligations under this Deed of Guarantee and Undertaking, shall give rise to a separate and independent cause of action against the Sponsors or (as the case may be) the relevant Sponsor and shall apply irrespective of any indulgence granted by the Secured Parties from time to time. 17. DELEGATION, ASSIGNMENT 17.1 DELEGATION The Security Agent shall be entitled at any time and as often as may be expedient to delegate all or any of the powers and discretions vested in it by the Financing Documents or any of them (including the power vested in it by virtue of this Clause 17.1) in such manner upon such terms and to such persons as the Security Agent in its absolute discretion may think fit. 17.2 ASSIGNMENT The provisions of Clause 15 of the Loan Agreement shall apply hereto and (MUTATIS MUTANDIS) be deemed incorporated herein and, accordingly any Lender may novate and/or assign its rights in respect of this Deed to any person to whom its Commitments and/or Outstandings are novated or assigned in accordance with such Clause, and this Deed shall remain in full force and effect after, and shall continue to secure the Secured Obligations after and resulting from, any novation or assignment in accordance with such Clause 15. 17.3 BENEFIT OF THIS DEED This Deed shall extend to, and enure to the benefit of the Security Agent and its duly appointed successors and assigns 18. NOTICES, ETC. 18.1 METHOD OF SENDING Each communication to be made hereunder shall be made in writing but, unless otherwise stated, may be made by facsimile transmission or by telex or by letter. 18.2 ADDRESSES FOR NOTICES Any communication or document to be made or delivered by one person to another pursuant to this Deed of Guarantee and Undertaking shall (unless the one has by not less than three (3) days' written notice to the other specified another address) be made or delivered to that other person at the respective addresses and facsimile numbers set out below. - 19 - (1) The Borrower:- PETRODRILL SIX LIMITED c/o Petrodrill Engineering NV K.P. van der Mandalelaan 38 3062 MB Rotterdam (Brainpark) The Netherlands Attention: Steve Assister Fax No: 00 31 10 272 2727 (2) The Sponsors PRIDE INTERNATIONAL INC. 5847 San Felipe Suite 3300 Houston Texas, TX77 057 USA Attention: Robert Randall Fax No: 001 713 914 9796 MARITIMA PETROLEO E ENGENHARIA LTDA Avenida Almirante Barroso 52 Group 3400 Rio de Janeiro Brazil Attention: German Efromovich Fax No: 00 55 21 220 6566 (3) The Lenders:- PETRO DIA THREE S.A. c/o MITSUBISHI CORPORATION 6-3 Marunouchi 2-chome Chiyoda-ku Tokyo Japan Attention: General Manager, Ship & Industrial Project Department Fax No: 00 81 3 3210 4446 - 20 - PETRO DIA FOUR S.A. c/o MITSUBISHI CORPORATION 6-3 Marunouchi 2-chome Chiyoda-ku Tokyo Japan Attention: General Manager, Ship & Industrial Project Department Fax No: 00 81 3 3210 4446 (4) The Facility Agent:- MITSUBISHI CORPORATION (UK) PLC Bow Bells House Bread Street London EC4M 9BQ Attention: General Manager, Machinery Department Fax No: 071 822 0184 (5) The Security Agent:- MITSUBISHI CORPORATION (UK) PLC Bow Bells House Bread Street London EC4M 9BQ Attention: General Manager, Machinery Department Fax No: 071 822 0184 18.3 DEEMED RECEIPT Any notice given hereunder shall be deemed to have been received: (i) If sent by facsimile transmission or by telex, at the opening of business one (1) Banking Day after the day it was transmitted; (ii) In the case of a written notice lodged by hand, at the time of actual delivery; and (iii) If posted, on the fifth Banking Day following the day on which it was properly despatched by first class mail postage prepaid. 19. GOVERNING LAW AND JURISDICTION 19.1 GOVERNING LAW This Agreement shall be governed by and construed in accordance with English law. - 21 - 19.2 SUBMISSION TO JURISDICTION Each of the parties hereto irrevocably agrees that the English courts are to have jurisdiction to settle any disputes which may arise out of or in connection with this Agreement and/or the other Financing Documents and that accordingly any suit, action or proceedings ("PROCEEDINGS") arising out of or in connection with this Agreement and/or the other Financing Documents may be brought in such courts. 19.3 WAIVER OF OBJECTION Each of the parties hereto hereby irrevocably waives any objection which it may have now or hereafter to the laying of the venue of any Proceedings in any such court as is referred to in Clause 19.2 and any claim that any such Proceedings have been brought in an inconvenient forum, and further irrevocably agrees that a judgment in any Proceedings brought in the English courts shall be conclusive and binding upon the Borrower and may be enforced in the courts of any other jurisdiction. 19.4 OTHER JURISDICTIONS Nothing contained in this Clause 19 shall limit the right of any of the parties hereto to take proceedings in any other court of competent jurisdiction, nor shall the taking of Proceedings in any one or more jurisdictions preclude the taking of Proceedings in any other jurisdiction, whether concurrently or not. 19.5 SERVICE OF PROCESS (1) The Borrower irrevocably and unconditionally: (a) designates, and appoints and empowers Hackwood Secretaries Limited of One Silk Street, London EC2Y 8HQ to receive for it and on its behalf, service of process issued out of the English courts in any Proceedings arising out of or in connection with this Agreement; (b) agrees to maintain in England a duly appointed process agent notified to the other parties to this Agreement, for the purposes of paragraph (a) above; (c) agrees that failure by any such process agent to give notice of such process to it shall not impair the validity of such service or of any judgment based thereon; (d) consents to the service of process out of any of the said courts in any such Proceedings by the airmailing of copies, postage prepaid, to it at its address for the time being applying for the purposes of Clause 18; and (e) agrees that nothing herein shall affect the right to serve process in any other manner permitted by law. (2) The Sponsors irrevocably and unconditionally: - 22 - (a) designate, and appoint and empower Hackwood Secretaries Limited of One Silk Street, London EC2Y 8HQ to receive for them and on their behalf, service of process issued out of the English courts in any Proceedings arising out of or in connection with this Agreement; (b) agree to maintain in England a duly appointed process agent notified to the other parties to this Agreement, for the purposes of paragraph (a) above; (c) agree that failure by any such process agent to give notice of such process to them shall not impair the validity of such service or of any judgment based thereon; (d) consent to the service of process out of any of the said courts in any such Proceedings by the airmailing of copies, postage prepaid, to them at the address for the time being applying for the purposes of Clause 18; and (e) agree that nothing herein shall affect the right to serve process in any other manner permitted by law. (3) The Lenders irrevocably and unconditionally: (a) designate, and appoint and empower Mitsubishi Corporation (UK) PLC of Bow Bells House, Bread Street, London EC4M 9BQ to receive for them and on their behalf, service of process issued out of the English courts in any Proceedings arising out of or in connection with this Agreement; (b) agree to maintain in England a duly appointed process agent notified to the other parties to this Agreement, for the purposes of paragraph (a) above; (c) agree that failure by any such process agent to give notice of such process to them shall not impair the validity of such service or of any judgment based thereon; (d) consent to the service of process out of any of the said courts in any such Proceedings by the airmailing of copies, postage prepaid, to them at the address for the time being applying for the purposes of Clause 18; and (e) agree that nothing herein shall affect the right to serve process in any other manner permitted by law. 20. COUNTERPARTS This Deed of Guarantee and Undertaking may be executed in any number of counterparts and by the different parties hereto on different counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument. 21. WAIVER; REMEDIES CUMULATIVE - 23 - No failure to exercise and no delay in exercising on the part of the Borrower and/or any of the Secured Parties any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof, or the exercise of any other right, power or privilege. The rights and remedies herein provided are cumulative and not exclusive of any rights or remedies provided by law. 22. LANGUAGE Each document referred to herein or to be delivered hereunder (including financial statements) and each other communication shall be in the English language. 23. SEVERABILITY Any provision in this Deed of Guarantee and Undertaking which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. IN WITNESS whereof the parties have caused this Deed of Guarantee and Undertaking to be executed and delivered as a deed the day and year first above written. EXECUTED and DELIVERED ) /s/ Illegible as a DEED by PETRODRILL ) SIX LIMITED acting by ) its duly authorised signatory) /attorney-in-fact in the presence of:- ) /s/ Illegible EXECUTED and DELIVERED ) /s/ Illegible as a DEED by PRIDE ) INTERNATIONAL INC acting by ) its duly authorised signatory/ ) attorney-in-fact in the presence of: ) /s/ Illegible EXECUTED and DELIVERED ) /s/ Illegible as a DEED by MARITIMA ) PETROLEO E ENGENHARIA ) LTDA acting by its duly authorised ) signatory/attorney-in-fact in the ) presence of: ) /s/ Illegible - 24 - EXECUTED and DELIVERED )/s/ H. MIYAMOTO as a DEED by PETRO DIA THREE ) S.A. acting by its duly authorised ) signatory/attorney-in-fact in ) the presence of: ) /s/ Illegible EXECUTED and DELIVERED )/s/ H. MIYAMOTO as a DEED by PETRO DIA FOUR ) S.A. acting by its duly authorised ) signatory/attorney-in-fact in ) the presence of: ) /s/ Illegible EXECUTED and DELIVERED ) /s/ Illegible as a DEED by MITSUBISHI ) CORPORATION (UK) PLC (in its ) capacity as Facility Agent) acting by ) its duly authorised signatory/ ) attorney-in-fact in the presence of: ) /s/ Illegible EXECUTED and DELIVERED ) /s/ Illegible as a DEED by MITSUBISHI ) CORPORATION (UK) PLC (in its ) capacity as Security Agent) acting by ) its duly authorised signatory/ ) attorney-in-fact in the presence of: ) /s/ Illegible EX-4.12 14 EXHIBIT 4.12 DATED 19 December 1998 PRIDE INTERNATIONAL INC. and MARITIMA PETROLEO E ENGENHARIA LTDA as Sponsors - and - PETRO DIA THREE SA AND PETRO DIA FOUR SA as Beneficiaries ------------------------------------------------- FLOOR GUARANTEE relating to the Loan Agreements in respect of "Amethyst 6" and "Amethyst 7" ------------------------------------------------- F I E L D - F I S H E R - W A T E R H O U S E 4 1 V I N E S T R E E T L O N D O N E C 3 N 2 A A INDEX CLAUSE/HEADING PAGE - - -------------- ---- 1. DEFINITIONS AND INTERPRETATION 2 2. FLOOR GUARANTEE AND UNDERTAKING 4 3. PRESERVATION OF OBLIGATIONS 5 4. PAYMENTS 8 5. TAXATION 8 6. REPRESENTATIONS AND WARRANTIES 9 7. CURRENCY INDEMNITY 10 8. DELEGATION, ASSIGNMENT 10 9. NOTICES, ETC. 11 10. COUNTERPARTS 12 11. WAIVER; REMEDIES CUMULATIVE 12 12. LANGUAGE 12 13. SEVERABILITY 12 14. GOVERNING LAW AND JURISDICTION 12 THIS DEED is made on 19 December 1998 BETWEEN:- (1) PRIDE INTERNATIONAL INC,. a company incorporated under the laws of the State of Louisiana, USA, of 5847 San Felipe, Suite 3300, Houston, Texas 77057, USA ("PRIDE") and MARITIMA PETROLEO E ENGENHARIA LTDA., a company incorporated under the laws of Brazil, of Avenida Almirante Barroso 52, Gr. 3400, 2031-000 Rio de Janeiro, Brazil ("MARITIMA") (together, the "SPONSORS" and, individually, a "SPONSOR"); and (2) PETRO DIA THREE SA a company duly organised and existing under the laws of the Republic of Panama whose registered office is at 53rd Street Urbanizacion Obarrio Torre Swiss Bank, 16th Floor, Panama City, Republic of Panama and PETRO DIA FOUR SA a company duly organised and existing under the laws of the Republic of Panama whose registered office is at 53rd Street Urbanizacion Obarrio Torre Swiss Bank, 16th Floor, Panama City, Republic of Panama (together the "Beneficiaries" and individually a "BENEFICIARY"). WHEREAS: (A) By a loan agreement (as amended or supplemented from time to time, the "LOAN AGREEMENT") of even date herewith and made between the Beneficiaries (1), the Borrower (2), the Facility Agent (3) and the Security Agent (4), the Beneficiaries have agreed, upon and subject to the terms and conditions of the Loan Agreement, to make available to the Borrower loan facilities not exceeding US$160,000,000 for the purposes therein specified. (B) By a further loan agreement (the "SISTER COMPANY LOAN AGREEMENT") dated the same date as the Loan Agreement and made between the Beneficiaries (1), the Sister Company (2), the Facility Agent (3) and the Security Agent (4), the Beneficiaries have agreed to make available to the Sister Company upon and subject to the terms and conditions of the Sister Company Loan Agreement loan facilities not exceeding US$180,000,000 for the purposes therein specified. (C) The Sponsors have agreed to execute and deliver this Deed to the Beneficiaries as two of the Lenders in consideration of the Beneficiaries, at the Sponsors' request, entering into the Loan Agreement and the Sister Company Loan Agreement and making or continuing loans or advances to, or otherwise giving credit or granting accommodation or granting time to, the Borrowers as defined in and pursuant to the Loan Agreement and/or the Sister Company Loan Agreement. (D) It is the parties' intention that this Deed shall be held by the Beneficiaries as security for the Guaranteed Obligations in addition to and separately from any other security therefor held by the Security Agent for the benefit of the Secured Parties, it being recognised that the obligations of the Borrower and of the Sister Company under the Loan Agreement and the Sister Company Loan Agreement respectively constitute separate and independent debts thereunder in favour of the Beneficiaries as Lenders. - 1 - IT IS AGREED as follows:- 1. DEFINITIONS AND INTERPRETATION 1.1 DEFINITIONS In this Deed the following words and expressions shall, except where the context otherwise requires, have the following meanings: "ADVANCE" means any Advance as defined in the Loan Agreement or in the Sister Company Loan Agreement; "AGENTS" means the Facility Agent and the Security Agent and "AGENT" means either or any of them as the context requires; "BANKING DAY" shall bear the meaning ascribed to it in the Loan Agreements; "BENEFICIARIES" means each of the Beneficiaries specified on page one of this Deed and their respective successors in title and transferees to the extent only that such Beneficiary expressly transfers or assigns the benefit of this Deed to such successor in title and transferee in accordance with Clause 8 (to the intent that no Lender other than the Beneficiaries shall be entitled to the benefit of this Deed other than as a successor in title and transferee of either Beneficiary as aforesaid); "BORROWER" means Petrodrill Six Limited, a company incorporated under the laws of the British Virgin Islands, of Arias Fabrega and Fabrega Trust Co; BVI Limited, 325 Waterfront Drive, Omar Hodge Building, 2nd Floor, Wickham's Cay, Road Town, Tortola, British Virgin Islands; "COMMITMENT" means any Commitment as defined in and for the purpose of the Loan Agreement or the Sister Company Loan Agreement; "DRAWDOWN NOTICE" means any Drawdown Notice as defined in the Loan Agreement and in the Sister Company Loan Agreement; "FACILITY AGENT" means Mitsubishi Corporation (UK) PLC in its capacity as facility agent for the Lenders under each of the Loan Agreement and the Sister Company Loan Agreement and includes any successor facility agent or agents appointed under the Loan Agreement and the Sister Company Loan Agreement or either of them; "FINANCING DOCUMENTS" means the Loan Agreement and the Sister Company Loan Agreement and the Security Documents and "FINANCING DOCUMENT" means any of them; "GUARANTEED OBLIGATIONS" is defined in Clause 2.1; "LENDERS" means each of the Lenders specified in Schedule 1 of the Loan Agreement and/or of the Sister Company Loan Agreement and their respective successors in title and transferees under the Loan Agreement and/or of the Sister Company Loan Agreement; "OUTSTANDINGS" means any Outstandings as defined in the Loan Agreement or in the Sister Company Loan Agreement; - 2 - "PROJECT DOCUMENTS" means the documents listed in Schedule 7 Part 1 of the Loan Agreement and in Schedule 7 part 1 of the Sister Company Loan Agreement; "RECEIVER" means a receiver and/or manager (and, as the context so admits, shall include an administrative receiver) or any similar person or officer appointed by the Security Agent pursuant to any Security Document; "REPAYMENT DATE" means any Repayment Date as defined in and for the purpose of each of the Loan Agreement and the Sister Company Loan Agreement; "SECURITY DOCUMENTS" means [this Deed and] the agreements, mortgages, deeds and other documents specified in Schedule 7 Part 2 of the Loan Agreement and/or the Sister Company Loan Agreement and any other documents (including, as the context may require the Loan Agreement and the Sister Company Loan Agreement) that may now or hereafter be included in the term "Security Documents" as that term is defined in either of the Loan Agreements or the Sister Company Loan Agreement; "SECURITY AGENT" means Mitsubishi Corporation (UK) PLC in its capacity as security trustee and agent under the Security Trust Deed and includes any successor security trustee and agent appointed under the terms thereof; "SECURITY PERIOD" means whichever of the later to expire of the Security Period under the Loan Agreement or under the Sister Company Loan Agreement (as the term "SECURITY PERIOD" is respectively defined therein); "SECURITY TRUST DEED" has the meaning ascribed to it in the Loan Agreement and the Sister Company Loan Agreement; "SEVERAL PROPORTIONS" means: (i) in relation to Pride, 30%; and (ii) in relation to Maritima, 70%; "SISTER COMPANY" means Petrodrill Seven Limited, a company incorporated under the laws of the British Virgin Islands, of Arias Fabrega and Fabrega Trust Co; BVI Limited, 325 Waterfront Drive, Omar Hodge Building, 2nd Floor, Wickham's Cay, Road Town, Tortola, British Virgin Islands; and "TAXES" means any Taxes as defined in the Loan Agreement or in the Sister Company Loan Agreement. 1.2 INTERPRETATION This Deed shall be interpreted consistently with the Loan Agreement, and accordingly the provisions of Clauses 1.2 to 1.4 (inclusive) of the Loan Agreement shall apply hereto and (MUTATIS MUTANDIS) shall be deemed to be incorporated into this Deed as if set out in full in this Deed. - 3 - 2. FLOOR GUARANTEE AND UNDERTAKING 2.1 GUARANTEE Each Sponsor hereby severally irrevocably and unconditionally guarantees to each of the Beneficiaries the due and punctual payment and discharge by each of the Borrower and the Sister Company of such Sponsor's Several Proportion of all monies, obligations and liabilities of any nature whatsoever which are now or at any time hereafter may be or become due or owing by the Borrower and/or the Sister Company to each such Beneficiary under or pursuant to the Loan Agreement or the Sister Company Loan Agreement (including, but not limited to, any damages for any breaches thereof) and such Sponsor's Several Proportion of any other liabilities, whether actual or contingent, now existing or hereafter incurred by the Borrower and/or the Sister Company to each such of the Beneficiaries under or pursuant to [the Loan Agreement or the Sister Company Loan Agreement](whether, in any such case, due, owing or incurred by the Borrower and/or the Sister Company alone or jointly with any other person(s) and in whatever name, firm or style and whether as principal or surety) (all such obligations and liabilities being referred to herein as the "GUARANTEED OBLIGATIONS") and undertakes that if the Borrower or the Sister Company (as the case may be) fails for any reason punctually to perform such of the Guaranteed Obligations or any of them as it is liable to perform, each Sponsor severally shall cause such Sponsor's Several Proportion of each and every such payment to be made within five (5) Banking Days of receipt by such Sponsor of a written demand from the Beneficiaries (or either of them) as if such Sponsor instead of the Borrower or the Sister Company (as the case may be) were expressed in the [the Loan Agreement or the Sister Company Loan Agreement respectively] to be the primary obligor with respect to such Sponsor's Several Proportion of the relevant Guaranteed Obligation. 2.2 INDEMNITY Each Sponsor hereby severally irrevocably and unconditionally undertakes with each of the Beneficiaries that if any sum expressed to be payable by such Sponsor under Clause 2.1 is not for any reason recoverable from that Sponsor under this Deed on the basis of a guarantee (including, without limitation, any sum not recoverable under this Deed due to any invalidity, unenforceability or avoidance of any of the Financing Documents) suchSponsor shall as a primary obligor indemnify the Beneficiaries in respect thereof and shall pay such sum to such Beneficiaries on first demand. 2.3 LIMITATION The aggregate amount recoverable from each of the Sponsors under Clause 2 of this Deed (whether as sureties or by way of indemnity) shall not exceed: (i) in the case of Pride US$32,400,000; and (ii) in the case of Maritima US$75,600,000. 2.4 COMMENCEMENT The obligation of the Guarantors under this Deed in respect of Guaranteed Obligations shall commence on the Charterparty Commencement Date and neither of the Guarantors shall have any obligation until such date but so that with effect from such date the - 4 - Guarantors shall be liable in respect of all Guaranteed Obligations whenever the same may have arisen (and whether the same arose prior to or after such date). 3. PRESERVATION OF OBLIGATIONS 3.1 DURATION OF OBLIGATIONS The Sponsors agree that their respective obligations under this Deed shall remain in full force and effect throughout the Security Period and notwithstanding the enforcement by the Security Agent of any of its rights under the Security Documents (including but without limitation, the appointment of a Receiver) or by either of the Beneficiaries or the taking of possession of any of the Secured Assets or any part thereof. 3.2 CONTINUING GUARANTEE ETC. Each of the Sponsors declares and agrees that: (i) this Deed shall be held by and shall be available to the Beneficiaries as a continuing guarantee and shall not be satisfied by any intermediate payment or satisfaction of any part of the moneys and liabilities hereby agreed to be paid or performed and shall remain in full force and effect until the Guaranteed Obligations and any other moneys and liabilities hereby agreed to be paid or performed have been unconditionally and irrevocably paid and discharged in full to the satisfaction of the Beneficiaries; (ii) it has not received any security from the Borrower or the Sister Company or from any other persons for the giving of this Deed and it will not take any such security without the prior written consent of the Beneficiaries, and the Sponsors will hold any security taken in breach of this provision in trust for the Beneficiaries; (iii) neither of the Beneficiaries shall be bound to enforce any guarantee or security or proceed or take any other steps against the Borrower and/or the Sister Company or any other person before enforcing this Deed; (iv) this Deed shall be in addition to, and not in substitution for, any other rights which the Beneficiaries may now or hereafter have under or by virtue of any guarantee, security, encumbrance or agreement or any lien or by operation of law or under any collateral or other security now or hereafter held by the Beneficiaries or the Security Agent or to which the Security Agent or either of the Beneficiaries may be entitled; and (v) without prejudice to sub-clause (i) this Deed shall be held by and shall be available to the Beneficiaries as security for the ultimate balance owing to the Beneficiaries in respect of the Guaranteed Obligations and shall not be discharged or affected by any intermediate reduction in (or extinguishment of) all or any of the Guaranteed Obligations resulting from a transfer or assignment by a Beneficiary of all or any of such Beneficiary's rights under the Loan Agreement or the Sister Company Loan Agreement pursuant to Clause 8. 3.3 AVOIDANCE OF SECURITIES - 5 - Any settlement or discharge under this Deed between either Beneficiary and the Sponsors shall be conditional upon no security or payment to the Beneficiaries (or either of them) by the Borrower and/or the Sister Company, the Sponsors or any other person being avoided or set-aside or ordered to be refunded or reduced by virtue of any provision or enactment relating to bankruptcy, insolvency or liquidation for the time being in force, and if such condition is not satisfied, the Beneficiaries (or either of them) shall be entitled to recover from the Sponsors on demand the value of such security or the amount of any such payment as if such settlement or discharge had not occurred. 3.4 PRESERVATION OF RIGHTS The obligations of the Sponsors under this Deed shall not be affected by any act, omission, matter or thing which, but for this provision, might operate to release or otherwise exonerate either of the Sponsors from its obligations hereunder in whole or in part, including (without limitation, and whether or not known to or discoverable by the Sponsors, the Borrower, the Sister Company, either Beneficiary or any other person): (i) any time or waiver granted to or composition with the Borrower, the Sister Company or the other Sponsor or any other person; (ii) the taking, variation, compromise, discharge, composition, arrangement, renewal or release of or refusal or neglect to perfect or enforce any rights, remedies or securities against the Borrower, the Sister Company or the other Sponsor or any other person; (iii) any legal limitation, disability, incapacity or other circumstances relating to the Borrower, the Sister Company or the other Sponsor or any other person; (iv) any amendment or supplement to this Deed or any of the Financing Documents or any other document or security; (v) the dissolution, liquidation, amalgamation, reconstruction or reorganisation of the Borrower, the Sister Company or the other Sponsor or any other person; (vi) the unenforceability or invalidity of any obligations of the Borrower, the Sister Company or the other Sponsor or any other person under this Deed or any of the other Financing Documents or any other document or security; (vii) the failure of either of the Beneficiaries or any other person to take any other guarantee or security (whether contemporaneous with this Deed) or otherwise; or (viii) any other act, event or omission which but for the provision would or might operate to impair, discharge or otherwise affect the obligations of the Sponsors or either of them hereunder. 3.5 NON-COMPETITION Until all the Guaranteed Obligations and the other moneys and liabilities hereby agreed to be paid or performed have been unconditionally and irrevocably paid and discharged in full to the satisfaction of the Beneficiaries, the Sponsors shall not by virtue of any payment made or performance hereunder on account of such moneys and liabilities or by - 6 - virtue of any relationship between, or transaction involving, the Sponsors, the Borrower, the Sister Company or any other person: (i) exercise any rights of subrogation or otherwise in relation to any rights, security or moneys held or received or receivable by any Secured Party or any other person; (ii) exercise any right of contribution from the other Sponsor or any co-surety or any other person liable in respect of such moneys and liabilities under any other guarantee, security or agreement; (iii) exercise any right of set-off or counterclaim against the Borrower, the Sister Company or the other Sponsor or any such co-surety or any other person; (iv) receive, claim or have the benefit of any payment, distribution, security or indemnity from the Borrower, the Sister Company or the other Sponsor or any such co-surety or any other person; or (v) unless so directed by the Beneficiaries (when the Sponsors will prove in accordance with such directions), claim as a creditor of the Borrower, the Sister Company or the other Sponsor or any such co-surety in competition with the Beneficiaries (or either of them). The Sponsors shall hold in trust for the Beneficiaries and forthwith pay or transfer (as appropriate) to the Beneficiaries any such payment (including an amount equal to any such set-off), distribution or benefit of such security, indemnity or claim received by it. 3.6 SUSPENSE ACCOUNTS Until the Guaranteed Obligations and all other liabilities hereby agreed to be paid or performed have been unconditionally and irrevocably paid in full to the satisfaction of the Beneficiaries, either Beneficiary may at any time keep in a separate account (without liability to pay interest thereon) for as long as it may think fit any moneys received, recovered or realised under this Deed or under any other guarantee, security or agreement relating in whole or in part to the moneys and liabilities hereby agreed to be paid and performed without being under any intermediate obligation to apply the same or any part thereof in or towards the discharge of such amount. 3.7 INTEREST The Sponsors shall pay interest at the relevant rate applicable under the relevant Financing Document (as well after as before judgement) on any amount for the time being due from the Sponsors to either Beneficiary under this Deed from the date of a valid demand for payment hereunder until actual payment in full. 3.8 OPENING OF NEW ACCOUNTS If for any reason this Deed ceases to be a continuing security, either Beneficiary may either continue any then existing account or open one or more fresh accounts for the Borrower or the Sister Company, but in either case the obligations of the Guarantors shall - 7 - remain unaffected by, and be computed without regard to, any payment into and out of any such account. 4. PAYMENTS 4.1 CURRENCY OF FUNDS All payments to be made by the Sponsors under this Deed shall be made: (i) for value on the due date at such time and in such funds as the Beneficiaries entitled to such payment may specify to the Sponsors as being customary at the time for the settlement of transaction in US Dollars in the place for payment; and (ii) to such account at such office or bank as the Beneficiary entitled to such payment may notify to the Sponsors for this purpose. 4.2 NO SET-OFF OR COUNTERCLAIMS All amounts due from the Sponsors to the Beneficiaries (or either of them) under this Deed shall be paid without any form of set-off, counterclaim or condition whatsoever. Any amount due from the Sponsors under this Deed shall not be reduced by any set-off, counterclaim or other claim which the Sponsors may have against the Borrower or the Sister Company whether under this Deed, any Project Document or otherwise. 4.3 UNCONDITIONAL OBLIGATION Nothing in this Deed, nor any matter, fact, act, omission, circumstance or thing whatsoever, including without limitation: (i) the failure or frustration of the project the subject of the Project Documents; (ii) any change in circumstances or political, economic or financial conditions; (iii) the insolvency, dissolution, death, disability or incapacity of any person whatsoever; or (iv) the breach by any person of any agreement or understanding, shall operate in any way to affect or minimise, or release the Sponsors from any of the Sponsors' obligations under, this Deed, all of which obligations shall subsist in full notwithstanding any such matter, fact, omission, circumstance or thing. 5. TAXATION All payments to be made by the Sponsors (or either of them) hereunder shall be made without set-off or counterclaim and free and clear of and without deduction for or on account of any present or future Taxes of any nature whatsoever imposed by or in any country ("APPLICABLE TAX") unless the Sponsors (or either of them) are compelled by law to make payment to or for the account of the Beneficiaries (or either of them) subject to such Applicable Tax, in which case it shall promptly pay such Applicable Tax and the amount of the relevant payment hereunder shall be increased to the extent necessary to - 8 - ensure that the recipient Beneficiary actually receives an amount, free and clear of and after deduction for all such Applicable Tax, equal to the full amount which would have been received if no such withholding or deduction had been made. Each of the Sponsors shall severally pay and indemnify and keep indemnified each of the Beneficiaries against all such Applicable Tax. The Sponsors shall promptly deliver to each of the Beneficiaries copies of official Tax receipts evidencing payment of any such Applicable Tax imposed as aforesaid. The obligations of the Sponsors under this Clause 5 shall survive the repayment of the Guaranteed Obligations and Sister Company Obligations and the payment of all other sums payable hereunder and under the other Security Documents. 6. REPRESENTATIONS AND WARRANTIES 6.1 REPRESENTATIONS Each of the Sponsors represents and warrants severally as to itself to each of the Beneficiaries on the date of this Deed as follows:- (i) It is a limited liability company duly organised and validly existing under the laws specified on page 1 of this Deed, possessing perpetual corporate existence and the capacity to sue or be sued in its own name and each of it and its Subsidiaries has the power to own its assets and carry on its business as it is now being conducted. (ii) It has the power to enter into and perform this Deed and each of the other Financing Documents and the Project Documents to which it is a party and the transactions contemplated thereby and has taken all necessary action to authorise the entry into and performance of this Deed and each of the other Financing Documents and the Project Documents to which it is a party and the transactions contemplated thereby in accordance with the terms thereof. (iii) This Deed and each of the other Financing Documents and the Project Documents to which it is a party constitute its legal, valid and binding obligations enforceable in accordance with their respective terms and are in proper form for the enforcement in all the courts of the country of incorporation. (iv) The entry into and performance of this Deed and each of the other Financing Documents and Project Documents to which it is a party and the transactions contemplated thereby do not conflict with: (a) any law or official requirement; (b) its constitutional documents; or (c) any agreement or document to which it or any of its Subsidiaries is a party or which is binding upon it or any of its Subsidiaries or any of their respective assets, and will not result in the creation or imposition of (or enforcement of) any encumbrance on any of its assets or the assets of any of its Subsidiaries. 6.2 REPETITION - 9 - The representations and warranties set out in this Clause 6 shall survive the execution of this Deed and the making of each Advance and shall be deemed to be repeated on the date of the giving of each Drawdown Notice, on each Drawdown Date on each Repayment Date, so long as any of the Guaranteed Obligations is or may be outstanding or any Commitment is in force with reference to the facts and circumstance then subsisting, as if make at each such time. 7. CURRENCY INDEMNITY 7.1 INDEMNITY (i) If, for any reason, any payment due from the Sponsors (or either of them) under or in connection with this Deed is made or is satisfied in a currency (the "OTHER CURRENCY") other than the currency in which the relevant payment under this Deed is due (the "CONTRACTUAL CURRENCY"), then to the extent that the payment (when converted into the Contractual Currency at the rate of exchange on the date of payment or, in the case of the liquidation or insolvency of the Sponsors (or either of them), at the rate of exchange on the latest date permitted by applicable law for the determination of liabilities in such liquidation or insolvency) actually received by the party entitled thereto falls short of the amount expressed to be due under the terms of this Deed, the Sponsors, or (as the case may be) the relevant Sponsor, shall, as a separate and independent several obligation, indemnify the party entitled thereto and hold such party harmless against the amount of such shortfall. (ii) If on any occasion the Contractual Currency so purchased exceeds the amount payable hereunder in the Contractual Currency to the party entitled thereto then, subject to the Sponsors, or (as the case may be) the relevant Sponsor, having no further obligation, actual or contingent, to such party under this Deed, such party shall refund to the Sponsors, or (as the case may be) the relevant Sponsor, the excess amount of the Contractual Currency so purchased. (iii) For the purpose of this Clause "RATE OF EXCHANGE" means the rate at which the party entitled thereto is able on the relevant date to purchase the Contractual Currency with the Other Currency and shall take into account any premium and other costs of exchange. 7.2 INDEPENDENT OBLIGATIONS The indemnities in Clause 7.1 shall constitute separate and independent obligations of the Sponsors from their other respective obligations under this Deed, shall give rise to a separate and independent cause of action against the Sponsors or (as the case may be) the relevant Sponsor severally and shall apply irrespective of any indulgence granted by the Beneficiaries (or either of them) from time to time. 8. ASSIGNMENT If either of the Beneficiaries transfers the benefit of any of its rights under the Loan Agreement or the Sister Company Loan Agreement to any transferee (a "TRANSFEREE") (including any transfer effected pursuant to and in accordance with Clause 15.4 of the Loan Agreement or the Sister Company Loan Agreement) such Beneficiary shall be - 10 - entitled to elect whether to transfer and assign the benefit of its rights under this Deed by the service of notice by such Beneficiary upon the Sponsors. If such Beneficiary does not serve such a notice such Beneficiary shall retain the full benefit of this Deed for the obligations of the Guarantors in respect of the Guaranteed Obligations and for the avoidance of any doubt it is expressly confirmed and agreed by the Guarantors and each of them that the benefit of this Deed shall apply in respect of the Guaranteed Obligations including (for the avoidance of doubt) any Guaranteed Obligations existing at the date of or incurred after the date of such transfer. 9. NOTICES, ETC. 9.1 METHOD OF SENDING Each communication to be made hereunder shall be made in writing but, unless otherwise stated, may be made by facsimile transmission or by telex or by letter. 9.2 ADDRESSES FOR NOTICES Any communication or document to be made or delivered by one person to another pursuant to this Deed shall (unless the one has by not less than three (3) days' written notice to the other specified another address) be made or delivered to that other person at the respective addresses set out below. (1) The Beneficiaries: Petro Dia Three S.A. c/o Mitsubishi Corporation 6-3 Marunouchi 2-chome Chiyoda-ku Tokyo Japan Attention: General Manager, Ship & Industrial Project Department Facsimile: (2) The Sponsors Petro Dia Four S.A. c/o Mitsubishi Corporation 6-3 Marunouchi 2-chome Chiyoda-ku Tokyo Japan Attention: General Manager, Ship & Industrial Project Department Facsimile: 9.3 DEEMED RECEIPT Any notice given hereunder shall be deemed to have been received: - 11 - (i) If sent by facsimile transmission or by telex, at the opening of business one (1) Banking Day after the day it was transmitted; (ii) In the case of a written notice lodged by hand, at the time of actual delivery; and (iii) If posted, on the fifth Banking Day following the day on which it was properly despatched by first class mail postage prepaid. 10. COUNTERPARTS This Deed may be executed in any number of counterparts and by the different parties hereto on different counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument. 11. WAIVER; REMEDIES CUMULATIVE No failure to exercise and no delay in exercising on the part of the Beneficiary (or either of them) any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof, or the exercise of any other right, power or privilege. The rights and remedies herein provided are cumulative and not exclusive of any rights or remedies provided by law. 12. LANGUAGE Each document referred to herein or to be delivered hereunder (including financial statements) and each other communication shall be in the English language. 13. SEVERABILITY Any provision in this Deed which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. 14. GOVERNING LAW AND JURISDICTION 14.1 GOVERNING LAW This Deed shall be governed by and construed in accordance with English law. 14.2 SUBMISSION TO JURISDICTION Each of the parties hereto irrevocably agrees that the English courts are to have jurisdiction to settle any disputes which may arise out of or in connection with this Deed and/or the Financing Documents and that accordingly any suit, action or proceedings ("PROCEEDINGS") arising out of or in connection with this Deed and/or the other Financing Documents may be brought in such courts. 14.3 WAIVER OF OBJECTION - 12 - Each of the Sponsors irrevocably waives any objection which it may have now or hereafter to the laying of the venue of any Proceedings in any such court as is referred to in Clause 14.2 and any claim that any such Proceedings have been brought in an inconvenient forum, and further irrevocably agrees that a judgment in any Proceedings brought in the English courts shall be conclusive and binding upon each of the Sponsors and may be enforced in the courts of any other jurisdiction. 14.4 OTHER JURISDICTIONS Nothing contained in this Clause 14 shall limit the right of any of the parties hereto to take proceedings in any other court of competent jurisdiction, nor shall the taking of Proceedings in any one or more jurisdictions preclude the taking of Proceedings in any other jurisdiction, whether concurrently or not. 14.5 SERVICE OF PROCESS The Sponsors irrevocably and unconditionally: (a) designate, and appoint and empower Hackwood Secretaries Limited of One Silk Street, London EC2Y 8HQ to receive for them and on their behalf, service of process issued out of the English courts in any Proceedings arising out of or in connection with this Agreement; (b) agree to maintain in England a duly appointed process agent notified to the other parties to this Agreement, for the purposes of paragraph (a) above; (c) agree that failure by any such process agent to give notice of such process to them shall not impair the validity of such service or of any judgment based thereon; (d) consent to the service of process out of any of the said courts in any such Proceedings by the airmailing of copies, postage prepaid, to them at the address for the time being applying for the purposes of Clause 8; and (e) agree that nothing herein shall affect the right to serve process in any other manner permitted by law. IN WITNESS whereof the parties have caused this Deed to be executed and delivered as a Deed. EXECUTED and DELIVERED ) /s/ Illegible as a DEED by PRIDE ) INTERNATIONAL INC acting by ) its duly authorised signatory/ ) attorney-in-fact in the presence of:- ) /s/ Illegible EXECUTED and DELIVERED ) as a DEED by MARITIMA ) - 13 - PETROLEO E ENGENHARIA ) /s/ Illegible LTDA acting by its duly authorised ) signatory/attorney-in-fact in the ) presence of:- ) /s/ Illegible EXECUTED and DELIVERED ) /s/ Illegible as a DEED by PETRO DIA THREE ) SA acting by its duly authorised ) signatory/attorney-in-fact ) in the presence of:- ) /s/ Illegible EXECUTED and DELIVERED ) /s/ Illegible as a DEED by PETRO DIA FOUR ) SA acting by its duly authorised ) signatory/attorney-in-fact ) in the presence of:- ) /s/ Illegible - 14 - EX-4.13 15 EXHIBIT 4.13 DATED 19 DECEMBER 1998 PETRODRILL SIX LIMITED AND OTHERS as Guarantors - and - MITSUBISHI CORPORATION (UK) PLC as Security Agent ----------------------------------------- INTER-COMPANY CROSS GUARANTEE ----------------------------------------- F I E L D - F I S H E R - W A T E R H O U S E 4 1 V I N E S T R E E T L O N D O N E C 3 N 2 A A CONTENTS NUMBER/CLAUSE PAGE ============= ==== 1. DEFINITIONS AND INTERPRETATION 1 2. JOINT AND SEVERAL GUARANTEE 4 3. CONTINUING SECURITY 4 4. INTEREST 4 5. REPRESENTATIONS AND WARRANTIES 5 6. OPENING OF NEW ACCOUNT 5 7. DEALINGS WITH THE PRINCIPALS AND OTHERS 5 8. DISCHARGE AND RELEASES AVOIDED 6 9. RIGHT TO MAKE DEMAND 7 10. CERTIFICATE 7 11. EFFECT OF PRINCIPAL'S INSOLVENCY 7 12. EFFECT OF OTHER GUARANTEES ETC. 8 13. RESORTING TO OTHER MEANS OF PAYMENT 8 14. NO PROOF IN COMPETITION WITH SECURITY AGENT 8 15. CHANGE IN CONSTITUTION OF PRINCIPALS OR GUARANTOR 9 16. NO SECURITY RECEIVED BY GUARANTORS 9 17. MONEY NOT RECOVERABLE ON FOOTING OF GUARANTEE 9 18. CHANGE IN SECURITY AGENT'S CONSTITUTION OR AMALGAMATION ETC. 9 19. PAYMENTS BY GUARANTORS 10 20. CURRENCY INDEMNITY 10 21. NO WAIVER OF RIGHTS UNDER GUARANTEE 10 22. SECURITY AGENT 11 23. DEMANDS 11 24. ASSIGNMENT 12 25. GOVERNING LAW AND JURISDICTION 12 26. WAIVER; REMEDIES CUMULATIVE 13 27. SEVERABILITY 14 28. PROPERTY IN THE DEED TO BELONG TO THE SECURITY AGENT 14 THE SCHEDULE 15 SIGNATORIES 15 THIS DEED OF GUARANTEE is made the 19 day of December 1998 BETWEEN (1) THE SEVERAL COMPANIES whose names and registered offices are specified in the Schedule below (together called the "COMPANIES" which expression shall include each or any one or more of them severally); and (2) MITSUBISHI CORPORATION (UK) PLC, a company incorporated in England and Wales (Reg No. 2214224), whose registered office is at Bow Bells House, Bread Street, London EC4M 9BQ in its capacity as security trustee and agent for the Secured Parties WHEREAS: (A) By loan agreement dated the same date as this Deed, and made between Petrodrill Six, the Lenders, the Facility Agent and the Security Agent, the Lenders have made available to Petrodrill Six upon the terms and subject to the conditions thereof, loan facilities in a maximum aggregate principal amount of US$160,000,000. (B) By a loan agreement dated the same date as this Deed, and made between Petrodrill Seven, the Lenders, the Facility Agent and the Security Agent, the Lenders have made available to Petrodrill Seven, upon the terms and subject to the conditions whereof, loan facilities in a maximum aggregate principal amount of US$180,000,000. (C) It is a condition of the Facilities being available for drawing that certain conditions (as set out in each of the Loan Agreements) have first been satisfied and that certain documents (as set out in the Loan Agreements) have first been delivered. (D) One of such conditions is a condition that the Security Documents (including, but not limited to, this Deed), duly executed by the parties thereto and being in form and substance satisfactory to the Security Agent, shall have been delivered to the Security Agent. NOW IT IS HEREBY AGREED as follows: 1. DEFINITIONS AND INTERPRETATION 1.1 DEFINED TERMS In this Deed the following words and expressions shall, except where the context otherwise requires, have the following meanings: "AGENTS" means the Facility Agent and the Security Agent and "AGENT" means either or any of them as the context requires; "AMETHYST" means Amethyst Financial Company Limited (one of the Companies); "BANKING DAY" shall bear the meaning ascribed to it in the Loan Agreements; "COMMITMENT" means any Commitment as defined in and for the purpose of each of the Loan Agreements; 1 "FACILITIES" means each of the Facilities as defined in the Petrodrill Six Loan Agreement or in the Petrodrill Seven Loan Agreement; "FACILITY AGENT" means Mitsubishi Corporation (UK) PLC in its capacity as facility agent for the Lenders under each Loan Agreement and includes any successor facility agent or agents appointed under the Loan Agreements or either of them; "FINANCING DOCUMENTS" means the Loan Agreements and the Security Documents and "FINANCING DOCUMENT" means any of them; "GUARANTEED OBLIGATIONS" is defined in Clause 2; "GUARANTOR" means each of the Companies in so far only as it covenants by this Deed to pay and discharge monies, obligations or liabilities due owing or incurred by a Company other than itself to the Agents or the Lenders; "LENDERS" means each of the Lenders specified in Schedule 1 of the Petrodrill Six Loan Agreement and in Schedule 1 of the Petrodrill Seven Loan Agreement and includes their respective successors in title and transferees under the relevant Loan Agreement; "LOAN AGREEMENTS" means the Petrodrill Six Loan Agreement and the Petrodrill Seven Loan Agreement and "LOAN AGREEMENT" means either or both of them as the context requires; "OUTSTANDINGS" means any Outstandings as defined in and for the purpose of each of the Loan Agreements; "PETRODRILL SIX" means Petrodrill Six Limited, a company incorporated under the laws of the British Virgin Islands, of Arias Fabrega and Fabrega Trust Co., BVI Limited, 325 Waterfront Drive, Omar Hodge Building, 2nd Floor, Wickham's Cay, Road Town, Tortola, British Virgin Islands; "PETRODRILL SIX LOAN AGREEMENT" means the loan agreement referred to in Recital (A); "PETRODRILL SEVEN" means Petrodrill Seven Limited, a company incorporated under the laws of the British Virgin Islands, of Arias Fabrega and Fabrega Trust Co., BVI Limited, 325 Waterfront Drive, Omar Hodge Building, 2nd Floor, Wickham's Cay, Road Town, Tortola, British Virgin Islands; "PETRODRILL SEVEN LOAN AGREEMENT" means the loan agreement referred to in Recital (B); "PRINCIPALS" means the Companies in so far only as any monies, obligations and liabilities may at any time be due or owing or payable from or by them under or pursuant to any of the Financing Documents (whether due, owing or incurred by the relevant person alone or jointly with any other person(s) and in whatever name form or style and whether as principal or surety) otherwise than as Guarantors under this Deed; "SECURED PARTIES" means the Agents and the Lenders; 2 "SECURITY AGENT" means Mitsubishi Corporation (UK) PLC, in its capacity as security trustee and (where applicable hereunder or thereunder) agent for the Secured Parties under the Security Trust Deed and the other Financing Documents and includes any successor security trustee and agent appointed under the terms hereof and thereof; "SECURITY DOCUMENTS" means the agreements, mortgages, deeds and other documents specified in Schedule 7 Part 2 of the Petrodrill Six Loan Agreement and in Schedule 7 Part 2 of the Petrodrill Seven Loan Agreement and any other documents (including, as the context may require the Loan Agreements) that may now or hereafter be included in the term "SECURITY DOCUMENTS" as that term is defined in and for the purpose of each of the Loan Agreements; "SECURITY TRUST DEED" shall have the meaning ascribed thereto in each of the Loan Agreements; "SHARE CHARGES" means the two deeds of even date herewith, each between Amethyst and the Security Agent by which Amethyst charged to the Security Agent the Shares in Petrodrill Six and Petrodrill Seven, respectively; and "SHARES" means all of the shares in each of Petrodrill Six and Petrodrill Seven held by Amethyst at the date hereof and such other shares in Petrodrill Six and Petrodrill Seven of which Amethyst or may at any time become (whether alone or jointly with any other person) the legal and/or beneficial owner, and all dividends, interest, payments and other distributions payable in relation to any of the shares and all stocks, shares, rights, money or property accruing or offered by way of redemption, bonus, preference, option, exchange, purchase, substitution or otherwise to or in respect of any of the shares, all allotments, offers, rights and benefits whatsoever accruing, offered or arising in respect of any of the shares and all or any other rights attaching to or exercisable by virtue of the ownership of any of the shares and all proceeds of any disposal of any of the shares or of any enforcement of the Share Charges and any other sum received or receivable in respect of any of the Shares. 1.2 CLAUSE HEADINGS Clause headings and the table of contents are inserted for convenience of reference only and will be ignored in the interpretation of this Deed. 1.3 CONSTRUCTION OF CERTAIN REFERENCES In this Deed, unless the context otherwise requires: (a) references to Recitals, Clauses and Schedules are to be construed as references to Clauses and Recitals of and Schedules to, this Deed; (b) references to this Deed (or to any other document) are to this Deed (or, as the case may be, to that other document) as from time to time amended, varied or supplemented; (c) references to any Act of Parliament or any Section of, Schedule to or other provision of an Act of Parliament shall be construed, at any particular time, as including reference to any modification, extension or re-enactment thereof then in force and instruments, orders and regulations then in force and made under or deriving validity from the relevant Act; 3 (d) words importing the plural will include the singular and vice versa; (e) references to persons include companies; and (f) expressions listed in Clause 1.2 of the Loan Agreements shall, where used in this Deed, unless the context otherwise requires, be construed in accordance with Clause 1.2 of the Loan Agreements. 2. JOINT AND SEVERAL GUARANTEE Each of the Companies unconditionally and irrevocably guarantees to and undertakes with the Security Agent (as trustee for the Secured Parties) both severally and also jointly with each of the other Companies that it will pay and discharge to the Security Agent on demand all monies, obligations and liabilities of any nature which are now or at any time hereafter may be or become due or owing by any other Company to any of the Agents or any of the Lenders under or pursuant to any of the Financing Documents (including damages for breach thereof) and any other liabilities, whether actual or contingent, now existing or hereafter incurred by any other Company to any of the Agents or any of the Lenders under or pursuant to any of the Financing Documents (whether in any such case due, owing or incurred by the relevant person alone or jointly with any other person(s) and in whatever name, form or style and whether as principal or surety) (except in any such case any monies, obligations and liabilities, due, owing or incurred by such other Company as Guarantor for the Company concerned) (all such monies, obligations and liabilities being referred to herein as the "GUARANTEED OBLIGATIONS") and each Company undertakes jointly and severally that if any other Company fails for any reason punctually to perform such of the Guaranteed Obligations or any of them as it is liable to perform, each Company shall cause every such payment to be made within five (5) Banking Days of receipt by such Company of a written demand from the Security Agent as if such Company were itself expressed in the relevant Financing Document to be the primary obligor with regard to the relevant Guaranteed Obligations Provided however that the amounts payable by Amethyst (but without affecting the liabilities of the other Companies under this Deed) shall be limited to the aggregate of amounts generated by the Shares including all realisations received by the Security Agent or by any delegate thereof or receiver, receiver and manager or administrative receiver or similar person by virtue of any enforcement of the Share Charges. 3. CONTINUING SECURITY This Deed shall be a continuing security for all the Guaranteed Obligations and shall not be discharged by any intermediate discharge or payment of or on account of any of the Guaranteed Obligations or any of them or any settlement of accounts between the Security Agent and the Principals, any other guarantor or any other person. No demand made by or on behalf of the Security Agent hereunder shall prejudice or restrict the rights of the Security Agent to make further or other demands. 4. INTEREST The Guarantors shall pay interest at the relevant rate applicable under the relevant Financing Document (as well after as before judgment) on any amount for the time being 4 due from the Guarantors to the Security Agent under this Deed from the date of a valid demand for payment hereunder until actual payment in full. 5. REPRESENTATIONS AND WARRANTIES Each of the Companies represents and warrants severally as to itself to as follows:- (i) It is a limited liability company duly organised and validly existing under the law of the country where its registered office is situate as specified against its name in the Schedule, possessing perpetual corporate existence and the capacity to sue or be sued in its own name and has the power to own its assets and carry on its business as it is now being conducted. (ii) It has the power to enter into and perform this and the transactions contemplated hereby and has taken all necessary action to authorise the entry into and performance of this Deed and the transactions contemplated hereby in accordance with the terms hereof. (iii) This Deed constitutes its legal, valid and binding obligations enforceable in accordance with its terms and is in proper form for the enforcement in all the courts of the country of incorporation. (iv) The entry into and performance of this Deed and the transactions contemplated hereby do not conflict with: (a) any law or official requirement; (b) its constitutional documents; or (c) any agreement or document to which it is a party or which is binding upon it or any of its assets, and will not result in the creation or imposition of (or enforcement of) any encumbrance on any of its assets. 6. OPENING OF NEW ACCOUNT If for any reason this Deed ceases to be a continuing security, the Secured Parties may either continue any then existing account or open one or more fresh accounts for the Principals, but in either case the obligations of the Guarantors under this Deed shall remain unaffected by, and be computed without regard to, any payment into or out of any such account. 7. DEALINGS WITH THE PRINCIPALS AND OTHERS The obligations of the Guarantors under this Deed and the liabilities of any other person under the Financing Documents and all security rights and interests of whatsoever nature created thereby or pursuant thereto (including, without limitation, those created by or pursuant to each of the Security Documents) shall not be impaired, discharged or otherwise affected by any act, omission, matter or thing which, but for this provision, might operate to release or otherwise exonerate any of the Guarantors from its obligations hereunder in whole or in part or to release, discharge, impair or adversely affect any such security rights and interests, including (without limitation, and whether or not known to or discoverable by the Guarantors, the Security Agent or any other person): 5 (i) any time or waiver granted to or composition with the Principals or any other person; (ii) the taking, variation, compromise, discharge, composition, arrangement, renewal or release of or refusal or neglect to perfect or enforce any rights, remedies or securities against the Principals or any other person; (iii) any legal limitation, disability, incapacity or other circumstances relating to the Principals or any other person; (iv) any amendment or supplement to this Deed or any of the other Financing Documents or any other document or security; (v) the dissolution, liquidation, amalgamation, reconstruction or reorganisation of Principals or any other person; (vi) the unenforceability or invalidity of any obligations of the Principals or any other person under this Deed or any of the other Financing Documents or any other document or security; (vii) the failure of the Security Agent or any other person to take any other guarantee or security (whether contemporaneous with this Deed) or otherwise; or (viii) any other act, event or omission which but for the provision would or might operate to impair, discharge or otherwise affect the obligations of the Guarantors hereunder. 8. DISCHARGE AND RELEASES AVOIDED 8.1 No assurance, security or payment which may be avoided or adjusted under the law, including under any enactment, relating to individual or corporate insolvency and no release, settlement or discharge given or made by either of the Agents and/or the Lenders on the faith of any such assurance, security or payment shall prejudice or affect the right of the Security Agent to recover all liabilities due and owing under this Deed from the Guarantors (including any monies which it or the Facility Agent or the Lenders may be compelled to refund under the provisions of the Insolvency Act 1986 and any costs payable by it or them or otherwise incurred in connection therewith) or to enforce the security created by or pursuant to this Deed to the full extent of the liabilities due and owing under this Deed. 8.2 In the event of any claim being made or proceedings being taken against the Security Agent the effect of which, if successful, would be the avoidance or reduction of any such security or payment and whether or not any Guarantor shall have been made a party thereto, the Security Agent shall have absolute discretion to concede or settle the same on such terms as it may think fit whereupon the preceding sub-Clause shall have effect as if such concession or settlement had been ordered by the court (without the possibility of appeal) and the relevant Guarantor shall in addition pay the Security Agent all costs and expenses (on a full indemnity basis) arising out of or in connection with any such claim or proceedings. 6 8.3 If the Security Agent has reasonable grounds for believing that any assurance, security or payment received by it from the Principals (or any of them) or the Guarantors or any other person in respect of the Guaranteed Obligations may be avoided or adjusted under any law relating to bankruptcy, insolvency or winding-up then the Security Agent shall be at liberty to retain the security created by or pursuant to this Deed for the relevant period (as defined below) after the payment and discharge in full of all amounts due and owing notwithstanding any release, settlement discharge or arrangement given or made by the Security Agent on, or as a consequence of, such payment or termination or liability provided that, if at any time within the relevant period after such payment or discharge, a petition shall be presented to a competent court for an order for the winding-up or the making of an administration order in respect of the Principals (or any of them) or the Principals (or any of them) shall commence to be wound-up or to go into administration, or if any analogous proceedings are taken in respect of the Guarantors or such other person, the Security Agent shall be at liberty to continue to retain such security (including the documents aforesaid) for and during such further period as the Security Agent may determine in which event such security shall be deemed to have continued to have been held as security for the payment and discharge to the Security Agent of all amounts due and owing under this Deed. In this Clause the "RELEVANT PERIOD" means a period of one month plus any statutory period during which any assurance, security or payment such as is referred to above may be avoided or invalidated (or such longer period as the Security Agent shall consider comparable in the light of the provisions of any applicable law of any jurisdiction). 9. RIGHT TO MAKE DEMAND If the right to make a demand for payment of any sum from the Principals has arisen the Security Agent may make a demand under this Deed (i) before making any demand on the Principals (or any of them) or any other surety or enforcing any other guarantee or security for the Guaranteed Obligations and (ii) for the payment of the ultimate balance after resorting to other means of payment or for the balance due at any time notwithstanding that the Security Agent has not resorted to other means of payment. 10. CERTIFICATE The Security Agent's certificate of the amount of the Guaranteed Obligations outstanding at any time shall, in the absence of manifest error, be PRIMA FACIE evidence for all purposes of this Deed as against the Guarantor. 11. EFFECT OF PRINCIPALS' INSOLVENCY The bankruptcy, liquidation or insolvency of any of the Principals shall not affect or determine the liability of the Guarantors under this Deed. All dividends, compositions and money received by the Security Agent from any of the Companies or from any other company, person or estate capable of being applied by the Security Agent in reduction of the indebtedness of any of the Principals shall be regarded for all purposes as payments in gross and the Security Agent shall be entitled to prove in the bankruptcy, liquidation or insolvency of any of the Principals in respect of the whole of such Principal's indebtedness to the Security Agent and/or the Lenders and without any right on the part of any of the Guarantors to be subrogated to the Security Agent in respect of any such proof to the intent that each of the guarantees contained in this Deed shall apply to and secure the whole of any ultimate balance which shall remain due to the Security Agent. 7 12. EFFECT OF OTHER GUARANTEES ETC. This Deed and the rights of the Security Agent under it shall be in addition to and shall not be in any way prejudiced or affected by any one or more other securities or guarantees for any of the Principals which the Security Agent may now or subsequently hold whether from any of the Guarantors or from any other person. 13. RESORTING TO OTHER MEANS OF PAYMENT The Security Agent shall be at liberty but not bound to resort for its own benefit to any other means of payment at any time and in any order it thinks fit without in consequence diminishing the liability of the Guarantors and the Security Agent may enforce any of the guarantees contained in this Deed either for the payment of the ultimate balance or balances after resorting to other means of payment (including any of such other guarantees) or for the balance or balances due at any time notwithstanding that any such other means of payment have not been resorted to and in each case without entitling the Guarantors to any benefit from such other means of payment so long as any money remains due or owing or payable (whether actually or contingently) from or by the Principals to the Security Agent. 14. NO PROOF IN COMPETITION WITH SECURITY AGENT Each of the guarantees contained in this Deed shall take effect as a guarantee of the whole and every part of the Guaranteed Obligations and accordingly none of the Guarantors shall be entitled as against the Security Agent to any right of proof in the bankruptcy, liquidation or insolvency of the Principals or any other surety or other right of a surety (including any right of contribution from any other surety) discharging, in whole or in part, its liability for the Guaranteed Obligations or to share in any security held or money received by the Security Agent on account of the Guaranteed Obligations or any other surety or to have or exercise any rights as surety (including any such right of contribution as stated above) in competition with the Security Agent unless and until the whole of the Guaranteed Obligations shall have first been completely discharged and satisfied. Furthermore, until such money shall have been discharged and satisfied in full none of the Guarantors shall, if any money shall have become payable or shall have been paid by any of the Guarantors under any of the guarantees contained in this Deed, take any step to enforce repayment or to exercise any other rights, claims or remedies of any kind which may accrue howsoever to any such Guarantor in respect either of the amount so payable or so paid (including any such right of contribution as stated above) or of any other money for the time being due to any such Guarantor from the Principal concerned or any other surety PROVIDED that in the event of the bankruptcy, liquidation or insolvency of any of the Principals or any other surety each of the Guarantors shall, if so directed by the Security Agent but not otherwise, prove for the whole or any part of the money due to that Guarantor from such Principal or any other surety as stated above on terms that the benefit of such proof and of all money to be received by the Guarantor in respect of it shall be held in trust for the Security Agent and applied in discharging the obligations of the Guarantor to the Security Agent under this Deed. For the purposes of enabling the Security Agent to sue any of the Principals or any other surety or to prove in the bankruptcy, liquidation or insolvency of any of the Principals or any other surety for the whole of such money as stated above, or to preserve intact the liability of any other party, the Security Agent may at any time place and keep, for such time as it may think prudent, any money received, or realised on account of the obligations of such Principal or under any other guarantee or security to the credit, either of such Guarantor, or such 8 other person or transaction (if any) as the Security Agent may think fit, without any intermediate obligation on the part of the Security Agent to apply the same or any part of it in or towards the discharge of the Guaranteed Obligations, or any intermediate right on the part of such Guarantor to sue such Principal or any other surety or to prove in the bankruptcy, liquidation or insolvency of such Principal or any other surety in competition with or so as to diminish any dividend or other advantage that would or might come to the Security Agent, or to treat the liability of such Principal or any other surety as diminished. 15. CHANGE IN CONSTITUTION OF PRINCIPALS OR GUARANTOR Each of the guarantees contained in this Deed shall remain in full force and effect notwithstanding any change in the constitution of any of the Principals or any of the Guarantors. 16. NO SECURITY RECEIVED BY GUARANTORS It is declared by each of the Guarantors that no security has been received by it from any of the Principals or any other surety for the giving of the guarantee on its part contained in this Deed and each of the Guarantors agrees that it will not, so long as such guarantee remains in force, take any security in respect of its liability under this Deed without first obtaining the written consent of the Security Agent. 17. MONEY NOT RECOVERABLE ON FOOTING OF GUARANTEE As a separate and independent stipulation each of the Guarantors agrees, both severally and also jointly with every other Guarantor, that any of the Guaranteed Obligations which may not be recoverable on the footing of a guarantee, whether by reason of any legal limitation, disability or incapacity on or of any of the Principals or any other fact or circumstance, and whether known to the Security Agent or any of the Guarantors or not, shall nevertheless be recoverable from the Guarantors as though the same had been incurred by the Guarantors and the Guarantors were jointly and severally liable as sole or principal debtors in respect of such Guaranteed Obligations and shall be paid by the Guarantors on demand Provided however that the amounts payable by Amethyst under this Clause 17 (but without affecting the liabilities of the other Companies under this clause 17) shall be limited to the aggregate of amounts generated by the Shares including all realisations received by the Security Agent or by any delegate thereof or receiver, receiver and manager or administrative receiver or similar person by virtue of any enforcement of the Share Charges. 18. CHANGE IN SECURITY AGENT'S CONSTITUTION OR AMALGAMATION ETC. This Deed shall continue to bind the Guarantors notwithstanding any amalgamation or merger that may be effected by the Security Agent with any other company or companies and notwithstanding any reconstruction by the Security Agent involving the formation of and transfer of the whole or any part of its undertaking and assets to a new company and notwithstanding the sale or transfer of the whole or any part of the undertaking and assets of the Security Agent to another company, whether the company or companies with which the Security Agent may amalgamate or merge or the company to which the Security Agent may transfer the whole or any part of its undertaking and assets either on 9 a reconstruction or sale or transfer as stated above shall or shall not differ from the Security Agent in their or its objects, character or constitution, it being the intent of each of the Guarantors that the guarantee on its part contained in this Deed shall remain valid and effectual in all respects in favour of, against and with reference to, and that the benefit of the guarantees and all rights conferred upon the Security Agent by this Deed may be assigned to and enforced by, any such company or companies and proceeded on in the same manner to all intents and purposes as if such company or companies had been named in this deed instead of and/or in addition to the Security Agent. 19. PAYMENTS BY GUARANTORS Each payment to be made by any of the Guarantors under this Deed shall be made to the Security Agent, in the appropriate currency in accordance with the terms and provisions of the relevant Financing Documents, to the credit of the Security Agent's account with whichever bank or banks located in the country of such currency, as shall be designated by the Security Agent regardless of any law, regulation or decree, now or after this date in effect, which affects or might in any manner affect any of such terms and provisions or the rights of the Security Agent as against such Principal. All such payments shall be made in full without set-off or counterclaim and free and clear of and without deduction of or withholding for or on account of any tax of any nature now or subsequently imposed by any country or any subdivision or taxing authority of or in such country or any federation or organisation of which such country is a member. If any such payment shall be subject to any such tax or if any of the Guarantors shall be required to make any such deduction or withholding, such Guarantor shall pay such tax, shall ensure that such payment, deduction or withholding will not exceed the minimum legal liability for it and shall simultaneously pay to the Security Agent such additional amount as may be necessary to enable the Security Agent to receive, after all such payments, deductions and withholdings, a net amount equal to the full amount payable under this Deed. If any of the Guarantors shall make any such payment, deduction or withholding such Guarantor shall within 30 days forward to the Security Agent an official receipt or other official documentation evidencing such payment or the payment of such deduction or withholding. As used in this Clause the term "TAX" includes all levies, imposts, duties, charges, fees, deductions, withholdings, turnover tax, transaction tax, stamp tax and any restrictions or conditions result in a charge. 20. CURRENCY INDEMNITY It is further agreed by each of the Guarantors, both severally and also jointly with every other Guarantor, that if any judgment or order is given or made for the payment of any amount due under this Deed and is expressed in a currency other than that in which such amount is payable by the Guarantors under this Deed the Guarantors will indemnify the Security Agent against any loss incurred as a result of any variation having occurred in rates of exchange between the date as at which such amount is converted into such other currency for the purposes of such judgment or order. This indemnity shall constitute a separate and independent obligation of the Guarantors and shall apply irrespective of any indulgence granted to any of the Guarantors from time to time and shall continue in full force and effect notwithstanding any such judgment or order as stated above. 21. NO WAIVER OF RIGHTS UNDER GUARANTEE Each of the Guarantors declares that no delay or omission on the part of the Security Agent in exercising any right, power, privilege or remedy in respect of any of the 10 guarantees contained in this Deed shall impair such right, power, privilege or remedy or be construed as a waiver of it nor shall any single or partial exercise of any such right, power, privilege or remedy preclude any further exercise of it or the exercise of any other right, power, privilege or remedy. The rights, powers, privilege and remedies provided in this Deed are cumulative and not exclusive of any rights, powers, privileges or remedies provided by law. 22. SECURITY AGENT The benefit of this Deed (including any sums received by the Security Agent pursuant to this Deed) shall be held by the Security Agent upon trust for the benefit of the Secured Parties as security for the Guaranteed Obligations in such shares and ranking in such order as shall be from time to time applicable pursuant to any agreement between the Secured Parties all in accordance with the Security Trust Deed; references in this Deed to the Security Agent shall be construed accordingly. 23. DEMANDS 23.1 METHOD OF SENDING Each communication to be made hereunder shall be made in writing but, unless otherwise stated, may be made by facsimile transmission or by telex or by letter. 23.2 ADDRESSES FOR NOTICES Any communication or document to be made or delivered by one person to another pursuant to this Deed shall (unless the one has by not less than three (3) days' written notice to the other specified another address) be made or delivered to that other person at the respective addresses set out below. (1) The Security Agent:- Bow Bells House Broad Street London EC4M 9BQ Attention: General Manager, Machinery Department; Facsimile: 0171-822 0184 (2) Petrodrill Six:- Arias Fabrega and Fabrega Trust Co., BVI Limited 325 Waterfront Drive Omar Hodge Building 2nd Floor, Wickham's Cay Road Town Tortola British Virgin Islands (3) Petrodrill Seven:- Arias Fabrega and Fabrega Trust Co., BVI Limited 325 Waterfront Drive 11 Omar Hodge Building 2nd Floor, Wickham's Cay Road Town Tortola British Virgin Islands (4) Amethyst Financial Company Ltd:- Arias Fabrega and Fabrega Trust Co., BVI Limited 325 Waterfront Drive Omar Hodge Building 2nd Floor, Wickham's Cay Road Town Tortola British Virgin Islands 23.3 DEEMED RECEIPT Any notice given hereunder shall be deemed to have been received: (i) If sent by facsimile transmission , at the opening of business one (1) Banking Day after the day it was transmitted; (ii) In the case of a written notice lodged by hand, at the time of actual delivery; and (iii) If posted, on the fifth Banking Day following the day on which it was properly despatched by first class mail postage prepaid. 24. ASSIGNMENT The provisions of Clause 15 of each of the Loan Agreements shall apply hereto and (MUTATIS MUTANDIS) be deemed incorporated herein and, accordingly, any Lender may novate and/or assign this Deed to any person to whom its Commitments and/or Outstandings are novated or assigned in accordance with such Clause and this Deed shall remain in full force and effect after, and shall continue to secure the Guaranteed Obligations after and resulting from, any novation or assignment in accordance with either such Clause 15. 25. GOVERNING LAW AND JURISDICTION 25.1 GOVERNING LAW This Deed shall be governed by and construed in accordance with English law. 12 25.2 SUBMISSION TO JURISDICTION For the benefit of the Security Agent, each of the Guarantors irrevocably agrees that the English courts are to have jurisdiction to settle any disputes which may arise out of or in connection with this Deed and that accordingly any suit, action or proceedings ("PROCEEDINGS") arising out of or in connection with this Deed may be brought in such courts. 25.3 WAIVER OF OBJECTION Each of the Guarantors irrevocably waives any objection which it may have now or hereafter to the laying of the venue of any Proceedings in any such court as is referred to in Clause 25.2 and any claim that any such Proceedings have been brought in an inconvenient forum and further irrevocably agrees that a judgment in any Proceedings brought in the English courts shall be conclusive and binding upon such Guarantor and may be enforced in the courts of any other jurisdiction. 25.4 OTHER JURISDICTIONS Nothing contained in this Clause 25 shall limit the right of the Security Agent to take proceedings against any Guarantor in any other court of competent jurisdiction, nor shall the taking of Proceedings in any one or more jurisdictions preclude the taking of Proceedings in any other jurisdiction, whether concurrently or not. 25.5 SERVICE OF PROCESS Each Company irrevocably and unconditionally: (a) designates, and appoints and empowers Hackwood Secretaries Limited of One Silk Street, London EC2Y 8HQ to receive for it and on its behalf, service of process issued out of the English courts in any Proceedings arising out of or in connection with this Deed; (b) agrees to maintain in England a duly appointed process agent notified to the Security Agent, for the purposes of paragraph (a) above; (c) agrees that failure by any such process agent to give notice of such process to it shall not impair the validity of such service or of any judgment based thereon; (d) consents to the service of process out of any of the said courts in any such Proceedings by the airmailing of copies, postage prepaid, to it at its address set out in the Schedule; and (e) agrees that nothing herein shall affect the right to serve process in any other manner permitted by law. 26. WAIVER; REMEDIES CUMULATIVE No failure to exercise and no delay in exercising on the part of the Security Agent any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise 13 thereof, or the exercise of any other right, power or privilege. The rights and remedies herein provided are cumulative and not exclusive of any rights or remedies provided by law. 27. SEVERABILITY Any provision in this Deed which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. 28. PROPERTY IN THE DEED TO BELONG TO THE SECURITY AGENT The paper on which this Deed is written shall remain at all times the property of the Security Agent. IN WITNESS WHEREOF this Deed has been executed the day and year first before written 14 THE SCHEDULE NAME OF COMPANY REGISTERED OFFICE OF EACH COMPANY Petrodrill Six Limited Arias Fabrega and Fabrega Co., BVI Limited 325 Waterfront Drive Omar Hodge Building 2nd Floor, Wickham's Cay Road Town Tortola British Virgin Islands Petrodrill Seven Limited Arias Fabrega and Fabrega Co., BVI Limited 325 Waterfront Drive Omar Hodge Building 2nd Floor, Wickham's Cay Road Town Tortola British Virgin Islands Amethyst Financial Arias Fabrega and Fabrega Company Ltd. Co., BVI Limited 325 Waterfront Drive Omar Hodge Building 2nd Floor, Wickham's Cay Road Town Tortola British Virgin Islands EXECUTED and DELIVERED ) /s/ Illegible as a DEED by PETRODRILL ) SIX LIMITED by its duly ) authorised signatory/attorney-in- ) fact in the presence of:- ) /s/ Illegible EXECUTED and DELIVERED ) /s/ Illegible as a DEED by PETRODRILL ) SEVEN LIMITED by its duly ) authorised signatory/attorney-in- ) fact in the presence of:- ) /s/ Illegible EXECUTED and DELIVERED ) 15 as a DEED by AMETHYST ) /s/ Illegible FINANCIAL COMPANY LTD. ) by its duly authorised signatory/ ) attorney-in-fact in the presence ) of:- ) /s/ Illegible EXECUTED and DELIVERED ) /s/ Illegible as a DEED by MITSUBISHI ) CORPORATION (UK) PLC ) by its duly authorised signatory/ ) attorney-in-fact in the presence ) of:- ) /s/ Illegible 16 EX-4.14 16 EXHIBIT 4.14 TRANSFER CERTIFICATE To: Mitsubishi Corporation (UK) PLC Bow Bells House Bread Street London EC4M 9BQ Attention: General Manager, Machinery Department PETRODRILL SEVEN LIMITED US$180,000,000 LOAN AGREEMENT DATED DECEMBER 19, 1998 1. This Transfer Certificate relates to the above loan agreement (the "LOAN AGREEMENT," which term shall include any amendments or supplements thereto), and the other Security Documents referred to therein. Terms defined in the Loan Agreement have the same meaning in this Transfer Certificate. In this Transfer Certificate: "EXISTING LENDER" means Petro Dia Four S.A., a company incorporated under the laws of Panama, whose registered office is at 53rd Street, Urbanizacion Obarrio, Torre Swiss Bank, 16th Floor, Panama City, Republic of Panama. "MC1" means Petro Dia Three S.A., a company incorporated under the laws of Panama, whose registered office is at 53rd Street, Urbanizacion Obarrio, Torre Swiss Bank, 16th Floor, Panama City, Republic of Panama. "TRANSFEREE" means Amethyst Financial Company Limited, a company incorporated under the laws of the British Virgin Islands, whose registered office is at c/o Arias Fabrega and Fabrega Trust Co. BVI Limited, 325 Waterfront Drive, Omar Hodge Building, 2nd Floor, Wickham's Cay, Road Town, Tortola, British Virgin Islands. 2. The Existing Lender (i) confirms that the details in the Schedule to this Transfer Certificate under the heading "RIGHTS TO BE ASSIGNED AND/OR OBLIGATIONS TO BE NOVATED" accurately summarizes the Outstandings which are to be assigned and/or Commitments which are to be novated by this Transfer Certificate and (ii) requests the Transferee to accept and procure the transfer to the Transferee of the portion specified in the Schedule hereto of, as the case may be, such Outstandings and/or its Commitment by counter-signing and delivering this Transfer Certificate to the Facility Agent at its address for the service of notices specified in the Loan Agreement. -1- 3. The Transferee hereby requests the Facility Agent to accept this Transfer Certificate as being delivered to the Facility Agent pursuant to and for the purposes of Clause 15 (Transfers) of the Loan Agreement so as to take effect in accordance with the terms thereof on the Transfer Date or on such later date as may be determined in accordance with the terms thereof. 4. The Transferee: (a) confirms that it has received a copy of the Loan Agreement together with such other documents and information as it has requested in connection with this transaction; (b) confirms that it has not relied and will not rely on the Existing Lender to check or enquire on its behalf into the legality, validity, effectiveness, adequacy or completeness of any such documents or information; (c) confirms and agrees that it has not relied and will not rely on any of the Existing Lender, the Agents, or the other Lenders to assess or keep under review on its behalf the financial condition, creditworthiness, condition, affair, status or nature of the Borrower or any other party to the Security Documents, and has not relied and will not rely on any of the Existing Lender, the Agents or the other Lenders to ensure that the Borrower or any other party to the Security Documents are not in breach of or default under any of the same; (d) if not already a Lender, appoints the Agents to act as its agents as provided in the Loan Agreement and the Security Trustee Deed and agrees to be bound by the Loan Agreement (including, but not limited to, Clause 15 (Transfer)); and (e) confirms that it shall not, by virtue of the transfer effected by this Transfer Certificate or otherwise, have or acquire any right or interest in the Floor Guarantee, the entire benefit of which is and will remain vested in MC1 for its own account absolutely. 5. The Transferee undertakes with the Existing Lender and each of the other parties to the Loan Agreement that it will perform, in accordance with their terms, all those obligations which, by the terms of the Loan Agreement, will be assumed by it upon delivery of the executed copy of this Transfer Certificate to the Facility Agent. 6. On execution of this Transfer Certificate by the Facility Agent on their behalf and by their execution of this Transfer Certificate, each of the Borrower, the Lenders and the Agents accept the Transferee as a party to the Loan Agreement in substitution for the Existing Lender with respect to all those rights and obligations which, by the terms of the Loan Agreement and other Security Documents, will be transferred to or assumed by the Transferee after delivery of the executed copy of this Transfer Certificate to the Facility Agent. For the avoidance of doubt, MC1 accepts and approves the Transferee as a Qualifying Lender to be a party to the Loan Agreement in substitution for the Existing Lender with respect to all those rights and obligations which, by the terms of the Loan Agreement and other Security Documents, will be transferred to or assumed by the Transferee after delivery of the executed copy of this Transfer Certificate to the Facility Agent. -2- 7. None of the Existing Lender, the other Lenders or the Agents: (a) makes any representation or warranty or assumes any responsibility with respect to the legality, validity, effectiveness, adequacy or enforceability of any of the Loan Agreement and the Security Documents or the Project Documents, or with respect to whether the Borrower, the Guarantors or any other party to the Security Documents or the Project Documents has complied with its obligations thereunder (including, without limitation, under Clause 3 (Conditions Precedent) of the Loan Agreement); or (b) assumes any responsibility for the financial condition of the Borrower, the Guarantors or any other party to any Security Document or Project Document or any other document or for the performance and observance by the Borrower, the Guarantors or any other party to the Security Documents or Project Documents or any other document of its or their obligations and any and all conditions and warranties, whether express or implied by law or otherwise, are hereby excluded. 8. The Existing Lender hereby gives notice that nothing herein or in the Loan Agreement (or any document relating thereto) shall oblige the Existing Lender to (i) accept a re-transfer from the Transferee of the whole or any part of its rights, benefits and/or obligations under the Loan Agreement transferred pursuant hereto or (ii) support any losses directly or indirectly sustained or incurred by the Transferee for any reason whatsoever, including, without limitation, the non-performance by the Borrower, the Guarantors or any other party to the Security Documents (or any document relating thereto) of its obligations under any such document. The Transferee hereby acknowledges the absence of any such obligation as is referred to in (i) or (ii) above. 9. This Transfer Certificate and the rights and obligations of the parties hereunder shall be governed by and construed in accordance with English law. 10. The Transferee warrants and represents to the Facility Agent and each of the Lenders that, by operation of this Transfer Certificate, and, in particular, MC1's approval given under paragraph 6 hereof, it is a Qualifying Lender as defined in Clause 1.1 of the Loan Agreement. 11. Notwithstanding Clause 15.3 of the Loan Agreement, each of the Facility Agent, the Security Agent, the Borrower and the Lenders hereby agrees that the Transferee may transfer (in accordance with, and subject to, the provisions of Clause 15.4 of the Loan Agreement, except to the extent modified by this Deed to, among other things, eliminate the strict requirement that the transferee be a Qualifying Lender, so that references in such Clause 15.4 to Clause 15.3 of the Loan Agreement or to Qualifying Lender shall be read as so modified) all or any part of the Outstandings, Commitments and other rights and obligations transferred to the Transferee pursuant to this Transfer Certificate (collectively, the "TRANCHE A PARTICIPATIONS") to any person that is a Qualifying Lender or to any other financial institution incorporated in or controlled by persons residing in or with a principal place of business in any country which is a member of OECD managing or owning a minimum of $100 million in assets according to its most recent quarterly balance sheet prepared under -3- generally accepted accounting principles applicable to such institution (each, a "PERMITTED LENDER"), and each of the Facility Agent, on behalf of the Borrower, the Lenders and the Agents, and MC1 and MC2 hereby agrees that, in the event that the Transferee exercises the right set forth in this Section 11 to transfer all or any part of the Tranche A Participations to a Permitted Lender, the Facility Agent (on its own behalf and on behalf of the other parties to the relevant Loan Agreement) and MC1 shall counter-sign appropriate Transfer Certificates for such transfer. -4- THE SCHEDULE 1. Existing Lender: Petro Dia Four S.A. 2. Transferee: Amethyst Financial Company Limited 3. Transfer Date: November 1, 1999 4. Rights to be Assigned and/or Obligations to be Novated Commitment: LENDER'S COMMITMENT FACILITY PORTION TRANSFERRED US$53,000,000 Tranche A US$53,000,000 Outstandings: AMOUNT OF LENDER'S FACILITY DRAWDOWN PORTION PARTICIPATION DATE TRANSFERRED US$47,744,376.99 Tranche A 12/24/98 US$47,744,376.99 US$3,017,179.38 Tranche A 6/24/99 US$3,017,179.38 US$2,238,443.63 Tranche A 10/29/99 US$2,238,443.63 ----------------- --------- -------- ----------------- US$53,000,000.00 Tranche A US$53,000,000.00 5. Transferee's Lending Office details: Address: Amethyst Financial Company Limited c/o Petrodrill Engineering N.V. K.P. van der Mandalelaan 38 3062 MB Rotterdam (Brainpark) The Netherlands Attn: Steve Assiter Tel. No.: +(31) 10 272 2722 Fax No.: +(31) 10 272 2727 -5- /s/ YOICHIRO MIYAMOTO /s/ EARL W. MCNIEL - - --------------------- ------------------ Petro Dia Four S.A. Amethyst Financial Company Limited Name: Yoichiro Miyamoto Name: Earl W. McNiel Title: Director Title: Treasurer /s/ YOICHIRO MIYAMOTO /s/ YOICHIRO MIYAMOTO - - --------------------- --------------------- Facility Agent for itself and on behalf of Petro Dia Three S.A. the Borrower, the Lenders and the Agents Name: Yoichiro Miyamoto Name: Yoichiro Miyamoto Title: Director Title: Attorney-in-Fact /s/ EARL W. MCNIEL /s/ YOICHIRO MIYAMOTO - - ------------------ --------------------- Petrodrill Seven Limited Security Agent Name: Earl W. McNiel Name: Yoichiro Miyamoto Title: Treasurer Title: Attorney-in-Fact EX-4.15 17 EXHIBIT 4.15 TRANSFER CERTIFICATE To: Mitsubishi Corporation (UK) PLC Bow Bells House Bread Street London EC4M 9BQ Attention: General Manager, Machinery Department PETRODRILL SIX LIMITED US$160,000,000 LOAN AGREEMENT DATED DECEMBER 19, 1998 1. This Transfer Certificate relates to the above loan agreement (the "LOAN AGREEMENT," which term shall include any amendments or supplements thereto), and the other Security Documents referred to therein. Terms defined in the Loan Agreement have the same meaning in this Transfer Certificate. In this Transfer Certificate: "EXISTING LENDER" means Petro Dia Four S.A., a company incorporated under the laws of Panama, whose registered office is at 53rd Street, Urbanizacion Obarrio, Torre Swiss Bank, 16th Floor, Panama City, Republic of Panama. "MC1" means Petro Dia Three S.A., a company incorporated under the laws of Panama, whose registered office is at 53rd Street, Urbanizacion Obarrio, Torre Swiss Bank, 16th Floor, Panama City, Republic of Panama. "TRANSFEREE" means Amethyst Financial Company Limited, a company incorporated under the laws of the British Virgin Islands, whose registered office is at c/o Arias Fabrega and Fabrega Trust Co. BVI Limited, 325 Waterfront Drive, Omar Hodge Building, 2nd Floor, Wickham's Cay, Road Town, Tortola, British Virgin Islands. 2. The Existing Lender (i) confirms that the details in the Schedule to this Transfer Certificate under the heading "RIGHTS TO BE ASSIGNED AND/OR OBLIGATIONS TO BE NOVATED" accurately summarizes the Outstandings which are to be assigned and/or Commitments which are to be novated by this Transfer Certificate and (ii) requests the Transferee to accept and procure the transfer to the Transferee of the portion specified in the Schedule hereto of, as the case may be, such Outstandings and/or its Commitment by counter-signing and delivering this Transfer Certificate to the Facility Agent at its address for the service of notices specified in the Loan Agreement. 3. The Transferee hereby requests the Facility Agent to accept this Transfer Certificate as being delivered to the Facility Agent pursuant to and for the purposes of Clause 15 (Transfers) of the Loan Agreement so as to take effect in accordance with the terms thereof on the Transfer Date or on such later date as may be determined in accordance with the terms thereof. 4. The Transferee: (a) confirms that it has received a copy of the Loan Agreement together with such other documents and information as it has requested in connection with this transaction; (b) confirms that it has not relied and will not rely on the Existing Lender to check or enquire on its behalf into the legality, validity, effectiveness, adequacy or completeness of any such documents or information; (c) confirms and agrees that it has not relied and will not rely on any of the Existing Lender, the Agents, or the other Lenders to assess or keep under review on its behalf the financial condition, creditworthiness, condition, affair, status or nature of the Borrower or any other party to the Security Documents, and has not relied and will not rely on any of the Existing Lender, the Agents or the other Lenders to ensure that the Borrower or any other party to the Security Documents are not in breach of or default under any of the same; (d) if not already a Lender, appoints the Agents to act as its agents as provided in the Loan Agreement and the Security Trust Deed and agrees to be bound by the Loan Agreement (including, but not limited to, Clause 15 (Transfer)); and (e) confirms that it shall not, by virtue of the transfer effected by this Transfer Certificate or otherwise, have or acquire any right or interest in the Floor Guarantee, the entire benefit of which is and will remain vested in MC1 for its own account absolutely. 5. The Transferee undertakes with the Existing Lender and each of the other parties to the Loan Agreement that it will perform, in accordance with their terms, all those obligations which, by the terms of the Loan Agreement, will be assumed by it upon delivery of the executed copy of this Transfer Certificate to the Facility Agent. 6. On execution of this Transfer Certificate by the Facility Agent on their behalf and by their execution of this Transfer Certificate, each of the Borrower, the Lenders and the Agents accept the Transferee as a party to the Loan Agreement in substitution for the Existing Lender with respect to all those rights and obligations which, by the terms of the Loan Agreement and other Security Documents, will be transferred to or assumed by the Transferee after delivery of the executed copy of this Transfer Certificate to the Facility Agent. For the avoidance of doubt, MC1 accepts and approves the Transferee as a Qualifying Lender to be a party to the Loan Agreement in substitution for the Existing Lender with respect to all those rights and obligations which, by the terms of the Loan Agreement and other Security Documents, will be transferred to or assumed by the Transferee after delivery of the executed copy of this Transfer Certificate to the Facility Agent. 7. None of the Existing Lender, the other Lenders or the Agents: (a) makes any representation or warranty or assumes any responsibility with respect to the legality, validity, effectiveness, adequacy or enforceability of any of the Loan Agreement and the Security Documents or the Project Documents, or with respect to whether the Borrower, the Guarantors or any other party to the Security Documents or the Project Documents has complied with its obligations thereunder (including, without limitation, under Clause 3 (Conditions Precedent) of the Loan Agreement); or (b) assumes any responsibility for the financial condition of the Borrower, the Guarantors or any other party to any Security Document or Project Document or any other document or for the performance and observance by the Borrower, the Guarantors or any other party to the Security Documents or Project Documents or any other document of its or their obligations and any and all conditions and warranties, whether express or implied by law or otherwise, are hereby excluded. 8. The Existing Lender hereby gives notice that nothing herein or in the Loan Agreement (or any document relating thereto) shall oblige the Existing Lender to (i) accept a re-transfer from the Transferee of the whole or any part of its rights, benefits and/or obligations under the Loan Agreement transferred pursuant hereto or (ii) support any losses directly or indirectly sustained or incurred by the Transferee for any reason whatsoever, including, without limitation, the non-performance by the Borrower, the Guarantors or any other party to the Security Documents (or any document relating thereto) of its obligations under any such document. The Transferee hereby acknowledges the absence of any such obligation as is referred to in (i) or (ii) above. 9. This Transfer Certificate and the rights and obligations of the parties hereunder shall be governed by and construed in accordance with English law. 10. The Transferee warrants and represents to the Facility Agent and each of the Lenders that, by operation of this Transfer Certificate, and, in particular, MC1's approval given under paragraph 6 hereof, it is a Qualifying Lender as defined in Clause 1.1 of the Loan Agreement. 11. Notwithstanding Clause 15.3 of the Loan Agreement, each of the Facility Agent, the Security Agent, the Borrower and the Lenders hereby agrees that the Transferee may transfer (in accordance with, and subject to, the provisions of Clause 15.4 of the Loan Agreement, except to the extent modified by this Deed to, among other things, eliminate the strict requirement that the transferee be a Qualifying Lender, so that references in such Clause 15.4 to Clause 15.3 of the Loan Agreement or to Qualifying Lender shall be read as so modified) all or any part of the Outstandings, Commitments and other rights and obligations transferred to the Transferee pursuant to this Transfer Certificate (collectively, the "TRANCHE A PARTICIPATIONS") to any person that is a Qualifying Lender or to any other financial institution incorporated in or controlled by persons residing in or with a principal place of business in any country which is a member of OECD managing or owning a minimum of $100 million in assets according to its most recent quarterly balance sheet prepared under generally accepted accounting principles applicable to such institution (each, a "PERMITTED LENDER"), and each of the Facility Agent, on behalf of the Borrower, the Lenders and the Agents, and MC1 and MC2 hereby agrees that, in the event that the Transferee exercises the right set forth in this Section 11 to transfer all or any part of the Tranche A Participations to a Permitted Lender, the Facility Agent (on its own behalf and on behalf of the other parties to the relevant Loan Agreement) and MC1 shall counter-sign appropriate Transfer Certificates for such transfer. THE SCHEDULE 1. Existing Lender: Petro Dia Four S.A. 2. Transferee: Amethyst Financial Company Limited 3. Transfer Date: November 1, 1999 4. Rights to be Assigned and/or Obligations to be Novated Commitment: LENDER'S COMMITMENT FACILITY PORTION TRANSFERRED US$47,000,000 Tranche A US$47,000,000 Outstandings: AMOUNT OF LENDER'S FACILITY DRAWDOWN PORTION PARTICIPATION FACILITY DATE TRANSFERRED US$35,487,649.00 Tranche A 12/24/98 US$35,487,649.00 US$ 2,478,227.00 Tranche A 1/27/99 US$ 2,478,227.00 US$ 2,445,291.00 Tranche A 2/26/99 US$ 2,445,291.00 US$ 796,372.00 Tranche A 3/26/99 US$ 796,372.00 US$ 1,282,973.38 Tranche A 4/19/99 US$ 1,282,973.38 US$ 2,524,452.70 Tranche A 6/24/99 US$ 2,524,452.70 US$ 1,985,034.92 Tranche A 10/29/99 US$ 1,985,034.92 __________________ ____________________ _________________ US$ 47,000,000.00 Tranche A US$47,000,000.00 5. Transferee's Lending Office details: Address: Amethyst Financial Company Limited c/o Petrodrill Engineering N.V. K.P. van der Mandalelaan 38 3062 MB Rotterdam (Brainpark) The Netherlands Attn: Steve Assiter Tel. No.: +(31) 10 272 2722 Fax No.: +(31) 10 272 2727 /s/ YOICHIRO MIYAMOTO /s/ EARL W. MCNIEL - - --------------------- ------------------ Petro Dia Four S.A. Amethyst Financial Company Limited Name: Yoichiro Miyamoto Name: Earl W. McNiel Title: Director Title: Treasurer /s/ YOICHIRO MIYAMOTO /s/ YOICHIRO MIYAMOTO - - --------------------- --------------------- Facility Agent for itself and on behalf of Petro Dia Three S.A. the Borrower, the Lenders and the Agents Name: Yoichiro Miyamoto Name: Yoichiro Miyamoto Title: Director Title: Attorney-in-Fact /s/ EARL W. MCNIEL /s/ YOICHIRO MIYAMOTO - - ------------------ --------------------- Petrodrill Six Limited Security Agent Name: Earl W. McNiel Name: Yoichiro Miyamoto Title: Treasurer Title: Attorney-in-Fact EX-4.16 18 EXHIBIT 4.16 Document 1 Contract No. MA-13509 COMMITMENT TO GUARANTEE OBLIGATION by THE UNITED STATES OF AMERICA Accepted by PETRODRILL FIVE LIMITED Shipowner (Under Title XI, Merchant Marine Act, 1936, as amended, and in effect on the date of this Guarantee Commitment) ------------------------------------------- TABLE OF CONTENTS DOC NO. DOCUMENT - - --- -------------------------------------- 1. Commitment to Guarantee Obligations Schedule One -- Form of Opinion of 2 Counsel Appendix I -- Form of Credit 3 Agreement Appendix II -- Form of Trust 4 Indenture Schedule A -- Schedule of 5 Definitions to the Trust Indenture Exhibit 1 -- General Provisions Incorporated into the Trust 6 Indenture by Reference Exhibit 2 -- Form of Floating Rate 7 Note Exhibit 3 -- Form of Fixed Rate 8 Note Exhibit 4 -- Form of Authorization 9 Agreement Exhibit 5 -- Form of Secretary's 10 Supplemental Indenture Appendix III -- Form of Security 11 Agreement Exhibit 1 -- General Provisions Incorporated into the Security 12 Agreement by Reference Schedule X -- Schedule of 13 Definitions Exhibit 2 -- Form of Secretary's 14 Note Exhibit 3 -- Form of First 15 Preferred Ship Mortgage Exhibit 4 -- Form of Title XI Reserve Fund and Financial 16 Agreement Exhibit 5 -- Form of Consent of 17 Shipyard 18 Exhibit 6 -- Construction Contract Exhibit 7 -- Form of Depository 19 Agreement COMMITMENT TO GUARANTEE OBLIGATIONS BY THE UNITED STATES OF AMERICA accepted by PETRODRILL FIVE LIMITED Shipowner THIS COMMITMENT TO GUARANTEE OBLIGATIONS, dated as of April 9, 1999 (the "Guarantee Commitment"), is made and entered into by the UNITED STATES OF AMERICA (the "United States"), represented by the SECRETARY OF TRANSPORTATION, acting by and through the MARITIME ADMINISTRATOR (the "Secretary"), and accepted on said date by PETRODRILL FIVE LIMITED, a British Virgin Islands international business company (the "Shipowner"). RECITALS A. The Shipowner will be the sole owner of the dynamic positioned semi-submersible drilling vessel to be named AMETHYST 5 ("the Vessel"), built pursuant to the Construction Contract with TDI-Halter, Limited Partnership (the "Shipyard"). B. To aid in financing the construction of the Vessel, the Shipowner will borrow an aggregate principal amount equal to 87 1/2% of the Actual Cost of the Vessel, as of the Closing Date. To accomplish such financing, the Shipowner has accepted this Guarantee Commitment subject to the terms and conditions set forth herein. C. The Shipowner has entered into the Credit Agreement providing for the sale and delivery of obligations in the aggregate principal amount of $150,183,000 to be designated "United States Government Guaranteed Export Ship Financing Obligations, AMETHYST 5 Series" (the "Obligations") having the maturity date and interest rate set forth in the Credit Agreement, the Indenture and the Obligations. D. As security for the Guarantees and the Secretary's Note, the Shipowner will execute and deliver the Security Agreement, Contract No. MA-13511, and the following agreements shall be executed and delivered: the Indenture, the Authorization Agreement, Contract No. MA-13510, the Secretary's Note, the Mortgage, Contract No. MA-13512, the Financial Agreement, Contract MA-13513, and the Depository Agreement, Contract No. MA-13514. W I T N E S S E T H: That under the provisions of Title XI of the Merchant Marine Act, 1936, as amended and in consideration of (i) the covenants of the Shipowner contained herein and (ii) other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Secretary hereby commits itself as herein provided. ARTICLE I FINDINGS AND DETERMINATIONS OF SECRETARY Pursuant to Section 1103(g)(i) of Title XI, the Secretary has determined that the issuance of this Guarantee Commitment will not result in the denial of an economically sound application to issue a commitment to guarantee obligations for a Vessel documented under the laws of the United States. Pursuant to Section 1104A(b)(1) of Title XI, the Secretary has approved the Shipowner as responsible and possessing the ability, experience, financial resources and other qualifications necessary to the adequate operation and maintenance of the Vessel. Pursuant to Section 1104A(b)(2) of Title XI, the Secretary has determined that the aggregate of the Actual Cost of the Vessel is $171,638,175. Prior to the Closing Date, the Secretary, in its discretion, may redetermine the actual Cost of the Vessel. On the Closing Date, the aggregate principal amount of the Obligations will not exceed 87 1/2% of the Actual Cost of the Vessel. Pursuant to Sections 1104A(b)(3), 1104A(b)(4) and 1104A(b)(5) of Title XI, the Secretary has determined that: (1) the maturity date of the Obligations is satisfactory, (2) payments of principal required by the Obligations are satisfactory, and (3) the interest rate to be borne by the Obligations to be issued on the Closing Date is reasonable. Pursuant to Section 1104A(d) of Title XI, the Secretary has found that the Shipowner's proposed use of the Vessel will be economically sound. Pursuant to Section 1104A(d)(A) of Title XI, the Secretary has determined that the construction, reconstruction or reconditioning of the Vessel will aid in the transition of United States shipyards to commercial activities or will preserve shipbuilding assets that would be essential in time of war or national emergency. The Secretary has further determined that the Secretary of Defense has received notice of the Secretary's receipt of application and that the Secretary of Defense has not disapproved the loan guarantee pursuant to the authority, under Section 1104A(j)(1) of Title XI, to assess whether the potential use of the Vessel may cause harm to the United States national security interests. The Secretary has determined that the countries in which the Shipowner has its chief executive offices or has located a substantial portion of its assets present an acceptable financial and legal risk to the Secretary's Security. ARTICLE II COMMITMENT TO GUARANTEE OBLIGATIONS The United States, represented by the Secretary, HEREBY COMMITS ITSELF TO GUARANTEE the payment of the unpaid interest on, and the unpaid balance of the principal of, the Obligations, including interest accruing between the date of default under the Obligations and the payment in full of the Guarantees, and, to effect this Guarantee Commitment, hereby commits itself to execute and deliver the Authorization Agreement, Security Agreement, Financial Agreement, and Depository Agreement on the Closing Date pursuant to the terms of the Guarantee Commitment. ARTICLE III THE OBLIGATIONS The Obligations shall be as provided in the Indenture and in the form of the Obligations annexed as Exhibits 2 and 3 to the Indenture. The Obligations shall be subject to all of the terms and conditions set forth in the Indenture. ARTICLE IV CONDITIONS TO EXECUTION AND DELIVERY OF THE GUARANTEE The obligation of the Secretary to execute and deliver the Guarantee on the Closing Date shall be subject to the following conditions unless waived in writing by the Secretary: (a) the Closing Date shall occur on or prior to September 11, 1999. (b) the Shipowner and the Shipyard shall have executed and delivered to the Secretary a copy of the Construction Contract, as amended, and the Shipyard shall have executed the Consent of Shipyard. (c) the Shipowner shall have executed and delivered the following documents in the form attached hereto: the Security Agreement, Financial Agreement, Trust Indenture, Secretary's Note, Obligations, Credit Agreement, and Depository Agreement; - 2 - (d) the Indenture Trustee shall have executed, in the form attached hereto, the Authorization Agreement and Trust Indenture; the Depository shall have executed the Depository Agreement; and the Lender shall have executed the Credit Agreement; (e) the following documents shall have been delivered to the Secretary: (i) one executed counterpart and one copy of the Credit Agreement; (ii) two executed counterparts of the Trust Indenture, (iii) two specimen copies of the Obligations; (iv) two executed originals of the legal opinion issued under section (j) of this Article; (v) two copies of the legal opinion delivered to the Lender pursuant to the Credit Agreement, and (vi) two originals of all other documents delivered by the Shipowner, Indenture Trustee or the Depository in connection with this Closing. (f) the Shipowner shall have executed an Officer's Certificate representing and warranting the truth of the following statements as of the Closing Date: (i) each of the representations and warranties set out at Section 2.01 of the Security Agreement; and (ii) the Shipowner is not in violation of any Federal laws having a substantial adverse effect on the interests of the United States of America and that the consummation of the Commitment would not violate non-Title XI Federal law. (g) the Secretary shall have received the Guarantee Fee payable under Section 1104A(e) of Title XI and the Investigation Fee, due under Section 1104A(f) of Title XI. (h) the Shipowner shall have complied in all material respects with its agreements under this Guarantee Commitment; (i) there shall not have occurred any event which constitutes (or after any period of time or any notice, or both, would constitute) a "Default" under the Security Agreement; (j) there shall have been delivered to the Secretary by the Shipowner opinions of counsel admitted to the appropriate jurisdictions of the United States and British Virgin Islands, the Commonwealth of the Bahamas, and the Federative Republic of Brazil acceptable to the Secretary, in the form annexed hereto as Schedule One which shall include, among other things, an opinion to the effect that: (i) by the terms of the Security Agreement, the Shipowner has granted to the Secretary a fully perfected, first priority security interest in each of the assets which constitutes the Security; and (ii) all filings, recordings, notice and other actions required to perfect the Secretary's interest in the Security and to render such security interest valid and enforceable under applicable law have been duly effected: (k) Petrodrill Four Limited shall have executed and delivered to the Secretary its guarantee of the Title XI debt of the Shipowner. (l) Each of Pride International, Inc. and Maritima Petroleo E Engenharia Ltda. shall have executed and delivered to the Secretary its guarantee of final charges that may be assessed against the Vessel due to late arrival penalties and/or ad valorem taxes in an amount not to exceed $20,500,000. (m) the Secretary shall have received a letter agreement from the Shipowner to provide the Secretary within a reasonable time after the Closing Date, with eight (8) conformed copies of the Guarantee Commitment and each of the Appendices and Exhibits thereto executed on or prior to such date; (n) on the Closing Date, the qualifying requirements set forth in Section 10 of the Financial Agreement shall have been complied with and certified to as required therein; and (o) at least fifteen (15) Business Days prior to the Closing Date, there shall have been delivered to the Secretary, pro forma balance sheets for the Shipowner as of the Closing Date, certified by an officer of the Shipowner showing, among other things, all non-Title XI debt of the Shipowner; (p) on the Closing Date, the Shipowner shall certify that all non-Title XI loans to the Shipowner relating to the Vessel has been discharged or subordinated satisfactorily to the Secretary, and (q) at least ten (10) days prior to the Closing Date, the Shipowner shall have provided the Secretary with satisfactory evidence of insurance as required by the Security Agreement. - 3 - (r) on the Closing Date, the Secretary shall be a beneficiary under the Shipyard's performance and labor and material payments bonds, which bonds shall be in form and substance satisfactory to the Secretary. (s) on the Closing Date, the Shipowner and Amethyst Financial Company Limited shall issue a declaration regarding lobbying activities pursuant to the provisions of 31 U.S.C. 1352. ARTICLE V VARIATION OF GUARANTEE COMMITMENT No variation from the terms and conditions hereof shall be permitted except pursuant to an amendment executed by the Secretary and the Shipowner. ARTICLE VI TERMINATION OR ASSIGNMENT OF GUARANTEE COMMITMENT This Guarantee Commitment may be terminated and the parties hereto shall have no further rights or obligations hereunder, upon written notice by the Secretary of the termination of the obligations of the United States pursuant to the Shipowner's failure to satisfy one or more conditions set forth in Article V hereof or upon the Secretary's determination, at or before the Closing Date, that (i) the Shipowner is in violation of Federal law and such violation would have a substantial, adverse affect on the interests of the United States of America or (ii) the consummation of the Commitment would violate non-Title XI Federal law. The Shipowner's warranties and representations shall survive the termination of this Agreement and the Secretary's issuance of the Guarantees. This Guarantee Commitment may not be assigned by the Shipowner without the prior written approval of the Secretary and any attempt to do so shall be null and void AB INITIO. ARTICLE VII GOVERNING LAW; JURISDICTION AND CONSENT TO SUIT This Guarantee Commitment hereby adopts and incorporates by reference as if fully set forth herein the provisions relating to Jurisdiction and Consent to Suit of the Special Provisions of the Security Agreement. ARTICLE VIII MISCELLANEOUS (a) The table of contents and the titles of the Articles are inserted as a matter of convenient reference and shall not be construed as a part of this Guarantee Commitment. This Guarantee Commitment may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument. (b) For all purposes of this Guarantee Commitment, unless otherwise expressly provided or unless the context shall otherwise require, capitalized terms used herein shall have the meaning given in Schedule X to the Security Agreement. - 4 - IN WITNESS WHEREOF, this Commitment to Guarantee Obligations has been executed by the United States and accepted by the Shipowner, all as of the day and year first above written. UNITED STATES OF AMERICA, SECRETARY OF TRANSPORTATION (SEAL) MARITIME ADMINISTRATION Attest: BY: /s/Joel C. Richard Secretary Maritime Administration /s/Larry Main Assistant Secretary ACCEPTED BY: PETRODRILL FIVE LIMITED as Shipowner BY: /s/Earl W. McNiel Treasurer Attest: BY: /s/ Robert W. Randall Secretary - 5 - EX-4.17 19 EXHIBIT 4.17 Document 1 Contract No. MA-13503 COMMITMENT TO GUARANTEE OBLIGATION by THE UNITED STATES OF AMERICA Accepted by PETRODRILL FOUR LIMITED Shipowner (Under Title XI, Merchant Marine Act, 1936, as amended, and in effect on the date of this Guarantee Commitment) ------------------------------------------- TABLE OF CONTENTS
DOC. NO. DOCUMENT - - ------ --------------------------------------------------------------------------------------------- 1 Commitment to Guarantee Obligations 2 Schedule One -- Form of Opinion of Counsel 3 Appendix I -- Form of Credit Agreement 4 Appendix II -- Form of Trust Indenture 5 Schedule A -- Schedule of Definitions to the Trust Indenture 6 Exhibit 1 -- General Provisions Incorporated into the Trust Indenture by Reference 7 Exhibit 2 -- Form of Floating Rate Note 8 Exhibit 3 -- Form of Fixed Rate Note 9 Exhibit 4 -- Form of Authorization Agreement 10 Exhibit 5 -- Form of Secretary's Supplemental Indenture 11 Appendix III -- Form of Security Agreement 12 Exhibit 1 -- General Provisions Incorporated into the Security Agreement by Reference 13 Schedule X -- Schedule of Definitions 14 Exhibit 2 -- Form of Secretary's Note 15 Exhibit 3 -- Form of First Preferred Ship Mortgage 16 Exhibit 4 -- Form of Title XI Reserve Fund and Financial Agreement 17 Exhibit 5 -- Form of Consent of Shipyard 18 Exhibit 6 -- Construction Contract 19 Exhibit 7 -- Form of Depository Agreement
COMMITMENT TO GUARANTEE OBLIGATIONS BY THE UNITED STATES OF AMERICA accepted by PETRODRILL FOUR LIMITED Shipowner THIS COMMITMENT TO GUARANTEE OBLIGATIONS, dated as of April 9, 1999 (the "Guarantee Commitment"), is made and entered into by the UNITED STATES OF AMERICA (the "United States"), represented by the SECRETARY OF TRANSPORTATION, acting by and through the MARITIME ADMINISTRATOR (the "Secretary"), and accepted on said date by PETRODRILL FOUR LIMITED, a British Virgin Islands international business company (the "Shipowner"). RECITALS: A. The Shipowner will be the sole owner of the dynamic positioned semi-submersible drilling vessel to be named AMETHYST 4 ("the Vessel"), built pursuant to the Construction Contract with TDI-Halter, Limited Partnership (the "Shipyard"). B. To aid in financing the construction of the Vessel, the Shipowner will borrow an aggregate principal amount equal to 87- 1/2% of the Actual Cost of the Vessel, as of the Closing Date. To accomplish such financing, the Shipowner has accepted this Guarantee Commitment subject to the terms and conditions set forth herein. C. The Shipowner has entered into the Credit Agreement providing for the sale and delivery of obligations in the aggregate principal amount of $149,625,000 to be designated "United States Government Guaranteed Export Ship Financing Obligations, AMETHYST 4 Series" (the "Obligations") having the maturity date and interest rate set forth in the Credit Agreement, the Indenture and the Obligations. D. As security for the Guarantees and the Secretary's Note, the Shipowner will execute and deliver the Security Agreement, Contract No. MA-13505, and the following agreements shall be executed and delivered: the Indenture, the Authorization Agreement, Contract No. MA-13504, the Secretary's Note, the Mortgage, Contract No. MA-13506, the Financial Agreement, Contract MA-13507, and the Depository Agreement, Contract No. MA-13508. W I T N E S S E T H: That under the provisions of Title XI of the Merchant Marine Act, 1936, as amended and in consideration of (i) the covenants of the Shipowner contained herein and (ii) other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Secretary hereby commits itself as herein provided. ARTICLE I FINDINGS AND DETERMINATIONS OF SECRETARY Pursuant to Section 1103(g)(i) of Title XI, the Secretary has determined that the issuance of this Guarantee Commitment will not result in the denial of an economically sound application to issue a commitment to guarantee obligations for a Vessel documented under the laws of the United States. Pursuant to Section 1104A(b)(1) of Title XI, the Secretary has approved the Shipowner as responsible and possessing the ability, experience, financial resources and other qualifications necessary to the adequate operation and maintenance of the Vessel. Pursuant to Section 1104A(b)(2) of Title XI, the Secretary has determined that the aggregate of the Actual Cost of the Vessel is $171,000,063. Prior to the Closing Date, the Secretary, in its discretion, may redetermine the Actual Cost of the Vessel. On the Closing Date, the aggregate principal amount of the Obligations will not exceed 87- 1/2% of the Actual Cost of the Vessel. Pursuant to Sections 1104A(b)(3), 1104A(b)(4) and 1104A(b)(5) of Title XI, the Secretary has determined that: (1) the maturity date of the Obligations is satisfactory, (2) payments of principal required by the Obligations are satisfactory, and (3) the interest rate to be borne by the Obligations to be issued on the Closing Date is reasonable. Pursuant to Section 1104A(d) of Title XI, the Secretary has found that the Shipowner's proposed use of the Vessel will be economically sound. Pursuant to Section 1104A(d)(A) of Title XI, the Secretary has determined that the construction, reconstruction or reconditioning of the Vessel will aid in the transition of United States shipyards to commercial activities or will preserve shipbuilding assets that would be essential in time of war or national emergency. The Secretary has further determined that the Secretary of Defense has received notice of the Secretary's receipt of application and that the Secretary of Defense has not disapproved the loan guarantee pursuant to the authority, under Section 1104A(j)(1) of Title XI, to assess whether the potential use of the Vessel may cause harm to the United States national security interests. The Secretary has determined that the countries in which the Shipowner has its chief executive offices or has located a substantial portion of its assets present an acceptable financial and legal risk to the Secretary's Security. ARTICLE II COMMITMENT TO GUARANTEE OBLIGATIONS The United States, represented by the Secretary, HEREBY COMMITS ITSELF TO GUARANTEE the payment of the unpaid interest on, and the unpaid balance of the principal of, the Obligations, including interest accruing between the date of default under the Obligations and the payment in full of the Guarantees, and, to effect this Guarantee Commitment, hereby commits itself to execute and deliver the Authorization Agreement, Security Agreement, Financial Agreement, and Depository Agreement on the Closing Date pursuant to the terms of the Guarantee Commitment. ARTICLE III THE OBLIGATIONS The Obligations shall be as provided in the Indenture and in the form of the Obligations annexed as Exhibits 2 and 3 to the Indenture. The Obligations shall be subject to all of the terms and conditions set forth in the Indenture. ARTICLE IV CONDITIONS TO EXECUTION AND DELIVERY OF THE GUARANTEE The obligation of the Secretary to execute and deliver the Guarantee on the Closing Date shall be subject to the following conditions unless waived in writing by the Secretary: (a) the Closing Date shall occur on or prior to September 11, 1999. (b) the Shipowner and the Shipyard shall have executed and delivered to the Secretary a copy of the Construction Contract, as amended, and the Shipyard shall have executed the Consent of Shipyard. (c) the Shipowner shall have executed and delivered the following documents in the form attached hereto: the Security Agreement, Financial Agreement, Trust Indenture, Secretary's Note, Obligations, Credit Agreement, and Depository Agreement; - 2 - (d) the Indenture Trustee shall have executed, in the form attached hereto, the Authorization Agreement and Trust Indenture; the Depository shall have executed the Depository Agreement; and the Lender shall have executed the Credit Agreement; (e) The following documents shall have been delivered to the Secretary: (i) one executed counterpart and one copy of the Credit Agreement; (ii) two executed counterparts of the Trust Indenture, (iii) two specimen copies of the Obligations; (iv) two executed originals of the legal opinion issued under section (j) of this Article; (v) two copies of the legal opinion delivered to the Lender pursuant to the Credit Agreement; and (iv) two originals of all other documents delivered by the Shipowner, Indenture Trustee or the Depository in connection with this Closing. (f) the Shipowner shall have executed an Officer's Certificate representing and warranting the truth of the following statements as of the Closing Date: (i) each of the representations and warranties set out at Section 2.01 of the Security Agreement; and (ii) the Shipowner is not in violation of any Federal laws having a substantial adverse effect on the interests of the United States of America and that the consummation of the Commitment would not violate non-Title XI Federal law. (g) the Secretary shall have received the Guarantee Fee payable under Section 1104A(e) of Title XI and the Investigation Fee, due under Section 1104A(f) of Title XI. (h) the Shipowner shall have complied in all material respects with its agreements under this Guarantee Commitment; (i) there shall not have occurred any event which constitutes (or after any period of time or any notice, or both, would constitute) a "Default" under the Security Agreement; (j) there shall have been delivered to the Secretary by the Shipowner opinions of counsel admitted to the appropriate jurisdictions of the United States and British Virgin Islands, the Commonwealth of the Bahamas, and the Federative Republic of Brazil acceptable to the Secretary, in the form annex hereto as Schedule One which shall include, among other things, an opinion to the effect that: (i) by the terms of the Security Agreement, the Shipowner has granted to the Secretary a fully perfected, first priority security interest in each of the assets which constitutes the Security; and (ii) all filings, recordings, notice and other actions required to perfect the Secretary's interest in the Security and to render such security interests valid and enforceable under applicable law have been duly effected; (k) Petrodrill Five Limited shall have executed and delivered to the Secretary its guarantee of the Title XI debt of the Shipowner. (l) Each of Pride International, Inc. and Maritima Petroleo E Engenharia Ltda. shall have executed and delivered to the Secretary its guarantee of final charges that may be assessed against the Vessel due to late arrival penalties and/or ad valorem taxes in an amount not to exceed $20,500,000. (m) the Secretary shall have received a letter agreement from the Shipowner to provide the Secretary within a reasonable time after the Closing Date, with eight (8) conformed copies of the Guarantee Commitment and each of the Appendices and Exhibits thereto executed on or prior to such date; (n) on the Closing Date, the qualifying requirements set forth in Section 10 of the Financial Agreement shall have been complied with and certified to as required therein; and (o) at least fifteen (15) Business Days prior to the Closing Date, there shall have been delivered to the Secretary, pro forma balance sheets for the Shipowner as of the Closing Date, certified by an officer of the Shipowner showing, among other things, all non-Title XI debt of the Shipowner; (p) on the Closing Date, the Shipowner shall certify that all non-Title XI loans to the Shipowner relating to the Vessel has been discharged or subordinated satisfactorily to the Secretary, and (q) at least ten (10) days prior to the Closing Date, the Shipowner shall have provided the Secretary with satisfactory evidence of insurance as required by the Security Agreement. - 3 - (r) on the Closing Date, the Secretary shall be a beneficiary under the Shipyard's performance and labor and material payments bonds, which bonds shall be in form and substance satisfactory to the Secretary. (s) on the Closing Date, the Shipowner and Amethyst Financial Company Limited shall issue a declaration regarding lobbying activities pursuant to the provisions of 31 U.S.C. 1352. ARTICLE V VARIATION OF GUARANTEE COMMITMENT No variation from the terms and conditions hereof shall be permitted except pursuant to an amendment executed by the Secretary and the Shipowner. ARTICLE VI TERMINATION OR ASSIGNMENT OF GUARANTEE COMMITMENT This Guarantee Commitment may be terminated and the parties hereto shall have no further rights or obligations hereunder, upon written notice by the Secretary of the termination of the obligations of the United States pursuant to the Shipowner's failure to satisfy one or more conditions set forth in Article V hereof or upon the Secretary's determination, at or before the Closing Date, that (i) the Shipowner is in violation of Federal law and such violation would have a substantial, adverse affect on the interests of the United States of America or (ii) the consummation of the Commitment would violate non-Title XI Federal law. The Shipowner's warranties and representations shall survive the termination of this Agreement and the Secretary's issuance of the Guarantees. This Guarantee Commitment may not be assigned by the Shipowner without the prior written approval of the Secretary and any attempt to do so shall be null and void AB INITIO. ARTICLE VII GOVERNING LAW; JURISDICTION AND CONSENT TO SUIT This Guarantee Commitment hereby adopts and incorporates by reference as if fully set forth herein the provisions relating to Jurisdiction and Consent to Suit of the Special Provisions of the Security Agreement. ARTICLE VIII MISCELLANEOUS (a) The table of contents and the titles of the Articles are inserted as a matter of convenient reference and shall not be construed as a part of this Guarantee Commitment. This Guarantee Commitment may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument. (b) For all purposes of this Guarantee Commitment, unless otherwise expressly provided or unless the context shall otherwise require, capitalized terms used herein shall have the meaning given in Schedule X to the Security Agreement. - 4 - IN WITNESS WHEREOF, this Commitment to Guarantee Obligations has been executed by the United States and accepted by the Shipowner, all as of the day and year first above written. UNITED STATES OF AMERICA, SECRETARY OF TRANSPORTATION (SEAL) MARITIME ADMINISTRATION Attest: BY: /s/Joel C. Richard Secretary Maritime Administration /s/Larry Main Assistant Secretary ACCEPTED BY: PETRODRILL FOUR LIMITED as Shipowner BY: /s/Earl W. McNiel Treasurer Attest: BY: /s/ Robert W. Randall Secretary - 5 - EX-4.18 20 EXHIBIT 4.18 CREDIT AGREEMENT dated as of April 9, 1999 among PETRODRILL FIVE LIMITED as Shipowner GOVCO INCORPORATED as Primary Lender CITIBANK, N.A. as Alternate Lender CITIBANK INTERNATIONAL PLC, as Facility Agent and CITICORP NORTH AMERICA, INC. as Administrative Agent for the Primary Lender and the commercial paper holders of the Primary Lender. TABLE OF CONTENTS SECTION 1. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION.................2 1.01 Defined Terms.................................................2 1.02 Principles of Construction....................................2 SECTION 2. THE CREDIT FACILITY........................................2 2.01 Amount........................................................2 2.02 Availability..................................................2 2.03 Disbursements and Minimum Amount of Utilizations..............3 2.04 Relationship of Floating Rate Note and Fixed Rate Note........3 SECTION 3. DISBURSEMENT REQUIREMENTS..................................3 3.01 Disbursement Procedures.......................................3 SECTION 4. TERMS OF THE CREDIT........................................4 4.01 Principal Repayment...........................................4 4.02 Interest Payment..............................................4 4.03 Prepayment....................................................5 4.04 Recapture.....................................................6 4.05 Evidence of Debt..............................................7 4.06 Limit of United States Guarantee..............................7 SECTION 5. CONDITIONS PRECEDENT........................................8 5.01 Conditions Precedent to Lenders' Obligations Under this Agreement...................................................8 5.02 Conditions Precedent to Each Disbursement.....................9 5.02 Conditions Precedent to Each Disbursement.....................9 SECTION 6. FEES AND EXPENSES...........................................9 6.01 Fees..........................................................9 6.02 Taxes.........................................................9 6.03 Expenses.....................................................10 6.04 Additional or Increased Costs................................11 SECTION 7. PAYMENTS..................................................12 7.01 Method of Payment............................................12 7.02 Application of Payments......................................13 SECTION 8. REPRESENTATIONS AND WARRANTIES BY THE SHIPOWNER...........14 8.01 Representations and Warranties of the Shipowner..............14 8.02 Agreements of the Shipowner..................................16 i SECTION 9. CANCELLATION, SUSPENSION AND EVENTS OF DEFAULT............17 9.01 Cancellation.................................................17 9.02 Events of Default............................................18 SECTION 10. GOVERNING LAW AND JURISDICTION...........................19 10.01 Governing Law................................................19 10.02 Submission to Jurisdiction...................................19 10.03 Waiver of Security Requirements..............................19 10.04 No Limitation................................................19 SECTION 11. MISCELLANEOUS............................................19 11.01 Computations.................................................19 11.02 Notices......................................................20 11.03 Disposition of Indebtedness..................................22 11.04 Disclaimer...................................................22 11.05 No Waiver; Remedies Cumulative...............................22 11.06 Currency.....................................................23 11.07 Severability.................................................23 11.08 Amendment or Waiver..........................................23 11.09 Indemnification..............................................23 11.10 Benefit of Agreement.........................................24 11.11 Waiver of Jury Trial.........................................24 11.12 Execution in Counterparts....................................24 11.13 Shipowner Documents..........................................24 11.14 Entire Agreement.............................................25 11.15 No Proceedings...............................................25 SECTION 12. ARRANGEMENTS AMONG THE AGENTS AND THE LENDERS...........25 12.01 Appointment..................................................25 12.02 Rights of Facility Agent.....................................25 12.03 Duties.......................................................26 12.04 Limitation on Obligations of Facility Agent..................26 12.05 Indemnification by Lenders...................................27 12.06 Limitation on Responsibility.................................27 12.07 No Claims on Employees of Facility Agent.....................27 12.08 Banking Business.............................................28 12.09 Resignation or Termination of Facility Agent.................28 12.10 Successor to Facility Agent..................................28 12.11 Discharge of Obligations.....................................28 12.12 Responsibilities of Lenders..................................28 12.13 Agency Division..............................................29 12.14 Administrative Agent.........................................29 12.15 Facility Agent Only Agent for the Lenders....................29 ii EXHIBITS Exhibit 1 Schedule of Definitions ANNEXES Annex A Form of Disbursement Requests iii THIS CREDIT AGREEMENT, dated as of April 9, 1999 is made by and among PETRODRILL FIVE LIMITED, a British Virgin Islands international business company (the "Shipowner"), GOVCO INCORPORATED, a Delaware corporation (the "Primary Lender"), CITIBANK, N.A., a national banking association (the "Alternate Lender"), CITIBANK INTERNATIONAL PLC, a bank organized and existing under the laws of England, as facility agent for both the Primary Lender and the Alternative Lender (and their respective successors and assigns) with respect to the Floating Rate Note, and its permitted successors and assigns (in such capacity, the "Facility Agent"), and CITICORP NORTH AMERICA, INC., a Delaware corporation, as administrative agent for the Primary Lender and the commercial paper holders of the Primary Lender (and their respective successors and assigns)(in such capacity, together with its permitted successors and assigns, the "Administrative Agent," and together with the Facility Agent, the "Agents"). As used herein, the term "Lender" shall mean either the Primary Lender or the Alternate Lender, as the case may be, depending on which of the two parties made or will make the relevant disbursement of funds under this Agreement; provided, however, that if the Primary Lender assigns its rights under this Agreement to the Alternate Lender, the term "Lender," as used herein, shall mean only the Alternate Lender. BACKGROUND WHEREAS: (A) by this Agreement, the Lenders have established a credit facility (the "Credit Facility") in the amount of $150,183,000, pursuant to which the Primary Lender may, in its discretion, subject to the terms and conditions hereof, extend financing to the Shipowner (i) for the manufacture, construction, fabrication, financing and purchase by the Shipowner of the Vessel; (ii) for the payment of the related Construction Period Interest; and (iii) for the payment of the Guarantee Fees; and if the Primary Lender chooses at any time not to extend, or continue to extend, any such financing, then the Alternate Lender shall extend the undisbursed portion of such financing; (B) the establishment of the Credit Facility is in reliance upon the commitment of the United States to guarantee the payment of the unpaid interest on, and the unpaid balance of the principal of, the Floating Rate Note, including interest accruing between the date of an Indenture Default under the Floating Rate Note and the payment in full of the Guarantee; (C) a condition to the Lenders' extension of the Credit Facility under this Agreement is the Facility Agent's timely receipt of Certificates Authorizing Disbursement and issuance of the Guarantee of the Floating Rate Note; (D) the Facility Agent will serve as facility agent for the benefit, and on behalf, of each of the Lenders in connection with the Credit Facility, this Agreement and the other related documents and the Administrative Agent will act as an administrative agent for the Primary Lender and the Primary Lender's commercial paper holders; and (E) the Credit Facility may be utilized by the Shipowner in accordance with the terms and conditions of this Agreement. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows: SECTION 1. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION 1.01 DEFINED TERMS. For the purposes of this Agreement, unless otherwise defined herein, defined terms shall have the meanings specified in Exhibit 1 hereto. 1.02 PRINCIPLES OF CONSTRUCTION. (a) The meanings set forth for defined terms in this Agreement shall be equally applicable to both the singular and plural forms of the terms defined. (b) Unless otherwise specified, all references in this Agreement to Annexes or Exhibits are to Annexes or Exhibits in or to this Agreement. (c) The headings of the Sections in this Agreement are included for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. SECTION 2. THE CREDIT FACILITY 2.01 AMOUNT. The Lenders hereby establish the Credit Facility, upon the terms and conditions set forth in this Agreement, in favor of the Shipowner in the maximum amount of $150,183,000 (the "Credit Facility Amount"), to enable the Shipowner to finance: (i) the manufacture, construction, fabrication, financing and purchase of the Vessel; (ii) Construction Period Interest; and (iii) the Guarantee Fees. The Primary Lender intends (but is not obligated) to fund the Credit Facility through the issuance and sale of Commercial Paper to investors which is exempt from the registration requirements of the United States Securities Act of 1933, as amended. The Primary Lender may, at its option, elect at any time not to fund the Credit Facility or the undisbursed portion thereof, in which case the Alternate Lender will, subject to the terms and conditions provided herein, be obligated to fund under the Credit Facility the amount (the "Available Amount") which is equal to the excess, if any, of the Credit Facility Amount over the outstanding principal amount evidenced by the Floating Rate Note, plus the aggregate outstanding principal amount evidenced by Fixed Rate Notes ("Outstanding Principal"). 2.02 AVAILABILITY. Disbursements under the Credit Facility may be made once a calendar month and up to and including the Final Disbursement Date. "Final Disbursement Date" shall mean either February 15, 2001 or, if 2 earlier, the date on which the Available Amount under the Credit Facility is canceled in accordance with Section 9.01 or reduced to zero. 2.03 DISBURSEMENTS AND MINIMUM AMOUNT OF UTILIZATIONS. Upon satisfaction of Sections 3.01, 5.01 and 5.02, disbursements shall be made by advances from the Primary Lender or the Alternate Lender to the Shipowner ("Disbursements") in accordance with Section 3.01. Notwithstanding anything in this Agreement to the contrary, the Shipowner may not request a Disbursement under the Credit Facility for an amount (a) less than the smaller of (i) $1,000,000 or (ii) the Available Amount or (b) more than the Available Amount. 2.04 RELATIONSHIP OF FLOATING RATE NOTE AND FIXED RATE NOTE. Disbursements from the Credit Facility shall become the indebtedness of the Shipowner to the Lenders under the Floating Rate Note. The Shipowner shall convert indebtedness under the Floating Rate Note to indebtedness under one or more Fixed Rate Notes no later than the earlier of (i) two years from the Delivery Date, or (ii) September 15, 2002. At its option, and from time to time, the Shipowner may convert any portion, or all, of the indebtedness of the Floating Rate Note to a Fixed Rate Note or series of Fixed Rate Notes at any time during or after the construction of the Vessel, so long as the conversion of the Floating Rate Note to the Fixed Rate Note does not occur later than the earlier of (i) two years after the Delivery Date or (ii) September 15, 2002, and, except for the final conversion, each conversion is in a minimum amount of $50,000,000; and the Shipowner shall have paid any amount payable under Section 4.04(a)(iv) or any other provision hereof in connection therewith. SECTION 3. DISBURSEMENT REQUIREMENTS 3.01 DISBURSEMENT PROCEDURES. Upon receipt by the Facility Agent of each Certificate Authorizing Disbursement at least five (5) Business Days prior to the proposed disbursement date, the Primary Lender may, and if the Primary Lender elects not to, the Alternate Lender shall, disburse funds in accordance with the terms of such Certificate Authorizing Disbursement to the Shipowner, or the Shipowner's designee, subject to the terms of this Agreement and such Certificate Authorizing Disbursement; provided that, if the Certificate Authorizing Disbursement and the request for disbursement referred to therein do not specify a disbursement date, then the disbursement date shall be the fifth Business Day (or such earlier or later Business Day as is requested by the Shipowner and is acceptable to the disbursing Lender) following the Facility Agent's receipt of such Certificate Authorizing Disbursement. Promptly following each Disbursement, the Facility Agent shall transmit to the Indenture Trustee a copy of the Certificate Authorizing Disbursement, a confirmation that the Disbursement was made, and a copy of Exhibit A to the Floating Rate Note, updated to reflect such Disbursement and other intervening, related events. 3 SECTION 4. TERMS OF THE CREDIT 4.01 PRINCIPAL REPAYMENT. The Shipowner shall repay all Outstanding Principal in twenty-four (24) approximately equal, successive semi-annual installments, with each such installment to be payable on a Payment Date; provided that, on the last Payment Date, the Shipowner shall repay in full the remaining Outstanding Principal. 4.02 INTEREST PAYMENT. (a) On each Interest Payment Date, the Shipowner shall pay to the Indenture Trustee, on behalf of the Person(s) entitled thereto, interest on the Outstanding Principal, calculated at an interest rate per annum equal to the Applicable Interest Rate therefor, as determined for each successive Interest Period. The Indenture Trustee shall calculate the Applicable Interest Rate based on information provided (i) by the Administrative Agent to the Facility Agent if the Primary Lender is the Lender, or (ii) by the Facility Agent if the Alternate Lender is the Lender. From time to time, the Administrative Agent or Facility Agent will confirm CP Rate, LIBOR, Base Rate, and Applicable Interest Rate to the Indenture Trustee. In the event that the Primary Lender assigns the financing of all or any portion of the amount outstanding under the Credit Facility (whether or not evidenced by a Note) to the Alternate Lender or other party, the interest rate on such amount shall be determined by the Facility Agent (and the Facility Agent shall notify the Indenture Trustee thereof) pursuant to clause (i) of the definition of Applicable Interest Rate for the period prior to the effective date of such assignment and pursuant to clause (ii) of such definition for all periods after such date. (b) The Shipowner shall pay to the Facility Agent, on behalf of the Person(s) entitled to any Unpaid Amount, on demand, interest on such Unpaid Amount (to the extent permitted by applicable law) for each Post Maturity Period at an interest rate per annum equal to the sum (the "Post Maturity Interest Rate") of (1) three percent (3%), plus (2) the Post Maturity Applicable Interest Rate. With respect to any Unpaid Amounts, the "Post Maturity Applicable Interest Rate" shall mean either (i) LIBOR on the Quotation Date therefor plus three tenths of one percent (0.30%) per annum, or (ii) for any such Post Maturity Period LIBOR cannot be determined the rate per annum reasonably determined by the Person to whom such Unpaid Amount is owed before the last day of such Post Maturity Period to be that which expresses as a percentage rate per annum the cost which such Person would incur in funding such Unpaid Amount from whatever source it reasonably deems appropriate for such Post Maturity Period plus three tenths of one percent (0.30%) per annum, or (iii) if any such Unpaid Amount is an Accelerated Repayment, then during the first Post Maturity Period the rate which would have been applicable to such Unpaid Amount had it not so fallen due. In the absence of an Indenture Default, any interest which shall have accrued under this Section 4.02(b) in respect of an Unpaid Amount shall be due and payable and shall be paid by the Shipowner on demand on such dates as the Person to whom such Unpaid Amount is owed may specify by written notice to the Shipowner, or if there is 4 an Indenture Default, any interest which shall have accrued under this Section 4.02(b) in respect of an Unpaid Amount shall be due and payable immediately and shall be paid by the Shipowner without demand and any payment by, or on behalf of, the Shipowner hereunder shall be governed by Section 7.02 and the provisions of the last paragraph of Section 9.02. As used herein, "Unpaid Amount" means all or any part of principal, accrued interest, fees or other amounts owing to the Lenders under this Agreement or the Floating Rate Note which is not paid in full when and as due and payable, whether at Stated Maturity, by acceleration or otherwise, or any sum due and payable by the Shipowner to the Lenders under any judgment of any court or arbitral tribunal in connection with this Agreement which is not paid on the date of such judgment; PROVIDED, HOWEVER, that it is agreed that Unpaid Amount shall not include any part of the principal and interest on the Floating Rate Note, except that Unpaid Amount shall include all such amounts thereof as are not paid by the Shipowner as and when they are due but are paid by the Shipowner prior to payment thereof by the Secretary. "LIBOR" shall mean, in relation to any Post Maturity Period (other than the first Post Maturity Period contemplated by clause (iii) of Section 4.02(b)), the rate of interest per annum (rounded upward, if necessary, to the nearest 1/16 of 1%) last quoted by the principal London office of CITIBANK, N.A., prior to the close of business at such London office on the Quotation Date for the offering to leading banks in the London interbank market of U.S. Dollar deposits on an overnight basis and in an amount comparable to the Unpaid Amount to which LIBOR is to apply. "Accelerated Repayment" shall mean any part of the principal of the Floating Rate Note which became due and payable on a day other than its Payment Date. "Post Maturity Period" shall mean with respect to the period from the date an Unpaid Amount was due until such amount shall have been paid in full, each successive period, the first of which shall start on the date such Unpaid Amount was due (or the date of any such judgment or arbitral award, if earlier) and each other of which shall start on the last day of the preceding such period, and the duration of each of which shall be one day, or if LIBOR applies, then from and including the Quotation Date for such Post Maturity Period to but excluding the next Quotation Date or such other duration selected by the Person to whom such Unpaid Amount is due; PROVIDED, HOWEVER, that in the case of any Accelerated Repayment, the first such Post Maturity Period applicable thereto shall be of a duration equal to the unexpired portion of its then applicable Interest Period. "Quotation Date" in relation to any Post Maturity Period means the day on which quotations would ordinarily be given by CITIBANK, N.A. in the London interbank market for dollar deposits for delivery on the first day of that period; PROVIDED, HOWEVER, that if, for any such Post Maturity Period, quotations would ordinarily be given on more than one date, the Quotation Date for that period shall be the last of those dates. 4.03 PREPAYMENT. (a) The Shipowner may from time to time prepay on any Interest Payment Date all or any part of the Outstanding Principal evidenced by the Floating Rate Note, provided that: (i) any partial prepayment shall be in a minimum principal amount of $10,000,000, unless otherwise required by the Indenture; (ii) the Shipowner shall have given the Facility Agent 5 and the Indenture Trustee prior written notice of such prepayment (which shall be not less than 40 nor more than 60 days); (iii) the Shipowner shall have paid in full all amounts due under this Agreement as of the date of such prepayment, including, without limitation, interest which has accrued to the date of prepayment on the amount prepaid and all other amounts payable hereunder relating to such prepayment; (iv) any amount prepaid hereunder (other than the Outstanding Principal amount thereof prepaid through the issuance of Fixed Rate Notes, the Outstanding Principal amount of which is subtracted from the Credit Facility pursuant to the last sentence of Section 2.01) shall not be considered part of the Available Amount; and (v) subject to Section 4.03(c), if the Lender is the Primary Lender, the Shipowner shall pay to the Facility Agent, for the benefit of the Primary Lender an amount equal to (x) the amount of yield that the Primary Lender is required to pay to holders of its Commercial Paper during the Liquidation Period (as defined below) on an amount of Commercial Paper having an aggregate issue price equal to the amount of the Shipowner's prepayment less (y) the amount of the estimated investment earnings, as determined by the Facility Agent, on the prepayment amount during the Liquidation Period. The "Liquidation Period" means the period from the date on which a prepayment is made to the earliest date on which the Primary Lender's total amount of Commercial Paper related to the funding of the Disbursements can be reduced (without prepayment thereof) by an amount equal to the amount of the Shipowner's prepayment. Prepayments shall be applied to the installments of principal of the Credit Facility in the inverse order of their maturity, and, in cases where more than one Note is Outstanding, PRO RATA to each Note. (b) Upon delivery to the Shipowner and the Secretary of the instrument satisfying and discharging the Indenture contemplated by Section 12.01 of the Exhibit 1 to the Indenture, all of the Shipowner's indebtedness, liabilities and obligations under this Agreement and the Fee Letter shall become immediately due and payable without demand upon, or notice to, the Shipowner. (c) Notwithstanding any other provision to the contrary herein, the Shipowner or the Secretary (after the Secretary's assumption of the Floating Rate Note pursuant to Section 6.09 of Exhibit 1 to the Indenture) may from time to time prepay all or any part of the principal amount of the Floating Rate Note without any prepayment penalty or premium in accordance with Article III of Exhibit 1 to the Indenture. (d) Notwithstanding any other provision to the contrary herein, the Shipowner shall have the right to prepay any portion of the Floating Rate Note and convert that Obligation to a Fixed Rate Note so long as it first obtains the Secretary's consent to the interest rate applicable to the Fixed Rate Note and, except for the final disbursement, such conversion equals or exceeds $50,000,000 principal; and the Shipowner shall have paid any amount payable under Section 4.04(a)(iv) or any other provision hereof in connection therewith. 4.04 RECAPTURE. (a) Upon the written request of the Facility Agent, the Shipowner shall pay to the applicable Lender, such amounts as shall be sufficient (in the reasonable judgment of such Lender) to compensate such Lender for any loss, expense or liability (including, without limitation, any loss, expense or liability incurred by reason of the liquidation or redeployment of deposits from third parties or in connection with obtaining funds to make or maintain any Disbursement) which such Lender reasonably determines is attributable to: (i) any failure to make scheduled payments on a Payment Date or any payment due in connection with any Redemption; or (ii) any failure by the Shipowner to borrow any advance for which a Certificate Authorizing Disbursement has been issued; or (iii) any revocation of a notice of prepayment given pursuant to Section 4.03(a); or (iv) subject to the provisions of Section 4.03(c), any prepayment of the Floating Rate Note (including, without limitation, due to the issuance of any fixed rate notes) other than on an Interest Payment Date after giving five Business Days prior written notice to such Lender. (b) Without prejudice to any other provision hereof (and at the Shipowner's expense), such Lender shall use such reasonable efforts as it shall determine in its sole discretion to minimize any loss, expense or liability to the extent possible. 4.05 EVIDENCE OF DEBT. The Shipowner agrees that to evidence further its obligation to repay all amounts disbursed under the Credit Facility, with interest accrued thereon, it shall issue and deliver to the Facility Agent, in accordance with the written instructions of the Facility Agent, the Floating Rate Note. The Floating Rate Note shall (i) be in the form of Exhibit 2 to the Indenture; (ii) bear the Secretary's Guarantee, and (iii) be valid and enforceable as to its principal amount at any time only to the extent of the aggregate amounts then disbursed and outstanding thereunder, and, as to interest, only to the extent of the interest accrued thereon at the rate guaranteed by the Secretary, with any interest in excess thereof being evidenced by this Agreement. 4.06 LIMIT OF UNITED STATES GUARANTEE. None of the interest, fees, and expenses arising under Sections 4.03, 4.04 and 6 and none of the Indemnified Amounts, commissions, Taxes, Other Taxes, Post Maturity Interest Rate, interest in excess of 9% (or such higher rate as may be agreed from time to time by the Secretary) (the "Cap Rate") under the Floating Rate Note, the costs of obtaining any interest rate protection, or any other charges, costs, expenses, or indebtedness owed by the Shipowner under this Agreement to any Person is guaranteed by the United States. The Guarantee of the United States extends only to the principal and interest owed under the Obligations and only to the extent specified therein. 7 SECTION 5. CONDITIONS PRECEDENT 5.01 CONDITIONS PRECEDENT TO LENDERS' OBLIGATIONS UNDER THIS AGREEMENT. The obligations of the Lenders under this Agreement shall be subject to the delivery to the Facility Agent of the documents indicated below on or before the Closing Date: (a) THIS AGREEMENT, THE FLOATING RATE NOTE AND THE FEE LETTER. This Agreement and the Fee Letter, each fully executed by the parties thereto in form and substance satisfactory to the Lenders, which shall be in full force and effect and the Floating Rate Note shall have been fully executed by the Shipowner, endorsed by, or on behalf of, the United States, and delivered to the Facility Agent, and all amounts then payable under the Fee Letter shall have been paid to the Person entitled thereto. (b) EXISTENCE. Evidence in form and substance satisfactory to the Lenders, that the Shipowner is duly organized, validly existing and in good standing under the laws of the British Virgin Islands, with full power, authority and legal right to own its property and to carry on its business as now conducted. (c) AUTHORITY. Evidence in form and substance satisfactory to the Lenders, of the authority of the Shipowner to execute, deliver, perform and observe the terms and conditions of this Agreement, the Floating Rate Note, the Fee Letter, and the Indenture and evidence of authority (including specimen signatures) for each Person who, on behalf of the Shipowner, signed this Agreement, the Floating Rate Note, the Fee Letter, and the Indenture, or will otherwise act as representatives of the Shipowner in the operation of the Credit Facility. (d) GOVERNMENTAL AND OTHER AUTHORIZATIONS. Copies, certified as true copies by a duly authorized officer of the Shipowner, of each consent, license, authorization or approval of, and exemption by, any Governmental Authority and any governmental authorities within the United States or elsewhere, which are necessary or advisable (i) for the execution, delivery, performance and observance by the Shipowner of this Agreement, the Floating Rate Note, the Fee Letter, and the Indenture; and (ii) for the validity, binding effect and enforceability of this Agreement, the Floating Rate Note, the Fee Letter, and the Indenture, or if none is necessary, a written certification from the Shipowner that none is necessary. (e) LEGAL OPINIONS. (1) Opinion of legal counsel for the Shipowner concerning this Agreement, the Floating Rate Note, the Fee Letter, and the Indenture; (2) Opinion of the Chief Counsel of the Maritime Administration dated the Closing Date, signed by or on behalf of such Chief Counsel, addressed to the Lenders and the Agents to the effect that the Guarantees and the Authorization Agreement have been or will be duly authorized, executed and delivered by the United States of America, and constitute legal, valid, and binding obligations of the United States of America 8 enforceable in accordance with their respective terms; and (3) Opinion of Mayer, Brown & Platt addressed to the Lenders, the Agents, and the Indenture Trustee concerning this Agreement, the Fee Letter, the Indenture and the Floating Rate Note. (f) GUARANTEE COMMITMENT. A copy of the fully executed Guarantee Commitment, which shall be in full force and effect until completion of the Closing. (g) AUTHORIZATION AGREEMENT. The fully executed Authorization Agreement, which shall be in full force and effect. (h) INDENTURE. The fully executed Indenture, which shall be in full force and effect. 5.02 CONDITIONS PRECEDENT TO EACH DISBURSEMENT. The agreement of the Primary Lender to fund any Disbursement under this Agreement and any obligations of the Alternate Lender to fund any Disbursements under this Agreement shall be subject only to the Facility Agent's receipt of a Certificate Authorizing Disbursement, upon which each such Lender may conclusively rely. SECTION 6. FEES AND EXPENSES 6.01 FEES. The Shipowner shall pay or cause to be paid to the Person entitled thereto such fees and other amounts as are set forth in that certain Fee Letter (as amended, restated or otherwise modified from time to time with the prior written consent of the Secretary, the "Fee Letter") dated as of April 1, 1999 between the Shipowner and the Agents, in each case when and as due. 6.02 TAXES. (a) The Shipowner agrees to pay all amounts owing by it under this Agreement or the Floating Rate Note free and clear of and without deduction for any and all present and future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, EXCLUDING in the case of each Lender, taxes imposed on its income, and franchise taxes imposed on it in lieu of income taxes, by either (i) the jurisdiction under the laws of which such Lender is organized or any political subdivision thereof, or (ii) the jurisdiction of such Lender's applicable lending office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings, and liabilities being hereinafter referred to as "Taxes"). In addition, the Shipowner agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or under the Floating Rate Note or from the execution, delivery, or registration of, or otherwise with respect to, this Agreement or the Floating Rate Note (hereinafter referred to as "Other Taxes"). (b) The Shipowner further agrees: (i) that, if the Shipowner is prevented by operation of law from paying any such Taxes or Other Taxes, or if any such Taxes or Other Taxes are required to be deducted or withheld, then the fees or expenses required to be paid under this Agreement shall, on an after-tax basis, be increased by the amount necessary to yield to the Lenders fees or expenses in the amounts provided for in this Agreement after the provision for the payment of all such Taxes and Other Taxes; (ii) that the Shipowner shall, at the request of any Lender or any Agent, execute and deliver to such Lender or Agent, as the case may be, such further instruments as may be necessary or desirable to effect the payment of the increased amounts as provided for in subsection (i) above; PROVIDED, HOWEVER, that the Shipowner may not amend the Floating Rate Note without the prior written consent of the Secretary; (iii) that the Shipowner shall hold the Lenders harmless from and against the full amount of Taxes and Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 6.02) and any and all liabilities (including, without limitation, penalties, interest and expenses) arising from, or with respect to, any Taxes or Other Taxes (whether or not properly or legally asserted) and whether paid, or payable, by the Shipowner, the Lenders, or any other Person; (iv) that, at the request of any Lender or any Agent, the Shipowner shall provide such Lender or Agent within the later of thirty (30) calendar days after such request or thirty (30) calendar days after the payment of such Taxes or Other Taxes, a copy evidencing the payment of any Taxes or Other Taxes by the Shipowner; and (v) that each payment under this Section 6.02 shall be made within thirty (30) days from the date the applicable Lender makes written demand therefor. Each demand for payment by such Lender under Section 6.02(b)(v) for amounts paid or incurred by the Lenders or itself shall be accompanied by a certificate (with accompanying documentation supporting the demand) showing in reasonable detail the basis for the calculation of the amounts demanded, which certificate, in the absence of manifest error, shall be conclusive and binding for all purposes. Notwithstanding anything to the contrary contained herein, the agreements in this Section 6.02 shall survive the termination of this Agreement and the payment of the Floating Rate Note and all other amounts due hereunder. 6.03 EXPENSES. The Shipowner agrees, whether or not the transactions hereby contemplated shall be consummated, to pay, or reimburse the Agents and the Lenders, respectively, promptly upon demand for the payment of all reasonable and duly documented costs and expenses arising in connection with the preparation, printing, execution, delivery, registration, implementation, modification of or waiver or consent under this Agreement, the Floating Rate Note or the Indenture, including, without limitation, the 10 reasonable and duly documented out-of-pocket expenses of the Agents and the Lenders (incurred in respect of telecommunications, mail or courier service, travel and the like), and the fees and expenses of counsel for the Agents and the Lenders. The Shipowner shall also pay all of the costs and expenses (including, without limitation, the fees and expenses of counsel) incurred by or charged to the Agents or the Lenders in connection with the amendment or enforcement of this Agreement, the Floating Rate Note or the Indenture or the protection or preservation of any right or claim of the Agents or the Lenders arising out of this Agreement, the Floating Rate Note or the Indenture. 6.04 ADDITIONAL OR INCREASED COSTS. (a) If, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation, or (ii) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the cost to any Lender of agreeing to make or making, funding or maintaining the Disbursements or the Credit Facility, then the Shipowner shall from time to time, upon demand by such Lender, pay to such Lender additional amounts sufficient to compensate such Lender for such increased cost. (b) If any Lender determines that compliance with any law or regulation or any guideline or request from any central bank or other governmental authority (whether or not having the force of law) affects or would affect the amount of capital required to be maintained by such Lender or any corporation controlling such Lender and that the amount of such capital is increased by or based upon the existence of such Lender's commitment to lend hereunder and other commitments of this type, then, upon demand by such Lender, the Shipowner shall immediately pay to the Facility Agent (for the benefit of such Lender), from time to time as specified by the Facility Agent (on behalf of such Lender), additional amounts sufficient to compensate such Lender or such corporation in the light of such circumstances, to the extent that such Lender reasonably determines such increase in capital to be allocable to the existence of its commitment to lend hereunder. (c) Each Lender shall take such reasonable steps as it shall determine to minimize amounts demanded under this Section 6.04; PROVIDED that no Lender shall be obligated to take any actions under this SECTION 6.04 if such Lender has determined, that such actions would cause it to incur any material costs or expenses or would otherwise be disadvantageous to it in any material respect. In the event that a Lender transfers the booking office of the Credit Facility or the Floating Rate Note to minimize amounts demanded under this Section 6.04, any costs and expenses incurred in such transfer shall be paid by the Shipowner on demand by such Lender. (d) Each demand for payment by the Facility Agent (on behalf of any Lender) under this Section 6.04 shall be accompanied by a certificate showing in reasonable detail the basis for the calculation of the amounts demanded, which certificate, in the absence of manifest error, shall be conclusive and binding for all purposes. 11 (e) Each Lender shall notify the Shipowner of any event occurring after the date of this Agreement which entitles such Lender to compensation pursuant to this Section 6.04, as promptly as practicable, and in any event within ninety (90) days after it has knowledge of such event and has determined that a request for compensation hereunder shall be made. The Shipowner shall not be obligated to reimburse any Lender for any loss or cost incurred more than ninety (90) days prior to delivery of notice to the Shipowner by the Lender requesting compensation under this Section 6.04. Notwithstanding anything to the contrary contained herein, the agreements in this SECTION 6.04 shall survive the termination of this Agreement and the payment of the Floating Rate Note and all other amounts due hereunder. SECTION 7. PAYMENTS 7.01 METHOD OF PAYMENT. (a) (i) All payments to be made by the Shipowner under this Agreement and the Floating Rate Note shall be made without set-off or counterclaim in Dollars in immediately available and freely transferable funds no later than 11:00 A.M. (New York City time) on the date on which due. Except as provided in Section 7.01(a)(ii), all payments to be made by the Shipowner or the Agents hereunder shall be made if to (A) the Primary Lender (for the account of Govco Incorporated, its successors and assigns), (B) the Alternate Lender (for the account of Citibank, N.A., its successors and assigns), (C) the Facility Agent (for the account of Citibank International plc, its successors and assigns), (D) the Administrative Agent (for the account of Citicorp North America, Inc., its successors and assigns), or (E) any other Lender (for the account of such Lender, its successors and assigns), in each case to the Facility Agent (for the account of Citibank International plc, its successors and assigns) at Citibank, N.A., 399 Park Avenue, New York, New York 10043, DDA. Account No. 10963054, Attn: Loans Agency. Upon receipt thereof by the Facility Agent, the Facility Agent shall forthwith forward such funds to the party entitled thereto pursuant to the written instructions provided by such party to the Facility Agent in accordance with Section 11.02. (ii) The Shipowner shall pay the principal and the guaranteed amount of the Applicable Interest Rate on the Floating Rate Note to the Indenture Trustee and all other amounts due under this Agreement directly to the Person entitled thereto, in each case, by wire transfer in same day and immediately available and freely transferable funds. Wire transfer instructions shall be provided to the Shipowner. Until further notice, wire instructions for the Indenture Trustee are as follows: The First National Bank of Maryland, ABA #052-000-113, Credit Trust Receipts, A/C #090-02-764, Re: Petrodrill. (b) Except as otherwise provided herein, whenever any payment would otherwise fall due on a day which is not a Business Day, the due date for payment shall be the immediately succeeding Business Day, and interest and fees shall be computed in accordance with Section 11.01. 12 (c) Whenever a sum is required to be paid to the Facility Agent under this Agreement for the account of another Person, the Facility Agent shall not be obligated to make such sum available to such other Person unless and until the Facility Agent shall have established to its satisfaction that is has actually received payment of such sum. Notwithstanding the foregoing, unless it has received actual notice to the contrary, the Facility Agent may (but shall not be obligated to) assume on the date of any Disbursement or any other payment required to be made by any Lender hereunder that such Lender has made available to the Facility Agent such Disbursement or other payment and the Facility Agent may (but shall not be required to) make available to the Shipowner on such date a corresponding amount in reliance upon such assumption. Additionally, the Facility Agent may (but shall not be obligated to) assume on the date of any payment required to be made by the Shipowner hereunder that the Shipowner has made available to the Facility Agent such payment and the Facility Agent may (but shall not be required to) make available to the Lenders on such date a corresponding amount in reliance upon such assumption. If and to the extent that either (i) the Lender shall not in fact have made such Disbursement or other payment available to the Facility Agent and the Facility Agent has made available a corresponding amount to the Shipowner in reliance on the above-described assumptions or (ii) the Shipowner has not in fact made such payment and the Facility Agent has made available a corresponding amount to the Lender in reliance on the above-described assumptions, then, in either such case, such Lender agrees to repay to the Facility Agent forthwith on demand such corresponding amount together with an amount sufficient to indemnify the Facility Agent against any cost or loss it may have suffered or incurred by reason of its having paid out such sum prior to receipt thereof. 7.02 APPLICATION OF PAYMENTS. In the absence of an Indenture Default, the Lenders shall each apply payments received by them under this Agreement and the Floating Rate Note (whether at Stated Maturity, by reason of acceleration, prepayment or otherwise), in the following order of priority: (i) interest due pursuant to Section 4.02(a); (ii) installments of principal due; (iii) interest due pursuant to Section 4.02(b) other than the amount described in clause (i) above; (iv) all amounts due under the Fee Letter; and (v) all other amounts due under this Agreement and not otherwise provided for in this Section 7.02. Upon the occurrence of an Indenture Default, the Lenders shall each hold any payments they receive after an Indenture Default from, or on behalf of, the Shipowner under this Agreement, the Fee Letter and any related agreement (excluding the Floating Rate Note) and shall promptly deliver such payments to the Secretary if the Secretary has been required to honor a Guarantee as a result of said Indenture Default. All such amounts received during an Indenture Default and delivered to the Secretary in accordance with the preceding sentence shall be applied first to pay, satisfy and discharge all amounts owed by the Shipowner to the Secretary under the Secretary's Note and the Mortgage and then to pay, satisfy and discharge any and all amounts owed to the Lenders or the Agents. 13 SECTION 8. REPRESENTATIONS AND WARRANTIES BY THE SHIPOWNER 8.01 REPRESENTATIONS AND WARRANTIES OF THE SHIPOWNER. The Shipowner represents and warrants to the Agents and the Lenders that, as of the Closing Date: (a) EXISTENCE AND AUTHORITY. The Shipowner is duly organized, validly existing under the laws of its jurisdiction of formation, is in good standing under the laws of its jurisdiction of formation, has been duly qualified to do business in, and is in good standing as a foreign corporation in each jurisdiction in which the conduct of its business or the ownership of its properties requires it to be so qualified, and has full power, authority and legal right to own its properties and conduct its business as it is presently now conducted. The Shipowner has full power, authority and legal right (i) to execute and deliver this Agreement, the Floating Rate Note and the Indenture, (ii) to perform and observe the terms and provisions of each of said documents to be performed or observed by it, (iii) to consummate the transactions contemplated thereby and (iv) to own its properties (including, without limitation, the Vessel owned or to be owned by it) and conduct its business as presently conducted. (b) GOVERNMENT AND OTHER AUTHORIZATIONS. All consents, licenses, authorizations and approvals of, and exemptions by, any Governmental Authority and any governmental authorities within the United States or elsewhere and any other Persons that are necessary or advisable: (i) for the execution, delivery, performance and observance by the Shipowner of this Agreement, the Floating Rate Note, and the Indenture; and (ii) for the validity, binding effect and enforceability of this Agreement, the Floating Rate Note, and the Indenture have been obtained and are in full force and effect. (c) RESTRICTIONS. The execution, delivery and performance or observance by the Shipowner of the terms of, and consummation by the Shipowner of the transactions contemplated by, this Agreement, the Floating Rate Note, and the Indenture do not and will not conflict with or result in a breach or violation of: (i) the charter, by-laws or organizational documents of the Shipowner; (ii) any federal or state law of the United States or any other ordinance, decree, constitutional provision, regulation or other requirement of any Governmental Authority (including, without limitation, any restriction on interest that may be paid by the Shipowner); or (iii) any order, writ, injunction, judgment or decree of any court or other tribunal. Further, the execution, delivery and performance or observance by the Shipowner of the terms of, and consummation by the Shipowner of the transactions contemplated by, this Agreement, the Floating Rate Note, and the Indenture does not and will not conflict with or result in a breach of any agreement or instrument to which the Shipowner is a party, or by which it or any of its revenues, properties or assets may be subject, or result in the creation or imposition of any Lien upon any of the revenues, properties or assets of the Shipowner pursuant to any such agreement or instrument. "Lien" shall mean any lien, lease, mortgage, pledge, 14 hypothecation, preferential arrangement relating to payments, or other encumbrance or security interest. (d) BINDING EFFECT. This Agreement, the Floating Rate Note, and the Indenture which have been executed on or before the date hereof have been duly executed and delivered by the Shipowner. Each of the Agreement, the Floating Rate Note, and the Indenture constitutes, and each of the Agreement, the Floating Rate Note, and the Indenture as it may hereafter be amended will constitute, a direct, general and unconditional obligation of the Shipowner which is legal, valid and binding upon the Shipowner and enforceable against the Shipowner in accordance with its respective terms. All obligations evidenced by the Floating Rate Note will be entitled to the benefits of the Guarantees and the Authorization Agreement. (e) CHOICE OF LAW. Under applicable conflict of laws principles, the choice of law provisions of this Agreement, the Floating Rate Note and the Indenture are valid, binding and not subject to revocation by the Shipowner. In any proceedings brought for enforcement of this Agreement, the choice of the law of the State of New York as the governing law of such documents will be recognized and such law will be applied. In any proceeding brought for enforcement of the Indenture or the Floating Rate Note, the choice of law of the State of Maryland as the governing law of such documents will be recognized and such law will be applied. (f) LEGAL PROCEEDINGS. No legal proceedings are pending or, to the best of the Shipowner's knowledge, threatened before any court or governmental agency which might: (i) materially and adversely affect the Shipowner's financial condition, business or operations; (ii) restrain or enjoin or have the effect of restraining or enjoining the performance or observance of the terms and conditions of any of this Agreement, the Indenture or the Floating Rate Note; or (iii) in any other manner question the validity, binding effect or enforceability of any of the provisions of this Agreement, the Indenture or the Floating Rate Note. (g) USE OF THE VESSEL. The Vessel will be used for lawful purposes. (h) SHIPOWNER FINANCIAL STATEMENTS. The Shipowner Financial Statements present fairly the financial condition of the Shipowner at the date of such statements and the results of the operations of the Shipowner for such fiscal year. The Shipowner Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States consistently applied. Except as fully reflected in the Shipowner Financial Statements, there are no liabilities or obligations with respect to the Shipowner of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether or not due) for the period to which the Shipowner Financial Statements relate that, either individually or in the aggregate, would be material to the Shipowner. Since the date of the most recent audited Shipowner Financial Statements, there has been no material adverse change in the financial condition, business prospects or operations of the Shipowner. 15 "Shipowner Financial Statements" shall mean the financial statements of the Shipowner furnished to the Facility Agent prior to the date of this Agreement. (i) NO TAXES. There is no Tax imposed on or in connection with: (i) the execution, delivery or performance of this Agreement, the Indenture or the Floating Rate Note; (ii) the enforcement of this Agreement, the Indenture or the Floating Rate Note; or (iii) on any payment to be made to any Lender under this Agreement or the Floating Rate Note. (j) LAWS. None of this Agreement, the Indenture, the Floating Rate Note, the transactions contemplated thereunder nor any Person party to this Agreement, the Indenture or the Floating Rate Note is required to qualify under the Trust Indenture Act or register or qualify under any securities law. (k) DEFAULTS. No Event of Default has occurred and is continuing and no event or circumstance has occurred and is continuing which with the passage of time, the giving of notice or both would constitute an Event of Default. 8.02 AGREEMENTS OF THE SHIPOWNER. The Shipowner agrees that until all amounts owing under this Agreement and the Floating Rate Note have been paid in full, the Shipowner will, unless the Agents and the Lenders shall have consented in writing: (a) INTEREST RATE PROTECTION. At all times that (1) a Floating Rate Note exists and (2) the Applicable Interest Rate is equal to or greater than the Cap Rate less 0.5%, the Shipowner (at its expense) within fifteen (15) Business Days thereafter, shall (A) enter into, and thereafter maintain in full force and effect, an amortizing interest rate cap agreement with a strike price providing for a cap based on the Applicable Interest Rate not in excess of the Cap Rate per annum and otherwise acceptable to the Lenders, with a counterparty rated "AA" or better by any of the rating agencies that rate the Commercial Paper issued by the Primary Lender or such other counterparty reasonably acceptable to the Lenders, covering the Floating Rate Note and based on the expected amortization schedule of such Note, and (B) execute such documents and instruments as may be necessary, or in the opinion of the Facility Agent desirable, to effect the assignment of its rights thereunder to the Facility Agent for the benefit of the Lenders and, if any payments are made under any Guarantee, the Secretary, in every case with such terms as are reasonably acceptable to the Facility Agent for the protection of the Lenders. If the Shipowner fails to satisfy the requirements of this Section 8.02(a) within the fifteen (15) Business Days set forth above, the Facility Agent may (in its sole discretion) and if the Facility Agent so elects, the Shipowner hereby authorizes and directs the Facility Agent to, satisfy the requirements of this Section 8.02(a), all at the expense of the Shipowner, due on demand. (b) NOTICE OF DEFAULTS. Promptly, but in no event later than ten (10) days after the occurrence of an Indenture Default or an Event of Default of which the Shipowner has knowledge, notify the Facility Agent 16 and the Indenture Trustee of any report required by the Shipowner Documents (or any other document entered into by the Shipowner in connection therewith), and send a copy thereof to the Facility Agent, in each case by facsimile or hand delivery. (c) FINANCIAL REPORTS. Beginning with the fiscal year in which this Agreement is executed and continuing until all amounts owing under this Agreement and the Floating Rate Note have been paid in full, the Shipowner shall furnish to the Facility Agent (and the Facility Agent, upon receipt thereof, shall furnish to each Lender and the Administrative Agent) a copy of all financial reports furnished to the Secretary pursuant to the Title XI Reserve Fund and Financial Agreement. (d) OTHER ACTS. From time to time, do and perform any and all acts and execute any and all documents as may be necessary or as reasonably requested by the Facility Agent or the Indenture Trustee in order to effect the purposes of this Agreement and to protect the interests of the Lenders in the Floating Rate Note and the interests of the Lenders in the Guarantees. (e) USE OF PROCEEDS. Use proceeds from each Disbursement solely to finance: (i) the manufacture, construction, fabrication, financing and purchase of the Vessel; (ii) Construction Period Interest; and (iii) the Guarantee Fees. Use the proceeds from the issuance of any Fixed Rate Notes to repay amounts owed under the Floating Rate Note or to finance: (i) the manufacture, construction, fabrication, financing and purchase of the Vessel; (ii) Construction Period Interest; and (iii) the Guarantee Fees. (f) SUCCESSORS. Require that any successor to all or substantially all of its business as a result of any merger or consolidation with any other entity, dissolution or termination of legal existence, sale, lease, transfer or other disposal of any substantial part of its properties or any of its properties essential to the conduct of its business or operations, as now or hereafter conducted, any change in control, any agreement to do any of, or any combination of, the foregoing, to assume all of the Shipowner's indebtedness, liabilities and obligations under this Agreement, the Indenture and the Floating Rate Note. SECTION 9. CANCELLATION, SUSPENSION AND EVENTS OF DEFAULT 9.01 CANCELLATION. The Shipowner may cancel at any time all or any part of the Available Amount of the Credit Facility, provided that (i) thirty (30) days' prior irrevocable written notice is given to the Agents, the Indenture Trustee, and the Secretary and (ii) the Shipowner shall have paid to the Lenders any commitment fees accrued and unpaid under Section 6.01 and all other amounts due and payable under this Agreement and the Floating Rate Note as of the proposed date of cancellation. In the absence of an Indenture Default, the Lenders may not for any reason cancel at any time any part of the Available Amount of the Credit Facility. 17 9.02 EVENTS OF DEFAULT. Upon the occurrence of any of the following events or conditions (each, an "Event of Default"): (a) any failure by the Shipowner to pay when and as due any amount owing under this Agreement, but which is not guaranteed by the Secretary; or (b) any failure by the Shipowner to comply with its obligations under Section 8.02(b) or 8.02(e); or any failure by the Shipowner to perform or comply with any of its agreements set forth in this Agreement (exclusive of any events specified as an Event of Default in any other subsection of this Section 9.02 and exclusive of Section 8.02(a)), which failure, if capable of being cured, remains uncured for a period of thirty (30) days after written notice thereof has been given to the Shipowner by the Facility Agent; or (c) the Shipowner shall be unable to pay its debts when and as they fall due or shall admit in writing its inability to pay its debts as they fall due or shall become insolvent; or the Shipowner shall apply for or consent to the appointment of any liquidator, receiver, trustee or administrator for all or a substantial part of its business, properties, assets or revenues; or a liquidator, receiver, trustee or administrator shall be appointed for the Shipowner and such appointment shall continue undismissed, undischarged or unstayed for a period of thirty (30) days, or the Shipowner shall institute (by petition, application, answer, consent or otherwise) any bankruptcy, arrangement, readjustment of debt, dissolution, liquidation or similar executory or judicial proceeding; or a bankruptcy, arrangement, readjustment of debt, dissolution, liquidation or similar executory or judicial proceeding shall be instituted against the Shipowner and shall remain undismissed, undischarged or unstayed for a period of thirty (30) days; or (d) an Indenture Default has occurred; then, and in any such event, and at any time thereafter, if such event is continuing, and if there is no Indenture Default (or if there is an Indenture Default, only after the Secretary has received all payments due under the Secretary's Note and the Mortgage), any Agent or any Lender (by written notice to the Shipowner), shall have the right to institute any judicial or other proceedings under this Agreement to recover all amounts owing under this Agreement. The Lenders agree that so long as an Indenture Default exists, all amounts received during such period from, or on behalf of, the Shipowner shall be applied in the manner set forth in Section 7.02. Notwithstanding an Event of Default, the Lenders may not terminate the Available Amount of the Credit Facility without the Secretary's consent; PROVIDED, HOWEVER, that the Shipowner's use of the Available Amount of the Credit Facility shall remain subject to the requirements of Sections 2.02, 3.01, and 5.02. Except as expressly provided above in this Section 9.02, presentment, demand, protest and all other notices of any kind are hereby expressly waived. Notwithstanding any other provision of this Agreement, if Section 9.02(c) is applicable, the Lender may file appropriate claims 18 in connection therewith, but shall apply any funds collected as a consequence of said filings in accordance with the provisions of Section 7.02 of this Agreement. SECTION 10. GOVERNING LAW AND JURISDICTION 10.01 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 10.02 SUBMISSION TO JURISDICTION. Each of the Shipowner and the Lenders hereby irrevocably agrees that any legal suit, action or proceeding arising out of or relating to this Agreement, or any of the transactions contemplated hereby, may be instituted by the other parties hereto in the Courts of the State of New York or the Federal Courts sitting in the Borough of Manhattan, City of New York, State of New York. Each of the Shipowner and the Lenders hereby irrevocably waives, to the fullest extent permitted by law, any objection which it may have now or hereafter to the laying of the venue or any objection based on forum non conveniens, or based on the grounds of jurisdiction with respect to any such legal suit, action or proceeding and irrevocably submits generally and unconditionally to the jurisdiction of any such court in any such suit, action or proceeding. Each of the Shipowner and the Lenders agrees that a judgment, after exhaustion of all available appeals, in any such action or proceeding shall be conclusive and binding upon it and may be enforced in any other jurisdiction by suit upon such judgment, a certified copy of which shall be conclusive evidence of the judgment. Each of the Shipowner and the Lenders waives personal service of any summons, complaint, or other process, which service may be made by such or any other means permitted by New York law. 10.03 WAIVER OF SECURITY REQUIREMENTS. To the extent the Shipowner may, in any action or proceeding arising out of or relating to this Agreement be entitled under applicable law to require or claim that the Agents or the Lenders post security for costs or take similar action, the Shipowner hereby irrevocably waives and agrees not to claim the benefit of such entitlement. 10.04 NO LIMITATION. Nothing in this Section 10 shall affect the right of the Agents or any Lender to serve process in any manner permitted by law or to commence legal proceedings or otherwise proceed against the Shipowner in any jurisdiction; PROVIDED, HOWEVER, that except as provided in Section 9.02, in the event of an Indenture Default, the Agents and the Lenders may not proceed against the Shipowner without the Secretary's consent unless the Secretary has received full payment under the Secretary's Note. SECTION 11. MISCELLANEOUS 11.01 COMPUTATIONS. Each determination of an interest rate by the Administrative Agent or the Facility Agent, or any other Person pursuant to any provision of this Agreement, the Fee Letter or the Floating Rate Note, in the absence of error, shall be conclusive and binding on the Shipowner. Each 19 determination of a fee or other amounts (excluding interest rates) by the Facility Agent, any Lender, or any other Person pursuant to any provision of this Agreement, the Fee Letter or the Floating Rate Note, in the absence of manifest error, shall be conclusive and binding on the Shipowner. All computations of interest and fees hereunder and under the Floating Rate Note shall be made on the basis of a year of three hundred sixty-five (365) days and actual days elapsed; PROVIDED, HOWEVER, that the CP Rate and LIBOR shall be determined on the basis of a year of 360 days and actual days elapsed. The Secretary and Indenture Trustee may request supporting documentation for the information provided by the Facility Agent or the Administrative Agent to the Indenture Trustee. 11.02 NOTICES. Except as otherwise specified, all notices given hereunder shall be in writing, and shall be given by mail, facsimile, tested telex or personal delivery and shall be deemed to be given for the purposes of this Agreement on the day that such notice is received by the intended recipient thereof. Unless otherwise specified in a notice delivered in accordance with this Section 11.02, all notices shall be delivered to the parties hereto and to the Indenture Trustee and the Secretary at their respective addresses indicated below: TO THE FACILITY AGENT AND THE LENDERS: Address: Citibank International plc, as Facility Agent P.O. Box 242 336 Strand London, England WC2R 1HB Attention: Karen Doran Telephone: 01144171500 4482 Facsimile: 01144171500 4274 With a copy to: Citibank, N.A., as the Alternate Lender 399 Park Avenue New York, New York 10043 Attention: Structured Trade Finance Facsimile (212) 793-2330 Telephone: (212) 559-6787 With a copy to the Administrative Agent TO THE ADMINISTRATIVE AGENT Address: Citicorp North America, Inc. 399 Park Avenue New York, New York 10043 Attention: Structured Trade Finance Facsimile (212) 793-2330 20 Telephone: (212) 559-6787 TO THE SHIPOWNER Petrodrill Five Limited c/o Arias, Fabrega & Fabrega P.O. Box 985 Omar Hodge Building Wickham's Cay Road Town, Tortola British Virgin Islands With a copy to: Petrodrill Five Limited c/o: Petrodrill Engineering N.V. K.P. van der Mandelelaan 38 3062 MB Rotterdam (Brainpark), The Netherlands Netherlands Attention: Steve Assiter Telephone: 011.31.10.272.2722 Facsimile: 011.31.10.272.2727 Email: assister@petrodrill.nl TO THE SECRETARY Address: SECRETARY OF TRANSPORTATION c/o Maritime Administrator 400 Seventh Street, S.W. Washington, D.C. 20590 Attention: Office of Ship Finance Telephone: (202) 366-5744 Facsimile: (202) 366-7901 TO THE INDENTURE TRUSTEE Address: FMB Trust Company, National Association Mail Code 101-591 25 South Charles Street Baltimore, Maryland 21201 Attention: Corporate Trust Department Telephone: (410) 244-4238 Facsimile: (410) 244-4236 21 11.03 DISPOSITION OF INDEBTEDNESS. Once the Shipowner has completely drawn down on the Credit Facility and the Available Amount is zero, each Lender may sell, assign, transfer, negotiate, or otherwise dispose of all or any part of its interest in all or any part of the Shipowner's indebtedness under this Agreement and the Floating Rate Note to any party (collectively, a "Disposition of Indebtedness"), and any such party shall enjoy all the rights and privileges of such Lender under this Agreement and the Floating Rate Note; PROVIDED, HOWEVER, that each Disposition of Indebtedness to any Person other than a domestic Affiliate of a Lender shall require the prior written consent of the Shipowner (which consent shall not be unreasonably withheld or delayed); PROVIDED, FURTHER, HOWEVER, that each Lender may pledge or grant participation in all or any part of its interest in all or any part of the Shipowner's indebtedness under this Agreement and the Floating Rate Note to any party at any time so long as such Lender's commitment to lend the Available Amount under this Agreement is not affected thereby. The Shipowner shall, at the request of the Facility Agent, execute and deliver to the Facility Agent or to any party that the Facility Agent may designate, any such further instruments as may be necessary or desirable to give full force and effect to a Disposition of Indebtedness by the applicable Lender. 11.04 DISCLAIMER. Neither the Agents nor the Lenders shall be responsible in any way for the performance of the Construction Contract or any other Shipowner Document, and no claim against the Shipbuilder or any other Person with respect to the performance of the Construction Contract will affect the obligations of the Shipowner under this Agreement or the Floating Rate Note. 11.05 NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part of any Agent or any Lender in exercising any right, power or privilege under this Agreement, the Floating Rate Note or the Indenture and no course of dealing between or among the Shipowner and any Agent or any Lender shall operate as a waiver of the rights of the Shipowner and such Lenders against each other under this Agreement; nor shall any single or partial exercise of any right, power or privilege hereunder or under the Floating Rate Note or the Indenture preclude the Shipowner, the Agents, or the Lenders from exercising against each other any other right, power or privilege hereunder. The rights and remedies expressly provided herein are cumulative and not exclusive of any rights or remedies which the Agents or the Lenders would otherwise have. No notice to or demand on the Shipowner in any case shall entitle the Shipowner to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of any Agent or any Lender under this Agreement to any other or further action in any circumstances without notice or demand. Notwithstanding any other provision to the contrary herein, no provision in this Agreement or any other related agreement preserves any rights in favor of the parties against the Secretary in the event that either party fails or delays to exercise any rights, powers, or privileges under this Agreement, the Floating Rate Note or the Indenture or engages in any particular course of dealing. 22 11.06 CURRENCY. All payments of principal, interest, fees or other amounts due hereunder and under the Floating Rate Note shall be made in Dollars, regardless of any law, rule, regulation or statute, whether now or hereafter in existence or in effect in any jurisdiction, which affects or purports to affect such obligations. The obligation of the Shipowner in respect of any amount due under this Agreement or the Floating Rate Note, notwithstanding any payment in any other currency (whether pursuant to a judgment or otherwise), shall be discharged only to the extent of the amount in Dollars that the Person entitled to receive that payment may, in accordance with normal banking procedures, purchase with the sum paid in that other currency (after any premium and costs of exchange) on the Business Day immediately succeeding the day on which that Person receives that payment. If the amount in Dollars that may be so purchased for any reason falls short of the amount originally due, the Shipowner shall pay such additional amounts, in Dollars, to compensate for the shortfall. Any obligation of the Shipowner not discharged by that payment shall continue to be due as a separate and independent obligation and shall accrue interest in accordance with Section 4.02 until discharged as provided herein. 11.07 SEVERABILITY. To the extent permitted by applicable law, the illegality or unenforceability of any provision of this Agreement shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement. 11.08 AMENDMENT OR WAIVER. This Agreement may not be changed, discharged or terminated without the written consent of the parties hereto, and no provision hereof may be waived without the written consent of the party to be bound thereby. There may be no change, discharge, termination or claim of waiver of the terms of this Agreement without the prior written consent of the Secretary, who is entitled to enforce his rights under this Agreement as an intended third party beneficiary to this Agreement. The parties hereto acknowledge, however, that nothing in this Agreement creates in either the Shipowner or the Lenders any right whatsoever against the Secretary. 11.09 INDEMNIFICATION. Without limiting any other rights that any Agent or any Lender may have hereunder or under applicable law, the Shipowner hereby agrees to indemnify each of the Agents and the Lenders (each, an "Indemnified Party") from and against any and all damages, losses, claims, liabilities and related costs and expenses, including reasonable attorneys' fees and disbursements (all the foregoing being collectively referred to as "Indemnified Amounts") awarded against or incurred by such Indemnified Party arising out of or as a result of this Agreement or the Floating Rate Note excluding, however, Indemnified Amounts to the extent resulting from gross negligence or willful misconduct on the part of such Indemnified Party. In the event of an Indenture Default, all amounts received by such Indemnified Party pursuant to such indemnification after an Indenture Default shall be held and paid in the manner required by Section 7.02. 23 11.10 BENEFIT OF AGREEMENT. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto; PROVIDED, HOWEVER, that the Shipowner may not assign any of its rights or obligations hereunder without the prior written consent of the Lenders, and, to the extent set forth in paragraph 11.03 hereof, the Secretary. 11.11 WAIVER OF JURY TRIAL. Each of the Shipowner and the Lenders waives its respective rights to a trial by jury of any claim or cause of action based upon or arising out of or related to this Agreement, any assignment or the transactions contemplated hereby, in any action, proceeding or other litigation of any type brought by any party against the other parties, whether with respect to contract claims, tort claims, or otherwise. Each of the Shipowner and the Lenders agrees that any such claim or cause of action shall be tried by a court trial without a jury. Without limiting the foregoing, the parties further agree that their respective right to a trial by jury is waived by operation of this section as to any action, counterclaim or other proceeding which seeks, in whole or in part, to challenge the validity or enforceability of this Agreement, any assignment or any provision hereof or thereof. This waiver shall apply to any subsequent amendments, renewals, supplements or modifications to this Agreement or any assignment. 11.12 EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same Agreement. Delivery of an executed counterpart of a signature page to this Agreement by facsimile shall be effective as delivery of a manually executed counterpart of this Agreement. 11.13 SHIPOWNER DOCUMENTS. Notwithstanding the provisions of this Agreement, in any conflict between this Agreement and the provisions of the Shipowner Documents, the Shipowner Documents shall govern the agreement between the parties hereto, but only with respect to the subject matter thereof. Notwithstanding the previous sentence, any provision in the Indenture (or any other agreement the Shipowner has entered into with any other Person) purporting to release the Shipowner of any indebtedness, liability or obligation shall not apply to any indebtedness, liability or obligation of the Shipowner hereunder and no termination of the Indenture (or any other agreement the Shipowner has entered into with any other Person) shall affect the continued effectiveness of this Agreement, which shall continue in full force and effect until the Credit Facility has been terminated and all indebtedness, liabilities and obligations of the Shipowner have been fully discharged and satisfied, the Floating Rate Note have been paid, satisfied and discharged in full, and there has elapsed a year and a day from the last payment received from, or on behalf, of the Shipowner. However, this Section 11.13 shall have no affect on the relationships established and the agreements entered into by the parties to the Shipowner Documents (and such other agreements the Shipowner has entered into with any other Person), in each case to which the Lenders are not parties in their capacities as the Lenders hereunder. 24 11.14 ENTIRE AGREEMENT. This Agreement, the Fee Letter and the Floating Rate Note contain the entire agreement among the parties hereto regarding the Credit Facility. 11.15 NO PROCEEDINGS. Each of the Shipowner, the Alternate Lender and the Agents hereby agrees that it will not institute against, or join any other Person in instituting against, the Primary Lender any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding, or any other proceeding under any federal or state bankruptcy or similar law, so long as any Commercial Paper issued by the Primary Lender shall be outstanding or there shall not have elapsed one year plus one day since the last day on which any such Commercial Paper shall have been outstanding. SECTION 12. ARRANGEMENTS AMONG THE AGENTS AND THE LENDERS 12.01 APPOINTMENT. Each Lender hereby appoints the Facility Agent to act as its agent in connection herewith and in connection with the Floating Rate Note and the Indenture and authorizes the Facility Agent to exercise such rights, powers and discretions as are specifically delegated to the Facility Agent by the terms hereof and thereof, together with all such rights, powers and discretions as are reasonably incidental thereto. Without limiting the foregoing, all notices to be delivered to, and approvals to be given by, a Lender under the disbursement procedures described in Section 3.01 hereof shall be delivered to and given by the Facility Agent on behalf of such Lender. 12.02 RIGHTS OF FACILITY AGENT. The Lenders and the Facility Agent agree that the Facility Agent may: (i) assume that (a) any representation made by the Shipowner in connection herewith is true; (b) no event which is or may become an Event of Default has occurred; (c) the Shipowner is not in breach of or default under its obligations hereunder; (d) any right, power, authority or discretion vested herein upon the Lenders or any other person or group of persons has not been exercised; unless it has, in its capacity as Facility Agent, notice or actual knowledge to the contrary; (ii) engage and pay for the advice or services of any lawyers, accountants, surveyors or other experts whose advice or services may to it seem necessary, expedient or desirable and rely upon any advice so obtained; (iii) rely as to any matters of fact which might reasonably be expected to be within the knowledge of the Shipowner upon a certificate signed by or on behalf of the Shipowner; (iv) rely upon any communication or document believed by it to be genuine; (v) refrain from exercising any right, power or discretion vested in it as facility agent hereunder unless and until instructed by a Lender as to 25 whether or not such right, power or discretion is to be exercised and, if it is to be exercised, as to the manner in which it should be exercised; and (vi) refrain from acting in accordance with any instructions of any Lender to begin any legal action or proceeding arising out of or in connection with this Agreement until it shall have received such security as it may require (whether by way of payment in advance or otherwise) for all costs, claims, expenses (including legal fees) and liabilities which it will or may expend or incur in complying with such instructions. 12.03 DUTIES. The Facility Agent shall: (i) promptly inform each Lender of the contents of any notice or document received by it from the Shipowner hereunder; (ii) promptly notify each Lender of the occurrence of any Event of Default or any default by the Shipowner in the due performance of or compliance with its obligations under this Agreement of which the Facility Agent has notice from any other party hereto; (iii) save as otherwise provided herein, act as facility agent hereunder in accordance with any instructions given to it by any Lender, which instructions shall be binding on all of the Lenders; and (iv) if so instructed by any Lender, refrain from exercising any right, power or discretion vested in it as facility agent hereunder. 12.04 LIMITATION ON OBLIGATIONS OF FACILITY AGENT. Notwithstanding anything to the contrary expressed or implied herein, the Lenders and the Facility Agent agree that the Facility Agent shall not: (i) be bound to inquire as to: 26 (a) whether or not any representation made by the Shipowner in connection herewith is true; (b) the occurrence or otherwise of any event which is or may become an Event of Default; (c) the performance by the Shipowner of its obligations hereunder; or (d) any breach of or default by the Shipowner or under its obligations hereunder; (ii) be bound to account to any Lender for any sum or the profit element of any sum received by it for its own account; (iii) be bound to disclose to any other person any information relating to the Shipowner or any of its agencies if such disclosure would or might in its opinion constitute a breach of any law or regulation or be otherwise actionable at the suit of any person; or (iv) be under any obligations other than those for which express provision is made herein. 12.05 INDEMNIFICATION BY LENDERS. The Alternate Lender shall, from time to time on demand by the Facility Agent, indemnify the Facility Agent, against any and all costs, claims, expenses (including legal fees) and liabilities (collectively, "Liabilities") together with any tax thereon which the Facility Agent may incur, otherwise than by reason of its own gross negligence or willful misconduct, in acting in its capacity as facility agent hereunder (including, without limitation, any Liabilities in anyway relating to or arising out of certifications made with respect to either (a) the due authorization, execution or delivery of a Floating Rate Note, or (b) laws and/or regulations of any Governmental Authority, in each case in connection with any request by the Facility Agent to the Indenture Trustee or the Secretary for the Secretary to endorse its guarantee on a Floating Rate Note or for the Indenture Trustee to authenticate a Floating Rate Note). 12.06 LIMITATION ON RESPONSIBILITY. The Facility Agent accepts no responsibility to the Lenders for the accuracy and/or completeness of any information supplied by the Shipowner in connection herewith or for the legality, validity, effectiveness, adequacy or enforceability of this Agreement, and the Facility Agent shall be under no liability to the Lenders (nor to the Shipowner, Indenture Trustee or the Secretary with respect to calculations of the Applicable Interest Rate) as a result of taking or omitting to take any action in relation to this Agreement, save in the case of its own negligence or willful misconduct. 12.07 NO CLAIMS ON EMPLOYEES OF FACILITY AGENT. Each Lender agrees that it will not assert or seek to assert against any director, officer or employee 27 of the Facility Agent any claim which it might have against it in respect of the matters referred to in Clause 12.06. 12.08 BANKING BUSINESS. The Lenders agree that the Facility Agent may accept deposits from, lend money to and generally engage in any kind of banking or other business with the Shipowner. 12.09 RESIGNATION OR TERMINATION OF FACILITY AGENT. (i) The Facility Agent may (after consultation with the Shipowner and the Lenders) resign its appointment hereunder at any time without assigning any reason therefor by giving not less than thirty (30) days' prior written notice to that effect to each of the other parties hereto; PROVIDED, that no such resignation shall be effective until a successor for the Facility Agent is appointed in accordance with the succeeding provisions of this Section 12; (ii) The Lenders and the Shipowner may jointly seek the termination of the appointment of the Facility Agent hereunder at any time by giving not less than thirty (30) days prior written notice to that effect to the Facility Agent; PROVIDED that no such termination shall be effective until a successor for the Facility Agent is appointed in accordance with the succeeding provisions of this Section 12; PROVIDED FURTHER that any such notice of termination must be signed by all of the Lenders and the Shipowner; and (iii) For the avoidance of doubt the parties hereto agree that the provisions of this Section 12.09 shall at no time apply to or restrict the ability of the Administrative Agent to resign its position of Administrative Agent. 12.10 SUCCESSOR TO FACILITY AGENT. If the Facility Agent gives notice of its resignation pursuant to Section 12.09(i) or receives notice of termination pursuant to Section 12.09(ii), then any reputable and experienced bank or other financial institution may be appointed as a successor to the Facility Agent by the Lenders with the consent of the Secretary and Shipowner (which consent of the Shipowner shall not be unreasonably withheld or delayed) during the period of such notice but, if no such successor is so appointed, the Facility Agent may appoint such a successor itself with the consent of the Secretary and Shipowner (which consent of the Shipowner shall not be unreasonably withheld or delayed). 12.11 DISCHARGE OF OBLIGATIONS. If a successor to the Facility Agent is appointed under the provisions of Section 12.10, then (i) the retiring Facility Agent shall be discharged from any further obligation hereunder but shall remain entitled to the benefits of the provisions of this Section 12 and (ii) its successor and each of the other parties hereto shall have the same rights and obligations amongst themselves as they would have had if such successor had been a party hereto. 12.12 RESPONSIBILITIES OF LENDERS. It is understood and agreed by each Lender that it is, and will continue to be, solely responsible for making its own independent appraisal of and investigations into the financial condition, 28 creditworthiness, condition, affairs, status and nature of the Shipowner, the Secretary and the United States of America and, accordingly, each Lender warrants to the Facility Agent that it has not relied and will not hereafter rely on the Facility Agent: (i) to check or inquire on its behalf into the adequacy, accuracy or completeness of any information provided by the Shipowner in connection with this Agreement or the transaction herein contemplated (whether or not such information has been or is hereafter circulated to such Lender by the Facility Agent); or (ii) to assess or keep under review on its behalf the financial condition, creditworthiness, condition, affairs, status or nature of the Shipowner. 12.13 AGENCY DIVISION. In acting as Facility Agent for the Lenders, the Facility Agent's agency division shall be treated as a separate entity from any other of its divisions or departments and, notwithstanding the foregoing provisions of this Section 12, in the event that the Facility Agent should act for the Shipowner in any capacity in relation to any other matter, any information given by the Shipowner to the Facility Agent in such other capacity may be treated as confidential by the Facility Agent. 12.14 ADMINISTRATIVE AGENT. Each party hereto (other than the Administrative Agent) acknowledges that the Administrative Agent is a party hereto only in its capacity as administrative agent of the Primary Lender and the Primary Lender's commercial paper holders. 12.15 FACILITY AGENT ONLY AGENT FOR THE LENDERS. The Facility Agent is not authorized to, nor shall it, act as the agent for the Secretary, the Indenture Trustee, the Shipowner or any of their successors in interest or assigns in any of the capacities provided for herein. 29 IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed and delivered as of the date first above written. PETRODRILL FIVE LIMITED, as the GOVCO INCORPORATED, as the Shipowner Primary Lender, by Citicorp North America, Inc., its By: /s/ EARL W. MCNIEL attorney-in-fact. (Signature) By: /s/ P. A. BOTTICELLI Name: EARL W. MCNIEL (Signature) (Print) Name: P. A. BOTTICELLI Title: TREASURER (Print) Title: VICE PRESIDENT (Print) CITIBANK INTERNATIONAL PLC, CITIBANK, N.A., as the as Facility Agent Alternate Lender By: /s/ P. A. BOTTICELLI By: /s/ AE KYONG CHUNG (Signature) (Signature) Name: P. A. BOTTICELLI Name: AE KYONG CHUNG (Print) (Print) Title: VICE PRESIDENT Title: VICE PRESIDENT (Print) (Print) CITICORP NORTH AMERICA, INC., as the Administrative Agent By: /s/ P. A. BOTTICELLI (Signature) Name: P. A. BOTTICELLI (Print) Title: VICE PRESIDENT (Print) EXHIBIT 1 TO CREDIT AGREEMENT Schedule of Definitions to Credit Agreement Dated as of April 9, 1999 "Accelerated Repayment" shall have the meaning set forth in Section 4.02(b) of the Credit Agreement. "Act" means the Merchant Marine Act, 1936, as amended, and in effect on the Closing Date. "Administrative Agent" means CITICORP NORTH AMERICA, INC., a Delaware corporation, as administrative agent for the Primary Lender and the commercial paper holders of the Primary Lender (and their respective successors and assigns), and its permitted successors and assigns. "Affiliate" or "Affiliated" means any Person directly or indirectly controlling, controlled by, or under common control with, another Person. "Agent" means each of the Administrative Agent and the Facility Agent, individually, and "Agents" means the Administrative Agent and the Facility Agent, collectively. "Alternate Lender" shall have the meaning set forth in the preamble to the Credit Agreement. "Applicable Interest Rate" shall mean (i) with respect to any Disbursement or portion thereof that is funded by the Primary Lender through its issuance of commercial paper notes and so long as the Primary Lender is the holder of the indebtedness related to such funded portion, a rate (the "CP Rate") equal to the sum of (A) the Primary Lender's weighted average cost (defined below) related to the issuance of commercial paper notes and other short-term borrowings or the sale of participation interests (collectively, "Commercial Paper"), which in each case have been allocated by the Primary Lender to the Credit Facility, which rate includes related issuance costs incurred by the Primary Lender, plus (B) during the Construction Period, four-tenths of one percent (.40%) and thereafter, nine-twentieths of one percent (0.45%), as calculated by the Administrative Agent for each Interest Period and specified in a notice sent by the Administrative Agent to the Facility Agent and by the Faculty Agent to the Shipowner and the Indenture Trustee at least three (3) Business Days prior to each Interest Payment Date on which the interest so calculated is payable (For purposes of the foregoing, the Primary Lender's "weighted average cost" of Commercial Paper shall consist of (I) the actual interest rate paid to purchasers of Commercial Paper, (II) the costs associated with the issuance of the Commercial Paper and (III) other borrowings the Primary Lender may incur, including the amount to fund small or odd dollar amounts that are not easily accommodated in the commercial paper market); and (ii) with respect to any Disbursement funded by the Alternate Lender or to the extent that a Disbursement held by the Primary Lender is assigned to the Alternate Lender or to any other assignee, then, from and after the applicable Disbursement Date or the effective date of such assignment, as the case may be, a rate per annum equal to LIBOR plus three tenths of one percent (0.30%) per annum; provided, however, that, if the Alternate Lender shall have determined, prior to the commencement of any Interest Period that: (A) Dollar deposits of sufficient amount and maturity for funding a Disbursement are not available to such Lender in the London interbank market in the ordinary course of business; or (B) by reason of circumstances affecting the relevant market, adequate and fair means do not exist for ascertaining the rate of interest to be applicable to a Disbursement; or (C) the relevant rate of interest referred to in the definition of LIBOR which is to be used to determine the rate of interest for a Disbursement does not cover the funding cost to the Lender of making or maintaining the Disbursement, then the Lender shall so notify the Indenture Trustee, who shall give notice to the Shipowner of such condition and interest shall, effective as of the date of such notice and so long as such condition shall exist, accrue during each applicable Interest Period at the Base Rate; provided, further, however that if, in the Lender's reasonable judgment, it becomes unlawful at any time for such Lender to make or maintain Disbursements based upon LIBOR, the Lender shall so notify the Indenture Trustee, who shall give notice to the Shipowner of such determination and, effective as of the date of such notice and so long as such condition shall exist, interest shall thereafter accrue during each applicable Interest Period at the Base Rate. -2- "Authorization Agreement" means the Authorization Agreement, Contract No. MA-13510, dated the Closing Date, between the Secretary and the Indenture Trustee, whereby the Secretary authorizes the Guarantee of the United States of America to be endorsed on the Floating Rate Note, as the same is originally executed, or as modified, amended or supplemented in accordance with the applicable provisions thereof. "Available Amount" shall have the meaning set forth in Section 2.01 of the Credit Agreement. "Base Rate" means, for any Interest Period or any other period, a fluctuating interest rate per annum as shall be in effect from time to time which rate per annum shall at all times be equal to the higher of: (a) the rate of interest announced publicly by Citibank, N.A. in New York, New York, from time to time, as Citibank, N.A.'s base rate; or (b) One-half of one percent (0.50%) per annum above the latest three-week moving average of secondary market morning offering rates in the United States for three-month certificates of deposit of major United States money market banks, such three-week moving average being determined weekly on each Monday (or, if any such day is not a Business Day, on the next succeeding Business Day) for the three-week period ending on the previous Friday by Citibank, N.A. on the basis of such rates reported by certificate of deposit dealers to and published by the Federal Reserve Bank of New York, or, if such publication shall be suspended or terminated, on the basis of quotations for such rates received by Citibank, N.A. from three New York certificate of deposit dealers of recognized standing selected by Citibank, N.A., in either case adjusted to the nearest one-fourth of one percent (0.25%) or, if there is no nearest one-fourth of one percent, to the next higher one-fourth of one percent. "Business Day" shall mean any day on which dealings in Dollar deposits are carried on in the London interbank market and on which commercial banks in London and New York City are open for domestic and foreign exchange business. "Certificate Authorizing Disbursement" shall mean, with respect to a Disbursement, the United States Certificate Authorizing Disbursement substantially in the form set forth in Annex A to the Credit Agreement. -3- "Closing Date" means April 9, 1999. "Commercial Paper" shall have the meaning set forth in clause (a)(i)of the definition of Applicable Interest Rate herein. "Construction Contract" means that certain Semi-Submersible Drilling Vessel Construction Contract (Hull No. 1829), dated April 9, 1998, by and between the Shipowner and the Shipyard, as the same may be amended, modified or supplemented in accordance with the applicable provisions thereof. "Construction Period" shall mean the period from the date hereof to the Delivery Date. "Construction Period Interest" shall mean all interest that accrues on the Outstanding Principal during the Construction Period. "CP Rate" shall have the meaning set forth in clause (a)(i) of the definition of Applicable Interest Rate herein. "Credit Agreement" or "Agreement" shall mean the Credit Agreement, dated as of the Closing Date, among the Shipowner; the Lenders, and the Agents, including any Exhibit, Annex, or other attachment thereto, as the same may be amended, modified or supplemented in accordance with the applicable provisions thereof. "Credit Facility" shall have the meaning set forth in Whereas Clause (A) of the Credit Agreement. "Credit Facility Amount" shall have the meaning set forth in Section 2.01 of the Credit Agreement. "Delivery Date" means the date on which the Vessel is delivered to and accepted by the Shipowner. "Depository Agreement" means the Depository Agreement, Contract No. MA-13514, dated the Closing Date, between the Shipowner, CITIBANK, N.A., as Depository, and the Secretary, as the same is originally executed, or amended, modified or supplemented in accordance with the applicable provisions thereof. -4- "Disbursements" shall have the meaning set forth in Section 2.03 of the Credit Agreement. "Disbursement Date" shall mean, in relation to any Disbursement, the Business Day on which the Lender shall make such Disbursement. "Disposition of Indebtedness" shall have the meaning set forth in Section 11.03 of the Credit Agreement. "Dollars", "U.S. Dollars", "U.S.D.", "U.S. $" or "$" shall mean the lawful currency of the United States of America. "Event of Default" shall have the meaning set forth in Section 9.02 of the Credit Agreement. "Facility Agent" means CITIBANK INTERNATIONAL PLC, a bank organized and existing under the laws of England, as facility agent for both the Primary Lender and the Alternative Lender (and their respective successors and assigns), and its permitted successors and assigns. "Fee Letter" shall have the meaning set forth in Section 6.01 of the Credit Agreement. "Final Disbursement Date" shall have the meaning set forth in Section 2.02 of the Credit Agreement. "Fixed Rate Note" shall mean the Note substantially identical to the form of Exhibit 3 to the Indenture, appropriately completed. "Floating Rate Note" shall mean the Note substantially identical to the form of Exhibit 2 to the Indenture, appropriately completed. "Governmental Authority" shall mean the government of any country, any agency, department or other administrative authority or instrumentality thereof, and any local or other governmental authority within any such country. "Guarantee" or "Guarantees" means the guarantee of the Floating Rate Note by the United States of America pursuant to Title XI of the Act, as provided in the Authorization Agreement. "Guarantee Commitment" means the Commitment to Guarantee Obligations, Contract No. MA-13509, dated as of the Closing Date, -5- executed by the Secretary and accepted by the Shipowner with respect to the Guarantees, as originally executed or as modified, amended or supplemented in accordance with the applicable provisions thereof. "Guarantee Fees" shall mean the amounts described in the Guarantee Commitment payable in consideration for the commitment therein described and payable as provided in such Guarantee Commitment. "Holder" means each holder of the Floating Rate Note. "Indemnified Amounts" shall have the meaning set forth in Section 11.09 of the Credit Agreement. "Indemnified Party" shall have the meaning set forth in Section 11.09 of the Credit Agreement. "Indenture" means the Trust Indenture dated as of the Closing Date, between the Shipowner and the Indenture Trustee, as the same is originally executed, or as modified, amended or supplemented in accordance with the applicable provisions thereof. "Indenture Default" has the meaning specified in Article VI of Exhibit 1 to the Indenture. "Indenture Trustee" means FMB Trust Company, National Association, a national banking association, and any successor trustee permitted under the Indenture. "Interest Payment Date" means, with respect to the Floating Rate Note, the date when any installment of interest on such Note is due and payable, which are March 15 and September 15 of each year, beginning on September 15, 1999, and the date of any prepayment of the Floating Rate Note. "Interest Period" shall mean, with respect to any Disbursement, (i) the period commencing on the Disbursement Date and extending up to, but not including, the next Interest Payment Date; and (ii) thereafter the period commencing on each Interest Payment Date and extending up to, but not including, the next Interest Payment Date. "Lender" shall have the meaning set forth in the preamble to the Credit Agreement. -6- "Liabilities" shall have the meaning set forth in Section 12.05 of the Credit Agreement. "LIBOR" (a) in relation to any Interest Period, shall mean the rate of interest per annum (rounded upward, if necessary, to the nearest 1/16 of 1%) quoted by the principal London office of CITIBANK, N. A., at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for the offering to leading banks in the London interbank market of U.S. Dollar deposits for a period and in an amount comparable to such Interest Period and the principal amount upon which interest is to be paid during such Interest Period; and (b) in relation to any Post Maturity Period, shall have the meaning as set forth in Section 4.02(b) of the Credit Agreement. "Lien" shall have the meaning set forth in Section 8.01(c) of the Credit Agreement. "Liquidation Period" shall have the meaning set forth in Section 4.03(a) of the Credit Agreement. "Maturity" when used with respect to any Obligation, means the date on which the principal of, or interest on, such Obligation becomes due and payable as therein provided, whether on a Payment Date, at the Stated Maturity or by prepayment, repayment, redemption or declaration of acceleration or otherwise. "Mortgage" means the first preferred ship mortgage on the Vessel, Contract No. MA-13512, between the Shipowner and the Secretary, as originally executed or as modified, amended or supplemented in accordance with the applicable provisions thereof. "Note" shall mean a Floating Rate Note or a Fixed Rate Note. "Obligation" or "Obligations" shall mean the Floating Rate Note or Fixed Rate Note(s) of the Shipowner bearing a Guarantee and authenticated and delivered pursuant to the Indenture and the Authorization Agreement. "Other Taxes" shall have the meaning set forth in Section 6.02(a) of the Credit Agreement. -7- "Outstanding Principal" shall have the meaning set forth in Section 2.01 of the Credit Agreement. "Payment Date" shall mean March 15 and September 15 of each year, beginning on March 15, 2001. "Payment Default" has the meaning specified in Section 6.01(a) of Exhibit 1 to the Indenture. "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Post Maturity Applicable Interest Rate" shall have the meaning set forth in Section 4.02(b) of the Credit Agreement. "Post Maturity Interest Rate" shall have the meaning set forth in Section 4.02(b) of the Credit Agreement. "Post Maturity Period" shall have the meaning set forth in Section 4.02(b) of the Credit Agreement. "Primary Lender" shall have the meaning set forth in the preamble to the Credit Agreement. "Quotation Date" shall have the meaning set forth in Section 4.02(b) of the Credit Agreement. "Redemption" means with respect to the redemption of the Floating Rate Note, the repayment or prepayment of the Floating Rate Note as applicable. "Redemption Date" means, with respect to the Floating Rate Note, a date fixed for the prepayment, repayment or redemption of such Note by or pursuant to Section 4 of the Credit Agreement, Article Fourth of the Indenture, or Article III of Exhibit 1 to the Indenture. "Redemption Price" means, with respect to the Floating Rate Note, the price at which the Floating Rate Note is to be prepaid, repaid, or redeemed pursuant to Section 4 of the Credit Agreement, Article Fourth of the Indenture, or Article III of Exhibit 1 to the Indenture. -8- "Secretary" means the Secretary of Transportation or any official or official body from time to time duly authorized to perform the duties and functions of the Secretary of Transportation under Title XI of the Act (including the Maritime Administrator, the Acting Maritime Administrator, and to the extent so authorized, the Deputy Maritime Administrator and other officials of the Maritime Administration). "Secretary's Note" means a promissory note or promissory notes issued and delivered by the Shipowner to the Secretary described in Article Third of the Special Provisions of the Security Agreement and shall also mean any promissory note issued in substitution for and replacement thereof pursuant to the Security Agreement. "Security Agreement" shall mean that certain security agreement, Contract No. MA-13511 dated as of the Closing Date, with respect to the Vessel, executed by the Shipowner and the Secretary relating to the security in respect to the Guarantees, as originally executed or as modified, amended or supplemented in accordance with the applicable provisions thereof. "Shipowner" means PETRODRILL FIVE LIMITED, a British Virgin Islands international business company, and for purposes of the Indenture and the Floating Rate Note, subject to the provisions of Sections 6.09, 8.01 and 8.02 of Exhibit 1 to the Indenture, shall also include its successors and assigns; provided, however, that for purposes of the Credit Agreement, the term Shipowner shall also include the Shipowner's permitted successors and assigns under the Credit Agreement. "Shipowner's Documents" means the Security Agreement, the Mortgage, the Title XI Reserve Fund and Financial Agreement, the Depository Agreement, and the Secretary's Note. "Shipowner Financial Statements" shall have the meaning set forth in Section 8.01(h) of the Credit Agreement. "Shipyard" or "Shipbuilder" means TDI-Halter, Limited Partnership. "Stated Maturity," when used with respect to the Floating Rate Note, means the date determinable as set forth in such Note as the final date on which the principal of such Note is due and payable, which shall include, without limitation, each of the Payment Dates. -9- "Taxes" shall have the meaning set forth in Section 6.02(a) of the Credit Agreement. "Title XI Reserve Fund and Financial Agreement" means that certain Title XI Reserve Fund and Financial Agreement, Contract No. MA-13513, dated as of the Closing Date, executed by the Shipowner and the Secretary, as amended, modified or supplemented in accordance with the applicable provisions thereof. "United States" means the United States of America. "Unpaid Amount" shall have the meaning set forth in Section 4.02(b) of the Credit Agreement. "Vessel" means the Shipowner's dynamic positioned, semi-submersible drilling rig to be named the AMETHYST 5, and constructed by TDI-Halter, Limited Partnership in accordance with the Construction Contract, including all work and material heretofore or hereafter performed upon or installed in or placed on board such a Vessel, together with related appurtenances, additions, improvements, and replacements. -10- EX-4.19 21 EXHIBIT 4.19 CREDIT AGREEMENT dated as of April 9, 1999 among PETRODRILL FOUR LIMITED as Shipowner GOVCO INCORPORATED as Primary Lender CITIBANK, N.A. as Alternate Lender CITIBANK INTERNATIONAL PLC, as Facility Agent and CITICORP NORTH AMERICA, INC. as Administrative Agent for the Primary Lender and the commercial paper holders of the Primary Lender. TABLE OF CONTENTS ----------------- SECTION 1. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION.................2 1.01 Defined Terms.................................................2 1.02 Principles of Construction....................................2 SECTION 2. THE CREDIT FACILITY........................................2 2.01 Amount........................................................2 2.02 Availability..................................................2 2.03 Disbursements and Minimum Amount of Utilizations..............3 2.04 Relationship of Floating Rate Note and Fixed Rate Note........3 SECTION 3. DISBURSEMENT REQUIREMENTS..................................3 3.01 Disbursement Procedures.......................................3 SECTION 4. TERMS OF THE CREDIT........................................4 4.01 Principal Repayment...........................................4 4.02 Interest Payment..............................................4 4.03 Prepayment....................................................5 4.04 Recapture.....................................................6 4.05 Evidence of Debt..............................................7 4.06 Limit of United States Guarantee..............................7 SECTION 5. CONDITIONS PRECEDENT........................................8 5.01 Conditions Precedent to Lenders' Obligations Under this Agreement...................................................8 5.02 Conditions Precedent to Each Disbursement.....................9 5.02 Conditions Precedent to Each Disbursement.....................9 SECTION 6. FEES AND EXPENSES...........................................9 6.01 Fees..........................................................9 6.02 Taxes.........................................................9 6.03 Expenses.....................................................10 6.04 Additional or Increased Costs................................11 SECTION 7. PAYMENTS..................................................12 7.01 Method of Payment............................................12 7.02 Application of Payments......................................13 SECTION 8. REPRESENTATIONS AND WARRANTIES BY THE SHIPOWNER...........14 8.01 Representations and Warranties of the Shipowner..............14 8.02 Agreements of the Shipowner..................................16 i SECTION 9. CANCELLATION, SUSPENSION AND EVENTS OF DEFAULT............17 9.01 Cancellation.................................................17 9.02 Events of Default............................................18 SECTION 10. GOVERNING LAW AND JURISDICTION...........................19 10.01 Governing Law................................................19 10.02 Submission to Jurisdiction...................................19 10.03 Waiver of Security Requirements..............................19 10.04 No Limitation................................................19 SECTION 11. MISCELLANEOUS............................................19 11.01 Computations.................................................19 11.02 Notices......................................................20 11.03 Disposition of Indebtedness..................................22 11.04 Disclaimer...................................................22 11.05 No Waiver; Remedies Cumulative...............................22 11.06 Currency.....................................................23 11.07 Severability.................................................23 11.08 Amendment or Waiver..........................................23 11.09 Indemnification..............................................23 11.10 Benefit of Agreement.........................................24 11.11 Waiver of Jury Trial.........................................24 11.12 Execution in Counterparts....................................24 11.13 Shipowner Documents..........................................24 11.14 Entire Agreement.............................................25 11.15 No Proceedings...............................................25 SECTION 12. ARRANGEMENTS AMONG THE AGENTS AND THE LENDERS...........25 12.01 Appointment..................................................25 12.02 Rights of Facility Agent.....................................25 12.03 Duties.......................................................26 12.04 Limitation on Obligations of Facility Agent..................26 12.05 Indemnification by Lenders...................................27 12.06 Limitation on Responsibility.................................27 12.07 No Claims on Employees of Facility Agent.....................27 12.08 Banking Business.............................................28 12.09 Resignation or Termination of Facility Agent.................28 12.10 Successor to Facility Agent..................................28 12.11 Discharge of Obligations.....................................28 12.12 Responsibilities of Lenders..................................28 12.13 Agency Division..............................................29 12.14 Administrative Agent.........................................29 12.15 Facility Agent Only Agent for the Lenders....................29 ii EXHIBITS - - -------- Exhibit 1 Schedule of Definitions ANNEXES - - ------- Annex A Form of Disbursement Requests iii THIS CREDIT AGREEMENT, dated as of April 9, 1999 is made by and among PETRODRILL FOUR LIMITED, a British Virgin Islands international business company (the "Shipowner"), GOVCO INCORPORATED, a Delaware corporation (the "Primary Lender"), CITIBANK, N.A., a national banking association (the "Alternate Lender"), CITIBANK INTERNATIONAL PLC, a bank organized and existing under the laws of England, as facility agent for both the Primary Lender and the Alternative Lender (and their respective successors and assigns) with respect to the Floating Rate Note, and its permitted successors and assigns (in such capacity, the "Facility Agent"), and CITICORP NORTH AMERICA, INC., a Delaware corporation, as administrative agent for the Primary Lender and the commercial paper holders of the Primary Lender (and their respective successors and assigns)(in such capacity, together with its permitted successors and assigns, the "Administrative Agent," and together with the Facility Agent, the "Agents"). As used herein, the term "Lender" shall mean either the Primary Lender or the Alternate Lender, as the case may be, depending on which of the two parties made or will make the relevant disbursement of funds under this Agreement; provided, however, that if the Primary Lender assigns its rights under this Agreement to the Alternate Lender, the term "Lender," as used herein, shall mean only the Alternate Lender. BACKGROUND ---------- WHEREAS: (A) by this Agreement, the Lenders have established a credit facility (the "Credit Facility") in the amount of $149,625,000, pursuant to which the Primary Lender may, in its discretion, subject to the terms and conditions hereof, extend financing to the Shipowner (i) for the manufacture, construction, fabrication, financing and purchase by the Shipowner of the Vessel; (ii) for the payment of the related Construction Period Interest; and (iii) for the payment of the Guarantee Fees; and if the Primary Lender chooses at any time not to extend, or continue to extend, any such financing, then the Alternate Lender shall extend the undisbursed portion of such financing; (B) the establishment of the Credit Facility is in reliance upon the commitment of the United States to guarantee the payment of the unpaid interest on, and the unpaid balance of the principal of, the Floating Rate Note, including interest accruing between the date of an Indenture Default under the Floating Rate Note and the payment in full of the Guarantee; (C) a condition to the Lenders' extension of the Credit Facility under this Agreement is the Facility Agent's timely receipt of Certificates Authorizing Disbursement and issuance of the Guarantee of the Floating Rate Note; (D) the Facility Agent will serve as facility agent for the benefit, and on behalf, of each of the Lenders in connection with the Credit Facility, this Agreement and the other related documents and the Administrative Agent will act as an administrative agent for the Primary Lender and the Primary Lender's commercial paper holders; and (E) the Credit Facility may be utilized by the Shipowner in accordance with the terms and conditions of this Agreement. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows: SECTION 1. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION 1.01 DEFINED TERMS. For the purposes of this Agreement, unless otherwise defined herein, defined terms shall have the meanings specified in Exhibit 1 hereto. 1.02 PRINCIPLES OF CONSTRUCTION. (a) The meanings set forth for defined terms in this Agreement shall be equally applicable to both the singular and plural forms of the terms defined. (b) Unless otherwise specified, all references in this Agreement to Annexes or Exhibits are to Annexes or Exhibits in or to this Agreement. (c) The headings of the Sections in this Agreement are included for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. SECTION 2. THE CREDIT FACILITY 2.01 AMOUNT. The Lenders hereby establish the Credit Facility, upon the terms and conditions set forth in this Agreement, in favor of the Shipowner in the maximum amount of $149,625,000 (the "Credit Facility Amount"), to enable the Shipowner to finance: (i) the manufacture, construction, fabrication, financing and purchase of the Vessel; (ii) Construction Period Interest; and (iii) the Guarantee Fees. The Primary Lender intends (but is not obligated) to fund the Credit Facility through the issuance and sale of Commercial Paper to investors which is exempt from the registration requirements of the United States Securities Act of 1933, as amended. The Primary Lender may, at its option, elect at any time not to fund the Credit Facility or the undisbursed portion thereof, in which case the Alternate Lender will, subject to the terms and conditions provided herein, be obligated to fund under the Credit Facility the amount (the "Available Amount") which is equal to the excess, if any, of the Credit Facility Amount over the outstanding principal amount evidenced by the Floating Rate Note, plus the aggregate outstanding principal amount evidenced by Fixed Rate Notes ("Outstanding Principal"). 2.02 AVAILABILITY. Disbursements under the Credit Facility may be made once a calendar month and up to and including the Final Disbursement Date. "Final Disbursement Date" shall mean either December 15, 2000 or, if 2 earlier, the date on which the Available Amount under the Credit Facility is canceled in accordance with Section 9.01 or reduced to zero. 2.03 DISBURSEMENTS AND MINIMUM AMOUNT OF UTILIZATIONS. Upon satisfaction of Sections 3.01, 5.01 and 5.02, disbursements shall be made by advances from the Primary Lender or the Alternate Lender to the Shipowner ("Disbursements") in accordance with Section 3.01. Notwithstanding anything in this Agreement to the contrary, the Shipowner may not request a Disbursement under the Credit Facility for an amount (a) less than the smaller of (i) $1,000,000 or (ii) the Available Amount or (b) more than the Available Amount. 2.04 RELATIONSHIP OF FLOATING RATE NOTE AND FIXED RATE NOTE. Disbursements from the Credit Facility shall become the indebtedness of the Shipowner to the Lenders under the Floating Rate Note. The Shipowner shall convert indebtedness under the Floating Rate Note to indebtedness under one or more Fixed Rate Notes no later than the earlier of (i) two years from the Delivery Date, or (ii) August 15, 2002. At its option, and from time to time, the Shipowner may convert any portion, or all, of the indebtedness of the Floating Rate Note to a Fixed Rate Note or series of Fixed Rate Notes at any time during or after the construction of the Vessel, so long as the conversion of the Floating Rate Note to the Fixed Rate Note does not occur later than the earlier of (i) two years after the Delivery Date or (ii) August 15, 2002, and, except for the final conversion, each conversion is in a minimum amount of $50,000,000; and the Shipowner shall have paid any amount payable under Section 4.04(a)(iv) or any other provision hereof in connection therewith. SECTION 3. DISBURSEMENT REQUIREMENTS 3.01 DISBURSEMENT PROCEDURES. Upon receipt by the Facility Agent of each Certificate Authorizing Disbursement at least five (5) Business Days prior to the proposed disbursement date, the Primary Lender may, and if the Primary Lender elects not to, the Alternate Lender shall, disburse funds in accordance with the terms of such Certificate Authorizing Disbursement to the Shipowner, or the Shipowner's designee, subject to the terms of this Agreement and such Certificate Authorizing Disbursement; provided that, if the Certificate Authorizing Disbursement and the request for disbursement referred to therein do not specify a disbursement date, then the disbursement date shall be the fifth Business Day (or such earlier or later Business Day as is requested by the Shipowner and is acceptable to the disbursing Lender) following the Facility Agent's receipt of such Certificate Authorizing Disbursement. Promptly following each Disbursement, the Facility Agent shall transmit to the Indenture Trustee a copy of the Certificate Authorizing Disbursement, a confirmation that the Disbursement was made, and a copy of Exhibit A to the Floating Rate Note, updated to reflect such Disbursement and other intervening, related events. 3 SECTION 4. TERMS OF THE CREDIT 4.01 PRINCIPAL REPAYMENT. The Shipowner shall repay all Outstanding Principal in twenty-four (24) approximately equal, successive semi-annual installments, with each such installment to be payable on a Payment Date; provided that, on the last Payment Date, the Shipowner shall repay in full the remaining Outstanding Principal. 4.02 INTEREST PAYMENT. (a) On each Interest Payment Date, the Shipowner shall pay to the Indenture Trustee, on behalf of the Person(s) entitled thereto, interest on the Outstanding Principal, calculated at an interest rate per annum equal to the Applicable Interest Rate therefor, as determined for each successive Interest Period. The Indenture Trustee shall calculate the Applicable Interest Rate based on information provided (i) by the Administrative Agent to the Facility Agent if the Primary Lender is the Lender, or (ii) by the Facility Agent if the Alternate Lender is the Lender. From time to time, the Administrative Agent or Facility Agent will confirm CP Rate, LIBOR, Base Rate, and Applicable Interest Rate to the Indenture Trustee. In the event that the Primary Lender assigns the financing of all or any portion of the amount outstanding under the Credit Facility (whether or not evidenced by a Note) to the Alternate Lender or other party, the interest rate on such amount shall be determined by the Facility Agent (and the Facility Agent shall notify the Indenture Trustee thereof) pursuant to clause (i) of the definition of Applicable Interest Rate for the period prior to the effective date of such assignment and pursuant to clause (ii) of such definition for all periods after such date. (b) The Shipowner shall pay to the Facility Agent, on behalf of the Person(s) entitled to any Unpaid Amount, on demand, interest on such Unpaid Amount (to the extent permitted by applicable law) for each Post Maturity Period at an interest rate per annum equal to the sum (the "Post Maturity Interest Rate") of (1) three percent (3%), plus (2) the Post Maturity Applicable Interest Rate. With respect to any Unpaid Amounts, the "Post Maturity Applicable Interest Rate" shall mean either (i) LIBOR on the Quotation Date therefor plus three tenths of one percent (0.30%) per annum, or (ii) for any such Post Maturity Period LIBOR cannot be determined the rate per annum reasonably determined by the Person to whom such Unpaid Amount is owed before the last day of such Post Maturity Period to be that which expresses as a percentage rate per annum the cost which such Person would incur in funding such Unpaid Amount from whatever source it reasonably deems appropriate for such Post Maturity Period plus three tenths of one percent (0.30%) per annum, or (iii) if any such Unpaid Amount is an Accelerated Repayment, then during the first Post Maturity Period the rate which would have been applicable to such Unpaid Amount had it not so fallen due. In the absence of an Indenture Default, any interest which shall have accrued under this Section 4.02(b) in respect of an Unpaid Amount shall be due and payable and shall be paid by the Shipowner on demand on such dates as the Person to whom such Unpaid Amount is owed may specify by written notice to the Shipowner, or if there is 4 an Indenture Default, any interest which shall have accrued under this Section 4.02(b) in respect of an Unpaid Amount shall be due and payable immediately and shall be paid by the Shipowner without demand and any payment by, or on behalf of, the Shipowner hereunder shall be governed by Section 7.02 and the provisions of the last paragraph of Section 9.02. As used herein, "Unpaid Amount" means all or any part of principal, accrued interest, fees or other amounts owing to the Lenders under this Agreement or the Floating Rate Note which is not paid in full when and as due and payable, whether at Stated Maturity, by acceleration or otherwise, or any sum due and payable by the Shipowner to the Lenders under any judgment of any court or arbitral tribunal in connection with this Agreement which is not paid on the date of such judgment; PROVIDED, HOWEVER, that it is agreed that Unpaid Amount shall not include any part of the principal and interest on the Floating Rate Note, except that Unpaid Amount shall include all such amounts thereof as are not paid by the Shipowner as and when they are due but are paid by the Shipowner prior to payment thereof by the Secretary. "LIBOR" shall mean, in relation to any Post Maturity Period (other than the first Post Maturity Period contemplated by clause (iii) of Section 4.02(b)), the rate of interest per annum (rounded upward, if necessary, to the nearest 1/16 of 1%) last quoted by the principal London office of CITIBANK, N.A., prior to the close of business at such London office on the Quotation Date for the offering to leading banks in the London interbank market of U.S. Dollar deposits on an overnight basis and in an amount comparable to the Unpaid Amount to which LIBOR is to apply. "Accelerated Repayment" shall mean any part of the principal of the Floating Rate Note which became due and payable on a day other than its Payment Date. "Post Maturity Period" shall mean with respect to the period from the date an Unpaid Amount was due until such amount shall have been paid in full, each successive period, the first of which shall start on the date such Unpaid Amount was due (or the date of any such judgment or arbitral award, if earlier) and each other of which shall start on the last day of the preceding such period, and the duration of each of which shall be one day, or if LIBOR applies, then from and including the Quotation Date for such Post Maturity Period to but excluding the next Quotation Date or such other duration selected by the Person to whom such Unpaid Amount is due; PROVIDED, HOWEVER, that in the case of any Accelerated Repayment, the first such Post Maturity Period applicable thereto shall be of a duration equal to the unexpired portion of its then applicable Interest Period. "Quotation Date" in relation to any Post Maturity Period means the day on which quotations would ordinarily be given by CITIBANK, N.A. in the London interbank market for dollar deposits for delivery on the first day of that period; PROVIDED, HOWEVER, that if, for any such Post Maturity Period, quotations would ordinarily be given on more than one date, the Quotation Date for that period shall be the last of those dates. 4.03 PREPAYMENT. (a) The Shipowner may from time to time prepay on any Interest Payment Date all or any part of the Outstanding Principal evidenced by the Floating Rate Note, provided that: (i) any partial prepayment shall be in a minimum principal amount of $10,000,000, unless otherwise required by the Indenture; (ii) the Shipowner shall have given the Facility Agent 5 and the Indenture Trustee prior written notice of such prepayment (which shall be not less than 40 nor more than 60 days); (iii) the Shipowner shall have paid in full all amounts due under this Agreement as of the date of such prepayment, including, without limitation, interest which has accrued to the date of prepayment on the amount prepaid and all other amounts payable hereunder relating to such prepayment; (iv) any amount prepaid hereunder (other than the Outstanding Principal amount thereof prepaid through the issuance of Fixed Rate Notes, the Outstanding Principal amount of which is subtracted from the Credit Facility pursuant to the last sentence of Section 2.01) shall not be considered part of the Available Amount; and (v) subject to Section 4.03(c), if the Lender is the Primary Lender, the Shipowner shall pay to the Facility Agent, for the benefit of the Primary Lender an amount equal to (x) the amount of yield that the Primary Lender is required to pay to holders of its Commercial Paper during the Liquidation Period (as defined below) on an amount of Commercial Paper having an aggregate issue price equal to the amount of the Shipowner's prepayment less (y) the amount of the estimated investment earnings, as determined by the Facility Agent, on the prepayment amount during the Liquidation Period. The "Liquidation Period" means the period from the date on which a prepayment is made to the earliest date on which the Primary Lender's total amount of Commercial Paper related to the funding of the Disbursements can be reduced (without prepayment thereof) by an amount equal to the amount of the Shipowner's prepayment. Prepayments shall be applied to the installments of principal of the Credit Facility in the inverse order of their maturity, and, in cases where more than one Note is Outstanding, PRO RATA to each Note. (b) Upon delivery to the Shipowner and the Secretary of the instrument satisfying and discharging the Indenture contemplated by Section 12.01 of the Exhibit 1 to the Indenture, all of the Shipowner's indebtedness, liabilities and obligations under this Agreement and the Fee Letter shall become immediately due and payable without demand upon, or notice to, the Shipowner. (c) Notwithstanding any other provision to the contrary herein, the Shipowner or the Secretary (after the Secretary's assumption of the Floating Rate Note pursuant to Section 6.09 of Exhibit 1 to the Indenture) may from time to time prepay all or any part of the principal amount of the Floating Rate Note without any prepayment penalty or premium in accordance with Article III of Exhibit 1 to the Indenture. (d) Notwithstanding any other provision to the contrary herein, the Shipowner shall have the right to prepay any portion of the Floating Rate Note and convert that Obligation to a Fixed Rate Note so long as it first obtains the Secretary's consent to the interest rate applicable to the Fixed Rate Note and, except for the final disbursement, such conversion equals or exceeds $50,000,000 principal; and the Shipowner shall have paid any amount payable under Section 4.04(a)(iv) or any other provision hereof in connection therewith. 4.04 RECAPTURE. (a) Upon the written request of the Facility Agent, the Shipowner shall pay to the applicable Lender, such amounts as shall be sufficient (in the reasonable judgment of such Lender) to compensate such 6 Lender for any loss, expense or liability (including, without limitation, any loss, expense or liability incurred by reason of the liquidation or redeployment of deposits from third parties or in connection with obtaining funds to make or maintain any Disbursement) which such Lender reasonably determines is attributable to: (i) any failure to make scheduled payments on a Payment Date or any payment due in connection with any Redemption; or (ii) any failure by the Shipowner to borrow any advance for which a Certificate Authorizing Disbursement has been issued; or (iii) any revocation of a notice of prepayment given pursuant to Section 4.03(a); or (iv) subject to the provisions of Section 4.03(c), any prepayment of the Floating Rate Note (including, without limitation, due to the issuance of any fixed rate notes) other than on an Interest Payment Date after giving five Business Days prior written notice to such Lender. (b) Without prejudice to any other provision hereof (and at the Shipowner's expense), such Lender shall use such reasonable efforts as it shall determine in its sole discretion to minimize any loss, expense or liability to the extent possible. 4.05 EVIDENCE OF DEBT. The Shipowner agrees that to evidence further its obligation to repay all amounts disbursed under the Credit Facility, with interest accrued thereon, it shall issue and deliver to the Facility Agent, in accordance with the written instructions of the Facility Agent, the Floating Rate Note. The Floating Rate Note shall (i) be in the form of Exhibit 2 to the Indenture; (ii) bear the Secretary's Guarantee, and (iii) be valid and enforceable as to its principal amount at any time only to the extent of the aggregate amounts then disbursed and outstanding thereunder, and, as to interest, only to the extent of the interest accrued thereon at the rate guaranteed by the Secretary, with any interest in excess thereof being evidenced by this Agreement. 4.06 LIMIT OF UNITED STATES GUARANTEE. None of the interest, fees, and expenses arising under Sections 4.03, 4.04 and 6 and none of the Indemnified Amounts, commissions, Taxes, Other Taxes, Post Maturity Interest Rate, interest in excess of 9% (or such higher rate as may be agreed from time to time by the Secretary) (the "Cap Rate") under the Floating Rate Note, the costs of obtaining any interest rate protection, or any other charges, costs, expenses, or indebtedness owed by the Shipowner under this Agreement to any Person is guaranteed by the United States. The Guarantee of the United States extends only to the principal and interest owed under the Obligations and only to the extent specified therein. 7 SECTION 5. CONDITIONS PRECEDENT 5.01 CONDITIONS PRECEDENT TO LENDERS' OBLIGATIONS UNDER THIS Agreement. The obligations of the Lenders under this Agreement shall be subject to the delivery to the Facility Agent of the documents indicated below on or before the Closing Date: (a) THIS AGREEMENT, THE FLOATING RATE NOTE AND THE FEE LETTER. This Agreement and the Fee Letter, each fully executed by the parties thereto in form and substance satisfactory to the Lenders, which shall be in full force and effect and the Floating Rate Note shall have been fully executed by the Shipowner, endorsed by, or on behalf of, the United States, and delivered to the Facility Agent, and all amounts then payable under the Fee Letter shall have been paid to the Person entitled thereto. (b) EXISTENCE. Evidence in form and substance satisfactory to the Lenders, that the Shipowner is duly organized, validly existing and in good standing under the laws of the British Virgin Islands, with full power, authority and legal right to own its property and to carry on its business as now conducted. (c) AUTHORITY. Evidence in form and substance satisfactory to the Lenders, of the authority of the Shipowner to execute, deliver, perform and observe the terms and conditions of this Agreement, the Floating Rate Note, the Fee Letter, and the Indenture and evidence of authority (including specimen signatures) for each Person who, on behalf of the Shipowner, signed this Agreement, the Floating Rate Note, the Fee Letter, and the Indenture, or will otherwise act as representatives of the Shipowner in the operation of the Credit Facility. (d) GOVERNMENTAL AND OTHER AUTHORIZATIONS. Copies, certified as true copies by a duly authorized officer of the Shipowner, of each consent, license, authorization or approval of, and exemption by, any Governmental Authority and any governmental authorities within the United States or elsewhere, which are necessary or advisable (i) for the execution, delivery, performance and observance by the Shipowner of this Agreement, the Floating Rate Note, the Fee Letter, and the Indenture; and (ii) for the validity, binding effect and enforceability of this Agreement, the Floating Rate Note, the Fee Letter, and the Indenture, or if none is necessary, a written certification from the Shipowner that none is necessary. (e) LEGAL OPINIONS. (1) Opinion of legal counsel for the Shipowner concerning this Agreement, the Floating Rate Note, the Fee Letter, and the Indenture; (2) Opinion of the Chief Counsel of the Maritime Administration dated the Closing Date, signed by or on behalf of such Chief Counsel, addressed to the Lenders and the Agents to the effect that the Guarantees and the Authorization Agreement have been or will be duly authorized, executed and delivered by the United States of America, and constitute legal, valid, and binding obligations of the United States of America 8 enforceable in accordance with their respective terms; and (3) Opinion of Mayer, Brown & Platt addressed to the Lenders, the Agents, and the Indenture Trustee concerning this Agreement, the Fee Letter, the Indenture and the Floating Rate Note. (f) GUARANTEE COMMITMENT. A copy of the fully executed Guarantee Commitment, which shall be in full force and effect until completion of the Closing. (g) AUTHORIZATION AGREEMENT. The fully executed Authorization Agreement, which shall be in full force and effect. (h) INDENTURE. The fully executed Indenture, which shall be in full force and effect. 5.02 CONDITIONS PRECEDENT TO EACH DISBURSEMENT. The agreement of the Primary Lender to fund any Disbursement under this Agreement and any obligations of the Alternate Lender to fund any Disbursements under this Agreement shall be subject only to the Facility Agent's receipt of a Certificate Authorizing Disbursement, upon which each such Lender may conclusively rely. SECTION 6. FEES AND EXPENSES 6.01 FEES. The Shipowner shall pay or cause to be paid to the Person entitled thereto such fees and other amounts as are set forth in that certain Fee Letter (as amended, restated or otherwise modified from time to time with the prior written consent of the Secretary, the "Fee Letter") dated as of April 1, 1999 between the Shipowner and the Agents, in each case when and as due. 6.02 TAXES. (a) The Shipowner agrees to pay all amounts owing by it under this Agreement or the Floating Rate Note free and clear of and without deduction for any and all present and future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, EXCLUDING in the case of each Lender, taxes imposed on its income, and franchise taxes imposed on it in lieu of income taxes, by either (i) the jurisdiction under the laws of which such Lender is organized or any political subdivision thereof, or (ii) the jurisdiction of such Lender's applicable lending office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings, and liabilities being hereinafter referred to as "Taxes"). In addition, the Shipowner agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or under the Floating Rate Note or from the execution, delivery, or registration of, or otherwise with respect to, this Agreement or the Floating Rate Note (hereinafter referred to as "Other Taxes"). (b) The Shipowner further agrees: 9 (i) that, if the Shipowner is prevented by operation of law from paying any such Taxes or Other Taxes, or if any such Taxes or Other Taxes are required to be deducted or withheld, then the fees or expenses required to be paid under this Agreement shall, on an after-tax basis, be increased by the amount necessary to yield to the Lenders fees or expenses in the amounts provided for in this Agreement after the provision for the payment of all such Taxes and Other Taxes; (ii) that the Shipowner shall, at the request of any Lender or any Agent, execute and deliver to such Lender or Agent, as the case may be, such further instruments as may be necessary or desirable to effect the payment of the increased amounts as provided for in subsection (i) above; PROVIDED, HOWEVER, that the Shipowner may not amend the Floating Rate Note without the prior written consent of the Secretary; (iii) that the Shipowner shall hold the Lenders harmless from and against the full amount of Taxes and Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 6.02) and any and all liabilities (including, without limitation, penalties, interest and expenses) arising from, or with respect to, any Taxes or Other Taxes (whether or not properly or legally asserted) and whether paid, or payable, by the Shipowner, the Lenders, or any other Person; (iv) that, at the request of any Lender or any Agent, the Shipowner shall provide such Lender or Agent within the later of thirty (30) calendar days after such request or thirty (30) calendar days after the payment of such Taxes or Other Taxes, a copy evidencing the payment of any Taxes or Other Taxes by the Shipowner; and (v) that each payment under this Section 6.02 shall be made within thirty (30) days from the date the applicable Lender makes written demand therefor. Each demand for payment by such Lender under Section 6.02(b)(v) for amounts paid or incurred by the Lenders or itself shall be accompanied by a certificate (with accompanying documentation supporting the demand) showing in reasonable detail the basis for the calculation of the amounts demanded, which certificate, in the absence of manifest error, shall be conclusive and binding for all purposes. Notwithstanding anything to the contrary contained herein, the agreements in this Section 6.02 shall survive the termination of this Agreement and the payment of the Floating Rate Note and all other amounts due hereunder. 6.03 EXPENSES. The Shipowner agrees, whether or not the transactions hereby contemplated shall be consummated, to pay, or reimburse the Agents and the Lenders, respectively, promptly upon demand for the payment of all reasonable and duly documented costs and expenses arising in connection with the preparation, printing, execution, delivery, registration, implementation, modification of or waiver or consent under this Agreement, the Floating Rate Note or the Indenture, including, without limitation, the 10 reasonable and duly documented out-of-pocket expenses of the Agents and the Lenders (incurred in respect of telecommunications, mail or courier service, travel and the like), and the fees and expenses of counsel for the Agents and the Lenders. The Shipowner shall also pay all of the costs and expenses (including, without limitation, the fees and expenses of counsel) incurred by or charged to the Agents or the Lenders in connection with the amendment or enforcement of this Agreement, the Floating Rate Note or the Indenture or the protection or preservation of any right or claim of the Agents or the Lenders arising out of this Agreement, the Floating Rate Note or the Indenture. 6.04 ADDITIONAL OR INCREASED COSTS. (a) If, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation, or (ii) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the cost to any Lender of agreeing to make or making, funding or maintaining the Disbursements or the Credit Facility, then the Shipowner shall from time to time, upon demand by such Lender, pay to such Lender additional amounts sufficient to compensate such Lender for such increased cost. (b) If any Lender determines that compliance with any law or regulation or any guideline or request from any central bank or other governmental authority (whether or not having the force of law) affects or would affect the amount of capital required to be maintained by such Lender or any corporation controlling such Lender and that the amount of such capital is increased by or based upon the existence of such Lender's commitment to lend hereunder and other commitments of this type, then, upon demand by such Lender, the Shipowner shall immediately pay to the Facility Agent (for the benefit of such Lender), from time to time as specified by the Facility Agent (on behalf of such Lender), additional amounts sufficient to compensate such Lender or such corporation in the light of such circumstances, to the extent that such Lender reasonably determines such increase in capital to be allocable to the existence of its commitment to lend hereunder. (c) Each Lender shall take such reasonable steps as it shall determine to minimize amounts demanded under this Section 6.04; PROVIDED that no Lender shall be obligated to take any actions under this SECTION 6.04 if such Lender has determined, that such actions would cause it to incur any material costs or expenses or would otherwise be disadvantageous to it in any material respect. In the event that a Lender transfers the booking office of the Credit Facility or the Floating Rate Note to minimize amounts demanded under this Section 6.04, any costs and expenses incurred in such transfer shall be paid by the Shipowner on demand by such Lender. (d) Each demand for payment by the Facility Agent (on behalf of any Lender) under this Section 6.04 shall be accompanied by a certificate showing in reasonable detail the basis for the calculation of the amounts demanded, which certificate, in the absence of manifest error, shall be conclusive and binding for all purposes. 11 (e) Each Lender shall notify the Shipowner of any event occurring after the date of this Agreement which entitles such Lender to compensation pursuant to this Section 6.04, as promptly as practicable, and in any event within ninety (90) days after it has knowledge of such event and has determined that a request for compensation hereunder shall be made. The Shipowner shall not be obligated to reimburse any Lender for any loss or cost incurred more than ninety (90) days prior to delivery of notice to the Shipowner by the Lender requesting compensation under this Section 6.04. Notwithstanding anything to the contrary contained herein, the agreements in this SECTION 6.04 shall survive the termination of this Agreement and the payment of the Floating Rate Note and all other amounts due hereunder. SECTION 7. PAYMENTS 7.01 METHOD OF PAYMENT. (a) (i) All payments to be made by the Shipowner under this Agreement and the Floating Rate Note shall be made without set-off or counterclaim in Dollars in immediately available and freely transferable funds no later than 11:00 A.M. (New York City time) on the date on which due. Except as provided in Section 7.01(a)(ii), all payments to be made by the Shipowner or the Agents hereunder shall be made if to (A) the Primary Lender (for the account of Govco Incorporated, its successors and assigns), (B) the Alternate Lender (for the account of Citibank, N.A., its successors and assigns), (C) the Facility Agent (for the account of Citibank International plc, its successors and assigns), (D) the Administrative Agent (for the account of Citicorp North America, Inc., its successors and assigns), or (E) any other Lender (for the account of such Lender, its successors and assigns), in each case to the Facility Agent (for the account of Citibank International plc, its successors and assigns) at Citibank, N.A., 399 Park Avenue, New York, New York 10043, DDA. Account No. 10963054, Attn: Loans Agency. Upon receipt thereof by the Facility Agent, the Facility Agent shall forthwith forward such funds to the party entitled thereto pursuant to the written instructions provided by such party to the Facility Agent in accordance with Section 11.02. (ii) The Shipowner shall pay the principal and the guaranteed amount of the Applicable Interest Rate on the Floating Rate Note to the Indenture Trustee and all other amounts due under this Agreement directly to the Person entitled thereto, in each case, by wire transfer in same day and immediately available and freely transferable funds. Wire transfer instructions shall be provided to the Shipowner. Until further notice, wire instructions for the Indenture Trustee are as follows: The First National Bank of Maryland, ABA #052-000-113, Credit Trust Receipts, A/C #090-02-764, Re: Petrodrill. (b) Except as otherwise provided herein, whenever any payment would otherwise fall due on a day which is not a Business Day, the due date for payment shall be the immediately succeeding Business Day, and interest and fees shall be computed in accordance with Section 11.01. 12 (c) Whenever a sum is required to be paid to the Facility Agent under this Agreement for the account of another Person, the Facility Agent shall not be obligated to make such sum available to such other Person unless and until the Facility Agent shall have established to its satisfaction that is has actually received payment of such sum. Notwithstanding the foregoing, unless it has received actual notice to the contrary, the Facility Agent may (but shall not be obligated to) assume on the date of any Disbursement or any other payment required to be made by any Lender hereunder that such Lender has made available to the Facility Agent such Disbursement or other payment and the Facility Agent may (but shall not be required to) make available to the Shipowner on such date a corresponding amount in reliance upon such assumption. Additionally, the Facility Agent may (but shall not be obligated to) assume on the date of any payment required to be made by the Shipowner hereunder that the Shipowner has made available to the Facility Agent such payment and the Facility Agent may (but shall not be required to) make available to the Lenders on such date a corresponding amount in reliance upon such assumption. If and to the extent that either (i) the Lender shall not in fact have made such Disbursement or other payment available to the Facility Agent and the Facility Agent has made available a corresponding amount to the Shipowner in reliance on the above-described assumptions or (ii) the Shipowner has not in fact made such payment and the Facility Agent has made available a corresponding amount to the Lender in reliance on the above-described assumptions, then, in either such case, such Lender agrees to repay to the Facility Agent forthwith on demand such corresponding amount together with an amount sufficient to indemnify the Facility Agent against any cost or loss it may have suffered or incurred by reason of its having paid out such sum prior to receipt thereof. 7.02 APPLICATION OF PAYMENTS. In the absence of an Indenture Default, the Lenders shall each apply payments received by them under this Agreement and the Floating Rate Note (whether at Stated Maturity, by reason of acceleration, prepayment or otherwise), in the following order of priority: (i) interest due pursuant to Section 4.02(a); (ii) installments of principal due; (iii) interest due pursuant to Section 4.02(b) other than the amount described in clause (i) above; (iv) all amounts due under the Fee Letter; and (v) all other amounts due under this Agreement and not otherwise provided for in this Section 7.02. Upon the occurrence of an Indenture Default, the Lenders shall each hold any payments they receive after an Indenture Default from, or on behalf of, the Shipowner under this Agreement, the Fee Letter and any related agreement (excluding the Floating Rate Note) and shall promptly deliver such payments to the Secretary if the Secretary has been required to honor a Guarantee as a result of said Indenture Default. All such amounts received during an Indenture Default and delivered to the Secretary in accordance with the preceding sentence shall be applied first to pay, satisfy and discharge all amounts owed by the Shipowner to the Secretary under the Secretary's Note and the Mortgage and then to pay, satisfy and discharge any and all amounts owed to the Lenders or the Agents. 13 SECTION 8. REPRESENTATIONS AND WARRANTIES BY THE SHIPOWNER 8.01 REPRESENTATIONS AND WARRANTIES OF THE SHIPOWNER. The Shipowner represents and warrants to the Agents and the Lenders that, as of the Closing Date: (a) EXISTENCE AND AUTHORITY. The Shipowner is duly organized, validly existing under the laws of its jurisdiction of formation, is in good standing under the laws of its jurisdiction of formation, has been duly qualified to do business in, and is in good standing as a foreign corporation in each jurisdiction in which the conduct of its business or the ownership of its properties requires it to be so qualified, and has full power, authority and legal right to own its properties and conduct its business as it is presently now conducted. The Shipowner has full power, authority and legal right (i) to execute and deliver this Agreement, the Floating Rate Note and the Indenture, (ii) to perform and observe the terms and provisions of each of said documents to be performed or observed by it, (iii) to consummate the transactions contemplated thereby and (iv) to own its properties (including, without limitation, the Vessel owned or to be owned by it) and conduct its business as presently conducted. (b) GOVERNMENT AND OTHER AUTHORIZATIONS. All consents, licenses, authorizations and approvals of, and exemptions by, any Governmental Authority and any governmental authorities within the United States or elsewhere and any other Persons that are necessary or advisable: (i) for the execution, delivery, performance and observance by the Shipowner of this Agreement, the Floating Rate Note, and the Indenture; and (ii) for the validity, binding effect and enforceability of this Agreement, the Floating Rate Note, and the Indenture have been obtained and are in full force and effect. (c) RESTRICTIONS. The execution, delivery and performance or observance by the Shipowner of the terms of, and consummation by the Shipowner of the transactions contemplated by, this Agreement, the Floating Rate Note, and the Indenture do not and will not conflict with or result in a breach or violation of: (i) the charter, by-laws or organizational documents of the Shipowner; (ii) any federal or state law of the United States or any other ordinance, decree, constitutional provision, regulation or other requirement of any Governmental Authority (including, without limitation, any restriction on interest that may be paid by the Shipowner); or (iii) any order, writ, injunction, judgment or decree of any court or other tribunal. Further, the execution, delivery and performance or observance by the Shipowner of the terms of, and consummation by the Shipowner of the transactions contemplated by, this Agreement, the Floating Rate Note, and the Indenture does not and will not conflict with or result in a breach of any agreement or instrument to which the Shipowner is a party, or by which it or any of its revenues, properties or assets may be subject, or result in the creation or imposition of any Lien upon any of the revenues, properties or assets of the Shipowner pursuant to any such agreement or instrument. "Lien" shall mean any lien, lease, mortgage, pledge, 14 hypothecation, preferential arrangement relating to payments, or other encumbrance or security interest. (d) BINDING EFFECT. This Agreement, the Floating Rate Note, and the Indenture which have been executed on or before the date hereof have been duly executed and delivered by the Shipowner. Each of the Agreement, the Floating Rate Note, and the Indenture constitutes, and each of the Agreement, the Floating Rate Note, and the Indenture as it may hereafter be amended will constitute, a direct, general and unconditional obligation of the Shipowner which is legal, valid and binding upon the Shipowner and enforceable against the Shipowner in accordance with its respective terms. All obligations evidenced by the Floating Rate Note will be entitled to the benefits of the Guarantees and the Authorization Agreement. (e) CHOICE OF LAW. Under applicable conflict of laws principles, the choice of law provisions of this Agreement, the Floating Rate Note and the Indenture are valid, binding and not subject to revocation by the Shipowner. In any proceedings brought for enforcement of this Agreement, the choice of the law of the State of New York as the governing law of such documents will be recognized and such law will be applied. In any proceeding brought for enforcement of the Indenture or the Floating Rate Note, the choice of law of the State of Maryland as the governing law of such documents will be recognized and such law will be applied. (f) LEGAL PROCEEDINGS. No legal proceedings are pending or, to the best of the Shipowner's knowledge, threatened before any court or governmental agency which might: (i) materially and adversely affect the Shipowner's financial condition, business or operations; (ii) restrain or enjoin or have the effect of restraining or enjoining the performance or observance of the terms and conditions of any of this Agreement, the Indenture or the Floating Rate Note; or (iii) in any other manner question the validity, binding effect or enforceability of any of the provisions of this Agreement, the Indenture or the Floating Rate Note. (g) USE OF THE VESSEL. The Vessel will be used for lawful purposes. (h) SHIPOWNER FINANCIAL STATEMENTS. The Shipowner Financial Statements present fairly the financial condition of the Shipowner at the date of such statements and the results of the operations of the Shipowner for such fiscal year. The Shipowner Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States consistently applied. Except as fully reflected in the Shipowner Financial Statements, there are no liabilities or obligations with respect to the Shipowner of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether or not due) for the period to which the Shipowner Financial Statements relate that, either individually or in the aggregate, would be material to the Shipowner. Since the date of the most recent audited Shipowner Financial Statements, there has been no material adverse change in the financial condition, business prospects or operations of the Shipowner. 15 "Shipowner Financial Statements" shall mean the financial statements of the Shipowner furnished to the Facility Agent prior to the date of this Agreement. (i) NO TAXES. There is no Tax imposed on or in connection with: (i) the execution, delivery or performance of this Agreement, the Indenture or the Floating Rate Note; (ii) the enforcement of this Agreement, the Indenture or the Floating Rate Note; or (iii) on any payment to be made to any Lender under this Agreement or the Floating Rate Note. (j) LAWS. None of this Agreement, the Indenture, the Floating Rate Note, the transactions contemplated thereunder nor any Person party to this Agreement, the Indenture or the Floating Rate Note is required to qualify under the Trust Indenture Act or register or qualify under any securities law. (k) DEFAULTS. No Event of Default has occurred and is continuing and no event or circumstance has occurred and is continuing which with the passage of time, the giving of notice or both would constitute an Event of Default. 8.02 AGREEMENTS OF THE SHIPOWNER. The Shipowner agrees that until all amounts owing under this Agreement and the Floating Rate Note have been paid in full, the Shipowner will, unless the Agents and the Lenders shall have consented in writing: (a) INTEREST RATE PROTECTION. At all times that (1) a Floating Rate Note exists and (2) the Applicable Interest Rate is equal to or greater than the Cap Rate less 0.5%, the Shipowner (at its expense) within fifteen (15) Business Days thereafter, shall (A) enter into, and thereafter maintain in full force and effect, an amortizing interest rate cap agreement with a strike price providing for a cap based on the Applicable Interest Rate not in excess of the Cap Rate per annum and otherwise acceptable to the Lenders, with a counterparty rated "AA" or better by any of the rating agencies that rate the Commercial Paper issued by the Primary Lender or such other counterparty reasonably acceptable to the Lenders, covering the Floating Rate Note and based on the expected amortization schedule of such Note, and (B) execute such documents and instruments as may be necessary, or in the opinion of the Facility Agent desirable, to effect the assignment of its rights thereunder to the Facility Agent for the benefit of the Lenders and, if any payments are made under any Guarantee, the Secretary, in every case with such terms as are reasonably acceptable to the Facility Agent for the protection of the Lenders. If the Shipowner fails to satisfy the requirements of this Section 8.02(a) within the fifteen (15) Business Days set forth above, the Facility Agent may (in its sole discretion) and if the Facility Agent so elects, the Shipowner hereby authorizes and directs the Facility Agent to, satisfy the requirements of this Section 8.02(a), all at the expense of the Shipowner, due on demand. (b) NOTICE OF DEFAULTS. Promptly, but in no event later than ten (10) days after the occurrence of an Indenture Default or an Event of Default of which the Shipowner has knowledge, notify the Facility Agent 16 and the Indenture Trustee of any report required by the Shipowner Documents (or any other document entered into by the Shipowner in connection therewith), and send a copy thereof to the Facility Agent, in each case by facsimile or hand delivery. (c) FINANCIAL REPORTS. Beginning with the fiscal year in which this Agreement is executed and continuing until all amounts owing under this Agreement and the Floating Rate Note have been paid in full, the Shipowner shall furnish to the Facility Agent (and the Facility Agent, upon receipt thereof, shall furnish to each Lender and the Administrative Agent) a copy of all financial reports furnished to the Secretary pursuant to the Title XI Reserve Fund and Financial Agreement. (d) OTHER ACTS. From time to time, do and perform any and all acts and execute any and all documents as may be necessary or as reasonably requested by the Facility Agent or the Indenture Trustee in order to effect the purposes of this Agreement and to protect the interests of the Lenders in the Floating Rate Note and the interests of the Lenders in the Guarantees. (e) USE OF PROCEEDS. Use proceeds from each Disbursement solely to finance: (i) the manufacture, construction, fabrication, financing and purchase of the Vessel; (ii) Construction Period Interest; and (iii) the Guarantee Fees. Use the proceeds from the issuance of any Fixed Rate Notes to repay amounts owed under the Floating Rate Note or to finance: (i) the manufacture, construction, fabrication, financing and purchase of the Vessel; (ii) Construction Period Interest; and (iii) the Guarantee Fees. (f) SUCCESSORS. Require that any successor to all or substantially all of its business as a result of any merger or consolidation with any other entity, dissolution or termination of legal existence, sale, lease, transfer or other disposal of any substantial part of its properties or any of its properties essential to the conduct of its business or operations, as now or hereafter conducted, any change in control, any agreement to do any of, or any combination of, the foregoing, to assume all of the Shipowner's indebtedness, liabilities and obligations under this Agreement, the Indenture and the Floating Rate Note. SECTION 9. CANCELLATION, SUSPENSION AND EVENTS OF DEFAULT 9.01 CANCELLATION. The Shipowner may cancel at any time all or any part of the Available Amount of the Credit Facility, provided that (i) thirty (30) days' prior irrevocable written notice is given to the Agents, the Indenture Trustee, and the Secretary and (ii) the Shipowner shall have paid to the Lenders any commitment fees accrued and unpaid under Section 6.01 and all other amounts due and payable under this Agreement and the Floating Rate Note as of the proposed date of cancellation. In the absence of an Indenture Default, the Lenders may not for any reason cancel at any time any part of the Available Amount of the Credit Facility. 17 9.02 EVENTS OF DEFAULT. Upon the occurrence of any of the following events or conditions (each, an "Event of Default"): (a) any failure by the Shipowner to pay when and as due any amount owing under this Agreement, but which is not guaranteed by the Secretary; or (b) any failure by the Shipowner to comply with its obligations under Section 8.02(b) or 8.02(e); or any failure by the Shipowner to perform or comply with any of its agreements set forth in this Agreement (exclusive of any events specified as an Event of Default in any other subsection of this Section 9.02 and exclusive of Section 8.02(a)), which failure, if capable of being cured, remains uncured for a period of thirty (30) days after written notice thereof has been given to the Shipowner by the Facility Agent; or (c) the Shipowner shall be unable to pay its debts when and as they fall due or shall admit in writing its inability to pay its debts as they fall due or shall become insolvent; or the Shipowner shall apply for or consent to the appointment of any liquidator, receiver, trustee or administrator for all or a substantial part of its business, properties, assets or revenues; or a liquidator, receiver, trustee or administrator shall be appointed for the Shipowner and such appointment shall continue undismissed, undischarged or unstayed for a period of thirty (30) days, or the Shipowner shall institute (by petition, application, answer, consent or otherwise) any bankruptcy, arrangement, readjustment of debt, dissolution, liquidation or similar executory or judicial proceeding; or a bankruptcy, arrangement, readjustment of debt, dissolution, liquidation or similar executory or judicial proceeding shall be instituted against the Shipowner and shall remain undismissed, undischarged or unstayed for a period of thirty (30) days; or (d) an Indenture Default has occurred; then, and in any such event, and at any time thereafter, if such event is continuing, and if there is no Indenture Default (or if there is an Indenture Default, only after the Secretary has received all payments due under the Secretary's Note and the Mortgage), any Agent or any Lender (by written notice to the Shipowner), shall have the right to institute any judicial or other proceedings under this Agreement to recover all amounts owing under this Agreement. The Lenders agree that so long as an Indenture Default exists, all amounts received during such period from, or on behalf of, the Shipowner shall be applied in the manner set forth in Section 7.02. Notwithstanding an Event of Default, the Lenders may not terminate the Available Amount of the Credit Facility without the Secretary's consent; PROVIDED, HOWEVER, that the Shipowner's use of the Available Amount of the Credit Facility shall remain subject to the requirements of Sections 2.02, 3.01, and 5.02. Except as expressly provided above in this Section 9.02, presentment, demand, protest and all other notices of any kind are hereby expressly waived. Notwithstanding any other provision of this Agreement, if Section 9.02(c) is applicable, the Lender may file appropriate claims in 18 connection therewith, but shall apply any funds collected as a consequence of said filings in accordance with the provisions of Section 7.02 of this Agreement. SECTION 10. GOVERNING LAW AND JURISDICTION 10.01 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 10.02 SUBMISSION TO JURISDICTION. Each of the Shipowner and the Lenders hereby irrevocably agrees that any legal suit, action or proceeding arising out of or relating to this Agreement, or any of the transactions contemplated hereby, may be instituted by the other parties hereto in the Courts of the State of New York or the Federal Courts sitting in the Borough of Manhattan, City of New York, State of New York. Each of the Shipowner and the Lenders hereby irrevocably waives, to the fullest extent permitted by law, any objection which it may have now or hereafter to the laying of the venue or any objection based on forum non conveniens, or based on the grounds of jurisdiction with respect to any such legal suit, action or proceeding and irrevocably submits generally and unconditionally to the jurisdiction of any such court in any such suit, action or proceeding. Each of the Shipowner and the Lenders agrees that a judgment, after exhaustion of all available appeals, in any such action or proceeding shall be conclusive and binding upon it and may be enforced in any other jurisdiction by suit upon such judgment, a certified copy of which shall be conclusive evidence of the judgment. Each of the Shipowner and the Lenders waives personal service of any summons, complaint, or other process, which service may be made by such or any other means permitted by New York law. 10.03 WAIVER OF SECURITY REQUIREMENTS. To the extent the Shipowner may, in any action or proceeding arising out of or relating to this Agreement be entitled under applicable law to require or claim that the Agents or the Lenders post security for costs or take similar action, the Shipowner hereby irrevocably waives and agrees not to claim the benefit of such entitlement. 10.04 NO LIMITATION. Nothing in this Section 10 shall affect the right of the Agents or any Lender to serve process in any manner permitted by law or to commence legal proceedings or otherwise proceed against the Shipowner in any jurisdiction; PROVIDED, HOWEVER, that except as provided in Section 9.02, in the event of an Indenture Default, the Agents and the Lenders may not proceed against the Shipowner without the Secretary's consent unless the Secretary has received full payment under the Secretary's Note. SECTION 11. MISCELLANEOUS 11.01 COMPUTATIONS. Each determination of an interest rate by the Administrative Agent or the Facility Agent, or any other Person pursuant to any provision of this Agreement, the Fee Letter or the Floating Rate Note, in the absence of error, shall be conclusive and binding on the Shipowner. Each 19 determination of a fee or other amounts (excluding interest rates) by the Facility Agent, any Lender, or any other Person pursuant to any provision of this Agreement, the Fee Letter or the Floating Rate Note, in the absence of manifest error, shall be conclusive and binding on the Shipowner. All computations of interest and fees hereunder and under the Floating Rate Note shall be made on the basis of a year of three hundred sixty-five (365) days and actual days elapsed; PROVIDED, HOWEVER, that the CP Rate and LIBOR shall be determined on the basis of a year of 360 days and actual days elapsed. The Secretary and Indenture Trustee may request supporting documentation for the information provided by the Facility Agent or the Administrative Agent to the Indenture Trustee. 11.02 NOTICES. Except as otherwise specified, all notices given hereunder shall be in writing, and shall be given by mail, facsimile, tested telex or personal delivery and shall be deemed to be given for the purposes of this Agreement on the day that such notice is received by the intended recipient thereof. Unless otherwise specified in a notice delivered in accordance with this Section 11.02, all notices shall be delivered to the parties hereto and to the Indenture Trustee and the Secretary at their respective addresses indicated below: TO THE FACILITY AGENT AND THE LENDERS: Address: Citibank International plc, as Facility Agent P.O. Box 242 336 Strand London, England WC2R 1HB Attention: Karen Doran Telephone: 01144171500 4482 Facsimile: 01144171500 4274 With a copy to: Citibank, N.A., as the Alternate Lender 399 Park Avenue New York, New York 10043 Attention: Structured Trade Finance Facsimile (212) 793-2330 Telephone: (212) 559-6787 With a copy to the Administrative Agent TO THE ADMINISTRATIVE AGENT Address: Citicorp North America, Inc. 399 Park Avenue New York, New York 10043 Attention: Structured Trade Finance Facsimile (212) 793-2330 Telephone: (212) 559-6787 20 TO THE SHIPOWNER Petrodrill Four Limited c/o Arias, Fabrega & Fabrega P.O. Box 985 Omar Hodge Building Wickham's Cay Road Town, Tortola British Virgin Islands With a copy to: Petrodrill Four Limited c/o: Petrodrill Engineering N.V. K.P. van der Mandelelaan 38 3062 MB Rotterdam (Brainpark), The Netherlands Netherlands Attention: Steve Assiter Telephone: 011.31.10.272.2722 Facsimile: 011.31.10.272.2727 Email: assister@petrodrill.nl TO THE SECRETARY Address: SECRETARY OF TRANSPORTATION c/o Maritime Administrator 400 Seventh Street, S.W. Washington, D.C. 20590 Attention: Office of Ship Finance Telephone: (202) 366-5744 Facsimile: (202) 366-7901 TO THE INDENTURE TRUSTEE Address: FMB Trust Company, National Association Mail Code 101-591 25 South Charles Street Baltimore, Maryland 21201 Attention: Corporate Trust Department Telephone: (410) 244-4238 Facsimile: (410) 244-4236 21 11.03 DISPOSITION OF INDEBTEDNESS. Once the Shipowner has completely drawn down on the Credit Facility and the Available Amount is zero, each Lender may sell, assign, transfer, negotiate, or otherwise dispose of all or any part of its interest in all or any part of the Shipowner's indebtedness under this Agreement and the Floating Rate Note to any party (collectively, a "Disposition of Indebtedness"), and any such party shall enjoy all the rights and privileges of such Lender under this Agreement and the Floating Rate Note; PROVIDED, HOWEVER, that each Disposition of Indebtedness to any Person other than a domestic Affiliate of a Lender shall require the prior written consent of the Shipowner (which consent shall not be unreasonably withheld or delayed); PROVIDED, FURTHER, HOWEVER, that each Lender may pledge or grant participation in all or any part of its interest in all or any part of the Shipowner's indebtedness under this Agreement and the Floating Rate Note to any party at any time so long as such Lender's commitment to lend the Available Amount under this Agreement is not affected thereby. The Shipowner shall, at the request of the Facility Agent, execute and deliver to the Facility Agent or to any party that the Facility Agent may designate, any such further instruments as may be necessary or desirable to give full force and effect to a Disposition of Indebtedness by the applicable Lender. 11.04 DISCLAIMER. Neither the Agents nor the Lenders shall be responsible in any way for the performance of the Construction Contract or any other Shipowner Document, and no claim against the Shipbuilder or any other Person with respect to the performance of the Construction Contract will affect the obligations of the Shipowner under this Agreement or the Floating Rate Note. 11.05 NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part of any Agent or any Lender in exercising any right, power or privilege under this Agreement, the Floating Rate Note or the Indenture and no course of dealing between or among the Shipowner and any Agent or any Lender shall operate as a waiver of the rights of the Shipowner and such Lenders against each other under this Agreement; nor shall any single or partial exercise of any right, power or privilege hereunder or under the Floating Rate Note or the Indenture preclude the Shipowner, the Agents, or the Lenders from exercising against each other any other right, power or privilege hereunder. The rights and remedies expressly provided herein are cumulative and not exclusive of any rights or remedies which the Agents or the Lenders would otherwise have. No notice to or demand on the Shipowner in any case shall entitle the Shipowner to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of any Agent or any Lender under this Agreement to any other or further action in any circumstances without notice or demand. Notwithstanding any other provision to the contrary herein, no provision in this Agreement or any other related agreement preserves any rights in favor of the parties against the Secretary in the event that either party fails or delays to exercise any rights, powers, or privileges under this Agreement, the Floating Rate Note or the Indenture or engages in any particular course of dealing. 22 11.06 CURRENCY. All payments of principal, interest, fees or other amounts due hereunder and under the Floating Rate Note shall be made in Dollars, regardless of any law, rule, regulation or statute, whether now or hereafter in existence or in effect in any jurisdiction, which affects or purports to affect such obligations. The obligation of the Shipowner in respect of any amount due under this Agreement or the Floating Rate Note, notwithstanding any payment in any other currency (whether pursuant to a judgment or otherwise), shall be discharged only to the extent of the amount in Dollars that the Person entitled to receive that payment may, in accordance with normal banking procedures, purchase with the sum paid in that other currency (after any premium and costs of exchange) on the Business Day immediately succeeding the day on which that Person receives that payment. If the amount in Dollars that may be so purchased for any reason falls short of the amount originally due, the Shipowner shall pay such additional amounts, in Dollars, to compensate for the shortfall. Any obligation of the Shipowner not discharged by that payment shall continue to be due as a separate and independent obligation and shall accrue interest in accordance with Section 4.02 until discharged as provided herein. 11.07 SEVERABILITY. To the extent permitted by applicable law, the illegality or unenforceability of any provision of this Agreement shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement. 11.08 AMENDMENT OR WAIVER. This Agreement may not be changed, discharged or terminated without the written consent of the parties hereto, and no provision hereof may be waived without the written consent of the party to be bound thereby. There may be no change, discharge, termination or claim of waiver of the terms of this Agreement without the prior written consent of the Secretary, who is entitled to enforce his rights under this Agreement as an intended third party beneficiary to this Agreement. The parties hereto acknowledge, however, that nothing in this Agreement creates in either the Shipowner or the Lenders any right whatsoever against the Secretary. 11.09 INDEMNIFICATION. Without limiting any other rights that any Agent or any Lender may have hereunder or under applicable law, the Shipowner hereby agrees to indemnify each of the Agents and the Lenders (each, an "Indemnified Party") from and against any and all damages, losses, claims, liabilities and related costs and expenses, including reasonable attorneys' fees and disbursements (all the foregoing being collectively referred to as "Indemnified Amounts") awarded against or incurred by such Indemnified Party arising out of or as a result of this Agreement or the Floating Rate Note excluding, however, Indemnified Amounts to the extent resulting from gross negligence or willful misconduct on the part of such Indemnified Party. In the event of an Indenture Default, all amounts received by such Indemnified Party pursuant to such indemnification after an Indenture Default shall be held and paid in the manner required by Section 7.02. 11.10 BENEFIT OF AGREEMENT. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and 23 assigns of the parties hereto; PROVIDED, HOWEVER, that the Shipowner may not assign any of its rights or obligations hereunder without the prior written consent of the Lenders, and, to the extent set forth in paragraph 11.03 hereof, the Secretary. 11.11 WAIVER OF JURY TRIAL. Each of the Shipowner and the Lenders waives its respective rights to a trial by jury of any claim or cause of action based upon or arising out of or related to this Agreement, any assignment or the transactions contemplated hereby, in any action, proceeding or other litigation of any type brought by any party against the other parties, whether with respect to contract claims, tort claims, or otherwise. Each of the Shipowner and the Lenders agrees that any such claim or cause of action shall be tried by a court trial without a jury. Without limiting the foregoing, the parties further agree that their respective right to a trial by jury is waived by operation of this section as to any action, counterclaim or other proceeding which seeks, in whole or in part, to challenge the validity or enforceability of this Agreement, any assignment or any provision hereof or thereof. This waiver shall apply to any subsequent amendments, renewals, supplements or modifications to this Agreement or any assignment. 11.12 EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same Agreement. Delivery of an executed counterpart of a signature page to this Agreement by facsimile shall be effective as delivery of a manually executed counterpart of this Agreement. 11.13 SHIPOWNER DOCUMENTS. Notwithstanding the provisions of this Agreement, in any conflict between this Agreement and the provisions of the Shipowner Documents, the Shipowner Documents shall govern the agreement between the parties hereto, but only with respect to the subject matter thereof. Notwithstanding the previous sentence, any provision in the Indenture (or any other agreement the Shipowner has entered into with any other Person) purporting to release the Shipowner of any indebtedness, liability or obligation shall not apply to any indebtedness, liability or obligation of the Shipowner hereunder and no termination of the Indenture (or any other agreement the Shipowner has entered into with any other Person) shall affect the continued effectiveness of this Agreement, which shall continue in full force and effect until the Credit Facility has been terminated and all indebtedness, liabilities and obligations of the Shipowner have been fully discharged and satisfied, the Floating Rate Note have been paid, satisfied and discharged in full, and there has elapsed a year and a day from the last payment received from, or on behalf, of the Shipowner. However, this Section 11.13 shall have no affect on the relationships established and the agreements entered into by the parties to the Shipowner Documents (and such other agreements the Shipowner has entered into with any other Person), in each case to which the Lenders are not parties in their capacities as the Lenders hereunder. 24 11.14 ENTIRE AGREEMENT. This Agreement, the Fee Letter and the Floating Rate Note contain the entire agreement among the parties hereto regarding the Credit Facility. 11.15 NO PROCEEDINGS. Each of the Shipowner, the Alternate Lender and the Agents hereby agrees that it will not institute against, or join any other Person in instituting against, the Primary Lender any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding, or any other proceeding under any federal or state bankruptcy or similar law, so long as any Commercial Paper issued by the Primary Lender shall be outstanding or there shall not have elapsed one year plus one day since the last day on which any such Commercial Paper shall have been outstanding. SECTION 12. ARRANGEMENTS AMONG THE AGENTS AND THE LENDERS 12.01 APPOINTMENT. Each Lender hereby appoints the Facility Agent to act as its agent in connection herewith and in connection with the Floating Rate Note and the Indenture and authorizes the Facility Agent to exercise such rights, powers and discretions as are specifically delegated to the Facility Agent by the terms hereof and thereof, together with all such rights, powers and discretions as are reasonably incidental thereto. Without limiting the foregoing, all notices to be delivered to, and approvals to be given by, a Lender under the disbursement procedures described in Section 3.01 hereof shall be delivered to and given by the Facility Agent on behalf of such Lender. 12.02 RIGHTS OF FACILITY AGENT. The Lenders and the Facility Agent agree that the Facility Agent may: (i) assume that (a) any representation made by the Shipowner in connection herewith is true; (b) no event which is or may become an Event of Default has occurred; (c) the Shipowner is not in breach of or default under its obligations hereunder; (d) any right, power, authority or discretion vested herein upon the Lenders or any other person or group of persons has not been exercised; unless it has, in its capacity as Facility Agent, notice or actual knowledge to the contrary; (ii) engage and pay for the advice or services of any lawyers, accountants, surveyors or other experts whose advice or services may to it seem necessary, expedient or desirable and rely upon any advice so obtained; (iii) rely as to any matters of fact which might reasonably be expected to be within the knowledge of the Shipowner upon a certificate signed by or on behalf of the Shipowner; (iv) rely upon any communication or document believed by it to be genuine; (v) refrain from exercising any right, power or discretion vested in it as facility agent hereunder unless and until instructed by a Lender as to 25 whether or not such right, power or discretion is to be exercised and, if it is to be exercised, as to the manner in which it should be exercised; and (vi) refrain from acting in accordance with any instructions of any Lender to begin any legal action or proceeding arising out of or in connection with this Agreement until it shall have received such security as it may require (whether by way of payment in advance or otherwise) for all costs, claims, expenses (including legal fees) and liabilities which it will or may expend or incur in complying with such instructions. 12.03 DUTIES. The Facility Agent shall: (i) promptly inform each Lender of the contents of any notice or document received by it from the Shipowner hereunder; (ii) promptly notify each Lender of the occurrence of any Event of Default or any default by the Shipowner in the due performance of or compliance with its obligations under this Agreement of which the Facility Agent has notice from any other party hereto; (iii) save as otherwise provided herein, act as facility agent hereunder in accordance with any instructions given to it by any Lender, which instructions shall be binding on all of the Lenders; and (iv) if so instructed by any Lender, refrain from exercising any right, power or discretion vested in it as facility agent hereunder. 12.04 LIMITATION ON OBLIGATIONS OF FACILITY AGENT. Notwithstanding anything to the contrary expressed or implied herein, the Lenders and the Facility Agent agree that the Facility Agent shall not: (i) be bound to inquire as to: 26 (a) whether or not any representation made by the Shipowner in connection herewith is true; (b) the occurrence or otherwise of any event which is or may become an Event of Default; (c) the performance by the Shipowner of its obligations hereunder; or (d) any breach of or default by the Shipowner or under its obligations hereunder; (ii) be bound to account to any Lender for any sum or the profit element of any sum received by it for its own account; (iii) be bound to disclose to any other person any information relating to the Shipowner or any of its agencies if such disclosure would or might in its opinion constitute a breach of any law or regulation or be otherwise actionable at the suit of any person; or (iv) be under any obligations other than those for which express provision is made herein. 12.05 INDEMNIFICATION BY LENDERS. The Alternate Lender shall, from time to time on demand by the Facility Agent, indemnify the Facility Agent, against any and all costs, claims, expenses (including legal fees) and liabilities (collectively, "Liabilities") together with any tax thereon which the Facility Agent may incur, otherwise than by reason of its own gross negligence or willful misconduct, in acting in its capacity as facility agent hereunder (including, without limitation, any Liabilities in anyway relating to or arising out of certifications made with respect to either (a) the due authorization, execution or delivery of a Floating Rate Note, or (b) laws and/or regulations of any Governmental Authority, in each case in connection with any request by the Facility Agent to the Indenture Trustee or the Secretary for the Secretary to endorse its guarantee on a Floating Rate Note or for the Indenture Trustee to authenticate a Floating Rate Note). 12.06 LIMITATION ON RESPONSIBILITY. The Facility Agent accepts no responsibility to the Lenders for the accuracy and/or completeness of any information supplied by the Shipowner in connection herewith or for the legality, validity, effectiveness, adequacy or enforceability of this Agreement, and the Facility Agent shall be under no liability to the Lenders (nor to the Shipowner, Indenture Trustee or the Secretary with respect to calculations of the Applicable Interest Rate) as a result of taking or omitting to take any action in relation to this Agreement, save in the case of its own negligence or willful misconduct. 12.07 NO CLAIMS ON EMPLOYEES OF FACILITY AGENT. Each Lender agrees that it will not assert or seek to assert against any director, officer or employee 27 of the Facility Agent any claim which it might have against it in respect of the matters referred to in Clause 12.06. 12.08 BANKING BUSINESS. The Lenders agree that the Facility Agent may accept deposits from, lend money to and generally engage in any kind of banking or other business with the Shipowner. 12.09 RESIGNATION OR TERMINATION OF FACILITY AGENT. (i) The Facility Agent may (after consultation with the Shipowner and the Lenders) resign its appointment hereunder at any time without assigning any reason therefor by giving not less than thirty (30) days' prior written notice to that effect to each of the other parties hereto; PROVIDED, that no such resignation shall be effective until a successor for the Facility Agent is appointed in accordance with the succeeding provisions of this Section 12; (ii) The Lenders and the Shipowner may jointly seek the termination of the appointment of the Facility Agent hereunder at any time by giving not less than thirty (30) days prior written notice to that effect to the Facility Agent; PROVIDED that no such termination shall be effective until a successor for the Facility Agent is appointed in accordance with the succeeding provisions of this Section 12; PROVIDED FURTHER that any such notice of termination must be signed by all of the Lenders and the Shipowner; and (iii) For the avoidance of doubt the parties hereto agree that the provisions of this Section 12.09 shall at no time apply to or restrict the ability of the Administrative Agent to resign its position of Administrative Agent. 12.10 SUCCESSOR TO FACILITY AGENT. If the Facility Agent gives notice of its resignation pursuant to Section 12.09(i) or receives notice of termination pursuant to Section 12.09(ii), then any reputable and experienced bank or other financial institution may be appointed as a successor to the Facility Agent by the Lenders with the consent of the Secretary and Shipowner (which consent of the Shipowner shall not be unreasonably withheld or delayed) during the period of such notice but, if no such successor is so appointed, the Facility Agent may appoint such a successor itself with the consent of the Secretary and Shipowner (which consent of the Shipowner shall not be unreasonably withheld or delayed). 12.11 DISCHARGE OF OBLIGATIONS. If a successor to the Facility Agent is appointed under the provisions of Section 12.10, then (i) the retiring Facility Agent shall be discharged from any further obligation hereunder but shall remain entitled to the benefits of the provisions of this Section 12 and (ii) its successor and each of the other parties hereto shall have the same rights and obligations amongst themselves as they would have had if such successor had been a party hereto. 12.12 RESPONSIBILITIES OF LENDERS. It is understood and agreed by each Lender that it is, and will continue to be, solely responsible for making its own independent appraisal of and investigations into the financial condition, 28 creditworthiness, condition, affairs, status and nature of the Shipowner, the Secretary and the United States of America and, accordingly, each Lender warrants to the Facility Agent that it has not relied and will not hereafter rely on the Facility Agent: (i) to check or inquire on its behalf into the adequacy, accuracy or completeness of any information provided by the Shipowner in connection with this Agreement or the transaction herein contemplated (whether or not such information has been or is hereafter circulated to such Lender by the Facility Agent); or (ii) to assess or keep under review on its behalf the financial condition, creditworthiness, condition, affairs, status or nature of the Shipowner. 12.13 AGENCY DIVISION. In acting as Facility Agent for the Lenders, the Facility Agent's agency division shall be treated as a separate entity from any other of its divisions or departments and, notwithstanding the foregoing provisions of this Section 12, in the event that the Facility Agent should act for the Shipowner in any capacity in relation to any other matter, any information given by the Shipowner to the Facility Agent in such other capacity may be treated as confidential by the Facility Agent. 12.14 ADMINISTRATIVE AGENT. Each party hereto (other than the Administrative Agent) acknowledges that the Administrative Agent is a party hereto only in its capacity as administrative agent of the Primary Lender and the Primary Lender's commercial paper holders. 12.15 FACILITY AGENT ONLY AGENT FOR THE LENDERS. The Facility Agent is not authorized to, nor shall it, act as the agent for the Secretary, the Indenture Trustee, the Shipowner or any of their successors in interest or assigns in any of the capacities provided for herein. 29 IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed and delivered as of the date first above written. PETRODRILL FOUR LIMITED, as the GOVCO INCORPORATED, as the Primary Shipowner Lender, by Citicorp North America, Inc., its attorney-in-fact. By:/s/ EARL W. MCNIEL By:/s/ P. A. BOTTICELLI (Signature) (Signature) Name: EARL W. MCNIEL Name: P.A. BOTTICELLI (Print) (Print) Title: TREASURER Title: VICE PRESIDENT (Print) CITIBANK INTERNATIONAL PLC, CITIBANK, N.A., as the Alternate as Facility Agent Lender By:/s/ P. A. BOTTICELLI By:/s/ AE KYONG CHUNG (Signature) (Signature) Name: P. A. BOTTICELLI Name: AE KYONG CHUNG (Print) (Print) Title: VICE PRESIDENT Title: VICE PRESIDENT (Print) (Print) CITICORP NORTH AMERICA, INC., as the Administrative Agent By:/s/ P. A. BOTTICELLI (Signature) Name: P. A. BOTTICELLI (Print) Title: VICE PRESDIENT (Print) 30 EXHIBIT 1 TO CREDIT AGREEMENT Schedule of Definitions to Credit Agreement Dated as of April 9, 1999 "Accelerated Repayment" shall have the meaning set forth in Section 4.02(b) of the Credit Agreement. "Act" means the Merchant Marine Act, 1936, as amended, and in effect on the Closing Date. "Administrative Agent" means CITICORP NORTH AMERICA, INC., a Delaware corporation, as administrative agent for the Primary Lender and the commercial paper holders of the Primary Lender (and their respective successors and assigns), and its permitted successors and assigns. "Affiliate" or "Affiliated" means any Person directly or indirectly controlling, controlled by, or under common control with, another Person. "Agent" means each of the Administrative Agent and the Facility Agent, individually, and "Agents" means the Administrative Agent and the Facility Agent, collectively. "Alternate Lender" shall have the meaning set forth in the preamble to the Credit Agreement. "Applicable Interest Rate" shall mean (i) with respect to any Disbursement or portion thereof that is funded by the Primary Lender through its issuance of commercial paper notes and so long as the Primary Lender is the holder of the indebtedness related to such funded portion, a rate (the "CP Rate") equal to the sum of (A) the Primary Lender's weighted average cost (defined below) related to the issuance of commercial paper notes and other short-term borrowings or the sale of participation interests (collectively, "Commercial Paper"), which in each case have been allocated by the Primary Lender to the Credit Facility, which rate includes related issuance costs incurred by the Primary Lender, plus (B) during the Construction Period, four-tenths of one percent (.40%) and thereafter, nine-twentieths of one percent (0.45%), as calculated by the Administrative Agent for each Interest Period and specified in a notice sent by the Administrative Agent to the Facility Agent and by the Faculty Agent to the Shipowner and the Indenture Trustee at least three (3) Business Days prior to each Interest Payment Date on which the interest so calculated is payable (For purposes of the foregoing, the Primary Lender's "weighted average cost" of Commercial Paper shall consist of (I) the actual interest rate paid to purchasers of Commercial Paper, (II) the costs associated with the issuance of the Commercial Paper and (III) other borrowings the Primary Lender may incur, including the amount to fund small or odd dollar amounts that are not easily accommodated in the commercial paper market); and (ii) with respect to any Disbursement funded by the Alternate Lender or to the extent that a Disbursement held by the Primary Lender is assigned to the Alternate Lender or to any other assignee, then, from and after the applicable Disbursement Date or the effective date of such assignment, as the case may be, a rate per annum equal to LIBOR plus three tenths of one percent (0.30%) per annum; provided, however, that, if the Alternate Lender shall have determined, prior to the commencement of any Interest Period that: (A) Dollar deposits of sufficient amount and maturity for funding a Disbursement are not available to such Lender in the London interbank market in the ordinary course of business; or (B) by reason of circumstances affecting the relevant market, adequate and fair means do not exist for ascertaining the rate of interest to be applicable to a Disbursement; or (C) the relevant rate of interest referred to in the definition of LIBOR which is to be used to determine the rate of interest for a Disbursement does not cover the funding cost to the Lender of making or maintaining the Disbursement, then the Lender shall so notify the Indenture Trustee, who shall give notice to the Shipowner of such condition and interest shall, effective as of the date of such notice and so long as such condition shall exist, accrue during each applicable Interest Period at the Base Rate; provided, further, however that if, in the Lender's reasonable judgment, it becomes unlawful at any time for such Lender to make or maintain Disbursements based upon LIBOR, the Lender shall so notify the Indenture Trustee, who shall give notice to the Shipowner of such determination and, effective as of the date of such notice and so long as such condition shall exist, interest shall thereafter accrue during each applicable Interest Period at the Base Rate. -2- "Authorization Agreement" means the Authorization Agreement, Contract No. MA-13504, dated the Closing Date, between the Secretary and the Indenture Trustee, whereby the Secretary authorizes the Guarantee of the United States of America to be endorsed on the Floating Rate Note, as the same is originally executed, or as modified, amended or supplemented in accordance with the applicable provisions thereof. "Available Amount" shall have the meaning set forth in Section 2.01 of the Credit Agreement. "Base Rate" means, for any Interest Period or any other period, a fluctuating interest rate per annum as shall be in effect from time to time which rate per annum shall at all times be equal to the higher of: (a) the rate of interest announced publicly by Citibank, N.A. in New York, New York, from time to time, as Citibank, N.A.'s base rate; or (b) One-half of one percent (0.50%) per annum above the latest three-week moving average of secondary market morning offering rates in the United States for three-month certificates of deposit of major United States money market banks, such three-week moving average being determined weekly on each Monday (or, if any such day is not a Business Day, on the next succeeding Business Day) for the three-week period ending on the previous Friday by Citibank, N.A. on the basis of such rates reported by certificate of deposit dealers to and published by the Federal Reserve Bank of New York, or, if such publication shall be suspended or terminated, on the basis of quotations for such rates received by Citibank, N.A. from three New York certificate of deposit dealers of recognized standing selected by Citibank, N.A., in either case adjusted to the nearest one-fourth of one percent (0.25%) or, if there is no nearest one-fourth of one percent, to the next higher one-fourth of one percent. "Business Day" shall mean any day on which dealings in Dollar deposits are carried on in the London interbank market and on which commercial banks in London and New York City are open for domestic and foreign exchange business. "Certificate Authorizing Disbursement" shall mean, with respect to a Disbursement, the United States Certificate Authorizing Disbursement substantially in the form set forth in Annex A to the Credit Agreement. -3- "Closing Date" means April 9, 1999. "Commercial Paper" shall have the meaning set forth in clause (a)(i)of the definition of Applicable Interest Rate herein. "Construction Contract" means that certain Semi-Submersible Drilling Vessel Construction Contract (Hull No. 1828), dated April 9, 1998, by and between the Shipowner and the Shipyard, as the same may be amended, modified or supplemented in accordance with the applicable provisions thereof. "Construction Period" shall mean the period from the date hereof to the Delivery Date. "Construction Period Interest" shall mean all interest that accrues on the Outstanding Principal during the Construction Period. "CP Rate" shall have the meaning set forth in clause (a)(i) of the definition of Applicable Interest Rate herein. "Credit Agreement" or "Agreement" shall mean the Credit Agreement, dated as of the Closing Date, among the Shipowner; the Lenders, and the Agents, including any Exhibit, Annex, or other attachment thereto, as the same may be amended, modified or supplemented in accordance with the applicable provisions thereof. "Credit Facility" shall have the meaning set forth in Whereas Clause (A) of the Credit Agreement. "Credit Facility Amount" shall have the meaning set forth in Section 2.01 of the Credit Agreement. "Delivery Date" means the date on which the Vessel is delivered to and accepted by the Shipowner. "Depository Agreement" means the Depository Agreement, Contract No. MA-13508, dated the Closing Date, between the Shipowner, CITIBANK, N.A., as Depository, and the Secretary, as the same is originally executed, or amended, modified or supplemented in accordance with the applicable provisions thereof. -4- "Disbursements" shall have the meaning set forth in Section 2.03 of the Credit Agreement. "Disbursement Date" shall mean, in relation to any Disbursement, the Business Day on which the Lender shall make such Disbursement. "Disposition of Indebtedness" shall have the meaning set forth in Section 11.03 of the Credit Agreement. "Dollars", "U.S. Dollars", "U.S.D.", "U.S. $" or "$" shall mean the lawful currency of the United States of America. "Event of Default" shall have the meaning set forth in Section 9.02 of the Credit Agreement. "Facility Agent" means CITIBANK INTERNATIONAL PLC, a bank organized and existing under the laws of England, as facility agent for both the Primary Lender and the Alternative Lender (and their respective successors and assigns), and its permitted successors and assigns. "Fee Letter" shall have the meaning set forth in Section 6.01 of the Credit Agreement. "Final Disbursement Date" shall have the meaning set forth in Section 2.02 of the Credit Agreement. "Fixed Rate Note" shall mean the Note substantially identical to the form of Exhibit 3 to the Indenture, appropriately completed. "Floating Rate Note" shall mean the Note substantially identical to the form of Exhibit 2 to the Indenture, appropriately completed. "Governmental Authority" shall mean the government of any country, any agency, department or other administrative authority or instrumentality thereof, and any local or other governmental authority within any such country. "Guarantee" or "Guarantees" means the guarantee of the Floating Rate Note by the United States of America pursuant to Title XI of the Act, as provided in the Authorization Agreement. "Guarantee Commitment" means the Commitment to Guarantee Obligations, Contract No. MA-13503, dated as of the Closing Date, -5- executed by the Secretary and accepted by the Shipowner with respect to the Guarantees, as originally executed or as modified, amended or supplemented in accordance with the applicable provisions thereof. "Guarantee Fees" shall mean the amounts described in the Guarantee Commitment payable in consideration for the commitment therein described and payable as provided in such Guarantee Commitment. "Holder" means each holder of the Floating Rate Note. "Indemnified Amounts" shall have the meaning set forth in Section 11.09 of the Credit Agreement. "Indemnified Party" shall have the meaning set forth in Section 11.09 of the Credit Agreement. "Indenture" means the Trust Indenture dated as of the Closing Date, between the Shipowner and the Indenture Trustee, as the same is originally executed, or as modified, amended or supplemented in accordance with the applicable provisions thereof. "Indenture Default" has the meaning specified in Article VI of Exhibit 1 to the Indenture. "Indenture Trustee" means FMB Trust Company, National Association, a national banking association, and any successor trustee permitted under the Indenture. "Interest Payment Date" means, with respect to the Floating Rate Note, the date when any installment of interest on such Note is due and payable, which are February 15 and August 15 of each year, beginning on August 15, 1999, and the date of any prepayment of the Floating Rate Note. "Interest Period" shall mean, with respect to any Disbursement, (i) the period commencing on the Disbursement Date and extending up to, but not including, the next Interest Payment Date; and (ii) thereafter the period commencing on each Interest Payment Date and extending up to, but not including, the next Interest Payment Date. "Lender" shall have the meaning set forth in the preamble to the Credit Agreement. -6- "Liabilities" shall have the meaning set forth in Section 12.05 of the Credit Agreement. "LIBOR" (a) in relation to any Interest Period, shall mean the rate of interest per annum (rounded upward, if necessary, to the nearest 1/16 of 1%) quoted by the principal London office of CITIBANK, N. A., at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for the offering to leading banks in the London interbank market of U.S. Dollar deposits for a period and in an amount comparable to such Interest Period and the principal amount upon which interest is to be paid during such Interest Period; and (b) in relation to any Post Maturity Period, shall have the meaning as set forth in Section 4.02(b) of the Credit Agreement. "Lien" shall have the meaning set forth in Section 8.01(c) of the Credit Agreement. "Liquidation Period" shall have the meaning set forth in Section 4.03(a) of the Credit Agreement. "Maturity" when used with respect to any Obligation, means the date on which the principal of, or interest on, such Obligation becomes due and payable as therein provided, whether on a Payment Date, at the Stated Maturity or by prepayment, repayment, redemption or declaration of acceleration or otherwise. "Mortgage" means the first preferred ship mortgage on the Vessel, Contract No. MA-13506, between the Shipowner and the Secretary, as originally executed or as modified, amended or supplemented in accordance with the applicable provisions thereof. "Note" shall mean a Floating Rate Note or a Fixed Rate Note. "Obligation" or "Obligations" shall mean the Floating Rate Note or Fixed Rate Note(s) of the Shipowner bearing a Guarantee and authenticated and delivered pursuant to the Indenture and the Authorization Agreement. "Other Taxes" shall have the meaning set forth in Section 6.02(a) of the Credit Agreement. -7- "Outstanding Principal" shall have the meaning set forth in Section 2.01 of the Credit Agreement. "Payment Date" shall mean February 15 and August 15 of each year, beginning on August 15, 2001. "Payment Default" has the meaning specified in Section 6.01(a) of Exhibit 1 to the Indenture. "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Post Maturity Applicable Interest Rate" shall have the meaning set forth in Section 4.02(b) of the Credit Agreement. "Post Maturity Interest Rate" shall have the meaning set forth in Section 4.02(b) of the Credit Agreement. "Post Maturity Period" shall have the meaning set forth in Section 4.02(b) of the Credit Agreement. "Primary Lender" shall have the meaning set forth in the preamble to the Credit Agreement. "Quotation Date" shall have the meaning set forth in Section 4.02(b) of the Credit Agreement. "Redemption" means with respect to the redemption of the Floating Rate Note, the repayment or prepayment of the Floating Rate Note as applicable. "Redemption Date" means, with respect to the Floating Rate Note, a date fixed for the prepayment, repayment or redemption of such Note by or pursuant to Section 4 of the Credit Agreement, Article Fourth of the Indenture, or Article III of Exhibit 1 to the Indenture. "Redemption Price" means, with respect to the Floating Rate Note, the price at which the Floating Rate Note is to be prepaid, repaid, or redeemed pursuant to Section 4 of the Credit Agreement, Article Fourth of the Indenture, or Article III of Exhibit 1 to the Indenture. -8- "Secretary" means the Secretary of Transportation or any official or official body from time to time duly authorized to perform the duties and functions of the Secretary of Transportation under Title XI of the Act (including the Maritime Administrator, the Acting Maritime Administrator, and to the extent so authorized, the Deputy Maritime Administrator and other officials of the Maritime Administration). "Secretary's Note" means a promissory note or promissory notes issued and delivered by the Shipowner to the Secretary described in Article Third of the Special Provisions of the Security Agreement and shall also mean any promissory note issued in substitution for and replacement thereof pursuant to the Security Agreement. "Security Agreement" shall mean that certain security agreement, Contract No. MA-13505 dated as of the Closing Date, with respect to the Vessel, executed by the Shipowner and the Secretary relating to the security in respect to the Guarantees, as originally executed or as modified, amended or supplemented in accordance with the applicable provisions thereof. "Shipowner" means PETRODRILL FIVE LIMITED, a British Virgin Islands international business company, and for purposes of the Indenture and the Floating Rate Note, subject to the provisions of Sections 6.09, 8.01 and 8.02 of Exhibit 1 to the Indenture, shall also include its successors and assigns; provided, however, that for purposes of the Credit Agreement, the term Shipowner shall also include the Shipowner's permitted successors and assigns under the Credit Agreement. "Shipowner's Documents" means the Security Agreement, the Mortgage, the Title XI Reserve Fund and Financial Agreement, the Depository Agreement, and the Secretary's Note. "Shipowner Financial Statements" shall have the meaning set forth in Section 8.01(h) of the Credit Agreement. "Shipyard" or "Shipbuilder" means TDI-Halter, Limited Partnership. "Stated Maturity," when used with respect to the Floating Rate Note, means the date determinable as set forth in such Note as the final date on which the principal of such Note is due and payable, which shall include, without limitation, each of the Payment Dates. -9- "Taxes" shall have the meaning set forth in Section 6.02(a) of the Credit Agreement. "Title XI Reserve Fund and Financial Agreement" means that certain Title XI Reserve Fund and Financial Agreement, Contract No. MA-13507, dated as of the Closing Date, executed by the Shipowner and the Secretary, as amended, modified or supplemented in accordance with the applicable provisions thereof. "United States" means the United States of America. "Unpaid Amount" shall have the meaning set forth in Section 4.02(b) of the Credit Agreement. "Vessel" means the Shipowner's dynamic positioned, semi-submersible drilling rig to be named the AMETHYST 4, and constructed by TDI-Halter, Limited Partnership in accordance with the Construction Contract, including all work and material heretofore or hereafter performed upon or installed in or placed on board such a Vessel, together with related appurtenances, additions, improvements, and replacements. -10- EX-4.20 22 EXHIBIT 4.20 APPENDIX III TO GUARANTEE COMMITMENT DOCUMENT 11 CONTRACT NO. MA-13511 SECURITY AGREEMENT SPECIAL PROVISIONS THIS SECURITY AGREEMENT, dated April 9, 1999 (the "Security Agreement"), is between PETRODRILL FIVE LIMITED, a British Virgin Islands international business company (the "Shipowner") and THE UNITED STATES OF AMERICA (the "United States"), represented by the Secretary of Transportation, acting by and through the Maritime Administrator (the "Secretary"), pursuant to Title XI of the Act. RECITALS: A. The Shipowner has entered the Construction Contract with TDI-Halter, Limited Partnership, the Shipyard for the Construction of the Vessel. B. On the date hereof, the Secretary entered into, and the Shipowner accepted a Commitment to Guarantee Obligations, Contract No. MA-13509, whereby the United States has committed itself to guarantee the payment in full of all the unpaid interest on, and the unpaid principal balance of, Obligations (as defined herein) in the aggregate principal amount equal to 87-1/2% of the Actual Cost of the Vessel on the Closing Date, which amount is set out in Table A. C. The Shipowner has entered into the Credit Agreement providing for the sale and delivery, on the Closing Date, of obligations in the aggregate principal amount of $150,183,000 to be designated "United States Government Guaranteed Export Ship Financing Obligations, AMETHYST 5 Series" (the "Obligations") having the maturity date and interest rate set forth in the Credit Agreement, the Indenture and the Obligations. D. On the date hereof, the Shipowner and FMB Trust Company, National Association, a national banking association, as Indenture Trustee, executed and delivered the Trust Indenture (the "Indenture") pursuant to which the Shipowner will issue the Obligations. E. On the date hereof, the Secretary and the Indenture Trustee executed the Authorization Agreement, Contract No. MA-13510, which authorizes the Indenture Trustee to endorse, execute, and authenticate the Secretary's Guarantee on each of the Obligations. F. As security for the due and timely payment of the Secretary's Note, issued this day by the Shipowner, and for the Secretary's issuance of the Guarantees, the Shipowner has executed and delivered the Security Agreement, Contract No. MA-13511, and the Financial Agreement, Contract No. MA-13513 on the Delivery Date will execute the Mortgage, Contract No. MA-13512, granting the Secretary a security interest in, among other things, the Construction Contract, the Vessel and certain other property, tangible and intangible, which the Shipowner now has or hereafter will acquire, and all of the proceeds thereof. G. As further security to the Secretary and in consideration of the Secretary's agreeing to issue the Guarantees, the Shipyard has executed on this date the Consent of Shipyard to the assignment of the Construction Contract to the Secretary. H. In order to implement certain aspects of the transactions contemplated by the Security Agreement and the Financial Agreement, the Secretary, the Shipowner and CITIBANK, N.A., a national banking association (the "Depository") have entered into the Depository Agreement, Contract No. MA-13514, on the date hereof. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, and of other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and in order to provide security to the Secretary for the Secretary's Note provided for herein, the parties hereto hereby agree as follows: 1. CONCERNING THESE SPECIAL AND GENERAL PROVISIONS. This Security Agreement shall consist of two parts: the Special Provisions and the General Provisions attached hereto as Exhibit 1 of the Security Agreement and incorporated herein by reference. In the event of any conflict, or inconsistency between the Special Provisions of this Security Agreement and Exhibit 1, said Special Provisions shall control. 2. The following additions, deletions and amendments are hereby made to the Security Agreement: (a) CONCERNING THE CREDIT AGREEMENT. The term "Bond Purchase Agreement" refers to the Credit Agreement. (b) GRANTING CLAUSE. Section 1.03(a) of Exhibit 1 hereto is amended to read as follows: SECTION 1.03. GRANTING CLAUSE. (a) In order to create a present security interest in the Secretary, the Shipowner does hereby grant, sell, convey, assign, transfer, mortgage, pledge, set over and confirm unto the Secretary continuing security interests in all of the right, title and interest of the Shipowner in and to all of the following, whether now owned or existing or hereafter arising or acquired: (1) Hull 1829 and all material, machinery, and equipment which are purchased for or identified for use in the construction of said hull pursuant to the Construction Contract, as amended, while under construction, including all additional, extra, or changed items requested by the Shipowner and agreed upon by the Shipyard pursuant to the Construction Contract. -2- (2) The Construction Contract (insofar as it relates to the Construction of the Vessel), together with all other contracts, whether now in existence or hereafter entered into, relating to the Construction of the Vessel. Said right, title and interest in and to the Construction Contract, and the other contracts conveyed to the Secretary by this subsection are hereinafter referred to collectively as the "Rights Under the Construction and Related Contracts." (3 ) The Guaranty of Halter Group Marine Inc., in connection with the Construction Contract. (4) The Shipowner's rights to receive all moneys which from time to time may become due to the Shipowner with respect to the Construction of the Vessel regardless of the legal theory by which moneys are recovered. Said right, title and interest in and to the moneys, cash, bonds, claims, and securities conveyed by this subsection are herein referred to collectively as the "Moneys Due with Respect to the Construction of the Vessel." The Secretary acknowledges and agrees that the Moneys Due with Respect to the Construction of the Vessel will be paid directly to the Depository for application in accordance with this Security Agreement and the Indenture. (5) All goods, whether equipment or inventory appertaining to or relating to the Vessel, including owner-furnished equipment, whether or not on board or ashore and not covered by the Mortgage. (6) The Chartering Contract between the Shipowner and Petroleo Brasileiro S.A. ("Petrobras") and the charter hire due thereunder, and the Shipowner's rights to receive all moneys which from time to time may become due to the Shipowner with respect to any other charter or charter hire relating to the Vessel or other earnings with respect to the operation of the Vessel. (7) The Title XI Reserve Fund and all moneys, instruments, negotiable documents, chattel paper, and proceeds thereof currently on deposit or hereafter deposited in the Title XI Reserve Fund. (8) The Construction Fund and all moneys, instruments, negotiable documents, chattel paper and proceeds, etc. (9) All moneys, instruments, negotiable documents, chattel paper and proceeds thereof held by the Depository under the Depository Agreement. -3- (10) Proceeds of Policies of Insurance relating to the Vessel and, whether or not insured, any general average claims or loss of hire claims the Shipowner may have with respect to the Vessel. (11) The Licensing Agreement between the Shipowner and Bigem Holdings N.V. relating to certain design data. (12) The Management Agreement between the Shipowner and Formaritima Ltd. relating to the management of the operation and maintenance of the Vessel. (13) The Marine and Nautical Services Agreement between the Shipowner and Workships Contractors B.V. relating to the day to day marine and nautical operation and maintenance of the Vessel. (14) The Construction Management Agreement between the Shipowner and Petrodrill Engineering N.V. relating to construction supervision, managing, accounting and budgeting, facilities and related services in connection with the Vessel. (15) All proceeds of the collateral described in paragraphs (1) through (14) of this Section. The Secretary shall have, upon execution and delivery thereof, as further security, certain right, title and interest in and to the following: (16) The Mortgage, in form and substance satisfactory to the Secretary to be executed and delivered by the Shipowner to the Secretary, as mortgagee, on the Delivery Date, covering the Vessel. (c) CONCERNING SECTION 2.02 For purposes of Section 2.02(b), the Secretary consents to Chartering Contract 101.2.100.97-8 dated December 5, 1997 between the Shipowner and Petroleo Brasileiro SA ("Petrobras"). (d) CONCERNING SECTION 2.05 (1) In connection with Section 2.05(a), declared war risk insurance is not required prior to the Delivery Date of the Vessel. (2) In connection with Section 2.05(b)(3) and the last paragraph of Section 2.05(e), the maximum amount of self-insurance permitted to the Shipowner under the last paragraph thereof shall be $100,000 per occurrence, PROVIDED, HOWEVER, that the maximum amount of self-insurance permitted to the Shipowner will be $150,000 per occurrence or series of occurrences arising out of one event in respect to a named wind storm, and $250,000 for operational risks arising from any one occurrence. -4- (3) In connection with clause (ii) of the initial paragraph of Section 2.05(c), the Secretary shall permit payment of losses up to the amount of $500,000 to be made directly to the Shipowner under the circumstances specified therein. (4) In connection with Section 2.05(l), as evidence of insurance maintained under Section 2.05, the Shipowner may submit a fleet cover note or comparable certificate of insurance setting forth the terms of the policy. (e) CONCERNING SECTION 2.08. (1) The notice referred to in paragraph of Section 2.08 shall read as follows: "NOTICE OF SHIP MORTGAGE This Vessel is owned by PETRODRILL FIVE LIMITED, a British Virgin Islands international business company ("Shipowner"), and is covered by a First Preferred Ship Mortgage in favor of the United States of America, under authority of Merchant Shipping Act of The Commonwealth of the Bahamas. Under the terms of said Mortgage neither the Shipowner, any charterer, the master or agent of this Vessel nor any other person has any right, power or authority to create, incur or permit to be placed or imposed upon this Vessel any lien whatsoever." (2) The first sentence of Section 2.08 of Exhibit 1 hereto is amended by inserting immediately after the words "Vessel's documents" and immediately before the word "and", the following: ; PROVIDED THAT, if at any time, it is provided by law that a Vessel's documents may be carried or kept at any place other than aboard the Vessel, then the certified copy of the Mortgage, any supplement to the Mortgage and any assignment of the Mortgage shall be carried or kept with the Vessel's documents, (f) CONCERNING DISBURSEMENTS FROM THE CREDIT FACILITY. Within a reasonable time after receipt of a Certificate Authorizing Disbursements (the "Certificate") in the form of Annex A to the Credit Agreement together with the submissions required by Section 5.03(a)(1), -5- the Secretary shall approve the Certificate provided that the Secretary has received and is satisfied with the accuracy and completeness of the information contained in the certificate and the information contained in the submissions required by Section 5.03(a)(1) and provided that the Secretary concludes that the provisions of section 5.03(a)(2) are also satisfied. Upon receipt of the Secretary's written approval of the Certificate, the Shipowner may draw down on the Credit Facility the amount permitted in the Certificate as approved by the Secretary, in the manner permitted by the Credit Agreement. (g) CONCERNING SECTION 6.01. Section 6.01 of Exhibit 1 hereto is hereby amended by adding the following events, which shall constitute a "Security Default": Failure of the Shipowner to convert the Floating Rate Note to Fixed Rate Note(s) on the earlier of (i) September 15, 2002, or (ii) two (2) years after the Delivery Date. Any event constituting a default under any security agreement or mortgage as amended, relating to the vessel owned by PETRODRILL FOUR LIMITED and financed under Title XI of the Merchant Marine Act, 1936, as amended. Failure to maintain at its registered office a register of mortgages, charges or other encumbrances, or failure to enter thereon the particulars of the security interests granted by the Security Agreement and the Financial Agreement, or failure to file a copy of the Security Agreement or the Financial Agreement at the Companies Registry of the British Virgin Islands. (h) CONCERNING SECTION 9.01. Subject to Section 9.01 of the Security Agreement, any notice, request, demand, direction, consent, waiver, approval or other communication, when given to a party hereto, shall be addressed to: Secretary as: SECRETARY OF TRANSPORTATION c/o Maritime Administrator U.S. Department of Transportation 400 Seventh Street, S.W. Washington, D.C. 20590 Shipowner as: PETRODRILL FIVE LIMITED c/o Arias, Fabrega & Fabrega P.O. Box 985 Omar Hodge Building Wickham's Cay Road Town, Tortola British Virgin Islands -6- With a copy to: PETRODRILL ENGINEERING NV K.P. van der Mandelelaan 38 3062 MB Rotterdam (Brainpark) The Netherlands Indenture Trustee as: FMB TRUST COMPANY, NATIONAL ASSOCIATION 25 South Charles St. 16th Floor (Mail Code 101-591) Baltimore, MD 21201 (i) GOVERNING LAW. This Agreement and the rights and obligations of the parties hereto shall be construed, enforced and governed by the laws of the United States of America, but to the extent they are inapplicable, then by the laws of the State of New York, including without limitation, the Uniform Commercial Code of the State of New York ("UCC"), but without regard to any conflict of laws provisions of the State of New York; provided, however, that to the extent required by the UCC, the laws of the British Virgin Islands shall govern the perfection of accounts and general intangibles hereunder. (j) JURISDICTION AND CONSENT TO SUIT. Any proceeding to enforce this Agreement may be brought in the Federal courts of the United States of America located in the State of New York of the United States of America. The Shipowner and the Secretary hereby irrevocably waive any present or future objection to such venue, and for each of itself and in respect of any of their respective properties hereby irrevocably consents and submits unconditionally to the non-exclusive jurisdiction of those courts. The Shipowner further irrevocably waives any claim that any such court is not a convenient forum for any such proceeding. The Shipowner agrees that any service of process, writ, judgment or other notice of legal process shall be deemed and held in every respect to be effectively served upon it in connection with proceedings in the State of New York if delivered to Sher & Blackwell, 1850 M Street, N.W., Suite 900, Washington, D.C. 20036, which it irrevocably designates and appoints as its authorized agent for the service of process in the State and Federal courts in the State of New York. Nothing herein shall affect the right of the Secretary to serve process in any other manner permitted by applicable law. The Shipowner further agrees that final judgment against it in any such action or proceeding arising out of or relating to this Agreement shall be conclusive and may be enforced in any other jurisdiction within or outside the United States of America by suit on the judgment, a certified or exemplified copy of which shall be conclusive evidence of that fact and of the judgment. (k) CONCERNING DISCLOSURE SHIPYARD PLANS. The Secretary shall not disclose or release the Shipowner's or the Shipyard's plans (including designs, drawings, construction drawings, and data) to any third party unless ordered to do so by a state or federal court or unless the Secretary releases the plans to a subsequent purchaser of the Vessel after Default by the Shipowner. In the event an action is brought by a third party under the Freedom of Information Act or under some other statute to obtain the disclosure of the Shipyard's plans, the Secretary shall notify the Shipowner within ten (10) Business Days. -7- (l) ENGAGEMENT LETTER. The Shipowner will not enter into a placement letter or engagement letter for the fixed rate financing without the prior written consent of the Secretary. (m) INCONSISTENCIES. Notwithstanding any provision herein, in the event there are any inconsistencies between the original of this document held by the Secretary, and an original held by any other party to this transaction, the provisions of the original held by the Secretary shall prevail. -8- IN WITNESS WHEREOF, this Security Agreement has been executed by the parties as of the day and year first written. PETRODRILL FIVE LIMITED SHIPOWNER Attest: BY: /s/ EARL W. MCNIEL ----------------------------- Treasurer /s/ ROBERT W. RANDALL ----------------------------- Secretary UNITED STATES OF AMERICA (SEAL) SECRETARY OF TRANSPORTATION MARITIME ADMINISTRATOR Attest: BY: /s/ JOEL C. RICHARD ----------------------------- Secretary /s/ LARRY MAIN ----------------------------- Assistant Secretary Maritime Administration -9- TABLE A The Actual Cost of the Vessel as of the date hereof as determined by the Secretary is $171,638,175. The itemization of said Actual Cost is as follows: Shipyard Contract Price $84,000,000 Owner Furnished Items 22,700,000 Design 1,669,000 Project Management Team 5,000,000 Spare Parts & Manual 3,500,000 Commissioning 2,000,000 Maritima Reimbursement 800,000 Insurance 200,000 Contingencies 11,976,000 Owner Furnished Foreign Items 24,500,000 ---------- Total Construction Cost $156,345,000 Net Interest during Construction 9,432,000 Guarantee Fee 5,861,175 --------- Estimated Total Actual Cost $171,638,175 EXHIBIT 1 TO SECURITY AGREEMENT DOCUMENT 12 GENERAL PROVISIONS TABLE OF CONTENTS ARTICLE I DEFINITIONS; OFFICER'S CERTIFICATES; GRANTING CLAUSE PAGE SECTION 1.01. Definitions...............................................1 SECTION 1.02. Officer's Certificates....................................1 SECTION 1.03. Granting Clause...........................................1 ARTICLE II SHIPOWNER'S REPRESENTATIONS AND AGREEMENTS SECTION 2.01. Shipowner's Representations, Agreements, Organization and Existence (a) General Representations...............................2 (b) Taxes.................................................3 SECTION 2.02. (a) Title to and Possession of the Vessel.................3 (b) Sale, Mortgage, Transfer or Charter of the Vessel.....4 (c) Taxes and Governmental Charges........................4 (d) Liens.................................................4 (e) Requisitions by the United States.....................4 (f) Compliance with Applicable Laws.......................5 (g) Operation of the Vessel...............................5 (h) Condition and Maintenance of the Vessel...............5 (i) Material Changes in the Vessel........................6 (j) Documentation of the Vessel...........................6 SECTION 2.03. Maintenance of Construction Contract......................6 SECTION 2.04. Delivery Requirements.....................................7 SECTION 2.05. Insurance.................................................7 SECTION 2.06. Inspection of the Vessel; Examination of Shipowner's Records..................................................13 SECTION 2.07. Requisition of Title, Termination of Construction Contract or Total Loss of the Vessel..............................13 SECTION 2.08. Notice of Mortgage.......................................14 SECTION 2.09. Compliance with Mortgage Laws............................15 SECTION 2.10. Performance of Shipowner's Agreements by the Secretary...15 SECTION 2.11. Perfection of Security Interests; Further Assurances.....15 SECTION 2.12. Modification of Formation Agreements.....................15 SECTION 2.13. Members of Limited Liability Companies...................16 SECTION 2.14. Concerning the Performance and Payment Bonds.............16 i ARTICLE III THE SECRETARY'S NOTE SECTION 3.01. Secretary's Note............................................16 SECTION 3.02. Termination of the Guarantees...............................16 SECTION 3.03. Execution of Additional Secretary's Note....................17 ARTICLE IV CONSTRUCTION FUND; MONEYS DUE WITH RESPECT TO CONSTRUCTION OF THE VESSEL SECTION 4.01. Construction Fund...........................................18 SECTION 4.02. Moneys Due with Respect to Construction of the Vessel.......18 ARTICLE V ACTUAL COST; THE ESCROW FUND SECTION 5.01. Actual Cost Determination...................................18 SECTION 5.02. Escrow Fund Deposits........................................19 SECTION 5.03. Escrow Fund Withdrawals.....................................19 SECTION 5.04. Investment and Liquidation of the Escrow Fund...............21 SECTION 5.05. Income on the Escrow Fund...................................21 SECTION 5.06. Termination Date of the Escrow Fund.........................22 ARTICLE VI DEFAULTS AND REMEDIES SECTION 6.01. What Constitutes "Defaults"; Continuance of Defaults........22 SECTION 6.02. Acceleration of Maturity of the Secretary's Note............23 SECTION 6.03. Waivers of Default..........................................24 SECTION 6.04. Remedies After Default......................................25 SECTION 6.05. Application of Proceeds.....................................26 SECTION 6.06. General Powers of the Secretary.............................27 ARTICLE VII AMENDMENTS AND SUPPLEMENTS TO THE SECURITY AGREEMENT, MORTGAGE AND INDENTURE SECTION 7.01. Amendments and Supplements to the Security Agreement and the Mortgage............................................28 SECTION 7.02. Amendments and Supplements to the Indenture.................28 ii ARTICLE VIII CONSOLIDATION, MERGER OR SALE SECTION 8.01. Consolidation, Merger, or Sale..............................29 SECTION 8.02. Transfer of a General Partner's or a Joint Venturer's Interest....................................................29 ARTICLE IX NOTICES SECTION 9.01. Notices and Communications..................................30 SECTION 9.02. Waivers of Notice...........................................30 SECTION 9.03. Shipowner's Name or Address Change.........................30 ARTICLE X DISCHARGE OF SECURITY AGREEMENT AND THE MORTGAGE SECTION 10.01. Discharge of Security Agreement and the Mortgage............30 ARTICLE XI MISCELLANEOUS SECTION 11.01. Successors and Assigns......................................31 SECTION 11.02. Execution in Counterparts...................................31 SECTION 11.03. Shipowner's Rights in Absence of Default....................31 SECTION 11.04. Surrender of Vessel's Documents.............................31 SECTION 11.05. Table of Contents, Titles and Headings......................31 SECTION 11.06. Payments in U.S. Currency...................................31 SECTION 11.07. Immunity....................................................32 iii ARTICLE I DEFINITIONS; OFFICER'S CERTIFICATES; GRANTING CLAUSE SECTION 1.01. DEFINITIONS. All capitalized terms used, but not defined herein, shall have the meaning ascribed in Schedule X. SECTION 1.02. OFFICER'S CERTIFICATES. To satisfy a covenant or condition provided for in this Security Agreement, the Responsible Officer of the Person making such Officer's Certificate shall certify that the officer (a) has read such covenant or condition; (b) has made or caused to be made such examination or investigation as is necessary to enable the Officer to express an informed opinion with respect to such covenant or condition; and (c) believes to the best of the Officer's knowledge that such condition or covenant has been met. An Officer's Certificate shall set forth the pertinent supporting information and shall be subject to the Secretary's review of its adequacy and accuracy. SECTION 1.03. GRANTING CLAUSE. (a) In order to create a present security interest in the Secretary, the Shipowner does hereby grant, sell, convey, assign, transfer, mortgage, pledge, set over and confirm unto the Secretary continuing security interests in all of the right, title and interest of the Shipowner in and to all of the following, whether now owned or existing or hereafter arising or acquired: (1) The Construction Contract (insofar as it relates to the Construction of the Vessel under its related Construction Contract), together with all other contracts, whether now in existence or hereafter entered into, relating to the Construction of the Vessel. Said right, title and interest in and to the Construction Contract, and the other contracts conveyed to the Secretary by this subsection are hereinafter referred to collectively as the "Rights Under the Construction and Related Contracts." (2) The Shipowner's rights to receive all moneys which from time to time may become due to the Shipowner with respect to the Construction of the Vessel regardless of the legal theory by which moneys are recovered. Said right, title and interest in and to the moneys, cash, bonds, claims, and securities conveyed by this subsection are herein referred to collectively as the "Moneys Due with Respect to the Construction of the Vessel." The Secretary acknowledges and agrees that the Moneys Due with Respect to the Construction of the Vessel will be paid directly to the Depository for application in accordance with this Security Agreement and the Indenture. (3) All goods, whether equipment or inventory appertaining to or relating to each Vessel, whether or not on board or ashore and not covered by the Mortgage, and any charter hire relating to each Vessel. (4) The Title XI Reserve Fund and all moneys, instruments, negotiable documents, chattel paper, and proceeds thereof currently on deposit or hereafter deposited in the Title XI Reserve Fund. (5) The Construction Fund and all moneys, instruments, negotiable documents, chattel paper and proceeds, etc. (6) All moneys, instruments, negotiable documents, chattel paper and proceeds thereof held by the Depository under the Depository Agreement. (7) Proceeds of Policies of Insurance relating to the Vessel and, whether or not insured, any general average claims or loss of hire claims the Shipowner may have with respect to the Vessel. (8) All proceeds of the collateral described in paragraphs (1) through (7) of this Section. The Secretary shall have, upon execution and delivery thereof, as further security, certain right, title and interest in and to the following: (9) The Mortgage, to be executed and delivered by the Shipowner to the Secretary, as mortgagee, on the date hereof, covering the Vessel. (b) The right, title and interest of the Secretary pursuant to Section 1.03(a) is herein, collectively, called the "Security." The Secretary shall hold the Security as collateral security for all of the obligations and liabilities of the Shipowner under the Secretary's Note and as collateral security for and with respect to the Guarantees whether now made or hereafter entered into. (c) Notwithstanding paragraphs (a) and (b) of this Section: (1) the Shipowner shall remain liable to perform its obligations under the Construction Contract and the above-mentioned other contracts; (2) the Secretary shall not, by virtue of this Security Agreement, have any obligations under any of the documents referred to in clause (1) or be required to make any payment owing by the Shipowner thereunder; and (3) if there is no existing Default, the Shipowner shall (subject to the rights of the Secretary hereunder) be entitled to exercise all of its rights under each of the documents referred to in this Section and shall be entitled to receive all of the benefits accruing to it thereunder as if paragraphs (a) and (b) of this Section were not applicable. (d) The Shipowner hereby agrees with the Secretary that the Security is to be held by the Secretary subject to the further agreements and conditions set forth herein. ARTICLE II SHIPOWNER'S REPRESENTATIONS AND AGREEMENTS The Shipowner hereby represents and agrees, so long as this Security Agreement shall not have been discharged, as follows: SECTION 2.01. SHIPOWNER'S REPRESENTATIONS, AGREEMENTS, ORGANIZATION AND EXISTENCE. (a) 2 GENERAL REPRESENTATIONS. The Shipowner hereby represents and warrants that the following are true statements as of the date hereof and further warrants that they shall remain true hereafter: (1) The Shipowner is duly organized, validly existing and in good standing under the laws of the jurisdiction designated in the initial paragraph of the Special Provisions hereof and shall maintain such existence. The Shipowner has not failed to qualify to do business in any jurisdiction in which its business or properties require such qualification, and had and has full legal right, power and authority to own its own properties and assets and conduct its business as it is presently conducted; (2) the Shipowner had and has legal power and authority to enter into and carry out the terms of the Guarantee Commitment, the Construction Contract, Bond Purchase Agreement, Obligations, Indenture, Security Agreement, Secretary's Note, Mortgage, Financial Agreement, and Depository Agreement (the "Documents"); (3) each of the Documents has been duly authorized, executed and delivered by the Shipowner and constitutes, in accordance with its respective terms, legal, valid and binding instruments enforceable against the Shipowner, except to the extent limited by applicable bankruptcy, reorganization, insolvency, moratorium or similar laws of general application relating to or affecting the enforcement of creditors rights as from time to time in effect; (4) the consummation of the transactions contemplated by and compliance by the Shipowner of all the terms and provisions of the Documents will not violate any provisions of the formation documents of the Shipowner and will not result in a breach of the terms and provisions of, or constitute a default under any other agreement or undertaking by the Shipowner or by which the Shipowner is bound or any order of any court or administrative agency entered into in any proceedings to which the Shipowner is or has been a party; and (5) there is no litigation, proceeding or investigation pending or, to the best of the Shipowner's knowledge, threatened, involving the Shipowner or any of its property which could prevent or jeopardize the performance by the Shipowner of its obligations under the Documents; (b) TAXES. The Shipowner has paid or caused to be paid all taxes assessed against it, unless the same are being contested in good faith or an authorized extension of time has been granted. SECTION 2.02. (a) TITLE TO AND POSSESSION OF THE VESSEL. On the date of this Security Agreement, the Shipowner represents and warrants that it lawfully owns the Vessel free from any liens, encumbrances, security interests, charges, or rights IN REM (subject only to (1) the equity of the Shipyard under the Construction Contract, if any, (2) liens on any undelivered Vessel which the Shipyard is obligated to discharge under the Construction Contract, (3) any security interest subordinated to the Secretary's security interest permitted under the Special Provisions hereof, (4) the Secretary's rights hereunder and (5) the liens permitted by paragraph (d)(3) of this Section. The 3 Shipowner shall, for the Secretary's benefit, warrant and defend the title to, and possession of, the Vessel and every part thereof against the claims and demands of all Persons whomsoever. (b) SALE, MORTGAGE, TRANSFER OR CHARTER OF THE VESSEL. (1) The Shipowner shall not, without the Secretary's prior written consent, sell, mortgage, demise charter or transfer the Vessel to any Person (or charter the Vessel to a Related Party under any form of charter). (2) The Shipowner hereby covenants that: (A) it will not enter into any time charter of the Vessel in excess of six months unless the time charter contains the following provision, "This time charter is subject to each of the rights and remedies of the Secretary of Transportation and has been assigned to the Secretary under a Security Agreement and Mortgage, each executed by the Shipowner in favor of the Secretary with respect to the Vessel being chartered." and (B) it shall, within 10 calendar days of entering into any time charter in excess of six months, transmit a copy of the time charter to the Secretary. (3) In no event may the Shipowner transfer the Vessel to any country designated by the Secretary of Defense as a country whose interests are hostile to the interests of the United States. (c) TAXES AND GOVERNMENTAL CHARGES. The Shipowner shall pay and discharge, or cause to be paid and discharged, on or before the same shall become delinquent, all taxes, assessments, government charges, fines and penalties lawfully imposed upon the Vessel, unless the same are being contested in good faith. (d) LIENS. (1) As a condition precedent to each payment by the Shipowner under the Construction Contract, the Shipowner shall require an Officer's Certificate from the Shipyard stating that once the Shipyard receives said payment, there will be no liens or rights IN REM against the respective Vessel. At the Delivery Date of each Vessel, the Shipowner and the Shipyard shall provide an Officer's Certificate stating that there are no liens or rights IN REM against the Vessel except for the Mortgage. (2) After the Delivery Date of the Vessel, the Shipowner shall satisfy, or cause to be satisfied, within 30 days of its knowledge thereof, any lien or encumbrance or right IN REM which shall be filed against the Vessel unless the same is being contested in good faith; and (3) Neither the Shipowner, any charterer, the master of the Vessel, nor any other Person has or shall have any right, power or authority, without the Secretary's prior written consent, to create, incur or permit to be placed or imposed on the Vessel any lien, encumbrance, security interest, charge, or rights IN REM, and statutory liens incident to current operations unless such statutory liens are subordinate to the Mortgage. (e) REQUISITIONS BY THE UNITED STATES. Should the United States of America, or any agency or instrumentality thereof, take or 4 requisition title or use of the Vessel, or seek to take or requisition title or use of the Vessel, the Shipowner agrees to comply promptly with said request, taking, or requisition, without the interposition of any defense whatsoever, saving only (i) its right to dispute at a subsequent time, the amount of compensation to be paid by the United States or (ii) the prior taking or requisition of title or use by another governmental body. The parties agree to be bound by the rights, duties, procedures, and remedies specified in Section 902 of the Act (46 App. U.S.C. 1242). (f) COMPLIANCE WITH APPLICABLE LAWS. The Shipowner shall at all times be in compliance with all applicable laws. Each Vessel (1) shall be designed to meet, and on the Delivery Date thereof and at all times thereafter shall be documented in a country which is party to the International Convention for Safety of Life at Sea, or other treaty, convention or international agreement governing vessel inspection to which the United States is a signatory and shall comply with all requirements of applicable laws, rules, and regulations of its country of documentation, all applicable treaties, conventions, international agreements to which that country is a signatory and the laws, rules and regulations of the ports it serves; and (2) shall have on board valid certificates showing compliance therewith. The foregoing shall not apply if: (A) the Vessel is in Government Use; (B) there has been an actual or constructive total loss or an agreed or compromised total loss of the Vessel; or (C) there has been any other loss with respect to the Vessel and the Shipowner shall not have had a reasonable time to repair the same. (g) OPERATION OF THE VESSEL. Except when the Vessel has been in Government Use, the Shipowner shall not (1) cause or permit the Vessel to be operated in any manner contrary to applicable law, rule, or regulation of its country of documentation, all applicable treaties, conventions, or international agreements to which that country is a signatory and the laws, rules, and regulations of the ports it serves, (2) abandon the Vessel in any port unless there has been an actual or constructive total loss or an agreed or compromised total loss of the Vessel. (h) CONDITION AND MAINTENANCE OF THE VESSEL. (1) The Vessel shall be constructed, maintained and operated so as to meet, at all times, the highest classification, certification, rating and inspection standards for vessels of the same age and type as may be imposed by the Classification Society. The foregoing shall not apply (i) if the Vessel has been under Government Use, (ii) in the event of an actual or constructive total loss or an agreed or compromised total loss of the Vessel, or (iii) there has been any other loss with respect to the Vessel and the Shipowner shall not have had a reasonable time to repair the same. (2) On the Delivery Date of the Vessel, the Shipowner shall furnish to the Secretary an Interim Class Certificate issued for the Vessel by the Classification Society and promptly after the Delivery Date of the Vessel, furnish to the Secretary a Certificate of Class with respect to the Vessel issued by the Classification Society. Subsequently, the Shipowner shall annually (A) furnish to the Secretary a Certificate of Confirmation of Class issued by the Classification Society showing that the above-mentioned classification and rating have been retained for each Vessel and (B) furnish to the Secretary copies of all Classification Society reports, including periodic and damage surveys for the Vessel; provided that, the foregoing shall not apply if the Vessel is in Government Use and the 5 governmental body does not permit classification and rating of the Vessel. (3) Notwithstanding Section 2.02(h)(2), if the Vessel is a barge which is not classed, then the Shipowner shall, at all times, at its own cost and expense maintain and preserve the Vessel, so far as may be practicable, in at least as good order and condition, ordinary wear and tear excepted, as at the Delivery Date of the Vessel, and shall perform or cause to be performed at least once every five years and at any other time reasonably required by the Secretary, a survey and inspection of the Vessel by an independent marine surveyor approved by the Secretary; and PROVIDED THAT, no such surveys will be required within the last three years prior to the final Stated Maturity of the Obligations. The Shipowner shall furnish two copies of the report of such independent marine surveyor to the Secretary within 15 days of such survey and inspection. The Shipowner shall deliver to the Secretary annually an Officer's Certificate stating the condition and maintenance of the Vessel; PROVIDED FURTHER, that none of this Section shall apply when the Vessel is in Government Use. (i) MATERIAL CHANGES IN THE VESSEL. After the Delivery Date of the Vessel, the Shipowner shall not make, or permit to be made, any material change in the structure, means of propulsion, type or speed of such Vessel or in its rig, unless it shall have received the Secretary's prior written consent thereto. (j) DOCUMENTATION OF THE VESSEL. Upon the Delivery Date and thereafter, the Vessel shall be and shall remain documented under the laws of the country specified in the Special Provisions. SECTION 2.03. MAINTENANCE OF CONSTRUCTION CONTRACT. (a) The Construction Contract shall be maintained in full force and effect insofar as it relates to the due performance by the Shipowner and the Shipyard of all their respective obligations thereunder and the Shipowner shall not, without the Secretary's prior written consent, amend, modify, assign or terminate the Construction Contract or consent to any change in the Construction Contract which releases the Shipyard from its obligations to comply with the provisions of the Construction Contract or any applicable laws, treaties, conventions, rules and regulations; PROVIDED THAT, the Secretary's prior written consent shall not be necessary, but prompt written notice to the Secretary shall be given for (1) any mandatory or regulatory change to the Construction Contract as a result of any requirements of any governmental agency, or (2) any non-mandatory changes that the Shipyard and the Shipowner desire to make which do not, in the aggregate, exceed five (5%) percent of the total Construction Contract price of the Vessel, and which do not cause the total Construction Contract price to be increased by an individual change by more than one (1%) percent or the delivery and completion date of the Vessel to be extended by more than ten (10) days. Notwithstanding the foregoing, no change shall be made in the general dimensions and/or characteristics of the Vessel which changes the capacity of the Vessel to perform as originally intended by the Construction Contract without the Secretary's prior written consent. The Secretary will nonetheless retain its authority to review work done under a change order to ascertain whether the work should be included in Actual Cost and whether the price charged is fair and reasonable. No withdrawals may be made from the Escrow Fund for work that is determined not to be includable in Actual Cost. 6 (b) Notwithstanding anything to the contrary contained in the Construction Contract or herein, no changes to the payment milestones and disbursement schedules shall be made without the Secretary's prior written consent, except to the extent reasonably required to reflect the change orders under paragraph (a) of this Section. SECTION 2.04. DELIVERY REQUIREMENTS. At or prior to the Delivery Date, the Shipowner shall have: (a) documented the Vessel under the laws of the country specified in the Special Provisions. (b) executed and delivered to the Secretary the Mortgage (or, if appropriate, a mortgage supplement) in the form of Exhibit 3 hereof; (c) recorded the Mortgage (or, if appropriate, a mortgage supplement) in the appropriate foreign registry, specified in the Special Provisions; (d) delivered to the Secretary an Officer's Certificate (1) from the Shipowner and the Shipyard certifying that the Vessel is free of any claim, lien, charge, mortgage, or other encumbrance of any character except as permitted under Section 2.02(d); (2) certifying that there has not occurred and is not then continuing any event which constitutes (or after any period of time or any notice, or both, would constitute) a default under the Security Agreement; (3) that the marine insurance as required under Section 2.05 will be in full force and effect at the time of Vessel delivery; (4) certifying that the Vessel was constructed substantially in accordance with the plans and specifications of the Construction Contract; (5) certifying that there have been no unusual occurrences (or a full description of such occurrences, if any) which would adversely affect the condition of the delivered Vessel. (e) delivered to the Secretary (1) an opinion of counsel substantially in the form of Exhibit A to the form of Mortgage; and (2) a certificate of delivery and acceptance from the Shipowner and the Shipyard to the Secretary with respect to the delivered Vessel; SECTION 2.05. INSURANCE. (a) Prior to the Delivery Date of the Vessel, the Shipowner shall, without cost to the Secretary or, with respect to war risk builder's risk insurance mentioned below, without cost to the Shipyard, cause the Vessel to be insured as provided in the Construction Contract and as contemplated by the Consent of Shipyard; PROVIDED THAT, the insurance required by this Section shall be approved by the Secretary. (b) Upon the Delivery Date of each Vessel and at all times thereafter, the Shipowner shall, without cost to the Secretary, keep the Vessel insured as indicated below and with such additional insurance as may be specified by the Secretary in an amount in U.S. dollars equal to 110% of the unpaid principal amount of the Secretary's Note, or such greater sum, up to and including the full commercial value of the Vessel as may be required by the Secretary. The Shipowner shall 7 provide 30 days prior written notice to the Secretary of all insurance renewals. (1) Marine and war risk hull insurance under the latest (at the time of issue of the policies in question) forms of American Institute of Marine Underwriters' policies approved by the Secretary and/or policies issued by or for the Maritime Administration (or under such other forms of policies as the Secretary may approve in writing) insuring the Vessel against the usual risks covered by such forms (including, at the Shipowner's option, such amounts of increased value and other forms of "total loss only" insurance as are permitted by said hull insurance policies); and (2) While the Vessel is laid up, at the Shipowner's option and in lieu of the above-mentioned marine and war risk hull insurance or marine and war risk hull and increased value insurance, port risk insurance under the latest (at the time of issue of the policies in question) forms of American Institute of Marine Underwriters' policies approved by the Secretary and/or policies issued by or for the Maritime Administration (or under such other forms of policies as the Secretary may approve in writing) insuring the Vessel against the usual risks covered by such forms. (3) Notwithstanding the foregoing, the Shipowner, with the Secretary's prior written consent, shall have the right to self-insure up to the amount specified in the Special Provisions hereof for any loss resulting from any one accident or occurrence (other than an actual or constructive total loss of the Vessel). (c) All policies of insurance under this Section shall provide, so long as this Security Agreement has not been discharged, that payment of all losses shall be made payable to the Secretary for distribution by him to himself, the Shipowner and (in the case of the insurance required by paragraph (a) of this Section) the Shipyard, except that (i) under the policies required by paragraph (b) of this Section and (ii) as provided in paragraph (e) of this Section, payment of all losses up to the amount specified in the Special Provisions hereof by all insurance underwriters with respect to any one accident, occurrence or event may be made directly to the Shipowner unless there is an existing Default, or if the Secretary shall have assumed the Shipowner's rights and duties under the Indenture and the Obligations and made any payments in default under the terms of Section 6.09 of the Indenture, in which event payment of all losses shall be made payable to the Secretary as aforesaid. Any such insurance recoveries to which the Secretary shall be so entitled shall be applied as follows: (1) In the event that insurance becomes payable under said policies on account of an accident, occurrence or event not resulting in an actual or constructive total loss or an agreed or compromised total loss of the Vessel, the Secretary shall (A) if there is no existing Default and if none of the events described in Section 2.07 has occurred, in accordance with the Shipowner's Request, pay, or consent that the underwriters pay, direct for repairs, liabilities, salvage claims or other charges and expenses (including sue and labor charges due or paid by the Shipowner) covered by the policies, or (to the extent that, as stated in an Officer's Certificate delivered to the Secretary, accompanied by written confirmation by the underwriter or a surveyor or adjuster, the damage shall have been repaired and the cost thereof paid of such liabilities, salvage claims, or other charges and 8 expenses discharged or paid) reimburse, or consent that the underwriters reimburse, the Shipowner therefor and (after all known damage with respect to the particular loss shall have been repaired, except to the extent the Shipowner, with the Secretary's written consent, deems the said repair inadvisable, and all known costs, liabilities, salvage claims, charges and expenses, covered by the policies, with respect to such loss shall have been discharged or paid, as stated in an Officer's Certificate delivered to the Secretary, accompanied by written confirmation by the underwriters or a surveyor or adjuster) pay, or consent that the underwriters pay, any balance to the Shipowner; or (B) if there is an existing Default, in accordance with a Request of Shipowner, pay, or consent that the underwriters pay, direct for the Shipowner's proportion of such repairs, liabilities, salvage claims or other charges and expenses (including sue and labor charges due or paid by the Shipowner) covered by the policies and hold any balance until the same may be paid or applied under Sections 2.05(c)(1)(A), 2.05(c)(1)(C) or 2.05(c)(1)(D), whichever is applicable; or (C) if the Guarantees shall have terminated pursuant to Section 3.02(c) or if the Secretary shall have assumed the Shipowner's rights and duties under the Indenture and the Obligations and made any payments in default under the terms of Section 6.09 of the Indenture and none of the events described in Section 2.07 has occurred, apply the insurance as provided in Section 6.05; or (D) if the Guarantees shall have terminated pursuant to Section 3.02(b) or (d), pay the insurance to the Shipowner; (2) In the event of an accident, occurrence or event resulting in an actual or constructive total loss of the Vessel prior to the Delivery Date of the Vessel, the Shipowner shall forthwith deposit with the Secretary any insurance moneys which the Shipowner receives on account thereof under policies of insurance required by paragraph (a) of this Section, and any such insurance moneys shall be held by the Secretary for 10 days (or such lesser or further time as the Shipowner and the Secretary may agree upon). Upon the expiration of said period of time, (A) if there is no existing Default and if the Shipowner, the Shipyard and the Secretary shall have elected not to construct the Vessel under the Construction Contract, then said insurance moneys shall be applied, to the extent necessary and required pursuant to Section 2.07; or (B) if there is no existing Default and if the Shipowner, the Shipyard and the Secretary shall not have made the election contemplated by clause A of this subsection, then said insurance moneys (together with the Shipowner's funds to the extent, if any, required by the Secretary for deposit on account of interest under clause (ii) below) shall be deposited in the Escrow Fund, in such amount and to the extent available, so that the moneys in the Escrow Fund after such deposit shall be equal to (i) the principal amount of the Outstanding Obligations relating to the Vessel at the time of such deposit and (ii) such interest on said deposit, if any, as may be required by the Secretary (said moneys to be subject to withdrawal in the same manner as moneys originally deposited in said Escrow Fund); and the balance, if any, of such insurance moneys held by the Secretary shall be paid to the Shipowner; and (3) In the event of an accident, occurrence or event resulting in an actual or constructive total loss or an agreed or compromised total loss of the Vessel, whether prior to or after the Delivery Date of the Vessel, and the insurance moneys have not been applied as provided in paragraph (c)(2) of this Section, the Shipowner shall forthwith deposit with the Secretary any insurance moneys which the Shipowner receives on account thereof under policies of insurance required by this Section, and any such insurance moneys received by the Secretary, whether from the 9 Shipowner or otherwise, or held by the Secretary pursuant to paragraph (c)(2) of this Section, shall (A) if there is no existing Default, be applied, to the extent necessary, pursuant to Section 2.07; (B) if there is an existing Security Default, be held until the same may be applied under Sections 2.05(c)(3)(A), 2.05(c)(3)(C) or 2.05(c)(3)(D), whichever is applicable; (C) if the guarantees shall have terminated pursuant to Section 3.02(c) or if the Secretary shall have assumed the Shipowner's rights and duties under the Indenture and the Obligations and made any payments in default under the terms of Section 6.09 of the Indenture, be applied as provided in Section 6.05; PROVIDED THAT, notwithstanding the foregoing Sections 2.05(c)(3)(A), 2.05(c)(3)(B), and 2.05(c)(3)(C), the Shipowner shall not be required to so deposit with the Secretary insurance moneys in an amount which, together with funds otherwise available for the redemption of Obligations is in excess of that required for the redemption of the Outstanding Obligations pursuant to Section 3.05 of the Indenture and for the payment to the Secretary of all other sums that may be secured by this Security Agreement and the Mortgage; or (D) if the Guarantees shall have terminated pursuant to Section 3.02(b) or 3.02(d), be paid to the Shipowner. (d) In the event of an accident, occurrence or event resulting in a constructive total loss of the Vessel, the Secretary shall have the right (with the prior written consent of the Shipowner, unless there is an existing Default, and at any time prior to the Delivery Date of the Vessel also with the prior written consent of the Shipyard) to claim for a constructive total loss of the Vessel. If (1) such claim is accepted by all underwriters under all policies then in force as to the Vessel under which payment is due for total loss and (2) payment in full is made in cash under such policies to the Secretary, then the Secretary shall have the right to abandon the Vessel to the underwriters of such policies, free from lien of this Security Agreement and the Mortgage. (e) Commencing on the Delivery Date of the Vessel, the Shipowner shall, without cost to the Secretary, keep the Vessel insured against marine and war risk protection and indemnity risks and liabilities by policies of insurance approved by the Secretary as to form and amount; PROVIDED THAT, (1) the Shipowner shall, as soon as possible before such Delivery Date, present any such policy to the Secretary (who shall promptly approve or disapprove the same), (2) any approval of a policy under this subsection shall be effective until the end of the policy period or until 60 days after the Secretary shall notify the Shipowner of a desired change in the form and/or amount thereof, whichever shall first occur, and (3) war protection and indemnity insurance shall be required unless the Secretary gives written notice to the Shipowner stating that such insurance is not required. Such policies may provide that (1) if the Shipowner shall not have incurred the loss, damage, or expense in question, any loss under such insurance may be paid directly to the Person to whom any liability covered by such policies has been incurred (whether or not a Default then exists), and (2) if the Shipowner shall have incurred the loss, damage or expense in question, any such loss shall be paid to the Shipowner in reimbursement if there is no existing Default of which the underwriter has written notice from the Shipowner or the Secretary, or, if there is such an existing Default, to the Secretary to be held and applied as follows: (A) applied as provided in Section 6.05 in the event the Guarantees shall have terminated pursuant to Section 3.02(c) or if the Secretary shall have assumed the Shipowner's rights and duties under the Indenture and the Obligations and made any payments in 10 default under the terms of Section 6.09 of the Indenture, or (B) to the extent not theretofore applied pursuant to Section 6.05, paid forthwith to the Shipowner upon its Request in the event there is no existing Default or the Guarantees shall have terminated pursuant to Section 3.02(b) or (d) at the date of delivery of such Request; PROVIDED THAT, irrespective of the foregoing, with the Secretary's prior written consent, the Shipowner shall have the right to self-insure in an amount up to the limit specified in the Special Provisions hereof with respect to each accident, occurrence or event, except that, with respect to cargo or property carried, the Shipowner, with the Secretary's prior written consent, shall have the right to self-insure in an amount up to the limit specified in the Special Provisions hereof with respect to each cargo or property carried. (f) All insurance required under this Section shall be placed and kept with the United States Government or with American and/or British (and/or other foreign, if permitted by the Secretary in writing) insurance companies, underwriters' association or underwriting funds approved by the Secretary. All insurance required under this Section shall be arranged through marine insurance brokers and/or underwriting agents as chosen by the Shipowner and approved by the Secretary. (g) The Secretary shall not have the right to enter into an agreement or compromise providing for an agreed or compromised total loss of the Vessel without prior written consent of (i) the Shipyard (prior to the Delivery Date of the Vessel) and (ii) (unless there is an existing Default) the Shipowner. If (1) the Shipowner shall have given prior consent thereto or (2) there is an existing Default, the Secretary shall have the right in his discretion, and with the prior written consent of the Shipyard prior to the Delivery Date of the Vessel, to enter into an agreement or compromise providing for an agreed or compromised total loss of the Vessel; PROVIDED THAT, if the aggregate amount payable to the Shipowner and/or the Secretary under such agreement or compromise, together with funds held by the Secretary and available for the redemption of Obligations, is not sufficient to redeem or pay the Outstanding Obligations pursuant to Section 2.07, the Secretary shall not enter into such agreement or compromise without the Shipowner's prior written consent. (h) During the continuance of (1) a taking or requisition of the use of the Vessel by any government or governmental body, or (2) a charter, with the Secretary's prior written consent, of the use of the Vessel by the United States Government or by any governmental body of the United States, or by any other government or governmental body, the provisions of this Section shall be deemed to have been complied with in all respects if such government or governmental body shall have agreed to reimburse, in a manner approved by the Secretary in writing, the Shipowner for loss or damage covered by the insurance required hereunder or resulting from the risks under paragraphs (a), (b) and (e) of this Section or if the Shipowner shall be entitled to just compensation therefor. In addition, the provisions of this Section shall be deemed to have been complied with in all respects during any period after (A) title to the Vessel shall have been taken or requisitioned by any government or governmental body or (B) there shall have been an actual or constructive total loss or an agreed or compromised total loss of the Vessel. In the event of any taking, requisition, charter or loss contemplated by this paragraph, the Shipowner shall promptly furnish to the Secretary an Officer's Certificate stating that such taking, requisition, charter or loss has occurred and, if there 11 shall have been a taking, requisition or charter of the use of the Vessel, that the government or governmental body in question has agreed to reimburse the Shipowner, in a manner approved by the Secretary, for loss or damage resulting from the risks under paragraphs (a), (b) and (e) of this Section or that the Shipowner is entitled to just compensation therefor. (i) All insurance required (A) under paragraph (a) of this Section shall be taken out in the names of the Shipowner, the United States and the Shipyard as assureds, and (B) under paragraphs (b) and (e) of this Section shall be taken out in the names of the Shipowner and the United States as assureds. All policies for such insurance so taken out shall, unless otherwise consented to by the Secretary, provide that (1) there shall be no recourse against the United States for the payment of premiums or commissions, (2) if such policies provide for the payment of club calls, assessments or advances, there shall be no recourse against the United States for the payment thereof, and (3) at least 10 days' prior written notice of any cancellation for the nonpayment of premiums, commissions, club calls, assessments or advances shall be given to the Secretary by the insurance underwriters. (j) The Shipowner shall not, without the Secretary's prior written consent, (1) do any act, nor voluntarily suffer or permit any act to be done, whereby any insurance required by this Section shall or may be suspended, impaired or defeated or (2) suffer or permit the Vessel to engage in any voyage or to carry any cargo not permitted under the policies of insurance then in effect without first covering the Vessel with insurance satisfactory in all respects for such voyage or the carriage of such cargo; PROVIDED THAT, this paragraph shall be subject to the requirements of any military authority of the United States and shall not apply if and so long as the title or use of the Vessel shall have been taken, requisitioned or chartered by any government or governmental body as contemplated by Section 2.07. (k) In the event that any claim or lien is asserted against the Vessel for loss, damage or expense which is covered by insurance hereunder and it is necessary for the Shipowner to obtain a bond or supply other security to prevent arrest of the Vessel or to release the Vessel from arrest on account of said claim or lien, the Secretary, on the Shipowner's Request, may, at the Secretary's sole option, assign to any Person executing a surety or guaranty bond or other agreement to save or release the Vessel from such arrest, all right, title and interest of the Secretary in and to said insurance covering such loss, damage or expense as collateral security to indemnify against liability under said bond or other agreement. (l) Except as the Secretary shall otherwise direct by notice in writing to the Shipowner, the Shipowner shall deliver to the Secretary the original policies evidencing insurance maintained under this Section; PROVIDED THAT, if any such original policy shall have been delivered previously to the Secretary or to a mortgagee by the Shipowner under another ship mortgage of the Shipowner, the Shipowner shall deliver a duplicate or pro forma copy of such policy to the Secretary. The Secretary or any agent thereof (who may also be an agent of the issuer) shall at all times hold the policies delivered as aforesaid; PROVIDED THAT, if one or more of said policies are held by an agent of the Secretary, the Shipowner shall, upon the Secretary's request, deliver a duplicate or pro forma copy thereof to the Secretary, and PROVIDED FURTHER, that if the Shipowner shall deliver to the Secretary a 12 Request (1) stating that delivery of such policy to the insurer is necessary in connection with the collection, enforcement or settlement of any claim thereunder (including claims for return premiums and any other amounts payable by the insurer) and (2) setting forth the name and address of the Person to whom such policy is to be delivered or mailed for such purpose, and if the Secretary approves such Request, the Secretary shall, at the Shipowner's expense, deliver or mail (by registered or certified mail, postage prepaid) such policy in accordance with such Request, accompanied by a written direction to the recipient to redeliver such policy directly to the Secretary or an agent thereof when it has served the purpose for which so delivered. The Shipowner agrees that, in case it shall at any time so cause the delivery or mailing of any policy to any Person as aforesaid, the Shipowner will cause such policy to be promptly redelivered to the Secretary or an agent thereof as aforesaid. The Secretary shall have no duty to see to the redelivery of such policy, but shall have the duty to request the redelivery thereof at intervals of 60 days thereafter. (m) Nothing in this Section shall limit the insurance coverage which the Secretary may require under any contract or agreement to which the Secretary and the Shipowner are parties. The requirements of this Section are expressly subject to the Special Provisions of this Security Agreement. SECTION 2.06. INSPECTION OF THE VESSEL; EXAMINATION OF SHIPOWNER'S RECORDS. The Shipowner will: (a) afford the Secretary, upon reasonable notice, access to the Vessel, its cargoes and papers for the purpose of inspecting the same; (b) maintain records of all amounts paid or obligated to be paid by or for the account of the Shipowner for the Vessel's Construction; and (c) at reasonable times permit the Secretary, upon request, to make reasonable, material and pertinent examination and audit of books, records and accounts maintained by the Shipowner, and to take information therefrom and make transcripts or copies thereof. SECTION 2.07. REQUISITION OF TITLE, TERMINATION OF CONSTRUCTION CONTRACT OR TOTAL LOSS OF THE VESSEL. In the event of requisition of title to or seizure or forfeiture of the Vessel, termination of the Construction Contract relating to the Vessel, or the occurrence of the circumstances referred to in Section 2.05(c)(3), then all of the following shall apply: (a) The Shipowner shall promptly give written notice thereof to the Secretary. (b) The Shipowner shall promptly pay all amounts it receives by reason of such requisition, seizure, forfeiture, termination or total loss ("Loss Event") to the Secretary. (c) After the Secretary has received sufficient funds to retire the Outstanding Obligations affected by the Loss Event: (1) if there is no existing Default, (A) the Secretary and the Shipowner shall give notice to the Indenture Trustee of a redemption of the Outstanding Obligations pursuant to Section 3.05 of the Indenture, (B) such amount, if any, held by the Secretary, shall be paid by the Secretary to 13 the Indenture Trustee not earlier than 10 days prior to, nor later than the opening of business on, the Redemption Date required by Section 3.05 of the Indenture, (C) the remainder shall next be applied by the Secretary for the payment of all other sums that may be secured hereby, and (D) the balance shall be paid to the Shipowner including any interest earned on the proceeds which are in excess of the amount required to redeem the Obligations; (2) if there is an existing Default and the Guarantees shall not have terminated pursuant to Section 3.02, such amounts shall be held until the same may be applied or paid under paragraphs (1), (3), or (4) of this subsection, whichever is applicable; (3) if the Guarantees shall have terminated pursuant to Section 3.02(c) or if the Secretary shall have assumed the Shipowner's rights and duties under the Indenture and the Obligations and made any payments in default under the terms of Section 6.09 of the Indenture, such amounts shall be applied as provided in Section 6.05; or (4) if the Guarantees shall have terminated pursuant to Section 3.02(b) or 3.02(d) such amounts shall be paid by the Secretary to the Shipowner. PROVIDED THAT, notwithstanding the foregoing, the Shipowner shall not be required to pay the Secretary any amount which the Secretary agrees is in excess of the amount needed for redemption of the Outstanding Obligations affected by the Loss Event. SECTION 2.08. NOTICE OF MORTGAGE. (a) A properly certified copy of the Mortgage shall be carried on board the Vessel with the Vessel's documents and shall be exhibited on demand to any Person having business with the Vessel or to any Secretary's representative. (b) A notice printed in plain type of such size that the paragraph of reading matter shall cover a space not less than six inches wide by nine inches high, and framed, shall be placed and kept prominently exhibited in the chart room and in the master's cabin of the Vessel. (c) The notice referred to in paragraph (b) of this Section shall read as follows: "NOTICE OF SHIP MORTGAGE This Vessel is owned by (NAME OF SHIPOWNER) , a (JURISDICTION) ("Shipowner"), and is covered by a First Preferred Ship Mortgage in favor of the United States of America, under authority of (NAME OF COUNTRY AND LEGAL CITATION). Under the terms of said Mortgage neither the Shipowner, any charterer, the master or agent of this Vessel nor any other person has any right, power or authority to create, incur or permit to be placed or imposed upon this Vessel any lien other than statutory liens incident to current operations that are subordinate to the Mortgage." 14 SECTION 2.09. COMPLIANCE WITH MORTGAGE LAWS. The Shipowner shall comply with and satisfy all of the provisions of the pertinent mortgage laws of the country in which the Vessel is documented in order to establish and thereafter maintain the Mortgage thereunder as a preferred mortgage upon the Vessel. SECTION 2.10. PERFORMANCE OF SHIPOWNER'S AGREEMENTS BY THE SECRETARY. If the Shipowner shall fail to perform any of its agreements hereunder or under the Mortgage, the Secretary may, in its discretion, at any time during the continuance of an event which by itself, with the passage of time, or the giving of notice, would constitute a Default, perform all acts and make all necessary expenditures to remedy such failure. Notwithstanding the foregoing, the Secretary shall not be obligated to (and shall not be liable for the failure to) perform such acts and make such expenditures. All funds advanced and expenses and damages incurred by the Secretary relating to such compliance shall constitute a debt due from the Shipowner to the Secretary and shall be secured hereunder and under the Mortgage prior to the Secretary's Note and shall be repaid by the Shipowner upon demand, together with interest at the rate that would have been paid by the Department of Treasury on the expended funds plus 1%. SECTION 2.11. PERFECTION OF SECURITY INTERESTS; FURTHER ASSURANCES. The Shipowner shall (i) furnish evidence satisfactory to the Secretary that all financing statements under the UCC, and all filings or recordings required by the laws of the country where the Shipowner is located, shall have been filed against the Shipowner and the Shipyard in all offices in which it may be necessary, or advisable in the opinion of the Secretary, to perfect its security interest, and (ii) from time to time execute and deliver such further instruments and take such action as may reasonably be required more effectively to subject the Security to the lien of the Security Agreement and the Mortgage as contemplated thereby, including but not limited to legal opinions from an independent counsel for the Shipowner to the effect that all UCC Financing Statements, or other filings and recordings with respect to the country where the Shipowner is located, have been filed to perfect the Secretary's interests in the Security as valid and enforceable first priority perfected security agreements. With respect to Security that constitutes accounts or general intangibles for money due or to become due, the Shipowner shall perfect the Secretary's Security by giving written notice to the account debtor(s) of the Secretary's security interest in such accounts and general intangibles. SECTION 2.12. MODIFICATION OF FORMATION AGREEMENTS. (a) If the Shipowner is organized as a general partnership, limited partnership, limited liability company or joint venture, then for so long as there is Outstanding any indebtedness to the United States of America pursuant to the Act, the partnership agreement, operating agreement, limited liability agreement, joint venture agreement (or any agreement constituting such an entity) shall not be amended, modified or voluntarily terminated without the Secretary's prior written consent. (b) In the event where any action by the Shipowner, any member of the Shipowner or the management of the Shipowner results or would result in dissolution of the Shipowner pursuant to its limited liability company agreement or governing law, each member of the Shipowner shall forthwith take all steps necessary to reform and reestablish the Shipowner. 15 SECTION 2.13. MEMBERS OF LIMITED LIABILITY COMPANIES. All existing and future members of a Shipowner which is a limited liability company (each being a "Member"), upon becoming a Member, shall forthwith enter into an agreement with the Secretary, in form and substance satisfactory to the Secretary, whereby each Member agrees: (1) that any amounts owed by the Shipowner to a Member with respect to its interest (as that or the equivalent term is used in the Shipowner's limited liability company agreement) (the "Distributions") shall be subordinated to the Shipowner's payment of the Secretary's Note and debts under the Security Agreement, provided that such Distributions may be paid to the extent the Shipowner is permitted to pay dividends under the Financial Agreement; (2) that in the event of default by the Shipowner under the Security Agreement, the Member shall be subordinated in its rights to receive any Distribution or to be paid any sums whatsoever by the Shipowner until the Secretary has made a full recovery of any and all amounts owed under the Secretary's Note and the Security Agreement. SECTION 2.14. CONCERNING THE PERFORMANCE AND PAYMENT BONDS. During the Construction, the Shipowner shall cause to be maintained a Performance Bond and Payment Bond naming the Shipowner and the Secretary as co-obligees (the "Surety Bonds") in form and substance satisfactory to the Secretary, to be obtained by the Shipyard in the amount of the Construction Contract, issued by such surety company or companies as shall be satisfactory to the Secretary (the "Surety"). In the event that the price for the work to be performed under the Construction Contract is increased, then the Surety Bonds shall be increased simultaneously in a corresponding amount. The Shipowner hereby agrees that the Secretary shall be the sole loss payee under the Surety Bonds and the Surety shall pay such amounts directly to the Secretary for distribution to the co-obligees as their interests may appear. The Shipowner hereby agrees that its interest as a co-obligee under each of the Surety Bonds is and shall be, upon the occurrence of a Default under the Security Agreement, fully subject and subordinate to the rights and interests of the Secretary therein. In the event of a default under the Security Agreement, which default results in a payment under any of the Surety Bonds, then the Surety Bonds proceeds shall be distributed by the Secretary in accordance with the provisions of Section 6.05 hereof. The Shipowner hereby irrevocably appoints the Secretary, the true and lawful attorney of the Shipowner, in its name and stead, to execute all consents, approvals, settlements and agreements on behalf of the Shipowner with respect to any rights related to the Surety Bonds. ARTICLE III THE SECRETARY'S NOTE SECTION 3.01. SECRETARY'S NOTE. On this date, the Shipowner has duly executed and delivered and the Secretary has accepted the Secretary's Note payable in an amount equal to the principal amount of the Obligations. SECTION 3.02. TERMINATION OF THE GUARANTEES. Except as provided in Section 6.08 of the Indenture, the Guarantee with respect to a particular Obligation, shall terminate only when, one or more of the following events shall occur: 16 (a) Such Obligation shall have been Retired or Paid; (b) The Obligees of all the Obligations then Outstanding shall have elected to terminate the Guarantees, and the Secretary has been so notified by the Indenture Trustee or all Obligees in writing; PROVIDED THAT, such termination shall not prejudice any rights accruing hereunder prior to such termination; (c) Such Guarantee shall have been paid in full in cash by the Secretary; or (d) The Indenture Trustee and each Obligee shall have failed to demand payment of such Guarantee as provided in the Indenture, Guarantee, or the Act. SECTION 3.03. EXECUTION OF ADDITIONAL SECRETARY'S NOTE. (a) In the event and when each new issue of Obligations is executed, authenticated and delivered on a date or dates subsequent to the date hereof, as contemplated by, and pursuant to the Indenture, the Shipowner shall, at the time of the issuance of such Obligations, execute and deliver to the Secretary an additional Secretary's Note or, at the Secretary's discretion, an endorsement to the Secretary's Note in an amount equal to the principal amount of, and at the interest rate borne by, such issue of Obligations, on the terms stated in the Secretary's Note. (b) Each Secretary's Note or endorsement executed and delivered in accordance with Section 3.03 shall together with the Secretary's Note be secured by this Security Agreement and the Mortgage. 17 ARTICLE IV CONSTRUCTION FUND; MONEYS DUE WITH RESPECT TO CONSTRUCTION OF THE VESSEL SECTION 4.01. CONSTRUCTION FUND. (a) The Shipowner has deposited with the Depository the amount, if any, indicated in the Depository Agreement from the proceeds of the Obligation to be held by the Depository in a Securities Account in accordance with the terms of the Depository Agreement. This Securities Account together with any future deposits and the proceeds from the investment of the amounts on deposit shall be called the "Construction Fund." (b) The Shipowner may withdraw money from the Construction Fund under the same procedures and conditions as the Shipowner may withdraw money from the Escrow Fund under Section 5.03, except that the Shipowner's Request for withdrawal will not be subject to Section 5.03(a)(2)(A) or 5.03(h). The administration of the Construction Fund shall also be subject to the terms and conditions of Sections 5.04 and 5.05. SECTION 4.02. MONEYS DUE WITH RESPECT TO CONSTRUCTION OF THE VESSEL. (a) In the event that the Shipowner shall receive any moneys from any Person in connection with the Construction of the Vessel, the Shipowner shall give written notice thereof to the Secretary and shall promptly pay the same over to the Depository to be held in the Title XI Reserve Fund. (b) Upon and after a final determination of Actual Cost in accordance with Section 5.01, in the absence of a Default, any moneys held by the Depository which are not to be applied for the redemption of Obligations under Section 3.04 of the Indenture shall be paid to the Shipowner. (c) In the event there is an existing Default, the money shall be held by the Depository in accordance with the provisions of the Depository Agreement. (d) In the event the Secretary assumes the Shipowner's rights and duties under Section 6.09 of the Indenture or pays the Guarantees, the Depository shall promptly pay all moneys including all Moneys Due with Respect to Construction of the Vessel to the Secretary, who will apply it in accordance with Section 6.05. ARTICLE V ACTUAL COST; THE ESCROW FUND SECTION 5.01. ACTUAL COST DETERMINATION. (a) The Actual Cost of the Vessel, determined as of the date of this Security Agreement, is as set forth in Table A hereof. (b) The Secretary agrees to: (1) make a final determination of the Actual Cost of the Vessel, limited to amounts paid by or for the account of the Shipowner on account of the items set forth in Table A hereof and, to the extent approved by the Secretary, any other items or any increase 18 in the amounts of such items, such determination to be made as of the time of payment by or for the account of the Shipowner of the full amount of said Actual Cost of the Vessel, excluding any amounts which are not to become due and payable, and (2) promptly give written notice to the Shipowner, of the results of said final determination; PROVIDED THAT, the Shipowner shall have requested such determination not less than 60 days in advance and shall have furnished to the Secretary not less than 30 days in advance of such determination along with a Shipowner's Officer's Certificate and a statement by an independent certified (or, with the Secretary's prior written consent, an independent) public accountant or firm of accountants of the total amounts paid or obligated to be paid by or for the account of the Shipowner for the Construction of the Vessel, together with a breakdown of such totals according to the items for which paid or obligated to be paid. SECTION 5.02. ESCROW FUND DEPOSITS. At the time of the sale of the Obligations, the Shipowner shall deposit with the Secretary in the Escrow Fund all of the proceeds of that sale unless the Shipowner is entitled to withdraw funds under Section 5.03. If the Obligations are issued before the delivery of the Vessel, then the Shipowner shall also deposit into the Escrow Fund on the Closing Date an amount equal to six months interest at the rate borne by the Obligations. SECTION 5.03. ESCROW FUND WITHDRAWALS. (a) The Secretary shall within a reasonable time after written Request from the Shipowner, disburse from the Escrow Fund directly to the Indenture Trustee, any Paying Agent for such Obligations, the Shipyard, or any other Person entitled thereto, any amount which the Shipowner is obligated to pay or to the Shipowner for any amounts it has paid on account of the items and amounts or any other items set forth in Table A annexed hereto or subsequently approved by the Secretary), PROVIDED THAT, the Secretary is satisfied with the accuracy and completeness of the information contained in the following submissions: (1) A Responsible Officer of the Shipowner shall deliver an Officer's Certificate, in form and substance satisfactory to the Secretary, stating that (A) there is neither a Default under the Construction Contract nor the Security Agreement; (B) there have been no occurrences which have or would adversely and materially affect the condition of the Vessel, its hull or any of its component parts; (C) the amounts of the Request is in accordance with the Construction Contract including the approved disbursement schedule and each item in these amounts is properly included in the Secretary's approved estimate of Actual Cost; (D) with respect to the Request, once the Contractor is paid there will be no liens or encumbrances on the Vessel, its hull or component parts for which the withdrawal is being requested except for those already approved by the Secretary; and (E) if the Vessel has already been delivered, it is in class and is being maintained in the highest and best condition. The Shipowner shall also attach an Officer's Certificate of the Shipyard, in form and substance satisfactory to the Secretary, stating that there are no liens or encumbrances as provided in clause (D) of this subsection and attaching the invoices and receipts supporting each proposed withdrawal to the satisfaction of the Secretary. (2) No payment or reimbursement under this Section shall be made (A) to any Person until the Construction Fund, if any, has been exhausted, (B) to any Person until the total amount paid by or for the account of the Shipowner from sources other than the proceeds of such 19 Obligations equals at least 12-l/2% of the Actual Cost of the Vessel is made; (C) to the Shipowner which would have the effect of reducing the total amounts paid by the Shipowner pursuant to clause (B) of this subsection; or (D) to any Person on account of items, amounts or increases representing changes and extras or owner furnished equipment, if any, set forth in Table A annexed hereto, unless such items, amounts and increases shall have been previously approved by the Secretary; PROVIDED, HOWEVER, that when the amount guaranteed by the Secretary equals 75% or less of the Actual Cost, then after the initial 12 1/2% of Actual Cost has been paid by or on behalf of the Shipowner for the Vessel and up to 37 1/2% of Actual Cost has been withdrawn from the Escrow Fund for the Vessel, the Shipowner shall pay the remaining Shipowner's equity of at least 12 1/2% (as determined by the Secretary) before additional monies can be withdrawn from the Escrow Fund relating to the Vessel. (b) The excess, as determined by the Secretary, of any amount on deposit in the Escrow Fund which represents interest on the principal amount deposited, over and above the amount of interest due on the next Interest Payment Date on the principal amount, as determined by the Secretary, remaining on deposit on such Interest Payment Date, may, unless there is an existing Default, be disbursed by the Secretary upon the Shipowner's Request made not more than 10 Business Days prior to such Interest Payment Date or made within at least 60 days after such Interest Payment Date. (c) The Secretary shall not be required to make any disbursement pursuant to this Section except out of the cash available in the Escrow Fund. If sufficient cash is not available to make the requested disbursement, additional cash shall be provided by the maturity or sale of securities in accordance with instructions pursuant to Section 5.04. If any sale or payment on maturity shall result in a loss in the principal amount of the Escrow Fund invested in securities so sold or matured, the requested disbursement from the Escrow Fund shall be reduced by an amount equal to such loss, and the Shipowner shall, no later than the time for such disbursement, pay to the Indenture Trustee, any Paying Agent, the Shipyard, or any other Person entitled thereto, the balance of the requested disbursement from the Shipowner's funds other than the proceeds of such Obligations. (d) If the Secretary assumes the Shipowner's rights and duties under the Indenture and the Obligations, and makes any payments in default under the Indenture, or the Secretary pays the Guarantees, all amounts in the Escrow Fund (including realized income which has not yet been paid to the Shipowner), shall be paid to the Secretary and be credited against any amounts due or to become due to the Secretary under the Security Agreement and the Secretary's Note. To the extent payment of the Escrow Fund to the Secretary is not required, said amounts or any balance thereof, shall be paid to the Shipowner. If the Secretary shall have assumed the Shipowner's rights and duties under the Indenture and the Obligations, and made any payments in default under the terms of Section 6.09 of the Indenture, or the Guarantees shall become payable by the Secretary as to the Obligations, all amounts in the Escrow Fund at the time such Guarantees become payable (including realized income which has not yet been paid to the Shipowner), shall be paid to the Secretary and be credited against any amounts due or to become due to the Secretary from the Shipowner with respect to all Obligations guaranteed 20 by the Secretary to which this Security Agreement relates. To the extent payment of the Escrow Fund to the Secretary is not required, said amounts or any balance thereof, shall be paid to the Shipowner. (e) At any time the Secretary shall have determined that there has been, for any reason, a disbursement from the Escrow Fund contrary to this Section, the Secretary shall give written notice to the Shipowner of the amount improperly disbursed, the amount to be deposited or redeposited into the Escrow Fund on account thereof, and the reasons for such determination. The Shipowner shall thereafter promptly deposit or redeposit, as appropriate, such amount (with interest, if any) required by the Secretary into the Escrow Fund. (f) Notwithstanding any other provision of this Section, the Shipowner shall not seek or receive reimbursement for any amount paid to the Shipyard or any Person by the Secretary. (g) In the event that one of the events described in Section 2.07 has occurred with respect to the Vessel or the Secretary shall have paid the Guarantees or shall have assumed the Shipowner's rights and duties under Section 6.09 of the Indenture, the Secretary may direct that moneys remaining on deposit in the Escrow Fund may be withdrawn in whole or in part for one of the following purposes: (1) application as provided in Section 3.05 of the Indenture (but in no event shall any such disbursement for such purpose be in an amount greater than the Outstanding Obligations); (2) payment to the Shipowner, or its order, in the event all Outstanding Obligations are Retired or Paid, other than by payment of the Guarantees; or (3) application as provided in Section 6.05, if the Secretary shall have paid the Guarantees or shall have assumed the Shipowner's rights and duties under the Indenture and the Obligations. (h) Any amounts remaining in the Escrow Fund on the Termination Date of the Escrow Fund which are in excess of 87 1/2% or 75% of Actual Cost, as the case may be, shall be applied pursuant to Section 3.04 of the Indenture. SECTION 5.04. INVESTMENT AND LIQUIDATION OF THE ESCROW FUND. The Secretary may invest the Escrow Fund in obligations of the United States with such maturities that the Escrow Fund will be available as required for the purposes hereof. The Secretary shall deposit the Escrow Fund into an account with the Treasury Department and, upon agreement with the Shipowner, shall deliver to the Treasury Department instructions for the investment, reinvestment and liquidation of the Escrow Fund. The Secretary shall have no liability to the Shipowner for acting in accordance with such instructions. SECTION 5.05. INCOME ON THE ESCROW FUND. Except as provided in Section 5.03, any income realized on the Escrow Fund shall, unless there is an existing Default, be paid to the Shipowner upon receipt by the Secretary of such income. For the purpose of this Section, the term "income realized on the Escrow Fund," shall mean with respect to the Escrow Fund (1) the excess of the cash received from the sale of securities over their cost (less any losses from sale not already paid pursuant to Section 5.03(c)) and (2) cash received from the payment of principal and interest on securities. 21 SECTION 5.06. TERMINATION DATE OF THE ESCROW FUND. The Escrow Fund will terminate 90 days after the Delivery Date of the Vessel covered by this Security Agreement (herein called the "Termination Date of the Escrow Fund"). In the event that on such date the payment by or for the account of the Shipowner of the full amount of the aggregate Actual Cost of the Vessel set forth in Table A hereof has not been made or the amounts with respect to such Actual Cost are not then due and payable, then the Shipowner and the Secretary by written agreement shall extend the Termination Date of the Escrow Fund for such period as shall be determined by the Shipowner and the Secretary as sufficient to allow for such contingencies. If the Secretary shall have earlier made a final determination of the Actual Cost of the Vessel in accordance with Section 5.01, the Termination Date of the Escrow Fund shall be deemed to be the date of such final determination; PROVIDED that, if as a result of such final determination, a redemption of Obligations is required pursuant to Section 3.04 of the Indenture, the Termination Date shall be the date specified as the Redemption Date in the notice of redemption given pursuant to Section 3.08 of the Indenture. ARTICLE VI DEFAULTS AND REMEDIES SECTION 6.01. WHAT CONSTITUTES "DEFAULTS;" CONTINUANCE OF DEFAULTS. Each of the following events shall constitute a "Default" within the meaning of Section 6.01: (a) A default in the payment of the whole or any part of the interest on any of the Outstanding Obligations when the same shall become due and payable; or default in the payment of the whole or any part of the principal of any of the Outstanding Obligations when the same shall become due and payable, whether by reason of Maturity, redemption, acceleration, or otherwise, or any default referred to in Section 6.01 of the Indenture; and continuation of such default for a period of 30 days shall constitute and is herein called a "Payment Default." Any corresponding default with respect to the interest on, or the principal of, the Secretary's Note is also deemed to be a Payment Default; (b) The following shall constitute and each is herein called a "Security Default:" (1) Default by the Shipowner in the due and punctual observance and performance of any provision in Sections 2.02(b) and (j), 2.03, 2.04, 2.09, 2.11, 2.12, 2.14, 8.01 and 8.02; (2) Default by the Shipowner continued after written notice specifying such failure by certified or registered mail to the Shipowner from the Secretary in the due and punctual observance and performance of any provision in Sections 2.02(a), (d), (f), (g) and (h), 2.05 (except (g) and (k) thereof), 2.07 and 2.13. (3) Default by the Shipowner continued for 30 days after written notice by certified or registered mail to the Shipowner from the Secretary in the due and punctual observance 22 of any other agreement in this Security Agreement or in the Mortgage; (4) The Shipowner shall become insolvent or bankrupt or shall cease paying or providing for the payment of its debts generally, or the Shipowner shall be dissolved or shall, by a court of competent jurisdiction, be adjudged a bankrupt, or shall make a general assignment for the benefit of its creditors, or shall lose its charter by forfeiture or otherwise; or a petition for reorganization of the Shipowner under the applicable bankruptcy laws shall be filed by the Shipowner, or such petition be filed by creditors and the same shall be approved by such a court of competent jurisdiction; or a reorganization of the Shipowner under said bankruptcy laws shall be approved by a court, whether proposed by a creditor, a stockholder or any other Person whomsoever; or a receiver or receivers of any kind whatsoever, whether appointed in admiralty, bankruptcy, common law or equity proceedings, shall be appointed, by a decree of a court of competent jurisdiction, or any other governmental body with respect to the Vessel, or all or substantially all of the Shipowner's property, and such decree shall have continued unstayed, on appeal or otherwise, and in effect for a period of 60 days; (5) Any default in the due and punctual observance and performance of any provision in the Financial Agreement or the Construction Contract; (6) Any representation or warranty made relating to the execution and delivery of this Security Agreement, the Mortgage, the Guarantee Commitment or the Financial Agreement, or in any certificate required to be furnished pursuant thereto, shall prove to be incorrect in any material respect; (7) Any event constituting a Default under any security agreement or preferred mortgage, relating to any other vessel or vessels owned by the Shipowner and financed under the Act; (8) Any additional Security Default prescribed in the Special Provisions hereof; and (9) Any event constituting a default under any bareboat or time charter or contract of affreightment of the Vessel. At any time following the occurrence of a Security Default, the Secretary may give the Indenture Trustee a Secretary's Notice with respect to such Security Default, after which the Indenture Trustee and the Obligees shall have the right to make demand for payment of the Guarantees in accordance with the Indenture and the Authorization Agreement, unless the Secretary shall have assumed the Shipowner's rights and duties under the Indenture and the Obligations, and made any payments in default under Section 6.09 of the Indenture. SECTION 6.02. ACCELERATION OF MATURITY OF THE SECRETARY'S NOTE. The Secretary may, by giving written notice to the Shipowner, declare the principal of the Secretary's Note and interest 23 accrued thereon to be immediately due and payable, at any time after (a) the Secretary shall have been obligated to pay the Guarantees pursuant to the terms of the Indenture and the Authorization Agreement, or (b) the Secretary shall have assumed the Shipowner's rights and duties under the Indenture and the Obligations, and made any payments in default under the terms of Section 6.09 of the Indenture. Thereupon, the principal of and interest on the Secretary's Note shall become immediately due and payable, together with interest at the same rates specified in the Secretary's Note. SECTION 6.03. WAIVERS OF DEFAULT. (a) If the Secretary shall not have assumed the Shipowner's rights and duties under the Indenture and the Obligations, and made any payments in default under the terms of Section 6.09 of the Indenture, and if the Secretary determines that an event which, with the passage of time, would become a Payment Default, has been remedied within 30 days after the occurrence of such event, upon a Request by the Shipowner, the Secretary shall waive the consequences of such event. (b) If the Secretary shall not have assumed the Shipowner's rights and duties under the Indenture and the Obligations, and made any payments in default under the terms of Section 6.09 of the Indenture, and if the Secretary shall have determined prior to payment of the Guarantees that a Payment Default has been remedied after the expiration of the aforesaid 30-day period, but prior to the date of demand by the Indenture Trustee or an Obligee for payment under the Guarantees, upon a Request by the Shipowner, the Secretary shall waive such Default. (c) If the Secretary shall have determined prior to the expiration of the period required for payment of the Guarantees that a Payment Default had not occurred or has been subsequently remedied by the Shipowner (and if the Secretary shall not have assumed the Shipowner's rights and duties under the Indenture and the Obligations, and made any payments in default under the terms of Section 6.09 of the Indenture and prior to any payment of Guarantees), the Secretary shall notify the Indenture Trustee and the Shipowner of such determination, and, the Secretary shall waive such Default. (d) The Secretary, in its sole discretion, may waive any Security Default or any event which by itself, or with the passage of time or the giving of notice, or both, would give rise to a Security Default; PROVIDED THAT, such Default is waived prior to the Secretary giving to the Indenture Trustee the Secretary's Notice. (e) The Secretary shall notify the Shipowner and the Indenture Trustee in writing of any determinations made under paragraphs (a), (b) and (c) of this Section, and the Secretary shall waive the consequences of any such Default, and annul any declaration under Section 6.02, and the consequences thereof. (f) No waiver under this Section shall extend to or affect any subsequent or other Default, nor impair any rights or remedies consequent thereon. 24 (g) No waiver under this Section shall be deemed to have occurred because the Secretary shall have assumed the Shipowner's rights and duties under the Indenture and the Obligations, and made any payments in default under the terms of Section 6.09 of the Indenture. SECTION 6.04. REMEDIES AFTER DEFAULT. (a) In the event of a Default, and before and after the payment of the Guarantees or the assumption by the Secretary of the Shipowner's rights and duties under the Indenture and the Obligations, and the making of any payments in default under the terms of Section 6.09 of the Indenture, the Secretary shall have the right to take the Vessel without legal process wherever the same may be (and the Shipowner or other Person in possession shall forthwith surrender possession of the Vessel to the Secretary upon demand) and hold, lay up, lease, charter, operate, or otherwise use the Vessel for such time and upon such terms as the Secretary may reasonably deem to be in the Secretary's best interest, accounting only for the net profits, if any, arising from the use of the Vessel, and charging against all receipts from the use of the Vessel, all reasonable charges and expenses relating to the Vessel's use. (b) Upon either (i) payment of the Guarantees or (ii) the Secretary's assumption of the Shipowner's rights and duties under the Indenture and the Obligations, and the making of any payments in default under Section 6.09 of the Indenture, the Secretary shall have the right to: (1) Exercise all the rights and remedies in foreclosure and otherwise given to mortgagees the laws of the United States, the country of documentation of the Vessel, or such other country in which the Vessel may be located at the time of the foreclosure; (2) Bring suit at law, in equity or in admiralty to recover judgment for any and all amounts due under the Secretary's Note, this Security Agreement and the Mortgage, collect the same out of any and all of Shipowner's property, whether or not the same is subject to the lien of the Mortgage, and in connection therewith, obtain a decree ordering the sale of the Vessel in accordance with paragraph (b)(4) of this Section; (3) Have a receiver of the Vessel appointed as a matter of right in any suit under this Section (and any such receiver may have the rights of the Secretary under paragraph (b)(4) of this Section; (4) Sell the Vessel, free from any claim of the Shipowner, by a public extrajudicial sale, held at such time and place and in such manner as the Secretary may reasonably deem advisable, after twice publishing notice of the time and place of such sale prior to the proposed sale in the Authorized Newspapers to the Shipowner. Such publication and mailing is to be made at least 10 Business Days prior to the date fixed for such sale; PROVIDED THAT, such sale may be adjourned from time to time without further publication or notice (other than announcement at the time and place appointed for such sale or adjourned sale). It shall not be necessary to bring the Vessel to the place appointed for such sale or adjourned sale; (5) Accept a conveyance of title to, and to take without legal process (and the 25 Shipowner or other Person in possession shall forthwith surrender possession to the Secretary), the whole or any part of the Vessel and the Security wherever the same may be, and to take possession of and to hold the same; (6) In the Secretary's discretion, take any and all action authorized by Sections 1105(c), 1105(e) and 1108(b) of the Act and any and all action provided for, or authorized, or permitted by, or with respect to the Increased Security; (7) Receive, in the event of an actual or constructive total loss, or an agreed or compromised total loss, or a requisition of title to or use of the Vessel, all insurance or other payments therefor to which the Shipowner would otherwise be entitled, such insurance moneys to be applied by the Secretary in accordance with Section 6.05; and (8) Pursue to final collection of all the claims arising under this Security Agreement, and to collect such claims from, the Increased Security. (c) The Shipowner hereby irrevocably appoints the Secretary the true and lawful attorney of the Shipowner, in its name and stead, to make all necessary transfers of the whole or any part of the Increased Security in connection with a sale, use or other disposition pursuant to Section 6.04(a) or 6.04(b), and for that purpose to execute all necessary instruments of assignment and transfer. Nevertheless, the Shipowner shall, if so requested by the Secretary in writing, ratify and confirm such sale by executing and delivering to any purchaser of the whole or any part of the Increased Security, such proper bill of sale, conveyance, instrument of transfer, or release as may be designated in such request. (d) No remedy shall be exclusive of any other remedy, and each and every remedy shall be cumulative and in addition to any other remedy. (e) No delay or omission to exercise any right or remedy shall impair any such right or remedy or shall be deemed to be a waiver of any Default. (f) The exercise of any right or remedy shall not constitute an election of remedies by the Secretary. (g) If the Secretary discontinues any proceeding, the rights and remedies of the Secretary and of the Shipowner shall be as though no such proceeding had been taken. SECTION 6.05. APPLICATION OF PROCEEDS. (a) The proceeds (from sale or otherwise) of the whole or any part of the Increased Security and use thereof by the Secretary under any of the foregoing powers, (b) the proceeds of any judgment collected by the Secretary for any default hereunder, (c) the proceeds of any insurance and of any claim for damages to the whole or any part of the Increased Security received by the Secretary while exercising any such power, and (d) all other amounts received by the Secretary, including amounts which are required by Sections 26 2.05 and 2.07 shall be applied by the Secretary as follows: (1) to the payment of all advances and all reasonable charges and expenses of the Secretary pursuant to this Security Agreement; (2) to the payment of the whole amount of the interest then due and unpaid upon the Secretary's Note; (3) to the payment of the whole amount of the principal then due and unpaid upon the Secretary's Note; (4) to the Secretary for application to any other debt of the Shipowner due to the Secretary under any other financing insured or guaranteed by the Secretary under to the Act; (5) to the Indenture Trustee for its reasonable fees and expenses; and (6) any balance thereof remaining shall be paid to the Shipowner. SECTION 6.06. GENERAL POWERS OF THE SECRETARY. (a) In the event the Vessel shall be arrested or detained by a marshal or other officer of any court of law, equity or admiralty jurisdiction in any country or nation of the world or by any government or other authority, and shall not be released from arrest or detention within 15 days from the date of arrest or detention, the Shipowner hereby authorizes the Secretary, in the name of the Shipowner, to apply for and receive possession of and to take possession of the Vessel with all the rights and powers that the Shipowner might have, possess and exercise in any such event. This authorization is irrevocable. (b) The Shipowner irrevocably authorizes the Secretary or its appointee (with full power of substitution) to appear in the name of the Shipowner in any court of any country or nation of the world where a suit is pending against the whole or any part of the Increased Security because of or on account of any alleged lien or claim against the whole or any part of the Increased Security, from which the whole or said part of the Increased Security has not been released. (c) The following shall constitute a debt due from the Shipowner to the Secretary, and shall be repaid by the Shipowner upon demand: all reasonable expenses incurred pursuant to paragraphs (a) or (b) of this Section and all reasonable expenses incurred incident to the exercise by the Secretary of any remedies pursuant to Section 6.04(b) or the assumption by the Secretary of the rights and duties of the Shipowner under the Indenture and the Obligations, and the making of any payments in default under the terms of Section 6.09 of the Indenture (including, but not limited to, fees paid to the Indenture Trustee for expenses incident to said assumption of the Indenture by the Secretary), together with interest at the rate that would have been paid by the Department of Treasury on the expended funds plus 1%. The Secretary shall not be obligated to (nor be liable for his failure to) take any action provided for in paragraphs (a) and (b) of this Section. 27 ARTICLE VII AMENDMENTS AND SUPPLEMENTS TO THE SECURITY AGREEMENT, MORTGAGE AND INDENTURE SECTION 7.01. AMENDMENTS AND SUPPLEMENTS TO THE SECURITY AGREEMENT AND THE MORTGAGE. This Security Agreement and the Mortgage may not be amended or supplemented orally, but may be amended or supplemented from time to time only by an instrument in writing executed by the Shipowner and the Secretary. SECTION 7.02. AMENDMENTS AND SUPPLEMENTS TO THE INDENTURE. Notwithstanding any provisions in the Indenture, the Shipowner agrees that no amendments or supplements will be made to the Indenture without the Secretary's prior written consent, and any purported action contrary to this Section shall be null and void AB INITIO and of no force and effect. 28 ARTICLE VIII CONSOLIDATION, MERGER OR SALE SECTION 8.01. CONSOLIDATION, MERGER OR SALE. (a) Nothing in this Security Agreement or the Mortgage shall prevent any lawful consolidation or merger of the Shipowner with or into any other Person, or any sale of the Vessel to any other Person lawfully entitled to acquire and operate the Vessel, or any sale by the Shipowner of all or substantially all of its assets to any other Person; PROVIDED THAT, the Secretary shall have given its prior written consent to such succession, merger, consolidation or sale. (b) Any Successor shall (by indenture supplemental to the Indenture, and by instrument amending or supplementing this Security Agreement, and the Mortgage, as may be necessary), expressly assume the payment of the principal of (and premium, if any) and interest on the Outstanding Obligations in accordance with the terms of the Obligations, shall execute and deliver to the Secretary, an endorsement to the Secretary's Note in form satisfactory to the Secretary, shall expressly assume the payment of the principal of and interest on the Secretary's Note, and shall expressly assume the performance of the agreements of the Shipowner in the Indenture, this Security Agreement, the Mortgage and any related document. (c) Upon the assumption of the documents listed in paragraph (b) of this Section, the Secretary shall consent to the surrender of the Vessel's documents pursuant to the laws of the Vessel's place of documentation provided that, concurrently with such surrender, the Vessel shall be redocumented under the laws of the Vessel's place of documentation. (d) In the event of any sale of the Vessel, the Secretary shall determine if there will remain adequate security for the Guarantees after discharge of the Vessel from the Security Agreement and Mortgage, and (1) the Shipowner shall redeem, together with any premium and/or accrued interest thereof, the Outstanding Obligations relating to the Vessel in accordance with the provisions of Article Third of the Indenture, or (2) the Person to which such sale shall have been made (the "Transferee"), shall assume the documents listed in paragraph (b) of this Section. Upon any such assumption, the Transferee shall succeed to and be substituted for the Shipowner with the same force and effect as if it had been named in the Indenture, the Obligations, this Security Agreement and the Mortgage (and such other documents) to the extent the same relate to the Outstanding Obligations and to the Vessel. SECTION 8.02. TRANSFER OF A GENERAL PARTNER'S OR A JOINT VENTURER'S INTEREST. If the Shipowner is organized as a partnership or a joint venture, a general partner or a joint venturer may lawfully transfer its respective interests under the terms of the partnership or joint venture agreement to any Person and may be released from all of their obligations thereunder and under this Security Agreement or the Mortgage; PROVIDED THAT, (i) the Secretary shall have given its prior written consent to the proposed transaction and (ii) the transferee shall assume in full all of the existing obligations which the transferring general partner or joint venturer has under the applicable partnership or joint 29 venture agreement, this Security Agreement, the Mortgage and any related document. ARTICLE IX NOTICES SECTION 9.01. NOTICES AND COMMUNICATIONS. Except as otherwise provided in this Security Agreement or by the Act, all notices, requests, demands, directions, consents, waivers, approvals or other communications shall be in writing in the English language (or accompanied by an accurate English translation upon which the Secretary shall have the right to rely for all purposes under this Agreement and shall be made or delivered in person or by registered or certified mail, postage prepaid, addressed to the party at the address of such party specified in the Special Provisions hereof, or at such other address as such party shall advise each other party by written notice, and shall be effective upon receipt by the addressee thereof. SECTION 9.02. WAIVERS OF NOTICE. In any case where notice by publication, mail or otherwise is provided for by this Security Agreement, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be deemed the equivalent of such notice. SECTION 9.03. SHIPOWNER'S NAME OR ADDRESS CHANGE. The Shipowner shall not change its name or its address without first providing written notice to the Secretary of the new name and/or the change in address. ARTICLE X DISCHARGE OF SECURITY AGREEMENT AND THE MORTGAGE SECTION 10.01. DISCHARGE OF SECURITY AGREEMENT AND THE MORTGAGE. (a) If the Obligations and the related Secretary's Note shall have been satisfied and discharged, and if the Shipowner shall pay or cause to be paid all other sums that may have become secured under this Security Agreement and the Mortgage, then this Security Agreement, the Mortgage and the liens, estate and rights and interests hereby and thereby granted, shall cease, determine, and become null and void, and the Secretary, on the Shipowner's Request and at the Shipowner's cost and expense, shall forthwith cause satisfaction and discharge and duly acknowledge such satisfaction and discharge of this Security Agreement and the Mortgage to be entered upon its and other appropriate records, and shall execute and deliver to the Shipowner such instruments as may be necessary, and forthwith the estate, right, title and interest of the Secretary in and to the Security, the Increased Security, and any other securities, cash, and any other property held by it under this Security Agreement and the Mortgage, shall thereupon cease, determine and become null and void, and the Secretary shall transfer, deliver and pay the same to the Shipowner. (b) If all of the Guarantees on the Outstanding Obligations shall have been terminated pursuant to Sections 3.02(b) or 3.02(d), the Secretary shall assign to the Shipowner this Security Agreement, the Mortgage and the liens, estate, rights and interests hereby and thereby granted. 30 ARTICLE XI MISCELLANEOUS SECTION 11.01. SUCCESSORS AND ASSIGNS. All the covenants, promises, stipulations and agreements of the Secretary and Shipowner in this Security Agreement shall bind the Secretary and Shipowner and its respective successors and assigns. This Security Agreement is for the sole benefit of the Shipowner, the Secretary, and their respective successors and assigns, and no other Person shall have any right hereunder. SECTION 11.02. EXECUTION IN COUNTERPARTS. This Security Agreement may be executed in any number of counterparts. All such counterparts shall be deemed to be originals and shall together constitute but one and the same instrument. SECTION 11.03. SHIPOWNER'S RIGHTS IN ABSENCE OF DEFAULT. Except during the existence of a Default), the Shipowner (1) shall be permitted to retain actual possession and use of the Vessel, and (2) shall have the right, from time to time, in its discretion and without the consent of or release by the Secretary, to dispose of, free from the lien hereof and of the Mortgage, any and all engines, machinery, masts, boats, anchors, cables, chains, rigging, tackle, apparel, furniture, capstans, outfit, tools, pumps, pumping and other equipment, and all other appurtenances to the Vessel, and also any and all additions, improvements and replacements in or to the Vessel or said appurtenances, after first or simultaneously replacing the same with items of at least substantially equal value. SECTION 11.04. SURRENDER OF VESSEL'S DOCUMENTS. The Secretary shall consent to the surrender of the Vessel's documents in connection with any redocumentation of the Vessel required on account of alterations to the Vessel which are not prohibited by this Security Agreement and by the Mortgage. SECTION 11.05. TABLE OF CONTENTS, TITLES AND HEADINGS. The table of contents, and titles of the Articles and the headings of the Sections are not a part of this Security Agreement and shall not be deemed to affect the meaning or construction of any of its provisions. SECTION 11.06. PAYMENTS IN U.S. CURRENCY. This is an international loan transaction in which the specification of United States currency is of the essence, and such currency shall be the currency of account in all events. The respective payment obligations of the Shipowner and the Secretary hereunder shall not be discharged by an amount paid in another currency, whether pursuant to a judgment or otherwise, to the extent that the amount so paid on prompt conversion to such currency under normal banking procedures does not yield after deduction of any and all fees, taxes or any other charges imposed on the payment of such amount of United States dollars then due. In the event that any payment by the Shipowner or the Secretary, whether pursuant to a judgment or otherwise, upon conversion and transfer, does not result in the payment of such amount of United States currency at the place such amount is due, each shall be entitled to demand immediate payment of, and shall have a separate cause of action against the other for, the additional amount necessary to 31 yield the amount then due. In the event either the Shipowner or the Secretary, upon the conversion of such judgment into currency, shall receive (as a result of currency exchange rate fluctuations) an amount greater than that to which it was entitled, the defaulting party shall be entitled to immediate reimbursement of the excess amount. SECTION 11.07. IMMUNITY. The Shipowner represents and warrants that it is subject to civil and commercial law with respect to its obligations under this Agreement, that the making and performance of this Agreement constitutes private and commercial acts rather than governmental or public acts and that neither the Shipowner nor any of its properties or revenues has any right of immunity on the grounds of Sovereignty or otherwise from suit, court jurisdiction, attachment prior to judgment, attachment in aid of execution of a judgment, set-off, execution of a judgment or from any other legal process with respect to its obligations under this Agreement. To the extent that the Shipowner may hereafter be entitled, in any jurisdiction in which judicial proceedings may at any time be commenced with respect to this Agreement to claim for itself or its revenues or assets any such immunity, and to the extent that in any such jurisdiction there may be attributed to the Shipowner such an immunity (whether or not claimed), the Shipowner hereby irrevocably agrees not to claim and hereby irrevocably waives such immunity. The foregoing waiver of immunity shall have effect under the United States Sovereign Immunities Act of 1976. 32 SCHEDULE X TO SECURITY AGREEMENT DOCUMENT 13 SCHEDULE OF DEFINITIONS "Act" means the Merchant Marine Act, 1936, as amended and in effect on the Closing Date. "Actual Cost" means the actual cost of a Vessel, as set forth in Table A of the Security Agreement or as subsequently redetermined by the Secretary pursuant to the Security Agreement and the Act. "Administrative Agent" means CITICORP NORTH AMERICA, INC., a Delaware corporation, as administrative agent for the Primary Lender and the commercial paper holders of the Primary Lender (and their respective successors and assigns), and its permitted successors and assigns. "Agent" means each of the Administrative Agent and the Facility Agent, individually, and "Agents" means the Administrative Agent and the Facility Agent, collectively. "Alternate Lender" means CITIBANK, N.A., a national banking association and its successors and assigns. "Audited Financial Statements" mean the annual audit of the Shipowner's accounts in accordance with generally accepted auditing standards by independent certified public accountants or independent licensed public accountants, certified or licensed by a regulatory authority of a state or other political subdivision of the United States, who may be the Shipowner's regular auditors. "Authorization Agreement" means the Authorization Agreement, Contract No. MA-13510, between the Secretary and the Indenture Trustee, whereby the Secretary authorizes the Guarantee of the United States to be endorsed on the Obligations, as the same is originally executed, or as modified, amended or supplemented therein. "Authorized Newspapers" means THE WALL STREET JOURNAL and THE JOURNAL OF COMMERCE, or if either ceases to exist, then in such other newspapers as the Secretary may designate and a newspaper printed in English, approved by the Secretary and of general circulation in Baltimore, Maryland. "Business Day" shall mean any day on which dealings in Dollar deposits are carried on in the London interbank market and on which commercial banks in London and New York City are open for domestic and foreign exchange business. "Chapter 313" means the provisions of 46 United States Code Chapter 313, as amended. "Classification Society" means Lloyd's Classification Society or such other Classification Society approved in writing by the Secretary which Classification Society shall in any event be either a member of the International Association of Classification Societies ("IACS") that has been ISO 9000 series registered or an IACS member that meets the requirements of the International Maritime Organization, and is qualified under a Quality Systems Certificate Scheme and recognized by the United States Coast Guard and the Secretary as meeting acceptable standards. "Closing Date" or "Closing" means the date when the Security Agreement is executed and delivered by the Shipowner. "Commitment to Guarantee Obligations" has the same meaning as the term Guarantee Commitment. "Consent of Shipyard" means each, and "Consents of Shipyards" means every, document evidencing such Shipyard's consent to the assignment of a Construction Contract to the Secretary under the Security Agreement as originally executed, modified, amended or supplemented. "Construction" means construction of the Vessel, including designing, inspecting, outfitting and equipping thereof. "Construction Contract" means that certain Semi-Submersible Drilling Vessel Construction Contract (Hull No. 1829), dated April 9, 1998, by and between the Shipowner and the Shipyard, as the same may be amended, modified or supplemented in accordance with the applicable provisions thereto. "Construction Fund" has the meaning specified in Article IV of the Security Agreement. "Corporate Trust Office" means the principal corporate trust office of the Indenture Trustee at which, at any time, its corporate trust business 2 shall be principally administered, which office at the date of execution of the Indenture is located at 25 South Charles Street, 16th Floor, Mail Code 101-591, Baltimore, Maryland 21201. "Credit Agreement" or "Agreement" shall mean the Credit Agreement, dated as of the Closing Date, among the Shipowner, the Lenders, and the Agents, including any Exhibit, Annex, or other attachment thereto, as the same may be amended, modified or supplemented. "Default" when used in the Security Agreement has the meaning attributed to it in Article VI thereof. "Delivery Date" means the date on which a Vessel is delivered to and accepted by the Shipowner. "Depository" shall mean the institution designated in the Depository Agreement or any successor. "Depository Agreement" shall mean the Depository Agreement, Contract No. MA-13514 among the Shipowner, the Secretary and the Depository, as originally executed or as modified or supplemented in accordance with the applicable provisions thereof. "Depreciated Actual Cost" means the depreciated actual cost of a Vessel, as set forth in Table A of the Security Agreement or as subsequently redetermined by the Secretary pursuant to the Security Agreement and the Act. "Eligible Investment" has the meaning given by Section 5 of the Financial Agreement. "Escrow Fund" means the account held by the Secretary, established under Section 1108 of the Act and administered pursuant to Article V of the Security Agreement. "Facility Agent" means CITIBANK INTERNATIONAL PLC, a bank organized and existing under the laws of England, as facility agent for both the Primary Lender and the Alternative Lender (and their respective successors and assigns), and its permitted successors and assigns. 3 "Financial Agreement" means the Title XI Reserve Fund and Financial Agreement, Contract No. MA-13513, executed by the Shipowner and the Secretary, as originally executed or as modified, amended or supplemented in accordance with the applicable provisions thereof. "Financial Asset" has the meaning given by Article 8-102(a)(9) of the UCC. "Government Use" means the use of a Vessel or requisition of its title required by a governmental body of the United States of America. "Guarantee" means each, and the "Guarantees" means every, guarantee of an Obligation by the United States pursuant to Title XI of the Act, as provided in the Authorization Agreement. "Guarantee Commitment" means the Commitment to Guarantee Obligations, Contract No. MA-13509, dated as of the Closing Date, executed by the Secretary and accepted by the Shipowner with respect to the Guarantees, as originally executed or as modified, amended or supplemented in accordance with the applicable provisions thereof. "Increased Security" means the Secretary's Note, the Security Agreement, the Vessels, the Security, the Escrow Fund, the Title XI Reserve Fund, the Construction Fund, and any other security agreement between the Secretary and the Shipowner relating to any vessels financed under the Act, and the Policies of Insurance, and the proceeds of the foregoing. "Indenture" means the Trust Indenture dated as of the Closing Date, between the Shipowner and the Indenture Trustee, as the same is originally executed, or as modified, amended or supplemented in accordance with the applicable provisions thereof. "Indenture Default" has the meaning specified in Article VI of the Indenture. "Indenture Trustee" means FMB Trust Company, National Association, a national banking association, and any successor trustee permitted under the Indenture. "Interest Payment Date" means with respect to any Obligation, the date when any installment of interest on such Obligation is due and payable. 4 "Lender" shall mean shall mean either the Primary Lender or the Alternate Lender, as the case may be, depending on which of the two parties made or will make the relevant disbursement of funds under the Credit Agreement; provided, however, that if the Primary Lender assigns its rights under the Credit Agreement to the Alternate Lender, the term "Lender," shall mean only the Alternate Lender, CITIBANK, N.A., a national banking association, and its successors and assigns. "Long Term Debt" means, as of any date, the total notes, bonds, debentures, equipment obligations and other evidence of indebtedness that would be included in long term debt in accordance with generally accepted accounting principles. There shall also be included any guarantee or other liability for the debt of any other Person, not otherwise included on the balance sheet. "Maturity" when used with respect to any Obligation, means the date on which the principal of such Obligation becomes due and payable as therein provided, whether at the Stated Maturity or by redemption, declaration of acceleration or otherwise. "Moneys Due with Respect to Construction of the Vessel" has the meaning specified in Section 1.03 of the Security Agreement. "Mortgage" means the first preferred ship mortgage on the Vessel, Contract No. MA-13512, between the Shipowner and the Secretary, as originally executed or as modified, amended "Mortgagee" means the Secretary, as mortgagee under the Mortgage. "Mortgagor" means the Shipowner, as mortgagor under the Mortgage. "Net Worth" means, as of any date, the total of paid-in capital stock, paid-in surplus, earned surplus and appropriated surplus, and all other amounts that would be included in net worth in accordance with generally accepted accounting principles, but exclusive of (1) any receivables from any stockholder, director, Officer or employee of the Company or from any Related Party (other than current receivables arising out of the ordinary course of business and not outstanding for more than 60 days) and (2) any increment resulting from the reappraisal of assets. "Obligation" or "Obligations" shall mean the Floating Rate Note or Fixed Rate Note(s) of the Shipowner bearing a Guarantee and authenticated and delivered pursuant to the Indenture and the Authorization Agreement. 5 "Obligation Register" has the meaning specified in Section 2.10 of the Indenture. "Obligee" means each, and "Obligees" means every, Holder of an Obligation. "Offering Circular" means the offering circular relating to the issuance and sale of each Fixed Rate Note. "Officer's Certificate" means a certificate conforming to Section 1.02 of the Security Agreement or the Indenture as the context may require. "Outstanding" when used with reference to the Obligations, shall mean all Obligations theretofore issued under the Indenture, except: (1) Obligations Retired or Paid; and (2) Obligations in lieu of which other Obligations have been issued under the Indenture. "Paying Agent" means any bank or trust company having the qualifications set forth in clauses (1), (3), (4) and (5) of Section 7.02(a) of Exhibit 1 to the Indenture, which shall be appointed by the Shipowner in accordance with Section 4.02 of Exhibit 1 to the Indenture to pay the principal of (and premium, if any) or interest on the Obligations on behalf of the Shipowner. "Payment Default" has the meaning specified in Section 6.01 of the Security Agreement. "Person" or "Persons" means any individual, corporation, partnership, joint venture, association, limited liability company, joint-stock company, trust, unincorporated organization, government, or any agency or political subdivision thereof. "Policies of Insurance" and "policies" means all cover notes, binders, policies of insurance and certificates of entry in a protection and indemnity association, club or syndicate with respect to the Vessel, (including all endorsements and riders thereto), including but not limited to all insurance required under Section 2.05 of the Security Agreement. "Primary Lender" means GOVCO INCORPORATED, a Delaware corporation, and its successors and assigns. "Redemption Date" means a date fixed for the redemption of an Obligation by the Indenture. 6 "Related Party" means one that can exercise control or significant influence over the management and/or operating policies of another Person, to the extent that one of the Persons may be prevented from fully pursuing its own separate interests. Related parties consist of all affiliates of an enterprise, including (1) its management and their immediate families, (2) its principal owners and their immediate families, (3) its investments accounted for by the equity method, (4) beneficial employee trusts that are managed by the management of the enterprise, and (5) any Person that may, or does, deal with the enterprise and has ownership of, control over, or can significantly influence the management or operating policies of another Person to the extent that an arm's-length transaction may not be achieved. "Request" means a written request to a Person for the action therein specified, signed by a Responsible Officer of the Person making such request. "Responsible Officer" means (1) in the case of any business corporation, the chairman of the board of directors, the president, any executive or senior vice president, the secretary, the treasurer, member or partner, (2) in the case of any commercial bank, the chairman or vice-chairman of the executive committee of the board of directors or trustees, the president, any executive or senior vice president, the secretary, the treasurer, any trust officer, and (3) with respect to the signing or authentication of Obligations and Guarantees by the Indenture Trustee, any person specifically authorized by the Indenture Trustee to sign or authenticate Obligations. "Retired or Paid," as applied to Obligations and the indebtedness evidenced thereby, means that such Obligations shall be deemed to have been so retired or paid and shall no longer be entitled to any rights or benefits provided in the Indenture if: (1) such Obligations shall have been paid in full; (2) such Obligations shall have been canceled by the Indenture Trustee; or (3) such Obligations shall have become due and payable at Maturity and funds sufficient for the payment of such Obligations (including interest to the date of Maturity, or in the case of a payment after Maturity, to the date of payment, together with any premium thereon) and available for such payment and are held by the Indenture Trustee or any Paying Agent with irrevocable directions, to pay such Obligations; PROVIDED THAT, the foregoing definition is subject to Section 6.08 of the Indenture. "Rights Under the Construction Contract and Related Contracts" shall have the meaning specified in Section 1.03 of the Security Agreement. 7 "Secretary" means the Secretary of Transportation or any officials duly authorized to perform the functions of the Secretary of Transportation under Title XI of the Act. "Secretary's Note" means a promissory note or promissory notes issued and delivered by the Shipowner to the Secretary substantially in the form of Exhibit 2 of the Security Agreement, including any promissory note issued in substitution for, or any endorsement or supplement thereof. "Secretary's Notice" means a notice from the Secretary to the Indenture Trustee that a Default, within the meaning of Section 6.01(b) of the Security Agreement has occurred. "Secretary of Defense" means the Secretary of Defense of the United States of America. "Security" has the meaning specified in Section 1.03 of the Security Agreement. "Securities Account" has the meaning given by Article 8-501 of the UCC. "Securities Intermediary" has the meaning given by Article 8-102(a)(14) of the UCC and also means the Depository. "Security Agreement" means the security agreement, Contract No. MA-13511, dated as of the Closing Date, consisting of the special provisions, the general provisions and this schedule X, executed by the Shipowner as security for the Secretary, as originally executed or as modified, amended or supplemented. "Security Default" has the meaning specified in Section 6.01 of the Security Agreement. "Shipowner" means Petrodrill Five Limited, a British Virgin Islands international business company, and shall include its successors and assigns. "Shipyard" or "Shipbuilder" means TDI-Halter, Limited Partnership, a Louisiana limited partnership. "Stated Maturity" means the date determinable as set forth in any 8 Obligation as the final date on which the principal of such Obligation is due and payable. "Successor" means a Person formed by or surviving a consolidation or merger with the Shipowner or to which the Vessels have been sold. "Supplemental Indenture" shall mean any indenture supplemental to the Indenture entered into pursuant to Article X of the Indenture. "Title XI" means Title XI of the Act. "Title XI Reserve Fund" has the meaning specified in the Financial Agreement. "Title XI Reserve Fund and Financial Agreement" means the Financial Agreement. "UCC" means the Uniform Commercial Code as enacted in the State of New York. "Vessel" means the Shipowner's Semi-Submersible Drilling Rig to be named the AMETHYST 5 and constructed by TDI-Halter, Limited Partnership in accordance with the Construction Contract, including all work and material heretofore or hereafter performed upon or installed in or placed on board such Vessel, together with related appurtenances, additions, improvements, and replacements. "Working Capital" shall mean the excess of current assets over current liabilities, both determined in accordance with generally accepted accounting principles and adjusted as follows: (1) In determining current assets, there shall also be deducted: (A) Any securities, obligations or evidence of indebtedness of a Related Party or of any stockholder, director, officer or employee (or any member of his family) of the Company or of such Related Party, except advances to agents required for the normal current operation of the Company's vessels and current receivables arising out of the ordinary course of business and not outstanding for more than 60 days; and (B) An amount equal to any excess of unterminated voyage revenue over unterminated voyage expenses; (2) In determining current liabilities, there shall be deducted any excess of unterminated voyage expenses over unterminated voyage revenue; and 9 (3) In determining current liabilities, there shall be added one half of all annual charter hire and other lease obligations (having a term of more than six months) due and payable within the succeeding fiscal year, other than charter hire and such other lease obligations already included and reported as a current liability on the Company's balance sheet. 10 EX-4.21 23 EXHIBIT 4.21 APPENDIX III TO GUARANTEE COMMITMENT DOCUMENT 11 CONTRACT NO. MA-13505 SECURITY AGREEMENT SPECIAL PROVISIONS THIS SECURITY AGREEMENT, dated April 9, 1999 (the "Security Agreement"), is between PETRODRILL FOUR LIMITED, a British Virgin Islands international business company (the "Shipowner") and THE UNITED STATES OF AMERICA (the "United States"), represented by the Secretary of Transportation, acting by and through the Maritime Administrator (the "Secretary"), pursuant to Title XI of the Act. RECITALS: A. The Shipowner has entered the Construction Contract with TDI-Halter, Limited Partnership, the Shipyard for the Construction of the Vessel. B. On the date hereof, the Secretary entered into, and the Shipowner accepted a Commitment to Guarantee Obligations, Contract No. MA-13503, whereby the United States has committed itself to guarantee the payment in full of all the unpaid interest on, and the unpaid principal balance of, Obligations (as defined herein) in the aggregate principal amount equal to 87-1/2% of the Actual Cost of the Vessel on the Closing Date, which amount is set out in Table A. C. The Shipowner has entered into the Credit Agreement providing for the sale and delivery, on the Closing Date, of obligations in the aggregate principal amount of $149,625,000 to be designated "United States Government Guaranteed Export Ship Financing Obligations, AMETHYST 4 Series" (the "Obligations") having the maturity date and interest rate set forth in the Credit Agreement, the Indenture and the Obligations. D. On the date hereof, the Shipowner and FMB Trust Company, National Association, a national banking association, as Indenture Trustee, executed and delivered the Trust Indenture (the "Indenture") pursuant to which the Shipowner will issue the Obligations. E. On the date hereof, the Secretary and the Indenture Trustee executed the Authorization Agreement, Contract No. MA-13504, which authorizes the Indenture Trustee to endorse, execute, and authenticate the Secretary's Guarantee on each of the Obligations. F. As security for the due and timely payment of the Secretary's Note, issued this day by the Shipowner, and for the Secretary's issuance of the Guarantees, the Shipowner has executed and delivered the Security Agreement, Contract No. MA-13505, and the Financial Agreement, Contract No. MA-13507, on the Delivery Date will execute the Mortgage, Contract No. MA-13506 granting the Secretary a security interest in, among other things, the Construction Contract, the Vessel and certain other property, tangible and intangible, which the Shipowner now has or hereafter will acquire, and all of the proceeds thereof. G. As further security to the Secretary and in consideration of the Secretary's agreeing to issue the Guarantees, the Shipyard has executed on this date the Consent of Shipyard to the assignment of the Construction Contract to the Secretary. H. In order to implement certain aspects of the transactions contemplated by the Security Agreement and the Financial Agreement, the Secretary, the Shipowner and CITIBANK, N.A., a national banking association (the "Depository") have entered into the Depository Agreement, Contract No. MA-13508, on the date hereof. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, and of other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and in order to provide security to the Secretary for the Secretary's Note provided for herein, the parties hereto hereby agree as follows: 1. CONCERNING THESE SPECIAL AND GENERAL PROVISIONS. This Security Agreement shall consist of two parts: the Special Provisions and the General Provisions attached hereto as Exhibit 1 of the Security Agreement and incorporated herein by reference. In the event of any conflict, or inconsistency between the Special Provisions of this Security Agreement and Exhibit 1, said Special Provisions shall control. 2. The following additions, deletions and amendments are hereby made to the Security Agreement: (a) CONCERNING THE CREDIT AGREEMENT. The term "Bond Purchase Agreement" refers to the Credit Agreement. (b) GRANTING CLAUSE. Section 1.03(a) of Exhibit 1 hereto is amended to read as follows: SECTION 1.03. GRANTING CLAUSE. (a) In order to create a present security interest in the Secretary, the Shipowner does hereby grant, sell, convey, assign, transfer, mortgage, pledge, set over and confirm unto the Secretary continuing security interests in all of the right, title and interest of the Shipowner in and to all of the following, whether now owned or existing or hereafter arising or acquired: (1) Hull 1828 and all material, machinery, and equipment which are purchased for or identified for use in the construction of said hull pursuant to the Construction Contract, as amended, while under construction, including all additional, extra, - 2 - or changed items requested by the Shipowner and agreed upon by the Shipyard pursuant to the Construction Contract. (2) The Construction Contract (insofar as it relates to the Construction of the Vessel), together with all other contracts, whether now in existence or hereafter entered into, relating to the Construction of the Vessel. Said right, title and interest in and to the Construction Contract, and the other contracts conveyed to the Secretary by this subsection are hereinafter referred to collectively as the "Rights Under the Construction and Related Contracts." (3 ) The Guaranty of Halter Group Marine Inc., in connection with the Construction Contract. (4) The Shipowner's rights to receive all moneys which from time to time may become due to the Shipowner with respect to the Construction of the Vessel regardless of the legal theory by which moneys are recovered. Said right, title and interest in and to the moneys, cash, bonds, claims, and securities conveyed by this subsection are herein referred to collectively as the "Moneys Due with Respect to the Construction of the Vessel." The Secretary acknowledges and agrees that the Moneys Due with Respect to the Construction of the Vessel will be paid directly to the Depository for application in accordance with this Security Agreement and the Indenture. (5) All goods, whether equipment or inventory appertaining to or relating to the Vessel, including owner-furnished equipment, whether or not on board or ashore and not covered by the Mortgage. (6) The Chartering Contract between the Shipowner and Petroleo Brasileiro S.A. ("Petrobras") and the charter hire due thereunder, and the Shipowner's rights to receive all moneys which from time to time may become due to the Shipowner with respect to any other charter or charter hire relating to the Vessel or other earnings with respect to the operation of the Vessel. (7) The Title XI Reserve Fund and all moneys, instruments, negotiable documents, chattel paper, and proceeds thereof currently on deposit or hereafter deposited in the Title XI Reserve Fund. (8) The Construction Fund and all moneys, instruments, negotiable documents, chattel paper and proceeds, etc. (9) All moneys, instruments, negotiable documents, chattel paper and proceeds thereof held by the Depository under the Depository Agreement. - 3 - (10) Proceeds of Policies of Insurance relating to the Vessel and, whether or not insured, any general average claims or loss of hire claims the Shipowner may have with respect to the Vessel. (11) The Licensing Agreement between the Shipowner and Bigem Holdings N.V. relating to certain design data. (12) The Management Agreement between the Shipowner and Formaritima Ltd. relating to the management of the operation and maintenance of the Vessel. (13) The Marine and Nautical Services Agreement between the Shipowner and Workships Contractors B.V. relating to the day to day marine and nautical operation and maintenance of the Vessel. (14) The Construction Management Agreement between the Shipowner and Petrodrill Engineering N.V. relating to construction supervision, managing, accounting and budgeting, facilities and related services in connection with the Vessel. (15) All proceeds of the collateral described in paragraphs (1) through (14) of this Section. The Secretary shall have, upon execution and delivery thereof, as further security, certain right, title and interest in and to the following: (16) The Mortgage, in form and substance satisfactory to the Secretary to be executed and delivered by the Shipowner to the Secretary, as mortgagee, on the Delivery Date, covering the Vessel. (c) CONCERNING SECTION 2.02 For purposes of Section 2.02(b), the Secretary consents to Chartering Contract 101.2.063.97-8 dated December 5, 1997 between the Shipowner and Petroleo Brasileiro SA ("Petrobras"). (d) CONCERNING SECTION 2.05 (1) In connection with Section 2.05(a), declared war risk insurance is not required prior to the Delivery Date of the Vessel. (2) In connection with Section 2.05(b)(3) and the last paragraph of Section 2.05(e), the maximum amount of self-insurance permitted to the Shipowner under the last paragraph thereof shall be $100,000 per occurrence, PROVIDED, HOWEVER, that - 4 - the maximum amount of self-insurance permitted to the Shipowner will be $150,000 per occurrence or series of occurrences arising out of one event in respect to a named wind storm, and $250,000 for operational risks arising from any one occurrence. (3) In connection with clause (ii) of the initial paragraph of Section 2.05(c), the Secretary shall permit payment of losses up to the amount of $500,000 to be made directly to the Shipowner under the circumstances specified therein. (4) In connection with Section 2.05(l), as evidence of insurance maintained under Section 2.05, the Shipowner may submit a fleet cover note or comparable certificate of insurance setting forth the terms of the policy. (e) CONCERNING SECTION 2.08. (1) The notice referred to in paragraph of Section 2.08 shall read as follows: "NOTICE OF SHIP MORTGAGE This Vessel is owned by PETRODRILL FOUR LIMITED, a British Virgin Islands international business company ("Shipowner"), and is covered by a First Preferred Ship Mortgage in favor of the United States of America, under authority of Merchant Shipping Act of The Commonwealth of the Bahamas. Under the terms of said Mortgage neither the Shipowner, any charterer, the master or agent of this Vessel nor any other person has any right, power or authority to create, incur or permit to be placed or imposed upon this Vessel any lien whatsoever." (2) The first sentence of Section 2.08 of Exhibit 1 hereto is amended by inserting immediately after the words "Vessel's documents" and immediately before the word "and", the following: ; PROVIDED THAT, if at any time, it is provided by law that a Vessel's documents may be carried or kept at any place other than aboard the Vessel, then the certified copy of the Mortgage, any supplement to the Mortgage and any assignment of the Mortgage shall be carried or kept with the Vessel's documents, (f) CONCERNING DISBURSEMENTS FROM THE CREDIT FACILITY. Within a reasonable time after receipt of a Certificate Authorizing Disbursements (the "Certificate") in the form of Annex A to the Credit Agreement together with the submissions required by Section 5.03(a)(1), - 5 - the Secretary shall approve the Certificate provided that the Secretary has received and is satisfied with the accuracy and completeness of the information contained in the certificate and the information contained in the submissions required by Section 5.03(a)(1) and provided that the Secretary concludes that the provisions of section 5.03(a)(2) are also satisfied. Upon receipt of the Secretary's written approval of the Certificate, the Shipowner may draw down on the Credit Facility the amount permitted in the Certificate as approved by the Secretary, in the manner permitted by the Credit Agreement. (g) CONCERNING SECTION 6.01. Section 6.01 of Exhibit 1 hereto is hereby amended by adding the following events, which shall constitute a "Security Default": Failure of the Shipowner to convert the Floating Rate Note to Fixed Rate Note(s) on the earlier of (i) August 15, 2002 or (ii) two (2) years after the Delivery Date. Any event constituting a default under any security agreement or mortgage as amended, relating to the vessel owned by PETRODRILL FIVE LIMITED and financed under Title XI of the Merchant Marine Act, 1936, as amended. Failure to maintain at its registered office a register of mortgages, charges or other encumbrances, or failure to enter thereon the particulars of the security interests granted by the Security Agreement and the Financial Agreement, or failure to file a copy of the Security Agreement or the Financial Agreement at the Companies Registry of the British Virgin Islands. (h) CONCERNING SECTION 9.01. Subject to Section 9.01 of the Security Agreement, any notice, request, demand, direction, consent, waiver, approval or other communication, when given to a party hereto, shall be addressed to: Secretary as: SECRETARY OF TRANSPORTATION c/o Maritime Administrator U.S. Department of Transportation 400 Seventh Street, S.W. Washington, D.C. 20590 Shipowner as: PETRODRILL FOUR LIMITED c/o Arias, Fabrega & Fabrega P.O. Box 985 Omar Hodge Building Wickham's Cay Road Town, Tortola British Virgin Islands With a copy to: PETRODRILL ENGINEERING NV K.P. van der Mandelelaan 38 - 6 - 3062 MB Rotterdam (Brainpark) The Netherlands Indenture Trustee as: FMB TRUST COMPANY, NATIONAL ASSOCIATION 25 South Charles St. 16th Floor (Mail Code 101-591) Baltimore, MD 21201 (i) GOVERNING LAW. This Agreement and the rights and obligations of the parties hereto shall be construed, enforced and governed by the laws of the United States of America, but to the extent they are inapplicable, then by the laws of the State of New York, including without limitation, the Uniform Commercial Code of the State of New York ("UCC"), but without regard to any conflict of laws provisions of the State of New York; provided, however, that to the extent required by the UCC, the laws of the British Virgin Islands shall govern the perfection of accounts and general intangibles hereunder. (j) JURISDICTION AND CONSENT TO SUIT. Any proceeding to enforce this Agreement may be brought in the Federal courts of the United States of America located in the State of New York] of the United States of America. The Shipowner and the Secretary hereby irrevocably waive any present or future objection to such venue, and for each of itself and in respect of any of their respective properties hereby irrevocably consents and submits unconditionally to the non-exclusive jurisdiction of those courts. The Shipowner further irrevocably waives any claim that any such court is not a convenient forum for any such proceeding. The Shipowner agrees that any service of process, writ, judgment or other notice of legal process shall be deemed and held in every respect to be effectively served upon it in connection with proceedings in the State of New York if delivered to Sher & Blackwell, 1850 M Street, N.W., Suite 900, Washington, D.C. 20036, which it irrevocably designates and appoints as its authorized agent for the service of process in the State and Federal courts in the State of New York. Nothing herein shall affect the right of the Secretary to serve process in any other manner permitted by applicable law. The Shipowner further agrees that final judgment against it in any such action or proceeding arising out of or relating to this Agreement shall be conclusive and may be enforced in any other jurisdiction within or outside the United States of America by suit on the judgment, a certified or exemplified copy of which shall be conclusive evidence of that fact and of the judgment. (k) CONCERNING DISCLOSURE SHIPYARD PLANS. The Secretary shall not disclose or release the Shipowner's or the Shipyard's plans (including designs, drawings, construction drawings, and data) to any third party unless ordered to do so by a state or federal court or unless the Secretary releases the plans to a subsequent purchaser of the Vessel after Default by the Shipowner. In the event an action is brought by a third party under the Freedom of Information Act or under some other statute to obtain the disclosure of the Shipyard's plans, the Secretary shall notify the Shipowner within ten (10) Business Days. - 7 - (l) ENGAGEMENT LETTER. The Shipowner will not enter into a placement letter or engagement letter for the fixed rate financing without the prior written consent of the Secretary. (m) INCONSISTENCIES. Notwithstanding any provision herein, in the event there are any inconsistencies between the original of this document held by the Secretary, and an original held by any other party to this transaction, the provisions of the original held by the Secretary shall prevail. - 8 - IN WITNESS WHEREOF, this Security Agreement has been executed by the parties as of the day and year first written. PETRODRILL FOUR LIMITED SHIPOWNER Attest: BY: /s/ EARL W. MCNIEL ------------------- Treasurer /s/ ROBERT W. RANDALL - - ----------------------- Secretary UNITED STATES OF AMERICA (SEAL) SECRETARY OF TRANSPORTATION MARITIME ADMINISTRATOR Attest: BY: /s/ JOEL C. RICHARD ------------------- /s/ LARRY MAIN Secretary - - ----------------------- Assistant Secretary Maritime Administration - 9 - TABLE A The Actual Cost of the Vessel as of the date hereof as determined by the Secretary is $171,000,063. The itemization of said Actual Cost is as follows: Shipyard Contract Price $84,000,000 Owner Furnished Items 22,700,000 Design 1,663,000 Project Management Team 5,000,000 Spare Parts & Manual 3,500,000 Commissioning 2,000,000 Maritima Reimbursement 800,000 Insurance 200,000 Contingencies 11,976,000 Owner Furnished Foreign Items 24,500,000 ------------- Total Construction Cost $156,339,000 Net Interest during Construction 8,432,000 Guarantee Fee 6,229,063 ------------ Estimated Total Actual Cost $171,000,063 EXHIBIT 1 TO SECURITY AGREEMENT DOCUMENT 12 GENERAL PROVISIONS TABLE OF CONTENTS ARTICLE I DEFINITIONS; OFFICER'S CERTIFICATES; GRANTING CLAUSE PAGE SECTION 1.01. Definitions...............................................1 SECTION 1.02. Officer's Certificates....................................1 SECTION 1.03. Granting Clause...........................................1 ARTICLE II SHIPOWNER'S REPRESENTATIONS AND AGREEMENTS SECTION 2.01. Shipowner's Representations, Agreements, Organization and Existence (a) General Representations...............................2 (b) Taxes.................................................3 SECTION 2.02. (a) Title to and Possession of the Vessel.................3 (b) Sale, Mortgage, Transfer or Charter of the Vessel.....4 (c) Taxes and Governmental Charges........................4 (d) Liens.................................................4 (e) Requisitions by the United States.....................4 (f) Compliance with Applicable Laws.......................5 (g) Operation of the Vessel...............................5 (h) Condition and Maintenance of the Vessel...............5 (i) Material Changes in the Vessel........................6 (j) Documentation of the Vessel...........................6 SECTION 2.03. Maintenance of Construction Contract......................6 SECTION 2.04. Delivery Requirements.....................................7 SECTION 2.05. Insurance.................................................7 SECTION 2.06. Inspection of the Vessel; Examination of Shipowner's Records..................................................13 SECTION 2.07. Requisition of Title, Termination of Construction Contract or Total Loss of the Vessel..............................13 SECTION 2.08. Notice of Mortgage.......................................14 SECTION 2.09. Compliance with Mortgage Laws............................15 SECTION 2.10. Performance of Shipowner's Agreements by the Secretary...15 SECTION 2.11. Perfection of Security Interests; Further Assurances.....15 SECTION 2.12. Modification of Formation Agreements.....................15 SECTION 2.13. Members of Limited Liability Companies...................16 SECTION 2.14. Concerning the Performance and Payment Bonds.............16 i ARTICLE III THE SECRETARY'S NOTE SECTION 3.01. Secretary's Note............................................16 SECTION 3.02. Termination of the Guarantees...............................16 SECTION 3.03. Execution of Additional Secretary's Note....................17 ARTICLE IV CONSTRUCTION FUND; MONEYS DUE WITH RESPECT TO CONSTRUCTION OF THE VESSEL SECTION 4.01. Construction Fund...........................................18 SECTION 4.02. Moneys Due with Respect to Construction of the Vessel.......18 ARTICLE V ACTUAL COST; THE ESCROW FUND SECTION 5.01. Actual Cost Determination...................................18 SECTION 5.02. Escrow Fund Deposits........................................19 SECTION 5.03. Escrow Fund Withdrawals.....................................19 SECTION 5.04. Investment and Liquidation of the Escrow Fund...............21 SECTION 5.05. Income on the Escrow Fund...................................21 SECTION 5.06. Termination Date of the Escrow Fund.........................22 ARTICLE VI DEFAULTS AND REMEDIES SECTION 6.01. What Constitutes "Defaults"; Continuance of Defaults........22 SECTION 6.02. Acceleration of Maturity of the Secretary's Note............23 SECTION 6.03. Waivers of Default..........................................24 SECTION 6.04. Remedies After Default......................................25 SECTION 6.05. Application of Proceeds.....................................26 SECTION 6.06. General Powers of the Secretary.............................27 ARTICLE VII AMENDMENTS AND SUPPLEMENTS TO THE SECURITY AGREEMENT, MORTGAGE AND INDENTURE SECTION 7.01. Amendments and Supplements to the Security Agreement and the Mortgage............................................28 SECTION 7.02. Amendments and Supplements to the Indenture.................28 ii ARTICLE VIII CONSOLIDATION, MERGER OR SALE SECTION 8.01. Consolidation, Merger, or Sale..............................29 SECTION 8.02. Transfer of a General Partner's or a Joint Venturer's Interest....................................................29 ARTICLE IX NOTICES SECTION 9.01. Notices and Communications..................................30 SECTION 9.02. Waivers of Notice...........................................30 SECTION 9.03. Shipowner's Name or Address Change.........................30 ARTICLE X DISCHARGE OF SECURITY AGREEMENT AND THE MORTGAGE SECTION 10.01. Discharge of Security Agreement and the Mortgage............30 ARTICLE XI MISCELLANEOUS SECTION 11.01. Successors and Assigns......................................31 SECTION 11.02. Execution in Counterparts...................................31 SECTION 11.03. Shipowner's Rights in Absence of Default....................31 SECTION 11.04. Surrender of Vessel's Documents.............................31 SECTION 11.05. Table of Contents, Titles and Headings......................31 SECTION 11.06. Payments in U.S. Currency...................................31 SECTION 11.07. Immunity....................................................32 iii ARTICLE I DEFINITIONS; OFFICER'S CERTIFICATES; GRANTING CLAUSE SECTION 1.01. DEFINITIONS. All capitalized terms used, but not defined herein, shall have the meaning ascribed in Schedule X. SECTION 1.02. OFFICER'S CERTIFICATES. To satisfy a covenant or condition provided for in this Security Agreement, the Responsible Officer of the Person making such Officer's Certificate shall certify that the officer (a) has read such covenant or condition; (b) has made or caused to be made such examination or investigation as is necessary to enable the Officer to express an informed opinion with respect to such covenant or condition; and (c) believes to the best of the Officer's knowledge that such condition or covenant has been met. An Officer's Certificate shall set forth the pertinent supporting information and shall be subject to the Secretary's review of its adequacy and accuracy. SECTION 1.03. GRANTING CLAUSE. (a) In order to create a present security interest in the Secretary, the Shipowner does hereby grant, sell, convey, assign, transfer, mortgage, pledge, set over and confirm unto the Secretary continuing security interests in all of the right, title and interest of the Shipowner in and to all of the following, whether now owned or existing or hereafter arising or acquired: (1) The Construction Contract (insofar as it relates to the Construction of the Vessel under its related Construction Contract), together with all other contracts, whether now in existence or hereafter entered into, relating to the Construction of the Vessel. Said right, title and interest in and to the Construction Contract, and the other contracts conveyed to the Secretary by this subsection are hereinafter referred to collectively as the "Rights Under the Construction and Related Contracts." (2) The Shipowner's rights to receive all moneys which from time to time may become due to the Shipowner with respect to the Construction of the Vessel regardless of the legal theory by which moneys are recovered. Said right, title and interest in and to the moneys, cash, bonds, claims, and securities conveyed by this subsection are herein referred to collectively as the "Moneys Due with Respect to the Construction of the Vessel." The Secretary acknowledges and agrees that the Moneys Due with Respect to the Construction of the Vessel will be paid directly to the Depository for application in accordance with this Security Agreement and the Indenture. (3) All goods, whether equipment or inventory appertaining to or relating to each Vessel, whether or not on board or ashore and not covered by the Mortgage, and any charter hire relating to each Vessel. (4) The Title XI Reserve Fund and all moneys, instruments, negotiable documents, chattel paper, and proceeds thereof currently on deposit or hereafter deposited in the Title XI Reserve Fund. (5) The Construction Fund and all moneys, instruments, negotiable documents, chattel paper and proceeds, etc. (6) All moneys, instruments, negotiable documents, chattel paper and proceeds thereof held by the Depository under the Depository Agreement. (7) Proceeds of Policies of Insurance relating to the Vessel and, whether or not insured, any general average claims or loss of hire claims the Shipowner may have with respect to the Vessel. (8) All proceeds of the collateral described in paragraphs (1) through (7) of this Section. The Secretary shall have, upon execution and delivery thereof, as further security, certain right, title and interest in and to the following: (9) The Mortgage, to be executed and delivered by the Shipowner to the Secretary, as mortgagee, on the date hereof, covering the Vessel. (b) The right, title and interest of the Secretary pursuant to Section 1.03(a) is herein, collectively, called the "Security." The Secretary shall hold the Security as collateral security for all of the obligations and liabilities of the Shipowner under the Secretary's Note and as collateral security for and with respect to the Guarantees whether now made or hereafter entered into. (c) Notwithstanding paragraphs (a) and (b) of this Section: (1) the Shipowner shall remain liable to perform its obligations under the Construction Contract and the above-mentioned other contracts; (2) the Secretary shall not, by virtue of this Security Agreement, have any obligations under any of the documents referred to in clause (1) or be required to make any payment owing by the Shipowner thereunder; and (3) if there is no existing Default, the Shipowner shall (subject to the rights of the Secretary hereunder) be entitled to exercise all of its rights under each of the documents referred to in this Section and shall be entitled to receive all of the benefits accruing to it thereunder as if paragraphs (a) and (b) of this Section were not applicable. (d) The Shipowner hereby agrees with the Secretary that the Security is to be held by the Secretary subject to the further agreements and conditions set forth herein. ARTICLE II SHIPOWNER'S REPRESENTATIONS AND AGREEMENTS The Shipowner hereby represents and agrees, so long as this Security Agreement shall not have been discharged, as follows: SECTION 2.01. SHIPOWNER'S REPRESENTATIONS, AGREEMENTS, ORGANIZATION AND EXISTENCE. (a) 2 GENERAL REPRESENTATIONS. The Shipowner hereby represents and warrants that the following are true statements as of the date hereof and further warrants that they shall remain true hereafter: (1) The Shipowner is duly organized, validly existing and in good standing under the laws of the jurisdiction designated in the initial paragraph of the Special Provisions hereof and shall maintain such existence. The Shipowner has not failed to qualify to do business in any jurisdiction in which its business or properties require such qualification, and had and has full legal right, power and authority to own its own properties and assets and conduct its business as it is presently conducted; (2) the Shipowner had and has legal power and authority to enter into and carry out the terms of the Guarantee Commitment, the Construction Contract, Bond Purchase Agreement, Obligations, Indenture, Security Agreement, Secretary's Note, Mortgage, Financial Agreement, and Depository Agreement (the "Documents"); (3) each of the Documents has been duly authorized, executed and delivered by the Shipowner and constitutes, in accordance with its respective terms, legal, valid and binding instruments enforceable against the Shipowner, except to the extent limited by applicable bankruptcy, reorganization, insolvency, moratorium or similar laws of general application relating to or affecting the enforcement of creditors rights as from time to time in effect; (4) the consummation of the transactions contemplated by and compliance by the Shipowner of all the terms and provisions of the Documents will not violate any provisions of the formation documents of the Shipowner and will not result in a breach of the terms and provisions of, or constitute a default under any other agreement or undertaking by the Shipowner or by which the Shipowner is bound or any order of any court or administrative agency entered into in any proceedings to which the Shipowner is or has been a party; and (5) there is no litigation, proceeding or investigation pending or, to the best of the Shipowner's knowledge, threatened, involving the Shipowner or any of its property which could prevent or jeopardize the performance by the Shipowner of its obligations under the Documents; (b) TAXES. The Shipowner has paid or caused to be paid all taxes assessed against it, unless the same are being contested in good faith or an authorized extension of time has been granted. SECTION 2.02. (a) TITLE TO AND POSSESSION OF THE VESSEL. On the date of this Security Agreement, the Shipowner represents and warrants that it lawfully owns the Vessel free from any liens, encumbrances, security interests, charges, or rights IN REM (subject only to (1) the equity of the Shipyard under the Construction Contract, if any, (2) liens on any undelivered Vessel which the Shipyard is obligated to discharge under the Construction Contract, (3) any security interest subordinated to the Secretary's security interest permitted under the Special Provisions hereof, (4) the Secretary's rights hereunder and (5) the liens permitted by paragraph (d)(3) of this Section. The 3 Shipowner shall, for the Secretary's benefit, warrant and defend the title to, and possession of, the Vessel and every part thereof against the claims and demands of all Persons whomsoever. (b) SALE, MORTGAGE, TRANSFER OR CHARTER OF THE VESSEL. (1) The Shipowner shall not, without the Secretary's prior written consent, sell, mortgage, demise charter or transfer the Vessel to any Person (or charter the Vessel to a Related Party under any form of charter). (2) The Shipowner hereby covenants that: (A) it will not enter into any time charter of the Vessel in excess of six months unless the time charter contains the following provision, "This time charter is subject to each of the rights and remedies of the Secretary of Transportation and has been assigned to the Secretary under a Security Agreement and Mortgage, each executed by the Shipowner in favor of the Secretary with respect to the Vessel being chartered." and (B) it shall, within 10 calendar days of entering into any time charter in excess of six months, transmit a copy of the time charter to the Secretary. (3) In no event may the Shipowner transfer the Vessel to any country designated by the Secretary of Defense as a country whose interests are hostile to the interests of the United States. (c) TAXES AND GOVERNMENTAL CHARGES. The Shipowner shall pay and discharge, or cause to be paid and discharged, on or before the same shall become delinquent, all taxes, assessments, government charges, fines and penalties lawfully imposed upon the Vessel, unless the same are being contested in good faith. (d) LIENS. (1) As a condition precedent to each payment by the Shipowner under the Construction Contract, the Shipowner shall require an Officer's Certificate from the Shipyard stating that once the Shipyard receives said payment, there will be no liens or rights IN REM against the respective Vessel. At the Delivery Date of each Vessel, the Shipowner and the Shipyard shall provide an Officer's Certificate stating that there are no liens or rights IN REM against the Vessel except for the Mortgage. (2) After the Delivery Date of the Vessel, the Shipowner shall satisfy, or cause to be satisfied, within 30 days of its knowledge thereof, any lien or encumbrance or right IN REM which shall be filed against the Vessel unless the same is being contested in good faith; and (3) Neither the Shipowner, any charterer, the master of the Vessel, nor any other Person has or shall have any right, power or authority, without the Secretary's prior written consent, to create, incur or permit to be placed or imposed on the Vessel any lien, encumbrance, security interest, charge, or rights IN REM, and statutory liens incident to current operations unless such statutory liens are subordinate to the Mortgage. (e) REQUISITIONS BY THE UNITED STATES. Should the United States of America, or any agency or instrumentality thereof, take or 4 requisition title or use of the Vessel, or seek to take or requisition title or use of the Vessel, the Shipowner agrees to comply promptly with said request, taking, or requisition, without the interposition of any defense whatsoever, saving only (i) its right to dispute at a subsequent time, the amount of compensation to be paid by the United States or (ii) the prior taking or requisition of title or use by another governmental body. The parties agree to be bound by the rights, duties, procedures, and remedies specified in Section 902 of the Act (46 App. U.S.C. 1242). (f) COMPLIANCE WITH APPLICABLE LAWS. The Shipowner shall at all times be in compliance with all applicable laws. Each Vessel (1) shall be designed to meet, and on the Delivery Date thereof and at all times thereafter shall be documented in a country which is party to the International Convention for Safety of Life at Sea, or other treaty, convention or international agreement governing vessel inspection to which the United States is a signatory and shall comply with all requirements of applicable laws, rules, and regulations of its country of documentation, all applicable treaties, conventions, international agreements to which that country is a signatory and the laws, rules and regulations of the ports it serves; and (2) shall have on board valid certificates showing compliance therewith. The foregoing shall not apply if: (A) the Vessel is in Government Use; (B) there has been an actual or constructive total loss or an agreed or compromised total loss of the Vessel; or (C) there has been any other loss with respect to the Vessel and the Shipowner shall not have had a reasonable time to repair the same. (g) OPERATION OF THE VESSEL. Except when the Vessel has been in Government Use, the Shipowner shall not (1) cause or permit the Vessel to be operated in any manner contrary to applicable law, rule, or regulation of its country of documentation, all applicable treaties, conventions, or international agreements to which that country is a signatory and the laws, rules, and regulations of the ports it serves, (2) abandon the Vessel in any port unless there has been an actual or constructive total loss or an agreed or compromised total loss of the Vessel. (h) CONDITION AND MAINTENANCE OF THE VESSEL. (1) The Vessel shall be constructed, maintained and operated so as to meet, at all times, the highest classification, certification, rating and inspection standards for vessels of the same age and type as may be imposed by the Classification Society. The foregoing shall not apply (i) if the Vessel has been under Government Use, (ii) in the event of an actual or constructive total loss or an agreed or compromised total loss of the Vessel, or (iii) there has been any other loss with respect to the Vessel and the Shipowner shall not have had a reasonable time to repair the same. (2) On the Delivery Date of the Vessel, the Shipowner shall furnish to the Secretary an Interim Class Certificate issued for the Vessel by the Classification Society and promptly after the Delivery Date of the Vessel, furnish to the Secretary a Certificate of Class with respect to the Vessel issued by the Classification Society. Subsequently, the Shipowner shall annually (A) furnish to the Secretary a Certificate of Confirmation of Class issued by the Classification Society showing that the above-mentioned classification and rating have been retained for each Vessel and (B) furnish to the Secretary copies of all Classification Society reports, including periodic and damage surveys for the Vessel; provided that, the foregoing shall not apply if the Vessel is in Government Use and the 5 governmental body does not permit classification and rating of the Vessel. (3) Notwithstanding Section 2.02(h)(2), if the Vessel is a barge which is not classed, then the Shipowner shall, at all times, at its own cost and expense maintain and preserve the Vessel, so far as may be practicable, in at least as good order and condition, ordinary wear and tear excepted, as at the Delivery Date of the Vessel, and shall perform or cause to be performed at least once every five years and at any other time reasonably required by the Secretary, a survey and inspection of the Vessel by an independent marine surveyor approved by the Secretary; and PROVIDED THAT, no such surveys will be required within the last three years prior to the final Stated Maturity of the Obligations. The Shipowner shall furnish two copies of the report of such independent marine surveyor to the Secretary within 15 days of such survey and inspection. The Shipowner shall deliver to the Secretary annually an Officer's Certificate stating the condition and maintenance of the Vessel; PROVIDED FURTHER, that none of this Section shall apply when the Vessel is in Government Use. (i) MATERIAL CHANGES IN THE VESSEL. After the Delivery Date of the Vessel, the Shipowner shall not make, or permit to be made, any material change in the structure, means of propulsion, type or speed of such Vessel or in its rig, unless it shall have received the Secretary's prior written consent thereto. (j) DOCUMENTATION OF THE VESSEL. Upon the Delivery Date and thereafter, the Vessel shall be and shall remain documented under the laws of the country specified in the Special Provisions. SECTION 2.03. MAINTENANCE OF CONSTRUCTION CONTRACT. (a) The Construction Contract shall be maintained in full force and effect insofar as it relates to the due performance by the Shipowner and the Shipyard of all their respective obligations thereunder and the Shipowner shall not, without the Secretary's prior written consent, amend, modify, assign or terminate the Construction Contract or consent to any change in the Construction Contract which releases the Shipyard from its obligations to comply with the provisions of the Construction Contract or any applicable laws, treaties, conventions, rules and regulations; PROVIDED THAT, the Secretary's prior written consent shall not be necessary, but prompt written notice to the Secretary shall be given for (1) any mandatory or regulatory change to the Construction Contract as a result of any requirements of any governmental agency, or (2) any non-mandatory changes that the Shipyard and the Shipowner desire to make which do not, in the aggregate, exceed five (5%) percent of the total Construction Contract price of the Vessel, and which do not cause the total Construction Contract price to be increased by an individual change by more than one (1%) percent or the delivery and completion date of the Vessel to be extended by more than ten (10) days. Notwithstanding the foregoing, no change shall be made in the general dimensions and/or characteristics of the Vessel which changes the capacity of the Vessel to perform as originally intended by the Construction Contract without the Secretary's prior written consent. The Secretary will nonetheless retain its authority to review work done under a change order to ascertain whether the work should be included in Actual Cost and whether the price charged is fair and reasonable. No withdrawals may be made from the Escrow Fund for work that is determined not to be includable in Actual Cost. 6 (b) Notwithstanding anything to the contrary contained in the Construction Contract or herein, no changes to the payment milestones and disbursement schedules shall be made without the Secretary's prior written consent, except to the extent reasonably required to reflect the change orders under paragraph (a) of this Section. SECTION 2.04. DELIVERY REQUIREMENTS. At or prior to the Delivery Date, the Shipowner shall have: (a) documented the Vessel under the laws of the country specified in the Special Provisions. (b) executed and delivered to the Secretary the Mortgage (or, if appropriate, a mortgage supplement) in the form of Exhibit 3 hereof; (c) recorded the Mortgage (or, if appropriate, a mortgage supplement) in the appropriate foreign registry, specified in the Special Provisions; (d) delivered to the Secretary an Officer's Certificate (1) from the Shipowner and the Shipyard certifying that the Vessel is free of any claim, lien, charge, mortgage, or other encumbrance of any character except as permitted under Section 2.02(d); (2) certifying that there has not occurred and is not then continuing any event which constitutes (or after any period of time or any notice, or both, would constitute) a default under the Security Agreement; (3) that the marine insurance as required under Section 2.05 will be in full force and effect at the time of Vessel delivery; (4) certifying that the Vessel was constructed substantially in accordance with the plans and specifications of the Construction Contract; (5) certifying that there have been no unusual occurrences (or a full description of such occurrences, if any) which would adversely affect the condition of the delivered Vessel. (e) delivered to the Secretary (1) an opinion of counsel substantially in the form of Exhibit A to the form of Mortgage; and (2) a certificate of delivery and acceptance from the Shipowner and the Shipyard to the Secretary with respect to the delivered Vessel; SECTION 2.05. INSURANCE. (a) Prior to the Delivery Date of the Vessel, the Shipowner shall, without cost to the Secretary or, with respect to war risk builder's risk insurance mentioned below, without cost to the Shipyard, cause the Vessel to be insured as provided in the Construction Contract and as contemplated by the Consent of Shipyard; PROVIDED THAT, the insurance required by this Section shall be approved by the Secretary. (b) Upon the Delivery Date of each Vessel and at all times thereafter, the Shipowner shall, without cost to the Secretary, keep the Vessel insured as indicated below and with such additional insurance as may be specified by the Secretary in an amount in U.S. dollars equal to 110% of the unpaid principal amount of the Secretary's Note, or such greater sum, up to and including the full commercial value of the Vessel as may be required by the Secretary. The Shipowner shall 7 provide 30 days prior written notice to the Secretary of all insurance renewals. (1) Marine and war risk hull insurance under the latest (at the time of issue of the policies in question) forms of American Institute of Marine Underwriters' policies approved by the Secretary and/or policies issued by or for the Maritime Administration (or under such other forms of policies as the Secretary may approve in writing) insuring the Vessel against the usual risks covered by such forms (including, at the Shipowner's option, such amounts of increased value and other forms of "total loss only" insurance as are permitted by said hull insurance policies); and (2) While the Vessel is laid up, at the Shipowner's option and in lieu of the above-mentioned marine and war risk hull insurance or marine and war risk hull and increased value insurance, port risk insurance under the latest (at the time of issue of the policies in question) forms of American Institute of Marine Underwriters' policies approved by the Secretary and/or policies issued by or for the Maritime Administration (or under such other forms of policies as the Secretary may approve in writing) insuring the Vessel against the usual risks covered by such forms. (3) Notwithstanding the foregoing, the Shipowner, with the Secretary's prior written consent, shall have the right to self-insure up to the amount specified in the Special Provisions hereof for any loss resulting from any one accident or occurrence (other than an actual or constructive total loss of the Vessel). (c) All policies of insurance under this Section shall provide, so long as this Security Agreement has not been discharged, that payment of all losses shall be made payable to the Secretary for distribution by him to himself, the Shipowner and (in the case of the insurance required by paragraph (a) of this Section) the Shipyard, except that (i) under the policies required by paragraph (b) of this Section and (ii) as provided in paragraph (e) of this Section, payment of all losses up to the amount specified in the Special Provisions hereof by all insurance underwriters with respect to any one accident, occurrence or event may be made directly to the Shipowner unless there is an existing Default, or if the Secretary shall have assumed the Shipowner's rights and duties under the Indenture and the Obligations and made any payments in default under the terms of Section 6.09 of the Indenture, in which event payment of all losses shall be made payable to the Secretary as aforesaid. Any such insurance recoveries to which the Secretary shall be so entitled shall be applied as follows: (1) In the event that insurance becomes payable under said policies on account of an accident, occurrence or event not resulting in an actual or constructive total loss or an agreed or compromised total loss of the Vessel, the Secretary shall (A) if there is no existing Default and if none of the events described in Section 2.07 has occurred, in accordance with the Shipowner's Request, pay, or consent that the underwriters pay, direct for repairs, liabilities, salvage claims or other charges and expenses (including sue and labor charges due or paid by the Shipowner) covered by the policies, or (to the extent that, as stated in an Officer's Certificate delivered to the Secretary, accompanied by written confirmation by the underwriter or a surveyor or adjuster, the damage shall have been repaired and the cost thereof paid of such liabilities, salvage claims, or other charges and 8 expenses discharged or paid) reimburse, or consent that the underwriters reimburse, the Shipowner therefor and (after all known damage with respect to the particular loss shall have been repaired, except to the extent the Shipowner, with the Secretary's written consent, deems the said repair inadvisable, and all known costs, liabilities, salvage claims, charges and expenses, covered by the policies, with respect to such loss shall have been discharged or paid, as stated in an Officer's Certificate delivered to the Secretary, accompanied by written confirmation by the underwriters or a surveyor or adjuster) pay, or consent that the underwriters pay, any balance to the Shipowner; or (B) if there is an existing Default, in accordance with a Request of Shipowner, pay, or consent that the underwriters pay, direct for the Shipowner's proportion of such repairs, liabilities, salvage claims or other charges and expenses (including sue and labor charges due or paid by the Shipowner) covered by the policies and hold any balance until the same may be paid or applied under Sections 2.05(c)(1)(A), 2.05(c)(1)(C) or 2.05(c)(1)(D), whichever is applicable; or (C) if the Guarantees shall have terminated pursuant to Section 3.02(c) or if the Secretary shall have assumed the Shipowner's rights and duties under the Indenture and the Obligations and made any payments in default under the terms of Section 6.09 of the Indenture and none of the events described in Section 2.07 has occurred, apply the insurance as provided in Section 6.05; or (D) if the Guarantees shall have terminated pursuant to Section 3.02(b) or (d), pay the insurance to the Shipowner; (2) In the event of an accident, occurrence or event resulting in an actual or constructive total loss of the Vessel prior to the Delivery Date of the Vessel, the Shipowner shall forthwith deposit with the Secretary any insurance moneys which the Shipowner receives on account thereof under policies of insurance required by paragraph (a) of this Section, and any such insurance moneys shall be held by the Secretary for 10 days (or such lesser or further time as the Shipowner and the Secretary may agree upon). Upon the expiration of said period of time, (A) if there is no existing Default and if the Shipowner, the Shipyard and the Secretary shall have elected not to construct the Vessel under the Construction Contract, then said insurance moneys shall be applied, to the extent necessary and required pursuant to Section 2.07; or (B) if there is no existing Default and if the Shipowner, the Shipyard and the Secretary shall not have made the election contemplated by clause A of this subsection, then said insurance moneys (together with the Shipowner's funds to the extent, if any, required by the Secretary for deposit on account of interest under clause (ii) below) shall be deposited in the Escrow Fund, in such amount and to the extent available, so that the moneys in the Escrow Fund after such deposit shall be equal to (i) the principal amount of the Outstanding Obligations relating to the Vessel at the time of such deposit and (ii) such interest on said deposit, if any, as may be required by the Secretary (said moneys to be subject to withdrawal in the same manner as moneys originally deposited in said Escrow Fund); and the balance, if any, of such insurance moneys held by the Secretary shall be paid to the Shipowner; and (3) In the event of an accident, occurrence or event resulting in an actual or constructive total loss or an agreed or compromised total loss of the Vessel, whether prior to or after the Delivery Date of the Vessel, and the insurance moneys have not been applied as provided in paragraph (c)(2) of this Section, the Shipowner shall forthwith deposit with the Secretary any insurance moneys which the Shipowner receives on account thereof under policies of insurance required by this Section, and any such insurance moneys received by the Secretary, whether from the 9 Shipowner or otherwise, or held by the Secretary pursuant to paragraph (c)(2) of this Section, shall (A) if there is no existing Default, be applied, to the extent necessary, pursuant to Section 2.07; (B) if there is an existing Security Default, be held until the same may be applied under Sections 2.05(c)(3)(A), 2.05(c)(3)(C) or 2.05(c)(3)(D), whichever is applicable; (C) if the guarantees shall have terminated pursuant to Section 3.02(c) or if the Secretary shall have assumed the Shipowner's rights and duties under the Indenture and the Obligations and made any payments in default under the terms of Section 6.09 of the Indenture, be applied as provided in Section 6.05; PROVIDED THAT, notwithstanding the foregoing Sections 2.05(c)(3)(A), 2.05(c)(3)(B), and 2.05(c)(3)(C), the Shipowner shall not be required to so deposit with the Secretary insurance moneys in an amount which, together with funds otherwise available for the redemption of Obligations is in excess of that required for the redemption of the Outstanding Obligations pursuant to Section 3.05 of the Indenture and for the payment to the Secretary of all other sums that may be secured by this Security Agreement and the Mortgage; or (D) if the Guarantees shall have terminated pursuant to Section 3.02(b) or 3.02(d), be paid to the Shipowner. (d) In the event of an accident, occurrence or event resulting in a constructive total loss of the Vessel, the Secretary shall have the right (with the prior written consent of the Shipowner, unless there is an existing Default, and at any time prior to the Delivery Date of the Vessel also with the prior written consent of the Shipyard) to claim for a constructive total loss of the Vessel. If (1) such claim is accepted by all underwriters under all policies then in force as to the Vessel under which payment is due for total loss and (2) payment in full is made in cash under such policies to the Secretary, then the Secretary shall have the right to abandon the Vessel to the underwriters of such policies, free from lien of this Security Agreement and the Mortgage. (e) Commencing on the Delivery Date of the Vessel, the Shipowner shall, without cost to the Secretary, keep the Vessel insured against marine and war risk protection and indemnity risks and liabilities by policies of insurance approved by the Secretary as to form and amount; PROVIDED THAT, (1) the Shipowner shall, as soon as possible before such Delivery Date, present any such policy to the Secretary (who shall promptly approve or disapprove the same), (2) any approval of a policy under this subsection shall be effective until the end of the policy period or until 60 days after the Secretary shall notify the Shipowner of a desired change in the form and/or amount thereof, whichever shall first occur, and (3) war protection and indemnity insurance shall be required unless the Secretary gives written notice to the Shipowner stating that such insurance is not required. Such policies may provide that (1) if the Shipowner shall not have incurred the loss, damage, or expense in question, any loss under such insurance may be paid directly to the Person to whom any liability covered by such policies has been incurred (whether or not a Default then exists), and (2) if the Shipowner shall have incurred the loss, damage or expense in question, any such loss shall be paid to the Shipowner in reimbursement if there is no existing Default of which the underwriter has written notice from the Shipowner or the Secretary, or, if there is such an existing Default, to the Secretary to be held and applied as follows: (A) applied as provided in Section 6.05 in the event the Guarantees shall have terminated pursuant to Section 3.02(c) or if the Secretary shall have assumed the Shipowner's rights and duties under the Indenture and the Obligations and made any payments in 10 default under the terms of Section 6.09 of the Indenture, or (B) to the extent not theretofore applied pursuant to Section 6.05, paid forthwith to the Shipowner upon its Request in the event there is no existing Default or the Guarantees shall have terminated pursuant to Section 3.02(b) or (d) at the date of delivery of such Request; PROVIDED THAT, irrespective of the foregoing, with the Secretary's prior written consent, the Shipowner shall have the right to self-insure in an amount up to the limit specified in the Special Provisions hereof with respect to each accident, occurrence or event, except that, with respect to cargo or property carried, the Shipowner, with the Secretary's prior written consent, shall have the right to self-insure in an amount up to the limit specified in the Special Provisions hereof with respect to each cargo or property carried. (f) All insurance required under this Section shall be placed and kept with the United States Government or with American and/or British (and/or other foreign, if permitted by the Secretary in writing) insurance companies, underwriters' association or underwriting funds approved by the Secretary. All insurance required under this Section shall be arranged through marine insurance brokers and/or underwriting agents as chosen by the Shipowner and approved by the Secretary. (g) The Secretary shall not have the right to enter into an agreement or compromise providing for an agreed or compromised total loss of the Vessel without prior written consent of (i) the Shipyard (prior to the Delivery Date of the Vessel) and (ii) (unless there is an existing Default) the Shipowner. If (1) the Shipowner shall have given prior consent thereto or (2) there is an existing Default, the Secretary shall have the right in his discretion, and with the prior written consent of the Shipyard prior to the Delivery Date of the Vessel, to enter into an agreement or compromise providing for an agreed or compromised total loss of the Vessel; PROVIDED THAT, if the aggregate amount payable to the Shipowner and/or the Secretary under such agreement or compromise, together with funds held by the Secretary and available for the redemption of Obligations, is not sufficient to redeem or pay the Outstanding Obligations pursuant to Section 2.07, the Secretary shall not enter into such agreement or compromise without the Shipowner's prior written consent. (h) During the continuance of (1) a taking or requisition of the use of the Vessel by any government or governmental body, or (2) a charter, with the Secretary's prior written consent, of the use of the Vessel by the United States Government or by any governmental body of the United States, or by any other government or governmental body, the provisions of this Section shall be deemed to have been complied with in all respects if such government or governmental body shall have agreed to reimburse, in a manner approved by the Secretary in writing, the Shipowner for loss or damage covered by the insurance required hereunder or resulting from the risks under paragraphs (a), (b) and (e) of this Section or if the Shipowner shall be entitled to just compensation therefor. In addition, the provisions of this Section shall be deemed to have been complied with in all respects during any period after (A) title to the Vessel shall have been taken or requisitioned by any government or governmental body or (B) there shall have been an actual or constructive total loss or an agreed or compromised total loss of the Vessel. In the event of any taking, requisition, charter or loss contemplated by this paragraph, the Shipowner shall promptly furnish to the Secretary an Officer's Certificate stating that such taking, requisition, charter or loss has occurred and, if there 11 shall have been a taking, requisition or charter of the use of the Vessel, that the government or governmental body in question has agreed to reimburse the Shipowner, in a manner approved by the Secretary, for loss or damage resulting from the risks under paragraphs (a), (b) and (e) of this Section or that the Shipowner is entitled to just compensation therefor. (i) All insurance required (A) under paragraph (a) of this Section shall be taken out in the names of the Shipowner, the United States and the Shipyard as assureds, and (B) under paragraphs (b) and (e) of this Section shall be taken out in the names of the Shipowner and the United States as assureds. All policies for such insurance so taken out shall, unless otherwise consented to by the Secretary, provide that (1) there shall be no recourse against the United States for the payment of premiums or commissions, (2) if such policies provide for the payment of club calls, assessments or advances, there shall be no recourse against the United States for the payment thereof, and (3) at least 10 days' prior written notice of any cancellation for the nonpayment of premiums, commissions, club calls, assessments or advances shall be given to the Secretary by the insurance underwriters. (j) The Shipowner shall not, without the Secretary's prior written consent, (1) do any act, nor voluntarily suffer or permit any act to be done, whereby any insurance required by this Section shall or may be suspended, impaired or defeated or (2) suffer or permit the Vessel to engage in any voyage or to carry any cargo not permitted under the policies of insurance then in effect without first covering the Vessel with insurance satisfactory in all respects for such voyage or the carriage of such cargo; PROVIDED THAT, this paragraph shall be subject to the requirements of any military authority of the United States and shall not apply if and so long as the title or use of the Vessel shall have been taken, requisitioned or chartered by any government or governmental body as contemplated by Section 2.07. (k) In the event that any claim or lien is asserted against the Vessel for loss, damage or expense which is covered by insurance hereunder and it is necessary for the Shipowner to obtain a bond or supply other security to prevent arrest of the Vessel or to release the Vessel from arrest on account of said claim or lien, the Secretary, on the Shipowner's Request, may, at the Secretary's sole option, assign to any Person executing a surety or guaranty bond or other agreement to save or release the Vessel from such arrest, all right, title and interest of the Secretary in and to said insurance covering such loss, damage or expense as collateral security to indemnify against liability under said bond or other agreement. (l) Except as the Secretary shall otherwise direct by notice in writing to the Shipowner, the Shipowner shall deliver to the Secretary the original policies evidencing insurance maintained under this Section; PROVIDED THAT, if any such original policy shall have been delivered previously to the Secretary or to a mortgagee by the Shipowner under another ship mortgage of the Shipowner, the Shipowner shall deliver a duplicate or pro forma copy of such policy to the Secretary. The Secretary or any agent thereof (who may also be an agent of the issuer) shall at all times hold the policies delivered as aforesaid; PROVIDED THAT, if one or more of said policies are held by an agent of the Secretary, the Shipowner shall, upon the Secretary's request, deliver a duplicate or pro forma copy thereof to the Secretary, and PROVIDED FURTHER, that if the Shipowner shall deliver to the Secretary a 12 Request (1) stating that delivery of such policy to the insurer is necessary in connection with the collection, enforcement or settlement of any claim thereunder (including claims for return premiums and any other amounts payable by the insurer) and (2) setting forth the name and address of the Person to whom such policy is to be delivered or mailed for such purpose, and if the Secretary approves such Request, the Secretary shall, at the Shipowner's expense, deliver or mail (by registered or certified mail, postage prepaid) such policy in accordance with such Request, accompanied by a written direction to the recipient to redeliver such policy directly to the Secretary or an agent thereof when it has served the purpose for which so delivered. The Shipowner agrees that, in case it shall at any time so cause the delivery or mailing of any policy to any Person as aforesaid, the Shipowner will cause such policy to be promptly redelivered to the Secretary or an agent thereof as aforesaid. The Secretary shall have no duty to see to the redelivery of such policy, but shall have the duty to request the redelivery thereof at intervals of 60 days thereafter. (m) Nothing in this Section shall limit the insurance coverage which the Secretary may require under any contract or agreement to which the Secretary and the Shipowner are parties. The requirements of this Section are expressly subject to the Special Provisions of this Security Agreement. SECTION 2.06. INSPECTION OF THE VESSEL; EXAMINATION OF SHIPOWNER'S RECORDS. The Shipowner will: (a) afford the Secretary, upon reasonable notice, access to the Vessel, its cargoes and papers for the purpose of inspecting the same; (b) maintain records of all amounts paid or obligated to be paid by or for the account of the Shipowner for the Vessel's Construction; and (c) at reasonable times permit the Secretary, upon request, to make reasonable, material and pertinent examination and audit of books, records and accounts maintained by the Shipowner, and to take information therefrom and make transcripts or copies thereof. SECTION 2.07. REQUISITION OF TITLE, TERMINATION OF CONSTRUCTION CONTRACT OR TOTAL LOSS OF THE VESSEL. In the event of requisition of title to or seizure or forfeiture of the Vessel, termination of the Construction Contract relating to the Vessel, or the occurrence of the circumstances referred to in Section 2.05(c)(3), then all of the following shall apply: (a) The Shipowner shall promptly give written notice thereof to the Secretary. (b) The Shipowner shall promptly pay all amounts it receives by reason of such requisition, seizure, forfeiture, termination or total loss ("Loss Event") to the Secretary. (c) After the Secretary has received sufficient funds to retire the Outstanding Obligations affected by the Loss Event: (1) if there is no existing Default, (A) the Secretary and the Shipowner shall give notice to the Indenture Trustee of a redemption of the Outstanding Obligations pursuant to Section 3.05 of the Indenture, (B) such amount, if any, held by the Secretary, shall be paid by the Secretary to 13 the Indenture Trustee not earlier than 10 days prior to, nor later than the opening of business on, the Redemption Date required by Section 3.05 of the Indenture, (C) the remainder shall next be applied by the Secretary for the payment of all other sums that may be secured hereby, and (D) the balance shall be paid to the Shipowner including any interest earned on the proceeds which are in excess of the amount required to redeem the Obligations; (2) if there is an existing Default and the Guarantees shall not have terminated pursuant to Section 3.02, such amounts shall be held until the same may be applied or paid under paragraphs (1), (3), or (4) of this subsection, whichever is applicable; (3) if the Guarantees shall have terminated pursuant to Section 3.02(c) or if the Secretary shall have assumed the Shipowner's rights and duties under the Indenture and the Obligations and made any payments in default under the terms of Section 6.09 of the Indenture, such amounts shall be applied as provided in Section 6.05; or (4) if the Guarantees shall have terminated pursuant to Section 3.02(b) or 3.02(d) such amounts shall be paid by the Secretary to the Shipowner. PROVIDED THAT, notwithstanding the foregoing, the Shipowner shall not be required to pay the Secretary any amount which the Secretary agrees is in excess of the amount needed for redemption of the Outstanding Obligations affected by the Loss Event. SECTION 2.08. NOTICE OF MORTGAGE. (a) A properly certified copy of the Mortgage shall be carried on board the Vessel with the Vessel's documents and shall be exhibited on demand to any Person having business with the Vessel or to any Secretary's representative. (b) A notice printed in plain type of such size that the paragraph of reading matter shall cover a space not less than six inches wide by nine inches high, and framed, shall be placed and kept prominently exhibited in the chart room and in the master's cabin of the Vessel. (c) The notice referred to in paragraph (b) of this Section shall read as follows: "NOTICE OF SHIP MORTGAGE This Vessel is owned by (NAME OF SHIPOWNER) , a (JURISDICTION) ("Shipowner"), and is covered by a First Preferred Ship Mortgage in favor of the United States of America, under authority of (NAME OF COUNTRY AND LEGAL CITATION). Under the terms of said Mortgage neither the Shipowner, any charterer, the master or agent of this Vessel nor any other person has any right, power or authority to create, incur or permit to be placed or imposed upon this Vessel any lien other than statutory liens incident to current operations that are subordinate to the Mortgage." 14 SECTION 2.09. COMPLIANCE WITH MORTGAGE LAWS. The Shipowner shall comply with and satisfy all of the provisions of the pertinent mortgage laws of the country in which the Vessel is documented in order to establish and thereafter maintain the Mortgage thereunder as a preferred mortgage upon the Vessel. SECTION 2.10. PERFORMANCE OF SHIPOWNER'S AGREEMENTS BY THE SECRETARY. If the Shipowner shall fail to perform any of its agreements hereunder or under the Mortgage, the Secretary may, in its discretion, at any time during the continuance of an event which by itself, with the passage of time, or the giving of notice, would constitute a Default, perform all acts and make all necessary expenditures to remedy such failure. Notwithstanding the foregoing, the Secretary shall not be obligated to (and shall not be liable for the failure to) perform such acts and make such expenditures. All funds advanced and expenses and damages incurred by the Secretary relating to such compliance shall constitute a debt due from the Shipowner to the Secretary and shall be secured hereunder and under the Mortgage prior to the Secretary's Note and shall be repaid by the Shipowner upon demand, together with interest at the rate that would have been paid by the Department of Treasury on the expended funds plus 1%. SECTION 2.11. PERFECTION OF SECURITY INTERESTS; FURTHER ASSURANCES. The Shipowner shall (i) furnish evidence satisfactory to the Secretary that all financing statements under the UCC, and all filings or recordings required by the laws of the country where the Shipowner is located, shall have been filed against the Shipowner and the Shipyard in all offices in which it may be necessary, or advisable in the opinion of the Secretary, to perfect its security interest, and (ii) from time to time execute and deliver such further instruments and take such action as may reasonably be required more effectively to subject the Security to the lien of the Security Agreement and the Mortgage as contemplated thereby, including but not limited to legal opinions from an independent counsel for the Shipowner to the effect that all UCC Financing Statements, or other filings and recordings with respect to the country where the Shipowner is located, have been filed to perfect the Secretary's interests in the Security as valid and enforceable first priority perfected security agreements. With respect to Security that constitutes accounts or general intangibles for money due or to become due, the Shipowner shall perfect the Secretary's Security by giving written notice to the account debtor(s) of the Secretary's security interest in such accounts and general intangibles. SECTION 2.12. MODIFICATION OF FORMATION AGREEMENTS. (a) If the Shipowner is organized as a general partnership, limited partnership, limited liability company or joint venture, then for so long as there is Outstanding any indebtedness to the United States of America pursuant to the Act, the partnership agreement, operating agreement, limited liability agreement, joint venture agreement (or any agreement constituting such an entity) shall not be amended, modified or voluntarily terminated without the Secretary's prior written consent. (b) In the event where any action by the Shipowner, any member of the Shipowner or the management of the Shipowner results or would result in dissolution of the Shipowner pursuant to its limited liability company agreement or governing law, each member of the Shipowner shall forthwith take all steps necessary to reform and reestablish the Shipowner. 15 SECTION 2.13. MEMBERS OF LIMITED LIABILITY COMPANIES. All existing and future members of a Shipowner which is a limited liability company (each being a "Member"), upon becoming a Member, shall forthwith enter into an agreement with the Secretary, in form and substance satisfactory to the Secretary, whereby each Member agrees: (1) that any amounts owed by the Shipowner to a Member with respect to its interest (as that or the equivalent term is used in the Shipowner's limited liability company agreement) (the "Distributions") shall be subordinated to the Shipowner's payment of the Secretary's Note and debts under the Security Agreement, provided that such Distributions may be paid to the extent the Shipowner is permitted to pay dividends under the Financial Agreement; (2) that in the event of default by the Shipowner under the Security Agreement, the Member shall be subordinated in its rights to receive any Distribution or to be paid any sums whatsoever by the Shipowner until the Secretary has made a full recovery of any and all amounts owed under the Secretary's Note and the Security Agreement. SECTION 2.14. CONCERNING THE PERFORMANCE AND PAYMENT BONDS. During the Construction, the Shipowner shall cause to be maintained a Performance Bond and Payment Bond naming the Shipowner and the Secretary as co-obligees (the "Surety Bonds") in form and substance satisfactory to the Secretary, to be obtained by the Shipyard in the amount of the Construction Contract, issued by such surety company or companies as shall be satisfactory to the Secretary (the "Surety"). In the event that the price for the work to be performed under the Construction Contract is increased, then the Surety Bonds shall be increased simultaneously in a corresponding amount. The Shipowner hereby agrees that the Secretary shall be the sole loss payee under the Surety Bonds and the Surety shall pay such amounts directly to the Secretary for distribution to the co-obligees as their interests may appear. The Shipowner hereby agrees that its interest as a co-obligee under each of the Surety Bonds is and shall be, upon the occurrence of a Default under the Security Agreement, fully subject and subordinate to the rights and interests of the Secretary therein. In the event of a default under the Security Agreement, which default results in a payment under any of the Surety Bonds, then the Surety Bonds proceeds shall be distributed by the Secretary in accordance with the provisions of Section 6.05 hereof. The Shipowner hereby irrevocably appoints the Secretary, the true and lawful attorney of the Shipowner, in its name and stead, to execute all consents, approvals, settlements and agreements on behalf of the Shipowner with respect to any rights related to the Surety Bonds. ARTICLE III THE SECRETARY'S NOTE SECTION 3.01. SECRETARY'S NOTE. On this date, the Shipowner has duly executed and delivered and the Secretary has accepted the Secretary's Note payable in an amount equal to the principal amount of the Obligations. SECTION 3.02. TERMINATION OF THE GUARANTEES. Except as provided in Section 6.08 of the Indenture, the Guarantee with respect to a particular Obligation, shall terminate only when, one or more of the following events shall occur: 16 (a) Such Obligation shall have been Retired or Paid; (b) The Obligees of all the Obligations then Outstanding shall have elected to terminate the Guarantees, and the Secretary has been so notified by the Indenture Trustee or all Obligees in writing; PROVIDED THAT, such termination shall not prejudice any rights accruing hereunder prior to such termination; (c) Such Guarantee shall have been paid in full in cash by the Secretary; or (d) The Indenture Trustee and each Obligee shall have failed to demand payment of such Guarantee as provided in the Indenture, Guarantee, or the Act. SECTION 3.03. EXECUTION OF ADDITIONAL SECRETARY'S NOTE. (a) In the event and when each new issue of Obligations is executed, authenticated and delivered on a date or dates subsequent to the date hereof, as contemplated by, and pursuant to the Indenture, the Shipowner shall, at the time of the issuance of such Obligations, execute and deliver to the Secretary an additional Secretary's Note or, at the Secretary's discretion, an endorsement to the Secretary's Note in an amount equal to the principal amount of, and at the interest rate borne by, such issue of Obligations, on the terms stated in the Secretary's Note. (b) Each Secretary's Note or endorsement executed and delivered in accordance with Section 3.03 shall together with the Secretary's Note be secured by this Security Agreement and the Mortgage. 17 ARTICLE IV CONSTRUCTION FUND; MONEYS DUE WITH RESPECT TO CONSTRUCTION OF THE VESSEL SECTION 4.01. CONSTRUCTION FUND. (a) The Shipowner has deposited with the Depository the amount, if any, indicated in the Depository Agreement from the proceeds of the Obligation to be held by the Depository in a Securities Account in accordance with the terms of the Depository Agreement. This Securities Account together with any future deposits and the proceeds from the investment of the amounts on deposit shall be called the "Construction Fund." (b) The Shipowner may withdraw money from the Construction Fund under the same procedures and conditions as the Shipowner may withdraw money from the Escrow Fund under Section 5.03, except that the Shipowner's Request for withdrawal will not be subject to Section 5.03(a)(2)(A) or 5.03(h). The administration of the Construction Fund shall also be subject to the terms and conditions of Sections 5.04 and 5.05. SECTION 4.02. MONEYS DUE WITH RESPECT TO CONSTRUCTION OF THE VESSEL. (a) In the event that the Shipowner shall receive any moneys from any Person in connection with the Construction of the Vessel, the Shipowner shall give written notice thereof to the Secretary and shall promptly pay the same over to the Depository to be held in the Title XI Reserve Fund. (b) Upon and after a final determination of Actual Cost in accordance with Section 5.01, in the absence of a Default, any moneys held by the Depository which are not to be applied for the redemption of Obligations under Section 3.04 of the Indenture shall be paid to the Shipowner. (c) In the event there is an existing Default, the money shall be held by the Depository in accordance with the provisions of the Depository Agreement. (d) In the event the Secretary assumes the Shipowner's rights and duties under Section 6.09 of the Indenture or pays the Guarantees, the Depository shall promptly pay all moneys including all Moneys Due with Respect to Construction of the Vessel to the Secretary, who will apply it in accordance with Section 6.05. ARTICLE V ACTUAL COST; THE ESCROW FUND SECTION 5.01. ACTUAL COST DETERMINATION. (a) The Actual Cost of the Vessel, determined as of the date of this Security Agreement, is as set forth in Table A hereof. (b) The Secretary agrees to: (1) make a final determination of the Actual Cost of the Vessel, limited to amounts paid by or for the account of the Shipowner on account of the items set forth in Table A hereof and, to the extent approved by the Secretary, any other items or any increase 18 in the amounts of such items, such determination to be made as of the time of payment by or for the account of the Shipowner of the full amount of said Actual Cost of the Vessel, excluding any amounts which are not to become due and payable, and (2) promptly give written notice to the Shipowner, of the results of said final determination; PROVIDED THAT, the Shipowner shall have requested such determination not less than 60 days in advance and shall have furnished to the Secretary not less than 30 days in advance of such determination along with a Shipowner's Officer's Certificate and a statement by an independent certified (or, with the Secretary's prior written consent, an independent) public accountant or firm of accountants of the total amounts paid or obligated to be paid by or for the account of the Shipowner for the Construction of the Vessel, together with a breakdown of such totals according to the items for which paid or obligated to be paid. SECTION 5.02. ESCROW FUND DEPOSITS. At the time of the sale of the Obligations, the Shipowner shall deposit with the Secretary in the Escrow Fund all of the proceeds of that sale unless the Shipowner is entitled to withdraw funds under Section 5.03. If the Obligations are issued before the delivery of the Vessel, then the Shipowner shall also deposit into the Escrow Fund on the Closing Date an amount equal to six months interest at the rate borne by the Obligations. SECTION 5.03. ESCROW FUND WITHDRAWALS. (a) The Secretary shall within a reasonable time after written Request from the Shipowner, disburse from the Escrow Fund directly to the Indenture Trustee, any Paying Agent for such Obligations, the Shipyard, or any other Person entitled thereto, any amount which the Shipowner is obligated to pay or to the Shipowner for any amounts it has paid on account of the items and amounts or any other items set forth in Table A annexed hereto or subsequently approved by the Secretary), PROVIDED THAT, the Secretary is satisfied with the accuracy and completeness of the information contained in the following submissions: (1) A Responsible Officer of the Shipowner shall deliver an Officer's Certificate, in form and substance satisfactory to the Secretary, stating that (A) there is neither a Default under the Construction Contract nor the Security Agreement; (B) there have been no occurrences which have or would adversely and materially affect the condition of the Vessel, its hull or any of its component parts; (C) the amounts of the Request is in accordance with the Construction Contract including the approved disbursement schedule and each item in these amounts is properly included in the Secretary's approved estimate of Actual Cost; (D) with respect to the Request, once the Contractor is paid there will be no liens or encumbrances on the Vessel, its hull or component parts for which the withdrawal is being requested except for those already approved by the Secretary; and (E) if the Vessel has already been delivered, it is in class and is being maintained in the highest and best condition. The Shipowner shall also attach an Officer's Certificate of the Shipyard, in form and substance satisfactory to the Secretary, stating that there are no liens or encumbrances as provided in clause (D) of this subsection and attaching the invoices and receipts supporting each proposed withdrawal to the satisfaction of the Secretary. (2) No payment or reimbursement under this Section shall be made (A) to any Person until the Construction Fund, if any, has been exhausted, (B) to any Person until the total amount paid by or for the account of the Shipowner from sources other than the proceeds of such 19 Obligations equals at least 12-l/2% of the Actual Cost of the Vessel is made; (C) to the Shipowner which would have the effect of reducing the total amounts paid by the Shipowner pursuant to clause (B) of this subsection; or (D) to any Person on account of items, amounts or increases representing changes and extras or owner furnished equipment, if any, set forth in Table A annexed hereto, unless such items, amounts and increases shall have been previously approved by the Secretary; PROVIDED, HOWEVER, that when the amount guaranteed by the Secretary equals 75% or less of the Actual Cost, then after the initial 12 1/2% of Actual Cost has been paid by or on behalf of the Shipowner for the Vessel and up to 37 1/2% of Actual Cost has been withdrawn from the Escrow Fund for the Vessel, the Shipowner shall pay the remaining Shipowner's equity of at least 12 1/2% (as determined by the Secretary) before additional monies can be withdrawn from the Escrow Fund relating to the Vessel. (b) The excess, as determined by the Secretary, of any amount on deposit in the Escrow Fund which represents interest on the principal amount deposited, over and above the amount of interest due on the next Interest Payment Date on the principal amount, as determined by the Secretary, remaining on deposit on such Interest Payment Date, may, unless there is an existing Default, be disbursed by the Secretary upon the Shipowner's Request made not more than 10 Business Days prior to such Interest Payment Date or made within at least 60 days after such Interest Payment Date. (c) The Secretary shall not be required to make any disbursement pursuant to this Section except out of the cash available in the Escrow Fund. If sufficient cash is not available to make the requested disbursement, additional cash shall be provided by the maturity or sale of securities in accordance with instructions pursuant to Section 5.04. If any sale or payment on maturity shall result in a loss in the principal amount of the Escrow Fund invested in securities so sold or matured, the requested disbursement from the Escrow Fund shall be reduced by an amount equal to such loss, and the Shipowner shall, no later than the time for such disbursement, pay to the Indenture Trustee, any Paying Agent, the Shipyard, or any other Person entitled thereto, the balance of the requested disbursement from the Shipowner's funds other than the proceeds of such Obligations. (d) If the Secretary assumes the Shipowner's rights and duties under the Indenture and the Obligations, and makes any payments in default under the Indenture, or the Secretary pays the Guarantees, all amounts in the Escrow Fund (including realized income which has not yet been paid to the Shipowner), shall be paid to the Secretary and be credited against any amounts due or to become due to the Secretary under the Security Agreement and the Secretary's Note. To the extent payment of the Escrow Fund to the Secretary is not required, said amounts or any balance thereof, shall be paid to the Shipowner. If the Secretary shall have assumed the Shipowner's rights and duties under the Indenture and the Obligations, and made any payments in default under the terms of Section 6.09 of the Indenture, or the Guarantees shall become payable by the Secretary as to the Obligations, all amounts in the Escrow Fund at the time such Guarantees become payable (including realized income which has not yet been paid to the Shipowner), shall be paid to the Secretary and be credited against any amounts due or to become due to the Secretary from the Shipowner with respect to all Obligations guaranteed 20 by the Secretary to which this Security Agreement relates. To the extent payment of the Escrow Fund to the Secretary is not required, said amounts or any balance thereof, shall be paid to the Shipowner. (e) At any time the Secretary shall have determined that there has been, for any reason, a disbursement from the Escrow Fund contrary to this Section, the Secretary shall give written notice to the Shipowner of the amount improperly disbursed, the amount to be deposited or redeposited into the Escrow Fund on account thereof, and the reasons for such determination. The Shipowner shall thereafter promptly deposit or redeposit, as appropriate, such amount (with interest, if any) required by the Secretary into the Escrow Fund. (f) Notwithstanding any other provision of this Section, the Shipowner shall not seek or receive reimbursement for any amount paid to the Shipyard or any Person by the Secretary. (g) In the event that one of the events described in Section 2.07 has occurred with respect to the Vessel or the Secretary shall have paid the Guarantees or shall have assumed the Shipowner's rights and duties under Section 6.09 of the Indenture, the Secretary may direct that moneys remaining on deposit in the Escrow Fund may be withdrawn in whole or in part for one of the following purposes: (1) application as provided in Section 3.05 of the Indenture (but in no event shall any such disbursement for such purpose be in an amount greater than the Outstanding Obligations); (2) payment to the Shipowner, or its order, in the event all Outstanding Obligations are Retired or Paid, other than by payment of the Guarantees; or (3) application as provided in Section 6.05, if the Secretary shall have paid the Guarantees or shall have assumed the Shipowner's rights and duties under the Indenture and the Obligations. (h) Any amounts remaining in the Escrow Fund on the Termination Date of the Escrow Fund which are in excess of 87 1/2% or 75% of Actual Cost, as the case may be, shall be applied pursuant to Section 3.04 of the Indenture. SECTION 5.04. INVESTMENT AND LIQUIDATION OF THE ESCROW FUND. The Secretary may invest the Escrow Fund in obligations of the United States with such maturities that the Escrow Fund will be available as required for the purposes hereof. The Secretary shall deposit the Escrow Fund into an account with the Treasury Department and, upon agreement with the Shipowner, shall deliver to the Treasury Department instructions for the investment, reinvestment and liquidation of the Escrow Fund. The Secretary shall have no liability to the Shipowner for acting in accordance with such instructions. SECTION 5.05. INCOME ON THE ESCROW FUND. Except as provided in Section 5.03, any income realized on the Escrow Fund shall, unless there is an existing Default, be paid to the Shipowner upon receipt by the Secretary of such income. For the purpose of this Section, the term "income realized on the Escrow Fund," shall mean with respect to the Escrow Fund (1) the excess of the cash received from the sale of securities over their cost (less any losses from sale not already paid pursuant to Section 5.03(c)) and (2) cash received from the payment of principal and interest on securities. 21 SECTION 5.06. TERMINATION DATE OF THE ESCROW FUND. The Escrow Fund will terminate 90 days after the Delivery Date of the Vessel covered by this Security Agreement (herein called the "Termination Date of the Escrow Fund"). In the event that on such date the payment by or for the account of the Shipowner of the full amount of the aggregate Actual Cost of the Vessel set forth in Table A hereof has not been made or the amounts with respect to such Actual Cost are not then due and payable, then the Shipowner and the Secretary by written agreement shall extend the Termination Date of the Escrow Fund for such period as shall be determined by the Shipowner and the Secretary as sufficient to allow for such contingencies. If the Secretary shall have earlier made a final determination of the Actual Cost of the Vessel in accordance with Section 5.01, the Termination Date of the Escrow Fund shall be deemed to be the date of such final determination; PROVIDED that, if as a result of such final determination, a redemption of Obligations is required pursuant to Section 3.04 of the Indenture, the Termination Date shall be the date specified as the Redemption Date in the notice of redemption given pursuant to Section 3.08 of the Indenture. ARTICLE VI DEFAULTS AND REMEDIES SECTION 6.01. WHAT CONSTITUTES "DEFAULTS;" CONTINUANCE OF DEFAULTS. Each of the following events shall constitute a "Default" within the meaning of Section 6.01: (a) A default in the payment of the whole or any part of the interest on any of the Outstanding Obligations when the same shall become due and payable; or default in the payment of the whole or any part of the principal of any of the Outstanding Obligations when the same shall become due and payable, whether by reason of Maturity, redemption, acceleration, or otherwise, or any default referred to in Section 6.01 of the Indenture; and continuation of such default for a period of 30 days shall constitute and is herein called a "Payment Default." Any corresponding default with respect to the interest on, or the principal of, the Secretary's Note is also deemed to be a Payment Default; (b) The following shall constitute and each is herein called a "Security Default:" (1) Default by the Shipowner in the due and punctual observance and performance of any provision in Sections 2.02(b) and (j), 2.03, 2.04, 2.09, 2.11, 2.12, 2.14, 8.01 and 8.02; (2) Default by the Shipowner continued after written notice specifying such failure by certified or registered mail to the Shipowner from the Secretary in the due and punctual observance and performance of any provision in Sections 2.02(a), (d), (f), (g) and (h), 2.05 (except (g) and (k) thereof), 2.07 and 2.13. (3) Default by the Shipowner continued for 30 days after written notice by certified or registered mail to the Shipowner from the Secretary in the due and punctual observance 22 of any other agreement in this Security Agreement or in the Mortgage; (4) The Shipowner shall become insolvent or bankrupt or shall cease paying or providing for the payment of its debts generally, or the Shipowner shall be dissolved or shall, by a court of competent jurisdiction, be adjudged a bankrupt, or shall make a general assignment for the benefit of its creditors, or shall lose its charter by forfeiture or otherwise; or a petition for reorganization of the Shipowner under the applicable bankruptcy laws shall be filed by the Shipowner, or such petition be filed by creditors and the same shall be approved by such a court of competent jurisdiction; or a reorganization of the Shipowner under said bankruptcy laws shall be approved by a court, whether proposed by a creditor, a stockholder or any other Person whomsoever; or a receiver or receivers of any kind whatsoever, whether appointed in admiralty, bankruptcy, common law or equity proceedings, shall be appointed, by a decree of a court of competent jurisdiction, or any other governmental body with respect to the Vessel, or all or substantially all of the Shipowner's property, and such decree shall have continued unstayed, on appeal or otherwise, and in effect for a period of 60 days; (5) Any default in the due and punctual observance and performance of any provision in the Financial Agreement or the Construction Contract; (6) Any representation or warranty made relating to the execution and delivery of this Security Agreement, the Mortgage, the Guarantee Commitment or the Financial Agreement, or in any certificate required to be furnished pursuant thereto, shall prove to be incorrect in any material respect; (7) Any event constituting a Default under any security agreement or preferred mortgage, relating to any other vessel or vessels owned by the Shipowner and financed under the Act; (8) Any additional Security Default prescribed in the Special Provisions hereof; and (9) Any event constituting a default under any bareboat or time charter or contract of affreightment of the Vessel. At any time following the occurrence of a Security Default, the Secretary may give the Indenture Trustee a Secretary's Notice with respect to such Security Default, after which the Indenture Trustee and the Obligees shall have the right to make demand for payment of the Guarantees in accordance with the Indenture and the Authorization Agreement, unless the Secretary shall have assumed the Shipowner's rights and duties under the Indenture and the Obligations, and made any payments in default under Section 6.09 of the Indenture. SECTION 6.02. ACCELERATION OF MATURITY OF THE SECRETARY'S NOTE. The Secretary may, by giving written notice to the Shipowner, declare the principal of the Secretary's Note and interest 23 accrued thereon to be immediately due and payable, at any time after (a) the Secretary shall have been obligated to pay the Guarantees pursuant to the terms of the Indenture and the Authorization Agreement, or (b) the Secretary shall have assumed the Shipowner's rights and duties under the Indenture and the Obligations, and made any payments in default under the terms of Section 6.09 of the Indenture. Thereupon, the principal of and interest on the Secretary's Note shall become immediately due and payable, together with interest at the same rates specified in the Secretary's Note. SECTION 6.03. WAIVERS OF DEFAULT. (a) If the Secretary shall not have assumed the Shipowner's rights and duties under the Indenture and the Obligations, and made any payments in default under the terms of Section 6.09 of the Indenture, and if the Secretary determines that an event which, with the passage of time, would become a Payment Default, has been remedied within 30 days after the occurrence of such event, upon a Request by the Shipowner, the Secretary shall waive the consequences of such event. (b) If the Secretary shall not have assumed the Shipowner's rights and duties under the Indenture and the Obligations, and made any payments in default under the terms of Section 6.09 of the Indenture, and if the Secretary shall have determined prior to payment of the Guarantees that a Payment Default has been remedied after the expiration of the aforesaid 30-day period, but prior to the date of demand by the Indenture Trustee or an Obligee for payment under the Guarantees, upon a Request by the Shipowner, the Secretary shall waive such Default. (c) If the Secretary shall have determined prior to the expiration of the period required for payment of the Guarantees that a Payment Default had not occurred or has been subsequently remedied by the Shipowner (and if the Secretary shall not have assumed the Shipowner's rights and duties under the Indenture and the Obligations, and made any payments in default under the terms of Section 6.09 of the Indenture and prior to any payment of Guarantees), the Secretary shall notify the Indenture Trustee and the Shipowner of such determination, and, the Secretary shall waive such Default. (d) The Secretary, in its sole discretion, may waive any Security Default or any event which by itself, or with the passage of time or the giving of notice, or both, would give rise to a Security Default; PROVIDED THAT, such Default is waived prior to the Secretary giving to the Indenture Trustee the Secretary's Notice. (e) The Secretary shall notify the Shipowner and the Indenture Trustee in writing of any determinations made under paragraphs (a), (b) and (c) of this Section, and the Secretary shall waive the consequences of any such Default, and annul any declaration under Section 6.02, and the consequences thereof. (f) No waiver under this Section shall extend to or affect any subsequent or other Default, nor impair any rights or remedies consequent thereon. 24 (g) No waiver under this Section shall be deemed to have occurred because the Secretary shall have assumed the Shipowner's rights and duties under the Indenture and the Obligations, and made any payments in default under the terms of Section 6.09 of the Indenture. SECTION 6.04. REMEDIES AFTER DEFAULT. (a) In the event of a Default, and before and after the payment of the Guarantees or the assumption by the Secretary of the Shipowner's rights and duties under the Indenture and the Obligations, and the making of any payments in default under the terms of Section 6.09 of the Indenture, the Secretary shall have the right to take the Vessel without legal process wherever the same may be (and the Shipowner or other Person in possession shall forthwith surrender possession of the Vessel to the Secretary upon demand) and hold, lay up, lease, charter, operate, or otherwise use the Vessel for such time and upon such terms as the Secretary may reasonably deem to be in the Secretary's best interest, accounting only for the net profits, if any, arising from the use of the Vessel, and charging against all receipts from the use of the Vessel, all reasonable charges and expenses relating to the Vessel's use. (b) Upon either (i) payment of the Guarantees or (ii) the Secretary's assumption of the Shipowner's rights and duties under the Indenture and the Obligations, and the making of any payments in default under Section 6.09 of the Indenture, the Secretary shall have the right to: (1) Exercise all the rights and remedies in foreclosure and otherwise given to mortgagees the laws of the United States, the country of documentation of the Vessel, or such other country in which the Vessel may be located at the time of the foreclosure; (2) Bring suit at law, in equity or in admiralty to recover judgment for any and all amounts due under the Secretary's Note, this Security Agreement and the Mortgage, collect the same out of any and all of Shipowner's property, whether or not the same is subject to the lien of the Mortgage, and in connection therewith, obtain a decree ordering the sale of the Vessel in accordance with paragraph (b)(4) of this Section; (3) Have a receiver of the Vessel appointed as a matter of right in any suit under this Section (and any such receiver may have the rights of the Secretary under paragraph (b)(4) of this Section; (4) Sell the Vessel, free from any claim of the Shipowner, by a public extrajudicial sale, held at such time and place and in such manner as the Secretary may reasonably deem advisable, after twice publishing notice of the time and place of such sale prior to the proposed sale in the Authorized Newspapers to the Shipowner. Such publication and mailing is to be made at least 10 Business Days prior to the date fixed for such sale; PROVIDED THAT, such sale may be adjourned from time to time without further publication or notice (other than announcement at the time and place appointed for such sale or adjourned sale). It shall not be necessary to bring the Vessel to the place appointed for such sale or adjourned sale; (5) Accept a conveyance of title to, and to take without legal process (and the 25 Shipowner or other Person in possession shall forthwith surrender possession to the Secretary), the whole or any part of the Vessel and the Security wherever the same may be, and to take possession of and to hold the same; (6) In the Secretary's discretion, take any and all action authorized by Sections 1105(c), 1105(e) and 1108(b) of the Act and any and all action provided for, or authorized, or permitted by, or with respect to the Increased Security; (7) Receive, in the event of an actual or constructive total loss, or an agreed or compromised total loss, or a requisition of title to or use of the Vessel, all insurance or other payments therefor to which the Shipowner would otherwise be entitled, such insurance moneys to be applied by the Secretary in accordance with Section 6.05; and (8) Pursue to final collection of all the claims arising under this Security Agreement, and to collect such claims from, the Increased Security. (c) The Shipowner hereby irrevocably appoints the Secretary the true and lawful attorney of the Shipowner, in its name and stead, to make all necessary transfers of the whole or any part of the Increased Security in connection with a sale, use or other disposition pursuant to Section 6.04(a) or 6.04(b), and for that purpose to execute all necessary instruments of assignment and transfer. Nevertheless, the Shipowner shall, if so requested by the Secretary in writing, ratify and confirm such sale by executing and delivering to any purchaser of the whole or any part of the Increased Security, such proper bill of sale, conveyance, instrument of transfer, or release as may be designated in such request. (d) No remedy shall be exclusive of any other remedy, and each and every remedy shall be cumulative and in addition to any other remedy. (e) No delay or omission to exercise any right or remedy shall impair any such right or remedy or shall be deemed to be a waiver of any Default. (f) The exercise of any right or remedy shall not constitute an election of remedies by the Secretary. (g) If the Secretary discontinues any proceeding, the rights and remedies of the Secretary and of the Shipowner shall be as though no such proceeding had been taken. SECTION 6.05. APPLICATION OF PROCEEDS. (a) The proceeds (from sale or otherwise) of the whole or any part of the Increased Security and use thereof by the Secretary under any of the foregoing powers, (b) the proceeds of any judgment collected by the Secretary for any default hereunder, (c) the proceeds of any insurance and of any claim for damages to the whole or any part of the Increased Security received by the Secretary while exercising any such power, and (d) all other amounts received by the Secretary, including amounts which are required by Sections 26 2.05 and 2.07 shall be applied by the Secretary as follows: (1) to the payment of all advances and all reasonable charges and expenses of the Secretary pursuant to this Security Agreement; (2) to the payment of the whole amount of the interest then due and unpaid upon the Secretary's Note; (3) to the payment of the whole amount of the principal then due and unpaid upon the Secretary's Note; (4) to the Secretary for application to any other debt of the Shipowner due to the Secretary under any other financing insured or guaranteed by the Secretary under to the Act; (5) to the Indenture Trustee for its reasonable fees and expenses; and (6) any balance thereof remaining shall be paid to the Shipowner. SECTION 6.06. GENERAL POWERS OF THE SECRETARY. (a) In the event the Vessel shall be arrested or detained by a marshal or other officer of any court of law, equity or admiralty jurisdiction in any country or nation of the world or by any government or other authority, and shall not be released from arrest or detention within 15 days from the date of arrest or detention, the Shipowner hereby authorizes the Secretary, in the name of the Shipowner, to apply for and receive possession of and to take possession of the Vessel with all the rights and powers that the Shipowner might have, possess and exercise in any such event. This authorization is irrevocable. (b) The Shipowner irrevocably authorizes the Secretary or its appointee (with full power of substitution) to appear in the name of the Shipowner in any court of any country or nation of the world where a suit is pending against the whole or any part of the Increased Security because of or on account of any alleged lien or claim against the whole or any part of the Increased Security, from which the whole or said part of the Increased Security has not been released. (c) The following shall constitute a debt due from the Shipowner to the Secretary, and shall be repaid by the Shipowner upon demand: all reasonable expenses incurred pursuant to paragraphs (a) or (b) of this Section and all reasonable expenses incurred incident to the exercise by the Secretary of any remedies pursuant to Section 6.04(b) or the assumption by the Secretary of the rights and duties of the Shipowner under the Indenture and the Obligations, and the making of any payments in default under the terms of Section 6.09 of the Indenture (including, but not limited to, fees paid to the Indenture Trustee for expenses incident to said assumption of the Indenture by the Secretary), together with interest at the rate that would have been paid by the Department of Treasury on the expended funds plus 1%. The Secretary shall not be obligated to (nor be liable for his failure to) take any action provided for in paragraphs (a) and (b) of this Section. 27 ARTICLE VII AMENDMENTS AND SUPPLEMENTS TO THE SECURITY AGREEMENT, MORTGAGE AND INDENTURE SECTION 7.01. AMENDMENTS AND SUPPLEMENTS TO THE SECURITY AGREEMENT AND THE MORTGAGE. This Security Agreement and the Mortgage may not be amended or supplemented orally, but may be amended or supplemented from time to time only by an instrument in writing executed by the Shipowner and the Secretary. SECTION 7.02. AMENDMENTS AND SUPPLEMENTS TO THE INDENTURE. Notwithstanding any provisions in the Indenture, the Shipowner agrees that no amendments or supplements will be made to the Indenture without the Secretary's prior written consent, and any purported action contrary to this Section shall be null and void AB INITIO and of no force and effect. 28 ARTICLE VIII CONSOLIDATION, MERGER OR SALE SECTION 8.01. CONSOLIDATION, MERGER OR SALE. (a) Nothing in this Security Agreement or the Mortgage shall prevent any lawful consolidation or merger of the Shipowner with or into any other Person, or any sale of the Vessel to any other Person lawfully entitled to acquire and operate the Vessel, or any sale by the Shipowner of all or substantially all of its assets to any other Person; PROVIDED THAT, the Secretary shall have given its prior written consent to such succession, merger, consolidation or sale. (b) Any Successor shall (by indenture supplemental to the Indenture, and by instrument amending or supplementing this Security Agreement, and the Mortgage, as may be necessary), expressly assume the payment of the principal of (and premium, if any) and interest on the Outstanding Obligations in accordance with the terms of the Obligations, shall execute and deliver to the Secretary, an endorsement to the Secretary's Note in form satisfactory to the Secretary, shall expressly assume the payment of the principal of and interest on the Secretary's Note, and shall expressly assume the performance of the agreements of the Shipowner in the Indenture, this Security Agreement, the Mortgage and any related document. (c) Upon the assumption of the documents listed in paragraph (b) of this Section, the Secretary shall consent to the surrender of the Vessel's documents pursuant to the laws of the Vessel's place of documentation provided that, concurrently with such surrender, the Vessel shall be redocumented under the laws of the Vessel's place of documentation. (d) In the event of any sale of the Vessel, the Secretary shall determine if there will remain adequate security for the Guarantees after discharge of the Vessel from the Security Agreement and Mortgage, and (1) the Shipowner shall redeem, together with any premium and/or accrued interest thereof, the Outstanding Obligations relating to the Vessel in accordance with the provisions of Article Third of the Indenture, or (2) the Person to which such sale shall have been made (the "Transferee"), shall assume the documents listed in paragraph (b) of this Section. Upon any such assumption, the Transferee shall succeed to and be substituted for the Shipowner with the same force and effect as if it had been named in the Indenture, the Obligations, this Security Agreement and the Mortgage (and such other documents) to the extent the same relate to the Outstanding Obligations and to the Vessel. SECTION 8.02. TRANSFER OF A GENERAL PARTNER'S OR A JOINT VENTURER'S INTEREST. If the Shipowner is organized as a partnership or a joint venture, a general partner or a joint venturer may lawfully transfer its respective interests under the terms of the partnership or joint venture agreement to any Person and may be released from all of their obligations thereunder and under this Security Agreement or the Mortgage; PROVIDED THAT, (i) the Secretary shall have given its prior written consent to the proposed transaction and (ii) the transferee shall assume in full all of the existing obligations which the transferring general partner or joint venturer has under the applicable partnership or joint 29 venture agreement, this Security Agreement, the Mortgage and any related document. ARTICLE IX NOTICES SECTION 9.01. NOTICES AND COMMUNICATIONS. Except as otherwise provided in this Security Agreement or by the Act, all notices, requests, demands, directions, consents, waivers, approvals or other communications shall be in writing in the English language (or accompanied by an accurate English translation upon which the Secretary shall have the right to rely for all purposes under this Agreement and shall be made or delivered in person or by registered or certified mail, postage prepaid, addressed to the party at the address of such party specified in the Special Provisions hereof, or at such other address as such party shall advise each other party by written notice, and shall be effective upon receipt by the addressee thereof. SECTION 9.02. WAIVERS OF NOTICE. In any case where notice by publication, mail or otherwise is provided for by this Security Agreement, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be deemed the equivalent of such notice. SECTION 9.03. SHIPOWNER'S NAME OR ADDRESS CHANGE. The Shipowner shall not change its name or its address without first providing written notice to the Secretary of the new name and/or the change in address. ARTICLE X DISCHARGE OF SECURITY AGREEMENT AND THE MORTGAGE SECTION 10.01. DISCHARGE OF SECURITY AGREEMENT AND THE MORTGAGE. (a) If the Obligations and the related Secretary's Note shall have been satisfied and discharged, and if the Shipowner shall pay or cause to be paid all other sums that may have become secured under this Security Agreement and the Mortgage, then this Security Agreement, the Mortgage and the liens, estate and rights and interests hereby and thereby granted, shall cease, determine, and become null and void, and the Secretary, on the Shipowner's Request and at the Shipowner's cost and expense, shall forthwith cause satisfaction and discharge and duly acknowledge such satisfaction and discharge of this Security Agreement and the Mortgage to be entered upon its and other appropriate records, and shall execute and deliver to the Shipowner such instruments as may be necessary, and forthwith the estate, right, title and interest of the Secretary in and to the Security, the Increased Security, and any other securities, cash, and any other property held by it under this Security Agreement and the Mortgage, shall thereupon cease, determine and become null and void, and the Secretary shall transfer, deliver and pay the same to the Shipowner. (b) If all of the Guarantees on the Outstanding Obligations shall have been terminated pursuant to Sections 3.02(b) or 3.02(d), the Secretary shall assign to the Shipowner this Security Agreement, the Mortgage and the liens, estate, rights and interests hereby and thereby granted. 30 ARTICLE XI MISCELLANEOUS SECTION 11.01. SUCCESSORS AND ASSIGNS. All the covenants, promises, stipulations and agreements of the Secretary and Shipowner in this Security Agreement shall bind the Secretary and Shipowner and its respective successors and assigns. This Security Agreement is for the sole benefit of the Shipowner, the Secretary, and their respective successors and assigns, and no other Person shall have any right hereunder. SECTION 11.02. EXECUTION IN COUNTERPARTS. This Security Agreement may be executed in any number of counterparts. All such counterparts shall be deemed to be originals and shall together constitute but one and the same instrument. SECTION 11.03. SHIPOWNER'S RIGHTS IN ABSENCE OF DEFAULT. Except during the existence of a Default), the Shipowner (1) shall be permitted to retain actual possession and use of the Vessel, and (2) shall have the right, from time to time, in its discretion and without the consent of or release by the Secretary, to dispose of, free from the lien hereof and of the Mortgage, any and all engines, machinery, masts, boats, anchors, cables, chains, rigging, tackle, apparel, furniture, capstans, outfit, tools, pumps, pumping and other equipment, and all other appurtenances to the Vessel, and also any and all additions, improvements and replacements in or to the Vessel or said appurtenances, after first or simultaneously replacing the same with items of at least substantially equal value. SECTION 11.04. SURRENDER OF VESSEL'S DOCUMENTS. The Secretary shall consent to the surrender of the Vessel's documents in connection with any redocumentation of the Vessel required on account of alterations to the Vessel which are not prohibited by this Security Agreement and by the Mortgage. SECTION 11.05. TABLE OF CONTENTS, TITLES AND HEADINGS. The table of contents, and titles of the Articles and the headings of the Sections are not a part of this Security Agreement and shall not be deemed to affect the meaning or construction of any of its provisions. SECTION 11.06. PAYMENTS IN U.S. CURRENCY. This is an international loan transaction in which the specification of United States currency is of the essence, and such currency shall be the currency of account in all events. The respective payment obligations of the Shipowner and the Secretary hereunder shall not be discharged by an amount paid in another currency, whether pursuant to a judgment or otherwise, to the extent that the amount so paid on prompt conversion to such currency under normal banking procedures does not yield after deduction of any and all fees, taxes or any other charges imposed on the payment of such amount of United States dollars then due. In the event that any payment by the Shipowner or the Secretary, whether pursuant to a judgment or otherwise, upon conversion and transfer, does not result in the payment of such amount of United States currency at the place such amount is due, each shall be entitled to demand immediate payment of, and shall have a separate cause of action against the other for, the additional amount necessary to 31 yield the amount then due. In the event either the Shipowner or the Secretary, upon the conversion of such judgment into currency, shall receive (as a result of currency exchange rate fluctuations) an amount greater than that to which it was entitled, the defaulting party shall be entitled to immediate reimbursement of the excess amount. SECTION 11.07. IMMUNITY. The Shipowner represents and warrants that it is subject to civil and commercial law with respect to its obligations under this Agreement, that the making and performance of this Agreement constitutes private and commercial acts rather than governmental or public acts and that neither the Shipowner nor any of its properties or revenues has any right of immunity on the grounds of Sovereignty or otherwise from suit, court jurisdiction, attachment prior to judgment, attachment in aid of execution of a judgment, set-off, execution of a judgment or from any other legal process with respect to its obligations under this Agreement. To the extent that the Shipowner may hereafter be entitled, in any jurisdiction in which judicial proceedings may at any time be commenced with respect to this Agreement to claim for itself or its revenues or assets any such immunity, and to the extent that in any such jurisdiction there may be attributed to the Shipowner such an immunity (whether or not claimed), the Shipowner hereby irrevocably agrees not to claim and hereby irrevocably waives such immunity. The foregoing waiver of immunity shall have effect under the United States Sovereign Immunities Act of 1976. 32 SCHEDULE X TO SECURITY AGREEMENT DOCUMENT 13 SCHEDULE OF DEFINITIONS "Act" means the Merchant Marine Act, 1936, as amended and in effect on the Closing Date. "Actual Cost" means the actual cost of a Vessel, as set forth in Table A of the Security Agreement or as subsequently redetermined by the Secretary pursuant to the Security Agreement and the Act. "Administrative Agent" means CITICORP NORTH AMERICA, INC., a Delaware corporation, as administrative agent for the Primary Lender and the commercial paper holders of the Primary Lender (and their respective successors and assigns), and its permitted successors and assigns. "Agent" means each of the Administrative Agent and the Facility Agent, individually, and "Agents" means the Administrative Agent and the Facility Agent, collectively. "Alternate Lender" means CITIBANK, N.A., a national banking association and its successors and assigns. "Audited Financial Statements" mean the annual audit of the Shipowner's accounts in accordance with generally accepted auditing standards by independent certified public accountants or independent licensed public accountants, certified or licensed by a regulatory authority of a state or other political subdivision of the United States, who may be the Shipowner's regular auditors. "Authorization Agreement" means the Authorization Agreement, Contract No. MA-13504, between the Secretary and the Indenture Trustee, whereby the Secretary authorizes the Guarantee of the United States to be endorsed on the Obligations, as the same is originally executed, or as modified, amended or supplemented therein. "Authorized Newspapers" means THE WALL STREET JOURNAL and THE JOURNAL OF COMMERCE, or if either ceases to exist, then in such other newspapers as the Secretary may designate and a newspaper printed in English, approved by the Secretary and of general circulation in Baltimore, Maryland. "Business Day" shall mean any day on which dealings in Dollar deposits are carried on in the London interbank market and on which commercial banks in London and New York City are open for domestic and foreign exchange business. "Chapter 313" means the provisions of 46 United States Code Chapter 313, as amended. "Classification Society" means Lloyd's Classification Society or such other Classification Society approved in writing by the Secretary which Classification Society shall in any event be either a member of the International Association of Classification Societies ("IACS") that has been ISO 9000 series registered or an IACS member that meets the requirements of the International Maritime Organization, and is qualified under a Quality Systems Certificate Scheme and recognized by the United States Coast Guard and the Secretary as meeting acceptable standards. "Closing Date" or "Closing" means the date when the Security Agreement is executed and delivered by the Shipowner. "Commitment to Guarantee Obligations" has the same meaning as the term Guarantee Commitment. "Consent of Shipyard" means each, and "Consents of Shipyards" means every, document evidencing such Shipyard's consent to the assignment of a Construction Contract to the Secretary under the Security Agreement as originally executed, modified, amended or supplemented. "Construction" means construction of the Vessel, including designing, inspecting, outfitting and equipping thereof. "Construction Contract" means that certain Semi-Submersible Drilling Vessel Construction Contract (Hull No. 1828), dated April 9, 1998, by and between the Shipowner and the Shipyard, as the same may be amended, modified or supplemented in accordance with the applicable provisions thereto. "Construction Fund" has the meaning specified in Article IV of the Security Agreement. "Corporate Trust Office" means the principal corporate trust office of the Indenture Trustee at which, at any time, its corporate trust business 2 shall be principally administered, which office at the date of execution of the Indenture is located at 25 South Charles Street, 16th Floor, Mail Code 101-591, Baltimore, Maryland 21201. "Credit Agreement" or "Agreement" shall mean the Credit Agreement, dated as of the Closing Date, among the Shipowner, the Lenders, and the Agents, including any Exhibit, Annex, or other attachment thereto, as the same may be amended, modified or supplemented. "Default" when used in the Security Agreement has the meaning attributed to it in Article VI thereof. "Delivery Date" means the date on which a Vessel is delivered to and accepted by the Shipowner. "Depository" shall mean the institution designated in the Depository Agreement or any successor. "Depository Agreement" shall mean the Depository Agreement, Contract No. MA-13508 among the Shipowner, the Secretary and the Depository, as originally executed or as modified or supplemented in accordance with the applicable provisions thereof. "Depreciated Actual Cost" means the depreciated actual cost of a Vessel, as set forth in Table A of the Security Agreement or as subsequently redetermined by the Secretary pursuant to the Security Agreement and the Act. "Eligible Investment" has the meaning given by Section 5 of the Financial Agreement. "Escrow Fund" means the account held by the Secretary, established under Section 1108 of the Act and administered pursuant to Article V of the Security Agreement. "Facility Agent" means CITIBANK INTERNATIONAL PLC, a bank organized and existing under the laws of England, as facility agent for both the Primary Lender and the Alternative Lender (and their respective successors and assigns), and its permitted successors and assigns. 3 "Financial Agreement" means the Title XI Reserve Fund and Financial Agreement, Contract No. MA-13507, executed by the Shipowner and the Secretary, as originally executed or as modified, amended or supplemented in accordance with the applicable provisions thereof. "Financial Asset" has the meaning given by Article 8-102(a)(9) of the UCC. "Government Use" means the use of a Vessel or requisition of its title required by a governmental body of the United States of America. "Guarantee" means each, and the "Guarantees" means every, guarantee of an Obligation by the United States pursuant to Title XI of the Act, as provided in the Authorization Agreement. "Guarantee Commitment" means the Commitment to Guarantee Obligations, Contract No. MA-13503, dated as of the Closing Date, executed by the Secretary and accepted by the Shipowner with respect to the Guarantees, as originally executed or as modified, amended or supplemented in accordance with the applicable provisions thereof. "Increased Security" means the Secretary's Note, the Security Agreement, the Vessels, the Security, the Escrow Fund, the Title XI Reserve Fund, the Construction Fund, and any other security agreement between the Secretary and the Shipowner relating to any vessels financed under the Act, and the Policies of Insurance, and the proceeds of the foregoing. "Indenture" means the Trust Indenture dated as of the Closing Date, between the Shipowner and the Indenture Trustee, as the same is originally executed, or as modified, amended or supplemented in accordance with the applicable provisions thereof. "Indenture Default" has the meaning specified in Article VI of the Indenture. "Indenture Trustee" means FMB Trust Company, National Association, a national banking association, and any successor trustee permitted under the Indenture. "Interest Payment Date" means with respect to any Obligation, the date when any installment of interest on such Obligation is due and payable. 4 "Lender" shall mean shall mean either the Primary Lender or the Alternate Lender, as the case may be, depending on which of the two parties made or will make the relevant disbursement of funds under the Credit Agreement; provided, however, that if the Primary Lender assigns its rights under the Credit Agreement to the Alternate Lender, the term "Lender," shall mean only the Alternate Lender, CITIBANK, N.A., a national banking association, and its successors and assigns. "Long Term Debt" means, as of any date, the total notes, bonds, debentures, equipment obligations and other evidence of indebtedness that would be included in long term debt in accordance with generally accepted accounting principles. There shall also be included any guarantee or other liability for the debt of any other Person, not otherwise included on the balance sheet. "Maturity" when used with respect to any Obligation, means the date on which the principal of such Obligation becomes due and payable as therein provided, whether at the Stated Maturity or by redemption, declaration of acceleration or otherwise. "Moneys Due with Respect to Construction of the Vessel" has the meaning specified in Section 1.03 of the Security Agreement. "Mortgage" means the first preferred ship mortgage on the Vessel, Contract No. MA-13506, between the Shipowner and the Secretary, as originally executed or as modified, amended "Mortgagee" means the Secretary, as mortgagee under the Mortgage. "Mortgagor" means the Shipowner, as mortgagor under the Mortgage. "Net Worth" means, as of any date, the total of paid-in capital stock, paid-in surplus, earned surplus and appropriated surplus, and all other amounts that would be included in net worth in accordance with generally accepted accounting principles, but exclusive of (1) any receivables from any stockholder, director, Officer or employee of the Company or from any Related Party (other than current receivables arising out of the ordinary course of business and not outstanding for more than 60 days) and (2) any increment resulting from the reappraisal of assets. "Obligation" or "Obligations" shall mean the Floating Rate Note or Fixed Rate Note(s) of the Shipowner bearing a Guarantee and authenticated and delivered pursuant to the Indenture and the Authorization Agreement. 5 "Obligation Register" has the meaning specified in Section 2.10 of the Indenture. "Obligee" means each, and "Obligees" means every, Holder of an Obligation. "Offering Circular" means the offering circular relating to the issuance and sale of each Fixed Rate Note. "Officer's Certificate" means a certificate conforming to Section 1.02 of the Security Agreement or the Indenture as the context may require. "Outstanding" when used with reference to the Obligations, shall mean all Obligations theretofore issued under the Indenture, except: (1) Obligations Retired or Paid; and (2) Obligations in lieu of which other Obligations have been issued under the Indenture. "Paying Agent" means any bank or trust company having the qualifications set forth in clauses (1), (3), (4) and (5) of Section 7.02(a) of Exhibit 1 to the Indenture, which shall be appointed by the Shipowner in accordance with Section 4.02 of Exhibit 1 to the Indenture to pay the principal of (and premium, if any) or interest on the Obligations on behalf of the Shipowner. "Payment Default" has the meaning specified in Section 6.01 of the Security Agreement. "Person" or "Persons" means any individual, corporation, partnership, joint venture, association, limited liability company, joint-stock company, trust, unincorporated organization, government, or any agency or political subdivision thereof. "Policies of Insurance" and "policies" means all cover notes, binders, policies of insurance and certificates of entry in a protection and indemnity association, club or syndicate with respect to the Vessel, (including all endorsements and riders thereto), including but not limited to all insurance required under Section 2.05 of the Security Agreement. "Primary Lender" means GOVCO INCORPORATED, a Delaware corporation, and its successors and assigns. "Redemption Date" means a date fixed for the redemption of an Obligation by the Indenture. 6 "Related Party" means one that can exercise control or significant influence over the management and/or operating policies of another Person, to the extent that one of the Persons may be prevented from fully pursuing its own separate interests. Related parties consist of all affiliates of an enterprise, including (1) its management and their immediate families, (2) its principal owners and their immediate families, (3) its investments accounted for by the equity method, (4) beneficial employee trusts that are managed by the management of the enterprise, and (5) any Person that may, or does, deal with the enterprise and has ownership of, control over, or can significantly influence the management or operating policies of another Person to the extent that an arm's-length transaction may not be achieved. "Request" means a written request to a Person for the action therein specified, signed by a Responsible Officer of the Person making such request. "Responsible Officer" means (1) in the case of any business corporation, the chairman of the board of directors, the president, any executive or senior vice president, the secretary, the treasurer, member or partner, (2) in the case of any commercial bank, the chairman or vice-chairman of the executive committee of the board of directors or trustees, the president, any executive or senior vice president, the secretary, the treasurer, any trust officer, and (3) with respect to the signing or authentication of Obligations and Guarantees by the Indenture Trustee, any person specifically authorized by the Indenture Trustee to sign or authenticate Obligations. "Retired or Paid," as applied to Obligations and the indebtedness evidenced thereby, means that such Obligations shall be deemed to have been so retired or paid and shall no longer be entitled to any rights or benefits provided in the Indenture if: (1) such Obligations shall have been paid in full; (2) such Obligations shall have been canceled by the Indenture Trustee; or (3) such Obligations shall have become due and payable at Maturity and funds sufficient for the payment of such Obligations (including interest to the date of Maturity, or in the case of a payment after Maturity, to the date of payment, together with any premium thereon) and available for such payment and are held by the Indenture Trustee or any Paying Agent with irrevocable directions, to pay such Obligations; PROVIDED THAT, the foregoing definition is subject to Section 6.08 of the Indenture. "Rights Under the Construction Contract and Related Contracts" shall have the meaning specified in Section 1.03 of the Security Agreement. 7 "Secretary" means the Secretary of Transportation or any officials duly authorized to perform the functions of the Secretary of Transportation under Title XI of the Act. "Secretary's Note" means a promissory note or promissory notes issued and delivered by the Shipowner to the Secretary substantially in the form of Exhibit 2 of the Security Agreement, including any promissory note issued in substitution for, or any endorsement or supplement thereof. "Secretary's Notice" means a notice from the Secretary to the Indenture Trustee that a Default, within the meaning of Section 6.01(b) of the Security Agreement has occurred. "Secretary of Defense" means the Secretary of Defense of the United States of America. "Security" has the meaning specified in Section 1.03 of the Security Agreement. "Securities Account" has the meaning given by Article 8-501 of the UCC. "Securities Intermediary" has the meaning given by Article 8-102(a)(14) of the UCC and also means the Depository. "Security Agreement" means the security agreement, Contract No. MA-13505, dated as of the Closing Date, consisting of the special provisions, the general provisions and this schedule X, executed by the Shipowner as security for the Secretary, as originally executed or as modified, amended or supplemented. "Security Default" has the meaning specified in Section 6.01 of the Security Agreement. "Shipowner" means Petrodrill Four Limited, a British Virgin Islands international business company, and shall include its successors and assigns. "Shipyard" or "Shipbuilder" means TDI-Halter, Limited Partnership, a Louisiana limited partnership. "Stated Maturity" means the date determinable as set forth in any 8 Obligation as the final date on which the principal of such Obligation is due and payable. "Successor" means a Person formed by or surviving a consolidation or merger with the Shipowner or to which the Vessels have been sold. "Supplemental Indenture" shall mean any indenture supplemental to the Indenture entered into pursuant to Article X of the Indenture. "Title XI" means Title XI of the Act. "Title XI Reserve Fund" has the meaning specified in the Financial Agreement. "Title XI Reserve Fund and Financial Agreement" means the Financial Agreement. "UCC" means the Uniform Commercial Code as enacted in the State of New York. "Vessel" means the Shipowner's Semi-Submersible Drilling Rig to be named the AMETHYST 4 and constructed by TDI-Halter, Limited Partnership in accordance with the Construction Contract, including all work and material heretofore or hereafter performed upon or installed in or placed on board such Vessel, together with related appurtenances, additions, improvements, and replacements. "Working Capital" shall mean the excess of current assets over current liabilities, both determined in accordance with generally accepted accounting principles and adjusted as follows: (1) In determining current assets, there shall also be deducted: (A) Any securities, obligations or evidence of indebtedness of a Related Party or of any stockholder, director, officer or employee (or any member of his family) of the Company or of such Related Party, except advances to agents required for the normal current operation of the Company's vessels and current receivables arising out of the ordinary course of business and not outstanding for more than 60 days; and (B) An amount equal to any excess of unterminated voyage revenue over unterminated voyage expenses; (2) In determining current liabilities, there shall be deducted any excess of unterminated voyage expenses over unterminated voyage revenue; and 9 (3) In determining current liabilities, there shall be added one half of all annual charter hire and other lease obligations (having a term of more than six months) due and payable within the succeeding fiscal year, other than charter hire and such other lease obligations already included and reported as a current liability on the Company's balance sheet. 10 EX-4.22 24 EXHIBIT 4.22 APPENDIX II TO GUARANTEE COMMITMENT DOCUMENT 4 --------------------------------------------------------- TRUST INDENTURE Relating to United States Government Guaranteed Ship Financing Obligations Between PETRODRILL FIVE LIMITED Shipowner AND FMB TRUST COMPANY, NATIONAL ASSOCIATION Indenture Trustee Dated as of April 9, 1999 --------------------------------------------------------- TRUST INDENTURE Between PETRODRILL FIVE LIMITED Shipowner AND FMB TRUST COMPANY, NATIONAL ASSOCIATION Indenture Trustee Dated as of April 9, 1999 TABLE OF CONTENTS TO SPECIAL PROVISIONS OF THE INDENTURE 1/ PAGE ---- Parties......................................................................1 Recitals.....................................................................1 ARTICLE FIRST Incorporation of General Provisions......................................... 2 ARTICLE SECOND The Obligations .............................................................3 ARTICLE THIRD Interest Rate Calculations...................................................3 ARTICLE FOUR Certain Redemptions..........................................................4 - - ------------------ 1/ This Table of Contents is not a part of the Indenture and has no bearing upon the interpretation of any of its terms and provisions. i ARTICLE FIFTH Definitions..................................................................6 ARTICLE SIXTH Additions, Deletions and Amendments to Exhibit 1.............................6 Signatures..................................................................23 Acknowledgements.........................................................24-25 EXHIBITS TO TRUST INDENTURE SCHEDULE A Schedule of Definitions to Trust Indenture EXHIBIT 1 General Provisions of the Indenture Incorporated by Reference EXHIBIT 2 Form of Floating Rate Note EXHIBIT 3 Form of Fixed Rate Note EXHIBIT 4 Authorization Agreement EXHIBIT 5 Form of Secretary Supplemental Indenture ii TRUST INDENTURE SPECIAL PROVISIONS THIS TRUST INDENTURE, is dated as of April 9, 1999 (said Trust Indenture, as the same may be amended, modified or supplemented from time to time as permitted hereunder, herein called the "Indenture"), is between (i) PETRODRILL FIVE LIMITED, a British Virgin Islands international business company (herein called the "Shipowner"), and (ii) FMB TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association (said banking association, any successor or assign hereunder, herein called the "Indenture Trustee"). RECITALS: A. As provided in Article Fifth hereof, the terms defined in Schedule A to this Indenture shall have the respective meanings stated in said Schedule; B. The Shipowner has duly executed this Indenture, and duly authorized the issuance hereunder of $150,183,000 principal amount of its Obligations pursuant to Section 2.03 of Exhibit 1 to this Indenture (herein together with any Obligations issued in respect thereof pursuant to Sections 2.09, 2.10, 2.12 and 3.10(b) of said Exhibit 1, called the "Obligations") designated "United States Government Guaranteed Export Ship Financing Obligations, AMETHYST 5 Series;" C. The Obligations will be issued by the Shipowner to aid in the financing of the cost of construction of a self-propelled semi-submersible drilling rig to be named the AMETHYST 5 (the "Vessel"); D. To aid in financing the construction of the Vessel, the Shipowner has entered into a credit agreement (the "Credit Agreement") with GOVCO INCORPORATED a Delaware corporation (the "Primary Lender"), CITIBANK, N.A., a national banking association (the "Alternate Lender'), CITIBANK INTERNATIONAL PLC, a bank organized and existing under the laws of England (the "Facility Agent") and CITICORP NORTH AMERICA, INC., a Delaware corporation (the "Administrative Agent") providing for the delivery of no more than $150,183,000 principal amount of notes designated "United States Government Guaranteed Export Ship Financing Obligations, AMETHYST 5 Series"; E. Under the Authorization Agreement in the form set forth as Exhibit 4 hereto, the Secretary, on behalf of the United States, has agreed and will agree to execute on the Obligations to be issued, a Guarantee of the payment of the unpaid interest to the date of such payment on, and the unpaid balance of the principal of, such Obligation under the provisions of Title XI of the Act, and the Indenture Trustee is authorized to cause the Guarantees, bearing the facsimile signature of the Secretary, and the facsimile seal of the United States Department of Transportation, to be imprinted on the Obligations, and to authenticate and deliver the Obligations and the Guarantees issued on the Closing Date and from time to time thereafter, such agreements and authorizations being subject to the conditions set forth in the Authorization Agreement; F. Pursuant to Section 1104(b)(5) of the Act, the Secretary will determine that the interest to be borne by the Obligations (exclusive of charges for the guarantee fee and service charges, if any) is reasonable; and G. All actions necessary have been or will be taken in order (1) to make the Obligations, when executed by the Shipowner, authenticated by the Indenture Trustee and issued under the Indenture, the valid, binding and legal obligations of the Shipowner in accordance with their terms, (2) to make the Guarantees to be endorsed on the Obligations, when executed on behalf of the Secretary, authenticated by the Indenture Trustee and delivered under this Indenture, the valid, binding and legal obligations of the United States in accordance with their terms, and (3) to make this Indenture the valid, binding and legal agreement of the parties hereto in accordance with its terms. NOW THEREFORE, in consideration of the premises, of the mutual covenants herein contained, of the purchase of the Obligations by the Holder and of other good and valuable consideration, the receipt and adequacy of which the parties hereby acknowledge, and for the equal and proportionate benefit of the present and future Holder, the parties hereto agree as follows: ARTICLE FIRST INCORPORATION OF GENERAL PROVISIONS This Indenture shall consist of two parts: the Special Provisions and the General Provisions attached hereto as Exhibit 1, made a part of this Indenture and incorporated herein by reference. In the event of a conflict, the terms of the Special Provisions shall prevail. 2 ARTICLE SECOND THE OBLIGATIONS (a) The Obligations issued hereunder shall be designated "United States Government Guaranteed Export Ship Financing Obligations, AMETHYST 5 Series," and shall be in the forms of Exhibits 2 and 3 to this Indenture; and, the aggregate principal amount of Obligations which may be issued under this Indenture shall not exceed $150,183,000 except as provided in Sections 2.09, 2.10, 2.12 and 3.10(b) of Exhibit 1 hereto. (b) The Obligations shall be in the denominations of $1,000 or any integral multiple thereof. (c) The Shipowner shall at all times cause to be maintained in the City of Baltimore, State of Maryland an office or agency for the purposes specified in Section 5.03 of Exhibit 1 to this Indenture. (d) The Indenture Trustee shall at all times have its Corporate Trust Office in the City of Baltimore, State of Maryland. ARTICLE THIRD INTEREST RATE CALCULATIONS Upon the terms and subject to the conditions contained in the Obligations, and based on information received from the Facility Agent (but only in connection with the Floating Rate Note), the Indenture Trustee will calculate the Applicable Interest Rate on the Obligations in the manner and at the times provided in the Obligations and shall communicate the same to the Shipowner, the Secretary and any paying agent identified to it in writing as soon as practicable after each determination. The Indenture Trustee, based on information received from the Facility Agent (but only in connection with the Floating Rate Note), will, upon the request of the Holder of the Obligations, determine the Applicable Interest Rate then in effect with respect to the Obligations. 3 ARTICLE FOURTH CERTAIN REDEMPTIONS (a) SCHEDULED MANDATORY REDEMPTION. The Obligations are subject to redemption at a Redemption Price equal to 100% of the principal amount thereof, together with interest accrued thereon to the applicable Redemption Date, through the operation of scheduled repayment providing for the semi-annual redemption on March 15 and September 15 of each year, commencing March 15, 2001 of $6,257,000 of principal amount of Obligations, which amount represents approximately one twenty-fourth (1/24) of the Original Principal Amount of Obligations, plus interest accrued thereon to the Redemption Date. There shall be a final redemption of the remaining outstanding principal of the Floating Rate Note on the earlier of (i) September 15, 2002, or (ii) two (2) years after the Delivery Date, and a final redemption of the remaining outstanding principal of the Fixed Rate Notes on September 15, 2012. Notwithstanding the foregoing provisions of this subsection (a), if the principal amount of Outstanding Obligations shall be reduced by reason of any redemption pursuant to Section 3.04 of Exhibit 1 to this Indenture, the principal amount of Obligations to be redeemed pursuant to this subsection (a) on each subsequent Redemption Date for such Obligations shall be reduced by an amount equal to the principal amount of such Obligations retired by reason of such redemption pursuant to Section 3.04 of Exhibit 1 hereto divided by the number of Redemption Dates (including the Stated Maturity of such Obligations) scheduled thereafter to September 15, 2002 in the case of the Floating Rate Note and September 15, 2012 in the case of Fixed Rate Note(s) (subject to such increase as shall be necessary so that the total principal amount of Obligations to be redeemed on any such Redemption Date shall be an integral multiple of $1,000); PROVIDED THAT, the entire unpaid principal amount of the Outstanding Obligations shall be paid not later than September 15, 2002 in the case of the Floating Rate Note and September 15, 2012 in the case of each Fixed Rate Note. The Shipowner shall, in accordance with Section 3.02(d) of Exhibit 1 hereto, promptly after each redemption pursuant to said Section 3.04, furnish to the Secretary, the Indenture Trustee and each Holder a revised table of scheduled repayments reflecting the reductions made pursuant to this subsection (a) as a result of such redemption. (b) OPTIONAL REDEMPTION OF OBLIGATIONS WITHOUT PREMIUM. At its option, the Shipowner may without premium, (i) prepay on any Interest Payment Date the Floating Rate Note, in whole or in part, in a minimum principal amount of $10,000,000, at a 4 Redemption Price equal to 100% of the principal amount thereof together with interest accrued thereon to the Redemption Date, or (ii) redeem or prepay the Floating Rate Note, in whole or in part, on a Redemption Date designated by the Shipowner, from the proceeds from the issuance of the Fixed Rate Notes. (c) OPTIONAL REDEMPTIONS OF OBLIGATIONS AT MAKE-WHOLE PREMIUM. At its option, the Shipowner may prepay on any Interest Payment Date the Fixed Rate Notes, in whole or in part, in a minimum principal amount of $10,000,000, at a Redemption Price equal to 100% of the principal amount thereof together with interest accrued thereon to the Redemption Date plus the Make-Whole Premium, if any. Prepayments shall be applied pro rata against each Fixed Rate Note and applied against the scheduled principal payments in the inverse order of scheduled maturity. (d) OPTIONAL REDEMPTIONS. If the Shipowner shall elect to make any such optional redemptions pursuant to this Article, the Shipowner shall, at least 40 days but not more than 60 days prior to the date fixed for redemption, deliver to the Indenture Trustee (1) a Request stating that the Shipowner intends to exercise its rights as above set forth to make such optional redemptions and specifying the Redemption Date and the principal amount which the Shipowner intends to redeem on such date, and (2) at least 35 days prior to the date fixed for redemption in the case of the Fixed Rate Notes, deliver to the Indenture Trustee an amount equal to the Make Whole Premium estimated by the Indenture Trustee, based on information received from the Holder or a calculation agent, to be paid on the Redemption Date. The Indenture Trustee, based on information received from the Holder or a calculation agent, shall give an estimate of the Make Whole Premium to the Shipowner within two (2) business days of the delivery of the Shipowner's Request. In the event the amount of the Make Whole Premium deposited by the Shipowner with the Indenture Trustee pursuant to this section (and interest, if any, accrued thereon, less any losses incurred on the investment thereof) is insufficient to pay the amount of the Make Whole Premium, the Shipowner shall pay the amount of the shortfall to the Indenture Trustee in immediately available funds upon one (1) day's notice. In the event the amount of the Make Whole Premium deposited by the Shipowner pursuant to this section (and interest, if any, accrued thereon, less any losses incurred on the investment thereof) exceeds the Make Whole Premium, the excess amount shall be refunded to the Shipowner by the Indenture Trustee in immediately available funds on the Redemption Date. ARTICLE FIFTH 5 DEFINITIONS For all purposes of this Indenture, unless otherwise expressly provided or unless the context otherwise requires: (1) All references herein to Articles, Sections or other subdivisions, unless otherwise specified, refer to the corresponding Articles, Sections and other subdivisions of this Indenture; (2) The terms "hereof," "herein," "hereby," "hereto," "hereunder" and "herewith" refer to this Indenture; and (3) The terms used herein and defined in Schedule A to this Indenture shall have the respective meanings stated in said Schedule. ARTICLE SIXTH ADDITIONS, DELETIONS AND AMENDMENTS TO EXHIBIT 1 The following additions, deletions and amendments are hereby made to Exhibit 1 to this Indenture. (a) CONCERNING IMMEDIATELY AVAILABLE FUNDS. Notwithstanding any provision in Exhibit 1 to this Indenture to the contrary, all payments are to be made in immediately available funds. (b) CONCERNING MANDATORY SCHEDULED REDEMPTIONS. The terms "sinking fund payment" and "sinking fund redemption" in Exhibit 1 to this Indenture refer to the mandatory scheduled redemption. (c) CONCERNING SECTION 2.02. Section 2.02(c) is revised to read as follows: (c) If the Maturity of any Obligation or an Interest Payment Date for any Obligation shall be a day other than a Business Day, then such payment may be made on the next succeeding Business Day, with the same force and effect as if made on the Interest Payment Date for such payment; PROVIDED, HOWEVER, that interest shall accrue thereon for the period after said Interest Payment Date (whether or not such next succeeding Business Day occurs in a succeeding month). 6 (d) CONCERNING SECTION 2.04. Prior to the earlier of (i) September 15, 2002, or (ii) two (2) years from the Delivery Date, the Shipowner and the Indenture Trustee may enter into a Supplemental Indenture, and the Indenture Trustee may enter into a supplement to the Authorization Agreement, pursuant to Section 2.04 of Exhibit 1 to this Indenture, to provide for the issuance of fixed rate obligations in the form of Exhibit 3 hereto for the purpose of repaying the Floating Rate Note; PROVIDED HOWEVER, that the Shipowner and Indenture Trustee have obtained the prior written consent of the Secretary and FURTHER PROVIDED, that (a) except for the final issuance, each issuance of a Fixed Rate Note must be in a minimum aggregate principal amount of $50,000,000, and (b) the proceeds from the issuance of Fixed Rate Notes shall be used to pay off, satisfy and cancel the Floating Rate Note; PROVIDED, HOWEVER, that during the Construction Period, the Floating Rate Note need not be paid off in its entirety and need only be reduced by the net proceeds from the issuance of the Fixed Rate Notes. (e) CONCERNING SECTION 2.06. Interest at the Applicable Interest Rate shall be due on each Disbursement at the end of each Interest Period. The Indenture Trustee, based on information received from the Facility Agent (but only in connection with the Floating Rate Note), will determine the Applicable Interest Rate for each Interest Period. (f) CONCERNING SECTION 2.10. The first paragraph of Section 2.10(c) is revised to read as follows: (c) The Shipowner or the Indenture Trustee shall not be required to register transfers or make exchanges of (1) Obligations for a period of 15 days immediately prior to (A) an Interest Payment Date or (B) any selection of Obligations to be redeemed, (2) Obligations after demand for payment of the Guarantees and prior to the payment thereof or rescission of such demand pursuant to Section 6.02(a), or (3) any Obligation which has been selected for redemption in whole or in part, except as to the unredeemed portion of any Obligation being redeemed in part. (g) CONCERNING SECTION 2.12. With respect to clause (1) of the proviso to Section 2.12 of Exhibit 1 to the Indenture, a written agreement of indemnity which is satisfactory in form and substance to the Secretary, the Shipowner, and the Indenture Trustee, executed and delivered by an institutional Holder having a capital and surplus of at least $100,000,000 shall be considered sufficient indemnity to the Secretary, the Shipowner, and the Indenture Trustee in connection with the execution, authentication and delivery of any new Obligations or the making of any payment as contemplated by said Section 2.12. 7 (h) CONCERNING PAYMENT OF THE OBLIGATIONS. Notwithstanding anything to the contrary in Exhibit 1 hereto, the Obligations to be issued hereunder shall be payable as to principal, premium (if any), and interest, at an office or agency maintained by the Shipowner for such purpose at the Corporate Trust Office of the Indenture Trustee, or at the option of the Shipowner, as to payments of principal, premium (if any), or interest by wire, in immediately available funds, by such Corporate Trust Office to the Obligees as appear in the Obligation Register, subject in any event to the provisions hereof concerning home office payment and subject to the Indenture Trustee's prior receipt of funds sufficient for the payment of principal, premium (if any) or interest by wire or other immediately available funds. The Indenture Trustee shall have no obligation to determine whether such wires or payments were received by the Obligees. (i) CONCERNING SECTION 3.02. Section 3.02(c) and (d) are revised to read as follows: (c) SCHEDULED REDEMPTIONS. If the Obligations of any series and Stated Maturity or the Special Provisions hereof or the Supplemental Indenture establishing such series shall so provide, such Obligations shall be subject to (i) scheduled redemption through the operation of a mandatory redemption schedule, in such amounts, at such times and subject to such credits (if any) as may be specified therein, and (ii) redemption at the option of the Shipowner, in connection with the operation of any such mandatory redemption schedule, in such additional amounts and subject to such conditions as may be specified therein. (d) ADJUSTMENTS OF REDEMPTION PAYMENTS. If the Obligations of any series and Stated Maturity or the Special Provisions hereof or of the Supplemental Indenture establishing such series provide for an adjustment in scheduled redemption payments as a result of any redemption or cancellation of Obligations, the Shipowner shall recompute the remaining scheduled redemption payments pursuant to such provisions and shall, at least 60 days prior to the next Interest Payment Date which occurs at least 60 days following any such redemption or cancellation of Obligations of such series requiring such recomputation, submit to the Secretary for his review such recomputation to ascertain compliance with the provisions of such Obligations or the Special Provisions hereof or such Supplemental Indenture, and table of revised mandatory redemption schedule payments on the Obligations of such series reflecting the adjustments made pursuant to such provisions as a result of such redemption or 8 cancellation. Upon advice by the Secretary that he finds such recomputation to comply with such provisions, the Shipowner shall submit said table to the Indenture Trustee and the Indenture Trustee shall promptly submit a copy thereof to each Holder of an Obligation of such series. (j) CONCERNING SECTION 3.03. The date required by Section 3.03 of Exhibit 1 hereto for the Floating Rate Note is the earlier of September15, 2002, or (ii) two (2) years from the Delivery Date. The date required by Section 3.03 of Exhibit 1 hereto for the Fixed Rate Notes is September 15, 2012. (k) CONCERNING SECTION 3.06. Section 3.06 of Exhibit 1 hereto is hereby amended in its entirety to read as follows: SECTION 3.06. REDEMPTION AFTER ASSUMPTION BY THE SECRETARY. Upon receipt by the Indenture Trustee of written instructions from the Secretary stating that the principal amount of Obligations specified in such instructions are required to be redeemed on the date specified therein (which shall be not less than 40 nor more than 60 days from the receipt of such instructions by the Indenture Trustee) at the option of the Secretary at any time after the Secretary's assumption of the Obligations pursuant to Section 6.09, the Indenture Trustee shall promptly give notice as provided in Section 3.08 of the redemption on the Redemption Date of the principal amount of Obligations specified in such instructions and the Indenture Trustee shall, on such Redemption Date, redeem such Obligations together with interest accrued thereon to such Redemption Date; PROVIDED THAT, the Secretary shall redeem at the principal amount thereof and interest accrued thereon the Outstanding Obligations relating to the Vessel if the Vessel has been sold pursuant to Section 8.02 to a purchaser or purchasers who have not assumed such Obligations by notice to the Indenture Trustee in accordance with this Section 3.06 within 40 days of the nonassumption of the Obligations by such purchaser. (l) CONCERNING SECTION 3.07. (i) Section 3.07(a) of Exhibit 1 to this Indenture is revised to delete the phrase "or 3.05." (ii) Notwithstanding the provisions of Section 3.07(b) of Exhibit 1 to this Indenture, if less than all of the Obligations are to be redeemed under any of the provisions contained or referred to in Article Fourth hereof (excluding Article Fourth (c) or Article III of said Exhibit 1), the Indenture Trustee shall select such Obligations to be redeemed on the Redemption Date by allocating the principal amount to be redeemed first between each 9 maturity of Obligations in proportion to the Outstanding Obligations and second among the holders of each maturity of Obligations in proportion to the aggregate principal amount of such maturity of Obligations registered in their respective names; provided that, the Indenture Trustee may select for redemption portions of the principal amount of the Obligations of a denomination larger than $1,000; but the portions of the principal amount of the Obligations so selected shall be equal to $1,000 or an integral multiple thereof. (m) CONCERNING SECTION 3.09. Section 3.09 of Exhibit 1 to this Indenture is revised to read as follows: SECTION 3.09. DEPOSIT OF REDEMPTION MONEYS. No later than 11:00 a.m. in Baltimore, Maryland on any Redemption Date, the Shipowner shall, except as contemplated by Section 3.08(b) or Article Fourth (d) of the Special Provisions, deposit or cause to be deposited with the Indenture Trustee or with any Paying Agent an amount in immediately available funds sufficient for such redemption (after taking into account any amounts then held by the Indenture Trustee or such Paying Agent and available for such redemption) with irrevocable directions to it to so apply the same. (n) CONCERNING SECTION 4.01. Section 4.01(b) of Exhibit 1 hereto is hereby amended in its entirety to read as follows: "(b) Cash held by the Indenture Trustee or any Paying Agent (other than the Shipowner) under this Indenture - (i) need not be segregated; (ii) shall not be invested except as permitted by clause (iv) of this Section 4.01(b); (iii) shall not bear interest except as the Shipowner and the Indenture Trustee (or such Paying Agent) may agree in writing; and (iv) if the Shipowner shall have deposited or caused to be deposited with the Indenture Trustee funds sufficient for the payment of the Obligations at their Maturity, including interest to the date of Maturity, and the date of Maturity is more than one (1) Business Day after the deposit of such funds, the Indenture Trustee upon the Request of the 10 Shipowner shall invest such funds, as directed by the Shipowner in writing, in direct obligations of the United States Government maturing at or prior to the date of Maturity of such Obligations and having a principal amount equal to not less than the amount of the funds so invested. Such investments shall be held in trust for the purpose for which the funds so invested were held. After the Obligations in respect of which the funds were deposited have been paid in full (except as to unclaimed amounts as referred to in Section 4.03) any of such funds (including interest received in respect of such investments and gain on matured investments purchased at a discount) held by the Indenture Trustee in excess of amounts to which Holders of such Obligations are entitled shall upon the Request of the Shipowner be paid by the Indenture Trustee to the Shipowner but only in the absence of an Indenture Default hereunder." (o) CONCERNING SECTION 4.02. The appointment of a Paying Agent by the Shipowner is subject to the prior written consent of the Secretary and Indenture Trustee, which consent shall not be unreasonably withheld. (p) CONCERNING SECTION 4.03. Section 4.03 is revised to read as follows: SECTION 4.03. UNCLAIMED AMOUNTS. Any moneys received by the Indenture Trustee or a Paying Agent, for the payment of Obligations or Guarantees and remaining unclaimed by the Holders thereof for 6 years after the date of the Maturity of said Obligations or the date of payment by the Secretary of the Guarantees shall, upon delivery to the Indenture Trustee of a Request by the Shipowner, be paid to the Shipowner; PROVIDED THAT, not less than 30 days prior to such payment, the Shipowner shall publish notice thereof to the Obligees at least once in the Authorized Newspapers and provide the Indenture Trustee with copies thereof. In such event, such Holders shall thereafter be entitled to look only to the Shipowner (and the settlor or settlors of any trust for which the Shipowner is trustee, to the extent paid over to it or them) for the payment thereof, and the Indenture Trustee or such Paying Agent, as the case may be, shall thereupon be relieved from all responsibility to such Holders therefor. No such Request, publication or payment shall be construed to extend any statutory period of limitations which would have been applicable in the absence of such Request, publication or payment. 11 (q) CONCERNING SECTIONS 5.01 AND 5.02. Sections 5.01 and 5.02 are revised to read as follows: SECTION 5.01. AUTHORIZATION, EXECUTION AND DELIVERY OF INDENTURE AND PERFORMANCE. The Shipowner has duly authorized the execution, delivery and performance of this Indenture. SECTION 5.02. PAYMENT AND PROCEDURE FOR PAYMENT OF OBLIGATIONS. The Shipowner will duly and punctually pay the principal of (and premium, if any) and interest on the Obligations according to the terms thereof and of this Indenture. The Shipowner will deposit with the Indenture Trustee or (subject to Section 3.09) a Paying Agent no later than 11:00 a.m. in Baltimore, Maryland on each date fixed for such payment or as otherwise provided by the Special Provisions hereof an amount in immediately available funds sufficient for such payment (after taking into account any amounts then held by the Indenture Trustee or such Paying Agent and available for such payment) with irrevocable directions to it to so apply the same; PROVIDED THAT, payments of interest may be made as provided in Section 2.02(b)(4) as modified by Article Sixth (b) of the Special Provisions; and PROVIDED FURTHER, that except with the consent of the Secretary the Shipowner shall not deposit any such amount more than ten (10) days prior to the date of the payment for which such amount is deposited, unless otherwise provided by the Special Provisions hereof. (r) CONCERNING SECTION 6.06. Section 6.06(a) revised to read as follows: SECTION 6.06. (a) OBLIGEES' RIGHT TO DIRECT INDENTURE TRUSTEE AFTER INDENTURE DEFAULT. During the continuance of any Indenture Default, the Holders of a majority in principal amount of the Outstanding Obligations shall have the right, by an Act of Obligees, to direct the Indenture Trustee: (1) to exercise or to refrain from exercising any right or to enforce any remedy granted to it by this Indenture; and (2) to direct the time, method and place of the exercise of any such right or the enforcement of any such remedy; PROVIDED THAT, subject to Section 7.03, the Indenture Trustee shall have the right not to take any such action if it shall determine in good faith that the action would involve it in personal liability, would subject it to 12 expenses and liability against which it had not been offered adequate security, or would be unjustly prejudicial to the Obligees not parties to such direction. Anything in this Section 6.06(a) to the contrary notwithstanding, the Indenture Trustee shall be obligated to demand payment of the Guarantees as provided in Section 6.02(a) unless the Holders of all Outstanding Obligations shall have elected to terminate the Guarantees as provided in Section 6.04(a)(2), in which case the Indenture Trustee shall be obligated to refrain from making such demand. (s) CONCERNING SECTION 6.09. The reference to "Exhibit 4" in Section 6.09 is revised to read "Exhibit 5" and the following paragraph is added at the end of Section 6.09: In the event that the Obligations are registered in the name of The Depository Trust Company ("DTC"), Cede & Co. ("Cede") or another nominee of DTC or Cede pursuant to a Letter of Representations ("LOR") which is executed among the Shipowner, the Indenture Trustee and DTC, and (i) if the Secretary assumes the Obligations pursuant to Section 6.09(a) hereof, or (ii) if the Secretary instructs the Shipowner and the Indenture Trustee to terminate the LOR, the Shipowner and the Indenture Trustee, immediately upon receipt of notice of such assumption or upon receipt of notice of such termination, shall terminate or cause the termination of the LOR in accordance with Section 11 thereof. The Indenture Trustee shall within 30 days from receipt of either such notice from the Secretary also instruct DTC to notify its direct and indirect participants of the need to re-register the Obligations in the names of the beneficial owners. Upon surrender by DTC of the Obligations issued in its name, the name of Cede or another nominee, the Shipowner shall issue at its sole expense, and the Indenture Trustee shall authenticate Obligations in the names provided to the Indenture Trustee by DTC. (t) CONCERNING SECTION 7.02. The reference to "$3,000,000" in Section 7.02 is revised to read "$75,000,000." (u) CONCERNING SECTION 7.03. Section 7.03(h) and (o) are revised to read as follows: (h) In all cases where this Indenture does not make express provision as to the evidence on which the Indenture Trustee may act or refrain from acting, the Indenture Trustee shall be entitled to receive and shall be protected (subject to paragraph (c) of this Section) in acting or refraining 13 from acting hereunder in reliance upon an Officer's Certificate as to the existence or nonexistence of any fact. (o) No provision of this Indenture shall require the Indenture Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers. (v) CONCERNING SECTION 7.04. Section 7.04 is revised to read as follows: SECTION 7.04. COMPENSATION, EXPENSES AND INDEMNIFICATION OF INDENTURE TRUSTEE. The Shipowner shall (1) pay such compensation to the Indenture Trustee as they may agree upon in writing from time to time and reimburse it for its reasonable expenses and disbursements (including counsel fees and expenses) and (2) indemnify the Indenture Trustee for, and hold it harmless against, any loss, liability or expense which it may incur or suffer without negligence or bad faith in acting under this Indenture or the Authorization Agreement. The compensation of the Indenture Trustee shall not be limited to the compensation provided by law for a trustee acting under an express trust. The obligations of the Shipowner under this Section 7.04 shall survive the termination of the Indenture and resignation or removal of the Indenture Trustee. (w) CONCERNING SECTIONS 8.01 AND 8.02. Sections 8.01 and 8.02 are revised to read as follows: SECTION 8.01. CONSOLIDATION, MERGER OR SALE BY SHIPOWNER. Nothing in this Indenture shall prevent any lawful consolidation or merger of the Shipowner with or into any other Person, or any sale of the Vessel to any other Person lawfully entitled to acquire and operate the Vessel or any sale by the Shipowner of all or substantially all of its assets to any other Person; PROVIDED THAT, except where the Shipowner shall be the Person surviving a merger or consolidation, the Person formed by or surviving such consolidation or merger, or to which the sale of the Vessel shall be made, shall, by Supplemental Indenture, expressly assume the payment of the principal of and interest (and premium, if any) on the Outstanding Obligations relating to the Vessel in accordance with the terms of the Obligations and of the Indenture and shall expressly assume the performance of the agreements of the Shipowner in the Indenture; PROVIDED FURTHER, that to the extent the Outstanding Obligations are not 14 so assumed, the Shipowner shall redeem or cause to be redeemed the Outstanding Obligations, such redemption to be in accordance with the terms of the Obligations and of the Indenture. When a Person so assumes this Indenture and the Outstanding Obligations, the Supplemental Indenture shall discharge and release the Shipowner from any and all obligations thereunder relating to the Outstanding Obligations. In the event of such an assumption by a Person to whom the Vessel has been sold (a) such Person shall succeed to, and be substituted for, and may exercise every right and power of the original Shipowner with the same effect as if such successor Shipowner had been named as the Shipowner herein and (b) the Outstanding Obligations shall be surrendered to the Indenture Trustee for appropriate notation or for the issuance of new Obligations in exchange for the Outstanding Obligations in the name of the successor Shipowner, as required by the Secretary and at the expense of the successor Shipowner. SECTION 8.02. SALE OF THE VESSEL BY THE SECRETARY. Nothing contained in this Indenture shall prevent the sale of the Vessel to any other Person by the Secretary, by a court of law or by the Shipowner following, in connection with or in lieu of a foreclosure or similar action. Following any such sale (1) the Person to whom the Vessel has been sold may, by Supplemental Indenture, expressly assume the payment of principal and interest (and premium, if any) on all of the Outstanding Obligations in accordance with the terms of the Obligations and the Indenture and shall expressly assume the performance of the agreements of the Shipowner in the Indenture; and (2) in the event such Person does not so assume, the Secretary shall prepay or redeem all of the Outstanding Obligations without premium pursuant to Section 3.06 hereof; PROVIDED THAT, the Secretary shall allow or permit the sale of the Vessel to the original Shipowner or to any affiliate of the original Shipowner only if (i) the Secretary has not prepaid or redeemed such Obligations prior to such sale, and (ii) such purchaser assumes all of the Outstanding Obligations as contemplated by the preceding clause (1). When a Person so assumes this Indenture and all of the Outstanding Obligations, the Supplemental Indenture shall discharge and release the Secretary from any and all obligations thereunder in the Secretary's capacity as Shipowner relating to the Outstanding Obligations. In the event of such an assumption by a Person to whom the Vessel has been sold (a) such Person shall succeed to, and be substituted for, and may exercise every right and power of the original Shipowner with the same effect as if such successor Shipowner had been named as the Shipowner herein and (b) the Outstanding Obligations shall be surrendered to the Indenture Trustee for appropriate notation or for the issuance of new Obligations in exchange for the 15 Outstanding Obligations in the name of the successor Shipowner, as required by the Secretary and at the expense of the successor Shipowner. Any such sale or the execution of a Supplemental Indenture by an successor Shipowner shall not discharge or in any manner affect the obligation of the United States to pay the Guarantees pursuant to the terms thereof. (x) CONCERNING NOTICES. Subject to the provisions of Section 13.01 of Exhibit 1 to this Indenture, any notice, request, demand, direction, consent, waiver, approval or other communication to be given to a party hereto or the Secretary, shall be deemed to have been sufficiently given or made when addressed to: The Indenture Trustee as: FMB TRUST COMPANY, NATIONAL ASSOCIATION 25 South Charles St. 16th Floor (Mail Code 101-591) Baltimore, MD 21201 The Shipowner as: Petrodrill FIVE Limited c/o Arias, Fabrega & Fabrega P.O. Box 985 Omar Hodge Building Wickham's Cay Road Town, Tortola British Virgin Islands With Copies to: PETRODRILL ENGINEERING NV K.P. van der Mandelelaan 38 3062 MB Rotterdam (Brainpark) The Netherlands The Secretary as: SECRETARY OF TRANSPORTATION c/o Maritime Administrator Department of Transportation 400 Seventh Street, SW Washington, D.C. 20590 Attention: Office of the Chief Counsel 16 (y) CONCERNING APPLICABLE LAW. This Indenture and each Obligation shall be governed by the federal laws of the United States of America, but to the extend that they are inapplicable by the laws of the State of Maryland. (z) CONCERNING DISBURSEMENT NOTATIONS. Upon receipt from the Lender of documents confirming Disbursements, the Indenture Trustee shall review Exhibit A of the Floating Rate Note (the "Grid"), and calculate principal and applicable interest thereon. If the Indenture Trustee's calculations are not consistent with those of the Lender, the calculations of the former shall prevail. The Indenture Trustee shall promptly thereafter send a copy of the Grid bearing its calculations to the Holder, who shall endorse the Indenture Trustee's calculations on the original Exhibit A to the Floating Rate Note, and send a copy thereof, so noted, to the Indenture Trustee, who, in turn, shall promptly send a copy thereof to the Secretary. (aa) CONCERNING REGISTERED AND BENEFICIAL OWNERSHIP OF THE OBLIGATIONS; LEGENDS. (i) The Fixed Rate Notes may be issued initially in the form of one or more permanent global Notes in definitive, fully registered form without interest coupons (each, a "Global Obligation"). Except as provided in paragraph (iii) below, owners of beneficial interests in Global Obligations ("Obligation Owners") will not be entitled to receive separate certificated Notes ("Definitive Obligation") and will not be considered the holders thereof. Each such Global Obligation shall be deposited with the Depository Trust Company (the "DTC") or the Indenture Trustee, as custodian for DTC, registered in the name of DTC or a nominee of DTC, and duly executed by the Shipowner and authenticated by the Indenture Trustee as provided in the Indenture. Each Global Obligation shall bear such legend as DTC may require. (ii) Members of, or participants in, DTC shall have no rights under the Indenture with respect to any Global Obligation held on their behalf by DTC or by the Indenture Trustee, as the custodian of DTC, or under such Global Obligation, and DTC may be treated by the Shipowner, the Indenture Trustee and any agent of the Shipowner or the Indenture Trustee as the absolute owner of such Global Obligation for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Shipowner, the Indenture Trustee or any agent of the Shipowner or the Indenture Trustee from giving effect to any written certification, proxy or other authorization furnished by DTC or impair, as between DTC and its members and participants, the operation of 17 customary practices of DTC governing the exercise of the rights of an owner of a beneficial interest in any Global Obligation. (iii) (1) The transfer and exchange of Global Obligations or beneficial interests therein shall be effected through DTC or the Indenture Trustee, as the custodian for DTC, in accordance with the Indenture and the procedures of DTC therefor. (2) A Global Obligation shall be exchangeable for Definitive Obligations registered in the names of persons owning beneficial interest in such Global Obligation only if any of the following events shall have occurred: (1) DTC notifies the Shipowner, with a copy to the Indenture Trustee, that it is unwilling or unable to continue as depositary for such Global Obligation or DTC ceases to be a clearing agency registered under the Securities Exchange Act of 1934, as amended, at a time when DTC is required to be so registered in order to act as depositary, and a successor depositary is not appointed by the Shipowner within 90 days thereafter, (2) the Shipowner or the Indenture Trustee elects to terminate DTC's services or the book entry system, (3) the Secretary assumes the Obligations, or (4) the Secretary instructs the Shipowner and Indenture Trustee to terminate the Letter of Representations. (3) Any Global Obligation that is exchangeable for Definitive Obligations registered in the name of the owners of beneficial interests therein pursuant to this paragraph (iii) shall be surrendered by DTC to the Indenture Trustee to be so exchanged, without charge, and the Shipowner shall execute and the Indenture Trustee shall authenticate and deliver, upon such exchange of such Global Obligation, an equal aggregate principal amount of Definitive Obligations of authorized denominations. Definitive Obligations issued in exchange for a beneficial interest in a Global Obligation pursuant hereto shall be registered in such names and in such authorized denominations as DTC, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Indenture Trustee in writing. The Indenture Trustee shall deliver such Definitive Obligations to the Obligation Owners in whose names such Obligations are so registered in accordance with the instructions of DTC. (4) The registered holder of a Global Obligation may grant proxies and otherwise authorize any Obligation Owner, including DTC's members and participants and Obligation Owners that may hold interest through such members and participants, to take any action which a Holder is entitled to take under the Indenture or the 18 Obligations. (5) In the event of the occurrence of any of the events specified in paragraph (iii)(2), the Shipowner will promptly make available to the Indenture Trustee a reasonable supply of Definitive Obligations. (6) Notwithstanding any other provision of the Indenture, a Global Obligation may not be transferred except as a whole by DTC for such Global Obligation to a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC. (iv) At such time as all beneficial interests in a Global Obligations have either been exchanged for Definitive Obligations, redeemed, repurchased or canceled, such Global Obligation shall be returned to the Indenture Trustee for cancellation or retained and canceled by the Indenture Trustee. (v) The Indenture Trustee shall have no responsibility or obligation to any owner of a beneficial interest in a Global Obligation, a member of, or a participant in DTC or any other Obligation Owner with respect to the accuracy of the records of DTC or its nominee or of any participant or member thereof, with respect to any ownership interest in the Obligations or with respect to the delivery to any participant, member, beneficial owner or other Obligation Owner (other than DTC) of any notice (including any notice of redemption) or the payment of any amount or delivery of any Obligations (or other security or property) under or with respect to such Obligations. All notices and communications to be given to the Holders and all payments to be made to Holders in respect to the Obligations shall be given or made only to or upon the order of the registered Holders (which shall be DTC or its nominee in the case of a Global Obligation). The rights of owners of beneficial interests in any Global Obligation shall be exercised only through DTC subject to the applicable rules and procedures of DTC. The Indenture Trustee may rely and shall be fully protected in relying upon information furnished by DTC with respect to its members, participants and any beneficial owners. (bb) JURISDICTION AND CONSENT TO SUIT. Any proceeding to enforce this Agreement may be brought in the Federal courts of the United States of America located in the State of Maryland of the United States of America. The Shipowner and the Indenture Trustee hereby irrevocably waive any present or future objection to such venue, and for each of itself and in respect of any of their respective properties hereby irrevocably consents and submits 19 unconditionally to the nonexclusive jurisdiction of those courts. The Shipowner further irrevocably waives any claim that any such court is not a convenient forum for any such proceeding. The Shipowner agrees that any service of process, writ, judgment or other notice of legal process shall be deemed and held in every respect to be effectively served upon it in connection with proceedings in the State of Maryland, if delivered to Sher & Blackwell, 1850 M Street, N.W., Suite 900, Washington, DC 20036, which it irrevocably designates and appoints as its authorized agent for the service of process in the State and Federal courts in the State of Maryland. Nothing herein shall affect the right of the Indenture Trustee to serve process in any other manner permitted by applicable law. The Shipowner further agrees that final judgment against it in any such action or proceeding arising out of or relating to this Indenture shall be conclusive and may be enforced in any other jurisdiction within or outside the United States of America by suit on the judgment, a certified or exemplified copy of which shall be conclusive evidence of that fact and of the judgment. (cc) PAYMENTS IN U.S. CURRENCY. This is an international loan transaction in which the specification of United States Dollars is of the essence, and such currency shall be the currency of account in all events. The respective payment obligations of the Shipowner and the Indenture Trustee hereunder shall not be discharged by an amount paid in another currency, whether pursuant to a judgment or otherwise, to the extent that the amount so paid on prompt conversion of such currency under normal banking procedures does not yield after deduction of any and all fees, taxes or any other charges imposed on the payment, the amount of United States Dollars then due. In the event that any payment by the Shipowner or the Indenture Trustee, whether pursuant to a judgment or otherwise, upon conversion and transfer, does not result in the payment of such amount of United States Dollars at the place such amount is due, each shall be entitled to demand immediate payment of, and shall have a separate cause of action against the other for, the additional amount necessary to yield the amount then due. In the event either the Shipowner or the Indenture Trustee, upon the conversion of such judgment into Dollars, shall receive (as a result of currency exchange rate fluctuations) an amount greater than that to which it was entitled, the defaulting party shall be entitled to immediate reimbursement of the excess amount. (dd) SHIPOWNER NOT IMMUNE. The Shipowner represents and warrants that it is subject to civil and commercial law with respect to its obligations under this Indenture, that the making and performance of this Indenture constitutes private and commercial acts rather than governmental or public acts and that neither the Shipowner nor any of its properties or revenues has any right of immunity on the grounds of sovereignty or otherwise from suit, 20 court jurisdiction, attachment prior to judgment, attachment in aid of execution of a judgment, set-off, execution of a judgment or from any other legal process with respect to its obligations under this Indenture. To the extent that the Shipowner may hereafter be entitled, in any jurisdiction in which judicial proceedings may at any time be commenced with respect to this Indenture to claim for itself or its revenues or assets any such immunity, and to the extent that in any such jurisdiction there may be attributed to the Shipowner such an immunity (whether or not claimed), the Shipowner hereby irrevocably agrees not to claim and hereby irrevocably waives such immunity. The foregoing waiver of immunity shall have effect under the United States Sovereign Immunities Act of 1976. 21 IN WITNESS WHEREOF, this Trust Indenture has been duly executed by the parties hereto as of the day and year first above written. PETRODRILL FIVE LIMITED Shipowner ATTEST: /s/ ROBERT W. RANDALL By: /s/ EARL W. MCNIEL Secretary Treasurer FMB TRUST COMPANY, NATIONAL ASSOCIATION Indenture Trustee (Seal) ATTEST: /s/ DAVID L. WILLIAMS By: /s/ ROBERT D. BROWN Vice President 22 DISTRICT OF COLUMBIA ) ) SS: CITY OF WASHINGTON ) On this 9th day of April, 1999, before me personally appeared Earl W. McNiel to me known, who being by me duly sworn, did depose and say that he is the Treasurer of PETRODRILL FIVE LIMITED, and that he signed his name thereto by authority of the Board of Directors of said corporation. In testimony whereof, I have hereunto set my hand and seal this 9th day of April, 1999. /s/ NORALYN RUSSELL ____________________ NOTARY PUBLIC (Notarial Stamp and Seal) 23 DISTRICT OF COLUMBIA ) ) SS: CITY OF WASHINGTON ) Be it known this 9th day of April, 1999, personally appeared before me, Robert D. Brown, who after being duly sworn, deposed and said that he is a Vice President of FMB Trust Company, National Association, a national banking association, which is described in and executed the instrument hereto annexed, and that he signed the instrument hereto annexed by order of the Board of Directors of the said national banking association, and acknowledged the annexed instrument to be the free act and deed of the said national banking association. In testimony whereof, I have hereunto set my hand and seal this 9th day of April, 1999. /s/ NORALYN RUSSELL ____________________ NOTARY PUBLIC (Notarial Stamp and Seal) 24 Document 6 EXHIBIT 1 GENERAL PROVISIONS OF THE INDENTURE INCORPORATED BY REFERENCE TABLE OF CONTENTS TO EXHIBIT 1* PAGE ARTICLE I. DEFINITIONS; OFFICER'S CERTIFICATE AND OPINIONS OF COUNSEL.........1 SECTION 1.01. Definitions..........................................1 SECTION 1.02. Officer's Certificates and Opinions of Counsel.......1 ARTICLE II. THE OBLIGATIONS....................................................2 SECTION 2.01. Designation of Obligations..........................2 SECTION 2.02. Issue, Form, Principal Amount, Maturity, Interest, Place of Payment, Denominations and Redemption of Obligations...................2 SECTION 2.03. Issuance of Obligations of Initial Series...........3 SECTION 2.04. Additional Obligations; Obligations of Additional Series...............................4 SECTION 2.05. Legends on Obligations..............................4 SECTION 2.06. Dates of Obligations; Interest Rates................4 SECTION 2.07. Execution of Obligations............................4 SECTION 2.08. Authentication of Obligations and Guarantees.......5 SECTION 2.09. Temporary Obligations...............................5 SECTION 2.10. Registration, Transfer and Exchange.................6 SECTION 2.11. Who Treated as Owners...............................7 SECTION 2.12. Lost, Stolen, Destroyed or Mutilated Obligations....7 SECTION 2.13. Reacquired Obligations, Cancellation and Disposition of Obligations..................8 ARTICLE III. REDEMPTION OF OBLIGATIONS........................................8 SECTION 3.01. Redemptions Suspended During Default................8 SECTION 3.02. Redemptions.........................................9 (a) Redemptions With Premium........................9 (b) Redemptions Without Premium.....................9 (c) Sinking Fund Redemptions........................9 (d) Adjustments of Redemption Payments..............9 SECTION 3.03. Terminal Mandatory Redemption......................10 SECTION 3.04. Redemptions to Comply with Provisions of Section 1104(b)(2) of the Act...............10 SECTION 3.05. Redemption After Total Loss, Requisition of Title, Seizure or Forfeiture of a Vessel or Termination of Certain Contracts.....10 SECTION 3.06. Redemption After Assumption by the Secretary.......11 SECTION 3.07. Determination of Obligations to be Redeemed........11 SECTION 3.08. Notices of Redemption..............................11 SECTION 3.09. Deposit of Redemption Moneys.......................12 SECTION 3.10. Payment of Redemption Price........................12 ARTICLE IV. CASH HELD BY INDENTURE TRUSTEE OR PAYING AGENTS.................13 SECTION 4.01. Generally..........................................13 SECTION 4.02. Paying Agents Other Than Indenture Trustee.........13 SECTION 4.03. Unclaimed Amounts..................................14 SECTION 4.04. Application of Funds...............................14 ARTICLE V. REPRESENTATIONS AND AGREEMENTS OF SHIPOWNER.....................15 SECTION 5.01. Authorization, Execution and Delivery of Indenture.15 SECTION 5.02. Payment and Procedure for Payment of Obligations...15 SECTION 5.03. Offices or Agencies of Shipowner...................15 ARTICLE VI. INDENTURE DEFAULTS AND REMEDIES.................................16 SECTION 6.01. What Constitutes "Indenture Defaults...............16 SECTION 6.02. Demand for Payment of Guarantees...................16 SECTION 6.03. Appointment of Indenture Trustee and Holders of Outstanding Obligations as Attorneys-in-Fact..........................17 SECTION 6.04. Termination and Payment of the Guarantees..........17 SECTION 6.05. Rights of Indenture Trustee After Indenture Default.......................................19 SECTION 6.06. (a) Obligees' Right to Direct Indenture Trustee After Indenture Default...............19 (b) Limitations on Obligees' Right to Sue..........20 (c) Unconditional Right of Obligees to Sue for Principal (and Premium, if any) and Interest..21 SECTION 6.07. Undertaking for Costs..............................21 SECTION 6.08. Recision of Payments...............................21 SECTION 6.09. Assumption of Obligations by Secretary.............22 ARTICLE VII. THE INDENTURE TRUSTEE...........................................23 SECTION 7.01. Acceptance of Trusts...............................23 SECTION 7.02. Eligibility of Indenture Trustee...................23 SECTION 7.03. Rights and Duties of Indenture Trustee.............23 SECTION 7.04. Compensation, Expenses and Indemnification of Indenture Trustee...........27 SECTION 7.05. Resignation and Removal of Indenture Trustee.......27 SECTION 7.06. Appointment of Successor Indenture Trustee.........27 SECTION 7.07. Effect of Appointment of Successor Indenture Trustee........................................28 SECTION 7.08. Merger, Consolidation and Sale of Indenture Trustee........................................28 ARTICLE VIII. CONSOLIDATION, MERGER OR SALE BY SHIPOWNER......................29 SECTION 8.01. Consolidation, Merger or Sale by Shipowner.........29 SECTION 8.02. Sale of the Vessel or Vessels by the Secretary.....30 ARTICLE IX. ACTS OF OBLIGEES................................................30 SECTION 9.01. Acts of Obligees...................................30 -ii- ARTICLE X. SUPPLEMENTAL INDENTURES.........................................31 SECTION 10.01. Permissible Without Action by Obligees............31 SECTION 10.02. Protection of Indenture Trustee...................32 SECTION 10.03. Reference in Obligations to Supplemental Indentures...................................32 SECTION 10.04. Waivers and Supplemental Indentures with Consent of Obligees..........................33 SECTION 10.05. Consent of Secretary..............................34 SECTION 10.06. Continued Validity of the Guarantees..............34 ARTICLE XI. PERFORMANCE OF OBLIGATIONS TO SECRETARY.........................34 SECTION 11.01. Performance of Obligations to Secretary...........34 ARTICLE XII. SATISFACTION AND DISCHARGE OF INDENTURE.........................34 SECTION 12.01. Satisfaction and Discharge of Indenture...........34 ARTICLE XIII. MISCELLANEOUS...................................................35 SECTION 13.01. Notices and Demands...............................35 SECTION 13.02. Waivers of Notice.................................35 SECTION 13.03. Benefit of Indenture..............................35 SECTION 13.04. Execution of Counterparts.........................35 SECTION 13.05. Table of Contents; Titles and Headings............35 SECTION 13.06. Integration with Special Provisions of the Indenture.....................................36 SECTION 13.07. Immunity of Incorporators, Stockholders, Officers and Directors........................36 SECTION 13.08. Applicable Law....................................36 -iii- EXHIBIT 1 GENERAL PROVISIONS OF THE INDENTURE INCORPORATED BY REFERENCE ARTICLE I DEFINITIONS; OFFICER'S CERTIFICATES AND OPINIONS OF COUNSEL SECTION 1.01. DEFINITIONS. For all purposes of this Indenture, the terms used herein shall have the meanings specified in the Special Provisions hereof, including without limitation Schedule A to this Indenture. SECTION 1.02. OFFICER'S CERTIFICATES AND OPINIONS OF COUNSEL. (a) Each Officer's Certificate or Opinion of Counsel with respect to compliance with a covenant or condition provided for herein (or waiver thereof) shall include: (1) A statement that the Person or Persons making such certificate or rendering such opinion has or have read such covenant or condition; (2) A brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) A statement that, in the opinion of such Person or Persons, he or they have made or caused to be made such examination or investigation as is necessary to enable him or them to express an informed opinion as to whether or not such covenant or condition has been complied with (or compliance therewith has been waived); and (4) A statement as to whether or not, in the opinion of such Person or Persons, such condition or covenant has been complied with (or such compliance has been waived). (b) An Opinion of Counsel may be based (insofar as it relates to factual matters, information with respect to which is in the possession of any Person) upon a certificate or opinion of or representations in writing signed by an officer or officers of such Person or by such Person, as the case may be, and may be based upon an Opinion of Counsel signed by another counsel. An Opinion of Counsel may state that said opinion is subject to the execution and delivery of designated instruments if copies of such instruments in form approved by such counsel are delivered to the Indenture Trustee prior to or concurrently with the delivery of said opinion. (c) A certificate or opinion of a Person or Persons other than counsel may be based, insofar as it relates to legal matters, upon an Opinion of Counsel, unless the Person or Persons signing such certificate or opinion knew that such Opinion of Counsel was erroneous or, in the exercise of reasonable care, should have known that the same was erroneous. (d) If the Indenture requires or permits the execution of any document by officers, counsel or other Persons, such document may be executed in counterparts by different officers, counsel or other Persons, all of which shall form one instrument. (e) If the signer of any document is required to be approved by the Indenture Trustee, the acceptance of such document by the Indenture Trustee shall be sufficient and conclusive evidence of such approval. (f) The fact that the delivery of any document is a condition precedent to any action required or permitted hereby shall not preclude the withdrawal, revocation, rescission, modification or amendment of such document at any time prior to such action, and, in the event of any such withdrawal, revocation or rescission, such document shall be disregarded for all purposes of this Indenture. ARTICLE II THE OBLIGATIONS SECTION 2.01. DESIGNATION OF OBLIGATIONS. The Obligations of each series shall be designated as stated in the Special Provisions hereof or in the Supplemental Indenture establishing such series. SECTION 2.02. ISSUE, FORM, PRINCIPAL AMOUNT, MATURITY, INTEREST, PLACE OF PAYMENT, DENOMINATIONS AND REDEMPTION OF OBLIGATIONS. (a) Upon or after the execution and delivery of this Indenture the aggregate principal amount of Obligations of the series and Stated Maturity or Maturities permitted by the Special Provisions hereof may be executed by the Shipowner, authenticated by the Indenture Trustee, and delivered as provided herein. (b) The Obligations of each series and Stated Maturity to be issued hereunder, the Guarantees of the United States to be endorsed thereon and the Indenture Trustee's authentication certificates to be endorsed thereon shall, in the case of the initial series of Obligations, be in the form or forms set forth in Exhibit 2 to the Special Provisions hereof or, in the case of Obligations of any -2- additional series, in the form or forms set forth in the Supplemental Indenture establishing such series, and said Obligations shall: (1) be limited to the respective principal amounts stated in the Special Provisions hereof or in the Supplemental Indenture establishing such series; (2) bear interest from the date specified in Section 2.06 at the rate or rates per annum stated in such Obligations; (3) mature in the amount or amounts and at the time or times stated therein; (4) be payable as to principal (and any premium thereon if premium in case of redemption prior to Stated Maturity is provided for therein), in any coin or currency of the United States which at the time of payment is legal tender for public and private debts, at an office or agency maintained from time to time by the Shipowner for such purpose as provided in Section 5.03 at the place or places stated in the Special Provisions hereof and payable as to interest as aforesaid or, at the option of the Shipowner, by check mailed by such office or agency to the addresses of the Obligees as such addresses shall appear in the Obligation Register; (5) be issued in the denominations provided in the Special Provisions hereof or in the Supplemental Indenture establishing such series; and (6) be subject to redemption to the extent and as provided in Article III. (c) If the Maturity of any Obligation or an Interest Payment Date for any Obligation shall be a day other than a Business Day, then such payment may be made on the next succeeding Business Day, with the same force and effect as if made on the nominal date for such payment, and no interest shall accrue thereon for the period after said nominal date (whether or not such next succeeding Business Day occurs in a succeeding month). SECTION 2.03. ISSUANCE OF OBLIGATIONS OF INITIAL SERIES. At any time and from time to time after the execution and delivery of this Indenture, the Shipowner may deliver to the Indenture Trustee Obligations of the initial series issuable under this Indenture duly executed by the Shipowner as hereinafter provided, accompanied by a Request of the Shipowner, and thereupon the Indenture Trustee shall authenticate such Obligations, after endorsing thereon -3- and authenticating the Guarantees of the United States in accordance with the Authorization Agreement, and shall deliver such Obligations and Guarantees in accordance with such Request. Each such Request shall specify the principal amounts, interest rates and Stated Maturities of the Obligations to be authenticated and the names and addresses of the Persons in whose name the Obligations are to be registered. SECTION 2.04. ADDITIONAL OBLIGATIONS; OBLIGATIONS OF ADDITIONAL SERIES. At any time or from time to time, the Shipowner may, with the approval of the Secretary, issue additional Obligations of any series and Stated Maturity theretofore issued or of one or more additional series, which shall (i) be in such principal amount, and (in the case of Obligations of any additional series) mature on such dates, bear interest at such rate or rates, be in such form or forms and have such other terms and provisions, as shall be set forth in a Supplemental Indenture providing for the issue thereof and (ii) be guaranteed by the United States under Title XI of the Act pursuant to a supplement to the Authorization Agreement. SECTION 2.05. LEGENDS ON OBLIGATIONS. Any Obligation may have imprinted or stamped thereon any legend, consistent herewith, which is prescribed by the Shipowner and approved by the Indenture Trustee, and, except for endorsements permitted by the second paragraph of Section 2.10(c), by the Secretary. SECTION 2.06. DATES OF OBLIGATIONS; INTEREST RATES. Each Obligation of any series shall be dated the date of its authentication and except as otherwise provided in this Section, shall bear interest from the Interest Payment Date for Obligations of such series next preceding the date of such Obligation to which interest on the Obligations of such series has been paid, unless (i) the date of such Obligation is the date to which interest on the Obligations of such series has been paid, in which case from the date of such Obligation, or (ii) no interest has been paid on the Obligations of such series since the original issue date (as defined below) of such Obligation, in which case from such original issue date. The term "original issue date" of an Obligation shall mean (a) in the case of an Obligation issued on original issue, the date of such Obligation, or (b) in the case of an Obligation not issued on original issue, the date of the Obligation (or portion thereof) issued on original issue for which such Obligation was issued (directly or indirectly) on registration of transfer, exchange or substitution. SECTION 2.07. EXECUTION OF OBLIGATIONS. The Obligations shall from time to time be executed on behalf of the Shipowner by a Responsible Officer thereof (whose signature may be a facsimile), and its corporate seal (which may be a facsimile) shall be affixed thereto or imprinted thereon and attested by its -4- secretary, an assistant secretary or an assistant trust officer (whose signature may be a facsimile). If any officer of the Shipowner whose signature (facsimile or otherwise) appears on any Obligation shall cease to be such officer before such Obligation shall have been authenticated by the Indenture Trustee or delivered, such Obligation nevertheless may be authenticated, issued and delivered with the same force and effect as though the person or persons whose signature or signatures (facsimile or otherwise) appear on such Obligation had not ceased to be such officer or officers of the Shipowner. SECTION 2.08. AUTHENTICATION OF OBLIGATIONS AND GUARANTEES. No Obligation or the Guarantee of the United States thereon shall be valid unless such Obligation shall bear thereon an authentication certificate, manually executed by the Indenture Trustee in accordance with the terms and conditions of the Authorization Agreement, substantially in the form or forms referred to in Section 2.02(b). Such authentication certificate, so executed, on any Obligation shall be conclusive evidence, and the only competent evidence, that such Obligation and such Guarantee have been duly executed, authenticated and delivered hereunder. SECTION 2.09. TEMPORARY OBLIGATIONS. There may be issued from time to time in lieu of (or in exchange for) any definitive Obligation or Obligations one or more temporary Obligations of like series and Stated Maturity, with a Guarantee of the United States endorsed thereon and authenticated by the Indenture Trustee, substantially of the same tenor as the definitive Obligations in lieu of (or in exchange for) which they are issued, with or without the specification of any Redemption Price or Prices. Such temporary Obligation or Obligations may be in such authorized denomination or denominations as shall be stated in a Request of the Shipowner delivered to the Indenture Trustee prior to the authentication thereof, which Request shall specify the aggregate principal amounts and the series and Stated Maturities of such temporary Obligations. If definitive Obligations are not ready for delivery, the Holder of any temporary Obligation may, at the Corporate Trust Office, with the consent of the Shipowner, exchange the same for a temporary Obligation or Obligations of like series, tenor, interest accrual date and Stated Maturity of authorized denominations for the same aggregate principal amount upon the surrender for cancellation of such temporary Obligation or Obligations. When definitive Obligations are ready for delivery, the Holder of any temporary Obligation may, at the Corporate Trust Office, exchange the same without charge for a definitive Obligation or Obligations of like series, tenor, -5- interest accrual date and Stated Maturity of authorized denominations for the same aggregate principal amount. SECTION 2.10. REGISTRATION, TRANSFER AND EXCHANGE. (a) The Shipowner shall cause the Indenture Trustee to keep an Obligation Register for the registration of ownership, transfers and exchanges of Obligations, at the Corporate Trust Office. (b) Any Obligation may be transferred at the Corporate Trust Office, by surrender of such Obligation for cancellation, accompanied by an instrument of transfer in form satisfactory to the Shipowner and the Indenture Trustee, duly executed by the registered Obligee or his duly authorized attorney, and thereupon the Shipowner shall execute, and the Indenture Trustee shall authenticate and deliver in the name of the transferee or transferees, a new Obligation or Obligations, and the Guarantee or Guarantees of the United States thereon, in authorized denominations of like series, tenor, interest accrual date and Stated Maturity and for the same aggregate principal amount. (c) The Shipowner shall not be required to register transfers or make exchanges of (1) Obligations for a period of 15 days immediately prior to (A) an Interest Payment Date or (B) any selection of Obligations to be redeemed, (2) Obligations after demand for payment of the Guarantees and prior to the payment thereof or rescission of such demand pursuant to Section 6.02(a), or (3) any Obligation which has been selected for redemption in whole or in part. If any Obligation surrendered for transfer or exchange has been selected for redemption in whole or in part, there may be endorsed on any Obligation or Obligations issued therefor an appropriate notation of such fact. (d) Any Obligation shall be exchangeable for a like principal amount of Obligations of the same series, tenor, interest accrual date and Stated Maturity but of different authorized denominations. Obligations to be exchanged shall be surrendered at the Corporate Trust Office, and the Shipowner shall execute, and the Indenture Trustee shall authenticate and deliver in exchange therefor, the Obligation or Obligations, and the Guarantee or Guarantees of the United States endorsed thereon, requested by the Obligee in accordance with this paragraph (d). (e) As a condition precedent to any transfer or exchange of Obligations, the Indenture Trustee may (except upon an exchange of temporary for definitive Obligations) require the payment of a sum sufficient to reimburse it for any taxes or other governmental charges that may be imposed with respect thereto and a sum not exceeding $2.00 for each Obligation delivered upon any such transfer or exchange. -6- SECTION 2.11. WHO TREATED AS OWNERS. The Shipowner, the Indenture Trustee, the Secretary, and any office or agency for the payment of principal of (and premium, if any) or interest on the Obligations may deem and treat the Person in whose name any Obligation is registered in the Obligation Register as the absolute owner of such Obligation for all purposes, and neither the Shipowner, the Indenture Trustee, the Secretary, nor any such office or agency shall be affected by any notice to the contrary, whether such Obligation shall be past due or not. All payments of or on account of principal (and premium, if any) or interest, or pursuant to the Guarantee endorsed on such Obligation, to such registered Obligee shall be valid and effectual to satisfy and discharge the liability of the Shipowner and the Secretary to the extent of the sum or sums so paid, except as otherwise provided in Section 6.08. SECTION 2.12. LOST, STOLEN, DESTROYED OR MUTILATED OBLIGATIONS. Upon receipt by the Shipowner and the Indenture Trustee of evidence satisfactory to them of the loss, theft, destruction or mutilation of any Outstanding Obligation and the ownership thereof, the Shipowner may execute, and upon request of the Shipowner, the Indenture Trustee shall, but subject to all limitations imposed by the Authorization Agreement and only to the extent authorized thereby, authenticate and deliver, a new Obligation, and the Guarantee of the United States endorsed thereon, of like series, tenor, interest accrual date, principal amount and Stated Maturity (which may bear such notation as may be required by the Indenture Trustee or by usage or by the rules of any stock exchange upon which the Obligations are then listed and which shall bear a serial number different from the serial number of the lost, stolen, destroyed or mutilated Obligation) in lieu of such lost, stolen, destroyed or mutilated Obligation and, similarly, upon receipt by the Shipowner and the Indenture Trustee of evidence satisfactory to them of the loss, theft, destruction or mutilation of any Obligation which has or is about to become due and payable, the Indenture Trustee may deem the applicant with respect thereto to be the owner of said Obligation for the purpose of receiving payment on account thereof of principal (and premium, if any) upon maturity or interest or the payment of the Guarantee thereof; PROVIDED THAT, as conditions precedent to the execution, authentication and delivery of any new Obligation in place of said Obligation or to any payment contemplated by this Section, (1) the Shipowner, the Indenture Trustee and the Secretary shall receive indemnity satisfactory to the Shipowner, the Indenture Trustee and the Secretary, (2) the Shipowner shall be reimbursed for all reasonable expenses (including any fees or expenses of the Indenture Trustee) incident thereto, and (3) said Obligation shall (unless the same shall have been lost, stolen or destroyed) be surrendered. -7- Obligations issued pursuant to this Section and the Guarantees endorsed thereon shall constitute original contractual obligations of the Shipowner and the United States, respectively, whether or not the lost, stolen or destroyed Obligations be at any time enforceable by anyone, and shall be equally and proportionately entitled to the benefits of this Indenture with all other Outstanding Obligations issued hereunder. The provisions of this Section 2.12 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of lost, stolen, destroyed or mutilated Obligations. SECTION 2.13. REACQUIRED OBLIGATIONS; CANCELLATION AND DISPOSITION OF OBLIGATIONS. In the event the Shipowner shall reacquire any Obligations (whether by purchase or otherwise), such Obligations shall forthwith be delivered to the Indenture Trustee for cancellation. Except as provided in Section 3.10(b), all Obligations surrendered for the purpose of payment, redemption, transfer, exchange, or substitution, or (if permitted in the Special Provisions hereof or the Supplemental Indenture establishing any additional series of Obligations) in discharge in whole or in part of any sinking fund payment shall, if surrendered to the Shipowner or any Paying Agent, be delivered to the Indenture Trustee for cancellation, or, if surrendered to the Indenture Trustee, shall be cancelled by it. No Obligation shall be authenticated in lieu of or in exchange for any Obligation cancelled as provided in this Section, except as may be expressly permitted by this Indenture. Obligations cancelled by the Indenture Trustee shall be delivered or disposed of as directed by a Request of the Shipowner. ARTICLE III REDEMPTION OF OBLIGATIONS SECTION 3.01. REDEMPTIONS SUSPENDED DURING DEFAULT. Notwithstanding the following provisions of this Article III, neither the Shipowner nor the Indenture Trustee shall redeem any Obligations, except pursuant to Section 3.04 or 3.06 during the continuance of any Indenture Default or event which with the lapse of time could constitute a Payment Default, except that, where the mailing of notice of redemption of any Obligations shall have theretofore been made, the Indenture Trustee shall redeem or cause to be redeemed such Obligations if it shall have received a sum sufficient for such redemption. Except as aforesaid, any moneys received by the Indenture Trustee for the redemption of Obligations which may not be applied to the redemption thereof shall be held as security for the payment of all the Obligations, and, (i) in case such Indenture Default or such event shall no longer be continuing, such moneys shall thereafter be applied to the -8- redemption of Obligations in accordance with the applicable provisions of the Obligations and of this Article III, (ii) in the event the Secretary shall have assumed the Obligations pursuant to Section 6.09 or shall have been required to pay the Guarantees, such moneys shall be paid over by the Indenture Trustee to the Secretary or (iii) if no Obligation shall be Outstanding, other than by payment of the Guarantees, such moneys shall be paid to the Shipowner. SECTION 3.02. REDEMPTIONS. (a) REDEMPTIONS WITH PREMIUM. If the Obligations of any series and Stated Maturity or the Special Provisions hereof or the Supplemental Indenture establishing such series shall so provide, such Obligations shall be subject to redemption at a premium in the amounts, at the price or prices, at the time or times and subject to the conditions specified therein. (b) REDEMPTIONS WITHOUT PREMIUM. The Obligations of each series shall be subject to redemption without premium in the amounts, at the time or times and subject to the conditions specified in Sections 3.03, 3.04, 3.05 and 3.06. If the Obligations of any series and Stated Maturity or the Special Provisions hereof or the Supplemental Indenture establishing such series shall so provide, such Obligations shall also be subject to redemption without premium in the amounts, at the time or times and subject to the conditions specified therein or as provided in subsection (c) of this Section 3.02. (c) SINKING FUND REDEMPTIONS. If the Obligations of any series and Stated Maturity or the Special Provisions hereof or the Supplemental Indenture establishing such series shall so provide, such Obligations shall be subject to (i) mandatory redemption through the operation of a sinking fund or similar fund, in such amounts, at such times and subject to such credits (if any) as may be specified therein, and (ii) redemption at the option of the Shipowner, in connection with the operation of any such fund, in such additional amounts and subject to such conditions as may be specified therein. (d) ADJUSTMENTS OF REDEMPTION PAYMENTS. If the Obligations of any series and Stated Maturity or the Special Provisions hereof or of the Supplemental Indenture establishing such series provide for an adjustment in mandatory redemption payments as a result of any redemption or cancellation of Obligations, the Shipowner shall recompute the remaining mandatory redemption payments pursuant to such provisions and shall, at least 60 days prior to the next Interest Payment Date which occurs at least 60 days following any such redemption or cancellation of Obligations of such series requiring such recomputation, submit to the Secretary for his review of such recomputation to ascertain compliance with the provisions of such Obligations or the Special Provisions hereof or such Supplemental Indenture, a table of -9- revised mandatory redemption payments on the Obligations of such series reflecting the adjustments made pursuant to such provisions as a result of such redemption or cancellation. Upon advice by the Secretary that he finds such recomputation to comply with such provisions, the Shipowner shall submit said table to the Indenture Trustee and the Indenture Trustee shall promptly submit a copy thereof to each Holder of an Obligation of such series. SECTION 3.03. TERMINAL MANDATORY REDEMPTION. The Shipowner shall redeem, at the principal amount thereof and interest accrued thereon, all the Obligations that shall be Outstanding on the date determined in accordance with Section 1104(b)(3) of the Act and specified in the Special Provisions hereof so that the final maturity of such Obligations shall not exceed the period specified in said Section. SECTION 3.04. REDEMPTIONS TO COMPLY WITH PROVISIONS OF SECTION 1104(B)(2) OF THE ACT. Upon receipt by the Indenture Trustee of a written instruction signed by the Secretary and a Responsible Officer of the Shipowner stating that upon receipt of funds paid to the Indenture Trustee by the Shipowner or the Secretary on behalf of the Shipowner such funds (i) shall be applied in the manner specified in such instruction to redeem the principal amount of Obligations specified in such instruction and (ii) are to be so applied in order that the principal amount of Obligations that will be Outstanding after such redemption will not exceed the principal amount thereof eligible for guarantee by the United States under Section 1104(b)(2) of the Act, the Indenture Trustee shall promptly give notice as provided in Section 3.08 of the redemption of such Obligations on a date which is no more than 45 days from the date of receipt by the Indenture Trustee of such instruction; and the Indenture Trustee shall, on such date, redeem such Obligations at the principal amount thereof and interest accrued thereon to such date. The Shipowner agrees to notify the Indenture Trustee of the redemption at least 10 days prior to receipt by the Indenture Trustee of such written instruction. SECTION 3.05. REDEMPTION AFTER TOTAL LOSS, REQUISITION OF TITLE, SEIZURE OR FORFEITURE OF A VESSEL OR TERMINATION OF CERTAIN CONTRACTS. Upon receipt by the Indenture Trustee of written instructions from the Secretary and the Shipowner stating that the principal amount of Obligations specified in such instructions are required to be redeemed on the date specified therein (which shall be not less than 40 nor more than 60 days from the receipt of such instructions by the Indenture Trustee) by reason of (i) an actual, constructive, agreed or compromised total loss of a Vessel, (ii) requisition of title to, or seizure or forfeiture of a Vessel or (iii) termination of any contract for the construction, reconstruction or reconditioning of a Vessel, the Indenture Trustee shall promptly give notice as provided in Section 3.08 of the redemption on such date of such principal amount of Obligations and the -10- Indenture Trustee shall, on such date, redeem such principal amount of Obligations together with interest accrued thereon to such Redemption Date. SECTION 3.06. REDEMPTION AFTER ASSUMPTION BY THE SECRETARY. Upon receipt by the Indenture Trustee of written instructions from the Secretary stating that the principal amount of Obligations specified in such instructions are required to be redeemed on the date specified therein (which shall be not less than 40 nor more than 60 days from the receipt of such instructions by the Indenture Trustee) at the option of the Secretary at any time after the Secretary's assumption of the Obligations pursuant to Section 6.09, the Indenture Trustee shall promptly give notice as provided in Section 3.08 of the redemption on the Redemption Date of the principal amount of Obligations specified in such instructions and the Indenture Trustee shall, on such Redemption Date, redeem such Obligations together with interest accrued thereon to such Redemption Date; PROVIDED THAT, the Secretary shall redeem at the principal amount thereof and interest accrued thereon the Proportionate Part of the Outstanding Obligations relating to such Vessel or Vessels which have been sold pursuant to Section 8.02 to a purchaser or purchasers who have not assumed such Obligations by notice to the Indenture Trustee in accordance with this Section 3.06 within 40 days of the nonassumption of the Obligations by such purchaser. The principal amount of the Proportionate Part of the Outstanding Obligations shall be determined by the Secretary. SECTION 3.07. DETERMINATION OF OBLIGATIONS TO BE REDEEMED. (a) If less than all the Obligations are to be redeemed pursuant to Section 3.04 or 3.05, the Indenture Trustee shall select Obligations of each series and Stated Maturity for redemption in proportion to the respective principal amounts of Obligations of such series and Stated Maturity then Outstanding, except as otherwise provided in the Special Provisions or in the Supplemental Indenture with respect to any series, making adjustment so that the principal amount of any Obligation to be redeemed shall be $1,000 or an integral multiple thereof. (b) If less than all the Obligations of any series or Stated Maturity are to be redeemed under any of the provisions contained or referred to in this Article III, the Indenture Trustee shall select, in such manner as it shall deem appropriate and fair, the Obligations of such series or Stated Maturity to be redeemed, and the Indenture Trustee shall, according to such method as it shall in its reasonable discretion deem appropriate, make adjustments so that the principal amount of any Obligation to be redeemed shall be $l,000 or an integral multiple thereof. SECTION 3.08. NOTICES OF REDEMPTION. (a) In case of any redemption of Obligations, whether mandatory or optional, a notice of redemption (indicating (1) the Redemption Date, (2) the Redemption Price, (3) if a part only of such -11- Obligations is to be redeemed, the numbers or other identification of the Obligations and the principal amount thereof to be redeemed, in whole or in part, (4) the Place of Payment upon redemption and (5) that interest shall cease to accrue after the Redemption Date (but only if the Indenture Trustee or any Paying Agent shall have received the required moneys), shall be given by the Shipowner or any authorized agent of the Shipowner (including the Indenture Trustee), by mailing a copy of such notice, by first class mail, postage prepaid, at least 30 days but not more than 60 days prior to the Redemption Date, to each Holder of an Outstanding Obligation to be redeemed in whole or in part at his last address appearing upon the Obligation Register. (b) Any notice of optional redemption of Obligations shall state that the redemption is subject to the receipt of the redemption moneys by the Indenture Trustee or any Paying Agent. Such notice shall be of no effect unless prior to the opening of business on the Redemption Date, the Indenture Trustee or such Paying Agent shall receive an amount in cash sufficient for such redemption (after taking into account any amounts then held by the Indenture Trustee or such Paying Agent and available for such redemption). SECTION 3.09. DEPOSIT OF REDEMPTION MONEYS. Prior to the opening of business on any Redemption Date, the Shipowner shall, except as contemplated by Section 3.08(b), deposit or cause to be deposited with the Indenture Trustee or (except in the case of redemptions pursuant to Section 3.04, 3.05 or 3.06) with any Paying Agent an amount sufficient for such redemption (after taking into account any amounts then held by the Indenture Trustee or such Paying Agent and available for such redemption) with irrevocable directions to it to so apply the same. SECTION 3.10. PAYMENT OF REDEMPTION PRICE. (a) If notice of redemption shall have been given as provided above, the Obligations or portions thereof specified in such notice shall, except as contemplated by Section 3.08(b), become due and payable on the Redemption Date and at the Place of Payment and the Redemption Price stated in such notice, and on and after said Redemption Date (unless the Shipowner shall default in the payment of such Redemption Price) interest on the Obligations or portions thereof so called for redemption shall cease to accrue. Upon presentation and surrender of such Obligations in accordance with such notice, such Obligations or the specified portions thereof shall be paid and redeemed at the applicable Redemption Price. (b) Upon presentation of any Obligation redeemed in part only, the Shipowner shall execute and the Indenture Trustee shall authenticate and deliver to or on the order of the Holder thereof, at the expense of the Shipowner, a new Obligation or Obligations of like series and Stated Maturity, -12- of authorized denominations, having endorsed thereon a Guarantee or Guarantees executed by, or on behalf of, the Secretary, in principal amount equal to the unredeemed portion of the Obligation so presented, or, at the option of such Holder, there may be noted thereon by the Indenture Trustee or, at its direction, by any Paying Agent the payment of the portion of the principal amount of such Obligation so called for redemption. ARTICLE IV CASH HELD BY INDENTURE TRUSTEE OR PAYING AGENTS SECTION 4.01. GENERALLY. (a) All cash held by the Indenture Trustee or any Paying Agent under this Indenture shall be held as a special deposit in trust for the purposes for which it is held (subject to Section 4.03). (b) Cash held by the Indenture Trustee or any Paying Agent (other than the Shipowner) under this Indenture: (1) need not be segregated; (2) shall not be invested; and (3) shall not bear interest except to the extent the Indenture Trustee or such Paying Agent allows interest on similar deposits or except as the Shipowner and the Indenture Trustee (or such Paying Agent) may agree. SECTION 4.02. PAYING AGENTS OTHER THAN INDENTURE TRUSTEE. (a) The Shipowner will cause any Paying Agent (other than the Indenture Trustee) which it may appoint by a writing delivered to such Paying Agent, with copies to the Indenture Trustee and the Secretary, to execute and deliver to the Indenture Trustee an instrument in which such agent shall agree with the Indenture Trustee that, subject to paragraph (b) of this Section and Section 4.03: (1) it will hold in trust all sums held by it as such agent for the payment of the principal of (and premium, if any) or interest on Obligations for the benefit of the Holders of such Obligations, or for the benefit of the Indenture Trustee; (2) it will forthwith give the Indenture Trustee written notice addressed to a Responsible Officer in the Corporate Trust Office of the Indenture Trustee signed by a Responsible Officer of the Paying Agent of (A) any payment by the Shipowner of the principal of (and premium, if -13- any) or interest on Obligations, specifying the amount paid, segregated as to principal (premium, if any) and interest, and identifying each Obligation on which any payment was made by number, date, series, Stated Maturity and the name of the Obligee, and/or (B) any failure of the Shipowner to make any such payment when the same shall be due and payable; and (3) it will promptly, and in no event later than ten days after any payment made by it hereunder, give the Indenture Trustee written notice addressed to a Responsible Officer in the Corporate Trust Office of the Indenture Trustee of all payments of Obligations made by it, including and identifying all endorsements of payment made on Obligations by it, signed and containing the specified information as provided in subparagraph (2) above, and deliver to the Indenture Trustee all Obligations surrendered to it, for cancellation by the Indenture Trustee. (b) The Shipowner may at any time cause to be paid to the Indenture Trustee all sums held in trust by any Paying Agent pursuant to this Section, such sums to be held by the Indenture Trustee upon the same trusts. SECTION 4.03. UNCLAIMED AMOUNTS. Any moneys received by the Indenture Trustee or a Paying Agent, for the payment of Obligations or Guarantees and remaining unclaimed by the Holders thereof for 6 years after the date of the Maturity of said Obligations or the date of payment by the Secretary of the Guarantees shall, upon delivery to the Indenture Trustee of a Request by the Shipowner, be paid to the Shipowner; PROVIDED THAT, not less than 30 days prior to such payment, the Shipowner shall publish notice thereof to the Obligees at least once in the Authorized Newspapers, unless the Indenture Trustee, in its discretion, waives the publication of such notice. In such event, such Holders shall thereafter be entitled to look only to the Shipowner (and the settlor or settlors of any trust for which the Shipowner is trustee, to the extent paid over to it or them) for the payment thereof, and the Indenture Trustee or such Paying Agent, as the case may be, shall thereupon be relieved from all responsibility to such Holders therefor. No such Request, publication or payment shall be construed to extend any statutory period of limitations which would have been applicable in the absence of such Request, publication or payment. SECTION 4.04. APPLICATION OF FUNDS. If at any time the Indenture Trustee shall hold funds (other than any amounts received by the Indenture Trustee pursuant to Section 7.04), the application, distribution or payment of which is not governed by Request or written instruction of the Shipowner delivered pursuant to any provision of the Indenture, the Indenture Trustee shall give written notice thereof to the Shipowner, who shall promptly -14- thereafter deliver to the Indenture Trustee a Request or written instruction bearing the written consent of the Secretary and directing the application, distribution or payment to be made of such funds. ARTICLE V REPRESENTATIONS AND AGREEMENTS OF SHIPOWNER The Shipowner hereby represents and agrees, so long as Obligations are Outstanding, as follows: SECTION 5.01. AUTHORIZATION, EXECUTION AND DELIVERY OF INDENTURE. The Shipowner has duly authorized the execution and delivery of this Indenture. SECTION 5.02. PAYMENT AND PROCEDURE FOR PAYMENT OF OBLIGATIONS. The Shipowner will duly and punctually pay the principal of (and premium, if any) and interest on the Obligations according to the terms thereof and of this Indenture. The Shipowner will deposit with the Indenture Trustee or (subject to Section 3.09) a Paying Agent prior to the opening of business on each date fixed for each payment an amount sufficient for such payment (after taking into account any amounts then held by the Indenture Trustee or such Paying Agent and available for such payment) with irrevocable directions to it to so apply the same; PROVIDED THAT, payments of interest may be made as provided in Section 2.02(b)(4); and PROVIDED FURTHER, that except with the consent of the Secretary the Shipowner shall not deposit any such amount more than ten days prior to the date of the payment for which such amount is deposited. SECTION 5.03. OFFICES OR AGENCIES OF SHIPOWNER. The Shipowner shall (1) at all times cause one or more offices or agencies to be maintained within the United States where Obligations may be presented for payment, registration of transfer and exchange, and where demands to or upon the Shipowner with respect thereto may be served, and (2) from time to time give written notice to the Indenture Trustee and to the Secretary of the location of such offices or agencies. The Corporate Trust Office shall be deemed to be such an office or agency for such purposes until the Shipowner shall give the Indenture Trustee and the Secretary written notice to the contrary. Any such office or agency for payment of the Obligations (other than the Corporate Trust Office) shall be a Paying Agent appointed in accordance with Section 4.02. -15- ARTICLE VI INDENTURE DEFAULTS AND REMEDIES SECTION 6.01. WHAT CONSTITUTES "INDENTURE DEFAULTS." Each of the following events shall constitute an "Indenture Default": (a) Default in the payment of the whole or any part of the interest on any of the Outstanding Obligations when the same shall become due and payable or default in the payment of the whole or any part of the principal of any of the Outstanding Obligations when the same shall become due and payable, whether by reason of Maturity, Redemption, acceleration or otherwise, or any default referred to in Section 6.08, and continuation of any such default for a period of 30 days (herein called a "Payment Default"); and (b) The giving of a Secretary's Notice to the Indenture Trustee. The Indenture Trustee shall give to the Obligees, the Secretary and the Shipowner prompt notice in writing of any Payment Default (unless such default shall have been remedied prior to the giving of such notice), and of the occurrence of any Indenture Default which shall be continuing; PROVIDED THAT, the Indenture Trustee shall have no duty to give any such notice unless and until a Responsible Officer of the Indenture Trustee, who is a Responsible Officer in its Corporate Trust Office, has actual knowledge of such default or Indenture Default. Any such notice of an Indenture Default to the Obligees (i) shall specify the nature of such Indenture Default, (ii) shall state that, by reason thereof, the Indenture Trustee is entitled under the Indenture to demand payment by the Secretary of the Guarantees, (iii) shall set forth the provisions of Section 6.04(b)(3) and (5), and (iv) shall advise the Obligees of the provisions of Section 6.02. SECTION 6.02. DEMAND FOR PAYMENT OF GUARANTEES. (a) If an Indenture Default shall have occurred and be continuing, the Indenture Trustee shall, not later than 60 days from the date of such Indenture Default, demand payment by the Secretary of the unpaid interest to the date of such payment on, and the unpaid balance of the principal of, all Outstanding Obligations, whereupon the entire unpaid principal amount of the Outstanding Obligations and all unpaid interest thereon shall become due and payable on the first to occur of the date which is 30 days from the date of such demand or the date on which the Secretary pays the Guarantees; PROVIDED THAT, in the case of a demand made as a result of a Payment Default, if, prior to the expiration of 30 days from the date of such demand and prior to any payment of the Guarantees by the Secretary, the Secretary shall find, and give written notice to the Shipowner and the Indenture Trustee to the effect that, there was no -16- Payment Default or that such Payment Default was remedied prior to such demand, such demand and the consequences thereof shall be rescinded and annulled and the Guarantees shall remain in full force and effect. The Indenture Trustee shall give to each Obligee and to the Shipowner prompt written notice of any demand made by the Indenture Trustee pursuant to this paragraph (a), any such notice to Obligees to be given as provided in Section 6.04(c). (b) If the Indenture Trustee shall not have made the demand referred to in Section 6.02(a) on or before the 30th day following an Indenture Default which shall have occurred and be continuing and if the Holders of all Outstanding Obligations shall not have theretofore elected to terminate the Guarantees as provided in Section 6.04(a)(2), any Holder of an Outstanding Obligation, by an Act of Obligees delivered to the Secretary (with copies thereof to the Indenture Trustee and the Shipowner), may, in place of the Indenture Trustee and on behalf of all Holders of Outstanding Obligations, make such demand, subject to all the provisions of, and with the effect provided in, Section 6.02(a); PROVIDED THAT, the right of each Holder under this paragraph (b) shall be without prejudice to the rights and duties of the Indenture Trustee under Section 6.02(a). SECTION 6.03. APPOINTMENT OF INDENTURE TRUSTEE AND HOLDERS OF OUTSTANDING OBLIGATIONS AS ATTORNEYS-IN-FACT. Each Holder of an Outstanding Obligation by the purchase and acceptance of its Obligation, irrevocably appoints the Indenture Trustee and each other Holder of an Outstanding Obligation its agent and attorney-in-fact for the purpose of making the demand provided for in Section 6.02 and (in the case of the Indenture Trustee) of receiving and distributing any payment or payments by the Secretary made pursuant to any such demand; PROVIDED THAT, no action or failure to act by the Indenture Trustee shall affect the rights of any Holder of an Outstanding Obligation to take any action whatsoever permitted by law and not in violation of the terms of the Obligations or of the Indenture. SECTION 6.04. TERMINATION AND PAYMENT OF THE GUARANTEES. (a) Except as otherwise provided in Section 6.08, the Guarantee with respect to any Obligation shall terminate in case, and only in case, one or more of the following events shall occur: (1) Such Obligation shall have been Retired or Paid; (2) The Holders of all Outstanding Obligations shall have elected, by Act of Obligees delivered to the Secretary, to terminate the Guarantees; -17- (3) Such Guarantee shall have been paid in full in cash by the Secretary; or (4) The Indenture Trustee and each Obligee shall have failed to demand payment of such Guarantee as provided herein or in such Guarantee or in the Act. (b) Subject to the provisions of Section 6.08, when the Secretary shall pay the Guarantees in full in cash to the Indenture Trustee: (1) The Indenture Trustee shall hold the entire amount thereof in trust for the sole purpose of providing for the payments specified in subparagraph (5) below; (2) No Obligation or Obligations shall thereafter be issued; (3) The Obligations (A) shall represent only the right to receive the payments from the Indenture Trustee specified in subparagraph (5) below and, in the event the Indenture Trustee makes payment to the Shipowner pursuant to Section 4.03, from the Shipowner, (B) shall otherwise no longer constitute or represent an obligation of the Shipowner, and (C) shall not be entitled to any other rights or benefits under this Indenture; (4) The Indenture Trustee shall forthwith give written notice to the Shipowner and to each of the Obligees, stating that it has received payment of the Guarantees in full in cash from the Secretary and that the same is available for distribution to the Obligees in the manner specified in subparagraph (5) below (and the Indenture Trustee shall give like notice to the Holders of the Obligations at least annually thereafter for a period of 6 years or until all Obligations shall have been cancelled, whichever is earlier); and (5) Upon the surrender for cancellation of any Obligation, the Indenture Trustee shall forthwith pay to the Holder of such Obligation in cash an amount (less the amount, if any, required to be withheld in respect of transfer or other taxes on payment to such Holder) equal to the unpaid principal amount of such Obligation and the unpaid interest accrued thereon to the date on which the Secretary shall have paid the Guarantees in full in cash to the Indenture Trustee; PROVIDED THAT, for the purposes of this subparagraph (5), the Indenture Trustee (A) may deem any Person as the owner of an Obligation in accordance with Section 2.11 and (B) shall not be required to make any payment in violation of applicable law. -18- (c) Each notice to Obligees required by this Section shall be given by the Indenture Trustee by first class mail, postage prepaid, to the address of each Obligee appearing upon the Obligation Register. (d) If the Secretary shall not have paid the Guarantees in full in cash to the Indenture Trustee within 30 days after any demand therefor pursuant to Section 6.02 (whether or not because the Secretary makes either of the findings referred to in the proviso of Section 6.02(a)), the Indenture Trustee shall give prompt written notice of such nonpayment to each Obligee and the Shipowner. If the Indenture Trustee shall have received notice of either of such findings, such notice to each Obligee shall so state. SECTION 6.05. RIGHTS OF INDENTURE TRUSTEE AFTER INDENTURE DEFAULT. During the continuance of any Indenture Default, the Indenture Trustee shall have the right to demand and to receive payment of the Guarantees and shall have, with the consent of the Secretary as to matters other than the enforcement of the Guarantees (unless all the Guarantees shall have terminated as provided herein): (a) the right (in its name, as the trustee of an express trust, or as agent and attorney-in-fact for each Holder of the Obligations as a class) to take all action to enforce its rights and remedies (including the institution and prosecution of all judicial and other proceedings and the filings of proofs of claim and debt in connection therewith), and to enforce all existing rights of the Holders of the Obligations as a class; and (b) all other rights and remedies granted to the Indenture Trustee by this Indenture, or the Authorization Agreement, or by law. In addition, during the continuance of an Indenture Default and if all the Guarantees shall have terminated as provided herein, the Indenture Trustee shall have the right, by written notice to the Shipowner, to declare the entire unpaid principal amount of the Outstanding Obligations and all unpaid interest to be immediately due and payable. SECTION 6.06. (a) OBLIGEES' RIGHT TO DIRECT INDENTURE TRUSTEE AFTER INDENTURE DEFAULT. During the continuance of any Indenture Default, the Holders of a majority in principal amount of the Outstanding Obligations shall have the right, by an Act of Obligees, to direct the Indenture Trustee: (1) to exercise or to refrain from exercising any right or to enforce any remedy granted to it by this Indenture; and -19- (2) to direct the time, method and place of the exercise of any such right or the enforcement of any such remedy; PROVIDED THAT, subject to Section 7.03, the Indenture Trustee shall have the right not to take any such action if it shall determine in good faith that the action would involve it in personal liability, would subject it to expenses against which it had not been offered adequate security and indemnity or would be unjustly prejudicial to the Obligees not parties to such direction. Anything in this Section 6.06(a) to the contrary notwithstanding, the Indenture Trustee shall be obligated to demand payment of the Guarantees as provided in Section 6.02(a) unless the Holders of all Outstanding Obligations shall have elected to terminate the Guarantees as provided in Section 6.04(a)(2), in which case the Indenture Trustee shall be obligated to refrain from making such demand. (b) LIMITATIONS ON OBLIGEES' RIGHT TO SUE. No Obligee shall have the right to institute any judicial or other proceedings under this Indenture unless: (1) the Indenture Trustee shall have been directed to institute such proceeding by the Holders of at least 25% in aggregate principal amount of the Obligations then Outstanding; (2) the Indenture Trustee shall have been offered adequate security and indemnity against the costs, expenses and liabilities to be incurred by compliance with such direction; (3) the Indenture Trustee shall not have instituted such proceeding within 60 days after the receipt of both such direction and such offer of security and indemnity; (4) no direction inconsistent with such request shall have been given to the Indenture Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Obligations; and (5) the institution and prosecution of such proceeding would not result in an impairment of the rights of any other Obligee, it being understood and intended that no one or more Obligees shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Obligees or to obtain or to seek to obtain priority or preference over any other Obligees or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all the Obligees. -20- (c) UNCONDITIONAL RIGHT OF OBLIGEES TO SUE FOR PRINCIPAL (AND PREMIUM, IF ANY) AND INTEREST. Nothing in paragraph (b) shall (i) affect the obligation of the Shipowner to pay the principal of (and premium, if any) and interest on the Obligations in accordance with their terms or affect the right of any Obligee to institute any judicial or other proceeding to enforce the payment of his Obligations or (ii) limit the right of any Obligee to demand payment of the Guarantees pursuant to Section 6.02(b) or to institute any judicial or other proceeding to enforce the payment of the Guarantee of any Obligation of which he is the Holder. SECTION 6.07. UNDERTAKING FOR COSTS. In any proceeding for the enforcement of any right or remedy under this Indenture, or in any proceeding against the Indenture Trustee for any action taken or omitted by it as Indenture Trustee, the court may in its discretion require the filing by any party litigant of an undertaking to pay the cost of such proceeding and may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant, having due regard to the merits and good faith of the claims or defense made by such party litigant. The provisions of this Section 6.07 shall not apply to any proceeding instituted by the Indenture Trustee or any proceeding instituted by any Obligee for the payment of the principal of (and premium, if any) and interest on his Obligations. SECTION 6.08. RECISION OF PAYMENTS. Notwithstanding any other provision of this Indenture, or of the Obligations, in the event that any payment to or on behalf of an Obligee of the principal of or interest due under any Obligation, or any portion of any such payment, shall at any time be repaid by such Obligee in compliance with an order (whether or not final) of a court of competent jurisdiction pursuant to any provision of the Bankruptcy Code (Title 11 of the United States Code) or any Federal Law replacing or superseding such Code, or applicable state law, and regardless of whether there has been any previous Indenture Default and any payment pursuant thereto, or whether such Obligation shall theretofore have been acquired by the Shipowner or cancelled, or whether an instrument satisfying and discharging this Indenture shall have been executed and delivered, (1) such Obligation shall not be deemed to have been Retired or Paid and shall be deemed to be Outstanding, (2) the return of such payment in whole or in part (but not the mere possibility that any such payment or portion thereof may be so required to be returned, nor any prior demand, suit or proceeding for such return) in compliance with the order of such court shall constitute a default in payment of such Obligation within the meaning of Section 6.01(a), which default shall be deemed to have occurred on the date of such repayment and which default, if continued for 30 days, will constitute a Payment Default, (3) the Guarantee of such Obligation and (to the extent necessary to enforce such Obligation and Guarantee) this -21- Indenture shall be in full force and effect, and (4) the Person required to return such payment or portion thereof shall be deemed for all purposes to be a Holder of such Obligation and entitled to enforce such Obligation and Guarantee to the extent of such repayment and, if there shall not be any Indenture Trustee hereunder then in office, such Person shall also be entitled to exercise on his own behalf all the rights of the Indenture Trustee hereunder necessary for such enforcement; PROVIDED THAT, in the event the Guarantee of any Obligation shall have terminated for reasons set forth in paragraphs (2) or (4) of Section 6.04(a) of this Indenture prior to the aforesaid date of repayment the provisions of this Section shall not apply to such Obligation. SECTION 6.09. ASSUMPTION OF OBLIGATIONS BY SECRETARY. Notwithstanding anything contained herein, (i) in the event the Shipowner shall fail to make any payment of principal or interest due on the Obligations on an Interest Payment Date and such failure to pay shall continue for a period of 25 days or (ii) in the event of any other default under the Mortgage or the Security Agreement, the Secretary shall have the right to and may, in his sole discretion, (a) by giving to the Indenture Trustee at any time pursuant to clause (ii) above or, if pursuant to clause (i) above, on or after the 25th day of said 25 day period of such default (but prior to the receipt by the Secretary of any demand for payment of the Guarantees pursuant to Section 6.02) a Secretary's Supplemental Indenture in the form of Exhibit 4 attached hereto, which Exhibit is incorporated herein by reference, assume the rights and obligations of the Shipowner under this Indenture and all Outstanding Obligations as provided in said Secretary's Supplemental Indenture; and (b) if applicable, make any payment of principal or interest which is due under the Obligations. By the execution of this Indenture by the Indenture Trustee and the Shipowner it is agreed hereunder that a Secretary's Supplemental Indenture shall be effective and binding upon the Indenture Trustee and the Shipowner and their respective successors or assigns without further act or deed of either as of the date executed and given to the Indenture Trustee by the Secretary as contemplated by this Section, and each of them for itself, its successors and assigns hereby irrevocably appoints the Secretary its true and lawful attorney-in-fact to execute and deliver said Secretary's Supplemental Indenture. Upon any such assumption by the Secretary, the Secretary shall succeed to and be substituted for and may exercise every right and power of the Shipowner under this Indenture and the Obligations with the same force and effect as if the Secretary has been named as the Shipowner herein and therein. Upon any such assumption by the Secretary, the Indenture Trustee, upon request of the Secretary, shall promptly notify the holders of the Outstanding Obligations of such assumption. The Secretary may exercise its rights under this Section 6.09 as often as it deems appropriate in its sole discretion. -22- ARTICLE VII THE INDENTURE TRUSTEE SECTION 7.01. ACCEPTANCE OF TRUSTS. The Indenture Trustee hereby accepts the trusts of this Indenture. SECTION 7.02. ELIGIBILITY OF INDENTURE TRUSTEE. (a) The Indenture Trustee shall at all times be a bank or trust company which (1) is organized as a corporation and doing business under the laws of the United States or any state thereof, (2) is authorized under such laws to exercise corporate trust powers, (3) is subject to supervision or examination by federal or state authority, (4) has a combined capital and surplus (as set forth in its most recent published report of condition) of at least $3,000,000 and (5) shall not have become incapable of acting or have been adjudged a bankrupt or an insolvent nor have had a receiver appointed for itself or for any of its property, nor have had a public officer take charge or control of it or its property or affairs for the purpose of rehabilitation, conservation or liquidation. (b) Should the Indenture Trustee at any time cease to be eligible, pursuant to this Section 7.02, to act as trustee, it shall promptly notify the Obligees, the Shipowner and the Secretary of such fact; and should the Shipowner obtain knowledge of such ineligibility, it shall promptly advise the Indenture Trustee, the Secretary, and the Obligees of such fact. Any such notice (i) shall set forth all the relevant facts known to the Indenture Trustee or the Shipowner, as the case may be, (ii) if to the Secretary or the Shipowner, shall be registered or certified mail, postage prepaid, and (iii) if to Obligees, shall be sent to each Obligee in the manner provided in Section 6.04(c) at his address as it appears on the Obligation Register, or at such other address as such Obligee may have furnished to the Indenture Trustee for such purpose. SECTION 7.03. RIGHTS AND DUTIES OF INDENTURE TRUSTEE. (a) The Indenture Trustee shall not be responsible for the correctness of the Recitals in the Special Provisions hereof or in the Obligations (except the Indenture Trustee's authentication certificate thereon), all of which Recitals are statements made solely by the Shipowner. (b) The Indenture Trustee shall not be responsible for the validity, execution by other parties thereto, or sufficiency of this Indenture, the Authorization Agreement, the Obligations or the Guarantees. (c) During the continuance of any Indenture Default (except for an Indenture Default resulting from those defaults in payment or Payment -23- Defaults referred to in paragraph (r) of this Section, concerning which the Indenture Trustee has not received the notice referred to in said paragraph (r) and the information relating to items (1) through (5) of said paragraph (r)), the Indenture Trustee shall exercise such of the rights and powers vested in it by Article VI, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (d) Except during the continuance of any Indenture Default (other than an Indenture Default referred to in the parenthetical expression set forth in paragraph (c) of this Section), the Indenture Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Indenture Trustee. (e) No provision of this Indenture shall relieve the Indenture Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct; PROVIDED THAT: (1) Except during the continuance of an Indenture Default (other than an Indenture Default referred to in the parenthetical expression set forth in paragraph (c) of this Section), (A) the duties of the Indenture Trustee shall be limited as provided in paragraph (d) of this Section, and (B) in the absence of bad faith on the part of the Indenture Trustee, the Indenture Trustee may conclusively rely upon certificates or opinions conforming to the requirements of this Indenture as to the truth of the statements and the correctness of the opinions expressed therein; (2) The Indenture Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Officers of the Indenture Trustee unless it shall be proved that the Indenture Trustee was negligent in ascertaining the pertinent facts; and (3) The Indenture Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with an Act of Obligees relating to the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any trust or power conferred upon the Indenture Trustee under this Indenture. (f) Subject to paragraph (i) of this Section, the Indenture Trustee shall be under a duty to examine certificates and opinions required by this Indenture to be furnished to it to determine whether or not they conform to the requirements hereof. -24- (g) Subject to paragraph (c) of this Section, the Indenture Trustee may rely and shall be protected in acting upon any resolution, certificate, opinion, notice, request, consent, order, appraisal, report, bond, or other paper or document believed by it to be genuine, to have been signed by the proper party or parties and to be in conformity with the provisions of this Indenture. (h) In all cases where this Indenture does not make express provision as to the evidence on which the Indenture Trustee may act or refrain from acting, the Indenture Trustee shall be protected (subject to paragraph (c) of this Section) in acting or refraining from acting hereunder in reliance upon an Officer's Certificate as to the existence or nonexistence of any fact. (i) The Indenture Trustee may consult with counsel satisfactory to the Indenture Trustee (who may be counsel to the Shipowner), and an Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such Opinion of Counsel. (j) Subject to paragraph (c) of this Section, the Indenture Trustee shall not be under any responsibility for the approval or selection of any expert for any of the purposes expressed herein; PROVIDED THAT the Indenture Trustee shall exercise reasonable care with respect to the approval or selection of independent experts whom it approves or selects to furnish opinions or certificates to the Indenture Trustee pursuant to this Indenture. (k) Whenever it is provided that the Indenture Trustee shall take any action, including the giving of any notice or the making of any demand, or refrain from taking any action upon the happening or continuation of a specified event (including an Indenture Default) or upon the fulfillment of any condition or upon the Request of the Shipowner or of Obligees or upon receipt of any notice, including a Secretary's Notice, the Indenture Trustee (1) shall, subject to paragraph (c) of this Section, have no liability for failure to take such action or for failure to refrain from taking such action unless and until a Responsible Officer of the Indenture Trustee, who is a Responsible Officer in the Corporate Trust Office, has actual knowledge of such event or continuation thereof or the fulfillment of such conditions or shall have received such Request, and (2) in taking or refraining from taking such action, shall have full power to give any and all notices and to do any and all acts and things incidental to such action. (l) Subject to paragraph (c) of this Section, the Indenture Trustee shall not be under any obligation to exercise any of the trusts or powers hereof at the request, order or direction of any Obligees or the Secretary, unless such -25- Obligees or the Secretary shall have offered to the Indenture Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities to be incurred thereby. (m) The Indenture Trustee, in its individual or any other capacity, may become the owner or pledgee of Obligations with the same rights it would have if it were not Indenture Trustee. (n) Notwithstanding any other provision of this Indenture, the Indenture Trustee shall not take any action contrary to the terms of the Authorization Agreement, and any such purported action or any attempt to take such action shall be void and of no effect and, except as provided in Section 7.06(b), shall not enter into any amendment to the Authorization Agreement except as expressly authorized by a Supplemental Indenture entered into pursuant to Article X. (o) No provision of this Indenture shall require the Indenture Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (p) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Indenture Trustee shall be subject to the provisions of this Section. (q) Upon the execution and delivery of an instrument satisfying and discharging this Indenture as provided in Section 12.01 hereof, all duties and obligations of the Indenture Trustee hereunder (except with respect to the application of funds for the payment of Obligations then held by the Indenture Trustee) shall cease and shall not thereafter be revived, whether or not the Indenture shall thereafter be in full force and effect as provided in Section 6.08. (r) Notwithstanding any other provisions of this Indenture or the Authorization Agreement, the Indenture Trustee shall have no duty or obligation to exercise any of its rights or powers hereunder with respect to a default in payment or Payment Default by reason of a repayment referred to in Section 6.08 unless and until it shall have received notice of such default and information concerning (1) the date thereof, (2) the Obligation to which such repayment relates, (3) the Person making such repayment and the Holder of such Obligation, (4) the amounts of such repayment attributable to principal, premium and interest on such Obligation, and (5) the Interest Payment Date or -26- other date on which the Obligee received the moneys to which the court order mentioned in Section 6.08 relates. SECTION 7.04. COMPENSATION, EXPENSES AND INDEMNIFICATION OF INDENTURE TRUSTEE. The Shipowner shall (1) pay reasonable compensation to the Indenture Trustee and reimburse it for its reasonable expenses and disbursements (including counsel fees and expenses) and (2) indemnify the Indenture Trustee for, and hold it harmless against, any loss, liability or expense which it may incur or suffer without negligence or bad faith in acting under this Indenture or the Authorization Agreement. The compensation of the Indenture Trustee shall not be limited to the compensation provided by law for a trustee acting under an express trust. SECTION 7.05. RESIGNATION AND REMOVAL OF INDENTURE TRUSTEE. (a) The Indenture Trustee may resign at any time by giving written notice to the Shipowner. Within 10 days thereafter, the resigning Indenture Trustee shall give notice of such resignation to the Obligees in the manner provided in Section 6.04(c). If the resigning Indenture Trustee fails to do so within such 10-day period, within the next succeeding 10 days the Shipowner shall give such notice in the same manner. (b) The Indenture Trustee may at any time be removed by: (1) written notice to the Indenture Trustee and the Shipowner by the Holders of a majority in principal amount of the Outstanding Obligations; or (2) written notice to the Indenture Trustee by the Shipowner or the Secretary that the Indenture Trustee has ceased to be eligible under Section 7.02(a). (c) Any resignation or removal of the Indenture Trustee shall be effective only upon appointment of a successor Indenture Trustee approved by the Secretary and the acceptance of such appointment by such successor Indenture Trustee. SECTION 7.06. APPOINTMENT OF SUCCESSOR INDENTURE TRUSTEE. (a) If the Indenture Trustee or the Shipowner shall have given notice of ineligibility of the Indenture Trustee pursuant to Section 7.02(b), or if any notice of resignation or of removal shall have been given pursuant to Section 7.05, then a successor Indenture Trustee may be appointed by the Shipowner; provided THAT, if such successor Indenture Trustee is not so appointed (or has not accepted such appointment) within 15 calendar days after the giving of any such notice, such appointment may be made (i) by the Secretary or (ii) by a court of competent -27- jurisdiction upon the application of the Secretary, the Shipowner, the retiring Indenture Trustee or any Person who then is, and has been, the Holder of an Outstanding Obligation for at least 6 months. (b) No successor Indenture Trustee shall be appointed without the prior written consent of the Secretary and until such successor Indenture Trustee shall enter into an amendment to the Authorization Agreement as set forth in the first sentence of Section 4.04 thereof. (c) If a successor Indenture Trustee is appointed, approved by the Secretary and accepts such appointment, and the Shipowner shall have knowledge thereof, the Shipowner shall give notice to the Obligees of such appointment in the manner provided in Section 6.04(c). The failure of the Shipowner to give such notice shall not affect the validity of any such appointment. SECTION 7.07. EFFECT OF APPOINTMENT OF SUCCESSOR INDENTURE TRUSTEE. Upon appointment and acceptance as Indenture Trustee, each successor Indenture Trustee shall forthwith, without further act or deed, succeed to all the rights and duties of its predecessor in trust under this Indenture and the Authorization Agreement. Such predecessor shall promptly deliver to such successor Indenture Trustee all sums held hereunder, together with all records and other documents necessary or appropriate in connection with the performance of the duties of the successor Indenture Trustee under this Indenture. Upon the written request of the successor Indenture Trustee or the Shipowner and upon payment of all amounts due to such predecessor under this Indenture, such predecessor shall transfer, assign and confirm to the successor Indenture Trustee all its rights under this Indenture by executing and delivering from time to time to the successor Indenture Trustee such further instruments and by taking such other action as may reasonably be deemed by such successor Indenture Trustee or the Shipowner to be necessary or appropriate in connection therewith and the predecessor Indenture Trustee shall have no liability for any actions taken by the successor Indenture Trustee. SECTION 7.08. MERGER, CONSOLIDATION AND SALE OF INDENTURE TRUSTEE. In the event of any merger (including for the purposes of this Section, the conversion of a state bank into a national banking association or vice versa) or consolidation of the Indenture Trustee into any other Person or in the event of the sale of all or substantially all the Indenture Trustee's corporate trust business, the Person resulting from such merger (including any such conversion) or consolidation, or the transferee in the case of any such sale, shall forthwith notify the Shipowner and, subject to Section 7.02(a) and 7.06(b), shall be the Indenture Trustee under this Indenture and the Authorization Agreement without further act or deed. -28- Obligations and Guarantees authenticated after any such merger, consolidation or sale may be authenticated by the successor Indenture Trustee either in its own name or in the name of any predecessor which shall have been the Indenture Trustee. ARTICLE VIII CONSOLIDATION, MERGER OR SALE BY SHIPOWNER SECTION 8.01. CONSOLIDATION, MERGER OR SALE BY SHIPOWNER. Nothing in this Indenture shall prevent any lawful consolidation or merger of the Shipowner with or into any other Person, or any sale of a Vessel or Vessels to any other Person lawfully entitled to acquire and operate such Vessel or Vessels or any sale by the Shipowner of all or substantially all of its assets to any other Person; PROVIDED THAT, except where the Shipowner shall be the Person surviving a merger or consolidation, the Person formed by or surviving such consolidation or merger, or to which the sale of such Vessel or Vessels shall be made, shall, by Supplemental Indenture, expressly assume the payment of the principal of and interest (and premium, if any) on the Proportionate Part of the Outstanding Obligations relating to such Vessel or Vessels in accordance with the terms of the Obligations and of the Indenture and shall expressly assume the performance of the agreements of the Shipowner in the Indenture; PROVIDED FURTHER, that to the extent said Proportionate Part of the Outstanding Obligations is not so assumed, the Shipowner shall redeem or cause to be redeemed the principal amount of the Proportionate Part of the Outstanding Obligations as is required by the Secretary, such redemption to be in accordance with the terms of the Obligations and of the Indenture. When a Person so assumes this Indenture and such Proportionate Part of the Outstanding Obligations, the Supplemental Indenture shall discharge and release the Shipowner from any and all obligations thereunder relating to such Proportionate Part of the Outstanding Obligations. In the event of such an assumption by a Person to whom a Vessel or Vessels have been sold (a) such Person shall succeed to, and be substituted for, and may exercise every right and power of the original Shipowner with the same effect as if such successor Shipowner had been named as the Shipowner herein and (b) such Proportionate Part of the Outstanding Obligations shall be surrendered to the Indenture Trustee for appropriate notation or for the issuance of new Obligations in exchange for such Proportionate Part of the Outstanding Obligations in the name of the successor Shipowner, as required by the Secretary. The principal amount of the Proportionate Part of the Outstanding Obligations shall be determined by the Secretary. -29- SECTION 8.02. SALE OF THE VESSEL OR VESSELS BY THE SECRETARY. Nothing contained in this Indenture shall prevent the sale of a Vessel or Vessels to any other Person or Persons by the Secretary, by a court of law or by the Shipowner following, in connection with or in lieu of a foreclosure or similar action. Following any such sale (1) the Person to whom such Vessel or Vessels have been sold may by Supplemental Indenture expressly assume the payment of and interest (and premium, if any) on the Proportionate Part of the Outstanding Obligations relating to such Vessel or Vessels in accordance with the terms of the Obligations and the Indenture and shall expressly assume the performance of the Shipowner in the Indenture; and (2) in the event such Person does not so assume, the Secretary shall redeem the Proportionate Part of the Outstanding Obligations relating to such Vessel or Vessels without premium pursuant to Section 3.06 hereof; PROVIDED THAT, the Secretary shall allow or permit the sale of a Vessel or Vessels to the original Shipowner or to any affiliate of the of the Shipowner only if (i) the Secretary has not redeemed such Obligations prior to such sale, and (ii) such purchaser assumes such Proportionate Part of the Outstanding Obligations as contemplated by the preceding clause (1). When a Person so assumes this Indenture and such Proportionate Part of the Outstanding Obligations, the Supplemental Indenture shall discharge and release the Secretary from any and all obligations thereunder in the Secretary's capacity as Shipowner relating to such Proportionate Part of the Outstanding Obligations. In the event of such an assumption by a Person to whom a Vessel or Vessels have been sold (a) such Person shall succeed to, and be substituted for, and may exercise every right and power of the original Shipowner with the same effect as if such successor Shipowner had been named as the Shipowner herein and (b) such Proportionate Part of the Outstanding Obligations shall be surrendered to the Indenture Trustee for appropriate notation or for the issuance of new Obligations in exchange for such Proportionate Part of the Outstanding Obligations in the name of the successor Shipowner, as required by the Secretary. Any such sale or the execution of a Supplemental Indenture by any successor Shipowner shall not discharge or in any manner affect the obligation of the United States to pay the Guarantees pursuant to the terms thereof. The principal amount of the Proportionate Part of the Outstanding Obligations shall be determined by the Secretary. ARTICLE IX ACTS OF OBLIGEES SECTION 9.01. ACTS OF OBLIGEES. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action required or permitted by this Indenture to be given or taken by Obligees may be embodied in and evidenced by one or more instruments of substantially similar tenor -30- signed by such Obligees in person or by an agent or attorney duly appointed in writing. Except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Indenture Trustee and, where it is hereby expressly required, to the Shipowner and the Secretary. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act of Obligees." Proof of execution of any such instrument or of a writing appointing any such agent or attorney shall be sufficient for any purpose of this Indenture and (subject to Section 7.03) conclusive in favor of the Indenture Trustee and the Shipowner, if made in the manner provided in paragraph (b) of this Section. (b) The fact and date of the execution by any Person of any instrument or writing referred to in paragraph (a) of this Section may be proved by the affidavit of a witness of such execution or by the certificate or acknowledgment of any notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by an officer of a corporation or a member of a partnership, on behalf of such corporation or partnership, such affidavit or certificate shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Indenture Trustee (or, if such instrument or writing is addressed to the Secretary, the Secretary) deems sufficient. (c) The ownership of Obligations shall be proved by the Obligation Register. (d) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Obligation shall bind every future Holder of the same Obligation and the Holder of every Obligation issued upon the transfer thereof or in exchange therefor or in lieu thereof in respect of anything done or suffered to be done by the Indenture Trustee, any Paying Agent or the Shipowner in reliance thereon, whether or not notation of such action is made upon such Obligation. ARTICLE X SUPPLEMENTAL INDENTURES SECTION 10.01. PERMISSIBLE WITHOUT ACTION BY OBLIGEES. The Shipowner, the Indenture Trustee, or, where applicable, the Secretary, from time to time and at any time, may, without the consent of or notice to any of the Obligees, subject to Sections 10.02 and 10.05, enter into an indenture or -31- other instrument supplemental hereto and which thereafter shall form a part hereof, for any one or more of the following purposes: (1) to add to the covenants of the Shipowner, whether applicable to one or more series of Obligations; (2) to evidence the succession pursuant to Article VIII of another corporation or entity to the Shipowner and the assumption by such successor of the Obligations of the Shipowner hereunder; (3) to eliminate any right reserved to or conferred upon the Shipowner; (4) to make such provisions for the purpose of curing any ambiguity or correcting or supplementing any provisions in this Indenture as the Shipowner or the Secretary may deem necessary or desirable, provided such provisions are not inconsistent with this Indenture and shall not adversely affect the interests of the Obligees; (5) to provide for the issuance of additional Obligations of any series and Stated Maturity theretofore issued under this Indenture or to set forth the terms and provisions of any one or more additional series of Obligations in accordance with Section 2.04; or (6) to evidence the assumption pursuant to Section 6.09 by the Secretary of the Shipowner's obligations under this Indenture and the Outstanding Obligations. SECTION 10.02. PROTECTION OF INDENTURE TRUSTEE. Upon receipt of a Request of the Shipowner that the Indenture Trustee execute any Supplemental Indenture and upon receipt of any Act of Obligees required pursuant to Section 10.04 and the consent of the Secretary required pursuant to Section 10.05, the Indenture Trustee shall enter into such Supplemental Indenture; PROVIDED THAT, the Indenture Trustee shall not be obligated to enter into any Supplemental Indenture which the Indenture Trustee believes adversely affects the Indenture Trustee's own rights, duties or immunities under this Indenture. SECTION 10.03. REFERENCE IN OBLIGATIONS TO SUPPLEMENTAL INDENTURES. Obligations authenticated and delivered after the execution and delivery of any Supplemental Indenture may, with the consent and approval of the Shipowner and the Indenture Trustee, contain a text modified to conform to such Supplemental Indenture or have imprinted or stamped thereon a legend with respect to such Supplemental Indenture, but no such modification or legend -32- shall be necessary to make such Supplemental Indenture effective. SECTION 10.04. WAIVERS AND SUPPLEMENTAL INDENTURES WITH CONSENT OF OBLIGEES. With the consent of the Holders of not less than 60% in principal amount of the Outstanding Obligations of each series affected thereby, by Act of Obligees delivered to the Shipowner and the Indenture Trustee, (x) compliance by the Shipowner with any of the terms of the Indenture may be waived or (y) the Shipowner and the Indenture Trustee may enter into any Supplemental Indenture for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of the Obligations issued under this Indenture; PROVIDED THAT, no such waiver or Supplemental Indenture shall: (a) Without the consent of all Obligees affected thereby (1) change the Stated Maturity or reduce the principal of any Obligation, (2) extend the time of payment of, or reduce the rate of, interest thereon, (3) change the due date of or reduce the amount of any mandatory sinking fund payment, (4) reduce any premium payable upon the redemption of any Obligation, or (5) change the coin or currency in which any Obligation or the interest thereon is payable; or (b) Without the consent of all Obligees (l) terminate or modify any of the Guarantees or the obligations of the Secretary thereunder, (2) reduce the amount of any of the Guarantees, (3) eliminate, modify or condition the duties of the Indenture Trustee to demand payment of the Guarantees or otherwise to comply with the provisions of Sections 6.02 and 6.04, (4) eliminate or reduce any of the eligibility requirements for the Indenture Trustee stated in Section 7.02, or (5) reduce the percentage in principal amount of the Outstanding Obligations of any series, the consent of whose Holders is required for any such Supplemental Indenture, or required for any waiver provided herein or to modify any of the provisions of this Section except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of all Obligees affected thereby. It shall not be necessary for any Act of Obligees under this Section to approve the particular form of any proposed Supplemental Indenture, but it shall be sufficient if such Act shall approve the substance thereof. Promptly after the execution of any Supplemental Indenture pursuant to this Section, the Shipowner shall give notice thereof to the Obligees in the manner provided in Section 6.04(c). Any failure of the Shipowner to give such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such Supplemental Indenture. -33- SECTION 10.05. CONSENT OF SECRETARY. Subject to the provisions of Section 11.01, no waiver pursuant to Section 10.04 shall be effective, and neither the Shipowner nor the Indenture Trustee shall enter into any Supplemental Indenture, without the prior written consent of the Secretary thereto, and any purported action or attempt to take such action forbidden to be taken by this Section shall be void and of no effect. SECTION 10.06. CONTINUED VALIDITY OF THE GUARANTEES. Notwithstanding anything herein to the contrary, this Indenture, the Guarantees and the Authorization Agreement shall each remain in full force and effect notwithstanding the assumption by the Secretary of the Obligations pursuant to the Secretary's Supplemental Indenture entered into pursuant to Section 6.09, and pursuant to Section 1103(e) of the Act, the validity of the Guarantee of any Obligation shall be unaffected, and such Guarantee and all responsibilities, requirements and consents relating to the Secretary under the terms and provisions of this Indenture shall remain in full force and effect notwithstanding any such assumption by the Secretary as aforesaid. ARTICLE XI PERFORMANCE OF OBLIGATIONS TO SECRETARY SECTION 11.01. PERFORMANCE OF OBLIGATIONS TO SECRETARY. Notwithstanding any other provisions of this Indenture to the contrary, each of the provisions hereof which requires or permits action by the Secretary, the consent, approval or authorization of the Secretary, the furnishing of any document, paper or information to the Secretary, or the performance of any other obligation to the Secretary, shall not be effective and the Sections containing such provisions shall be read as though there were no such requirements or permissions, after termination of the Guarantees pursuant to Section 6.04(a). ARTICLE XII SATISFACTION AND DISCHARGE OF INDENTURE SECTION 12.01. SATISFACTION AND DISCHARGE OF INDENTURE. Whenever all Outstanding Obligations authenticated and delivered hereunder shall have been Retired or Paid the Indenture Trustee shall forthwith deliver to the Shipowner and the Secretary a duly executed instrument, in form submitted to it by the Shipowner and reasonably satisfactory to the Indenture Trustee, satisfying and discharging this Indenture and, at the time such form of instrument is submitted to the Indenture Trustee the Shipowner shall deliver to the Indenture Trustee an Officer's Certificate and an Opinion of Counsel -34- each stating that all conditions precedent herein provided relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the Obligations of the Shipowner to the Indenture Trustee under Section 7.04 shall survive. ARTICLE XIII MISCELLANEOUS SECTION 13.01. NOTICES AND DEMANDS. Except as otherwise specifically provided herein or in the Act, any notice, request, demand or direction upon, or other communication to, the Indenture Trustee, the Shipowner or the Secretary shall be deemed to have been sufficiently given or made by being mailed, registered or certified mail, postage prepaid, addressed to the Indenture Trustee, the Shipowner or the Secretary at their respective addresses appearing in the Special Provisions of this Indenture or at such other address as any of them may advise the others in writing from time to time. Except as otherwise specifically provided herein or in the Act, any notice, request, demand or direction upon, or other communication to, the Obligees shall be deemed to have been sufficiently given or made by being mailed, registered or certified mail, postage prepaid, to the address of each Obligee last appearing on the Obligation Register. SECTION 13.02. WAIVERS OF NOTICE. In any case where notice by mail or otherwise is provided herein, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be deemed the equivalent of such notice. Waivers of notice shall be filed with the Indenture Trustee, but such filing shall not be a condition precedent to the validity of any action taken thereon in reliance upon any such waiver. SECTION 13.03. BENEFIT OF INDENTURE. This Indenture is for the sole benefit of the Shipowner, the Indenture Trustee, the Holders from time to time of the Outstanding Obligations and (until the obligations to the Secretary shall have terminated as provided in Article XI) the Secretary. SECTION 13.04. EXECUTION OF COUNTERPARTS. This Indenture may be executed in any number of counterparts. All such counterparts shall be deemed to be original and shall together constitute but one and the same instrument. SECTION 13.05. TABLE OF CONTENTS; TITLES AND HEADINGS. Any table of contents, the titles of the Articles and the headings of the Sections are not a -35- part of this Indenture and shall not be deemed to affect the meaning or construction of any of its provisions. SECTION 13.06. INTEGRATION WITH SPECIAL PROVISIONS OF THE INDENTURE. In the event of any conflict between the provisions of the Special Provisions of the Indenture and of this Exhibit 1 thereto, the provisions of the Special Provisions shall govern and the provisions of this Exhibit 1 to the Indenture shall be deemed to be amended accordingly. SECTION 13.07. IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS. No recourse shall be had for the payment of the principal of, or the premium, if any, or interest on any Obligation, or for any claim based thereon or otherwise in respect thereof or of the indebtedness represented thereby, or upon any obligation, covenant or agreement of this Indenture, against any incorporator, stockholder, officer or director, as such, past, present or future, of the Shipowner or of any successor corporation, either directly or through the Shipowner or any successor corporation, whether by virtue of any constitutional provision, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly agreed and understood that this Indenture and the Obligations are solely corporate obligations, and that no personal liability whatsoever shall attach to, or be incurred by, any incorporator, stockholder, officer or director, as such, past, present or future, of the Shipowner or of any successor corporation, either directly or through the Shipowner or any successor corporation, because of the incurring of the indebtedness hereby authorized or under, or by reason of, any of the obligations, covenants, promises or agreements contained in this Indenture or in any of the Obligations or to be implied herefrom or therefrom, and that all liability, if any, of that character against every such incorporator, stockholder, officer and director is, by the acceptance of the Obligations and as a condition of, and as part of the consideration for, the execution of this Indenture and the issue of the Obligations, expressly waived and released. SECTION 13.08. APPLICABLE LAW. This Indenture and each Obligation shall be governed by the laws referred to in the Special Provisions hereof, except to the extent Federal law applies hereto. -36- SCHEDULE A TO TRUST INDENTURE DOCUMENT 5 Schedule of Definitions to Trust Indenture Dated as of April 9,1999 "Act" means the Merchant Marine Act, 1936, as amended, and in effect on the Closing Date. "Act of Obligees" means any request, demand, authorization, direction, notice, consent, waiver or other action to be given or taken by the Obligees and embodied in one or more documents of the type, and executed in the manner, required by the Indenture. "Administrative Agent" means CITICORP NORTH AMERICA, INC., a Delaware corporation, as administrative agent for the Primary Lender and the commercial paper holders of the Primary Lender (and their respective successors and assigns), and its permitted successors and assigns. "Actual Cost" means the actual cost of a Vessel, as set forth in Table A of the Security Agreement or as subsequently redetermined by the Secretary pursuant to the Security Agreement and the Act. "Actual Knowledge" means actual knowledge of a Responsible Officer of a Person. "Affiliate" or "Affiliated" means any Person directly or indirectly controlling, controlled by, or under common control with, another Person. "Agent" means each of the Administrative Agent and the Facility Agent, individually, and "Agents" means the Administrative Agent and the Facility Agent, collectively. "Alternate Lender" means CITIBANK, N.A., a national banking association and its successors and assigns. "Applicable Interest Rate" shall mean (a)(i) with respect to any Disbursement or portion thereof that is funded by the Primary Lender through its issuance of commercial paper notes and so long as the Primary Lender is the holder of the indebtedness related to such funded portion, a rate (the "CP Rate") equal to the sum of (A) the Primary Lender's weighted average cost (defined below) related to the issuance of commercial paper notes and other short-term borrowings or the sale of participation interests (collectively, "Commercial Paper"), which in each case have been allocated by the Primary Lender to the Credit Facility, which rate includes related issuance costs incurred by the Primary Lender, plus (B) during the Construction Period, four-tenths of one percent (.40%) and thereafter, nine-twentieths of one percent (0.45%), as calculated by the Administrative Agent for each Interest Period and specified in a notice sent by the Administrative Agent to the Facility Agent and by the Facility Agent to the Shipowner and the Indenture Trustee at least three (3) Business Days prior to each Interest Payment Date on which the interest so calculated is payable (For purposes of the foregoing, the Primary Lender's "weighted average cost" of Commercial Paper shall consist of (I) the actual interest rate paid to purchasers of Commercial Paper, (II) the costs associated with the issuance of the Commercial Paper and (III) other borrowings the Primary Lender may incur, including the amount to fund small or odd dollar amounts that are not easily accommodated in the commercial paper market); and (ii) with respect to any Disbursement funded by the Alternate Lender or to the extent that a Disbursement held by the Primary Lender is assigned to the Alternate Lender or to any other assignee, then, from and after the applicable Disbursement Date or the effective date of such assignment, as the case may be, a rate per annum equal to LIBOR plus three tenths of one percent (0.30%) per annum; provided, however, that, if the Alternate Lender shall have determined, prior to the commencement of any Interest Period that: (A) Dollar deposits of sufficient amount and maturity for funding a Disbursement are not available to such Lender in the London interbank market in the ordinary course of business; or (B) by reason of circumstances affecting the relevant market, adequate and fair means do not exist for ascertaining the rate of interest to be applicable to a Disbursement; or (C) the relevant rate of interest referred to in the definition of LIBOR which is to be used to determine the rate of interest for a Disbursement does not cover the funding cost to the Lender of making or maintaining the Disbursement, then the Lender shall so notify the Indenture Trustee, who shall give notice to the Shipowner of such condition and interest shall, effective as of the date of such notice and so long as such condition shall exist, accrue during each applicable Interest Period at the Base Rate; provided, further, however that if, in the Lender's reasonable judgment, it becomes unlawful at any time for such Lender to make or maintain Disbursements based upon LIBOR, the Lender shall so notify the Indenture Trustee, who shall give notice to the Shipowner of such determination and, effective as of the date of such notice and so long as such condition shall exist, interest shall thereafter accrue during each applicable Interest Period at the Base Rate. -2- (b) with respect to Obligations which are Fixed Rate Notes, the interest rate set forth in each such Obligation, which interest rate shall be as approved by the Secretary as reasonable pursuant to Section 1104A (b)(5) of the Act. "Authorization Agreement" means the Authorization Agreement, Contract No. MA-13510, dated the Closing Date, between the Secretary and the Indenture Trustee, whereby the Secretary authorizes the Guarantee of the United States of America to be endorsed on each of the Obligations, as the same is originally executed, or as modified, amended or supplemented in accordance with the applicable provisions thereof. "Authorized Newspapers" means THE WALL STREET JOURNAL and THE JOURNAL OF COMMERCE, or if either ceases to exist, then in such other newspapers as the Secretary may designate and a newspaper printed in English, approved by the Secretary and of general circulation in Baltimore, Maryland. "Base Rate" means, for any Interest Period or any other period, a fluctuating interest rate per annum as shall be in effect from time to time which rate per annum shall at all times be equal to the higher of: (a) the rate of interest announced publicly by Citibank, N.A. in New York, New York, from time to time, as Citibank, N.A.'s base rate; or (b) one-half of one percent (0.50%) per annum above the latest three-week moving average of secondary market morning offering rates in the United States for three-month certificates of deposit of major United States money market banks, such three-week moving average being determined weekly on each Monday (or, if any such day is not a Business Day, on the next succeeding Business Day) for the three-week period ending on the previous Friday by Citibank, N.A. on the basis of such rates reported by certificate of deposit dealers to and published by the Federal Reserve Bank of New York, or, if such publication shall be suspended or terminated, on the basis of quotations for such rates received by Citibank, N.A. from three New York certificate of deposit dealers of recognized standing selected by Citibank, N.A., in either case adjusted to the nearest one-fourth of one percent (0.25%) or, if there is no nearest one-fourth of one percent, to the next higher one-fourth of one percent. "Borrower" means the Shipowner. -3- "Business Day" shall mean any day on which dealings in Dollar deposits are carried on in the London interbank market and on which commercial banks in London and New York City are open for domestic and foreign exchange business. "Cede" means Cede & Company. "Certificate Authorizing Disbursement" shall mean, with respect to a Disbursement, the United States Certificate Authorizing Disbursement substantially in the form set forth in Annex A to the Credit Agreement. "Closing Date" means April 9, 1999. "Commercial Paper" shall have the meaning set forth in clause (a)(i)of the definition of Applicable Interest Rate herein. "Construction Contract" means that certain Semi-Submersible Drilling Vessel Construction Contract (Hull No.1829), dated April 9, 1998, by and between the Shipowner and the Shipyard, as the same may be amended, modified or supplemented in accordance with the applicable provisions thereof. "Construction Period" shall mean the period from the date hereof to the Delivery Date. "Construction Period Interest" shall mean all interest that accrues on the Outstanding Principal during the Construction Period. "Corporate Trust Office" means the principal corporate trust office of the Indenture Trustee at which, at any time, its corporate trust business shall be principally administered, which office at the date of execution of the Indenture is located at 25 South Charles Street, 16th Floor, Mail Code 101-591, Baltimore, Maryland 21201. "CP Rate" shall have the meaning set forth in clause (a)(i) of the definition of Applicable Interest Rate herein. "Credit Agreement" or "Agreement" shall mean the Credit Agreement, dated as of the Closing Date, among the Shipowner, the Lenders, and the Agents, including any Exhibit, Annex, or other attachment thereto, as the same may be amended, modified or supplemented. "Credit Facility" shall have the meaning set forth in Whereas Clause (A) of the Credit Agreement. "DTC" means The Depository Trust Company. -4- "Definitive Obligation" has the meaning specified in Article Sixth, paragraph (aa) of the Special Provisions of the Indenture. "Delivery Date" means the date on which the Vessel is delivered to and accepted by the Shipowner. "Depreciated Actual Cost" means the depreciated actual cost of the Vessel as determined and re-determined by the Secretary pursuant to Sections 1101(g) and 1104(b)(2) of the Act. "Disbursement" shall have the meaning set forth in Section 2.03 of the Credit Agreement. "Disbursement Date" shall mean, in relation to any Disbursement, the Business Day on which the Lender shall make such Disbursement. "Dollars," "U.S. Dollars," "U.S.D.," "U.S.$" or "$" shall mean the lawful currency of the United States of America. "Facility Agent" means CITIBANK INTERNATIONAL PLC, a bank organized and existing under the laws of England, as facility agent for both the Primary Lender and the Alternative Lender (and their respective successors and assigns), and its permitted successors and assigns. "Final Disbursement Date" shall have the meaning set forth in Section 2.02 of the Credit Agreement. "Fixed Rate Note" shall mean an Obligation substantially in the form of Exhibit 3 to the Indenture, appropriately completed. "Floating Rate Note" shall mean the Obligation substantially in the form of Exhibit 2 to the Indenture, appropriately completed. "Global Obligation" has the meaning specified in Article Sixth, paragraph (aa) of the Special Provisions of the Indenture. "Governmental Authority" shall mean the government of any country, any agency, department or other administrative authority or instrumentality thereof, and any local or other governmental authority within any such country. "Guarantee" or "Guarantees" means the guarantee of an Obligation by the United States of America pursuant to Title XI of the Act, as provided in the Authorization Agreement. -5- "Guarantee Commitment" means the Commitment to Guarantee Obligations, Contract No. MA-13509, dated as of the Closing Date, executed by the Secretary and accepted by the Shipowner with respect to the Guarantees, as originally executed or as modified, amended or supplemented in accordance with the applicable provisions thereof. "Guarantee Fees" shall mean the amounts described in the Guarantee Commitment payable in consideration for the commitment therein described and payable as provided in such Guarantee Commitment. "Holder" means the holder of an Obligation. "Indenture" means the Trust Indenture dated as of the Closing Date, between the Shipowner and the Indenture Trustee, as the same is originally executed, or as modified, amended or supplemented in accordance with the applicable provisions thereof. "Indenture Default" has the meaning specified in Article VI of Exhibit 1 to the Indenture. "Indenture Trustee" means FMB Trust Company, National Association, a national banking association, and any successor trustee permitted under the Indenture. "Interest Payment Date" means, with respect to any Obligation, the date when any installment of interest on such Obligation is due and payable, which are March 15 and September 15 of each year, beginning on September 15, 1999, and the date of any prepayment of any Obligation. "Interest Period" shall mean, with respect to any Disbursement, (i) the period commencing on the Disbursement Date and extending up to, but not including, the next Interest Payment Date; and (ii) thereafter the period commencing on each Interest Payment Date and extending up to, but not including, the next Interest Payment Date. "Lender" shall mean shall mean either the Primary Lender or the Alternate Lender, as the case may be, depending on which of the two parties made or will make the relevant disbursement of funds under the Credit Agreement; provided, however, that if the Primary Lender assigns its rights under the Credit Agreement to the Alternate Lender, the term "Lender," shall mean only the Alternate Lender, CITIBANK, N.A., a national banking association, and its successors and assigns. -6- "Letter of Representations" means the Letter of Representations between the Shipowner and the Indenture Trustee and other documentation necessary or desirable to effectuate the issuance of the Fixed Rate Notes as Global Obligations. "LIBOR" shall mean, in relation to any Interest Period, the rate of interest per annum (rounded upward, if necessary, to the nearest 1/16 of 1%) quoted by the principal London office of CITIBANK, N. A., at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for the offering to leading banks in the London interbank market of U.S. Dollar deposits for a period and in an amount comparable to such Interest Period and the principal amount upon which interest is to be paid during such Interest Period. "Make-Whole Premium" means an amount equal to the excess, if any, between (i) the sum of the respective Payment Values of each Prospective Payment, over (ii) 100% of the aggregate principal amount being prepaid on the Redemption Date. "Make-Whole Premium Determination Date" means the second Business Day before the applicable Redemption Date. "Maturity" when used with respect to any Obligation, means the date on which the principal of, or interest on, such Obligation becomes due and payable as therein provided, whether on a Payment Date, at the Stated Maturity or by prepayment, repayment, redemption or declaration of acceleration or otherwise. "Mortgage" means the first preferred ship mortgage on the Vessel, Contract No. MA-13512, between the Shipowner and the Secretary, as originally executed or as modified, amended or supplemented in accordance with the applicable provisions thereof. "Note" shall mean a Floating Rate Note or a Fixed Rate Note. "Obligation" or "Obligations" shall mean the Floating Rate Note or Fixed Rate Note(s) of the Shipowner bearing a Guarantee and authenticated and delivered pursuant to the Indenture and the Authorization Agreement. "Obligation Owners" has the meaning specified in Article Sixth, paragraph (aa) of the Special Provisions of the Indenture. "Obligation Register" has the meaning specified in Section 2.10 of Exhibit 1 to the Indenture. "Obligee" means each Holder. -7- "Original Principal Amount" shall mean the maximum principal amount of the Obligations. "Officer's Certificate" means a certificate conforming to Section 1.02 of Exhibit 1 to the Indenture and signed by a Responsible Officer of the Person giving such certificate. "Opinion of Counsel" means an opinion of counsel conforming to Section 1.02 of Exhibit 1 to the Indenture. "Outstanding," when used with reference to the Obligations, shall mean all Obligations theretofore issued under the Indenture, except: (1) Obligations Retired or Paid; and (2) Obligations in lieu of which other Obligations have been issued under the Indenture. For the purposes of Articles VI and X of Exhibit 1 to the Indenture, and also in determining whether the Holders of a stated percentage of the principal amount of Outstanding Obligations have taken any Act of Obligees required or permitted by the Indenture, Obligations owned by the Shipowner or by any Affiliate of the Shipowner (excluding (a) Obligations held by an Affiliate of the Shipowner when such Affiliate is acting in a fiduciary capacity if it is established to the satisfaction of the Indenture Trustee that neither the Shipowner nor another Affiliate has a beneficial interest therein and (b) Obligations pledged in good faith by the Shipowner or by any Affiliate of the Shipowner, if the pledgee (i) is not an Affiliate of the pledgor and (ii) establishes to the satisfaction of the Indenture Trustee that the pledgee has the right to vote such Obligations) shall be disregarded and deemed not to be Outstanding; PROVIDED HOWEVER THAT, for the purpose of determining whether the Indenture Trustee shall be protected in relying on any such Act of Obligees, only Obligations which the Indenture Trustee has actual knowledge are so owned shall be so disregarded and deemed not to be Outstanding. Obligations which are not Outstanding shall not be entitled to any rights or benefits provided in the Indenture. "Outstanding Principal" shall have the meaning set forth in Section 2.01 of the Credit Agreement. "Paying Agent" means any bank or trust company having the qualifications set forth in clauses (1), (3), (4) and (5) of Section 7.02(a) of Exhibit 1 to the Indenture, which shall be appointed by the Shipowner in accordance with Section 4.02 of Exhibit 1 to the Indenture to pay the principal -8- of (and premium, if any) or interest on the Obligations on behalf of the Shipowner. "Payment Date" shall mean March 15 and September 15 of each year, beginning on March 15, 2001. "Payment Default" has the meaning specified in Section 6.01(a) of Exhibit 1 to the Indenture. "Payment Value" of each Prospective Payment shall be determined by discounting such Prospective Payment at the Reinvestment Rate for the period from the Payment Date on which such Prospective Payment was scheduled to be paid to the applicable Redemption Date. "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Place of Payment" means the place at which an Obligation is to be redeemed pursuant to Article III of Exhibit 1 to the Indenture. "Principal Office," when used with respect to the Shipowner, means the office of the Shipowner at which, at any particular time, its corporate business is principally administered, which office at the date of execution of the Indenture is located in the British Virgin Islands. "Primary Lender" means GOVCO INCORPORATED, a Delaware corporation, and its successors and assigns. "Prospective Payment" means, with respect to the Fixed Rate Notes: (i) each scheduled interest payment on each scheduled principal amount to be prepaid; and (ii) the scheduled principal amount to be prepaid. "Redeem" means with respect to the redemption of Obligations, to repay or prepay. "Redemption" means with respect to the redemption of Obligations, the repayment or prepayment of Obligations as applicable. "Redemption Date" means, with respect to any Obligation, a date fixed for the prepayment, repayment or redemption of such Obligation by or pursuant to Article Fourth of the Indenture or Article III of Exhibit 1 to the Indenture. "Redemption Price" means, with respect to any Obligation, the price at -9- which an Obligation is to be prepaid, repaid, or redeemed pursuant to Article Fourth of the Indenture or Article III of Exhibit 1 to the Indenture. "Reinvestment Rate" means the yield determined by the Indenture Trustee, based on information received from the Holder or calculation agent, to be the yield of the issue of actively traded United States Treasury securities having a maturity equal to the Weighted Average Life to Final Maturity; provided, however, that if such Weighted Average Life to Final Maturity is not equal to the maturity of an actively traded United States Treasury security (rounded to the nearest one-twelfth of a year), such yield shall be obtained by linear interpolation from the yields of actively traded United States Treasury securities having the greater maturity closest to and the lesser maturity closest to such Weighted Average Life to Final Maturity. The yields shall be determined by reference to the yields as indicated by Telerate Access Service (page 8003 or the relevant page at the date of determination indicating such yields) (or, if such data ceases to be available, any publicly available sources of similar market data) at approximately 11:00 a.m. (New York City time) on the Make-Whole Premium Determination Date. "Remaining Dollar Years" means the sum of the amounts obtained by multiplying: (i) the amount of each remaining scheduled payment of principal of the Fixed Rate Notes (without giving effect to such Redemption) by (ii) the number of years (rounded to the nearest one-twelfth) which will elapse between the Redemption Date and the Payment Date for such scheduled principal amount. "Request" means a written request to a Person for the action therein specified, signed by the Person making such request or a Responsible Officer thereof. "Responsible Officer" means (i) in the case of any business corporation, the chairman of the board of directors, the president, any vice-president, the secretary, assistant secretary, the treasurer or assistant treasurer thereof, (ii) in the case of any commercial bank, the chairman or vice-chairman of the executive committee of the board of directors or trustees, the president, any vice president, the secretary, the treasurer, any trust officer, any executive, senior, second or assistant vice president or any officer or assistant officer customarily performing functions similar to those performed by the persons who at the time shall be such officers or to whom any related matter is referred because of his/her knowledge of and familiarity with the particular subject thereof, (iii) in the case of the Indenture Trustee, any senior trust officer or trust officer, or any vice president associated with the Corporate Trust Office, and (iv) with respect to the signing or authentication of Obligations and Guarantees by the Indenture Trustee, any person specifically authorized by the Indenture Trustee to sign or authenticate Obligations. -10- "Retired or Paid," as applied to Obligations and the indebtedness evidenced thereby, means that such Obligations shall be deemed to have been retired or paid and shall no longer be entitled to any rights or benefits provided in the Indenture if: (1) such Obligations shall have been paid in full in immediately available funds; (2) such Obligations shall have been cancelled by the Indenture Trustee or shall have been delivered to the Indenture Trustee for cancellation; or (3) such Obligations shall have become due and payable at Maturity and funds sufficient for the payment of such Obligations (including interest to the date of Maturity, or in the case of a payment after Maturity, to the date of payment, together with any premium thereon) and available for such payment (whether as a result of payment pursuant to the Guarantees or otherwise) shall be held by the Indenture Trustee or any Paying Agent pursuant to Section 4.02 of Exhibit 1 to the Indenture (or shall have been so held and shall thereafter have been paid to the Shipowner pursuant to Section 4.03 of Exhibit 1 to the Indenture) in trust for the purpose or with irrevocable directions, to apply the same; PROVIDED THAT, the foregoing definition is subject to the provisions of Section 6.08 of Exhibit 1 to the Indenture. "Secretary" means the Secretary of Transportation or any official or official body from time to time duly authorized to perform the duties and functions of the Secretary of Transportation under Title XI of the Act (including the Maritime Administrator, the Acting Maritime Administrator, and to the extent so authorized, the Deputy Maritime Administrator and other officials of the Maritime Administration). "Secretary's Note" means a promissory note or promissory notes issued and delivered by the Shipowner to the Secretary described in Article Third of the Special Provisions of the Security Agreement and shall also mean any promissory note issued in substitution for and replacement thereof pursuant to the Security Agreement. "Secretary's Notice" means a notice from the Secretary to the Indenture Trustee to the effect that (a) a default, within the meaning of Section 1105(b) of the Act, has occurred under a mortgage, loan agreement, or other security agreement that has been entered into between the Secretary, the Shipowner -11- and any other parties in order to protect the interests of the United States of America in connection with the Guarantees, (b) such notice is given for the purposes of Section 6.01(b) of Exhibit 1 to the Indenture in order to protect the security interests of the United States of America under such mortgage, loan agreement or other security agreement, and (c) the Guarantees will terminate upon the expiration of 60 days from the date of such notice if the Indenture Trustee and each Obligee shall have failed to demand payment of the Guarantees as provided in the Indenture, the Guarantees or the Act. Such notice shall be given (i) in writing, by registered mail, return receipt requested, deposited in the United States Mail on the date of such notice and addressed to a Responsible Officer in the Corporate Trust Office of the Indenture Trustee in accordance with the Special Provisions of the Indenture, (ii) by telegram, telex, telecopy or similar means of transmission dispatched on such date and addressed to the Responsible Officer in the Corporate Trust Office of the Indenture Trustee, as aforesaid, and (iii) by collect telephone call made on such date to a Responsible Officer in the Corporate Trust Office of the Indenture Trustee. A Secretary's Notice shall not be deemed to have been given unless it shall have been given in accordance with all the provisions of this definition, and the date of any Secretary's Notice shall be deemed to be the last date on which it is so given pursuant to clauses (i) through (iii) above. "Secretary's Supplemental Indenture" means a Supplemental Indenture evidencing the succession, pursuant to Section 6.09 of Exhibit 1 to the Indenture, of the Secretary to the Shipowner, and the assumption by the Secretary of the obligations of the Shipowner under the Indenture. "Section 1104" means Section 1104A of the Act, and when used with reference to subsections of Section 1104, means subsections of Section 1104A. "Security Agreement" shall mean that certain security agreement, Contract No. MA-13511, dated as of the Closing Date, with respect to the Vessel, executed by the Shipowner and the Secretary relating to the security in respect to the Guarantees, as originally executed or as modified, amended or supplemented in accordance with the applicable provisions thereof. "Shipowner" means PETRODRILL FIVE LIMITED, a British Virgin Islands international business company, and subject to the provisions of Sections 6.09, 8.01 and 8.02 of Exhibit 1 to the Indenture, shall also include its successors and assigns. "Shipyard" or "Shipbuilder" means TDI-Halter, Limited Partnership, a Louisiana limited partnership. "Stated Maturity," when used with respect to any Obligation, means the date determinable as set forth in such Obligation as the final date on which the -12- principal of such Obligation is due and payable, which shall include, without limitation, each of the Payment Dates. "Supplemental Indenture" shall mean any indenture supplement to the Indenture entered into pursuant to Article X thereof. "Title XI" means Title XI of the Act. "Title XI Reserve Fund and Financial Agreement" means that certain Title XI Reserve Fund and Financial Agreement, Contract No. MA-13513, dated as of the Closing Date, executed by the Shipowner and the Secretary, as amended, modified or supplemented in accordance with the applicable provisions thereof. "United States" means the United States of America. "Vessel" means the Shipowner's dynamic positioned semi-submersible drilling rig to be named the AMETHYST 5 and constructed by TDI-Halter, Limited Partnership in accordance with the Construction Contract, including all work and material heretofore or hereafter performed upon or installed in or placed on board such Vessel, together with related appurtenances, additions, improvements, and replacements. "Weighted Average Life to Final Maturity" means the number of years (rounded up to the nearest one-twelfth of a year) obtained by dividing: (i) the then Remaining Dollar Years by (ii) the total amount of the then remaining aggregate unpaid principal amount of such Fixed Rate Notes (without giving effect to the subject Redemption). -13- EX-4.23 25 EXHIBIT 4.23 APPENDIX II TO GUARANTEE COMMITMENT DOCUMENT 4 --------------------------------------------------------- TRUST INDENTURE Relating to United States Government Guaranteed Ship Financing Obligations Between PETRODRILL FOUR LIMITED Shipowner AND FMB TRUST COMPANY, NATIONAL ASSOCIATION Indenture Trustee Dated as of April 9, 1999 --------------------------------------------------------- TRUST INDENTURE Between PETRODRILL FOUR LIMITED Shipowner AND FMB TRUST COMPANY, NATIONAL ASSOCIATION Indenture Trustee Dated as of April 9, 1999 TABLE OF CONTENTS TO SPECIAL PROVISIONS OF THE INDENTURE 1/ PAGE Parties.................................................................... 1 Recitals................................................................... 1 ARTICLE FIRST Incorporation of General Provisions........................................ 2 ARTICLE SECOND The Obligations ........................................................... 3 ARTICLE THIRD Interest Rate Calculations................................................. 3 ARTICLE FOUR Certain Redemptions........................................................ 4 - - ------------------ 1/ This Table of Contents is not a part of the Indenture and has no bearing upon the interpretation of any of its terms and provisions. i ARTICLE FIFTH Definitions................................................................ 6 ARTICLE SIXTH Additions, Deletions and Amendments to Exhibit 1........................... 6 Signatures................................................................. 23 Acknowledgements........................................................ 24-25 EXHIBITS TO TRUST INDENTURE SCHEDULE A Schedule of Definitions to Trust Indenture EXHIBIT 1 General Provisions of the Indenture Incorporated by Reference EXHIBIT 2 Form of Floating Rate Note EXHIBIT 3 Form of Fixed Rate Note EXHIBIT 4 Authorization Agreement EXHIBIT 5 Form of Secretary Supplemental Indenture ii TRUST INDENTURE SPECIAL PROVISIONS THIS TRUST INDENTURE, is dated as of April 9, 1999 (said Trust Indenture, as the same may be amended, modified or supplemented from time to time as permitted hereunder, herein called the "Indenture"), is between (i) PETRODRILL FOUR LIMITED, a British Virgin Islands international business company (herein called the "Shipowner"), and (ii) FMB TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association (said banking association, any successor or assign hereunder, herein called the "Indenture Trustee"). RECITALS: A. As provided in Article Fifth hereof, the terms defined in Schedule A to this Indenture shall have the respective meanings stated in said Schedule; B. The Shipowner has duly executed this Indenture, and duly authorized the issuance hereunder of $149,625,000 principal amount of its Obligations pursuant to Section 2.03 of Exhibit 1 to this Indenture (herein together with any Obligations issued in respect thereof pursuant to Sections 2.09, 2.10, 2.12 and 3.10(b) of said Exhibit 1, called the "Obligations") designated "United States Government Guaranteed Export Ship Financing Obligations, AMETHYST 4 Series;" C. The Obligations will be issued by the Shipowner to aid in the financing of the cost of construction of a self-propelled semi-submersible drilling rig to be named the AMETHYST 4 (the "Vessel"); D. To aid in financing the construction of the Vessel, the Shipowner has entered into a credit agreement (the "Credit Agreement") with GOVCO INCORPORATED a Delaware corporation (the "Primary Lender"), CITIBANK, N.A., a national banking association (the "Alternate Lender'), CITIBANK INTERNATIONAL PLC, a bank organized and existing under the laws of England (the "Facility Agent") and CITICORP NORTH AMERICA, INC., a Delaware corporation (the "Administrative Agent") providing for the delivery of no more than $149,625,000 principal amount of notes designated "United States Government Guaranteed Export Ship Financing Obligations, AMETHYST 4 Series"; E. Under the Authorization Agreement in the form set forth as Exhibit 4 hereto, the Secretary, on behalf of the United States, has agreed and will agree to execute on the Obligations to be issued, a Guarantee of the payment of the unpaid interest to the date of such payment on, and the unpaid balance of the principal of, such Obligation under the provisions of Title XI of the Act, and the Indenture Trustee is authorized to cause the Guarantees, bearing the facsimile signature of the Secretary, and the facsimile seal of the United States Department of Transportation, to be imprinted on the Obligations, and to authenticate and deliver the Obligations and the Guarantees issued on the Closing Date and from time to time thereafter, such agreements and authorizations being subject to the conditions set forth in the Authorization Agreement; F. Pursuant to Section 1104(b)(5) of the Act, the Secretary will determine that the interest to be borne by the Obligations (exclusive of charges for the guarantee fee and service charges, if any) is reasonable; and G. All actions necessary have been or will be taken in order (1) to make the Obligations, when executed by the Shipowner, authenticated by the Indenture Trustee and issued under the Indenture, the valid, binding and legal obligations of the Shipowner in accordance with their terms, (2) to make the Guarantees to be endorsed on the Obligations, when executed on behalf of the Secretary, authenticated by the Indenture Trustee and delivered under this Indenture, the valid, binding and legal obligations of the United States in accordance with their terms, and (3) to make this Indenture the valid, binding and legal agreement of the parties hereto in accordance with its terms. NOW THEREFORE, in consideration of the premises, of the mutual covenants herein contained, of the purchase of the Obligations by the Holder and of other good and valuable consideration, the receipt and adequacy of which the parties hereby acknowledge, and for the equal and proportionate benefit of the present and future Holder, the parties hereto agree as follows: ARTICLE FIRST INCORPORATION OF GENERAL PROVISIONS This Indenture shall consist of two parts: the Special Provisions and the General Provisions attached hereto as Exhibit 1, made a part of this Indenture and incorporated herein by reference. In the event of a conflict, the terms of the Special Provisions shall prevail. 2 ARTICLE SECOND THE OBLIGATIONS (a) The Obligations issued hereunder shall be designated "United States Government Guaranteed Export Ship Financing Obligations, AMETHYST 4 Series," and shall be in the forms of Exhibits 2 and 3 to this Indenture; and, the aggregate principal amount of Obligations which may be issued under this Indenture shall not exceed $149,625,000 except as provided in Sections 2.09, 2.10, 2.12 and 3.10(b) of Exhibit 1 hereto. (b) The Obligations shall be in the denominations of $1,000 or any integral multiple thereof. (c) The Shipowner shall at all times cause to be maintained in the City of Baltimore, State of Maryland an office or agency for the purposes specified in Section 5.03 of Exhibit 1 to this Indenture. (d) The Indenture Trustee shall at all times have its Corporate Trust Office in the City of Baltimore, State of Maryland. ARTICLE THIRD INTEREST RATE CALCULATIONS Upon the terms and subject to the conditions contained in the Obligations, and based on information received from the Facility Agent (but only in connection with the Floating Rate Note), the Indenture Trustee will calculate the Applicable Interest Rate on the Obligations in the manner and at the times provided in the Obligations and shall communicate the same to the Shipowner, the Secretary and any paying agent identified to it in writing as soon as practicable after each determination. The Indenture Trustee, based on information received from the Facility Agent (but only in connection with the Floating Rate Note), will, upon the request of the Holder of the Obligations, determine the Applicable Interest Rate then in effect with respect to the Obligations. 3 ARTICLE FOURTH CERTAIN REDEMPTIONS (a) SCHEDULED MANDATORY REDEMPTION. The Obligations are subject to redemption at a Redemption Price equal to 100% of the principal amount thereof, together with interest accrued thereon to the applicable Redemption Date, through the operation of scheduled repayment providing for the semi-annual redemption on February 15 and August 15 of each year, commencing February 15, 2001 of $6,234,000 of principal amount of Obligations, which amount represents approximately one twenty-fourth (1/24) of the Original Principal Amount of Obligations, plus interest accrued thereon to the Redemption Date. There shall be a final redemption of the remaining outstanding principal of the Floating Rate Note on the earlier of (i) August 15, 2002, or (ii) two (2) years after the Delivery Date, and a final redemption of the remaining outstanding principal of the Fixed Rate Notes on August 15, 2012. Notwithstanding the foregoing provisions of this subsection (a), if the principal amount of Outstanding Obligations shall be reduced by reason of any redemption pursuant to Section 3.04 of Exhibit 1 to this Indenture, the principal amount of Obligations to be redeemed pursuant to this subsection (a) on each subsequent Redemption Date for such Obligations shall be reduced by an amount equal to the principal amount of such Obligations retired by reason of such redemption pursuant to Section 3.04 of Exhibit 1 hereto divided by the number of Redemption Dates (including the Stated Maturity of such Obligations) scheduled thereafter to August 15, 2002 in the case of the Floating Rate Note and August 15, 2012 in the case of Fixed Rate Note(s) (subject to such increase as shall be necessary so that the total principal amount of Obligations to be redeemed on any such Redemption Date shall be an integral multiple of $1,000); PROVIDED THAT, the entire unpaid principal amount of the Outstanding Obligations shall be paid not later than August 15, 2002 in the case of the Floating Rate Note and August 15, 2012 in the case of each Fixed Rate Note. The Shipowner shall, in accordance with Section 3.02(d) of Exhibit 1 hereto, promptly after each redemption pursuant to said Section 3.04, furnish to the Secretary, the Indenture Trustee and each Holder a revised table of scheduled repayments reflecting the reductions made pursuant to this subsection (a) as a result of such redemption. (b) OPTIONAL REDEMPTION OF OBLIGATIONS WITHOUT PREMIUM. At its option, the Shipowner may without premium, (i) prepay on any Interest Payment Date the Floating Rate Note, in whole or in part, in a minimum principal amount of $10,000,000, at a 4 Redemption Price equal to 100% of the principal amount thereof together with interest accrued thereon to the Redemption Date, or (ii) redeem or prepay the Floating Rate Note, in whole or in part, on a Redemption Date designated by the Shipowner, from the proceeds from the issuance of the Fixed Rate Notes. (c) OPTIONAL REDEMPTIONS OF OBLIGATIONS AT MAKE-WHOLE PREMIUM. At its option, the Shipowner may prepay on any Interest Payment Date the Fixed Rate Notes, in whole or in part, in a minimum principal amount of $10,000,000, at a Redemption Price equal to 100% of the principal amount thereof together with interest accrued thereon to the Redemption Date plus the Make-Whole Premium, if any. Prepayments shall be applied pro rata against each Fixed Rate Note and applied against the scheduled principal payments in the inverse order of scheduled maturity. (d) OPTIONAL REDEMPTIONS. If the Shipowner shall elect to make any such optional redemptions pursuant to this Article, the Shipowner shall, at least 40 days but not more than 60 days prior to the date fixed for redemption, deliver to the Indenture Trustee (1) a Request stating that the Shipowner intends to exercise its rights as above set forth to make such optional redemptions and specifying the Redemption Date and the principal amount which the Shipowner intends to redeem on such date, and (2) at least 35 days prior to the date fixed for redemption in the case of the Fixed Rate Notes, deliver to the Indenture Trustee an amount equal to the Make Whole Premium estimated by the Indenture Trustee, based on information received from the Holder or a calculation agent, to be paid on the Redemption Date. The Indenture Trustee, based on information received from the Holder or a calculation agent, shall give an estimate of the Make Whole Premium to the Shipowner within two (2) business days of the delivery of the Shipowner's Request. In the event the amount of the Make Whole Premium deposited by the Shipowner with the Indenture Trustee pursuant to this section (and interest, if any, accrued thereon, less any losses incurred on the investment thereof) is insufficient to pay the amount of the Make Whole Premium, the Shipowner shall pay the amount of the shortfall to the Indenture Trustee in immediately available funds upon one (1) day's notice. In the event the amount of the Make Whole Premium deposited by the Shipowner pursuant to this section (and interest, if any, accrued thereon, less any losses incurred on the investment thereof) exceeds the Make Whole Premium, the excess amount shall be refunded to the Shipowner by the Indenture Trustee in immediately available funds on the Redemption Date. 5 ARTICLE FIFTH DEFINITIONS For all purposes of this Indenture, unless otherwise expressly provided or unless the context otherwise requires: (1) All references herein to Articles, Sections or other subdivisions, unless otherwise specified, refer to the corresponding Articles, Sections and other subdivisions of this Indenture; (2) The terms "hereof," "herein," "hereby," "hereto," "hereunder" and "herewith" refer to this Indenture; and (3) The terms used herein and defined in Schedule A to this Indenture shall have the respective meanings stated in said Schedule. ARTICLE SIXTH ADDITIONS, DELETIONS AND AMENDMENTS TO EXHIBIT 1 The following additions, deletions and amendments are hereby made to Exhibit 1 to this Indenture. (a) CONCERNING IMMEDIATELY AVAILABLE FUNDS. Notwithstanding any provision in Exhibit 1 to this Indenture to the contrary, all payments are to be made in immediately available funds. (b) CONCERNING MANDATORY SCHEDULED REDEMPTIONS. The terms "sinking fund payment" and "sinking fund redemption" in Exhibit 1 to this Indenture refer to the mandatory scheduled redemption. (c) CONCERNING SECTION 2.02. Section 2.02(c) is revised to read as follows: (c) If the Maturity of any Obligation or an Interest Payment Date for any Obligation shall be a day other than a Business Day, then such payment may be made on the next succeeding Business Day, with the same force and effect as if made on the Interest Payment Date for such payment; PROVIDED, HOWEVER, that interest shall accrue thereon for the period after said Interest Payment Date (whether or not such next succeeding Business Day occurs in a succeeding month). 6 (d) CONCERNING SECTION 2.04. Prior to the earlier of (i) August 15, 2002, or (ii) two (2) years from the Delivery Date, the Shipowner and the Indenture Trustee may enter into a Supplemental Indenture, and the Indenture Trustee may enter into a supplement to the Authorization Agreement, pursuant to Section 2.04 of Exhibit 1 to this Indenture, to provide for the issuance of fixed rate obligations in the form of Exhibit 3 hereto for the purpose of repaying the Floating Rate Note; PROVIDED HOWEVER, that the Shipowner and Indenture Trustee have obtained the prior written consent of the Secretary and FURTHER PROVIDED, that (a) except for the final issuance, each issuance of a Fixed Rate Note must be in a minimum aggregate principal amount of $50,000,000, and (b) the proceeds from the issuance of Fixed Rate Notes shall be used to pay off, satisfy and cancel the Floating Rate Note; PROVIDED, HOWEVER, that during the Construction Period, the Floating Rate Note need not be paid off in its entirety and need only be reduced by the net proceeds from the issuance of the Fixed Rate Notes. (e) CONCERNING SECTION 2.06. Interest at the Applicable Interest Rate shall be due on each Disbursement at the end of each Interest Period. The Indenture Trustee, based on information received from the Facility Agent (but only in connection with the Floating Rate Note), will determine the Applicable Interest Rate for each Interest Period. (f) CONCERNING SECTION 2.10. The first paragraph of Section 2.10(c) is revised to read as follows: (c) The Shipowner or the Indenture Trustee shall not be required to register transfers or make exchanges of (1) Obligations for a period of 15 days immediately prior to (A) an Interest Payment Date or (B) any selection of Obligations to be redeemed, (2) Obligations after demand for payment of the Guarantees and prior to the payment thereof or rescission of such demand pursuant to Section 6.02(a), or (3) any Obligation which has been selected for redemption in whole or in part, except as to the unredeemed portion of any Obligation being redeemed in part. (g) CONCERNING SECTION 2.12. With respect to clause (1) of the proviso to Section 2.12 of Exhibit 1 to the Indenture, a written agreement of indemnity which is satisfactory in form and substance to the Secretary, the Shipowner, and the Indenture Trustee, executed and delivered by an institutional Holder having a capital and surplus of at least $100,000,000 shall be considered sufficient indemnity to the Secretary, the Shipowner, and the Indenture Trustee in connection with the execution, authentication and delivery of any new Obligations or the making of any payment as contemplated by said Section 2.12. 7 (h) CONCERNING PAYMENT OF THE OBLIGATIONS. Notwithstanding anything to the contrary in Exhibit 1 hereto, the Obligations to be issued hereunder shall be payable as to principal, premium (if any), and interest, at an office or agency maintained by the Shipowner for such purpose at the Corporate Trust Office of the Indenture Trustee, or at the option of the Shipowner, as to payments of principal, premium (if any), or interest by wire, in immediately available funds, by such Corporate Trust Office to the Obligees as appear in the Obligation Register, subject in any event to the provisions hereof concerning home office payment and subject to the Indenture Trustee's prior receipt of funds sufficient for the payment of principal, premium (if any) or interest by wire or other immediately available funds. The Indenture Trustee shall have no obligation to determine whether such wires or payments were received by the Obligees. (i) CONCERNING SECTION 3.02. Section 3.02(c) and (d) are revised to read as follows: (c) SCHEDULED REDEMPTIONS. If the Obligations of any series and Stated Maturity or the Special Provisions hereof or the Supplemental Indenture establishing such series shall so provide, such Obligations shall be subject to (i) scheduled redemption through the operation of a mandatory redemption schedule, in such amounts, at such times and subject to such credits (if any) as may be specified therein, and (ii) redemption at the option of the Shipowner, in connection with the operation of any such mandatory redemption schedule, in such additional amounts and subject to such conditions as may be specified therein. (d) ADJUSTMENTS OF REDEMPTION PAYMENTS. If the Obligations of any series and Stated Maturity or the Special Provisions hereof or of the Supplemental Indenture establishing such series provide for an adjustment in scheduled redemption payments as a result of any redemption or cancellation of Obligations, the Shipowner shall recompute the remaining scheduled redemption payments pursuant to such provisions and shall, at least 60 days prior to the next Interest Payment Date which occurs at least 60 days following any such redemption or cancellation of Obligations of such series requiring such recomputation, submit to the Secretary for his review such recomputation to ascertain compliance with the provisions of such Obligations or the Special Provisions hereof or such Supplemental Indenture, and table of revised mandatory redemption schedule payments on the Obligations of such series reflecting the adjustments made pursuant to such provisions as a result of such redemption or 8 cancellation. Upon advice by the Secretary that he finds such recomputation to comply with such provisions, the Shipowner shall submit said table to the Indenture Trustee and the Indenture Trustee shall promptly submit a copy thereof to each Holder of an Obligation of such series. (j) CONCERNING SECTION 3.03. The date required by Section 3.03 of Exhibit 1 hereto for the Floating Rate Note is the earlier of August 15, 2002, or (ii) two (2) years from the Delivery Date. The date required by Section 3.03 of Exhibit 1 hereto for the Fixed Rate Notes is August 15, 2012. (k) CONCERNING SECTION 3.06. Section 3.06 of Exhibit 1 hereto is hereby amended in its entirety to read as follows: SECTION 3.06. REDEMPTION AFTER ASSUMPTION BY THE SECRETARY. Upon receipt by the Indenture Trustee of written instructions from the Secretary stating that the principal amount of Obligations specified in such instructions are required to be redeemed on the date specified therein (which shall be not less than 40 nor more than 60 days from the receipt of such instructions by the Indenture Trustee) at the option of the Secretary at any time after the Secretary's assumption of the Obligations pursuant to Section 6.09, the Indenture Trustee shall promptly give notice as provided in Section 3.08 of the redemption on the Redemption Date of the principal amount of Obligations specified in such instructions and the Indenture Trustee shall, on such Redemption Date, redeem such Obligations together with interest accrued thereon to such Redemption Date; PROVIDED THAT, the Secretary shall redeem at the principal amount thereof and interest accrued thereon the Outstanding Obligations relating to the Vessel if the Vessel has been sold pursuant to Section 8.02 to a purchaser or purchasers who have not assumed such Obligations by notice to the Indenture Trustee in accordance with this Section 3.06 within 40 days of the nonassumption of the Obligations by such purchaser. (l) CONCERNING SECTION 3.07. (i) Section 3.07(a) of Exhibit 1 to this Indenture is revised to delete the phrase "or 3.05." (ii) Notwithstanding the provisions of Section 3.07(b) of Exhibit 1 to this Indenture, if less than all of the Obligations are to be redeemed under any of the provisions contained or referred to in Article Fourth hereof (excluding Article Fourth (c) or Article III of said Exhibit 1), the Indenture Trustee shall select such Obligations to be redeemed on the Redemption Date by allocating the principal amount to be redeemed first between each 9 maturity of Obligations in proportion to the Outstanding Obligations and second among the holders of each maturity of Obligations in proportion to the aggregate principal amount of such maturity of Obligations registered in their respective names; provided that, the Indenture Trustee may select for redemption portions of the principal amount of the Obligations of a denomination larger than $1,000; but the portions of the principal amount of the Obligations so selected shall be equal to $1,000 or an integral multiple thereof. (m) CONCERNING SECTION 3.09. Section 3.09 of Exhibit 1 to this Indenture is revised to read as follows: SECTION 3.09. DEPOSIT OF REDEMPTION MONEYS. No later than 11:00 a.m. in Baltimore, Maryland on any Redemption Date, the Shipowner shall, except as contemplated by Section 3.08(b) or Article Fourth (d) of the Special Provisions, deposit or cause to be deposited with the Indenture Trustee or with any Paying Agent an amount in immediately available funds sufficient for such redemption (after taking into account any amounts then held by the Indenture Trustee or such Paying Agent and available for such redemption) with irrevocable directions to it to so apply the same. (n) CONCERNING SECTION 4.01. Section 4.01(b) of Exhibit 1 hereto is hereby amended in its entirety to read as follows: "(b) Cash held by the Indenture Trustee or any Paying Agent (other than the Shipowner) under this Indenture - (i) need not be segregated; (ii) shall not be invested except as permitted by clause (iv) of this Section 4.01(b); (iii) shall not bear interest except as the Shipowner and the Indenture Trustee (or such Paying Agent) may agree in writing; and (iv) if the Shipowner shall have deposited or caused to be deposited with the Indenture Trustee funds sufficient for the payment of the Obligations at their Maturity, including interest to the date of Maturity, and the date of Maturity is more than one (1) Business Day after the deposit of such funds, the Indenture Trustee upon the Request of the 10 Shipowner shall invest such funds, as directed by the Shipowner in writing, in direct obligations of the United States Government maturing at or prior to the date of Maturity of such Obligations and having a principal amount equal to not less than the amount of the funds so invested. Such investments shall be held in trust for the purpose for which the funds so invested were held. After the Obligations in respect of which the funds were deposited have been paid in full (except as to unclaimed amounts as referred to in Section 4.03) any of such funds (including interest received in respect of such investments and gain on matured investments purchased at a discount) held by the Indenture Trustee in excess of amounts to which Holders of such Obligations are entitled shall upon the Request of the Shipowner be paid by the Indenture Trustee to the Shipowner but only in the absence of an Indenture Default hereunder." (o) CONCERNING SECTION 4.02. The appointment of a Paying Agent by the Shipowner is subject to the prior written consent of the Secretary and Indenture Trustee, which consent shall not be unreasonably withheld. (p) CONCERNING SECTION 4.03. Section 4.03 is revised to read as follows: SECTION 4.03. UNCLAIMED AMOUNTS. Any moneys received by the Indenture Trustee or a Paying Agent, for the payment of Obligations or Guarantees and remaining unclaimed by the Holders thereof for 6 years after the date of the Maturity of said Obligations or the date of payment by the Secretary of the Guarantees shall, upon delivery to the Indenture Trustee of a Request by the Shipowner, be paid to the Shipowner; PROVIDED THAT, not less than 30 days prior to such payment, the Shipowner shall publish notice thereof to the Obligees at least once in the Authorized Newspapers and provide the Indenture Trustee with copies thereof. In such event, such Holders shall thereafter be entitled to look only to the Shipowner (and the settlor or settlors of any trust for which the Shipowner is trustee, to the extent paid over to it or them) for the payment thereof, and the Indenture Trustee or such Paying Agent, as the case may be, shall thereupon be relieved from all responsibility to such Holders therefor. No such Request, publication or payment shall be construed to extend any statutory period of limitations which would have been applicable in the absence of such Request, publication or payment. 11 (q) CONCERNING SECTIONS 5.01 AND 5.02. Sections 5.01 and 5.02 are revised to read as follows: SECTION 5.01. AUTHORIZATION, EXECUTION AND DELIVERY OF INDENTURE AND PERFORMANCE. The Shipowner has duly authorized the execution, delivery and performance of this Indenture. SECTION 5.02. PAYMENT AND PROCEDURE FOR PAYMENT OF OBLIGATIONS. The Shipowner will duly and punctually pay the principal of (and premium, if any) and interest on the Obligations according to the terms thereof and of this Indenture. The Shipowner will deposit with the Indenture Trustee or (subject to Section 3.09) a Paying Agent no later than 11:00 a.m. in Baltimore, Maryland on each date fixed for such payment or as otherwise provided by the Special Provisions hereof an amount in immediately available funds sufficient for such payment (after taking into account any amounts then held by the Indenture Trustee or such Paying Agent and available for such payment) with irrevocable directions to it to so apply the same; PROVIDED THAT, payments of interest may be made as provided in Section 2.02(b)(4) as modified by Article Sixth (b) of the Special Provisions; and PROVIDED FURTHER, that except with the consent of the Secretary the Shipowner shall not deposit any such amount more than ten (10) days prior to the date of the payment for which such amount is deposited, unless otherwise provided by the Special Provisions hereof. (r) CONCERNING SECTION 6.06. Section 6.06(a) revised to read as follows: SECTION 6.06. (a) OBLIGEES' RIGHT TO DIRECT INDENTURE TRUSTEE AFTER INDENTURE DEFAULT. During the continuance of any Indenture Default, the Holders of a majority in principal amount of the Outstanding Obligations shall have the right, by an Act of Obligees, to direct the Indenture Trustee: (1) to exercise or to refrain from exercising any right or to enforce any remedy granted to it by this Indenture; and (2) to direct the time, method and place of the exercise of any such right or the enforcement of any such remedy; PROVIDED THAT, subject to Section 7.03, the Indenture Trustee shall have the right not to take any such action if it shall determine in good faith that the action would involve it in personal liability, would subject it 12 to expenses and liability against which it had not been offered adequate security, or would be unjustly prejudicial to the Obligees not parties to such direction. Anything in this Section 6.06(a) to the contrary notwithstanding, the Indenture Trustee shall be obligated to demand payment of the Guarantees as provided in Section 6.02(a) unless the Holders of all Outstanding Obligations shall have elected to terminate the Guarantees as provided in Section 6.04(a)(2), in which case the Indenture Trustee shall be obligated to refrain from making such demand. (s) CONCERNING SECTION 6.09. The reference to "Exhibit 4" in Section 6.09 is revised to read "Exhibit 5" and the following paragraph is added at the end of Section 6.09: In the event that the Obligations are registered in the name of The Depository Trust Company ("DTC"), Cede & Co. ("Cede") or another nominee of DTC or Cede pursuant to a Letter of Representations ("LOR") which is executed among the Shipowner, the Indenture Trustee and DTC, and (i) if the Secretary assumes the Obligations pursuant to Section 6.09(a) hereof, or (ii) if the Secretary instructs the Shipowner and the Indenture Trustee to terminate the LOR, the Shipowner and the Indenture Trustee, immediately upon receipt of notice of such assumption or upon receipt of notice of such termination, shall terminate or cause the termination of the LOR in accordance with Section 11 thereof. The Indenture Trustee shall within 30 days from receipt of either such notice from the Secretary also instruct DTC to notify its direct and indirect participants of the need to re-register the Obligations in the names of the beneficial owners. Upon surrender by DTC of the Obligations issued in its name, the name of Cede or another nominee, the Shipowner shall issue at its sole expense, and the Indenture Trustee shall authenticate Obligations in the names provided to the Indenture Trustee by DTC. (t) CONCERNING SECTION 7.02. The reference to "$3,000,000" in Section 7.02 is revised to read "$75,000,000." (u) CONCERNING SECTION 7.03. Section 7.03(h) and (o) are revised to read as follows: (h) In all cases where this Indenture does not make express provision as to the evidence on which the Indenture Trustee may act or refrain from acting, the Indenture Trustee shall be entitled to receive and shall be protected (subject to paragraph (c) of this Section) in acting or refraining from acting hereunder in reliance upon an Officer's Certificate as to the existence or nonexistence of any fact. 13 (o) No provision of this Indenture shall require the Indenture Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers. (v) CONCERNING SECTION 7.04. Section 7.04 is revised to read as follows: SECTION 7.04. COMPENSATION, EXPENSES AND INDEMNIFICATION OF INDENTURE TRUSTEE. The Shipowner shall (1) pay such compensation to the Indenture Trustee as they may agree upon in writing from time to time and reimburse it for its reasonable expenses and disbursements (including counsel fees and expenses) and (2) indemnify the Indenture Trustee for, and hold it harmless against, any loss, liability or expense which it may incur or suffer without negligence or bad faith in acting under this Indenture or the Authorization Agreement. The compensation of the Indenture Trustee shall not be limited to the compensation provided by law for a trustee acting under an express trust. The obligations of the Shipowner under this Section 7.04 shall survive the termination of the Indenture and resignation or removal of the Indenture Trustee. (w) CONCERNING SECTIONS 8.01 AND 8.02. Sections 8.01 and 8.02 are revised to read as follows: SECTION 8.01. CONSOLIDATION, MERGER OR SALE BY SHIPOWNER. Nothing in this Indenture shall prevent any lawful consolidation or merger of the Shipowner with or into any other Person, or any sale of the Vessel to any other Person lawfully entitled to acquire and operate the Vessel or any sale by the Shipowner of all or substantially all of its assets to any other Person; PROVIDED THAT, except where the Shipowner shall be the Person surviving a merger or consolidation, the Person formed by or surviving such consolidation or merger, or to which the sale of the Vessel shall be made, shall, by Supplemental Indenture, expressly assume the payment of the principal of and interest (and premium, if any) on the Outstanding Obligations relating to the Vessel in accordance with the terms of the Obligations and of the Indenture and shall expressly assume the performance of the agreements of the Shipowner in the Indenture; PROVIDED FURTHER, that to the extent the Outstanding Obligations are not 14 so assumed, the Shipowner shall redeem or cause to be redeemed the Outstanding Obligations, such redemption to be in accordance with the terms of the Obligations and of the Indenture. When a Person so assumes this Indenture and the Outstanding Obligations, the Supplemental Indenture shall discharge and release the Shipowner from any and all obligations thereunder relating to the Outstanding Obligations. In the event of such an assumption by a Person to whom the Vessel has been sold (a) such Person shall succeed to, and be substituted for, and may exercise every right and power of the original Shipowner with the same effect as if such successor Shipowner had been named as the Shipowner herein and (b) the Outstanding Obligations shall be surrendered to the Indenture Trustee for appropriate notation or for the issuance of new Obligations in exchange for the Outstanding Obligations in the name of the successor Shipowner, as required by the Secretary and at the expense of the successor Shipowner. SECTION 8.02. SALE OF THE VESSEL BY THE SECRETARY. Nothing contained in this Indenture shall prevent the sale of the Vessel to any other Person by the Secretary, by a court of law or by the Shipowner following, in connection with or in lieu of a foreclosure or similar action. Following any such sale (1) the Person to whom the Vessel has been sold may, by Supplemental Indenture, expressly assume the payment of principal and interest (and premium, if any) on all of the Outstanding Obligations in accordance with the terms of the Obligations and the Indenture and shall expressly assume the performance of the agreements of the Shipowner in the Indenture; and (2) in the event such Person does not so assume, the Secretary shall prepay or redeem all of the Outstanding Obligations without premium pursuant to Section 3.06 hereof; PROVIDED THAT, the Secretary shall allow or permit the sale of the Vessel to the original Shipowner or to any affiliate of the original Shipowner only if (i) the Secretary has not prepaid or redeemed such Obligations prior to such sale, and (ii) such purchaser assumes all of the Outstanding Obligations as contemplated by the preceding clause (1). When a Person so assumes this Indenture and all of the Outstanding Obligations, the Supplemental Indenture shall discharge and release the Secretary from any and all obligations thereunder in the Secretary's capacity as Shipowner relating to the Outstanding Obligations. In the event of such an assumption by a Person to whom the Vessel has been sold (a) such Person shall succeed to, and be substituted for, and may exercise every right and power of the original Shipowner with the same effect as if such successor Shipowner had been named as the Shipowner herein and (b) the Outstanding Obligations shall be surrendered to the Indenture Trustee for appropriate notation or for the issuance of new Obligations in exchange for the Outstanding 15 Obligations in the name of the successor Shipowner, as required by the Secretary and at the expense of the successor Shipowner. Any such sale or the execution of a Supplemental Indenture by an successor Shipowner shall not discharge or in any manner affect the obligation of the United States to pay the Guarantees pursuant to the terms thereof. (x) CONCERNING NOTICES. Subject to the provisions of Section 13.01 of Exhibit 1 to this Indenture, any notice, request, demand, direction, consent, waiver, approval or other communication to be given to a party hereto or the Secretary, shall be deemed to have been sufficiently given or made when addressed to: The Indenture Trustee as: FMB TRUST COMPANY, NATIONAL ASSOCIATION 25 South Charles St. 16th Floor (Mail Code 101-591) Baltimore, MD 21201 The Shipowner as: Petrodrill Four Limited c/o Arias, Fabrega & Fabrega P.O. Box 985 Omar Hodge Building Wickham's Cay Road Town, Tortola British Virgin Islands With Copies to: PETRODRILL ENGINEERING NV K.P. van der Mandelelaan 38 3062 MB Rotterdam (Brainpark) The Netherlands The Secretary as: SECRETARY OF TRANSPORTATION c/o Maritime Administrator Department of Transportation 400 Seventh Street, SW Washington, D.C. 20590 Attention: Office of the Chief Counsel 16 (y) CONCERNING APPLICABLE LAW. This Indenture and each Obligation shall be governed by the federal laws of the United States of America, but to the extend that they are inapplicable by the laws of the State of Maryland. (z) CONCERNING DISBURSEMENT NOTATIONS. Upon receipt from the Lender of documents confirming Disbursements, the Indenture Trustee shall review Exhibit A of the Floating Rate Note (the "Grid"), and calculate principal and applicable interest thereon. If the Indenture Trustee's calculations are not consistent with those of the Lender, the calculations of the former shall prevail. The Indenture Trustee shall promptly thereafter send a copy of the Grid bearing its calculations to the Holder, who shall endorse the Indenture Trustee's calculations on the original Exhibit A to the Floating Rate Note, and send a copy thereof, so noted, to the Indenture Trustee, who, in turn, shall promptly send a copy thereof to the Secretary. (aa) CONCERNING REGISTERED AND BENEFICIAL OWNERSHIP OF THE OBLIGATIONS; LEGENDS. (i) The Fixed Rate Notes may be issued initially in the form of one or more permanent global Notes in definitive, fully registered form without interest coupons (each, a "Global Obligation"). Except as provided in paragraph (iii) below, owners of beneficial interests in Global Obligations ("Obligation Owners") will not be entitled to receive separate certificated Notes ("Definitive Obligation") and will not be considered the holders thereof. Each such Global Obligation shall be deposited with the Depository Trust Company (the "DTC") or the Indenture Trustee, as custodian for DTC, registered in the name of DTC or a nominee of DTC, and duly executed by the Shipowner and authenticated by the Indenture Trustee as provided in the Indenture. Each Global Obligation shall bear such legend as DTC may require. (ii) Members of, or participants in, DTC shall have no rights under the Indenture with respect to any Global Obligation held on their behalf by DTC or by the Indenture Trustee, as the custodian of DTC, or under such Global Obligation, and DTC may be treated by the Shipowner, the Indenture Trustee and any agent of the Shipowner or the Indenture Trustee as the absolute owner of such Global Obligation for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Shipowner, the Indenture Trustee or any agent of the Shipowner or the Indenture Trustee from giving effect to any written certification, proxy or other authorization furnished by DTC or impair, as between DTC and its members and participants, the operation of 17 customary practices of DTC governing the exercise of the rights of an owner of a beneficial interest in any Global Obligation. (iii) (1) The transfer and exchange of Global Obligations or beneficial interests therein shall be effected through DTC or the Indenture Trustee, as the custodian for DTC, in accordance with the Indenture and the procedures of DTC therefor. (2) A Global Obligation shall be exchangeable for Definitive Obligations registered in the names of persons owning beneficial interest in such Global Obligation only if any of the following events shall have occurred: (1) DTC notifies the Shipowner, with a copy to the Indenture Trustee, that it is unwilling or unable to continue as depositary for such Global Obligation or DTC ceases to be a clearing agency registered under the Securities Exchange Act of 1934, as amended, at a time when DTC is required to be so registered in order to act as depositary, and a successor depositary is not appointed by the Shipowner within 90 days thereafter, (2) the Shipowner or the Indenture Trustee elects to terminate DTC's services or the book entry system, (3) the Secretary assumes the Obligations, or (4) the Secretary instructs the Shipowner and Indenture Trustee to terminate the Letter of Representations. (3) Any Global Obligation that is exchangeable for Definitive Obligations registered in the name of the owners of beneficial interests therein pursuant to this paragraph (iii) shall be surrendered by DTC to the Indenture Trustee to be so exchanged, without charge, and the Shipowner shall execute and the Indenture Trustee shall authenticate and deliver, upon such exchange of such Global Obligation, an equal aggregate principal amount of Definitive Obligations of authorized denominations. Definitive Obligations issued in exchange for a beneficial interest in a Global Obligation pursuant hereto shall be registered in such names and in such authorized denominations as DTC, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Indenture Trustee in writing. The Indenture Trustee shall deliver such Definitive Obligations to the Obligation Owners in whose names such Obligations are so registered in accordance with the instructions of DTC. (4) The registered holder of a Global Obligation may grant proxies and otherwise authorize any Obligation Owner, including DTC's members and participants and Obligation Owners that may hold interest through such members and participants, to take any action which a Holder is entitled to take under the Indenture or the Obligations. 18 (5) In the event of the occurrence of any of the events specified in paragraph (iii)(2), the Shipowner will promptly make available to the Indenture Trustee a reasonable supply of Definitive Obligations. (6) Notwithstanding any other provision of the Indenture, a Global Obligation may not be transferred except as a whole by DTC for such Global Obligation to a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC. (iv) At such time as all beneficial interests in a Global Obligations have either been exchanged for Definitive Obligations, redeemed, repurchased or canceled, such Global Obligation shall be returned to the Indenture Trustee for cancellation or retained and canceled by the Indenture Trustee. (v) The Indenture Trustee shall have no responsibility or obligation to any owner of a beneficial interest in a Global Obligation, a member of, or a participant in DTC or any other Obligation Owner with respect to the accuracy of the records of DTC or its nominee or of any participant or member thereof, with respect to any ownership interest in the Obligations or with respect to the delivery to any participant, member, beneficial owner or other Obligation Owner (other than DTC) of any notice (including any notice of redemption) or the payment of any amount or delivery of any Obligations (or other security or property) under or with respect to such Obligations. All notices and communications to be given to the Holders and all payments to be made to Holders in respect to the Obligations shall be given or made only to or upon the order of the registered Holders (which shall be DTC or its nominee in the case of a Global Obligation). The rights of owners of beneficial interests in any Global Obligation shall be exercised only through DTC subject to the applicable rules and procedures of DTC. The Indenture Trustee may rely and shall be fully protected in relying upon information furnished by DTC with respect to its members, participants and any beneficial owners. (bb) JURISDICTION AND CONSENT TO SUIT. Any proceeding to enforce this Agreement may be brought in the Federal courts of the United States of America located in the State of Maryland of the United States of America. The Shipowner and the Indenture Trustee hereby irrevocably waive any present or future objection to such venue, and for each of itself and in respect of any of their respective properties hereby irrevocably consents and submits unconditionally to 19 the nonexclusive jurisdiction of those courts. The Shipowner further irrevocably waives any claim that any such court is not a convenient forum for any such proceeding. The Shipowner agrees that any service of process, writ, judgment or other notice of legal process shall be deemed and held in every respect to be effectively served upon it in connection with proceedings in the State of Maryland, if delivered to Sher & Blackwell, 1850 M Street, N.W., Suite 900, Washington, DC 20036, which it irrevocably designates and appoints as its authorized agent for the service of process in the State and Federal courts in the State of Maryland. Nothing herein shall affect the right of the Indenture Trustee to serve process in any other manner permitted by applicable law. The Shipowner further agrees that final judgment against it in any such action or proceeding arising out of or relating to this Indenture shall be conclusive and may be enforced in any other jurisdiction within or outside the United States of America by suit on the judgment, a certified or exemplified copy of which shall be conclusive evidence of that fact and of the judgment. (cc) PAYMENTS IN U.S. CURRENCY. This is an international loan transaction in which the specification of United States Dollars is of the essence, and such currency shall be the currency of account in all events. The respective payment obligations of the Shipowner and the Indenture Trustee hereunder shall not be discharged by an amount paid in another currency, whether pursuant to a judgment or otherwise, to the extent that the amount so paid on prompt conversion of such currency under normal banking procedures does not yield after deduction of any and all fees, taxes or any other charges imposed on the payment, the amount of United States Dollars then due. In the event that any payment by the Shipowner or the Indenture Trustee, whether pursuant to a judgment or otherwise, upon conversion and transfer, does not result in the payment of such amount of United States Dollars at the place such amount is due, each shall be entitled to demand immediate payment of, and shall have a separate cause of action against the other for, the additional amount necessary to yield the amount then due. In the event either the Shipowner or the Indenture Trustee, upon the conversion of such judgment into Dollars, shall receive (as a result of currency exchange rate fluctuations) an amount greater than that to which it was entitled, the defaulting party shall be entitled to immediate reimbursement of the excess amount. (dd) SHIPOWNER NOT IMMUNE. The Shipowner represents and warrants that it is subject to civil and commercial law with respect to its obligations under this Indenture, that the making and performance of this Indenture constitutes private and commercial acts rather than governmental or public acts and that neither the Shipowner nor any of its properties or revenues has any right of immunity on the grounds of sovereignty or otherwise from suit, 20 court jurisdiction, attachment prior to judgment, attachment in aid of execution of a judgment, set-off, execution of a judgment or from any other legal process with respect to its obligations under this Indenture. To the extent that the Shipowner may hereafter be entitled, in any jurisdiction in which judicial proceedings may at any time be commenced with respect to this Indenture to claim for itself or its revenues or assets any such immunity, and to the extent that in any such jurisdiction there may be attributed to the Shipowner such an immunity (whether or not claimed), the Shipowner hereby irrevocably agrees not to claim and hereby irrevocably waives such immunity. The foregoing waiver of immunity shall have effect under the United States Sovereign Immunities Act of 1976. 21 IN WITNESS WHEREOF, this Trust Indenture has been duly executed by the parties hereto as of the day and year first above written. PETRODRILL FOUR LIMITED Shipowner ATTEST: /s/ ROBERT W. RANDALL By: /s/ EARL W. MCNIEL Secretary Treasurer FMB TRUST COMPANY, NATIONAL ASSOCIATION Indenture Trustee (Seal) ATTEST: /s/ DAVID L. WILLIAMS By: /s/ ROBERT D. BROWN Vice President 22 DISTRICT OF COLUMBIA ) ) SS: CITY OF WASHINGTON ) On this 9th day of April, 1999, before me personally appeared Earl W. McNiel to me known, who being by me duly sworn, did depose and say that he is the Treasurer of PETRODRILL FOUR LIMITED, and that he signed his name thereto by authority of the Board of Directors of said corporation. In testimony whereof, I have hereunto set my hand and seal this 9th day of April, 1999. /s/ NORALYN RUSSELL NOTARY PUBLIC (Notarial Stamp and Seal) 23 DISTRICT OF COLUMBIA ) ) SS: CITY OF WASHINGTON ) Be it known this 9th day of April, 1999, personally appeared before me, Robert D. Brown, who after being duly sworn, deposed and said that he is a Vice President of FMB Trust Company, National Association, a national banking association, which is described in and executed the instrument hereto annexed, and that he signed the instrument hereto annexed by order of the Board of Directors of the said national banking association, and acknowledged the annexed instrument to be the free act and deed of the said national banking association. In testimony whereof, I have hereunto set my hand and seal this 9th day of April, 1999. /s/ NORALYN RUSSELL NOTARY PUBLIC (Notarial Stamp and Seal) 24 Document 6 EXHIBIT 1 GENERAL PROVISIONS OF THE INDENTURE INCORPORATED BY REFERENCE TABLE OF CONTENTS TO EXHIBIT 1* PAGE ARTICLE I. DEFINITIONS; OFFICER'S CERTIFICATE AND OPINIONS OF COUNSEL.........1 SECTION 1.01. Definitions..........................................1 SECTION 1.02. Officer's Certificates and Opinions of Counsel.......1 ARTICLE II. THE OBLIGATIONS....................................................2 SECTION 2.01. Designation of Obligations..........................2 SECTION 2.02. Issue, Form, Principal Amount, Maturity, Interest, Place of Payment, Denominations and Redemption of Obligations...................2 SECTION 2.03. Issuance of Obligations of Initial Series...........3 SECTION 2.04. Additional Obligations; Obligations of Additional Series...............................4 SECTION 2.05. Legends on Obligations..............................4 SECTION 2.06. Dates of Obligations; Interest Rates................4 SECTION 2.07. Execution of Obligations............................4 SECTION 2.08. Authentication of Obligations and Guarantees.......5 SECTION 2.09. Temporary Obligations...............................5 SECTION 2.10. Registration, Transfer and Exchange.................6 SECTION 2.11. Who Treated as Owners...............................7 SECTION 2.12. Lost, Stolen, Destroyed or Mutilated Obligations....7 SECTION 2.13. Reacquired Obligations, Cancellation and Disposition of Obligations..................8 ARTICLE III. REDEMPTION OF OBLIGATIONS........................................8 SECTION 3.01. Redemptions Suspended During Default................8 SECTION 3.02. Redemptions.........................................9 (a) Redemptions With Premium........................9 (b) Redemptions Without Premium.....................9 (c) Sinking Fund Redemptions........................9 (d) Adjustments of Redemption Payments..............9 SECTION 3.03. Terminal Mandatory Redemption......................10 SECTION 3.04. Redemptions to Comply with Provisions of Section 1104(b)(2) of the Act...............10 SECTION 3.05. Redemption After Total Loss, Requisition of Title, Seizure or Forfeiture of a Vessel or Termination of Certain Contracts.....10 SECTION 3.06. Redemption After Assumption by the Secretary.......11 SECTION 3.07. Determination of Obligations to be Redeemed........11 SECTION 3.08. Notices of Redemption..............................11 SECTION 3.09. Deposit of Redemption Moneys.......................12 SECTION 3.10. Payment of Redemption Price........................12 ARTICLE IV. CASH HELD BY INDENTURE TRUSTEE OR PAYING AGENTS.................13 SECTION 4.01. Generally..........................................13 SECTION 4.02. Paying Agents Other Than Indenture Trustee.........13 SECTION 4.03. Unclaimed Amounts..................................14 SECTION 4.04. Application of Funds...............................14 ARTICLE V. REPRESENTATIONS AND AGREEMENTS OF SHIPOWNER.....................15 SECTION 5.01. Authorization, Execution and Delivery of Indenture.15 SECTION 5.02. Payment and Procedure for Payment of Obligations...15 SECTION 5.03. Offices or Agencies of Shipowner...................15 ARTICLE VI. INDENTURE DEFAULTS AND REMEDIES.................................16 SECTION 6.01. What Constitutes "Indenture Defaults...............16 SECTION 6.02. Demand for Payment of Guarantees...................16 SECTION 6.03. Appointment of Indenture Trustee and Holders of Outstanding Obligations as Attorneys-in-Fact..........................17 SECTION 6.04. Termination and Payment of the Guarantees..........17 SECTION 6.05. Rights of Indenture Trustee After Indenture Default.......................................19 SECTION 6.06. (a) Obligees' Right to Direct Indenture Trustee After Indenture Default...............19 (b) Limitations on Obligees' Right to Sue..........20 (c) Unconditional Right of Obligees to Sue for Principal (and Premium, if any) and Interest..21 SECTION 6.07. Undertaking for Costs..............................21 SECTION 6.08. Recision of Payments...............................21 SECTION 6.09. Assumption of Obligations by Secretary.............22 ARTICLE VII. THE INDENTURE TRUSTEE...........................................23 SECTION 7.01. Acceptance of Trusts...............................23 SECTION 7.02. Eligibility of Indenture Trustee...................23 SECTION 7.03. Rights and Duties of Indenture Trustee.............23 SECTION 7.04. Compensation, Expenses and Indemnification of Indenture Trustee...........27 SECTION 7.05. Resignation and Removal of Indenture Trustee.......27 SECTION 7.06. Appointment of Successor Indenture Trustee.........27 SECTION 7.07. Effect of Appointment of Successor Indenture Trustee........................................28 SECTION 7.08. Merger, Consolidation and Sale of Indenture Trustee........................................28 ARTICLE VIII. CONSOLIDATION, MERGER OR SALE BY SHIPOWNER......................29 SECTION 8.01. Consolidation, Merger or Sale by Shipowner.........29 SECTION 8.02. Sale of the Vessel or Vessels by the Secretary.....30 ARTICLE IX. ACTS OF OBLIGEES................................................30 SECTION 9.01. Acts of Obligees...................................30 -ii- ARTICLE X. SUPPLEMENTAL INDENTURES.........................................31 SECTION 10.01. Permissible Without Action by Obligees............31 SECTION 10.02. Protection of Indenture Trustee...................32 SECTION 10.03. Reference in Obligations to Supplemental Indentures...................................32 SECTION 10.04. Waivers and Supplemental Indentures with Consent of Obligees..........................33 SECTION 10.05. Consent of Secretary..............................34 SECTION 10.06. Continued Validity of the Guarantees..............34 ARTICLE XI. PERFORMANCE OF OBLIGATIONS TO SECRETARY.........................34 SECTION 11.01. Performance of Obligations to Secretary...........34 ARTICLE XII. SATISFACTION AND DISCHARGE OF INDENTURE.........................34 SECTION 12.01. Satisfaction and Discharge of Indenture...........34 ARTICLE XIII. MISCELLANEOUS...................................................35 SECTION 13.01. Notices and Demands...............................35 SECTION 13.02. Waivers of Notice.................................35 SECTION 13.03. Benefit of Indenture..............................35 SECTION 13.04. Execution of Counterparts.........................35 SECTION 13.05. Table of Contents; Titles and Headings............35 SECTION 13.06. Integration with Special Provisions of the Indenture.....................................36 SECTION 13.07. Immunity of Incorporators, Stockholders, Officers and Directors........................36 SECTION 13.08. Applicable Law....................................36 -iii- EXHIBIT 1 GENERAL PROVISIONS OF THE INDENTURE INCORPORATED BY REFERENCE ARTICLE I DEFINITIONS; OFFICER'S CERTIFICATES AND OPINIONS OF COUNSEL SECTION 1.01. DEFINITIONS. For all purposes of this Indenture, the terms used herein shall have the meanings specified in the Special Provisions hereof, including without limitation Schedule A to this Indenture. SECTION 1.02. OFFICER'S CERTIFICATES AND OPINIONS OF COUNSEL. (a) Each Officer's Certificate or Opinion of Counsel with respect to compliance with a covenant or condition provided for herein (or waiver thereof) shall include: (1) A statement that the Person or Persons making such certificate or rendering such opinion has or have read such covenant or condition; (2) A brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) A statement that, in the opinion of such Person or Persons, he or they have made or caused to be made such examination or investigation as is necessary to enable him or them to express an informed opinion as to whether or not such covenant or condition has been complied with (or compliance therewith has been waived); and (4) A statement as to whether or not, in the opinion of such Person or Persons, such condition or covenant has been complied with (or such compliance has been waived). (b) An Opinion of Counsel may be based (insofar as it relates to factual matters, information with respect to which is in the possession of any Person) upon a certificate or opinion of or representations in writing signed by an officer or officers of such Person or by such Person, as the case may be, and may be based upon an Opinion of Counsel signed by another counsel. An Opinion of Counsel may state that said opinion is subject to the execution and delivery of designated instruments if copies of such instruments in form approved by such counsel are delivered to the Indenture Trustee prior to or concurrently with the delivery of said opinion. (c) A certificate or opinion of a Person or Persons other than counsel may be based, insofar as it relates to legal matters, upon an Opinion of Counsel, unless the Person or Persons signing such certificate or opinion knew that such Opinion of Counsel was erroneous or, in the exercise of reasonable care, should have known that the same was erroneous. (d) If the Indenture requires or permits the execution of any document by officers, counsel or other Persons, such document may be executed in counterparts by different officers, counsel or other Persons, all of which shall form one instrument. (e) If the signer of any document is required to be approved by the Indenture Trustee, the acceptance of such document by the Indenture Trustee shall be sufficient and conclusive evidence of such approval. (f) The fact that the delivery of any document is a condition precedent to any action required or permitted hereby shall not preclude the withdrawal, revocation, rescission, modification or amendment of such document at any time prior to such action, and, in the event of any such withdrawal, revocation or rescission, such document shall be disregarded for all purposes of this Indenture. ARTICLE II THE OBLIGATIONS SECTION 2.01. DESIGNATION OF OBLIGATIONS. The Obligations of each series shall be designated as stated in the Special Provisions hereof or in the Supplemental Indenture establishing such series. SECTION 2.02. ISSUE, FORM, PRINCIPAL AMOUNT, MATURITY, INTEREST, PLACE OF PAYMENT, DENOMINATIONS AND REDEMPTION OF OBLIGATIONS. (a) Upon or after the execution and delivery of this Indenture the aggregate principal amount of Obligations of the series and Stated Maturity or Maturities permitted by the Special Provisions hereof may be executed by the Shipowner, authenticated by the Indenture Trustee, and delivered as provided herein. (b) The Obligations of each series and Stated Maturity to be issued hereunder, the Guarantees of the United States to be endorsed thereon and the Indenture Trustee's authentication certificates to be endorsed thereon shall, in the case of the initial series of Obligations, be in the form or forms set forth in Exhibit 2 to the Special Provisions hereof or, in the case of Obligations of any -2- additional series, in the form or forms set forth in the Supplemental Indenture establishing such series, and said Obligations shall: (1) be limited to the respective principal amounts stated in the Special Provisions hereof or in the Supplemental Indenture establishing such series; (2) bear interest from the date specified in Section 2.06 at the rate or rates per annum stated in such Obligations; (3) mature in the amount or amounts and at the time or times stated therein; (4) be payable as to principal (and any premium thereon if premium in case of redemption prior to Stated Maturity is provided for therein), in any coin or currency of the United States which at the time of payment is legal tender for public and private debts, at an office or agency maintained from time to time by the Shipowner for such purpose as provided in Section 5.03 at the place or places stated in the Special Provisions hereof and payable as to interest as aforesaid or, at the option of the Shipowner, by check mailed by such office or agency to the addresses of the Obligees as such addresses shall appear in the Obligation Register; (5) be issued in the denominations provided in the Special Provisions hereof or in the Supplemental Indenture establishing such series; and (6) be subject to redemption to the extent and as provided in Article III. (c) If the Maturity of any Obligation or an Interest Payment Date for any Obligation shall be a day other than a Business Day, then such payment may be made on the next succeeding Business Day, with the same force and effect as if made on the nominal date for such payment, and no interest shall accrue thereon for the period after said nominal date (whether or not such next succeeding Business Day occurs in a succeeding month). SECTION 2.03. ISSUANCE OF OBLIGATIONS OF INITIAL SERIES. At any time and from time to time after the execution and delivery of this Indenture, the Shipowner may deliver to the Indenture Trustee Obligations of the initial series issuable under this Indenture duly executed by the Shipowner as hereinafter provided, accompanied by a Request of the Shipowner, and thereupon the Indenture Trustee shall authenticate such Obligations, after endorsing thereon -3- and authenticating the Guarantees of the United States in accordance with the Authorization Agreement, and shall deliver such Obligations and Guarantees in accordance with such Request. Each such Request shall specify the principal amounts, interest rates and Stated Maturities of the Obligations to be authenticated and the names and addresses of the Persons in whose name the Obligations are to be registered. SECTION 2.04. ADDITIONAL OBLIGATIONS; OBLIGATIONS OF ADDITIONAL SERIES. At any time or from time to time, the Shipowner may, with the approval of the Secretary, issue additional Obligations of any series and Stated Maturity theretofore issued or of one or more additional series, which shall (i) be in such principal amount, and (in the case of Obligations of any additional series) mature on such dates, bear interest at such rate or rates, be in such form or forms and have such other terms and provisions, as shall be set forth in a Supplemental Indenture providing for the issue thereof and (ii) be guaranteed by the United States under Title XI of the Act pursuant to a supplement to the Authorization Agreement. SECTION 2.05. LEGENDS ON OBLIGATIONS. Any Obligation may have imprinted or stamped thereon any legend, consistent herewith, which is prescribed by the Shipowner and approved by the Indenture Trustee, and, except for endorsements permitted by the second paragraph of Section 2.10(c), by the Secretary. SECTION 2.06. DATES OF OBLIGATIONS; INTEREST RATES. Each Obligation of any series shall be dated the date of its authentication and except as otherwise provided in this Section, shall bear interest from the Interest Payment Date for Obligations of such series next preceding the date of such Obligation to which interest on the Obligations of such series has been paid, unless (i) the date of such Obligation is the date to which interest on the Obligations of such series has been paid, in which case from the date of such Obligation, or (ii) no interest has been paid on the Obligations of such series since the original issue date (as defined below) of such Obligation, in which case from such original issue date. The term "original issue date" of an Obligation shall mean (a) in the case of an Obligation issued on original issue, the date of such Obligation, or (b) in the case of an Obligation not issued on original issue, the date of the Obligation (or portion thereof) issued on original issue for which such Obligation was issued (directly or indirectly) on registration of transfer, exchange or substitution. SECTION 2.07. EXECUTION OF OBLIGATIONS. The Obligations shall from time to time be executed on behalf of the Shipowner by a Responsible Officer thereof (whose signature may be a facsimile), and its corporate seal (which may be a facsimile) shall be affixed thereto or imprinted thereon and attested by its -4- secretary, an assistant secretary or an assistant trust officer (whose signature may be a facsimile). If any officer of the Shipowner whose signature (facsimile or otherwise) appears on any Obligation shall cease to be such officer before such Obligation shall have been authenticated by the Indenture Trustee or delivered, such Obligation nevertheless may be authenticated, issued and delivered with the same force and effect as though the person or persons whose signature or signatures (facsimile or otherwise) appear on such Obligation had not ceased to be such officer or officers of the Shipowner. SECTION 2.08. AUTHENTICATION OF OBLIGATIONS AND GUARANTEES. No Obligation or the Guarantee of the United States thereon shall be valid unless such Obligation shall bear thereon an authentication certificate, manually executed by the Indenture Trustee in accordance with the terms and conditions of the Authorization Agreement, substantially in the form or forms referred to in Section 2.02(b). Such authentication certificate, so executed, on any Obligation shall be conclusive evidence, and the only competent evidence, that such Obligation and such Guarantee have been duly executed, authenticated and delivered hereunder. SECTION 2.09. TEMPORARY OBLIGATIONS. There may be issued from time to time in lieu of (or in exchange for) any definitive Obligation or Obligations one or more temporary Obligations of like series and Stated Maturity, with a Guarantee of the United States endorsed thereon and authenticated by the Indenture Trustee, substantially of the same tenor as the definitive Obligations in lieu of (or in exchange for) which they are issued, with or without the specification of any Redemption Price or Prices. Such temporary Obligation or Obligations may be in such authorized denomination or denominations as shall be stated in a Request of the Shipowner delivered to the Indenture Trustee prior to the authentication thereof, which Request shall specify the aggregate principal amounts and the series and Stated Maturities of such temporary Obligations. If definitive Obligations are not ready for delivery, the Holder of any temporary Obligation may, at the Corporate Trust Office, with the consent of the Shipowner, exchange the same for a temporary Obligation or Obligations of like series, tenor, interest accrual date and Stated Maturity of authorized denominations for the same aggregate principal amount upon the surrender for cancellation of such temporary Obligation or Obligations. When definitive Obligations are ready for delivery, the Holder of any temporary Obligation may, at the Corporate Trust Office, exchange the same without charge for a definitive Obligation or Obligations of like series, tenor, -5- interest accrual date and Stated Maturity of authorized denominations for the same aggregate principal amount. SECTION 2.10. REGISTRATION, TRANSFER AND EXCHANGE. (a) The Shipowner shall cause the Indenture Trustee to keep an Obligation Register for the registration of ownership, transfers and exchanges of Obligations, at the Corporate Trust Office. (b) Any Obligation may be transferred at the Corporate Trust Office, by surrender of such Obligation for cancellation, accompanied by an instrument of transfer in form satisfactory to the Shipowner and the Indenture Trustee, duly executed by the registered Obligee or his duly authorized attorney, and thereupon the Shipowner shall execute, and the Indenture Trustee shall authenticate and deliver in the name of the transferee or transferees, a new Obligation or Obligations, and the Guarantee or Guarantees of the United States thereon, in authorized denominations of like series, tenor, interest accrual date and Stated Maturity and for the same aggregate principal amount. (c) The Shipowner shall not be required to register transfers or make exchanges of (1) Obligations for a period of 15 days immediately prior to (A) an Interest Payment Date or (B) any selection of Obligations to be redeemed, (2) Obligations after demand for payment of the Guarantees and prior to the payment thereof or rescission of such demand pursuant to Section 6.02(a), or (3) any Obligation which has been selected for redemption in whole or in part. If any Obligation surrendered for transfer or exchange has been selected for redemption in whole or in part, there may be endorsed on any Obligation or Obligations issued therefor an appropriate notation of such fact. (d) Any Obligation shall be exchangeable for a like principal amount of Obligations of the same series, tenor, interest accrual date and Stated Maturity but of different authorized denominations. Obligations to be exchanged shall be surrendered at the Corporate Trust Office, and the Shipowner shall execute, and the Indenture Trustee shall authenticate and deliver in exchange therefor, the Obligation or Obligations, and the Guarantee or Guarantees of the United States endorsed thereon, requested by the Obligee in accordance with this paragraph (d). (e) As a condition precedent to any transfer or exchange of Obligations, the Indenture Trustee may (except upon an exchange of temporary for definitive Obligations) require the payment of a sum sufficient to reimburse it for any taxes or other governmental charges that may be imposed with respect thereto and a sum not exceeding $2.00 for each Obligation delivered upon any such transfer or exchange. -6- SECTION 2.11. WHO TREATED AS OWNERS. The Shipowner, the Indenture Trustee, the Secretary, and any office or agency for the payment of principal of (and premium, if any) or interest on the Obligations may deem and treat the Person in whose name any Obligation is registered in the Obligation Register as the absolute owner of such Obligation for all purposes, and neither the Shipowner, the Indenture Trustee, the Secretary, nor any such office or agency shall be affected by any notice to the contrary, whether such Obligation shall be past due or not. All payments of or on account of principal (and premium, if any) or interest, or pursuant to the Guarantee endorsed on such Obligation, to such registered Obligee shall be valid and effectual to satisfy and discharge the liability of the Shipowner and the Secretary to the extent of the sum or sums so paid, except as otherwise provided in Section 6.08. SECTION 2.12. LOST, STOLEN, DESTROYED OR MUTILATED OBLIGATIONS. Upon receipt by the Shipowner and the Indenture Trustee of evidence satisfactory to them of the loss, theft, destruction or mutilation of any Outstanding Obligation and the ownership thereof, the Shipowner may execute, and upon request of the Shipowner, the Indenture Trustee shall, but subject to all limitations imposed by the Authorization Agreement and only to the extent authorized thereby, authenticate and deliver, a new Obligation, and the Guarantee of the United States endorsed thereon, of like series, tenor, interest accrual date, principal amount and Stated Maturity (which may bear such notation as may be required by the Indenture Trustee or by usage or by the rules of any stock exchange upon which the Obligations are then listed and which shall bear a serial number different from the serial number of the lost, stolen, destroyed or mutilated Obligation) in lieu of such lost, stolen, destroyed or mutilated Obligation and, similarly, upon receipt by the Shipowner and the Indenture Trustee of evidence satisfactory to them of the loss, theft, destruction or mutilation of any Obligation which has or is about to become due and payable, the Indenture Trustee may deem the applicant with respect thereto to be the owner of said Obligation for the purpose of receiving payment on account thereof of principal (and premium, if any) upon maturity or interest or the payment of the Guarantee thereof; PROVIDED THAT, as conditions precedent to the execution, authentication and delivery of any new Obligation in place of said Obligation or to any payment contemplated by this Section, (1) the Shipowner, the Indenture Trustee and the Secretary shall receive indemnity satisfactory to the Shipowner, the Indenture Trustee and the Secretary, (2) the Shipowner shall be reimbursed for all reasonable expenses (including any fees or expenses of the Indenture Trustee) incident thereto, and (3) said Obligation shall (unless the same shall have been lost, stolen or destroyed) be surrendered. -7- Obligations issued pursuant to this Section and the Guarantees endorsed thereon shall constitute original contractual obligations of the Shipowner and the United States, respectively, whether or not the lost, stolen or destroyed Obligations be at any time enforceable by anyone, and shall be equally and proportionately entitled to the benefits of this Indenture with all other Outstanding Obligations issued hereunder. The provisions of this Section 2.12 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of lost, stolen, destroyed or mutilated Obligations. SECTION 2.13. REACQUIRED OBLIGATIONS; CANCELLATION AND DISPOSITION OF OBLIGATIONS. In the event the Shipowner shall reacquire any Obligations (whether by purchase or otherwise), such Obligations shall forthwith be delivered to the Indenture Trustee for cancellation. Except as provided in Section 3.10(b), all Obligations surrendered for the purpose of payment, redemption, transfer, exchange, or substitution, or (if permitted in the Special Provisions hereof or the Supplemental Indenture establishing any additional series of Obligations) in discharge in whole or in part of any sinking fund payment shall, if surrendered to the Shipowner or any Paying Agent, be delivered to the Indenture Trustee for cancellation, or, if surrendered to the Indenture Trustee, shall be cancelled by it. No Obligation shall be authenticated in lieu of or in exchange for any Obligation cancelled as provided in this Section, except as may be expressly permitted by this Indenture. Obligations cancelled by the Indenture Trustee shall be delivered or disposed of as directed by a Request of the Shipowner. ARTICLE III REDEMPTION OF OBLIGATIONS SECTION 3.01. REDEMPTIONS SUSPENDED DURING DEFAULT. Notwithstanding the following provisions of this Article III, neither the Shipowner nor the Indenture Trustee shall redeem any Obligations, except pursuant to Section 3.04 or 3.06 during the continuance of any Indenture Default or event which with the lapse of time could constitute a Payment Default, except that, where the mailing of notice of redemption of any Obligations shall have theretofore been made, the Indenture Trustee shall redeem or cause to be redeemed such Obligations if it shall have received a sum sufficient for such redemption. Except as aforesaid, any moneys received by the Indenture Trustee for the redemption of Obligations which may not be applied to the redemption thereof shall be held as security for the payment of all the Obligations, and, (i) in case such Indenture Default or such event shall no longer be continuing, such moneys shall thereafter be applied to the -8- redemption of Obligations in accordance with the applicable provisions of the Obligations and of this Article III, (ii) in the event the Secretary shall have assumed the Obligations pursuant to Section 6.09 or shall have been required to pay the Guarantees, such moneys shall be paid over by the Indenture Trustee to the Secretary or (iii) if no Obligation shall be Outstanding, other than by payment of the Guarantees, such moneys shall be paid to the Shipowner. SECTION 3.02. REDEMPTIONS. (a) REDEMPTIONS WITH PREMIUM. If the Obligations of any series and Stated Maturity or the Special Provisions hereof or the Supplemental Indenture establishing such series shall so provide, such Obligations shall be subject to redemption at a premium in the amounts, at the price or prices, at the time or times and subject to the conditions specified therein. (b) REDEMPTIONS WITHOUT PREMIUM. The Obligations of each series shall be subject to redemption without premium in the amounts, at the time or times and subject to the conditions specified in Sections 3.03, 3.04, 3.05 and 3.06. If the Obligations of any series and Stated Maturity or the Special Provisions hereof or the Supplemental Indenture establishing such series shall so provide, such Obligations shall also be subject to redemption without premium in the amounts, at the time or times and subject to the conditions specified therein or as provided in subsection (c) of this Section 3.02. (c) SINKING FUND REDEMPTIONS. If the Obligations of any series and Stated Maturity or the Special Provisions hereof or the Supplemental Indenture establishing such series shall so provide, such Obligations shall be subject to (i) mandatory redemption through the operation of a sinking fund or similar fund, in such amounts, at such times and subject to such credits (if any) as may be specified therein, and (ii) redemption at the option of the Shipowner, in connection with the operation of any such fund, in such additional amounts and subject to such conditions as may be specified therein. (d) ADJUSTMENTS OF REDEMPTION PAYMENTS. If the Obligations of any series and Stated Maturity or the Special Provisions hereof or of the Supplemental Indenture establishing such series provide for an adjustment in mandatory redemption payments as a result of any redemption or cancellation of Obligations, the Shipowner shall recompute the remaining mandatory redemption payments pursuant to such provisions and shall, at least 60 days prior to the next Interest Payment Date which occurs at least 60 days following any such redemption or cancellation of Obligations of such series requiring such recomputation, submit to the Secretary for his review of such recomputation to ascertain compliance with the provisions of such Obligations or the Special Provisions hereof or such Supplemental Indenture, a table of -9- revised mandatory redemption payments on the Obligations of such series reflecting the adjustments made pursuant to such provisions as a result of such redemption or cancellation. Upon advice by the Secretary that he finds such recomputation to comply with such provisions, the Shipowner shall submit said table to the Indenture Trustee and the Indenture Trustee shall promptly submit a copy thereof to each Holder of an Obligation of such series. SECTION 3.03. TERMINAL MANDATORY REDEMPTION. The Shipowner shall redeem, at the principal amount thereof and interest accrued thereon, all the Obligations that shall be Outstanding on the date determined in accordance with Section 1104(b)(3) of the Act and specified in the Special Provisions hereof so that the final maturity of such Obligations shall not exceed the period specified in said Section. SECTION 3.04. REDEMPTIONS TO COMPLY WITH PROVISIONS OF SECTION 1104(B)(2) OF THE ACT. Upon receipt by the Indenture Trustee of a written instruction signed by the Secretary and a Responsible Officer of the Shipowner stating that upon receipt of funds paid to the Indenture Trustee by the Shipowner or the Secretary on behalf of the Shipowner such funds (i) shall be applied in the manner specified in such instruction to redeem the principal amount of Obligations specified in such instruction and (ii) are to be so applied in order that the principal amount of Obligations that will be Outstanding after such redemption will not exceed the principal amount thereof eligible for guarantee by the United States under Section 1104(b)(2) of the Act, the Indenture Trustee shall promptly give notice as provided in Section 3.08 of the redemption of such Obligations on a date which is no more than 45 days from the date of receipt by the Indenture Trustee of such instruction; and the Indenture Trustee shall, on such date, redeem such Obligations at the principal amount thereof and interest accrued thereon to such date. The Shipowner agrees to notify the Indenture Trustee of the redemption at least 10 days prior to receipt by the Indenture Trustee of such written instruction. SECTION 3.05. REDEMPTION AFTER TOTAL LOSS, REQUISITION OF TITLE, SEIZURE OR FORFEITURE OF A VESSEL OR TERMINATION OF CERTAIN CONTRACTS. Upon receipt by the Indenture Trustee of written instructions from the Secretary and the Shipowner stating that the principal amount of Obligations specified in such instructions are required to be redeemed on the date specified therein (which shall be not less than 40 nor more than 60 days from the receipt of such instructions by the Indenture Trustee) by reason of (i) an actual, constructive, agreed or compromised total loss of a Vessel, (ii) requisition of title to, or seizure or forfeiture of a Vessel or (iii) termination of any contract for the construction, reconstruction or reconditioning of a Vessel, the Indenture Trustee shall promptly give notice as provided in Section 3.08 of the redemption on such date of such principal amount of Obligations and the -10- Indenture Trustee shall, on such date, redeem such principal amount of Obligations together with interest accrued thereon to such Redemption Date. SECTION 3.06. REDEMPTION AFTER ASSUMPTION BY THE SECRETARY. Upon receipt by the Indenture Trustee of written instructions from the Secretary stating that the principal amount of Obligations specified in such instructions are required to be redeemed on the date specified therein (which shall be not less than 40 nor more than 60 days from the receipt of such instructions by the Indenture Trustee) at the option of the Secretary at any time after the Secretary's assumption of the Obligations pursuant to Section 6.09, the Indenture Trustee shall promptly give notice as provided in Section 3.08 of the redemption on the Redemption Date of the principal amount of Obligations specified in such instructions and the Indenture Trustee shall, on such Redemption Date, redeem such Obligations together with interest accrued thereon to such Redemption Date; PROVIDED THAT, the Secretary shall redeem at the principal amount thereof and interest accrued thereon the Proportionate Part of the Outstanding Obligations relating to such Vessel or Vessels which have been sold pursuant to Section 8.02 to a purchaser or purchasers who have not assumed such Obligations by notice to the Indenture Trustee in accordance with this Section 3.06 within 40 days of the nonassumption of the Obligations by such purchaser. The principal amount of the Proportionate Part of the Outstanding Obligations shall be determined by the Secretary. SECTION 3.07. DETERMINATION OF OBLIGATIONS TO BE REDEEMED. (a) If less than all the Obligations are to be redeemed pursuant to Section 3.04 or 3.05, the Indenture Trustee shall select Obligations of each series and Stated Maturity for redemption in proportion to the respective principal amounts of Obligations of such series and Stated Maturity then Outstanding, except as otherwise provided in the Special Provisions or in the Supplemental Indenture with respect to any series, making adjustment so that the principal amount of any Obligation to be redeemed shall be $1,000 or an integral multiple thereof. (b) If less than all the Obligations of any series or Stated Maturity are to be redeemed under any of the provisions contained or referred to in this Article III, the Indenture Trustee shall select, in such manner as it shall deem appropriate and fair, the Obligations of such series or Stated Maturity to be redeemed, and the Indenture Trustee shall, according to such method as it shall in its reasonable discretion deem appropriate, make adjustments so that the principal amount of any Obligation to be redeemed shall be $l,000 or an integral multiple thereof. SECTION 3.08. NOTICES OF REDEMPTION. (a) In case of any redemption of Obligations, whether mandatory or optional, a notice of redemption (indicating (1) the Redemption Date, (2) the Redemption Price, (3) if a part only of such -11- Obligations is to be redeemed, the numbers or other identification of the Obligations and the principal amount thereof to be redeemed, in whole or in part, (4) the Place of Payment upon redemption and (5) that interest shall cease to accrue after the Redemption Date (but only if the Indenture Trustee or any Paying Agent shall have received the required moneys), shall be given by the Shipowner or any authorized agent of the Shipowner (including the Indenture Trustee), by mailing a copy of such notice, by first class mail, postage prepaid, at least 30 days but not more than 60 days prior to the Redemption Date, to each Holder of an Outstanding Obligation to be redeemed in whole or in part at his last address appearing upon the Obligation Register. (b) Any notice of optional redemption of Obligations shall state that the redemption is subject to the receipt of the redemption moneys by the Indenture Trustee or any Paying Agent. Such notice shall be of no effect unless prior to the opening of business on the Redemption Date, the Indenture Trustee or such Paying Agent shall receive an amount in cash sufficient for such redemption (after taking into account any amounts then held by the Indenture Trustee or such Paying Agent and available for such redemption). SECTION 3.09. DEPOSIT OF REDEMPTION MONEYS. Prior to the opening of business on any Redemption Date, the Shipowner shall, except as contemplated by Section 3.08(b), deposit or cause to be deposited with the Indenture Trustee or (except in the case of redemptions pursuant to Section 3.04, 3.05 or 3.06) with any Paying Agent an amount sufficient for such redemption (after taking into account any amounts then held by the Indenture Trustee or such Paying Agent and available for such redemption) with irrevocable directions to it to so apply the same. SECTION 3.10. PAYMENT OF REDEMPTION PRICE. (a) If notice of redemption shall have been given as provided above, the Obligations or portions thereof specified in such notice shall, except as contemplated by Section 3.08(b), become due and payable on the Redemption Date and at the Place of Payment and the Redemption Price stated in such notice, and on and after said Redemption Date (unless the Shipowner shall default in the payment of such Redemption Price) interest on the Obligations or portions thereof so called for redemption shall cease to accrue. Upon presentation and surrender of such Obligations in accordance with such notice, such Obligations or the specified portions thereof shall be paid and redeemed at the applicable Redemption Price. (b) Upon presentation of any Obligation redeemed in part only, the Shipowner shall execute and the Indenture Trustee shall authenticate and deliver to or on the order of the Holder thereof, at the expense of the Shipowner, a new Obligation or Obligations of like series and Stated Maturity, -12- of authorized denominations, having endorsed thereon a Guarantee or Guarantees executed by, or on behalf of, the Secretary, in principal amount equal to the unredeemed portion of the Obligation so presented, or, at the option of such Holder, there may be noted thereon by the Indenture Trustee or, at its direction, by any Paying Agent the payment of the portion of the principal amount of such Obligation so called for redemption. ARTICLE IV CASH HELD BY INDENTURE TRUSTEE OR PAYING AGENTS SECTION 4.01. GENERALLY. (a) All cash held by the Indenture Trustee or any Paying Agent under this Indenture shall be held as a special deposit in trust for the purposes for which it is held (subject to Section 4.03). (b) Cash held by the Indenture Trustee or any Paying Agent (other than the Shipowner) under this Indenture: (1) need not be segregated; (2) shall not be invested; and (3) shall not bear interest except to the extent the Indenture Trustee or such Paying Agent allows interest on similar deposits or except as the Shipowner and the Indenture Trustee (or such Paying Agent) may agree. SECTION 4.02. PAYING AGENTS OTHER THAN INDENTURE TRUSTEE. (a) The Shipowner will cause any Paying Agent (other than the Indenture Trustee) which it may appoint by a writing delivered to such Paying Agent, with copies to the Indenture Trustee and the Secretary, to execute and deliver to the Indenture Trustee an instrument in which such agent shall agree with the Indenture Trustee that, subject to paragraph (b) of this Section and Section 4.03: (1) it will hold in trust all sums held by it as such agent for the payment of the principal of (and premium, if any) or interest on Obligations for the benefit of the Holders of such Obligations, or for the benefit of the Indenture Trustee; (2) it will forthwith give the Indenture Trustee written notice addressed to a Responsible Officer in the Corporate Trust Office of the Indenture Trustee signed by a Responsible Officer of the Paying Agent of (A) any payment by the Shipowner of the principal of (and premium, if -13- any) or interest on Obligations, specifying the amount paid, segregated as to principal (premium, if any) and interest, and identifying each Obligation on which any payment was made by number, date, series, Stated Maturity and the name of the Obligee, and/or (B) any failure of the Shipowner to make any such payment when the same shall be due and payable; and (3) it will promptly, and in no event later than ten days after any payment made by it hereunder, give the Indenture Trustee written notice addressed to a Responsible Officer in the Corporate Trust Office of the Indenture Trustee of all payments of Obligations made by it, including and identifying all endorsements of payment made on Obligations by it, signed and containing the specified information as provided in subparagraph (2) above, and deliver to the Indenture Trustee all Obligations surrendered to it, for cancellation by the Indenture Trustee. (b) The Shipowner may at any time cause to be paid to the Indenture Trustee all sums held in trust by any Paying Agent pursuant to this Section, such sums to be held by the Indenture Trustee upon the same trusts. SECTION 4.03. UNCLAIMED AMOUNTS. Any moneys received by the Indenture Trustee or a Paying Agent, for the payment of Obligations or Guarantees and remaining unclaimed by the Holders thereof for 6 years after the date of the Maturity of said Obligations or the date of payment by the Secretary of the Guarantees shall, upon delivery to the Indenture Trustee of a Request by the Shipowner, be paid to the Shipowner; PROVIDED THAT, not less than 30 days prior to such payment, the Shipowner shall publish notice thereof to the Obligees at least once in the Authorized Newspapers, unless the Indenture Trustee, in its discretion, waives the publication of such notice. In such event, such Holders shall thereafter be entitled to look only to the Shipowner (and the settlor or settlors of any trust for which the Shipowner is trustee, to the extent paid over to it or them) for the payment thereof, and the Indenture Trustee or such Paying Agent, as the case may be, shall thereupon be relieved from all responsibility to such Holders therefor. No such Request, publication or payment shall be construed to extend any statutory period of limitations which would have been applicable in the absence of such Request, publication or payment. SECTION 4.04. APPLICATION OF FUNDS. If at any time the Indenture Trustee shall hold funds (other than any amounts received by the Indenture Trustee pursuant to Section 7.04), the application, distribution or payment of which is not governed by Request or written instruction of the Shipowner delivered pursuant to any provision of the Indenture, the Indenture Trustee shall give written notice thereof to the Shipowner, who shall promptly -14- thereafter deliver to the Indenture Trustee a Request or written instruction bearing the written consent of the Secretary and directing the application, distribution or payment to be made of such funds. ARTICLE V REPRESENTATIONS AND AGREEMENTS OF SHIPOWNER The Shipowner hereby represents and agrees, so long as Obligations are Outstanding, as follows: SECTION 5.01. AUTHORIZATION, EXECUTION AND DELIVERY OF INDENTURE. The Shipowner has duly authorized the execution and delivery of this Indenture. SECTION 5.02. PAYMENT AND PROCEDURE FOR PAYMENT OF OBLIGATIONS. The Shipowner will duly and punctually pay the principal of (and premium, if any) and interest on the Obligations according to the terms thereof and of this Indenture. The Shipowner will deposit with the Indenture Trustee or (subject to Section 3.09) a Paying Agent prior to the opening of business on each date fixed for each payment an amount sufficient for such payment (after taking into account any amounts then held by the Indenture Trustee or such Paying Agent and available for such payment) with irrevocable directions to it to so apply the same; PROVIDED THAT, payments of interest may be made as provided in Section 2.02(b)(4); and PROVIDED FURTHER, that except with the consent of the Secretary the Shipowner shall not deposit any such amount more than ten days prior to the date of the payment for which such amount is deposited. SECTION 5.03. OFFICES OR AGENCIES OF SHIPOWNER. The Shipowner shall (1) at all times cause one or more offices or agencies to be maintained within the United States where Obligations may be presented for payment, registration of transfer and exchange, and where demands to or upon the Shipowner with respect thereto may be served, and (2) from time to time give written notice to the Indenture Trustee and to the Secretary of the location of such offices or agencies. The Corporate Trust Office shall be deemed to be such an office or agency for such purposes until the Shipowner shall give the Indenture Trustee and the Secretary written notice to the contrary. Any such office or agency for payment of the Obligations (other than the Corporate Trust Office) shall be a Paying Agent appointed in accordance with Section 4.02. -15- ARTICLE VI INDENTURE DEFAULTS AND REMEDIES SECTION 6.01. WHAT CONSTITUTES "INDENTURE DEFAULTS." Each of the following events shall constitute an "Indenture Default": (a) Default in the payment of the whole or any part of the interest on any of the Outstanding Obligations when the same shall become due and payable or default in the payment of the whole or any part of the principal of any of the Outstanding Obligations when the same shall become due and payable, whether by reason of Maturity, Redemption, acceleration or otherwise, or any default referred to in Section 6.08, and continuation of any such default for a period of 30 days (herein called a "Payment Default"); and (b) The giving of a Secretary's Notice to the Indenture Trustee. The Indenture Trustee shall give to the Obligees, the Secretary and the Shipowner prompt notice in writing of any Payment Default (unless such default shall have been remedied prior to the giving of such notice), and of the occurrence of any Indenture Default which shall be continuing; PROVIDED THAT, the Indenture Trustee shall have no duty to give any such notice unless and until a Responsible Officer of the Indenture Trustee, who is a Responsible Officer in its Corporate Trust Office, has actual knowledge of such default or Indenture Default. Any such notice of an Indenture Default to the Obligees (i) shall specify the nature of such Indenture Default, (ii) shall state that, by reason thereof, the Indenture Trustee is entitled under the Indenture to demand payment by the Secretary of the Guarantees, (iii) shall set forth the provisions of Section 6.04(b)(3) and (5), and (iv) shall advise the Obligees of the provisions of Section 6.02. SECTION 6.02. DEMAND FOR PAYMENT OF GUARANTEES. (a) If an Indenture Default shall have occurred and be continuing, the Indenture Trustee shall, not later than 60 days from the date of such Indenture Default, demand payment by the Secretary of the unpaid interest to the date of such payment on, and the unpaid balance of the principal of, all Outstanding Obligations, whereupon the entire unpaid principal amount of the Outstanding Obligations and all unpaid interest thereon shall become due and payable on the first to occur of the date which is 30 days from the date of such demand or the date on which the Secretary pays the Guarantees; PROVIDED THAT, in the case of a demand made as a result of a Payment Default, if, prior to the expiration of 30 days from the date of such demand and prior to any payment of the Guarantees by the Secretary, the Secretary shall find, and give written notice to the Shipowner and the Indenture Trustee to the effect that, there was no -16- Payment Default or that such Payment Default was remedied prior to such demand, such demand and the consequences thereof shall be rescinded and annulled and the Guarantees shall remain in full force and effect. The Indenture Trustee shall give to each Obligee and to the Shipowner prompt written notice of any demand made by the Indenture Trustee pursuant to this paragraph (a), any such notice to Obligees to be given as provided in Section 6.04(c). (b) If the Indenture Trustee shall not have made the demand referred to in Section 6.02(a) on or before the 30th day following an Indenture Default which shall have occurred and be continuing and if the Holders of all Outstanding Obligations shall not have theretofore elected to terminate the Guarantees as provided in Section 6.04(a)(2), any Holder of an Outstanding Obligation, by an Act of Obligees delivered to the Secretary (with copies thereof to the Indenture Trustee and the Shipowner), may, in place of the Indenture Trustee and on behalf of all Holders of Outstanding Obligations, make such demand, subject to all the provisions of, and with the effect provided in, Section 6.02(a); PROVIDED THAT, the right of each Holder under this paragraph (b) shall be without prejudice to the rights and duties of the Indenture Trustee under Section 6.02(a). SECTION 6.03. APPOINTMENT OF INDENTURE TRUSTEE AND HOLDERS OF OUTSTANDING OBLIGATIONS AS ATTORNEYS-IN-FACT. Each Holder of an Outstanding Obligation by the purchase and acceptance of its Obligation, irrevocably appoints the Indenture Trustee and each other Holder of an Outstanding Obligation its agent and attorney-in-fact for the purpose of making the demand provided for in Section 6.02 and (in the case of the Indenture Trustee) of receiving and distributing any payment or payments by the Secretary made pursuant to any such demand; PROVIDED THAT, no action or failure to act by the Indenture Trustee shall affect the rights of any Holder of an Outstanding Obligation to take any action whatsoever permitted by law and not in violation of the terms of the Obligations or of the Indenture. SECTION 6.04. TERMINATION AND PAYMENT OF THE GUARANTEES. (a) Except as otherwise provided in Section 6.08, the Guarantee with respect to any Obligation shall terminate in case, and only in case, one or more of the following events shall occur: (1) Such Obligation shall have been Retired or Paid; (2) The Holders of all Outstanding Obligations shall have elected, by Act of Obligees delivered to the Secretary, to terminate the Guarantees; -17- (3) Such Guarantee shall have been paid in full in cash by the Secretary; or (4) The Indenture Trustee and each Obligee shall have failed to demand payment of such Guarantee as provided herein or in such Guarantee or in the Act. (b) Subject to the provisions of Section 6.08, when the Secretary shall pay the Guarantees in full in cash to the Indenture Trustee: (1) The Indenture Trustee shall hold the entire amount thereof in trust for the sole purpose of providing for the payments specified in subparagraph (5) below; (2) No Obligation or Obligations shall thereafter be issued; (3) The Obligations (A) shall represent only the right to receive the payments from the Indenture Trustee specified in subparagraph (5) below and, in the event the Indenture Trustee makes payment to the Shipowner pursuant to Section 4.03, from the Shipowner, (B) shall otherwise no longer constitute or represent an obligation of the Shipowner, and (C) shall not be entitled to any other rights or benefits under this Indenture; (4) The Indenture Trustee shall forthwith give written notice to the Shipowner and to each of the Obligees, stating that it has received payment of the Guarantees in full in cash from the Secretary and that the same is available for distribution to the Obligees in the manner specified in subparagraph (5) below (and the Indenture Trustee shall give like notice to the Holders of the Obligations at least annually thereafter for a period of 6 years or until all Obligations shall have been cancelled, whichever is earlier); and (5) Upon the surrender for cancellation of any Obligation, the Indenture Trustee shall forthwith pay to the Holder of such Obligation in cash an amount (less the amount, if any, required to be withheld in respect of transfer or other taxes on payment to such Holder) equal to the unpaid principal amount of such Obligation and the unpaid interest accrued thereon to the date on which the Secretary shall have paid the Guarantees in full in cash to the Indenture Trustee; PROVIDED THAT, for the purposes of this subparagraph (5), the Indenture Trustee (A) may deem any Person as the owner of an Obligation in accordance with Section 2.11 and (B) shall not be required to make any payment in violation of applicable law. -18- (c) Each notice to Obligees required by this Section shall be given by the Indenture Trustee by first class mail, postage prepaid, to the address of each Obligee appearing upon the Obligation Register. (d) If the Secretary shall not have paid the Guarantees in full in cash to the Indenture Trustee within 30 days after any demand therefor pursuant to Section 6.02 (whether or not because the Secretary makes either of the findings referred to in the proviso of Section 6.02(a)), the Indenture Trustee shall give prompt written notice of such nonpayment to each Obligee and the Shipowner. If the Indenture Trustee shall have received notice of either of such findings, such notice to each Obligee shall so state. SECTION 6.05. RIGHTS OF INDENTURE TRUSTEE AFTER INDENTURE DEFAULT. During the continuance of any Indenture Default, the Indenture Trustee shall have the right to demand and to receive payment of the Guarantees and shall have, with the consent of the Secretary as to matters other than the enforcement of the Guarantees (unless all the Guarantees shall have terminated as provided herein): (a) the right (in its name, as the trustee of an express trust, or as agent and attorney-in-fact for each Holder of the Obligations as a class) to take all action to enforce its rights and remedies (including the institution and prosecution of all judicial and other proceedings and the filings of proofs of claim and debt in connection therewith), and to enforce all existing rights of the Holders of the Obligations as a class; and (b) all other rights and remedies granted to the Indenture Trustee by this Indenture, or the Authorization Agreement, or by law. In addition, during the continuance of an Indenture Default and if all the Guarantees shall have terminated as provided herein, the Indenture Trustee shall have the right, by written notice to the Shipowner, to declare the entire unpaid principal amount of the Outstanding Obligations and all unpaid interest to be immediately due and payable. SECTION 6.06. (a) OBLIGEES' RIGHT TO DIRECT INDENTURE TRUSTEE AFTER INDENTURE DEFAULT. During the continuance of any Indenture Default, the Holders of a majority in principal amount of the Outstanding Obligations shall have the right, by an Act of Obligees, to direct the Indenture Trustee: (1) to exercise or to refrain from exercising any right or to enforce any remedy granted to it by this Indenture; and -19- (2) to direct the time, method and place of the exercise of any such right or the enforcement of any such remedy; PROVIDED THAT, subject to Section 7.03, the Indenture Trustee shall have the right not to take any such action if it shall determine in good faith that the action would involve it in personal liability, would subject it to expenses against which it had not been offered adequate security and indemnity or would be unjustly prejudicial to the Obligees not parties to such direction. Anything in this Section 6.06(a) to the contrary notwithstanding, the Indenture Trustee shall be obligated to demand payment of the Guarantees as provided in Section 6.02(a) unless the Holders of all Outstanding Obligations shall have elected to terminate the Guarantees as provided in Section 6.04(a)(2), in which case the Indenture Trustee shall be obligated to refrain from making such demand. (b) LIMITATIONS ON OBLIGEES' RIGHT TO SUE. No Obligee shall have the right to institute any judicial or other proceedings under this Indenture unless: (1) the Indenture Trustee shall have been directed to institute such proceeding by the Holders of at least 25% in aggregate principal amount of the Obligations then Outstanding; (2) the Indenture Trustee shall have been offered adequate security and indemnity against the costs, expenses and liabilities to be incurred by compliance with such direction; (3) the Indenture Trustee shall not have instituted such proceeding within 60 days after the receipt of both such direction and such offer of security and indemnity; (4) no direction inconsistent with such request shall have been given to the Indenture Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Obligations; and (5) the institution and prosecution of such proceeding would not result in an impairment of the rights of any other Obligee, it being understood and intended that no one or more Obligees shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Obligees or to obtain or to seek to obtain priority or preference over any other Obligees or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all the Obligees. -20- (c) UNCONDITIONAL RIGHT OF OBLIGEES TO SUE FOR PRINCIPAL (AND PREMIUM, IF ANY) AND INTEREST. Nothing in paragraph (b) shall (i) affect the obligation of the Shipowner to pay the principal of (and premium, if any) and interest on the Obligations in accordance with their terms or affect the right of any Obligee to institute any judicial or other proceeding to enforce the payment of his Obligations or (ii) limit the right of any Obligee to demand payment of the Guarantees pursuant to Section 6.02(b) or to institute any judicial or other proceeding to enforce the payment of the Guarantee of any Obligation of which he is the Holder. SECTION 6.07. UNDERTAKING FOR COSTS. In any proceeding for the enforcement of any right or remedy under this Indenture, or in any proceeding against the Indenture Trustee for any action taken or omitted by it as Indenture Trustee, the court may in its discretion require the filing by any party litigant of an undertaking to pay the cost of such proceeding and may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant, having due regard to the merits and good faith of the claims or defense made by such party litigant. The provisions of this Section 6.07 shall not apply to any proceeding instituted by the Indenture Trustee or any proceeding instituted by any Obligee for the payment of the principal of (and premium, if any) and interest on his Obligations. SECTION 6.08. RECISION OF PAYMENTS. Notwithstanding any other provision of this Indenture, or of the Obligations, in the event that any payment to or on behalf of an Obligee of the principal of or interest due under any Obligation, or any portion of any such payment, shall at any time be repaid by such Obligee in compliance with an order (whether or not final) of a court of competent jurisdiction pursuant to any provision of the Bankruptcy Code (Title 11 of the United States Code) or any Federal Law replacing or superseding such Code, or applicable state law, and regardless of whether there has been any previous Indenture Default and any payment pursuant thereto, or whether such Obligation shall theretofore have been acquired by the Shipowner or cancelled, or whether an instrument satisfying and discharging this Indenture shall have been executed and delivered, (1) such Obligation shall not be deemed to have been Retired or Paid and shall be deemed to be Outstanding, (2) the return of such payment in whole or in part (but not the mere possibility that any such payment or portion thereof may be so required to be returned, nor any prior demand, suit or proceeding for such return) in compliance with the order of such court shall constitute a default in payment of such Obligation within the meaning of Section 6.01(a), which default shall be deemed to have occurred on the date of such repayment and which default, if continued for 30 days, will constitute a Payment Default, (3) the Guarantee of such Obligation and (to the extent necessary to enforce such Obligation and Guarantee) this -21- Indenture shall be in full force and effect, and (4) the Person required to return such payment or portion thereof shall be deemed for all purposes to be a Holder of such Obligation and entitled to enforce such Obligation and Guarantee to the extent of such repayment and, if there shall not be any Indenture Trustee hereunder then in office, such Person shall also be entitled to exercise on his own behalf all the rights of the Indenture Trustee hereunder necessary for such enforcement; PROVIDED THAT, in the event the Guarantee of any Obligation shall have terminated for reasons set forth in paragraphs (2) or (4) of Section 6.04(a) of this Indenture prior to the aforesaid date of repayment the provisions of this Section shall not apply to such Obligation. SECTION 6.09. ASSUMPTION OF OBLIGATIONS BY SECRETARY. Notwithstanding anything contained herein, (i) in the event the Shipowner shall fail to make any payment of principal or interest due on the Obligations on an Interest Payment Date and such failure to pay shall continue for a period of 25 days or (ii) in the event of any other default under the Mortgage or the Security Agreement, the Secretary shall have the right to and may, in his sole discretion, (a) by giving to the Indenture Trustee at any time pursuant to clause (ii) above or, if pursuant to clause (i) above, on or after the 25th day of said 25 day period of such default (but prior to the receipt by the Secretary of any demand for payment of the Guarantees pursuant to Section 6.02) a Secretary's Supplemental Indenture in the form of Exhibit 4 attached hereto, which Exhibit is incorporated herein by reference, assume the rights and obligations of the Shipowner under this Indenture and all Outstanding Obligations as provided in said Secretary's Supplemental Indenture; and (b) if applicable, make any payment of principal or interest which is due under the Obligations. By the execution of this Indenture by the Indenture Trustee and the Shipowner it is agreed hereunder that a Secretary's Supplemental Indenture shall be effective and binding upon the Indenture Trustee and the Shipowner and their respective successors or assigns without further act or deed of either as of the date executed and given to the Indenture Trustee by the Secretary as contemplated by this Section, and each of them for itself, its successors and assigns hereby irrevocably appoints the Secretary its true and lawful attorney-in-fact to execute and deliver said Secretary's Supplemental Indenture. Upon any such assumption by the Secretary, the Secretary shall succeed to and be substituted for and may exercise every right and power of the Shipowner under this Indenture and the Obligations with the same force and effect as if the Secretary has been named as the Shipowner herein and therein. Upon any such assumption by the Secretary, the Indenture Trustee, upon request of the Secretary, shall promptly notify the holders of the Outstanding Obligations of such assumption. The Secretary may exercise its rights under this Section 6.09 as often as it deems appropriate in its sole discretion. -22- ARTICLE VII THE INDENTURE TRUSTEE SECTION 7.01. ACCEPTANCE OF TRUSTS. The Indenture Trustee hereby accepts the trusts of this Indenture. SECTION 7.02. ELIGIBILITY OF INDENTURE TRUSTEE. (a) The Indenture Trustee shall at all times be a bank or trust company which (1) is organized as a corporation and doing business under the laws of the United States or any state thereof, (2) is authorized under such laws to exercise corporate trust powers, (3) is subject to supervision or examination by federal or state authority, (4) has a combined capital and surplus (as set forth in its most recent published report of condition) of at least $3,000,000 and (5) shall not have become incapable of acting or have been adjudged a bankrupt or an insolvent nor have had a receiver appointed for itself or for any of its property, nor have had a public officer take charge or control of it or its property or affairs for the purpose of rehabilitation, conservation or liquidation. (b) Should the Indenture Trustee at any time cease to be eligible, pursuant to this Section 7.02, to act as trustee, it shall promptly notify the Obligees, the Shipowner and the Secretary of such fact; and should the Shipowner obtain knowledge of such ineligibility, it shall promptly advise the Indenture Trustee, the Secretary, and the Obligees of such fact. Any such notice (i) shall set forth all the relevant facts known to the Indenture Trustee or the Shipowner, as the case may be, (ii) if to the Secretary or the Shipowner, shall be registered or certified mail, postage prepaid, and (iii) if to Obligees, shall be sent to each Obligee in the manner provided in Section 6.04(c) at his address as it appears on the Obligation Register, or at such other address as such Obligee may have furnished to the Indenture Trustee for such purpose. SECTION 7.03. RIGHTS AND DUTIES OF INDENTURE TRUSTEE. (a) The Indenture Trustee shall not be responsible for the correctness of the Recitals in the Special Provisions hereof or in the Obligations (except the Indenture Trustee's authentication certificate thereon), all of which Recitals are statements made solely by the Shipowner. (b) The Indenture Trustee shall not be responsible for the validity, execution by other parties thereto, or sufficiency of this Indenture, the Authorization Agreement, the Obligations or the Guarantees. (c) During the continuance of any Indenture Default (except for an Indenture Default resulting from those defaults in payment or Payment -23- Defaults referred to in paragraph (r) of this Section, concerning which the Indenture Trustee has not received the notice referred to in said paragraph (r) and the information relating to items (1) through (5) of said paragraph (r)), the Indenture Trustee shall exercise such of the rights and powers vested in it by Article VI, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (d) Except during the continuance of any Indenture Default (other than an Indenture Default referred to in the parenthetical expression set forth in paragraph (c) of this Section), the Indenture Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Indenture Trustee. (e) No provision of this Indenture shall relieve the Indenture Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct; PROVIDED THAT: (1) Except during the continuance of an Indenture Default (other than an Indenture Default referred to in the parenthetical expression set forth in paragraph (c) of this Section), (A) the duties of the Indenture Trustee shall be limited as provided in paragraph (d) of this Section, and (B) in the absence of bad faith on the part of the Indenture Trustee, the Indenture Trustee may conclusively rely upon certificates or opinions conforming to the requirements of this Indenture as to the truth of the statements and the correctness of the opinions expressed therein; (2) The Indenture Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Officers of the Indenture Trustee unless it shall be proved that the Indenture Trustee was negligent in ascertaining the pertinent facts; and (3) The Indenture Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with an Act of Obligees relating to the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any trust or power conferred upon the Indenture Trustee under this Indenture. (f) Subject to paragraph (i) of this Section, the Indenture Trustee shall be under a duty to examine certificates and opinions required by this Indenture to be furnished to it to determine whether or not they conform to the requirements hereof. -24- (g) Subject to paragraph (c) of this Section, the Indenture Trustee may rely and shall be protected in acting upon any resolution, certificate, opinion, notice, request, consent, order, appraisal, report, bond, or other paper or document believed by it to be genuine, to have been signed by the proper party or parties and to be in conformity with the provisions of this Indenture. (h) In all cases where this Indenture does not make express provision as to the evidence on which the Indenture Trustee may act or refrain from acting, the Indenture Trustee shall be protected (subject to paragraph (c) of this Section) in acting or refraining from acting hereunder in reliance upon an Officer's Certificate as to the existence or nonexistence of any fact. (i) The Indenture Trustee may consult with counsel satisfactory to the Indenture Trustee (who may be counsel to the Shipowner), and an Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such Opinion of Counsel. (j) Subject to paragraph (c) of this Section, the Indenture Trustee shall not be under any responsibility for the approval or selection of any expert for any of the purposes expressed herein; PROVIDED THAT the Indenture Trustee shall exercise reasonable care with respect to the approval or selection of independent experts whom it approves or selects to furnish opinions or certificates to the Indenture Trustee pursuant to this Indenture. (k) Whenever it is provided that the Indenture Trustee shall take any action, including the giving of any notice or the making of any demand, or refrain from taking any action upon the happening or continuation of a specified event (including an Indenture Default) or upon the fulfillment of any condition or upon the Request of the Shipowner or of Obligees or upon receipt of any notice, including a Secretary's Notice, the Indenture Trustee (1) shall, subject to paragraph (c) of this Section, have no liability for failure to take such action or for failure to refrain from taking such action unless and until a Responsible Officer of the Indenture Trustee, who is a Responsible Officer in the Corporate Trust Office, has actual knowledge of such event or continuation thereof or the fulfillment of such conditions or shall have received such Request, and (2) in taking or refraining from taking such action, shall have full power to give any and all notices and to do any and all acts and things incidental to such action. (l) Subject to paragraph (c) of this Section, the Indenture Trustee shall not be under any obligation to exercise any of the trusts or powers hereof at the request, order or direction of any Obligees or the Secretary, unless such -25- Obligees or the Secretary shall have offered to the Indenture Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities to be incurred thereby. (m) The Indenture Trustee, in its individual or any other capacity, may become the owner or pledgee of Obligations with the same rights it would have if it were not Indenture Trustee. (n) Notwithstanding any other provision of this Indenture, the Indenture Trustee shall not take any action contrary to the terms of the Authorization Agreement, and any such purported action or any attempt to take such action shall be void and of no effect and, except as provided in Section 7.06(b), shall not enter into any amendment to the Authorization Agreement except as expressly authorized by a Supplemental Indenture entered into pursuant to Article X. (o) No provision of this Indenture shall require the Indenture Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (p) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Indenture Trustee shall be subject to the provisions of this Section. (q) Upon the execution and delivery of an instrument satisfying and discharging this Indenture as provided in Section 12.01 hereof, all duties and obligations of the Indenture Trustee hereunder (except with respect to the application of funds for the payment of Obligations then held by the Indenture Trustee) shall cease and shall not thereafter be revived, whether or not the Indenture shall thereafter be in full force and effect as provided in Section 6.08. (r) Notwithstanding any other provisions of this Indenture or the Authorization Agreement, the Indenture Trustee shall have no duty or obligation to exercise any of its rights or powers hereunder with respect to a default in payment or Payment Default by reason of a repayment referred to in Section 6.08 unless and until it shall have received notice of such default and information concerning (1) the date thereof, (2) the Obligation to which such repayment relates, (3) the Person making such repayment and the Holder of such Obligation, (4) the amounts of such repayment attributable to principal, premium and interest on such Obligation, and (5) the Interest Payment Date or -26- other date on which the Obligee received the moneys to which the court order mentioned in Section 6.08 relates. SECTION 7.04. COMPENSATION, EXPENSES AND INDEMNIFICATION OF INDENTURE TRUSTEE. The Shipowner shall (1) pay reasonable compensation to the Indenture Trustee and reimburse it for its reasonable expenses and disbursements (including counsel fees and expenses) and (2) indemnify the Indenture Trustee for, and hold it harmless against, any loss, liability or expense which it may incur or suffer without negligence or bad faith in acting under this Indenture or the Authorization Agreement. The compensation of the Indenture Trustee shall not be limited to the compensation provided by law for a trustee acting under an express trust. SECTION 7.05. RESIGNATION AND REMOVAL OF INDENTURE TRUSTEE. (a) The Indenture Trustee may resign at any time by giving written notice to the Shipowner. Within 10 days thereafter, the resigning Indenture Trustee shall give notice of such resignation to the Obligees in the manner provided in Section 6.04(c). If the resigning Indenture Trustee fails to do so within such 10-day period, within the next succeeding 10 days the Shipowner shall give such notice in the same manner. (b) The Indenture Trustee may at any time be removed by: (1) written notice to the Indenture Trustee and the Shipowner by the Holders of a majority in principal amount of the Outstanding Obligations; or (2) written notice to the Indenture Trustee by the Shipowner or the Secretary that the Indenture Trustee has ceased to be eligible under Section 7.02(a). (c) Any resignation or removal of the Indenture Trustee shall be effective only upon appointment of a successor Indenture Trustee approved by the Secretary and the acceptance of such appointment by such successor Indenture Trustee. SECTION 7.06. APPOINTMENT OF SUCCESSOR INDENTURE TRUSTEE. (a) If the Indenture Trustee or the Shipowner shall have given notice of ineligibility of the Indenture Trustee pursuant to Section 7.02(b), or if any notice of resignation or of removal shall have been given pursuant to Section 7.05, then a successor Indenture Trustee may be appointed by the Shipowner; provided THAT, if such successor Indenture Trustee is not so appointed (or has not accepted such appointment) within 15 calendar days after the giving of any such notice, such appointment may be made (i) by the Secretary or (ii) by a court of competent -27- jurisdiction upon the application of the Secretary, the Shipowner, the retiring Indenture Trustee or any Person who then is, and has been, the Holder of an Outstanding Obligation for at least 6 months. (b) No successor Indenture Trustee shall be appointed without the prior written consent of the Secretary and until such successor Indenture Trustee shall enter into an amendment to the Authorization Agreement as set forth in the first sentence of Section 4.04 thereof. (c) If a successor Indenture Trustee is appointed, approved by the Secretary and accepts such appointment, and the Shipowner shall have knowledge thereof, the Shipowner shall give notice to the Obligees of such appointment in the manner provided in Section 6.04(c). The failure of the Shipowner to give such notice shall not affect the validity of any such appointment. SECTION 7.07. EFFECT OF APPOINTMENT OF SUCCESSOR INDENTURE TRUSTEE. Upon appointment and acceptance as Indenture Trustee, each successor Indenture Trustee shall forthwith, without further act or deed, succeed to all the rights and duties of its predecessor in trust under this Indenture and the Authorization Agreement. Such predecessor shall promptly deliver to such successor Indenture Trustee all sums held hereunder, together with all records and other documents necessary or appropriate in connection with the performance of the duties of the successor Indenture Trustee under this Indenture. Upon the written request of the successor Indenture Trustee or the Shipowner and upon payment of all amounts due to such predecessor under this Indenture, such predecessor shall transfer, assign and confirm to the successor Indenture Trustee all its rights under this Indenture by executing and delivering from time to time to the successor Indenture Trustee such further instruments and by taking such other action as may reasonably be deemed by such successor Indenture Trustee or the Shipowner to be necessary or appropriate in connection therewith and the predecessor Indenture Trustee shall have no liability for any actions taken by the successor Indenture Trustee. SECTION 7.08. MERGER, CONSOLIDATION AND SALE OF INDENTURE TRUSTEE. In the event of any merger (including for the purposes of this Section, the conversion of a state bank into a national banking association or vice versa) or consolidation of the Indenture Trustee into any other Person or in the event of the sale of all or substantially all the Indenture Trustee's corporate trust business, the Person resulting from such merger (including any such conversion) or consolidation, or the transferee in the case of any such sale, shall forthwith notify the Shipowner and, subject to Section 7.02(a) and 7.06(b), shall be the Indenture Trustee under this Indenture and the Authorization Agreement without further act or deed. -28- Obligations and Guarantees authenticated after any such merger, consolidation or sale may be authenticated by the successor Indenture Trustee either in its own name or in the name of any predecessor which shall have been the Indenture Trustee. ARTICLE VIII CONSOLIDATION, MERGER OR SALE BY SHIPOWNER SECTION 8.01. CONSOLIDATION, MERGER OR SALE BY SHIPOWNER. Nothing in this Indenture shall prevent any lawful consolidation or merger of the Shipowner with or into any other Person, or any sale of a Vessel or Vessels to any other Person lawfully entitled to acquire and operate such Vessel or Vessels or any sale by the Shipowner of all or substantially all of its assets to any other Person; PROVIDED THAT, except where the Shipowner shall be the Person surviving a merger or consolidation, the Person formed by or surviving such consolidation or merger, or to which the sale of such Vessel or Vessels shall be made, shall, by Supplemental Indenture, expressly assume the payment of the principal of and interest (and premium, if any) on the Proportionate Part of the Outstanding Obligations relating to such Vessel or Vessels in accordance with the terms of the Obligations and of the Indenture and shall expressly assume the performance of the agreements of the Shipowner in the Indenture; PROVIDED FURTHER, that to the extent said Proportionate Part of the Outstanding Obligations is not so assumed, the Shipowner shall redeem or cause to be redeemed the principal amount of the Proportionate Part of the Outstanding Obligations as is required by the Secretary, such redemption to be in accordance with the terms of the Obligations and of the Indenture. When a Person so assumes this Indenture and such Proportionate Part of the Outstanding Obligations, the Supplemental Indenture shall discharge and release the Shipowner from any and all obligations thereunder relating to such Proportionate Part of the Outstanding Obligations. In the event of such an assumption by a Person to whom a Vessel or Vessels have been sold (a) such Person shall succeed to, and be substituted for, and may exercise every right and power of the original Shipowner with the same effect as if such successor Shipowner had been named as the Shipowner herein and (b) such Proportionate Part of the Outstanding Obligations shall be surrendered to the Indenture Trustee for appropriate notation or for the issuance of new Obligations in exchange for such Proportionate Part of the Outstanding Obligations in the name of the successor Shipowner, as required by the Secretary. The principal amount of the Proportionate Part of the Outstanding Obligations shall be determined by the Secretary. -29- SECTION 8.02. SALE OF THE VESSEL OR VESSELS BY THE SECRETARY. Nothing contained in this Indenture shall prevent the sale of a Vessel or Vessels to any other Person or Persons by the Secretary, by a court of law or by the Shipowner following, in connection with or in lieu of a foreclosure or similar action. Following any such sale (1) the Person to whom such Vessel or Vessels have been sold may by Supplemental Indenture expressly assume the payment of and interest (and premium, if any) on the Proportionate Part of the Outstanding Obligations relating to such Vessel or Vessels in accordance with the terms of the Obligations and the Indenture and shall expressly assume the performance of the Shipowner in the Indenture; and (2) in the event such Person does not so assume, the Secretary shall redeem the Proportionate Part of the Outstanding Obligations relating to such Vessel or Vessels without premium pursuant to Section 3.06 hereof; PROVIDED THAT, the Secretary shall allow or permit the sale of a Vessel or Vessels to the original Shipowner or to any affiliate of the of the Shipowner only if (i) the Secretary has not redeemed such Obligations prior to such sale, and (ii) such purchaser assumes such Proportionate Part of the Outstanding Obligations as contemplated by the preceding clause (1). When a Person so assumes this Indenture and such Proportionate Part of the Outstanding Obligations, the Supplemental Indenture shall discharge and release the Secretary from any and all obligations thereunder in the Secretary's capacity as Shipowner relating to such Proportionate Part of the Outstanding Obligations. In the event of such an assumption by a Person to whom a Vessel or Vessels have been sold (a) such Person shall succeed to, and be substituted for, and may exercise every right and power of the original Shipowner with the same effect as if such successor Shipowner had been named as the Shipowner herein and (b) such Proportionate Part of the Outstanding Obligations shall be surrendered to the Indenture Trustee for appropriate notation or for the issuance of new Obligations in exchange for such Proportionate Part of the Outstanding Obligations in the name of the successor Shipowner, as required by the Secretary. Any such sale or the execution of a Supplemental Indenture by any successor Shipowner shall not discharge or in any manner affect the obligation of the United States to pay the Guarantees pursuant to the terms thereof. The principal amount of the Proportionate Part of the Outstanding Obligations shall be determined by the Secretary. ARTICLE IX ACTS OF OBLIGEES SECTION 9.01. ACTS OF OBLIGEES. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action required or permitted by this Indenture to be given or taken by Obligees may be embodied in and evidenced by one or more instruments of substantially similar tenor -30- signed by such Obligees in person or by an agent or attorney duly appointed in writing. Except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Indenture Trustee and, where it is hereby expressly required, to the Shipowner and the Secretary. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act of Obligees." Proof of execution of any such instrument or of a writing appointing any such agent or attorney shall be sufficient for any purpose of this Indenture and (subject to Section 7.03) conclusive in favor of the Indenture Trustee and the Shipowner, if made in the manner provided in paragraph (b) of this Section. (b) The fact and date of the execution by any Person of any instrument or writing referred to in paragraph (a) of this Section may be proved by the affidavit of a witness of such execution or by the certificate or acknowledgment of any notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by an officer of a corporation or a member of a partnership, on behalf of such corporation or partnership, such affidavit or certificate shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Indenture Trustee (or, if such instrument or writing is addressed to the Secretary, the Secretary) deems sufficient. (c) The ownership of Obligations shall be proved by the Obligation Register. (d) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Obligation shall bind every future Holder of the same Obligation and the Holder of every Obligation issued upon the transfer thereof or in exchange therefor or in lieu thereof in respect of anything done or suffered to be done by the Indenture Trustee, any Paying Agent or the Shipowner in reliance thereon, whether or not notation of such action is made upon such Obligation. ARTICLE X SUPPLEMENTAL INDENTURES SECTION 10.01. PERMISSIBLE WITHOUT ACTION BY OBLIGEES. The Shipowner, the Indenture Trustee, or, where applicable, the Secretary, from time to time and at any time, may, without the consent of or notice to any of the Obligees, subject to Sections 10.02 and 10.05, enter into an indenture or -31- other instrument supplemental hereto and which thereafter shall form a part hereof, for any one or more of the following purposes: (1) to add to the covenants of the Shipowner, whether applicable to one or more series of Obligations; (2) to evidence the succession pursuant to Article VIII of another corporation or entity to the Shipowner and the assumption by such successor of the Obligations of the Shipowner hereunder; (3) to eliminate any right reserved to or conferred upon the Shipowner; (4) to make such provisions for the purpose of curing any ambiguity or correcting or supplementing any provisions in this Indenture as the Shipowner or the Secretary may deem necessary or desirable, provided such provisions are not inconsistent with this Indenture and shall not adversely affect the interests of the Obligees; (5) to provide for the issuance of additional Obligations of any series and Stated Maturity theretofore issued under this Indenture or to set forth the terms and provisions of any one or more additional series of Obligations in accordance with Section 2.04; or (6) to evidence the assumption pursuant to Section 6.09 by the Secretary of the Shipowner's obligations under this Indenture and the Outstanding Obligations. SECTION 10.02. PROTECTION OF INDENTURE TRUSTEE. Upon receipt of a Request of the Shipowner that the Indenture Trustee execute any Supplemental Indenture and upon receipt of any Act of Obligees required pursuant to Section 10.04 and the consent of the Secretary required pursuant to Section 10.05, the Indenture Trustee shall enter into such Supplemental Indenture; PROVIDED THAT, the Indenture Trustee shall not be obligated to enter into any Supplemental Indenture which the Indenture Trustee believes adversely affects the Indenture Trustee's own rights, duties or immunities under this Indenture. SECTION 10.03. REFERENCE IN OBLIGATIONS TO SUPPLEMENTAL INDENTURES. Obligations authenticated and delivered after the execution and delivery of any Supplemental Indenture may, with the consent and approval of the Shipowner and the Indenture Trustee, contain a text modified to conform to such Supplemental Indenture or have imprinted or stamped thereon a legend with respect to such Supplemental Indenture, but no such modification or legend -32- shall be necessary to make such Supplemental Indenture effective. SECTION 10.04. WAIVERS AND SUPPLEMENTAL INDENTURES WITH CONSENT OF OBLIGEES. With the consent of the Holders of not less than 60% in principal amount of the Outstanding Obligations of each series affected thereby, by Act of Obligees delivered to the Shipowner and the Indenture Trustee, (x) compliance by the Shipowner with any of the terms of the Indenture may be waived or (y) the Shipowner and the Indenture Trustee may enter into any Supplemental Indenture for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of the Obligations issued under this Indenture; PROVIDED THAT, no such waiver or Supplemental Indenture shall: (a) Without the consent of all Obligees affected thereby (1) change the Stated Maturity or reduce the principal of any Obligation, (2) extend the time of payment of, or reduce the rate of, interest thereon, (3) change the due date of or reduce the amount of any mandatory sinking fund payment, (4) reduce any premium payable upon the redemption of any Obligation, or (5) change the coin or currency in which any Obligation or the interest thereon is payable; or (b) Without the consent of all Obligees (l) terminate or modify any of the Guarantees or the obligations of the Secretary thereunder, (2) reduce the amount of any of the Guarantees, (3) eliminate, modify or condition the duties of the Indenture Trustee to demand payment of the Guarantees or otherwise to comply with the provisions of Sections 6.02 and 6.04, (4) eliminate or reduce any of the eligibility requirements for the Indenture Trustee stated in Section 7.02, or (5) reduce the percentage in principal amount of the Outstanding Obligations of any series, the consent of whose Holders is required for any such Supplemental Indenture, or required for any waiver provided herein or to modify any of the provisions of this Section except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of all Obligees affected thereby. It shall not be necessary for any Act of Obligees under this Section to approve the particular form of any proposed Supplemental Indenture, but it shall be sufficient if such Act shall approve the substance thereof. Promptly after the execution of any Supplemental Indenture pursuant to this Section, the Shipowner shall give notice thereof to the Obligees in the manner provided in Section 6.04(c). Any failure of the Shipowner to give such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such Supplemental Indenture. -33- SECTION 10.05. CONSENT OF SECRETARY. Subject to the provisions of Section 11.01, no waiver pursuant to Section 10.04 shall be effective, and neither the Shipowner nor the Indenture Trustee shall enter into any Supplemental Indenture, without the prior written consent of the Secretary thereto, and any purported action or attempt to take such action forbidden to be taken by this Section shall be void and of no effect. SECTION 10.06. CONTINUED VALIDITY OF THE GUARANTEES. Notwithstanding anything herein to the contrary, this Indenture, the Guarantees and the Authorization Agreement shall each remain in full force and effect notwithstanding the assumption by the Secretary of the Obligations pursuant to the Secretary's Supplemental Indenture entered into pursuant to Section 6.09, and pursuant to Section 1103(e) of the Act, the validity of the Guarantee of any Obligation shall be unaffected, and such Guarantee and all responsibilities, requirements and consents relating to the Secretary under the terms and provisions of this Indenture shall remain in full force and effect notwithstanding any such assumption by the Secretary as aforesaid. ARTICLE XI PERFORMANCE OF OBLIGATIONS TO SECRETARY SECTION 11.01. PERFORMANCE OF OBLIGATIONS TO SECRETARY. Notwithstanding any other provisions of this Indenture to the contrary, each of the provisions hereof which requires or permits action by the Secretary, the consent, approval or authorization of the Secretary, the furnishing of any document, paper or information to the Secretary, or the performance of any other obligation to the Secretary, shall not be effective and the Sections containing such provisions shall be read as though there were no such requirements or permissions, after termination of the Guarantees pursuant to Section 6.04(a). ARTICLE XII SATISFACTION AND DISCHARGE OF INDENTURE SECTION 12.01. SATISFACTION AND DISCHARGE OF INDENTURE. Whenever all Outstanding Obligations authenticated and delivered hereunder shall have been Retired or Paid the Indenture Trustee shall forthwith deliver to the Shipowner and the Secretary a duly executed instrument, in form submitted to it by the Shipowner and reasonably satisfactory to the Indenture Trustee, satisfying and discharging this Indenture and, at the time such form of instrument is submitted to the Indenture Trustee the Shipowner shall deliver to the Indenture Trustee an Officer's Certificate and an Opinion of Counsel -34- each stating that all conditions precedent herein provided relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the Obligations of the Shipowner to the Indenture Trustee under Section 7.04 shall survive. ARTICLE XIII MISCELLANEOUS SECTION 13.01. NOTICES AND DEMANDS. Except as otherwise specifically provided herein or in the Act, any notice, request, demand or direction upon, or other communication to, the Indenture Trustee, the Shipowner or the Secretary shall be deemed to have been sufficiently given or made by being mailed, registered or certified mail, postage prepaid, addressed to the Indenture Trustee, the Shipowner or the Secretary at their respective addresses appearing in the Special Provisions of this Indenture or at such other address as any of them may advise the others in writing from time to time. Except as otherwise specifically provided herein or in the Act, any notice, request, demand or direction upon, or other communication to, the Obligees shall be deemed to have been sufficiently given or made by being mailed, registered or certified mail, postage prepaid, to the address of each Obligee last appearing on the Obligation Register. SECTION 13.02. WAIVERS OF NOTICE. In any case where notice by mail or otherwise is provided herein, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be deemed the equivalent of such notice. Waivers of notice shall be filed with the Indenture Trustee, but such filing shall not be a condition precedent to the validity of any action taken thereon in reliance upon any such waiver. SECTION 13.03. BENEFIT OF INDENTURE. This Indenture is for the sole benefit of the Shipowner, the Indenture Trustee, the Holders from time to time of the Outstanding Obligations and (until the obligations to the Secretary shall have terminated as provided in Article XI) the Secretary. SECTION 13.04. EXECUTION OF COUNTERPARTS. This Indenture may be executed in any number of counterparts. All such counterparts shall be deemed to be original and shall together constitute but one and the same instrument. SECTION 13.05. TABLE OF CONTENTS; TITLES AND HEADINGS. Any table of contents, the titles of the Articles and the headings of the Sections are not a -35- part of this Indenture and shall not be deemed to affect the meaning or construction of any of its provisions. SECTION 13.06. INTEGRATION WITH SPECIAL PROVISIONS OF THE INDENTURE. In the event of any conflict between the provisions of the Special Provisions of the Indenture and of this Exhibit 1 thereto, the provisions of the Special Provisions shall govern and the provisions of this Exhibit 1 to the Indenture shall be deemed to be amended accordingly. SECTION 13.07. IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS. No recourse shall be had for the payment of the principal of, or the premium, if any, or interest on any Obligation, or for any claim based thereon or otherwise in respect thereof or of the indebtedness represented thereby, or upon any obligation, covenant or agreement of this Indenture, against any incorporator, stockholder, officer or director, as such, past, present or future, of the Shipowner or of any successor corporation, either directly or through the Shipowner or any successor corporation, whether by virtue of any constitutional provision, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly agreed and understood that this Indenture and the Obligations are solely corporate obligations, and that no personal liability whatsoever shall attach to, or be incurred by, any incorporator, stockholder, officer or director, as such, past, present or future, of the Shipowner or of any successor corporation, either directly or through the Shipowner or any successor corporation, because of the incurring of the indebtedness hereby authorized or under, or by reason of, any of the obligations, covenants, promises or agreements contained in this Indenture or in any of the Obligations or to be implied herefrom or therefrom, and that all liability, if any, of that character against every such incorporator, stockholder, officer and director is, by the acceptance of the Obligations and as a condition of, and as part of the consideration for, the execution of this Indenture and the issue of the Obligations, expressly waived and released. SECTION 13.08. APPLICABLE LAW. This Indenture and each Obligation shall be governed by the laws referred to in the Special Provisions hereof, except to the extent Federal law applies hereto. -36- SCHEDULE A TO TRUST INDENTURE DOCUMENT 5 Schedule of Definitions to Trust Indenture Dated as of April 9,1999 "Act" means the Merchant Marine Act, 1936, as amended, and in effect on the Closing Date. "Act of Obligees" means any request, demand, authorization, direction, notice, consent, waiver or other action to be given or taken by the Obligees and embodied in one or more documents of the type, and executed in the manner, required by the Indenture. "Administrative Agent" means CITICORP NORTH AMERICA, INC., a Delaware corporation, as administrative agent for the Primary Lender and the commercial paper holders of the Primary Lender (and their respective successors and assigns), and its permitted successors and assigns. "Actual Cost" means the actual cost of a Vessel, as set forth in Table A of the Security Agreement or as subsequently redetermined by the Secretary pursuant to the Security Agreement and the Act. "Actual Knowledge" means actual knowledge of a Responsible Officer of a Person. "Affiliate" or "Affiliated" means any Person directly or indirectly controlling, controlled by, or under common control with, another Person. "Agent" means each of the Administrative Agent and the Facility Agent, individually, and "Agents" means the Administrative Agent and the Facility Agent, collectively. "Alternate Lender" means CITIBANK, N.A., a national banking association and its successors and assigns. "Applicable Interest Rate" shall mean (a)(i) with respect to any Disbursement or portion thereof that is funded by the Primary Lender through its issuance of commercial paper notes and so long as the Primary Lender is the holder of the indebtedness related to such funded portion, a rate (the "CP Rate") equal to the sum of (A) the Primary Lender's weighted average cost (defined below) related to the issuance of commercial paper notes and other short-term borrowings or the sale of participation interests (collectively, "Commercial Paper"), which in each case have been allocated by the Primary Lender to the Credit Facility, which rate includes related issuance costs incurred by the Primary Lender, plus (B) during the Construction Period, four-tenths of one percent (.40%) and thereafter, nine-twentieths of one percent (0.45%), as calculated by the Administrative Agent for each Interest Period and specified in a notice sent by the Administrative Agent to the Facility Agent and by the Facility Agent to the Shipowner and the Indenture Trustee at least three (3) Business Days prior to each Interest Payment Date on which the interest so calculated is payable (For purposes of the foregoing, the Primary Lender's "weighted average cost" of Commercial Paper shall consist of (I) the actual interest rate paid to purchasers of Commercial Paper, (II) the costs associated with the issuance of the Commercial Paper and (III) other borrowings the Primary Lender may incur, including the amount to fund small or odd dollar amounts that are not easily accommodated in the commercial paper market); and (ii) with respect to any Disbursement funded by the Alternate Lender or to the extent that a Disbursement held by the Primary Lender is assigned to the Alternate Lender or to any other assignee, then, from and after the applicable Disbursement Date or the effective date of such assignment, as the case may be, a rate per annum equal to LIBOR plus three tenths of one percent (0.30%) per annum; provided, however, that, if the Alternate Lender shall have determined, prior to the commencement of any Interest Period that: (A) Dollar deposits of sufficient amount and maturity for funding a Disbursement are not available to such Lender in the London interbank market in the ordinary course of business; or (B) by reason of circumstances affecting the relevant market, adequate and fair means do not exist for ascertaining the rate of interest to be applicable to a Disbursement; or (C) the relevant rate of interest referred to in the definition of LIBOR which is to be used to determine the rate of interest for a Disbursement does not cover the funding cost to the Lender of making or maintaining the Disbursement, then the Lender shall so notify the Indenture Trustee, who shall give notice to the Shipowner of such condition and interest shall, effective as of the date of such notice and so long as such condition shall exist, accrue during each applicable Interest Period at the Base Rate; provided, further, however that if, in the Lender's reasonable judgment, it becomes unlawful at any time for such Lender to make or maintain Disbursements based upon LIBOR, the Lender shall so notify the Indenture Trustee, who shall give notice to the Shipowner of such determination and, effective as of the date of such notice and so long as such condition shall exist, interest shall thereafter accrue during each applicable Interest Period at the Base Rate. -2- (b) with respect to Obligations which are Fixed Rate Notes, the interest rate set forth in each such Obligation, which interest rate shall be as approved by the Secretary as reasonable pursuant to Section 1104A (b)(5) of the Act. "Authorization Agreement" means the Authorization Agreement, Contract No. MA-13504, dated the Closing Date, between the Secretary and the Indenture Trustee, whereby the Secretary authorizes the Guarantee of the United States of America to be endorsed on each of the Obligations, as the same is originally executed, or as modified, amended or supplemented in accordance with the applicable provisions thereof. "Authorized Newspapers" means THE WALL STREET JOURNAL and THE JOURNAL OF COMMERCE, or if either ceases to exist, then in such other newspapers as the Secretary may designate and a newspaper printed in English, approved by the Secretary and of general circulation in Baltimore, Maryland. "Base Rate" means, for any Interest Period or any other period, a fluctuating interest rate per annum as shall be in effect from time to time which rate per annum shall at all times be equal to the higher of: (a) the rate of interest announced publicly by Citibank, N.A. in New York, New York, from time to time, as Citibank, N.A.'s base rate; or (b) one-half of one percent (0.50%) per annum above the latest three-week moving average of secondary market morning offering rates in the United States for three-month certificates of deposit of major United States money market banks, such three-week moving average being determined weekly on each Monday (or, if any such day is not a Business Day, on the next succeeding Business Day) for the three-week period ending on the previous Friday by Citibank, N.A. on the basis of such rates reported by certificate of deposit dealers to and published by the Federal Reserve Bank of New York, or, if such publication shall be suspended or terminated, on the basis of quotations for such rates received by Citibank, N.A. from three New York certificate of deposit dealers of recognized standing selected by Citibank, N.A., in either case adjusted to the nearest one-fourth of one percent (0.25%) or, if there is no nearest one-fourth of one percent, to the next higher one-fourth of one percent. "Borrower" means the Shipowner. -3- "Business Day" shall mean any day on which dealings in Dollar deposits are carried on in the London interbank market and on which commercial banks in London and New York City are open for domestic and foreign exchange business. "Cede" means Cede & Company. "Certificate Authorizing Disbursement" shall mean, with respect to a Disbursement, the United States Certificate Authorizing Disbursement substantially in the form set forth in Annex A to the Credit Agreement. "Closing Date" means April 9, 1999. "Commercial Paper" shall have the meaning set forth in clause (a)(i)of the definition of Applicable Interest Rate herein. "Construction Contract" means that certain Semi-Submersible Drilling Vessel Construction Contract (Hull No.1828), dated April 9, 1998, by and between the Shipowner and the Shipyard, as the same may be amended, modified or supplemented in accordance with the applicable provisions thereof. "Construction Period" shall mean the period from the date hereof to the Delivery Date. "Construction Period Interest" shall mean all interest that accrues on the Outstanding Principal during the Construction Period. "Corporate Trust Office" means the principal corporate trust office of the Indenture Trustee at which, at any time, its corporate trust business shall be principally administered, which office at the date of execution of the Indenture is located at 25 South Charles Street, 16th Floor, Mail Code 101-591, Baltimore, Maryland 21201. "CP Rate" shall have the meaning set forth in clause (a)(i) of the definition of Applicable Interest Rate herein. "Credit Agreement" or "Agreement" shall mean the Credit Agreement, dated as of the Closing Date, among the Shipowner, the Lenders, and the Agents, including any Exhibit, Annex, or other attachment thereto, as the same may be amended, modified or supplemented. "Credit Facility" shall have the meaning set forth in Whereas Clause (A) of the Credit Agreement. "DTC" means The Depository Trust Company. -4- "Definitive Obligation" has the meaning specified in Article Sixth, paragraph (aa) of the Special Provisions of the Indenture. "Delivery Date" means the date on which the Vessel is delivered to and accepted by the Shipowner. "Depreciated Actual Cost" means the depreciated actual cost of the Vessel as determined and re-determined by the Secretary pursuant to Sections 1101(g) and 1104(b)(2) of the Act. "Disbursement" shall have the meaning set forth in Section 2.03 of the Credit Agreement. "Disbursement Date" shall mean, in relation to any Disbursement, the Business Day on which the Lender shall make such Disbursement. "Dollars," "U.S. Dollars," "U.S.D.," "U.S.$" or "$" shall mean the lawful currency of the United States of America. "Facility Agent" means CITIBANK INTERNATIONAL PLC, a bank organized and existing under the laws of England, as facility agent for both the Primary Lender and the Alternative Lender (and their respective successors and assigns), and its permitted successors and assigns. "Final Disbursement Date" shall have the meaning set forth in Section 2.02 of the Credit Agreement. "Fixed Rate Note" shall mean an Obligation substantially in the form of Exhibit 3 to the Indenture, appropriately completed. "Floating Rate Note" shall mean the Obligation substantially in the form of Exhibit 2 to the Indenture, appropriately completed. "Global Obligation" has the meaning specified in Article Sixth, paragraph (aa) of the Special Provisions of the Indenture. "Governmental Authority" shall mean the government of any country, any agency, department or other administrative authority or instrumentality thereof, and any local or other governmental authority within any such country. "Guarantee" or "Guarantees" means the guarantee of an Obligation by the United States of America pursuant to Title XI of the Act, as provided in the Authorization Agreement. -5- "Guarantee Commitment" means the Commitment to Guarantee Obligations, Contract No. MA-13509, dated as of the Closing Date, executed by the Secretary and accepted by the Shipowner with respect to the Guarantees, as originally executed or as modified, amended or supplemented in accordance with the applicable provisions thereof. "Guarantee Fees" shall mean the amounts described in the Guarantee Commitment payable in consideration for the commitment therein described and payable as provided in such Guarantee Commitment. "Holder" means the holder of an Obligation. "Indenture" means the Trust Indenture dated as of the Closing Date, between the Shipowner and the Indenture Trustee, as the same is originally executed, or as modified, amended or supplemented in accordance with the applicable provisions thereof. "Indenture Default" has the meaning specified in Article VI of Exhibit 1 to the Indenture. "Indenture Trustee" means FMB Trust Company, National Association, a national banking association, and any successor trustee permitted under the Indenture. "Interest Payment Date" means, with respect to any Obligation, the date when any installment of interest on such Obligation is due and payable, which are February 15 and August 15 of each year, beginning on August 15, 1999, and the date of any prepayment of any Obligation. "Interest Period" shall mean, with respect to any Disbursement, (i) the period commencing on the Disbursement Date and extending up to, but not including, the next Interest Payment Date; and (ii) thereafter the period commencing on each Interest Payment Date and extending up to, but not including, the next Interest Payment Date. "Lender" shall mean shall mean either the Primary Lender or the Alternate Lender, as the case may be, depending on which of the two parties made or will make the relevant disbursement of funds under the Credit Agreement; provided, however, that if the Primary Lender assigns its rights under the Credit Agreement to the Alternate Lender, the term "Lender," shall mean only the Alternate Lender, CITIBANK, N.A., a national banking association, and its successors and assigns. -6- "Letter of Representations" means the Letter of Representations between the Shipowner and the Indenture Trustee and other documentation necessary or desirable to effectuate the issuance of the Fixed Rate Notes as Global Obligations. "LIBOR" shall mean, in relation to any Interest Period, the rate of interest per annum (rounded upward, if necessary, to the nearest 1/16 of 1%) quoted by the principal London office of CITIBANK, N. A., at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for the offering to leading banks in the London interbank market of U.S. Dollar deposits for a period and in an amount comparable to such Interest Period and the principal amount upon which interest is to be paid during such Interest Period. "Make-Whole Premium" means an amount equal to the excess, if any, between (i) the sum of the respective Payment Values of each Prospective Payment, over (ii) 100% of the aggregate principal amount being prepaid on the Redemption Date. "Make-Whole Premium Determination Date" means the second Business Day before the applicable Redemption Date. "Maturity" when used with respect to any Obligation, means the date on which the principal of, or interest on, such Obligation becomes due and payable as therein provided, whether on a Payment Date, at the Stated Maturity or by prepayment, repayment, redemption or declaration of acceleration or otherwise. "Mortgage" means the first preferred ship mortgage on the Vessel, Contract No. MA-13506, between the Shipowner and the Secretary, as originally executed or as modified, amended or supplemented in accordance with the applicable provisions thereof. "Note" shall mean a Floating Rate Note or a Fixed Rate Note. "Obligation" or "Obligations" shall mean the Floating Rate Note or Fixed Rate Note(s) of the Shipowner bearing a Guarantee and authenticated and delivered pursuant to the Indenture and the Authorization Agreement. "Obligation Owners" has the meaning specified in Article Sixth, paragraph (aa) of the Special Provisions of the Indenture. "Obligation Register" has the meaning specified in Section 2.10 of Exhibit 1 to the Indenture. "Obligee" means each Holder. -7- "Original Principal Amount" shall mean the maximum principal amount of the Obligations. "Officer's Certificate" means a certificate conforming to Section 1.02 of Exhibit 1 to the Indenture and signed by a Responsible Officer of the Person giving such certificate. "Opinion of Counsel" means an opinion of counsel conforming to Section 1.02 of Exhibit 1 to the Indenture. "Outstanding," when used with reference to the Obligations, shall mean all Obligations theretofore issued under the Indenture, except: (1) Obligations Retired or Paid; and (2) Obligations in lieu of which other Obligations have been issued under the Indenture. For the purposes of Articles VI and X of Exhibit 1 to the Indenture, and also in determining whether the Holders of a stated percentage of the principal amount of Outstanding Obligations have taken any Act of Obligees required or permitted by the Indenture, Obligations owned by the Shipowner or by any Affiliate of the Shipowner (excluding (a) Obligations held by an Affiliate of the Shipowner when such Affiliate is acting in a fiduciary capacity if it is established to the satisfaction of the Indenture Trustee that neither the Shipowner nor another Affiliate has a beneficial interest therein and (b) Obligations pledged in good faith by the Shipowner or by any Affiliate of the Shipowner, if the pledgee (i) is not an Affiliate of the pledgor and (ii) establishes to the satisfaction of the Indenture Trustee that the pledgee has the right to vote such Obligations) shall be disregarded and deemed not to be Outstanding; PROVIDED HOWEVER THAT, for the purpose of determining whether the Indenture Trustee shall be protected in relying on any such Act of Obligees, only Obligations which the Indenture Trustee has actual knowledge are so owned shall be so disregarded and deemed not to be Outstanding. Obligations which are not Outstanding shall not be entitled to any rights or benefits provided in the Indenture. "Outstanding Principal" shall have the meaning set forth in Section 2.01 of the Credit Agreement. "Paying Agent" means any bank or trust company having the qualifications set forth in clauses (1), (3), (4) and (5) of Section 7.02(a) of Exhibit 1 to the Indenture, which shall be appointed by the Shipowner in accordance with Section 4.02 of Exhibit 1 to the Indenture to pay the principal -8- of (and premium, if any) or interest on the Obligations on behalf of the Shipowner. "Payment Date" shall mean February 15 and August 15 of each year, beginning on February 15, 2001. "Payment Default" has the meaning specified in Section 6.01(a) of Exhibit 1 to the Indenture. "Payment Value" of each Prospective Payment shall be determined by discounting such Prospective Payment at the Reinvestment Rate for the period from the Payment Date on which such Prospective Payment was scheduled to be paid to the applicable Redemption Date. "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Place of Payment" means the place at which an Obligation is to be redeemed pursuant to Article III of Exhibit 1 to the Indenture. "Principal Office," when used with respect to the Shipowner, means the office of the Shipowner at which, at any particular time, its corporate business is principally administered, which office at the date of execution of the Indenture is located in the British Virgin Islands. "Primary Lender" means GOVCO INCORPORATED, a Delaware corporation, and its successors and assigns. "Prospective Payment" means, with respect to the Fixed Rate Notes: (i) each scheduled interest payment on each scheduled principal amount to be prepaid; and (ii) the scheduled principal amount to be prepaid. "Redeem" means with respect to the redemption of Obligations, to repay or prepay. "Redemption" means with respect to the redemption of Obligations, the repayment or prepayment of Obligations as applicable. "Redemption Date" means, with respect to any Obligation, a date fixed for the prepayment, repayment or redemption of such Obligation by or pursuant to Article Fourth of the Indenture or Article III of Exhibit 1 to the Indenture. "Redemption Price" means, with respect to any Obligation, the price at -9- which an Obligation is to be prepaid, repaid, or redeemed pursuant to Article Fourth of the Indenture or Article III of Exhibit 1 to the Indenture. "Reinvestment Rate" means the yield determined by the Indenture Trustee, based on information received from the Holder or calculation agent, to be the yield of the issue of actively traded United States Treasury securities having a maturity equal to the Weighted Average Life to Final Maturity; provided, however, that if such Weighted Average Life to Final Maturity is not equal to the maturity of an actively traded United States Treasury security (rounded to the nearest one-twelfth of a year), such yield shall be obtained by linear interpolation from the yields of actively traded United States Treasury securities having the greater maturity closest to and the lesser maturity closest to such Weighted Average Life to Final Maturity. The yields shall be determined by reference to the yields as indicated by Telerate Access Service (page 8003 or the relevant page at the date of determination indicating such yields) (or, if such data ceases to be available, any publicly available sources of similar market data) at approximately 11:00 a.m. (New York City time) on the Make-Whole Premium Determination Date. "Remaining Dollar Years" means the sum of the amounts obtained by multiplying: (i) the amount of each remaining scheduled payment of principal of the Fixed Rate Notes (without giving effect to such Redemption) by (ii) the number of years (rounded to the nearest one-twelfth) which will elapse between the Redemption Date and the Payment Date for such scheduled principal amount. "Request" means a written request to a Person for the action therein specified, signed by the Person making such request or a Responsible Officer thereof. "Responsible Officer" means (i) in the case of any business corporation, the chairman of the board of directors, the president, any vice-president, the secretary, assistant secretary, the treasurer or assistant treasurer thereof, (ii) in the case of any commercial bank, the chairman or vice-chairman of the executive committee of the board of directors or trustees, the president, any vice president, the secretary, the treasurer, any trust officer, any executive, senior, second or assistant vice president or any officer or assistant officer customarily performing functions similar to those performed by the persons who at the time shall be such officers or to whom any related matter is referred because of his/her knowledge of and familiarity with the particular subject thereof, (iii) in the case of the Indenture Trustee, any senior trust officer or trust officer, or any vice president associated with the Corporate Trust Office, and (iv) with respect to the signing or authentication of Obligations and Guarantees by the Indenture Trustee, any person specifically authorized by the Indenture Trustee to sign or authenticate Obligations. -10- "Retired or Paid," as applied to Obligations and the indebtedness evidenced thereby, means that such Obligations shall be deemed to have been retired or paid and shall no longer be entitled to any rights or benefits provided in the Indenture if: (1) such Obligations shall have been paid in full in immediately available funds; (2) such Obligations shall have been cancelled by the Indenture Trustee or shall have been delivered to the Indenture Trustee for cancellation; or (3) such Obligations shall have become due and payable at Maturity and funds sufficient for the payment of such Obligations (including interest to the date of Maturity, or in the case of a payment after Maturity, to the date of payment, together with any premium thereon) and available for such payment (whether as a result of payment pursuant to the Guarantees or otherwise) shall be held by the Indenture Trustee or any Paying Agent pursuant to Section 4.02 of Exhibit 1 to the Indenture (or shall have been so held and shall thereafter have been paid to the Shipowner pursuant to Section 4.03 of Exhibit 1 to the Indenture) in trust for the purpose or with irrevocable directions, to apply the same; PROVIDED THAT, the foregoing definition is subject to the provisions of Section 6.08 of Exhibit 1 to the Indenture. "Secretary" means the Secretary of Transportation or any official or official body from time to time duly authorized to perform the duties and functions of the Secretary of Transportation under Title XI of the Act (including the Maritime Administrator, the Acting Maritime Administrator, and to the extent so authorized, the Deputy Maritime Administrator and other officials of the Maritime Administration). "Secretary's Note" means a promissory note or promissory notes issued and delivered by the Shipowner to the Secretary described in Article Third of the Special Provisions of the Security Agreement and shall also mean any promissory note issued in substitution for and replacement thereof pursuant to the Security Agreement. "Secretary's Notice" means a notice from the Secretary to the Indenture Trustee to the effect that (a) a default, within the meaning of Section 1105(b) of the Act, has occurred under a mortgage, loan agreement, or other security agreement that has been entered into between the Secretary, the Shipowner -11- and any other parties in order to protect the interests of the United States of America in connection with the Guarantees, (b) such notice is given for the purposes of Section 6.01(b) of Exhibit 1 to the Indenture in order to protect the security interests of the United States of America under such mortgage, loan agreement or other security agreement, and (c) the Guarantees will terminate upon the expiration of 60 days from the date of such notice if the Indenture Trustee and each Obligee shall have failed to demand payment of the Guarantees as provided in the Indenture, the Guarantees or the Act. Such notice shall be given (i) in writing, by registered mail, return receipt requested, deposited in the United States Mail on the date of such notice and addressed to a Responsible Officer in the Corporate Trust Office of the Indenture Trustee in accordance with the Special Provisions of the Indenture, (ii) by telegram, telex, telecopy or similar means of transmission dispatched on such date and addressed to the Responsible Officer in the Corporate Trust Office of the Indenture Trustee, as aforesaid, and (iii) by collect telephone call made on such date to a Responsible Officer in the Corporate Trust Office of the Indenture Trustee. A Secretary's Notice shall not be deemed to have been given unless it shall have been given in accordance with all the provisions of this definition, and the date of any Secretary's Notice shall be deemed to be the last date on which it is so given pursuant to clauses (i) through (iii) above. "Secretary's Supplemental Indenture" means a Supplemental Indenture evidencing the succession, pursuant to Section 6.09 of Exhibit 1 to the Indenture, of the Secretary to the Shipowner, and the assumption by the Secretary of the obligations of the Shipowner under the Indenture. "Section 1104" means Section 1104A of the Act, and when used with reference to subsections of Section 1104, means subsections of Section 1104A. "Security Agreement" shall mean that certain security agreement, Contract No. MA-13505, dated as of the Closing Date, with respect to the Vessel, executed by the Shipowner and the Secretary relating to the security in respect to the Guarantees, as originally executed or as modified, amended or supplemented in accordance with the applicable provisions thereof. "Shipowner" means PETRODRILL FOUR LIMITED, a British Virgin Islands international business company, and subject to the provisions of Sections 6.09, 8.01 and 8.02 of Exhibit 1 to the Indenture, shall also include its successors and assigns. "Shipyard" or "Shipbuilder" means TDI-Halter, Limited Partnership, a Louisiana limited partnership. "Stated Maturity," when used with respect to any Obligation, means the date determinable as set forth in such Obligation as the final date on which the -12- principal of such Obligation is due and payable, which shall include, without limitation, each of the Payment Dates. "Supplemental Indenture" shall mean any indenture supplement to the Indenture entered into pursuant to Article X thereof. "Title XI" means Title XI of the Act. "Title XI Reserve Fund and Financial Agreement" means that certain Title XI Reserve Fund and Financial Agreement, Contract No. MA-13513, dated as of the Closing Date, executed by the Shipowner and the Secretary, as amended, modified or supplemented in accordance with the applicable provisions thereof. "United States" means the United States of America. "Vessel" means the Shipowner's dynamic positioned semi-submersible drilling rig to be named the AMETHYST 4 and constructed by TDI-Halter, Limited Partnership in accordance with the Construction Contract, including all work and material heretofore or hereafter performed upon or installed in or placed on board such Vessel, together with related appurtenances, additions, improvements, and replacements. "Weighted Average Life to Final Maturity" means the number of years (rounded up to the nearest one-twelfth of a year) obtained by dividing: (i) the then Remaining Dollar Years by (ii) the total amount of the then remaining aggregate unpaid principal amount of such Fixed Rate Notes (without giving effect to the subject Redemption). -13- EX-4.24 26 EXHIBIT 4.24 GUARANTY AGREEMENT IN FAVOR OF THE UNITED STATES This Guaranty Agreement (the "Guaranty Agreement") is dated this 9th day April, 1999 by PETRODRILL FIVE LIMITED, a British Virgin Islands international business company (the "Guarantor"), to the United States of America, represented by the Secretary of Transportation, acting by and through the Maritime Administrator (the "Secretary"). RECITALS: A. WHEREAS, the Guarantor is the sister company of PETRODRILL FOUR LIMITED, (the "Shipowner"); and B. WHEREAS, the Shipowner, in connection with the financing of the cost of construction of the AMETHYST 4, to be wholly owned by the Shipowner (the "Vessels"), on the date hereof, borrowed certain funds and created and authorized the issuance of obligations designated "United States Government Guaranteed Export Ship Financing Obligations, AMETHYST 4 Series" (the "Obligations"), consisting on the date hereof of $149,625,000 aggregate principal amount of the Obligations, bearing interest at the rate specified therein and issued under a trust indenture between the Shipowner and FMB Trust Company, National Association, a national trust company as trustee, dated as of the date hereof, said Obligations constituting the legal, valid and binding obligations of the Shipowner; and C. WHEREAS, the Shipowner, on the date hereof, accepted the Secretary's Commitment to Guarantee Obligations (the "Commitment") pursuant to Title XI of the Merchant Marine Act, 1936, as amended (the "Act"), whereby the Secretary authorized a guarantee to be endorsed upon each of the Obligations (the "Guarantees"); and D. WHEREAS, the Shipowner has, in consideration of the issuance of the Guarantees by the Secretary of the payment of the unpaid interest on, and the unpaid balance of the principal of the Obligations, executed a security agreement dated the date hereof, between the Shipowner and the Secretary (the "Security Agreement") and issued and delivered to the Secretary a promissory note in the principal amount of $149,625,000, (said promissory note, as originally executed and as the same may hereafter be amended, modified, supplemented or endorsed, herein called the "Secretary's Note"). E. WHEREAS, the Secretary has required this Guaranty Agreement from the Guarantor as an integral part of the consideration offered by or on behalf of the Shipowner as a condition of the Secretary's decision to enter into the Commitment to issue the Guarantees, and the Guarantor has agreed to enter into this Guaranty Agreement for the purpose of guaranteeing the Shipowner's obligations to the Secretary under the Secretary's Note. NOW THEREFORE, in consideration of the premises, and of other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the Guarantor hereby agrees as follows: 1. DEFINITIONS. Unless otherwise specifically defined herein, the capitalized terms used herein which are defined in Schedule X to the Security Agreement, dated the date hereof and any reference therein to other instruments shall have the respective meanings stated in Schedule X of the Security Agreement or such other instruments. 2. GUARANTEE. a) The Guarantor hereby absolutely, irrevocably and unconditionally guarantees the due and punctual payment of the principal of and the interest on the Secretary's Note. The Guarantor shall be required to make said payments under this Guaranty Agreement upon receipt of a written notice from the Secretary which states that the Shipowner has not promptly, completely or effectively made said payments. The failure of Guarantor to receive such a written notice or the failure of the Secretary to send said notice shall not relieve the Guarantor of its obligations under this Guaranty Agreement. The Guarantor shall immediately pay to the Secretary or its designee in immediately available funds such payments guaranteed herein. b) The Guarantor hereby consents and agrees that its obligations under this Guaranty Agreement will not be discharged by any act or omission to act of any kind by the Secretary or any other person or any other circumstances whatsoever (including, but not limited to, any extension, rearrangement or renewal with respect to any indebtedness or other obligation of the Shipowner with or without notice to the Guarantor, any waiver of any right of the Secretary under the terms of the Secretary's Note, the Security Agreement, the Mortgage or this Guaranty Agreement, any release of security, any transfer or assignment of rights or obligations accruing to the Secretary under the Secretary's Note, the Security Agreement, the Mortgage or this Guaranty Agreement, any corporate reorganization, dissolution, merger, acquisition of or by or other alteration of the corporate existence or structure of the Shipowner or the Guarantor, discharge of the Shipowner in bankruptcy, the invalidity, illegality or unenforceability of the Secretary's Note, the Security Agreement, the Mortgage or this Guaranty Agreement or the absence of any action to enforce the obligations of the Shipowner) which might constitute a legal or equitable discharge of the Guarantor; it being the intention of the Guarantor that this Guaranty Agreement be absolute, continuing and unconditional and the guarantee hereunder shall only be discharged by the payment in full of all sums so guaranteed hereunder. c) The Guarantor hereby irrevocably and unconditionally waives: (i) notice of any of the matters referred to in this Guaranty Agreement and any action by the Secretary in reliance thereon; (ii) all notices which may be required by statute, rule of law or otherwise to preserve any rights against the Guarantor hereunder, including without limitations, any demand, protest, proof of notice of non-payment of all sums payable under the Secretary's Note or any notice of any failure on the part of the Shipowner to perform or comply with any covenant, term or obligations of any agreement to which it is a party; (iii) any requirement for the enforcement, assertion or exercise of 2 any right, remedy, power or privilege under or with respect to the Mortgage, the Security Agreement or the Secretary's Note; (iv) any requirement of diligence; (v) any requirement that the Shipowner be joined as a party to any proceedings for the enforcement of any provision of this Guaranty Agreement or that the Secretary proceed against any other guarantor executing this Guaranty Agreement or any other guaranty agreement; (vi) any and all defenses to payment hereunder, except the defense of payment already made, and agree to confess without contesting liability hereunder for any judgment entered hereon; (vii) presentment, demand, protest, notice of protest and dishonor, notice of intent to accelerate and notice of acceptance; or (viii) the right to require the Secretary to pursue any remedy in the Secretary's power whatsoever. d) The Guarantor hereby agrees that this Guaranty Agreement shall continue to be effective or shall be reinstated, as the case may be, if at any time payment of any sum hereby guaranteed is rescinded or must be otherwise restored or returned by the Secretary, upon the insolvency, bankruptcy or reorganization of the Shipowner, or otherwise, all as though such payment had not been made. The Guarantor further agrees that if the maturity of any obligations guaranteed herein be accelerated by bankruptcy or otherwise, such maturity shall also be deemed accelerated for the purpose of this Guaranty Agreement without demand or notice to the Guarantor. e) Any amount payable hereunder shall not be subject to any reduction by reason of any counterclaim, set-off, deduction, abatement or otherwise. f) The Guarantor shall pay all reasonable costs and expenses (including, without limitation, attorneys' fees and expenses) incurred in connection with the enforcement of the obligations of the Guarantor under this Guaranty Agreement. g) The Secretary's Note may be amended, modified or endorsed without the consent of the Guarantor. h) The Secretary may enforce the Guarantor's obligations hereunder without in any way first pursuing or exhausting any other rights or remedies which the Secretary may have against the Shipowner or any other person, firm or corporation or against any security the Secretary may hold. (i) The Guarantor hereby agrees that this Guaranty Agreement shall be secured by a mortgage on the AMETHYST 5 upon its delivery. 3. SECRETARY'S RIGHTS. The Guarantor authorizes the Secretary, without notice or demand and without affecting the Guarantor's liability hereunder, to take and hold security for the payment of this Guaranty Agreement and/or any of the obligations guaranteed herein and exchange, enforce, waive and release any such security; and to apply such security and direct the order or manner of sale thereof as the Secretary in his discretion may determine; and to obtain a guarantee of any of the obligations guaranteed herein from any one or more persons, corporations or entities whomsoever and at any time or times to enforce, waive, rearrange, modify, limit or release such other persons, corporations or entities from their obligations under such guarantees. 3 4. PRIMARY LIABILITY. It is expressly agreed that the liability of the Guarantor for the payment of the obligations guaranteed herein shall be primary and not secondary. 5. REPRESENTATIONS AND WARRANTIES. The Guarantor represents and warrants as follows: a) The Guarantor is a corporation duly organized, validly existing and in good standing under the laws of the British Virgin Islands, and has full power and authority (corporate, legal and other) to execute, deliver and carry out the terms of this Guaranty Agreement; b) This Guaranty Agreement has been duly authorized, executed and delivered by the Guarantor and constitutes the legal, valid and binding obligation of the Guarantor enforceable against the Guarantor in accordance with its terms; c) The execution, delivery and performance the Guarantor of this Guaranty Agreement does not require the approval or consent of its shareholders or of any governmental authority and does not contravene the Guarantor's Memorandum of Association and Articles of Association or any mortgage, indenture or other agreement binding upon it, or any law, regulation, order, judgment or decree applicable to the Guarantor; and d) The Guarantor's guarantee pursuant to this Guaranty Agreement may be expected to benefit, directly or indirectly, the Guarantor. e) The Guarantor has fully adequate financial resources, funds, and assets to satisfy its obligations under this Guaranty Agreement, and the Guarantor will in the future retain financial resources, funds, and assets to fully satisfy its obligations under this Guaranty Agreement. 6. CONTINUING GUARANTEE. This Guaranty Agreement is a continuing guarantee of payment and collectibility and shall: a) Remain in full force and effect so long as any obligation of the Shipowner to the Secretary referred to herein exists; b) Be binding upon the Guarantor, its successors and assigns; and c) Be executed and issued for the sole and exclusive benefit of the United States, and no other party shall be permitted to claim any benefit, direct or indirect, therefrom. This Guaranty Agreement is nonassignable, any assignment thereof shall be null and void and have no legal effect whatsoever. d) Inure to the benefit of, and be enforceable by the Secretary, his successors and assigns. 4 7. DEFAULT. A default under the terms of this Guaranty Agreement shall be deemed to occur if the Guarantor fails to make any payments guaranteed hereunder. 8. NOTICES AND COMMUNICATIONS. All notices, requests, demands, directions, consents, waivers, approvals or other communications shall be in writing, in the English language (or accompanied by an accurate English translation upon which the Secretary shall have the right to rely for all purposes under this Agreement) and shall be made or delivered in person or by registered or certified mail, postage prepaid, addressed to the Guarantor or the Secretary as provided below or to such other address as the Guarantor or the Secretary may hereafter specify in a written notice to the other, and shall be effective upon receipt by the addressee thereof. In any conflict over the meaning of this Guaranty Agreement or any notices, directions or other communications pursuant thereto, the English language shall control, notwithstanding any relevant translations of the English version into any other language. Guarantor: PETRODRILL FIVE LIMITED c/o Arias, Fabrega & Fabrega P.O. Box 985 Omar Hodge Building Wickham's Cay Road Town, Tortola British Virgin Islands With a copy to: PETRODRILL ENGINEERING NV K.P. van der Mandelelaan 38 3062 MB Rotterdam (Brainpark) The Netherlands Secretary: SECRETARY OF TRANSPORTATION c/o Maritime Administrator Maritime Administration U.S. Department of Transportation 400 Seventh Street, SW Washington, DC 20590 Attention: Chief, Division of Ship Financing Contracts 9. AMENDMENTS AND SUPPLEMENTS. No agreement shall be effective to change or modify, supplement, amend or discharge in whole or in part this Guaranty Agreement unless such agreement is in writing, signed by the Guarantor and the Secretary. 10. GOVERNING LAW. This Guaranty Agreement and the rights and obligations of the parties hereto shall be construed, enforced, and governed by the laws of the United States of America, but to the extent they are inapplicable, then by the laws of the District of Columbia of the United States of America without regard to its conflict of laws provision. 5 11. JURISDICTION AND CONSENT TO SUIT. Any proceeding to enforce this Agreement may be brought in the Federal courts of the United States of America located in the District of Columbia of the United States of America. The Guarantor hereby irrevocably waives any present or future objection to such venue, and for itself and in respect of any of its properties hereby irrevocably consents and submits unconditionally to the exclusive jurisdiction of those courts. The Guarantor further irrevocably waives any claim that any such court is not a convenient forum for any such proceeding. The Guarantor agrees that any service of process, writ, judgment or other notice of legal process shall be deemed and held in every respect to be effectively served upon it in connection with proceedings in the District of Columbia of the United States of America, if delivered Sher & Blackwell, Suite 900, 1850 M Street, N.W., Washington D.C. 20036, which it irrevocably designates and appoints as its authorized agent for the service of process in the District and Federal courts in the District of Columbia of the United States of America. The Guarantor further agrees that final judgment against it in any such action or proceeding arising out of or relating to this Agreement shall be conclusive and may be enforced in any other jurisdiction within or outside the United States of America by suit on the judgment, a certified or exemplified copy of which shall be conclusive evidence of that fact and of the judgment. 12. PAYMENTS IN U.S. CURRENCY. This Guarantee is part of an international financial transaction in which the specification of United States currency is of the essence, and such currency shall be the currency of account in all events. The payment obligations of the Guarantor hereunder shall not be discharged by an amount paid in another currency, whether pursuant to a judgment or otherwise, to the extent that the amount so paid on prompt conversion to such currency under normal banking procedures does not yield after deduction of any and all fees, taxes or any other charges imposed on the payment of such amount of United States dollars then due. In the event that any payment by the Guarantor, whether pursuant to a judgment or otherwise, upon conversion and transfer, does not result in the payment of such amount of United States currency at the place such amount is due, the Secretary shall be entitled to demand immediate payment of, and shall have a cause of action against the Guarantor for, the additional amount necessary to yield the amount then due. In the event the Secretary, upon the conversion of such judgment into currency, shall receive (as a result of currency exchange rate fluctuations) an amount greater than that to which it was entitled, the Guarantor shall be entitled to immediate reimbursement of the excess amount. The terms "U.S. currency" or the "dollars" or the symbol "$" as used herein shall mean dollars in any coin or currency of the United States of America. 13 IMMUNITY. The Guarantor represents and warrants that it is subject to civil and commercial law with respect to its obligations under this Agreement, that the making and performance of this Agreement constitutes private and commercial acts rather than governmental or public acts and that neither the Guarantor nor any of its properties or revenues has any right of immunity on the grounds of Sovereignty or otherwise from suit, court jurisdiction, attachment prior to judgment, attachment in aid of execution of a judgment, set-off, execution of a judgment or from any other legal process with respect to its obligations under this Agreement. To the extent that the Guarantor may hereafter be entitled, in any jurisdiction in which judicial proceedings may at any time be commenced with respect to this Agreement to claim for itself or its revenues or assets any 6 such immunity, and to the extent that in any such jurisdiction there may be attributed to the Guarantor such an immunity (whether or not claimed), the Guarantor hereby irrevocably agrees not to claim and hereby irrevocably waives such immunity. The foregoing waiver of immunity shall have effect under the United States Sovereign Immunities Act of 1976. 14. COUNTERPARTS. This Guaranty Agreement may be executed in one or more counterparts. All such counterparts shall be deemed to be originals and shall together constitute but one and the same instrument. 7 IN WITNESS WHEREOF, this Guaranty Agreement has been executed on the day and year first above written. PETRODRILL FIVE LIMITED By: /s/ EARL W. MCNIEL --------------------- Name: Earl W. McNiel Title: Treasurer Attest: /s/ ROBERT W. RANDALL - - ---------------------- Name:Robert W. Randall Title: Secretary ACKNOWLEDGED BY: UNITED STATES OF AMERICA SECRETARY OF TRANSPORTATION By: MARITIME ADMINISTRATOR (Seal) By: /s/ JOEL C. RICHARD ----------------------- Secretary Maritime Administration ATTEST: /s/ LARRY MAIN - - ----------------------- Assistant Secretary Maritime Administration 8 EX-4.25 27 EXHIBIT 4.25 GUARANTY AGREEMENT IN FAVOR OF THE UNITED STATES This Guaranty Agreement (the "Guaranty Agreement") is dated this 9th day of April, 1999 by PETRODRILL FOUR LIMITED, a British Virgin Islands international business company (the "Guarantor"), to the United States of America, represented by the Secretary of Transportation, acting by and through the Maritime Administrator (the "Secretary"). RECITALS: A. WHEREAS, the Guarantor is the sister company of PETRODRILL FIVE LIMITED, (the "Shipowner"); and B. WHEREAS, the Shipowner, in connection with the financing of the cost of construction of the AMETHYST 5, to be wholly owned by the Shipowner (the "Vessels"), on the date hereof, borrowed certain funds and created and authorized the issuance of obligations designated "United States Government Guaranteed Export Ship Financing Obligations, AMETHYST 5 Series" (the "Obligations"), consisting on the date hereof of $150,183,000 principal amount of the Obligations, bearing interest at the rate specified therein and issued under a trust indenture between the Shipowner and FMB Trust Company, National Association, a national trust company as trustee, dated as of the date hereof, said Obligations constituting the legal, valid and binding obligations of the Shipowner; and C. WHEREAS, the Shipowner, on the date hereof, accepted the Secretary's Commitment to Guarantee Obligations (the "Commitment") pursuant to Title XI of the Merchant Marine Act, 1936, as amended (the "Act"), whereby the Secretary authorized a guarantee to be endorsed upon each of the Obligations (the "Guarantees"); and D. WHEREAS, the Shipowner has, in consideration of the issuance of the Guarantees by the Secretary of the payment of the unpaid interest on, and the unpaid balance of the principal of the Obligations, executed a security agreement dated the date hereof, between the Shipowner and the Secretary (the "Security Agreement") and issued and delivered to the Secretary a promissory note in the principal amount of $150,183,000, (said promissory note, as originally executed and as the same may hereafter be amended, modified, supplemented or endorsed, herein called the "Secretary's Note"). E. WHEREAS, the Secretary has required this Guaranty Agreement from the Guarantor as an integral part of the consideration offered by or on behalf of the Shipowner as a condition of the Secretary's decision to enter into the Commitment to issue the Guarantees, and the Guarantor has agreed to enter into this Guaranty Agreement for the purpose of guaranteeing the Shipowner's obligations to the Secretary under the Secretary's Note. 1 NOW THEREFORE, in consideration of the premises, and of other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the Guarantor hereby agrees as follows: 1. DEFINITIONS. Unless otherwise specifically defined herein, the capitalized terms used herein which are defined in Schedule X to the Security Agreement, dated the date hereof and any reference therein to other instruments shall have the respective meanings stated in Schedule X of the Security Agreement or such other instruments. 2. GUARANTEE. a) The Guarantor hereby absolutely, irrevocably and unconditionally guarantees the due and punctual payment of the principal of and the interest on the Secretary's Note. The Guarantor shall be required to make said payments under this Guaranty Agreement upon receipt of a written notice from the Secretary which states that the Shipowner has not promptly, completely or effectively made said payments. The failure of Guarantor to receive such a written notice or the failure of the Secretary to send said notice shall not relieve the Guarantor of its obligations under this Guaranty Agreement. The Guarantor shall immediately pay to the Secretary or its designee in immediately available funds such payments guaranteed herein. b) The Guarantor hereby consents and agrees that its obligations under this Guaranty Agreement will not be discharged by any act or omission to act of any kind by the Secretary or any other person or any other circumstances whatsoever (including, but not limited to, any extension, rearrangement or renewal with respect to any indebtedness or other obligation of the Shipowner with or without notice to the Guarantor, any waiver of any right of the Secretary under the terms of the Secretary's Note, the Security Agreement, the Mortgage or this Guaranty Agreement, any release of security, any transfer or assignment of rights or obligations accruing to the Secretary under the Secretary's Note, the Security Agreement, the Mortgage or this Guaranty Agreement, any corporate reorganization, dissolution, merger, acquisition of or by or other alteration of the corporate existence or structure of the Shipowner or the Guarantor, discharge of the Shipowner in bankruptcy, the invalidity, illegality or unenforceability of the Secretary's Note, the Security Agreement, the Mortgage or this Guaranty Agreement or the absence of any action to enforce the obligations of the Shipowner) which might constitute a legal or equitable discharge of the Guarantor; it being the intention of the Guarantor that this Guaranty Agreement be absolute, continuing and unconditional and the guarantee hereunder shall only be discharged by the payment in full of all sums so guaranteed hereunder. c) The Guarantor hereby irrevocably and unconditionally waives: (i) notice of any of the matters referred to in this Guaranty Agreement and any action by the Secretary in reliance thereon; (ii) all notices which may be required by statute, rule of law or otherwise to preserve any rights against the Guarantor hereunder, including without limitations, any demand, protest, proof of notice of non-payment of all sums payable under the Secretary's Note or any notice of any failure on the part of the Shipowner to perform or comply with any covenant, term or obligations of any agreement to which it is a party; (iii) any requirement for the enforcement, assertion or exercise of 2 any right, remedy, power or privilege under or with respect to the Mortgage, the Security Agreement or the Secretary's Note; (iv) any requirement of diligence; (v) any requirement that the Shipowner be joined as a party to any proceedings for the enforcement of any provision of this Guaranty Agreement or that the Secretary proceed against any other guarantor executing this Guaranty Agreement or any other guaranty agreement; (vi) any and all defenses to payment hereunder, except the defense of payment already made, and agree to confess without contesting liability hereunder for any judgment entered hereon; (vii) presentment, demand, protest, notice of protest and dishonor, notice of intent to accelerate and notice of acceptance; or (viii) the right to require the Secretary to pursue any remedy in the Secretary's power whatsoever. d) The Guarantor hereby agrees that this Guaranty Agreement shall continue to be effective or shall be reinstated, as the case may be, if at any time payment of any sum hereby guaranteed is rescinded or must be otherwise restored or returned by the Secretary, upon the insolvency, bankruptcy or reorganization of the Shipowner, or otherwise, all as though such payment had not been made. The Guarantor further agrees that if the maturity of any obligations guaranteed herein be accelerated by bankruptcy or otherwise, such maturity shall also be deemed accelerated for the purpose of this Guaranty Agreement without demand or notice to the Guarantor. e) Any amount payable hereunder shall not be subject to any reduction by reason of any counterclaim, set-off, deduction, abatement or otherwise. f) The Guarantor shall pay all reasonable costs and expenses (including, without limitation, attorneys' fees and expenses) incurred in connection with the enforcement of the obligations of the Guarantor under this Guaranty Agreement. g) The Secretary's Note may be amended, modified or endorsed without the consent of the Guarantor. h) The Secretary may enforce the Guarantor's obligations hereunder without in any way first pursuing or exhausting any other rights or remedies which the Secretary may have against the Shipowner or any other person, firm or corporation or against any security the Secretary may hold. (i) The Guarantor hereby agrees that this Guaranty Agreement shall be secured by a mortgage on the AMETHYST 4 upon its delivery. 3. SECRETARY'S RIGHTS. The Guarantor authorizes the Secretary, without notice or demand and without affecting the Guarantor's liability hereunder, to take and hold security for the payment of this Guaranty Agreement and/or any of the obligations guaranteed herein and exchange, enforce, waive and release any such security; and to apply such security and direct the order or manner of sale thereof as the Secretary in his discretion may determine; and to obtain a guarantee of any of the obligations guaranteed herein from any one or more persons, corporations or entities whomsoever and at any time or times to enforce, waive, rearrange, modify, limit or release such other persons, corporations or entities from their obligations under such guarantees. 3 4. PRIMARY LIABILITY. It is expressly agreed that the liability of the Guarantor for the payment of the obligations guaranteed herein shall be primary and not secondary. 5. REPRESENTATIONS AND WARRANTIES. The Guarantor represents and warrants as follows: a) The Guarantor is a corporation duly organized, validly existing and in good standing under the laws of the British Virgin Islands, and has full power and authority (corporate, legal and other) to execute, deliver and carry out the terms of this Guaranty Agreement; b) This Guaranty Agreement has been duly authorized, executed and delivered by the Guarantor and constitutes the legal, valid and binding obligation of the Guarantor enforceable against the Guarantor in accordance with its terms; c) The execution, delivery and performance the Guarantor of this Guaranty Agreement does not require the approval or consent of its shareholders or of any governmental authority and does not contravene the Guarantor's Memorandum of Association and Articles of Association or any mortgage, indenture or other agreement binding upon it, or any law, regulation, order, judgment or decree applicable to the Guarantor; and d) The Guarantor's guarantee pursuant to this Guaranty Agreement may be expected to benefit, directly or indirectly, the Guarantor. e) The Guarantor has fully adequate financial resources, funds, and assets to satisfy its obligations under this Guaranty Agreement, and the Guarantor will in the future retain financial resources, funds, and assets to fully satisfy its obligations under this Guaranty Agreement. 6. CONTINUING GUARANTEE. This Guaranty Agreement is a continuing guarantee of payment and collectibility and shall: a) Remain in full force and effect so long as any obligation of the Shipowner to the Secretary referred to herein exists; b) Be binding upon the Guarantor, its successors and assigns; and c) Be executed and issued for the sole and exclusive benefit of the United States, and no other party shall be permitted to claim any benefit, direct or indirect, therefrom. This Guaranty Agreement is nonassignable, any assignment thereof shall be null and void and have no legal effect whatsoever. d) Inure to the benefit of, and be enforceable by the Secretary, his successors and assigns. 4 7. DEFAULT. A default under the terms of this Guaranty Agreement shall be deemed to occur if the Guarantor fails to make any payments guaranteed hereunder. 8. NOTICES AND COMMUNICATIONS. All notices, requests, demands, directions, consents, waivers, approvals or other communications shall be in writing, in the English language (or accompanied by an accurate English translation upon which the Secretary shall have the right to rely for all purposes under this Agreement) and shall be made or delivered in person or by registered or certified mail, postage prepaid, addressed to the Guarantor or the Secretary as provided below or to such other address as the Guarantor or the Secretary may hereafter specify in a written notice to the other, and shall be effective upon receipt by the addressee thereof. In any conflict over the meaning of this Guaranty Agreement or any notices, directions or other communications pursuant thereto, the English language shall control, notwithstanding any relevant translations of the English version into any other language. Guarantor: PETRODRILL FOUR LIMITED c/o Arias, Fabrega & Fabrega P.O. Box 985 Omar Hodge Building Wickham's Cay Road Town, Tortola British Virgin Islands With a copy to: PETRODRILL ENGINEERING NV K.P. van der Mandelelaan 38 3062 MB Rotterdam (Brainpark) The Netherlands Secretary: SECRETARY OF TRANSPORTATION c/o Maritime Administrator Maritime Administration U.S. Department of Transportation 400 Seventh Street, SW Washington, DC 20590 Attention: Chief, Division of Ship Financing Contracts 9. AMENDMENTS AND SUPPLEMENTS. No agreement shall be effective to change or modify, supplement, amend or discharge in whole or in part this Guaranty Agreement unless such agreement is in writing, signed by the Guarantor and the Secretary. 10. GOVERNING LAW. This Guaranty Agreement and the rights and obligations of the parties hereto shall be construed, enforced, and governed by the laws of the United States of America, but to the extent they are inapplicable, then by the laws of the District of Columbia of the United States of America without regard to its conflict of laws provision. 5 11. JURISDICTION AND CONSENT TO SUIT. Any proceeding to enforce this Agreement may be brought in the Federal courts of the United States of America located in the District of Columbia of the United States of America. The Guarantor hereby irrevocably waives any present or future objection to such venue, and for itself and in respect of any of its properties hereby irrevocably consents and submits unconditionally to the exclusive jurisdiction of those courts. The Guarantor further irrevocably waives any claim that any such court is not a convenient forum for any such proceeding. The Guarantor agrees that any service of process, writ, judgment or other notice of legal process shall be deemed and held in every respect to be effectively served upon it in connection with proceedings in the District of Columbia of the United States of America, if delivered Sher & Blackwell, Suite 900, 1850 M Street, N.W., Washington D.C. 20036, which it irrevocably designates and appoints as its authorized agent for the service of process in the District and Federal courts in the District of Columbia of the United States of America. The Guarantor further agrees that final judgment against it in any such action or proceeding arising out of or relating to this Agreement shall be conclusive and may be enforced in any other jurisdiction within or outside the United States of America by suit on the judgment, a certified or exemplified copy of which shall be conclusive evidence of that fact and of the judgment. 12. PAYMENTS IN U.S. CURRENCY. This Guarantee is part of an international financial transaction in which the specification of United States currency is of the essence, and such currency shall be the currency of account in all events. The payment obligations of the Guarantor hereunder shall not be discharged by an amount paid in another currency, whether pursuant to a judgment or otherwise, to the extent that the amount so paid on prompt conversion to such currency under normal banking procedures does not yield after deduction of any and all fees, taxes or any other charges imposed on the payment of such amount of United States dollars then due. In the event that any payment by the Guarantor, whether pursuant to a judgment or otherwise, upon conversion and transfer, does not result in the payment of such amount of United States currency at the place such amount is due, the Secretary shall be entitled to demand immediate payment of, and shall have a cause of action against the Guarantor for, the additional amount necessary to yield the amount then due. In the event the Secretary, upon the conversion of such judgment into currency, shall receive (as a result of currency exchange rate fluctuations) an amount greater than that to which it was entitled, the Guarantor shall be entitled to immediate reimbursement of the excess amount. The terms "U.S. currency" or the "dollars" or the symbol "$" as used herein shall mean dollars in any coin or currency of the United States of America. 13. IMMUNITY. The Guarantor represents and warrants that it is subject to civil and commercial law with respect to its obligations under this Agreement, that the making and performance of this Agreement constitutes private and commercial acts rather than governmental or public acts and that neither the Guarantor nor any of its properties or revenues has any right of immunity on the grounds of Sovereignty or otherwise from suit, court jurisdiction, attachment prior to judgment, attachment in aid of execution of a judgment, set-off, execution of a judgment or from any other legal process with respect to its obligations under this Agreement. To the extent that the Guarantor may hereafter be entitled, in any jurisdiction in which judicial proceedings may at any time be commenced with respect to this Agreement to claim for itself or its revenues or assets any 6 such immunity, and to the extent that in any such jurisdiction there may be attributed to the Guarantor such an immunity (whether or not claimed), the Guarantor hereby irrevocably agrees not to claim and hereby irrevocably waives such immunity. The foregoing waiver of immunity shall have effect under the United States Sovereign Immunities Act of 1976. 14. COUNTERPARTS. This Guaranty Agreement may be executed in one or more counterparts. All such counterparts shall be deemed to be originals and shall together constitute but one and the same instrument. 7 IN WITNESS WHEREOF, this Guaranty Agreement has been executed on the day and year first above written. PETRODRILL FOUR LIMITED By: /s/ EARL W. MCNIEL _____________________ Name: Earl W. McNiel Title: Treasurer Attest: /s/ ROBERT W. RANDALL Name: Robert W. Randall Title: Secretary ACKNOWLEDGED BY: UNITED STATES OF AMERICA SECRETARY OF TRANSPORTATION By: MARITIME ADMINISTRATOR (Seal) By: /s/ JOEL C. RICHARD ___________________ Secretary Maritime Administration ATTEST: /s/ LARRY MAIN ___________________ Assistant Secretary Maritime Administration 8 EX-4.26 28 EXHIBIT 4.26 GUARANTY AGREEMENT IN FAVOR OF THE UNITED STATES This Guaranty Agreement (the "Guaranty Agreement") is dated this 9th day of April, 1999 by Pride International, Inc. (the "Guarantor"), to the United States of America, represented by the Secretary of Transportation, acting by and through the Maritime Administrator (the "Secretary"). RECITALS: A. WHEREAS, Petrodrill Four Limited and Petrodrill Five Limited, British Virgin Islands international business companies (each a "Shipowner" and collectively the "Shipowners") are indirectly owned in part by the Guarantor; and B. WHEREAS, the Shipowners, in connection with the financing of the cost of the construction of the AMETHYST 4 and AMETHYST 5 (collectively, the "Vessels"), on the date hereof, borrowed certain funds and created and authorized the issuance of obligations designated "United States Government Guaranteed Export Ship Financing Obligations, AMETHYST 4 Series" and "United States Government Guaranteed Export Ship Financing Obligations, AMETHYST 5 Series" (the "Obligations"), consisting on the date hereof of $ 299,808,000 aggregate principal amount of the Obligations, bearing interest at the rate specified therein and issued under trust indentures (the "Indentures") between the Shipowners and FMB Trust Company, National Association, a national banking association, (the "Indenture Trustee") as trustee, dated as of the date hereof, said Obligations constituting the legal, valid and binding obligations of the Shipowner; and C. WHEREAS, each Shipowner, on the date hereof, accepted the Secretary's Commitment to Guarantee Obligations (the "Commitment") pursuant to Title XI of the Merchant Marine Act, 1936, as amended (the "Act"), whereby the Secretary authorized a guarantee to be endorsed upon each of the Obligations (the "Guarantees"); and D. WHEREAS, each Shipowner has, in consideration of the issuance of the Guarantees by the Secretary of the payment of the unpaid interest on, and the unpaid balance of the principal of the Obligations issued by the Shipowners pursuant to the terms and provisions of the Security Agreements dated the date hereof, between the Shipowner and the Secretary (the "Security Agreements"), granted a security interest in its Chartering Contract with Petroleo Brasileiro S.A. ("Petrobras") to the Secretary. E. WHEREAS, the AMETHYST 4 and AMETHYST 5 are expected to be delivered to Petrobras on approximately June 9, 2000, and August 9, 2000, respectively, approximately 392 and 434 days beyond the delivery date under their respective Chartering Contracts (collectively "the Contracts"). F. WHEREAS, Petrobras has a contractual right to impose penalties if the Vessels are not timely delivered (the "Late Arrival Penalties"). G. WHEREAS, under the expected delivery schedule, the maximum aggregate Late Arrival Penalties would be approximately $31,550,000. H. WHEREAS, Petrobras has informed the Shipowners that its policy has been to negotiate with its contractors on the form and timing of any penalties to reduce their impact and that in the past Petrobras has negotiated installment plans or discounted the penalties from the end of the relevant Contract. I. WHEREAS, Petrobras has confirmed that it has no reason to expect that it will not apply the same policy to the Late Arrival Penalties under the Contracts, subject to the approval of its Board of Directors. J. WHEREAS, the Secretary is concerned that there may be ad valorem taxes imposed by the Federative Republic of Brazil on the Vessels when they are delivered to Petrobras ("Ad Valorem Taxes"). K. WHEREAS, the Secretary has required this Guaranty Agreement from the Guarantor in conjunction with the consideration offered by or on behalf of the Shipowners as a condition of the Secretary's decision to enter into the Commitments to issue the Guarantees, and the Guarantor has agreed to enter into this Guaranty Agreement for the purpose of guaranteeing the Shipowners' payment of Late Arrival Penalties and Ad Valorem Taxes up to an aggregate amount of $20,500,000. NOW THEREFORE, in consideration of the premises, and of other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the Guarantor hereby agrees as follows: 1. DEFINITIONS. Unless otherwise specifically defined herein, the capitalized terms used herein which are defined in Schedule X to the Security Agreements, dated the date hereof and any reference therein to other instruments shall have the respective meanings stated in Schedule X of the Security Agreements or such other instruments. 2. GUARANTEE. a) Whenever a Shipowner has been billed for any Late Arrival Penalties or Ad Valorem Taxes (said Late Arrival Penalties or Ad Valorem Taxes, collectively, the "Aggregate Amounts"), but is not permitted by the provisions of the Title XI Reserve Fund and Financial Agreement (the "Financial Agreement") to pay any or all of the Aggregate Amounts, the Guarantor hereby absolutely, irrevocably and unconditionally promises to pay those portions of any Aggregate Amounts which cannot be paid by the Shipowner by virtue of the provisions of the Financial Agreement; PROVIDED, HOWEVER, that the maximum Aggregate Amount which the Guarantor is obligated to pay hereunder for both Shipowners shall not exceed Twenty Million Five Hundred Thousand Dollars ($20,500,000). The Guarantor shall pay the Aggregate 2 Amounts required hereunder, in immediately available funds, to the relevant billing entity or its designee within the later of (i) ten (10) business days of the Shipowner's receipt of each bill for Late Arrival Penalties and Ad Valorem Taxes , (ii) if applicable, within ten (10) business days of a final ruling by Petrobras on any appeal by the Shipowner to Petrobras against the imposition of Late Arrival Penalties pursuant to Section 8.7 of the Chartering Contract, or (iii) if the Shipowner's duty to pay such a bill has been continuously stayed by a court of competent jurisdiction, within ten (10) business days of the issuance of a final, unappealable order by a court of competent jurisdiction ordering the Shipowner to pay such a bill. In the event the Guarantor fails to pay the Aggregate Amounts in the manner and amounts required hereunder, the Secretary shall have the right to compel the Guarantor to pay such Aggregate Amounts directly to the Secretary for distribution, as the Secretary may decide, either to relevant billing entity or to the Secretary to be retained and set off against any indebtedness owed the Secretary by the Shipowner. The Shipowners shall not be required to repay the Guarantor for any amounts paid hereunder until permitted by the provisions of the Financial Agreements. b) The Guarantor hereby consents and agrees that its obligations under this Guaranty Agreement will not be discharged by any act or omission to act of any kind by the Secretary or any other person or any other circumstances whatsoever (including, but not limited to, any extension, rearrangement or renewal with respect to any indebtedness or other obligation of the Shipowners with or without notice to the Guarantor, any waiver of any right of the Secretary under the terms of the Secretary's Note, the Security Agreement, the Mortgage or this Guaranty Agreement, any release of security, any transfer or assignment of rights or obligations accruing to the Secretary under the Secretary's Note, the Security Agreement, the Mortgage or this Guaranty Agreement, any corporate reorganization, dissolution, merger, acquisition of or by or other alteration of the corporate existence or structure of the Shipowners or the Guarantor, discharge of either Shipowner in bankruptcy, the invalidity, illegality or unenforceability of the Secretary's Note, the Security Agreement, the Mortgage or this Guaranty Agreement or the absence of any action to enforce the obligations of either Shipowner) which might constitute a legal or equitable discharge of the Guarantor; it being the intention of the Guarantor that this Guaranty Agreement be absolute, continuing and unconditional and the guarantee hereunder shall only be discharged by the payment in full of all sums so guaranteed hereunder in an Aggregate Amount not to exceed Twenty Million Five Hundred Thousand Dollars ($20,500,000). c) The Guarantor hereby irrevocably and unconditionally waives: (i) notice of any of the matters referred to in this Guaranty Agreement and any action by the Secretary in reliance thereon; (ii) all notices which may be required by statute, rule of law or otherwise to preserve any rights against the Guarantor hereunder, including without limitations, any demand, protest, proof of notice of non-payment of all sums payable under the Secretary's Note or to Petrobras or any notice of any failure on the part of either Shipowner to perform or comply with any covenant, term or obligations of any agreement to which it is a party; (iii) any requirement for the enforcement, assertion or exercise of any right, remedy, power or privilege under or with respect to this Guaranty Agreement; (iv) any requirement of diligence; (v) any requirement that the Shipowner be joined as a party to any proceedings for the enforcement of any provision of this Guaranty Agreement or that the 3 Secretary proceed against any other guarantor executing or any other guaranty agreement; (vi) any and all defenses to payment hereunder, except the defense of payment already made, and agree to confess without contesting liability hereunder for any judgment entered hereon; (vii) presentment, demand, protest, notice of protest and dishonor, notice of intent to accelerate and notice of acceptance; or (viii) the right to require the Secretary to pursue any remedy in the Secretary's power whatsoever. d) The Guarantor hereby agrees that this Guaranty Agreement shall continue to be effective or shall be reinstated, as the case may be, if at any time payment of any sum hereby guaranteed is rescinded or must be otherwise restored or returned by the Secretary or Petrobras, upon the insolvency, bankruptcy or reorganization of the Shipowner, or otherwise, all as though such payment had not been made. The Guarantor further agrees that if the maturity of any obligations guaranteed herein be accelerated by bankruptcy or otherwise, such maturity shall also be deemed accelerated for the purpose of this Guaranty Agreement without demand or notice to the Guarantor. e) Any amount payable hereunder shall not be subject to any reduction by reason of any counterclaim, set-off, deduction, abatement or otherwise. f) The Guarantor shall pay all reasonable costs and expenses (including, without limitation, attorneys' fees and expenses) incurred in connection with the enforcement of the obligations of the Guarantor under this Guaranty Agreement. g) The Contracts may be amended, modified or endorsed without the consent of the Guarantor. h) The Secretary may enforce the Guarantor's obligations hereunder without in any way first pursuing or exhausting any other rights or remedies which the Secretary may have against the Shipowners or any other person, firm or corporation or against any security the Secretary may hold. 3. SECRETARY'S RIGHTS. The Guarantor authorizes the Secretary, without notice or demand and without affecting the Guarantor's liability hereunder, to take and hold security from any entity (other than the Guarantor) to secure the payment of this Guaranty Agreement and/or any of the obligations guaranteed herein and exchange, enforce, waive and release any such security; and to apply such security and direct the order or manner of sale thereof as the Secretary in his discretion may determine; and to obtain a guarantee of any of the obligations guaranteed herein from any one or more persons, corporations or entities whomsoever (other than the Guarantor) and at any time or times to enforce, waive, rearrange, modify, limit or release such other persons, corporations or entities from their obligations under such guarantees. 4. PRIMARY LIABILITY. It is expressly agreed that the liability of the Guarantor for the payment of the obligations guaranteed herein shall be primary and not secondary. The liability of the Guarantor for payment of sums due hereunder is joint and several with the liability of Maritima 4 Petroleo e Engerharia Ltda. under its Payment Undertaking in favor of the Secretary with respect to the Late Arrival Penalties and Ad Valorem Taxes; PROVIDED that the maximum amount the Guarantor is obligated to pay hereunder shall not exceed Twenty Million Five Hundred Thousand Dollars ($20,500,000). 5. REPRESENTATIONS AND WARRANTIES. The Guarantor represents and warrants as follows: a) The Guarantor is a corporation duly organized, validly existing and in good standing under the laws of the State of Louisiana and has full power and authority (corporate, legal and other) to execute, deliver and carry out the terms of this Guaranty Agreement; b) This Guaranty Agreement has been duly authorized, executed and delivered by the Guarantor and constitutes the legal, valid and binding obligation of the Guarantor enforceable against the Guarantor in accordance with its terms; c) The execution, delivery and performance the Guarantor of this Guaranty Agreement does not require the approval or consent of its shareholders or of any governmental authority and does not contravene the Guarantor's Certificate of Incorporation or any mortgage, indenture or other agreement binding upon it, or any law, regulation, order, judgment or decree applicable to the Guarantor; and d) The Guarantor's guarantee pursuant to this Guaranty Agreement may be expected to benefit, directly or indirectly, the Guarantor. e) The Guarantor has fully adequate financial resources, funds, and assets to satisfy its obligations under this Guaranty Agreement. 6. CONTINUING GUARANTEE. This Guaranty Agreement is a continuing guarantee of payment and collectibility and shall: a) Remain in full force and effect so long as either Shipowner may be liable for the payment of Late Arrival Penalties and Ad Valorem Taxes and shall terminate upon the Secretary's receipt of (i) written notice from Petrobras to both Shipowners that any and all liabilities for Late Arrival Penalties have been satisfied under the Contracts, and (ii) that evidence satisfactory to the Secretary that no Ad Valorem Taxes are or will be due, but if due, such taxes have been paid, provided, however, that this Guaranty shall terminate at such time as the Guarantor or the Shipowners provide a Letter of Credit in an amount equal to the amount hereunder guaranteed, which together with any other agreements with the issuer relating to the Letter of Credit are in form and substance satisfactory to the Secretary, and further provided that the Shipowners may not collateralize this Letter of Credit or repay the issuer with respect to any draws made under the Letter of Credit or incur any fees unless such payments would be allowed as dividends under the Shipowners' Financial Agreements 5 b) Be binding upon the Guarantor, its successors and assigns such taxes; and c) Be executed and issued for the sole and exclusive benefit of the United States, and no other party shall be permitted to claim any benefit, direct or indirect, therefrom. This Guaranty Agreement is nonassignable, any assignment thereof shall be null and void and have no legal effect whatsoever. d) Inure to the benefit of, and be enforceable by the Secretary, his successors and assigns. 7. DEFAULT. A default under the terms of this Guaranty Agreement shall be deemed to occur if the Guarantor fails to make any payments guaranteed hereunder. 8. NOTICES. All communications may be made or delivered in person or by certified or registered mail, postage prepaid, addressed to the Guarantor or the Secretary as provided below or to such other address as the Guarantor or the Secretary may hereafter specify in a written notice to the other and all notices or other communications shall be in writing so addressed and shall be effective upon receipt by the addressee thereof: Guarantor: Pride International Inc. 5847 San Felipe Suite 3300 Houston, TX 77057 Attention: Chief Financial Officer With a copy to: Sher & Blackwell 1850 M Street, NW Suite 900 Washington, DC 20036 Attention: Jeffrey F. Lawrence/Anne E. Mickey Secretary: SECRETARY OF TRANSPORTATION c/o Maritime Administrator Maritime Administration U.S. Department of Transportation 400 Seventh Street, SW Washington, DC 20590 Attention: Chief, Division of Ship Financing Contracts 9. AMENDMENTS AND SUPPLEMENTS. No agreement shall be effective to change or modify, supplement, amend or discharge in whole or in part this Guaranty Agreement unless such agreement is in writing, signed by the Guarantor and the Secretary. 6 10. GOVERNING LAW. This Guaranty Agreement shall be governed by the federal law of the United States of America or in the absence of applicable federal law by the laws of the District of Columbia. 11. CONFIDENTIALITY. Neither party shall, without the prior written consent of the other, disclose to any third party (including Petrobras) the terms and conditions of this Guaranty Agreement except as required by law or governmental requirements, and then only with notice of such to the other party 12. COUNTERPARTS. This Guaranty Agreement may be executed in one or more counterparts. All such counterparts shall be deemed to be originals and shall together constitute but one and the same instrument. 7 IN WITNESS WHEREOF, this Guaranty Agreement has been executed on the day and year first above written. PRIDE INTERNATIONAL, INC. (Seal) By: /s/ EARL W. MCNIEL _____________________ Name: Earl W. McNiel Title: Vice President Attest: /s/ ROBERT W. RANDALL _________________________ Name: Robert W. Randall Title: Secretary ACKNOWLEDGED BY: UNITED STATES OF AMERICA SECRETARY OF TRANSPORTATION By: MARITIME ADMINISTRATOR (Seal) By: /s/ JOEL C. RICHARD _________________________________ Secretary Maritime Administration ATTEST: /s/ LARRY MAIN _________________________ Assistant Secretary Maritime Administration 8 EX-4.27 29 EXHIBIT 4.27 9.03 PAYMENT UNDERTAKING IN FAVOR OF THE UNITED STATES This Payment Undertaking (the "Payment Undertaking") is dated this 9th day of April, 1999 by Maritima Petroleo e Engenharia Ltda.. ("Maritima"), to the United States of America, represented by the Secretary of Transportation, acting by and through the Maritime Administrator (the "Secretary"). RECITALS: A. WHEREAS, Petrodrill Four Limited and Petrodrill Five Limited, British Virgin Islands international business companies (each a "Shipowner" and collectively the "Shipowners") are indirectly owned in part by Maritima; and B. WHEREAS, the Shipowners, in connection with the financing of the cost of the construction of the AMETHYST 4 and AMETHYST 5 (collectively, the "Vessels"), on the date hereof, borrowed certain funds and created and authorized the issuance of obligations designated "United States Government Guaranteed Export Ship Financing Obligations, AMETHYST 4 Series" and "United States Government Guaranteed Export Ship Financing Obligations, AMETHYST 5 Series" (the "Obligations"), consisting on the date hereof of $299,808,000 aggregate principal amount of the Obligations, bearing interest at the rate specified therein and issued under trust indentures (the "Indentures") between the Shipowners and FMB Trust Company, National Association, a national banking association, (the "Indenture Trustee") as trustee, dated as of the date hereof, said Obligations constituting the legal, valid and binding obligations of the Shipowner; and C. WHEREAS, each Shipowner, on the date hereof, accepted the Secretary's Commitment to Guarantee Obligations (the "Commitment") pursuant to Title XI of the Merchant Marine Act, 1936, as amended (the "Act"), whereby the Secretary authorized a guarantee to be endorsed upon each of the Obligations (the "Guarantees"); and D. WHEREAS, each Shipowner has, in consideration of the issuance of the Guarantees by the Secretary of the payment of the unpaid interest on, and the unpaid balance of the principal of the Obligations issued by the Shipowners pursuant to the terms and provisions of the Security Agreements dated the date hereof, between the Shipowner and the Secretary (the "Security Agreements"), granted a security interest in its Chartering Contract with Petroleo Brasileiro S.A. ("Petrobras") to the Secretary. E. WHEREAS, the AMETHYST 4 and AMETHYST 5 are expected to be delivered to Petrobras on approximately June 9, 2000, and August 9, 2000, respectively, approximately 392 and 434 days beyond the delivery date under their respective Chartering Contracts (collectively "the Contracts"). 2 F. WHEREAS, Petrobras has a contractual right to impose penalties if the Vessels are not timely delivered (the "Late Arrival Penalties"). G. WHEREAS, under the expected delivery schedule, the maximum aggregate Late Arrival Penalties would be approximately $31,550,000. H. WHEREAS, Petrobras has informed the Shipowners that its policy has been to negotiate with its contractors on the form and timing of any penalties to reduce their impact and that in the past Petrobras has negotiated installment plans or discounted the penalties from the end of the relevant Contract. I. WHEREAS, Petrobras has confirmed that it has no reason to expect that it will not apply the same policy to the Late Arrival Penalties under the Contracts, subject to the approval of its Board of Directors. J. WHEREAS, the Secretary is concerned that there may be ad valorem taxes imposed by the Federative Republic of Brazil on the Vessels when they are delivered to Petrobras ("Ad Valorem Taxes") K. WHEREAS, the Secretary has required this Payment Undertaking from Maritima in conjunction with the consideration offered by or on behalf of the Shipowners as a condition of the Secretary's decision to enter into the Commitments to issue the Guarantees, and Maritima has agreed to enter into this Payment Undertaking for the purpose of guaranteeing the Shipowners' payment of Late Arrival Penalties and Ad Valorem Taxes up to an aggregate amount of $20,500,000. NOW THEREFORE, in consideration of the premises, and of other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, Maritima hereby agrees as follows: 1. DEFINITIONS. Unless otherwise specifically defined herein, the capitalized terms used herein which are defined in Schedule X to the Security Agreements, dated the date hereof and any reference therein to other instruments shall have the respective meanings stated in Schedule X of the Security Agreements or such other instruments. 2. PAYMENT UNDERTAKING. a) Whenever a Shipowner has been billed for any Late Arrival Penalties or Ad Valorem Taxes (said Late Arrival Penalties or Ad Valorem Taxes, collectively, the "Aggregate Amounts"), but is not permitted by the provisions of the Title XI Reserve Fund and Financial Agreement (the "Financial Agreement") to pay any or all of the Aggregate Amounts, Maritima hereby absolutely, irrevocably and unconditionally promises to pay those portions of any Aggregate Amounts which cannot be paid by the Shipowner by virtue of the provisions of the Financial Agreement; PROVIDED, HOWEVER, that the maximum Aggregate Amount which 3 Maritima is obligated to pay hereunder for both Shipowners shall not exceed Twenty Million Five Hundred Thousand Dollars ($20,500,000). Maritima shall pay the Aggregate Amounts required hereunder, in immediately available funds, to the relevant billing entity or its designee within the later of (i) ten (10) business days of the Shipowner's receipt of each bill for Late Arrival Penalties and Ad Valorem Taxes , (ii) if applicable, within ten (10) business days of a final ruling by Petrobras on any appeal by the Shipowner to Petrobras against the imposition of Late Arrival Penalties pursuant to Section 8.7 of the Chartering Contract, or (iii) if the Shipowner's duty to pay such a bill has been continuously stayed by a court of competent jurisdiction, within ten (10) business days of the issuance of a final, unappealable order by a court of competent jurisdiction ordering the Shipowner to pay such a bill. In the event Maritima fails to pay the Aggregate Amounts in the manner and amounts required hereunder, the Secretary shall have the right to compel Maritima to pay such Aggregate Amounts directly to the Secretary for distribution, as the Secretary may decide, either to the relevant billing entity or to the Secretary to be retained and set off against any indebtedness owed the Secretary by the Shipowner. The Shipowners shall not be required to repay Maritima for any amounts paid hereunder until permitted by the provisions of the Financial Agreements. b) Maritima hereby consents and agrees that its obligations under this Payment Undertaking will not be discharged by any act or omission to act of any kind by the Secretary or any other person or any other circumstances whatsoever (including, but not limited to, any extension, rearrangement or renewal with respect to any indebtedness or other obligation of the Shipowners with or without notice to Maritima, any waiver of any right of the Secretary under the terms of the Secretary's Note, the Security Agreement, the Mortgage or this Payment Undertaking, any release of security, any transfer or assignment of rights or obligations accruing to the Secretary under the Secretary's Note, the Security Agreement, the Mortgage or this Payment Undertaking, any corporate reorganization, dissolution, merger, acquisition of or by or other alteration of the corporate existence or structure of the Shipowners or Maritima, discharge of either Shipowner in bankruptcy, the invalidity, illegality or unenforceability of the Secretary's Note, the Security Agreement, the Mortgage or this Payment Undertaking or the absence of any action to enforce the obligations of either Shipowner) which might constitute a legal or equitable discharge of Maritima; it being the intention of Maritima that this Payment Undertaking be absolute, continuing and unconditional and the undertaking hereunder shall only be discharged by the payment in full of all sums so due hereunder in an Aggregate Amount not to exceed Twenty Million Five Hundred Thousand Dollars ($20,500,000). c) Maritima hereby irrevocably and unconditionally waives: (i) notice of any of the matters referred to in this Payment Undertaking and any action by the Secretary in reliance thereon; (ii) all notices which may be required by statute, rule of law or otherwise to preserve any rights against Maritima hereunder, including without limitations, any demand, protest, proof of notice of non-payment of all sums payable under the Secretary's Note or to Petrobras or any notice of any failure on the part of either Shipowner to perform or comply with any covenant, term or obligations of any agreement to which it is a party; (iii) any requirement for the enforcement, assertion or exercise of any right, remedy, power or privilege under or with respect to this Payment Undertaking; (iv) any requirement of diligence; (v) any requirement that the Shipowner be joined as a party to any proceedings for the enforcement of any 4 provision of this Payment Undertaking or that the Secretary proceed against any other guarantor executing or any other Payment Undertaking; (vi) any and all defenses to payment hereunder, except the defense of payment already made, and agree to confess without contesting liability hereunder for any judgment entered hereon; (vii) presentment, demand, protest, notice of protest and dishonor, notice of intent to accelerate and notice of acceptance; or (viii) the right to require the Secretary to pursue any remedy in the Secretary's power whatsoever. d) Maritima hereby agrees that this Payment Undertaking shall continue to be effective or shall be reinstated, as the case may be, if at any time payment of any sum hereby due is rescinded or must be otherwise restored or returned by the Secretary or Petrobras, upon the insolvency, bankruptcy or reorganization of the Shipowner, or otherwise, all as though such payment had not been made. Maritima further agrees that if the maturity of any obligations whose payment is undertaken herein be accelerated by bankruptcy or otherwise, such maturity shall also be deemed accelerated for the purpose of this Payment Undertaking without demand or notice to Maritima. e) Any amount payable hereunder shall not be subject to any reduction by reason of any counterclaim, set-off, deduction, abatement or otherwise. f) Maritima shall pay all reasonable costs and expenses (including, without limitation, attorneys' fees and expenses) incurred in connection with the enforcement of the obligations of Maritima under this Payment Undertaking. g) The Contracts may be amended, modified or endorsed without the consent of Maritima. h) The Secretary may enforce Maritima's obligations hereunder without in any way first pursuing or exhausting any other rights or remedies which the Secretary may have against the Shipowners or any other person, firm or corporation or against any security the Secretary may hold. 3. SECRETARY'S RIGHTS. Maritima authorizes the Secretary, without notice or demand and without affecting Maritima's liability hereunder, to take and hold security from any entity (other than Maritima) to secure the payment of this Payment Undertaking and/or any of the obligations guaranteed herein and exchange, enforce, waive and release any such security; and to apply such security and direct the order or manner of sale thereof as the Secretary in his discretion may determine; and to obtain a guarantee of any of the obligations guaranteed herein from any one or more persons, corporations or entities whomsoever (other than Maritima) and at any time or times to enforce, waive, rearrange, modify, limit or release such other persons, corporations or entities from their obligations under such guarantees. 5 4. PRIMARY LIABILITY. It is expressly agreed that the liability of Maritima for the payment of the obligations due herein shall be primary and not secondary. The liability of Maritima for payment of sums due hereunder is joint and several with the liability of Pride International Inc. under its Guaranty Agreement in favor of the Secretary with respect to the Late Arrival Penalties and Ad Valorem Taxes; PROVIDED that the maximum amount Maritima is obligated to pay hereunder shall not exceed Twenty Million Five Hundred Thousand Dollars ($20,500,000). 5. REPRESENTATIONS AND WARRANTIES. Maritima represents and warrants as follows: a) Maritima is a company duly organized, validly existing and in good standing under the laws of the Federative Republic of Brazil and has full power and authority (corporate, legal and other) to execute, deliver and carry out the terms of this Payment Undertaking; b) This Payment Undertaking has been duly authorized, executed and delivered by Maritima and constitutes the legal, valid and binding obligation of Maritima enforceable against Maritima in accordance with its terms; c) The execution, delivery and performance Maritima of this Payment Undertaking does not require the approval or consent of its shareholders or of any governmental authority and does not contravene Maritima's Certificate of Incorporation or any mortgage, indenture or other agreement binding upon it, or any law, regulation, order, judgment or decree applicable to Maritima; and d) Maritima's guarantee pursuant to this Payment Undertaking may be expected to benefit, directly or indirectly, Maritima. e) Maritima has fully adequate financial resources, funds, and assets to satisfy its obligations under this Payment Undertaking. 6. CONTINUING UNDERTAKING. This Payment Undertaking shall: a) Remain in full force and effect so long as either Shipowner may be liable for the payment of Late Arrival Penalties and Ad Valorem Taxes and shall terminate upon the Secretary's receipt of (i) written notice from Petrobras to both Shipowners that any and all liabilities for Late Arrival Penalties have been satisfied under the Contracts, and (ii) that evidence satisfactory to the Secretary that no Ad Valorem Taxes are or will be due, but if due, such taxes have been paid, provided, however, that this Payment Undertaking shall terminate at such time as Maritima or the Shipowners provide a Letter of Credit in an amount equal to the amount hereunder guaranteed, which together with any other agreements with the issuer relating to the Letter of Credit are in form and substance satisfactory to the Secretary, and further provided that the Shipowners may not collateralize this Letter of Credit or repay the issuer with respect to any draws made under the Letter of Credit or incur any fees unless such payments would be allowed as dividends under the Shipowners' Financial Agreements. b) Be binding upon Maritima, its successors and assigns such taxes; and 6 c) Be executed and issued for the sole and exclusive benefit of the United States, and no other party shall be permitted to claim any benefit, direct or indirect, therefrom. This Payment Undertaking is nonassignable; any assignment thereof shall be null and void and have no legal effect whatsoever. d) Inure to the benefit of, and be enforceable by the Secretary, his successors and assigns. 7. DEFAULT. A default under the terms of this Payment Undertaking shall be deemed to occur if Maritima fails to make any payments due hereunder. 8. NOTICES AND COMMUNICATIONS. All notices, requests, demands, directions, consents, waivers, approvals or other communications shall be in writing, in the English language (or accompanied by an accurate English translation upon which the Secretary shall have the right to rely for all purposes under this Agreement) and shall be made or delivered in person or by registered or certified mail, postage prepaid, addressed to Maritima or the Secretary as provided below or to such other address as Maritima or the Secretary may hereafter specify in a written notice to the other, and shall be effective upon receipt by the addressee thereof. In any conflict over the meaning of this Payment Undertaking or any notices, directions or other communications pursuant thereto, the English language shall control, notwithstanding any relevant translations of the English version into any other language. Maritima: Maritima Petroleo e Engenharia Ltda. Avenida Almirante Barroso 52 3400 GR, 20031.000 - Centro Rio de Janeiro, Brazil Attention: German Efromovich With a copy to: Sher & Blackwell 1850 M Street, NW Suite 900 Washington, DC 20036 Attention: Jeffrey F. Lawrence/Anne E. Mickey Secretary: SECRETARY OF TRANSPORTATION c/o Maritime Administrator Maritime Administration U.S. Department of Transportation 400 Seventh Street, SW Washington, DC 20590 Attention: Chief, Division of Ship Financing Contracts 7 9. AMENDMENTS AND SUPPLEMENTS. No agreement shall be effective to change or modify, supplement, amend or discharge in whole or in part this Payment Undertaking unless such agreement is in writing, signed by Maritima and the Secretary. 10. GOVERNING LAW. This Payment Undertaking and the rights and obligations of the parties hereto shall be construed, enforced, and governed by the laws of the United States of America, but to the extent they are inapplicable, then by the laws of the District of Columbia of the United States of America without regard to its conflict of laws provision. 11. CONFIDENTIALITY. Neither party shall, without the prior written consent of the other, disclose to any third party (including Petrobras) the terms and conditions of this Payment Undertaking except as required by law or governmental requirements, and then only with notice of such to the other party 12. JURISDICTION AND CONSENT TO SUIT. Any proceeding to enforce this Agreement may be brought in the Federal courts of the United States of America located in the District of Columbia of the United States of America. Maritima hereby irrevocably waives any present or future objection to such venue, and for itself and in respect of any of its properties hereby irrevocably consents and submits unconditionally to the non-exclusive jurisdiction of those courts. Maritima further irrevocably waives any claim that any such court is not a convenient forum for any such proceeding. Maritima agrees that any service of process, writ, judgment or other notice of legal process shall be deemed and held in every respect to be effectively served upon it in connection with proceedings in the District of Columbia of the United States of America, if delivered to Sher & Blackwell, 1850 M Street, N.W., Suite 900, Washington, DC 20036, which it irrevocably designates and appoints as its authorized agent for the service of process in the District and Federal courts in the District of Columbia of the United States of America. Maritima further agrees that final judgment against it in any such action or proceeding arising out of or relating to this Agreement shall be conclusive and may be enforced in any other jurisdiction within or outside the United States of America by suit on the judgment, a certified or exemplified copy of which shall be conclusive evidence of that fact and of the judgment. 13. PAYMENTS IN U.S. CURRENCY. This Payment Undertaking is part of an international financial transaction in which the specification of United States currency is of the essence, and such currency shall be the currency of account in all events where payments are due to the Secretary. The payment obligations of Maritima hereunder to the Secretary shall not be discharged by an amount paid in another currency, whether pursuant to a judgment or otherwise, to the extent that the amount so paid on prompt conversion to such currency under normal banking procedures does not yield after deduction of any and all fees, taxes or any other charges imposed on the payment of such amount of United States dollars then due. In the event that any payment by Maritima to the Secretary, whether pursuant to a judgment or otherwise, upon conversion and transfer, does not result in the payment of such amount of United States currency at the place such amount is due, the Secretary shall be entitled to demand immediate payment of, and shall have a cause of action against Maritima for, the additional amount necessary to yield the amount then due. In the event the Secretary, upon the conversion of such judgment into currency, shall receive (as a result of currency exchange rate fluctuations) an amount greater than that to which it was entitled, Maritima shall be entitled to immediate reimbursement of the excess amount. The terms "U.S. currency" or the "dollars" or the symbol "$" as used herein shall mean dollars in any coin or currency of the United States of America. 8 14. IMMUNITY. Maritima represents and warrants that it is subject to civil and commercial law with respect to its obligations under this Agreement, that the making and performance of this Agreement constitutes private and commercial acts rather than governmental or public acts and that neither Maritima nor any of its properties or revenues has any right of immunity on the grounds of Sovereignty or otherwise from suit, court jurisdiction, attachment prior to judgment, attachment in aid of execution of a judgment, set-off, execution of a judgment or from any other legal process with respect to its obligations under this Agreement. To the extent that Maritima may hereafter be entitled, in any jurisdiction in which judicial proceedings may at any time be commenced with respect to this Agreement to claim for itself or its revenues or assets any such immunity, and to the extent that in any such jurisdiction there may be attributed to Maritima such an immunity (whether or not claimed), Maritima hereby irrevocably agrees not to claim and hereby irrevocably waives such immunity. The foregoing waiver of immunity shall have effect under the United States Sovereign Immunities Act of 1976. 15. COUNTERPARTS. This Payment Undertaking may be executed in one or more counterparts. All such counterparts shall be deemed to be originals and shall together constitute but one and the same instrument. 9 IN WITNESS WHEREOF, this Payment Undertaking has been executed on the day and year first above written. MARITIMA PETROLEO E ENGENHARIA LTDA By: /s/ GERMAN EFROMOVICH ________________________ Name: German Efromovich Title: President ATTEST: /s/ MARCELO VIOLLAND ________________________ Name: Title: ACKNOWLEDGED BY: UNITED STATES OF AMERICA SECRETARY OF TRANSPORTATION By: MARITIME ADMINISTRATOR By: /s/ JOEL C. RICHARD ___________________ Secretary Maritime Administration ATTEST: /s/ LARRY MAIN ______________ Assistant Secretary Maritime Administration EX-4.28 30 EXHIBIT 4.28 INTERGUARANTOR AGREEMENT This Interguarantor Agreement is made April 9, 1999, between on the one hand, Maritima Petroleo e Engenharia Ltda. ("Maritima"), and on the other hand Pride International, Inc. ("Pride"), (referred to herein individually as "Party", and collectively as "Parties"). RECITALS: A. WHEREAS, Petrodrill Four Limited and Petrodrill Five Limited, British Virgin Islands international business companies (each a "Shipowner" and collectively the "Shipowners") are each indirectly owned 70% by Maritima and 30% by Pride; and B. WHEREAS, the Shipowners, in connection with the financing of the cost of the construction of the AMETHYST 4 and AMETHYST 5 (collectively, the "Vessels"), on the date hereof, borrowed certain funds and created and authorized the issuance of obligations designated "United States Government Guaranteed Export Ship Financing Obligations, AMETHYST 4 Series" and "United States Government Guaranteed Export Ship Financing Obligations, AMETHYST 5 Series" (the "Obligations") consisting on the date hereof of $299,808,000 aggregate principal amount of the Obligations, bearing interest at the rate specified therein and issued under trust indentures (the "Indentures") between the Shipowners and FMB Trust Company, National Association, a national banking association, (the "Indenture Trustee") as trustee, dated as of the date hereof, said Obligations constituting the legal, valid and binding obligations of the Shipowners; and C. WHEREAS, each Shipowner, on the date hereof, accepted the Secretary's Commitment to Guarantee Obligations (the "Commitment") pursuant to Title XI of the Merchant Marine Act, 1936, as amended (the "Act"), whereby the Secretary authorized a guarantee to be endorsed upon each of the Obligations (the "Guarantees"); and D. WHEREAS, each Shipowner has, in consideration of the issuance of the Guarantees by the Secretary of the payment of the unpaid interest on, and the unpaid balance of the principal of the Obligations issued by the Shipowners pursuant to the terms and provisions of the Security Agreements dated the date hereof, between the Shipowner and the Secretary (the "Security Agreements"), granted a security interest in its Chartering Contract with Petroleo Brasileiro S.A. ("Petrobras") to the Secretary. E. WHEREAS, the AMETHYST 4 and AMETHYST 5 are expected to be delivered to Petrobras on approximately June 9, 2000, and August 9, 2000, respectively, approximately 392 and 434 days beyond the delivery date under their respective Chartering Contracts (collectively "the Contracts"). F. WHEREAS, Petrobras has a contractual right to impose penalties if the Vessels are not timely delivered (the "Late Arrival Penalties"). G. WHEREAS, under the expected delivery schedule, the maximum aggregate Late Arrival Penalties would be approximately $31,550,000. H. WHEREAS, Petrobras has informed the Shipowners that its policy has been to negotiate with its contractors on the form and timing of any penalties to reduce their impact and that in the past Petrobras has negotiated installment plans or discounted the penalties from the end of the relevant Contract. I. WHEREAS, Petrobras has confirmed that it has no reason to expect that it will not apply the same policy to the Late Arrival Penalties under the Contracts, subject to the approval of its Board of Directors. J. WHEREAS, the Secretary is concerned that there may be ad valorem taxes imposed by the Federative Republic of Brazil on the Vessels when they are delivered to Petrobras ("Ad Valorem Taxes"). K. WHEREAS, the Secretary has required a Payment Undertaking from Maritima and a Guaranty Agreement from Pride in conjunction with the consideration offered by or on behalf of the Shipowners as a condition of the Secretary's decision to enter into the Commitments to issue the Guarantees. L. WHEREAS, Maritima has entered into a Payment Undertaking and Pride has entered into a Guaranty Agreement for the purpose of guaranteeing to the United States Government the Shipowners' payment of Late Arrival Penalties and Ad Valorem Taxes up to an aggregate amount of $20,500,000. M. WHEREAS under the Payment Undertaking and Guaranty Agreement, the Parties may be held jointly and severally liable for the payment of Late Arrival Penalties and Ad Valorem Taxes up to an aggregate amount of $20,5000,000 each. NOW THEREFORE, in consideration of the premises, and of other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the Parties hereby agree as follows: 1. Unless otherwise specifically defined herein, the capitalized terms used herein which are defined in Schedule X to the Security Agreements, dated the date hereof and any reference therein to other instruments shall have the respective meanings stated in Schedule X of the Security Agreements or such other instruments. 2 2. In the event one or both of the Shipowners default in their obligation to pay the Late Arrival Penalties or Ad Valorem Taxes and one or more of the Parties are required to make payment pursuant to the Payment Undertaking or Guaranty Agreement for any part of the Late Arrival Fees, Ad Valorem Taxes, and any interest, penalties, costs, attorney's fees or any other amounts related thereto (collectively "Guarantee Payment"), the Parties shall be responsible only for their respective Proportionate Share of the Guarantee Payment which shall be based on each Party's direct and indirect percentage of ownership of the Shipowners at the time of default. The percentage of ownership interest in the Shipowners is referred to herein as the "Proportionate Share." By way of example, if Maritima is required to pay a Guarantee Payment under the Payment Undertaking because of a default by Petrodrill Four Limited, and Maritima's ownership interest in Petrodrill Four Limited (directly or indirectly through subsidiaries or affiliates) is 70%, then Martima's Proportionate Share equals 70%. In the same example, Pride's Proportionate Share would be 30%. In the event one Party fails to pay its Proportionate Share and the other party pays the defaulting Party's Proportionate Share or any part thereof, the paying Party shall be indemnified by the non paying Party and shall promptly pay such amount to the paying Party. Failing to make such indemnification payment, the paying Party shall have its joint venture interest increased pursuant to the terms of the Amethyst Financial Company Limited's Shareholder Agreement. 3. If, upon written demand by the United States Government pursuant to the Guaranty Agreement or Payment Undertaking, one of the Parties pays more than its Proportionate Share of the Guarantee Payment, the Party which paid the excess amount shall be indemnified by the non paying Party and shall promptly pay such amount to the paying Party. Failing to make such indemnification payment, the paying Party shall be compensated for such excess by the other Party or its joint venture interest increased pursuant to the terms of the Amethyst Financial Company Limited's Shareholder Agreement. 4. This Interguarantor Agreement shall be governed and interpreted by the federal law of the United States of America or in the absence of applicable federal law by the laws of the District of Columbia. 5. Any proceeding to enforce this Interguarantor Agreement may be brought in the Federal courts of the United States of America located in the District of Columbia of the United States of America. The Parties hereby irrevocably waive any present or future objection to such venue, and irrevocably consent and submit unconditionally to the exclusive jurisdiction of those courts. The Parties further irrevocably waive any claim that any such court is not a convenient forum for any such proceeding. 6. Neither party shall, without the prior written consent of the other, disclose to any third party (including Petrobras) the terms and conditions of the Payment Undertaking or Guaranty Agreement except as required by law or governmental requirements, and then only with notice of such to the other party. 7. This Interguarantor Agreement may be executed in one or more counterparts. All such counterparts shall be deemed to be originals and shall together constitute but one and the same instrument. 3 IN WITNESS WHEREOF, this Interguarantor Agreement has been executed on the day and year first above written. MARITIMA PETROLEO E ENGENHARIA LTDA By: /s/ GERMAN EFROMOVICH -------------------------------- Name: Title: Attest: - - ------------------------- PRIDE INTERNATIONAL, INC. By: /s/ EARL W. MCNIEL -------------------------------- Name: Earl W. McNiel Title: Vice President ATTEST: /s/ ROBERT W. RANDALL - - ------------------------- Robert W. Randall Secretary 4 EX-4.29 31 EXHIBIT 4.29 EXHIBIT 4 TO SECURITY AGREEMENT DOCUMENT 16 Contract No. MA -13513 TITLE XI RESERVE FUND AND FINANCIAL AGREEMENT THIS TITLE XI RESERVE FUND AND FINANCIAL AGREEMENT (the "Financial Agreement"), dated April 9, 1999 between PETRODRILL FIVE LIMITED, a British Virgin Islands international business company, "the Company"), and THE UNITED STATES OF AMERICA (the "United States"), represented by the Secretary of Transportation, acting by and through the Maritime Administrator (the "Secretary"). RECITALS: Pursuant to the conditions and understandings set forth in the Recitals to the Security Agreement executed on this date, the Company has authorized the issuance of obligations designated "United States Government Guaranteed Export Ship Financing Obligations, AMETHYST 5 Series" in an aggregate principal amount not to exceed $150,183,000 to finance the cost of construction of the AMETHYST 5 the ("Vessel"); NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, and of other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereby agree as follows: SECTION 1. (a) GRANTING CLAUSE. The Company hereby sells, grants, conveys, mortgages, assigns, transfers, pledges, confirms and sets over to the Secretary a continuing security interest in all of its right, title and interest in and to (1) the Title XI Reserve Fund, and (2) all sums, instruments, moneys, negotiable documents, chattel paper and proceeds thereof currently on deposit, or hereafter deposited in the Title XI Reserve Fund. (b) DEFINITIONS. For all purposes of this Financial Agreement, unless otherwise expressly provided or unless the context otherwise requires, the capitalized terms used herein shall have the meaning specified in Schedule X to the Security Agreement entered into on this date. SECTION 2. TITLE XI RESERVE FUND DEPOSITS. (a) Pursuant to the Depository Agreement, the Company shall establish with the Depository a depository account (herein called the "Title XI Reserve Fund"). (b)(1) Within 120 days after the end of each fiscal year of the Company, the Company shall compute its net income attributable to the operation of the Vessel ("Title XI Reserve Fund Net Income"). This computation requires the multiplication of the Company's total net income after taxes by a fraction with a numerator composed of the total original capitalized cost of all Company vessels (whether leased or owned) and a denominator composed of the total original capitalized cost of all the Company's assets. The net income after taxes, computed in accordance with generally accepted accounting principles, shall be adjusted as follows: (A) The depreciation expense applicable to the accounting year shall be added back. (B) There shall be subtracted an amount equal to the principal amount of debt required to be paid or redeemed, and actually paid or redeemed by the Company during the year; and the principal amount of Obligations Retired or Paid, prepaid or redeemed, in excess of the required Redemptions or payments which may be used by the Company as a credit against future required Redemptions or other required payments with respect to the Obligations, but excluding payments from the Title XI Reserve Fund and the Title XI Escrow Fund. (2) Promptly after the computation of the Title XI Reserve Fund Net Income by the Company: (A) If the Vessel is owned by the Company, then from the Title XI Reserve Fund Net Income for the Vessel there shall be deducted, annually, an amount (pro rated for a period of less than a full fiscal year) which is 10% of the Company's aggregate original equity investment in said Vessel, as specified in Attachment A. (B) The Company shall, unless otherwise approved by the Secretary in writing, deposit into the Title XI Reserve Fund an amount equal to sixty-five percent (65%) of the balance of the Title XI Reserve Fund Net income remaining after the above deductions. 2 (C) Irrespective of the Company's deposit requirements into the Title XI Reserve Fund, the Company shall not be required to make any deposits into the Title XI Reserve Fund if (i) the Obligations and the related Secretary's Note shall have been satisfied and discharged and if the Company shall have paid or caused to be paid all other sums secured under the Security Agreement or the Mortgage, (ii) all of the Guarantees on the Outstanding Obligations shall have been terminated pursuant to the provisions of the Security Agreement, or (iii) the amount (including any securities at current market value) in the Title XI Reserve Fund is equal to, or in excess of 50% of the principal amount of the Outstanding Obligations; (D) The Company shall deliver to the Secretary (with a copy to the Depository) at the time of each deposit into the Title XI Reserve Fund pursuant to Section 2(b)(2)(B), and any deposits required under the Security Agreement, a statement of an independent certified public accountant (who may be the regular auditors for the Company) stating that such deposit has been computed in accordance with Section 2(b)(2)(B) (and the Security Agreement, if applicable) and showing the pertinent calculations. (E) In addition, the Company shall deliver to the Secretary (with a copy to the Depository), within 120 days after the end of each fiscal year of the Company, a statement by such certified public accountant stating (i) the total amount of all deposits to be so deposited into the Title XI Reserve Fund for such fiscal year (and showing the pertinent calculations), or (ii) that no such deposit was required to be made for such fiscal year (and showing the pertinent calculations) and that at the end of such fiscal year no adjustments pursuant to Section 2(b)(2)(F) were required to be made (and, if such adjustments were required to be made, stating the reasons therefor). (F) The computation of all deposits required by this Section 2 shall be made on the basis of information available to the Company at the time of each such deposit. Each such deposit shall be subject to adjustments from time to time in the event and to the extent that the same would be required or permitted by mistakes or omissions, additional information becoming available to the Company, or judicial or administrative determinations made subsequent to the making of such deposits. SECTION 3. WITHDRAWALS FROM THE TITLE XI RESERVE FUND. (a) From time to time, moneys in the Title XI Reserve Fund shall be subject to withdrawal by delivery by the Company to the Secretary of a Request for Payment (specifying 3 the Person or Persons to be paid and the amount of such payment) executed by the Company, together with an Officer's Certificate of the Company stating the reasons and purpose for the withdrawal. (b) Upon approval by the Secretary of the Request for Payment evidenced by the countersignature thereon of the Secretary, the Secretary shall cause the Request for Payment to be delivered to the Depository, which shall promptly make payment to such Person or Persons in accordance with the terms of such Request for Payment. (c) The purposes for which withdrawals may be made, subject to the prior approval of the Secretary, are the following: (1) for application toward the redemption of Title XI Bonds or Obligations; (2) for payment of debt service; (3) for payment to the Company, as of the end of each tax year of the Company (and thereafter as any tax adjustments of the Company may require), in amounts equal to any increments in the Company's tax liability resulting from net capital gains realized from capital transactions in the Title XI Reserve Fund consummated during such tax year; (4) for payment into the Company's general funds in an amount equal to that portion of the Title XI Reserve Fund which is in excess of 50% of the principal amount of the Outstanding Title XI Bonds or Obligations; and (5) for any other payment with the prior written approval of the Secretary. SECTION 4. TERMINATION OF THE TITLE XI RESERVE FUND. (a) The Title XI Reserve Fund shall terminate at such time as the Secretary's Note shall have been satisfied and discharged and the Company shall have paid or caused to be paid all sums secured under the Security Agreement or the Mortgage. (b) Upon the termination of the Title XI Reserve Fund, pursuant to Section 4(a), the moneys remaining in the Title XI Reserve Fund shall be subject to withdrawal and payment into the general funds of the Company. 4 (c) Upon payment by the Secretary to the Indenture Trustee of the Guarantees pursuant to the Indenture, the Title XI Reserve Fund shall, upon written instructions of the Secretary, be terminated and the balance remaining in the Title XI Reserve Fund shall be paid to the Secretary and the Company as determined by the Secretary. (d) Any withdrawal from the Title XI Reserve Fund pursuant to Section 4 shall not effect a discharge of or diminish any obligations of the Company under the Security Agreement, Mortgage or any other agreement as the case may be except to the extent that the amount withdrawn is applied to payments required to be made by the Company under the Security Agreement, Mortgage or any other agreement. SECTION 5. ELIGIBLE INVESTMENTS; FORM OF DEPOSITS. (a) Moneys in the Title XI Reserve Fund shall, if so directed by a Request of the Company delivered to the Depository (with a copy to the Secretary), be invested by the Depository in the following Eligible Investments: (1) time deposits, negotiable certificates of deposit, or similar instruments of deposit with a bank or trust company organized as a corporation under the laws of the United States or any State thereof, or of the District of Columbia, subject to supervision or examination by Federal or State authority or authority of the District of Columbia, and having a combined capital and surplus of at least $3,000,000; PROVIDED THAT, the aggregate of all such time deposits and certificates of deposit with any one bank or trust company shall not exceed 10% of the combined capital and surplus of such bank or trust company; (2) short term commercial paper having either of the two highest ratings for short term commercial paper assigned by any two nationally recognized organizations regularly engaged in rating the investment quality of such commercial paper; and (3) securities (designated by the Company in such Request) which at the date of such investment are -- (A) direct obligations of, or obligations (other than the Obligations or Obligations related to the Company) fully guaranteed or insured by, the United States or any agency of the United States or with the Secretary's prior written consent and subject to such conditions imposed by him, obligations or securities fully insured by an instrumentality of the United States; 5 (B) bonds, not in default as to principal or interest of any county, municipality or state of the United States and having either of the two highest ratings for bonds assigned by any two nationally recognized organizations regularly engaged in rating the investment quality of such bonds; (C) bonds, not in default as to principal or interest, of corporations organized and existing under the laws of the United States or of the District of Columbia or of any state of the United States and having one of the three highest ratings for bonds assigned by any two nationally recognized organizations regularly engaged in rating the investment quality of such bonds; PROVIDED THAT, no investment under this subsection shall be made in any obligations of the Company or a Related Party; (D) capital stock, but limited at the time of acquisition to any amounts in the Title XI Reserve Fund in excess of the principal amount of Obligations to be redeemed pursuant to the mandatory sinking fund provisions of the Indenture, during the next succeeding 12 months of (i) corporations organized and existing under the laws of the United States or the District of Columbia or of any state of the United States if such stock is currently fully listed and registered upon an exchange registered with the Securities and Exchange Commission as a national securities exchange and permitted for investment by a savings bank under the laws of the State of New York without regard to the provisions therein limiting such investments to a percentage of the assets or surplus of such savings bank, (ii) banks either regulated by the Comptroller of the Currency of the United States or subject to the Banking Law of the State of New York, or (iii) insurance companies licensed to do business in such state; PROVIDED THAT, no investment under this subsection shall be made in stock of the Company or a Related Party; PROVIDED FURTHER that, any request under this subsection shall be accompanied by an opinion of counsel satisfactory to the Secretary as to the qualification of such securities under this clause and PROVIDED FURTHER, that the Company shall cause to be sold, within 60 days, or at any time if the Secretary so directs the Company in writing, any securities which cease to qualify under this subsection. (b) In any case where the Company is required to deposit or redeposit sums into the Title XI Reserve Fund, the Company shall make the required deposit in cash or, in lieu thereof, with the Secretary's prior written approval, may deposit into the Title XI Reserve Fund, negotiable certificates of deposit, short term commercial paper or securities which are (1) Eligible Investments (2) owned by the Company and (3) of an equivalent current market value (based upon the last sales 6 price thereof on the Business Day immediately preceding such deposit or, if there shall have been no sale thereof on such day, the average of the last known bid and asked prices). With the Secretary's prior written approval, the Company may exchange Eligible Investments in the Title XI Reserve Fund at current market value (determined as above provided) for an equivalent amount of cash. (c) Cash held in the Title XI Reserve Fund will be held by the Depository pursuant to the Depository Agreement. SECTION 6. COMPANY'S RIGHTS WITH RESPECT TO SECURITIES HELD IN THE TITLE XI RESERVE FUND. Unless there is an existing Default under the Security Agreement, the Company shall have: (a) the right to vote securities held in the Title XI Reserve Fund as to (1) the sale of all or any part of the assets of the issuer or obligor thereof, (2) the increase or reduction of the capital of such issuer or obligor, (3) the liquidation, dissolution, merger or consolidation of such issuer or obligor, or (4) any purpose which would not then impair the lien of, or the security interest granted to the Secretary; and (b) the right to exercise any and all rights of ownership of such securities, including the right to consent or object to the extension, modification or renewal of any thereof, the right to consent or object to any plan of reorganization, or readjustment, and the right to exercise any right, privilege or option pertaining thereto. SECTION 7. ANNUAL STATEMENT OF COMPANY WITH RESPECT TO THE TITLE XI RESERVE FUND. Within 120 days after the close of each fiscal year of the Company at the end of which there are funds in the Title XI Reserve Fund (and at such other times as the Secretary may request in writing), the Company shall submit to the Secretary (with a copy to the Depository) (a) an opinion of counsel satisfactory to the Secretary as to the qualification, under Section 5(a)(3)(D), of securities acquired pursuant to Section 5(a)(3)(D) and then held in the Title XI Reserve Fund and (b) a list of the Eligible Investments held in the Title XI Reserve Fund at the close of said fiscal year (or at the time of the Secretary's request as aforesaid). 7 SECTION 8. FINANCIAL REQUIREMENTS OF THE COMPANY. (a) PRIMARY COVENANTS. The Company shall not without the Secretary's prior written consent: (1) Except as hereinafter provided, make any distribution of earnings, except as may be permitted by (A) or (B) below: (A) From retained earnings in an amount specified in Section 8(a)(1)(C) below, PROVIDED THAT, in the fiscal year in which the distribution of earnings is made there is no operating loss to the date of such payment of such distribution of earnings, and (i) there was no operating loss in the immediately preceding three fiscal years, or (ii) there was a one-year operating loss during the immediately preceding three fiscal years, but (a) such loss was not in the immediately preceding fiscal year, and (b) there was positive net income for the three year period; (B) If distributions of earnings may not be made under (A) above, a distribution can be made in an amount equal to the total operating net income for the immediately preceding three fiscal year period, PROVIDED THAT, (i) there were no two successive years of operating losses, (ii) in the fiscal year in which such distribution is made, there is no operating loss to the date of such distribution, and (iii) the distribution or earnings made would not exceed an amount specified in Section 8(a)(1)(C) below; (C) Distributions of earnings may be made from earnings of prior years in an aggregate amount equal to (i) 40 percent of the Company's total net income after tax for each of the prior years, less any distributions that were made in such years; or (ii) the aggregate of the Company's total net income after tax for such prior years, PROVIDED THAT, after making such distribution, the Company's Long Term Debt does not exceed its Net Worth. In computing net income for purposes of this subsection, extraordinary gains, such as gains from the sale of assets, shall be excluded; (2) Enter into any service, management or operating agreement for the operation of the Vessel (excluding husbanding type agreements), or appoint or designate a managing or operating agent for the operation of the Vessel (excluding husbanding agents) unless approved by the Secretary; (3) (A) Sell, mortgage, transfer, or demise charter the Vessel or any assets to any non-Related Party except as permitted in subsection 8(a)(7) below, or (B) sell, mortgage, transfer, or demise charter the Vessel or any assets to a Related 8 Party, unless such transaction is (i) at a fair market value as determined by an independent appraiser acceptable to the Secretary, and (ii) a total cash transaction or, in the case of demise charter, the charter payments are cash payments; (4) Enter into any agreement for both (A) sale and (B) leaseback of the same assets so sold unless the proceeds from such sale are at least equal to the fair market value of the property sold; (5) Except as necessary to avoid arrest or the threat of arrest of the Vessel or the Vessel of PETRODRILL FOUR LIMITED, or to arrange for the release of the Vessel or the Vessel of PETRODRILL FOUR LIMITED, guarantee, or otherwise become liable for the obligations of any Person, except in respect of any undertakings as to the fees and expenses of the Indenture Trustee, except endorsement for deposit of checks and other negotiable instruments acquired in the ordinary course of business and except as otherwise permitted in Section 8(b); (6) Directly or indirectly embark on any new enterprise or business activity not directly connected with the business of shipping or other activity in which the Company is actively engaged; (7) Enter into any merger or consolidation or convey, sell, demise charter, or otherwise transfer, or dispose of any portion of its properties or assets (any and all of which acts are encompassed within the words "sale" or "sold" as used herein), PROVIDED THAT, the Company shall not be deemed to have sold such properties or assets if (A) the Net Book Value (defined as the original book value of an asset less depreciation calculated on a straight line basis over its useful life) of the aggregate of all the assets sold by the Company during any period of 12 consecutive calendar months does not exceed 10% of the total Net Book Value of all of the Company's assets (the assets which are the basis for the calculation of the 10% of the Net Book Value are those indicated on the most recent audited annual financial statement required to be submitted pursuant to Section 9 hereof prior to the date of the sale); (B) the Company retains the proceeds of the sale of assets for use in accordance with the Company's regular business activities; and (C) the sale is not otherwise prohibited by subsection 8(a)(3). Notwithstanding any other provision of this subsection, the Company may not consummate such sale without the Secretary's prior written consent if the Company has not, prior to the time of such sale, submitted to the Secretary the financial statement in clause A of this subsection, and any attempt to consummate a sale absent such approval shall be null and void AB INITIO. 9 (b) SUPPLEMENTAL COVENANTS. Unless, after giving effect to such transaction or transactions, during any fiscal year of the Company, (1) the Company's Working Capital is equal to at least one dollar, (2) the Company's Long-Term Debt does not exceed two times the Company's Net Worth and (3) the Company's Net Worth is at least the amount specified in Attachment A hereto, the Company shall not, without the Secretary's prior written consent: (A) Withdraw any capital; (B) Redeem any share capital or convert any of the same into debt; (C) Pay any dividend (except dividends payable in capital stock of the Company); (D) Make any loan or advance (except advances to cover current expenses of the Company), either directly or indirectly, to any stockholder, director, officer, or employee of the Company, or to any Related Party; (E) Make any investments in the securities of any Related Party; (F) Prepay in whole or in part any indebtedness to any stockholder, director, officer or employee of the Company, or to any Related Party; (G) Increase any direct employee compensation (as hereinafter defined) paid to any employee in excess of $150,000 per annum; nor increase any direct employee compensation which is already in excess of $150,000 per annum; nor initially employ or re-employ any person at a direct employee compensation rate in excess of $150,000 per annum; provided, however, that beginning with January 1, 2000, the $150,000 limit may be increased annually based on the previous year's closing CPI-U (Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics). For the purpose of this section the term "direct employee compensation" is the total amount of any wage, salary, bonus, commission, or other form of direct payment to any employee from all companies with guarantees under Title XI of the Act as reported to the Internal Revenue Service for any fiscal year; (H) Acquire any fixed assets other than those required for the maintenance and operations of the Company's existing assets, including the normal maintenance and operation of any vessel or vessels owned or chartered by the Company; 10 (I) Either enter into or become liable (directly or indirectly) under charters and leases (having a term of twelve months or more) for the payment of charter hire and rent on all such charters and leases which have annual payments aggregating in excess of $1,000,000 (which amount shall be increased at the end of each of the Company's fiscal years by a percentage equal to the CPI-U); (J) Pay any indebtedness subordinated to the Obligations or to any other Title XI obligations; (K) Create, assume, incur, or in any manner become liable for any indebtedness, except current liabilities, or short term loans, incurred or assumed in the ordinary course of business as such business presently exists; (L) Make any investment, whether by acquisition of stock or indebtedness, or by loan, advance, transfer of property, capital contribution, guarantee of indebtedness or otherwise, in any Person, other than obligations of the United States, bank deposits or investments in securities of the character permitted for moneys in the Title XI Reserve Fund; (M) Create, assume, permit or suffer to exist or continue any mortgage, lien, charge or encumbrance upon, or pledge of, or subject to the prior payment of any indebtedness, any of its property or assets, real or personal, tangible or intangible, whether now owned or hereafter acquired, or own or acquire, or agree to acquire, title to any property of any kind subject to or upon a chattel mortgage or conditional sales agreement or other title retention agreement, except (i) loans, mortgages and indebtedness guaranteed by the Secretary under Title XI of the Act or related to the construction of a vessel approved for Title XI by the Secretary and (ii) liens incurred in the ordinary course of business as such business presently exists; (N) Pay any penalties if the Vessel is not timely delivered to Petroleo Brasileiro S.A. ("Petrobras") under the chartering contract dated as of December 5, 1997, between Petrobras and Maritima Petroleo e Engenharia Ltda which has been assigned to the Shipowner (the "Chartering Contract"), in so far as it relates to the chartering of the Vessel (the "Late Arrival Penalties"); 11 (O) Pay any ad valorem taxes on the Vessel imposed by the Federative Republic of Brazil, or any agency, instrumentality or other entity thereof, or any other state, local, municipal or other governmental entity located in Brazil ("Ad Valorem Taxes"); (P) Reimburse or repay any amount paid by Maritima Petroleo e Engenharia Ltda or Pride International Inc. pursuant to their respective guaranties to the Secretary issued on the Closing Date in connection with Late Arrival Penalties and Ad Valorem Taxes. SECTION 9. (a) ANNUAL FINANCIAL STATEMENTS. The Company shall furnish to the Secretary, in duplicate, (1) within 120 days after the end of the Shipowner's fiscal year commencing with the first fiscal year ending after the date of the Security Agreement, the Company's Audited Financial Statements including balance sheet and income statement for such fiscal year along with a completed M.A. Form 172 or such other form approved by the Secretary, and (2) within 90 days after the expiration of each semi-annual period of each fiscal year commencing with the first such semi-annual period ending after the date of the Security Agreement, a completed M.A. Form 172 or such other form approved by the Secretary for such semi-annual period along with an Officer's Certificate certifying its accuracy. (b) ANNUAL NO DEFAULT CERTIFICATES. Within 120 days after the end of the Company's fiscal year, the Company shall furnish to the Secretary, an Officer's Certificate dated as of the close of such fiscal year stating whether or not, the Company is in default in the performance of or in default in the compliance with any covenant, agreement or condition contained herein or in the Mortgage, Security Agreement or charter relating to any Vessel listed in Attachment A hereto, and if so, specifying each such default and stating the nature thereof. SECTION 10. QUALIFYING FINANCIAL REQUIREMENTS OF THE COMPANY. Immediately upon the execution and delivery of this Agreement, the Company shall meet the requirements with respect to Working Capital, Net Worth and Long Term Debt specified in Section 8(b). SECTION 11. NOTICES. Except as otherwise provided in this Agreement, notices, requests, directions, instructions, waivers, approvals or other communication may be made or delivered in person or by registered or certified mail, postage prepaid, addressed to the party as provided below, or to such other address as such party may hereafter specify in a written notice to the other parties named herein, and all notices or other communications shall be in writing 12 so addressed and shall be effective upon receipt by the addressee thereof: The Secretary as: SECRETARY OF TRANSPORTATION c/o Maritime Administrator Maritime Administration 400 Seventh Street, S.W. Washington, D.C. 20590 The Title XI Reserve Fund Depository as: CITIBANK, N.A. 111 Wall Street, 5th Floor New York, New York 10005 13 The Company as: PETRODRILL FIVE LIMITED c/o Arias, Fabrega & Fabrega P.O. Box 985 Omar Hodge Building Wickham's Cay Road Town, Tortola British Virgin Islands With a copy to: PETRODRILL ENGINEERING NV K.P. van der Mandelelaan 38 3062 MB Rotterdam (Brainpark) The Netherlands SECTION 12. AMENDMENTS AND SUPPLEMENTS. No agreement shall be effective to amend, supplement, or discharge in whole or in part this Financial Agreement unless such agreement is in writing signed by the parties hereto. Any amendments, additions, deletions, substitutions or other changes not made in accordance with this provision shall be invalid and of no effect. SECTION 13. COUNTERPARTS. This Financial Agreement may be executed in any number of counterparts. All such counterparts shall be deemed to be originals, and shall together constitute but one and the same instrument. SECTION 14. JURISDICTION AND CONSENT TO SUIT. This Title XI Reserve Fund and Financial Agreement hereby adopts and incorporates by reference as if fully set forth herein the provisions relating to Jurisdiction and Consent to Suit of the Special Provisions of the Security Agreement. SECTION 15. PAYMENTS IN U.S. CURRENCY. This Title XI Reserve Fund and Financial Agreement hereby adopts and incorporates by reference as if fully set forth herein Section 11.06 of the Security Agreement. SECTION 16. IMMUNITY. This Title XI Reserve Fund and Financial Agreement hereby adopts and incorporates by reference as fully set forth herein Section 11.07 of the Security Agreement. 14 IN WITNESS WHEREOF, this Title XI Reserve Fund and Financial Agreement has been executed by the parties hereto as of the day and year first above written. Attest: PETRODRILL FIVE LIMITED /s/ ROBERT W. RANDALL BY: /s/ EARL W. MCNIEL --------------------- ------------------ Secretary Treasurer UNITED STATES OF AMERICA Attest: SECRETARY OF TRANSPORTATION (SEAL) MARITIME ADMINISTRATOR /s/ LARRY MAIN -------------- BY: /s/ JOEL C. RICHARD ------------------- 15 ATTACHMENT A TITLE XI RESERVE FUND AND FINANCIAL AGREEMENT (Contract No. MA - 13513) 1. This Financial Agreement shall apply to the following Vessel: AMETHYST 5 2. The Company's aggregate original equity investment for use in Section 2 for the Vessel AMETHYST 5 is $26,455,175. 3. The Company's Net Worth for use in Section 8(b) is $26,455,175. EX-4.30 32 EXHIBIT 4.30 EXHIBIT 4 TO SECURITY AGREEMENT DOCUMENT 16 Contract No. MA -13507 TITLE XI RESERVE FUND AND FINANCIAL AGREEMENT THIS TITLE XI RESERVE FUND AND FINANCIAL AGREEMENT (the "Financial Agreement"), dated April 9, 1999 between PETRODRILL FOUR LIMITED, a British Virgin Islands international business company, "the Company"), and THE UNITED STATES OF AMERICA (the "United States"), represented by the Secretary of Transportation, acting by and through the Maritime Administrator (the "Secretary"). RECITALS: Pursuant to the conditions and understandings set forth in the Recitals to the Security Agreement executed on this date, the Company has authorized the issuance of obligations designated "United States Government Guaranteed Export Ship Financing Obligations, AMETHYST 4 Series" in an aggregate principal amount not to exceed $149,625,000 to finance the cost of construction of the AMETHYST 4 the ("Vessel"); NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, and of other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereby agree as follows: SECTION 1. (a) GRANTING CLAUSE. The Company hereby sells, grants, conveys, mortgages, assigns, transfers, pledges, confirms and sets over to the Secretary a continuing security interest in all of its right, title and interest in and to (1) the Title XI Reserve Fund, and (2) all sums, instruments, moneys, negotiable documents, chattel paper and proceeds thereof currently on deposit, or hereafter deposited in the Title XI Reserve Fund. (b) DEFINITIONS. For all purposes of this Financial Agreement, unless otherwise expressly provided or unless the context otherwise requires, the capitalized terms used herein shall have the meaning specified in Schedule X to the Security Agreement entered into on this date. SECTION 2. TITLE XI RESERVE FUND DEPOSITS. (a) Pursuant to the Depository Agreement, the Company shall establish with the Depository a depository account (herein called the "Title XI Reserve Fund"). (b)(1) Within 120 days after the end of each fiscal year of the Company, the Company shall compute its net income attributable to the operation of the Vessel ("Title XI Reserve Fund Net Income"). This computation requires the multiplication of the Company's total net income after taxes by a fraction with a numerator composed of the total original capitalized cost of all Company vessels (whether leased or owned) and a denominator composed of the total original capitalized cost of all the Company's assets. The net income after taxes, computed in accordance with generally accepted accounting principles, shall be adjusted as follows: (A) The depreciation expense applicable to the accounting year shall be added back. (B) There shall be subtracted an amount equal to the principal amount of debt required to be paid or redeemed, and actually paid or redeemed by the Company during the year; and the principal amount of Obligations Retired or Paid, prepaid or redeemed, in excess of the required Redemptions or payments which may be used by the Company as a credit against future required Redemptions or other required payments with respect to the Obligations, but excluding payments from the Title XI Reserve Fund and the Title XI Escrow Fund. (2) Promptly after the computation of the Title XI Reserve Fund Net Income by the Company: (A) If the Vessel is owned by the Company, then from the Title XI Reserve Fund Net Income for the Vessel there shall be deducted, annually, an amount (pro rated for a period of less than a full fiscal year) which is 10% of the Company's aggregate original equity investment in said Vessel, as specified in Attachment A. (B) The Company shall, unless otherwise approved by the Secretary in writing, deposit into the Title XI Reserve Fund an amount equal to sixty-five percent (65%) of the balance of the Title XI Reserve Fund Net income remaining after the above deductions. (C) Irrespective of the Company's deposit requirements into the Title 2 XI Reserve Fund, the Company shall not be required to make any deposits into the Title XI Reserve Fund if (i) the Obligations and the related Secretary's Note shall have been satisfied and discharged and if the Company shall have paid or caused to be paid all other sums secured under the Security Agreement or the Mortgage, (ii) all of the Guarantees on the Outstanding Obligations shall have been terminated pursuant to the provisions of the Security Agreement, or (iii) the amount (including any securities at current market value) in the Title XI Reserve Fund is equal to, or in excess of 50% of the principal amount of the Outstanding Obligations; (D) The Company shall deliver to the Secretary (with a copy to the Depository) at the time of each deposit into the Title XI Reserve Fund pursuant to Section 2(b)(2)(B), and any deposits required under the Security Agreement, a statement of an independent certified public accountant (who may be the regular auditors for the Company) stating that such deposit has been computed in accordance with Section 2(b)(2)(B) (and the Security Agreement, if applicable) and showing the pertinent calculations. (E) In addition, the Company shall deliver to the Secretary (with a copy to the Depository), within 120 days after the end of each fiscal year of the Company, a statement by such certified public accountant stating (i) the total amount of all deposits to be so deposited into the Title XI Reserve Fund for such fiscal year (and showing the pertinent calculations), or (ii) that no such deposit was required to be made for such fiscal year (and showing the pertinent calculations) and that at the end of such fiscal year no adjustments pursuant to Section 2(b)(2)(F) were required to be made (and, if such adjustments were required to be made, stating the reasons therefor). (F) The computation of all deposits required by this Section 2 shall be made on the basis of information available to the Company at the time of each such deposit. Each such deposit shall be subject to adjustments from time to time in the event and to the extent that the same would be required or permitted by mistakes or omissions, additional information becoming available to the Company, or judicial or administrative determinations made subsequent to the making of such deposits. SECTION 3. WITHDRAWALS FROM THE TITLE XI RESERVE FUND. (a) From time to time, moneys in the Title XI Reserve Fund shall be subject to withdrawal by delivery by the Company to the Secretary of a Request for Payment (specifying the Person or Persons to be paid and the amount of such payment) executed by 3 the Company, together with an Officer's Certificate of the Company stating the reasons and purpose for the withdrawal. (b) Upon approval by the Secretary of the Request for Payment evidenced by the countersignature thereon of the Secretary, the Secretary shall cause the Request for Payment to be delivered to the Depository, which shall promptly make payment to such Person or Persons in accordance with the terms of such Request for Payment. (c) The purposes for which withdrawals may be made, subject to the prior approval of the Secretary, are the following: (1) for application toward the redemption of Title XI Bonds or Obligations; (2) for payment of debt service; (3) for payment to the Company, as of the end of each tax year of the Company (and thereafter as any tax adjustments of the Company may require), in amounts equal to any increments in the Company's tax liability resulting from net capital gains realized from capital transactions in the Title XI Reserve Fund consummated during such tax year; (4) for payment into the Company's general funds in an amount equal to that portion of the Title XI Reserve Fund which is in excess of 50% of the principal amount of the Outstanding Title XI Bonds or Obligations; and (5) for any other payment with the prior written approval of the Secretary. SECTION 4. TERMINATION OF THE TITLE XI RESERVE FUND. (a) The Title XI Reserve Fund shall terminate at such time as the Secretary's Note shall have been satisfied and discharged and the Company shall have paid or caused to be paid all sums secured under the Security Agreement or the Mortgage. (b) Upon the termination of the Title XI Reserve Fund, pursuant to Section 4(a), the moneys remaining in the Title XI Reserve Fund shall be subject to withdrawal and payment into the general funds of the Company. (c) Upon payment by the Secretary to the Indenture Trustee of the 4 Guarantees pursuant to the Indenture, the Title XI Reserve Fund shall, upon written instructions of the Secretary, be terminated and the balance remaining in the Title XI Reserve Fund shall be paid to the Secretary and the Company as determined by the Secretary. (d) Any withdrawal from the Title XI Reserve Fund pursuant to Section 4 shall not effect a discharge of or diminish any obligations of the Company under the Security Agreement, Mortgage or any other agreement as the case may be except to the extent that the amount withdrawn is applied to payments required to be made by the Company under the Security Agreement, Mortgage or any other agreement. SECTION 5. ELIGIBLE INVESTMENTS; FORM OF DEPOSITS. (a) Moneys in the Title XI Reserve Fund shall, if so directed by a Request of the Company delivered to the Depository (with a copy to the Secretary), be invested by the Depository in the following Eligible Investments: (1) time deposits, negotiable certificates of deposit, or similar instruments of deposit with a bank or trust company organized as a corporation under the laws of the United States or any State thereof, or of the District of Columbia, subject to supervision or examination by Federal or State authority or authority of the District of Columbia, and having a combined capital and surplus of at least $3,000,000; PROVIDED THAT, the aggregate of all such time deposits and certificates of deposit with any one bank or trust company shall not exceed 10% of the combined capital and surplus of such bank or trust company; (2) short term commercial paper having either of the two highest ratings for short term commercial paper assigned by any two nationally recognized organizations regularly engaged in rating the investment quality of such commercial paper; and (3) securities (designated by the Company in such Request) which at the date of such investment are -- (A) direct obligations of, or obligations (other than the Obligations or Obligations related to the Company) fully guaranteed or insured by, the United States or any agency of the United States or with the Secretary's prior written consent and subject to such conditions imposed by him, obligations or securities fully insured by an instrumentality of the United States; 5 (B) bonds, not in default as to principal or interest of any county, municipality or state of the United States and having either of the two highest ratings for bonds assigned by any two nationally recognized organizations regularly engaged in rating the investment quality of such bonds; (C) bonds, not in default as to principal or interest, of corporations organized and existing under the laws of the United States or of the District of Columbia or of any state of the United States and having one of the three highest ratings for bonds assigned by any two nationally recognized organizations regularly engaged in rating the investment quality of such bonds; PROVIDED THAT, no investment under this subsection shall be made in any obligations of the Company or a Related Party; (D) capital stock, but limited at the time of acquisition to any amounts in the Title XI Reserve Fund in excess of the principal amount of Obligations to be redeemed pursuant to the mandatory sinking fund provisions of the Indenture, during the next succeeding 12 months of (i) corporations organized and existing under the laws of the United States or the District of Columbia or of any state of the United States if such stock is currently fully listed and registered upon an exchange registered with the Securities and Exchange Commission as a national securities exchange and permitted for investment by a savings bank under the laws of the State of New York without regard to the provisions therein limiting such investments to a percentage of the assets or surplus of such savings bank, (ii) banks either regulated by the Comptroller of the Currency of the United States or subject to the Banking Law of the State of New York, or (iii) insurance companies licensed to do business in such state; PROVIDED THAT, no investment under this subsection shall be made in stock of the Company or a Related Party; PROVIDED FURTHER that, any request under this subsection shall be accompanied by an opinion of counsel satisfactory to the Secretary as to the qualification of such securities under this clause and PROVIDED FURTHER, that the Company shall cause to be sold, within 60 days, or at any time if the Secretary so directs the Company in writing, any securities which cease to qualify under this subsection. (b) In any case where the Company is required to deposit or redeposit sums into the Title XI Reserve Fund, the Company shall make the required deposit in cash or, in lieu thereof, with the Secretary's prior written approval, may deposit into the Title XI Reserve Fund, negotiable certificates of deposit, short term commercial paper or securities which are (1) Eligible Investments (2) owned by the Company and (3) of an equivalent current market value (based upon the last sales price thereof on the Business Day immediately preceding such deposit or, if there 6 shall have been no sale thereof on such day, the average of the last known bid and asked prices). With the Secretary's prior written approval, the Company may exchange Eligible Investments in the Title XI Reserve Fund at current market value (determined as above provided) for an equivalent amount of cash. (c) Cash held in the Title XI Reserve Fund will be held by the Depository pursuant to the Depository Agreement. SECTION 6. COMPANY'S RIGHTS WITH RESPECT TO SECURITIES HELD IN THE TITLE XI RESERVE FUND. Unless there is an existing Default under the Security Agreement, the Company shall have: (a) the right to vote securities held in the Title XI Reserve Fund as to (1) the sale of all or any part of the assets of the issuer or obligor thereof, (2) the increase or reduction of the capital of such issuer or obligor, (3) the liquidation, dissolution, merger or consolidation of such issuer or obligor, or (4) any purpose which would not then impair the lien of, or the security interest granted to the Secretary; and (b) the right to exercise any and all rights of ownership of such securities, including the right to consent or object to the extension, modification or renewal of any thereof, the right to consent or object to any plan of reorganization, or readjustment, and the right to exercise any right, privilege or option pertaining thereto. SECTION 7. ANNUAL STATEMENT OF COMPANY WITH RESPECT TO THE TITLE XI RESERVE FUND. Within 120 days after the close of each fiscal year of the Company at the end of which there are funds in the Title XI Reserve Fund (and at such other times as the Secretary may request in writing), the Company shall submit to the Secretary (with a copy to the Depository) (a) an opinion of counsel satisfactory to the Secretary as to the qualification, under Section 5(a)(3)(D), of securities acquired pursuant to Section 5(a)(3)(D) and then held in the Title XI Reserve Fund and (b) a list of the Eligible Investments held in the Title XI Reserve Fund at the close of said fiscal year (or at the time of the Secretary's request as aforesaid). SECTION 8. FINANCIAL REQUIREMENTS OF THE COMPANY. (a) PRIMARY Covenants. The Company shall not without the Secretary's prior written consent: (1) Except as hereinafter provided, make any distribution of earnings, except as may be permitted by (A) or (B) below: 7 (A) From retained earnings in an amount specified in Section 8(a)(1)(C) below, PROVIDED THAT, in the fiscal year in which the distribution of earnings is made there is no operating loss to the date of such payment of such distribution of earnings, and (i) there was no operating loss in the immediately preceding three fiscal years, or (ii) there was a one-year operating loss during the immediately preceding three fiscal years, but (a) such loss was not in the immediately preceding fiscal year, and (b) there was positive net income for the three year period; (B) If distributions of earnings may not be made under (A) above, a distribution can be made in an amount equal to the total operating net income for the immediately preceding three fiscal year period, PROVIDED THAT, (i) there were no two successive years of operating losses, (ii) in the fiscal year in which such distribution is made, there is no operating loss to the date of such distribution, and (iii) the distribution or earnings made would not exceed an amount specified in Section 8(a)(1)(C) below; (C) Distributions of earnings may be made from earnings of prior years in an aggregate amount equal to (i) 40 percent of the Company's total net income after tax for each of the prior years, less any distributions that were made in such years; or (ii) the aggregate of the Company's total net income after tax for such prior years, PROVIDED THAT, after making such distribution, the Company's Long Term Debt does not exceed its Net Worth. In computing net income for purposes of this subsection, extraordinary gains, such as gains from the sale of assets, shall be excluded; (2) Enter into any service, management or operating agreement for the operation of the Vessel (excluding husbanding type agreements), or appoint or designate a managing or operating agent for the operation of the Vessel (excluding husbanding agents) unless approved by the Secretary; (3) (A) Sell, mortgage, transfer, or demise charter the Vessel or any assets to any nn-Related Party except as permitted in subsection 8(a)(7) below, or (B) sell, mortgage, transfer, or demise charter the Vessel or any assets to a Related Party, unless such transaction is (i) at a fair market value as determined by an independent appraiser acceptable to the Secretary, and (ii) a total cash transaction or, in the case of demise charter, the charter payments are cash payments; (4) Enter into any agreement for both (A) sale and (B) leaseback of the 8 same assets so sold unless the proceeds from such sale are at least equal to the fair market value of the property sold; (5) Except as necessary to avoid arrest or the threat of arrest of the Vessel or the Vessel of PETRODRILL FIVE LIMITED, or to arrange for the release of the Vessel or the Vessel of PETRODRILL FIVE LIMITED, guarantee, or otherwise become liable for the obligations of any Person, except in respect of any undertakings as to the fees and expenses of the Indenture Trustee, except endorsement for deposit of checks and other negotiable instruments acquired in the ordinary course of business and except as otherwise permitted in Section 8(b); (6) Directly or indirectly embark on any new enterprise or business activity not directly connected with the business of shipping or other activity in which the Company is actively engaged; (7) Enter into any merger or consolidation or convey, sell, demise charter, or otherwise transfer, or dispose of any portion of its properties or assets (any and all of which acts are encompassed within the words "sale" or "sold" as used herein), PROVIDED THAT, the Company shall not be deemed to have sold such properties or assets if (A) the Net Book Value (defined as the original book value of an asset less depreciation calculated on a straight line basis over its useful life) of the aggregate of all the assets sold by the Company during any period of 12 consecutive calendar months does not exceed 10% of the total Net Book Value of all of the Company's assets (the assets which are the basis for the calculation of the 10% of the Net Book Value are those indicated on the most recent audited annual financial statement required to be submitted pursuant to Section 9 hereof prior to the date of the sale); (B) the Company retains the proceeds of the sale of assets for use in accordance with the Company's regular business activities; and (C) the sale is not otherwise prohibited by subsection 8(a)(3). Notwithstanding any other provision of this subsection, the Company may not consummate such sale without the Secretary's prior written consent if the Company has not, prior to the time of such sale, submitted to the Secretary the financial statement in clause A of this subsection, and any attempt to consummate a sale absent such approval shall be null and void AB INITIO. (b) SUPPLEMENTAL COVENANTS. Unless, after giving effect to such transaction or transactions, during any fiscal year of the Company, (1) the Company's Working Capital is equal to at least one dollar, (2) the Company's Long-Term Debt does not exceed two times the Company's Net Worth and (3) the Company's Net Worth is at least the amount specified in Attachment A hereto, the Company shall 9 not, without the Secretary's prior written consent: (A) Withdraw any capital; (B) Redeem any share capital or convert any of the same into debt; (C) Pay any dividend (except dividends payable in capital stock of the Company); (D) Make any loan or advance (except advances to cover current expenses of the Company), either directly or indirectly, to any stockholder, director, officer, or employee of the Company, or to any Related Party; (E) Make any investments in the securities of any Related Party; (F) Prepay in whole or in part any indebtedness to any stockholder, director, officer or employee of the Company, or to any Related Party; (G) Increase any direct employee compensation (as hereinafter defined) paid to any employee in excess of $150,000 per annum; nor increase any direct employee compensation which is already in excess of $150,000 per annum; nor initially employ or re-employ any person at a direct employee compensation rate in excess of $150,000 per annum; provided, however, that beginning with January 1, 2000, the $150,000 limit may be increased annually based on the previous year's closing CPI-U (Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics). For the purpose of this section the term "direct employee compensation" is the total amount of any wage, salary, bonus, commission, or other form of direct payment to any employee from all companies with guarantees under Title XI of the Act as reported to the Internal Revenue Service for any fiscal year; (H) Acquire any fixed assets other than those required for the maintenance and operations of the Company's existing assets, including the normal maintenance and operation of any vessel or vessels owned or chartered by the Company; (I) Either enter into or become liable (directly or indirectly) under charters and leases (having a term of twelve months or more) for the payment of charter hire and rent on all such charters and leases which have annual 10 payments aggregating in excess of $1,000,000 (which amount shall be increased at the end of each of the Company's fiscal years by a percentage equal to the CPI-U); (J) Pay any indebtedness subordinated to the Obligations or to any other Title XI obligations; (K) Create, assume, incur, or in any manner become liable for any indebtedness, except current liabilities, or short term loans, incurred or assumed in the ordinary course of business as such business presently exists; (L) Make any investment, whether by acquisition of stock or indebtedness, or by loan, advance, transfer of property, capital contribution, guarantee of indebtedness or otherwise, in any Person, other than obligations of the United States, bank deposits or investments in securities of the character permitted for moneys in the Title XI Reserve Fund; (M) Create, assume, permit or suffer to exist or continue any mortgage, lien, charge or encumbrance upon, or pledge of, or subject to the prior payment of any indebtedness, any of its property or assets, real or personal, tangible or intangible, whether now owned or hereafter acquired, or own or acquire, or agree to acquire, title to any property of any kind subject to or upon a chattel mortgage or conditional sales agreement or other title retention agreement, except (i) loans, mortgages and indebtedness guaranteed by the Secretary under Title XI of the Act or related to the construction of a vessel approved for Title XI by the Secretary and (ii) liens incurred in the ordinary course of business as such business presently exists; (N) Pay any penalties if the Vessel is not timely delivered to Petroleo Brasileiro S.A. ("Petrobras") under the chartering contract dated as of December 5, 1997, between Petrobras and Maritima Petroleo e Engenharia Ltda which has been assigned to the Shipowner (the "Chartering Contract"), in so far as it relates to the chartering of the Vessel (the "Late Arrival Penalties"); (O) Pay any ad valorem taxes on the Vessel imposed by the Federative Republic of Brazil, or any agency, instrumentality or other entity thereof, or any other state, local, municipal or other governmental entity located in Brazil ("Ad Valorem Taxes"); (P) Reimburse or repay any amount paid by Maritima Petroleo e 11 Engenharia Ltda or Pride International Inc. pursuant to their respective guaranties to the Secretary issued on the Closing Date in connection with Late Arrival Penalties and Ad Valorem Taxes. SECTION 9. (a) ANNUAL FINANCIAL STATEMENTS. The Company shall furnish to the Secretary, in duplicate, (1) within 120 days after the end of the Shipowner's fiscal year commencing with the first fiscal year ending after the date of the Security Agreement, the Company's Audited Financial Statements including balance sheet and income statement for such fiscal year along with a completed M.A. Form 172 or such other form approved by the Secretary, and (2) within 90 days after the expiration of each semi-annual period of each fiscal year commencing with the first such semi-annual period ending after the date of the Security Agreement, a completed M.A. Form 172 or such other form approved by the Secretary for such semi-annual period along with an Officer's Certificate certifying its accuracy. (b) ANNUAL NO DEFAULT CERTIFICATES. Within 120 days after the end of the Company's fiscal year, the Company shall furnish to the Secretary, an Officer's Certificate dated as of the close of such fiscal year stating whether or not, the Company is in default in the performance of or in default in the compliance with any covenant, agreement or condition contained herein or in the Mortgage, Security Agreement or charter relating to any Vessel listed in Attachment A hereto, and if so, specifying each such default and stating the nature thereof. SECTION 10. QUALIFYING FINANCIAL REQUIREMENTS OF THE COMPANY. Immediately upon the execution and delivery of this Agreement, the Company shall meet the requirements with respect to Working Capital, Net Worth and Long Term Debt specified in Section 8(b). SECTION 11. NOTICES. Except as otherwise provided in this Agreement, notices, requests, directions, instructions, waivers, approvals or other communication may be made or delivered in person or by registered or certified mail, postage prepaid, addressed to the party as provided below, or to such other address as such party may hereafter specify in a written notice to the other parties named herein, and all notices or other communications shall be in writing so addressed and shall be effective upon receipt by the addressee thereof: The Secretary as: SECRETARY OF TRANSPORTATION 12 c/o Maritime Administrator Maritime Administration 400 Seventh Street, S.W. Washington, D.C. 20590 The Title XI Reserve Fund Depository as: CITIBANK, N.A. 111 Wall Street, 5th Floor New York, New York 10005 13 The Company as: Petrodrill Four Limited c/o Arias, Fabrega & Fabrega P.O. Box 985 Omar Hodge Building Wickham's Cay Road Town, Tortola British Virgin Islands With a copy to: PETRODRILL ENGINEERING NV K.P. van der Mandelelaan 38 3062 MB Rotterdam (Brainpark) The Netherlands SECTION 12. AMENDMENTS AND SUPPLEMENTS. No agreement shall be effective to amend, supplement, or discharge in whole or in part this Financial Agreement unless such agreement is in writing signed by the parties hereto. Any amendments, additions, deletions, substitutions or other changes not made in accordance with this provision shall be invalid and of no effect. SECTION 13. COUNTERPARTS. This Financial Agreement may be executed in any number of counterparts. All such counterparts shall be deemed to be originals, and shall together constitute but one and the same instrument. SECTION 14. JURISDICTION AND CONSENT TO SUIT. This Title XI Reserve Fund and Financial Agreement hereby adopts and incorporates by reference as if fully set forth herein the provisions relating to Jurisdiction and Consent to Suit of the Special Provisions of the Security Agreement. SECTION 15. PAYMENTS IN U.S. CURRENCY. This Title XI Reserve Fund and Financial Agreement hereby adopts and incorporates by reference as if fully set forth herein Section 11.06 of the Security Agreement. SECTION 16. IMMUNITY. This Title XI Reserve Fund and Financial Agreement hereby adopts and incorporates by reference as fully set forth herein Section 11.07 of the Security Agreement. 14 IN WITNESS WHEREOF, this Title XI Reserve Fund and Financial Agreement has been executed by the parties hereto as of the day and year first above written. Attest: PETRODRILL FOUR LIMITED /s/ ROBERT W. RANDALL BY: /s/ EARL W. MCNIEL - - --------------------- ------------------ Secretary Treasurer UNITED STATES OF AMERICA Attest: SECRETARY OF TRANSPORTATION (SEAL) MARITIME ADMINISTRATOR /s/ LARRY MAIN - - -------------- BY: /s/ JOEL C. RICHARD ------------------- ATTACHMENT A TITLE XI RESERVE FUND AND FINANCIAL AGREEMENT (Contract No. MA - 13507) 1. This Financial Agreement shall apply to the following Vessel: AMETHYST 4 2. The Company's aggregate original equity investment for use in Section 2 for the Vessel AMETHYST 4 is $26,455,175. 3. The Company's Net Worth for use in Section 8(b) is $26,455,175. EX-8.1 33 EXHIBIT 8.1 [BAKER & BOTTS LETTERHEAD] 066597.0102 December 8, 1999 Amethyst Financial Company Ltd. c/o Arias Fabrega & Fabrega Trust Co. BVI Limited 325 Waterfront Drive Omar Hodge Bldg., Second Floor Wickham's Cay, Road Town Tortola, British Virgin Islands Pride International, Inc. 5847 San Felipe, Suite 3300 Houston, Texas 77057 Gentlemen: We have acted as special United States counsel to Amethyst Financial Company Ltd., a British Virgin Islands international business company with limited liability (the "Company"), and Pride International, Inc., a Louisiana corporation ("Pride"), in connection with the registration of $53 million aggregate principal amount of the Company's 11 3/4% Senior Secured Notes due 2001 (the "new notes") pursuant to a registration statement on Forms F-4 and S-4 (the "Registration Statement") filed by the Company with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Act"). The defined terms "old notes," "new notes" and "exchange offer" used in this opinion have the meanings assigned to such terms in the Registration Statement. The following opinion is based on our review of the Registration Statement and such other materials and documents as we have deemed appropriate. In rendering our opinion, we have assumed the accuracy of the matters described in the Registration Statement and that the transactions described in the Registration Statement will take place as stated therein. On the basis of the foregoing, we hereby confirm, based on existing law and regulations, that the discussion set forth in the Prospectus included in the Registration Statement under the caption "Tax Considerations -- Material United States Federal Income Tax Considerations" is our opinion as to all material United States federal income tax consequences of Amethyst Financial Company, Ltd. - 2 - December 8, 1999 the exchange of old notes for new notes pursuant to the exchange offer. Our opinion is subject to the qualifications and limitations set forth in that discussion. We hereby consent to the reference to our Firm under the captions "Tax Considerations -- Material United States Federal Income Tax Considerations" and "Legal Matters" in the Prospectus included in the Registration Statement and to the filing of this opinion with the Commission as an exhibit to the Registration Statement. In giving such consent, we do not admit that we are within the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission thereunder. Very truly yours, BAKER & BOTTS, L.L.P. By: /s/ BENJAMIN G. WELLS LPT/BGW/ED EX-8.2 34 EXHIBIT 8.2 [DANCIA PENN & CO LETTERHEAD] Your ref: Our ref: 1168-66-003 8 December, 1999 Amethyst Financial Company Ltd. c/o Arias Fabrega & Fabrega Trust Co. BVI Limited 325 Waterfront Drive Omar Hodge Bldg. Second Floor Wickham's Cay, Road Town Tortola, British Virgin Islands Pride International, Inc. 5847 San Felipe, Suite 3300 Houston, TX 77057 Dear Gentlemen: 1. We are lawyers qualified to practice and practising in the British Virgin Islands and have acted as counsel to Amethyst Financial Company Ltd. a company with limited liability incorporated in the British Virgin Islands under the provisions of the International Business Companies Act, 1984 (as amended) (the "Company"), and Pride International Inc., a Louisiana corporation ("Pride"), in connection with the registration of $53 million aggregate principal amount of the Company's 11 3/4% Senior Secured Notes due 2001 pursuant to a Registration Statement on Forms F-4 and S-4 (the "Registration Statement") to be filed by the Company and Pride with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Act"). The terms "old notes", "new notes" and "exchange offer" in this opinion have the same meanings as defined in the Registration Statement. 2. In rendering this opinion, we have examined the Company's constitutional documents and such corporate resolutions as we have considered necessary, the Registration Rights Agreement dated 28th October, 1999 among Amethyst Financial Company Limited, Pride International, Inc., Maritima Petroleo e Engenharia Ltda., and Donaldson, Lufkin & Jenrette Securities Corporation and the Registration Statement relating to the Exchange Offer referred to in the said Registration Rights Agreement. 3. For the purpose of this opinion we have assumed: (i) that all documents submitted to us as facsimile, copy or specimen documents conform with their originals; 2 Amethyst Financial Company Ltd. Pride International, Inc. December 6, 1999 (ii) that the signatures on the originals, certified or other copies of all documents submitted to us are genuine; (iii) that all documents submitted to us as originals are authentic; and (iv) the accuracy of the matters described in the Registration Statement and that the transactions described in the Registration Statement will take place as stated therein. 4. On the basis of the foregoing, we hereby confirm based on existing law and regulations, that the discussion set forth in the prospectus included in the Registration Statement under the caption "Tax Considerations -- Material British Virgin Islands Tax Considerations" is our opinion as to all material British Virgin Islands tax consequences of the exchange of old notes for new notes pursuant to the Exchange Offer. 5. We have updated our search of the company's records maintained at the Companies Registry of the British Virgin Islands as of today's date and have found no evidence of any steps having been taken or being taken to appoint a receiver, manager or a liquidator for or to wind up the Company, or any claims, litigation or arbitration proceedings being instituted against it and certify that the Company, may, as of the date hereof enter into the said Registration Statement relating to the Exchange Offer. Our opinion is subject to the qualifications and limitations set forth in that discussion. 6. We hereby consent to the references to our firm under the captions "Risk Factors -- Risk Factors Relating to Our Business", "Description of New Notes -- Enforceability of Judgments", and "Tax Considerations -- Material British Virgin Islands Considerations" in the prospectus included in the Registration Statement and to the filing of this opinion with the Commission as an exhibit to the Registration Statement. In giving such consent, we do not admit that we are within the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission thereunder. Our opinion is given for the sole benefit of the addressees hereof and are not to be relied upon by any other person, nor are they to be quoted or made public in any way without our prior written consent. Yours sincerely, /s/ ASTRA D. PENN Astra D. Penn EX-10.1 35 EXHIBIT 10.1 MARCIA BARBOSA SERRA Tradutora Publica Juramentada e Interprete Comercial Sworn Public Translator and Commercial Interpreter Rua Aperana, 38 apt 301-Leblon-22450 ISS: 1261003-00-CIC: 606442227-00 Tel.: 274-3844 I, THE UNDERSIGNED, SWORN PUBLIC TRANSLATOR AND COMMERCIAL INTERPRETER IN AND FOR THIS CITY AND STATE OF RIO DE JANEIRO, FEDERATIVE REPUBLIC OF BRAZIL, REGISTERED AT THE COMMERCIAL BOARD OF RIO DE JANEIRO UNDER NUMBER 97, DO HEREBY CERTIFY AND ATTEST THAT A DOCUMENT IN THE PORTUGUESE LANGUAGE WAS SUBMITTED TO ME FOR TRANSLATION INTO ENGLISH, WHICH I PERFORMED ACCORDING TO MY OFFICE, AS FOLLOWS: TRANSLATION NO. 4016/98 (Xerox copy submitted for translation.)....................................... (On paper with letterhead of Petroleo Brasileiro S.A. - PETROBRAS.)........... CONTRACT No. 101.2.155.97-9................................................... CHARTERING CONTRACT CHARTERING CONTRACT OF THE DYNAMIC POSITIONING FLOATING UNIT AMETHYST 7, ENTERED INTO BETWEEN PETROLEO BRASILEIRO S.A. - PETROBRAS AND THE COMPANY MARITIMA NAVEGACAO E ENGENHARIA LTDA.-- PETROLEO BRASILEIRO S.A. - PETROBRAS, a mixed economy company, organized and existing under Law No. 2.004, dated 10/03/53, with head office at Av. Republica do Chile, 65, City of Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil enrolled in the General Taxpayers' Registry of the Ministry of Finance under No. 33.000.167/0001-01, represented herein by the Executive Superintendent of Exploration and Production South-Southeast LUIZ EDUARDO G. CARNEIRO, hereforth called PETROBRAS, and the Company MARITIMA NAVEGACAO E 1 ENGENHARIA LTDA., with head office at Avenida Almirante Barroso, No. 42, 34th floor, City of Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil, enrolled in the General Taxpayers' Registry of the Ministry of Finance under No. 46.828.596/0001-13, represented herein by its President, Mr. GERMAN EFROMOVICH, have agreed upon the present CONTRACT for the chartering of the Dynamic Positioning Floating Unit AMETHYST 7 and its accessories, described in Attachment I, henceforth called the UNIT, according to the authorization of PETROBRAS' Executive Board (MINUTES No. 4.129, Item No. 47, dated 12/19/97) the parties being bound to the terms of the Invitation to Bid No. 101.0.016.97-5, and subjected to the following Clauses and Conditions:.......................... (End of the Qualification)..................................................... 2 FIRST CLAUSE - OBJECT......................................................... 1.1. The object of the present CONTRACT is the chartering to PETROBRAS, of the UNIT, in order to be used in the drilling and/or evaluation and/or completion and/or workover of oil and/or gas (vertical, directional and horizontal) wells, in the Brazilian continental shelf, down to a maximum depth of 5,000 (five thousand) meters, in a water depth down to 1,200 (twelve hundred) meters............................................... 1.1.1. It is included, as an object of the CONTRACT, the performance, by the CONTRACTOR, of any and all operations needed for the perfect fulfillment of the chartering object of the CONTRACT, such as, but not limited to, the performance and supervision of the positioning, ballasting and movement of the UNIT................................... 1.2. PETROBRAS may determine that the CONTRACTOR makes the reentry in wells already drilled, and it can install in the UNIT equipment and production facilities, the provisions of item 14.1 of this CONTRACT being complied with................................................... 1.3. The chartering object of the present CONTRACT is included in the Annual Activities Plans, under the following codes:................... B 12000 - Boring - Production Development............................ A 22000 - Boring - Exploratory Drilling.............................. B 13000 - Completion and Intervention for Evaluation - Production Development.......................................................... A 24000 - Intervention for Evaluation - Exploratory Drilling......... (End of Clause)............................................................... 3 SECOND CLAUSE - PERIOD OF VALIDITY AND DURATION............................... 2.1. Period of Validity - The present CONTRACT binds the parties as of its signature, but the payments in foreign currency can only be made after the date of its registry in the Central Bank of Brazil.......... 2.2 Duration - The present CONTRACT will have a duration of 2,190 (twenty-one hundred and ninety) days, and it can be ended after 1,825 (eighteen hundred and twenty-five) days have elapsed, by means of a notice from PETROBRAS, with at least 45 (forty-five) days in advance.. 2.2.1. Beginning of the CONTRACT - The beginning of the CONTRACT will occur when the UNIT is released by PETROBRAS, through a written notice, to begin the operations, after the general equipment testing foreseen in item 3.1 of this CONTRACT is carried out.............................. 2.2.2 Automatic Extension - If at the end of the duration mentioned in 2.2, some operation is still being performed in a well, the duration of the present CONTRACT will be automatically extended, until the completion of the works in said well, considering as the final limit the UNIT's arrival in the port or sheltered waters chosen by common agreement between the parties and, also, in case there are still PETROBRAS' equipment aboard the UNIT, the completion of the withdrawal of such equipment will be considered as the final limit.... 2.2.3 This CONTRACT may be extended for successive periods through a prior agreement between the parties, by means of an Addendum, the other contract conditions being complied with, and limited to a maximum contract period of 2,190 (twenty-one hundred and ninety) days......... 4 2.3. Arrival in Brazil - The Unit should arrive at the port or in sheltered waters, in Macae-RJ. The beginning of operations should occur up to the date of 12.29.99, the provision set forth in item 8.1 of this CONTRACT being complied with................................................... 2.3.1. At the port or in sheltered waters mentioned in 2.3, the customs and helideck inspections in the UNIT will be carried out, as well as the loading/unloading of the CONTRACTOR's and PETROBRAS' materials, and also the general equipment testing will begin as foreseen in item 3.1 of this CONTRACT...................................................... (End of Clause)............................................................... 5 THIRD CLAUSE - CONTRACTOR's OBLIGATIONS....................................... 3.1. Before the beginning of the CONTRACT, the CONTRACTOR will arrange for a general test of the operating conditions of all of the UNIT's equipment, as provided for in ATTACHMENT VIII, in the presence of PETROBRAS' Inspection. The occurrences found during the performance of the tests will be duly recorded in the Daily Drilling Certificate (ADP) signed by PETROBRAS' Inspection and by the CONTRACTOR's representative. The UNIT will be released to sail to the first location after proving the good operating conditions of the equipment which comprise the rig's main systems, that is, energy generation and distribution system, dynamic positioning system, industrial safety, liquid and bulk storage, fluid circulation and processing, safety and wellhead, column elevation, rotation and handling, columns, columns, instrumentation, formation test equipment and communications system... 3.1.1. The tests referred to in 3.1 will be made in a period estimated in 3 (three) days, after which the UNIT will be released to sail to begin the operations, provided there is nothing pending in the rig's main systems, as set forth in item 3.1..................................... 3.1.1.1.In the event the tests last for a period exceeding 3 (three) days, for reasons ascribed to PETROBRAS, the rate foreseen in REF 104 (WAITING RATE) of ATTACHMENT II, will be due, applied as of the fourth day of tests, until the UNIT is released. The periods spent with equipment repair will not be calculated for the purposes of counting such duration, and also no fees will be due during such periods. 3.1.2. PETROBRAS may opt for the partial or total performance of the receipt tests, in sheltered waters, in the deepest water depth set forth in the contract, or still in the first location.......................... 6 3.2. To maintain, during the contract period, the UNIT, its fittings, as well as accessories and replacement elements and personnel in perfect working conditions in a working regime of 24 (twenty-four) hours a day, 7 (seven) days a week, and to guarantee that the UNIT is calculated to carry out the activities object of this contract........ 3.2.1. To strictly comply with the recommendations of the equipment manufacturers. carrying out the maintenance foreseen in their operation manuals, which will be provided for in the Unit's preventive maintenance plan. 3.3. Technical Evaluation Award and Certificates - To submit copies of the Registry, Survey, Classification and Technical Survey and Evaluation Award Certificates of the UNIT and its fittings, signed by a qualified and well-known organization, not related with the CONTRACTOR, notarized in the Brazilian Consulate and translated by a Sworn Public Translator, if issued abroad, and which should contain:.. 3.3.1. Description of the UNIT and accessories;.............................. 3.3.2. Operating conditions and physical conditions of the UNIT;............. 3.3.3. Light displacement of the UNIT (Light weight);........................ 3.3.4. Year of construction;................................................. 3.3.5. Year of reconditioning, listing spare parts and parts replaced;....... 3.3.6. Technological differences between the UNIT surveyed and a more modern UNIT of the same kind;................................................ 3.3.7. Forecast of the average useful life of the good used and its new analog;............................................................... 3.3.8. Market value; of reproduction and replacement;........................ 3.3.9. Net weight of the equipment installed in the UNIT;.................... 7 3.3.10. Technical catalogues of the equipment installed in the UNIT........... 3.4. To regularize, before the proper authorities, the entry and stay of the UNIT in Brazil, arranging, at its expense, for the Release, Surveys, Registries and Temporary Admission........................... 3.4.1. Regarding new equipment and equipment without use, the "Technical Survey and Evaluation Award" referred to in item 3.3 may be replaced by factory catalogues or purchase invoices, with description, year of manufacture, useful life forecast and value of each equipment......... 3.5. Safety, Sanitation and Labor Medicine - To carry out its operations in strict compliance with the international safety, sanitation and labor medicine standards, being liable for the violations committed. To supply, for its account, and maintain in perfect operating conditions, the safety equipment in accordance with the safety plan ("SAFETY PLAN") approved by the Administration of the vessel=s Country of Registry, and with the good practice in the services of completion/evaluation/workover........................................ 3.5.1. The UNIT will comply with the IMO - MODU - CODE (Mobile Offshore Drilling Unit) standard............................................... 3.6. Sea Operations - To manage the UNIT in strict compliance with the laws, standards, regulations and administrative rules, as well as with the instructions issued by the Shipping Office or by other proper authorities, specially those regarding the spillage of oil and other residues from the UNIT into the sea, being liable, as a result, for any charges arising from the violation of such laws, standards, regulations, administrative rules and instructions, the 8 limit established in subitem 3.6.2. being complied with, and with the exception of the cases provided for in item 3.20 of this CONTRACT..... 3.6.1. To plan and carry out operations aiming at preventing and fighting oil and gas blow outs, fires, or other incidents, complying with the provision of item 2.4 of ATTACHMENT II to this CONTRACT. Although the CONTRACTOR is considered fully responsible for such operations, it is obliged to discuss the methods to be adopted with PETROBRAS, in order to find the best operating solution............... 3.6.2. Exception is made of the events arising from kick, blow out, surging, or formation testing, which the CONTRACTOR will be kept free and safe from. In the other cases of spillage of petroleum, oils and other residues into the sea, the CONTRACTOR will be liable up to the limit of US$500,000.00 (five hundred thousand dollars) per event and its deployments....................................................... 3.7. To comply with all laws, standards, decrees, regulations, administrative rules and instructions in force in Brazil, that govern the exploration and research in the Brazilian submarine shelf, including those regarding environmental protection.................... 3.8. Replacement and Repairs - The replacement cost for equipment, materials and accessories needed for the UNIT's perfect operation, as well as the expenses with repairs of any kind, will run for the CONTRACTOR's account.................................................. 3.8.1. The above mentioned repair cost covers any and all expenses, including taxes and duties due from the moment of the purchase of the equipment, spare parts and materials, to their installation and placement in the UNIT, with exception of expenses with transportation between the support vessels port of operation and the UNIT........... 9 3.8.2. Regarding the Temporary Admission of the UNIT, as well as the import of the equipment, materials and accessories mentioned in item 3.8, the CONTRACTOR will comply with the provisions of the Internal Revenue's Rulling Instruction No. 136/87........................................ 3.9. At the end of this CONTRACT or of its extension, to bear the charges arising from the return of the UNIT, its fittings, accessories, equipment, spare parts, and materials for replacement or repair, such charges including, but not limited to, the preparation, packing, shipping, transportation, unloading, stay, freight, clearance, storage, wharfage, stowage, insurance and other similar expenses............... 3.10. To maintain, at its expenses, besides the UNIT, the crew adequate and sufficient for its operation, being also obliged to comply with the pertinent legal provisions, issued by Brazilian authorities and by those of the CONTRACTOR's country of origin................................. 3.11. To bear all expenses with displacement of the crew mentioned in item 3.10, including transportation from abroad to the Port or Airport of Macae-RJ, as indicated by PETROBRAS, and the return to the place of origin, and any and all expenses with the crew's stay in Brazil, medical and hospital expenses, meals, passports, and similar expenses......... 3.11.1. To maintain PETROBRAS safe from any complaints, claims from its employees, representatives, as a result of the present contract....... 3.12. To promote, without charges to PETROBRAS, the replacement and immediate withdrawal of any crew member that may be requested in writing by PETROBRAS at any time, due to bad behavior, technical deficiency, or health conditions..................................................... 10 3.13. To maintain a special identification for the crew, so as to distinguish it from PETROBRAS' and other companies' personnel who may eventually work in other services related to the object of the present CONTRACT.. 3.14. Radio-Communications - To supply, operate and maintain VRH, SSB and Radio-Beacon and portable Transceptor equipment, adequate for PETROBRAS' land communications system, for the guidance of helicopters, so as to comply with the Radio Communications Plan supplied by PETROBRAS, appearing in Attachment I............................................. 3.14.1. Other Radio Communications systems deemed necessary to support the CONTRACTOR's operations, both in the UNIT and on land, will be supplied, installed and operated by it. The CONTRACTOR will be responsible for the obtainment of the licenses and frequencies to operate such equipment.. 3.14.2. The CONTRACTOR will maintain, at its expenses, radio operators, fluent in spoken Portuguese, who will remain 24 (twenty-four) hours a day operating the equipment installed in the UNIT, whether they belong to PETROBRAS or to the CONTRACTOR........................................ 3.14.3. Immediately after the UNIT's arrival, the CONTRACTOR will arrange with the proper authorities the issuing of the "Terms of Survey" regarding the radio station existing on broad................................... 3.14.4. The CONTRACTOR will bear any expenses related to the telecommunications equipment and services, with exception of those provided for in item 4.7 of this CONTRACT...................................................... 3.15. Insurances - To provide for the contracting, at its expenses, of the insurances necessary to fulfill this CONTRACT and the Brazilian Laws, intended for the coverage of 11 the Unit and all of its accessories, even when they are being transported under PETROBRAS' responsibility, as well as the Civil Liability insurance for damages and losses caused to third parties.................................... 3.15.1. MARITIMA NAVEGACAO E ENGENHARIA LTDA. will appear as co-insured in the Civil Liability insurance policy which it makes, by force of item 3.12 of the SERVICE RENDERING CONTRACT entered into between it and PETROBRAS............................................................ 3.15.2. During the period of validity of this CONTRACT, the CONTRACTOR should maintain insurance coverage for the UNIT and all of its accessories, according to the conditions of the LONDON STANDARD DRILLING BARGE FORM - ALL RISK, or similar................................................. 3.15.3. The redress due to the CONTRACTOR's Civil Liability arising from damages provided for in this Clause, is not limited to the amount set forth in subitem 3.12.1 of the SERVICES RENDERING CONTRACT entered into between the parties, for the Civil Liability Insurance against Third Parties, and will be ruled by the pertinent Brazilian laws..................... 3.16. Franchises that may be established for the insurances mentioned in item 3.15 and in its subitems, as well as the onus arising from the Insurers' requirements and/or recommendations will fully run for the CONTRACTOR's account............................................................... 3.17. To keep PETROBRAS free and safe from any and all indemnity claim for damages and/or losses of any kind which the CONTRACTOR may have sustained as a result of this CONTRACT, whether or not it has made adequate and sufficient insurance for such circumstances.............. 12 3.17.1. PETROBRAS will be equally kept free and safe from any and all indemnity claim for damages and/or losses of any kind which the CONTRACTOR may have caused to third parties by its duly proven action or omission, arising from this CONTRACT, whether or not it has made adequate and sufficient insurance for such circumstances........................... 3.17.2. In return, the CONTRACTOR will be kept free and safe from any and all indemnity claim for damages and/or losses of any kind, which PETROBRAS may have sustained from third parties, or has caused to third parties by its duly proven action or omission, as a result of this CONTRACT, whether or not it has made adequate and sufficient insurance for such circumstances......................................................... 3.18. The CONTRACTOR waives for itself and will require from its Insurers and/or Subcontractors, in any and all insurance made as a result of this CONTRACT, the inclusion, in each policy contracted, the provision assuring the waiver of any right to subrogation against PETROBRAS..... 3.19. To submit to E&P/GETRAT, up to 30 (thirty) days after the beginning of the performance, as provided for in item 2.2.1, the originals of the certificates of the insurances made as a result of this CONTRACT, containing all essential data, such as insurers, time limits, periods of validity, amounts insured, and coverage conditions, and with PETROBRAS appearing as co-insured, except in the civil liability insurance, of which it will participate as a third party........................... 3.19.1. The certificates mentioned in item 3.19 will contain a provision that the insurances mentioned cannot be amended and/or canceled without PETROBRAS' prior authorization....................................... 13 3.20. Losses and Damages - The CONTRACTOR will be liable for losses of and damages to its own equipment and material, and to those which it and its agents may cause to PETROBRAS or to third parties, as a result of its duly proven action or omission, in the following cases:.............. 3.20.1 In the event of losses of or damages to equipment and/or materials belonging to PETROBRAS and/or to third parties, which are aboard the UNIT, or during their movement between the UNIT, and the support vessels, the CONTRACTOR's liability will be limited to the replacement or repair of the equipment so lost or damaged due to the CONTRACTOR's or its employees' duly proven fault. However, the CONTRACTOR will not be liable and will be kept free and safe from in the event of damages to reservoirs, indirect damages or loss of profit of PETROBRAS, losses and damages arising from pollution coming from the well, resulting from kick and/or blow-out;..................................................... 3.20.2. In case of losses and damages caused to the well, arising from the events mentioned in subitem 2.1.5 of ATTACHMENT II, the CONTRACTOR will reimburse PETROBRAS the payments it comes to make to third parties referring to cementing, logging, or other services related to the object of the present CONTRACT, as well as to materials (cement, casing, bits, completion fluid materials). In the event PETROBRAS opts for the definitive abandonment of the damaged well, the CONTRACTOR will reimburse the expenses made by PETROBRAS to drill that well.......... 3.20.3. In the cases mentioned in subitems 3.20.1 and 3.20.2 the limit for the CONTRACTOR's liability is of US$500,000.00 per event and its deployments.......................................................... 14 3.21. Secrecy - To maintain complete secrecy on the data and information supplied by PETROBRAS, as well as on all of the results and analyses arising from the operations carried out according to the present CONTRACT............................................................. 3.21.1. All data, information and other documents, of any kind, related to the fulfillment of the present CONTRACT, will be the exclusive property of PETROBRAS............................................................ 3.21.2. The CONTRACTOR and its crew cannot disclose nor supply to third parties any materials or information obtained or developed as a result of this CONTRACT, unless expressly authorized by PETROBRAS................... 3.21.3. The provision of this item 3.21 is a standing obligation, valid even after the termination, in any fashion, of the present CONTRACT....... 3.22. UNIT's HELIDECK...................................................... 3.22.1. To arrange for the release of the UNIT's helideck by the proper Brazilian authorities (Ports and Coast Authority, Civil Aviation Department of the Ministry of Aeronautics, Internal Revenue, Maritime Police and Customs), bearing all expenses arising therefrom........... 3.22.2. The Unit's helideck shall be approved for operations with S-61 type helicopters according to chapter 24 of the Administrative Directive # 005 from DPC - Standards and Procedures for Sea Navigation, dated 01.15.97, which deals with the Construction, Installation, Approval and Changes of Helideck and Operations of Helicopters in Offshore Platforms and Merchant Ships.- To submit to PETROBRAS, at least 30 (thirty) days before the date foreseen for the Unit's arrival in Brazil, the following documents referring to the helideck:................................. 15 3.23. The CONTRACTOR should adopt procedures that minimize the consumption of fuel and industrial water without prejudice for the operations....... 3.24. The CONTRACTOR should provide installations in the UNIT for the training and leisure of all personnel abroad, and which should contain at least the following:....................................................... a) Parlor games room;................................................ b) TV room capable of tuning 5 (five) main channels available in Brazil, in any location;.......................................... c) Movie theater with VCR;........................................... d) Two other TV sets to be installed in cabins indicated by PETROBRAS' Inspection;............................................ 3.25. Besides sea water, the CONTRACTOR will judiciously use industrial water to clean the UNIT, in order to avoid high consumption and always giving priority to its use in the completion fluid.......................... 3.26. All documents between the CONTRACTOR and PETROBRAS, when requested by PETROBRAS, will be written and submitted in Portuguese............... 3.27. The CONTRACTOR undertakes to maintain throughout the fulfillment of the contract, all conditions required in the bid stage................... 3.28. The redo any and all operation refused by the INSPECTION, without any charge to PETROBRAS, as a result of irregular performance, bearing all costs involved....................................................... 3.29. To maintain a representative accredited and accepted by PETROBRAS in the UNIT or in a place previously designated by PETROBRAS, to represent the CONTRACTOR in the fulfillment of the CONTRACT........................ 16 3.31. (sic) To comply with the requests contained in the Operation(s) Authorization(s) issued by PETROBRAS.................................. 3.32. To allow, after negotiations between the contracting parties, the provisional installation in the chartered vessel, of complementary euqipment such as, but not limited to: pipes or rises in catenary by the J-lay method, or similar, submarine manifolds, provided they do not jeopardize the Vessel's safety and are in accordance with the rules of the Classification Society................................... (End of Clause)............................................................... 17 FOURTH CLAUSE - PETROBRAS' OBLIGATIONS........................................ 4.1. To adopt the measures necessary for the request to register this CONTRACT in the Central Bank of Brazil, soon after the proper documents are received, and the submittal of which is the CONTRACTOR's responsibility........................................... 4.2. To make, monthly, the payments due to the CONTRACTOR as a result of the present CONTRACT, based on ATTACHMENT II and ATTACHMENT III and under the conditions set forth in Clauses Sixth: Measurement, and Seventh: Form or Payment, the other ATTACHMENTS, Clauses and Conditions of this CONTRACT being complied with....................... 4.3. At its exclusive judgment, and without any co-responsibility, PETROBRAS may cooperate with the CONTRACTOR, assisting it before the proper authorities, referring to processes that are going through the procedural stages in the respective Agencies, regarding the UNIT, materials and/or equipment pertaining to the object of this CONTRACT. Such cooperation, however, will not lessen the CONTRACTOR's responsibility for the obtainment of the documents and/or benefits that may be the object of the respective proceedings.. 4.4. PETROBRAS will reimburse the CONTRACTOR, by means of submittal, by the latter, of the corroborative documents, in the acquisition currency, the cost of replacement or repair of the commands and other components of the production string and of the fishing string belonging to the CONTRACTOR, which are lost or damaged, by accident not due to the normal wear nor to the CONTRACTOR's duly proven action or omission, with the 18 deduction of a 25% depreciation per contract year, with a 20% residual value, applying, for its calculation, the least indemnity cost (Ci) obtained by means of the following formulae:- Ci = Vr.y (1 - 0.02083n), or Ci = Cr, where:......................... Ci - indemnity cost;................................................. Cr - repair cost;.................................................... Vr - replacement value;.............................................. n - number of months between the date of the beginning of the CONTRACT and the date of the loss (the fraction of a month is counted as a whole month);........................................ y - 1 (for new strings), and 0.9 (for "Premium" strings)............ 4.4.1. In the event there is a renewal of the string or of a part of the elements that comprise the production string (pipes, commands and other components), during the period of validity of the CONTRACT, the depreciation period to be considered - the "n" of the formula, will be the one comprised between the purchase date and the date when the element or the string was lost........................................ 4.4.2. PETROBRAS may, at its discretion and expense, carry out inspections in the drill string, its components and accessories, the CONTRACTOR being obliged to repair or replace, for its account, the equipment rejected.............................................................. 4.5. Transportation:....................................................... 4.5.1. PETROBRAS will provide transportation for all crew members to the UNIT from the port or airport, as indicated by PETROBRAS in the beginning of this CONTRACT, and vice-versa. At its exclusive discretion, the transportation to be provided will be by helicopter or vessel............................................................. 19 4.5.2. PETROBRAS will provide transportation of the material and equipment object of this CONTRACT, from the port or airport designated, to the UNIT and vice-versa................................................... 4.5.3. In any circumstances foreseen in items 4.5.1 and 4.5.2, the granting of insurance coverage will not be PETROBRAS' competence, and the CONTRACTOR waives immediately,, for itself and for its insurers, any return action against PETROBRAS or third parties at its service, as a result of the transportation provided................................. 4.5.4 In the cases when there is need to program exclusive air transportation, for the Unit's inspection by the Navy and/or the Shipping Office, the costs arising therefrom will be charged to the CONTRACTOR............................................................ 4.5.5. PETROBRAS may provide air or sea transportation for the CONTRACTOR's materials, industrial or fresh water and fuel before the beginning of the CONTRACT, as defined in subitem 2.2.1. The costs arising therefrom will be reimbursed by the CONTRACTOR to PETROBRAS at the time the first invoice is issued...................................... 4.5.6. PETROBRAS will provide tugs and support vessels for the UNIT, from the location where the equipment general testing is performed, to the first location, between locations and from the last location to the Brazilian port or sheltered waters closest thereto, which will be chosen in common agreement by the parties.......................... 4.5.6.1.PETROBRAS will supply support vessels for the positioning of the Unit in the locations to be drilled under this contract............... 4.5.7 PETROBRAS may provide tugs and/or support vessels to load and unload materials and to handle anchors, in a location to be defined between the parties, in the cases of inspection and/or dockages, including those arising from act of God or force majeure, as defined in 20 the Twelfth Clause of this CONTRACT. The costs arising therefrom will be reimbursed by the CONTRACTOR to PETROBRAS.............................. 4.6 Fuel and Water - To supply, for its account, all fuel and water necessary for the operations, complying with the provision set forth in subitems 4.6.1 and 4.6.2, from the beginning of the CONTRACT, until its termination, as defined in subitems 2.2.1 and 2.2.2, respectively.......................................................... 4.6.1. The supply of water mentioned in item 4.6 includes also the industrial water intended for the cleaning of the UNIT, the provision set forth in item 3.23 being complied with............................ 4.6.2. PETROBRAS will supply, for its account, the fuel necessary for the UNIT's equipment, up to the limit of 15,695m3/year. Over this limit the onus will run for the CONTRACTOR's account. 4.6.2.1.PETROBRAS will carry out the measurement of the fuel existing aboard the UNIT, at the beginning of the contract, at the end of each contract year, and at the end of the contract, when the average consumption will be calculated. The volume exceeding the established limit will be charged to the CONTRACTOR at the time of the measurement, at the consumer's sales price, on the date PETROBRAS issues the Debt Note, in force in the City of Rio de Janeiro-RJ, duly adjusted in keeping with the different ICMS aliquots in force in the State of Rio de Janeiro and in the State where the UNIT is operating.................. 4.6.3. During the UNIT's dockage periods, all fuel consumed will run for the CONTRACTOR's full responsibility and cost, from the interruption of the operations until the return to the same previous situation. The fuel cost during that period will be charged to the 21 CONTRACTOR, after the consumption calculation, and at a price to be defined according to the criterium mentioned in 4.6.2.1................ 4.7. To maintain, besides the CONTRACTOR's Radio communications equipment, aboard the UNIT, equipment exclusively for PETROBRAS' communications with its land bases................................................... 4.8. To notify the CONTRACTOR, in writing, on the imposition of eventual fines. ............................................................... 4.9. To issue the Measurement Bulletin (MB), as set forth in the Sixth Clause of this Contract............................................... 4.10. To issue the Operation(s) Authorization(s) with all the information necessary for their performance, such as: location, time limit, amount, scope, and beginning and end dates............................ 4.11. PETROBRAS will reimburse the CONTRACTOR, by means of submittal by the latter, of corroborative documents, in the acquisition currency, the cost of replacement of VX rings, VX with Hycar and VX with lead inserts for the BOP and WCT connections with wellheads and filter elements, as provided for in items 24, 25 and 34 of Attachment IV - Mutual Obligations of the Chartering Contract......................... (End of Clause)............................................................... 22 FIFTH CLAUSE - PRICES AND VALUE............................................... 5.1. For the chartering of the UNIT and its accessories, PETROBRAS will pay the rates set forth in ATTACHMENT II and ATTACHMENT III to this CONTRACT, under the conditions set forth in Clauses Sixth Measurement, and Seventh: Form of Payment............................ 5.1.1. The contract prices will include all specified tariffs, supervision, administration, taxes, fiscal emoluments and all expenses that fall directly or indirectly upon the chartering, including profit, needed for its perfect fulfillment, until the end of the contract, no price revision claims being therefore valid................................. 5.2. The total estimated value of this present CONTRACT is of US$317,145,762.45 (three hundred and seventeen million, one hundred and forth-five thousand, seven hundred and sixty-two dollars and firty-five cents), equivalent to R$348,035,759.71 (three hundred and forty-eight million, thirty-five thousand, seven hundred and fifty-nine reais and seventy-one cents), converted at the exchange rate of R$1,0974/US$1,00, referring to the chartering of the Unit..... 5.3. PETROBRAS does not undertake to make the payment of the total estimated in item 5.2, but of the amount corresponding to the chartering effectively occurred and accepted by PETROBRAS;....................... 5.4. In the event the Unit suffers a delay of up to 90 (ninety) days, regarding the time limit granted in item 2.3 of the present contract, the CONTRACTOR will have its total daily rate reduced in 10% (ten percent), as of the beginning of the contract, for a period iqual to the number of days of delay........................................... 23 5.5. In the event the Unit suffers a delay exceeding 90 (ninety) days, counted as of the time limit granted in item 2.3 of the present contract, besides the reduction of the 10% (ten percent) in the total daily rate for a period of 90 days, as defined in item 5.4, the CONTRACTOR will also be subjected to the imposition of a fine according to item 8.1 of this contract................................ 5.6. The financial resources necessary for the payment of the chartering object of the present CONTRACT are duly equated, and specifically assured in the current year's budget and provided for in the following ones, so as to cover the total contract period.............. (End of Clause)............................................................... 24 SIXTH CLAUSE - MEASUREMENT OF THE CHARTERING 6.1. Periodicity of the measurement of the chartering and determination of the reimbursable expenses............................................. 6.1.1. For the chartering, the measurement will be monthly, according to the procedures mentioned below, with the consequent issuing of the respective Measurement Bulletins (MB):................................ a) The initial measurement of the chartering will be made between the date of the beginning of this CONTRACT and the last day of the calendar month;............................................... b) The intermediate measurements of the chartering, corresponding to a given month of the order "m", cover the period between day 01 of the month "m" and the last day of the calendar month of the order "m";........................................................ c) The final measurement of the chartering will be made between day 01 of the month "m" and this CONTRACT's termination date.......... 6.1.2. The reimbursable expenses, if foreseen in the CONTRACT, will be determined on any day of the month, according to the vouchers submitted to and accepted by PETROBRAS, and more than one determination can be made in the same period covered by the measurement........................................................... 6.1.2.1.The results found will be submitted to the CONTRACTOR on the 5th (fifth) working day, as of the submittal of said vouchers, by means of a Reimbursement Document (RD), which will be signed by the Manager of this CONTRACT, for invoicing purposes................................. 6.1.2.2.The reimbursable expenses and the deductions, if foreseen in the CONTRACT, will be severally made evident in the Reimbursement Documents (RD).... 25 6.2. Issuing of the Measurement Bulletins (MB)............................. 6.2.1. PETROBRAS, through the Manager of this CONTRACT, at the end of each period as mentioned in the letters of subitem 6.1.1 of this Clause, will carry out the measurement of the chartering, gathering the results found in the Measurement Bulletin (MB), for the signature of the Manager of this CONTRACT and of the CONTRACTOR, complying with the following:........................................................ a) For the initial, intermediate and final measurements ending on the last day of a given month of the order "m", the CONTRACTOR will receive one of the copies of the MB up to the 5th (fifth) working day of the subsequent month, so that it may submit the respective collection documents, as provided for in subitem 6.3.1 of this Clause;................................................... b) For the final measurement, when the termination of the CONTRACT does not occur in the last day of the month, the CONTRACTOR will receive one of the copies of the MB, up to the 5th (fifth) working day after the termination of the CONTRACT, so that it may submit the respective collection documents, as provided for in subitem 6.3.1 of this Clause;..................................... c) For each measurement period of the chartering, only 1 (one) collection document may be issued, being understood that collection documents with partial values regarding said period will not be taken into account for payment purposes;.............. d) The portions regarding the basic values and the deductions are to be made evident in the Measurement Bulletins (MB), if foreseen in the CONTRACT;..................................................... 6.3. Time for the submittal of collection documents........................ 26 6.3.1. The CONTRACTOR will submit the respective collection documents to PETROBRAS' Financial Department, as mentioned in item 7.1 of this CONTRACT, in the following conditions:................................ 27 - - ------------------------------------------------------------------------------- TYPE OF MEASUREMENT OCCASION FOR THE SUBMITTAL OF MEASUREMENT DOCUMENT COLLECTION DOCUMENTS - - ------------------------------------------------------------------------------- INITIAL MB Up to the 8th working day following the last INTERMEDIATE day of the chartering performance period, and AND FINAL PETROBRAS will make the payment on the 30th consecutive day, as of the final date of the measured period, the provision in subitem 6.3.1.1 being complied with...................... - - ------------------------------------------------------------------------------- MOBILIZATION MB After the receipt of the MB, and PETROBRAS OF THE UNIT will make the payment on the 30th consecutive day, as of the date the collection document is submitted........................................ - - ------------------------------------------------------------------------------- DETERMINATION RD In the first working day after the RD is issued, OF and the payment will be made within 30 (thirty) REIMBURSABLE days, as of the date of its submittal............ EXPENSES - - ------------------------------------------------------------------------------- 28 6.3.1.1.The payments due by virtue of this CONTRACT, referring to the chartering, will always occur on the 30th day as of the end of the measured period, covered by the MB's, or on the 1st (first) working day subsequent thereto, provided the CONTRACTOR complies with the time limits for the submittal of the Collection Documents set forth herein. In the event of non-compliance, by the CONTRACTOR, with said submittal time limits, the payments will be postponed for the number of days equal to the delay in the delivery of such documents........................ 6.4. Measurements follow-up................................................ 6.4.1. The CONTRACTOR undertakes to follow-up the measurements and the determinations carried out by PETROBRAS, offering, at that time, the impugnations or considerations it deems necessary, which will be submitted for PETROBRAS' appraisal and decision....................... 6.4.2. The CONTRACTOR's signature by its representative before PETROBRAS will imply in the acknowledgment of the accuracy of the Measurement Bulletin (MB) for all legal purposes.................................. (End of Clause)............................................................... SEVENTH CLAUSE - FORM OF PAYMENT.............................................. 7.1. The payments due as a result of this contract will be made by PETROBRAS to the CONTRACTOR in Brazilian currency, 30 (thirty) consecutive days as of the last day of the period of execution of the services, provided the CONTRACTOR submits the collection documents up to the 8th (eighth) working day following the last day of the period of execution of the services.......................................... 29 7.1.1. The payments will be made on the basis of the average exchange rate of the American Dollar selling price, in force on the working day immediately before the date of the effective payment.................. 7.1.2. The payment of eventual diffrence in readjustment will be made on the same day when the payment of the respective service occurs, provides the CONTRACTOR submits the corresponding collection document up to the 5th (fifth) working day following that when the indexes that permit the issuing of the Readjustment Bulletin (RB) are known........ 7.1.3. The payment of reimbursable expenses, if any, will be made 30 (thirty) days after the submittal of the collection document.......... 7.1.4. In the event of non-submittal of the collection documents within the time limits set forth above, the payments will be postponed for the number of days corresponding to those of the delay in the submittal of the collection documents........................................... 7.2. The collection documents should be submitted, together with the original of the document giving rise to it (MB, RB, RD) in the Docket of the Financial Department indicated by PETROBRAS, for the purpose of checking the time limits for the payment........................... 7.3. The collection documents will be issued without erasures, complying with the pertinent laws in force, and will contain obligatorily the following information:................................................ a) Place and date of its issuing and number of the collection document;......................................................... b) Number and date of signature of the contract deed;................ c) Number and date of the documents originating them (MB, RB, RD);... d) Gross value of the collection document, both in numbers and in writing;.......................................................... 30 e) Name and code of the banking establishment, branch, and the respective code, and number of the current account of the payee, where the payments will be made;.................................. f) In order that a particular payment is made in a banking establishment different from the one indicated at the time the contract deed was signed, such amendment will obligatorily be preceded by a fax/correspondence from the CONTRACTOR or shall appear in the payee's collection document......................... 7.3.1 In the event the collection document is inaccurate, it will be returned to the CONTRACTOR and the time limit foreseen in item 7.1 will be postponed for as many days as those corresponding to the delay in the submittal of such document............................... 7.3.2 In the event of re-submittal of the collection document, as a result of a previous impugnation, this fact should appear in the history of the collection document............................................... 7.3.3 The CONTRACTOR will obligatorily submit, every month to the Manager of the Contract:...................................................... a) Payroll of the CONTRACTOR's employees who are involved in the rendering of the services contracted.............................. b) A photocopy of the Social Security Payment Slip (GRPS), duly settled and authenticated, obligatorily filling out the data that identify PETROBRAS, informing in field "8" of the GRPS (other information), the name, CGC/CEI of PETROBRAS, number, date and amount of the Invoice or Bill of Sale referring to the services rendered in the month............................................. 31 c) In case of a Cooperative, to submit the payment vouchers of the amounts paid, distributed or credited to its members as remuneration for the services rendered in the fulfillment of this contract......... 7.3.4. The collection documents will not be accepted by PETROBRAS if submitted with the Income Tax at Source already withheld.............. 7.3.5. It is the responsibility of PETROBRAS' disbursing office the explanations of doubts regarding the issuing of the collection documents............................................................. 7.3.6. Eventual payments made for more or for less by PETROBRAS, will be compensated as soon as they are detected, and the respective amounts will be duly corrected................................................ 7.3.7. The CONTRACTOR should indicate the place and fax number, if any, for the receipt of the "Notice of Payment Foreseen"...................... 7.4. The vouchers for reimbursable expenses due to the CONTRACTOR as a result of this contract deed, will be previously submitted to the Manager of the contract, for checking, besides being duly settled by the respective supplier or service renderer, when such is the case.... 7.4.1. If the originals cannot remain in PETROBRAS' hands, copies thereof may be submitted, which will be checked by the Inspector and/or Manager, and the following should appear in every original document: "Copy Submitted for Reimbursement On ___/___/___", followed by the signature and identification by name, position and registry number, and the originals will be returned to the CONTRACTOR. The following text will appear in the copies of each document in PETROBRAS' hands: "Checked with the Original On 32 ___/___/___", which the Inspector and/or Manager will sign, identifying the signature by name, position, and registry number.................. 7.4.2. In special cases of reimbursement of import expenses (duties and/or expenses), the CONTRACTOR will submit a letter forwarding the vouchers for such expenses, together with the import process to the department in charge of its follow-up................................. 7.4.3. The receipt, duly formalized by PETROBRAS of any reimbursable expense voucher, does not represent the recognition of the debt, nor the proof that the expenses were made................................. 7.4.4. The collection of reimbursable expenses will be made through the issuing of a Services Invoice, after approval of said corroborative documents and issuing by PETROBRAS of the respective Reimbursement Document - DR, which will be issued up to 5 (five) working days, as of the date of submittal of said documents............................ 7.4.4.1.PETROBRAS' Inspection has 3 (three) working days to proceed with the checking of of the expense vouchers and to notify its approval to the CONTRACTOR, so that it may issue the Combined Invoice and Bill of Sale.................................................................. 7.4.5. The total amount of the collection document will be obtained by applying the following formula:....................................... VTD , where................................ -------- VTR = 1 - ICP VTR = total amount to be reimbursed to the CONTRACTOR;............ VTD = total amount of the reimbursable expenses, actually authorized;.................................................. ICP = total of the sum of the aliquots of taxes collected, in the decimal form (ISS or ICMS, as the case may be, COFINS and PIS/PASEP)................................................... (End of Clause)............................................................... 33 EIGHTH CLAUSE-FINES........................................................... 8.1. Non-compliance, by the CONTRACTOR, after 91 (ninety-one) days beyond the time limit mentioned in item 2.3 of this CONTRACT, will imply in the imposition of fine against the CONTRACTOR, in a written notice, corresponding to 30% (thirty per cent) of the rate provided for in REF 101 of ATTACHMENT III, per day of delay exceeding 90 day.............. 8.2. In the event of non-compliance, by the CONTRACTOR, with the inspection's requirements within the time limit it may set, PETROBRAS may, by a written notice, impose upon the CONTRACTOR, per day of non-compliance with such requirements, as of the end of the time limit set, a fine corresponding to 20% (twenty per cent) of the rate provided for in REF 101 of ATTACHMENT III. ........................... 8.3. The penalties set forth in this Clause do not exclude any other provided for in the laws in force and/or in this CONTRACT, nor the CONTRACTOR's liability for damages it may cause to PETROBRAS, as a result of non-fulfillment of the conditions agreed upon herein. 8.4. The amount corresponding to the sum of the values of the fines applied is limited to 10% (ten percent) of the estimated value of the present CONTRACT...................................................... 8.5. The penalties to which the CONTRACTOR is subjected to due to the provision set forth in this Clause, will be discounted in the first payment and in the subsequent ones, which the CONTRACTOR is entitled to, after the sanctions are applied by PETROBRAS...................... 8.6. In the event of balance, PETROBRAS reserves itself the right to make or complement the deduction in collection document(s) related to any other contract deed eventually entered into with the CONTRACTOR, or to use any other adequate means to settle the debt, if necessary...... 34 8.7. The CONTRACTOR may appeal against the imposition of the fine, in a declaration, within the non-deferrable time limit of 15 (fifteen) consecutive days as of the date the notice is received................ 8.8. Non-appearance of the CONTRACTOR's personnel for boarding on the date and time agreed upon between PETROBRAS and the CONTRACTOR, will subject the CONTRACTOR to the payment of a fine of US$140.00 per passenger in the case of air transportation, and US$40.00 in the case of sea transportation................................................. 8.8.1. The fine set forth in item 8.8 will not be charged if the CONTRACTOR asks PETROBRAS to change the boarding schedule at least 24 (twenty-four) hours in advance..................................... 8.9. In a written notice and without prejudice of the capacity to rescind the contract, PETROBRAS may impose upon the CONTRACTOR a compensatory fine of 100% (one hundred per cent) of the amount of the conviction, due to default of its labor, social security or tax obligations.............. 8.9.1. The payment of said fine will not exempt the CONTRACTOR from the obligation to reimburse PETROBRAS for the amount imposed upon it as a result of an eventual joint conviction passed by a Labor Court or by the proper administrative jurisdictions............................... 8.9.2. The CONTRACTOR will be fined in the precentual of 5% (five percent) on the amount of the invoice in the event it does not submit the GRPS or submits at variance....................................... (End of Clause)............................................................... 35 NINTH CLAUSE - INSPECTION..................................................... 9.1. The inspection of the chartering contracted herein will be carried out by PETROBRAS' representatives, and the CONTRACTOR undertakes to allow their free access to the UNIT and to the operations locations, and to comply immediately with the observations of such inspection, which will have ample powers to:...................................... 9.1.1. Determine, provided it comes to its knowledge and is within its capacity, the suspension of the operations which perhaps are being carried out in disagreement with the good technique or which threaten the safety of persons or assets of PETROBRAS, third parties or of the CONTRACTOR itself, the subitem 2.1.7 of ATTACHMENT II being complied with.................................................................. 9.1.2. Refuse the employment of condemned or improper equipment and materials, tools and production string components, as well as operations which do not comply with the established programs;......... 9.1.3. Order the withdrawal, from the work site, of any of the CONTRACTOR's employees who, in PETROBRAS' opinion, may endanger the good performance of the operations or hinder its inspecting activities;.... 9.1.4. Certify on the accuracy of the information reported daily by the CONTRACTOR;........................................................... 9.1.5. Notify the CONTRACTOR, in writing, on the imposition of the penalties provide for in this CONTRACT, including those referring to the CONTRACTOR's action or omission;...................................... 9.1.6. Request from the CONTRACTOR a detailed report of any accident occurred and on any operation or repair performed..................... 36 9.2. However, the responsibility, operation, movement and administration of the UNIT will be under the exclusive control and command of the CONTRACTOR or its employees........................................... 9.3. The total or partial action or omission of the Inspection, does not lessen at all the CONTRACTOR's full responsibility for the rendering of the obligations agreed upon herein, nor does it imply any reduction or change in the CONTRACTOR's obligations in the faithful and perfect fulfillment of the present CONTRACT....................... 9.4. Notes - PETROBRAS' Inspection should record its observations on the Driller's Log approved by the IADC and on the Daily Drilling Certificate (ADP), to safeguard the rights and responsibilities foreseen in this CONTRACT............................................. 9.5. During the contract period, PETROBRAS will carry out the CONTRACTOR's performance evaluation, covering the groups in equipment and material, human resources, installations, quality and efficiency. The results of the performance evaluations will be notified and consolidated by means of a service performance certificate............ (End of Clause)............................................................... 37 TENTH CLAUSE - RESCISION...................................................... 10.1. PETROBRAS may rescind the present CONTRACT, without the CONTRACTOR being entitled to any right to indemnity and/or withholding in the following cases:...................................................... 10.1.1. Nonfulfillment, or irregular fulfillment of contract clauses, specifications, operations and Inspection's requests, provided the fact mentioned is not remedied within the time limit of 60 (sixty) days, or the repeated commitment of faults in the fulfillment of the CONTRACT;............................................................. 10.1.2. Total or partial subcontracting of the object of the present CONTRACT, the association of the CONTRACTOR with another, merger/division or total or partial incorporation, except if allowed for in this CONTRACT, which affects the good performance of this instrument;........................................................... 10.1.3. Interruption of the operations for more than 60 (sixty) days;......... 10.1.4. Decree of the CONTRACTOR's bankruptcy............................. 10.1.5. When the penalties provided for in item 8.4 of this contract is attained;............................................................. 10.1.6. Slowness in the execution of the works, leading PETROBRAS to prove the impossibility of completing the operations within the established time limits;.......................................................... 10.1.7. Non-compliance with the determinations of PETROBRAS' agent appointed to follow-up and inspect the fulfillment of the CONTRACT, as well as those of his superiors;............................................... 10.1.8. The dissolution of the CONTRACTOR;.................................... 38 10.1.9. The social change or the modification of the company's purpose or structure, which in PETROBRAS' opinion, hinders the performance of the operations;....................................................... 10.1.10.Delay in the beginning of the fulfillment of the CONTRACT for more than 180 (one hundred and eighty) days...................................... 10.1.11.Rescision of the SERVICES RENDERING CONTRACT for Drilling and/or Evaluation and/or Completion and/or Workover using the UNIT, entered into between PETROBRAS and MARITIMA NAVEGACAO E ENGENHARIA LTDA........ 10.1.12.If the limit set forth in subitem 2.1.9 of ATTACHMENT II to this CONTRACT is attained. 10.1.13.If the limits set forth in NOTE 2 of REF. 102 of ATTACHMENT II to this CONTRACT are attained............................................ 10.1.14.Non-submittal of the proof of fulfillment of labor obligations towards the employees directly involved in the services object of this contract, including social security contributions and deposits in the FGTS, when requested by the Inspection, or if such default is proven;............................................................... 10.1.15.Non-submittal or submittal at variance of the GRPS, when the corresponding invoice is delivered.................................... 10.1.15.1.The rescision for this reason does not prevent PETROBRAS from imposing the respective fine, foreseen in 8.7.2;...................... 10.2. In the event of rescision of the contract deed for the reasons foreseen in 10.1, PETROBRAS will:..................................... a) take over the object of the contract deed, on the stage and location where it is found;....................................... 39 b) enforce the contract guarantee, if any, for the reimbursement of the amounts of fines and indemnities due to it;................... c) withhold the credits arising from the contract deed, up to the limits of the damages caused to it................................ 10.3. After the CONTRACT is rescinded, as set forth in this Clause, the CONTRACTOR is liable, in legal and contract fashion, for the violation or inadequate performance which gives rise to the rescision, as well as for the reimbursement of damages which PETROBRAS may come to sustain............................................................... 10.4 After the contract is rescinded, PETROBRAS, at its exclusive judgment, may adjudicate the operations object thereof to whom it deems appropriate, without behoving the CONTRACTOR any consultation or interference, claim and/or indemnity, for whatever title, and the CONTRACTOR will be liable to legal and contract penalties, besides being liable for damages PETROBRAS may sustain........................ 10.4.1. The CONTRACTOR is also liable for the pertinent administrative sanctions, its full defense being guaranteed.......................... 10.5. In the event PETROBRAS does not impose the right to rescind the present CONTRACT according to this Clause, it may, at its absolute discretion, withhold the payments of pending invoices, until the CONTRACTOR fulfills the contract condition it has infringed, but such fact will not represent novation nor will it generate rights that may be claimed by the CONTRACTOR.......................................... (End of Clause)............................................................... 40 ELEVENTH CLAUSE - FISCAL CHARGES.............................................. 11.1. Taxes (taxes, fees, emoluments, fiscal and parafiscal contributions) that are due as a direct or indirect result of the present CONTRACT, or of its fulfillment, will be the exclusive responsibility of the taxpayer, so defined in the tax rule, with no right to reimbursement. PETROBRAS, as the withholding source, will withhold and pay within the legal time period, from the payments it makes, the taxes it is liable to by the laws in force. 11.1.1. The CONTRACTOR states that, in quoting its prices, it has taken into account the taxes (taxes, fees, emoluments, fiscal and parafiscal contributions) charged on the fulfillment of this CONTRACT, and it cannot make any claim due to error on such evaluation, for the purpose of requesting a price revision ou reimbursement of payments set down by the property authority.................................... 11.1.2. Once found, during the period of validity of the CONTRACT, that the CONTRACTOR has unduly added to its prices amounts corresponding to taxes, fiscal and/or parafiscal contributions and emoluments of any kind that are not charged to the performance of the services agreed upon, such values will be immediately excluded, with the consequent reduction of the prices practiced and reimbursement of amounts that may have been paid to the CONTRACTOR.................................. 11.2. If, during the period of validity of this CONTRACT, any of the following events occur: o creation of new taxes;............................................ o extinction of existing taxes;..................................... o changes in the aliquots;.......................................... o establishment of tax incentives of any kind; and.................. 41 o exemption or abatement of federal, state or county taxes,......... which, provedly come to increase or reduce the burdens of the parties to the contract, the prices will be revised, so as to fit them into the changes made, compensating, at the first opportunity, any differences arising from such changes. However, if it is a question of tax incentives, the advantages arising therefrom will always be for PETROBRAS......................................................... (End of Clause)............................................................... 42 TWELFTH CLAUSE - FORCE MAJEURE................................................ 12.1. PETROBRAS and the CONTRACTOR will not be liable for the nonfulfillment of their respective obligations in case of events that characterize an act of God or force majeure defined in the sole paragraph of Article 1.058 of the Brazilian Civil Code. Any suspension of performance due to this item 12.1 will be limited to the period during which such cause or its consequences exist, and such period will be added to the duration of the CONTRACT mentioned in the Second Clause of the present CONTRACT. However, the CONTRACTOR is assured the right to receive the rate provided for in REF 104 of ATTACHMENT III, with the exception of the exemption from payment set forth in subitem 2.1.4 of the ATTACHMENT II, and the reimbursements mentioned in this CONTRACT, and furthermore, the parties will severally assume their losses............................ 12.2 If the circumstances that justify the invoking of the existence of an act of God or force majeure occurs, the party unable to fulfill its obligations will immediately notify the other party, in writing, on the occurrence of its consequences.................................... 12.3. If the impediment arising from the force majeure lasts for more than 90 (ninety) consecutive days, any of the parties may opt for the termination of the CONTRACT, with both parties complying with their mutual obligations due until the date of the beginning of said impediment............................................................ (End of Clause)............................................................... 43 THIRTEENTH CLAUSE - ASSIGNMENT AND TRANSFER................................... 13.1. The CONTRACTOR cannot assign or transfer, in whole or in part, the present CONTRACT, except with PETROBRAS' prior authorization in writing............................................................... 13.2. The CONTRACTOR cannot assign or give in guarantee, at any title, in whole or in part, the credits of any kind, arising or deriving from the present CONTRACT, except with PETROBRAS' prior authorization in writing. The prior authorization will obligatorily state that PETROBRAS imposes upon the assignee of the credits the exceptions that behooves it, mentioning expressly that the payments to the assignee will be conditioned to the fulfillment, by the assignor, of all of its contract obligations....................................... 13.3. The occurrence of the above mentioned events, duly authorized by PETROBRAS, does not exempt the CONTRACTOR from any of its contract obligations........................................................... 13.4. PETROBRAS may assign or transfer, in whole or in part, the present contract, under commercial conditions to be agreed upon by the parties. ............................................................. (End of Clause)............................................................... 44 FOURTEENTH CLAUSE - ADDITIONAL EQUIPMENT...................................... 14.1. PETROBRAS may install in the UNIT the additional equipment it deems necessary for research, drilling, completion of wells or production. It is agreed, however, that no structural change will be made in the UNIT without the CONTRACTOR's consent in writing. All PETROBRAS' equipment installed in the UNIT will remain its property, and it will be removed by it before the end of this CONTRACT. The installation and removal expenses will run for PETROBRAS' account. During the installation and removal of PETROBRAS' equipment, the rate set forth in REF 104 of ATTACHMENT III will be paid if the interruption of the operations becomes necessary.......................................... (End of Clause)............................................................... 45 FIFTEENTH CLAUSE - ATTORNEY OF RECORD......................................... 15.1. The CONTRACTOR undertakes to maintain, in the City of Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil, during the contract period and until the settlement of eventual demands arising from the CONTRACT, a representative with "ad-judicia et extra" powers, who may receive service of process, inclusive in execution proceedings, as well as to sign compromise and settlements regarding controversies resulting from this CONTRACT, and the summons can be made by publication, in the event of absence or lack of an Attorney........... 15.1.1. Within 30 (thirty) days after the signature of the present CONTRACT, the CONTRACTOR will notify PETROBRAS the name, qualification, office and residence of its representative and attorney of record, as set forth in item 15.1.................................................... (End of Clause)............................................................... 46 SIXTEENTH CLAUSE - CONTRACT RELATIONSHIPS..................................... 16.1. This CONTRACT is related to another one for the rendering of services of Drilling and/or evaluation and/or completion and/or workover, signed on this same date between PETROBRAS and MARITIMA NAVEGACAO E ENGENHARIA LTDA. (End of Clause)............................................................... 47 SEVENTEENTH CLAUSE - INTERVENIENCE............................................ 17.1. Clause non-applicable in this CONTRACT................................ (End of Clause)............................................................... 48 EIGHTEENTH CLAUSE - LIABILITY................................................. 18.1. PETROBRAS' and the CONTRACTOR's liability for damages will be limited to the direct damages in accordance with the Brazilian Civil Code and pertinent laws, with exception of loss of profit and indirect damages, the direct damages being limited to 100% (one hundred percent) of the total contract value.................................................. (End of Clause)............................................................... 49 NINETEENTH CLAUSE - COMPLEMENTARY DOCUMENTS 19.l. The ATTACHMENTS mentioned below are an integral part of the present CONTRACT and, in the event of disagreement between the ATTACHMENTS and the CONTRACT, the text of the CONTRACT will prevail............... ATTACHMENTS I - Technical specifications of the Unit ................................. II - Applicability of the Rates and Incidents in the Performance........... III. - Unit Prices Spreadsheet............................................... IV - Mutual Obligations ................................................... V - List of Specialized Personnel;........................................ VI - Environmental Operating Conditions VII - PETROBRAS' Safety Rules............................................... VIII - Equipment Testing Program............................................. IX - Procedures In the Event of Fatal Accidents............................ (End of Clause)....................................... ........................ 50 TWENTIETH CLAUSE - PRICE READJUSTMENT......................................... 20.1. The contract prices are fixed and non-readjustable.................... (End of Clause) .............................................................. 51 TWENTY-FIRST CLAUSE - ACCEPTANCE.............................................. 21.1. After the chartering operations are completed in strict compliance with the conditions set forth in this contract deed, PETROBRAS will accept them by means of a Definite Deed of Definitive Receipt, signed by both parties....................................................... 21.2. The signature of the Deed of Definitive Receipt does not exempt the CONTRACTOR from the liabilities foreseen in this contract and in the laws in force......................................................... (End of Clause) .............................................................. 52 TWENTY-SECOND CLAUSE - LOSS OR DISAPPEARANCE.................................. 22.1. In the event the Vessel is lost or disappears, no payment regarding the same will be due by PETROBRAS to the CONTRACTOR, as of the date or as of the moment it was last heard of................................. (End of Clause)............................................................... 53 TWENTY-THIRD CLAUSE - GROSS OR GENERAL AVERAGE............................... 23.1. The gross or general average will be ruled in the Port of Rio de Janeiro according to the York and Antuerp Rules/1974.................. (End of Clause) .............................................................. 54 TWENTY-FOURTH CLAUSE - JURISDICTION........................................... 24.1. The Jurisdiction of the County of the Capital of the State of Rio de Janeiro will be competent to settle any questions arising from the present CONTRACT, with the express waiver, by the parties, of any other, however privileged ............................................ (End of Clause) .............................................................. AND BEING THUS AGREED, the parties sign the present deed in 3 (three) copies with the same tenor, with the witnesses below ................................ Rio de Janeiro, (blank) ...................................................... (Signed:) LUIZ EDUARDO G. CARNEIRO........................................... LUIZ EDUARDO G. CARNEIRO - EXECUTIVE SUPERINTENDENT OF EXPLORATION AND PRODUCTION SOUTH - SOUTHEAST - PETROLEO BRASILEIRO S.A. - PETROBRAS........... (Signed:) GERMAN EFROMOVICH.................................................. GERMAN EFROMOVICH - PRESIDENT................................................. MARITIMA NAVEGACAO E ENGENHARIA LTDA.......................................... WITNESSES: (Signed:) Elaine Brabo....................................................... CPF No. 970.702.897-15........................................................ (Signed:) (illegible)........................................................ CPF No. 610.769.457-91........................................................ 55 CONTRACT NO. 101.2.155.97-9................................................... CHARTERING ATTACHMENT II APPLICABILITY OF THE RATES AND, INCIDENTS IN THE PERFORMANCE. 1 - APPLICABILITY OF THE RATES - DEFINITION OF THE CHARTERING RATES PER 24 (TWENTY-FOUR) HOUR DAY ....................................................... REF 101 - OPERATION RATE - It will be applied during the activities requiring the use of the UNIT, such as electric logging, formation testing, completion, workover operations, including line scouring and cutting operations.................................................................... REF 102 - REPAIR RATE - In the periods when there is an interruption of the activities that require the use of the UNIT, mentioned in REF 101 of this ATTACHMENT and the operations for Moving the UNIT between locations, REF 105 of this ATTACHMENT, due to maintenance, including replacement of mud pump spare parts, and/or repair in the UNIT's equipment, or in those which supply is the CONTRACTOR's responsibility, no rate will be due ...................... NOTE 1. The repair period will be considered as of the interruption of the operation that is being performed, until the return to the same situation when the interruption occurred, except for the periods when the interruption in the repair activities occur due to adverse sea conditions, as set forth in NOTE 2 of REF. 104 ........................................................... NOTE 2. In the event the CONTRACTOR remains in REPAIR RATE for an accumulated total of 30% of the time, for any period of 6 (six) contract months, PETROBRAS may rescind the present CONTRACT, based on subitem 10.1.14 of this CONTRACT ..................................................................... 56 NOTE 3. It will be considered as repairs the occurrences due to wash outs in the drill pipes and in the other elements of the drill string, belonging the Contractor, with exception of those arising from the presence of H2S and from abnormal mechanical conditions occurred in the well .......................... NOTE 4. At the Inspection's discretion, for the maintenance of the BOP, the CONTRACTOR may be granted a franchise of up to 24 hours between the instant the BOP is set on the test stump, until its operating withdrawal, and the moment of its movement for the next running in another well, without the CONTRACTOR entering in repair rate, provided such maintenance is carried out according to international standards. In the period within these 24 hours intended exclusively for the BOP maintenance, the waiting rate (Ref. 104) will be due................................................................... REF. 103 - RATE ADDITIONAL (AT) - In each measurement period, as set forth in subitem, 6.1.1 of the CONTRACT, the CONTRACTOR will be entitled to receive a Rate Additional, calculated by means of the following formulae:............... AT = 0.10 x (NT - NFM - NREP - NIPG - NTOR) X FOR PI (IS LESS THAN OR EQUAL TO) 0. 300 TO................................................................ AT - (0.16 - 2 x PI) x (NT - NFM - NREP - NIPG - FOR 0.03 (IS LESS THAN OR EQUAL TO) PI 0,0800 NTOR) x TO................................................ AT = Zero..........................................................TO PI>0, 800 Where:........................................................................ AT = Rate Additional ......................................................... TO = Operation Rate (REF 101)................................................. PI = Unavailability Proportion, calculated with 4(four) decimal places, being: PI = NREP + NIPG + NTOR ------------------ NT - NFM .............................................................................. NT = Total number of days in the measurement period considered; .............. NFM = Total number of days in which the act of God or force majeure occurs, as defined in the TWELFTH CLAUSE of the CONTRACT, in the measurement period considered;................................................................... 57 NREP = Total number of days under repair rate (REF 102) in the measurement period considered;............................................................ NIPG = Total number of days under exemption from payment (according to item 2.1 of this ATTACHMENT) in the measurement period considered;................. NTOR = Total number of days with reduced operation rate (according to subitems 2.2.3 and 2.2.4 of this ATTACHMENT) in the measurement period considered ................................................................... REF. 104 - WAITING RATE (TE) - corresponds to 95% of the operation rate (TO) and which will be applied in BAD WEATHER, FORCE MAJEURE and WAITING situations, as defined below:................................................. 1) BAD WEATHER SITUATIONS - in the event of stoppage of the operations when environmental conditions are so severe as to endanger the UNIT's operating capacity, the limitations in Attachment VI, being complied with, making the operations unstable or unsafe or preventing support vessels from having access to the UNIT, or preventing the tugs' operations, at the time of change of locations, although the UNIT may operate normally, in spite of the BAD WEATHER ........................... 2) FORCE MAJEURE SITUATIONS - during the period when the UNIT cannot operate, due to act of God or force majeure, as defined in the TWELFTH CLAUSE of the CONTRACT, until the removal of the impediment or the rescision of the CONTRACT, as the case may be ........................... 3) WAITING - waiting for the arrival, maintenance or availability of materials from PETROBRAS or third parties, under PETROBRAS' responsibility, even if the Maintenance is made in the UNIT; waiting for daylight to carry out formation tests; waiting for orders from PETROBRAS, such as, but not limited to: change of programs, definition to proceed with the 58 completion or other production activity, rest for PETROBRAS' team or of those of third party at PETROBRAS' service; waiting for tugs or support vessels................................................................ NOTE 1. The period spent in disconnecting the LMRP from the BOP due to environmental conditions will be considered as BAD WEATHER situation, until the return to the previous situation ......................................... NOTE 2. If a BAD WEATHER situation occurs which interrupts a repair activity, the waiting Rate (REF 104) with a 40% (fourty percent) reduction, will be due during that period ........................................................... REF. 105 - MOVING RATE - corresponds to 95% (ninety-five percent) of the Operation Rate (TO) and will be applied during the following periods: ........ a) Beginning of the Contract - After the acceptance of the UNIT's equipment operating conditions, once the general testing provided for in ITEM 3.1 of the CONTRACT has been carried out, until the spud in of the first well or reentry in the first well (beginning of running the first tool for access to the well); ................................................ b) Between Locations - After the end of the completion or intervention operations in a well, with the arrival of the BOP or tool used in the well (the one which occurs last) in the moon pool, until the spud in or reentry in a new well (beginning of running the first tool for access to the well); .............................................................. NOTE: This period includes the DP system calibration and tests, always on each new location, and others in each contract year or at any time, when requested by PETROBRAS........................................................ c) End of Contract - After the end of the spud in or intervention operations in the last well, with the arrival of the BOP or tool used in the well (the one which occurs last) in the moon pool, until the UNIT's arrival in a place of sheltered waters, chosen in common agreement between 59 the parties, or, if there are PETROBRAS' equipment still aboard, until the withdrawal of such equipment from the UNIT............................... REF. 106 MOBILIZATION OF THE UNIT (MOB) - No rate will be due for the mobilization of the Unit and its its fittings................................. REP. 107 DEMOBILIZATION OF THE UNIT (DEMOB) - No rate will be due for the demobilization of the UNIT and its fittings................................... 2 - INCIDENTS IN THE PERFORMANCE ............................................. 2.1. Exemption from Payment - PETROBRAS will be exempted from the payment of the rates foreseen in this ATTACHMENT, during the period in which occurs:............................................................... 2.1.1. Interruption of the services due to the CONTRACTOR's duly proven fault arising from operational error and/or lack of material or equipment, inclusive due to the loss of subaquatic equipment or spare parts ................................................................ 2.1.2. Stoppage of the services and/or of the UNIT due to measures related to impositions by made the insurers .................................. 2.1.3. CONTRACTOR's refusal to operate under the conditions foreseen in ATTACHMENT VI - Environmental Operating Conditions ................... 2.1.4. Stoppage of the services and/or of the UNIT for inspection or dockage purposes, including surveys and dockages arising from act of God or force majeure, as defined in the TWELFTH CLAUSE of the CONTRACT, the corresponding expenses also running for the CONTRACTOR's account ..... NOTE 1. The exemption from payment will begin in the moment there is an interruption of the operational continuity object of this CONTRACT, even if the withdrawal of all or part of 60 PETROBRAS' and/or the CONTRACTOR's cargo becomes necessary for the inspection and/or dockage............................................................... NOTE 2. The end of the exemption from payment, due to the inspection and/or dockage, will occur:.......................................................... a) On the return to the same location, the moment the operation returns to the previous situation;................................ b) On the mobilization to another location, the moment the UNIT starts sailing after PETROBRAS' and/or the CONTRACTOR's materials have been put back on board....................................... 2.1.5. Occurrence of kick, drill string sticking, loss of circulation, fishing or abandonment, caused by the CONTRACTOR's duly proven action or omission, from the moment the problem was ascertained, until the return to the situation prior to its occurrence, or displacement to another location, in the event of abandonment ........................ 2.1.5.1.The exemption from payment referred to in 2.1.5 will be limited to a period of 15 (fifteen) days, per event, after which the reduction foreseen in subitem 2.2.3 of this ATTACHMENT will be applied ......... 2.1.6. Occurrence of blow out caused by the CONTRACTOR's duly proven action or omission, from the moment the problem was ascertained, until the return to the situation prior to its occurrence ...................... 2.1.6.1.The exemption from payment referred to in item 2.1.6 will be limited to a period of 45 (forty-five) days, after which the reduction foreseen in subitem 2.2.4 of this ATTACHMENT will be applied...................... 61 2.1.7. Suspension of the services, determined by PETROBRAS' Inspection, based on item 9.1.1 of the CONTRACT......................................... 2.1.8. Interruption of the operations due to a failure occurred in any of the UNIT's equipment, at the time of the testing to be carried out according to item 3.1 of the CONTRACT .......................................... 2.1.9. In the occurrence of events of exemption from payment provided for in subitems 2.1.1, 2.1.2, 2.1.3, and 2.1.7, for a total accumulated period exceeding 30% (thirty percent) in any 6 (six) month period, PETROBRAS may rescind the present CONTRACT, based on. its subitem 10.1.13. 2.2. REDUCTION IN THE DAILY OPERATION, WAITING AND MOVEMENT RATE ...................................................................... The rates foreseen in this ATTACHMENT will be reduced in the following cases . 2.2.1. Total or partial inoperativeness or malfunction of any equipment which delays or hinders the operation, such as, but not limited to, winches, top drive, kelly spinner, geolograph, current meter, air compressors, shale shaker, mixing pumps, mud laboratory equipment and bulk receipt and transfer systems, are reason for the reduction of the daily rate provided for in REF 101, in 1% (one percent), cumulative per equipment, provided the CONTRACTOR is notified in writing in the Daily Drilling Certificate (ADP), by PETROBRAS' Inspection and which, after the time limit the latter has set to repair said equipment, such repair has not been made ............................................................ 2.2.2. Low Efficiency - REFERENCE RATES 101 and 105 of this ATTACHMENT will have a 20% (twenty percent) reduction, in the event low efficiency is verified, according to the 62 operating efficiency parameters listed below. Such reduction will be applied during the whole period corresponding to the activity in which low efficiency is verified:........................................... Operating Parameters:................................................. - Maneuver of the drill string in a cased well (except BHA): o Inside the riser and 20" casing = 500 m/h..................... o Inside the 13 3/8" casing = 600 m/h .......................... o Inside of 9 5/8" casing = 700 m/h ............................ - Break of DP's per Unit - 25jt/h .................................... - Casing string running in the sea/inside the riser/previous casing (joints with approximately 12 m long) .............................. o 30" Casing - 2 jt/h .......................................... o 20" Casing - 5 jt/h .......................................... o 13 3/8" Casing - 13 jt/h ..................................... o 9 5/8" Casing - 18 jt/h ...................................... o 7" Casing - 15 jt/h .......................................... - Running of drilling riser, excluding normal time for testing (50 ft joint): 45/m/h...................................................... - Pulling of drilling riser (50 ft joints): 60 m/h - Installation or pulling of the kill/choke lines/ telescopic joint/ stretchers: 6.0h ................................................... - Diverter installation or pulling: 2.0h ............................. - Assembly of the dampening lines in the M.R.: 1.5h.................. - Assembly of the flexitube equipment: 5.0h. ......................... - Assembly of the production tail: 2.0h .............................. 63 - Tubing running or pulling, per unit - 150 m/h ...................... - Tubing running or pulling per section - 300 m/h..................... - Completion risers running or pulling - 50 m/h ...................... - Assembly of terminal head and slings -2.0 h ........................ - Moving of WCT to/from the moon pool - 3.0 h......................... - Moving of tree cap or tree running tool to/from the moon pool - 2.5h - Assembly of lubricator and wire line BOP - 1.5h NOTE: The above mentioned operating parameters are based on normal weather conditions.................................................................... 2.2.3. Beginning on the 16th (sixteenth day), inclusive, of the occurrence of kick, drill string sticking, loss of circulation or fishing, caused by the CONTRACTOR's duly proven action or omission, until the return to the situation prior to its occurrence, the applicable rate will be reduced by 50% (fifty percent) ....................................... 2.2.4. Beginning on the 46th (forty-sixth) day, inclusive, of the occurrence of Blow out caused by the CONTRACTOR's duly proven action or omission, until the return to the situation prior to its occurrence, the applicable rate will be reduced by 50% (fifty percent) ............... 2.3. Period of Validity of the Contract Rates the contract rates set forth in this ATTACHMENT will apply in the period set forth below: ......... a) Beginning: release of the UNIT, by PETROBRAS, to sail to the first location, after the equipment general testing provided for in item 3.1 of the CONTRACT has been carried out, with the exception of the provision in its subitem 3.1.1.1 ................................. b) End: after the end of the completion of the last well, with the UNIT's arrival at a port or sheltered waters chosen by common agreement between the parties, and if there 64 are PETROBRAS' equipment still aboard, with the withdrawal of such equipment from the UNIT........................................... 2.4. Blow-Out - PETROBRAS will be responsible for the well control operation costs, in the event of blow-out and caving caused by the blow-out. Such provisions apply only to the well control costs and do not apply to the loss of assets, lesions and/or damages caused by the blow-out, which are protected by the provisions of the pertinent items of this CONTRACT. The CONTRACTOR undertakes to place at PETROBRAS' disposal all of its resources in personnel and equipment related to this CONTRACT, without any additional charges to PETROBRAS. If the CONTRACTOR has contributed with duly proven action or omission for the occurrence of the accident, no rate will be due, until the solution of the problem, in compliance with the provisions in subitems 2.1.6 and 2.2.4 of this ATTACHMENT ...................................................................... (End of ATTACHMENT)........................................................... 65 RENDERING OF SERVICES CONTRACT NO. 101.2.155.97-9................................................... ATTACHMENT III - UNIT PRICES SPREADSHEET CHARTERING - - ------------------------------------------------------------------------------- UNIT PRICES SPREAD SHEET - - ------------------------------------------------------------------------------- OBJECT OF BID: CHARTERING OF A FLOATING UNIT, PROVIDED WITH DYNAMIC POSITIONING SYSTEM. - - ------------------------------------------------------------------------------- PLACE OF OPERATION: BRAZILIAN CONTINENTAL SHELF AND INTERNATIONAL WATERS - - ------------------------------------------------------------------------------- UNIT'S NAME: AMETHYST 7 - - ------------------------------------------------------------------------------- COMPANY'S NAME: MARITIMA NAVEGACAO E ENGENHARIA LTDA. - - ------------------------------------------------------------------------------- CODE ITEMIZATION UNIT UNIT PRICE (US$) - - ------------------------------------------------------------------------------- 02.222.305 OPERATION RATE DAY 128,999.70 (REF.101) - - ------------------------------------------------------------------------------- 02.222.306 REPAIR RATE DAY No rate will be due (REF.102) - - ------------------------------------------------------------------------------- 02.222.307 WAITING RATE- DAY (95% OF REF. 101) BAD WEATHER (REF.104.1) - - ------------------------------------------------------------------------------- 02.222.308 WAITING RATE- DAY (95% OF REF. 101) FORCE MAJEURE RATE (REF. 104.2) - - ------------------------------------------------------------------------------- 02.222.309 WAITING RATE- DAY (95% OF REF.101) - - ------------------------------------------------------------------------------- 66 - - ------------------------------------------------------------------------------- WAITING (REF. 104.3) - - ------------------------------------------------------------------------------- 02.222.310 MOVEMENT RATE DAY (95% OF REF. 101) (REF.105) - - ------------------------------------------------------------------------------- 02.222.311 MOBILIZATION UNIQUE NO RATE WILL BE RATE (REF. 106) DUE. - - ------------------------------------------------------------------------------- SIGNATURES DATE OF THE PROPOSAL - - ------------------------------------------------------------------------------- PETROBRAS CONTRACTOR 10/08/97 Andre de Mesquita Pinto (illegible) - - ------------------------------------------------------------------------------- (Illegible rubber stamp.)..................................................... 67 CONTRACT NO. 101.2.155.97-9................................................... CHARTERING ATTACHMENT IV MUTUAL OBLIGATIONS - - ------------------------------------------------------------------------------- DESCRIPTION ON ACCOUNT OF SUPPLIED BY ------------------------------------------------ PET CONT PET CONT - - ------------------------------------------------------------------------------- 1. Production Adaptor Base X X and WCT - - ------------------------------------------------------------------------------- 2. Cement, bentonite, X X baritine, and other materials and additives for manufacturing mud and cementing. - - ------------------------------------------------------------------------------- 2. (sic) Cementing and logging Unit: a) Installation and removal X X b) Maintenance X X c) Rent X X - - ------------------------------------------------------------------------------- 3. Equipment and tools X X specific for evaluation, completion and production operation of wells. - - ------------------------------------------------------------------------------- 4. Fishing tools and replacement materials for pipes and production tools a) Foreseen in X X Attachment I b) Not foreseen in X X Attachment I - - ------------------------------------------------------------------------------- 5. Equipment, tools and X X replacement materials needed - - ------------------------------------------------------------------------------- 68 - - ------------------------------------------------------------------------------- DESCRIPTION ON ACCOUNT OF SUPPLIED BY ------------------------------------------------ PET CONT PET CONT - - ------------------------------------------------------------------------------- for the services of logging, formation tests and/or production and/or perforation, not included in ATTACHMENT I. - - ------------------------------------------------------------------------------- 6. Lubricants and greases X X for the CONTRACTOR's equipment. - - ------------------------------------------------------------------------------- 7. Industrial and fresh X X water. - - ------------------------------------------------------------------------------- 8. Replacement materials, X X including for fishing tools and other CONTRACTOR's equipment listed in Attachment I. - - ------------------------------------------------------------------------------- 9. Consumer equipment and X X materials for completion fluid tests listed in Attachment I. (Note: PETROBRAS will inform monthly on the minimum stock needed). - - ------------------------------------------------------------------------------- 10. Steel ropes, slings, X X sisal or nylon ropes and cordage in general, needed for tying towlines, for mooring support vessels and in cargo evaluation, completion and handling. - - ------------------------------------------------------------------------------- 11. Hoses for loading and X X unloading of liquids and bulk material with connections - - ------------------------------------------------------------------------------- 69 - - ------------------------------------------------------------------------------- DESCRIPTION ON ACCOUNT OF SUPPLIED BY ------------------------------------------------ PET CONT PET CONT - - ------------------------------------------------------------------------------- compatible with those of the supply vessels. - - ------------------------------------------------------------------------------- 12. Materials to make X X completion fluids. - - ------------------------------------------------------------------------------- 13. Conventional bits. X X - - ------------------------------------------------------------------------------- 14. Safety equipment for X X individual use: gloves, helmets, boots, masks, ear protectors, and other personal use equipment for the CONTRACTOR's employees. - - ------------------------------------------------------------------------------- 15. Services, materials and X X equipment to mark locations. - - ------------------------------------------------------------------------------- 16. Surveying of the sea X X bottom, if necessary. - - ------------------------------------------------------------------------------- 17. Welding equipment and X X materials needed for well completion and abandonment operations. - - ------------------------------------------------------------------------------- 18. Bulls eye for running X X tools. - - ------------------------------------------------------------------------------- 19. Warehouses, office and X X storage area for the CONTRACTOR on land. - - ------------------------------------------------------------------------------- 20. Radio-beacon with X X working frequencies compatible with those mentioned in Attachment I. - - ------------------------------------------------------------------------------- 70 - - ------------------------------------------------------------------------------- DESCRIPTION ON ACCOUNT OF SUPPLIED BY ------------------------------------------------ PET CONT PET CONT - - ------------------------------------------------------------------------------- 21. Safety and survival X X equipment, including maintenance (subjected to periodical inspection by PETROBRAS. - - ------------------------------------------------------------------------------- 22. Screens for mud sieves, X X according to PETROBRAS' specifications. - - ------------------------------------------------------------------------------- 23. Materials for X X maintenance of equipment and test lines, supplied by the CONTRACTOR, for formation testing and/ or production (painting, boiler factory, and welding). - - ------------------------------------------------------------------------------- 24. VX ring, VX with HYCAR and VX with lead insert for connection BOP- WELLHEAD, LMRP-BOP STACK: - - ------------------------------------------------------------------------------- a) In normal operation X X X - - ------------------------------------------------------------------------------- b) In reinstallation due X X X to problem with the ESCP - - ------------------------------------------------------------------------------- 25. VX ring, VX with HYCAR X X X and VX with lead insert for WCT. - - ------------------------------------------------------------------------------- 26. Remote operation submarine vehicle (ROV) a) Installation and X X removal - - ------------------------------------------------------------------------------- 71 b) Maintenance X X c) Rent X X - - ------------------------------------------------------------------------------- 27. Hydraulic fluid for X X BOP driving and tests. - - ------------------------------------------------------------------------------- 28. Hydraulic fluid for X X WCT driving and tests. - - ------------------------------------------------------------------------------- 29. Special grease for pipes X X and completion equipment. - - ------------------------------------------------------------------------------- 30. Individual safety X X equipment for operation in the moon pool. - - ------------------------------------------------------------------------------- 31. Paper and ink for X X microcomputer printer. - - ------------------------------------------------------------------------------- 32. Beacons, hydrophones, X X transducers, transponders, betteries. - - ------------------------------------------------------------------------------- 33. Diesel oil a) up to the limit set X X forth in Clause 4.6.2 b) above the limit set X X forth in Clause 4.6.2 - - ------------------------------------------------------------------------------- 34. Filter elements for the X X completion fluid filtering Unit. - - ------------------------------------------------------------------------------- (End of Attachment)........................................................... 72 CONTRACT NO. 101.2.155.97-9................................................... ATTACHMENT "V" LIST OF (MINIMUM) SPECIALIZED PERSONNEL ABOARD - - - Captain or Barge 1 - - - Tool Pusher (1 board superintendent) 2 - - - Driller 2 - - - Assistant Driller 2 - - - Derrickman 2 - - - Roughneck 6 - - - Crane Operator 2 - - - Area Man 8 - - - Welder 2 - - - Watchstander 2 - - - Subsea Engineer 1 - - - Mechanic 1 - - - Assistant Mechanic 1 - - - Electrician 1 - - - Assistant Electrician 1 - - - Radio Operator (Portuguese speaking) 2 - - - Male nurse 1 - - - Storekeeper 1 - - - Safety guard 1 NOTE: Supplementary personnel will be supplied according to the CONTRACTOR's conveniences and needs or to comply with the requirements of government laws.. 73 CONTRACT NO. 101.2.155.97-9................................................... ATTACHMENT "VI" ENVIRONMENTAL OPERATING CONDITIONS (PERMISSIBLE LIMITS FOR ENVIRONMENTAL CONDITIONS ACTING SIMULTANEOUSLY) - - ------------------------------------------------------------------------------- OPERATION HEAVE PITCH WIND WAVE CURRENT (FEET) OR (MPH) (FEET) (KNOTS) ROLL (DEGREES) - - ------------------------------------------------------------------------------- Conductor's jetting/ 2.0 2.5 30 3.0 1.4 driving - - ------------------------------------------------------------------------------- Drilling 2.5 3.0 30 3.0 1.4 - - ------------------------------------------------------------------------------- Casing running 2.0 3.0 30 3.0 1.4 - - ------------------------------------------------------------------------------- Casing hanger setting 1.5 2.0 30 2.1 1.4 - - ------------------------------------------------------------------------------- BOP running 1.5 1.5 19 2.1 2.5 - - ------------------------------------------------------------------------------- BOP setting 1.5 1.5 19 2.1 1.4 - - ------------------------------------------------------------------------------- Maneuvering 3.5 3.0 44 8.5 1.4 - - ------------------------------------------------------------------------------- LMPR disconnection 7 4 51 10.5 2.5 - - ------------------------------------------------------------------------------- LMPR connection 1.5 1.5 19 2.1 1.4 - - ------------------------------------------------------------------------------- Formation testing 3.5 4.0 44 8.5 1.4 - - ------------------------------------------------------------------------------- Operation with boats 2.5 3.0 39 6.7 1.4 - - ------------------------------------------------------------------------------- Running the WCT 1.5 1.5 19 2.1 2.5 (lay-away) - - ------------------------------------------------------------------------------- 74 - - ------------------------------------------------------------------------------- Running the WCT 1.5 1.5 19 2.1 2.5 (without lines) - - ------------------------------------------------------------------------------- Operation with flexitube 2.0 3.0 30 5.0 1.4 - - ------------------------------------------------------------------------------- Operation with wire-line 3.0 4.0 44 8.5 1.4 - - ------------------------------------------------------------------------------- Operation with BAP 2.5 3.0 39 6.7 1.4 - - ------------------------------------------------------------------------------- NOTE: These data may be corrected/adjusted later and in common agreement, considering the Unit's operating performance.----------------- 75 CONTRACT NO. 101.2.155.97-9................................................... ATTACHMENT "VII" PETROBRAS' SAFETY RULES 1. Service Rule No. 46/71: o Safety Rules for Offshore Operations. 2. Service Order No. 01/72: o Operational Safety Rules - Continental Shelf. 3. Service Rule No. 41/72: o Electricity - Safety Rules 4. Service Order No. 01/76: o Industrial Safety Rules (General) o Industrial Safety Rules (Drilling) o Industrial Safety Rules (Production) 5. General Safety Manual: o Safety and Environmental Instruction for Contractors (E&P - BC). 76 CONTRACT NO. 101.2.155.97-9................................................... ATTACHMENT VIII EQUIPMENT TESTING PROGRAM In order to carry out the UNIT's equipment testing in an easier and more agile manner, the CONTRACTOR is to submit to PETROBRAS, as quickly as required the following documents:............................................. 1. CERTIFICATES............................................................ a) Survey and Appraisal Report, updated and valid for the fiscal year regarding the UNIT offered, issued by one of the entities: ABS, NOBLE & DENTON, DNV, LLOYDS or BUREAU VERITAS, and if the report is issued abroad, it will be translated into Portuguese by a sworn public translator and notarized in the Brazilian Consulate......................................................... b) Classification or Class Confirmation Certificate for hull and equipment, compatible with the proposal submitted (certified copy);............................................................ c) Report on claims from the classification societies mentioned in the Class Confirmation Certificate (in the event there are claims);.......................................................... NOTE:PETROBRAS will evaluate the above mentioned documents and will indicate in what time limits eventual claims will be settled, and at PETROBRAS' judgment, it can be at the time of the UNIT's inspection or at mobilization after the contract is signed.......................................... d) Freeboard Certificate;............................................ e) IOPP (International Oil Pollution Prevention) Certificate;........ 77 f) IMO-MUDU-CODE Certificate - Mobile Offshore Drilling Unit - latest edition (unnecessary for Drill Ship);...................... g) Cargo Ship Safety Equipment Certificate;.......................... h) Cargo Ship Safety Construction;................................... NOTE:All documents required are to be within their period of validity.................................................... 2. INDUSTRIAL SAFETY AND ENVIRONMENTAL CONTROL............................. - Manuals and emergency plans in the Portuguese Language............ 3. STORAGE CAPACITY........................................................ - Complete floor plan of bulk movement system, specifying:.......... a) Exclusive lines to move cement;............................. b) Exclusive lines to move bentonite and baritine;............. c) Location and type of bulk line valves and their respective driving systems;............................................ d) Pneumatic lines for cleaning and clearing bulk lines;....... e) Location of the manometers;................................. f) Quantity, flow, operating pressure and location of compressors;................................................ g) Quantity, flow, operation pressure and location of the air drying Unit(s);............................................. h) Schematic drawing of each silo with their respective aeration systems and points of connection with the bulk lines....................................................... 4. FLUID CIRCULATION AND PROCESSING SYSTEM................................. - Sketch of the system emphasizing pulsation dampers (suction and tamping), safety valves, feed pumps, position of the suction lines in relation to suction sieves' tanks and filters............ 78 - Floor plan of the drilling fluid feed and discharge lines showing the flexibility in relation to the sand traps and mud tanks....... - Floor plan of the degasser instalation showing the active tank, separate processed mud and gas discharge lines, emphasizing this line's connection point with the gas discharge line............... - Floor plan of the mud tanks system, emphasizing the supply lines, gun lines, mixture funnel and centrifugal pumps interconnection lines............................................................. 5. WELLHEAD SAFETY EQUIPMENT SYSTEM........................................ - Sketch of the BOP/LMRP, specifying lines, valves and measures/dimensions............................................... - Floor plan of the kill and choke lines from the BOP to the choke manifold, specifying valves, connections, dampener chambers, anchorage points and interconnection with the other systems....... - Floor plan of the atmospheric air separator....................... - Layout of the trip tank installation, giving the following information:...................................................... a) Capacity;................................................... b) Location;................................................... c) Sensitivity;................................................ d) Measuring system;........................................... e) Scale type;................................................. f) Driller's scale visualization conditions;................... g) Supply System for the above item............................ 79 - Floor plan of the stand pipe manifold, specifying lines, valves, manometers and interconnections with the other systems............ - Inspection report on the riser, riser handling tools and connectors, telescopic joint and flexible joint, according to the API RP 2P and RP 2Q standards, with update date not exceeding 1 year.............................................................. NOTE: If the reports indicate the need of repair in some equipment, the service performance certificates will also be submitted................................................ - Biannual inspection certificate of the choke manifold, with the manufacturer's approval................................. - Biannual inspection certificate of the BOP Unit and driving system, with the manufacturer's approval.................... - Biannual inspection certificate of the BOP, with the manufacturer's approval. - Proof of technical hability of the well drilling and control personnel........................................... - To supply an internal maintenance and rust prevention program for the marine risers and kill and choke lines...... 6. ENERGY GENERATION SYSTEM................................................ - Unifilar diagram of the energy generation and distribution system. 7. STABILITY............................................................... - To submit the vessel's stability curve, updated in the proposal's conditions, in keeping with the environmental conditions.......... 8. DYNAMIC POSITIONING SYSTEM (including the moto-generators assembly, thrusters and propellers)............................................... 80 - Schematic diagram of the dynamic positioning system............... - To submit the inspection and tests procedures to be carried out at every new location. - To submit the tests and inspections procedures to be carried out at the end of each contract year.................................. 9. DRILL STRINGS AND ACCESSORIES........................................... - Inspection report on all equipment of the drill and completion strings, subs and accessories (used equipment).................... - Purchase voucher of the drill and completion strings, subs and accessories (for new equipment)................................... 10. FISHING TOOLS AND ACCESSORIES........................................... - Inspection report on all components of the fishing tools (used equipment) or purchase vouchers (for new tools)................... 11. SUNDRY SYSTEMS.......................................................... - Winches load test certificate..................................... - Description of the compressed air system, emphasizing compressors, layout of lines, valves and interconnection with the other systems..................................................... - Preventive Maintenance Plans with their respective timecharts..... - Ballast and sewer flowchart....................................... - Proof will be needed for the existence on board and for the operating capacity of all equipment and accessories listed in Attachments C and D to the chartering and service rendering contracts......................................................... NOTE: Such equipment must be in places of easy access for survey........ 81 A) RECEIPT TEST...................................................... - Proof will be needed for the existence on board and for the operating capacity of all equipment and accessories listed in Attachments C and D to the chartering and services rendering contracts. NOTE: Such equipment must be in places of easy access for survey. - The following systems, equipment and tools listed below will be checked, inspected and tested:...................... 1) DRILL STRING, COMPONENTS AND ACCESSORIES.................... - The CONTRACTOR will submit recent inspection reports, according to the specification API RP7G for the whole drill string and accessories such as, but not limited to: drill pipes, drill collars, HW, Subs, stabilizers, reamers, bumper subs, lift-sub, kelly, slips, elevators, fishing tools, etc., which proves the good conditions of the string and its accessories. The information from the reports and the general conditions of the string and its accessories will be checked by PETROBRAS by means of a sampling inspection. In the event of discrepancy between the data submitted by the CONTRACTOR and those checked by PETROBRAS, showing an inadequate condition of the string and its accessories, the CONTRACTOR will carry out another inspection, for its own account........................................... NOTE 1: Any equipment refused by the inspection will be immediately repaired or replaced by the CONTRACTOR, for its own account................................... 82 NOTE 2: For the string, components and new accessories, no inspection report will be required, documents proving that such equipment is new will be sufficient......... NOTE:3 The CONTRACTOR's equipment will be stored and arranged so as to facilitate the inspection by sampling to be carried out by PETROBRAS............... - The same procedure will be adopted for the telescopic joints and flexible joints............................ 2) EXTRACTOR OF SOLIDS......................................... The following will be examined:............................. - sieves,............................................... - dessander,............................................ - degasser-test suction and discharge................... - centrifuge (if any)................................... The operation and work pressure, as well as the existence of manometers, will be checked.............................. 3) MUD TANKS AND VALVES........................................ Waterproofness, working of the agitators, mixture funnel and depth gun, besides the existence of fixed marks to control the tanks volume will be checked.................... 4) CENTRIFUGAL PUMPS........................................... The following will be checked:.............................. 83 - working, vibration and noises;........................ - Packing (leaks);...................................... - Work pressures........................................ NOTE: Items 3 and 4 will be tested with sea water................ 5) MUD LABORATORY AND TEST EQUIPMENT........................... The existence on board and the adequacy to the requirements described in Attachments B and C to this CONTRACT will be checked..................................................... 6) DRILLING DERRICK............................................ Maintenance conditions (corrosion), fastening system and the conditions of the traveling block rails will be examined.................................................... 7) CROWN BLOCK................................................. The pulleys will be examined as to the profile wear, alignment, clearance, buckling of the axles, lubrication, etc......................................................... 8) MUD PUMPS................................................... The following will be carried out:.......................... - observation of working, vibrations, noises;........... - pressure and maximum work flows tests for the liner user;................................................. - safety valve working test;............................ - checking of the suction and discharge pulsation dampeners;............................................ - watertightness tests with nominal pressure of the mud pumps and of all manifold valves;..................... 84 - watertightness tests with nominal pressure of all manifold values of the stand pipe manifold and of the kelly hose;........................................... - random disassembling of the suction for visual inspection of the piston, sleeve, packing, valve and seat.................................................. 9) SWIVEL...................................................... The mandril, gooseneck, body, etc., will be checked and nominal pressure test with rotation will be performed....... 10) MOTION COMPENSATOR.......................................... The piston alignment, lock bar, alignment in the rail, general conditions, leaks and chains will be checked........ 11) RISER AND GUIDE LINE TENSIONERS............................. The general conditions, leaks, pulleys and cables will be inspected................................................... 12) RISER RECOIL SYSTEM/HANG OFF SYSTEM/FILL-UP VALVE (IF ANY).. The systems' operation will be checked. 13) HIGH COMPRESSORS AND AIR RESERVOIRS......................... The general conditions, leaks, lines and system yield will be checked.................................................. 14) TOP DRIVE................................................... Working tests (connection and disconnection of one or more sections of the DP's) will be carried out and the general conditions will be inspected................................ 15) KELLY SPINNER............................................... 85 The general conditions, specially the rollers' wear, and working will be checked, and connection and disconnection operation of one or more DP's will be carried out........... 16) HOOK........................................................ The general conditions and the locking system will be checked..................................................... 17) TRAVELING BLOCK............................................. The pulleys wear, axles alignment, lubrication system, retraction system, etc., will be inspected.................. 18) DRAWWORKS................................................... - The operation of the mechanical break system (brake bands), electromagnetic (distance between irons, voltage level and SCR feeder conditions), cooling system and clutches will be checked................... - The operation of the cat-heads and height limitator with the assembly/ disassembly of one or more command sections, will be checked............................. 19) ROTARY TABLE................................................ The operation in high and low, brake system, tachometer and lubrication ................................................ 20) TRIP TANK................................................... Capacity, installation site, sensitivity of the level indicator system, visualization condition and supply system will be inspected........................................... 21) HYDRAULIC TONGS AND PNEUMATIC SPIDER FOR CASING AND PNEUMATIC TONGS FOR DRILL PIPES............................. Operation tests will be made and maintenance conditions will be checked............................................. 86 22) SAND-LINE OR WIRE-LINE SYSTEM............................... - Operation of the clutches and brake will be tested by lowering the photoclinometer inside the drill string coinciding with the photoclinometer overshot test (TOTCO) will be tested. Test to be made on location before the beginning of the operations................ - The existence of an alignment guide for the sand-line cable in the drum will be checked..................... 23) CHOKE MANIFOLD.............................................. All valves with low pressure (300 psi) and in high pressure (system's work pressure). Manometers, hydraulic choke operation, manual choke, remote control panel, etc., will be tested................................................... 24) UPPER AND LOWER KELLY COCK, INSIDE BOP AND SAFETY VALVE - Drivers will be tested and work pressure tests will be made............................................... - The end connections of each element will be checked and tested with work pressure. The CONTRACTOR should have end seal plugs adequate for the test............. 25) KILL AND CHOKE LINE HOSES................................... The end connections will be checked and tested with the system's work pressure. The CONTRACTOR should have end seal plugs adequate for the test............................ 26) DRILL INSTRUMENTATION SYSTEM................................ 87 The following will be tested:............................... - geolograph;........................................... - rotary table tachometer;.............................. - manometers;........................................... - stroke counter;....................................... - level control in the mud tanks;....................... - torque indicator...................................... 27) FLARE PIPE AND BOOMS........................................ Their existence on board will be checked, analyzing the maintenance conditions of the lines by means of inspections, and the facilities for installation of the production test equipment system............................ 28) BOP SYSTEM.................................................. The following will be carried out:.......................... - pressure tests of the slide valves with low pressure and high pressure, compatible with the system......... - pressure tests of the annulars with low pressure and high pressure, compatible with the system............. - complete function test in both POD's, through all panels................................................ - choke and kill valves tested with low pressure and high pressure, compatible with the system............. - working of the shear ram valve will be checked with opening for examination of the blades conditions...... 88 - the opening and closing of all ram, annular and kill and choke valves chambers will be tested............... - the hydraulic driving unit will be checked as to: fluid used, fluid low level alarm, low air pressure and low accumulators pressure, maintenance conditions, leaks and mixing systems.................. - the volumetric capacity of accumulators and the capacity of electric and pneumatic pumps of the hydraulic Unit will be tested. - the locking system of the ram valve(s) will be tested. - the SPM valves conditions will be checked by opening and inspecting one of them, chosen at random.......... - the locking/unlocking system of the H-4 hydraulic connectors will be tested............................. - the surface and bottom accumulators' pre-charge will be checked............................................ - The operation of the following systems will be tested: o Driving back-up................................. o emergency recovery.............................. o handling........................................ 29) TRAVELING TONGS, EZY-TORQ, TORQUE SENSOR, SLIPS, ETC........ One or more sections of the drill collars and drill pipes will be assembled/disassembled to check the working of such equipment. The general maintenance conditions, chuck jaws and cables will be checked.................................. 89 30) BULK TRANSFER SYSTEM........................................ The following will be carried out:.......................... - the operation of the compressor will be checked, and noise, oil and air leaks, and maintenance state, filters and dehumidifier will be inspected............ - operation and watertightness of valves, lines and silos will be checked, looking for possible clogging.. - transfer of cement from 1 silo to the daily silo (if any) and from this to the surge-tank will be made..... 31) EMERGENCY ENERGY GENERATION SYSTEM.......................... - a black-out in the energy system generation system will be simulated to see if the emergency generator is automatically turned on............................ 32) MAIN MOTOR GENERATOR ASSEMBLY............................... The following will be carried out: - vibration, noises, insulation, leaks, maintenance, etc., will be checked................................. - generators input and output in the bus bar, synchronism and load divisions will be tested......... - load and voltage and frequency regulation will be tested................................................ 33) DESSALTER................................................... Operation and production capacity will be checked........... 34) CAT-LINES CRANES............................................ 90 The following will be carried out: - operation of the winches and maintenance of the cabled will be checked................................ - the elevation and rotation system, the operation with flying boom and pulley block and the operation of the boom height pawl will be checked...................... - the report of the last inspection carried out by the UNIT's classification society in the winches will be examined.............................................. 35) DEJECTA TREATMENT UNIT...................................... Its operation will be inspected............................. 36) TELECOMMUNICATION SYSTEM.................................... Operational tests will be made in all radio equipment existing on board, including radio-beacon................... 37) OVERHEAD TRAVELING CRANES................................... Their operation, and the maintenance conditions of cables and sliders will be examined................................ 38) DC/SCR MOTORS............................................... The maintenance conditions and insulation, as well as the collectors and brushes will be examined..................... - SCR functional test................................... 39) DIVERTER.................................................... The following will be tested:............................... 91 - flow line wing valves;................................ - diverters and insert packer lock;..................... - the control panel will be checked..................... 40) SAFETY EQUIPMENT............................................ SALVAGE..................................................... Fireproof rigid vessels (capsules, whalers):................ - lowering, motor, fuels, sprinklers, start;............ - rations, garnishing, hatches, cleaning, fire extinguisher, signaling equipment..................... Inflatable rafts:........................................... - quantity, capacity, location, height in relation to the sea;.............................................. - validity of the last inspection, means of access to the sea;.............................................. - conditions of the cocoon.............................. Jackets:.................................................... - quantity (sufficiency), location, protection, and maintenance........................................... Life-buoys:................................................. - quantity (sufficiency), location, heaving-lines, lanterns, smudge pots................................. Escape routes:.............................................. - vertical and horizontal signaling (indicative plates); - clearing, lighting(emergency)......................... WATER SUPPLY SYSTEM FOR FIRE FIGHTING....................... 92 Fire ring:.................................................. - water system for the platform;........................ - sprinklers system;.................................... - painting, corrosion, signaling, visual conditions;.... - valves, hydrants, guns................................ Fire pumps:................................................. - operation;............................................ - motor, fuel, start, panel, tests...................... FIRE FIGHTING FIXED SYSTEMS................................. - Foam system: chambers, tanks, guns, hydrants and carrier liquid;....................................... - Cylinders; conditions, reloading, retesting (CO2 or HALON, if any);....................................... - Lines and diffusers: general conditions.............. - Automatic: feeding, panels, batteries, detectors, tests................................................. - Manual: commands, interconnections, tests............ - Alarms: interconnections............................. FIRE EXTINGUISHERS - water, carbon dioxide, chemical powder (portable and carts);............................................... - distribution, location, general conditions;........... - revision, recharge, retest, control, meters, replacement........................................... FIRE POSTS.................................................. - hose, keys, sprinkler;................................ 93 - fiber boxes, general conditions, post identification;. - visual signaling: sufficiency and general conditions. EMERGENCY EQUIPMENT......................................... - autonomous breathing apparatuses, reserve bottles, breathable air fixed system, fire proximity clothing, flashlight, ax, safety belt;.......................... - distribution, location, general conditions, inventory, maintenance and replacement................ COMMUNICATIONS AND ALARMS................................... - telephone (internal, external): Operating capacity;.. - radiophony: VHF. Operating capacity;................ - portable transceptors: quantity; distribution, intrinsic safety;..................................... - intercom: quantity, distribution, and horns audibility, interconnection with the platform, coding of sound alarm tones, amplifiers;..................... - visual signaling: sufficiency, general conditions;... - fire alarm, glass breaking type: batteries, bells, tests................................................. EMERGENCY LIGHTING.......................................... - charger, batteries and lanterns....................... HELIDECK.................................................... - protection: guns, fire extinguishers, salvage equipment;............................................ - painting, protection screen, net, landing lights, safety warnings;...................................... - guest welcoming practices............................. LOAD LIFTING................................................ 94 - winches: general conditions, separation, signaling, maintenance;.......................................... - manual and electric tackles: general conditions, operation, signalling, maintenance;................... - material movement and storage areas................... TRAINING.................................................... - abandonment, fire fighting, first aid and brigade..... MANUALS AND PLANS........................................... - emergency; safety;.................................... - disclosure, knowledge;................................ - distribution, control, updating;...................... - tasks schedules for emergency and abandonment situations, including in Portuguese................... ORDER AND CLEANLINESS....................................... - installation's general aspect;........................ - particularly alarming places.......................... SMOKE, HEAT AND GAS DETECTION SYSTEM........................ - test of hydrocarbons detection sensors................ BALLAST AND SEWER SYSTEM.................................... - functional test....................................... 41) ANCHORING SYSTEM............................................ 42) DYNAMIC POSITIONING SYSTEM.................................. 43) PROPULSION SYSTEM........................................... 95 B) LOCATION MOVING TEST.............................................. To be defined between the CONTRACTOR and PETROBRAS................ C) BEGINNING OF CONTRACT YEAR TEST................................... To be defined between the CONTRACTOR and PETROBRAS................ 96 CONTRACT NO. 101.2.155.97-9................................................... ATTACHMENT "IX" PROCEDURES IN THE EVENT OF FATAL ACCIDENTS 1. If, during the period of validity of the CONTRACT, a fatal accident occurs with a CONTRACTOR's employee, the CONTRACTOR should:............. 1.1. Notify the Inspection immediately, for the proper measures;............. 1.2. Take measures so that the employee's relatives be notified with the utmost urgency on the event, giving them the social support due;........ 1.3 Formally establish an Investigation Commission, within 48 hours after the accident, in order to, in the maximum time limit of 15 days, identify the causes and recommend the measures deemed necessary to prevent similar accidents............................................... 2. The report should contain, at least, the following information regarding the accident:................................................. - description;...................................................... - exact location;................................................... - data regarding the injured persons;............................... - basic and immediate causes;....................................... - measures to be taken in order to prevent its repetition........... 3. The CONTRACTOR should guarantee the Commission enough authority and autonomy to carry out the investigations without any restrictions....... 4. A PETROBRAS' employee should participate in the Commission, appointed by the authority in charge of the operational office.................... 97 5. After conclusion of the Commission's work, it will also behoove the CONTRACTOR, at the Inspection's request, to disclose the results of the report, so as to convey the experience from the accident to other contractor companies.................................................... (All pages of the document were initialized.)................................. . - . - . - . - . - . - . - . - . - . - . - . - . - . - . - . - . - . - . - . THESE BEING the precise terms and content of the aforementioned document, I hereby set my Hand and Seal on this Translation, performed on the 5th of February, 1998, in this City of Rio de Janeiro, Federative Republic of Brazil. /s/ MARCIA BARBOSA SERRA _________________________ Marcia Barbosa Serra Sworn Public Translator 98 EX-10.1(A) 36 EXHIBIT 10.1(A) MARCIA BARBOSA SERRA Tradutora Publica Juramentada e Interprete Comercial Sworn Public Translator and Commercial Interpreter Rua Aperana, 38 apt 301 - Leblon - 22450-190 ISS: 1261003-00 - CIC: 606442227-00 Tel.: 274-3844 I, the undersigned, Sworn Public Translator and Commercial Interpreter in and for this City and State of Rio de Janeiro, Federative Republic of Brazil, registered at the Commercial Board of Rio de Janeiro under Number 97, do hereby CERTIFY and ATTEST that a document in the Portuguese Language was submitted to me for translation into English, which I performed according to my Office, as follows: Translation No. 2661/98 (On paper with letter of PETROBRAS.)./. RIDER No. 01 FOR THE ASSIGNMENT OF RIGHTS AND OBLIGATIONS ARISING FROM CONTRACT 101.2.155.97-9, ENTERED INTO BETWEEN MARITIMA PETROLEO E ENGENHARIA LTDA., SUCCESSOR OF MARITIMA NAVEGACAO E ENGENHARIA LTDA., and PETRODRILL SEVEN LTD., WITH THE CONSENT OF PETROLEO BRASILEIRO S.A.-PETROBRAS./. PETROLEO BRASILEIRO S.A. - PETROBRAS, a mixed economy company, with head office at Av. Republica do Chile 65, in the City of Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil, enrolled in the General Taxpayers Registry of the Ministry of Finance under No. 33.000.167/0001 01, henceforth called PETROBRAS, represented herein by the Executive Superintendent of Exploration and Production, Luiz Eduardo G. Carneiro, and the Company MARITIMA PETROLEO E ENGENHARIA LTDA., successor of MARITIMA NAVEGACAO E ENGENHARIA LTDA., with head office at Av. Almirante Barroso, 52, Group 3400, City of Rio de Janeiro, Federative Republic of Brazil, enrolled in the General Taxpayers Registry of the Ministry of Finance under No. 46.828.596/0001/13, henceforth called the ASSIGNOR, represented herein by its President, German Efromovich, and the company PETRODRILL SEVEN LTD., with head office in Omar Hodge Building, Wickhams Cay, Road Town, Tortola, Ilhas Virgens Britanicas, henceforth called the ASSIGNEE, represented herein by its Director, German Efromovich, have agreed to add a rider to contract 101.2.155.97-9 (AMETHYST 7), according to the following clauses and conditions:/. FIRST CLAUSE OBJECT./. 1. The present Rider has as its object:/. 1.1.1 The total assignment, as of the date of the signature of this Rider, henceforth called the ASSIGNMENT DATE, by the ASSIGNOR to the ASSIGNEE of the rights and obligations arising from Contract No. 101.2.155.97-9 and its Attachments./. 1.1.2. To change the contract value foreseen in item 5.2 of the Fifth Clause- PRICES AND VALUE./. 1.1.3. To change the redaction of the Seventh Clause-FORM OF PAYMENT./. 1.1.4. To change the Fourth Clause-PETROBRAS OBLIGATIONS, including item 4.12./. SECOND CLAUSE-RESPONSIBILITY./. 2.1. The ASSIGNEE, as of the ASSIGNMENT DATE, becomes the CONTRACTOR, being liable, before PETROBRAS for the fulfillment of all contract obligations undertaken by the ASSIGNOR, and will also have all rights arising from the Contract./. 2.2. The ASSIGNEE is liable before PETROBRAS for the fulfillment of all contract obligations undertaken by the ASSIGNOR in the Contract, as well as for eventual losses and damages arising from its acts or omissions./. 2.3. The ASSIGNOR will be jointly liable with the ASSIGNEE for the complete fulfillment of all obligations arising from the Contract./. 2.4. The ASSIGNOR, as of the ASSIGNMENT DATE, will have no right arising from the Contract, giving PETROBRAS, full and complete acquittance for any and all contract value./. THIRD CLAUSE-PRICES AND VALUE./. 3.1. The redaction of item 5.2 and its subitems becomes:/. "5.2. The total estimated value of the present Contract becomes US$ 317,145,762.45 (three hundred and seventeen million, one hundred and forty-five thousand, seven hundred and sixty-two dollars and forty-five cents), equivalent to R$ 348,035,759.91 (three hundred forty-eight million, thirty-five thousand, seven hundred and fifty-nine reais and ninety-one cents), converted at the exchange rate of R$ 1,0974/US$1,00, referring to the following charges:/. 3.2. Item 5.5 is included with the following redaction:/. "5.5. Besides the value mentioned in 5.2, the appropriation of US$100,000.00 is foreseen for the payment of eventual reimbursements"./. FOURTH CLAUSE-PETROBRAS' OBLIGATIONS./. 4.1. Item 4.12 is included, with the following redaction:/. "4.12. To adopt the measures necessary for the request to register this Contract at the Central Bank of Brazil, immediately after the receipt of the legal documents, the supply of which is the CONTRACTOR's responsibility.". FIFTH CLAUSE-FORM OF PAYMENT./. 5.1. The redaction of the Seventh Clause is changed to:/. "7.1 The payments of the rates foreseen in Attachment II and Attachment III shall be made by PETROBRAS to the CONTRACTOR in American Dollars, by bank remittance to a bank account abroad it indicates, after the present Contract is registered at the Central Bank of Brazil, 30 (thirty) days as of the date of the end of the measuring period considered, provided the CONTRACTOR has fulfilled the time limits set forth in subitem 6.3.1., for the submittal of the collection documents at the docket of the Financial Department indicated by PETROBRAS, with exception of the provision appearing in subitem 7.2.4./. 7.1.1. For the reimbursable expenses foreseen in this Contract, the instructions contained in item 7.4 and their developments should be complied with, and the payments will be made in the currency of origin of said expenses, within 30 (thirty) days after the submittal of the collection documents at the docket of the Financial Department indicated by PETROBRAS./. 7.1.2. Collection documents comprise any type of billing, such as: Invoice, Invoice with separate Bill of Sale, Service Invoice, besides others foreseen in fiscal laws./. 7.1.3. For payment purposes, the CONTRACTOR shall supply the Contract Manager, after its signature, the following information:/. a) Bank name and number;/. b) Bank branch name and code;/. c) Bank branch address;/. d) CONTRACTOR's current account number./ 7.1.3.1. Whenever a billing is submitted with information different from those indicated in subitem 7.1.3, these changes will only be considered if accompanied by a formal communication by the CONTRACTOR and shall prevail only for the specific purpose of such payment. 7.2. The collection documents shall be issued without erasures, complying with the pertinent laws in force, for submittal at the Financial Department indicated in item 7.1 of this Clause, in its original copy, accompanied by 1 (one) copy of the respective Measurement Bulletin (MB), and/or Reimbursement Document (RD), as the case may be, duly approved by this contract's Manager, containing, obligatorily, but not exclusively, the following information:/. a) Number of the collection document;/. b) Place and date of its issuing;/. c) Brief description of the object of this Contract;/. d) Indication of the number and date of this Contract;/. e) Indication of the month/year or period which the collection document refers to;/. f) Number and date of the Measurement Bulletin (MB) and/or Reimbursement Document (RD)./. g) Place of the rendering and/or execution of the chartering. In the event the chartering has been rendered in different locations, its value should be broken down by locations of performance and the period in which it was rendered at each of the locations shall be indicated;/. h) Gross amount of the collection document, by numbers and in writing;/. i) Place for payment purpose, as provided for in subitem 7.1.3 of this Clause;/. j) Signature by the CONTRACTOR'S representative, accredited before PETROBRAS, above his/her name and position typewritten or above the CONTRACTOR'S company stamp identifying him/her;/. l) In case of Rider or Letter of Agreement to the Contract which implies in payments, mention its number and date of signature, besides the data above./. 7.2.1. The omission of any of the above mentioned data will cause, within 5 (five) working days, the return of the collection documents by PETROBRAS' Financial Department./. 7.2.2. If the above situation occurs and in case the collection document shows errors, it will be returned to the CONTRACTOR, and the time limits for the payment foreseen in item 7.1 and subitem 7.1.1 shall be added to the period that becomes necessary for the explanation and re-submittal of the collection document./. 7.2.2.1. The above mentioned condition also applies in case the collection document is submitted in another department, and not as indicated in item 7.1./. 7.2.3. Independent of the data above, the invoices in foreign currency shall be also submitted in the Portuguese language , or if issued abroad, they shall be notarizes at the Brazilian Consulate, under which jurisdiction the CONTRACTOR is located, and translated by a sworn public translator./. 7.2.4. The CONTRACTOR shall, obligatorily, submit monthly, together with the invoice, the payroll of the CONTRACTOR's Brazilian crew who are involved in the chartering object of this Contract, as well as with a photocopy of the GRPS (Social Security Payment Slip), duly settled and authenticated, with the data identifying the entity to whom the service was rendered being obligatorily filled out, informing in field 8 of the GRPS (other information) PETROBRAS' name and CGC, number, date, and amount of the invoice or bill of sale referring to the chartering rendered in the month, subitems 8.9, 10.1.15, and 10.1.16 being also complied with./. 7.3. The collection documents referring to reimbursements shall also be issued, itemizing, individually, the reimbursable expenses, their total amount, such itemization also to appear in the respective Reimbursement Document (RD)./. 7.3.1. The original vouchers of the reimbursable expenses due to the CONTRACTOR, by force of the contract instrument, shall be previously submitted to the Contract Manager, for checking, besides being duly paid for by the respective supplier or service rendered, when such is the case./. 7.3.1.1. In the event the original vouchers cannot remain in PETROBRAS' possession, copies thereof may be submitted, which shall be checked by the Contract Manager, and the following text is to be placed on each original document: "COPY SUBMITTED FOR REIMBURSEMENT ON (specify date)", followed by the signature and identification by name, position and registry number, and the original are to be returned to the CONTRACTOR. In the copies that are in PETROBRAS' possession, the following text will be place on each document: "CHECKED WITH THE ORIGINAL ON (specify the data)" and the Contract Manager will sign, identifying the signature by name, position and registry number./. 7.3.1.2. The receipt, duly made formal by PETROBRAS, of any reimbursable expense voucher, does not represent the recognition of debt, nor the proof that the expense has been made./. 7.3.2. The collection of reimbursable expenses can only be made by means of issuing and submittal, by the CONTRACTOR, of the Bill of Sale for the equipment and accessories, with the respective Reimbursement Document (RD) duly attached thereto, and previously approved by the Contract Manager./. 7.3.2.1. The submittal of the collection document mentioned in subitem 7.3.2, shall comply with the provisions appearing in items 7.1. and 7.2 of this Clause./. 7.3.2.2. The vouchers shall be legal documents to explain doubts referring to the collections, which shall be settled, as a last resort, by PETROBRAS' Disbursement Office, who will be in possession of the vouchers approved by PETROBRAS to prepare the payment process./. 7.4. Eventual payments made for more or for less by PETROBRAS shall be compensated as soon as they are detected, by issuing the Debit/ Credit Notes, as the case may be./. 7.5. The amounts corresponding to reimbursable expenses, without budget allotment foreseen in this contract instrument, do not burden this contract's estimated total, but should, however, be foreseen in the Budget Programs of the Executive Superintendence of Exploration and Production (E&P)./. 7.6. The collection documents submitted by the CONTRACTOR, as well as the final collection document, shall be paid with the deduction of amounts that, at any title, under the conditions set forth in the contract, or others specially agreed upon, that are due to PETROBRAS./. 7.7. The CONTRACTOR agrees that, at PETROBRAS exclusive option, the present Contract can be paid by means of third party financing, provided the time limits, currency amounts, and place of payment, and the CONTRACTOR's rights foreseen in this Contract, are complied with"./. SIXTH CLAUSE-RESPONSIBILITY./. 6.1 The present rider brinds the parties as of the date of its signature and enters in force as of the ASSIGNMENT DATE./. SEVENTH CLAUSE-RATIFICATION./. 7.1. PETROBRAS, the ASSIGNOR and the ASSIGNEE ratify the terms and conditions of the Contract that are not incompatible with the provisions of this instrument./. And being thus agreed, the parties sign the present Rider in 4 (four) copies of the same tenor and fashion, together with the witnesses below./. Rio de Janeiro, July 10, 1998./. (Signed:) (Illegible)-Luiz Eduardo G. Carneiro./. Executive Superintendent of Exploration and Production South-Southeast./. PETROLEO BRASILEIRO S.A./. (Signed:) (Illegible) - German Efromovich./. President - MARITIMA PETROLEO E ENGENHARIA LTDA (ASSIGNOR)./. (Signed:) (Illegible) - German Efromovich./. Director - PETRODRILL SEVEN LTD. (ASSIGNEE)./. WITNESSES:/. (Signed:) Victor Archer (Rubber stamp:) Victor Archer - Administrator-Registry 012730-0./. (Signed:) (Illegible)./. (The rubber stamp and the initials of Victor Archer appeared on the first page of the document.)/. (An initial appeared on all pages of the documents.)/. .-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.- (.-THESE BEING) the precise terms and content of the aforementioned document, I hereby set my Hand and Seal on this Translation, performed on November 20, 1998 in this City of Rio de Janeiro, Federative Republic of Brazil. ------------------------ /s/ MARCIA BARBOSA SERRA Marcia Barbosa Serra Sworn Public Translator EX-10.2 37 EXHIBIT 10.2 MARCIA BARBOSA SERRA Tradutora Publica Juramentada e Interprete Comercial SWORN PUBLIC TRANSLATOR AND COMMERCIAL INTERPRETER Rua Aperana, 38 apt 301 - Leblon - 22450 - 190 ISS: 1261003-00- CIC: 606442227-00 Tel: 274-3844 I, the undersigned, Sworn Public Translator and Commercial Interpreter in and for this City and State of Rio de Janeiro, Federative Republic of Brazil, registered at the Commercial Board of Rio de Janeiro under Number 97, do hereby CERTIFY and ATTEST that a document in the Portuguese Language was submitted to me for translation into English, which I performed according to my Office, as follows: Translation No. 4017/98 (Xerox copy submitted for translation.)....................................... (On paper with letterhead of Petroleo Brasileiro S.A. - PETROBRAS.)........... CONTRACT No. 101.0.156.97-1................................................... SERVICES RENDERING CONTRACT SERVICES RENDERING CONTRACT ENTERED INTO BETWEEN PETROLEO BRASILEIRO S.A. - PETROBRAS AND THE COMPANY MARITIMA NAV. E ENG. LTDA............................................................ PETROLEO BRASILEIRO S.A. - a mixed economy company, organized and existing under Law No. 2.004, dated 10/03/53, with head office at Av. Republica do Chile, 65, City of Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil, enrolled in the General Taxpayers' Registry of the Ministry of Finance under No 33.000.167/0001-01, henceforth called PETROBRAS, represented herein by the Executive Superintendent of Exploration and Production South-Southeast LUIZ EDUARDO G. CARNEIRO, and the Company MARITIMA NAVEGACAO E ENGENHARIA LTDA., with head office at Avenida Almirante Barroso, no 42, 34th floor, City of Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil, enrolled in the General Taxpayers' Registry of the Ministry of Finance under No. 46.828.596/0001-13, henceforth called the CONTRACTOR, represented herein by its President, Mr. GERMAN EFROMOVICH, have agreed upon the present contract to render services, with the use of the Dynamic Positioning Floating Unit AMETHYST 7 and its accessories, described in Attachment I, henceforth called the Unit, according to the authorization of PETROBRAS' Executive Board (Minutes No. 4.129, Item No. 48, dated 12.19.97) the parties being bound to the terms of the Invitation to Bid No. 101.0.015.97-2 and subjected to the following Clauses and Conditions:......................................................... (End of the Qualification)...................................................... 2 FIRST CLAUSE - OBJECT 1.1. The object of the present contract is the rendering, by the CONTRACTOR, of the services of drilling and/or evaluation and/or completion and/or workover of oil and/or gas (vertical, directional and horizontal) wells, in the Brazilian continental shelf, down to a maximum depth of 5,000 (five thousand) meters, in a water depth down to 1,200 (twelve hundred) meters by using the Unit...................................... 1.1.1 For the fulfillment of the present contract, the CONTRACTOR is to maintain its base of operations in the City of Macae-RJ................ 1.2. The services object of the present contract are contained in the Continental Shelf Activities and Disbursement and Cost Plans, under the following codes: B 12000 - Boring - Production Development. A 22000 - Boring - Exploratory Drilling B 13000 - Completion and Intervention for Evaluation - Production Development. A 24000 - Intervention for Evaluation - Exploratory Drilling...................................... (End of Clause)................................................................ 3 SECOND CLAUSE - PERIOD OF VALIDITY AND DURATION................................. 2.1. PERIOD OF VALIDITY - The present contract binds the parties as of its signature.............................................................. 2.2. DURATION - The present contract will have a duration of 2,190 (twenty-one hundred and ninety) days, and can be terminated, after 1,825 (eighteen hundred and twenty-five) days have elapsed, through a notice from PETROBRAS, with at least 45 (forty-five) days in advance... 2.2.1. BEGINNING OF THE CONTRACT - The beginning of the contract will occur when the Unit is released by PETROBRAS, through a written notice, to begin the operations, after the general equipment testing foreseen in item 3.1 is carried out................................................ 2.2.2. AUTOMATIC EXTENSION - If at the end of the duration mentioned in 2.2, some operation is still being performed in a well, the duration of the present contract will be automatically extended, until the completion of the works in said well, considering as the final limit the Unit's arrival at the port or sheltered waters chosen by common agreement between the parties and, also, in case there are still PETROBRAS' equipment aboard the Unit, the completion of the withdrawal of such equipment will be considered as the final limit........................ 2.2.3. This contract may be extended for successive period, through a prior agreement between the parties, by means of an Addendum, the other contract conditions being complied with, and limited to a maximum contract period of 2,190 (twenty-one hundred and ninety) days.......... 2.3. ARRIVAL IN BRAZIL - The Unit should arrive at the port or in sheltered waters, in Macae-RJ. The beginning of operations should occur up to the date of 12.29.99, the provision set forth in item 9.1 of this contract being complied with.................................................... 2.3.1. At the port or in sheltered waters mentioned in 2.3, the customs and helideck inspections in the Unit will be carried out, as well as the loading /unloading of the CONTRACTOR's and 4 PETROBRAS' materials, and also the general equipment testing will begin as foreseen in item 3.1 of this contract......................... (End of Clause)................................................................ 5 THIRD CLAUSE - CONTRACTOR'S OBLIGATIONS 3.1. Before the beginning of the contract, the CONTRACTOR will arrange for a general test of the operating conditions of all of the Unit's equipment, as provided for in Attachment VIII, in the presence of PETROBRAS' Inspection. The occurrences found during the performance of the tests will be duly recorded in the Daily Drilling Certificate (ADP) signed by PETROBRAS ' Inspection and by the CONTRACTOR's representative. The CONTRACTOR will be released to begin operations after proving the good operating conditions of the equipment which comprise the Unit's main systems, such as, energy generation and distribution system, anchoring system, industrial safety, liquid and bulk storage, fluid circulation and processing, safety and wellhead, column elevation, rotation and handling, columns, instrumentation, formation test equipment and communications system..................... 3.1.1. The tests referred to in 3.1 will be made in a period estimated in 3 (three) days, after which the Unit will be released to sail to the first location, provided there is nothing pending in the Unit's main systems, as defined in item 3.1........................................ 3.1.1.1. In the event the tests last for a period exceeding 3 (three) days, for reasons ascribed to PETROBRAS, the rate foreseen in Ref 104 (Waiting Rate) of Attachment II, will be due, applied as of the fourth day of tests, until the Unit is released. The periods spent with equipment repair will not be calculated for the purpose of counting such duration, and also no fee will be due during such periods.............. 3.1.2. PETROBRAS may opt for the partial or total performance of the receipt tests, in sheltered waters, in the deepest water depth set forth in the contract, or still in the first location............................... 6 3.2. OPERATION - To render the services object of this contract using the Unit and the equipment listed in Attachment I, complying with the other conditions of and Attachments to this contract, according to the international standards recommended for services of such nature........ 3.2.1. SAFETY STANDARDS - The CONTRACTOR will carry out the services in strict compliance with the international safety standards for work of such nature, aiming at the protection of personnel, materials and equipment that belong to it, PETROBRAS and third parties. PETROBRAS' Safety Rules, which the CONTRACTOR states to know will be particularly complied with. In the event of conflict between PETROBRAS' standards and the CONTRACTOR's, the CONTRACTOR's Standards will prevail, unless PETROBRAS expressly requires to the contrary in each case.............. 3.3. SUPPLY OF MATERIALS - To be responsible for the purchase, when requested by PETROBRAS, in the domestic market, of other materials needed to render the services object of this contract. The purchase of the materials mentioned in this item will be submitted to the prior approval by PETROBRAS which will reimburse them as set forth in item 4.2.................................................................... 3.3.1. The materials mentioned in item 3.3 will be delivered by the CONTRACTOR to PETROBRAS, at the port or airport the latter indicates.............. 3.3.2. To submit the expense vouchers in the maximum period of 60 (sixty) consecutive days after the actual date of the purchase................. 3.4. SERVICES BY THIRD PARTIES - To request, when asked by PETROBRAS, other specialized services available in Brazil, related to the object of this contract, behooving the CONTRACTOR all measures for their actual performance, . including the obtainment of PETROBRAS' prior and express approval of the costs arising therefrom, which will be reimbursed as set forth in item 4.2.................................................. 7 3.5. PERSONNEL - To be liable, in its own name, and for its own responsibility and onus, for all personnel needed for the efficient and complete performance of the services object of this contract which will operate on the basis of 24 (twenty-four) hours a day and 7 (seven) days a week. The list of the minimum personnel to be used by the CONTRACTOR is basically the one mentioned in Attachment V......................... 3.5.1. The CONTRACTOR guarantees that the personnel mentioned in Attachment V will allow it to fully carry out the performance of the services object of this contract, running, as a result, for its own account, all charges arising from the need to increase the personnel................ 3.5.2. The CONTRACTOR will be liable for the maintenance and cost of the personnel required for the fulfillment of the operational and safety rules and regulations issued by the proper authorities, including the compliance with the provisions of the PORTOMARINST No. 1302, dated 06.26.85, and of the Navy Department, Ports and Coasts Authority....... 3.5.3. The technical personnel should possess proven competence in their specialization, and the CONTRACTOR is to supply PETROBRAS with their respective "curriculum vitae".......................................... 3.5.4. To provide for training and/or recycling of its personnel in the Course on Basic Safety Notions, held by PETROBRAS, according to the program and conditions to be agreed upon between the parties................... 3.5.4.1. For the Board Superintendents, for the Persons in Charge and for the Drillers, a qualification certificate in well control supplied by PETROBRAS or by a Training Center qualified by IADC or IWCS will be required............................................................... 8 3.6. To be liable for all charges regarding the contracting of its personnel and any additionals that are or may become due, as well as for the withholding and payment of social, labor and social security contributions set down by the Law, and other charges that may become due at any title, being for all purposes, the sole employer............ 3.6.1. Whenever requested by PETROBRAS, the CONTRACTOR will submit the documents regarding the proof of payment of its labor obligations, including social security contributions (CND - Negative Debt Certificate) and FGTS deposits, regarding its employees................ 3.6.2. To make sure that its personnel, who work in activities or operations that subject them to noxious agents, included in the list referred to in Article 58 of Law No. 8.213/91, are not retired in this special condition, according to the restriction expressly contained in Article 3rd of Law No. 9.032 dated 04.18.95.................................... 3.7. To bear all measures and expenses with displacement of personnel, such as, but not limited to, transportation from abroad to the port or airport of Macae-RJ, as indicated by PETROBRAS, and the return to the place of origin, and any and all expenses with personnel travel and stay in Brazil, insurances, medical and hospital expenses, meals, passports, as well as for extra expenses caused by delay or canceling of flights, be it due to bad weather or to the non-availability of planes................................................................. 3.8. To promote, without charges to PETROBRAS, the replacement and immediate withdrawal of any of its employees that may be required by PETROBRAS at any time, due to bad behavior, technical deficiency, inefficiency or health conditions...................................................... 3.9. Whenever requested, to train PETROBRAS' personnel in the services object of the present contract......................................... 9 3.10. All correspondence between the CONTRACTOR and PETROBRAS will be written and forwarded in Portuguese............................................ 3.11. To provide, in the Unit chartered for the performance of the services object of this contract, lodging, food, mess room services, rendered by a Brazilian company, for PETROBRAS' personnel and those of third parties at PETROBRAS' service, up to the maximum of 26 (twenty-six) persons, being agreed that the CONTRACTOR will freely supply 900 (nine hundred) meals per month. The meals exceeding this number will be paid by PETROBRAS, based on the rate set forth in the Unit Price Spreadsheet appearing in Attachment III................................ 3.11.1. The quality of the mess room services and the food supply are the CONTRACTOR's responsibility, who will maintain a permanent supervision by a male nurse on board and eventually by a qualified nutritionist. PETROBRAS may require that the CONTRACTOR takes measures in the event such services show a loss in quality standards......................... 3.12. INSURANCES - To provide, for its account, the contracting of the insurances necessary to fulfill this contract and the Brazilian laws, intended to cover its assets and its personnel, even when they are in transportation under PETROBRAS' responsibility, as well as the Civil Liability insurance for damages and losses caused to third parties, which will not imply in limiting the CONTRACTOR's liability, and it should also include PETROBRAS as a third party for the purposes of such coverage............................................................... 3.12.1. The minimum mandatory value of the civil liability insurance is of US$1,000.000.00 (one million dollars), per event, during the period of validity of this contract and of its eventual extension, which amount is to be converted into Brazilian currency on the date the present contract is signed. MARITIMA NAVEGACAO E ENGENHARIA LTDA. is to appear as co-insured in that policy........................................... 10 3.13. The franchises which may be established for the insurances mentioned in item 3.12, as well as the onus arising from the insurers' requirements and/or recommendations will fully run for the CONTRACTOR 's account.... 3.13.1. The provision of item 3.13 applies also to the insurances of transportation made by the CONTRACTOR, regarding the CONTRACTOR's equipment, tools, and materials to be transported by PETROBRAS, as set forth in item 4.4...................................................... 3.14. To keep PETROBRAS free and safe from any and all indemnity claim for damages and/or losses of any kind which the CONTRACTOR may have sustained as a result of this contract, whether or not it has made adequate and sufficient insurance for such circumstances............... 3.14.1. PETROBRAS will be equally kept free and safe from any and all indemnity claim for damages and/or losses of any kind which the CONTRACTOR may have caused to third parties for its duly proven grossly negligent action or omission, arising from this contract, whether or not it has made adequate and sufficient insurance for such circumstances.......... 3.14.2. In return, the CONTRACTOR will be kept free and safe from any and all indemnity claim for damages and/or losses of any kind, which PETROBRAS may have sustained from third parties, or has caused to third parties by its duly proven grossly negligent action or omission, as a result of this contract, whether or not it has made adequate and sufficient insurance for such circumstances....................................... 3.15. To undertake, up to the limit equivalent to US$500,000.00 (five hundred thousand United States dollars) per event, any and all liability for death or damages to persons, provided they are caused by duly proven grossly negligent action or omission on its part and/or its employees and/or personnel....................................................... 11 3.16. The CONTRACTOR waives for itself and will require from its Insurers and/or Subcontractors, in any and all insurance made as a result of this contract, the inclusion, in each policy contracted, the provision assuring the waiver of any right to subrogation against PETROBRAS...... 3.17. To submit to the contract Manager, up to 30 (thirty) consecutive days after its inception, as foreseen in item 2.2.1, the originals of the insurance policies made as a result of this contract, containing all essential data, such as insurers, time limits, period of validity, amounts insured, and coverage conditions, and with PETROBRAS appearing as co-insured, except in the civil liability insurance, of which it will participate as a third party...................................... 3.17.1. The policies mentioned in item 3.17 will contain a provision that the insurances mentioned cannot be amended and/or cancelled without PETROBRAS' prior authorization......................................... 3.18. LOSSES AND DAMAGES - The CONTRACTOR will be liable for damages to its own equipment and material, and to those which it and its agents may cause to PETROBRAS or to third parties, as a result of its duly proven grossly negligent action or omission, in the following cases:.......... 3.18.1. In the event of losses of or damages to equipment and/or materials belonging to PETROBRAS and/or to third parties, which are aboard the Unit, or during their moving between the Unit and the support vessels, the CONTRACTOR's liability will be limited to the replacement or repair of the equipment so lost or damaged due to the CONTRACTOR's or its employees' duly proven fault. However, the CONTRACTOR will not be liable for and will be kept free and safe from in the event of damages to reservoirs, indirect damages or loss of profit of PETROBRAS, losses and damages arising from pollution coming from the well, resulting from kick and/or blow-out................................................... 12 3.18.2. In case of losses and damages caused to the well, arising from the events mentioned in subitem 2.1.5 of Attachment II, the CONTRACTOR will reimburse PETROBRAS the payments it comes to make to third parties referring to cementing, logging or other services related to the object of the present contract, as well as to materials (cement, casing, bits, completion fluid materials). In the event PETROBRAS opts for the definitive abandonment of the damaged well, the CONTRACTOR will reimburse the expenses made by PETROBRAS to drill that well............ 3.18.3. In the cases mentioned in subitems 3.18.1 and 3.18.2. the limit for the CONTRACTOR's liability is of US$500,000.00 per event and its deployments............................................................ 3.19. SECRECY - To maintain complete secrecy on the data and information supplied by PETROBRAS, as well as on all of the results and analyses arising from the services referring to the present contract............ 3.19.1. All data, information and other documents, of any kind, referring to the fulfillment of this contract, are PETROBRAS' exclusive property.... 3.19.2. The CONTRACTOR and its personnel cannot disclose or supply to third parties any materials or information obtained as a result of this contract, unless expressly authorized by PETROBRAS..................... 3.19.3. The provision of this item 3.19 is a standing obligation, valid even after the termination, in any fashion, of the present contract......... 13 3.20. To be liable for the violations it commits regarding author's right and the use of materials and/or performance processes protected by trade-marks and patents, as well as for any claims arising from the bad use it makes of them, running for its account the payment of any charges, royalties, fees, commission, indemnities, and, any other expenses arising from said violation, including the legal ones......... 3.21. SEA OPERATIONS - To render the services object of this contract in strict compliance with the laws, standards, regulations and administrative rules, as well as the instructions issued by the Shipping Office or by other proper authorities, specially those regarding the spillage of oil and other residues from the Unit into the sea, being liable, as a result, for any charges arising from the violation of such laws, standards, regulations, administrative rules and instructions, the limit established in subitem 3.21.2 being complied with, and excepting the cases provided for in item 3.20 of this contract.......................................................... 3.21.1. To plan and carry out operations intended to prevent and fight oil or gas blow outs, fires, or other accidents, complying with the provision set forth in item 2.4 of the Attachment I to this contract. Although the CONTRACTOR is considered fully responsible for such operations, it is obliged to discuss the methods to be adopted with PETROBRAS, so as to find the best operating solution.................................... 3.21.2. With exception of the cases arising from kick, blow out, surging or formation testing, which the CONTRACTOR will be kept free and safe from, in the other cases of spillage of petroleum, oil and other residues in the sea, the CONTRACTOR will be liable up to the limit of US$500,000.00 (five hundred thousand dollars) per event and its deployments............................................................ 14 3.22. The storage aboard the Unit, as well as the handling aboard, and between the Unit and support vessels, of materials, equipment, drilling or completion fluid additives, chemical additives belonging to PETROBRAS or to third parties at the service of PETROBRAS, are the CONTRACTOR's responsibility............................................ 3.23. To bear all expenses, including with diesel oil and transportation of the Unit for dockages, including those arising from act of God or force majeure, as defined in the Thirteenth Clause of the contract........... 3.24. To maintain a hospital ward in the Unit with at least 2 (two) beds, provided with equipment and medicine necessary for the prompt attention to sick and injured persons, as determined by the Shipping Office, such hospital ward being subjected to periodical inspections by PETROBRAS... 3.25. The CONTRACTOR undertakes to maintain all conditions required in the bidding stage, during the performance of the services contracted....... 3.26. To maintain an agent accredited and accepted by PETROBRAS in the Unit or in a place previously designated by PETROBRAS, to represent the CONTRACTOR in the fulfillment of the contract.......................... 3.27. To comply with the requests contained in the Service Authorization(s) issued by PETROBRAS.................................................... 3.28. To allow, after negotiations between the contracting parties, the provisional installation in the chartered vessel, of complementary equipment such as, but not limited to: pipes or risers in catenary by the J-lay method, or similar, submarine manifolds, provided they do not 15 jeopardize the Vessel's safety and are in accordance with the rules of the Classification Society............................................. (End of Clause)................................................................ 16 FOURTH CLAUSE - PETROBRAS' OBLIGATIONS 4.1. To make, monthly, the payments for the services rendered by the CONTRACTOR due to the present contract, based on Attachment II and Attachment III and on the conditions set forth in Clauses Sixth: Readjustment - Seventh: Measurement - and Eighth: Form of Payment, the other Attachments, Clauses and Conditions of this contract being complied with.......................................................... 4.2. To reimburse, by means of submittal of vouchers, the expenses with materials and services of third parties, according to items 3.3 and 3.4 of this contract. The reimbursement will be comprised of:.............. a) Amount of the bill issued by the supplying and/or service rendering company;............................................................ b) Expenses actually made to place the materials in the Unit;.......... c) Cost of the insurance for the materials, if authorized by PETROBRAS. In the event PETROBRAS does not authorize such insurance, the CONTRACTOR will not be liable for losses and damages of any kind that they may sustain until their delivery to PETROBRAS at the port or airport it indicates............................................. 4.3. OPERATIONS AND LOCATIONS PROGRAM - PETROBRAS will provide the CONTRACTOR with the Operations Program, in writing and with due antecedence, and it also will notify on the locations where the services will be rendered, so that the CONTRACTOR may adopt, in due time, the measures necessary for their performance..................... 4.4. Transportation:........................................................ 4.4.1. PETROBRAS will provide transportation to the Unit of all of the CONTRACTOR's personnel involved in the rendering of the services, from the port or airport indicated by PETROBRAS in the beginning of this contract, and vice-versa. At its exclusive discretion, the transportation to be provided will be by helicopter or vessel.......... 17 4.4.2. PETROBRAS will provide transportation for the material and equipment, related to the object of this contract, from the port or airport designated, to the Unit and vice-versa................................. 4.4.3. In any circumstances foreseen in this item, the granting of insurance coverage will not be PETROBRAS' competence, and the CONTRACTOR waives immediately, for itself and for its insurers, any return action against PETROBRAS or third parties at its service, as a result of the transportation provided................................................ 4.4.4. In the event there is need to program exclusive air transportation, to survey the Unit, by the Navy and/or Shipping Office, the costs arising therefrom will be charged to the CONTRACTOR............................ 4.4.5. PETROBRAS may provide air or sea transportation for the CONTRACTOR's materials, industrial or fresh water and fuel before the beginning of the contract, as defined in item 2.2.1. The costs arising therefrom will be reimbursed by the CONTRACTOR to PETROBRAS...................... 4.4.6. PETROBRAS will provide tugs and support vessels for the Unit, from the location where the general testing of the equipment is performed, to the first location, between locations and from the last location to the Brazilian port or sheltered waters closest thereto, which will be chosen in common agreement between the parties......................... 4.4.6.1. PETROBRAS will provide the support vessels for the Unit's positioning in the locations to be drilled during the fulfillment of this contract. 18 4.4.7. PETROBRAS may provide tugs and/or support vessels to load and unload materials and to handle anchors, in a place to be defined by the parties, in cases of inspection and/or dockages, including those arising from act of God or force majeure, as defined in the Thirteenth Clause of this contract. The costs arising therefrom will be reimbursed by the CONTRACTOR to PETROBRAS......................................... 4.5. FUEL AND WATER - To supply, for its account, all fuel and water necessary for the performance of the services object of this contract, from the beginning of the contract, as provided for in subitem 2.2.1, the provisions of item 3.23 of this contract being complied with....... 4.5.1. The supply of water mentioned in item 4.5 includes also the industrial water intended for cleaning the Unit................................... 4.6. COMPLETION FLUID - To maintain the control of the - properties of the fluid by an accredited employee, as well as to control the stock of materials necessary for such purpose................................... 4.7. ANCILLARY SERVICES - To provide, at its expenses and under its responsibility, the ancillary services-referring to: cementing, formation testing, electric logging, flexitube operation, operation with nitrogen, electric wire operation, wireline operation, when they derive from PETROBRAS' own programming................................. 4.8. At its exclusive judgment, and without any co-responsibility, PETROBRAS may cooperate with the CONTRACTOR, assisting it before the Foreign Trade Department - Trade Exchange Coordinating Office (CTIC), regarding proceedings submitted to these Agencies, referring to materials and/or equipment pertaining to the rendering of the services object of this contract. Such cooperation, however, will not lessen the CONTRACTOR's liability for the obtainment of the documents and/or benefits that may be the object of the respective proceedings............................ 19 4.9. To issue Service Authorization(s) with all information necessary for their performance, such as: location, time limit, value, scope, and beginning and end dates................................................ 4.10. To notify the CONTRACTOR, in writing, on the imposition of eventual fines.................................................................. 4.11. To issue the Measurement Bulletin (MB), as set forth in the Seventh Clause: Measurement, of this contract.................................. (End of Clause)................................................................ 20 FIFTH CLAUSE - PRICES AND VALUE 5.1. For the rendering of the services object of this contract, PETROBRAS will pay to the CONTRACTOR the rates set forth in Attachment II and Attachment III to this contract, under the conditions set forth in Clauses Sixth - Readjustment, Seventh - Measurement, and Eighth - Form of Payment............................................................. 5.1.1. The contract prices include all specified tariffs, supervision, administration, taxes, fiscal emoluments and all expenses that fall directly or indirectly upon the rendering of the services, including profit, needed for its perfect fulfillment, until the end of the contract, no price revision claims being therefore valid............... 5.2. The total estimated value of this present contract is of R$39,116,746.50 (thirty-nine million, one hundred and sixteen thousand, seven hundred and forty-six reais and fifty cents)..................... 5.3. PETROBRAS does not undertake to make the payment of the total estimated in item 5.2, but of the amount corresponding to the services rendered and accepted by PETROBRAS.............................................. 5.4. In the event the Unit suffers a delay of up to 90 (ninety) days, regarding the time limit granted in item 2.3 of the present contract, the CONTRACTOR will have its total daily rate reduced by 10% (ten percent), as of the beginning of the contract, for a period equal to the number of days of delay............................................ 5.5. In the event the Unit suffers a delay greater than 90 (ninety) days, as of the time limit granted in item 2.3 of the present Contract, besides the maximum reduction of 10% (ten percent) in the total daily rate for a period of 90 days as defined in item 5.4, the CONTRACTOR will be subjected to the imposition of fines according to item 8.1 of this contract............................................................... 21 5.6. The financial resources necessary for the payment of the services object of the present contract are duly equated and specifically assured in the budget for the present fiscal year and foreseen for the following ones to cover the period for the total rendering of the services.................. (End of Clause)................................................................ 22 SIXTH CLAUSE - PRICE READJUSTMENT 6.1. The contract prices in Brazilian currency, will be readjusted yearly, after 1 (one) year as of the month when the CONTRACTOR's proposal was submitted has elapsed, for more or for less, as a result of the variation of the elements that comprise the readjustment formulae, set forth in subitems 6.2.1 and 6.2.2 below................................ 6.1.1. If, during the period of validity of this contract, new legal provisions are created which permit the reduction of the periodicity referred to in 6.1, the parties will make a new agreement regarding the contract prices, to expurgate eventual overprices arising from the periodicity originally established for the application of the readjustment........................................................... 6.2. The prices set forth in the Unit Prices Spreadsheet - Attachment III to this contract, will be readjusted by applying the following calculation formulae:.............................................................. 6.2.1. For the prices of Ref 101, 104 and 105 of the Unit Prices Spreadsheet - Attachment III:........................................................ INS USA MEQ PCR = PCI. [0.55 -------- + 0.10 ---------- + 0.35 ---- INSo USAo MEQo 6.2.2. For the price referring to extra meals, appearing in the Unit Prices Spreadsheet - Attachment III:........................................... ABR PRC = PCI . [-------] ABRo Where:.......................................................................... PCR= readjusted contract price;............................................ PCI= initial contract price, in force on the date of the CONTRACTOR's proposal;............................................................. INS= Index number of the National Consumer Price Index (INPC), published by the Brazilian Institute of Geography and Statistics-IBGE, corresponding to the months in which the readjustment is due.......... 23 INSo= Index number of the INS defined above, corresponding to the month when the CONTRACTOR's proposal was submitted;........................................ USA= value of the United States dollar selling rate in the commercial exchange in force on the 30th day of the month when the readjustment is due;............................................................... USAo= value of the same rate in force on the 30th day of the month when the CONTRACTOR's proposal was submitted;.................................. MEQ= definitive value of the Wholesale Price Index - Domestic Availability - Brazil - Production Goods - Machinery, Vehicles and Equipment - Machinery and Equipment- Column 15 of the Getulio Vargas Foundation's Magazine "Conjuntura Economica", code A0161724, corresponding to the month when the readjustment is due;................................... MEQo= definitive value of that same index, corresponding to the month when the CONTRACTOR's proposal was submitted;.............................. ABR= definitive value of the Price Index - Consumer Price - Brazil-Cost of Living - Food, Column 1, Code A0201475, of the Getulio Vargas Foundation's Magazine "Conjuntura Economica" corresponding to the month when the readjustment is due;................................... ABRo= definitive value of this same index, corresponding to the month when the CONTRACTOR's proposal was submitted............................... 6.2.3. The reference basis of the CONTRACTOR's proposal is the month of (blank)............................................................... 6.3. PETROBRAS will make the readjustment calculation, expressing its result, duly made evident, in the Measurement Bulletin (MB) of the services to which it refers, for the purposes of issuing the respective collection document........................................ 24 6.4. In the event of delay in the partial or total disclosure of the indexes, a readjustment factor will be provisionally used, calculated on the basis of the last indexes known by then, at the time the Measurement Bulletin (MB) was issued.................................. 6.4.1. The eventual difference between the definitive and the provisional readjustment will be invoiced by the CONTRACTOR after the issuing of the Readjustment Bulletin (RB) by PETROBRAS, as provided for in subitem 7.3.1 of this contract........................................ 6.5. The readjustment will not include the services performed before the date when the reason that justifies it has occurred................... 6.6. The readjustment factor will be applied with 4 (four) decimal places, without rounding off.................................................. 6.7. The CONTRACTOR states that the prices proposed for the performance of the services object of the contract have taken into account all costs, inputs, expenses and other legal obligations for the complete fulfillment of the contract provisions established.................... (End of Clause)................................................................ 25 SEVENTH CLAUSE - MEASUREMENT 7.1. Periodicity of the measurements of the services and determination of the reimbursable expenses.......................................... 7.1.1. For the services, the measurement will be made monthly, according to the procedures mentioned below, with the consequent issuing of the respective Measurement Bulletins (MB):................................ a) the initial measurement of the services will be made between the date of the beginning of this contract and the last day of the calendar month;................................................. b) The intermediate measurements of the services, corresponding to a given month, of the order "m", cover the period between day 01 and the last day of the calendar month of the order "m";........ c) The final measurement of the services will cover the period between day 01 of the month "m" and the day of the termination of this contract................................................ 7.1.2. The reimbursable expenses, if provided for in the contract, will be determined on any day of the month, according to the vouchers submitted to and accepted by PETROBRAS, and more than one determination can be made in the same period covered by the measurement........................................................... 7.1.2.1. The results found will be submitted to the CONTRACTOR on the 5th (fifth) working day, as of the submittal of said vouchers, by means of a Reimbursement Document (RD), which will be signed by the Manager of this contract, for invoicing purposes................................. 7.1.2.2. The reimbursable expenses and the deductions, if provided for in the contract, are to be individually made evident in the Reimbursement Documents (RD)........................................................ 7.2. Issuing of the Measurement Bulletins (MB)............................. 26 7.2.1. PETROBRAS, through the Manager of this contract, at the end of each period as mentioned in the letters of subitem 7.1.1 of this Clause, will carry out the measurement of the services, gathering the results found in the Measurement Bulletin (MB), for the signature of the Manager of this contract and of the CONTRACTOR, complying with the following: a) For the initial, intermediate and final measurements ending on the last day of a given month of the order "m", the CONTRACTOR will receive one of the copies of the MB up to the 5th (fifth) subsequent working day, so that he may submit the respective collection documents, as provided for in subitem 7.4.1 of this Clause;......................................................... b) For the final measurement, when the termination of the contract does not occur in the last day of the month, the CONTRACTOR will receive one of the copies of the MB, up to the 5th (fifth) working day after the termination of the contract, so that he may submit the respective collection documents, as provided for in subitem 7.4.1;............................................... c) for each measurement period of the services, only 1 (one) collection document may be issued, being understood that collection documents with partial values regarding said period will not be taken into account for payment purposes, with exception of the cases of collection of differences in readjustment, if any;........................................... d) In the Measurement Bulletins (MB), the portions regarding the basic and readjustment values, if any, will be made evident, using the last definitive factor known by then, and the deductions, if provided for in the contract..................... 7.3. Collection of the readjustment difference............................. 7.3.1. For the payment of an eventual .readjustment complement, due to the non-availability of indexes at the time the MB is issued, PETROBRAS will issue a Readjustment Bulletin (RB)............................... 27 7.3.1.1. The Readjustment Bulletin (RB) will be submitted to the CONTRACTOR on the third working day after the disclosure of the indexes applicable, to the calculation of the definitive readjustment factor.............. 7.4. Time for the submittal of collection documents........................ 7.4.1. The CONTRACTOR will submit the respective collection documents to PETROBRAS' Financial Department, as mentioned in item 8.1 of this contract, in the following conditions:................................ -------------------------------------------------------------------------- OCCASION FOR THE SUBMITTAL OF TYPE OF MEASURE-MENT MEASUREMENT COLLECTION DOCUMENTS -------------------------------------------------------------------------- -------------------------------------------------------------------------- INITIAL INTERMEDIATE MB Up to the 8th working day INTERMEDIATE AND FINAL following the last day of the performance of the serviceds, and PETROBRAS will make the payment on the 30th consecutive day, as of the final day of the period measured, the provision in subitem 7.4.1.1 being complied with.------------------ -------------------------------------------------------------------------- INITIAL INTERMEDIATE RB In case of an eventual INTERMEDIATE AND FINAL complement of readjustment difference, the RB will be issued up to the 3rd working day after the index to calculate its issuing is known and the payment will be made together with the payment of the principal, the minimum of 10 (ten) working days between the submittal of the Collection Document and the date of payment being complied with.- -------------------------------------------------------------------------- DETERMINATION OF RD In the first working day after REIMBURSABLE the DR is issued, and the EXPENSES payment will be made in a period of 30 (thirty) days, as of the day of its submittal.----------- -------------------------------------------------------------------------- 28 7.4.1.1. The payments due because of this contract, referring to the services, will always occur on the 30th day as of the end of the measured period, included in the MB's, or on the first subsequent working day, provided the CONTRACTOR fulfills the time limits for the submittal of the Collection Documents set forth herein. In the event of noncompliance, by the CONTRACTOR, with said submittal time limits, the payments will be postponed for the number of days equal to the delay in the delivery of such documents..................................... 7.5. Measurement follow-up................................................. 7.5.1. The CONTRACTOR undertakes to follow-up the measurements and the determinations carried out by PETROBRAS, offering, at that time, the impugnations or considerations it deems necessary, which will be submitted to PETROBRAS' appraisal and decision........................ 7.5.2. The CONTRACTOR's signature by its representative before PETROBRAS will imply in the acknowledgement of the accuracy of the Measurement Bulletin (MB) and/or Readjustment Bulletin (RB) for all legal purposes.............................................................. (End of Clause)................................................................. 29 EIGHTH CLAUSE - FORM AND PLACE OF PAYMENT....................................... 8.1. The monthly payments due as a result of this contract will be made by PETROBRAS to the CONTRACTOR, in Brazilian currency, 30 (thirty) consecutive days, as of the last day of the period of performance of the services, provided the CONTRACTOR submits the collection documents until the 8th (eighth) working day after the last day of the period of performance of the services........................................... 8.1.1. The payment of an eventual difference in readjustment will be made on the same day in which the payment of the respective service occurs, provided the CONTRACTOR submits the corresponding collection document up to the 5th (fifty) working day after the indexes that permit the issuing of the Readjustment Bulletin (RB) are known................... 8.1.2. The payment of reimbursable expenses, if any, will be made 30 (thirty) consecutive days after the submittal of the collection document....... 8.1.3. In the event of non-submittal of the collection documents in the time limits set above, the payment will be postponed for as many consecutive days as those corresponding to the delay in the delivery of the collection documents........................................... 8.2. The collection documents will be submitted, together with the original of the document giving rise to them (MB, RB, RD) in the Docket of the Financial Department indicated by PETROBRAS, for the purposes of checking the fulfillment of the time limits for their payment............................................................... 8.3. The collection documents will be issued without erasures, complying with the pertinent laws in force, and will contain obligatorily the following information:................................................ a) Place and date of its emission and number of the collection document;......................................................... 30 b) Number and date of signature of the contract deed;................ c) Number and date of the documents originating them (MB, RB, RD);... d) Gross value of the collection documents, both in numbers and in writing;.......................................................... e) Name and code of the banking establishment, branch and the respective code, and number of the current account of the payee, where the payments will be made;.................................. f) In order that a particular payment is made in a banking establishment different from the one indicated at the time the contract deed was signed, such amendment will obligatorily be preceded by a fax/correspondence from the CONTRACTOR or will appear in the payee's collection document......................... 8.3.1. In the event the collection document is inaccurate, it will be returned to the CONTRACTOR and the time limit foreseen in item 8.1 will be postponed for as many days as those corresponding to the delay in the submittal of such document..................................... 8.3.2. In the event of re-submittal of the collection document, as a result of a previous impugnation, this fact should appear in the history of the collection document............................................... 8.3.3. The CONTRACTOR will obligatorily submit, every month to the Manager of the contract:......................................................... a) Payroll of the CONTRACTOR's employees who are involved in the rendering of the services contracted;............................. b) A photocopy of the Social Security Payment Slip (GRPS), duly settled and certified, obligatorily filling out the data identifying PETROBRAS, informing on field "8" (other information), the name, CGC/CEI of PETROBRAS, number, date and amount of the Invoice or Bill of Sale referring to the services rendered in the month............................................. 31 c) In case of a Cooperative, to submit the payment vouchers of the amounts paid, distributed or credited to its members as a remuneration for the services rendered in fulfillment of this contract.......................................................... 8.3.4. The collection documents will not be accepted by PETROBRAS if submitted with Income Tax at Source already withheld.................. 8.3.5. It is the responsibility of PETROBRAS' disbursing office the explanation of doubts regarding the issuing of the collection documents............................................................. 8.3.6. Eventual payments made for more or for less by PETROBRAS, will be compensated as soon as they are detected, and the respective amounts will be duly corrected................................................ 8.3.7. The CONTRACTOR should indicate the place and fax number, if any, for the receipt of the "Notice of Payment Foreseen"....................... 8.4. The vouchers for the reimbursable expenses due to the CONTRACTOR as a result of this contract deed, will be previously submitted to the Manager of the contract, for checking, besides being duly settled by the respective supplier or service renderer, when such is the case.... 8.4.1. If the original cannot remain in PETROBRAS' hands, copies thereof may be submitted, which will be checked by the Inspector and/or Manager, and the following should appear in every original document: "Copy Submitted for Reimbursement on _/_/_", followed by the signature and identification by name, position and registry number, and the originals will be returned to the CONTRACTOR. The following text will appear in the copies of each document in PETROBRAS' hands: "Checked with the Original On which the Inspector and/or Manager will sign, identifying the signature by name, position, and registry number...... 32 8.4.2. In special cases of reimbursement of import costs (duties and/or expenses), the CONTRACTOR will send a letter submitting the vouchers for such expenses, together with the import proceeding, to the office responsible for its follow-up......................................... 8.4.3. The receipt, duly formalized by PETROBRAS, of any reimbursable expense voucher, does not represent the recognition of the debt, nor the proof that the expenses was made............................................ 8.4.4. The collection of reimbursable expenses will be made through the issuing of a Services Invoice, after approval by PETROBRAS of the respective Reimbursement Document-RD, which will be issued up to 5 (five) working days, as of the date of submittal of said documents.... 8.4.4.1. PETROBRAS' Inspection has 3 (three) working days to proceed with the checking of the expense voucher and to notify its approval to the CONTRACTOR, so that it may issue the Combined Invoice and Bill of Sale.................................................................. 8.4.5. The total amount of the collection document will be obtained by applying the following formula:....................................... VTR = VTD , where: ---------- I - ICP VTR = total amount to be reimbursed to the CONTRACTOR;............... VTD = total amount of the reimbursable expenses, effectively authorized;.................................................... ICP = total of the, sum of the aliquots of taxes collected, in the decimal form (ISS or ICMS, as the case may be, COFFINS and PIS/PASEP)..................................................... 33 (End of Clause)................................................................. 34 NINTH CLAUSE - FINES............................................................ 9.1. Non-compliance, by the CONTRACTOR, after ninety-one days beyond the time limit mentioned in item 2.3 of this contract have elapsed, will imply in the imposition of fine against the CONTRACTOR, in a written notice, corresponding to 30% (thirty percent) of the rate foreseen in Ref 101 of Attachment III, per day of delay........................... 9.2. In the event of non-compliance, by the CONTRACTOR, with the inspection's requirements within the time limit it may set, PETROBRAS may, by a written notice, impose against the CONTRACTOR, per day of non-compliance with such requirements, as of the end of the time limit set, a fine corresponding to 20% (twenty percent) of the rate provided for in Ref 101 of Attachment III...................................... 9.3. The penalties set forth in this Clause do not exclude any other provided for in the Laws in force and/or in this contract............. 9.4. The amount corresponding to the sum of the basic values of the fines imposed is limited to 10% (ten per cent) of the estimated total value of the present contract............................................... 9.5. The basic values of the fines will be readjusted by the readjustment factor calculated by the formula shown in subitem 6.2.1 of this contract and in force in the period of its imposition................. 9.5.1. The fines will be forwarded by the Inspection, for discount by the Disbursing Office, as soon as the pertinent definitive readjustment factors are known..................................................... 9.5.2. In the event of balance, PETROBRAS reserves itself the right to make or complement the deduction in collection document(s) related to any other contract deed eventually entered into with the CONTRACTOR, or to use any other adequate means to settle the debt, if necessary......... 35 9.6. In a written notice and without prejudice of the capacity to rescind the contract, PETROBRAS may impose upon the CONTRACTOR a compensatory fine of 100% (one hundred per cent) of the amount of the conviction, due to default of its labor, social security or tax obligations....... 9.6.1. The payment of said fine will not exempt the CONTRACTOR from the obligation to reimburse PETROBRAS for the amount imposed upon it as a result of an eventual joint conviction passed by a Labor Court or by the proper administrative jurisdictions............................... 9.6.2. The CONTRACTOR will be fined in the percentual of 5% (five percent) on the amount of the invoice in the event it does not submit the GRPS or submits it at variance................................................ 9.6.2.1. The GRPS is considered at variance if it does not have proof of payment of social security contributions of all of the CONTRACTOR's Brazilian crew working in the fulfillment of the contract............. 9.7. The CONTRACTOR may appeal against the imposition of the fine, in a declaration, within the non-deferrable time limit of 15 (fifteen) consecutive days as of the date the notice is received................ (End of Clause)................................................................ 36 TENTH CLAUSE - INSPECTION 10.1. The inspection of the services contracted herein will be carried out by PETROBRAS' representatives, and the CONTRACTOR undertakes to allow their free access to the Unit and to the service locations, and to comply immediately with the observations of such inspection, which will have ample powers to:............................................ 10.1.1. Determine the interruption of the evaluation and/or completion of the well, for the purpose of carrying out formation testing, corings, electric loggings and other services deemed necessary;................ 10.1.2. Determine, provided it comes to its knowledge and is within its capacity, the suspension of the services which perhaps are being carried out in disagreement with the good technique or which threaten the safety of persons or assets of PETROBRAS, third parties and of the CONTRACTOR itself, complying with subitem 2.1.7 of Attachment I....... 10.1.3. Refuse the use of improper or inadequate techniques, as well as the operations that do not comply with the established programs........... 10.11.4. Refuse the employment of condemned or improper materials, tools and production string components, which do not comply with PETROBRAS' and API's standards....................................................... 10.1.5. Order the withdrawal, from the worksite, of any of the CONTRACTOR's employees who, in PETROBRAS' opinion, may endanger the good performance of the services or hinder its inspecting activities....... 10.1.6. Certify on the accuracy of the information reported daily by the CONTRACTOR............................................................ 10.1.7. Notify the CONTRACTOR, in writing, on the imposition of the fines provided for in this contract, including those referring to the CONTRACTOR's action or omission....................................... 37 10.1.8. Request from the CONTRACTOR a detailed report on any accident occurred and on any operation or repair performed..................... 10.1.9. Request from the CONTRACTOR the documentation regarding the proof of payment of its labor obligations, including social security contributions (Negative Debt Certificate) and deposits in the FGTS, for the crew members.................................................. 10.2. RECORDINGS - PETROBRAS' Inspection should record its observations on the Driller's Log approved by the IADC and on the Daily Drilling Certificate (ADP), to safeguard the rights and liabilities foreseen in this contract...................................................... 10.3. During the period of validity of the contract, PETROBRAS will carry out evaluation of the CONTRACTOR's performance, covering the groups in equipment and material, human resources, installations, quality and efficiency. The results of the performance evaluations will be notified and consolidated by means of service performance certificates.......................................................... (End of Clause)................................................................. 38 ELEVENTH CLAUSE - RESCISSION.................................................... 11.1. PETROBRAS may rescind the present contract, without the CONTRACTOR being entitled to any right to indemnity and/or withholding in the following cases:...................................................... 11.1.1. Nonfulfillment, or irregular fulfillment of contract clauses, specifications, operations and Inspection's requests, provided the fact mentioned is not remedied within the time limit of 60 (sixty) days or the repeated commitment of faults in the fulfillment of the contract;............................................................. 11.1.2. Total or partial subcontracting of the object of the present contract, the association of the CONTRACTOR will another merger/division or total or partial incorporation, except if allowed for in this contract, which affects the good fulfillment of this instrument....... 11.1.3 Interruption of the services for more than 60 (sixty) days;........... 11.1.4. Decree of the CONTRACTOR's bankruptcy................................. 11.1.5. When the limit for the imposition of penalties provided for in item 9.4 of this contract is attained...................................... 11.1.6. Slowness in the performance of the works, leading PETROBRAS to prove the impossibility of completing the services within the established time limits........................................................... 11.1.7. Non-compliance with the determinations of PETROBRAS' agent appointed to follow-up and inspect the fulfillment of the contract, as well as those of his superiors................................................ 11.1.8. The dissolution of the CONTRACTOR..................................... 11.1.9. The corporate change or the modification of the company's purpose or structure, which in PETROBRAS' opinion, hinders the performance of the services;............................................................. 11.1.10. Delay in the beginning of the fulfillment of the contract for more than 180 (one hundred and eighty) days................................ 39 11.1.11. Rescission of the Chartering contract of the unit entered into between PETROBRAS and MARITIMA NAVEGACAO E ENGENHARIA LTDA.................... 11.1.12. If the limit set forth in subitem 2.1.9 of Attachment II to this contract is attained.................................................. 11.1.13. If the limits set forth in Note 2 of Ref 102 of Attachment II to this contract is attained.................................................. 11.1.14. Non-submittal of the proof of fulfillment of labor obligations towards the employees directly involved in the services object of this contract, including social security contributions and deposits in the FGTS, when requested by the Inspection, or if such default is proved.. 11.1.15. Non-submittal or submittal at variance of the GRPS, when the corresponding invoice is delivered.................................... 11.1.15.1. The rescission for this reason does not prevent PETROBRAS from imposing the respective fine, foreseen in 8.7.2;...................... 11.2. In the event of rescission of the contract deed for the reasons foreseen in 10.1, PETROBRAS:.......................................... a) will take over the object of the contract deed, on the stage and location where it is found;...................................... b) will enforce the contract guarantee, if any, for the reimbursement of the amounts of fines and indemnities due to it;. c) will withhold the credits arising from the contract deed, up to the limits of the damages caused to it;.......................... 40 11.3. After the contract is rescinded, as set forth in this Clause, the CONTRACTOR is liable, in legal and contract fashion, for the violation or inadequate performance which gives rise to the rescission, as well as for the reimbursement of damages which PETROBRAS may come to sustain............................................................... 11.4. After the contract is rescinded, PETROBRAS, at its exclusive judgment, may adjudicate the operations object thereof to whom it deems appropriate, without behooving the CONTRACTOR any consultation or interference, claim and/or indemnity, for whatever title, and the CONTRACTOR will be liable to legal and contract penalties, besides answering for damages PETROBRAS may sustain........................... 11.4.1. The CONTRACTOR is also liable for the pertinent administrative sanctions, its full defense being guaranteed.......................... 11.5. In the event PETROBRAS does not impose the right to rescind the present contract according to this Clause, it may, at its absolute discretion, withhold the payments of pending invoices, until the CONTRACTOR fulfills the contract condition it has infringed, but such fact will not represent novation nor will it generate rights that may be claimed by the CONTRACTOR.......................................... (End of Clause)................................................................ 41 TWELFTH CLAUSE - FISCAL CHARGES................................................. 12.1. Taxes (taxes, fees, emoluments, fiscal and parafiscal contributions) that are due as a direct or indirect result of the present contract, or of its fulfillment, will be the exclusive responsibility of the taxpayer, so defined in the tax rule, with no right to reimbursement. PETROBRAS, as the disbursing source, will discount and withhold within the legal time period, from the payments it makes, the taxes it is liable to by the laws in force........................................ 12.1.1. The CONTRACTOR states that, in quoting its prices, it has taken into account the taxes (taxes, fees, emoluments, fiscal and parafiscal contributions) charged on the fulfillment of this contract, and it cannot make any claim due to error on such evaluation, for the purpose of requesting a price revision or reimbursement of payments set down by the proper authority............................................... 12.1.2. Once found, during the period of validity of the contract, that the CONTRACTOR has unduly added to its prices amounts corresponding to taxes, fiscal and/or parafiscal contributions and emoluments of any kind that are not charged to the performance of the services agreed upon, such values will be immediately excluded, with the consequence, reduction of the prices practiced and reimbursement of amounts that may have been paid to the CONTRACTOR.................................. 12.2. If, during the period of validity of this contract, any of the following events occur: - creation of new taxes;............................................... - extinction of existing taxes;........................................ - changes in the aliquots;............................................. - establishment of tax incentives of any kind; and..................... 42 - exemption or abatement of federal, state or county taxes;............ which, provedly come to increase or reduce the burdens of the parties to the contract, the prices will be revised, so as to f it them into the changes made, compensating, at the first opportunity, any differences arising from such changes. However, if it is a question of tax incentives, the advantages arising therefrom will always be for PETROBRAS.............................................................. (End of Clause)................................................................. 43 THIRTEENTH CLAUSE - FORCE MAJEURE 13.1. PETROBRAS and the CONTRACTOR will not be liable for the nonfulfillment of their respective obligations in case of events that characterize an act of God or force majeure defined in the sole paragraph of Article 1.058 of the Brazilian Civil Code. Any suspension of performance due to this item will be limited to the period during which such cause or its consequences exist, and such period will be added to the duration of the contract mentioned in the Second Clause of the present contract. However, the CONTRACTOR is assured the right to receive the rate provided for in Ref 104 of Attachment III, with the exception of the exemption from payment set forth in subitem 2.1.4 of the Attachment II, and the reimbursements mentioned in this contract, and furthermore, the parties will severally assume their losses........... 13.2. If the circumstance that justify the invoking of the existence of an act of God or force majeure occurs, the party unable to fulfill its obligations will immediately notify the other party, in writing, on the occurrence and its consequences................................ 13.3. If the impediment arising from the force majeure lasts for more than 90 (ninety) consecutive days, any of the parties may opt for the termination of the contract, with both parties complying with their mutual obligations due until the date of the beginning of said impediment............................................................ (End of Clause)................................................................. 44 FOURTEENTH CLAUSE ASSIGNMENT AND TRANSFER....................................... 14.1. The CONTRACTOR cannot assign or transfer, in whole or in part, the present contract, except with PETROBRAS' prior authorization in writing............................................................... 14.2. The CONTRACTOR cannot assign or give in guarantee, at any title, in whole or in part, the credits of any kind, arising or deriving from the, present contract, except with PETROBRAS' prior authorization in writing. The prior authorization will obligatorily state that PETROBRAS imposes upon the assignee of the credits the exceptions that behooves it, mentioning expressly that the payments to the assignee will be conditioned to the fulfillment, by the assignor, of all of its contract obligations.................................................. 14.3. The occurrence of the above mentioned events, duly authorized by PETROBRAS, does not exempt the CONTRACTOR from any of its contract obligations........................................................... 14.4. PETROBRAS may assign or transfer, in whole or in part, the present contract, under commercial conditions to be agreed upon by the parties............................................................... (End of Clause)................................................................. 45 FIFTEENTH CLAUSE - CONTRACT-RELATIONSHIPS....................................... 15.1. This contract is related to another one for chartering the Unit, signed on this same date between PETROBRAS and MARITIMA NAVEGACAO E ENGENHARIA LTDA....................................................... (End of Clause)................................................................. 46 SIXTEENTH CLAUSE - INTERVENIENCE................................................ 16.1. Clause-non-applicable in this Contract.................................... (End of Clause)................................................................. 47 SEVENTEENTH CLAUSE - ACCEPTANCE................................................. 17.1. After the services are completed in strict compliance with the conditions set forth in the present deed, PETROBRAS will accept them by means of a Definitive Acceptance Deed signed by the parties........ 17.1.1. Before the signature of the Definitive Acceptance Deed the CONTRACTOR will comply with all of the Inspection's requirements regarding claims, without any charge to PETROBRAS............................... 17.1.2. The signature of the Definitive Acceptance Deed does not exempt the CONTRACTOR from the liabilities provided for in this contract and in the laws in force..................................................... (End of Clause)................................................................. 48 EIGHTEENTH CLAUSE - LIABILITY................................................... 18.1. PETROBRAS' and the CONTRACTOR'S liability for damages will be limited to the direct damages in accordance with the Brazilian Civil Code and pertinent laws, with exception of loss of profit and indirect damages, the indirect damages being limited to 100% (one hundred percent) of the total contract value.............................................. (End of Clause)................................................................. 49 NINETEENTH CLAUSE - COMPLEMENTARY DOCUMENTS------------------------------------- 19.1. The Attachments mentioned below are an integral part of the present contract and, in the event of disagreement between the Attachments and the contract, the text of the contract will prevail................... ATTACHMENTS I - Technical specifications of the Unit........................... II - Applicability- of the Rates and Incidents in the Performance... III - Unit Prices Spreadsheet........................................ IV - Responsibilities in the Performance and Mutual Obligations..... V - List of Specialized Personnel;................................. VI - Environmental Operating Conditions............................. VII - PETROBRAS' Safety Rules........................................ VIII - Radio Communication and Radio Beacon Frequency Plan............ IX - Equipment Testing Program...................................... X - Procedures in the Event of Fatal Accidents..................... (End of Clause)................................................................ 50 TWENTIETH CLAUSE - JURISDICTION................................................. 20.1. The Jurisdiction of the County of the Capital of the State of Rio de Janeiro will be competent to settle any questions arising from the Present contract, with the express waiver, by the parties, of any other, however privileged............................................. (End of Clause)................................................................. 51 AND BEING THUS AGREED, the parties sign the present deed in 3 (three) copies with the same tenor, with the witnesses below............................ Rio de Janeiro, (blank)......................................................... (SIGNED:) Luiz Eduardo G. Carneiro.............................................. LUIZ EDUARDO G. CARNEIRO - EXECUTIVE SUPERINTENDENT OF EXPLORATION AND PRODUCTION SOUTH - SOUTHEAST.................................................... PETROLEO BRASILEIRO S.A. - PETROBRAS............................................ (SIGNED:) German Efromovich..................................................... GERMAN EFROMOVICH - PRESIDENT................................................... MARITIMA NAVEGACAO E ENGENHARIA LTDA............................................ WITNESSES:...................................................................... (SIGNED:) Elaine Brabo.......................................................... CPF No. 970.702.897-15.......................................................... (SIGNED:) Luiz Carlos Brazil Rodrigues.......................................... CPF No. 610.769.457.91.......................................................... 52 CONTRACT No. 101.2.156.97-1 SERVICES RENDERING ATTACHMENT II APPLICABILITY OF THE RATES AND INCIDENTS IN THE PERFORMANCE. 1 - APPLICABILITY OF THE RATES - DEFINITION OF THE SERVICE RATES PER 24 (TWENTY-FOUR) HOUR DAY.................................................... REF 101 - OPERATION RATE - It will be applied during the activities requiring the use of the Unit, such as electric logging, formation testing, completion and workover operations, including drilling lines scouring and cutting operations.-- REF 102 - REPAIR RATE - In the periods when there is an interruption of the activities that require the use of the Unit, mentioned in Ref 101 of this Attachment and the operations for Moving the Unit between locations, Ref 105 of this Attachment, due to maintenance, including replacement of mud pump spare parts, and/or repair in the Unit's equipment, or in those which supply is the CONTRACTOR's responsibility, no rate will be due................................ NOTE 1. The repair period will be considered as of the interruption of the operation that is being performed, until the return to the same situation when the interruption occurred, except for the periods when the interruption in the repair activities occurs due to adverse sea conditions, as set forth in Note 2 of Ref. 104........................ NOTE 2. In the event the CONTRACTOR remains in Repair Rate for an accumulated total of 30% (thirty percent) of the time, for any period of 6 (six) contract months, PETROBRAS may rescind the present contract, based on subitem 11.1.14 of this contract................... 53 NOTE 3. It will be considered as repairs the occurrences due to wash outs in the drill pipes and in the other elements of the drill string, belonging the CONTRACTOR, with exception of those arising from the presence of H2S and from abnormal mechanical conditions occurred in the well.............................................................. NOTE 4. At the Inspection's discretion, for the maintenance of the BOP, the CONTRACTOR may be granted a franchise of up to 24 (twenty-four) hours between the instant the BOP is set of the test stump, until its operational withdrawal, and the moment of its movement for the next running in another well, without the CONTRACTOR entering in repair rate, provided such maintenance is carried out according to international standards. In the period within these 24 (twenty-four) hours intended exclusively for the BOP maintenance, the waiting rate (Ref. 104) will be due................................................ REF. 103 RATE ADDITIONAL (RA) - In each measurement period, as set forth in subitem 7.1.1 of the contract, the CONTRACTOR will be entitled to the receipt of a Rate Additional calculated by means of the following formulae:................ AT = 0.10 x (NT - NFM - NREP - NIPG - NTOR) x for PI less than or equal to 0.0300 TO.................................................................. AT = (0.16 - 2 x PI) x (NT - NFM - NREP - NIPG -for 0.03 less than or equal PI 0.0800 NTOR) x TO...................................................... AT = Zero .........................to PI> 0.0800 Where:.......................................................................... AT = Rate Additional............................................................ TO = Operation Rate (REF 101)................................................... PI = Unavailability Proportion, calculated with 4 (four) decimal places, being:. 54 NREP + NIPG + NTOR PI = _________________________ NT - NFM NT = Total number of days in the measurement period considered;............. NFM = Total number of days in which the act of God or force majeure occurs, as defined in the Thirteenth Clause of the contract, in the measurement period considered;....................................................... NREP = Total number of days under repair rate (Ref 102) in the measurement period considered;...................................................... NIPG = Total number of days under exemption from payment (according to item 2.1 of this ATTACHMENT) in the measurement period considered; ............................................................. NTOR = Total number of days with reduced operation rate (according to subitems 2.2.3 and 2.2.4 of this Attachment) in the measurement period considered........................................................ REF. 104 - WAITING RATE (TE) - corresponds to 95% (ninety-five percent) of the Operation Rate (TO) and which will be applied in Bad Weather, Force Majeure and waiting situations, as defined below:........................................... 1) Bad Weather Situations - in the event of stoppage of the operations when environmental conditions are so severe as to endanger the unit's operating capacity, the limitations in Attachment VI, being complied with, making the operations unstable or unsafe or preventing support vessels to have access to the Unit, or preventing the tugs' operations, at the time of change of locations, although the Unit may operate normally, in spite of the bad weather. .................................................................. 2) Force Majeure Situations - during the period when the Unit cannot operate, due to act of God or force majeure, as defined in the Thirteenth Clause of the contract, until the removal of the impediment or the rescission of the contract, as the case may be............................................... 55 3) Waiting - waiting for the arrival, maintenance or availability of materials from PETROBRAS or third parties, under PETROBRAS' responsibility, even if the maintenance is made in the Unit; waiting for daylight to carry out formation tests; waiting for orders from PETROBRAS, such as, but not limited to: change of programs, definition to proceed with the completion or other production activity, rest for PETROBRAS' team or of those of third party at PETROBRAS' service; waiting for tugs or support vessels........... NOTE 1. The period spent in disconnecting the LMRP from the BOP due to environmental conditions, will be considered as bad weather situation, until the return to the previous situation............................ NOTE 2. If a bad weather situation occurs which interrupts a repair activity, the Waiting Rate (Ref 104) with a 40% (forty percent) reduction will be due during that period.............................. REF. 105 - MOVING RATE - corresponds to 95% (ninety-five percent) of the Operation Rate (TO) and will be applied during the following periods:........... a) Beginning of the Contract - After the acceptance of the Unit's equipment operating conditions, once the general testing provided for in item 3.1. of the contract has been carried out, until the spud in of the first well; b) Between locations - After the end of the, completion or intervention operations in a well, with the arrival of the BOP or tool used in the well (the one which occurs last) in the moon pool, until the spud in or reentry in a new well (beginning of running the first tool for access to the well)..................................................................... 56 NOTE: In this period are included the DP system calibration and tests, always in each new location, and others in each contract year or at any time, when requested by PETROBRAS............................................ c) End of the Contract - After the end of the spud in or intervention operations in the last well, with the arrival of the BOP or tool used in the well (the one which occurs last) in the moon pool, until the Unit's arrival in a sheltered waters location, chosen in common agreement between the parties, or, if there are PETROBRAS' equipment still aboard, until the withdrawal of such equipment from the Unit................................ 2 - INCIDENTS IN THE PERFORMANCE................................................ 2.1. Exemption from Payment - PETROBRAS will be exempted from the payment of the rates foreseen in this Attachment, during the period in which occurs:............................................................... 2.1.1. Interruption of the services due to the CONTRACTOR's duly proven fault arising from operational error and/or lack of material or equipment, inclusive due to the loss of equipment or subaquatic spare parts...... 2.1.2. Stoppage of the services and/or of the Unit due to measures related to impositions by made the insurers...................................... 2.1.3. CONTRACTOR's refusal to operate under the conditions foreseen in Attachment VI - Environmental Operating Conditions.................... 2.1.4. Stoppage of the services and/or of the Unit for inspection or dockage purposes, including surveys and dockages arising from act of God or force majeure, as defined in the Thirteenth Clause of the contract, the corresponding expenses also running for the CONTRACTOR's account.. 57 NOTE 1. The exemption from payment will begin in the moment there is an interruption of the operational continuity object of this contract, even if the withdrawal of all or part of PETROBRAS' and/or the CONTRACTOR's cargo becomes necessary for the inspection and/or dockage. NOTE 2. The end of the exemption from payment, due to the inspection and/or dockage, will occur:.................................................. a) On the return to the same location, the moment the operations returns to the previous situation;............................... b) On the mobilization for another location, the moment the Unit starts sailing after PETROBRAS' and/or the CONTRACTOR's materials have been put back on board...................................... 2.1.5. Occurrence of kick, drill string sticking, loss of circulation, fishing or abandonment, caused by the CONTRACTOR's duly proven action or omission, from the moment the problem was ascertained, until the return to the situation prior to its occurrence, or displacement to another location, in the event of abandonment......................... 2.1.5.1. The exemption from payment referred to in 2.1.5 will be limited to a period of 15 (fifteen) days, per event, after which the reduction foreseen in subitem 2.2.3 of this Attachment will be applied.......... 2.1.6. Occurrence of blow out caused by the CONTRACTOR's duly proven action or omission, from the moment the problem was ascertained, until the return to the situation prior to its occurrence................................ 58 2.1.6.1. The exemption from payment referred to in item 2.1.6 will be limited to a period of 45 (forty-five) days, after which the reduction foreseen in subitem 2.2.4. of this Attachment will be applied......... 2.1.7. Suspension of the services, determined by PETROBRAS' Inspection, based on item 10.1.1 of the contract........................................ 2.1.8. Interruption of the operations due to a failure occurred- in any of the Unit's equipment, at the time of the testing to be carried out according to item 3.1 of the contract................................. 2.1.9. In the occurrence of events of exemption from payment foreseen in subitems 2.1.1, 2.1.2, 2.1.3, and 2.1.7, for a total accumulated period of time exceeding 30% (thirty percent) in any 6 (six) month period, PETROBRAS may rescind the present contract, based on its subitem 11.1.13....................................................... 2.2. Reduction in the Operation, Waiting and Movement Daily Rate. The rates foreseen in this Attachment will be reduced in the following cases:................................................................ 2.2.1. Total or partial inoperativeness or malfunction of any equipment which delays or hinders the operations, such as, but not limited to, winches, kelly spinner, geolograph, current meter, air compressors, shale shaker, mixing pumps, mud laboratory equipment and bulk receipt and transfer systems, are reason for the reduction of the daily rate foreseen in Ref 101, in 1% (one percent), cumulative per equipment, provided the CONTRACTOR is notified in writing in the Daily Drilling Certificate (ADP), by PETROBRAS' Inspection and which, after the time limit the latter has set to repair said equipment, such repair has not been made............................................................. 2.2.2. Low Efficiency - Reference Rates 101 and 105 of this Attachment will suffer a 20% (twenty percent) reduction, in the event low efficiency is verified, according to the operating efficiency parameters listed below. Such reduction will be applied during the whole corresponding activity period in which low efficiency is verified:.................. 59 Operating Parameters: - - - Maneuver of the drill string in a cased well (except BHA):................ o Inside the riser and 20" casing = 500 m/h........................... o Inside the 13 3/8" casing = 600 m/h................................. o Inside of 9 5/8" casing = 700-m/h................................... - - - Break of DP's per unit = 25jt/h........................................... - - - Casing string - run in the sea/inside the riser/previous casing (joints approximately 12 m long).................................................. o 30" Casing - 2 jt/h o 20" Casing - 5 jt/h o 13 3/8" Casing 13 jt/h o 9 5/8" Casing 18 jt/h o 7" Casing - 15 jt/h - - - Running of driller riser, excluding normal time for testing (50 ft joint): 45m/h............................................................. - - - Pulling of drilling riser (50 ft joints): 60 m/h.......................... - - - Installation or pulling of the kill/choke lines/ telescopic joint/stretchers: 6.0h.................................................... - - - Diverter installation or pulling: 2.Oh.................................... - - - Assembly of the dampening lines in the M.R.: 1.5h......................... - - - Assembly of the flexitube equipment: 5.0h................................. - - - Assembly of the production tail: 2.0h..................................... 60 - - - Tubing running or pulling, per unit - 150 m/h............................. - - - Tubing running or pulling per section - 300 m/h Completion risers running or pulling - 50 m/h............................................... - - - Assembly of terminal head and slings -2.0 h............................... - - - Moving of WCT to/from the moon pool - 3.0 h............................... - - - Moving of tree cap or tree running tool to/from the moon pool - 2.5h...... - - - Assembly of lubricator and wire line BOP - 1.5h........................... NOTE: The above mentioned operating parameters are based on normal weather conditions............................................................. 2.2.3. Beginning on the 16th (sixteenth day), inclusive, of the occurrence of kick, drill string sticking, loss of circulation or fishing, caused by the CONTRACTOR's duly proven action or omission, until the return to the situation prior to its occurrence, the applicable rate will be reduced by 50% (fifty-percent)........................................ 2.2.4. Beginning on the 46th (forty-sixth) day, inclusive, of the occurrence of Blow-out caused by the CONTRACTOR's duly proven action or omission, until the return to the situation prior to its occurrence, the applicable rate will be reduced by 50% (fifty percent)................ 2.3. Period of Validity of the Contract Rates - the contract rates set forth in this Attachment will apply in the period set forth below:.... a) Beginning: release of the Unit, by PETROBRAS, to sail to the first location, after the equipment general testing foreseen in item 3.1 of the contract has been carried out, with the exception of the provision in its subitem 3.1.1.1.......................... b) End: after the end of the completion of the last well, with the Unit' s arrival at a port or sheltered waters chosen by common agreement between the parties, and if there are PETROBRAS' equipment still aboard, with the withdrawal of such equipment from the Unit.................................................... 61 2.4. Blow-Out - PETROBRAS will be responsible for the well control operation costs, in the event of blow-out and caving caused by the blow-out. Such provisions apply only to the well control costs and do not apply to the loss of assets, lesions and/or damages caused by the blow-out, which are protected by the provisions of the pertinent items of this contract. The CONTRACTOR undertakes to place at PETROBRAS' disposal all of its resources in personnel and equipment related to this contract, without any additional charges to PETROBRAS. If the CONTRACTOR has contributed with duly proven action or omission for the occurrence of the accident, no rate will be due, until the solution of the problem, subitems 2.1.6 and 2.2.4 of this being complied with............................................... (End of Attachment)............................................................. 62 - - -------------------------------------------------------------------------------- CONTRACT No. 101.2 156.97-1..................................................... ATTACHMENT III - UNIT PRICES SPREADSHEET SERVICES RENDERING - - -------------------------------------------------------------------------------- UNIT PRICES SPREADSHEET - - -------------------------------------------------------------------------------- OBJECT OF BID: Services of Drilling, Completion, Evaluation and Workover of of Oil and Gas Wells, by means of the use of a Floating Unit, provided with Dynamic Positioning System. - - -------------------------------------------------------------------------------- PLACE OF OPERATION: Brazilian Continental Shelf and International Waters. - - -------------------------------------------------------------------------------- UNIT'S NAME: AMETHYST 7 - - -------------------------------------------------------------------------------- COMPANY'S NAME: MARITIMA NAVEGACAO E ENGENHARIA LTDA. - - -------------------------------------------------------------------------------- CODE ITEMIZATION UNIT UNIT PRICE (R$) - - -------------------------------------------------------------------------------- 07.201.351 Operation Rate (Ref. 101) Day 15,729.00 - - -------------------------------------------------------------------------------- 07.201.358 Repair Rate (Ref. 102) Day No rate will be - - -------------------------------------------------------------------------------- 07.201.362 Waiting Rate - Bad Weather (Ref. 104.1) Day (95% of Ref. 101) - - -------------------------------------------------------------------------------- 07.201.363 Waiting Rate - Force Majeure (Ref. 104.2) Day (95% of Ref 101) - - -------------------------------------------------------------------------------- 07.201.364 Waiting Rate - Waiting (Ref. 104.3) Day (95% of Ref. 101) - - -------------------------------------------------------------------------------- 07.201.366 Movement Rate - (Ref. 105) Day (95% of Ref. 101) - - -------------------------------------------------------------------------------- 09.252.008 Meals (Item 3.11 of Serv. Rendering Cont.) Each 20.00 - - -------------------------------------------------------------------------------- SIGNATURES DATE OF THE PROPOSAL - - -------------------------------------------------------------------------------- PETROBRAS CONTRACTOR 10/08/97 Andre de German Efromovich Mesquita Pinto - - -------------------------------------------------------------------------------- (Rubber stamp: Andre de Mesquita Pinto - Register No. 014177.3.)............... 63 CONTRACT No. 101.2.156.97-1..................................................... SERVICES RENDERING ATTACHMENT IV RESPONSIBILITY IN THE PERFORMANCE AND MUTUAL OBLIGATIONS 1 - RESPONSIBILITIES IN THE PERFORMANCE........................................ 1.1. The CONTRACTOR should provide, at its own expenses, pipe inspection according to API-RP 7 G Standard for drill string elements in use, at every 15,000m drilled. This inspection should be necessarily made by personnel accredited by PETROBRAS, and accompanied by PETROBRAS' Inspection which will attest the drill string conditions in accordance with the results of said inspection. The drill string elements rejected by the Inspection will be immediately repaired and/or replaced by the CONTRACTOR, who will undertake the corresponding costs................................................................. 1.1.1. The CONTRACTOR should make provisions so that the same numbering of the parts is maintained for the period of validity of the contract.... 1.1.2. The reports on the inspections made on the drill string, riser column, and handling equipment will be submitted to PETROBRAS immediately after their performance............................................... 1.1.3. The CONTRACTOR should maintain a control of the elements of the string used in each well, recording at each maneuver, in the driller's log, which parts belong to the BHA in use, mentioning, the inspection report numbering...................................................... 64 1.1.4. The CONTRACTOR will provide, for its own cost, for the inspection of the drill string, when requested in writing by PETROBRAS, in the event of abnormal occurrences, such as wash-out or frequent string breaks... 1.1.5. The CONTRACTOR will provide, for its own cost, for the inspection according to API RP-8B standard, in each contract year, in all drill string handling equipment, such as, but not limited to, slips, elevators, travelling tongs, hook, elevator arms, spiders, drilling winch, etc. This inspection should be necessarily accompanied by PETROBRAS' Inspection which will attest the drill string conditions in accordance with the results of said inspection. The equipment rejected by the Inspection will be immediately repaired and/or replaced by the CONTRACTOR............................................................ NOTE: The same procedure described in 1.1.5 will be applied to the riser column and to its handling tools, complying with standard API RP2K. 1.2. Casing - The CONTRACTOR should measure and run the conductors and the casing strings in accordance with the drilling programs established by PETROBRAS.......................................................... 1.2.1. The CONTRACTOR will keep the casing pipes with their respective protectors............................................................ 1.2.2. The CONTRACTOR will exert its best efforts to remove all recoverable casing, when the well is abandoned.................................... 1.3. Cementing, Formation Testing and Electric Logs - the CONTRACTOR will provide facilities and give assistance to third parties, in charge by PETROBRAS, for the performance of cementing, electric log, drill string testing, and other related services, complying with the programs and safety rules set down by PETROBRAS....................... 65 1.4. Fishing - the CONTRACTOR should carry out all fishing operations that may become necessary.................................................. 1.5. Subsurface Pressures - the CONTRACTOR will exert its best efforts to control subsurface pressures, always maintaining all safety equipment, including the ancillary ones, in good operating conditions, so as to avoid contamination of the drilling fluid by hydrocarbons and fires resulting from blow-outs.............................................. 1.6. Well Completion and Abandonment - the CONTRACTOR will complete or abandon the wells in safety conditions, according to the programs set down by PETROBRAS..................................................... 1.7. Drilling Reports - the CONTRACTOR undertakes to inform daily to PETROBRAS, until 01:00h of the following day, on the progress of the operations, weather conditions, bulk and liquid stock consumption, and the status of the equipment that comprise the vessel's dynamic positioning system, and of others that the Inspection considers necessary, by means of bulletins, reports and records approved by the IADC and/or required by the Inspection................................ 1.7.1. The duration of the delays or wastes of time, their reasons, and other facts deemed important, will be recorded in detail in the Daily Drilling Data......................................................... 1.7.2. Whenever requested by PETROBRAS, the CONTRACTOR will submit detailed reports on the progress of the operations carried out, or on any accident that may have occurred....................................... 1.8. The CONTRACTOR undertakes to inform immediately to PETROBRAS, Inspection when the Unit enters in a Degraded State................... 1.8.1. The following situations are considered Degraded State: (to be defined in common agreement between the parties).............................. 66 1.8.2. In the event of non-fulfillment of Clause 1.8, and the Unit comes to enter into yellow alert or red alert, a 20% (twenty percent) fine will be charged on the operation rate during the whole period in which the abnormality persists.................................................. 1.9. The CONTRACTOR undertakes to measure the sea current profiles (intensity and direction with reference to the true North) from the surface of the sea down to the sea bottom, carried out at 0600 and 1200 GMT (Greenwich Mean Time), and to deliver daily the data obtained to PETROBRAS. Such profiles should obligatorily cover the following depths: 20, 50, 150, 200, 250, 300, 350, 400m, and at every 100 (one hundred) meters thereafter, until the last depth investigated corresponds to 5 (five) meters from the bottom of the sea............. 1.9.1. The data should be delivered to PETROBRAS' Inspector, in disk and in a format according to PETROBRAS' instructions........................... 1.10. Maintenance and Conservation - the CONTRACTOR will be responsible for the maintenance, conservation and cleaning services of the Unit and of all existing equipment and installations, maintaining all safety devices in perfect operating and adjustment conditions................ 1.10.1. The CONTRACTOR undertakes to keep and maintain PETROBRAS's materials and equipment, aboard the Unit, as well as all that are object of the loading and unloading operations in the support vessels............... 1.11. Ancillary Services in equal price, time limit and availability conditions, the CONTRACTOR should give preference to the ancillary services rendered by Brazilian companies, when they become necessary for the rendering of the services object of this contract............. 67 1.12. Lubricants - to preferably use lubricants of the make PETROBRAS DISTRIBUIDORA-BR, submitting a justification in the event it uses another make.......................................................... 1.13. Wellhead inclination - the wellhead will not be installed with inclinations exceeding 1 1/2 degrees (one and a half degree). If, by the Inspection's decision, the well continues to be drilled with an inclination exceeding that limit, the possible wear of the inner parts of the BOP, Lower Marine Riser, Adapter Riser and Spool, resulting therefrom, will be PETROBRAS, responsibility, provided the CONTRACTOR proves that said wear resulted from the operation in that well with wellhead inclination exceeding 2 degrees (two degrees)................ 1.14. The CONTRACTOR should submit a description of its operating procedures for the events of disconnection, formation testing, and BOP and choke manifold testing...................................................... 1.14.1. The procedures to be adopted will be discussed and approved by PETROBRAS............................................................. 1.15. The Board -Superintendents, Tool Pushers, and Drillers will be required to have proven technical competence in kick control, attested by a certificate of training in an entity recognized by PETROBRAS..... 1.16. The CONTRACTOR should carry out well shutoff training exercises every week, on an occasion to be agreed upon with the Inspection, and according to the rules in force in PETROBRAS, which operation should be entered in the Driller's Log....................................... 1.16.1. The CONTRACTOR should submit a Safety Project for BOP, Choke Manifold and in well shutoff training test, which will be approved by PETROBRAS' Inspection................................................. 1.17. Drill Riser - the CONTRACTOR will maintain the drill riser, inner joints perfectly clean and free from debris and/or rust............... 68 1.17.1. The CONTRACTOR should perform the inner cleaning of all drill riser joints, using the proper tool and compressed air, whenever the operation following the riser string run is a completion and/or workover operation.................................................... 69 CONTRACT No. 101.2.156.97-1..................................................... 2. MUTUAL OBLIGATIONS - - -------------------------------------------------------------------------------- DESCRIPTION ON ACCOUNT OF SUPPLIED BY - - -------------------------------------------------------------------------------- PET CONT PET CONT - - -------------------------------------------------------------------------------- 1. Cementing, logging, formation X X and X and/or production tests, directional drilling, perforating, wireline, nitrogen unit, flexitube, etc. - - -------------------------------------------------------------------------------- 2. Welding services necessary for X X drilling, completion, well abandonment and maintenance operations. - - -------------------------------------------------------------------------------- 3. Technical supervision for X X manufacturing and control of drilling fluid, completion. - - -------------------------------------------------------------------------------- 4. CONTRACTOR's land support X X base (office and storehouse). - - -------------------------------------------------------------------------------- 5. Handling and storage of X X materials and equipment belonging to or supplied by the CONTRACTOR on land or in the Unit. - - -------------------------------------------------------------------------------- 6. Handling and storage of X X materials and equipment of PETROBRAS or third parties, aboard the Unit. - - -------------------------------------------------------------------------------- 7. Land transportation, cargo X X loading and unloading of materials under the CONTRACTOR's responsibility. - - -------------------------------------------------------------------------------- 8. Fishing services. X X - - -------------------------------------------------------------------------------- 9. Cleaning and painting services X X aboard the Unit, including those of PETROBRAS' materials and equipment installed in the Unit. - - -------------------------------------------------------------------------------- 10. Mess room, hostelry and meal supply services: - - - CONTRACTOR's personnel X X - - - PETROBRAS personnel (up to 1300 X X meals a month) - - - PETROBRAS personnel (exceeding X X X 900 meals a month) - - -------------------------------------------------------------------------------- 11. BOP and riser lines tests, X X not programmed, carried out with the Cementing Unit. - - -------------------------------------------------------------------------------- 12. Operations with special tools. X X - - -------------------------------------------------------------------------------- 13. Air or sea transportation X X of the CONTRACTOR's equipment and personnel in the area of operation. - - -------------------------------------------------------------------------------- 14. Air or sea transpiration X X or X of the CONTRACTOR's personnel in the area of operation, besides those programmed for shift changes and Supervision personnel. - - -------------------------------------------------------------------------------- 70 - - -------------------------------------------------------------------------------- 15. Air or sea transportation X X programmed but not used by the CONTRACTOR, without prior notice to PETROBRAS. - - -------------------------------------------------------------------------------- 16. Air or sea transportation X X of the CONTRACTOR's material and/or personnel, in an emergency character, due to the CONTRACTOR's failure or lack of programming. - - -------------------------------------------------------------------------------- 17. All customs expenses, fees, X X including agent services, licenses, taxes or similar charges regarding the import or shipment to the Unit of all equipment, spare parts and consumables of the CONTRACTOR. - - -------------------------------------------------------------------------------- 18. All expenses, including those X X with licenses, taxes or similar charges regarding the vessel's adaptation and operation in accordance with the Laws, Rules, Decrees, Administration Rules and Instructions in force in Brazil. - - -------------------------------------------------------------------------------- 19. Services of submarine X X inspection, measurement, intervention, etc. with a remote operated submarine vehicle. - - -------------------------------------------------------------------------------- 20. Services to interconnect the X X boom lines with the burners. - - -------------------------------------------------------------------------------- 21. Special repair and recovery services with qualified welding in equipments and lines belonging to: a) PETROBRAS X X b) CONTRACTOR X X - - -------------------------------------------------------------------------------- 22. Communication services via satellite, when used by: - PETROBRAS X X or X - the CONTRACTOR X X or X - - -------------------------------------------------------------------------------- 23. Maintenance of communication X X or X service via satellite - - -------------------------------------------------------------------------------- 24. Rental or Brasilsat X X or X satellite signal - - -------------------------------------------------------------------------------- 25. Rental of satellite signal X X for the DGPS - - -------------------------------------------------------------------------------- 26. Services in the burners supplied by the CONTRACTOR. - Operation during production tests X X - Maintenance and repairs X X - - -------------------------------------------------------------------------------- 71 - - -------------------------------------------------------------------------------- 27. Services for the Remote | | | | | | | | | | - Operation Vehicle (ROV: | X | | X | | Installation, operation, | | | | | maintenance and removal of | | | | | the vehicle | | | | | - Welding services and adaptation | | X | | X | work for the installation and | | | | | removal of the vehicle, winch, | | | | | command cabin, storehouse and | | | | | workshop | | | | | - - -------------------------------------------------------------------------------- (End of Attachment)------------------------------------------------------------- 72 CONTRACT No. 101.2.156.97-1----------------------------------------------------- ATTACHMENT "V" LIST OF (MINIMUM) SPECIALIZED PERSONNEL ABOARD - - - Captain or Barge 1 - - - Tool Pusher (1 superintendent on board) 2 - - - Driller 2 - - - Assistant Driller 2 - - - Derrickman 2 - - - Roughneck 6 - - - Crane operator 2 - - - Area Man 8 - - - Welder 2 - - - Watchstander 2 - - - Subsea Engineer 1 - - - Mechanic 1 - - - Assistant Mechanic 1 - - - Electrician 1 - - - Assistant Electrician 1 - - - Radio Operator (Portuguese speaking) 2 - - - Male nurse 1 - - - Storekeeper 1 - - - Safety guard 1 NOTE: Supplementary personnel will be supplied according to the CONTRACTOR's conveniences and needs or to comply with the requirements of government laws.------------------------------------------------------------------ 73 CONTRACT No. 101.2.156.97-1----------------------------------------------------- ATTACHMENT "VI" ENVIRONMENTAL OPERATING CONDITIONS (PERMISSIBLE LIMITS FOR ENVIRONMENTAL CONDITIONS ACTING SIMULTANEOUSLY) ------------------------------------------------------------------------------- PITCH OR OPERATION HEAVE ROLL WIND WAVES CURRENT (feet) (Degrees) (MPH) (feet) (knots) ------------------------------------------------------------------------------- Conductor's jetting/driving 2.0 2.5 30 3.0 1.4 ------------------------------------------------------------------------------- Drilling 2.5 3.0 30 3.0 1.4 ------------------------------------------------------------------------------- Casing running 2.0 3.0 30 3.0 1.4 ------------------------------------------------------------------------------- Casing hanger setting 1.5 2.0 30 2.1 1.4 ------------------------------------------------------------------------------- BOP running 1.5 1.5 19 2.1 2.5 ------------------------------------------------------------------------------- BOP setting 3.5 1.5 19 2.1 1.4 ------------------------------------------------------------------------------- Maneuvering 3.5 3.0 44 8.5 1.4 ------------------------------------------------------------------------------- LMPR disconnection 7 4 51 10.5 2.5 ------------------------------------------------------------------------------- LMRP connection 1.5 1.5 19 2.1 1.4 ------------------------------------------------------------------------------- Formation testing 3.5 4.0 44 8.5 1.4 ------------------------------------------------------------------------------- Operating with boats 2.5 3.0 39 6.7 1.4 ------------------------------------------------------------------------------- Running the WCT (lay-away) 1.5 1.5 19 2.1 2.5 ------------------------------------------------------------------------------- Running the WCT (without lines) 1.5 1.5 19 2.1 2.5 ------------------------------------------------------------------------------- Operation with flexitube 2.0 3.0 30 5.0 1.4 ------------------------------------------------------------------------------- Operation with wire-line 3.0 4.0 44 8.5 1.4 ------------------------------------------------------------------------------- Operation with BAP 2.5 3.0 39 6.7 1.4 ------------------------------------------------------------------------------- NOTE: These data may be corrected/adjusted later and in common agreement, considering the Unit's operating performance--------------------------- 74 CONTRACT No. 101.2.156.97-1----------------------------------------------------- ATTACHMENT "VII" PETROBRAS' SAFETY RULES 1. Service Rule No. 46/71: o Safety Rules for Offshore Operations. 2. Service Order No. 01/72: o Operational Safety Rules - Continental Shelf. 3. Service Rule No. 41/72: o Electricity - Safety Rules 4. Service Order No. 01/76: o Industrial Safety Rules (general) o Industrial Safety Rules (Drilling) o Industrial Safety Rules (Production) 5. General Safety Manual: o Safety and Environmental Instruction for Contractors (E&P - BC). 75 CONTRACT NO. 101.2.156.97-1 ATTACHMENT VIII EQUIPMENT TESTING PROGRAM In order to carry out the Unit's equipment testing in an easier and more agile manner, the CONTRACTOR is to submit to PETROBRAS, as quickly as required the following documents:............................................... 1. CERTIFICATES.............................................................. a) Survey and Appraisal Report, updated and valid for the fiscal year regarding the Unit offered, issued by one of the entities: ABS, NOBLE & DENTON, DNV, LLOYDS or BUREAU VERITAS, and if the report is issued abroad, it will be translated into Portuguese by a sworn public translator and notarized in the Brazilian Consulate.......... b) Classification or Class Confirmation Certificate for hull and equipment, compatible with the proposal submitted (certified copy);. c) Report on claims from the classification societies mentioned in the Class Confirmation Certificate (in the event there are claims);..... NOTE: PETROBRAS will evaluate the above mentioned documents and will mention in what time limits eventual claims are to be settled, and at PETROBRAS' judgment, it can be at the time of the Unit's inspection or at mobilization after the contract is signed........................... d) Freeboard Certificate;.............................................. e) IOPP (International Oil Pollution Prevention) Certificate;.......... f) IMO-MUDU-CODE Certificate - Mobile Offshore Drilling Unit - latest edition (unnecessary for Drill Ship);....................... g) Cargo Ship Safety Equipment Certificate;............................ 76 h) Cargo Ship Safety Construction;..................................... NOTE: All documents required are to be within their period of validity. 2. INDUSTRIAL SAFETY AND ENVIRONMENTAL CONTROL............................... - Manuals and emergency plans in the Portuguese language.............. 3. STORAGE CAPACITY.......................................................... - Complete floor plan of bulk movement system, specifying:............ a) Exclusive lines to move cement;..................................... b) Exclusive lines to move bentonite and baritine;..................... c) Location and type of bulk line valves and their respective driving systems;............................................................ d) Pneumatic lines for cleaning and clearing bulk lines;............... e) Location of the manometers;......................................... f) Quantity, flow, operation pressure and location of compressors;..... g) Quantity, flow, operating pressure and location of the air drying unit(s);............................................................ h) Schematic drawing of each silo with their respective aeration systems and points of connection with the bulk lines................ 4. FLUID CIRCULATION AND PROCESSING SYSTEM................................... - Sketch of the system emphasizing pulsation dampers (suction and tamping), safety valves, feed pumps, position of the suction lines in relation to the suction sieves' tanks and filters................ - Floor plan of the drilling fluid feed and discharge lines showing the flexibility in relation to the sand traps and mud tanks......... 77 - Floor plan of the degasser installation showing the active tank, separate processed mud and gas discharge lines, emphasizing the connection point of this line with the gas discharge line........... - Floor plan of the mud tanks system, emphasizing the supply lines, gun lines, mixture funnel and centrifugal pumps interconnection lines............................................................... 5. WELLHEAD SAFETY EQUIPMENT SYSTEM.......................................... - Sketch of the BOP/LMRP, specifying lines, valves and measures/dimensions................................................. - Floor plan of the kill and choke lines from the BOP to the choke manifold, specifying valves, connections, dampener chambers, anchorage points and interconnection with the other systems......... - Floor plan of the atmospheric air separator ........................ - Layout of the trip tank installation, giving the following information:........................................................ a) Capacity;..................................................... b) Location;..................................................... c) Sensitivity;.................................................. d) Measuring system;............................................. e) Scale type;................................................... f) Driller's scale visualization conditions;..................... g) Supply System for the above item............................... - Floor plan of the stand pipe manifold, specifying lines, valves, manometers and interconnections with the other systems....................................................... 78 - Inspection report on the riser, riser handling tools and connectors, telescopic joint and flexible joint, according to the API RP 2P and RP 2Q standards, with update date not exceeding 1 year.............................................. NOTE: If the reports show the need of repair in some equipment, the service performance certificates will also be submitted......................... - Biannual inspection certificate of the choke manifold, with the manufacturer's approval............................................. - Biannual inspection certificate of the BOP unit and driving system, with the manufacturer's approval.................................... - Biannual inspection certificate of the BOP, with the manufacturer's approval............................................................ - Proof of technical hability of the well drilling and control personnel........................................................... - To supply an internal maintenance and rust prevention program for the marine risers: and kill and choke lines......................... 6. ENERGY GENERATION SYSTEM.................................................. - Unifilar diagram of the energy generation and distribution system... 7. STABILITY................................................................. - To submit the vessel's stability curve, updated in the proposal's conditions, in keeping with the environmental conditions............ 8. DYNAMIC POSITIONING SYSTEM (including the motor generators assembly, thrusters and propellers)................................................. - Schematic diagram of the dynamic positioning system..................... 79 - To submit the inspection and tests procedures to be carried out at every new location.................................................. - To submit the tests and inspections procedures to be carried out at the end of each contract year....................................... 9. DRILLING STRING AND ACCESSORIES........................................... - Inspection report on all equipment of the drilling and completion strings, subs and accessories (used equipment)...................... - Purchase voucher of the drill and completion strings, subs and accessories (for new equipment)..................................... 10. FISHING TOOLS AND ACCESSORIES............................................. - Inspection report on all components of the fishing tools (used equipment) or purchase voucher (for new tools)...................... 11. SUNDRY SYSTEMS............................................................ - Winches load test certificate........................................ - Description of the compressed air system, emphasizing compressors, layout of lines, valves and interconnection with the other systems... - Preventive Maintenance Plans with their respective timecharts........ - Ballast and sewer flowchart.......................................... Proof will be needed for the existence on board and for the operating capacity of all equipment and accessories listed in Attachments C and D of the chartering and services rendering contracts........................... 80 NOTE: Such equipment must be in places of easy access for survey............ A) RECEIPT TEST.............................................................. - Proof will be needed for the existence on board and for the operating capacity of all equipment and accessories listed in Attachments C and D of the chartering and services rendering contracts........................................................... NOTE: Such equipment must be in places of easy access for survey.............. The following systems, equipment and tools listed below will be checked, inspected and tested:.................................................. 1) DRILL STRING, COMPONENTS AND ACCESSORIES........................... - The CONTRACTOR will submit recent inspection reports, according to the specification API RP7G for the whole drill string and accessories such as, but not limited to: drill pipes, drill collars, HW, Subs, stabilizers, reamers, bumper subs, lift-sub, kelly, slips, elevators, fishing tools, etc, which prove the good conditions of the string and its accessories...................................... - The information from the reports and the general conditions of the string and its accessories will be checked by PETROBRAS by means of a sampling inspection. In the event of discrepancy between the data submitted by the CONTRACTOR and those checked by PETROBRAS, showing an inadequate condition of the string and its accessories, the CONTRACTOR will carry out another inspection, for its own account... NOTE 1: Any equipment refused by the inspection will be immediately repaired or replaced by the CONTRACTOR, for its own account........... 81 NOTE 2: For the string, components and new accessories, no inspection report will be required, documents proving that such equipment is new will be sufficient.................................................... NOTE 3: The CONTRACTOR's equipment will be stored and arranged so as to facilitate the inspection by sampling to be carried out by PETROBRAS.- - The same procedure will be adopted for the telescopic joints and flexible joints..................................................... 2) EXTRACTOR OF SOLIDS The following will be examined:..................................... - sieves,....................................................... - dessander,.................................................... - degasser - test suction and discharge......................... - centrifugue (if any).......................................... The operation and work pressure, as well as the existence of manometers, will be checked..................................................... 3) MUD TANKS AND VALVES Waterproofness, working of the agitators, mixture funnel and depth gun, besides the existence of fixed marks to control the tanks volume will be checked.............................................. 4) CENTRIFUGAL PUMPS The following will be checked:...................................... - working, vibration and noises;................................ - Packing (leaks);.............................................. - Work pressures................................................ NOTE: Items 3 and 4 will be tested with sea water........................... 82 5) MUD LABORATORY AND TEST EQUIPMENT. - The existence on board and the adequacy to the requirements described in Attachments B and C to this contract will be checked....................................................... 6) DRILLING DERRICK Maintenance conditions (corrosion), fastening system and the conditions of the travelling block rails will be examined............................................................ 7) CROWN BLOCK The pulleys will be examined as to profiles wear, alignments, clearance, buckling of the axles, lubrication, etc...... 8) MUD PUMPS........................................................... The following will be carried out:.................................. - observation of working, vibrations, noises;................... - pressure and maximum work flows tests for the liner used;..... - safety valve working test;.................................... - checking of the suction and discharge pulsation dampeners; watertightness tests with nominal pressure of the mud pumps and of all manifold valves;................................... - watertightness tests with nominal pressure of all manifold valves of the stand pipe manifold and of the kelly hose;...... - random disassembling of the suction for visual inspection of the piston, sleeve, packing, valve and seat................... 9) SWIVEL - The mandril, gooseneck, body, etc. will be checked and nominal pressure test with rotation will be performed................. 83 10) MOTION COMPENSATOR - The piston alignment, lock bar, alignment in the rail, general conditions, leaks and chains will be checked.................. 11) RISER AND GUIDE LINES TENSIONERS - The general conditions, leaks, pulleys and cables will be inspected..................................................... 12) RISER RECOIL SYSTEM/HANG OFF SYSTEM/ FILL-UP) VALVE (if any) - The systems operation will be checked......................... 13) HIGH COMPRESSORS AND AIR RESERVOIRS - The general conditions, leaks, lines and system yield will be checked....................................................... 14) TOP DRIVE - Working tests (connection and disconnection of one or more sections of the DP's) will be carried out and the general conditions will be inspected................................................... 15) KELLY SPINNER - The general conditions, specially the rollers wear, and working will be checked, and connection and disconnection operation of one or more DP's will be carried out............................. 16) HOOK - The general conditions and the locking system will be checked. 17) TRAVELLING BLOCK - The pulleys wear, axles alignment, lubrication system, retraction system, etc., will be inspected.......................... 18) DRAWWORKS - The operation of the mechanical break system (brake bands), electromagnetic (distance between irons, voltage level and SCR feeder conditions), cooling system and clutches will be checked..... - The operation of the cat-heads and height limitator with the assembly/disassembly of one or more command sections, will be checked............................................................. 19) ROTARY TABLE - The operation in high and low, brake system, tachometer and lubrication system will be checked.................................. 84 20) TRIP TANK - Capacity, installation site, sensitivity of the level indicator system, visualization condition and supply system will be inspected........................................................... 21) HYDRAULIC TONGS AND PNEUMATIC SPIDER OR CASING AND PNEUMATIC TONGS FOR DRILL PIPES - Operation tests will be made and maintenance conditions will be checked.......................................................... 22) SAND-LINE OR WIRE-LINE SYSTEM....................................... - Operation of the clutches and brake will be tested by lowering the photo-clinometer inside the drill string coinciding with the photo-clinometer overshot test (TOTCO) will be tested. Test to be made on location before the beginning of operations................. - The existence of an alignment guide for the sand-line cable in the drum will be checked............................................ 23) CHOKE MANIFOLD...................................................... - All valves with low pressure (300 psi) and in high pressure (system's work pressure). Manometers, hydraulic choke operation, manual choke, remote control panel, etc. will be tested............. 24) UPPER AND LOWER KELLY COCK, INSIDE BOP AND SAFETY VALVE............. - Drivers will be tested and work pressure tests will be made......... - The end connections of each element will be checked and tested with work pressure. The CONTRACTOR should have end seal plugs adequate for the test........................................................ 25) KILL AND CHOKE LINE HOSES........................................... 85 The end connections will be checked and tested with the system's work pressure. The CONTRACTOR should have end seal plugs adequate for the test........................................................ 26) DRILL INSTRUMENTATION SYSTEM........................................ The following will be tested:............................................. - geolograph;......................................................... - rotary table tachometer;............................................ - manometers;......................................................... - stroke counter;..................................................... - level control in the mud tanks;..................................... - torque indicator.................................................... 27) FLARE PIPE AND BOOMS................................................ - Their existence on board will be checked, analyzing the maintenance conditions of the lines by means of inspection, and the facilities for installation of the production test equipment system............ 28) BOP SYSTEM - The following will be carried out:.................................. - pressure tests of the slide valves with low pressure and high pressure, compatible with the system................................ - pressure tests of the annulars with low pressure and high pressure, compatible with the system.......................................... - complete function test in both POD's, through all panels............ 86 - choke and kill valves tested with low pressure and high pressure, compatible with the system.......................................... - working of the shear ram valve will be checked with opening for examination of the blades conditions................................ - the opening and closing of all ram, annular and kill and choke valves chambers will be tested...................................... - the hydraulic driving unit will be checked as to: fluid used, low fluid level alarm, low air pressure and low accumulators pressure, maintenance conditions, leaks and mixing systems.................... - the volumetric capacity of accumulators and the capacity of electric and pneumatic pumps of the hydraulic unit will be tested............ - the locking system of the ram valve(s) will be tested............... - the SPM valves conditions will be checked by opening and inspecting one of them, chosen at random....................................... - the locking/unlocking system of the H-4 hydraulic connectors will be tested.............................................................. - the surface and bottom accumulators' precharge will be checked...... - The operation of the following systems will be tested:.............. o Driving back-up............................................... o emergency recovery............................................ o handling...................................................... 29) TRAVELLING TONGS, EZY TORQ, TORQUE SENSOR, SLIPS, ETC............... One or more sections of the drill collars and drill pipes will be assembled/disassembled to check the working of such equipment. The general maintenance conditions, chuck Jaws and cables will be checked............................................................. 87 30) BULK TRANSFER SYSTEM................................................ The following will be carried out:.................................. - the operation of the compressor will be checked, and noises, oil and air leaks, and maintenance state, filters and dehumidifier will be inspected........................................................... - operation and watertightness of valves, lines and silos will be checked, looking for possible clogging.............................. - transfer of cement from 1 silo to the daily silo (if any) and from this to the surge tank will be made................................. 31) EMERGENCY ENERGY GENERATION SYSTEM - a black-out in the energy system generation system will be simulated to see if the emergency generator is automatically turned on........ 32) MAIN MOTO-GENERATOR ASSEMBLY - The following will be carried out:.................................. - vibration, noises, insulation, leaks, maintenance, etc., will be checked............................................................. - generators input and output in the bus bar, synchronisms and load divisions will be tested. .......................................... - load and voltage and frequency regulation will be tested............ 33) DESSALTER Operation and production capacity will be checked................... 34) CAT-LINES CRANES The following will be carried out:.................................. - operation of the winches and maintenance of the cables will be checked............................................................. 88 - the elevation and rotation system, the operation with flying boom and pulley block and the operation of the boom height pawl will be checked............................................................. - the report of the last inspection carried out by the Unit's classification society in the winches will be examined.............. 35) DEJECTA TREATMENT UNIT Its operation will be inspected..................................... 36) TELECOMMUNICATION SYSTEM Operating tests will be made in all radio equipment existing on board, including radio beacon....................................... 37) OVERHEAD TRAVELLING CRANES Their operation, and the maintenance conditions of cables and sliders will be examined............................................ 38) DC/SCR MOTORS The maintenance conditions and insulation, as well as the collectors and brushes will be examined........................................ - SCR functional test........................................... 39) DIVERTER - The following will be tested: flow line wing valves;.......... - diverters and insert packer lock;............................. - the control panel will be checked............................. 40) SAFETY EQUIPMENT Salvage............................................................. 89 Fireproof rigid vessels (capsules, whalers):........................ - lowering, motor, fuels, sprinklers, start;.......................... - rations, garnishing, hatches, cleaning, fire extinguishers, signaling equipment................................................. Inflatable rafts: - quantity, capacity, location, height relation to the sea;........... - validity of the last inspection, means of access to the sea;........ - conditions of the cocoon............................................ Jackets:................................................................. - quantity (sufficiency), location, protection, and maintenance....... Life-buoys:.............................................................. - quantity (sufficiency), location, heaving-lines, lanterns, smudge pots................................................................ Escape routes:........................................................... - vertical and horizontal signaling (indicative plates);.............. - clearing, lighting (emergency)...................................... Water Supply System for Fire Fighting..................................... Fire ring:................................................................ - water system for the rig;........................................... - sprinklers system;.................................................. - painting, corrosion, signaling, visual conditions;.................. - valves, hydrants, guns.............................................. Fire pumps:.............................................................. - operation;.......................................................... 90 - motor, fuel, start, panel, tests.................................... Fire Fighting Fixed Systems.............................................. - Foam system: chambers, tanks, guns, hydrants and carrier liquid..... - Cylinders; conditions, reloading, retesting (C02 or HALON, if any).. - Lines and diffusers: general conditions............................. - Automatic: feeding, panels, batteries, detectors, tests............. - Manual: commands, interconnections, tests........................... - Alarms: interconnections............................................ Fire Extinguishers........................................................ - water, carbon dioxyde, chemical powder (portable and carts);........ - distribution, location, general conditions;......................... - revision, recharge, retest, control, meters, replacement............ - Fire Posts.......................................................... - hose, keys, sprinkler;.............................................. - fiber boxes, general conditions, post identification;............... - visual signaling: sufficiency and general conditions................ Emergency Equipment...................................................... - autonomous breathing apparatuses, reserve bottle, breathable air fixed system, fire proximity clothing, lantern, ax, safety belt;.... - distribution, location, general conditions, inventory, maintenance and replacement..................................................... Communications and Alarms................................................ - telephone (internal, external): Operating capacity;................. 91 - radiophony: VHF. Operating capacity;............................... - portable transceptors: quantity; distribution, intrinsic safety;.... - intercom: quantity, distribution, and horns audibility, interconnection with the rig, coding of sound alarm tones, amplifiers; ........................................................ - visual signaling: sufficiency, general conditions;.................. - fire alarm, glass breaking type: batteries, bells, tests............ Emergency Lighting....................................................... - charger, batteries and lanterns..................................... Helideck................................................................. - protection: guns, fire extinguishers, salvage equipment;............ - painting, protection screen, net, landing lights, safety warnings;.. - guest welcoming practices........................................... Load Lifting............................................................. - winches: general conditions, operation, signaling, maintenance;..... - manual and electric tackles: general conditions, operation, signaling, maintenance;............................................. - material movement and storage areas................................. Training................................................................. - abandonment, fire fighting, first aid and brigade................... Manuals and Plans........................................................ - emergency; safety;.................................................. - disclosure, knowledge;.............................................. 92 - distribution, control, updating;.................................... - tasks schedules for emergency and abandonment situations, including in Portuguese....................................................... Order and Cleanliness..................................................... - installation's general aspect;...................................... - particularly alarming places........................................ Smoke, Heat and Gas Detection System...................................... - test of hydrocarbons detection sensors.............................. Ballast and Sewer System................................................. - functional test..................................................... 41) ANCHORING SYSTEM.................................................... 42) DYNAMIC POSITIONING SYSTEM.......................................... 43) PROPULSION SYSTEM................................................... B) LOCATION MOVING TEST...................................................... To be defined between the CONTRACTOR and PETROBRAS........................ C) BEGINNING OF CONTRACT YEAR TEST........................................... To be defined between the CONTRACTOR and PETROBRAS........................ 93 CONTRACT No. 101.2.156.97-1..................................................... ATTACHMENT IX PROCEDURES IN THE EVENT OF FATAL ACCIDENTS 1. If, during the period of validity of the contract, a fatal accident occurs with a CONTRACTOR's employee, the CONTRACTOR should:........... 1.1. Notify the Inspection immediately, for the proper measures; .......... 1.2. Take measures so that the employee's relatives be notified with the utmost urgency on the event, giving them the social support due;...... 1.3. Formally establish an Investigation Commission, within 48 hours after the accident, in order to, in the maximum time limit of 15 days, identify the causes and recommend the measures deemed necessary to prevent similar accidents............................................. 2. The report should contain, at least, the following information regarding the accident:............................................... - description; .................................................... - exact location; ................................................. - data regarding the injured persons;.............................. - basic and immediate causes;...................................... - measures to be taken in order to prevent its repetition.......... 3. The CONTRACTOR should guarantee the Commission enough authority and autonomy to carry out the investigations without any restrictions..... 4. A PETROBRAS' employee should participate in the Commission, appointed by the authority in charge of the operational office.................. 5. After conclusion of the Commission's work, it will also behoove the CONTRACTOR, at the Inspection's request, to disclose the results of the report, so as to convey the experience from the accident to other contractor companies.................................................. - - -------------------------------------------------------------------------------- 94 THESE BEING the precise terms and content of the aforementioned document, I hereby set my Hand and Seal on this Translation, performed on the 5th of February, 1998 in this City of Rio de Janeiro, Federative Republic of Brazil. /s/ MARCIA BARBOSA SERRA _________________________________ Marcia Barbosa Serra Sworn Public Translator 95 EX-10.2(A) 38 EXHIBIT 10.2(A) MARCIA BARBOSA SERRA Tradutora Publica Juramentada e Interprete Comercial Sworn Public Translator and Commercial Interpreter Rua Aperana, 38 apt 301 - Leblon - 22450 - 190 ISS: 1261003-00- CIC: 606442227-00 Tel: 274-3844 I, the undersigned, Sworn Public Translator and Commercial Interpreter in and for this City and State of Rio de Janeiro, Federative Republic of Brazil, registered at the Commercial Board of Rio de Janeiro under Number 97, do hereby CERTIFY and ATTEST that a document in the Portuguese Language was submitted to me for translation into English, which I performed according to my Office, as follows: Translation No. 2660/98 (On paper with letterhead of PETROBRAS.) RIDER No. 1 TO CONTRACT 101.2.156.97-1 ENTERED INTO BETWEEN PETROLEO BRASILEIRO S/A AND THE COMPANY MARITIMA PETROLEO E ENGENHARIA LTDA./. PETROLEO BRASILEIRO S.A. - PETROBRAS, a mixed economy company,with head office at Av. Republica do Chile 65, in the City of Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil, enrolled in the General Taxpayer Registry of the Ministry of Finance under No. 33.000.167/0001-01, henceforth called PETROBRAS, represented herein by the Executive Superintendent of Exploration and Production South-Southeast, Luiz Eduardo G. Carneiro, and the Company MARITIMA PETROLEO E ENGENHARIA LTDA., succesor of MARITIMA NAVEGACAO E ENGENHARIA LTDA., with head office at Av. Almirante Barroso, 52, Group 3400, City of Rio de Janeiro, Federative Republic of Brazil, enrolled in the General Taxpayers Registry of the Ministry of Finance under No. 46.828.596/0001/13, henceforth called the CONTRACTOR, represented herein by its President, German Efromovich, have agreed to add a rider to contract 101.2.156.97-1, according to the following clauses and conditions:/. FIRST CLAUSE - OBJECT. 1. The present Rider has as its object./. 1.1. To change the corporate name of the CONTRACTOR from MARITIMA NAVEGACAO E ENGENHARIA LTDA. to MARITIMA PETROLEO E ENGENHARIA LTDA./. 1.2. To include as INTERVENIENT PARTY, to the present contract, the company PETRODRILL SEVEN LTD., with head office in Omar Hodge Building, Wickhams Cay, Road Town, Tortola, Ilhas Virgens Britanicas, represented by its Director GERMAN EFROMOVICH./. 1.3. To change the redaction of items 3.12.1 and 3.21.2 of the THIRD CLAUSE - CONTRACTOR'S OBLIGATIONS./. 1.4. To change the redaction of item 16.1 of the SIXTEENTH CLAUSE - INTERVENIENCE./. SECOND CLAUSE - CONTRACTOR'S OBLIGATIONS./. 2.1. The Redaction of items 3.12.1 and 3.21.2. change to:/. 3.12.1 "The minimum value of the civil liability insurance is of US$1,000,000.00 (one million dollars), per occurrence, during the period of validity of this CONTRACT and its eventual extension, which amount is to be converted into Brazilian currency on the date of signature of this instrument. THE INTERVENIENT PARTY IS TO APPEAR AS CO-INSURED IN THIS INSURANCE POLICY./. 3.21.2 "Exception is made to cases arising from kick, blow-out, surge or formation testing, in which the CONTRACTOR will be kept free and safe from, in the other cases of spillage of oil and other residues in the sea, the CONTRACTOR AND THE INTERVENIENT PARTY WILL BE JOINTLY LIABLE, UP TO THE LIMIT OF US$500,000.00 (FIVE HUNDRED THOUSAND DOLLARS), PER EVENT AND ITS DEVELOPMENTS./. THIRD CLAUSE - INTERVENIENCE./. 3.1. The redaction of item 16.1 is changed to:/. 16.1. "THE INTERVENIENT PARTY SIGNS THE PRESENT CONTRACT, TOGETHER WITH THE CONTRACTOR, BEING JOINTLY LIABLE WITH IT FOR ALL OBLIGATIONS ARISING FROM THE PRESENT CONTRACT AND IT EXECUTION, INCLUDING FOR LOSSES. FOURTH CLAUSE - RATIFICATION./. 4.1 The parties ratify the other conditions of the CONTRACT that were not changed by the present instrument./. And being thus agreed, the parties sign the present Rider in 2 (two) copies of the same tenor and fashion, together with the witnesses below./. Rio de Janeiro, August 21, 1998./. (Signed:) (Illegible) - Luiz Eduardo G. Carneiro./. Executive Superintendent of Exploration and Production South-Southeast./. PETROBRAS - PETROLEO BRASILEIRO S.A./. (Signed:) (Illegible) - German Efromovich./. President - MARITIMA PETROLEO E ENGENHARIA LTDA./. (Signed:) (Illegible) - German Efromovich ./. Director - PETRODRILL SEVEN LTD./. WITNESSES./. (Signed:) Elaine Brabo - Name: ELAINE BRABO./. (Signed:) Andre de Mesquita Pinto - Name: ANDRE DE MESQUITA PINTO./. (Two initials appeared on the first page of the document.)/. - - -------------------------------------------------------------------------------- THESE BEING the precise terms and content of the aforementioned document, I hereby set my Hand and Seal on this Translation, performed on November 20, 1998 in this City of Rio de Janeiro, Federative Republic of Brazil. /s/ MARCIA BARBOSA SERRA ____________________________________ Marcia Barbosa Serra Sworn Public Translator EX-10.3 39 EXHIBIT 10.3 MARCIA BARBOSA SERRA Tradutora Publica Juramentada e Interprete Comercial Sworn Public Translator and Commercial Interpreter Rua Aperana, 38 Apt # 301 - Leblon - 22450 ISS: 1261003-00 CIC: 606442227-00 Tel.: 274-3844 I, the undersigned, Sworn Public Translator and Commercial Interpreter in and for this City and State of Rio de Janeiro, Federative Republic of Brazil, registered at the Commercial Board of Rio de Janeiro under Number 97, do hereby CERTIFY and ATTEST that a document in the Portuguese Language was submitted to me for translation into English, which I performed according to my Office, as follows: Translation No. 4030/98 (Original submitted for translation.)......................................... (On paper with letterhead of Petroleo Brasileiro S.A. - PETROBRAS.)........... LETTER OF AGREEMENT PETROLEO BRASILEIRO S.A. - PETROBRAS, a mixed economy company with head office at Av. Republica do Chile, 65, City of Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil enrolled in the General Taxpayers' Registry of the Ministry of Finance under No. 33.000.167/0001-01, represented herein by the Executive Superintendent of Exploration and Production South - Southeast, Engineer LUIZ EDUARDO G. CARNEIRO, henceforth called PETROBRAS, and the Company MARITIMA NAVEGACAO E ENGENHARIA LTDA., with head office at Avenida Almirante Barroso, no. 42, 34th floor, City of Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil, enrolled in the General Taxpayers' Registry of the Ministry of Finance under No. 46.828.596/0001-13, represented herein by its President, Mr. GERMAN EFROMOVICH, have agreed upon the present Letter of Agreement regarding contracts 101.2.155.97-9 (Chartering) and 101.2.156.97-1 (Rendering of Services) for the Unit Amethyst 7, henceforth called the Unit, as follows:.................................................. Item New Redaction Chart./Services 1.1. (Charter.) The object of the present contract is the chartering to PETROBRAS, of the Unit, which, according to the CONTRACTOR, is to be built in a shipyard for the purpose of fulfilling this contract, in order to be used in the drilling and/or evaluation and/or completion and/or workover of oil and/or gas (vertical, directional and horizontal) wells, in the Brazilian continental shelf, down to a maximum depth of 5,000 (five thousand) meters, in a water depth down to 1,200 (one thousand twelve hundred) meters.................. 3.17.- (Serv.) To submit to the contract Manager, up to 30 (thirty) consecutive days after its inception, as foreseen in item 2.2.1, the originals or certified copies of the insurance policies made as a result of this contract, containing all essencial data, such as insurers, time limits, period of validity, amounts insured, and coverage conditions, and with PETROBRAS appearing as co-insured, except in the civil liability insurance, of which it will participate as a third party................................................. 3.19.- (Chart.) To submit to the Manager of this contract, up to 30 (thirty) days after the beginning of the performance, as foreseen in item 2.2.1, the originals or certified copies of the certificates of the insurances made as a result of this contract, containing all essential data, such as insurers, time limits, periods of validity, amounts insured, and coverage conditions, and with PETROBRAS appearing as co-insured, except in the civil liability insurance, of which it will participate as a third party....................... 7.7 (Chart.) The CONTRACTOR agrees that, at PETROBRAS' exclusive option, the payments referring to the chartering object of the present contract can be made through financing by third parties, provided the time limits, currency, amounts and place of payment set forth in the contract are complied with....................................................... 12.5 - (Chart.) In the present contract, it will 13.5 - (Serv.) be considered as act of God the situation in which one of the parties is prevented from fulfilling its obligations, provided it proves that:............................................ o the non-fulfillment of the obligation was due to the existence of an impediment beyond its control;............. o the party impeded could not, within its ability, overcome the impediment and its effects, in order to fulfill its contract obligation within the time limit set down, and.... o the impediment and its effects could not be avoided nor overcome................................................... As an illustration of act of God or force majeure, one may mention wars, strikes, submarine earthquakes, among other facts, which effects were not possible to avoid or prevent.................... And being thus agreed, the parties sign the present Letter of Agreement, in 2 (two) copies with the same tenor, with the witnesses below... Rio de Janeiro January 15, 1998.............................................. PETROLEO BRASILEIRO S/A - PETROBRAS.......................................... (Signed:) Luiz Eduardo G. Carneiro.......................................... Luiz Eduardo G. Carneiro - Executive Superintendent of Exploration and Production South - Southeast.............................. MARITIMA NAVEGACAO E ENGENHARIA LTDA......................................... (Signed:) German Efromovich................................................. German Efromovich - President................................................ WITNESSES: ................................................................. (Signed:) Andre de Mesquita Pinto........................................... for Claudio Fontes Nunes..................................................... (Signed:) Hamylton P. Padilha Jr............................................ Hamylton P. Padilha Jr....................................................... (Two initials appeared on the first page of the document.)............. - - -------------------------------------------------------------------------------- THESE BEING the precise terms and content of the aforementioned document, I hereby set my Hand and Seal on this Translation, performed on the 17th of February 1998 in this City of Rio de Janeiro, Federative Republic of Brazil. /s/ MARCIA BARBOSA SERRA _________________________________ Marcia Barbosa Serra Sworn Public Translator EX-10.4 40 EXHIBIT 10.4 MARCIA BARBOSA SERRA Tradutora Publica Juramentada e Interprete Comercial Sworn Public Translator and Commercial Interpreter Rua Aperana, 38 apt 301 - Leblon - 22450-190 ISS: 1261003-00 CIC: 606442227-00 Tel.: 274-3844 I, the undersigned, Sworn Public Translator and Commercial Interpreter in and for this City and State of Rio de Janeiro, Federative Republic of Brazil, registered at the Commercial Board of Rio de Janeiro under Number 97, do hereby CERTIFY and ATTEST that a document in the Portuguese Language was submitted to me for translation into English, which I performed according to my Office, as follows: Translation No. 4029/98 LETTER OF AGREEMENT (Original submitted for translation.)......................................... (On paper with letterhead of Petroleo Brasileiro S.A. - PETROBRAS.)........... PETROLEO BRASILEIRO S.A. - PETROBRAS, a mixed economy company with head office at Av. Republica do Chile, 65, City of Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil enrolled in the General Taxpayers' Registry of the Ministry of Finance under No. 33.000.167/0001-01, represented herein by the Executive Superintendent of Exploration and Production South - Southeast, Engineer LUIZ EDUARDO G. CARNEIRO, henceforth called PETROBRAS, and the Company MARITIMA PETROLEO E ENGENHARIA LTDA., with head office at Avenida Almirante Barroso, no. 42, 34th floor, City of Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil, enrolled in the General Taxpayers' Registry of the Ministry of Finance under No. 46.828.596/0001-13, represented herein by its President, Mr. GERMAN EFROMOVICH, henceforth called the CONTRACTOR, whereas:...................................................... 1. the parties have entered into two contracts, one under No. 101.2.155.97-9, the object of which is the chartering of the semi-submersible floating Unit, provided with dynamic positioning (DP), called AMETHYST 7, to operate in a water depth of up to 1,200m, and one under No. 101.2.156.97-1, for the rendering of drilling, completion, evaluation and workover services........................................ 2. the contract period set forth in subitem 2.2.3 of the second Clause of said contracts is of 6 (six) years, with forecast for extention of the time limit by means of an agreement..................................... THE PARTIES RESOLVE a) that the contract period of 6 (six) years, at its final term, will be automatically extended for 2 (two) more years;.......................... b) that the other clauses of said contract deeds remain unchanged.......... And being thus agreed, the parties sign the present Letter of Agreement, in 2 (two) copies with the same tenor, with the witnesses below. Rio de Janeiro January 15, 1998............................................... (Signed:) Luiz Eduardo G. Carneiro........................................... Luiz Eduardo G. Carneiro - Executive Superintendent of Exploration and Production South - Southeast............................... PETROLEO BRASILEIRO S/A - PETROBRAS........................................... (Signed:) German Efromovich.................................................. German Efromovich - President................................................. WITNESSES: ................................................................... MARITIMA PETROLEO E ENGENHARIA LTDA. ......................................... (Signed:) Andre de Mesquita Pinto............................................ for/Claudio Fontes Nunes...................................................... (Signed:) Hamylton P. Padilha Jr. ........................................... Hamylton P. Padilha Jr. ...................................................... (Two initials appeared on the first page of the document.) - - -------------------------------------------------------------------------------- THESE BEING the precise terms and content of the aforementioned document, I hereby set my Hand and Seal on this Translation, performed on the 17th of February, 1998 in this City of Rio de Janeiro, Federative Republic of Brazil. /s/ MARCIA BARBOSA SERRA ______________________________ Marcia Barbosa Serra Sworn Public Translator EX-10.5 41 EXHIBIT 10.5 MARCIA BARBOSA SERRA Tradutora Publica Juramentada e Interprete Comercial Sworn Public Translator and Commercial Interpreter Rua Aperana, 38 apt 301 - Leblon - 22450 ISS: 1261003-00 - CIC: 606442227-00 Tel.: 274-3844 I, THE UNDERSIGNED, SWORN PUBLIC TRANSLATOR AND COMMERCIAL INTERPRETER IN AND FOR THIS CITY AND STATE OF RIO DE JANEIRO, FEDERATIVE REPUBLIC OF BRAZIL, REGISTERED AT THE COMMERCIAL BOARD OF RIO DE JANEIRO UNDER NUMBER 97, DO HEREBY CERTIFY AND ATTEST THAT A DOCUMENT IN THE PORTUGUESE LANGUAGE WAS SUBMITTED TO ME FOR TRANSLATION INTO ENGLISH, WHICH I PERFORMED ACCORDING TO MY OFFICE, AS FOLLOWS: TRANSLATION NO. 4014/98 (Xerox copy submitted for translation.)....................................... (On paper with letterhead of Petroleo Brasileiro S.A. - PETROBRAS.)........... Contract No. 101.2.159.97-1................................................... CHARTERING CONTRACT CHARTERING Contract OF THE DYNAMIC POSITIONING FLOATING Unit AMETHYST 6, ENTERED INTO BETWEEN PETROLEO BRASILEIRO S.A. - PETROBRAS AND THE COMPANY MARITIMA NAVEGACAO E ENGENHARIA LTDA.-- PETROLEO BRASILEIRO S.A. - PETROBRAS, a mixed economy company, organized and existing under Law No. 2.004, dated 10/03/53, with head office at Av. Republica do Chile, 65, City of Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil enrolled in the General Taxpayers' Registry of the Ministry of Finance under No. 33.000.167/0001-01, represented herein by the Executive Superintendent of Exploration and Production South-Southeast LUIZ EDUARDO G. CARNEIRO, hereforth called PETROBRAS, and the Company MARITIMA NAVEGACAO E ENGENHARIA LTDA., with head office at Avenida Almirante Barroso, No 42, 34th floor, City of Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil, enrolled in the General Taxpayers' Registry of the Ministry of Finance under No. 46.828.596/0001-13, represented herein by its President, Mr. GERMAN EFROMOVICH, have agreed upon the present Contract for the chartering of the Dynamic Positioning Floating Unit AMETHYST 6 and 1 its accessories, described in Attachment I, henceforth called the Unit, according to the authorization of PETROBRAS' Executive Board (MINUTES No. 4.129, Item No. 47, dated 12.19.97) the parties being bound to the terms of the Invitation to Bid No. 101.0.016.97-5 and subjected to the following Clauses and Conditions:............................................................... (End of the Qualification).................................................... 2 FIRST CLAUSE - OBJECT......................................................... 1.1. The object of the present Contract is the chartering to PETROBRAS, of the Unit, in order to be used in the drilling and/or evaluation and/or completion and/or workover of oil and/or gas (vertical, directional and horizontal) wells, in the Brazilian continental shelf, down to a maximum depth of 5,000 (five thousand) meters, in a water depth down to 1,200 (twelve hundred) meters......................................... 1.1.1. It is included, as an object of the Contract, the performance, by the CONTRACTOR, of any and all operations needed for the perfect fulfillment of the chartering object of the Contract, such as, but not limited to, the performance and supervision of the positioning, ballasting and movement of the Unit................................... 1.2. PETROBRAS may determine that the CONTRACTOR makes the reentry in wells already drilled, and it can install in the Unit equipment and production facilities, the provisions of item 14.1 of this Contract being complied with................................................... 1.3. The chartering object of the present Contract is included in the Annual Activities Plans, under the following codes:.................... B 12000 - Boring - Production Development............................. A 22000 - Boring - Exploratory Drilling............................... B 13000 - Completion and Intervention for Evaluation - Production Development................................................. A 24000 - Intervention for Evaluation - Exploratory Drilling.......... (End of Clause)................................................................ 3 SECOND CLAUSE - PERIOD OF VALIDITY AND DURATION............................... 2.1. PERIOD OF VALIDITY - The present Contract binds the parties as of its signature, but the payments in foreign currency can only be made after the date of its registry in the Central Bank of Brazil.......... 2.2 DURATION - The present Contract will have a duration of 2,190(twenty-one hundred and ninety) days............................. 2.1.1. BEGINNING OF THE CONTRACT - The beginning of the Contract will occur when the Unit is released by PETROBRAS, through a written notice, to begin the operations, after the general equipment testing foreseen in item 3.1 of this Contract is carried out.............................. 2.2.2. AUTOMATIC EXTENSION - If at the end of the duration mentioned in 2.2, some operation is still being performed in a well, the duration of the present Contract will be automatically extended, until the completion of the works in said well, considering as the final limit the Unit's arrival in the port or sheltered waters chosen by common agreement between the parties and, also, in case there are still PETROBRAS' equipment aboard the Unit, the completion of the withdrawal of such equipment will be considered as the final limit....................... 2.2.3. This Contract may be extended for successive periods through a prior agreement between the parties, by means of an Addendum, the other Contract conditions being complied with, and limited to a maximum Contract period of 2,190 (twenty-one hundred and ninety) days......... 2.3. ARRIVAL IN BRASIL - The Unit should arrive at the port or in sheltered waters, in Macae-RJ. The beginning of operations should occur up to the date of 12.29.99, the provisions set forth in item 8.1 of this Contract being complied with................................................... 4 2.3.1. At the port or in sheltered waters mentioned in 2.3, the customs and helideck inspections in the Unit will be carried out, as well as the loading/unloading of the CONTRACTOR's and PETROBRAS' materials, and also the general equipment testing will begin as foreseen in item 3.1 of this Contract...................................................... (End of Clause)................................................................ 5 THIRD CLAUSE - CONTRACTOR'S OBLIGATIONS....................................... 3.1. Before the beginning of the Contract, the CONTRACTOR will arrange for a general test of the operating conditions of all of the Unit's equipment, as provided for in Attachment VIII, in the presence of PETROBRAS' Inspection. The occurrences found during the performance of the tests will be duly recorded in the Daily Drilling Certificate (ADP) signed by PETROBRAS' Inspection and by the CONTRACTOR's representative. The Unit will be released to sail to the first location after proving the good operating conditions of the equipment which comprise the rig's main systems, that is, energy generation and distribution system, dynamic positioning system, industrial safety, liquid and bulk storage, fluid circulation and processing, safety and wellhead, column elevation, rotation and handling, columns, columns, instrumentation, formation test equipment and communications system............... 3.1.1. The tests referred to in 3.1 will be made in a period estimated in (three) days, after which the Unit will be released to sail to begin the operations, provided there is nothing pending in the rig's main systems, as set forth in item 3.1..................................... 3.1.1.1. In the event the tests last for a period exceeding 3 (three) days, for reasons ascribed to PETROBRAS, the rate foreseen in Ref 104 (Waiting Rate) of Attachment II, will be due, applied as of the fourth day of tests, until the Unit is released. The periods spent with equipment repair will not be calculated for the purpose of counting such duration, and also no fees will be due during such periods. 3.1.2. PETROBRAS may opt for the partial or total performance of the receipt tests, in sheltered waters, in the deepest water depth set forth in the Contract, or still in the first location.......................... 7 3.2. To maintain, during the Contract period, the Unit, its fittings, as well as accessories and replacement elements and personnel in perfect working conditions in a working regime of 24 (twenty-four) hours a day, 7 (seven) days a week, and to guarantee that the Unit is calculated to carry out the activities object of this Contract........ 3.2.1. To strictly comply with the recommendations of the equipment manufacturers. carrying out the maintenance foreseen in their operation manuals, which will be provided for in the Unit's preventative maintenance plan......................................... 3.3. TECHNICAL EVALUATION AWARD AND CERTIFICATES - To submit copies of the Registry, Survey, Classification and Technical Survey and Evaluation Award Certificates of the Unit and its fittings, signed by a qualified and well-known organization, not related with the CONTRACTOR, notarized in the Brazilian Consulate and translated by a Sworn Public Translator, if issued abroad, and which should contain:.. 3.3.1. Description of the Unit and accessories;.............................. 3.3.2. Operationing conditions and physical conditions of the Unit;.......... 3.3.3. Light displacement of the Unit (Light weight);........................ 3.3.4. Year of construction;................................................. 3.3.5. Year of reconditioning, listing spare parts and parts replaced;....... 3.3.6. Technological differences between the Unit surveyed and a more modern Unit of the same kind;................................................ 3.3.7. Forecast of the average useful life of the good used and its new analog;............................................................... 3.3.8. Market value, of reproduction and replacement;........................ 3.3.9. Net weight of the equipment installed in the Unit;.................... 8 3.3.10. Technical catalogues of the equipment installed in the Unit........... 3.4. To regularize, before the proper authorities, the entry and stay of the Unit in Brazil, arranging, at its expenses, for the Release, Surveys, Registries and Temporary Admission.................................... 3.4.1. Regarding new equipment and equipment without use, the "Technical Survey and Evaluation Award" referred to in item 3.3 may be replaced by factory catalogues or purchase invoices, with description, year of manufacture, useful life forecast and value of each equipment......... 3.5. Safety, Sanitation and Labor Medicine - To carry out its operations in strict compliance with the international safety, sanitation and labor medicine standards, being liable for the violations committed. To supply, for its account, and maintain in perfect operating conditions, the safety equipment in accordance with the safety plan ("Safety plan") approved by the Administration of the vessel's Country of Registry, and with the good practice in the services of completion/evaluation/workover........................................ 3.5.1 (sic) The Unit will comply with the IMO - MODU - CODE (Mobile Offshore Drilling Unit) standard............................................... 3.6. (sic) SEA OPERATIONS - To manage the Unit in strict compliance with the laws, standards, regulations and administrative rules, as well as with the instructions issued by the Shipping Office or by other proper authorities, specially those regarding the spillage of oil and other residues from the Unit into the sea, being liable, as a result, for any charges arising from the violation of such laws, standards, regulations, administrative rules and instructions, the limit established in subitem 3.6.2. being complied with, and with the exception of the cases provided for in item 3.20 of this Contract..... 9 3.6.1. (sic) To plan and carry out operations aiming at preventing and fighting oil and gas blow outs, fires, or other incidents, complying with the provision in item 2.4 of Attachment II to this Contract. Although the CONTRACTOR is considered fully responsible for such operations, it is obliged to discuss the methods to be adopted with PETROBRAS, in order to find the best operating solution............... 3.6.2. (sic) Exception is made of the events arising from kick, blow out, surging, or formation testing, which the CONTRACTOR will be kept free and safe from. In the other cases of spillage of petroleum, oils and other residues into the sea, the CONTRACTOR will be liable up to the limit of US$500,000.00 (five hundred thousand dollars) per event and its deployments....................................................... 3.7. (sic) To comply with all laws, standards, decrees, regulations, administrative rules and instructions in force in Brazil, that govern the exploration and research in the Brazilian submarine shelf, including those regarding environmental protection.................... 3.8. (sic) REPLACEMENT AND REPAIRS - The replacement cost for equipment, materials and accessories needed for the Unit's perfect operation, as well as the expenses with repairs of any kind, will run for the CONTRACTOR's account.................................................. 3.8.1. (sic) The above mentioned repair cost covers any and all expenses, including taxes and duties due from the moment of the purchase of the equipment, spare parts and materials, to their installation and placement in the Unit, with exception of expenses with transportation between the support vessels' port of operation and the Unit........... 10 3.8.2. (sic) Regarding the Temporary Admission of the Unit, as well as the import of the equipment, materials and accessories mentioned in item 3.8, the CONTRACTOR will comply with the provisions of the Internal Revenue's Rulling Instruction No. 136/87............................... 3.9. (sic) At the end of this Contract or of its extension, to bear the charges arising from the return of the Unit, its fittings, accessories, equipment, spare parts, and materials for replacement or repair, such charges including, but not limited to, the preparation, packing, shipping, transportation, unloading, stay, freight, clearance, storage, wharfage, stowage, insurance and other similar expenses.............................................................. 3.10. (sic) To maintain, at its expenses, besides the Unit, the crew adequate and sufficient for its operation, being also obliged to comply with the pertinent legal provisions, issued by Brazilian authorities and by those of the CONTRACTOR's country of origin........................... 3.11. (sic) To bear all expenses with displacement of the crew, mentioned in Item 3.10, including transportation from abroad to the Port or Airport of Macae-RJ, as indicated by PETROBRAS, and the return to the place of origin, and any and all expenses with the crew's stay in Brazil, medical and hospital expenses, meals, passports, and similar expenses.............................................................. 3.11.1. To maintain PETROBRAS safe from any complaints, claims from its employees, representatives, as a result of the present Contract....... 3.12. (sic) To promote, without charges to PETROBRAS, the replacement and immediate withdrawal of any crew member that may be requested in writing by PETROBRAS at any time, due to bad behavior, technical deficiency, or health conditions...................................... 11 3.13. (sic) To maintain a special identification for the crew, so as to distinguish it from PETROBRAS' and other companies' personnel who may eventually work in other services related to the object of the present Contract.............................................................. 3.14. (sic) RADIO COMMUNICATIONS - To supply, operate and maintain VRH, SSB and Radio-Beacon and portable Transceptor equipment, adequate for PETROBRAS' land communications system, for the guidance of helicopters, so as to comply with the Radio Communications Plan supplied by PETROBRAS, appearing in Attachment I.................................. 3.14.1. (sic) Other Radio Communications systems deemed necessary to support the CONTRACTOR's operations, both in the Unit and on land, will be supplied, installed and operated by it. The CONTRACTOR will be responsible for the obtainment of the licenses and frequencies to operate such equipment................................................ 3.14.2. (sic) The CONTRACTOR will maintain, at its expenses, radio operators, fluent in spoken Portuguese, who will remain 24 (twenty-four) hours a day operating the equipment installed in the Unit, whether they belong to PETROBRAS or to the CONTRACTOR..................................... 3.14.3. (sic) Immediately after the Unit's arrival, the CONTRACTOR will arrange with the proper authorities for the issuing of the "Terms of Survey" regarding the radio station existing on board......................... 3.14.4. (sic) The CONTRACTOR will bear any expenses related to the telecommunications equipment and services, with exception of those provided for in item 4.7 of this Contract............................. 3.15. (sic) INSURANCES - To provide for the Contracting, at its expenses, of the insurances necessary to fulfill this Contract and the Brazilian Laws, intended for the coverage of the Unit and all of its accessories, even when they are being transported under PETROBRAS' responsibility, as well as the Civil Liability insurance for damages and losses caused to third parties..................................................... 12 3.15.1. COMPANY MARITIMA NAVEGACAO E ENGENHARIA LTDA. will appear as co-insured in the Civil Liability insurance policy which it makes, by force of item 3.12 of the SERVICES RENDERING Contract entered into between it and PETROBRAS......................................................... 3.15.2. (sic) During the period of validity of this Contract, the CONTRACTOR should maintain insurance coverage for the Unit and all of its accessories, according to the conditions of the London Standard Drilling Barge Form All Risk, or similar. ............................ 3.15.3. (sic) The redress due to the CONTRACTOR's Civil Liability arising from damages provided for in this Clause, is not limited to the amount set forth in subitem 3.12.1. of the Services Rendering Contract entered into between the parties, for the Civil Liability Insurance against Third Parties, and will be ruled by the pertinent Brazilian laws...... 3.16. (sic) The Franchises that may be established for the insurances mentioned in item 3.15 and in its subitems, as well as the onus arising from the insurers' requirements and/or recommendations will fully run for the CONTRACTOR's account................................. 3.17. (sic) To keep PETROBRAS free and safe from any and all indemnity claim for damages and/or losses of any kind which the CONTRACTOR may have sustained as a result of this Contract, whether or not it has made adequate and sufficient insurance for such circumstances.......... 13 3.17.1. (sic) PETROBRAS will be equally kept free and safe from any and all indemnity claim for damages and/or losses of any kind which the CONTRACTOR may have caused to third parties by its duly proven action or omission, arising from this Contract, whether or not it has made adequate and sufficient insurance for such circumstances.............. 3.17.2. (sic) In return, the CONTRACTOR will be kept free and safe from any and all indemnity claim for damages and/or losses of any kind, which PETROBRAS may have sustained from third parties, or has caused to third parties by its duly proven action or omission, as a result of this Contract, whether or not it has made adequate and sufficient insurance for such circumstances................................................ 3.18. (sic) The CONTRACTOR waives for itself and will require from its Insurers and/or SubContractors, in any and all insurance made as a result of this Contract, the inclusion, in each policy Contracted, the provision assuring the waiver of any right of subrogation against PETROBRAS............................................................. 3.19. (sic) To submit to E&P/GETRAT, up to 30 (thirty) days after the beginning of the performance, as provided for in item 2.2.1, the originals of the certificates of the insurances made as a result of this Contract, containing all essential data, such as insurers, time limits, periods of validity, amounts insured, and coverage conditions, and with PETROBRAS appearing as co-insured, except in the civil liability insurance, of which it will participate as a third party.... 3.19.1. (sic) The certificates mentioned in item 3.19 will contain a provision that the insurances mentioned cannot be amended and/or cancelled without PETROBRAS' prior authorization................................ 14 3.20. (sic) Losses and Damages - The CONTRACTOR will be liable for losses of and damages to its own equipment and material, and to those which it and its agents may cause to PETROBRAS or to third parties, as a result of its duly proven action or omission, in the following cases:........ 3.20.1. (sic) In the event of losses of or damages to equipment and/or materials belonging to PETROBRAS and/or to third parties, which are aboard the Unit, or during their movement between the Unit and the support vessels, the CONTRACTOR's liability will be limited to the replacement or repair of the equipment so lost or damaged due to the CONTRACTOR's or its employees' duly proven fault. However, the CONTRACTOR will not be liable and will be kept free and safe from in the event of damages to reservoirs, indirect damages or loss of profit of PETROBRAS, losses and damages arising from pollution coming from the well, resulting from kick and/or blow-out;............................ 3.20.2. (sic) In case of losses and damages caused to the well, arising from the events mentioned in subitem 2.1.5 of Attachment II, the CONTRACTOR will reimburse PETROBRAS the payments it comes to make to third parties referring to cementing, logging, or other services related to the object of the present Contract, as well as to materials (cement, casing, bits, completion fluid materials). In the event PETROBRAS opts for the definitive abandonment of the damaged well, the CONTRACTOR will reimburse the expenses made by PETROBRAS to drill that well.................................................................. 3.20.3. (sic) In the cases mentioned in subitems 3.20.1 and 3.20.2 the limit for the CONTRACTOR's liability is of US$500,000.00 per event and its deployments........................................................... 15 3.21. (sic) SECRECY - To maintain complete secrecy on the data and information supplied by PETROBRAS, as well as on all of the results and analyses arising from the operations carried out according to the present Contract...................................................... 3.21.1. (sic) All data, information and other documents, of any kind, related to the fulfillment of the present Contract, will be the exclusive property of PETROBRAS................................................. 3.21.2. (sic) The CONTRACTOR and its crew cannot disclose nor supply to third parties any materials or information obtained or developed as a result of this Contract, unless expressly authorized by PETROBRAS............ 3.21.3. (sic) The provision of this item 3.21 is a standing obligation, valid even after the termination, in any fashion, of the present Contract... 3.22. (sic) Unit's Helideck................................................. 3.22.1. (sic) To arrange for the release of the Unit's helideck by the proper Brazilian authorities (Ports and Coast Authority, Civil Aviation Department of the Ministry of Aeronautics, Internal Revenue, Maritime Police and Customs), bearing all expenses arising therefrom........... 3.22.2. The Unit's helideck shall be approved for operations with S-61 type helicopters according to chapter 24 of the Administrative Directive #005 from DPC - Standards and Procedures for Sea Navigation, dated 01/15/97, which deals with the Construction, Installation, Approval and Changes of Helideck and Operations of Helicopters in Offshore Platforms and Merchant Ships. - To submit to PETROBRAS, at least 30 (thirty) days before the date foreseen for the Unit's arrival in Brazil, the following documents referring to the helideck:........................ 16 3.23. (sic) The CONTRACTOR should adopt procedures that minimize the consumption of fuel and industrial water without prejudice for the operations............................................................ 3.24. (sic) The CONTRACTOR should provide installations in the Unit for the training and leisure of all personnel aboard, and which should contain at least the following:............................................... a) Parlor games room;................................................ b) TV room capable of tuning 5 (five) main channels available in Brazil, in any location;.......................................... c) Movie theater with VCR;........................................... d) Two other TV sets to be installed in cabins indicated by PETROBRAS' Inspection............................................. 3.25. (sic) Besides sea water, the CONTRACTOR will judiciously use industrial water to clean the Unit, in order to avoid high consumption and always giving priority to its use in the completion fluid.................... 3.26. (sic) All documents between the CONTRACTOR and PETROBRAS, when requested by PETROBRAS, will be written and submitted in Portuguese... 3.27. (sic) The CONTRACTOR undertakes to maintain throughout the fulfillment of the Contract, all conditions required in the bid stage............. 3.28. (sic) To redo any and all operation refused by the INSPECTION, without any charge to PETROBRAS, as a result of irregular performance, bearing all costs involved.................................................... 3.29. (sic) To maintain a representative accredited and accepted by PETROBRAS in the Unit or in a place previously designated by PETROBRAS, to represent the CONTRACTOR in the fulfillment of the Contract........... 17 3.31. (sic) To comply with the requests contained in the Operation(s) Authorization(s) issued by PETROBRAS.................................. 3.32. To allow, after negotiations between the Contracting parties, the provisional installation in the chartered Vessel, of complementary equipment such as, but not limited to: pipes or rises in catenary by the J-lay method, or similar, submarine manifolds, provided they do not jeopardize the Vessel's safety and are in accordance with the rules of the Classification Society............................................ (End of Clause)................................................................ 18 FOURTH CLAUSE - PETROBRAS' OBLIGATIONS......................................... 4.1. To adopt the measures necessary for the request to register this Contract in the Central Bank of Brazil, soon after the proper documents are received, and the submittal of which is the CONTRACTOR's responsibility........................................................ 4.2. To make, monthly, the payments due to the CONTRACTOR as a result of the present Contract, based on Attachment II and Attachment III and under the conditions set forth in Clauses Sixth: Measurement, and Seventh: Form or Payment, other Attachments, Clauses and Conditions of this Contract being complied with.................................. 4.3. At its exclusive judgment, and without any co-responsibility, PETROBRAS may cooperate with the CONTRACTOR, assisting it before the proper authorities, referring to processes that are going through the procedural stages in the respective Agencies, regarding the Unit, materials and/or equipment pertaining to the object of this Contract. Such cooperation, however, will not lessen the CONTRACTOR's responsibility for the obtainment of the documents and/or benefits that may be the object of the respective proceedings....................... 4.4. PETROBRAS will reimburse the CONTRACTOR, by means of submittal, by the latter, of the corroborative documents, in the acquisition currency, the cost of replacement or repair of the commands and other components of the production string and of the fishing string belonging to the CONTRACTOR, which are lost or damaged, by accident not due to the normal wear nor to the CONTRACTOR's duly proven action or omission, with the deduction of a 25% depreciation per Contract year, with a 20% residual value, applying, for its calculation, the least indemnity cost (Ci) obtained by means of the following formulae:-.................... 19 Ci = Vr.y (1 - 0.02083n), or Ci = Cr, where:......................... Ci - indemnity cost;................................................. Cr - repair cost;.................................................... Vr - replacement value;.............................................. n - number of months between the date of the beginning of the Contract and the date of the loss (the fraction of a month is counted as a whole month);...................................... y - 1 (for new strings), and 0.9 (for "Premium" strings)............ 4.4.1. In the event there is a renewal of the string or of a part of the elements that comprise the production string (pipes, commands and other components), during the period of validity of the Contract, the depreciation period to be considered - the "n" of the formula, will be the one comprised between the purchase date and the date when the element or the string was lost......................................... 4.4.2. PETROBRAS may, at its discretion and expense, carry out inspections in the drill string, its components and accessories, the CONTRACTOR being obliged to repair or replace, for its account, the equipment rejected............................................................... 4.5. Transportation:........................................................ 4.5.1. PETROBRAS will provide transportation for all crew members to the Unit from the port or airport, as indicated by PETROBRAS in the beginning of this Contract, and vice-versa. At its exclusive discretion, the transportation to be provided will be by helicopter or vessel....... 20 4.5.2. PETROBRAS will provide transportation of the material and equipment object of this Contract, from the port or airport designated, to the Unit and vice-versa................................................... 4.5.3. In any circumstances foreseen in items 4.5.1 and 4.5.2, the granting of insurance coverage will not be PETROBRAS' competence, and the CONTRACTOR waives immediately, for itself and for its insurers, any return action against PETROBRAS or third parties at its service, as a result of the transportation provided................................. 4.5.4. In the cases when there is need to program exclusive air transportation, for the Unit's inspection by the Navy and/or the Shipping Office, the costs arising therefrom will be charged to the CONTRACTOR............................................................ 4.5.5. PETROBRAS may provide air or sea transportation for the CONTRACTOR's materials, industrial or fresh water and fuel before the beginning of the Contract, as defined in subitem 2.2.1. The costs arising therefrom will be reimbursed by the CONTRACTOR to PETROBRAS at the time the first invoice is issued..................................................... 4.5.6. PETROBRAS will provide tugs and support vessels for the Unit, from the location where the equipment general testing is performed, to the first location, between locations and from the last location to the Brazilian port or sheltered waters closest thereto, which will be chosen in common agreement by the parties....................................... 4.5.6.1. PETROBRAS will supply support vessels for the positioning of the United in the locations to be drilled under this Contract.................... 21 4.5.7. PETROBRAS may provide tugs and/or support vessels to load and onload materials and to handle anchors, in a location to be defined between the parties, in the cases of inspection and/or dockages, including those arising from act of God or force majeure, as defined in the Twelfth Clause of this Contract. The costs arising therefrom will be reimbursed by the CONTRACTOR to PETROBRAS............................. 4.6. FUEL AND WATER - To supply, for its account, all fuel and water necessary for the operations, complying with the provision set forth in subitems 4.6.1 and 4.6.2, from the beginning of the Contract, until its termination, as defined in subitems 2.2.1 and 2.2.2, respectively. 4.6.1. The supply of water mentioned in item 4.6 includes also the industrial water intended to clean the Unit, the provision set forth in item 3.23 being complied with...................................... 4.6.2. PETROBRAS will supply, for its account, the fuel necessary for the Unit's equipment, up to the limit of 15.695m3/year. Over this limit the onus will run for the CONTRACTOR's account........................ 4.6.2.1.PETROBRAS will carry out the measurement of the fuel existing aboard the Unit, at the beginning of the Contract, at the end of each Contract year, and at the end of the Contract, when the average consumption will be calculated. The volume exceeding the established limit will be charged to the CONTRACTOR at the time of the measurement, at the consumer's sales price, on the date PETROBRAS issues the Debt Note, in force in the City of Rio de Janeiro-RJ, duly adjusted in keeping with the different ICMS aliquots in force in the State of Rio de Janeiro and in the State where the Unit is operating.................. 4.6.3. During the Unit's dockage periods, all fuel consumed will run for the CONTRACTOR's full responsibility and cost, from the interruption of the operations until the return to the same previous situation. The fuel cost during that period will be charged to the CONTRACTOR, after the consumption calculation, and at a price to be defined according to the criterium mentioned in 4.6.2.1................................. 22 4.7. To maintain, besides the CONTRACTOR's radio communications equipment, aboard the Unit, equipment exclusively for PETROBRAS' communications with its land bases................................................... 4.8. To notify the CONTRACTOR, in writing, on the imposition of eventual fines................................................................. 4.9. To issue the Measurement Bulleting (MB), as set forth in the Sixth Clause of this Contract............................................... 4.10. To issue the Operation's Authorization(s) with all the information necessary for their performance, such as: location, time limit, amount, scope, and beginning and end dates.................................... 4.11. PETROBRAS will reimburse the CONTRACTOR, by means of submittal by the latter, of corroborative documents, in the acquisition currency, the cost of replacement of VX rings, VX with Hycar and VX with lead inserts for the BOP and WCT connections with well-heads and filter elements, as provided for in items 24, 25 and 34 of Attachment IV - Mutual Obligations of the Chartering Contract................................ (End of Clause)................................................................ FIFTH CLAUSE - PRICES AND VALUE................................................ 5.1. For the chartering of the Unit and its accessories, PETROBRAS will pay the rates set forth in Attachment II and Attachment III to this Contract, under the conditions set forth in Clauses Sixth: Measurement, and Seventh: Form of Payment.......................................... 23 5.1.1. The Contract prices will include all specified tariffs, supervision, administration, taxes, fiscal emoluments and all expenses that fall directly or indirectly upon the chartering, including profit, needed for its perfect fulfillment, until the end of the Contract, no price revision claims being therefore valid................................ 5.2. The total estimated value of this present Contract is of US$295,019,262.45 (two hundred and ninety-five million, nineteen thousand, two hundred and sixty-two dollars and forty-five cents), equivalent to R$322,308,544.22 (three hundred and twenty-two million, three hundred and eight thousand, five hundred and forty-four reais and twenty-two cents), converted at the exchange rate of R$1,0925/US$1.00, referring to the chartering of the Unit............................... 5.3. PETROBRAS does not undertake to make the payment of the total estimated in item 5.2, but of the amount corresponding to the chartering effectively occurred and accepted by PETROBRAS........................ 5.4. In the event the Unit suffers a delay of up to 90 (ninety) days, regarding the time limit granted in item 2.3 of the present Contract, the CONTRACTOR will have its total daily rate reduced in 10% (ten percent), as of the beginning of the Contract, for a period equal to the number of days of delay........................................... 5.5. In the event the Unit suffers a delay exceeding 90 (ninety) days, counted as of the time limit granted in item 2.3 of the present Contract, besides the reduction of the 10% (ten percent) in the total daily rate for a period of 90 days, as defined in item 5.4, the CONTRACTOR will also be subjected to the imposition of a fine according to item 8.1 of this Contract.......................................... 24 5.6. The financial resources necessary for the payment of the chartering object of the present Contract are duly equated, and specifically assured in the current year's budget and provided for in the following ones, so as to cover the total Contract period........................ (End of Clause)............................................................... 25 SIXTH CLAUSE - MEASUREMENT OF THE CHARTERING 6.1. Periodicity of the measurement of the chartering and determination of the reimbursable expenses............................................. 6.1.1. For the chartering, the measurement will be monthly, according to the procedures mentioned below, with the consequent issuing of the respective Measurement Bulletins (MB):................................ a) The initial measurement of the chartering will be made between the date of the beginning of this Contract and the last day of the calendar month;............................................... b) The intermediate measurements of the chartering, corresponding to a given month of the order "m", cover the period between day 01 of the month "m" and the last day of the calendar month of the order "m";........................................................ c) The final measurement of the chartering will be made between day 01 of the month "m" and this Contract's termination date.......... 6.1.2. The reimbursable expenses, if foreseen in the Contract, will be determined on any day of the month, according to the vouchers submitted to and accepted by PETROBRAS, and more than one determination can be made in the same period covered by the measurement........................................................... 6.1.2.1. The results found will be submitted to the CONTRACTOR on the 5th (fifth) working day, as of the submittal of said vouchers, by means of a Reimbursement Document (RD), which will be signed by the Manager of this Contract, for invoicing purposes................................. 6.1.2.2. The reimbursable expenses and the deductions, if foreseen in the Contract, will be severally made evident in the Reimbursement Documents (RD)......... 6.2. Issuing of the Measurement Bulletins (MB)............................. 26 6.2.1. PETROBRAS, through the Manager of this Contract, at the end of each period as mentioned in the letters of subitem 6.1.1 of this Clause, will carry out the measurement of the chartering, gathering the results found in the Measurement Bulletin (MB), for the signature of the Manager of this Contract and of the CONTRACTOR, complying with the following:......................................................... a) For the initial, intermediate, and final measurements ending on the last day of a given month of the order "m", the CONTRACTOR will receive one of the copies of the MB up to the 5th (fifth) working day of the subsequent month, so that it may submit the respective collection documents, as provided for in subitem 6.3.1 of this Clause;............................................................ b) For the final measurement, when the termination of the Contract does not occur in the last day of the month, the CONTRACTOR will receive one of the copies of the MB, up to the 5th (fifth) working day after the termination of the Contract, so that it may submit the respective collection documents, as provided for in subitem 6.3.1 of this Clause;....................................................... c) For each measurement period of the chartering, only 1 (one) collection document may be issued, being understood that collection documents with partial values regarding said period will not be taken into account for payment purposes;........................... d) The portions regarding the basic values and the deductions are to be made evident in the Measurement Bulletins (MB), if foreseen in the Contract;.......................................................... 6.3. Time for the submittal of collection documents........................ 27 6.3.1. The CONTRACTOR will submit the respective collection documents to PETROBRAS' Financial Department, as mentioned in item 7.1 of this Contract, in the following conditions:................................ 28 - - -------------------------------------------------------------------------------- TYPE OF MEASUREMENT OCCASION FOR THE SUBMITTAL MEASUREMENT DOCUMENT OF COLLECTION DOCUMENTS - - -------------------------------------------------------------------------------- INITIAL MB Up to the 8th working day following INTERMEDIATE the last day of the chartering AND FINAL performance period, and PETROBRAS will make the payment on the 30th consecutive day, as of the final date of the measured period, the provision in subitem 6.3.1.1 being complied with. - - -------------------------------------------------------------------------------- MOBILIZATION MB After the receipt of the MB, and OF THE Unit PETROBRAS will make the payment on the 30th consecutive day, as of the date the collection document is submitted. - - -------------------------------------------------------------------------------- DETERMINATION RD In the first working day after the OF RD is issued, and the payment will REIMBURSABLE be made within 30 (thirty) days, as EXPENSES of the date of its submittal. - - -------------------------------------------------------------------------------- 29 6.3.1.1. The payments due by virtue of this Contract, referring 1st (first) to the chartering, will always occur on the 30th day as of the end of the measured period, covered by the MB's, or on the first working day subsequent thereto, provided the CONTRACTOR complies with the time limits for the submittal of the Collection Documents set forth herein. In the event of non-compliance, by the CONTRACTOR, with said submittal time limits, the payments will be postponed for the number of days equal to the delay in the delivery of such documents.................. 6.4. Measurements follow-up................................................ 6.4.1. The CONTRACTOR undertakes to follow-up the measurements and the determinations carried out by PETROBRAS, offering, at that time, the impugnations or considerations it deems necessary, which will be submitted for PETROBRAS' appraisal and decision....................... 6.4.2. The CONTRACTOR's signature by its representative before PETROBRAS will imply in the acknowledgment of the accuracy of the Measurement Bulletin (MB) for all legal purposes........................................... (End of Clause)................................................................ 30 SEVENTH CLAUSE - FORM OF PAYMENT............................................... 7.1. The payments due as a result of this Contract will be made by PETROBRAS to the CONTRACTOR, in Brazilian currency, 30 (thirty) consecutive days as of the last day of the period of execution of the services, provided the CONTRACTOR submits the collection documents up to the 8th (eighth) working day following the last day of the period of execution of the services.............................................................. 7.1.1. The payments will be made on the basis of the average exchange rate of the American Dollar selling price, in force on the working day immediately before the date of the effective payment.................. 7.1.2. The payment of eventual difference in readjustment will be made on the same day when the payment of the respective service occurs, provides the CONTRACTOR submits the corresponding collection document up to the 5th (fifth) working day following that when the indexes that permit the issuing of the Readjustment Bulletin (RB) are known................... 7.1.3. The payment of reimbursable expenses, if any, will be made 30 (thirty) days after the submittal of the collection document................... 7.1.4. In the event of non-submittal of the collection documents within the time limits set forth above, the payments will be postponed for the number of days corresponding to those of the delay in the submittal of the collection documents.............................................. 31 7.2. The collection documents should be submitted, together with the original of the document giving rise to it (MB, RB, RD) in the Docket of the Financial Department indicated by PETROBRAS, for the purpose of checking the time limits for the payment. 32 7.3. The collection documents will be issued without erasuares, complying with the pertinent laws in force, and will contain obligatorily the following information:................................................ a) Place and date of its issuing and number of the collection document;.......................................................... b) Number and date of signature of the Contract deed;................. c) Number and date of the documents originating them (MB, RB, RD);.... 33 d) Gross value of the collection document, both in numbers and in writing;.......................................................... e) Name and code of the banking establishment, branch, and the respective code, and number of the current account of the payee, where the payments will be made;.................................. f) In order that a particular payment is made in a banking establishment different from the one indicated at the time the Contract deed was signed, such amendment will obligatorily be preceded by a fax/correspondence from the CONTRACTOR or shall appear in the payee's collection document................................. 7.3.1. In the event the collection document is inaccurate, it will be returned to the CONTRACTOR and the time limit foreseen in item 7.1 will be postponed for as many days as those corresponding to the delay in the submittal of such document. 34 7.3.3 The CONTRACTOR will obligatorily submit, every month to the Manager of the Contract:......................................................... a) Payroll of the CONTRACTOR's employees who are involved in the rendering of the services Contracted............................... b) A photocopy of the Social Security Payment Slip (GRPS), duly settled and authenticated, obligatorily filling out the date that identify PETROBRAS, informing in field "8" of the GRPS (other information), the name, CGC/CEI of PETROBRAS, number, date and amount of the Invoice or Bill of Sale referring to the services rendered in the month.............................................................. 35 c) In case of a Cooperative, to submit the payment vouchers of the amounts paid, distributed or credited to its members as remuneration for the services rendered in the fulfillment of this Contract...... 7.3.4. The collection documents will not be accepted by PETROBRAS if submitted with the Income Tax at Source already withheld........................ 7.3.5. It is the responsibility of PETROBRAS' disbursing office the explanations of doubts regarding the issuing of the collection documents............................................................. 7.3.6. Eventual payments made for more or for less by PETROBRAS, will be compensated as soon as they are detected, and the respective amounts will be duly corrected................................................ 7.3.7. The CONTRACTOR should indicate the place and fax number, if any, for the receipt of the "Notice of Payment Foreseen."...................... 7.4. The vouchers for reimbursable expenses due to the CONTRACTOR as a result of this Contract deed, will be previously submitted to the Manager of the Contract, for checking, besides being duly settled by the respective supplier or service renderer, when such is the case.... 7.4.1. If the originals cannot remain in PETROBRAS' hands, copies thereof may be submitted, which will be checked by the Inspector and/or Manager, and the following should appear in every original document: "Copy Submitted for Reimbursement On ___/___/___", followed by the signature and identification by name, position and registry number, and the originals will be returned to the CONTRACTOR. The following text will appear in the copies of each document in PETROBRAS' hands: "Checked with the Original On ___/___/___", which the Inspector and/or Manager will sign, identifying the signature by name, position, and registry number................................................................ 36 7.4.2. In special cases of reimbursement of import expenses (duties and/or expenses), the CONTRACTOR will submit a letter forwarding the vouchers for such expenses, together with the import process to the department in charge of its follow-up................................................ 7.4.3. The receipt, duly formalized by PETROBRAS of any reimbursable expense voucher, does not represent the recognition of the debt, nor the proof that the expenses were made............................................ 7.4.4. The collection of reimbursable expenses will be made through the issuing of a Services Invoice, after approval of said corroborative documents and issuing by PETROBRAS of the respective Reimbursement Document - DR, which will be issued up to 5 (five) working days, as of the date of submittal of said documents............................................ 7.4.4.1.PETROBRAS' Inspection has 3 (three) working days to proceed with the checking of the expense vouchers and to notify its approval to the CONTRACTOR, so that it may issue the Combined Invoice and Bill of Sale. 7.4.5. The total amount of the collection document will be obtained by applying the following formula:................................................. VTD VTR = ---------------- , where......................... 1 - ICP VTR = total amount to be reimbursed to the CONTRACTOR;............... VTD = total amount of the reimbursable expenses, actually authorized; ICP = total of the sum of the aliquots of taxes collected, in the decimal form (ISS or ICMS, as the case may be, COFINS and PIS/PASEP)..................................................... 37 EIGHTH CLAUSE FINES............................................................ 8.1. Non-compliance, by the CONTRACTOR, after 91 (ninety-one) days beyond the time limit mentioned in item 2.3 of this Contract, will imply in the imposition of a fine against the CONTRACTOR, in a written notice, corresponding to 30% (thirty per cent) of the rate provided for in Ref 101 of Attachment III, per day of delay exceeding 90 days....... 8.2. In the event of non-compliance, by the CONTRACTOR, with the inspection's requirements within the time limit it may set, PETROBRAS may, by a written notice, impose upon the CONTRACTOR, per day of non-compliance with such requirements, as of the end of the time limit set, a fine corresponding to 20% (twenty per cent) of the rate provided for in Ref 101 of Attachment III. .................................... 8.3. The penalties set forth in this Clause do not exclude any other provided for by the laws in force and/or in this Contract, nor the CONTRACTOR's liability for damages it may cause to PETROBRAS, as a result of non-fulfillment of the conditions agreed upon herein. 8.4. The amount corresponding to the sum of the values of the fines applied is limited to 10% (ten percent) of the estimated value of the present Contract.............................................................. 8.5. The penalties to which the CONTRACTOR is subjected to due to the provision set forth in this Clause, will be discounted in the first payment and in the subsequent ones, which the CONTRACTOR is entitled to, after the sanctions are applied by PETROBRAS...................... 8.6. In the event of balance, PETROBRAS reserves itself the right to make or complement the deduction in collection document(s) related to any other Contract deed eventually entered into with the CONTRACTOR, or to use any other adequate means to settle the debt, if necessary............. 38 8.7. The CONTRACTOR may appeal against the imposition of the fine, in a declaration, within the non-deferrable time limit of 15 (fifteen) consecutive days as of the date the notice is received................ 8.8. Non-appearance of the CONTRACTOR's personnel for boarding on the date and time agreed upon between PETROBRAS and the CONTRACTOR, will subject the CONTRACTOR to the payment of a fine of US$140.00 per passenger in the case of air transportation, and US$40.00 in the case of sea transportation........................................................ 8.8.1. The fine set forth in item 8.8 will not be charged if the CONTRACTOR asks PETROBRAS to change the boarding schedule at least 24 (twenty-four) hours in advance........................................ 8.9 In a written notice and without prejudice of the capacity to rescind the Contract, PETROBRAS may impose upon the CONTRACTOR a compensatory fine of 100% (one hundred per cent) of the amount of the conviction, due to default of its labor, social security or tax obligations....... 8.9.1. The payment of said fine will not exempt the CONTRACTOR from the obligation to reimburse PETROBRAS for the amount imposed upon it as a result of an eventual joint conviction passed by a Labor Court or by the proper administrative jurisdictions............................... 8.9.2 The CONTRACTOR will be fined in the percentual of 5% (five percent) on the amount of the invoice in the event it does not submit the GRPS or submits at variance................................................... (End of Clause)................................................................ 39 NINTH CLAUSE INSPECTION........................................................ 9.1. The inspection of the chartering Contracted herein will be carried out by PETROBRAS' representatives, and the CONTRACTOR undertakes to allow their free access to the Unit and to the operations locations, and to comply immediately with the observations of such inspection, which will have ample powers to:................................................. 9.1.1. Determine, provided it comes to its knowledge and is within its capacity, the suspension of the operations which perhaps are being carried out in disagreement with the good technique or which threaten the safety of persons or assets of PETROBRAS, third parties or of the CONTRACTOR itself, the subitem 2.1.7 of Attachment II being complied with......................................................... 9.1.2. Refuse the employment of condemned or improper equipment and materials, tools and production string components, as well as operations which do not comply with the established programs;......... 9.1.3. Order the withdrawal from the work site, of any of the CONTRACTOR's employees who, in PETROBRAS' opinion, may endanger the good performance of the operations or hinder its inspecting activities;................ 9.1.4. Certify on the accuracy of the information reported daily by the CONTRACTOR;........................................................... 9.1.5. Notify the CONTRACTOR, in writing, on the imposition of the penalties provided for in this Contract, including those referring to the CONTRACTOR's action or omission;...................................... 9.1.6. Request from the CONTRACTOR a detailed report on any accident occurred and on any operation or repair performed..................... 40 9.2. However, the responsibility, operation, movement and administration of the Unit will be under the exclusive control and command of the CONTRACTOR or its employees........................................... 9.3. The total or partial action or omission of the Inspection, does not lessen at all the CONTRACTOR's full responsibility for the rendering of the obligations agreed upon herein, nor does it imply any reduction or change in the CONTRACTOR's obligations in the faithful and perfect fulfillment of the present Contract................................... 9.4. PETROBRAS' Inspection should record its observations on the Driller's Log approved by the IADC and on the Daily Drilling Certificate (ADP), to safeguard the rights and responsibilities foreseen in this Contract............................................. 9.5. During the Contract period, PETROBRAS will carry out the CONTRACTOR's performance evaluation, covering the groups in equipment and material, human resources, installations, quality and efficiency. The results of the performance evaluations will be notified and consolidated by means of a service performance certificate.................................. (End of Clause)................................................................ 41 TENTH CLAUSE - RESCISSION...................................................... 10.1. PETROBRAS may rescind the present Contract, without the CONTRACTOR being entitled to any right to indemnity and/or withholding in the following cases:...................................................... 10.1.1. Nonfulfillment, or irregular fulfillment of Contract clauses, specifications, operations and Inspection's requests, provided the fact mentioned is not remedied within the time limit of 60 (sixty) days, or time limits, as well as the repeated commitment of faults in the fulfillment of the Contract;.......................................... 10.1.2. Total or partial subContracting of the object of the present Contract, the association of the CONTRACTOR with another, merger/division or total or partial incorporation, except if allowed for in this Contract, which affects the good performance of this instrument;................ 10.1.3. Interruption of the operations for more than 60 (sixty) days;......... 10.1.4. Decree of the CONTRACTOR's bankruptcy................................. 10.1.5. When the penalties provided for in item 8.4 of this Contract is attained;............................................................. 10.1.6. Slowness in the execution of the works, leading PETROBRAS to prove the impossibility of completing the operations within the established time limits;............................................................... 10.1.7. Non-compliance with the determinations of PETROBRAS' agent appointed to follow-up and inspect the fulfillment of the Contract, as well as those of his superiors;...................................................... 10.1.8. The dissolution of the CONTRACTOR;.................................... 10.1.9. The social change or the modification of the company's purpose or structure, which in PETROBRAS' opinion, hinders the performance of the operations;........................................................... 42 10.1.10. Delay in the beginning of the fulfillment of the Contract for more than 180 (one hundred and eighty) days...................................... 10.1.11. Rescission of the Services Rendering Contract for Drilling and/or Evaluation and/or Completion and/or Workover using the Unit, entered into between PETROBRAS and MARITIMA NAVEGACAO E ENGENHARIA LTDA....... 10.1.12. If the limit set forth in subitem 2.1.9 of Attachment II to this Contract is attained.................................................. 10.1.13. If the limits set forth in NOTE 2 of Ref. 102 of Attachment II to this Contract are attained................................................. 10.1.14. Non-submittal of the proof of fulfillment of labor obligations towards the employees directly involved in the services object of this Contract, including social security contributions and deposits in the FGTS, when requested by the Inspection, or if such default is proven;............................................................... 10.1.15. Non-submittal or submittal at variance of the GRPS, when the corresponding invoice is delivered.................................... 10.1.15.1The rescission for this reason does not prevent PETROBRAS from imposing the respective fine, foreseen in 8.7.2;...................... 10.2. In the event of rescission of the Contract deed for the reasons foreseen in 10.1, PETROBRAS will:..................................... a) take over the object of the Contract deed, on the stage and location where it is found;................................................. b) enforce the Contract guarantee, if any, for the reimbursement of the amounts of fines and indemnities due to it;........................ 43 c) withhold the credits arising from the Contract deed, up to the limits of the damages caused to it................................. 10.3 After the contract is rescinded, as set forth in this clause, the CONTRACTOR is liable, in legal and contract fashion, for the violation or inadequate performance which gives rise to the rescision, as well as for the reimbursement of damages which PETROBAS may come to sustain.... 10.4. After the Contract is rescinded, PETROBRAS at its exclusive judgment, may adjudicate the operations object thereof to whom it deems appropriate, without behoving the CONTRACTOR any consultation or interference, claim and/or indemnity, for whatever title, and the CONTRACTOR will be liable to legal and Contract penalties, besides being liable for damages PETROBRAS may sustain............................... 10.4.1. The CONTRACTOR is also liable for the pertinent administrative sanctions, its full defense being guaranteed.......................... 10.5. In the event PETROBRAS does not impose the right to rescind the present Contract according to this Clause, it may, at its absolute discretion, withhold the payments of pending invoices, until the CONTRACTOR fulfills the Contract condition it has infringed, but such fact will not represent novation nor will it generate rights that may be claimed by the CONTRACTOR..................................................... (End of Clause)................................................................ 44 ELEVENTH CLAUSE - FISCAL CHARGES............................................... 11.1. Taxes (taxes, fees, emoluments, fiscal and parafiscal contributions) that are due as a direct or indirect result of the present Contract, or of its fulfillment, will be the exclusive responsibility of the taxpayer, so defined in the tax rule, with no right to reimbursement. PETROBRAS, as the withholding source, will withhold and pay within the legal time period, from the payments it makes, the taxes it is liable to by thelaws in force.......................................... 11.1.1. The CONTRACTOR states that, in quoting its prices, it has taken into account the taxes (taxes, fees, emoluments, fiscal and parafiscal contributions) charged on the fulfillment of this Contract, and it cannot make any claim due to error on such evaluation, for the purpose of requesting a price revision [ou] reimbursement of payments set down by the property authority............................................. 11.1.2. Once found, during the period of validity of the Contract, that the CONTRACTOR has unduly added to its prices amounts corresponding to taxes, fiscal and/or parafiscal contributions and emoluments of any kind that are not charged to the performance of the services agreed upon, such values will be immediately excluded, with the consequent reduction of the prices practiced and reimbursement of amounts that may have been paid to the CONTRACTOR...................................... 11.2. If, during the period of validity of this Contract, any of the following events occur: creation of new taxes;.............................................. extinction of existing taxes;....................................... changes in the aliquots;............................................ 45 establishment of tax incentives of any kind; and.................... exemption or abatement of federal, state or county taxes,........... which, provedly come to increase or reduce the burdens of the parties to the Contract, the prices will be revised, so as to fit them into the changes made, compensating, at the first opportUnity, any differences arising from such changes. However, if it is a question of tax incentives, the advantages arising therefrom will always be for PETROBRAS............................................ (End of Clause)................................................................ 46 TWELFTH CLAUSE - FORCE MAJEURE................................................ 12.1. PETROBRAS and the CONTRACTOR will not be liable for the nonfulfillment of their respective obligations in case of events that characterize an act of God or force majeure defined in the sole paragraph of Article 1.058 of the Brazilian Civil Code. Any suspension of performance due to this item 12.1 will be limited to the period during which such cause or its consequences exist, and such period will be added to the duration of the Contract mentioned in the Second Clause of the present Contract. However, the CONTRACTOR is assured the right to receive the rate provided for in Ref 104 of Attachment III, with the exception of the exemption from payment set forth in subitem 2.1.4 of the Attachment II, and the reimbursements mentioned in this Contract, and furthermore, the parties will severally assume their losses............................ 12.2 If the circumstances that justify the invoking of the existence of an act of God or force majeure occurs, the party unable to fulfill its obligations will immediately notify the other party, in writing, on the occurrence of its consequences........................................ 12.3. If the impediment arising from the force majeure lasts for more than 90 (ninety) consecutive days, any of the parties may opt for the termination of the Contract, with both parties complying with their mutual obligations due until the date of the beginning of said impediment............................................................ (End of Clause)................................................................ 47 THIRTEENTH CLAUSE - ASSIGNMENT AND TRANSFER................................... 13.1. The CONTRACTOR cannot assign or transfer, in whole or in part, the present Contract, except with PETROBRAS' prior authorization in writing............................................................... 13.2. The CONTRACTOR cannot assign or give in guarantee, at any title, in whole or in part, the credits of any kind, arising or deriving from the present Contract, except with PETROBRAS' prior authorization in writing. The prior authorization will obligatorily state that PETROBRAS imposes upon the assignee of the credits the exceptions that behooves it, mentioning expressly that the payments to the assignee will be conditioned to the fulfillment, by the assignor, of all of its Contract obligations....................................... 13.3. The occurrence of the above mentioned events, duly authorized by PETROBRAS, does not exempt the CONTRACTOR form any of its Contract obligations........................................................... 13.4. PETROBRAS may assign or transfer, in whole or in part, the present Contract, under commercial conditions to be agreed upon by the parties. ............................................................. (End of Clause)............................................................... 48 FOURTEENTH CLAUSE - ADDITIONAL EQUIPMENT...................................... 14.1. PETROBRAS may install in the Unit the additional equipment it deems necessary for research, drilling, completion of wells or production. It is agreed, however, that no structural change will be made in the Unit without the CONTRACTOR's consent in writing. All PETROBRAS' equipment installed in the Unit will remain its property, and it will be removed by it before the end of this Contract. The installation and removal expenses will run for PETROBRAS' account. During the installation and removal of PETROBRAS' equipment, the rate set forth in Ref 104 of Attachment III will be paid if the interruption of the operations becomes necessary...................................................... (End of Clause)............................................................... 49 FIFTEENTH CLAUSE - ATTORNEY OF RECORD......................................... 15.1. The CONTRACTOR undertakes to maintain, in the City of Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil, during the Contract period and until the settlement of eventual demands arising from this Contract, a representative with "ad-judicia et extra" powers, who may receive service of process, inclusive in execution proceedings, as well as to sign compromise and settlements regarding controversies resulting from this Contract, and the summons can be made by publication, in the event or lack of an Attorney.............. 15.1.1. Within 30 (thirty) days after the signature of the present contract, the CONTRACTOR will notify PETROBRAS the name, qualification, office and residence of its representative and attorney of record, as set forth in item 15.1.................................................... (End of Clause)............................................................... 50 SIXTEENTH CLAUSE - CONTRACT RELATIONSHIPS..................................... 16.1. This Contract is related to another one for the rendering of services of drilling and/or evaluation and/or completion and/or workover, signed on this same date between PETROBRAS and MARITIMA NAVEGACAO E ENGENHARIA LTDA. (End of Clause)............................................................... 51 SEVENTEENTH CLAUSE - INTERVENIENCE............................................ 17.1. Clause non-applicable in this Contract................................ (End of Clause)............................................................... 52 EIGHTEENTH CLAUSE - LIABILITY................................................. 18.1. PETROBRAS' and the CONTRACTOR's liability for damages will be limited to the direct damages in accordance with the Brazilian Civil Code and pertinent laws, with exception of loss of profit and indirect damages, the direct damages being limited to 100% (one hundred percent) of the total Contract value.................................................. (End of Clause)............................................................... 53 NINETEENTH CLAUSE - COMPLEMENTARY DOCUMENTS 19.l. The ATTACHMENTS mentioned below are an integral part of the present Contract and, in the event of disagreement between the Attachments and the contract, the text of the contract will prevail............... ATTACHMENTS:.................................................................. I - Technical specifications of the Unit ............................. II - Applicability of the Rates and Incidents in the Performance...... III - Unit Prices Spreadsheet ........................................ IV - Mutual Obligations .............................................. V - List of Specialized Personnel;.................................... VI - Environmental Operating Conditions............................... VII - PETROBRAS' Safety Rules.......................................... VIII - Equipment Testing Program....................................... IX - Procedures In the Event of Fatal Accidents........................ (End of Clause)............................................................... 54 TWENTIETH CLAUSE - PRICE READJUSTMENT......................................... 20.1. The contract prices are fixed and non-readjustable.................... (End of Clause) .............................................................. 55 TWENTY-FIRST CLAUSE - ACCEPTANCE.............................................. 21.1. After the chartering operations are completed in strict conpliance with the conditions set forth in this Contract deed, PETROBRAS will accept them by means of a Deed of Definitive Receipt, signed by both parties............................................................... 21.2. The signature of the Deed of Definitive Receipt does not exempt the CONTRACTOR from the liabilities foreseen in this Contract and in the laws in force......................................................... (End of Clause) .............................................................. 56 TWENTY-SECOND CLAUSE - LOSS OR DISAPPEARANCE.................................. 22.1. In the event the vessel is lost or disappears, no payment regarding the same will be due by PETROBRAS to the CONTRACTOR, as of the day or as of the moment it was last heard of................................. (End of Clause)............................................................... 57 TWENTY-THIRD CLAUSE - GROSS OR GENERAL AVERAGE................................ 23.1. The gross or general average will be ruled in the Port of Rio de Janeiro according to the York and Antwerp Rules/1974.................. (End of Clause) .............................................................. 58 TWENTY-FOURTH CLAUSE - JURISDICTION........................................... 24.1. The Jurisdiction of the County of the Capital of the State of Rio de Janeiro will be competent to settle any questions arising from the present Contract, with the express waiver, by the parties, of any other, however privileged ............................................ (End of Clause) .............................................................. AND BEING THUS AGREED, the parties sign the present deed in 3 (three) copies with the same tenor, with the witnesses below ........................ Rio de Janeiro, January 12, 1998. ............................................ (Signed:) Luiz Eduardo G. Carneiro LUIZ EDUARDO G. CARNEIRO - EXECUTIVE SUPERINTENDENT OF EXPLORATION AND PRODUCTION SOUTH - SOUTHEAST - PETROLEO BRASILEIRO S.A. - PETROBRAS........... (Signed:) German Efromovich GERMAN EFROMOVICH - PRESIDENT................................................. MARITIMA NAVEGACAO E ENGENHARIA LTDA.......................................... WITNESSES:.................................................................... (Signed:) Elaine Brabo ....................................................... CPF No. 970.702.897-15. ...................................................... (Signed:) (illegible) ........................................................ CPF No. 610.769.457-91. ...................................................... Contract 101.2.159 97-1....................................................... 59 CHARTERING ATTACHMENT II APPLICABILITY OF THE RATES AND, INCIDENTS IN THE PERFORMANCE. 1 - APPLICABILITY OF THE RATES - DEFINITION OF THE CHARTERING RATES PER 24 (TWENTY-FOUR) HOUR DAY ....................................................... REP 101 - OPERATION RATE - It will be applied during the activities requiring the use of the Unit, such as electric logging, formation testing, completion, and workover operations, including line scouring and cutting operations.................................................................... REP 102 - REPAIR RATE - In the periods when there is an interruption of the activities that require the use of the Unit, mentioned in Ref 101 of this ATTACHMENT and the operations for Moving the Unit between locations, Ref 105 of this ATTACHMENT, due to maintenance, including replacement of mud pump spare parts, and/or repair in the Unit's equipment, or in those which supply is the Contractor's responsibility, no rate will be due ...................... NOTE 1. The repair period will be considered as of the interruption of the operation that is being performed, until the return to the same situation when the interruption occurred, except for the periods when the interruption in the repair activities occur due to adverse sea conditions, as set forth in NOTE 2 of Ref. 104 ........................................................... NOTE 2. In the event the CONTRACTOR remains in Repair Rate for an accumulated total of 30% of the time, for any period of 6 (six) Contract months, PETROBRAS may rescind the present Contract, based on subitem 10.1.14 of this contract..... 60 NOTE 3. It will be considered as repairs the occurrences due to wash outs in the drill pipes and in the other elements of the drill string, belonging the CONTRACTOR, with exception of those arising from the presence of H2S and from abnormal mechanical conditions occurred in the well .......................... NOTE 4. At the Inspection's discretion, for the maintenance of the BOP, the CONTRACTOR may be granted a franchise of up to 24 hours between the instant the BOP is set on the test stump, until its operating withdrawal, and the moment of its movement for the next running in another well, without the CONTRACTOR entering in repair rate, provided such maintenance is carried out according to international standards. In the period within these 24 hours intended exclusively for the BOP maintenance, the waiting rate (Ref. 104) will be due................................................................... REP. 103 - RATE ADDITIONAL (AT) - In each measurement period, as agreed upon in subitem, 6.1.1 of the contract, the CONTRACTOR will be entitled to receive a Rate Additional, calculated by means of the following formulae:............. AT = 0.10 x (NT - NFM - NREP - NIPG NTOR) x for PI less than or equal 0.0300 TO AT = (0.16 - 2 x PI) x (NT - NFM - NREP - NIPG - for 0.03 less than or equal to PI 0,0800 NTOR) x TO......................................................... AT = Zero to PI> 0.0800 Where:........................................................................ AT = Rate Additional ......................................................... TO = Operation Rate (Ref 101)................................................. PI = Unavailability Proportion, calculated with 4 (four) decimal places, being: ....................................................................... NREP + NIPG + NTOR PI = ------------------ NT - NFM NT = Total number of days in the measurement period considered;............... 61 NFM = Total number of days in which the act of God or force majeure occurs, as defined in the Twelfth Clause of the contract, in the measurement period considered ................................................................... NREP = Total number of days under repair rate (Ref 102) in the measurement period considered;............................................................ NIPG = Total number of days under exemption from payment (according to item 2.1 of this Attachment) in the measurement period considered ................. NTOR = Total number of days with reduced operation rate (according to subitems 2.2.3 and 2.2.4 of this ATTACHMENT) in the measurement period considered Ref. 104 - WAITING RATE (TE) - corresponds to 95% of the operation rate (TO) and which will be applied in Bad Weather, Force Majeure and Waiting situations, as defined below:................................................. 1) BAD WEATHER SITUATIONS - in the event of stoppage of the operations when environmental conditions are so severe as to endanger the Unit's operating capacity, the limitations in Attachment IV being complied with, making the operations unstable or unsafe or preventing support vessels from having access to the Unit, or preventing the tugs' operations, at the time of change of locations, although the Unit may operate normally, in spite of the Bad Weather ......................................................... 2) FORCE MAJEURE SITUATIONS - during the period when the Unit cannot operate, due to act of God or force majeure, as defined in the TWELFTH CLAUSE of the Contract, until the removal of the impediment or the rescission of the Contract, as the case may be .......................... 3) WAITING - waiting for the arrival, maintenance or availability of materials from PETROBRAS or third parties, under PETROBRAS' responsibility, even if the Maintenance is made in the Unit; waiting for daylight to carry out formation tests; waiting for orders from PETROBRAS, such as, but not limited to: change of programs, definition to proceed with the completion or other production activity, rest for PETROBRAS' team or of those of third party at PETROBRAS' service; waiting for tugs or support vessels........ 62 NOTE 1. The period spent in disconnecting the LMRP from the BOP due to environmental conditions will be considered as Bad Weather situation, until the return to the previous situation ......................................... NOTE 2. If a Bad Weather situation occurs which interrupts a Repair activity, the waiting Rate (Ref 104) with a 40% (forty percent) reduction, will be due during that period ........................................................... Ref. 105 - Movement Rate - corresponds to 95% (ninety-five percent) of the Operation Rate (TO) and will be applied during the following periods: ........ a) Beginning of the Contract - After the acceptance of the Unit's equipment operating conditions, once the general testing provided for in Item 3.1. of the contract has been carried out, until the spud in of the first well or reentry in the first well (beginning of running the first tool for access to the well); ................................................ b) Between locations - After the end of the completion or intervention operations in a well, with the arrival of the BOP or tool used in the well (the one which occurs last) in the moon pool, until the spud in or reentry in a new well (beginning of running the first tool for access to the well); NOTE: This period includes the DP system calibration and tests, always in each new location, and in others in each Contract year or at any time, when requested by PETROBRAS........................................................ 63 c) End of Contract - After the end of the spud in or intervention operations in the last well, with the arrival of the BOP or tool used in the well (the one which occurs last) in the moon pool, until the Unit's arrival in a place of sheltered waters, chosen in common agreement between the parties, or, if there are PETROBRAS' equipment still aboard, until the withdrawal of such equipment from the Unit............. Ref. 106 MOBILIZATION OF THE Unit (MOB) - No rate will be due for the mobilization of the Unit and its fittings..................................... Ref. 107 DEMOBILIZATION OF THE Unit (DEMOB) - No rate will be due for the demobilization of the Unit and its fittings................................... 2 - INCIDENTS IN THE PERFORMANCE ............................................. 2.1. Exemption from Payment - PETROBRAS will be exempted from the payment of the rates foreseen in this ATTACHMENT, during the period in which occurs ............................................................... 2.1.1. Interruption of the services due to the CONTRACTOR's duly proven fault arising from operational error and/or lack of material or equipment, inclusive due to the loss of subaquatic equipment or spare parts 2.1.2. Stoppage of the services and/or of the Unit due to measures related to impositions by made the insurers .................................. 2.1.3. CONTRACTOR's refusal to operate under the conditions foreseen in Attachment VI - Environmental Operating Conditions .................. 2.1.4. Stoppage of the services and/or of the Unit for inspection or dockage purposes, including surveys and dockages arising from act of God or force majeure, as defined in the Twelfth Clause of the contract, the corresponding expenses also running for the CONTRACTOR's account ..... 64 NOTE 1. The exemption from payment will begin in the moment there is an interruption of the operational continuity object of this contract, even if the withdrawal of all or part of PETROBRAS' and/or the CONTRACTOR's cargo becomes necessary for the inspection and/or dockage........................... NOTE 2. The end of the exemption from payment, due to the inspection and/or dockage, will occur:.......................................................... a) On the return to the same location, the moment the operation returns to the previous situation;................................ b) On the mobilization to another location, the moment the Unit starts sailing after PETROBRAS' or the CONTRACTOR's materials have been put back on board. ..................................... 2.1.5. Occurrence of kick, drill string sticking, loss of circulation, fishing or abandonment, caused by the CONTRACTOR's duly proven action or omission, from the moment the problem was ascertained, until the return to the situation prior to its occurrence, or displacement to another location, in the event of abandonment ........................ 2.1.5.1. The exemption from payment referred to in 2.1.5 will be limited to a period of 15 (fifteen) days, per event, after which the reduction foreseen in subitem 2.2.3 of this ATTACHMENT will be applied 2.1.6. Occurrence of blow out caused by the CONTRACTOR's duly proven action or omission, from the moment the problem was ascertained, until the return to the situation prior to its occurrence ...................... 65 2.1.6.1. The exemption from payment referred to in item 2.1.6 will be limited to a period of 45 (forty-five) days, after which the reduction foreseen in subitem 2.2.4 of this ATTACHMENT will be applied...................... 2.1.7. Suspension of the services, determined by PETROBRAS' Inspection, based on item 9.1.1 of the Contract................................... 2.1.8. Interruption of the operations due to a failure occurred in any of the Unit's equipment, at the time of the testing to be carried out according to item 3.1 of the contract ................................ 2.1.9. In the occurrence of events of exemption from payment provided for in subitem 2.1.1, 2.1.2, 2.1.3, and 2.1.7, for a total accumulated period exceeding 30% (thirty percent) in any 6 (six) month period, PETROBRAS may rescind the present contract, based on its subitem 10.1.13......... 2.2. REDUCTION IN THE DAILY OPERATION, WAITING AND MOVEMENT RATE........... The rates foreseen in this Attachment will be reduced in the following cases ............................................................. 2.2.1. Total or partial inoperativeness or malfunction of any equipment which delays or hinders the operation, such as, but not limited to, winches, top drive, kelly spinner, geolograph, current meter, air compressors, shale shaker, mixing pumps, mud laboratory equipment and bulk receipt and transfer systems, are reason for the reduction of the daily rate provided for in Ref 101, in 1% (one percent), cumulative per equipment, provided the CONTRACTOR is notified in writing in the Daily Drilling Certificate (ADP), by PETROBRAS' Inspection and which, after the time limit the latter has set to repair said equipment, such repair has not been made.................. 66 2.2.2. Low Efficiency - Reference Rates 101 and 105 of this Attachment will have suffer a 20% (twenty percent) reduction, in the event low efficiency is verified, according to the operating efficiency parameters listed below. Such reduction will be applied during the whole period corresponding to the activity in which low efficiency is verified:.... Operating Parameters: ........................................................ - - - Maneuver of the drill string in a cased well (except BHA): ............... o Inside the riser and 20" casing = 500 m/h......................... o Inside the 13 3/8" casing = 600 m/h .............................. o Inside of 9 5/8" casing = 700 m/h ................................ - - - Break of DP's per Unit - 25jt/h .......................................... - - - Casing string running in the sea/inside the riser/previous casing (joints with approximately 12 m long) ............................................ o 30" Casing - 2 jt/h ........................................ o 20" Casing - 5 jt/h ........................................ o 13 3/8" Casing - 13 jt/h ........................................ o 9 5/8" Casing - 18 jt/h ........................................ o 7" Casing - 15 jt/h ........................................ - - - Running of drilling riser, excluding normal time for testing (50 ft joint): 45/m/h ........................................................... - - - Pulling of drilling riser (50 ft joints): 60 m/h - - - Installation or pulling of the kill/choke lines/ telescopic joint/stretchers: 6.0h ................................................... - - - Diverter installation or pulling: 2.0h ................................... - - - Assembly of the dampening lines in the M.R.: 1.5h........................ 67 - - - Assembly of the flexitube equipment: 5.0h. ............................... - - - Assembly of the production tail: 2.0h .................................... - - - Tubing running or pulling, per Unit - 150 m/h ............................ - - - Tubing running or pulling per section - 300 m/h........................... - - - Completion risers running or pulling - 50 m/h ............................ - - - Assembly of terminal head and sling's -2.0 h ............................. - - - Moving of WCT to/from the moon pool - 3.0 h............................... - - - Moving of tree cap or tree running tool to/from the moon pool - 2.5h ..... - - - Assembly of lubricator and wire line BOP - 1.5h NOTE: The above mentioned operating parameters are based on normal weather condition..................................................................... 2.2.3. Beginning on the 16th (sixteenth day), inclusive, of the occurrence of kick, drill string sticking, loss of circulation or fishing, caused by the CONTRACTOR's duly proven action or omission, until the return to the situation prior to its occurrence, the applicable rate will be reduced by 50% (fifty percent) ............................... 2.2.4. Beginning on the 46th (forty-sixth) day, inclusive, of the occurrence of Blow out caused by the CONTRACTOR's duly proven action or omission, until the return to the situation prior to its occurrence, the applicable rate will be reduced by 50% (fifty percent) ........... 2.3. Period of Validity of the Contract Rates-the contract rates set forth in this Attachment will apply in the period set forth below: ......... a) Beginning: release of the Unit, by PETROBRAS, to sail to the first location, after the equipment general testing provided for in item 3.1 of the Contract has been carried out, with the exception of the provision in its subitem 3.1.1.1................ 68 b) End: after the end of the completion of the last well, with this Unit's arrival at a port or sheltered waters chosen by common agreement between the parties, and if there is PETROBRAS' equipment still aboard, with the withdrawal of such equipment from the Unit. 2.4. Blow-Out - PETROBRAS will be responsible for the well control operation costs, in the event of blow-out and caving caused by the blow-out. Such provisions apply only to the well control costs and do not apply to the loss of assets, lesions and/or damages caused by the blow-out, which are protected by the provisions of the pertinent items of this contract. The CONTRACTOR undertakes to place at PETROBRAS' disposal all of its resources in personnel -and equipment related to this Contract, without any additional charges to PETROBRAS. If the CONTRACTOR has contributed with duly proven action or omission for the occurrence of the accident, no rate will be due, until the solution of the problem, in compliance with the provisions in subitems, 2.1.6 and 2.2.4 of this Attachment ........................................ (End of ATTACHMENT)........................................................... 69 ATTACHMENT III - Unit PRICES SPREADSHEET CHARTERING ATTACHMENT III - Unit PRICES SPREADSHEET CHARTERING - - ------------------------------------------------------------------------------- Unit PRICES SPREAD SHEET Contract NO. 101.2.008.97-9 - - ------------------------------------------------------------------------------- OBJECT OF BID: CHARTERING OF A FLOATING Unit, PROVIDED WITH DYNAMIC POSITIONING SYSTEM. - - ------------------------------------------------------------------------------- PLACE OF OPERATION: BRAZILIAN CONTINENTAL SHELF AND INTERNATIONAL WATERS - - ------------------------------------------------------------------------------- Unit'S NAME: AMETHYST 6 - - ------------------------------------------------------------------------------- COMPANY'S NAME: MARITIMA NAVEGACAO E ENGENHARIA LTDA. - - ------------------------------------------------------------------------------- CODE ITEMIZATION Unit Unit PRICE (US$) - - ------------------------------------------------------------------------------- OPERATION RATE 02.222.305 (Ref. 101) DAY 119,999.70 - - ------------------------------------------------------------------------------- REPAIR RATE (Ref. No rate will be 02.222.306 102) DAY due - - ------------------------------------------------------------------------------- WAIT. - BAD WEATHER RATE 02.222.307 (Ref. 104.1) DAY (95% OF Ref. 101) - - ------------------------------------------------------------------------------- WAITING RATE - FORCE MAJEURE 02.222.308 (Ref. 104.2) DAY (95% OF Ref. 101) - - ------------------------------------------------------------------------------- WAITING RATE - WAITING 02.222.309 (Ref.104.3) DAY (95% OF Ref. 101) - - ------------------------------------------------------------------------------- 70 - - ------------------------------------------------------------------------------- MOVEMENT RATE 02.222.310 (Ref. 105) DAY (95% OF Ref. 101) - - ------------------------------------------------------------------------------- MOBILIZATION RATE NO RATE WILL BE 02.222.311 (Ref. 106) UNIQUE DUE. - - ------------------------------------------------------------------------------- DATE OF THE SIGNATURES PROPOSAL - - ------------------------------------------------------------------------------- PETROBRAS CONTRACTOR (illegible) (illegible) 09/08/97 - - ------------------------------------------------------------------------------- (Illegible rubber stamp.)...................................................... 71 Contract No. 101.2.159.97-1 CHARTERING ATTACHMENT IV MUTUAL OBLIGATIONS - - ------------------------------------------------------------------------------- DESCRIPTION ON ACCOUNT OF SUPPLIED BY ---------------------------------------------------- PET CONT PET CONT - - ------------------------------------------------------------------------------- 1. Production Adaptor Base and WCT X X - - ------------------------------------------------------------------------------- 2. Cement, bentonite, baritine and other materials and additives for manufacturing mud and cementing. X X - - ------------------------------------------------------------------------------- 2. (sic) Cementing and logging Unit: a) Installation and removal X X b) Maintenance X X c) Rent X X - - ------------------------------------------------------------------------------- 3. Equipment and tools specific for evaluation, completion and production operations of wells. X X - - ------------------------------------------------------------------------------- 72 - - ------------------------------------------------------------------------------- DESCRIPTION ON ACCOUNT OF SUPPLIED BY ---------------------------------------------------- PET CONT PET CONT - - ------------------------------------------------------------------------------- 4. Fishing tools and replacement materials for pipes and production tools: a) Foreseen in Attachment I X X b) Not foreseen in Attachment I X X - - ------------------------------------------------------------------------------- 5. Equipment, tools and replacement materials needed for the services of logging, formation tests and/or production and/or perforation, not included in Attachment I. X X - - ------------------------------------------------------------------------------- 6. Lubricants and greases for the CONTRACTORs equipment X X - - ------------------------------------------------------------------------------- 7. Industrial and fresh water. X X - - ------------------------------------------------------------------------------- 73 - - ------------------------------------------------------------------------------- DESCRIPTION ON ACCOUNT OF SUPPLIED BY ---------------------------------------------------- PET CONT PET CONT - - ------------------------------------------------------------------------------- 8. Replacement materials, including for fishing tools and other CONTRACTOR's equipment listed in Attachment I. X X - - ------------------------------------------------------------------------------- 9. Consumer equipment and materials for completion fluid tests listed in Attachment I. (Note: PETROBRAS will inform monthly on the minimum stock needed). X X - - ------------------------------------------------------------------------------- 10.Steel ropes, slings, sisal or nylon ropes and cordage in general, needed for tying towlines, for mooring support vessels and in cargo evaluation, completion and handling. X X - - ------------------------------------------------------------------------------- 11.Hoses for loading and unloading of liquids and bulk material with connections compatible with those of the supply vessels. X X - - ------------------------------------------------------------------------------- 12.Materials to make completion fluid. X X - - ------------------------------------------------------------------------------- 13.Conventional bits. X X - - ------------------------------------------------------------------------------- 74 - - ------------------------------------------------------------------------------- DESCRIPTION ON ACCOUNT OF SUPPLIED BY ---------------------------------------------------- PET CONT PET CONT - - ------------------------------------------------------------------------------- 14.Safety equipment for individual use: gloves, helmets, boots, masks, ear protectors, and other personal use equipment for the CONTRACTOR's employees. X X - - ------------------------------------------------------------------------------- 15.Services, materials and equipment to mark locations. X X - - ------------------------------------------------------------------------------- 16.Surveying of the sea bottom, if necessary. X X - - ------------------------------------------------------------------------------- 17.Welding equipment and material needed for well completions and abandonment operations. X X - - ------------------------------------------------------------------------------- 18.Bulls eye for running tools. X X - - ------------------------------------------------------------------------------- 19.Warehouses, office and storage area for the CONTRACTOR on land. X X - - ------------------------------------------------------------------------------- 20.Radio-beacon with working frequencies compatible with those mentioned in Attachment I. X X - - ------------------------------------------------------------------------------- 21.Safety and survival equipment, including maintenance (subjected to periodical inspection by PETROBRAS. X X - - ------------------------------------------------------------------------------- 22.Screens for mud sieves, according to PETROBRAS' specifications. X X - - ------------------------------------------------------------------------------- 75 - - ------------------------------------------------------------------------------- DESCRIPTION ON ACCOUNT OF SUPPLIED BY ---------------------------------------------------- PET CONT PET CONT - - ------------------------------------------------------------------------------- 23.Materials for the maintenance of equipment and test lines, supplied by the CONTRACTOR, for formation testing and/or production (painting, boiler factory and welding). X X - - ------------------------------------------------------------------------------- 24.VX ring, VX with HYCAR and VX with lead insert for connection BOP-WELLHEAD, LMRP-BOP STACK: a) In normal operation X b) In reinstallation X X due to problem with the ESCP X X X - - ------------------------------------------------------------------------------- 25.VX ring, VX with HYCAR and VX with lead insert for WCT. X X X - - ------------------------------------------------------------------------------- 76 - - ------------------------------------------------------------------------------- DESCRIPTION ON ACCOUNT OF SUPPLIED BY ---------------------------------------------------- PET CONT PET CONT - - ------------------------------------------------------------------------------- 26.Remote operation submarine vehicle (ROV) a) Installation and removal X X b) Maintenance X X c) Rent X X - - ------------------------------------------------------------------------------- 77 - - ------------------------------------------------------------------------------- DESCRIPTION ON ACCOUNT OF SUPPLIED BY ---------------------------------------------------- PET CONT PET CONT - - ------------------------------------------------------------------------------- a) Supplied by the CONTRACTOR X X - - ------------------------------------------------------------------------------- b) Supplied by PETROBRAS X X - - ------------------------------------------------------------------------------- 27.Hydraulic fluid for BOP driving and test. X X - - ------------------------------------------------------------------------------- 28.Hydraulic fluid for WCT driving and test. X X - - ------------------------------------------------------------------------------- 29.Special greases for pipes and completion equipment. X X - - ------------------------------------------------------------------------------- 30.Individual safety equipment for operation in the moon pool. X X - - ------------------------------------------------------------------------------- 31.Paper and ink for microcomputer printer. X X - - ------------------------------------------------------------------------------- 32.Beacons, hydrophones, transducers, transponders, batteries. X X - - ------------------------------------------------------------------------------- 33. Diesel oil a) up to the limit set forth in Clause 4.6.2. X X b) above the limit set forth in Clause 4.6.2. X X - - ------------------------------------------------------------------------------- 34.Filter elements for the completion fluid filtering Unit. X X - - ------------------------------------------------------------------------------- 78 ATTACHMENT V LIST OF (MINIMUM) SPECIALIZED PERSONNEL ABOARD ---------------------------------------- - Captain or Barge 1 ---------------------------------------- - Tool Pusher (1 board superintendent) 2 ---------------------------------------- - Driller 2 ---------------------------------------- - Assistant Driller 2 ---------------------------------------- - Derrickman 2 ---------------------------------------- - Roughneck 6 ---------------------------------------- - Crane Operator 2 ---------------------------------------- - Area Man 8 ---------------------------------------- - Welder 2 ---------------------------------------- - Watchstander 2 ---------------------------------------- - Subsea Engineer 1 ---------------------------------------- - Mechanic 1 ---------------------------------------- - Assistant Mechanic 1 ---------------------------------------- - Electrician 1 ---------------------------------------- 79 ---------------------------------------- - Assistant Electrician 1 ---------------------------------------- - Radio Operator (Portuguese speaking) 2 ---------------------------------------- - Male nurse 1 ---------------------------------------- - Storekeeper 1 ---------------------------------------- - Safety guard 1 ---------------------------------------- NOTE: Supplementary personnel will be supplied according to the CONTRACTOR's conveniences and needs or to comply with the requirements of government laws.... 80 CONTRACT NO. 101.2.159. 97-1................................................... ATTACHMENT "VI" ENVIRONMENTAL OPERATING CONDITIONS (PERMISSIBLE LIMITS FOR ENVIRONMENTAL CONDITIONS ACTING SIMULTANEOUSLY) - - ------------------------------------------------------------------------------- PITCH OR HEAVE ROLL WIND WAVE CURRENT OPERATION (FEET) (DEGREES) (MPH) (FEET) (KNOTS) - - ------------------------------------------------------------------------------- Conductor's jetting/driving 2.0 2.5 30 3.0 1.4 - - ------------------------------------------------------------------------------- Drilling 2.5 3.0 30 3.0 1.4 - - ------------------------------------------------------------------------------- Casing running 2.0 3.0 30 3.0 1.4 - - ------------------------------------------------------------------------------- Casing hanger setting 1.5 2.0 30 2.1 1.4 - - ------------------------------------------------------------------------------- BOP running 1.5 1.5 19 2.1 2.5 - - ------------------------------------------------------------------------------- BOP setting 1.5 1.5 19 2.1 1.4 - - ------------------------------------------------------------------------------- Maneuvering 3.5 3.0 44 8.5 1.4 - - ------------------------------------------------------------------------------- LMPR disconnection 7 4 51 10.5 2.5 - - ------------------------------------------------------------------------------- LMPR connection 1.5 1.5 19 2.1 1.4 - - ------------------------------------------------------------------------------- Formation testing 3.5 4.0 44 8.5 1.4 - - ------------------------------------------------------------------------------- Operation with boats 2.5 3.0 39 6.7 1.4 - - ------------------------------------------------------------------------------- Running the WCT (lay-away) 1.5 1.5 19 2.1 2.5 - - ------------------------------------------------------------------------------- 81 - - ------------------------------------------------------------------------------- Running the WCT (without lines) 1.5 1.5 19 2.1 2.5 - - ------------------------------------------------------------------------------- Operation with flexitube 2.0 3.0 30 5.0 1.4 - - ------------------------------------------------------------------------------- Operation with wire-line 3.0 4.0 44 8.5 1.4 - - ------------------------------------------------------------------------------- 82 CONTRACT NO 101.2.159. 97-1..................................................... ATTACHMENT VIII EQUIPMENT TESTING PROGRAM In order to carry out the Unit's equipment testing in an easier and more agile manner, the CONTRACTOR is to submit to PETROBRAS, as quickly as required the following documents:............................................. 1. CERTIFICATES............................................................ a) Survey and Appraisal Report, updated and valid for the fiscal year regarding the Unit offered, issued by one of the entities: ABS, NOBLE & DENTON, DNV, LLOYDS or BUREAU VERITAS, and if the report is issued abroad, it will be translated into Portuguese by a sworn public translator and notarized in the Brazilian Consulate......................................................... b) Classification or Class Confirmation Certificate for hull and equipment, compatible with the proposal submitted (certified copy);............................................................ c) Report on claims from the classification societies mentioned in the Class Confirmation Certificate (in the event there are claims);.......................................................... NOTE:PETROBRAS will evaluate the above mentioned documents and will indicate in what time limits eventual claims will be settled, and at PETROBRAS' judgment, it can be at the time the Unit's inspection or at mobilization after the Contract is signed................................................... d) Freeboard Certificate;............................................ e) IOPP (International Oil Pollution Prevention) Certificate;........ f) IMO-MUDU-CODE Certificate - Mobile Offshore Drilling Unit - latest edition (unnecessary for Drill Ship);...................... 83 g) Cargo Ship Safety Equipment Certificate;.......................... h) Cargo Ship Safety Construction;................................... NOTE: All documents required are to be within their period of validity.................................................... 2. INDUSTRIAL SAFETY AND ENVIRONMENTAL CONTROL............................. - Manuals and emergency plans in the Portuguese Language............ 3. STORAGE CAPACITY........................................................ - Complete floor plan of bulk movement system, specifying:.......... a) Exclusive lines to move cement;............................. b) Exclusive lines to move bentonite and baritine;............. c) Location and type of bulk line valves and their respective driving systems;............................................ d) Pneumatic lines for cleaning and clearing bulk lines;....... e) Location of the manometers;................................. f) Quantity, flow, operation pressure and location of compressors;................................................ g) Quantity, flow, operating pressure and location of the air drying Unit(s);............................................. h) Schematic drawing of each silo with their respective aeration systems and points of connection with the bulk lines....................................................... 4. FLUID CIRCULATION AND PROCESSING SYSTEM................................. - Sketch of the system emphasizing pulsation dampers (suction and tamping), safety valves, feed pumps, position of the suction lines in relation to the suction sieves' tanks and filters........ - Floor plan of the drilling fluid feed and discharge lines showing the flexibility in relation to the sand traps and mud tanks....... 84 - Floor plan of the degasser installation showing the active tank, separate processed mud and gas discharge lines, emphasizing this line's connection point with the gas discharge line............... - Floor plan of the mud tanks system, emphasizing the supply lines, gun lines, mixture funnel and centrifugal pumps interconnection lines............................................................. 5. WELLHEAD SAFETY EQUIPMENT SYSTEM........................................ - Sketch of the BOP/LMRP, specifying lines, valves and measures/dimensions............................................... - Floor plan of the kill and choke lines from the BOP to the choke manifold, specifying valves, connections, dampener chambers, anchorage points and interconnection with the other systems....... - Floor plan of the atmospheric air separator....................... - Layout of the trip tank installation, giving the following information:...................................................... a) Capacity;................................................... b) Location;................................................... c) Sensitivity;................................................ d) Measuring system;........................................... e) Scale type;................................................. f) Driller's scale visualization conditions;................... g) Supply System for the above item............................ - Floor plan of the stand pipe manifold, specifying lines, valves, manometers and interconnections with the other systems............ 85 10. FISHING TOOLS AND ACCESSORIES........................................... - Inspection report on all components of the fishing tools (used equipment) or purchase vouchers (for new tools)................... 11. SUNDRY SYSTEMS.......................................................... - Winches load test certificate..................................... - Description of the compressed air system, emphasizing compressors, layout of lines, valves and interconnection with the other systems..................................................... - Preventive Maintenance Plans with their respective timecharts..... - Ballast and sewer flowchart....................................... - Proof will be needed for the existence on board and for the operating capacity of all equipment and accessories listed in Attachments C and D to the chartering and services rendering Contracts......................................................... NOTE:Such equipment must be in places of easy access for survey. A) RECEIPT TEST...................................................... 86 - Proof will be needed for the existence on board and for the operating capacity of all equipment and accessories listed in Attachments C and D to the chartering and service rendering Contracts. NOTE: Such equipment must be in places of easy access for inspection - The following systems, equipment and tools listed below will be checked, inspected and tested:...................... 1) DRILL STRING, COMPONENTS AND ACCESSORIES.................... - The CONTRACTOR will submit recent inspection reports, according to the specification API RP7G for the whole drill string and accessories such as, but not limited to: drill pipes, drill collars, HW, Subs, stabilizers, reamers, bumper subs, lift-sub, kelly, slips, elevators, fishing tools, etc., which prove the good conditions of the string and its accessories. The information from the reports and the general conditions of the string and its accessories will be checked by PETROBRAS by means of a sampling inspection. In the event of discrepancy between the data submitted by the CONTRACTOR and those checked by PETROBRAS, showing an inadequate condition of the string and its accessories, the CONTRACTOR will carry out another inspection, for its own account........... NOTE 1: Any equipment refused by the inspection will be immediately repaired or replaced by the CONTRACTOR, for its own account................. 87 NOTE 2: For the string, components and new accessories, no inspection report will be required, documents proving that such equipment is new will be sufficient.............................. NOTE 3: The CONTRACTOR's equipment will be stored and arranged so as to facilitate the inspection by sampling to be carried out by PETROBRAS......... - The same procedure will be adopted for the telescopic joints and flexible joints............................ 2) EXTRACTOR OF SOLIDS......................................... The following will be examined:............................. - sieves,............................................... - desander,............................................. - degasser, -test suction and discharge................ - centrifuge (if any)................................... The operation and work pressure, as well as the existence of manometers, will be checked.............................. 3) MUD TANKS AND VALVES........................................ Waterproofness, working of the agitators, mixture funnel and depth gun, besides the existence of fixed marks to control the tanks volume will be checked.................... 4) CENTRIFUGAL PUMPS........................................... The following will be checked:.............................. 88 - working, vibration and noises;........................ - Packing (leaks);...................................... - Work pressures........................................ NOTE: Items 3 and 4 will be tested with sea water................ 5) MUD LABORATORY AND TEST EQUIPMENT........................... The existence on board and the adequacy to the requirements described in Attachments B and C to this Contract will be checked..................................................... 6) DRILLING DERRICK............................................ Maintenance conditions (corrosion), fastening system and the conditions of the traveling block rails will be examined.................................................... 7) CROWN BLOCK................................................. The pulleys will be examined as to the profile wear, alignment, clearance, buckling of the axles, lubrication, etc......................................................... 8) MUD PUMPS................................................... The following will be carried out:.......................... - observation of working, vibrations, noises;........... - pressure and maximum work flows tests for the liner used;................................................. - safety valve working test;............................ - checking of the suction and discharge pulsation dampeners;............................................ - watertightness tests with nominal pressure of the mud pumps and of all manifold valves;..................... 89 - watertightness tests with nominal pressure of all manifold values of the stand pipe manifold and of the kelly hose;........................................... - random disassembling of the suction for visual inspection of the piston, sleeve, packing, valve and seat.................................................. 9) SWIVEL...................................................... The mandril, gooseneck, body, etc., will be check and nominal pressure test with rotation will be performed....... 10) MOTION COMPENSATOR........................................... The piston alignment, lock bar, alignment in the rail, general conditions, leaks and chains will be checked........ 11) RISER AND GUIDE LINE TENSIONERS............................. The general conditions, leaks, pulleys and cables will be inspected................................................... 12) RISER RECOIL SYSTEM/HANG OFF SYSTEM/FILL-UP SYSTEM VALVE (IF ANY).................................................... The systems' operation will be checked...................... 13) HIGH COMPRESSORS AND AIR RESERVOIRS......................... The general conditions, leaks, lines and system yield will be checked.................................................. 14) TOP DRIVE................................................... Working tests (connection and disconnection of one or more sections of the DP's) will be carried out and the general conditions will be inspected................................ 15) KELLY SPINNER............................................... 90 The general conditions, specially the rollers' wear, and working will be checked, and connection and disconnection operation of one or more DP's will be carried out........... 16) HOOK........................................................ The general conditions and the locking system will be checked..................................................... 17) TRAVELING BLOCK............................................. The pulleys wear, axles alignment, lubrication system, retraction system, etc., will be inspected.................. 18) DRAWWORKS................................................... - The operation of the mechanical break system (brake bands), electromagnetic (distance between irons, voltage level and SCR feeder conditions), cooling system and clutcheads will be checked................. - The operation of the cat-heads and height limitator with the assembly/ disassembly of one or more command sections, will be checked............................. 19) ROTARY TABLE................................................ The operation in high and low, brake system, tachometer and lubrication ................................................ 20) TRIP TANK................................................... Capacity, installation site, sensitivity to the level indicator system, visualization condition and supply system will be inspected........................................... 21) HYDRAULIC TONGS AND PNEUMATIC SPIDER FOR CASING AND PNEUMATIC TONGS FOR DRILL PIPES............................. - Operation tests will be made and maintenance conditions will be checked............................................... 91 22) SAND-LINE OR WIRE-LINE SYSTEM............................... - Operation of the clutches and brake will be tested by lowering the photoclinometer inside the drill string coinciding with the photoclinometer overshot test (TOTCO) will be tested. Test to be made on location before the beginning of the operations................................. - The existence of an alignment guide for the sand-line cable in the drum will be checked................................. 23) CHOKE MANIFOLD.............................................. All valves with low pressure (300 psi) and in high pressure (system's work pressure), Manometers, hydraulic choke operation, manual choke, remote control panel, etc., will be tested................................................... 24) UPPER AND LOWER KELLY COCK, INSIDE BOP AND SAFETY VALUE - Drivers will be tested and work pressure tests will be made............................................... 92 - The end connections of each element will be checked and tested with work pressure. The CONTRACTOR should have end seal plugs adequate for the test............. 25) KILL AND CHOKE LINES HOSES.................................. The end connections will be checked and tested with the system's work pressure. The CONTRACTOR should have end seal plugs adequate for the test............................ 26) DRILL INSTRUMENTATION SYSTEM................................ The following will be tested:............................... - geolograph;........................................... - rotary table tachometer;.............................. - manometers;........................................... - stroke counter;....................................... - level control in the mud tanks;....................... - torque indicator...................................... 27) FLARE PIPE AND BOOMS........................................ Their existence on board will be checked, analyzing the maintenance conditions of the lines by means of inspection, and the facilities for installation of the production test equipment system............................ 28) BOP SYSTEM.................................................. The following will be carried out:.......................... 93 - pressure tests of the slide valves with low pressure and high pressure, compatible with the system......... - pressure tests of the annulars with low pressure and high pressure, compatible with the system............. - complete function test in both POD's, through all panels................................................ - choke and kill valves tested with low pressure and high pressure, compatible with the system............. - working of the shear ram valve will be checked with opening for examination of the blades conditions...... - the opening and closing of all ram, annular a kill and choke valve chambers will be tested............... - the hydraulic driving Unit will be checked as to: fluid used, fluid low level alarm, low air pressure and low accumulators pressure, maintenance conditions, leaks and mixing systems.................. - the volumetric capacity of accumulators and the capacity of electric and pneumatic pumps of the hydraulic Unit will be tested......................... - the locking system of the ram valve(s) will be tested. - the SPM valves conditions will be checked by opening and inspecting one of them, chosen at random.......... - the locking/unlocking system of the H-4 hydraulic connectors will be tested............................. - the surface and bottom accumulators' pre-charge will be checked............................................ 94 - the operation of the following systems will be tested: o driving back-up................................. o emergency recovery.............................. o handling........................................ 29) TRAVELING TONGS, EZY-TORQ, TORQUE SENSOR, SLIPS, ETC........ One or more sections of the drill collars and drill pipes will be assembled/disassembled to check the working of such equipment. The general maintenance conditions, chuck jaws and cables will be checked.................................. 30) BULK TRANSFER SYSTEM........................................ The following will be carried out:.......................... - the operation of the compressor will be checked, and noise, oil and air leaks, and maintenance state, filters and dehumidifier will be inspected............ - operation and watertightness of valves, lines and silos will be checked, looking for possible clodding.. - transfer of cement from 1 silo to the daily silo (if any) and from this to the surge- tank will be made.... 31) EMERGENCY ENERGY GENERATION SYSTEM.......................... - a black-out in the energy system generation system will be simulated to see if the emergency generator is automatically turned on............................ 32) MAIN MOTOR-GENERATORS ASSEMBLY.............................. 95 The following will be carried out: - vibration, noises, insulation, leaks, maintenance, etc., will be checked................................. - generators input and output in the bus bar, synchronism and load divisions will be tested......... - load and voltage and frequency regulation will be tested................................................ 33) DESSALTER................................................... Operation and production capacity will be checked........... 34) CAT-LINES CRANES............................................ The following will be carried out: - operation of the winches and maintenance of the cabled will be checked................................ - the elevation and rotation system, the operation with flying boom and pulley block and the operation of the boom height pawl will be checked...................... - the report of the last inspection carried out by the Unit's classification society in the winches will be examined.............................................. 35) DEJECTA TREATMENT Unit...................................... Its operation will be inspected............................. 36) TELECOMMUNICATION SYSTEM.................................... Operational tests will be made in all radio equipment existing on board, including radio-beacon................... 96 37) OVERHEAD TRAVELING CRANE.................................... Their operation, and the maintenance conditions of cables and sliders will be examined................................ 38) DC/SCR MOTORS............................................... The maintenance conditions and insulation, as well as the collectors and brushes will be examined..................... - SCR functional test................................... 39) DIVERTER.................................................... The following will be tested:............................... - flow line wing valves;................................ - diverters and insert packer lock;..................... - the control panel will be checked..................... 40) SAFETY EQUIPMENT............................................ SALVAGE..................................................... Fireproof rigid vessels (capsules, whalers):................ - lowering, motor, fuels, sprinklers, start;............ - rations, garnishing, hatches, cleaning, fire extinguisher, signaling equipment..................... Inflatable rafts:........................................... - quantity, capacity, location, height in relation to the sea;.............................................. - validity of the last inspection, means of access to the sea;.............................................. - conditions of the cocoon.............................. 97 Jackets:.................................................... - quantity (sufficiency), location, protection, and maintenance........................................... Life-buoys:................................................. - quantity (sufficiency), location, heaving-lines, lanterns, smudge pots................................. Escape routes:.............................................. - vertical and horizontal signaling (indicative plates); - clearing, lighting(emergency)......................... WATER SUPPLY SYSTEM FOR FIRE FIGHTING....................... Fire ring:.................................................. - water system for the platform;........................ - sprinkler system;..................................... - painting, corrosion, signaling, visual conditions;.... - valves, hydrants, guns................................ Fire pumps:................................................. - operation;............................................ - motor, fuel, start, panel, tests...................... FIRE FIGHTING FIXED SYSTEMS................................. - Foam system: chambers, tanks, guns, hydrants and carrier liquid........................................ - Cylinders; conditions, reloading, retesting (CO2 or HALON, if any)........................................ - Lines and diffusers: general conditions.............. 98 - Automatic: feedings, panels, batteries, detectors, tests;................................................ - Manual: commands, interconnections, tests;........... - Alarms: interconnections............................. FIRE EXTINGUISHERS - water, carbon dioxide, chemical powder (portable and carts);............................................... - distribution, location, general conditions;........... - revision, recharge, retest, control, meters, replacement........................................... FIRE POSTS.................................................. - hose, keys, sprinkler;................................ - fiber boxes, general conditions, post identification;. - visual signaling: sufficiency and general conditions. EMERGENCY EQUIPMENT......................................... - autonomous breathing apparatuses, reserve bottles, breathable air fixed system, fire proximity clothing, flashlight, ax, safety belts;......................... - distribution, location, general conditions, inventory, maintenance and replacement........................... COMMUNICATIONS AND ALARMS................................... - telephone (internal, external): Operating capacity;.. - radiophony: VHF. Operating capacity;................ - portable transceptors: quantity; distribution, intrinsic safety;..................................... 99 - intercom: quantity, distribution, and horns audibility, interconnection with the platform, coding of sound alarm tones, amplifiers;..................... - visual signaling: sufficiency, general conditions;... - fire alarm, glass breaking type: batteries, bells, tests................................................. EMERGENCY LIGHTING.......................................... - charger, batteries and lanterns....................... HELIDECK.................................................... - protection: guns, fire extinguishers, salvage equipment;............................................ - painting, protection screen, net, landing lights, safety warnings;...................................... - guest welcoming practices............................. LOAD LIFTING................................................ - winches: general conditions, operation, signaling, maintenance;.......................................... - manual and electric tackles: general conditions, operation, signaling, maintenance;.................... - material movement and storage areas................... TRAINING.................................................... - abandonment, fire fighting, first aid and brigade..... MANUALS AND PLANS........................................... - emergency; safety;.................................... - disclosure, knowledge;................................ - distribution, control, updating;...................... 100 - tasks schedules for emergency and abandonment situations, including in Portuguese................... ORDER AND CLEANLINESS....................................... - installation's general aspect;........................ - particularly alarming places.......................... SMOKE, HEAT AND GAS DETECTION SYSTEM........................ - test of hydrocarbons detection sensors................ BALLAST AND SEWER SYSTEM.................................... - functional test....................................... 41) ANCHORING SYSTEM............................................ 42) DYNAMIC POSITIONING SYSTEM.................................. 43) PROPULSION SYSTEM........................................... B) LOCATION MOVING TEST.............................................. To be defined between the CONTRACTOR and PETROBRAS................ C) BEGINNING OF Contract YEAR TEST................................... To be defined between the CONTRACTOR and PETROBRAS................ 101 Contract No. 101.2.159.97-1................................................... ATTACHMENT "IX" PROCEDURES IN THE EVENT OF FATAL ACCIDENTS 1. If, during the period of validity of the Contract, a fatal accident occurs with a CONTRACTOR's employee, the CONTRACTOR should:............. 1.1. Notify the Inspection immediately, for the proper measures;............. 1.2. Take measures so that the employee's relatives be notified with the utmost urgency on the event, giving them the social support due;........ 1.3 Formally establish an Investigation Commission, within 48 hours after the accident, in order to, in the maximum time limit of 15 days, identify the causes and recommend the measures deemed necessary to prevent similar accidents............................................... 2. The report should contain, at least, the following information regarding the accident:................................................. - description;...................................................... - exact location;................................................... - data regarding the injured persons;............................... - basic and immediate causes;....................................... - measures to be taken in order to prevent its repetition........... 3. The CONTRACTOR should guarantee the Commission enough authority and autonomy to carry out the investigations without any restrictions....... 4. A PETROBRAS' employee should participate in the Commission, appointed by the authority in charge of the operational office.................... 102 5. After conclusion of the Commission's work, it will also behoove the CONTRACTOR, at the Inspection's request, to disclose the results of the report, so as to convey the experience from the accident to other Contractor companies.................................................... (All pages of the document were initialed.)................................... - - -------------------------------------------------------------------------------- THESE BEING the precise terms and content of the aforementioned document, I hereby set my Hand and Seal on this Translation, performed on the 5th of February, 1998, in this City of Rio de Janeiro, Federative Republic of Brazil. /s/ MARCIA BARBOSA SERRA ____________________________________ Marcia Barbosa Serra Sworn Public Translator 103 EX-10.5(A) 42 EXHIBIT 10.5(A) MARCIA BARBOSA SERRA Tradutora Publica Juramentada e Interprete Comercial Sworn Public Translator and Commercial Interpreter Rua Aperana, 38 apt. # 301 - Leblon - 22450-190 ISS: 1251003-00 - CIC: 606442227-00 Tel: 274-3544 I, THE UNDERSIGNED, SWORN PUBLIC TRANSLATOR AND COMMERCIAL INTERPRETER IN AND FOR THIS CITY AND STATE OF RIO DE JANEIRO, FEDERATIVE REPUBLIC OF BRAZIL, REGISTERED AT THE COMMERCIAL BOARD OF RIO DE JANEIRO UNDER NUMBER 97, DO HEREBY CERTIFY AND ATTEST THAT A DOCUMENT IN THE PORTUGUESE LANGUAGE WAS SUBMITTED TO ME FOR TRANSLATION INTO ENGLISH, WHICH I PERFORMED ACCORDING TO MY OFFICE, AS FOLLOWS: TRANSLATION NO. 2659/98 (On paper with letterhead of Petroleo Brasileiro S.A. - PETROBRAS.)............ RIDER No. 01 FOR THE ASSIGNMENT OF RIGHTS AND OBLIGATIONS ARISING FROM CONTRACT 101.2.159.97-1, ENTERED INTO BETWEEN MARITIMA PETROLEO E ENGENHARIA LTDA., SUCCESSOR OF MARITIMA NAVEGACAO E ENGENHARIA LTDA., and PETRODRILL SIX LTD., WITH THE CONSENT OF PETROLEO BRASILEIRO S.A. - PETROBRAS./. PETROLEO BRASILEIRO S.A. - PETROBRAS, a mixed economy company, with head office at Av. Republica do Chile 65, in the City of Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil, enrolled in the General Taxpayers Registry of the Ministry of Finance under No. 33.000.167/0001-01, henceforth called PETROBRAS, represented herein by the Executive Superintendent of Exploration and Production, Luiz Eduardo G. Carneiro, and the Company MARITIMA PETROLEO E ENGENHARIA LTDA., successor of MARITIMA NAVEGACAO E ENGENHARIA LTDA., with head office at Av. Almirante Barroso, 52, Group 3400, City of Rio de Janeiro, Federative Republic of Brazil, enrolled in the General Taxpayers Registry of the Ministry of Finance under No. 46.828.596/0001/13, henceforth called the ASSIGNOR, represented herein by its President, German Efromovich, and the company PETRODRILL SIX LTD., with head office in Omar Hodge Building, Wickhams Cay, Road Town, Tortola, Ilhas Virgens Britanicas, henceforth called the ASSIGNEE, represented herein by its Director, German Efromovich, have agreed to add a rider to contract 101.2.159.97-1 (AMETHYST 6), according to the following clauses and conditions:/. FIRST CLAUSE - OBJECT./. 1. The present Rider has as its object:/. 1.1.1. The total assignment, as of the date of the signature of this Rider, henceforth called the ASSIGNMENT DATE, by the ASSIGNOR to the ASSIGNEE of the rights and obligations arising from Contract No. 101.2.159.97-1 and its Attachments./. 1.1.2. To change the contract value foreseen in item 5.2 of the Fifth Clause - PRICES AND VALUE./. 1.1.3. To change the redaction of the Seventh Clause - FORM OF PAYMENT./. 1.1.4. To change the Fourth Clause - PETROBRAS' OBLIGATIONS, including item 4.12./. SECOND CLAUSE - RESPONSIBILITY./. 2.1. The ASSIGNEE, as of the ASSIGNMENT DATE, becomes the CONTRACTOR, being liable, before PETROBRAS for the fulfillment of all contract obligations undertaken by the ASSIGNOR, and will also have all rights arising from the Contract./. 2.2. The ASSIGNEE is liable before PETROBRAS for the fulfillment of all contract obligations undertaken by the ASSIGNOR in the Contract, as well as for eventual losses and damages arising from its acts or omissions./. 2.3. The ASSIGNOR will be jointly liable with the ASSIGNEE for the complete fulfillment of all obligations arising from the Contract./. 2.4. The ASSIGNOR, as of the ASSIGNMENT DATE, will have no right arising from the Contract, giving PETROBRAS, full and complete acquittance for any and all contract value./. THIRD CLAUSE - PRICES AND VALUE./. 3.1. The redaction of item 5.2 and its subitems becomes:/. "5.2. The total estimated value of the present Contract becomes US$ 295,019,262.45 (two hundred and ninety-five million, nineteen thousand, two hundred and sixty-two dollars and forty-five cents), equivalent to R$ 322.308.544,22 (three hundred and twenty-two million, three hundred and eight thousand, five hundred and forty-four reais and twenty-two cents) , converted at the exchange rate of R$1,0925/US$1,00, referring to the following charges:/. 3.2. Item 5.5 is included with the following redaction:/. "5.5. Besides the value mentioned in 5.2, the appropriation of US$100,000.00 is foreseen for the payment of eventual reimbursements"./. FOURTH CLAUSE - PETROBRAS' OBLIGATIONS./. 4.1. Item 4.12 is included, with the following redaction:/. "4.12.To adopt the measures necessary for the request to register this Contract at the Central Bank of Brazil, immediately after the receipt of the legal documents, the supply of which is the CONTRACTOR's responsibility.". FIFTH CLAUSE - FORM OF PAYMENT./. 5.1. The redaction of the Seventh Clause is changed to:/. "7.1 The payments of the rates foreseen in Attachment II and Attachment III shall be made by PETROBRAS to the CONTRACTOR in American Dollars, by bank remittance to a bank account abroad it indicates, after the present Contract is registered at the Central Bank of Brazil, 30 (thirty) days as of the date of the end of the measuring period considered, provided the CONTRACTOR has fulfilled the time limits set forth in subitem 6.3.1., for the submittal of the collection documents at the docket of the Financial Department indicated by PETROBRAS, with exception of the provision appearing in subitem 7.2.4./. 7.1.1.For the reimbursable expenses foreseen in this Contract, the instructions contained in item 7.4 and their developments should be complied with, and the payments will be made in the currency of origin of said expenses, within 30 (thirty) days after the submittal of the collection documents at the docket of the Financial Department indicated by PETROBRAS./. 7.1.2.Collection documents comprise any type of billing, such as: Invoice, Invoice with separate Bill of Sale, Service Invoice, besides others foreseen in fiscal laws./. 7.1.3.For payment purposes, the CONTRACTOR shall supply the Contract Manager, after its signature, the following information:/. a) Bank name and number;/. b) Bank branch name and code;/. c) Bank branch address;/. d) CONTRACTOR's current account number./ 7.1.3.1. Whenever a billing is submitted with information different from those indicated in subitem 7.1.3, these changes will only be considered if accompanied by a formal communication by the CONTRACTOR and shall prevail only for the specific purpose of such payment. 7.2. The collection documents shall be issued without erasures, complying with the pertinent laws in force, for submittal at the Financial Department indicated in item 7.1 of this Clause, in its original copy, accompanied by 1 (one) copy of the respective Measurement Bulletin (MB), and/or Reimbursement Document (RD), as the case may be, duly approved by this contract's Manager, containing, obligatorily, but not exclusively, the following information:/. a) Number of the collection document;/. b) Place and date of its issuing;/. c) Brief description of the object of this Contract;/. d) Indication of the number and date of this Contract;/. e) Indication of the month/year or period which the collection document refers to;/. f) Number and date of the Measurement Bulletin (MB) and/or Reimbursement Document (RD)./. g) Place of the rendering and/or execution of the chartering. In the event the chartering has been rendered in different locations, its value should be broken down by locations of performance and the period in which it was rendered at each of the locations shall be indicated;/. h) Gross amount of the collection document, by numbers and in writing;/. i) Place for payment purpose, as provided for in subitem 7.1.3 of this Clause;/. j) Signature by the CONTRACTOR'S representative, accredited before PETROBRAS, above his/her name and position typewritten or above the CONTRACTOR'S company stamp identifying him/her;/. 1) In case of Rider or Letter of Agreement to the Contract which implies in payments, mention its number and date of signature, besides the data above./. 7.2.1.The omission of any of the above mentioned data will cause, within 5 (five) working days, the return of the collection documents by PETROBRAS' Financial Department./. 7.2.2.If the above situation occurs and in case the collection document shows errors, it will be returned to the CONTRACTOR, and the time limits ofr the payment foreseen in item 7.1 and subitem, 7.1.1 shall be added to the period that becomes necessary for the explanation and re-submittal of the collection document./. 7.2.2.1. The above mentioned condition also applies in case the collection document is submitted in another department, and not as indicated in item 7.1./. 7.2.3.Independent of the data above, the invoices in foreign currency shall be also submitted in the Portuguese language, or if issued abroad, they shall be notarizes at the Brazilian Consulate, under which jurisdiction the CONTRACTOR is located, and translated by a sworn public translator./. 7.2.4.The CONTRACTOR shall, obligatorily, submit monthly, together with the invoice, the payroll of the CONTRACTOR's Brazilian crew who are involved in the chartering object of this Contract, as well as with a photocopy of the GRPS (Social Security Payment Slip), duly settled and authenticated, with the data identifying the entity to whom the service was rendered being obligatorily filled out, informing in field 8 of the GRPS (other information) PETROBRAS' name and CGC, number, date, and amount of the invoice or bill of sale referring to the chartering rendered in the month, subitems 8.9, 10.1.15, and 10.1.16 being also complied with./. 7.3. The collection documents referring to reimbursements shall also be issued, itemizing, individually, the reimbursable expenses, their total amount, such itemization also to appear in the respective Reimbursement Document (RD)./. 7.3.1.The original vouchers of the reimbursable expenses due to the CONTRACTOR, by force of the contract instrument, shall be previously submitted to the Contract Manager, for checking, besides being duly paid for by the respective supplier or service rendered, when such is the case./. 7.3.1.1. In the event the original vouchers cannot remain in PETROBRAS' possession, copies thereof may be submitted, which shall be checked by the Contract Manager, and the following text is to be placed on each original document: "COPY SUBMITTED FOR REIMBURSEMENT ON (specify date)", followed by the signature and identification by name, position and registry number, and the original are to be returned to the CONTRACTOR. In the copies that are in PETROBRAS' possession, the following text will be place on each document: "CHECKED WITH THE ORIGINAL ON (specify the data)" and the Contract Manager will sign, identifying the signature by name, position and registry number./. 7.3.1.2.The receipt, duly made formal by PETROBRAS, of any reimbursable expense voucher, does not represent the recognition of debt, nor the proof that the expense has been made./. 7.3.2.The collection of reimbursable expenses can only be made by means of issuing and submittal, by the CONTRACTOR, of the Bill of Sale for the equipment and accessories, with the respective Reimbursement Document (RD) duly attached thereto, and previously approved by the Contract Manager./. 7.3.2.1. The submittal of the collection document mentioned in subitem 7.3.2, shall comply with the provisions appearing in items 7.1. and 7.2 of this Clause./. 7.3.2.2. The vouchers shall be legal documents to explain doubts referring to the collections, which shall be settled, as a last resort, by PETROBRAS' Disbursement Office, who will be in possession of the vouchers approved by PETROBRAS to prepare the payment process./. 7.4. Eventual payments made for more or for less by PETROBRAS shall be compensated as soon as they are detected, by issuing the Debit/ Credit Notes, as the case may be./. 7.5. The amounts corresponding to reimbursable expenses, without budget allotment foreseen in this contract instrument, do not burden this contract's estimated total, but should, however, be foreseen in the Budget Programs of the Executive Superintendence of Exploration and Production (E&P)./. 7.6. The collection documents submitted by the CONTRACTOR, as well as the final collection document, shall be paid with the deduction of amounts that, at any title, under the conditions set forth in the contract, or others specially agreed upon, that are due to PETROBRAS./. 7.7. The CONTRACTOR agrees that, at PETROBRAS' exclusive option, the present Contract can be paid by means of third party financing, provided the time limits, currency, amounts, and place of payment, and the CONTRACTOR's rights foreseen in this Contract, are complied with"./. SIXTH CLAUSE RESPONSIBILITY./. 6.1 The present rider binds the parties as of the date of its signature and enters in force as of the ASSIGNMENT DATE./. SEVENTH CLAUSE -- RATIFICATION./. 7.1. PETROBRAS, the ASSIGNOR and the ASSIGNEE ratify the terms and conditions of the Contract that are not incompatible with the provisions of this instrument./. And being thus agreed, the parties sign the present Rider in 4 (four) copies of the same tenor and fashion, together with the witnesses below./. Rio de Janeiro, July 10, 1998./. (Signed:) (Illegible) - Luiz Eduardo G. Carneiro./. Executive Superintendent of Exploration and Production South-Southeast./. PETROLEO BRASILEIRO S.A./. (Signed:) (Illegible) - German Efromovich./. President - MARITIMA PETROLEO E ENGENHARIA LTDA (ASSIGNOR)./. (Signed:) (Illegible) - German Efromovich./. Director - PETRODRILL SIX LTD. (ASSIGNEE)./. WITNESSES:/. (Signed:) Victor Archer (Rubber stamp:) Victor Archer - Administrator-Registry 012730-0./. (Signed:) (Illegible)./. (The rubber stamp and the initials of Victor Archer appeared on the first page of the document.)/. (An initial appeared on all pages of the documents.)/. .-THESE BEING the precise terms and content of the aforementioned document, I hereby set my Hand and Seal on this Translation, performed on November 20, 1998 in this City of Rio de Janeiro, Federative Republic of Brazil. /s/ MARCIA BARBOSA SERRA Marcia Barbosa Serra Sworn Public Translator EX-10.6 43 EXHIBIT 10.6 MARCIA BARBOSA SERRA Tradutora Publica Juramentada e Interprete Comercial Sworn Public Translator and Commercial Interpreter I, the undersigned, Sworn Public Translator and Commercial Interpreter in and for this City and State of Rio de Janeiro, Federative Republic of Brazil, registered at the Commercial Board of Rio de Janeiro under Number 97, do hereby CERTIFY and ATTEST that a document in the Portuguese Language was submitted to me for translation into English, which I performed according to my Office, as follows:........................................................ Translation No. 4015/98....................................................... (Xerox copy submitted for translation.)....................................... (On paper with letterhead of Petroleo Brasileiro S.A. - PETROBRAS.)........... CONTRACT 101.2.160.97-0....................................................... SERVICES RENDERING CONTRACT SERVICES RENDERING CONTRACT ENTERED INTO BETWEEN PETROLEO BRASILEIRO S.A. -PETROBRAS AND THE COMPANY MARITIMA NAV. E ENG. LTDA......... PETROLEO BRASILEIRO S.A. - PETROBRAS, a mixed economy company, organized and existing under Law No. 2.004, dated 10/03/53, with head office at Av. Republica do Chile, 65, City of Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil, enrolled in the General Taxpayers' Registry of the Ministry of Finance under No 33.000.167/0001-01, henceforth called PETROBRAS, represented herein by the Executive Superintendent of Exploration and Production South-Southeast LUIZ EDUARDO G. CARNEIRO, and the Company MARITIMA NAVEGACAO E ENGENHARIA LTDA., with head office at Avenida Almirante Barroso, nO 42, 34th floor, City of Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil, enrolled in the General Taxpayers' Registry of the Ministry of Finance under No. 46-828.596/0001-13, henceforth called the CONTRACTOR, represented herein by its President, Mr. GERMAN EFROMOVICH, have agreed upon the present contract to render services, with the use of the Dynamic Positioning Floating Unit AMETHYST 6 and its accessories, described in Attachment I, henceforth called the Unit, according to the authorization of PETROBRAS' Executive Board (Minutes No. 4.129, Item No. 47, dated -1- 12/19/97) the parties being bound to the terms of the Invitation to Bid No. 101.0.016.97-5 and subjected to the following Clauses and Conditions:...................................... (End of the Qualification).................................................... -2- FIRST CLAUSE - OBJECT......................................................... 1.1. The object of the present. contract is the rendering, by the CONTRACTOR, of the services of drilling and/or evaluation and/or completion and/or workover of oil and/or gas (vertical, directional and horizontal) wells, in the Brazilian continental shelf, down to a maximum depth of 5,000 (five thousand) meters, in a water depth down to 1,200 (twelve hundred) meters by using the Unit................ 1.1.1. For the fulfillment of the present contract, the CONTRACTOR is to maintain its base of operations in the City of Macae-RJ................... 1.2. The services object of the present contract are contained in the Continental Shelf Activities and Disbursement and Cost Plans, under the following codes:..................................................... B 12000 - Boring - Production Development............................ A 22000 - Boring - Exploratory Drilling.............................. B 13000 - Completion and Intervention for Evaluation Production Development ............................................... A 24000 - Intervention for Evaluation -Exploratory Drilling ......... (End of Clause)............................................................... -3- SECOND- CLAUSE - - PERIOD OF VALIDITT AND DURATION .--------------- 2.1. PERIOD OF VALIDITY - The present contract binds-the parties as of its signature............................................................ 2.2. DURATION - The present contract will have a duration of 2,190 (twenty-one hundred and ninety) days............................ 2.2.1. BEGINNING OF THE CONTRACT - The beginning of the contract will occur when the Unit is released by PETROBRAS, through a written notice, to begin the operations, after the general equipment testing foreseen in item 3.1 is carried out..................................... 2.2.2. AUTOMATIC EXTENSION - If at the end of the duration mentioned in 2.2, some operation is still being performed in a well, the duration of the present contract will be automatically extended, until the completion of the works in said well, considering as the final limit the Unit's arrival at the port or sheltered waters chosen by common agreement between the parties and, also, in case there are still PETROBRAS' equipment aboard the Unit, the completion of the withdrawal of such equipment will be considered as the final limit..... 2.2.3. This contract may be extended for successive period, through a prior agreement between the parties, by means of an Addendum, the other contract conditions being complied with, and limited to a maximum contract period of 2,190 (twenty-one hundred and ninety) days........... 2.3. ARRIVAL IN BRAZIL - The Unit should arrive at the port or in sheltered waters, in Macae-RJ. The beginning of operations should occur up to the date of 12.29.99, the provision set forth in item 9.1 of this contract being complied with..................................................... 2.3.1. At the port or in sheltered waters mentioned in 2.3, the customs and helideck inspections in the Unit will be carried out, as well as the loading/unloading of the CONTRACTOR's and PETROBRAS' materials, and also the general equipment testing will begin as foreseen in item 3.1 of this contract .................................. (End of Clause) .............................................................. -4- THIRD CLAUSE - CONTRACTOR'S OBLIGATIONS ...................................... 3.1. Before the beginning of the contract, the CONTRACTOR will arrange for a general test of the operating conditions of all of the Unit's equipment, as provided for in Attachment VIII, in the presence of PETROBRAS' Inspection. The occurrences found during the performance of the tests will be duly recorded in the Daily Drilling Certificate (ADP) signed by PETROBRAS' Inspection and by the CONTRACTOR's representative. The CONTRACTOR will be released to begin operations after proving the good operating conditions of the equipment which comprise the Unit's main systems, such as, energy generation and distribution system, anchoring system, industrial safety, liquid and bulk storage, fluid circulation and processing, safety and wellhead, column elevation, rotation and handling, columns, instrumentation, formation test equipment and communications system...................... 3.1.1. The tests referred-to in 3.1 will be made in a period estimated in 3 (three) days, after which the Unit will be released to sail to the first location, provided there is nothing pending in the unit's main systems, as defined in item 3.1............................. 3.1.1.1. In the event the tests last for a period exceeding 3 (three) days, for reasons ascribed to PETROBRAS, the rate foreseen in Ref 104 (Waiting Rate) of Attachment II, will be due, applied as of the fourth day of tests, until the Unit is released. The periods spent with equipment repair will not be calculated for the purpose of counting such duration, and also no fee will be due during such periods ......... 3.1.2. PETROBRAS may opt for the partial or total performance of the receipt tests, in sheltered waters, in the deepest water depth set forth in the contract, or still in the first location................... 3.2. OPERATION - To render the services object of this contract using the Unit and the equipment listed in Attachment I, complying with the other conditions of and Attachments to this contract, according to the international standards recommended for services of such nature....... -5- 3.2.1. SAFETY STANDARDS - The CONTRACTOR will carry out the services in strict compliance with the international safety standards for work of such nature, aiming at the protection of personnel, materials and equipment that belong to it, PETROBRAS and third parties. PETROBRAS' Safety Rules which, the CONTRACTOR states to know will be particularly complied with. In the event of conflict between PETROBRAS' standards and the CONTRACTOR's, the CONTRACTOR's Standards will prevail, unless PETROBRAS expressly requires to the contrary in each case.......... 3.3. SUPPLY OF MATERIALS - To be responsible for the purchase, when requested by PETROBRAS, in the domestic market, of other materials needed to render the services object of this contract. The purchase of the materials mentioned in this item will be submitted to the prior approval by PETROBRAS which will reimburse them as set forth in item 4.2 ............................................................... 3.3.1. The materials mentioned in item 3.3 will be delivered by the CONTRACTOR to PETROBRAS, at the port or airport the latter indicates. 3.3.2. To submit the expense vouchers in the maximum period of 60 (sixty) consecutive days after the actual date of the purchase.......... 3.4. SERVICES BY THIRD PARTIES - To request, when asked by PETROBRAS, other specialized services available in Brazil, related to the object of this contract, behooving the CONTRACTOR all measures for their actual performance, including the obtainment of PETROBRAS' prior and express approval of the costs arising therefrom, which will be reimbursed as set forth in item 4.2. 3.5. PERSONNEL - To be liable, in its own name, and for its own responsibility and onus, for all personnel needed for the efficient and complete performance of the services object of this contract which will operate on the basis of 24 (twenty-four) hours a day and 7 (seven) days a week. The list of the minimum personnel to be used by the CONTRACTOR is basically the one mentioned in Attachment V.................... -6- 3.5.1. The CONTRACTOR guarantees that the personnel mentioned in Attachment V will allow it to fully carry out the performance of the services object of this contract, running, as a result, for its own account, all charges arising from the need to increase the personnel. 3.5.2. The CONTRACTOR will be liable for the maintenance and cost of the personnel required for the fulfillment of the operational and safety rules and regulations issued by the proper authorities, including the compliance with the provisions of the PORTOMARINST No. 1302, dated 06.26.85, and of the Navy Department, Ports and Coasts Authority............................................................ 3.5.3. The technical personnel should possess proven competence in their specialization, and the CONTRACTOR is to supply PETROBRAS with their respective "curriculum vitae"..................................... 3.5.4. To provide for training and/or recycling of its personnel in the Course on Basic Safety Notions, held by PETROBRAS, according to the program and conditions to be agreed upon between the parties........ 3.5.4.1. For the Board Superintendents, for the Persons in Charge and for the Drillers, a qualification certificate in well control supplied by PETROBRAS or by a Training Center qualified by IADC or IWCS will be required............................................................ 3.6. To be liable for all charges regarding the contracting of its personnel and any additionals that are or may become due, as well as for the withholding and payment of social, labor and social security contributions set down by the Law, and other charges that may become due at any title, being for all purposes, the sole employer.......... 3.6.1. Whenever requested by PETROBRAS, the CONTRACTOR will submit the documents regarding the proof of payment of its labor obligations, including social security contributions (CND - Negative Debt Certificate) and FGTS deposits, regarding its employees............. 3.6.2. To make sure that its personnel, who work in activities or operations that subject them to noxious agents, included in the list referred to in Article 58 of Law No. 8.213/91, are not retired in this special condition, according to the restriction expressly contained in Article 3rd of Law No. 9.032 dated 04.18.95............................. -7- 3.7. To bear all measures and expenses with displacement of personnel, such as, but not limited to, transportation from abroad to the port or airport of Macae-RJ, as indicated by PETROBRAS, and the return to the place of origin, and any and all expenses with personnel travel and stay in Brazil, insurances, medical and hospital expenses, meals, passports, as well as for extra expenses caused by delay or cancelling of flights, be it due to bad weather or to the non-availability of planes. .......................................................... 3.8. To promote, without charges to PETROBRAS, the replacement and immediate withdrawal of any of its employees that may be required by PETROBRAS at any time, due to bad behavior, technical deficiency, inefficiency or health conditions. ..................................... 3.9. Whenever requested, to train PETROBRAS' personnel in the services object of the present contract........................................ 3.10. All correspondence between the CONTRACTOR and PETROBRAS will be written and forwarded in Portuguese. ................................ 3.11. To provide, in the Unit chartered for the performance of the services object of this contract, lodging, food, mess room services, rendered by a Brazilian company, for PETROBRAS' personnel and those of third parties at PETROBRAS' service, up to the maximum of 26 (twenty-six) persons, being agreed that the CONTRACTOR will freely supply 900 (nine hundred) meals per month. The meals exceeding this number will be paid by PETROBRAS, based on the rate set forth in the Unit Price Spreadsheet appearing in Attachment III................. 3.11.1. The quality of the mess room services and the food supply are the CONTRACTOR's responsibility, who will maintain a permanent supervision by a male nurse on board and eventually by a qualified nutricionist. PETROBRAS may require that the CONTRACTOR takes measures in the event such services show a loss in quality standards.................... -8- 3.12. INSURANCES - To provide, for its account, the contracting of the insurances necessary to fulfill this contract and the Brazilian laws, intended to cover its assets and its personnel, even when they are in transportation under PETROBRAS' responsibility, as well as the Civil Liability insurance for damages and losses caused to third parties, which will not imply in limiting the CONTRACTOR's liability, and it should also include PETROBRAS as and third party for the purposes of such coverage............................................... 3.12.1. The minimum mandatory value of the civil liability insurance is of US$1,000.000.00 (one million dollars), per event, during the period of validity of this contract and of its eventual extension, which amount is to be converted into Brazilian currency on the date the present contract is signed. MARITIMA NAVEGACAO E ENGENHARIA LTDA. is to appear as co-insured in that policy..................................... 3.13. The franchises which may be established for the insurances mentioned in item 3.12, as well as the onus arising from the insurers requirements and/or recommendations will fully run for the CONTRACTOR`s account.............................................................. 3.13.1. The provision of item 3.13 applies also to the insurances of transportation made by the CONTRACTOR, regarding the CONTRACTOR's equipment, tools, and materials to be transported by PETROBRAS as set forth in item 4.4................................................... 3.14. To keep PETROBRAS free and safe from any and all indemnity claim for damages and/or losses of any kind which the CONTRACTOR may have sustained as a result of this contract, whether or not it has made adequate and sufficient insurance for such circumstances............. 3.14.1. PETROBRAS will be equally kept free and safe from any and all indemnity claim for damages and/or losses of any kind which the CONTRACTOR may have caused to third parties for its duly proven grossly negligent action or omission, arising from this contract, whether or not it has made adequate and sufficient insurance for such circumstances......... 3.14.2 In return, the CONTRACTOR will be kept free and safe from any and all indemnity claim for damages and/or losses of any kind, which PETROBRAS may have sustained from, third parties, or has caused to third parties by its duly proven grossly negligent action or omission, as a result of this contract, whether or not it has made adequate and sufficient insurance for such circumstances................ -9- 3.15. To undertake, up to the limit equivalent to US$500,000.00 (five hundred thousand United States dollars) per event, any and all liability for death or damages to persons, provided they are caused by duly proven grossly negligent action or omission on its part and/or its employees and/or personnel.............................................. 3.16. The CONTRACTOR waives for itself and will require from its Insurers and/or Subcontractors, in any and all insurance made as a result of this contract, the inclusion, in each policy contracted, the provision assuring the waiver of any right to subrogation against PETROBRAS.. 3.17. To submit to the contract Manager, up to 30 (thirty) consecutive days after its inception, as foreseen in item 2.2.1, the originals of the insurance policies made as a result of this contract, containing all essential data, such as insurers, time limits, period of validity, amounts insured, and coverage conditions, and with PETROBRAS appearing as co-insured, except in the civil liability insurance, of which it will participate as a third party.............................. 3.17.1. The policies mentioned in item 3.17 will contain a provision that the insurances mentioned cannot be amended and/or cancelled without PETROBRAS' prior authorization .................................... 3.18. LOSSES AND DAMAGES - The CONTRACTOR will be liable for damages to its own equipment and material, and to those which it and its agents may cause to PETROBRAS or to third parties, as a result of its duly proven grossly negligent action or omission, in the following cases:...... 3.18.1. In the event of losses of or damages to equipment and/or materials belonging to PETROBRAS and/or to third parties, which are aboard the Unit, or during their moving between the Unit and the support vessels, the CONTRACTOR's liability will be limited to the replacement or repair of the equipment so lost or damaged due to the CONTRACTOR's or its employees' duly proven fault. However, the CONTRACTOR will not be liable for and will be kept free and safe from in the event of damages to reservoirs, indirect damages or loss of profit of PETROBRAS, losses and damages arising from pollution coming from the well, resulting from kick-and/or blow-out. -10- 3.18.2. In case of losses and damages caused to the well, arising from the events mentioned in subitem 2.1.5 of Attachment II, the CONTRACTOR will reimburse PETROBRAS the payments it comes to make to third parties referring to cementing, logging or other services related to the object of the present contract, as well as to materials (cement, casing, bits, completion fluid materials). In the event PETROBRAS opts for the definitive abandonment of the damaged well, the CONTRACTOR will reimburse the expenses made by PETROBRAS to drill that well.. 3.18.3. In the cases mentioned in subitem 3.18.1 and 3.18.2. the limit for the CONTRACTOR's liability is of US$500,000.00 per event and its deployments......................................................... 3.19. SECRECY - To maintain complete secrecy on the data and information supplied by PETROBRAS, as well as on all of the results and analyses arising from the services referring to the present contract....... 3.19.1. All data, information and other documents, of any kind, referring to the fulfillment of this contract, are PETROBRAS' exclusive property. 3.19.2. The CONTRACTOR and its personnel cannot disclose or supply to third parties any materials or information obtained as a result of this contract, unless expressly authorized by PETROBRAS................. 3.19.3. The provision of this item 3.19 is a standing obligation, valid even after the termination, in any fashion, of the present contract.... 3.20. To be liable for the violations it commits regarding author's right and the use of materials and/or performance processes protected by trade-marks and patents, as well as for any claims arising from the bad use it makes of them, running for its account the payment of any charges, royalties, fees, commission, indemnities, and any other expenses arising from said violation, including the legal ones....... -11- 3.21. SEA OPERATIONS - To render the services object of this contract in strict compliance with the laws, standards, regulations and administrative rules, as well as the instructions issued by the Shipping Office or by other proper authorities, specially those regarding the spillage of oil and other residues from the Unit into, the sea, being liable, as a result, for any charges arising from the violation of such laws, standards, regulations, administrative rules and instructions, the limit established in subitem 3.21.2 being complied with, and excepting the cases provided for in item 3.20 of this contract....................................................... 3.21.1. To plan and carry out operations intended to prevent and fight oil or gas blow outs, fires, or other accidents, complying with the provision set forth in item 2.4 of the Attachment I to this contract. Although the CONTRACTOR is considered fully responsible for such operations, it is obliged to discuss the methods to be adopted with PETROBRAS, so as to find the best operating solution............... 3.21.2. With exception of the cases arising from kick, blow out, surging or formation testing, which the CONTRACTOR will be kept free and safe from, in the other cases of spillage of petroleum, oil and other residues in the sea, the CONTRACTOR will be liable up to the limit of US$500,000.00 (five hundred thousand dollars) per event and its deployments.......................................................... 3.22. The storage aboard the Unit, as well as the handling aboard, and between the Unit and support vessels, of materials, equipment, drilling or completion fluid additives, chemical additives belonging to PETROBRAS or to third parties at the service of PETROBRAS, are the CONTRACTOR's responsibility..................................... 3.23. To bear all expenses, including with diesel oil and transportation of the Unit for dockages, including those arising from act of God or force majeure, as defined in the Thirteenth Clause of the contract......... -12- 3.24. To maintain a hospital ward in the Unit with at least 2 (two) beds, provided with equipment and medicine necessary for the prompt attention to sick and injured persons, as determined by the Shipping office, such hospital ward being subjected to periodical inspections by PETROBRAS. 3.25. The CONTRACTOR undertakes to maintain all conditions required in the bidding stage, during the performance of the SERVICES contracted. 3.26. To maintain an agent accredited and accepted by PETROBRAS in the Unit or in a place previously designated by PETROBRAS, to represent the CONTRACTOR in the fulfillment of the contract............. 3.27. To comply with the requests contained in the Service Authorization(s) issued by PETROBRAS............................... 3.28. To allow, after negotiations between the contracting parties, the provisional installation in the chartered vessel, of complementary equipment such as, but not limited to: pipes or risers in catenary by the J-lay method, or similar, submarine manifolds, provided they do not jeopardize the Vessel's safety and are in accordance with the rules of the Classification Society....................................... (End of Clause)............................................................... -13- FOURTH-CLAUSE - PETROBRAS' OBLIGATIONS................................... 4.1. To make monthly, the payments for the services rendered by the CONTRACTOR due to the present contract, based on Attachment II and Attachment III and on the conditions set forth in Clauses Sixth: Readjustment -Seventh: Measurement - and Eighth: Form of Payment, the other Attachments, Clauses and Conditions of this contract being complied with........................................................... 4.2. To reimburse, by means of submittal of vouchers, the expenses with materials and services of third parties, according to items 3.3 and 3.4 of -this contract. The reimbursement will be comprised of:.............. a) Amount of the bill issued by the supplying and/or service rendering company;............................................ b) Expenses actually made to place the materials in the Unit;..... c) Cost of the insurance for the materials, if authorized by PETROBRAS. In the event PETROBRAS does not authorize such insurance, the CONTRACTOR will not be liable for losses and damages of any kind that they may sustain until their delivery to PETROBRAS at the port or airport it indicates................ 4.3. OPERATIONS AND LOCATIONS PROGRAM - PETROBRAS will provide the CONTRACTOR with the Operations Program, in writing and with due antecedence, and it also will notify on the locations where the services will be rendered, so that the CONTRACTOR may adopt, in due time, the measures necessary for their performance...................... 4.4. TRANSPORTATION:......................................................... 4.4.1. PETROBRAS will provide transportation to the Unit of all of the CONTRACTOR's personnel involved in the rendering of the services, from the port or airport indicated by PETROBRAS in the beginning of this contract, and vice-versa. At its exclusive discretion, the transportation to be provided will be by helicopter ou vessel........ 4.4.2. PETROBRAS will provide transportation for the material and equipment, related to the object of this contract, from the port or airport designated, to the Unit and vice-versa ......................... -14- 4.4.3. In any circumstances foreseen in this item, the granting of insurance coverage will not be PETROBRAS' competence, and the CONTRACTOR waives immediately, for itself and for its Insurers, any return action against PETROBRAS or third parties at its service, as a result of the transportation provided.............................. 4.4.4. In the event there is need to program exclusive air transportation, to survey the Unit, by the Navy and/or Shipping Office, the costs arising therefrom will be charged to the CONTRACTOR........... 4.4.5. PETROBRAS may provide air or sea transportation for the CONTRACTOR's materials, industrial or fresh water and fuel before the beginning of the contract, as defined in item 2.2.1. The costs arising therefrom will be reimbursed by the CONTRACTOR to PETROBRAS........ 4.4.6. PETROBRAS will provide tugs and support vessels for the Unit, from the location where the general testing of the equipment is performed, to the first location, between locations and from the last location to the Brazilian port or sheltered waters closest thereto, which will be chosen in common agreement between the parties........... 4.4.6.1. PETROBRAS will provide the support vessels for the Unit's positioning in the locations to be drilled during the fulfillment of this contract............................................ 4.4.7. PETROBRAS may provide tugs and/or support vessels to load and unload materials and to handle anchors, in a place to be defined by the parties, in cases of inspection and/or dockages, including those arising from act of God or force majeure, as defined in the Thirteenth Clause of this contract. The costs arising therefrom will be reimbursed by the CONTRACTOR to PETROBRAS.................. 4.5. FUEL AND WATER - To supply, for its account, all fuel and water necessary for the performance of the services object of this contract, from the beginning of the contract, as provided for in subitem 2.2.1, the provisions of item 3.23 of this contract being complied with..... -15- 4.5.1. The supply of water mentioned in item 4.5 includes also the industrial water intended for cleaning the Unit......................... 4.6. COMPLETION FLUID - To maintain the control of the properties of the fluid by an accredited employee, as well as to control the stock of materials necessary for such purpose................................ 4.7. To provide, at its expenses and under its responsibility, the ancillary services referring to: cementing, formation testing, electric logging, flexitube operation, operation with nitrogen, electric wire operation, wireline operation, when they derive from PETROBRAS' own programming. 4.8. At its exclusive judgment, and without any co-responsibility, PETROBRAS may cooperate with the CONTRACTOR, assisting it before the Foreign Trade Department - Trade Exchange Coordinating Office (CTIC), regarding proceedings submitted to these Agencies, referring to materials and/or equipment pertaining to the rendering of the services object of this contract. Such cooperation, however, will not lessen the CONTRACTOR's liability for the obtainment of the documents and/or benefits that may be the object of the respective proceedings.... 4.9. To issue Service Authorization(s) with all information necessary for their performance, such as: location, time limit, value, scope, and beginning and end dates.............................................. 4.10. To notify the CONTRACTOR, in writing, on the imposition of eventual fines................................................................ 4.11. To issue the Measurement-Bulletin (MB), as set forth in the Seventh Clause: Measurement, of this contract.............................. (End of Clause)............................................................... -16- FIFTH CLAUSE - PRICES AND VALUE .............................................. 5.1. For the rendering of the services object of this contract, PETROBRAS will pay to the CONTRACTOR the rates set forth in Attachment II and Attachment III to this contract, under the conditions set forth in Clauses Sixth - Readjustment, Seventh - Measurement, and Eighth - Form of Payment................................................ 5.1.1. The contract prices include all specified tariffs, supervision, administration, taxes, fiscal emoluments and all expenses that fall directly or indirectly upon the rendering of the services, including profit, needed for its perfect fulfillment, until the end of the contract, no price revision claims being therefore valid............. 5.2. The total estimated value of this present contract is of R$36,258.986.10 (thirty-six million, two hundred and fifty-eight thousand, nine hundred and eighty-six reais and ten cents)............ 5.3. PETROBRAS does not undertake to make the payment of the total estimated in item 5.2, but of the amount corresponding to the services rendered and accepted by PETROBRAS. ............................... 5.4. In the event the Unit suffers a delay of up to 90 (ninety) days, regarding the time limit granted in item 2.3 of the present contract, the CONTRACTOR will have its total daily rate reduced by 10% (ten percent), as of the beginning of the contract, for a period iqual to the number of days of delay........................................... 5.5. In the event the Unit suffers a delay greater than 90 (ninety) days, as of the time limit granted in item 2.3 of the present Contract, besides the maximum reduction of 10% (ten percent) in the total daily rate for a period of 90 days as defined in item 5.4, the CONTRACTOR will be subjected to the imposition of fines according to item 8.1 of this contract............................................................... 5.6. The financial resources necessary for the payment of the services object of the present contract are duly equated and specifically assured in the budget for the present fiscal year and foreseen for the following ones to cover the period for the total rendering of the services. ............................................................. (End of Clause)............................................................... -17- SIXTH CLAUSE - PRICE READJUSTMENT ............................................ 6.1. The contract prices in Brazilian currency, will be readjusted yearly, after 1 (one) year as of the month when the CONTRACTOR's proposal was submitted has elapsed, for more or for less, as a result of the variation of the elements that comprise the readjustment formulae, set forth in subitems 6.2.1 and 6.2.2 below............................. 6.1.1. If, during the period of validity of this contract, new legal provisions are created which permit the reduction of the periodicity referred to in 6.1, the parties will make a new agreement regarding the contract prices, to expurgate eventual overprices arising from the periodicity originally established for the application of the readjustment........................................................ 6.2. The prices set forth in the Unit Prices Spreadsheet - Attachment III to this contract, will be readjusted by applying the following calculation formulae............................................................. 6.2.1. For the prices of Ref 101, 104 and 105 of the Unit Prices Spreadsheet - Attachment III: INS USA MEQ PCR = PCI. [0.55 -------- +0.10 -------- +0.35 --------] INSo USAo MEQo 6.2.2. For the price referring to extra meals, appearing in the Unit Prices Spreadsheet - Attachment III:....................................... ABR PCR = PCI. [ ------- ] ABRo Where:........................................................................ PCR= readjusted contract price;........................................ PCI= initial contract price, in force on the date of the CONTRACTOR's proposal;......................................................... INS= index number of the National Consumer Price Index (INPC), published by the Brazilian Institute of Geography and Statistics - IBGE, corresponding to the months in which the readjustment is due. INSO= index number of the INS defined above, corresponding to the month when the CONTRACTOR's proposal was submitted; USA= value of the United States dollar selling rate in the commercial exchange in force on the 30th day of the month when the readjustment is due;........................................................... -18- USA= value of the same rate in force on the 30th day of the month when the CONTRACTOR'S proposal was submitted; ......................... MEQ= definitive value of the Wholesale Price Index - Domestic Availability - Brazil Production Goods - Machinery, Vehicles and Equipment - Machinery and Equipment- Column 15 of the Getulio Vargas Foundation's Magazine "Conjuntura Economica," code A0161724, corresponding to the month when the readjustment is due; MEQO= definitive value of that same index, corresponding to the month when the CONTRACTOR's proposal was submitted;.................... ABR= definitive value of the Price Index - Consumer Price - Brazil - Cost of Living Food, Column 1, Code A0201475, of the Getulio Vargas Foundation's Magazine "Conjuntura Economica," corresponding to the month when the readjustment is due;.......... ABRO= definitive value of this same index, corresponding to the month when the CONTRACTOR's proposal was submitted...................... 6.2.3. The reference basis of the CONTRACTOR's proposal is the month of (blank)................................................................ 6.3. PETROBRAS will make the readjustment calculation, expressing its result, duly made evident, in the Measurement Bulletin (MB) of the services to which it refers, for the purposes of issuing the respective collection document. ........................................ 6.4. In the event of delay in the partial or total disclosure of the indexes, a readjustment factor will be provisionally used, calculated on the basis of the last indexes known by then, at the time the Measurement Bulletin (MB) was issued................................ 6.4.1. The eventual difference between the definitive and the provisional readjustment will be invoiced by the CONTRACTOR after the issuing of the Readjustment Bulletin (RB) by PETROBRAS, as provided for in subitem 7.3.1 of this contract.......................... -19- 6.5. The readjustment will not include the services performed before the date when the reason that justifies it has occurred.................. 6.6. The readjustment factor will be applied with 4 (four) decimal places, without rounding off................................................ 6.7. The CONTRACTOR states that the prices proposed for the performance of the services object of the contract have taken into account all costs, inputs, expenses and other legal obligations for the complete fulfillment of the contract provisions established................... (End of Clause)............................................................... -20- SEVENTH CLAUSE - MEASUREMENT ................................................. 7.1. Periodicity of the measurements of the services and determination of the reimbursable expenses............................................ 7.1.1. For the services, the measurement will be made monthly, according to the procedures mentioned below, with the consequent issuing of the respective Measurement Bulletins (MB):............................... a) the inimical measurement of the services will be made between the date of the beginning of this contract and the last day of the calendar month;................................................ b) The intermediate measurements of the services, corresponding to a given month, of the order "m", cover the period between day 01 and the last day of the calendar month of the order "m";....... c) The final measurement of the services will cover the period between day 01 of the month "m" and the day of the termination of this contract............................................... 7.1.2. The reimbursable expenses, if provided for in the contract, will be determined on any day of the month, according to the vouchers submitted to and accepted by PETROBRAS, and more than one determination can be made in the same period covered by the measurement.................. 7.1.2.1. The results found will be submitted to the CONTRACTOR on the 5th (fifth) working day, as of the submittal of said vouchers, by means of a Reimbursement Document (RD), which will be signed by the Manager of this contract, for invoicing purposes................................ 7.1.2.2. The reimbursable expenses and the deductions, if provided for in the contract, are to be individually made evident in the Reimbursement Documents (RD)...................................................... 7.2. Issuing of the Measurement Bulletins (MB). 7.2.1. PETROBRAS, through the Manager of this contract, at the end of each period as mentioned in the letters of subitem 7.1.1 of this Clause, will carry out the measurement of the services, gathering the results found in the Measurement Bulletin (MB) for the signature of the Manager of this contract and of the CONTRACTOR, complying with the following: -21- a) For the initial intermediate and measurements ending on the last final day of, a given month of the order "m", the CONTRACTOR will receive one of the copies of the MB up of the 5th (fifth) subsequent working day, so that he may submit the respective collection documents, as provided for in subitem 7.4.1 of this Clause;........................................................... b) For the final measurement, when the termination of the contract does not occur in the last day of the month, the CONTRACTOR will receive one of the copies of the MB, up to the 5th (fifth) working day after the termination of the contract, so that he may submit the respective collection documents, as provided for in subitem 7.4.1;. c) For each measurement period of the services, only 1 (one) collection document may be issued, being understood that collection documents with partial values regarding said period will not be taken into account for payment purposes, with exception of the cases of collection of differences in readjustment, if any; d) In the Measurement Bulletins (MB), the portions regarding the basic and readjustment values, if any, will be made evident, using the last definitive factor known by then, and the deductions, if provided for in the contract...................................... 7.3. Collection of the readjustment difference............................ 7.3.1. For the payment of an eventual readjustment complement, due to the non-availability of indexes at the time the MB is issued, PETROBRAS will issue a Readjustment Bulletin (RB).................. 7.3.1.1. The Readjustment Bulletin (RB) will be submitted to the CONTRACTOR on the third working day after the disclosure of the indexes applicable to the calculation of the definitive readjustment factor................ 7.4 Time for the submittal of collection documents....................... 7.4.1. The CONTRACTOR will submit the respective collection documents to PETROBRAS' Financial Department, as mentioned in item 8.1 of this contract, in the following conditions:............................... -22- - - -------------------------------------------------------------------------------- TYPE OF MEASUREMENT MEASUREMENT OCCASION FOR THE SUBMITTAL OF DOCUMENT COLLECTION DOCUMENTS - - -------------------------------------------------------------------------------- INITIAL INTERMEDIATE MB Up to the 8th working day following AND FINAL the last day of the performance of the serviced, and PETROBRAS will make the payment on the 30th consecutive day, as of the final day of the period measured, the provision in subitem 7.4.1.1 being complied with. - - -------------------------------------------------------------------------------- INITIAL INTERMEDIATE RB In case of an eventual complement of AND FINAL readjustment difference, the RB will be issued up to the 3rd working day after the index to calculate its issuing is known, and the payment will be made together with the payment of the principal, the minimum of 10 (ten) working days between the submittal of the Collection Document and the date of payment being complied with. - - -------------------------------------------------------------------------------- DETERMINATION OF RD In the first working day after the REIMBURSABLE DR is issued, and the payment will EXPENSES be made in a period of 30 (thirty) days, as of the day of its submittal. - - -------------------------------------------------------------------------------- 7.4.1.1. The payments due because of this contract, referring to the services, will always occur on the 30th day as of the end of the measured period, included in the MB's, or on the first subsequent working day, provided the CONTRACTOR fulfills the time limits for the submittal of the Collection Documents set herein. In the event of non-compliance by the CONTRACTOR, with said submittal time limits, the payments will be postponed for the number of days equal to the delay in the delivery of such documents..... 7.5. Measurement follow-up............................................... 7.5.1. The CONTRACTOR undertakes to follow-up the measurements and the determinations carried but by PETROBRAS, offering, at that time, the impugnations or considerations it deems necessary, which will be submitted to PETROBRAS' appraisal and decision..................... -23- 7.5.2. The CONTRACTOR's signature by its representative before PETROBRAS will imply in the acknowledgement of the accuracy of the Measurement Bulletin (MB) and/or Readjustment Bulletin (RB) for all legal purposes......................................................... (End of Clause)............................................................... -24- EIGHTH CLAUSE - FORM AND PLACE OF PAYMENT..................................... 8.1. The monthly payments due as a result of this contract will be made by PETROBRAS to the CONTRACTOR, in Brazilian currency, 30 (thirty) consecutive days, as of the last day of the period of performance of the services, provided the CONTRACTOR submits the collection documents until the 8th (eighth) working day after the last day of the period of performance of the services.......................................... 8.1.1. The payment of an eventual difference in readjustment will be made on the same day in which the payment of the respective service occurs, provided the CONTRACTOR submits the corresponding collection document up to the 5th (fifty) working day after the indexes that permit the issuing of the Readjustment Bulletin (RB) are known.......... 8.1.2. The payment of reimbursable expenses, if any, will be made 30 (thirty) consecutive days after the submittal of the collection document....... 8.1.3. In the event of non-submittal of the collection documents in the time limits set above, the payment will be postponed for as many consecutive days as those corresponding to the delay in the delivery of the collection documents ............................................... 8.2. The collection documents will be submitted, together with the original of the document giving rise to them (MB, RB, RD) in the Docket of the Financial Department indicated by PETROBRAS, for the purposes of checking the fulfillment of the time limits for their payment........ 8.3. The collection documents will be issued without erasures, complying with the pertinent laws in force, and will contain obligatorily the following information:............................................... a) Place and date of its emission and number of the collection document;...................................................... b) Number and date of signature of the contract deed;............. c) Number and date of the documents originating them (MB, RB, RD);. d) Gross value of the collection documents, both in numbers and in writing;........................................................ -25- e) Name and code of the banking establishment, branch and the respective code and number of the current account of the payee, where the payments will be made;............................... f) In order that a particular payment is made in a banking establishment different from the one indicated at the time the contract deed was signed, such amendment will obligatorily be preceded by a fax/correspondence from the CONTRACTOR or will appear in the payee's collection document..................... 8.3.1. In the event the collection document is inaccurate, it will be, returned to the CONTRACTOR and the time limit foreseen in item 8.1 will be postponed for as many days as those corresponding to the delay in the submittal of such document....................................... 8.3.2. In the event of re-submittal of the collection document, as a result of a previous impugnation, this fact should appear in the history of the collection document 8.3.3. The CONTRACTOR will obligatorily submit, every month to the Manager of the contract: ............................................... a) Payroll of the CONTRACTOR's employees who are involved in the rendering of the services contracted; b) A photocopy of the Social Security Payment Slip (GRPS), duly settled and certified, obligatorily filling out the data identifying PETROBRAS, informing on field "8" (other information), the name, CGC/CEI of PETROBRAS, number, date and amount of the Invoice or Bill of Sale referring to the services rendered in the month....... c) In case of a Cooperative, to submit the payment vouchers of the amounts paid, distributed or credited to its members as a remuneration for the services rendered in fulfillment of this contract.......................................................... 8.3.4. The collection documents will not be accepted by PETROBRAS if submitted with Income Tax at Source already withheld................. 8.3.5. It is the responsibility of PETROBRAS' disbursing office the explanation of doubts regarding the issuing of the collection documents............................................................. -26- 8.3.6. Eventual payments made for more or for less by PETROBRAS, will be compensated as soon as they are detected, and the respective amounts will be duly corrected.......................................... 8.3.7. The CONTRACTOR should indicate the place and fax number, if any, for the receipt of the "Notice of Payment Foreseen"..................... 8.4. The vouchers for the reimbursable expenses due to the CONTRACTOR as a result of this contract deed, will be previously submitted to the Manager of the contract, for checking, besides being duly settled by the respective supplier or service renderer, when such is the case... 8.4.1. If the original cannot remain in PETROBRAS' hands, copies thereof may be submitted, which will be checked by the Inspector and/or Manager, and the following should appear in every original document: "Copy Submitted for Reimbursement on __/__/__", followed by the signature and identification by name, position and registry number, and the originals will be returned to the CONTRACTOR. The following text will appear in the copies of each document in PETROBRAS' hands: "Checked with the Original On __/__/__", which the Inspector and/or Manager will sign, identifying the signature by name, position, and registry number. 8.4.2. In special cases of reimbursement of import costs (duties and/or expenses), the CONTRACTOR will send a letter submitting the vouchers for such expenses, together with the import proceeding, to the office responsible for its follow-up........................................ 8.4.3. The receipt, duly formalized by PETROBRAS, of any reimbursable expense voucher, does not represent the recognition of the debt, nor the proof that the expenses was made.................................... 8.4.4. The collection of reimbursable expenses will be made through the issuing of a Services Invoice, after approval by PETROBRAS of the respective Reimbursement Document - RD, which will be issued up to 5 (five) working days, as of the date of submittal of said documents... -27- 8.4.4.1. PETROBRAS' Inspection has 3 (three) working days to proceed with the checking of the expense voucher and to notify its approval to the CONTRACTOR, so that it may issue the Combined Invoice and Bill of Sale. 8.4.5. The total amount of the collection document will be obtained by applying the following formula: ...................................... VTD VTR = --------- , where I - ICP VTR= total amount to be reimbursed to the CONTRACTOR;.................. VTD= total amount of the reimbursable expenses, effectively authorized; ICP= total of, the sum of the aliquots of taxes collected, in the decimal form (ISS or ICMS, as the case may be, COFFINS and PIS/PASEP)........................................................ (End of Clause)............................................................... -28- NINTH CLAUSE - FINES ......................................................... 9.1. Non-compliance, by the CONTRACTOR, after ninety-one days beyond the time limit mentioned in item 2.3 of this contract have elapsed, will imply in the imposition of fine against the CONTRACTOR, in a written notice, corresponding to 30% (thirty percent) of the rate foreseen in Ref 101 of Attachment III, per day of delay.......................... 9.2. In the event of non-compliance, by the CONTRACTOR, with the inspection's requirements within the time limit it may set, PETROBRAS may, by a written notice, impose against the CONTRACTOR, per day of noncompliance with such requirements, as of the end of the time limit set, a fine corresponding to 20% (twenty percent) of the rate provided for in Ref 101 of Attachment III.......................... 9.3. The penalties set forth in this Clause do not exclude any other provided for in the Laws in force and/or in this contract............ 9.4. The amount corresponding to the sum of the basic values of the fines imposed is limited to 10% (ten per cent) of the estimated total value of the present contract.............................................. 9.5. The basic values of the fines will be readjusted by the readjustment factor calculated by the formula shown in subitem 6.2.1 of this contract and in force in the period of its imposition................ 9.5.1. The fines: will: be forwarded by the Inspection, for discount by the Disbursing office, as soon as the pertinent definitive readjustment factors are known.......................................... 9.5.2. In the event of balance, PETROBRAS reserves itself the right to make or complement the deduction in collection document(s) related to any other contract deed eventually entered into with the CONTRACTOR, or to use any other adequate means to settle the debt, if necessary..... 9.6. In a written notice and without prejudice of the capacity to rescind the contract, PETROBRAS may impose upon the CONTRACTOR a compensatory fine of 100% (one hundred per cent) of the amount of the conviction, due to default of its labor, social security or tax obligations... -29- 9.6.1. The payment of said fine will not exempt the CONTRACTOR from the obligation to reimburse PETROBRAS for the amount imposed upon it as a result of an eventual joint conviction passed by a Labor Court or by the proper administrative jurisdictions.............................. 9.6.2. The CONTRACTOR will be fined in the percentual of 5% (five percent) on the amount of the invoice in the event it does not submit the GRPS or submits it at variance...................................... 9.6.2.1. The GRPS is considered at variance if it does not have proof of payment of social security contributions of all of the CONTRACTOR's Brazilian crew working in the fulfillment of the contract............... 9.7. The CONTRACTOR may appeal against the imposition of the fine, in a declaration, within the non-deferrable time limit of 15 (fifteen) consecutive days as of the date the notice is received............... (End of Clause)............................................................... -30- TENTH CLAUSE - INSPECTION .................................................... 10.1. The inspection of the services contracted herein will be carried out by PETROBRAS' representatives, and the CONTRACTOR undertakes to allow their free access to the Unit and to the service locations, and to comply immediately with the observations of such inspection, which will have ample powers to:.......................................... 10.1.1. Determine the interruption of the evaluation and/or completion of the well, for the purpose of carrying out formation testing, corings, electric loggings and other services deemed necessary; ........ 10.1.2. Determine, provided it comes to its knowledge and is within its capacity, the suspension of the services which perhaps are being carried out in disagreement with the good technique or which threaten the safety of persons or assets of PETROBRAS, third parties and of the CONTRACTOR itself, complying with subitem 2.1.7 of Attachment I..... 10.1.3. Refuse the use of improper or inadequate techniques, as well as the operations that do not comply with the established programs ........ 10.1.4. Refuse the employment of condemned or improper materials, tools and production string components, which do not comply with PETROBRAS' and API's standards.................................... 10.1.5. Order the withdrawal, from the work site, of any of the CONTRACTOR's employees who, in PETROBRAS' opinion, may endanger the good performance of the services or hinder its inspecting activities... 10.1.6. Certify on the accuracy of the information reported daily by the CONTRACTOR........................................................... 10.1.7. Notify the CONTRACTOR, in writing, on the imposition of the fines provided for in this contract, including those referring to the CONTRACTOR's action or omission .................................... 10.1.8. Request from the CONTRACTOR a detailed report on any accident occurred and on any operation or repair performed ...................... -31- 10.1.9. Request from the CONTRACTOR the documentation regarding the proof of payment of its labor obligations, including social security contributions (Negative Debt Certificate) and deposits in the FGTS, for the crew members............................................... 10.2. RECORDINGS - PETROBRAS' Inspection should record its observations on the Driller's Log approved by the IADC and on the Daily Drilling Certificate (ADP), to safeguard the rights and liabilities foreseen in this contract........................................................ 10.3. During the period of validity of the contract, PETROBRAS will carry out evaluation of the CONTRACTOR's performance, covering the groups in equipment and material, human resources, installations, quality and efficiency. The results of the performance evaluations will be notified and consolidated by means of service performance certificates....... (End of Clause)............................................................... -32- ELEVENTH CLAUSE - RESCISSION ................................................. 11.1. PETROBRAS may rescind the present contract, without the CONTRACTOR being entitled to any right to indemnity and/or withholding in the following cases:..................................................... 11.1.1. Nonfulfillment, or irregular fulfillment of contract clauses, specifications, operations and Inspection's requests, provided the fact mentioned is not remedied within the time limit of 60 (sixty) days or the repeated commitment of faults in the fulfillment of the contract;... 11.1.2. Total or partial subcontracting of the object of the present contract, the association of the CONTRACTOR will another, merger/division or total or partial incorporation, except if allowed for in this contract, which affects the good fulfillment of this instrument............................................................. 11.1.3 Interruption of the services for more than 60 (sixty) days;....... 11.1.4. Decree of the CONTRACTOR's bankruptcy............................. 11.1.5. When the limit for the imposition of penalties provided for in item 9.4 of this contract is attained................................... 11.1.6. Slowness in the performance of the works, leading, PETROBRAS to prove the impossibility of completing the services within the established time limits................................................. 11.1.7. Non-compliance with the determinations of PETROBRAS' agent appointed to follow-up and inspect the fulfillment of the contract, as well as those of his superiors.......................................... 11.1.8. The dissolution of the CONTRACTOR................................. 11.1.9. The corporate change or the modification of the company's purpose or structure, which in PETROBRAS' opinion, hinders the performance of the services;........................................................ 11.1.10. Delay in the beginning of the fulfillment of the contract for more than 180 (one hundred and eighty) days.................................. 11.1.11. Rescission of the Chartering contract of the Unit entered into between PETROBRAS and MARITIMA NAVEGACAO E ENGENHARIA LTDA......... 11.1.12. If the limit set forth in subitem 2.1.9 of Attachment II to this contract is attained.................................................... 11.1.13. If the limits set forth in Note 2 of Ref 102 of Attachment II to this contract is attained............................................... -33- 11.1.14. Non-submittal of the proof of fulfillment of labor obligations towards the employees directly involved in the services object of this contract, including social security contributions and deposits in the FGTS, when requested by the Inspection, or if such default is proved.. 11.1.15. Non-submittal or submittal at variance of the GRPS, when the corresponding invoice is delivered................................... 11.1.15.1. The rescision for this reason does not prevent PETROBRAS from imposing the respective fine, foreseen in 8.7.2;................... 11.2. In the event of rescision of the contract deed for the reasons foreseen in 10.1, PETROBRAS:....................................... a) will take over the object of the contract deed, on the stage and location where it is found;....................................... b) will enforce the contract guarantee, if any, for the reimbursement of the amounts of fines and indemnities due to it;................ c) will withhold the credits arising from the contract deed, up to the limits of the damages caused to it;........................... 11.3. After the contract is rescinded, as set forth in this Clause, the CONTRACTOR is liable, in legal and contract fashion, for the violation or inadequate performance which gives rise to the rescission, as well as for the reimbursement of damages which PETROBRAS may come to sustain................................................................ 11.4. After the contract is rescinded, PETROBRAS, at its exclusive judgment, may adjudicate the operations object thereof to whom it deems appropriate, without behoving the CONTRACTOR any consultation or interference, claim and/or indemnity, for whatever title, and the CONTRACTOR will be liable to legal and contract penalties, besides answering for damages PETROBRAS may sustain........................ -34- 11.4.1. The CONTRACTOR is also liable for the pertinent administrative sanctions, its full defense being guaranteed........................ 11.5. In the event PETROBRAS does not impose the right to rescind the present contract according to this Clause, it may, at its absolute discretion, withhold the payments of pending invoices, until the CONTRACTOR fulfills the contract condition it has infringed, but such fact will not represent novation nor will it generate rights that may be claimed by the CONTRACTOR............................................ (End of Clause)............................................................... -35- TWELFTH CLAUSE - FISCAL CHARGES............................................... 12.1. Taxes (taxes, fees, emoluments, fiscal and parafiscal contributions) that are due as a direct or indirect result of the present contract, or of its fulfillment, will be the exclusive responsibility of the taxpayer, so defined in the tax rule, with no right to reimbursement. PETROBRAS, as the disbursing source, will discount and withhold within the legal time period, from the payments it makes, the taxes it is liable to by the laws in force....................................... 12.1.1. The CONTRACTOR states that, in quoting its prices, it has taken into account the taxes, (taxes, fees, emoluments, fiscal and parafiscal contributions) charged on the fulfillment of this contract, and it cannot make any claim due to error on such evaluation, for the purpose of requesting a price revision ou reimbursement of payments set down by the proper authority.................................................... 12.1.2. Once found, during the period of validity of the contract, that the CONTRACTOR has unduly added to its prices amounts corresponding to taxes, fiscal and/or parafiscal contributions and emoluments of any kind that are not charged to the performance of the services agreed upon, such values will be immediately excluded, with the consequence reduction of the prices practiced and reimbursement of amounts that may have been paid to the CONTRACTOR........................................ 12.2. If, during the period of validity of this contract, any of the following events occur: ............................................ - creation of new taxes;............................................ - extinction of existing taxes;..................................... - changes in the aliquots;.......................................... - establishment of tax incentives of any kind; and ................. - exemption or abatement of federal, state or county taxes;......... which, provedly come to increase or reduce the burdens of the parties to the contract, the prices will be revised, so as to fit them into the -36- changes made, compensating, at the first opportunity, any differences arising from such changes. However, if it is a question of tax incentives, the advantages arising therefrom will always be for PETROBRAS........... (End of Clause)............................................................... -37- THIRTEENTH CLAUSE - FORCE MAJEURE ............................................ 13.1. PETROBRAS and the CONTRACTOR will not be liable for the nonfulfillment of their respective obligations in case of events that characterize an act of God or force majeure defined in the sole paragraph of Article 1.058 of the Brazilian Civil Code. Any suspension of performance due to this item will be limited to the period during which such cause or its consequences exist, and such period will be added to the duration of the contract mentioned in the Second Clause of the present contract. However, the CONTRACTOR is assured the right to receive the rate provided for in Ref 104 of Attachment III, with the exception of the exemption from payment set forth in subitem 2.1.4 of the Attachment II, and the reimbursements mentioned in this contract, and furthermore, the parties will severally assume their losses......... 13.2. If the circumstance that justify the invoking of the existence of an act of God or force majeure occurs, the party unable to fulfill its obligations will immediately notify the other party, in writing, on the occurrence and its consequences................................... 13.3. If the impediment arising from the force majeure lasts for more than 90 (ninety) consecutive days, any of the parties may opt for the termination of the contract, with both parties complying with their mutual obligations due until the date of the beginning of said impediment............................................................ (End of Clause)............................................................... -38- FOURTEENTH CLAUSE - ASSIGNMENT AND TRANSFER.................................. 14.1. The CONTRACTOR cannot assign or transfer, in whole or in part, the present contract, except with PETROBRAS' prior authorization in writing................................................................ 14.2. The CONTRACTOR cannot assign or give in guarantee, at any title, in whole or in part, the credits of any kind, arising or deriving from the present contract, except with PETROBRAS' prior authorization in writing. The prior authorization will obligatorily state that PETROBRAS imposes upon the assignee of the credits the exceptions that behooves it, mentioning expressly that the payments to the assignee will be conditioned to the fulfillment, by the assignor, of all of its contract obligations......................................... 14.3. The occurrence of the above mentioned events, duly authorized by PETROBRAS, does not exempt the CONTRACTOR from any of its contract obligations............................................................ 14.4. PETROBRAS may assign or transfer, in whole or in part, the present contract, under commercial conditions to be agreed upon by the parties. (End of Clause)............................................................... -39- FIFTEENTH CLAUSE - CONTRACT RELATIONSHIPS..................................... 15.1. This contract is related to another one for chartering the Unit, signed on this same date between PETROBRAS and MARITIMA NAVEGACAO E ENGENHARIA LTDA....................................................... (End of Clause)............................................................... -40- SIXTEENTH CLAUSE - INTERVENIENCE.............................................. 16.1. Clause non-applicable in this Contract.................................. (End of Clause)............................................................... -41- SEVENTEENTH CLAUSE - ACCEPTANCE............................................... 17.1. After the services are completed in strict compliance with the conditions set forth in the present deed, PETROBRAS will accept them by means of a Definitive Acceptance Deed signed by the parties..... 17.1.1. Before the signature of the Definitive Acceptance Deed the CONTRACTOR will comply with all of the Inspection's requirements regarding claims, without any charge to PETROBRAS.................. 17.1.2. The signature of the Definitive Acceptance Deed does not exempt the CONTRACTOR from the liabilities provided for in this contract and in the laws in force.................................................... (End of Clause)............................................................... -42- EIGHTEENTH - CLAUSE LIABILITY................................................. 18.1. PETROBRAS' and the CONTRACTOR'S liability for damages will be limited to the direct damages in accordance with the Brazilian Civil Code and pertinent laws, with exception of loss of profit and indirect damages, the indirect damages being limited to: 100% (one hundred percent) of the total contract value............................ (End of Clause) .............................................................. -43- NINETEENTH CLAUSE - COMPLEMENTARY DOCUMENTS................................... 19.1. The Attachments mentioned below are an integral part of the present contract and, in the event of disagreement between the Attachments and the contract, the text of the contract will prevail.. ATTACHMENTS: I - Technical specifications of the Unit............................. II - Applicability of the Rates and Incidents in the Performance....... III- Unit Prices Spreadsheet........................................... IV - Responsibilities in the Performance and Mutual Obligations........ V - List of Specialized Personnel..................................... VI - Environmental operating Conditions................................ VII - PETROBRAS' Safety Rules........................................... VIII - Radio Communication and Radio Beacon Frequency Plan............... IX - Equipment Testing Program ........................................ X - Procedures in the Event of Fatal Accidents........................ (End of Clause) .............................................................. -44- TWENTIETH CLAUSE - JURISDICTION............................................... 20.1. The Jurisdiction of the County of the Capital of the State of Rio de Janeiro will be competent to settle any questions arising from the present contract, with the express waiver, by the parties, of any other, however privileged............................................... (End of Clause)............................................................... -45- AND BEING THUS AGREED, the parties sign the present deed in 3 (three) copies with the same tenor, with the witnesses below ......................... Rio de Janeiro, January 12, 1998.............................................. (SIGNED:) LUIZ EDUARDO G. CARNEIRO............................................ LUIZ EDUARDO G. CARNEIRO - EXECUTIVE SUPERINTENDENT OF EXPLORATION AND PRODUCTION SOUTH SOUTHEAST ................................................... PETROLEO BASILEIRO S.A. - PETROBRAS ..................................... (SIGNED:) GERMAN EFROMOVICH.................................................. GERMAN EFROMOVICH - PRESIDENT................................................. MARITIMA NAVEGACAO E ENGENHARIA LTDA.......................................... WITNESSES: .................................................................. (SIGNED:) ELAINE BRABO........................................................ CPF No. 970.702.897-15........................................................ (SIGNED:) LUIS CARLOS BRAZIL RODRIGUES........................................ CPF NO. 610.769.457.91........................................................ CONTRACT 101.2.160.97-0....................................................... SERVICES RENDERING ATTACHMENT II APPLICABILITY OF THE RATES AND INCIDENTS IN THE PERFORMANCE. 1 - APPLICABILITY OF THE RATES-DEFINITION OF THE SERVICE RATES PER 24 (TWENTY-FOUR) HOUR DAY............................................ REF 101 - OPERATION RATE - It will be applied during the activities requiring the use, of the Unit, such as electric logging, formation testing, completion and workover operations, including drilling lines scouring and cutting operations. -46- REF 102 - REPAIR RATE - In the periods when there is an interruption of the activities that require the use of the Unit, mentioned in Ref 101 of this Attachment and the operations for Moving the Unit between locations, Ref 105 of this Attachment, due to maintenance, including replacement of mud pump spare parts, and/or repair in the Unit's equipment, or in those which supply is the CONTRACTOR's responsibility, no rate will be due....................... NOTE1. The repair period will be considered as of the interruption of the operation that is being performed, until the return to the same situation when the interruption occurred, except for the periods when the interruption in the repair activities occurs due to adverse sea conditions, as set forth in Note 2 of Ref. 104..... NOTE 2. In the event the CONTRACTOR remains in Repair Rate for an accumulated total of 30% (thirty percent) of the time, for any period of 6 (six) contract months, PETROBRAS may rescind the present contract, based on subitem 11.1.14 of this contract...... NOTE 3. It will be considered as repairs the occurrences due to wash outs in the drill pipes and in the other elements of the drill string, belonging the CONTRACTOR, with exception of those arising from the presence of H2S and from abnormal mechanical conditions occurred in the well.............................................. NOTE 4. At the Inspection's discretion, for the maintenance of the BOP, the CONTRACTOR may be granted a franchise of up to 24 (twenty-four) hours between the instant the BOP is set of the test stump, until its operational withdrawal, and the moment of its movement for the next running in another well, without the CONTRACTOR entering in repair rate, provided such maintenance is carried out according to international standards. In the period within these 24 (twenty-four) hours intended exclusively for the BOP maintenance, the waiting rate (Ref. 104) will be due.......... -47- REF. 103 - RATE ADDITIONAL (RA) - In each measurement period, as set forth in subitem 7.1.1 of the contract, the CONTRACTOR will be entitled to the receipt of a Rate Additional calculated by means of the following formulae: .......... AT = 0.10 x (NT - NFM - NREP - NIPG - NTOR) x for PI less than or equal to 0.0300 TO....... AT = (0.16 - 2 x PI) x (NT - NFM - NREP - NIPG - for 0.03 < PI 0.0800 NTOR) x TO........................................................ AT = Zero................................................to PI> 0.0800 Where:........................................................................ AT = Rate Additional................................................... TO = Operation Rate (REF 101).......................................... PI = Unavailability Proportion, calculated with 4 (four) decimal places, being:.......................................................... NREP + NIPG + NTOR PI = ------------------ NT - NFM NT = Total number of days in the measurement period considered;....... NFM = Total number of days in which the act of God or force majeure occurs, as defined in the Thirteenth Clause of the contract, in the measurement period considered;................................ NREP = Total number of days under repair rate (Ref 102), in the measurement period considered;.................................... NIPG = Total number of days under exemption from payment (according to item 2.1 of this Attachment) in the measurement period considered; NTOR = Total number of days with reduced operation rate (according to subitems 2.2.3 and 2.2.4 of this Attachment) in the measurement period considered................................................. REF. 104 - WAITING RATE (TE) - corresponds to 95% (ninety-five percent) of the Operation Rate (TO) and which will be applied in Bad Weather, Force Majeure and. Waiting situations, as defined below: .................... -48- 1) Bad Weather Situations - in the event of stoppage of the operations when environmental conditions are so severe as to endanger the Unit's operating-capacity, the limitations in Attachment VI, being complied with, making the operations unstable or unsafe or preventing support vessels to have access to the Unit, or preventing the tugs' operations, at the time of change of locations, although the Unit may operate normally, inspite of the bad weather.................................... 2) Force Majeure Situations - during the period when the Unit cannot operate, due to act of God or force majeure, as defined in the Thirteenth Clause of the contract, until the removal of the impediment or the rescission of the contract, as the case may be................... 3) Waiting - waiting for the arrival, maintenance or availability of materials from PETROBRAS or third parties, under PETROBRAS responsibility, even if the maintenance is made in the Unit; waiting for daylight to carry out formation tests; waiting for orders from PETROBRAS, such as, but not limited to: change of programs, definition to proceed with the completion or other production activity, rest for PETROBRAS' team- or of those of third party at PETROBRAS' service; waiting for tugs or support vessels NOTE 1. The period spent in disconnecting the LMRP from the BOP due to environmental conditions, will be considered as bad weather situation, until the return to the previous situation.............................. NOTE 2. If a bad weather situation occurs which interrupts a repair activity, the Waiting Rate (Ref 104) with a 40% (forty percent) reduction will be due during that period................................ REF. 105 - MOVING RATE - corresponds to 95% (ninety-five percent) of the Operation Rate (TO) and will be applied during the following periods: a) Beginning of the Contract - After the acceptance of the Unit's equipment operating conditions, once the general testing provided for in item 3.1. of the contract has been carried out, until the spud in of the first well;........................................ b) Between locations - After the end of the completion or intervention operations in a well, with the arrival of the BOR or tool used in the well (the one which occurs last) in the moon pool until the spud in or reentry in a new well (beginning of running the first tool for access to the well)................................. -49- NOTE: In this period are included the DP system calibration and tests, always in each new location, and others in each contract year or at any time, when requested by PETROBRAS..................... c) End of the Contract - After the end of the spud in or intervention operations in the last well, with the arrival of the BOP or tool used in the well (the one which occurs last) in the moon pool, until the Unit's arrival in a sheltered waters location, chosen in common agreement between the parties, or, if there are PETROBRAS' equipment still aboard, until the withdrawal of such equipment from the Unit...................................... 2 - INCIDENTS IN THE PERFORMANCE ............................................. 2.1. Exemption from Payment - PETROBRAS will be exempted from the payment of the rates foreseen in this Attachment, during the period in which occurs:........................................................... 2.1.1. Interruption of the services due to the CONTRACTOR's duly proven fault arising from operational error and/or lack of material or equipment, inclusive due to the loss of equipment or subaquatic spare parts................................................................ 2.1.2. Stoppage of the services and/or of the Unit due to measures related to impositions by made the insurers............................. 2.1.3. CONTRACTOR's refusal to operate under the conditions foreseen in Attachment VI Environmental Operating Conditions..................... 2.1.4. Stoppage of the services and/or of the Unit for inspection or dockage purposes, including surveys and dockages arising from act of God or force majeure, as defined in the Thirteenth Clause of the contract, the corresponding expenses also running for the CONTRACTOR's account................................................................ NOTE 1. The exemption from payment will begin in the moment there is an interruption of the operational continuity object of this contract, even if the withdrawal of all or part of PETROBRAS' and/or the CONTRACTOR's cargo becomes necessary for the inspection and/or dockage................................. -50- NOTE 2. The end of the exemption from payment, due to the inspection and/or dockage, will occur:....................................... a) on the return to the same location, the moment the operations returns to the previous situation; ............................... b) On the mobilization for another location, the moment the Unit starts sailing after PETROBRAS' and/or the CONTRACTOR's materials have been put back on board....................................... 2.1.5. Occurrence of kick, drill string sticking, loss of circulation, fishing or abandonment, caused by the CONTRACTOR's duly proven action or omission, from the moment the problem was ascertained, until the return to the situation prior to its occurrence, or displacement to another location, in the event of abandonment 2.1.5.1. The exemption from payment referred to in 2.1.5 will be limited to a period of 15 (fifteen) days, per event, after which the reduction foreseen in subitem 2.2.3 of this Attachment will be applied........................ 2.1.6. Occurrence of blow out caused by the CONTRACTOR's duly proven action or omission, from the moment the problem was ascertained until the return to the situation prior to its occurrence..................... 2.1.6.1. The exemption from payment referred to in item 2.1.6 will be limited to a period of 45 (forty-five) days, after which the reduction foreseen in subitem 2.2.4 of this Attachment will be applied............ 2.1.7. Suspension of the services, determined by PETROBRAS' Inspection, based on item 10.1.1 of the contract........................ 2.1.8. Interruption of the operations due to a failure occurred in any of the Unit's equipment, at the time of the testing to be carried out according to item 3.1 of the contract................................ -51- 2.1.9. In the occurrence of events of exemption from payment foreseen in subitems 2.1.1, 2.1.2, 2.1.3, and 2.1.7, for a total accumulated period of time exceeding 30% (thirty percent) in any 6 (six) month period, PETROBRAS may rescind the present contract, based on its subitem 11.1.13................................................................ 2.2. Reduction in the Operation, Waiting and Movement Daily Rate ......... The rates foreseen in this Attachment will be reduced in the following cases:................................................................. 2.2.1. Total or partial inoperativeness or malfunction of any equipment which delays or hinders the operations, such as, but not limited to, winches, kelly spinner, geolograph, current meter, air compressors, shale shaker, mixing pumps, mud laboratory equipment and bulk receipt and transfer systems are reason for the reduction of the daily rate foreseen in Ref 101, in 1% (one percent), cumulative per equipment, provided the CONTRACTOR is notified in writing in the Daily Drilling Certificate (ADP), by PETROBRAS' Inspection and which, after the time limit the latter has set to repair said equipment, such repair has not been made........................................................... 2.2.2. Low Efficiency - Reference Rates 101 and 105 of -this Attachment will suffer a 20% (twenty percent) reduction, in the event low efficiency is verified, according to the operating efficiency parameters listed below. Such reduction will be applied during the whole corresponding activity period in which low efficiency is verified: Operating Parameters:......................................................... - - - Maneuver of the drill string in a cased well (except BHA):.............. o Inside the riser and 20" casing = 500 m/h......................... o Inside the 13 3/8" casing = 600 m/h.............................. o Inside of 9 5/8" casing = 700 m/h................................. - - - Break of DP's per unit = 25jt/h......................................... - - - Casing string run in the sea/inside the riser/previous casing (joints approximately 12 m long)................................................ -52- 30" Casing - 2 jt/h .................................................... 20" Casing - 5 jt/h..................................................... 13 3/8" Casing 13 jt/h ................................................. 9 5/8" Casing 18 jt/h .................................................. 7" Casing 15 jt/h ...................................................... - - - Running of drilling riser, excluding normal time for testing (50 ft. joint): 45m/h........................................................... - - - Pulling of drilling riser (50 ft joints): 60m/h ........................ - - - Installation or pulling of the kill/choke lines/ telescopic joint/stretchers: 6.0h ...................................... - - - Diverter installation or pulling: 2.0h.................................. - - - Assembly of the dampening lines in the M.R.: 1.5h....................... - - - Assembly of the flexitube equipment: 5.0h............................... - - - Assembly of the production tail: 2.0h................................... - - - Tubing running or pulling, per unit 150 m/h............................. - - - Tubing running or pulling per section - 300 m/h......................... - - - Completion risers running or pulling - 50 m/h........................... - - - Assembly of terminal head and slings -2.0 h............................. - - - Moving of WCT to/from the moon pool - 3.0 h............................. - - - Moving of tree cap or tree running tool to/from the moon pool - 2.5h ... - - - Assembly of lubricator and wire line BOP -1.5h.......................... NOTE: The above mentioned operating parameters are based on normal weather conditions................................................ 2.2.3. Beginning on the 16th (sixteenth day), inclusive, of the occurrence of kick, drill string sticking, loss of circulation or fishing, caused by the CONTRACTOR's duly proven action or omission, until the return to the situation prior to its occurrence, the applicable rate will be reduced by 50% (fifty percent).................. -53- 2.2.4. Beginning on the 46th (forty-sixth) day, inclusive, of the occurrence of Blow-out caused by the CONTRACTOR's duly proven action or omission, until the return to the situation prior to its occurrence, the applicable rate will be reduced by 50% (fifty percent).............. 2.3. Period of Validity of the Contract Rates - the contract rates set forth in this Attachment will apply in the period set forth below:........ a) Beginning: release of the Unit, by PETROBRAS, to sail to the first location, after the equipment general testing foreseen in item 3.1 of the contract has been carried out, with the exception of the provision in its subitem 3.1.1.1........................... b) End: after the end of the completion of the last well, with the Unit's arrival at a port or sheltered waters chosen by common agreement between the parties, and if there are PETROBRAS' equipment still aboard, with the withdrawal of such equipment from the Unit..................................................... 2.4. Blow-Out - PETROBRAS will be responsible for the well control operation costs, in the event of blow-out and caving caused by the blow-out. Such provisions apply only to the well control costs and do not apply to the loss of assets, lesions and/or damages caused by the blow-out, which are protected by the provisions of the pertinent items of this contract. The CONTRACTOR undertakes to place at PETROBRAS' disposal all of its resources in personnel and equipment related to this contract, without any additional charges to PETROBRAS. If the CONTRACTOR has contributed with duly proven action or omission for the occurrence of the accident, no rate will be due, until the solution of the problem, subitems 2.1.6 and 2.2.4 of this being complied with.... (End of Attachment)........................................................... -54- CONTRACT 101.2.160.97-0....................................................... ATTACHMENT III - UNIT PRICES SPREADSHEET SERVICES RENDERING - - -------------------------------------------------------------------------------- UNIT PRICES SPREAD SHEET INVITATION TO BID E&P - 101.0.016.97-5 - - -------------------------------------------------------------------------------- OBJECT OF BID: Services of Drilling, Completion, Evaluation and Workover of Oil and Gas Wells, by means of the use of a Floating Unit, provided with Dynamic Positioning System. - - -------------------------------------------------------------------------------- PLACE OF OPERATION: Brazilian Continental Shelf and International Waters. - - -------------------------------------------------------------------------------- UNIT'S NAME: AMETHYST 6 - - -------------------------------------------------------------------------------- COMPANY'S NAME: MARITIMA NAVEGACAO E ENGENHARIA LTDA. - - -------------------------------------------------------------------------------- CODE ITEMIZATION UNIT UNIT PRICE (R$) - - -------------------------------------------------------------------------------- 07.201.351 Operation Rate Day 14,566.60 (Ref. 101) - - -------------------------------------------------------------------------------- 07.201.358 Repair Rate Day No rate will be due (Ref. 102) - - -------------------------------------------------------------------------------- 07.201.362 Waiting Rate - Bad Day (95% of Ref. 101) Weather (Ref. 104.1) - - -------------------------------------------------------------------------------- 07.201.363 Waiting Rate - Force Day (95% of Ref. 101) Majeure (Ref 104.2) - - -------------------------------------------------------------------------------- 07.201.364 Waiting Rate - Day (95% of Ref. 101) Waiting (Ref. 104.3) - - -------------------------------------------------------------------------------- 07.201.366 Movement Rate - Day (95% of Ref. 101) (Ref. 105) - - -------------------------------------------------------------------------------- 09.242.008 Meals (Item 3.11 of Each 20.00 Serv. Rendering Cont. - - -------------------------------------------------------------------------------- SIGNATURES DATE OF THE PROPOSAL - - -------------------------------------------------------------------------------- PETROBRAS CONTRACTOR 09.08.97 Andre de Mesquita Pinto German Efromovich - - -------------------------------------------------------------------------------- (Rubber stamp: Andre de Mesquita Pinto - Register NO. 014177.3).............. - - -------------------------------------------------------------------------------- -55- CONTRACT 101.2.160.97-0....................................................... SERVICES RENDERING ATTACHMENT IV RESPONSIBILITY IN THE PERFORMANCE AND MUTUAL OBLIGATIONS 1 - RESPONSIBILITIES IN THE PERFORMANCE..................................... 1.1. The CONTRACTOR should provide, at its own expenses, pipe inspection according to API-RP 7 G Standard for drill string elements in use, at every 15,000m drilled. This inspection should be necessarily made by personnel accredited by PETROBRAS, and accompanied by PETROBRAS' Inspection which will attest the drill string conditions in accordance with the results of said inspection. The drill string elements rejected by the Inspection will be immediately repaired and/or replaced by the CONTRACTOR, who will undertake the corresponding costs................................................................ 1.1.1. The CONTRACTOR should make provisions so that the same numbering of the parts is maintained for the period of validity of the contract... 1.1.2. The reports on the inspections made on the drill string, riser column, and handling equipment will be submitted to PETROBRAS immediately after their performance..................................... 1.1.3. The CONTRACTOR should maintain a control of the elements of the string used in each well, recording at each maneuver, in the driller's log, which parts belong to the BHA in use, mentioning the inspection report numbering............................................. 1.1.4. The CONTRACTOR will provide, for its own cost, for the inspection of the drill string, when requested in writing by PETROBRAS, in the event of abnormal occurrences, such as wash-out or frequent string breaks................................................................ 1.1.5. The CONTRACTOR will provide, for its own cost, for the inspection according to API RP-8B standard, in each contract year, in all drill string handling equipment, such as, but not limited to, slips, elevators, travelling tongs, hook, elevator arms, spiders, drilling winch, etc. This inspection should be necessarily accompanied by PETROBRAS' Inspection which will attest the drill string conditions in accordance with the results of said inspection. The equipment rejected by the Inspection will be immediately repaired and/or replaced by the CONTRACTOR....................................... -56- NOTE: The same procedure described in 1.1.5 will be applied to the riser column and to its handling tools, complying with standard API RP2K...... 1.2. Casing - The CONTRACTOR should measure and run the conductors and the casing strings in accordance with the drilling programs established by PETROBRAS.......................................................... 1.2.1. The CONTRACTOR will keep the casing pipes with their respective protectors........................................................... 1.2.2. The CONTRACTOR will exert its best efforts to remove all recoverable casing, when the well is abandoned.......................... 1.3. Cementing, Formation Testing and Electric Logs - the CONTRACTOR will provide facilities and give assistance to third parties, in charge by PETROBRAS, for the performance of cementing, electric log, drill string testing, and other related services, complying with the programs and safety rules set down by PETROBRAS............................. 1.4 Fishing - the CONTRACTOR should carry out all fishing operations that may become necessary................................................ 1.5 Subsurface Pressures - the CONTRACTOR will exert its best efforts to control subsurface pressures, always maintaining all safety equipment, including the ancillary ones in good operating conditions, so as to avoid contamination of the drilling fluid by hydrocarbons and fires resulting from blow-outs.............................................. 1.6. Well Completion and Abandonment - the CONTRACTOR will complete or abandon the wells in safety conditions, according to the program set down by PETROBRAS.................................................. 1.7. Drilling Reports - the CONTRACTOR undertakes to inform daily to PETROBRAS, until 01:00h of the following day, on the progress of the operations, weather conditions, bulk and liquid stock consumption, and the status of the equipment that comprise the vessel's dynamic positioning system, and of others that the Inspection considers necessary, by means of bulletins, reports and records approved by the IADC and/or required by the Inspection............................... -57- 1.7.1. The duration of the delays or wastes of time, their reasons, and other facts deemed important, will be recorded in detail in the Daily Drilling Data....................................................... 1.7.2. Whenever requested by PETROBRAS, the CONTRACTOR will submit detailed reports on the progress of the operations carried out, or on any accident that may have occurred...................................... 1.8. The CONTRACTOR undertakes to inform immediately to PETROBRAS' Inspection when the Unit enters in a Degraded State.................. 1.8.1. The following situations are considered Degraded State: (to be defined in common agreement between the parties)........................ 1.8.2. In the event of non-fulfillment of Clause 1.8, and the Unit comes to enter into yellow alert or red alert, a 20% (twenty percent) fine will be charged on the operation rate during the whole period in which the abnormality persists................................................ 1.9. The CONTRACTOR undertakes to measure the sea current profiles (intensity and direction with reference to the true North) from the surface of the sea down to the sea bottom, carried out at 0600 and 1200 GMT (Greenwich Mean Time), and to deliver daily the data obtained to PETROBRAS. Such profiles should obligatorily cover the following depths: 20, 50, 150, 200, 250, 300, 350, 400m, and at every 100 (one-hundred) meters thereafter, until the last depth investigated corresponds to 5 (five) meters from the bottom of the sea............ 1.9.1. The data should be delivered to PETROBRAS' Inspector, in disk and in a format according to PETROBRAS' instructions.......... 1.10. Maintenance and Conservation - the CONTRACTOR will be responsible for the maintenance, conservation and cleaning services of the Unit and of all existing equipment and installations, maintaining all safety devices in perfect operating and adjustment conditions................ -58- 1.10.1. The CONTRACTOR undertakes to keep and maintain PETROBRAS's materials and equipment, aboard the Unit, as well as all that are object of the loading and unloading operations in the support vessels.......... 1.11. Ancillary Services - in equal price, time limit and availability conditions, the CONTRACTOR should give preference to the ancillary services rendered by Brazilian companies, when they become necessary for the rendering of the services object of this contract............ 1.12. Lubricants - to preferably use lubricants of the make PETROBRAS DISTRIBUIDORA-BR, submitting a justification in the event it uses another make........................................................ 1.13. Wellhead inclination - the wellhead will not be installed with inclinations exceeding 1 1/2 (degree) (one and a half degree). If, by the inspection's decision, the well continues to be drilled with an inclination exceeding that limit, the possible wear of the inner parts of the BOP, Lower Marine Riser, Adapter Riser and Spool, resulting therefrom, will be PETROBRAS, responsibility, provided the CONTRACTOR proves that said wear resulted from the operation in that well with wellhead inclination exceeding 2(degree) (two degrees)............... 1.14. The CONTRACTOR should submit a description of its operating procedures for the events of disconnection, formation testing, and BOP and choke manifold testing.................................................... 1.14.1. The procedures to be adopted will be discussed and approved by PETROBRAS.......................................................... 1.15. The Board Superintendents, Tool Pushers, and Drillers will be required to have proven technical competence in kick control, attested by a certificate of training in an entity recognized by PETROBRAS....... 1.16. The CONTRACTOR should carry out well shut off training exercises every week, on an occasion to be agreed upon with the Inspection, and according to the rules in force in PETROBRAS, which operation should be entered in the Driller's Log.................................. 1.16.1. The CONTRACTOR should submit a Safety Project for BOP, Choke Manifold and in well shutoff training test, which will be approved by PETROBRAS' Inspection.............................................. -59- 1.17. Drill Riser - the CONTRACTOR will maintain the drill riser inner joints perfectly clean and free from debris and/or rust........................ 1.17.1. The CONTRACTOR should perform the inner cleaning of all drill riser joints, using the proper tool and compressed air, whenever the operation following the riser string run is a completion and/or workover operation...................................................... -60- CONTRACT 101.2.160.97-0....................................................... 2. MUTUAL OBLIGATIONS - - -------------------------------------------------------------------------------- DESCRIPTION ON ACCOUNT OF SUPPLIED BY - - -------------------------------------------------------------------------------- PET CONT PET CONT 1. Cementing, logging, formation X X and X and/or production tests, directional drilling, perforating, wireline, nitrogen unit, flexitube, etc. - - -------------------------------------------------------------------------------- 2. Welding services necessary for X X drilling, completion, well abandonment and maintenance operations. - - -------------------------------------------------------------------------------- 3. Technical supervision for X X manufacturing and control of drilling fluid, completion. - - -------------------------------------------------------------------------------- 4. CONTRACTOR's land support X X base (office and storehouse). - - -------------------------------------------------------------------------------- 5. Handling and storage of X X materials and equipment belonging to or supplied by the CONTRACTOR on land or in the Unit. - - -------------------------------------------------------------------------------- 6. Handling and storage of X X materials and equipment of PETROBRAS or third parties, aboard the Unit. - - -------------------------------------------------------------------------------- 7. Land transportation, cargo X X loading and unloading of materials under the CONTRACTOR's responsibility. - - -------------------------------------------------------------------------------- 8. Fishing services. X X - - -------------------------------------------------------------------------------- 9. Cleaning and painting services X X aboard the Unit, including those of PETROBRAS' materials and equipment installed in the Unit. - - -------------------------------------------------------------------------------- 10. Mess room, hostelry and meal supply services: - - - CONTRACTOR's personnel X X - - - PETROBRAS' personnel (up to 1300 X X meals a month) - - - PETROBRAS' personnel (exceeding X X 900 meals a month) - - -------------------------------------------------------------------------------- 11. BOP and riser lines tests, X X not programmed, carried out with the Cementing Unit. - - -------------------------------------------------------------------------------- 12. Operations with special tools. X X - - -------------------------------------------------------------------------------- 13. Air or sea transportation X X of the CONTRACTOR's equipment and personnel in the area of operation. - - -------------------------------------------------------------------------------- -61- - - -------------------------------------------------------------------------------- 14. Air or sea transportation X X or X of the CONTRACTOR's personnel in the area of operation, besides those programmed for shift changes and Supervision personnel. - - -------------------------------------------------------------------------------- 15. Air or sea transportation X X programmed but not used by the CONTRACTOR, without prior notice to PETROBRAS. - - -------------------------------------------------------------------------------- 16. Air or sea transportation X X of the CONTRACTOR's material and/or personnel, in an emergency character, due to the CONTRACTOR's failure or lack of programming. - - -------------------------------------------------------------------------------- 17. All customs expenses, fees, X X including agent services, licenses, taxes or similar charges regarding the import or shipment to the Unit of all equipment, spare parts and consumables of the CONTRACTOR. - - -------------------------------------------------------------------------------- 18. All expenses, including those X X with licenses, taxes or similar charges regarding the vessel's adaptation and operation in accordance with the Laws, Rules, Decrees, Administration Rules and Instructions in force in Brazil. - - -------------------------------------------------------------------------------- 19. Services of submarine X X inspection, measurement, intervention, etc. with a remote operated submarine vehicle. - - -------------------------------------------------------------------------------- 20. Services to interconnect the X X boom lines with the burners. - - -------------------------------------------------------------------------------- 21. Special repair and recovery services with qualified welding in equipments and lines belonging to: a) PETROBRAS X X b) CONTRACTOR X X - - -------------------------------------------------------------------------------- 22. Communication services via satellite, when used by: - PETROBRAS X X or X - the CONTRACTOR X X or X - - -------------------------------------------------------------------------------- 23. Maintenance of communication X X or X service via satellite - - -------------------------------------------------------------------------------- -62- - - -------------------------------------------------------------------------------- 24. Rental or Brasilsat X X or X satellite signal - - -------------------------------------------------------------------------------- 25. Rental of satellite signal X X for the DGPS - - -------------------------------------------------------------------------------- 26. Services in the burners supplied by the CONTRACTOR. - - -------------------------------------------------------------------------------- * MISSING PAGES 108 AND 109** and needs or to comply with the requirements of government laws................. -63- CONTRACT 101.2.160.97-0....................................................... ATTACHMENT "VI" ENVIRONMENTAL OPERATING CONDITIONS (PERMISSIBLE LIMITS FOR ENVIRONMENTAL CONDITIONS ACTING SIMULTANEOUSLY) - - -------------------------------------------------------------------------------- PITCH HEAVE OR ROLL WIND WAV CURRENT OPERATION (feet) (Degrees) (MPH) (feet) (knots) - - -------------------------------------------------------------------------------- Conductor's jetting/driving 2.0 2.5 30 3.0 1.4 - - -------------------------------------------------------------------------------- Drilling 2.5 3.0 30 3.0 1.4 - - -------------------------------------------------------------------------------- Casing running 2.0 3.0 30 3.0 1.4 - - -------------------------------------------------------------------------------- Casing hanger setting 1.5 2.0 30 2.1 1.4 - - -------------------------------------------------------------------------------- BOP running 1.5 1.5 19 2.1 2.5 - - -------------------------------------------------------------------------------- BOP setting 3.5 1.5 19 2.1 1.4 - - -------------------------------------------------------------------------------- Maneuvering 3.5 3.0 44 8.5 1.4 - - -------------------------------------------------------------------------------- LMRP disconnection 7 4 51 10.5 2.5 - - -------------------------------------------------------------------------------- -64- - - -------------------------------------------------------------------------------- LMRP connection 1.5 1.5 19 2.1 1.4 - - -------------------------------------------------------------------------------- Formation testing 3.5 4.0 44 8.5 1.4 - - -------------------------------------------------------------------------------- Operation with boats 2.5 3.0 39 6.7 1.4 - - -------------------------------------------------------------------------------- Running the WCT (lay-away) 1.5 1.5 19 2.1 2.5 - - -------------------------------------------------------------------------------- Running the WCT (without lines) 1.5 1.5 19 2.1 2.5 - - -------------------------------------------------------------------------------- Operation with flexitube 2.0 3.0 30 5.0 1.4 - - -------------------------------------------------------------------------------- Operation with wireline 3.0 4.0 44 8.5 1.4 - - -------------------------------------------------------------------------------- Overation with BAP 2.5 3.0 39 6.7 1.4 - - -------------------------------------------------------------------------------- NOTE: These data may be corrected/adjusted later and in common agreement, considering the Unit's operating performance...................... -65- CONTRACT 101.2.160.97-0 ...................................................... ATTACHMENT "VII" PETROBRAS' SAFETY RULES 1. Service Rule No. 46/71: o Safety Rules for Offshore Operations. 2. Service Order No. 01/72: o Operational Safety Rules - Continental Shelf. 3. Service Rule No. 41/72: o Electricity - Safety Rules 4. Service Order No. 01/76: o Industrial Safety Rules (general) o Industrial Safety Rules (Drilling) o Industrial Safety Rules (Production) 5. General Safety Manual: o Safety and Environmental Instruction for Contractors (E&P - BC). -66- CONTRACT 101.2.160.97-0....................................................... ATTACHMENT XIII EQUIPMENT TESTING PROGRAM In order to carry out the Unit's equipment testing in an easier and more agile manner, the CONTRACTOR is to submit to PETROBRAS, as quickly as required the following documents: 1. CERTIFICATES................................................................ a) Survey and Appraisal Report, updated and valid for the fiscal year regarding the Unit offered, issued by one of the entities: ABS, NOBLE & DENTON, DNV, LLOYDS or BUREAU VERITAS, and if the report is issued abroad, it will be translated into Portuguese by a sworn public translator and notarized in the Brazilian Consulate......................................................... b) Classification or Class Confirmation Certificate for hull and equipment, compatible with the proposal submitted (certified copy);............................................................ c) Report on claims from the classification societies mentioned in the Class Confirmation Certificate (in the event there are claims);.......................................................... NOTE: PETROBRAS will evaluate the above mentioned documents and will mention in what time limits eventual claims are to be settled, and at PETROBRAS' judgment, it can be at the time of the Unit's inspection or at mobilization after the contract is signed............. d) Freeboard Certificate;............................................ e) IOPP (International Oil Pollution Prevention) Certificate;........ f) IMO-MUDU-CODE Certificate - Mobile Offshore Drilling Unit - latest edition (unnecessary for Drill Ship);...................... g) Cargo Ship Safety Equipment Certificate;.......................... h) Cargo Ship Safety Construction;................................... NOTE: All documents required are to be within their period of validity........ 2. INDUSTRIAL SAFETY AND ENVIRONMENTAL CONTROL ........................... - Manuals and emergency plans in the Portuguese language............ -67- 3. STORAGE CAPACITY........................................................ - Complete floor plan of bulk movement system, specifying:.......... a) Exclusive lines to move cement;................................... b) Exclusive lines to move bentonite and baritine;................... c) Location and type of bulk line valves and their respective driving systems;.................................................. d) Pneumatic lines for cleaning and clearing bulk lines;............. e) Location of the manometers;....................................... f) Quantity, flow, operation pressure and location of compressors;... g) Quantity, flow, operating pressure and location of the air drying unit(s);......................................................... h) Schematic drawing of each silo with their respective aeration systems and points of connection with the bulk lines.............. 4. FLUID CIRCULATION AND PROCESSING SYSTEM................................. - Sketch of the system emphasizing pulsation dampers (suction and tamping), safety valves, feed pumps, position of the suction lines in relation to the suction sieves' tanks and filters........ - Floor plan of the drilling fluid feed and discharge lines showing the flexibility in relation to the sand traps and mud tanks....... - Floor plan of the degasser instalation showing the active tank, separate processed mud and gas discharge lines, emphasizing the connection point of this line with the gas discharge line......... - Floor plan of the mud tanks system, emphasizing the supply lines, gun lines, mixture funnel and centrifugal pumps interconnection lines............................................................. 5. WELLHEAD SAFETY EQUIPMENT SYSTEM ....................................... - Sketch of the BOP/LMRP, specifying lines, valves and measures/dimensions............................................... -68- - Floor plan of the kill and choke lines from the BOP to the choke manifold, specifying valves, connections, dampener chambers, anchorage points and interconnection with the other systems....................... - Floor plan of the atmospheric air separator....................... - Layout of the trip tank installation, giving the following information:...................................................... a) Capacity;................................................... b) Location;................................................... c) Sensitivity;................................................ d) Measuring system;........................................... e) Scale type;................................................. f) Driller's scale visualization conditions;................... g) Supply System for the above item............................ - Floor plan of the stand pipe manifold, specifying lines, valves, manometers and interconnections with the other systems........... - Inspection report on the riser, riser handling tool, and connectors, telescopic joint and flexible joint, according to the API RP 2P and RP 2Q standards, with update date not exceeding 1 year. NOTE: If the reports show the need of repair in some equipment, the service performance certificates will also be submitted........... - Biannual inspection certificate of the choke manifold, with the manufacturer's approval........................................... - Biannual inspection certificate of the BOP unit and driving system, with the manufacturer's approval.......................... - Biannual inspection certificate of the BOP, with the manufacturer's approval................................................. - Proof of technical ability of the well drilling and control personnel......................................................... -69- - To supply an internal maintenance and rust prevention program for the marine risers and kill and choke lines........................ 6. ENERGY GENERATION SYSTEM ............................................... - Unifilar diagram of the energy generation and distribution system. 7. STABILITY............................................................... - To submit the vessel's stability curve, updated in the proposal's conditions, in keeping with the environmental conditions.......... 8. DYNAMIC POSITIONING SYSTEM (including the moto-generators assembly, thrusters and propellers)............................................... - Schematic diagram of the dynamic positioning system............... - To submit the inspection and tests procedures to be carried out at every new location............................................. - To submit the tests and inspections procedures to be carried out at the end of each contract year.................................. 9. DRILLING STRING AND ACCESSORIES ........................................ - Inspection report on all equipment of the drilling and completion strings, subs and accessories (used equipment).................... - Purchase voucher of the drill and completion strings, subs and accessories (for new equipment)................................... 10. FISHING TOOLS AND ACCESSORIES.......................................... - Inspection report on all components of the fishing tools (used equipment) or purchase voucher (for new tools)................... 11. SUNDRY SYSTEMS ......................................................... - Winches load test certificate..................................... - Description of the compressed air system, emphasizing compressors, layout of lines, valves and interconnection with the other systems..................................................... -70- - Preventive Maintenance Plans with their respective timecharts..... - Ballast and sewer flowchart....................................... Proof will be needed for the existence on board and for the operating capacity of all equipment and accessories listed in Attachments C and D of the chartering and services rendering contracts............................... NOTE: Such equipment must be in places of easy access for survey........ A) RECEIPT TEST ........................................................... - Proof will be needed for the existence on board and for the operating capacity of all equipment and accessories listed in Attachments C and D of the chartering and services rendering contracts......................................................... NOTE: Such equipment must be in places of easy access for survey........ - The following systems, equipment and tools listed below will be checked, inspected and tested:.................................... 1) DRILL STRING, COMPONENTS AND ACCESSORIES.......................... - The CONTRACTOR will submit recent inspection reports, according to the specification API RP7G for the whole drill string and accessories such as, but not limited to: drill pipes, drill collars, HW, Subs, stabilizers, reamers, bumper subs, lift-sub, kelly, slips, elevators, fishing tools, etc, which prove the good conditions of the string and its accessories. The information from the reports and the general conditions of the string and its accessories will be checked by PETROBRAS by means of a sampling inspection. In the event of discrepancy between the data submitted by the CONTRACTOR and those checked by PETROBRAS, showing an inadequate condition of the string and its accessories, the CONTRACTOR will carry out another inspection, for its own account........................... NOTE 1: Any equipment refused by the inspection will be immediately repaired or replaced by the CONTRACTOR, for its own account....... -71- NOTE 2: For the string, components and new accessories, no inspection report will be required, documents proving that such equipment is new will be sufficient ........................................... NOTE 3: The CONTRACTOR's equipment will be stored and arranged so as to facilitate the inspection by sampling to be carried out by PETROBRAS.................................................... - The same procedure will be adopted for the telescopic joints and flexible joints................................................... 2) EXTRACTOR OF SOLIDS .............................................. The following will be examined:................................... - sieves....................................................... - dessander,................................................... - degasser - test suction and discharge........................ - centrifugue (if any)......................................... The operation and work pressure, as well as the existence of manometers, will be checked....................................... 3) MUD TANKS AND VALVES.............................................. Waterproofness, working of the agitators, mixture funnel and depth gun, besides the existence fixed marks to control the tanks volume will be checked................................................... 4) CENTRIFUGAL PUMPS................................................. The following will be checked:.................................... - working, vibration and noises;.............................. - Packing (leaks);............................................ - Work pressures.............................................. NOTE: Items 3 and 4 will be tested with sea water....................... 5) MUD LABORATORY AND TEST EQUIPMENT The existence on board and the adequacy to the requirements described in Attachments B and C to this contract will be checked. 6) DRILLING DERRICK ................................................. -72- Maintenance conditions (corrosion), fastening system and the conditions of the travelling block rails will be examined........ 7) CROWN BLOCK ...................................................... The pulleys will be examined as to profiles wear, alignments, clearance, buckling of the axles, lubrication, etc................ 8) MUD PUMOS ........................................................ The following will be carried out: .............................. - observation of working, vibrations, noises; ................ - pressure and maximum work flows tests for the liner used;... - safety valve working test; ................................. - checking of the suction and discharge pulsation dampeners;. - watertightness tests with nominal pressure of the mud pumps and of all manifold valves;................................. - watertightness tests with nominal pressure of all manifold valves of the stand pipe manifold and of the kelly hose;.... - random disassembling of the suction for visual inspection of the piston, sleeve, packing, valve and seat.............. 9) SWIVEL............................................................ The mandril, gooseneck, body, etc. will be checked and nominal pressure test with rotation will be performed............................................... 10) MOTION COMPENSATOR................................................ The piston alignment, lock bar, alignment in the rail, general conditions, leaks and chains will be checked...................... 11) RISER AND GUIDE LINES TENSIONERS.................................. The general conditions, leaks, pulleys and cables will be inspected......................................................... 12) RISER RECOIL SYSTEM/HANG OFF SYSTEM/ FILL-UP VALVE (if any) ...... -73- The systems' operation will be checked............................ 13) HIGH COMPRESSORS AND AIR RESERVOIRS............................... The general conditions, leaks, lines and system yield will be checked........................................................... 14) TOP DRIVE......................................................... Working tests (connection and disconnection of one or more sections of the DP's) will be carried out and the general conditions will be inspected...................................... 15) KELLY SPINNER..................................................... The general conditions, specially the rollers' wear, and working will be checked, and connection and disconnection operation of one or more DP's will be carried out.............................. 16) HOOK.............................................................. The general conditions and the locking system will be checked..... 17) TRAVELLING BLOCK.................................................. The pulleys wear, axles alignment, lubrication system, retraction system, etc., will be inspected................................... 18) DRAWWORKS......................................................... - The operation of the mechanical break system (brake bands), electromagnetic (distance between irons, voltage level and SCR feeder conditions), cooling system and clutches will be checked..................................................... - The operation of the cat-heads and height limitator with the assembly/disassembly of one or more command sections, will be checked............................................. 19) ROTARY TABLE...................................................... - The operation in high and low, brake system, tachometer and lubrication system will be checked.......................... 20) TRIP TANK ........................................................ - Capacity, installation site, sensitivity of the level indicator system, visualization condition and supply system will be inspected........................... -74- 21) HYDRAULIC TONGS AND PNEUMATIC SPIDER FOR CASING AND PNEUMATIC TONGS FOR DRILL PIPES ............................................ - Operation tests will be made and maintenance conditions will be checked............................................. 22) SAND-LINE OR WIRE-LINE SYSTEM .................................... - operation of the clutches and brake will be tested by lowering the photo-clinometer inside the drill string coinciding with the photo-clinometer overshot test (TOTCO) will be tested. Test to be made on location before the beginning of operations..................................... - The existence of an alignment guide for the sand-line cable in the drum will be checked................................. 23) CHOKE MANIFOLD.................................................... - All valves with low pressure (300 psi) and in high pressure (system's work pressure). Manometers, hydraulic choke operation, manual choke, remote control panel, etc. will be tested.......................... 24) UPPER AND LOWER KELLY COCK, INSIDE BOP AND SAFETY VALVE........... - Drivers will be tested and work pressure tests will be made. - The end connections of each element will be checked and tested with work pressure. The CONTRACTOR should have end seal plugs adequate for the test ........................... 25) KILL AND CHOKE LINE HOSES......................................... The end connections will be checked and tested with the system's work pressure. The CONTRACTOR should have end seal plugs adequate for the test...................................................... 26) DRILL INSTRUMENTATION SYSTEM ..................................... The following will be tested: .................................... - geolograph;................................................. - rotary table tachometer;.................................... -75- - manometers;................................................. - stroke counter; ............................................ - level control in the mud tanks;............................. - torque indicator............................................ 27) FLARE PIPE AND BOOMS.............................................. Their existence on board will be checked, analyzing the maintenance conditions of the lines by means of inspection, and the facilities for instalation of the production test equipment system............................................................ 28) BOP SYSTEM ....................................................... The following will be carried out: ............................... - pressure tests of the slide valves with low pressure and high pressure, compatible with the system................... - pressure tests of the annulars with low pressure and high pressure, compatible with the system........................ - complete function test in both POD's, through all panels.... - choke and kill valves tested with low pressure and high pressure, compatible with the system........................ - working of the shear ram valve will be checked with opening for examination of the blades conditions.................... - the opening and closing of all ram, annular and kill and choke valves chambers will be tested........................ - the hydraulic driving unit will be checked as to: fluid used, low fluid level alarm, low air pressure and low accumulators pressure, maintenance conditions, leaks and mixing systems.............................................. - the volumetric capacity of accumulators and the capacity of electric and pneumatic pumps of the hydraulic unit will be tested...................................................... -76- - the locking system of the ram valve(s) will be tested ...... - the SPM valves conditions will be checked by opening and inspecting one of them, chosen at random.................... - the locking /unlocking system of the H-4 hydraulic connectors will be tested................................... - the surface and bottom accumulators' pre-charge will be checked..................................................... - The operation of the following systems will be tested:...... o Driving back-up........................................ o emergency recovery .................................... o handling .............................................. 29) TRAVELLING TONGS, EZY-TORG, TORGUE SENSOR, SLIPS, ETC............. One or more sections of the drill collars and drill pipes will be assembled/disassembled to check the working of such equipment. The general maintenance conditions, chuck jaws and cables will be checked................. 30) BULK TRANSFER SYSTEM ............................................. The following will be carried out:................................ - the operation of the compressor will be checked, and noises, oil and air leaks, and maintenance state, filters and dehumidifier will be inspected ......................... - operation and watertightness of valves, lines and silos will be checked, looking for possible clogging.............. - transfer of cement from 1 silo to the daily silo (if any) and from this to the surge-tank will be made................ 31) EMERGENCY ENERGY GENERATION SYSTEM............................... - a black-out in the energy system generation system will be simulated to see if the emergency generator is automatically turned on ......... 32) MAIN MOTO-GENERATOR ASSEMBLY ..................................... -77- - The following will be carried out:.......................... - vibration, noises, insulation, leaks, maintenance, etc., will be checked. - generators input and output in the bus bar, synchronisms and load divisions will be tested............................... - load and voltage and frequency regulation will be tested.... 33) DESSALTER......................................................... - Operation and production capacity will be checked........... 34) CAT-LINES CRANES.................................................. The following will be carried out:................................ - operation of the winches and maintenance of the cables will be checked.................................................. - the elevation and rotation system, the operation with flying boom and pulley block and the operation of the boom height pawl will be checked... - the report of the last inspection carried out by the Unit's classification society in the winches will be examined...... 35) Dejecta Treatment Unit............................................ Its operation will be inspected................................... 36) TELECOMMUNICATION SYSTEM.......................................... Operating tests will be made in all radio equipment existing on board, including radio-beacon..................................... 37) OVERHEAD TRAVELLING CRANES ....................................... Their operation, and the maintenance conditions of cables and sliders will be examined.......................................... 38) DC/SCR MOTORS .................................................... The maintenance conditions and insulation, as well as the collectors and brushes will be examined........................... - SCR functional test ........................................ -78- 39) DIVERTER.......................................................... The following will be tested: .................................... - flow line wing valves;...................................... - diverters and insert packer lock;........................... - the control panel will be checked........................... 40) SAFETY EQUIPMENT................................................. Salvage .......................................................... Fireproof rigid vessels (capsules, whalers):...................... - lowering, motor, fuels, sprinklers, start; ................. - rations, garnishing, hatches, cleaning, fire extinguishers, signaling equipment ........................................ Inflatable rafts: - quantity, capacity, location, height in relation to the sea; - validity of the last inspection, means of access to the sea; ....................................................... - conditions of the cocoon ................................... Jackets: ......................................................... - quantity (sufficiency), location, protection, and maintenance................................................. Life-buoys:....................................................... - quantity (sufficiency), location, heaving-lines, lanterns, smudge pots................................................. Escape routes:.................................................... - vertical and horizontal signaling (indicative plates)....... - clearing, lighting (emergency)................................ Water Supply System for Fire Fighting ............................ Fire ring: ....................................................... - water system for the rig;................................... - sprinklers system;.......................................... - painting, corrosion, signaling, visual conditions;.......... -79- - valves, hydrants, guns...................................... Fire pumps:....................................................... - operation;.................................................. - motor, fuel, start, panel, tests............................ Fire Fighting Fixed Systems ...................................... - Foam system: chambers, tanks, guns, hydrants and carrier liquid ..................................................... - Cylinders; conditions, reloading, retesting (C02 or HALON, if any)..................................................... - Lines and diffusers: general conditions..................... - Automatic: feeding, panels, batteries, detectors, tests..... - Manual: commands, interconnections, tests................... - Alarms: interconnections.................................... Fire Extinguishers................................................ - water, carbon dioxyde, chemical powder (portable and carts); - distribution, location, general conditions;................. - revision, recharge, retest, control, meters, replacement.... Fire Posts........................................................ - hose, keys, sprinkler;...................................... - fiber boxes, general conditions, post identification;....... - visual signaling: sufficiency and general conditions........ Emergency Equipment .............................................. - autonomous breathing apparatuses, reserve bottle, breathable air fixed system, fire proximity clothing, lantern, ax, safety belt;................................................ - distribution, location, general conditions, inventory, maintenance and replacement................................. Communications and Alarms......................................... - telephone (internal, external): Operating capacity;......... -80- - radiophony: VHF. Operating capacity;........................ - portable transceptors: quantity; distribution, intrinsic safety;..................................................... - intercom: quantity, distribution, and horns audibility, interconnection with the rig, coding of sound alarm tones, amplifiers; ................................................ - visual signaling: sufficiency, general conditions;.......... - fire alarm, glass breaking type: batteries, bells, tests.... Emergency Lighting................................................ - charger, batteries and lanterns............................. Helideck.......................................................... - protection: guns, fire extinguishers, salvage equipment; ... - painting, protection screen, net, landing lights, safety warnings;................................................... - guest welcoming practices................................... Load Lifting ..................................................... - winches: general conditions, operation, signaling, maintenance;................................................ - manual and electric-tackles: general conditions, operation, signaling, maintenance;..................................... - material movement and storage areas........................ Training ......................................................... - abandonment, fire fighting, first aid and brigade........... Manuals and Plans................................................. - emergency; safety;.......................................... - disclosure, knowledge;...................................... - distribution, control, updating;............................ - tasks schedules for emergency and abandonment situations, including in Portuguese..................................... Order and Cleanliness ............................................ -81- - installation's general aspect;.............................. - particularly alarming places ............................... Smoke, Heat and Gas Detection System.............................. - test of hydrocarbons detection sensors...................... Ballast and Sewer System.......................................... - functional test ............................................ 41) Anchoring System.................................................. 42) Dynamic Positioning System........................................ 43) Propulsion System................................................. B) LOCATION MOVING TEST ................................................... To be defined between the CONTRACTOR and PETROBRAS................. C) BEGINNING OF CONTRACT YEAR TEST ........................................ To be defined between the CONTRACTOR and PETROBRAS................. -82- ATTACHMENT IX PROCEDURES IN THE EVENT OF FATAL ACCIDENTS 1. If, during the period of validity of the contract, a fatal accident occurs with a CONTRACTOR's employee, the CONTRACTOR should:............. 1.1. Notify the Inspection immediately, for the proper measures;............. 1.2. Take measures so that the employee's relatives be notified with the utmost urgency on the event, giving them the social support due; ....... 1.3. Formally establish an Investigation Commission, within 48 hours after the accident, in order to, in the maximum time limit of 15 days, identify the causes and recommend the measures deemed necessary to prevent similar accidents............................................... 2. The report should contain, at least, the following information regarding the accident:................................................. - description;...................................................... - exact location;................................................... - data regarding the injured persons;............................... - basic and immediate causes;....................................... - measures to be taken in order to prevent its repetition........... 3. The CONTRACTOR should guarantee the Commission enough authority and autonomy to carry out the investigations without any restrictions....... 4. A PETROBRAS' employee should participate in the Commission, appointed by the authority in charge of the operational office......... 5. After conclusion of the Commission's work, it will also behoove the CONTRACTOR, at the Inspection's request, to disclose the results of the report, so as to convey the experience from the accident to other contractor companies.................................................... -83- THESE BEING the precise terms and content of the aforementioned document, I hereby set my Hand and Seal on this Translation, performed on the 5th of February, 1998 in this City of Rio de Janeiro, Federative Republic of Brazil. /s/ MARCIA BARBOSA SERRA ____________________________________ Marcia Barbosa Serra Sworn Public Translator -84- EX-10.6(A) 44 EXHIBIT 10.6(A) Marcia Barbosa Serra Tradutora Publica Juramentada e Interprete Comercial Sworn Public Translator and Commercial Interpreter Rua Aperana, 38 apt. # 301 - Leblon - 22450-190 ISS: 1261003-00 - CIC: 606442227-00 Tel: 274-3844 I, the undersigned, Sworn Public Translator and Commercial Interpreter in and for this City and State of Rio de Janeiro, Federative Republic of Brazil, registered at the Commercial Board of Rio de Janeiro under Number 97, do hereby CERTIFY and ATTEST that a document in the Portuguese Language was submitted to me for translation into English, which I performed according to my Office, as follows: Translation No. 2658/98 (On paper with letter of PETROBRAS.)./. RIDER No. 1 TO CONTRACT 101.2.160.97-0 ENTERED INTO BETWEEN PETROLEO BRASILEIRO S/A AND THE COMPANY MARITIMA PETROLEO E ENGENHARIA LTDA./. PETROLEO BRASILEIRO S/A - PETROBRAS, a mixed economy, company., with head office at Av. Republica do Chile 65, in the City of Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil, enrolled in the General Taxpayers Registry of the Ministry of Finance under No. 33.000.167/0001-01,, henceforth called PETROBRAS, represented herein by the Executive Superintendent of Exploration and Production South-Southeast, Luiz Eduardo G. Carneiro, and the Company MARITIMA PETROLEO E ENGENHARIA LTDA., successor of MARITIMA NAVEGACAO E ENGENHARIA LTDA., with head office at Av. Almirante Barroso, 52, Group 3400, City of Rio de Janeiro, Federative Republic of Brazil, enrolled in the General Taxpayers Registry of the Ministry of Finance under No. 46.828.596/0001/13, henceforth called the CONTRACTOR, represented herein by its President, German Efromovich, have agreed to add a rider to contract 101.2.160.97-0, according to the following clauses and conditions:/. FIRST CLAUSE - OBJECT./. 1. The present Rider has as its object:/. 1.1. To change the corporate name, of the CONTRACTOR from MARITIMA NAVEGACAO E ENGENHARIA LTDA. to MARITIMA PETROLEO E ENGENHARIA LTDA./. 1.2. To include as INTERVENIENT PARTY, to the present contract, the company PETRODRILL SIX LTD., with head office in Omar Hodge Building, Wickhams Cay, Road Town, Tortola, Ilhas Virgens Britanicas, represented by its Director GERMAN EFROMOVICH./. 1.3. To change the redaction of item 16. 1 of the SIXTEENTH CLAUSE - INTERVENIENCE./. SECOND CLAUSE - CONTRACTOR'S OBLIGATIONS./. 2.1. The Redaction of items 3.12.1 and 3.21.2. change to:/. 3.12.1. "The minimum value of the civil liability insurance is of US$1,000,000.00 (one million dollars), per occurrence, during the period of validity of this CONTRACT and its eventual extension, which amount is to be converted into Brazilian currency on the date of signature of this instrument. THE INTERVENIENT PARTY (IS TO APPEAR AS CO-INSURED IN THIS INSURANCE POLICY)./. 3.21.2. "Exception is made to cases arising from kick, blow-out, surge or formation testing, in which the CONTRACTOR will be kept free and safe from, in the other cases of spillage of oil and other residues in the sea, the CONTRACTOR AND THE INTERVENIENT PARTY (WILL BE JOINTLY LIABLE, UP TO THE LIMIT OF US$500,000.00 (FIVE HUNDRED THOUSAND DOLLARS), PER EVENT AND ITS DEVELOPMENTS)./. THIRD CLAUSE - INTERVENIENCE./. 3.1. The redaction of item 16.1 is changed to:/. 16.1. "The INTERVENIENT PARTY signs the present CONTRACT, together with the CONTRACTOR, being jointly liable with it for all obligations arising from the present CONTRACT and its execution, including for losses./. FOURTH CLAUSE - RATIFICATION./. 4.1. The parties ratify the other conditions of the CONTRACT that were not changed by the present instrument./. And being thus agreed, the parties sign the present Rider in 2 (two) copies of the same tenor and fashion, together with the witnesses below. Rio de Janeiro, August 21, 1998./. (Signed:) (Illegible) - Luiz Eduardo G. Carneiro./. Executive Superintendent of Exploration and Production South-Southeast./. PETROBRAS - PETROLEO BRASILEIRO S.A./. (Signed:) (Illegible) - German Efromovich./. President - MARITIMA PETROLEO E ENGENHARIA LTDA./. (Signed:) (Illegible) - German Efromovich./. Director - PETRODRILL SIX LTD./. WITNESSES:/. (Signed:) Elaine Brabo - Name: ELAINE BRABO./. (Signed:) Andre de Mesquita Pinto - Name: ANDRE DE MESQUITA PINTO./. (Two initials appeared on the first page of the document.)/. - - -------------------------------------------------------------------------------- THESE BEING the precise terms and content of the aforementioned document, I hereby set my Hand and Seal on this Translation, performed on November 20, 1998 in this City of Rio de Janeiro, Federative Republic of Brazil. /s/ MARCIA BARBOSA SERRA ------------------------------ Marcia Barbosa Serra Sworn Public Translator EX-10.7 45 EXHIBIT 10.7 Marcia Barbosa Serra Tradutora Publica Juramentada e Interprete Comercial Sworn Public Translator and Commercial Interpreter Rua Aperana, 38 apt. # 301 - Leblon - 22450- ISS: 1261003-00 - CIC: 606442227-00 Tel: 274-3844 I, the undersigned, Sworn Public Translator and Commercial Interpreter in and for this City and State of Rio de Janeiro, Federative Republic of Brazil, registered at the Commercial Board of Rio de Janeiro under Number 97, do hereby CERTIFY and ATTEST that a document in the Portuguese language was submitted to me for translation into English, which I performed according to my Office, as follows: Translation No. 4031/98 (Original submitted for translation.)........................................ (On paper with letterhead of Petroleo Brasileiro S.A. - PETROBRAS.).......... LETTER OF AGREEMENT PETROLEO BRASILEIRO S.A. - PETROBRAS, a mixed economy company with head office at Av. Republica do Chile, 65, City of Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil enrolled in the General Taxpayers' Registry of the Ministry of Finance under No. 33.000.167/0001-01, represented herein by the Executive Superintendent of Exploration and Production South - Southeast, Engineer LUIZ EDUARDO G. CARNEIRO, henceforth called PETROBRAS, and the Company MARITIMA NAVEGACAO E ENGENHARIA LTDA., with head office at Avenida Almirante Barroso, no. 42, 34th floor, City of Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil, enrolled in the General Taxpayers' Registry of the Ministry of Finance under No. 46.828.596/0001-13, represented herein by its President, Mr. GERMAN EFROMOVICH, have agreed upon the present Letter of Agreement regarding contracts 101.2.159.97-2 (Chartering) and 101.2.160.97-0 (Rendering of Services) for the Unit Amethyst 6, henceforth called the Unit, as follows:................................................. Item New Redaction 1.1. (Charter.) The object of the present contract is the chartering to PETROBRAS, of the Unit, which, according to the CONTRACTOR, is to be built in a shipyard for the purpose of fulfilling this contract, in order to be used in the drilling and/or evaluation and/or completion and/or workover of oil and/or gas (vertical, directional and horizontal) wells, in the Brazilian continental shelf, down to a maximum depth of 5,000 (five thousand) meters, in a water depth down to 1,200 (one thousand twelve hundred) meters..................................... 3.17.-(Serv.) To submit to the contract Manager, up to 30 (thirty) consecutive days after its inception, as foreseen in item 2.2.1, the originals or certified copies of the insurance policies made as a result of this contract, containing all essencial data, such as insurers, time limits, period of validity, amounts insured, and coverage conditions, and with PETROBRAS appearing as co-insured, except in the civil liability insurance, of which it will participate as a third party ..................................................... 3.19.-(Chart.) To submit to the Manager of this contract, up to 30 (thirty) days after the beginning of the performance, as foreseen in item 2.2.1, the originals or certified copies of the certificates of the insurances made as a result of this contract, containing all essential data, such as insurers, time limits, periods of validity, amounts insured, and coverage conditions, and with PETROBRAS appearing as co-insured, except in the civil liability insurance, of which it will participate as a third party....................... 7.7-(Chart.) The CONTRACTOR agrees that, at PETROBRAS' exclusive option, the payments referring to the chartering object of the Present contract can be made through financing by third parties, provided the time limits, currency, amounts and place of payment set forth in the contract are complied with........ 12.5 - (Chart.) In the present contract, it will 13.5 - (Serv.) be considered as act of God the situation in which one of the parties is prevented from fulfilling its obligations, provided it proves that:............................................ o the non-fulfillment of the obligation was due to the existence of an impediment beyond its control;....................... o the party impeded could not, within its ability, overcome the impediment and its effects, in order to fulfill its contract obligation within the time limit set down, and............. o the impediment and its effects could not be avoided nor overcome................................................... As an illustration of act of God or force majeure, one may mention wars, strikes, submarine earthquakes, among other facts, which effects were not possible to avoid or prevent........................................................ And being thus agreed, the parties sign the present Letter of Agreement, in 2 (two) copies with the same tenor, with the witnesses below................................................ Rio de Janeiro January 15, 1998....................................... PETROLEO BRASILEIRO S/A - PETROBRAS................................... (Signed:) Luiz Eduardo G. Carneiro.................................... Luiz Eduardo G. Carneiro - Executive Superintendentof Exploration and Production South - Southeast........................................ MARITIMA NAVEGACAO E ENGENHARIA LTDA.................................. (Signed:) German Efromovich........................................... German Efromovich - President......................................... WITNESSES: ........................................................... (Signed:) Andre de Mesquita Pinto..................................... for/Claudio Fontes Nunes.............................................. (Signed:) Hamylton P. Padilha Jr...................................... Hamylton P. Padilha Jr...................................... (Two initials appeared on the first page of the document.)... .-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.- THESE BEING the precise terms and content of the aforementioned document, I hereby set my Hand and Seal on this Translation, performed on the 17th of February 1998 in this City of Rio de Janeiro, Federative Republic of Brazil. /s/ MARCIA BARBOSA SERRA ----------------------------------------- Marcia Barbosa Serra Sworn Public Translator EX-10.8 46 EXHIBIT 10.8 Marcia Barbosa Serra Tradutora Publica Juramentada e Interprete Comercial Sworn Public Translator and Commercial Interpreter Rua Aperana, 38 apt. # 301 - Leblon - 22450 ISS: 1261003-00 - CIC: 606442227-00 Tel: 274-3844 I, the undersigned, Sworn Public Translator and Commercial Interpreter in and for this City and State of Rio de Janeiro, Federative Republic of Brazil, registered at the Commercial Board of Rio de Janeiro under Number 97, do hereby CERTIFY and ATTEST that a document in the Portuguese Language was submitted to me for translation into English, which I performed according to my Office, as follows: Translation No. 4033/98 LETTER OF AGREEMENT (Original submitted for translation.)......................................... (On paper with letterhead of Petroleo Brasileiro S.A. - PETROBRAS.)........... PETROLEO BRASILEIRO S.A. - PETROBRAS, a mixed economy company with head office at Av. Republica do Chile, 65, City of Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil enrolled in the General Taxpayers' Registry of the Ministry of Finance under No. 33.000.167/0001-01, represented herein by the Executive Superintendent of Exploration and Production South - Southeast, Engineer LUIZ EDUARDO G. CARNEIRO, henceforth called PETROBRAS, and the Company MARITIMA PETROLEO E ENGENHARIA LTDA., with head office at Avenida Almirante Barroso, no. 42, 34th floor, City of Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil, enrolled in the General Taxpayers' Registry of the Ministry of Finance under No. 46.828.596/0001-13, represented herein by its President, Mr. GERMAN EFROMOVICH, henceforth called the CONTRACTOR, whereas:...................................................... 1. the parties have entered into two contracts, one under No. 101.2.159.97-1, the object of which is the chartering of the semi-submersible floating Unit, provided with dynamic positioning (DP), called AMETHYST 6, to operate in a water depth of up to 1,200m, and one under No. 101.2.160.97-0, for the rendering of drilling, completion, evaluation and workover services........................................ 2. the contract period set forth in subitem 2.2.3 of the second Clause of said contracts is of 6 (six) years, with forecast for extention of the time limit by means of an agreement..................................... THE PARTIES RESOLVE a) that the contract period of 6 (six) years, at its final term, will be automatically extended for 2 (two) more years;.......................... b) that the other clauses of said contract deeds remain unchanged.......... And being thus agreed, the parties sign the present Letter of Agreement, in 2 (two) copies with the same tenor, with the witnesses below.... Rio de Janeiro January 15, 1998............................................... (Signed:) Luiz Eduardo G. Carneiro........................................... Luiz Eduardo G. Carneiro - Executive Superintendent of Exploration and Production South - Southeast............................... PETROLEO BRASILEIRO S/A - PETROBRAS........................................... (Signed:) German Efromovich.................................................. German Efromovich - President................................................. WITNESSES: .................................................................. MARITIMA PETROLEO E ENGENHARIA LTDA........................................... (Signed:) Andre de Mesquita Pinto............................................ for/ Claudio Fontes Nunes..................................................... (Signed:) Hamylton P. Padilha Jr............................................. Hamylton P. Padilha Jr........................................................ (Two initials appeared on the first page of the document.).............. - - -------------------------------------------------------------------------------- THESE BEING the precise terms and content of the aforementioned document, I hereby set my Hand and Seal on this Translation, performed on the 17th of February, 1998 in this City of Rio de Janeiro, Federative Republic of Brazil. /s/ MARCIA BARBOSA SERRA _________________________________ Marcia Barbosa Serra Sworn Public Translator EX-10.9 47 EXHIBIT 10.9 MARCIA BARBOSA SERRA Tradutora Publica Juramentada e Interprete Comercial Sworn Public Translator and Commercial Interpreter Rua Aperana, 38 apt 301-Leblon-22450 ISS: 1261003-00-CIC: 606442227-00 Tel.: 274-3844 I, THE UNDERSIGNED, SWORN PUBLIC TRANSLATOR AND COMMERCIAL INTERPRETER IN AND FOR THIS CITY AND STATE OF RIO DE JANEIRO, FEDERATIVE REPUBLIC OF BRAZIL, REGISTERED AT THE COMMERCIAL BOARD OF RIO DE JANEIRO UNDER NUMBER 97, DO HEREBY CERTIFY AND ATTEST THAT A DOCUMENT IN THE PORTUGUESE LANGUAGE WAS SUBMITTED TO ME FOR TRANSLATION INTO ENGLISH, WHICH I PERFORMED ACCORDING TO MY OFFICE, AS FOLLOWS: TRANSLATION NO. 3973/97 (Xerox copy submitted for translation.)....................................... (On paper with letterhead of Petroleo Brasileiro S.A. - PETROBRAS.)........... CONTRACT NO. 101.2.100.97-8................................................... CHARTERING CONTRACT CHARTERING CONTRACT OF THE DYNAMIC POSITIONING FLOATING UNIT AMETHYST 5, ENTERED INTO BETWEEN PETROLEO BRASILEIRO S.A. - PETROBRAS AND THE COMPANY MARITIMA NAV. E ENG. LTDA.-- PETROLEO BRASILEIRO S.A. - PETROBRAS, a mixed economy company, organized and existing under Law No. 2.004, dated 10/03/53, with head office at Av. Republica do Chile, 65, City of Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil enrolled in the General Taxpayers Registry of the Ministry of Finance under No. 33.000.167/0001-01, represented herein by the Executive Superintendent of Exploration and Production (E & P), Engineer LUIZ EDUARDO G. CARNEIRO, hereforth called PETROBRAS, and the Company MARITIMA NAVEGACAO E ENGENHARIA LTDA., with head office at Avenida Almirante Barroso, No. 42, 34th floor, City of 1 Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil, enrolled in the General Taxpayers' Registry of the Ministry of Finance under No. 46.828.596/0001-13, represented herein by its President, Mr. GERMAN EFROMOVICH, have agreed upon the present CONTRACT for the chartering of the Dynamic Positioning Floating UNIT AMETHYST 5 and its accessories, described in Attachment I, henceforth called the UNIT, according to the authorization of PETROBRAS' Executive Board (MINUTES No. 4.116, Item No. 24, dated 09/18/97) the parties being bound to the terms of the Invitation to Bid No. 101.0.001.97-6, and subjected to the following Clauses and Conditions:................................................................... (End of the Qualification).................................................... 2 FIRST CLAUSE - OBJECT......................................................... 1.1. The object of the present CONTRACT is the chartering to PETROBRAS, of the UNIT, in order to be used in the evaluation and/or completion and/or workover of oil and/or gas (vertical, directional and horizontal) wells, in the Brazilian continental shelf, down to a maximum depth of 5,000 (five thousand) meters, in a water depth down to 1,200 (twelve hundred) meters................................................................ 1.1.1. It is included, as an object of the CONTRACT, the performance, by the CONTRACTOR, of any and all operations needed for the perfect fulfillment of the chartering object of the CONTRACT, such as, but not limited to, the performance and supervision of the positioning, ballasting and movement of the UNIT................................... 1.2. PETROBRAS may determine that the CONTRACTOR makes the reentry in wells already drilled, and it can install in the UNIT equipment and production facilities, the provisions of item 14.1 of this CONTRACT being complied with................................................... 1.3. The chartering object of the present CONTRACT is included in the Annual Activities Plans, under the following codes:.......................... B 12100 - Boring - Production Development............................ A 22100 - Boring - Exploratory Drilling.............................. B 13200 - Completion and Intervention for Evaluation - Production Development........................................................... A 24200 - Intervention for Evaluation - Exploratory Drilling......... C 15200 - Well Workover Operation..................................... (End of Clause)............................................................... 3 SECOND CLAUSE - PERIOD OF VALIDITY AND DURATION............................... 2.1. Period of Validity - The present CONTRACT binds the parties as of its signature, but the payments in foreign currency can only be made after the date of its registry in the Central Bank of Brazil.......... 2.2 Duration - The present CONTRACT will have a duration of 2,190 (twenty-one hundred and ninety) days.................................. 2.1.1. Beginning of the CONTRACT - The beginning of the CONTRACT will occur when the UNIT is released by PETROBRAS, through a written notice, to begin the operations, after the general equipment testing foreseen in item 3.1 of this CONTRACT is carried out.............................. 2.2.2 Automatic Extension - If at the end of the duration mentioned in 2.2, some operation is still being performed in a well, the duration of the present CONTRACT will be automatically extended, until the completion of the works in said well, considering as the final limit the UNIT's arrival in the port or sheltered waters chosen by common agreement between the parties and, also, in case there are still PETROBRAS' equipment aboard the UNIT, the completion of the withdrawal of such equipment will be considered as the final limit.... 2.2.3 This CONTRACT may be extended for successive periods of 365 (three hundred and sixty-five) running days, through a prior agreement between the parties, by means of an Addendum, the other contract conditions being complied with, and limited to a maximum contract period of 2,190 (twenty-one hundred and ninety) days.................. 2.3. Arrival in Brazil - The UNIT should arrive at the port or in sheltered waters, in Macae-RJ. The beginning of operations should occur up to the date of 07/06/99, the provision set forth in item 8.1 of this contract being complied with.................................. 4 2.3.1. At the port or in sheltered waters mentioned in 2.3, the customs and helideck inspections in the UNIT will be carried out, as well as the loading/unloading of the CONTRACTOR's and PETROBRAS' materials, and also the general equipment testing will begin, as foreseen in item 3.1 of this CONTRACT......................................................... (End of Clause)............................................................... 5 THIRD CLAUSE - CONTRACTOR'S OBLIGATIONS....................................... 3.1. Before the beginning of the CONTRACT, the CONTRACTOR will arrange for a general test of the operational conditions of all of the UNIT's equipment, as provided for in ATTACHMENT VIII, in the presence of PETROBRAS' Inspection. The occurrences found during the performance of the tests will be duly recorded in the Daily Drilling Certificate (ADP) signed by PETROBRAS' Inspection and by the CONTRACTOR's representative. The UNIT will be released to sail to the first location after proving the good operating conditions of the equipment which comprise the drill's main systems, that is, energy generation and distribution system, dynamic positioning system, industrial safety, liquid and bulk storage, fluid circulation and processing, safety and wellhead, column elevation, rotation and handling, columns, columns instrumentation, formation test equipment and communications system.................... 3.1.1. The tests referred to in 3.1 will be made in a period estimated in 3 (three) days, after which the UNIT will be released to sail to begin the operations, provided there is nothing pending in the rig's main systems, as set forth in item 3.1..................................... 3.1.1.1.In the event the tests last for a period exceeding 3 (three) days, for reasons ascribed to PETROBRAS, the rate foreseen in REF 104 (WAITING RATE) of ATTACHMENT II, will be due, applied as of the fourth day of tests, until the UNIT is released. The periods spent with equipment repair will not be calculated for the purposes of counting such duration, and no fees will be due during such periods. 3.1.2. PETROBRAS may opt for the partial or total performance of the receipt tests, in sheltered waters, in the deepest water depth set forth in the Contract, or still in the first location.......................... 7 3.2. To maintain, during the contract period, the UNIT, its fittings, as well as accessories and replacement elements and personnel in perfect working conditions in a working regime of 24 (twenty-four) hours a day, 7 (seven) days a week, and to guarantee that the UNIT is calculated to carry out the activities object of this contract........ 3.2.1. To strictly comply with the recommendations of the equipment manufacturers. carrying out the maintenance foreseen in their operation manuals, which will be provided for in the UNIT's preventive mainternance plan.......................................... 3.3. Technical Evaluation Award and Certificates - To submit copies of the Registry, Survey, Classification and Technical Survey and Evaluation Award Certificates of the UNIT and its fittings, signed by a qualified and well-known organization, not related with the CONTRACTOR notarized in the Brazilian Consulate and translated by a Sworn Public Translator, if issued abroad, and which should contain:.. 3.3.1. Description o the UNIT and accessories;............................... 3.3.2. Operating conditions and physical conditions of the UNIT;........... 3.3.3. Light displacement of the UNIT (Light weight);........................ 3.3.4. Year of construction;................................................. 3.3.5. Year of reconditioning, listing spare parts and parts replaced;....... 3.3.6. Technological differences between the UNIT surveyed and a more modern UNIT of the same kind;................................................ 3.3.7. Forecast of the average useful life of the good used and its new analog;............................................................... 3.3.8. Market value, of reproduction and replacement;........................ 3.3.9. Net weight of the equipment installed in the UNIT;.................... 8 3.3.10. Technical catalogues of the equipment installed in the UNIT........... 3.4. To regularize, before the proper authorities, the entry and stay of the UNIT in Brazil, arranging, at its expense, for the Release, Surveys, Registries and Temporary Admission........................... 3.4.1. Regarding new equipment and equipment without use, the "Technical Survey and Evaluation Award" referred to in item 3.3 may be replaced by factory catalogues or purchase invoices, with description, year of manufacture, useful life forecast and value of each equipment;..................... 3.5. Safety, Sanitation and Labor Medicine - To carry out its operations in strict compliance with the international safety, sanitation and labor medicine standards, being liable for the violations committed. To supply, for its account, and maintain in perfect operating conditions, the safety equipment in accordance with the safety plan ("SAFETY PLAN") approved by the Administration of the VESSEL's Country of Registry, and with the good completion/evaluation/workover practice.............................................................. 3.5.1. The UNIT will comply with the IMO - MODU - CODE (Mobile Offshore Drilling Unit) standard...................................... 3.6. Sea Operations - To manage the UNIT in strict compliance with the laws, standards, regulations and administrative rules, as well as the instructions issued by the Shipping Office or by other proper authorities, specially those regarding the spillage of oil and other residues from the UNIT into the sea, being liable, as a result, for any charges arising from the violation of such laws, standards, regulations, administrative rules and instructions, the 9 limit established in subitem 3.6.2. being complied with, and with the exception of the cases provided for in item 3.20 of this CONTRACT..... 3.6.1. To plan and carry out operations aiming at preventing and fighting oil and gas blow outs, fires, or other accidents, complying with the provision of item 2.4 of ATTACHMENT II to this CONTRACT. Although the CONTRACTOR is considered fully responsible for such operations, it is obliged to discuss the methods to be adopted with PETROBRAS, in order to find the best operating solution...................................... 3.6.2. Exception is made of the events arising from kick, blow out, surgings, or formation testing, which the CONTRACTOR will be kept free and safe from. In the other cases of spillage of petroleum, oils and other residues into the sea, the CONTRACTOR will be liable up to the limit of US$500000.00 (five hundred thousand dollars), per event and its deployments.......................................................... 3.7. To comply with all laws, standards, decrees, regulations, administrative rules and instructions in force in Brazil, that govern the exploration and research in the Brazilian submarine shelf, including those regarding environmental protection............................................. 3.8. Replacement and Repairs - The replacement cost for equipment, materials and accessories needed for the UNIT's perfect operation, as well as the expenses with repairs of any kind, will run for the CONTRACTOR's account............................................................... 3.8.1. The above mentioned repair cost covers any and all expenses, including taxes and duties due from the moment of purchase of the equipment, spare parts and materials, to their installation and placement in the UNIT, with exception of expenses with transportation between the support vessels' port of operation and the UNIT............................... 10 3.8.2. Regarding the Temporary Admission of the UNIT, as well as the import of the equipment, materials and accessories mentioned in item 3.8, the CONTRACTOR will comply with the provisions of the Internal Revenue's Rulling Instruction No. 136/87............................. 3.9. At the end of this CONTRACT or of its extention, to bear the charges arising from the return of the UNIT, its fittings, accessories, equipment, spare parts, and materials for replacement or repair, such charges including, but not limited to, the preparation, packing, shipping, transportation, unloading, stay, freight, clearance, storage, wharfage, stowage, insurance, and other similar expenses............. 3.10. To maintain, at its expenses, besides the UNIT, the crew adequate and sufficient for its operation, being also obliged to comply with the pertinent legal provisions, issued by Brazilian authorities and by those of the CONTRACTOR's country of origin................................. 3.11. To bear all expenses with displacement of the crew mentioned in item 3.10, including transportation from abroad to the port or airport of Macae-RJ, as indicated by PETROBRAS, and the return to the place of origin, and any and all expenses with the crew's stay in Brazil, medical and hospital expenses, meals, passports, and similar expenses......... 3.11.1 To maintain PETROBRAS safe from any complaints, claims from its employees, representatives, as a result of the present contract. 3.12. To promote, without charges to PETROBRAS, the replacement and immediate withdrawal of any crew member that may be requested in writing by PETROBRAS at any time, due to bad behavior, technical deficiency, or health conditions.................................................... 11 3.13. To maintain a special identification for the crew, so as to distinguish it from PETROBRAS' and other companies' personnel who may eventually work in other services related to the object of the present CONTRACT.. 3.14. Radio Communications - To supply, operate and maintain VHR, SSB and Radio-Beacon and portable Transceptor equipment, adequate for PETROBRAS' land communications system, for the guidance of helicopters, so as to comply with the Radio Communications Plan supplied by PETROBRAS, appearing in ATTACHMENT I............................................. 3.14.1. Other Radio Communications systems deemed necessary to support the CONTRACTOR's operations, both in the UNIT and on land, will be supplied, installed and operated by it. The CONTRACTOR will be responsible for the obtainment of the licenses and frequencies to operate such equipment.. 3.14.2. The CONTRACTOR will maintain, at its expenses, radio operators, fluent in spoken Portuguese, who will remain 24 (twenty-four) hours a day operating the equipment installed in the UNIT, whether they belong to PETROBRAS or to the CONTRACTOR........................................ 3.14.3. Immediately after the UNIT's arrival, the CONTRACTOR will arrange with the proper authorities for the issuing of the "Terms of Survey" regarding the radio station existing on board........................ 3.14.4. The CONTRACTOR will bear any expenses related to the telecommunications equipment and services, with exception of those provided for in item 4.7 of this CONTRACT..................................................... 3.15. Insurances - To provide for the contracting, at its expenses, of the insurances necessary to fulfill this CONTRACT and the Brazilian Laws, intended for the coverage of......................................... 12 the Unit and all of its accessories, even when they are being transported under PETROBRAS' responsibility, as well as the Civil Liability insurance for damages and losses caused to third parties............................................................... 3.15.1. MARITIMA NAVEGACAO E ENGENHARIA LTDA. will appear as co-insured in the Civil Liability insurance policy which it makes, by force of item 3.12 of the SERVICES RENDERING CONTRACT entered into with and PETROBRAS.... 3.15.2. During the period of validity of this CONTRACT, the CONTRACTOR should maintain insurance coverage for the UNIT and all of its accessories, according to the conditions set forth in Coverage No. 3 of the Hull Insurance Rate in Brazil. (Note: This reading of subitem 3.15.2 for drill ships will be adopted.)........................................ 3.15.2. During the period of validity of this Contract, the CONTRACTOR should maintain insurance coverage for the UNIT and all of its accessories, according to the conditions of the LONDON STANDARD DRILLING BARGE FORM - ALL RISK, or similar. ........................................ 3.15.3. The redress due to the CONTRACTOR's Civil Liability arising from damages provided for in this Clause, is not limited to the amount set forth in subitem 3.12.1 of the SERVICES RENDERING CONTRACT entered into between the parties, for the Civil Liability Insurance against Third Parties, and will be ruled by the pertinent Brazilian laws..................... 3.16. Franchises that may be established for the insurances mentioned in item 3.15 and in its subitems, as well as the onus arising from the insurers' requirements and/or recommendations will fully run for the CONTRACTOR's account.................................................. 13 3.17. To keep PETROBRAS free and safe from any and all indemnity claim for damages and/or losses of any kind which the CONTRACTOR may have sustained as a result of this CONTRACT, whether or not it has made adequate and sufficient insurance for such circumstances............. 3.17.1. PETROBRAS will be equally kept free and safe from any and all indemnity claim for damages and/or losses of any kind which the CONTRACTOR may have caused to third parties by its duly proven action or omission, arising from this CONTRACT, whether or not it has made adequate and sufficient insurance for such circumstances.......................... 3.17.2. In return, the CONTRACTOR will be kept free and safe from any and all indemnity claim for damages and/or losses of any kind, which PETROBRAS may have sustained from third parties, or has caused to third parties by its duly proven action or omission, as a result of this CONTRACT, whether or not it has made adequate and sufficient insurance for such circumstances........................................................ 3.18. The CONTRACTOR waives for itself and will require from its Insurers and/or Subcontractors, in any and all insurance made as a result of this CONTRACT, the inclusion, in each policy contracted, the provision assuring the waiver of any right of subrogation against PETROBRAS.... 3.19. To submit to E&P/GETRAT, up to 30 (thirty) days after the beginning of the performance, as provided for in item 2.2.1, the originals of the certificates of the insurances made as a result of this CONTRACT, containing all essential data, such as insurers, time limits, periods of validity, amounts insured, and coverage conditions, and with 14 PETROBRAS appearing as co-insured, except in the civil liability insurance, of which it will participate as a third party.... 3.19.1. The certificates mentioned in item 3.19 will contain a provision that the insurances mentioned cannot be amended and/or canceled without PETROBRAS' prior authorization........................................ 3.20. Losses and Damages - The CONTRACTOR will be liable for losses of and damages to its own equipment and material, and to those which it and its agents may cause to PETROBRAS or to third parties, as a result of its duly proven action or omission, in the following cases:............... 3.20.1 In the event of losses of or damages to equipment and/or materials belonging to PETROBRAS and/or third parties, which are aboard the UNIT, or during the movement between the UNIT, and the support vessels, the CONTRACTOR's liability will be limited to the replacement or repair of the equipment so lost or damaged due to the CONTRACTOR's or its employees' duly proven fault. However, the CONTRACTOR will not be liable and will be kept free and safe from in the event of damages to reservoirs, indirect damages or loss of profit of PETROBRAS, losses and damages arising from pollution coming from the well, resulting from kick and/or blow-out;..................................................... 3.20.2. In case of losses and damages caused to the well, arising from the events mentioned in subitem 2.1.5 of ATTACHMENT II, the CONTRACTOR will reimburse PETROBRAS the payments it comes to make to third parties referring to cementing, logging, or other services related to the object of the present CONTRACT, as well as to materials (cement, 15 casing, bits, completion fluid materials). In the event PETROBRAS opts for the definitive abandonment of the damaged well, the CONTRACTOR will reimburse the expenses made by PETROBRAS to drill that well................................................................. 3.20.3. In the cases mentioned in subitems 3.20.1 and 3.20.2. The limit for the CONTRACTOR's liability is of US$500,000.00 per event and its deployments.......................................................... 3.21. Secrecy - To maintain complete secrecy on the data and information supplied by PETROBRAS, as well as on all of the results and analyses arising from the operations carried out according to the present CONTRACT............................................................. 3.21.1. All data, information and other documents, of any kind, related to the fulfillment of the present Contract, will be the exclusive property of PETROBRAS............................................................ 3.21.2. The CONTRACTOR and its crew cannot disclose or supply to third parties any materials or information obtained or developed as a result of this CONTRACT, unless expressly authorized by PETROBRAS................... 3.21.3. The provision of this item 3.21 is a standing obligation, valid even after the termination, in any fashion, of the present CONTRACT....... 3.22. UNIT'S HELIDECK...................................................... 3.22.1. To arrange for the release of the UNIT's helideck by the proper Brazilian authorities (Ports and Coast Authority, Civil Aviation Department of the Ministry of Aeronautics, Internal Revenue, Maritime Police and Customs), bearing all expenses arising therefrom.......... 3.22.2. The Unit's helideck shall be approed for operations with S-61 type helicopters according to chapter 24 of the Administrative Directive 005 from DPC - Standards and Procedures for Sea Navigation, dated 01/15/97, which deals with the Construction, Installation, Approval 16 and Changes of Helideck and Operations of Helicopters in Offshore Platforms and Merchant Ships.......................................... 3.23. The CONTRACTOR should adopt procedures that minimize the consumption of fuel and industrial water without prejudice for the operations........ 3.24. The CONTRACTOR should provide installations in the UNIT for the training and leisure of all personnel abroad, and which should contain at least the following:....................................... a) Parlor games room;................................................ b) TV room capable of tuning 5 (five) main channels available in Brazil, in any location;.......................................... c) Movie theater with VCR;........................................... d) Two other TV sets to be installed in cabins indicated by PETROBRAS' Inspection............................................. 17 3.25. Besides sea water, the CONTRACTOR will judiciously use industrial water to clean the UNIT, in order to avoid high consumption and always giving priority for its use in the completion fluid.......................... 3.26. All documents between the CONTRACTOR and PETROBRAS, when requested by PETROBRAS, will be written and submitted in Portuguese................ 3.27. The CONTRACTOR undertakes to maintain throughout the fulfillmetn of the CONTRACT, all conditions required in the bid stage.................... 3.28. To redo any and all operation refused by the INSPECTION, without any charge to PETROBRAS, as a result of irregular performance, bearing all costs involved........................................................ 3.30. (sic) To maintain a representative accredited and accepted by PETROBRAS in the UNIT or in a place previously designated by PETROBRAS, to represent the CONTRACTOR in the fulfillment of the CONTRACT.............................................................. 3.31. To comply with the requests contained in the Operation(s) Authorization(s) issued by PETROBRAS.................................. 3.32. To allow, after negotiations between the contracting parties, the provisional installation in the charatered Vessel, of complementary equipment such as, but not limited to: pipes or reises in catenary by the J-lay method, or similar, submarine manifolds, provided they do not jeopardize the Vessel's safety and are in accordance with the rules of the Classification Society................................... (End of Clause)............................................................... 18 FOURTH CLAUSE - PETROBRAS' OBLIGATIONS........................................ 4.1. To adopt the measures necessary for the request to register this CONTRACT in the Central Bank of Brazil, soon after the proper documents are received, and the submittal of which is the CONTRACTOR's responsibility........................................... 4.2. To make, monthly, the payments due to the CONTRACTOR as a result of the present CONTRACT, based on the ATTACHMENT II and ATTACHMENT III and on the conditions set forth in Clauses Sixth: Measurement, and Seventh: Form or Payment, the other ATTACHMENTS, Clauses and Conditions of this CONTRACT being complied with......................................... 4.3. At its exclusive judgment, and without any co-responsibility, PETROBRAS may cooperate with the CONTRACTOR, assisting it before the proper authorities, referring to processes that are going through the procedural stages in the respective Agencies, regarding the UNIT, materials and/or equipment pertaining to the object of this CONTRACT. Such cooperation, howver, will not lessen the CONTRACTOR's responsibility for the obtainment of the documents and/or benefits that may be the object of the respective proceedings.. 4.4. PETROBRAS will reimburse the CONTRACTOR, by means of submittal, by the latter, of the corroborative documents, in the acquisition currency, the cost of replacement or repair of the commands and other components of the production string and of the fishing string belonging to the CONTRACTOR, which are lost or damaged, by accident not due to the normal wear nor to the CONTRACTOR's duly proven action or omission, with the deduction of a 25% depreciation per contract year, with a 20% residual 19 value, applying, for its calculation, the least indemnity cost (Ci) obtained by means of the following formulae:- Ci = Vr.y (1 - 0.02083n), or Ci + Cr, where:......................... Ci - indemnity cost;................................................. Cr - repair cost;.................................................... Vr - replacement value;.............................................. n - number of months between the date of the beginning of the CONTRACT and the date of the loss (the fraction of a month is counted as a whole month);........................................ y - 1 (for new strings), and 0.9 (for "Premium" strings)............ 4.4.1. In the event there is a renewal of the string or of part of the elements that comprise the production string (pipes, commands and other components), during the period of validity of the CONTRACT, the depreciation period to be considered - the "n" of the formula, will be the one comprised between the purchase date and the date when the element or the string was lost........................................ 4.4.2. PETROBRAS may, at its discretion and expense, carry out inspections in the drill string, its components and accessories, the CONTRACTOR being obliged to repair or replace, for its account, the equipment rejected.............................................................. 4.5. Transportation:....................................................... 4.5.1. PETROBRAS will provide transportation for all crew members of the UNIT from the port or airport, as indicated by PETROBRAS in the beginning of this CONTRACT, and vice-versa. At its exclusive discretion, the transportation to be provided will be by helicopter or vessel............................................................. 20 4.5.2. PETROBRAS will provide transportation of the material and equipment object of this CONTRACT, from the port or airport designated, to the UNIT and vice-versa................................................... 4.5.3. In any circumstances foreseen in items 4.5.1 and 4.5.2, the granting of insurance coverage will not be PETROBRAS' competence, and the CONTRACTOR waives immediately,, for itself and for its insurers, any return action against PETROBRAS or third parties at its service, as a result of the transportation provided................................. 4.5.4. In the cases when there is need to program exclusive air transportation, for the UNIT's inspection by the Navy and/or the SHIPPING OFFICE, the costs arising therefrom will be charged to the CONTRACTOR............. 4.5.5. PETROBRAS may provide air or sea transportation for the CONTRACTOR's materials, industrial or fresh water and fuel before the beginning of the CONTRACT, as defined in item 2.2.1. The costs arising therefrom will be reimbursed by the CONTRACTOR to PETROBRAS at the time the first invoice is issued............................................... 4.5.6. PETROBRAS will provide tugs and support vessels for the UNIT, from the location where the equipment general testing is performed, to the first location, between locations 21 and from the last location to the Brazilian port or sheltered waters closest thereto, which will be chosen in common agreement by the parties............................. 4.5.6.1.PETROBRAS will supply support vessels for the positioning of the UNIT in the locations to be drilled under this CONTRACT....................... 4.5.7 PETROBRAS may provide tugs and/or support vessels to load and onload materials and to handle anchors, in a location to be defined between the parties, in the cases of inspection and/or dockages, including those arising from act of God or force majeure, as defined in the Twelfth Clause of this Contract. The costs arising therefrom will be reimbursed by the CONTRACTOR to PETROBRAS............................. 4.6 Fuel and Water - To supply, for its account, all fuel and water necessary for the operations, complying with the provision set forth in subitems 4.6.1 and 4.6.2, from the beginning of the CONTRACT, until its termination, as defined in subitems 2.2.1 and 2.2.2, respectively.......................................................... 4.6.1. The supply of water mentioned in item 4.6 includes also the industrial water intended for the cleaning of the UNIT, the provision set forth in item 3.23 being complied with............................ 4.6.2. PETROBRAS will supply, for its account, the fuel necessary for the UNIT's equipment, up to the limit of 12.775m3/year. Over this limit the onus will run for the CONTRACTOR's account........................ 4.6.2.1.PETROBRAS will carry out the measurement of the fuel existing aboard the UNIT, at the beginning of the CONTRACT, at the end of each contract year, and at the end of the CONTRACT, 22 when the average consumption will be calculated. The volume exceeding the established limit will be charged to the CONTRACTOR at the time of the measurement, at the consumer's sales price, on the date PETROBRAS issues the Debt Note, in force in the City of Rio de Janeiro-RJ, duly adjusted in keeping with the different ICMS aliquots in force in the State of Rio de Janeiro and in the State where the UNIT is operating............................................................ 4.6.3. During the UNIT's dockage periods, all fuel consumed will run for the CONTRACTOR's full responsibility and cost, from the interruption of the operation until the return to the same previous situation. The fuel cost during that period will be charged to the CONTRACTOR, after the consumption calculation, and at a price to be defined according to the criterium mentioned in 4.6.2.1................................. 4.7. To maintain, besides the CONTRACTOR's Radio communications equipment, aboard the UNIT, equipment exclusively for PETROBRAS' communications with its land bases................................................... 4.8 To notify the CONTRACTOR, in writing, on the imposition of eventual fines................................................................. 23 4.9. To issue the Measurement Bulletin (MB), as set forth in the Sixth Clause of this Contract............................................... 4.10. To issue the Operations Authorization(s) with all the information necessary for their performance, such as: location, time limit, amount, scope, and beginning and end dates............................ 4.11 PETROBRAS will reimburse the CONTRACTOR, by means of submittal by the latter, of corroborative documents, in the acquisition currency, the cost of replacementof VX rings, VX with Hycar and VX with lead inserts for the BOP and ANM connections with wellheads and filter elements, as provided for in items 24, 25 and 34 of ATTACHMENT IV - MUTUAL OBLIGATIONS of the Chartering Contract......................... (End of Clause)............................................................... 24 FIFTH CLAUSE - PRICES AND VALUE............................................... 5.1. For the chartering of the UNIT and its accessories, PETROBRAS will pay the rates set forth in ATTACHMENT II and ATTACHMENT III to this CONTRACT, under the conditions provided for in Clauses Sixth - Measurement, and Seventh: Form of Payment............................ 5.1.1. The contract prices include all specified tarriffs, supervision, administration, taxes, fiscal emoluments and all expenses that fall directly or indirectly upon the chartering, including profit, needed for its perfect fulfillment, until the end of the contract, no price revisions claims being therefore valid............................... 5.2. The total estimated value of this present contract is of US$223,719,698.40, equivalent to R$238,485,198.49, converted at the exchange rate of R$1,0660/US$1,00, referring to the following charges:............................................................. 5.2.1. Chartering of the UNIT:US$217,239,765.00;............................. 5.2.2. Mobilization: US$6,479,933.40;....................................... 5.3. PETROBRAS does not undertake to make the payment of the total estimated in item 5.2, but of the amount corresponding to the chartering effectively occurred and accepted by PETROBRAS............. 5.4 In the event the UNIT offered begins the Contract before the time period of 630 (six hundred and thirty) days granted according to item 2.3 of the present Contract, PETROBRAS will grant a bonus for anticipation, varying linearly from zero, for zero day of anticipation, up to a maximum value of 30% (thirty percent) of the value of the 25 mobilization rate, for an anticipation greater than or equal to 180 (one hundre and eighty) days. 5.5 In the event the UNIT suffers a delay regarding the time limit granted in item 2.3 of the present Contract, the CONTRACTOR will have its mobilization rate reduced in up to 30% (thirty percent), for a delay greater than or equal to 90 (ninety) days, which will vary linearly up to zero, for zero day of delay. 5.6 In the event the UNIT suffers a delay exceeding 90 (ninety) days, counted in relation to the time limit granted in item 2.3 of the present Contract, besides the maximum reduction of 30% (thirty percent) in the mobilization rate, the CONTRACTOR will be subjected to the imposition of fines according to items 8.1 and 9.1 of the Chartering and Services Contracts, as of the 91st (ninety-first) day until the 180th (one hundred and eighthieth) day of delay............. 5.7. The financial resources necessary for the payment of the chartering object of the present CONTRACT are duly equated, and specifically assured in the current year's budget and provided for in the following ones, so as to cover the total contract period.............. (End of Clause)............................................................... 26 SIXTH CLAUSE - MEASUREMENT OF THE CHARTERING -- 6.1. Periodicity of the measurement of the chartering and determination of the reimbursable expenses............................................. 6.1.1. For the chartering, the measurement will be monthly, according to the procedures mentioned below, with the consequent issuing of the respective Measurement Bulletins (MB):................................ a) The initial measurement of the chartering will be made between the date of the beginning of this CONTRACT and the last day of the calendar month;............................................... a.1.) MOBILIZATION measurement: The MOBILIZATION OF THE UNIT, REF 106 of ATTACHMENT III to this CONTRACT, will have its measurement made after the release of the UNIT, by PETROBRAS to sail to the first location, after the general equipment testing forseen in item 3.1 of the CONTRACT is carried out................................................. b) The intermediate measurements of the chartering, corresponding to a given month of the order "m", cover the period between day 01 of the month "m" and the last day of the calendar month of the order "m";........................................................ c) The final measurement of the chartering will be made between day 01 of the month "m" and this CONTRACT's termination date............. 6.1.2. The reimbursable expenses, if forseen in the CONTRACT, will be determined on any day of the month, according to the vouchers submitted to and accepted by PETROBRAS, and more than one determination can be made in the same period covered by the measurement........................................................... 27 6.1.2.1.The results found will be submitted to the CONTRACTOR on the 5th (fifth) working day, as of the submittal of said vouchers, by means of a Reimbursement Document (RD), which will be signed by the Manager of this CONTRACT, for invoicing purposes................................. 6.1.2.2.The reimbursable expenses and the deductions, if forseen in the CONTRACT, will be severally made evident in the Reimbursement Documents (RD)......... 6.2. Issuing of the Measurement Bulletins (MB)............................. 6.2.1. PETROBRAS, through the Manager of this CONTRACT, at the end of each period as mentioned in the letters of subitem 6.1.1 of this Clause, will carry out the measurement of the chartering, gathering the results found in the Measurement Bulletin (MB), for the signature of the Manager of this CONTRACT and of the CONTRACTOR, complying with the following:........................................................ a) For the initial, intermediate and final measurements ending on the last day of a given month of the order "m", the CONTRACTOR will receive one of the copies of the MB up to the 5th (fifth) working day of the subsequent month, so that it may submit the respective collection documents, as provided for in subitem 6.3.1 of this Clause;................................................... b) For the final measurement, when the termination of the CONTRACT does not occur in the last day of the month, the CONTRACTOR will receive one of the copies of the MB, up to the 5th (fifth) working day after the termination of the CONTRACT, so that it may submit the respective collection documents, as provided for in subitem 6.3.1 of this Clause...................................... 28 c) For each measurement period of the chartering, only 1 (one) collection document may be issued, being understood that collection documents with partial values regarding said period will not be taken into account for payment purposes;.............. d) The portions regarding the basic values and the deductions are to be made evident in the Measurement Bulletins (MB), if provided for in the Contract;.............................................. 6.3. Time for the submittal of collection documents........................ 6.3.1. The CONTRACTOR will submit the respective collection documents to PETROBRAS' Financial Department, as mentioned in item 7.1 of this CONTRACT, in the following conditions:................................ 29 TYPE OF MEASUREMENT OCCASION FOR THE SUBMITTAL OF MEASUREMENT DOCUMENT COLLECTION DOCUMENTS - - -------------------------------------------------------------------------------- INITIAL MB Up to the 8th working day following INTERMEDIATE the last day of the chartering AND FINAL performance period, and PETROBRAS will make the payment on the 30th consecutive day, as of the final date of the measured period, the provision in subitem 6.3.1.1 being complied with. - - -------------------------------------------------------------------------------- MOBILIZATION MB After the receipt of the MB, and OF THE UNIT PETROBRAS will make the payment on the 30th consecutive day, as of the date the collection document is submitted. - - -------------------------------------------------------------------------------- DETERMINATION RD In the first working day afer the RD OF is issued, and the payment will be REIMBURSABLE made within 30 (thirty) days, as of EXPENSES the date of its submittal. - - -------------------------------------------------------------------------------- 30 6.3.1.1.The payments due by virtue of this CONTRACT, referring to the chartering, will always occur on the 30th day after the end of the measured period, covered by the MB's, or on the first working day subsequent thereto, provided the CONTRACTOR complies with the time limits for the submittal of the Collection Documents set forth herein. In the event of non-compliance, by the CONTRACTOR, with said submittal time limits, the payments will be postponed for the number of days equal to the delay in the delivery of such documents........................ 6.4. Measurements follow-up................................................ 6.4.1. The CONTRACTOR undertakes to follow-up the measurements and the determinations carried out by PETROBRAS, offering, at that time, the impugnation or considerations it deems necessary, which will be submitted for PETROBRAS' appraisal and decision....................... 6.4.2. The CONTRACTOR's signature by its representative before PETROBRAS will imply in the acknowledgment of the accuracy of the Measurement Bulletin (MB) for all legal purposes.................................. (End of Clause)............................................................... SEVENTH CLAUSE - FORM OF PAYMENT.............................................. 7.1. The payments due as a result of this Contract will be made by PETROBRAS to the CONTRACTOR, in Brazilian currency, 30 (thirty) consecutive days as of the date of the end of the last day of the period of execution of the service, provided the CONTRACTOR submits the collection documents up to the 8th (eighth) working day following the last day of the period of execution of the services. 31 7.1.1. The payments will be made on the basis of the average exchange rate of the American Dollar selling price, in force on the working day immediately before the date of the effective payment.................. 7.1.2. The payment of eventual difference in readjustment will be made on the same day when the payment of the respective service occurs, provides the CONTRACTOR submits the corresponding collection document up to the 5th (fifth) working day the indexes that permit the issuing of the Readjustment Bulletin (RB) are known........................... 7.1.3. The payment of reimburseable expenses, if any, will be made 30 (thirty) days after the submittal of the collection document................... 7.1.4 In the event of non-submittal of the collection documents within the time limits set forth above, the payments will be postponed for the number of days corresponding to those of the delay in the submittal of the collection documents. 7.2. The collection documents should be submitted, together with the original of the document giving rise to it (MB, RB, RD) in the Docket of the Financial Department indicated by PETROBRAS, for the purpose of checking the time limits for the payment. 7.3. The collection documents will be issued without erasures, complying with the pertinent laws in force, and will contain obligatorily the following information:.......................................................... a) Place and date of its issuing and number of the collection document;......................................................... b) Number and date of signature of the contract deed;................ c) Number and date of the documents originating them (MB, RB, RD); .. d) Gross value of the collectoin documents, numbers and in writing; 32 e) Name and code of the banking establishment, branch, and the respective code, and number of the current account of the payee, where the payments will be made; f) In order that a particular payment is made in a banking establishment different from the one indicated at the time the contract deed was signed, such amendment will obligatorily be preceded by a fax/correspondence from the CONTRACTOR or shall appear in the payee's collection document. g) Location where the chartering was rendered and/or performed. If the chartering was performed in several locations, its value will be broken down for the locations of its performance and the period in which it was rendered in each location should be mentioned;........................................................ h) Gross amount of the collection document, both in numbers and in writing;.......................................................... i) place for payment purposes, as provided for in subitem 7.1.3 of this Clause;...................................................... j) Signature of the CONTRACTOR's representative, accredited before PETROBRAS, above his name and position typewritten or with a stamp of the CONTRACTOR company identifying him;.................. l) (sic) List of taxes charged on the amount invoiced and which should be withheld by the disbursing office;...................... m) (sic) In the case of Addendum or Agreement-Letter to the CONTRACT which implies in the payment, besides the above mentioned data, its number and the date of its signature should also be added..... 7.2.1. The omission of any of the above-mentioned data will cause the return of the collection document by PETROBRAS' Financial Department within 05 (five) working days................................................ 33 7.3.1. In the event the collection document is inaccurate, it will be returned to the CONTRACTOR and the time limit foreseen in item 7.1 will be postponed for as many days as those corresponding to the delay in the submittal of such document. 34 7.3.2. In the event of re-submittal of the collection document, as a result of a previous impugnation, this fact should appear in the history of the collection document. 7.3.3. The CONTRACTOR will obligatorily submit, every month to the Manager of the Contract:--- a) Payroll of the CONTRACTOR's employees who are involved in the rendering of the services contracted............................. b) A photocopy of the Social Security Payment Slip (GRPS), duly settled and authenticated, obligatorily filling out the data that identify PETROBRAS, informing in field "8" of the GRPS (other information), the name, CGC/CEI of PETROBRAS, number, date and amount of the Invoice or Bill of Sale referring to the services rendered in the month............................................................. c) In case of a Cooperative, to submit the payment vouchers of the amounts paid, distributed or credited to its members as remuneration for the services rendered in the fulfillment of this Contract..... 7.3.4 The collection documents will not be accepted by PETROBRAS if submitted with the INcome TAx at Source already withheld........................ 7.3.5 It is the responsibility of PETROBRAS: disbursing office the explanations of doubts regarding the issuing of the collection documents............................................................. 7.3.6 Eventual payments made for more or for less by PETROBRAS, will be compensated as soon as they are detected, and the respective amounts will be duly corrected............................................... 7.3.7. The CONTRACTOR should indicate the place and fax number, if any, for the receipt of the "Notice of Payment Foreseen". 7.4. The vouchers for reimbursable expenses due to CONTRACTOR as a result of this contract deed, will be previously submitted to the Manager of the Contract, for checking, besides being duly settled by the respective supplier or service renderer, when such is the case................... 7.4.1. If the originals cannot remain in PETROBRAS' hands, copies thereof may be submitted, which will be checked by the Inspector and/or Manager, and the following should appear in every original document: "COPY SUBMITTED FOR REIMBURSEMENT ON ____/___/___", followed by the signature and identification by name, position and registry number, and the originals will be returned to the CONTRACTOR. The following text will appear in the copies of each document in PETROBRAS' hands: "CHECKED WITH THE ORIGINAL ON ___/___/___", which the Inspector and/or Manager will sign, identifying the signature by name, position, and registry number..... 7.4.2. In special cases of reimbursement of import expenses (duties and/or expenses), the CONTRACTOR will submit a letter forwarding the vouchers for such expenses, together with the import process to the department in charge of its follow-up. 7.4.3. The receipt, duly formalized by PETROBRAS of any reimburseable expense voucher, does not represent the recognition of the debt, nor the proof that the expenses were made................................. 7.4.4. The collection of reimburseable expenses will be made through the issuing of a Services Invoice, after approval of said corroborative documents and issuing by PETROBRAS of 35 the respective Reimbursement Document - DR, which will be issued up to 5 (five) working days, as of the date of submittal of said documents. - 7.4.4.1.PETROBRAS Inspection has 3 (three) working days to proceed with the checking of the expense vouchers and to notify its approval to the CONTRACTOR, so that it may issue the Combined Invoice and Bill of Sale. 7.4.5. The total amount of the collection document will be obtained by applying the following formula: VTD , where -------- VTR = 1- ICP VTR = total amount to be reimbursed to the CONTRACTOR; VTD = total amount of the reimbursable expenses, actually authorized; ICP = total of the sum of the aliquots of taxes collected, in the decimal form (ISS or ICMS, as the case may be, COFINS and PIS/PASEP). (End of Clause)............................................................... 36 EIGHTH CLAUSE - FINES......................................................... 8.1. Non-compliance, by the CONTRACTOR, after ninety-one days beyond the time limit mentioned in item 2.3 of this Contract, will imply in the imposition of a fine against the CONTRACTOR, in a written notice, corresponding to 30% (thirty per cent) of the rate provided for in REF 101 of ATTACHMENT III, per day of delay........................... 8.2. In the event of non-compliance, by the CONTRACTOR, with the inspection's requirements within the time limit it may set, PETROBRAS may, by a written notice, impose upon the CONTRACTOR, per day of non-compliance with such requirements, as of the end of the time limit set, a fine corresponding to 20% (twenty per cent) of the rate provided for in REF 101 of ATTACHMENT III. ........................... 8.3. The penalties set forth in this Clause do not exclude any other provided for by the Laws in force and/or in this CONTRACT, nor the CONTRACTOR's liability for damages it may cause to PETROBRAS, as a result of non-fulfillment of the conditions agreed upon herein. 8.4. The amount corresponding to the sum of the basic values of the fines applied is limited to 10% (ten percent) of the estimated value of the present CONTRACT...................................................... 8.5. The penalties to which the CONTRACTOR is subjected to due to the provision set forth in this Clause, will be discounted in the first payment and in the subsequent ones, which the CONTRACTOR is entitled to, after the sanctions are applied by PETROBRAS...................... 8.6. In the event of balance, PETROBRAS reserves itself the right to make or complement the deduction in collection document(s) related to any other contract deed eventually entered into with the CONTRACTOR, or to use any other adequate means to settle the debt, if necessary...... 37 8.7. The CONTRACTOR may appeal against the imposition of the fine, in a declaration, within the non-deferrable time limit of 15 (fifteen) consecutive days as of the date the notice is received................ 8.8. Non-appearance of the CONTRACTOR's personnel for boarding on the date and time agreed upon between PETROBRAS and the CONTRACTOR, will subject the CONTRACTOR to the payment of a fine of US$140.00 per passenger in the case of air transportation, and US$40.00 in the case of sea transportation................................................. 8.8.1. The fine set forth in item 8.8 will not be charged if the CONTRACTOR requests PETROBRAS to change the boarding schedule at least 24 (twenty-four) hours in advance. 8.9. In a written notice and without prejudice of the capacity to rescind the CONTRACT, PETROBRAS may impose upon the CONTRACTOR a compensatory fine of 100% (one hundred percent) of the amount of the conviction, due to default of its labor, social security or tax obligations. 8.9.1.The payment of said fine will not exempt the CONTRACTOR from the obligation to reimburse PETROBRAS for the amount imposed upon it as a result of an eventual joint conviction passed by a Labor Court or by the proper administrative jurisdictions. 8.9.2.The CONTRACTOR will be fined in the percentual of 5% (five percent) on the amount of the invoice in the event it does not submit the GRPS or submits at variance. (End of Clause)............................................................... 38 NINTH CLAUSE - INSPECTION..................................................... 9.1. The inspection of the chartering contracted herein will be carried out by PETROBRAS' representatives, and the CONTRACTOR undertakes to allow their free access to the UNIT and to the operations locations, and to comply immediately with the observations of such inspection, which will have ample powers:......................................... 9.1.1. To determine, provided it comes to its knowledge and is within its capacity, the suspension of the operations which perhaps are being carried out in disagreement with the good technique or which threaten the safety of persons or assets of PETROBRAS, third parties and of the CONTRACTOR itself, subitem 2.1.7 of ATTACHMENT II being complied with. 9.1.2. To refuse the employment of condemned or improper equipment and materials, tools and productions string components, as well as operations which do not comply with the established programs;........ 9.1.3. To order the withdrawal from the work site, of any of the CONTRACTOR's employees who, in PETROBRAS' opinion, may endanger the good performance of the operations or hinder its inspecting activities;............... 9.1.4. To certify on the accuracy of the information reported daily by the CONTRACTOR;........................................................... 9.1.5. To notify the CONTRACTOR, in writing, on the imposition of the penalties provided for in this CONTRACT, including those referring to the CONTRACTOR's action or omission;...................................... 9.1.6. To request from the CONTRACTOR a detailed report on any accident occurred and on any operation or repair performed..................... 9.2. However, the responsibility, operation, movement and administration of the UNIT will be under the exclusive control and command of the CONTRACTOR or its employees........................................... 39 9.3. The total or partial action or omission of the Inspection, does not lessen at all the CONTRACTOR's full responsibility for the rendering of the obligations agreed upon herein, nor does it imply in any reduction or change in the CONTRACTOR's obligations in the faithfull and perfect fulfillment of the present CONTRACT................................... 9.4. Recording - PETROBRAS' Inspection should record its observations on the Driller's Log approved by the IADC and on the Daily Drilling Certificate (ADP), to safeguard the rights and responsibilities foreseen in this CONTRACT.............................................................. 9.5. During the contract period, PETROBRAS will carry out the CONTRACTOR's performance evaluation, covering the groups in equipment and material, human resources, installations, quality and efficiency. The results of the performance evaluations will be notified and consolidated by means of a service performance certificate.................................. (End of Clause)............................................................... 40 TENTH CLAUSE - RECISSION...................................................... 10.1. PETROBRAS may rescind the present CONTRACT, without the CONTRACTOR being entitled to any right to indemnity and/or withholding in the following cases:...................................................... 10.1.1. Nonfulfillment, or irregular fulfillment of contract clauses, specifications, operations and INSPECTION's requests, or the repeated commitment of faults in the fulfillment of the CONTRACT;.............. 10.1.2. Total or partial subcontracting of the object of the present CONTRACT, the association of the CONTRACTOR will another, merger/division or total or partial incorporation, except if allowed for in this CONTRACT, which affects the good performance of this instrument;...................... 10.1.3. Interruption of the operations for more than 60 (sixty) days;......... 10.1.4. Decree of the CONTRACTOR's bankruptcy................................. 10.1.5. Suspension of the operations for more than 60 (sixty) days;........... 10.1.6. When the limit for the imposition of penalties provided for in the item 8.4 of this CONTRACT is attained;................................ 10.1.7. Slowness in the performance of the works, leading PETROBRAS to prove the impossibility of completing the operations within the established time limits;.......................................................... 10.1.8. Non-compliance with the determination of PETROBRAS' agent appointed to follow-up and inspect the fulfillment of the CONTRACT, as well as those of his superiors;............................................... 10.1.9. The dissolution of the CONTRACTOR;.................................... 10.1.10.The social change or the modification of the company's purpose or structure, which in PETROBRAS' opinion, hinders the performance of the operations;........................................................... 41 10.1.11.Delay in the beginning of the fulfillment of the CONTRACT for more than 180 (one hundred and eighty) days..................................... 10.1.12.Recision of the SERVICES RENDERING CONTRACT for Evaluation and/or Completion and/or Workover using the UNIT, entered into between PETROBRAS and MARITIMA NAVEGACAO E ENGENHARIA LTDA.................... 10.1.13.If the limit set forth in subitem 2.1.9 of ATTACHMENT II to this CONTRACT is attained.................................................. 10.1.14.If the limits set forth in NOTE 2 of REF. 102 of ATTACHMENT II to this CONTRACT is attained.................................................. 10.1.15.Non-submittal of the proof of fulfillment of labor obligations towards the employees directly involved in the services object of this CONTRACT, including social security contributions and deposits in the FGTS, when requested by the Inspection, or proof of such default;................ 10.1.16.Non-submittal or submittal at variance of the GRPS, when the corresponding invoice is delivered.................................... 10.1.16.1 The rescision for this reason does not prevent PETROBRAS from imposing the respective fine, foreseen in 8.7.2................................ 10.2. In the event of rescision of the contract deed for the reasons foreseen in 10.1, PETROBRAS will:.............................................. a) take over the object of the contract deed, on the stage and location where it is found;....................................... 42 b) enforce the contract guarantee, if any, for the reimbursement of the amounts of fines and indemnities due to it;................... c) withhold the credits arising from the contract deed, up to the limits of the damages caused to it;............................... 10.3. After the CONTRACT is rescinded, as set forth in this Clause, the CONTRACTOR is liable, in legal and contract fashion, for the violation or inadequate performance which gives rise to the rescision, as well as for the reimbursement of damages which PETROBRAS may come to sustain......................................... 10.4. After the CONTRACT is rescinded, PETROBRAS at its exclusive judgment, may adjudicate the operations object thereof to whom it deems appropriate, without behoving the CONTRACTOR any consultation or interference, claim and/or indemnity, for whatever title, and the CONTRACTOR will be liable to legal and contract penalties, besides being liable for damages PETROBRAS may sustain........................ 10.4.1. The CONTRACTOR is also liable for the pertinent administrative sanctions, its full defense being guaranteed.......................... 10.5. In the event PETROBRAS does not impose the right to rescind the present CONTRACT according to this Clause, it may, at its absolute discretion, withold the payments of pending invoices, until the CONTRACTOR fulfills the contract condition it has infringed, but such fact will not represent novation nor will it generate rights that may be claimed by the CONTRACTOR.......................................... (End of Clause)............................................................... 43 ELEVENTH CLAUSE - FISCAL CHARGES.............................................. 11.1. Taxes (taxes, fees, emoluments, fiscal and parafiscal contributions) that are due as a direct or indirect result of the present CONTRACT, or of its fulfillment, will be the exclusive responsibility of the taxpayer, so defined in the tax rule, with no right to reimbursement. PETROBRAS, as the withholding source, will withhold and pay within the legal time period, from the payments it makes, the taxes it is liable to by the laws in force................................................. 11.1.1. The CONTRACTOR states that, in quoting its prices, it has taken into account the taxes (taxes, fees, emoluments, fiscal and parafiscal contributions) charged on the fulfillment of this CONTRACT, and it cannot make any claim due to error on such evaluation, for the purpose of requesting a price revision ou reimbursement of payments set down by the property authority............................................ 11.1.2. Once found, during the period of validity of the CONTRACT, that the CONTRACTOR has unduly added to its prices amounts corresponding to taxes, fiscal and/or parafiscal contributions and emoluments of any kind that are not charged to the performance of the services agreed upon, such values will be immediately excluded, with the consequent reduction of the prices practiced and reimbursement of amounts that may have been paid to the CONTRACTOR............................................... 11.2. If, during the period of validity of this CONTRACT, any of the following events occur: o creation of new taxes;............................................ o extinction of existing taxes;..................................... o changes in the aliquots;.......................................... 44 o establishment of tax incentives of any kind; and.................. o exemption or abatement of federal, state or county taxes;......... which, provedly come to increase or reduce the burdens of the parties to the contract, the prices will be revised, so as to fit them into the changes made, compensating, at the first opportunity, any differences arising from such changes. However, if it is a question of tax incentives, the advantages arising therefrom will always be for PETROBRAS......................................................... (End of Clause)............................................................... 11.2.1. The price revisions referred to in 11.2, be it for more or less, will be done according to the following criterium: [OBJECT OMITTED] K = Factor inciding upon the initial price; A1 =Aliquot referring to taxes due as a result of the Contract, according to the laws in force on the date and the CONTRACTOR's proposal is submitted;............................................ A2 =New aliquotes in force after the date the CONTRACTOR's proposal is submitted and/or during the performance of the services object of the Contract................................................... (End of Clause)............................................................... 45 TWELFTH CLAUSE - FORCE MAJEURE................................................ 12.1. PETROBRAS and the CONTRACTOR will not be liable for the nonfulfillment of their respective obligations in case of events that characterize an act of God or force majeure defined in the sole paragraph of Article 1.058 of the Brazilian Civil Code. Any suspension of performance due to such item 12.1 will be limited to the period during which such cause or its consequences exist, and such period will be added to the duration of the CONTRACT mentioned in the Second Clause of the present CONTRACT. However, the CONTRACTOR is assured the right to receive the rate provided for in REF 104 of ATTACHMENT III, with the exception of the exemption from payment set forth in subitem 2.1.4 of the ATTACHMENT II, and the reimbursements mentioned in this CONTRACT, and furthermore, the parties will severally assume their losses............................ 12.2 If the circumstances that justify the invoking of the existence of an act of God or force majeure occurs, the party unable to fulfill its obligations will immediately notify the other party, in writing, on the occurrence and its consequences.................................... 12.3. If the impediment arising from the force majeure lasts for more than 90 (ninety) consecutive days, any of the parties may opt for the termination of the CONTRACT, with both parties complying with their mutual obligations due until the date of the beginning of said impediment............................................................ (End of Clause)............................................................... 46 THIRTEENTH CLAUSE - ASSIGNMENT AND TRANSFER................................... 13.1. The CONTRACTOR cannot assign or transfer, in whole or in part, the present CONTRACT, except with PETROBRAS' prior authorization in writing............................................................... 13.2. The CONTRACTOR cannot assign or give in guarantee, at any title, in whole or in part, the credits of any kind, arising or deriving from the present CONTRACT, except with PETROBRAS' prior authorization in writing. The prior authorization will obligatorily state that PETROBRAS imposes upon the assignee of the credits the exceptions that behooves it, mentioning expressly that the payments to the assignee will be conditioned to the fulfillment, by the assignor, of all of its contract obligations....................................... 13.3. The occurrence of the above mentioned events, duly authorized by PETROBRAS, does not exempt the CONTRACTOR from any of its contract obligations........................................................... 13.4. PETROBRAS may assign or transfer, in whole or in part, the present CONTRACT, under commercial conditions to be agreed upon by the parties. ............................................................. (End of Clause)............................................................... 47 FOURTEENTH CLAUSE - ADDITIONAL EQUIPMENT...................................... 14.1. PETROBRAS may install in the UNIT the additional equipment it deems necessary for research, drilling, completion of wells or production. It is agreed, however, that no structural change will be made in the UNIT without the CONTRACTOR's consent in writing. All PETROBRAS' equipment installed in the UNIT will remain its property, and it will be removed by it before the end of this CONTRACT. The installation and removal expenses will run for PETROBRAS' account. During the installation and removal of PETROBRAS' equipment, the rate set forth in REF 104 of ATTACHMENT III will be paid if the interruption of the operations becomes necessary.......................................... (End of Clause)............................................................... 48 FIFTEENTH CLAUSE - ATTORNEY OF RECORD......................................... 15.1. The CONTRACTOR undertakes to maintain, in the City of Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil, during the contract period and until the settlement of eventual demands arising from this CONTRACT, a representative with "ad-judica et extra" powers, who may receive service of process, inclusive in execution proceedings, as well as to sign compromise and settlements regarding controversies resulting from this CONTRACT, and the summons can be made by publication, in the event of absence or lack of an Attorney........... 15.1.1. Within 30 (thirty) days after the signature of the present CONTRACT, the CONTRACTOR will notify PETROBRAS the name, qualification, office and residence of its representative and attorney of record, as set forth in item 15.1.................................................... (End of Clause)............................................................... 49 SIXTEENTH CLAUSE - CONTRACT RELATIONSHIPS..................................... 16.1. This CONTRACT is related to another one for the rendering of services of evaluation and/or completion and/or workover, signed on this same date between PETROBRAS and MARITIMA NAVEGACAO E ENGENHARIA LTDA. (End of Clause)............................................................... 50 SEVENTEENTH CLAUSE - INTERVENIENCE............................................ 17.1. Clause non-applicable in this Contract................................ (End of Clause)............................................................... 51 EIGHTEENTH CLAUSE - LIABILITY................................................. 18.1. PETROBRAS' and the CONTRACTOR's liability for damages will be limited to the direct damages in accordance with the Brazilian Civil Code and pertinent laws, with exception of loss of profit and indirect damages, the direct damages being limited to 100% (one hundred percent) of the total contract value.................................. (End of Clause)............................................................... 52 NINETEENTH CLAUSE - COMPLEMENTARY DOCUMENTS 19.l. The ATTACHMENTS mentioned. below are an integral part of the present CONTRACT and, in the event of disagreement between the Attachments and the CONTRACT, the text of the CONTRACT will prevail............... ATTACHMENTS:.................................................................. I - Technical specifications of the UNIT ..................................... II - Applicability of the Rates and Incidentals in the Performance............ III. - Unit Prices Spreadsheet ............................................... IV - Mutual Obligations ...................................................... V - List of Specialized Personnel;............................................ VI - Environment Operating Conditions......................................... VII - PETROBRAS' Safety Rules................................................. VIII - Equipment Testing Program.............................................. IX - Procedures In the Event of Fatal Accidents............................... (End of Clause)............................................................... 53 TWENTIETH CLAUSE - PRICE READJUSTMENT......................................... 20.1. The contract prices are fixed and non-readjustable.................... (End of Clause) .............................................................. 54 TWENTY-FIRST CLAUSE - ACCEPTANCE.............................................. 21.1. After the chartering operations are completed in strict compliance with the conditions set forth in this contract deed, PETROBRAS will accept them by means of a Definite Deed of Receipt, signed by both parties............................................................... 21.2. The signature of the Definite Deed of Receipt does not exempt the CONTRACTOR from the liabilities foreseen in this contract and in the laws in force......................................................... (End of Clause) .............................................................. 55 TWENTY-SECOND CLAUSE - LOSS OR DISAPPEARANCE.................................. 22.1. In the event the Vessel is lost or disappears, no payment regarding the same will be due by PETROBRAS to the CONTRACTOR, as of the day or as of the moment it was last heard of................................. (End of Clause)............................................................... 56 TWENTY-THIRD CLAUSE - GROSS OR GENERAL AVERAGE............................... 23.1. The gross or general average will be ruled in the Port of Rio de Janeiro according to the York and Antuerp Rules/1974.................. (End of Clause) .............................................................. 57 TWENTY-FOURTH CLAUSE - JURISDICTION........................................... 24.1. The Jurisdiction of the County of the Capital of the State of Rio de Janeiro will be competent to settle any questions arising from the present CONTRACT, with the express waiver, by the parties, of any other, however privileged ............................................ (End of Clause) .............................................................. AND BEING THUS AGREED, the parties sign the present deed in 3 (three) copies with the same tenor, with the witnesses below ........................ Rio de Janeiro, December 05, 1997............................................. PETROLEO BRASILEIRO S.A. - PETROBRAS.......................................... (Signed:) (Luis Eduardo G. Carneiro).......................................... ------------------------ LUIZ EDUARDO G. CARNEIRO - EXECUTIVE SUPERINTENDENT OF EXPLORATION AND PRODUCTION SOUTH - SOUTHEAST.................................................. MARITIMA NAVEGACAO E ENGENHARIA LTDA.......................................... (Signed:) German Efromovich................................................... ----------------- GERMAN EFROMOVICH - PRESIDENT ................................................ WITNESSES:.................................................................... (Signed:) (illegible) CPF No. 299.579.427-49................................ (Signed:) Roberta Lomenha da Costa - CPF No. 034.053.477-00 ................ CONTRACT 101.2.100.97-8....................................................... 58 CONTRACT 101.2.100.97.8....................................................... CHARTERING ATTACHMENT II APPLICABILITY OF THE RATES AND INCIDENTS IN THE PERFORMANCE. 1 - APPLICABILITY OF THE RATES - DEFINITION OF THE SERVICE RATES PER 24 (TWENTY-FOUR) HOUR DAY REP 101 - OPERATION RATE - It will be applied during the activities requiring the use of the UNIT, such as electric logging, formation testing, completion, workover operations, including line scouring and cutting operations.................................................................... REP 102 - REPAIR RATE - In the periods when there is an interruption of the activities that require the use of the UNIT, mentioned in REF 101 of this ATTACHMENT and the operations for Moving the UNIT between locations, REF 105 of this ATTACHMENT, due to maintenance, including replacement of mud pump spare parts, and/or repair in the UNIT's equipment, or in those which supply is the CONTRACTOR's responsibility, no rate will be due ...................... NOTE 1. The repair period will be considered as of the interruption of the operation that is being performed, until the return to the same situation when the interruption occurred, except for the periods when the interruption in the repair activities occur due to adverse sea conditions, as set forth in NOTE 2 of REF. 104 ........................................................... NOTE 2. In the event the CONTRACTOR remains in REPAIR RATE for an accumulated total of 30% of the time, for any period of 6 contract months, PETROBRAS may rescind the present CONTRACT, based on subitem 10.1.14 of this CONTRACT ...... 59 NOTE 3. It will be considered as repairs the occurrences due to wash outs in the drill pipe and in the other elements of the drill string, belonging the CONTRACTOR, with exception of those arising from the presence of H2S and from abnormal mechanical conditions occurred in the well .......................... NOTE 4. At the Inspection's discretion, for the maintenance of the BOP, the CONTRACTOR may be granted a franchise of up to 24 hours between the instant the BOP is set on the test stump, until its operational withdrawal, and the moment of its movement for the next running in another well, without the CONTRACTOR entering into the repair rate, provided such maintenance is carried out according to international standards. In the period within these 24 hours intended exclusively for the BOP maintenance, the waiting rate (Ref. 104) will be due........................................................................ REP. 103 - RATE ADDITIONAL (AT) - The CONTRACTOR will not be entitled to receive a Rate Additional..................................................... 60 REF. 104 - WAITING RATE (TE) - corresponds to 95% of the operation rate (TO) and which will be applied in BAD WEATHER, FORCE MAJEURE and WAITING situations, as defined below:................................................. 1) BAD WEATHER SITUATIONS - in the event of stoppage of the operations when environmental conditions are so severe as to endanger the UNIT's operating capacity, the limitations in ATTACHMENT VI, being complied with, making the operations unstable or unsafe or preventing support vessels to have access to the UNIT, or preventing the tugs operations, at the time of change of locations, although the UNIT may operate normally, in spite of the BAD WEATHER ................................... 2) FORCE MAJEURE SITUATIONS - during the period when the UNIT cannot operate, due to act of God or force majeure, as defined in the TWELFTH CLAUSE of the CONTRACT, until the removal of the impediment or the rescision of the CONTRACT, as the case may be .......................... 3) WAITING - waiting for the arrival, maintenance or availability of materials from PETROBRAS or third parties, under PETROBRAS' responsibility, even if the maintenance is made in the UNIT; waiting for daylight to carry out formation tests; waiting for orders from PETROBRAS, such as, but not limited to, change of programs, definition to proceed with the 61 completion or other production activity, rest for PETROBRAS' team or of those of third party at PETROBRAS' service; waiting for towage or support vessels....... NOTE 1. The period spent in disconnecting the LMRP from the BOP due to environmental conditions, will be considered as bad weather, until the return to the previous situation .................................................... NOTE 2. If a BAD WEATHER situation occurs which interrupts a repair activity, the Waiting Rate (REF 104) with a 25% (twenty-five percent) redution, will be due during that period .................................................... REF. 105 - MOVING RATE - corresponds to 95% (ninety-five percent) of the Operation Rate (TO) and will be applied during the following periods:......... a) Beginning of the Contract - After the acceptance of the UNIT's equipment operating conditions, once the general testing provided for in ITEM 3.1. of the CONTRACT has been carried out, until the spud in of the first well or reentry in the first well (beginning of lowering the first tool for access to the well); ................................................ b) Between locations - After the end of the completion or intervention operations in a well, with the arrival of the BOP or tool used in the well (the one which occurs last) in the moon pool, until the spud in or reentry in a new well (beginning of lowering the first tool for access to the well); .................................................................. NOTE: This period includes the DP system calibration and tests, always on each new location, and in others in each contract year or at any time, when requested by PETROBRAS, ...................................................... c) End of Contract - After the end of the spud in or intervention operations in the last well, with the arrival of the BOP or tool used in the well (the one which occurs last) in the moon pool, 62 until the UNIT's arrival in a place of sheltered waters location, chosen in common agreement between the parties, or, if there is PETROBRAS' equipment. still aboard, until the withdrawal of such equipment from the UNIT...... REF. 106 MOBILIZATION OF THE UNIT (MOB) - to the Santana Island, in the State of Rio de Janeiro, or in a place in sheltered waters to be indicated by PETROBRAS, included therein all the costs inherent to the displacement of the UNIT, such as, but not limited to: insurances, customs clearance, port fees, fuel, crew, tow, taxes referring to the UNIT, all costs incurred until the beginning of the validity of the daily rates, as defined in item 2.3 of this ATTACHMENT, such as: transportation and hostelry for PETROBRAS' and/or third party's personnel, transportation of materials and transportation of equipment of the CONTRACTOR between the UNIT and the cost, this total value being limited to the maximum value of 60 (sixty) daily operations rate (the sum of the chartering and services rendering rates), in United States Dollars.......................... REP. 107 DEMOBILIZATION OF THE UNIT (DEMOB) - No rate will be due or the demobilization of the UNIT and its fittings................................... 2 - INCIDENTS IN THE PERFORMANCE ............................................. 2.1. Exemption from Payment - PETROBRAS will be exempted from the payment of the rates foreseen in this ATTACHMENT, during the period in which occurs ............................................................... 2.1.1. Interruption of the services due to the CONTRACTOR's duly proven fault arising from operational error, and/or lack of material or equipment, inclusive due to the loss of equipment or subaquatic spare parts ................................................................ 63 2.1.2. Stoppage of the services and/or of the UNIT due to measures related to the impositions by made the insurers .............................. 2.1.3. CONTRACTOR's refusal to operate under the conditions foreseen in ATTACHMENT VI - Environmental Operating Conditions .................. 2.1.4. Stoppage of the services and/or of the UNIT for inspection or dockage purposes, including surveys and dockages arising from act of God or force majeure, as defined in the TWELFTH CLAUSE of the CONTRACT, the corresponding expenses also running for the CONTRACTOR's account...... NOTE 1. The exemption from payment will begin in the moment there is an interruption of the operational continuity object of this CONTRACT, even if the withdrawal of all or part of PETROBRAS' and/or the CONTRACTOR's cargo becomes necessary for the inspection and/or dockage........................... NOTE 2. The end of the exemption from payment, due to the inspection and/or dockage, will occur:.......................................................... a) On the return to the same location, the moment the operations returns to the previous situation;................................ b) In the mobilization to another location, the moment the UNIT starts sailing after PETROBRAS' and/or the CONTRACTOR's materials have been put back on board....................................... 2.1.5. Occurrence of kick, drill string sticking, loss of circulation, fishing or abandonment, caused by the CONTRACTOR's duly proven action or omission, from the moment the problem 64 was ascertained, until the return to the situation prior to its occurrence, or displacement to another location, in the event of abandonment ......................................................... 2.1.5.1.The exemption from payment referred to in 2.1.5 will be limited to a period of 15 (fifteen) days, per event, after which the reduction foreseen in subitem 2.2.3 of this ATTACHMENT will be applied ..................................................................... 2.1.6. Occurrence of blow out caused by the CONTRACTOR's duly proven action or omission, from the moment the problem was ascertained, until the return to the situation prior to its occurrence ...................... 2.1.6.1.The exemption from payment referred to in item 2.1.6 will be limited to a period of 45 (forty-five) days, after which the reduction foreseen in subitem 2.2.4 of this ATTACHMENT will be applied...................... 2.1.7. Suspension of the services, determined by PETROBRAS' Inspection, based on item 9.1.1 of the CONTRACT................................... 2.1.8. Interruption of the operations due to a failure occurred in any of the UNIT's equipment, at the time of the testing to be carried out according to item 3.1 of the CONTRACT ................................ 2.1.9. In the occurrence of events of exemption from payment provided for in subitem 2.1.1, 2.1.2, 2.1.3, and 2.1.7, for a total accumulated period exceeding 30% in any 6 month period, PETROBRAS may rescind the present CONTRACT, based on its subitem 10.1.12. 2.2. REDUCTION IN THE DAILY OPERATION, WAITING AND MOVEMENT RATE........... The rates foreseen in this ATTACHMENT will be reduced in the following cases . 65 2.2.1. Total or partial inoperativeness or malfunction of any equipment which delays or hinders the operation, such as, but not limited to, winches, top drive, kelly spinner, geolograph, current meter, air compressors, shale shaker, mixing pumps, mud laboratory equipment and bulk receipt and transfer systems, are reason for the reduction of the daily rate provided for in REF 101, in 1% (one percent), cumulative per equipment, provided the CONTRACTOR is notified in writing in the Daily Drilling Certificate (ADP), by PETROBRAS' Inspection and which, after the time limit the latter has set to repair said equipment, such repair has not been made ................. 2.2.2. Low Efficiency - REFERENCE RATES 101 and 105 of this ATTACHMENT will have a 20% (twenty percent) reduction, in the event low efficiency is verified, according to the operating efficiency parameters listed below. Such reduction will be applied during the whole corresponding activity period in which low efficiency is verified:.................. Operating Parameters: ........................................................ - - - Maneuver of the drill string in a cased well (except BHA): ............... o Inside the riser and 20" casing = 500 m/h......................... o Inside the 13 3/8" casing = 600 m/h .............................. o Inside of 9 5/8" casing = 700 m/h ................................ - - - Break of DP's per unit - 25jt/h .......................................... - - - Casing string run in the sea/inside the riser/previous casing (joints approximately 12 m long) ................................................. o 30" Casing - 2 jt/h o 20" Casing - 5 jt/h 66 o 13 3/8" Casing - 13 jt/h o 9 5/8" Casing - 18 jt/h o 7" Casing - 15 jt/h - - - Running of drilling riser, excluding normal time for testing (50 ft joints): 45/m/h .......................................................... - - - Pulling of drilling riser (50 ft joints): 60 m/h - - - Installation or pulling of the kill/choke lines/ telescopic joint/stretchers: 6,0h ................................................... - - - Diverter installation or pulling: 2,0h .................................... - - - Assembly of the dampening lines in the M.R.: 1,5h........................ - - - Assembly of the flexitube equipment: 5,0h. ............................... - - - Assembly of the production tail: 2,0h .................................... - - - Tubing running or pulling, per unit - 150 m/h ............................ - - - Tubing running or pulling per section - 300 m/h........................... - - - Completion risers running or pulling - 50 m/h ............................ - - - Assembly of terminal head and slings -2,0 h ............................. - - - Moving of ANM to/from the moon pool - 3,0 h............................... - - - Moving of tree cap or tree running tool to/from the moon pool - 2,5h ..... - - - Assembly of lubricator and wire line BOP - 1,5h NOTE: The above mentioned operating parameters are based on normal weather conditions.................................................................... 2.2.3. Beginning on the 16th (sixteenth day), inclusive, of the occurrence of kick, drill string sticking, loss of circulation or fishing, caused by the CONTRACTOR's duly proven action or omission, until the return to the situation prior to its occurrence, the applicable rate will be reduced by 50% (fifty percent) ............................................... 67 2.2.4. Beginning on the 46th (forty-sixth) day, inclusive, of the occurrence of Blow out caused by the CONTRACTOR's duly proven action or omission, until the return to the situation prior to its occurrence, the applicable rate will be reduced by 50% (fifty percent) ........... 2.3. Period of Validity of the Contract Rates-the contract rates set forth in this ATTACHMENT will apply in the period set forth below: ......... a) Beginning: release of the UNIT, by PETROBRAS, to sail to the first location, after the equipment general testing provided for in item 3.1 of the CONTRACT has been carried out, with the exception of the provision in its subitem 3.1.1.1 ................ b) End: after the end of the completion of the last well, with this UNIT's arrival at a port or sheltered waters chosen by common agreement between the parties, and if there is PETROBRAS' equipment still aboard, with the withdrawal of such equipment from the UNIT..................................................... 2.4. Blow-Out - PETROBRAS will be responsible for the well control operation costs, in the event of blow-out and caving caused by the blow-out. Such provisions apply only to the well control costs and do not apply to the loss of assets, lesions and/or damages caused by the blow-out, which are protected by the provisions of the pertinent items of this CONTRACT. The CONTRACTOR undertakes to place at PETROBRAS' disposal all of its resources in personnel and equipment related to this CONTRACT, without any additional charges to PETROBRAS. If the CONTRACTOR has contributed with duly proven action or omission for the occurrence of the accident, no rate will be due, until the solution of the problem, in compliance with the provisions in subitems, 2.1.6 and 2.2.4 of this ATTACHMENT ...................... (End of ATTACHMENT)........................................................... 68 ATTACHMENT III - UNIT PRICES SPREADSHEET CHARTERING - - ------------------------------------------------------------------------------- UNIT PRICES SPREAD SHEET - - ------------------------------------------------------------------------------- OBJECT OF BID: CHARTERING OF A FLOATING UNIT PROVIDED WITH DYNAMIC POSITIONING SYSTEM. - - ------------------------------------------------------------------------------- PLACE OF OPERATION: BRAZILIAN CONTINENTAL SHELF - - ------------------------------------------------------------------------------- UNIT'S NAME: AMETHYST 5 - - ------------------------------------------------------------------------------- COMPANY'S NAME: MARITIMA NAVEGACAO E ENGENHARIA LTDA. - - ------------------------------------------------------------------------------- CODE ITEMIZATION UNIT UNIT PRICE (US$) - - ------------------------------------------------------------------------------- OPERATION RATE 02.222.305 (REF. 101) DAY 97,199.00 - - ------------------------------------------------------------------------------- REPAIR RATE (REF. No Rate Due 02.222.306 102) DAY will - - ------------------------------------------------------------------------------- WAIT. - BAD WEATHER RATE 02.222.307 (REF. 104.1) DAY (95% OF 101) - - ------------------------------------------------------------------------------- WAIT. FORCE MAJEURE RATE 02.222.308 (REF. 104.2) DAY (95% OF REF. 101) - - ------------------------------------------------------------------------------- WAIT. RATE - WAITING 02.222.309 (REF.104.3) DAY (95% OF 101) Ref. - - ------------------------------------------------------------------------------- 69 - - ------------------------------------------------------------------------------- MOVEMENT RATE 02.222.310 (REF. 105) DAY (95% OF 101) Ref. - - ------------------------------------------------------------------------------- MOBILIZATION RATE 02.222.311 (REF. 106) Unique 6,479.933.40 (60 times the value of the daily rate, max.) - - ------------------------------------------------------------------------------- DATE OF THE SIGNATURES PROPOSAL - - ------------------------------------------------------------------------------- PETROBRAS CONTRACTOR (illegible) (blank) 05/13/97 - - ------------------------------------------------------------------------------- 70 Contract 101.2.100.97-8 CHARTERING ATTACHMENT IV MUTUAL OBLIGATIONS - - -------------------------------------------------------------------------------- DESCRIPTION ON ACCOUNT OF SUPPLIED BY ---------------------------------- PET CONT PET CONT - - -------------------------------------------------------------------------------- 1. Production Adaptor Base and ANM X X - - -------------------------------------------------------------------------------- 2. Cement, bentonite, baritine and X X other materials and additives for manufacturing mud and cementing. - - -------------------------------------------------------------------------------- 71 - - -------------------------------------------------------------------------------- DESCRIPTION ON ACCOUNT OF SUPPLIED BY ---------------------------------- PET CONT PET CONT - - -------------------------------------------------------------------------------- 2. (sic) Cementing and logging unit: a) Installation and removal X X b) Maintenance X X c) Rent X X - - -------------------------------------------------------------------------------- 3. Equipment and tools specific X X for evaluation, completion and production of wells. - - -------------------------------------------------------------------------------- 4. Fishing tools and replacement materials for pipes and production tools: - - -------------------------------------------------------------------------------- a) Foreseen in ATTACHMENT I X X - - -------------------------------------------------------------------------------- b) Not foreseen in ATTACHMENT I X X - - -------------------------------------------------------------------------------- 5. Equipment, tools and replacement X X materials needed for the services of logging, formation tests and/or production and/or perforation, not included in ATTACHMENT I - - -------------------------------------------------------------------------------- 72 - - -------------------------------------------------------------------------------- DESCRIPTION ON ACCOUNT OF SUPPLIED BY ---------------------------------- PET CONT PET CONT - - -------------------------------------------------------------------------------- 6. Lubricants and greases for X X the CONTRACTOR's equipment. - - -------------------------------------------------------------------------------- 7. Industrial and fresh water. X X - - -------------------------------------------------------------------------------- 8. Replacement materials, including X X for fishing tools and other CONTRACTOR's equipment listed in ATTACHMENT I - - -------------------------------------------------------------------------------- 9. Consumer equipment and materials X X for completion fluid tests listed in Attachment I. (Note: PETROBRAS will inform monthly on the minimum stock needed). - - -------------------------------------------------------------------------------- 10. Steel ropes, slings, sisal or X X nylon ropes and cordate in general, needed for tying towlines, for mooring support vessels and in drilling, evaluation, completion and handling. - - -------------------------------------------------------------------------------- 73 - - -------------------------------------------------------------------------------- DESCRIPTION ON ACCOUNT OF SUPPLIED BY ---------------------------------- PET CONT PET CONT - - -------------------------------------------------------------------------------- 11. Hoses for loading and unloading X X of liquids and bulk material with connections compatible with those of the supply vessels. - - -------------------------------------------------------------------------------- 12. Materials to make drilling and X X completion fluid. - - -------------------------------------------------------------------------------- 13. Conventional bits. X X - - -------------------------------------------------------------------------------- 14. Safety equipment for individual X X use: gloves, helmets, boots, masks, ear protectors, and other personal use equipment for the CONTRACTOR's employees. - - -------------------------------------------------------------------------------- 15. Services, materials and X X equipment to mark locations. - - -------------------------------------------------------------------------------- 16. Surveying of the sea bottom, X X if necessary. - - -------------------------------------------------------------------------------- 17. Welding equipment and material X X needed for well completions and abandonment operations. - - -------------------------------------------------------------------------------- 18. Bulls eye for running tools X X - - -------------------------------------------------------------------------------- 74 - - -------------------------------------------------------------------------------- DESCRIPTION ON ACCOUNT OF SUPPLIED BY ---------------------------------- PET CONT PET CONT - - -------------------------------------------------------------------------------- 19. Warehouses, office and X X storage area for the CONTRACTOR on land. - - -------------------------------------------------------------------------------- 20. Radio-beacon with working X X frequencies compatible with those mentioned in ATTACHMENT I. - - -------------------------------------------------------------------------------- 21. Safety and survival equipment, X X including maintenance (subjected to periodical inspection by PETROBRAS - - -------------------------------------------------------------------------------- 22. Screens for mud sieves, X X according to PETROBRAS' specifications.. - - -------------------------------------------------------------------------------- 23. Materials for the maintenance X X of equipment and test lines, supplied by the CONTRACTOR, for formation testing and/or production (painting, boiler factory and welding). - - -------------------------------------------------------------------------------- 24. VX ring, VX with HYCAR and VX with lead insert for connection BOP-WELLHEAD, LMRP-BOP STACK: a) In normal operation X X X b) In reinstallation due to X X X problem with the ESCP - - -------------------------------------------------------------------------------- 75 - - -------------------------------------------------------------------------------- DESCRIPTION ON ACCOUNT OF SUPPLIED BY ---------------------------------- PET CONT PET CONT - - -------------------------------------------------------------------------------- 25. VX ring, VX with HYCAR X X X and VX with lead insert for ANM. - - -------------------------------------------------------------------------------- 26. Remote operation submarine vehicle (ROV) - - -------------------------------------------------------------------------------- a) Installation and removal X X b) maintenance X X c) Rent X X - - -------------------------------------------------------------------------------- 27. Hydraulic fluid for BOP X X driving and test. - - -------------------------------------------------------------------------------- 28. Hydraulic fluid for X X ANM driving and test. - - -------------------------------------------------------------------------------- 29. Special greases for pipes X X and completion equipment. - - -------------------------------------------------------------------------------- 30. Individual safety equipment X X for operation in the moon pool. - - -------------------------------------------------------------------------------- 31. Paper and ink for micro-computer X X printer. - - -------------------------------------------------------------------------------- 32. Becons, hydrophones, X X transducers, transponders, batteries. - - -------------------------------------------------------------------------------- 76 - - -------------------------------------------------------------------------------- DESCRIPTION ON ACCOUNT OF SUPPLIED BY ---------------------------------- PET CONT PET CONT - - -------------------------------------------------------------------------------- 33. Diesel Oil - - -------------------------------------------------------------------------------- a) up to the limit set X X forth in clause 4.6.2 - - -------------------------------------------------------------------------------- b) above the limit set X X forth in clause 4.6.2 - - -------------------------------------------------------------------------------- 34. Filter elements for the X X completion fluid filtering unit. - - -------------------------------------------------------------------------------- (End of Attachment)........................................................... 77 ATTACHMENT "V" LIST OF (MINIMUM) SPECIALIZED PERSONNEL ABOARD -------------------------------------------------------------- Captain or Barge 1 -------------------------------------------------------------- Tool Pusher (1 superintendent aboard) 2 -------------------------------------------------------------- Driller 2 -------------------------------------------------------------- Assistant Driller 2 -------------------------------------------------------------- Derrickman 2 -------------------------------------------------------------- Roughneck 6 -------------------------------------------------------------- Crane Operator 2 -------------------------------------------------------------- Area Man 8 -------------------------------------------------------------- Welder 2 -------------------------------------------------------------- Watchstander 2 -------------------------------------------------------------- Subsea Engineer 1 -------------------------------------------------------------- Mechanic 3 -------------------------------------------------------------- Electrician 3 -------------------------------------------------------------- Radio Operator (Portuguese speaker) 2 -------------------------------------------------------------- Male nurse 1 -------------------------------------------------------------- Storekeeper 1 -------------------------------------------------------------- 78 Safety guard 1 -------------------------------------------------------------- NOTE: Supplementary personnel will be supplied according to the CONTRACTOR's conveniences and needs or to comply with the requirements of government laws. (End of Attachment).......................................................... 79 ATTACHMENT "VI" ENVIRONMENTAL OPERATING CONDITIONS (PERMISSIBLE LIMITS FOR ENVIRONMENTAL CONDITIONS ACTING SIMULTANEOUSLY) OPERATION HEAVE PITCH WIND WAVES CURRENT (FEET) or (MPH) (feet) (knots) ROLL (Degrees) - - -------------------------------------------------------------------------------- Conductor jetting/driving 2.0 2.5 30 3.0 1.5 - - -------------------------------------------------------------------------------- Drilling 2.5 3.0 30 3.0 1.5 - - -------------------------------------------------------------------------------- Casing running 2.0 3.0 30 3.0 1.5 - - -------------------------------------------------------------------------------- Casing hanger setting 1.5 2.0 30 2.1 1.5 - - -------------------------------------------------------------------------------- BOP running 1.5 1.5 19 2.1 1.0 - - -------------------------------------------------------------------------------- BOP setting 1.5 1.5 19 2.1 0.75 - - -------------------------------------------------------------------------------- Maneuvering 3.5 3.0 44 8.5 1.5 - - -------------------------------------------------------------------------------- LMPR disconnection 7 4 51 10.5 1.0 - - -------------------------------------------------------------------------------- LMPR connection 1.5 1.5 19 2.1 0.75 - - -------------------------------------------------------------------------------- Formation testing 3.5 4.0 44 8.5 1.5 - - -------------------------------------------------------------------------------- Operation with boats 2.5 3.0 39 6.7 1.5 - - -------------------------------------------------------------------------------- Running the ANM (lay-away) 1.5 1.5 19 2.1 0.75 - - -------------------------------------------------------------------------------- Running the ANM (without lines) 1.5 1.5 19 2.1 0.75 - - -------------------------------------------------------------------------------- 80 - - -------------------------------------------------------------------------------- Operation with flexitube 2.0 3.0 30 5.0 1.5 - - -------------------------------------------------------------------------------- Operation with wire-line 3.0 4.0 44 8.5 1.5 - - -------------------------------------------------------------------------------- Operation with BAP 2.5 3.0 39 6.7 0.75 - - -------------------------------------------------------------------------------- (End of Attachment)........................................................... 81 ATTACHMENT "VII" PETROBRAS' SAFETY RULES 1. Service Rule No. 46/71: o Safety Rules for Offshore Operations. 2. Service Order No. 01/72: o Operational Safety Rules - Continental Shelf. 3. Service Rule No. 41/72: o Electricity - Safety Rules 4. Service Order No. 01/76: o Industrial Safety Rules (General) o Industrial Safety Rules (Drilling) o Industrial Safety Rules (Production) 5. General Safety Manual: Safety and Environmental Instruction for Contractors (E&P - BC). 82 ATTACHMENT "VIII" EQUIPMENT TESTING PROGRAM In order to carry out the UNIT's equipment testing in an easier and more agile manner, the CONTRACTOR is to submit to PETROBRAS, as quickly as required the following documents:............................................. 1. CERTIFICATES............................................................ a) Survey and Appraisal Report, updated and valid for the fiscal year regarding the UNIT offered, issued by one of the entities: ABS, NOBLE & DENTON, DNV, LLOYDS or BUREAU VERITAS, and if the report is issued abroad, it will be translated into Portuguese by a sworn public translator and notarized in the Brazilian Consulate......................................................... b) Classification or Class Confirmation Certificate for hull and equipment, compatible with the proposal submitted (certified copy);............................................................ c) Report on claims from the classification societies mentioned in the Class Confirmation Certificate (in the event there are claims);.......................................................... NOTE:PETROBRAS will evaluated the above mentioned documents and will mention in what time limits eventual claims will be settled, and at PETROBRAS' judgment, it can be at the time of the UNIT's inspection or at mobilization after the contract is signed.......................................... d) Freeboard Certificate;............................................ e) IOOP (International Oil Pollution Prevention) Certificate;........ f) IMO-MUDU-CODE - Mobile Offshore Drilling Unit - latest edition (unnecessary for Drill Ship);..................................... 83 g) Cargo Ship Safety Equipment Certificate;.......................... h) Cargo Ship Safety Construction;................................... NOTE: All documents required are to be within their period of validity.................................................... 2. INDUSTRIAL SAFETY AND ENVIRONMENTAL CONTROL............................. - Manuals and emergency plans in the Portuguese Language............ 3. STORAGE CAPACITY........................................................ - Complete floor plan of bulk movement system, specifying:.......... a) Exclusive lines to move cement;............................. b) Exclusive lines to move bentonite and baritine;............. c) Location and type of bulk line valves and their respective driving systems;............................................ d) Pneumatic lines for cleaning and clearing bulk lines;....... e) Location of the manometers;................................. f) Quantity, flow, operating pressure and location of compressors;................................................ g) Quantity, flow, operating pressure and location of the air drying unit(s);............................................. h) Schematic drawing of each silo with their respective aeration systems and points of connection with the bulk lines........ 4. FLUID CIRCULATION AND PROCESSING SYSTEM................................. - Sketch of the system emphasizing pulsation dampers (suction and tamping), safety valves, feed pumps, position of the suction lines in relation to the suction sieves' tanks and filters........ - Floor plan of the drilling fluid feed and discharge lines showing the flexibility in relation to the sand traps and mud tanks....... 84 - Floor plan of the degasser instalation showing the active tank, separate processed mud and gas discharge lines, emphasizing the connection point of this line with the gas discharge line......... - Floor plan of the mud tanks system, emphasizing the supply lines, gun lines, mixture funnel and centrifugal pumps interconnection lines............................................................. 5. WELLHEAD SAFETY EQUIPMENT SYSTEM........................................ - Sketch of the BOP/LMRP, specifying lines, valves and measures/dimensions............................................... - Floor plan of the kill and choke lines from the BOP to the choke manifold, specifying valves, connections, dampener chambers, anchorage points and interconnection with the other systems....... - Floor plan of the atmospheric air separator....................... - Layout of the trip tank installation, giving the following information:...................................................... a) Capacity;................................................... b) Location;................................................... c) Sensitivity;................................................ d) Measuring system;........................................... e) Scale type;................................................. f) Driller's scale visualization conditions;................... g) Supply System for the above item............................ - Floor plan of the stand pipe manifold, specifying lines, valves, manometers and interconnections with the other systems............ 85 - Inspection report on the riser, riser handling tools and connectors, telescopic joint and flexible joint, according to the ARPI RP 2P and RP 2Q standards, with update date not exceeding 1 year.............................................................. NOTE: If the reports indicate the need of repair in some equipment, the service performance certificates will also be submitted................................................ - Biannual inspection certificate of the choke manifold, with the manufacturer's approval................................. - Biannual inspection certificate of the BOP unit and driving system, with the manufacturer's approval.................... - Biannual inspection certificate of the BOP, with the manufacturer's approval. - Proof of technical hability of the well drilling and control personnel........................................... - To supply an internal maintenance and rust prevention program for the marine risers and kill and choke lines...... 6. ENERGY GENERATION SYSTEM................................................ - Unifilar diagram of the energy generation and distribution system. 7. STABILITY............................................................... - To submit the vessel's stability curve, updated in the proposal's conditions, in keeping with the environmental conditions.......... 8. DYNAMIC POSITIONING SYSTEM (including the motor-generators assembly, thrusters and propellers)............................................... - Schematic diagram of the dynamic positioning system............... - To submit the inspection and tests procedures to be carried out at every new location. 86 - To submit the tests and inspections procedures to be carried out at the end of each contract year.................................. 9. DRILLING STRING AND ACCESSORIES......................................... - Inspection report on all equipment of the drilling and completion strings, subs and accessories (used equipment).................... - Purchase voucher of the drill and completion strings, subs and accessories (for new equipment)................................... 10. FISHING TOOLS AND ACCESSORIES........................................... - Inspection report on all components of the fishing tools (used equipment) or purchase vouchers (for new tools)................... 11. SUNDRY SYSTEMS.......................................................... - Winches load test certificate..................................... - Description of the compressed air system, emphasizing compressors, layout of lines, valves and interconnection with the other systems..................................................... - Preventive Maintenance Plans with their respective timecharts..... - Ballast and sewer flowchart ...................................... - Proof will be needed for the existence on board and for the operating capacity of all equipment and accessories listed in Attachments C and D of the chartering and services rendering contracts......................................................... NOTE: Such equipment must be in places of easy access for survey........ A) RECEIPT TEST...................................................... 87 - Proof will be needed for the existence on board and for the operating capacity of all equipment and accessories listed in Attachments C and D of the chartering and services rendering contracts. NOTE: Such equipment must be in places of easy access for survey.. - The following systems, equipment and tools listed below will be checked, inspected and tested:...................... 1) Drill String, Components and Accessories.................... ---------------------------------------- - The CONTRACTOR will submit recent inspection reports, according to the specification API RP7G for the whole drill string and accessories such as, but not limited to: drill pipes, drill collars, HW, Subs, stabilizers, reamers, bumper subs, lift-sub, kelly, slips, elevators, fishing tools, etc., which prove the good conditions of the string and its accessories. The information from the reports and the general conditions of the string and its accessories will be checked by PETROBRAS by means of a sampling inspection. In the event of discrepancy between the data submitted by the CONTRACTOR and those checked by PETROBRAS, showing an inadequate condition of the string and its accessories, the CONTRACTOR will carry out another inspection, for its own account........................................... NOTE 1: Any equipment refused by the inspection will be immediately repaired or replaced by the CONTRACTOR, for its own account................................... 88 NOTE 2: For the string, components and new accessories, no inspection report will be required, documents proving that such equipment is new will be sufficient......... NOTE 3: The CONTRACTOR's equipment will be stored and arranged so as to facilitate the inspection by sampling to be carried out by PETROBRAS............... - The same procedure will be adopted for the telescopic joints and flexible joints............................ 2) Extractor Of Solids......................................... ------------------- The following will be examined:............................. - sieves,............................................... - dessander,............................................ - degasser-test suction and discharge-- ................ - centrifugue (if any)................................... The operation and work pressure, as well as the existence of manometers, will be checked.............................. 3) Mud Tanks and Valves........................................ -------------------- Waterproofness, working of the agitators, mixture funnel and depth gun, besides the existence of fixed marks to control the tanks volume will be checked.................... 4) Centrifugal Pumps........................................... ----------------- 89 The following will be checked:.............................. - working, vibration and noises;........................ - Packing (leaks);...................................... - Work pressures........................................ NOTE: Items 3 and 4 will be tested with sea water................ 5) Mud Laboratory and Test Equipment........................... --------------------------------- The existence on board and the adequacy to the requirements described in Attachments B and C to this CONTRACT will be checked..................................................... 6) Drilling Derrick............................................ ---------------- Maintenance conditions (corrosion), fastening system and the conditions of the traveling block rails will be examined.................................................... 7) Crown Block................................................. ----------- The pulleys will be examined as to the profile wear, alignment, clearance, buckling of the axles, lubrication, etc......................................................... 8) Mud Pumps................................................... --------- The following will be carried out:.......................... - observation of working, vibrations, noises;........... - pressure and maximum work flows tests for the liner user;................................................. - safety valve working test;............................ - checking of the suction and discharge pulsation dampeners;............................................ - watertightness tests with nominal pressure of the mud pumps and of all manifold valves;..................... 90 - watertightness tests with nominal pressure of all manifold valves of the stand pipe manifold and of the kelly hose;........................................... - random disassembling of the suction for visual inspection of the piston, sleeve, packing, valve and seat.................................................. 9) Swivel...................................................... ------ The mandril, gooseneck, body, etc., will be checked and nominal pressure test with rotation will be performed....... 10) Motion Compensator.......................................... ------------------- The piston alignment, lock bar, alignment in the rail, general conditions, leaks and chains will be checked........ 11) Riser and Guide Line Tensioners............................. ------------------------------- The general conditions, leaks, pulleys and cables will be inspected................................................... 12) Riser Recoil System/Hang Off System/Fill-Up System Valve ----------------------------------------------------------- (if any).................................................... The systems' operation will be checked. 13) High Compressors and Air Reservoirs......................... ----------------------------------- The general conditions, leaks, lines and system yield will be checked.................................................. 14) Top Drive................................................... --------- Working tests (connection and disconnection of one or more sections of the DP's) will be carried out and the general conditions will be inspected................................ 15) Kelly Spinner............................................... ------------- 91 The general conditions, specially the rollers' wear, and working will be checked, and connection and disconnection operation of one or more DP's will be carried out........... 16) Hook........................................................ ---- The general conditions and the locking system will be checked..................................................... 17) Traveling Block............................................. --------------- The pulleys wear, axles alignment, lubrication system, retraction system, etc., will be inspected.................. 18) Drawworks................................................... --------- - The operation of the mechanical break system (brake bands), electromagnetic (distance between irons, voltage level and SCR feeder conditions), cooling system and clutches will be checked................... - The operation of the cat-heads and height limitator with the assembly/ disassembly of one or more command sections, will be checked............................. 19) Rotary Table................................................ ------------ The operation in high and low, brake system, tachometer and lubrication system will be checked.......................... 20) Trip Tank................................................... --------- Capacity, installation site, sensitivity for the level indicator system, visualization condition and supply system will be inspected........................................... 21) Hydraulic Tongs and Pneumatic Spider for Casing and Pneumatic Tongs for Drill Pipes............................. 92 - Operation tests will be made and maintenance conditions will be checked............................ 22) Sand-Line or Wire-Line Systems.............................. ------------------------------ - Operation of the clutches and brake will be tested by lowering the photoclinometer inside the drill string coinciding with the photoclinometer overshot test (TOTCO) will be tested. Test to be made on location before the beginning of the operations................ - The existence of an alignment guide for the sand-line cable in the drum will be checked..................... 23) Choke Manifold.............................................. -------------- All valves with low pressure (300 psi) and in high pressure (system's work pressure). Manometers, hydraulic choke operation, manual choke, remote control panel, etc., will be tested................................................... 24) Upper and Lower Kelly Cock, Inside Bop and Safety Value ------------------------------------------------------- - Drivers will be tested and work pressure tests will be made............................................... - The end connections of each element will be checked and tested with work pressure. The CONTRACTOR should have end seal plugs adequate for the test............. 93 25) Kill and Choke Lines Hoses.................................. -------------------------- The end connections will be checked and tested with the system's work pressure. The CONTRACTOR should have end seal plugs adequate for the test................................. 26) Drill Instrumentation System................................ ---------------------------- The following will be tested:............................... - geolograph;........................................... - rotary table tachometer;.............................. - manometers;........................................... - stroke counter;....................................... - level control in the mud tanks;....................... - torque indicator...................................... 27) Flare Pipe and Booms........................................ -------------------- Their existence on board will be checked, analyzing the maintenance conditions of the lines by means of inspection, and the facilities for instalation of the production test equipment system............................ 28) BOP System.................................................. ---------- The following will be carried out:.......................... - pressure tests of the slide valves with low pressure and high pressure, compatible with the system......... - pressure tests of the annulars with low pressure and high pressure, compatible with the system.............. 94 - complete function test in both POD's, through all panels................................................ - choke and kill valves tested with low pressure and high pressure, compatible with the system. ........... - working of the shear ram valve will be checked with opening for examination of the blades conditions...... - the opening and closing of all ram, annular a kill and choke valves chambers will be tested.............. - the hydraulic driving unit will be checked as to: fluid used, fluid low level alarm, low air pressure and low accumulators pressure, maintenance conditions, leaks and mixing systems.................. - the volumetric capacity of accumulators and the capacity of electric and pneumatic pumps of the hydraulic unit will be tested......................... - the locking system of the ram valve(s) will be tested. - the SPM valves conditions will be checked by opening and inspecting one of them, chosen at random.......... - the locking/unlocking system of the H-4 hydraulic connectors will be tested............................. - the surface and bottom accumulators' pre-charge will be checked............................................ - the operation of the following systems will be tested: o Driving back-up................................. o emergency recovery.............................. o handling........................................ 95 29) Traveling Tongs, Ezy-Torq, Torque Sensor, Slips, Etc........ ---------------------------------------------------- One or more sections of the drill collars and drill pipes will be assembled/disassembled to check the working of such equipment. The general maintenance conditions, chuck jaws and cables will be checked.................................. 30) Bulk Transfer System........................................ -------------------- The following will be carried out:.......................... - the operation of the compressor will be checked, and noise, oil and air leaks, and maintenance state, filters and dehumidifier will be inspected............ - operation and watertightness of valves, lines and silos will be checked, looking for possible clogging.. - transfer of cement from 1 silo to the daily silo (if any) and from this to the surge-tank will be made.... 31) Emergency Energy Generation System.......................... ---------------------------------- - a black-out in the energy system generation system will be simulated to see if the emergency generator is automatically turned on............................ 32) Main Motor Generator Assembly.............................. ------------------------------ The following will be carried out: - vibration, noises, insulation, leaks, maintenance, etc., will be checked................................. 96 - generators input and output in the bus bar, synchronism and load divisions will be tested......... - load and voltage and frequency regulation will be tested................................................ 33) Dessalter................................................... --------- Operation and production capacity will be checked........... 34) Cat-Lines Cranes............................................ The following will be carried out: - operation of the winches and maintenance of the cabled will be checked................................ - the elevation and rotation system, the operation with flying boom and pulley block and the operation of the boom height pawl will be checked...................... - the report of the last inspection carried out by the UNIT's classification society in the winches will be examined.............................................. 35) Dejecta Treatment Unit...................................... ---------------------- Its operation will be inspected............................. 36) Telecommunication System.................................... ------------------------ Operational tests will be made in all radio equipment existing on board, including radio-beacon................... 37) Overhead Traveling Crane.................................... ------------------------ Their operation, and the maintenance conditions of cables and sliders will be examined................................ 97 38) DC/SCR Motors............................................... ------------- The maintenance conditions and insulation, as well as the collectors and brushes will be examined..................... - SCR functional test................................... 39) Diverter.................................................... -------- The following will be tested:............................... - flow line wing valves;................................ - diverters and insert packer lock;..................... - the control panel will be checked..................... 40) Safety Equipment............................................ ---------------- Salvage..................................................... Fireproof rigid vessels (capsules, whalers):................ - lowering, motor, fuels, sprinklers, start;............ - rations, garnishing, hatches, cleaning, fire extinguisher, signaling equipment..................... Inflatable rafts:........................................... - quantity, capacity, location, height in relation to the sea;.............................................. - validity of the last inspection, means of access to the sea;.............................................. - conditions of the cocoon.............................. Jackets:.............................................. - quantity (sufficiency), location, pro-tection, and maintenance........................................... Life-buoys:................................................. 98 - quantity (sufficiency), location, heaving-lines, lanterns, smudge pots................................. Escape routes:.............................................. - vertical and horizontal signaling (indicative plates); - clearing, lighting(emergency)......................... Water Supply System for Fire Fighting....................... ------------------------------------- Fire ring:.................................................. - water system for the platform;........................ - sprinkler system;..................................... - painting, corrosion, signaling, visual conditions;.... - valves, hydrants, guns................................ Fire pumps:................................................. - operation;............................................ - motor, fuel, start, panel, tests...................... Fire Fighting Fixed Systems................................. --------------------------- - Foam system: chambers, tanks, guns, hydrants and carrier liquid;....................................... - Cylinders; conditions, reloading, retesting (CO2 or HALON, if any)....................................... - Lines and diffusers: general conditions;............. - Automatic: feedings, panels, batteries, detectors, tests................................................ - Manual: commands, interconnections, tests........... - Alarms: interconnections............................. 99 Fire Extinguishers ------------------ - water, carbon dioxyde, chemical powder (portable and carts);............................................... - distribution, location, general conditions;........... - revision, recharge, retest, control, meters, replacement........................................... Fire Posts.................................................. ---------- - hose, keys, sprinkler;................................ - fiber boxes, general conditions, post identification;. - visual signaling: sufficiency and general conditions. Emergency Equipment......................................... ------------------- - autonomous breathing apparatuses, reserve bottles, breathable air fixed system, fire proximity clothing, lantern, ax, safety belt;............................ - distribution, location, general conditions, inventory, maintenance and replacement................ Communications and Alarms................................... ------------------------- - telephone (internal, external): Operating capacity;.. - radiophony: VHF. Operating capacity;................ - portable transceptors: quantity; distribution, intrinsic safety;..................................... - intercom: quantity, distribution, and horns audibility, interconnection with the platform, coding of sound alarm tones, amplifiers;..................... - visual signaling: sufficiency, general conditions;... - fire alarm, glass breaking type: batteries, bells, tests................................................. 100 Emergency Lighting.......................................... ------------------ - charger, batteries and lanterns....................... Helideck.................................................... -------- - protection: guns, fire extinguishers, salvage equipment;............................................ - painting, protection screen, net, landing lights, safety warnings;...................................... - guest welcoming practices............................. Load Lifting................................................ ------------ - winches: general conditions, oparation, signaling, maintenance;.......................................... - manual and electric tackles: general conditions, operation, signalling, maintenance;................... - material movement and storage areas................... Training.................................................... -------- - abandonment, fire fighting, first aid and brigade..... Manuals and Plans........................................... ----------------- - emergency; safety;.................................... - disclosure, knowledge;................................ - tasks schedules for emergency and abandonment situations, including in Portuguese................... Order and Cleanliness....................................... --------------------- - installation's general aspect;........................ - particularly alarming places.......................... Smoke, Heat and Gas Detection System........................ ------------------------------------ 101 - test of hydrocarbons detection sensors................ Ballast and Sewer System.................................... ------------------------ - functional test....................................... 41) Anchoring System............................................ ---------------- 42) Dynamic Positioning System.................................. -------------------------- 43) Propulsion System........................................... ----------------- B) Location Moving Test.............................................. -------------------- To be defined between the CONTRACTOR and PETROBRAS................ C) Beginning of Contract Year Test................................... ------------------------------- To be defined between the CONTRACT and PETROBRAS.................. (End of Attachment) .................................................... 102 ATTACHMENT IX PROCEDURES IN THE EVENT OF FATAL ACCIDENTS 1. If, during the period of validity of the CONTRACT, a fatal accident occurs with a CONTRACTOR's employee, the CONTRACTOR should:............. 1.1. Notify the Inspection immediately, for the proper measures;............. 1.2. Take measures so that the employee's relatives be notified with the utmost urgency on the event, giving them the social support due;........ 1.3 Formally establish an Investigation Commission, within 48 hours after the accident, in order to, in the maximum time limit of 15 days, identify the causes and recommend the measures deemed necessary to prevent similar accidents............................................... 2. The report should contain, at least, the following information regarding the accident:................................................. - description;...................................................... - exact location;................................................... - data regarding the injured persons;............................... - basic and immediate causes;....................................... - measures to be taken in order to prevent its repetition........... 3. The CONTRACTOR should guarantee the Commission enough authority and autonomy to carry out the investigations without any restrictions....... 4. A PETROBRAS' employee should participate in the Commission, appointed by the authority in charge of the operational office.................... 103 5. After conclusion of the Commission's work, it will also behoove the CONTRACTOR, at the Inspection's request, to disclose the results of the report, so as to convey the experience from the accident to other contractor companies.................................................... (All pages of the document were initialized.)................................. . - . - . - . - . - . - . - . - . - . - . - . - . - . - . - . - . - . - . - . THESE BEING the precise terms and content of the aforementioned document, I hereby set my Hand and Seal on this Translation, performed on the 22nd of December, in this City of Rio de Janeiro, Federative Republic of Brazil. /s/ MARCIA BARBOSA SERRA ------------------------ Marcia Barbosa Serra Sworn Public Translator 104 EX-10.9(A) 48 EXHIBIT 10.9(A) I, the undersigned, Sworn Public Translator and Commercial Interpreter in and for this City and State of Rio de Janeiro, Federative Republic of Brazil, registered at the Commercial Board of Rio de Janeiro under Number 97, do hereby CERTIFY and ATTEST that a document in the Portuguese Language was submitted to me for translation into English, which I performed according to my Office, as follows: Translation No. 2674/98 (On paper with letterhead of PETROBRAS.) RIDER No. 01 TO CONTRACT 101.2.100.97-8, ENTERED INTO BETWEEN MARITIMA PETROLEO E ENGENHARIA LTDA., SUCCESSOR OF MARITIMA NAVEGACAO E ENGENHARIA LTDA., and PETRODRILL FIVE LTD., WITH THE CONSENT OF PETROLEO BRASILEIRO S.A. - PETROBRAS. PETROLEO BRASILEIRO S.A. - PETROBRAS, a mixed economy company, with head office at Av. Republica do Chile 65, in the City of Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil, enrolled in the General Taxpayers Registry of the Ministry of Finance under No. 33.000.167/0001-01, henceforth called PETROBRAS, represented herein by the Executive Superintendent of Exploration and Production, Luiz Eduardo G. Carneiro, and the Company MARITIMA PETROLEO E ENGENHARIA LTDA., successor of MARITIMA NAVEGACAO E ENGENHARIA LTDA., with head office at Av. Almirante Barroso, 52, 34th floor, City of Rio de Janeiro, Federative Republic of Brazil, enrolled in the General Taxpayers Registry of the Ministry of Finance under No. 46.828.596/0001/13, henceforth called the ASSIGNOR, represented herein by its President, German Efromovich, and the company PETRODRILL FIVE LTD., with head office in Omar Hodge Building, Wickhams Cay, Road Town, Tortola, Ilhas Virgens Britanicas, henceforth called the ASSIGNEE, represented herein by its Director, German Efromovich, have agreed to add a rider to contract 101.2.100.97-8 (AMETHYST 5), according to the following, clauses and conditions: FIRST CLAUSE - OBJECT. 1.1. The present Rider has as its object: 1.1.1. The total assignment, as of the date of the signature of this Rider, henceforth called the ASSIGNMENT DATE, by the ASSIGNOR to the ASSIGNEE of the rights and obligations arising from Contract No. 101.2.100.97-8 and its Attachments. 1.1.2. To change the contract value foreseen in item 5.2 of the Fifth Clause - PRICES AND VALUE. 1.1.3. To change the redaction of the Seventh Clause - FORM OF PAYMENT. 1.1.4. To change the Fourth Clause - PETROBRAS' OBLIGATIONS, including item 4.12. SECOND CLAUSE - RESPONSIBILITY. 2.1. The ASSIGNEE, as of the ASSIGNMENT DATE, becomes the CONTRACTOR, being liable, before PETROBRAS for the fulfillment of all contract obligations undertaken by the ASSIGNOR, and will also have all rights arising from the Contract. 2.2. The ASSIGNEE is liable before PETROBRAS for the fulfillment of all contract obligations undertaken by the ASSIGNOR in the Contract, as well as for eventual losses and damages arising from its acts or omissions. 2.3. The ASSIGNOR will be jointly liable with the ASSIGNEE for the complete fulfillment of all obligations arising from the Contract. 2.4. The ASSIGNOR, as of the ASSIGNMENT DATE, will have no right arising from the Contract, giving PETROBRAS, full and complete acquittance for any and all contract value. THIRD CLAUSE - PRICES AND VALUE. 3.1. The redaction of item 5.2 and its subitems becomes: 5.2. The total estimated value of the present Contract becomes US$223,719,698.40 (two hundred and twenty-three million, seven hundred and nineteen thousand, six hundred and ninety-eight American dollars and forty cents), equivalent to R$ 238,485,198.49 5.2.1. Chartering of the UNIT: US$217,239,765.00; 5.2.2. Mobilization: US$6,479,933.40. 3.2. Item 5.5 is included with the following redaction: "5.5. Besides the value mentioned in 5.2, the appropriation of US$100,000.00 is foreseen for the payment of eventual reimbursements". FOURTH CLAUSE - PETROBRAS' OBLIGATIONS. 4.1. Item 4.12 is included, with the following redaction: "4.12. To adopt the measures necessary for the request to register this Contract at the Central Bank of Brazil, immediately after the receipt of the legal documents, the supply of which is the CONTRACTOR'S responsibility." FIFTH CLAUSE - FORM OF PAYMENT. 5.1. The redaction of the Seventh Clause is changed to: "7.1. The payments of the rates foreseen in Attachment II and Attachment III shall be made by PETROBRAS to the CONTRACTOR in American Dollars, by bank remittance to a bank account abroad it indicates, after the present Contract is registered at the Central Bank of Brazil, 30 (thirty) days as of the date of the end of the measuring period considered, provided the CONTRACTOR has fulfilled the time limits set forth in subitem 6.3.1, for the submittal of the collection documents at the docket of the Financial Department indicated by PETROBRAS, with exception of the provision appearing in subitem 7.2.4. 7.1.1. For the reimbursable expenses foreseen in this Contract, the instructions contained in item 7.4 and their developments should be of the Financial Department indicated by PETROBRAS, with exception of the provision appearing in subitem 7.2.4. 7.1.1. For the reimbursable expenses foreseen in this Contract, the instructions contained in item 7.4 and their developments should be complied with, and the payments will be made in the currency of origin of said expenses, within 30 (thirty) days after the submittal of the collection documents at the docket of the Financial Department indicated by PETROBRAS. 7.1.2. Collection documents comprise any type of billing, such as: Invoice, Invoice with separate Bill of Sale, Service Invoice, besides others foreseen in fiscal laws. 7.1.3. For payment purposes, the CONTRACTOR shall supply the Contract Manager, after its signature, the following information: a) Bank name and number; b) Bank branch name and code; c) Bank branch address; d) CONTRACTOR'S current account number. 7.1.3.1. Whenever a billing is submitted with bank information different from those indicated in subitem 7.1.3, these changes will only be considered if accompanied by a formal communication by the CONTRACTOR and shall prevail only for the specific purpose of such payment. 7.2. The collection documents shall be issued without erasures, complying with the pertinent laws in force, for submittal at the Financial Department indicated in item 7.1 of this Clause, in its original copy, accompanied by 1 (one) copy of the respective Measurement Bulletin (MB), and/or Reimbursement Document (RD), as the case may be, duly appointed by this contract's Manager, containing, obligatorily, but not exclusively, the following information: a) Number of the collection document; b) Place and date of its issuing; c) Brief description of the object of this Contract; d) Indication of the number and date of this Contract; e) Indication of the month/year or period which the collection document refers to; f) Number and date of the Measurement Bulletin (MB) and/or Reimbursement Document (RD). g) Place of the rendering and/or execution of the chartering. In the event the chartering has been rendered in different locations, its value should be broken down by locations of performance and the period in which it was rendered at each of the locations shall be indicated; h) Gross amount of the collection document, by numbers and in writing; i) Place for payment purpose, as provided for in subitem 7.1.3 of this Clause; j) Signature by the CONTRACTOR'S representative, accredited before PETROBRAS, above his/her name and position typewritten or above the CONTRACTOR'S company stamp identifying him/her; 1) In case of Rider or Letter of Agreement to the Contract which implies in payments, mention its number and date of signature, besides the data above. 7.2.1. The omission of any of the above mentioned data will cause, within 5 (five) working days, the return of the collection documents by PETROBRAS' Financial Department. 7.2.2. If the above situation occurs and in the case the collection document shows errors, it will be returned to the CONTRACTOR, and the time limits of the payment foreseen in item 7.1 and subitem 7.1.1 shall be added to the period that becomes necessary for the explanation and re-submittal of the collection document. 7.2.2.1. The above mentioned condition also applies in case the collection document is submitted in another department, and not as indicated in item 7.1. 7.2.3. Independent of the data above, the invoices in foreign currency shall be also submitted in the Portuguese language, or if issued abroad, they shall be notarized at the Brazilian Consulate, under which jurisdiction the CONTRACTOR is located, and translated by a sworn public translator. 7.2.4. The CONTRACTOR shall, obligatorily, submit monthly, together with the invoice, the payroll of the CONTRACTOR'S Brazilian crew who are involved in the chartering object of this Contract, as well as with a photocopy of the GRPS (Social Security Payment Slip), duly settled and authenticated, with the data identifying the entity to whom the service was rendered being obligatorily filled out, informing on field 8 of the GRPS (other information) PETROBRAS' name and CGC, number, date, and amount of the invoice or bill of sale referring to the chartering rendered in the month, subitems 8.9, 10.1.15, and 10.1.16 being also complied with. 7.3. The collection documents referring to reimbursements shall also be issued, itemizing, individually, the reimbursable expenses, their total amount, such itemization also to appear in the respective Reimbursement Document (RD). 7.3.1. The original vouchers of the reimbursable expenses due to the CONTRACTOR, by force of the contract instrument, shall be previously submitted to the Contract Manager, for checking, besides being duly paid for by the respective supplier or service rendered, when such is the case. 7.3.1.1. In the event the original vouchers cannot remain in PETROBRAS' possession, copies thereof may be submitted, which shall be checked by the Contract Manager, and the following text is to be placed on each original document: "COPY SUBMITTED FOR REIMBURSEMENT ON (specify date)", followed by the signature and identification by name, position and registry number, and the original are to be returned to the CONTRACTOR. In the copies that are in PETROBRAS' possession, the following text will be placed on each document: "CHECKED WITH THE ORIGINAL ON (specify the data)" and the Contract Manager will sign, identifying the signature by name, position and registry number. 7.3.1.2. The receipt, duly made formal by PETROBRAS, of any reimbursable expense voucher, does not represent the recognition of debt, nor the proof that the expense has been made. 7.3.2. The collection of reimbursable expenses can only be made by means of issuing and submittal, by the CONTRACTOR, of the Bill of Sale for the equipment and accessories, with the respective Reimbursement Document (RD) duly attached thereto, and previously approved by the Contract Manager. 7.3.2.1. The submittal of the collection document mentioned in subitem 7.3.2, shall comply with the provisions appearing in items 7.1 and 7.2 of this Clause. 7.3.2.2. The vouchers shall be the legal documents to explain doubts referring to the collections, which shall be settled, as a last resort, by PETROBRAS' Disbursement Office, who will be in possession of the vouchers approved by PETROBRAS to prepare the payment process. 7.4. Eventual payments made for more or less by PETROBRAS shall be compensated as soon as they are detected, by issuing the Debit/Credit Notes, as the case may be. 7.5. The amounts corresponding to reimbursable expenses, without budget allotment foreseen in this contract instrument, do not burden this contract's estimated total, but should, however, be foreseen in the Budget Programs of the Executive Superintendence of Exploration and Production (E&P). 7.6. The collection documents submitted by the CONTRACTOR, as well as the final collection document, shall be paid with the deduction of amounts that, at any title, under the conditions set forth in the contract, or others specially agreed upon, are due to PETROBRAS. 7.7. The CONTRACTOR agrees that, at PETROBRAS exclusive option, the present Contract can be paid by means of third party financing, provided the time limits, currency, amounts, and place of payment, and the CONTRACTOR'S rights foreseen in this Contract, are complied with". SIXTH CLAUSE - RESPONSIBILITY. 6.1. The present rider binds the parties as of the date of its signature and enters in force as of the ASSIGNMENT DATE. SEVENTH CLAUSE - RATIFICATION. 7.1. PETROBRAS, the ASSIGNOR and the ASSIGNEE ratify the terms and conditions of the Contract that are not incompatible with the provisions of this instrument. And being thus agreed, the parties sign the present Rider in 4 (four) copies of the same tenor and fashion, together with the witnesses below. Rio de Janeiro, July 10, 1998. (Signed:) (Illegible) - Luiz Eduardo G. Carneiro. Executive Superintendent of Exploration and Production South-Southeast. PETROLEO BRASILEIRO S.A. (Signed:) (Illegible) - German Efromovich. President - MARITIMA PETROLEO E ENGENHARIA LTDA (ASSIGNOR). (Signed:) (Illegible) - German Efromovich. Director - PETRODRILL FIVE LTD. (ASSIGNEE) WITNESSES: (Signed:) (Illegible) (Rubber stamp:) Jose Joao Afonso Filho - Administrator - Registry 010979.7. (Signed:) (Illegible). (The rubber stamp and the signature of Jose Joao Afonso Filho appeared on the first page of the document.) (An ititial appeared on all other pages of the document.) - - -------------------------------------------------------------------------------- THESE BEING the precise terms and content of the aforementioned document, I hereby set my Hand and Seal on this Translation, performed on November 26, 1998 in this City of Rio de Janeiro, Federative Republic of Brazil. /s/ MARCIA BARBOSA SERRA ------------------------ Marcia Barbosa Serra Sworn Public Translator EX-10.10 49 EXHIBIT 10.10 MARCIA BARBOSA SERRA Tradutora Publica Juramentada e Interprete Comercial SWORN PUBLIC TRANSLATOR AND COMMERCIAL INTERPRETER Rua Aperana, 38 apt 301 - Leblon -22450 ISS: 1261003-00 - CIC 606442227-00 Tel.: 274:3844 I, the undersigned, Sworn Public Translator and Commercial Interpreter in and for this City and State of Rio de Janeiro, Federative Republic of Brazil, registered at the Commercial Board of Rio de Janeiro under Number 97, do hereby CERTIFY and ATTEST that a document in the Portuguese Language was submitted to me for translation into English, which I performed according to my Office, as follows: TRANSLATION NO. 3975/97 (Xerox copy submitted for translation.)....................................... (On paper with letterhead of Petroleo Brasileiro S.A. PETROBRAS.)............ CONTRACT 101.2.101.97-0....................................................... SERVICES RENDERING CONTRACT SERVICES RENDERING CONTRACT ENTERED INTO BETWEEN PETROLEO BRASILEIRO S.A. - PETROBRAS AND THE COMPANY MARITIMA NAVEGACAO E ENG. LTDA........................... PETROLEO BRASILEIRO S.A. PETROBRAS, a mixed economy company, organized and existing under Law No. 2.004, dated 10/03/53, with head office at Av. Republica do Chile, 65, City of Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil, enrolled in the General Taxpayers' Registry of the Ministry of Finance under No 33.000.167/0001-01, represented herein by the Executive Superintendent of Exploration and Production (E&P), Engineer LUIZ EDUARDO G. (2) CARNEIRO, henceforth called PETROBRAS, and the Company MARITIMA NAVEGACAO E ENGENHARIA LTDA., with head office at Avenida Almirante Barroso, no 42, 34th floor, City of Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil, enrolled in the General Taxpayers' Registry of the Ministry of Finance under No.46.828.596/0001-13, represented herein by its President, Mr. GERMAN EFROMOVICH, have agreed upon the present CONTRACT to render services, with the use of the Dynamic Positioning Floating Unit AMETHYST 5 and its accessories, described in Attachment I, henceforth called the UNIT, according to the authorization of PETROBRAS' Executive Board (MINUTES No. 4.116, Item No. 24, dated 09/18/97) the parties being bound to the terms of the Invitation to Bid No. 101.0.001.97-6 and subjected to the following Clauses and Conditions: ............................................ (End of the Qualification) ................................................... (3) FIRST CLAUSE - OBJECT......................................................... 1.1. The object of the present CONTRACT is the rendering, by the CONTRACTOR, of the services of evaluation and/or completion and/or workover of oil and/or gas (vertical, directional and horizontal) wells, in the Brazilian continental shelf, down to a maximum depth of 5,000 (five thousand) meters, in a water depth down to 1,200 (twelve hundred) meters by using the UNIT................................................ 1.1.1. For the fulfillment of the present CONTRACT, the CONTRACTOR is to maintain its base of operation in the City of Macae-RJ................ 1.2. The services object of the present CONTRACT are contained in the Continental Shelf Activities and Disbursement and Cost Plans, under the following codes: ..................................................... B 12100-Boring-Production Development................................. A 22100-Boring-Exploratory Drilling................................... B 13200-Completion and Intervention for Evaluation-Production Development........................................................ A 24200-Intervention for Evaluation-Exploratory Drilling.............. C 15200 = Workover Operation.......................................... (End of Clause)............................................................... 4 SECOND CLAUSE - PERIOD OF VALIDITY AND DURATION.............................. 2.1. Period of Validity-The present CONTRACT binds the parties as of its signature............................................................. 2.2. Duration-The present CONTRACT will have a duration of 2,190 (twenty-one hundred and ninety) days.............................................. 2.2.1. Beginning of the CONTRACT-The beginning of the CONTRACT will occur when the UNIT is released by PETROBRAS, through a written notice, to begin the operations, after the general equipment testing foreseen in item 3.1 is carried out........................................................ 2.2.2. Automatic Extension-If at the end of the duration mentioned in 2.2, some operation is still being performed in a well, the duration of the present CONTRACT will be automatically extended, until the completion of the works in said well, considering as the final limit the Unit's arrival at the port or sheltered waters chosen by common agreement between the parties and, also, in case there are still PETROBRAS' equipment aboard the UNIT, the completion of the withdrawal of such limit................................................................. 2.2.3. This CONTRACT may be extended for successive periods of 365 (three hundred and sixty-five) consecutive days, through a prior agreement between the parties, by means of an Addendum, the other contract conditions being complied with, and limited to a maximum contract period of 2,190 (twenty-one hundred and ninety) days ........................ 2.3. Arrival in Brazil - The UNIT should arrive at the port or in sheltered waters, in Macae-RJ. The beginning of operations should occur up to the date of 07/06/99, the provision set forth in item 9.1 of this CONTRACT being complied with .................................................. 2.3.1. At the port or in sheltered waters mentioned in 2.3, the customs and helideck inspections in the UNIT will be carried out, as well as the loading/unloading of the Contractor's and 5 PETROBRAS' materials, and also the general equipment testing will begin as foreseen in item 3.1 of this CONTRACT.............................................................. (End of Clause)............................................................... 6 THIRD CLAUSE - CONTRACTOR'S OBLIGATIONS....................................... 3.1. Before the beginning of the CONTRACT, the CONTRACTOR will arrange for a general test of the operating conditions of all of the Unit's equipment, as provided for in ATTACHMENT VIII, in the presence of PETROBRAS' Inspection. The occurrences found during the performance of the tests will be duly recorded in the Daily Drilling Certificate (ADP) signed by PETROBRAS' Inspection and by the Contractor's representative. The CONTRACTOR will be released to begin operations after proving the good operating conditions of the equipment which comprise the Unit's main systems, such as, energy generation and distribution system, anchoring system, industrial safety, liquid and bulk storage, fluid circulation and processing, safety and wellhead, column elevation, rotation and handling, columns, instrumentation, formation test equipment and communications system................................................. 3.1.1. The tests referred to in 3.1 will be made in a period estimated in 3 (three) days, after which the UNIT will be released to sail nothing pending in the Unit's main systems, as defined in item 3.1............ 3.1.1.1. In the event the tests last for a period exceeding 3 (three) days, for reasons ascribed to PETROBRAS, the rate foreseen in REF 104 (WAITING RATE) of ATTACHMENT II, will be due, applied as of the fourth day of tests, until the UNIT is released. The periods spent with equipment repair will not be calculated for the purpose of counting such duration, and also no fee will be due during such periods...................... 3.1.2. PETROBRAS may opt for the partial or total performance of the receipt tests, in sheltered waters, in the deepest water depth set forth in the CONTRACT, or still in the first location.............................. 7 3.2. Operation -To render the services object of this CONTRACT using the UNIT and the equipment listed in ATTACHMENT I, complying with the other conditions of and ATTACHMENTS to this CONTRACT, according to the international standards recommended for services of such nature......... 3.2.1. Safety Standards - The CONTRACTOR will carry out the services in strict compliance with the international safety standards for work of such nature, aiming at the protection of personnel, materials and equipment that belong to it, PETROBRAS and third parties. PETROBRAS' Safety Rules, which the CONTRACTOR states to know will be particularly complied with. In the event of conflict, between PETROBRAS' standards and the Contractor's, the Contractor's Standards will prevail, unless PETROBRAS expressly requires to the contrary in each case............... ....... 3.3. Supply of Materials - To be responsible for the purchase, when requested by PETROBRAS, in the domestic market, of other materials needed to render the services object of this CONTRACT. The purchase of the materials mentioned in this item will be submitted to the prior approval by PETROBRAS which will reimburse them as set forth in item 4.2..... 3.3.1. The materials mentioned in item 3.3 will be delivered by the CONTRACTOR to PETROBRAS, at the port or airport the latter indicates............. 3.3.2. To submit the expense vouchers in the maximum period of 60 (sixty) consecutive days after the actual date of the purchase................ 3.4. Services by Third Parties - To request, when asked by PETROBRAS, other specialized services available in Brazil, related to the object of this CONTRACT, behooving the CONTRACTOR all measures for their actual performance, including the obtainment of PETROBRAS' prior and express approval of the costs arising therefrom, which will be reimbursed as set forth in item 4.2..................................................... 8 3.5. Personnel - To be liable, in its own name, and for its own responsibility and onus, for all personnel needed for the efficient and complete performance of the services object of this CONTRACT which will operate on the basis of 24 (twenty-four) hours a day and 7 (seven) days a week. The list of the minimum personnel to be used by the CONTRACTOR is basically the one mentioned in ATTACHMENT V....................... 3.5.1. The CONTRACTOR guarantees that the personnel mentioned in ATTACHMENT V will allow it to fully carry out the performance of the services object of this CONTRACT, running, as a result, for its own account, all charges arising from the need to increase the personnel.............. 3.5.2.The CONTRACTOR will be liable for the maintenance and cost of the personnel required for the fulfillment of the operational and safety rules and regulations issued by the proper authorities, including the compliance with the provisions of the PORTOMARINST No. 13-02, dated 06/26/85, and of the Navy Department, Ports and Coasts Authority...... 3.5.3. The technical personnel should possess proven competence in their specialization, and the CONTRACTOR is to supply PETROBRAS with their respective "curriculum vitae"......................................... 3.5.4. To provide for training and/or recycling of its personnel in the Course on BASIC SAFETY NOTIONS, held by PETROBRAS, according to the program and conditions to be agreed upon between the parties ..................... 3.5.4.1. For Superintendents on Board, for the Persons in Charge and for the Drillers, a qualification certificate in well control supplied by PETROBRAS or by a Training Center qualified by IADC or IWCS will be required................................... 3.6. To be liable for all charges regarding the contracting of its personnel and any additional that are or may become due, as well as for the withholding and payment of social, labor and 9 social security contributions set down by the Law, and other charges that may become due at any title, being for all purposes, the sole employer.............................................................. 3.6.1. Whenever requested by PETROBRAS, the CONTRACTOR will submit the documents regarding the proof of payment of its labor obligations, including social security contributions (CD Negative Debt Certificate) and FGT. deposits, regarding its employees............................ 3.6.2. To make sure that its personnel, who work in activities or operations that subject them to. noxious agents, included in the list referred to in Article 58 of Law No. 8.213/91, are not retired in this special condition, according to the restriction expressly contained in Article 3rd of Law No. 9.032 dated 04.18.95................................... 3.7. To bear all measures and expenses with displacement of personnel, such as, but not limited to, transportation from abroad to the port or airport of Macae-RJ, as indicated by PETROBRAS, and the, return to the place of origin, and any and all expenses with personnel travel and stay in Brazil, insurances, medical and hospital expenses, meals, passports, as well as for extra expenses caused by delay or cancelling of flights, be it due to bad weather or to the non-availability of planes................................................................ 3.8. To promote, without charges to PETROBRAS, the replacement and immediate withdrawal of any of its employees that may be required by PETROBRAS at any time, due to bad behavior, technical deficiency, inefficiency or health conditions.................................................... 10 3.9. Whenever requested, to train PETROBRAS' personnel in the services object of the present CONTRACT............................................... 3.10. All correspondence between the CONTRACTOR and PETROBRAS will be written and forwarded in Portuguese 3.11 To provide, in the UNIT chartered for the performance of the services object of this CONTRACT, lodging, food, mess room services, rendered by a Brazilian company, for PETROBRAS' personnel and those of third parties at PETROBRAS' service, up to the maximum of 26 (twenty-six) persons, being agreed that the CONTRACTOR will freely supply 1300 (thirteen hundred) meals per month. The meals exceeding this number will be paid by PETROBRAS, based on the rate set forth in the Unit Price Spreadsheet appearing in ATTACHMENT III. 3.11.1. The quality of the mess room services and the food supply are the contractor's responsibility, who will maintain a permanent supervision by a male nurse on board and eventually by a qualified nutritionist. PETROBRAS may require that the CONTRACTOR takes measures in the event such services show a loss in quality standards........................ 3.12. Insurances - To provide, for its account, the contracting of the insurances necessary to fulfill this CONTRACT and the Brazilian laws, intended to cover its assets and its personnel, even when they are in transportation under PETROBRAS' responsibility, as well as the Civil Liability insurance for damages and losses caused to third parties, which will not imply in limiting the contractor's liability, and it should also include PETROBRAS as a third party for the purposes of such coverage ............................................................. 3.12.1. The minimum mandatory value of the civil liability insurance is of US$1,000,000.00 (one million dollars), per event, during the period of validity of this CONTRACT and of its eventual extension, which amount is to be converted into Brazilian currency on the date the 11 present CONTRACT is signed. MARITIMA NAVEGACAO E ENGENHARIA LTDA. is to appear as co-insured in this policy................................... 3.13. The franchises which may be established for the insurances mentioned in item 3.12, as well as the onus arising from the Insurers' requirements and/or, recommendations will fully run for the contractor's account... 3.13.1. The provision of item 3.13 applies also to the insurances of transportation made by the CONTRACTOR, regarding the contractor's equipment by PETROBRAS, as set forth in item 4.4 3.14. The keep PETROBRAS free and safe from any and all indemnity claim for damages and/or losses of any kind which the CONTRACTOR may have sustained as a result of this CONTRACT, whether or not it has made adequate and sufficient insurance for such circumstances......................................................... 3.14.1. PETROBRAS will be equally kept free and safe from any and all indemnity claim for damages and/or losses of any kind which the CONTRACTOR may have caused to third parties for its duly proven grossly negligent action or omission, arising from this CONTRACT, whether or not it has made adequate and sufficient insurance for such circumstances......... 3.14.2. In return, the CONTRACTOR will be kept free and safe from any and all indemnity claim for damages and/or losses of any kind, which PETROBRAS may have sustained from third parties, or has caused to third parties by its duly proven grossly negligent action or omission, as a result of this CONTRACT, whether or not it has made adequate and sufficient insurance for such circumstances...................................... 3.15. To undertake, up to the limit equivalent to US$500,000.00 (five hundred thousand United States dollars) per event, any and all liability for death or damages to persons, provided they 12 are caused by duly proven grossly negligent action or omission on its part and/or its employees and/or personnel........................... 3.16. The CONTRACTOR waives for itself and will require from its Insurers, and/or Subcontractors, in any and all insurance made as a result of this CONTRACT, the inclusion, in each policy contracted, the provision assuring the waiver of any right to subrogation against PETROBRAS..... 3.17. To submit to the CONTRACT Manager, up to 30 (thirty) consecutive days after its inception, as foreseen, in item 2.2.1, the originals of the insurance policies made as a result of this CONTRACT, containing all essential data, such as insurers, time limits, period of validity, amounts insured, and coverage conditions, and with PETROBRAS appearing as coinsured, except in the civil liability insurance, of which it will participate as a third party 3.17.1. The policies mentioned in item 3.17 will contain a provision that the insurances mentioned cannot be amended and/or cancelled without PETROBRAS' prior authorization........................................ 3.18. Losses and Damages-The CONTRACTOR will be liable for damages to its own equipment and material, and to those which; it and its agents may cause to PETROBRAS or to third parties, as a result of its duly proven grossly negligent action or omission, in the following cases:................. 3.18.1. In the event of losses of or damages to equipment and/or materials belonging to PETROBRAS and/or to third parties, which are aboard the UNIT, or during their moving between the UNIT and the support vessels, the contractor's liability will be limited to the replacement or repair of the equipment so lost or damaged due to the contractor's or its employees' duly proven fault. However, the CONTRACTOR will not be liable for and will 13 be kept free and safe from in the event of damages to reservoirs, indirect damages or loss of profit of PETROBRAS, losses and damages arising from pollution coming from the well, resulting from kick and/or blowout............................................................... 3.18.2. In case of losses and damages caused to the well, arising from the events mentioned in subitem, 2.1.5 of ATTACHMENT II, the CONTRACTOR will reimburse PETROBRAS the payments it comes to make to third parties referring to cementing, logging, or other services related to the object of the present CONTRACT, as well as to materials (cement, casing, bits, completion fluid materials). In the event PETROBRAS opts for the definitive abandonment of the damaged well, the CONTRACTOR will reimburse the expenses made by PETROBRAS to drill that well........... 3.18.3. In the cases mentioned in subitems; 3.18.1 and 3.18.2. the limit for the contractor's liability is of US$500,000.00 per event and its deployments........................................................... 3.19. Secrecy - To maintain complete secrecy on the data and information supplied by PETROBRAS, as well as on all of the results and analyses arising from the services referring to the present CONTRACT. 3.19.1 All data, information and other documents of any kind, referring to the fulfillment of this CONTRACT, are PETROBRAS' exclusive property....... 3.19.2. The CONTRACTOR and its personnel cannot disclose or supply to third parties any materials or information obtained as a result of this CONTRACT, unless expressly authorized by PETROBRAS.................... 3.19.3. The provision of this item 3.19 is a standing obligation, valid even after the termination, in any fashion, of the present CONTRACT........ 3.20. The be liable for the violations it commits regarding author's right and the use of materials and/or performance processes protected by trademarks and patents, as well as for any claims 14 arising from the bad use it makes of them, running for its account the payment of any charges, royalties, fees, commission, indemnities, and any other expenses arising from said violation, including the legal ones.................................................................. 3.21. Sea Operations To render the services object of this CONTRACT in strict compliance with the laws, standards, regulations and administrative rules, as well as the instructions issued by the Shipping Office or by other proper authorities, specially those regarding the spillage of oil and other residues from the UNIT into the sea, being liable, as a result, for any charges arising from the violation of such laws, standards, regulations, administrative rules and instructions, the limit established in subitem 3.21.2 being complied with, and excepting the cases provided for in item 3.20 of this CONTRACT...................... 3.21.1. To plan and carry out operations intended to prevent and fight oil or gas blow outs, fires, or other accidents, complying with the provision set forth in item 2.4 of the ATTACHMENT I to this CONTRACT. Although the CONTRACTOR is considered fully responsible for such operations, it is obliged to discuss the methods to be adopted with PETROBRAS, so as to find the best operating solution....................................... 3.21.2. With exception of the cases arising from kick, blow out, surging or formation testing, which the CONTRACTOR will be kept free and safe from, in the other cases of spillage of petroleum, oil and other residues in the sea, the CONTRACTOR will be liable up to the limit of US$500,000.00 (five hundred thousand American dollars) per event and its deployments. 3.22. The storage aboard the UNIT, as well as the handling aboard, and between the UNIT and support vessels, of materials, equipment, drilling or completion fluid additives, chemical additives belonging to PETROBRAS or to third parties at the service of PETROBRAS, are the contractor's responsibility........................................................ 15 3.23. To bear all expenses, including with diesel oil and transportation of the UNIT for dockages, including those arising from act of God or force majeure, as defined in the Thirteenth Clause of the CONTRACT............ 3.24. To maintain a hospital ward in the UNIT with at least 2 (two) beds, provided with equipment and medicine necessary for the prompt attention to sick and injured persons, as determined by the Shipping Office, such hospital ward being subjected to periodical inspections by PETROBRAS.. 3.25. The CONTRACTOR undertakes to maintain all conditions required in the bidding. stage, during the performance of the SERVICES CONTRACTED..... 3.26. To maintain an agent accredited and accepted by PETROBRAS in the UNIT or in a place previously designated by PETROBRAS, to represent the CONTRACTOR in the fulfillment of the CONTRACT .................... 3.27. To comply with the requests contained in the Service Authorization(s) issued by PETROBRAS................................................... 3.28. To allow, after negotiations between the contracting parties, the provisional installation in the chartered vessel, of complementary equipment such as, but not limited to: pipes or risers in catenary by the J-lay method, or similar, submarine manifolds, provided they do not jeopardize the Vessel's safety and are in accordance with the rules of the Classification Society............................................ (End of Clause)............................................................... 16 FOURTH CLAUSE - PETROBRAS' OBLIGATIONS......................................... 4.1. To make monthly payments for the services rendered by the CONTRACTOR due to the present CONTRACT, based on the ATTACHMENT II and ATTACHMENT III and on the conditions set forth in Clauses Sixth: Readjustment Seventh: Measurement and Eighth: Form of Payment, the other ATTACHMENTS, Clauses and Conditions of this CONTRACT being complied with. 4.2. To reimburse, by means of submittal of vouchers, the expenses. with materials and services of third parties, according to items 3.3 and 3.4 of this CONTRACT. The reimbursement will be comprised of: a) Amount of the bill issued by the supplying and/or service rendering company;......................................................... b) Expenses actually made to place the materials in the UNIT;....... c) Cost of the :insurance for the materials, as authorized by PETROBRAS. In the event PETROBRAS does not authorize such insurance, the CONTRACTOR will not be liable for losses and damages of any kind that they may. sustain: until their delivery to PETROBRAS at the port or airport it indicates:........ 4.3. Operations and Locations Program PETROBRAS will provide the CONTRACTOR with the Operations Program, in writing and with due antecedence, and it also, will notify; on the locations where the services will be rendered, so that the CONTRACTOR may adopt, in due time, the measures necessary for their performance....................................... 4.4. Transportation:....................................................... 4.4.1. PETROBRAS will provide transportation to the UNIT of all of the contractor's personnel involved in the rendering of the services, from the port or airport indicated by 17 PETROBRAS in the beginning of this CONTRACT, and vice versa. At its exclusive discretion, the transportation to be provided will be by helicopter or vessel......... 4.4.2. PETROBRAS will provide transportation for the material and equipment, related to the object of this CONTRACT, from the port or airport designated, to the UNIT and vice versa 4.4.3 In any circumstances foreseen in this Item, the granting of insurance coverage will not be PETROBRAS' competence, and the CONTRACTOR waives immediately, for itself and for its insurers, any return action against PETROBRAS or third parties at its service, as a result of the transportation provided............................................... 4.4.4. In the event there is need to program exclusive air transportation, to survey the UNIT, by the Navy and/or SHIPPING OFFICE, the costs arising therefrom will be charged to the CONTRACTOR .......................... 4.4.5. PETROBRAS may provide air or sea transportation for the contractor's materials, industrial or fresh water and fuel before the beginning of the CONTRACT, as defined in item 2.2.1. The costs arising therefrom will be reimbursed by the CONTRACTOR to PETROBRAS.......................... 4.4.6. PETROBRAS will provide tugs and support vessels for the UNIT, from the location where the general, testing of the equipment is performed, to the first location, between locations and from the last location to the Brazilian port or sheltered waters closest thereto, which will be chosen in common agreement between the parties............................... 4.4.6.1. PETROBRAS will provide the support vessels f or the Unit's positioning in the locations to be drilled during the fulfillment of this CONTRACT.............................................................. 4.4.7. PETROBRAS may provide tugs and/or support vessels to load and unload materials and to handle anchors, in a place to be defined by the parties, in cases of inspection and/or dockages, including those arising from act of God or force majeure, as defined in the 18 Thirteenth Clause of this CONTRACT. The costs arising therefrom will be reimbursed by the CONTRACTOR to PETROBRAS............................. 4.5. Fuel and Water To supply, for its account, all fuel and water necessary for the performance of the services object of this CONTRACT, from the beginning of the CONTRACT, as provided for in subitem, 2.2.1, the provisions of item 3.23 of this CONTRACT being complied with.......... 4.5.1. The supply of water mentioned in item 4.5 includes also the industrial water intended for cleaning the UNIT. 4.6 Completion Fluid-To maintain the control of the properties of the fluid by an accredited employee, as well as to control the stock of materials necessary for such purpose........................................... 4.7. Ancillary Services-To provide, at its expenses and under its responsibility, the ancillary services, referring to: cementing, formation testing, electric logging, flexitube operation, operation with nitrogen, electric wire operation, wireline operation, when they derive from PETROBRAS' own programming....................................... 4.8. At its exclusive judgment, and without any coresponsibility, PETROBRAS may cooperate with the CONTRACTOR, assisting it before the Foreign Trade Department Trade Exchange Coordinating Office (CTIC), regarding proceedings submitted to these Agencies, referring to materials and/or equipment pertaining to the rendering of the services object of this CONTRACT. Such cooperation, however, will not lessen , the contractor's liability for the obtainment of the documents and/or benefits that may be the object of the respective proceedings........................... 4.9. To issue Service Authorization (s) with all information necessary for their performance, such as: location, time limit, value scope, and beginning and end dates............................................... 4.10. To notify the CONTRACTOR, in writing, on the imposition of eventual fines................................................................. 19 4.11. To issue the Measurement Bulletin (MB), as set forth in the Seventh Clause: Measurement, of this CONTRACT................................. (End of Clause)............................................................... 20 FIFTH CLAUSE - PRICES AND VALUE............................................... 5.1. For the rendering of the services object of this CONTRACT, PETROBRAS will pay to the CONTRACTOR the rates set forth in ATTACHMENT II and ATTACHMENT III to this CONTRACT, under the conditions set forth in Clauses Sixth-Measurement Seventh-Measurement, and Eighth-Form of Payment............................................................... 5.1.1. The contract prices include all specified tariffs, supervision, administration, taxes, fiscal emoluments and all expenses that fall directly or indirectly upon the rendering of the services, including profit, needed for its perfect fulfillment, until the end of the contract, no price revision claims being therefore valid.............. 5.2. The total estimated value of this present contract is of R$26,117,862.95 (twenty-six million, one hundred and seventeen thousand, eight hundred and sixty-two reais and ninety-five cents)............................ 5.3. PETROBRAS does not undertake to make the payment of the total estimated in item 5.2, but of the amount corresponding to the services rendered and accepted by PETROBRAS............................................. 5.4. In the event the UNIT begins the Contract before the time limit of 630(six hundred and thirty) days granted according to item 2.3 of the present CONTRACT, PETROBRAS will grant a bonus for anticipation, varying linearly from zero, for zero days of anticipation, up to a maximum amount of 30%..(thirty percent) of the value of the mobilization rate, for an anticipation greater than or equal to 180 (one hundred and eighty) days.......................................................... 5.5. In the event the UNIT suffers a delay regarding the time limit granted in item 2.3 of the present Contract, the CONTRACTOR will have its mobilization rate reduced in up to 30% (thirty percent), for a delay greater than or equal to 90 (ninety) days, which will vary linearly up to zero; for zero day of delay..................................... 21 5.6. In the event the UNIT suffers a delay greater than 90 (ninety) days, as of the time limit granted in item 2.3 of the present Contract, besides the maximum reduction of 30% (thirty percent) in the mobilization rate, the CONTRACTOR will be subjected to the. imposition of fines according to items 8.1 and 9.1 of the 91st (ninety-first) to the 180th (one hundred and eightieth) day of delay................................... 5.7. The financial resources necessary for the payment of the services object of the present CONTRACT are duly equated and specifically assured in the budget for the present fiscal year and foreseen for the following ones to cover the period for the total rendering of the services.............................................................. (End of Clause)............................................................... 22 SIXTH CLAUSE - PRICE READJUSTMENT............................................. 6.1. The contract prices in Brazilian currency, will be readjusted yearly, after l (one) year as of the month when the CONTRACTOR's proposal was submitted has elapsed, for more or for less, as a result of the variation of the elements that comprise the readjustment formula, set forth in subitems 6.2.1 and 6.2.2 below............................... 6.1.1. If during the period of validity of this CONTRACT, new legal provisions are created which permit the reduction of the periodicity referred to in 6.1, the parties will make a new agreement regarding the contract prices, to expurgate eventual overprices arising from the periodicity originally established for the application of the readjustment........ 6.2. The prices set forth in the Unit Prices Spreadsheet-ATTACHMENT III to this CONTRACT, will be readjusted by applying the following calculation formulae: ............................................................ 6.2.1. For the prices of REF 101, 104 and 105 of the Unit Prices Spreadsheet- ATTACHMENT III: INS USA MEQ PCR = PCI, [0.55 ----- + 0.10 ----- + 0.35 -----] ISOo USAo MEQo 6.2.2. For the price referring to extra meals, appearing in the Unit Prices Spreadsheet - ATTACHMENT III:.................................... ABR PRC = PCI. [-----] ABRo Where: ....................................................................... PCR = readjusted contract price;.............................................. PCI = initial contract price, in force on the date of the contractor's proposal;................................................................... 23 INS = Index number of the National Consumer Price Index (INPC), published by the Brazilian Institute of Geography and Statistics IBGE, corresponding to the months in which the readjustment is due............ INSo= Index number of the INS defined above, corresponding to the month when the CONTRACTOR's proposal was submitted;................................ USA = value of the United States dollar selling rate in the commercial exchange in force on the 30th day of the month in which the readjustment is due;.................................................... USAo = value of the same rate in force on the 30th day of the month the CONTRACTOR's proposal was submitted;.................................... MEQ = definitive value of the Wholesale Index - Domestic - Availability - Brazil-Production Goods - Machinery, Vehicles and Equipment - Machinery and Equipment - Column 15 of the Getulio Vargas Foundation's Magazine "Conjuntura Economica", code A0161724, corresponding to the month when the readjustment is due;................................................ MEQo = definitive value of this same index, corresponding to the month when the CONTRACTOR's proposal was submitted;............................... ABR = definitive value of the Price Index - Consumer Price - Brazil - Cost of Living - Food, Column 1, Code A0201475, of the Getulio Vargas Foundation's Magazine "Conjuntura Economica", corresponding to the month when the readjustment is due;..................................... ABRo = definitive value of this same index, corresponding to the month when the CONTRACTOR's proposal was submitted .................................. 6.2.3. The reference basis of the CONTRACTOR's proposal is the month of May/97. 24 6.3 PETROBRAS will make the readjustment calculation, expressing its result, duly made evident, in the Measurement Bulletin (MB) of the services to which it refers, for the purposes of issuing the respective collection document..................................................... 6.4. In the event of delay in the partial or total disclosure of the indexes, a readjustment factor will be provisionally used, calculated on the basis of the last indexes known by then, at the time the Measurement Bulletin (MB) was issued.............................................. 6.4.1. The eventual difference between the definitive and the provisional readjustment will be invoiced by the CONTRACTOR after the issuing of the Readjustment Bulletin (RB) by PETROBRAS, as provided for in subitem 7.3.1 of this CONTRACT................................................ 6.5. The readjustment will not include the services performed before the date when the reason that justifies it has occurred........................ 6.6. The readjustment factor will be applied with 4 (four) decimal places, without rounding off.................................................. 6.7. The CONTRACTOR states that the prices proposed for the performance of the services object of the contract have taken into account all costs, inputs, expenses and other legal obligations for the complete fulfillment of the contract provisions established.................... (End of Clause)............................................................... 25 SEVENTH CLAUSE - MEASUREMENT.................................................. 7.1. Periodicity of the measurements of the services and determination of the reimbursable expenses................................................. 7.1.1. For the services, the measurement will be made monthly, according to the procedures mentioned below, with the consequent issuing of the respective Measurement Bulletins (MB)................................. a) the initial measurement of the services will be made between the date of the beginning of this CONTRACT and the last day of the calendar month;................................................... b) The intermediate measurements of the services, corresponding to a given month, of the order "m", cover the period between day 01 and the last day of the calendar month of the order "m";................ c). The final measurement of the services will cover the period between day 01 of the month "m" and the day of the termination of this CONTRACT.......................................................... 7.1.2. The reimbursable expenses, if provided for in the CONTRACT, will be determined on any day of the month, according to the vouchers submitted to and accepted by PETROBRAS, and more than one determination can be made in the same period, covered by the measurement................... 7.1.2.1. The results found will be submitted to the CONTRACTOR on the 5th (fifth) working day, as of the submittal of said vouchers, by means of a Reimbursement Document (RD), which will be signed by the Manager of this CONTRACT, for invoicing purposes...................................... 7.1.2.2. The reimbursable expenses and the deductions, if provided. for in the CONTRACT, are to be individually made evident in the Reimbursement Documents (RD)........................................................ 7.2. Issuing of the Measurement Bulletins (MB)............................... 26 7.2.1. PETROBRAS, through the Manager of this CONTRACT, at the end of each period as mentioned in the letters of subitem 7.1.1 of this Clause, will carry out the measurement of the services, gathering the results found in the Measurement Bulletin (MB), for the signature of the Manager of this CONTRACT and of the CONTRACTOR, complying with the following: a) For the initial, intermediate and final measurements ending on the last day of CONTRACTOR will receive one of the copies of the MB up to the 5th (fifth) subsequent working day, so that it may submit the respective collection documents, As provided for in subitem 7.4.1 of this Clause;....................................................... b) For the final measurement, when the termination of the CONTRACT does not occur in the last day of the month, the CONTRACTOR will receive one of the copies of the MB, up to the 5th (fifth) working day after the termination of the CONTRACT, so that it may submit the respective collection documents, as provided for in subitem 7.4.1;............ c) For each measurement period of the services, only 1 (one) collection document may be issued, being understood that collection documents with partial values regarding said period will not be taken into account for payment purposes, with exception of the cases of collection of differences in readjustment, if any;................. d) In the Measurement Bulletins (MB), the portions regarding the basic and readjustment values, if any, will be made evident, using the last definitive factor known by then, and the deductions, if provided for in the CONTRACT.................................................... 7.3. Collection of the readjustment difference............................. 27 7.3.1. For the payment of an eventual readjustment complement, due to the non-availability of indexes at the time the MB is issued, PETROBRAS will issue a Readjustment Bulletin (RB).................................... 7.3.1.1. The Readjustment Bulletin (RB) will be submitted to the CONTRACTOR on the third working day after the, disclosure of the indexes applicable to the calculation of the definitive readjustment factor................. 7.4. Time for the submittal of collection documents.......................... 7.4.1. The CONTRACTOR will submit the respective collection documents to PETROBRAS' Financial Department, as mentioned in item 8.1 of this CONTRACT, in the following conditions:................................ - - -------------------------------------------------------------------------------- MEASUREMENT OCCASION FOR THE SUBMITTAL OF COLLECTION TYPE OF MEASUREMENT DOCUMENTS DOCUMENTS - - ------------------- ----------- ---------------------------------------------- INITIAL MB Up to the 8th working day following the last day of the performance of the services, and INTERMEDIATE PETROBRAS will make the payment on the 30th consecutive day, as of the final day of AND FINAL the period measured, the provision in subitem 4.1.1 being complied with. INITIAL RB In case of an eventual complement of readjustment difference, the RB will be issued up to the 3rd working day after the index to INTERMEDIATE calculate its issuing is known, and the payment will be made together with the payment AND FINAL of the principal, the minimum of 10 (ten) working days between the submittal of the Collection Document and the date of payment being complied with DETERMINATION OF RD In the first working day after the DR is REIMBURSABLE issued, and the payment will be made in a EXPENSES period of 30 (thirty) days as of the day of its submittal. - - -------------------------------------------------------------------------------- 7.4.1.1 The payments due because of this CONTRACT, referring to the services, will always occur on the 30th day after the end of the measured period, included in the MB's, or on the 28 first subsequent working day, provided the CONTRACTOR fulfills the time limits for the submittal of the Collection Documents set forth herein. In the event of non-compliance, by the CONTRACTOR, with said submittal time limits, the payments will be postponed for the number of days equal to the delay in the delivery of such documents.................. 7.5. Measurement follow-up................................................. 7.5.1. The CONTRACTOR undertakes to follow-up the measurements and the determinations carried out by PETROBRAS, offering, at that time, the impugnations or considerations it deems necessary, which will be submitted to PETROBRAS appraisal and decision........................ 7.5.2 The CONTRACTOR's signature by its representative before PETROBRAS will imply in the acknowledgement of the accuracy of the Measurement Bulletin (MB) and/or Readjustment Bulletin (RB) for all legal purposes......... (End of Clause)............................................................... 29 EIGHTH CLAUSE - FORM AND PLACE OF PAYMENT 8.1. The monthly payments due as a result of this CONTRACT will be made by PETROBRAS to the CONTRACTOR, in Brazilian currency, 30 (thirty) consecutive days, as of the last day of the period of performance of the services, provided the CONTRACTOR submits the collection documents until the 8th (eighth)working day after the last day of the period of performance of the services........................................... 8.1.1. The payment of an eventual difference in readjustment will be made on the same day in which the payment of the respective service occurs, provided the CONTRACTOR submits the corresponding collection document up to the 5th (fifty) working day after the indexes that permit the issuing of the Readjustment Bulletin (RB) are known........................... 8.1.2. The payment of reimbursable expenses, if any, will be made 30 (thirty) consecutive days after the submittal of the collection document....... 8.1.3. In the event of non-submittal of the collection documents in the time limits set above, the payment will be postponed for as many consecutive days as those corresponding to the delay in the delivery of the collection documents.................................................. 8.2. The collection documents will be submitted, together with the original of the document giving rise to them (MB, RB, RD) in the Docket of the Financial Department indicated by PETROBRAS, for the purposes of checking the fulfillment of the time limits for their payment......... 8.3. The collection documents will be issued without erasures, complying with the pertinent laws in force, and will contain obligatorily the following information: ......................................................... a) Place and date of its emission and number of the collection document;.......................................................... b) Number and date of signature of the contract deed;................. c) Number and date of the documents originating them (MB, RB, RD);.... 30 d) Gross value of the collection documents, both in numbers and in writing;........................................................... e) Name and code of the banking establishment, branch and the respective code, and number of the current account of the payee, where the payments will be made;............................................. f) In order that a particular payment is made in a banking establishment different from the one indicated at the time the contract deed was signed, such amendment will obligatorily be preceded by a fax/correspondence from the CONTRACTOR or will appear in the payee's collection document................................................ 8.3.1. In the event the collection document is inaccurate, it will be returned to the CONTRACTOR and the time limit foreseen in item 8.1 will be postponed for as many days as those corresponding to the delay in the submittal of such document............................................ 8.3.2. In the event of re-submittal of the collection document, as a result of a previous impugnation, this fact should appear in the history of the collection document................................................... 8.3.3. The CONTRACTOR will obligatorily submit, every month to the Manager of the CONTRACT:......................................................... a) Payroll of the CONTRACTOR's employees who are involved in the rendering of the services contracted;.............................. b) A photocopy of the Social Security Payment Slip (GRPS), duly settled and authenticated, obligatorily filling out field "8" (other information), the name, CGC of PETROBRAS, number, date and amount of the Invoice or Bill of Sale referring to the services rendered in the month.............................................................. 31 c) In case of a Cooperative, to submit the payment vouchers of the amount s paid, distributed or credited to its members as a remuneration for the services rendered in the fulfillment of this contract.......................................................... 8.3.4. The collection documents will not be accepted by PETROBRAS if submitted with Income Tax at Source already withheld........................... 8.3.5. It is the responsibility of PETROBRAS' disbursing office the explanation of doubts regarding the issuing of the collection documents.......... 8.3.6. Eventual payments made for more or for less by PETROBRAS, will be compensated as soon as they are detected, and the respective amounts will be duly corrected............................................... 8.3.7. The CONTRACTOR should indicate the place and fax number, if any, for the receipt of the "Notice of Payment Foreseen".......................... 8.4. The vouchers for the reimbursable expenses due to the CONTRACTOR as a result of this contract deed, will be previously submitted to the Manager of the CONTRACT, for checking, besides being duly settled by the respective supplier or service rendered, when such is the case........ 8.4.1. If the original cannot remain in PETROBRAS' hands, copies thereof may be submitted, which will be checked by the Inspector and/or Manager, and the following should appear in every original document: "COPY SUBMITTED FOR REIMBURSEMENT ON .../.../..." followed by the signature and identification by name, position and registry number, and the originals will be returned to the CONTRACTOR. The following text will appear in the copies of each document in PETROBRAS' hands: "CHECKED WITH THE ORIGINAL ON .../.../...", which the Inspector and/or Manager will sign, identifying the signature by name, position, and registry number. 32 8.4.2 In special cases of reimbursement of import costs (duties and/or expenses), the CONTRACTOR will send a letter submitting the vouchers for such expenses, together with the import proceeding, to the office responsible for its follow-up......................................... 8.4.3. The receipt, duly formalized by PETROBRAS, of any reimbursable expense voucher, does not represent the recognition of the debt, nor the proof that the expenses was made............................................ 8.4.4. The collection of reimbursable expenses can only be made through. the issuing of a Services Invoice, after approval by PETROBRAS of the respective Reimbursement Document RD, which will be issued up to 5 (five) working days, as of the date of submittal of said documents.... 8.4.4.1. PETROBRAS' Inspection has 3 (three) working days to proceed with the checking of the expense voucher and to notify its approval to the CONTRACTOR, so that it may issue the Combined Invoice and Bill of Sale. 8.4.5. The total amount of the collection document will be obtained by applying the following formula:................................................ VTD VTR = ----- , where: I-ICP VTR = total amount to be reimbursed to the CONTRACTOR;........................ VTD = total amount of the reimbursable expenses, effectively authorized; ..... ICP = total of the sum of the aliquots of taxes collected, in the decimal form (ISS or ICMS, as the case may be, COFFINS and PIS/PASEP)........... (End of Clause)............................................................... 33 NINTH CLAUSE - FINES.......................................................... 9.1. Noncompliance, by the CONTRACTOR, after ninety-one days beyond the time limit mentioned in item 2.3 of this CONTRACT have elapsed, will imply in the imposition of fine against the CONTRACTOR, in a written notice, corresponding to 30% (thirty per cent) of the rate foreseen in REF 101 of ATTACHMENT III, per day of delay.................................. 9.2. In the event of noncompliance, by the CONTRACTOR, with the inspection's requirements within the time limit it may set, PETROBRAS may, by a written notice, impose against the CONTRACTOR, per day of noncompliance with such requirements, as of the end of the time limit set, a fine corresponding to 20% (twenty per cent) of the rate provided for in REF 101 of ATTACHMENT III................................................. 9.3. The penalties set forth in this Clause do not exclude any other provided for in the Laws in force and/or in this CONTRACT...................... 9.4. The amount corresponding to the sum of the basic values of the fines imposed is limited damages to 10% (ten per cent) of the estimated total value of the present CONTRACT......................................... 9.5. The basic values of the fines will be readjusted by the readjustment factor calculated by the formula shown in subitem 6.2.1 of this CONTRACT and in force in the period of its imposition.......................... 9.5.1. The fines will be forwarded by the Inspection, for discount by the Disbursing Office, as soon as the pertinent definitive readjustment factors are known..................................................... 9.5.2. In the event of balance, PETROBRAS reserves itself the right to make or complement the deduction in collection document(s) related to any other contract deed eventually entered into with the CONTRACTOR, or to use any other adequate means to settle the debt, if necessary................. 34 9.6. In a written notice and without prejudice of the capacity to rescind the CONTRACT, PETROBRAS may impose upon the CONTRACTOR a compensatory fine of 100% (one hundred per cent) of the amount of the conviction, due to default of its labor, social security or tax obligations. 9.6.1 The payment of said fine will not exempt the CONTRACTOR from the obligation to reimburse PETROBRAS for the amount imposed upon it as a result of an eventual joint conviction passed by a Labor Court or by the proper administrative jurisdictions.................................. 9.6.2 The CONTRACTOR will be fined in the percentual of 5% (five percent) on the amount of the invoice in the event it does not submit the GRPS or submits it at variance................................................ 9.6.2.1. The GRPS is considered at variance if it does not have proof of payment of social security contributions of all of the CONTRACTOR's Brazilian crew working in the fulfillment of the CONTRACT............. 9.7. The CONTRACTOR may appeal against the imposition of the fine, in a declaration, within the non-deferrable time limit of 15 (fifteen) consecutive days as of the date the notice is received................ (End of Clause)............................................................... 35 TENTH CLAUSE - INSPECTION..................................................... 10.1. The inspection of the services contracted herein will be carried out by PETROBRAS' representatives, and the CONTRACTOR undertakes to allow their free access to the UNIT and to the service locations and to comply immediately with the observations of such inspection, which will have ample powers to:................................................. 10.1.1. Determine the interruption of the evaluation and/or completion of the well, for the purpose of carrying out formation testing, corings, electric loggings and other services deemed necessary;................ 10.1.2. Determine, provided it comes to its knowledge and is within its capacity, the suspension of the services which perhaps are being carried out in disagreement with the good technique or which threaten the safety of persons or assets of PETROBRAS, third parties and of the CONTRACTOR itself, complying with subitem 2.1.7 of ATTACHMENT I.................. 10.1.3. Refuse the use of improper or inadequate techniques, as well as the operations that do not comply with the established programs. 10.1.4 Refuse the employment of condemned or improper materials, tools and production string components, which do not comply with PETROBRAS' and API's standards....................................................... 10.1.5. Order the withdrawal, from the work site, of any of the CONTRACTOR's employees who, in PETROBRAS' opinion, may endanger the good performance of the services or hinder its inspecting activities .................. 10.1.6. Certify on the accuracy of the information reported daily by the CONTRACTOR............................................................ 10.1.7. Notify the CONTRACTOR, in writing, on the imposition of the fines provided for in this CONTRACT, including those referring to the CONTRACTOR's action or omission....................................... 10.1.8. Request from the CONTRACTOR a detailed report on any accident occurred and on any operation or repair performed.............................. 36 10.1.9. Request from the CONTRACTOR the documentation regarding the proof of payment of its labor obligations, including social security contributions (Negative Debt Certificate) and deposits in the FGTS, for the crew members...................................................... 10.2. Recordings-PETROBRAS' Inspection should record its observations on the Driller's Log approved by the IADC and on the Daily Drilling Certificate (ADP), to safeguard the rights and liabilities foreseen in this CONTRACT.............................................................. 10.3. During the period of validity of the CONTRACT, PETROBRAS will carry out evaluation of the CONTRACTOR's performance, covering the groups in equipment and material, human resources, installations, quality and efficiency. The results of the performance evaluations will be notified and consolidated by means of service performance certificates......... (End of Clause)............................................................... 37 ELEVENTH CLAUSE - RECISION.................................................... 11.1 PETROBRAS may rescind the present CONTRACT, without the CONTRACTOR being entitled to any right to indemnity and/or withholding in the following cases:................................................................ 11.1.1. Nonfulfillment, or irregular fulfillment of contract clauses, specifications, operations or time limits, as well as the repeated perpetration of faults in the fulfillment of the CONTRACT;............ 11.1.2. Total or partial subcontracting of the object of the present CONTRACT, the association of the CONTRACTOR will another, merger/ division or total or partial incorporation, except if allowed for in this CONTRACT, which affects the good fulfillment of this instrument................. 11.1.3. Interruption of the services for more than 60 (sixty) days, without good cause and previous notice to PETROBRAS;.......................... 11.1.4. Decree of the CONTRACTOR's bankruptcy................................. 11.1.5. Suspension of the services for more than 60 (sixty) days ............. 11.1.6. When the limit for the imposition of penalties provided for in item 9.4 of this CONTRACT is attained........................................ 11.1.7. Slowness in the performance of the works, leading PETROBRAS to prove the impossibility of completing the services within the established time limits................................................................ 11.1.8. Noncompliance with the determinations of PETROBRAS' agent appointed to follow-up and inspect the fulfillment of the CONTRACT, as well as those of his superiors...................................................... 11.1.9. The dissolution of the CONTRACTOR..................................... 11.1.10 The social change or the modification of the company's purpose or structure, which in PETROBRAS' opinion, hinders, the performance of the services;............................................................. 11.1.11 Delay in the beginning of the fulfillment of the CONTRACT for more than 180 (one hundred and eighty) days................................ 38 11.1.12 Rescision of the CHARTERING CONTRACT of the UNIT entered into between PETROBRAS and the INTERVENIENT PARTY.................................. 11.1.13. If the limit set forth in subitem 2.1.9 of ATTACHMENT II to this CONTRACT is attained.................................................. 11.1.14. If the limits set forth in NOTE 2 of REF 102 of ATTACHMENT II to this CONTRACT is attained.................................................. 11.1.15. Non-submittal of the proof of fulfillment of labor obligations towards the employees directly involved in the services object of this CONTRACT, including social security contributions and deposits in the FGTS, when requested by the Inspection, or if such default is proved............. 11.1.16. Non-submittal or submittal at variance of the GRPS, when the corresponding invoice is delivered.................................... 11.1.16.1. The rescision for this reason does not prevent PETROBRAS from imposing the respective fine, foreseen in 8.7.2;...................... 11.2. In the event of rescision of the contract deed for the reasons foreseen in 10.1, PETROBRAS: a) will take over the object of the contract deed, on the stage and location where it is found;........................................ b) will enforce the contract guarantee, if any, for the reimbursement of the amounts of fines and indemnities due to it;....................... c) will withhold the credits arising from the contract deed, up to the limits of the damages caused to it;................................... 11.3. After the CONTRACT is rescinded, as set forth in this Clause, the CONTRACTOR is liable, in legal and contract fashion, for the violation or inadequate performance which gives rise to 39 the rescision, as well as f or the reimbursement of damages which PETROBRAS may come to sustain......................................... 11.4. After the CONTRACT is rescinded, PETROBRAS, at its exclusive judgment, may adjudicate the operations object thereof to whom it deems appropriate, without behoving the CONTRACTOR any consultation or interference, claim and/or indemnity, for whatever title, and the CONTRACTOR will be liable to legal and contract penalties, besides answering for damages PETROBRAS may sustain........................... 11.4.1. The CONTRACTOR is also liable for the pertinent administrative sanctions, its full defense being guaranteed.......................... 11.5 In the event PETROBRAS does not impose the right to rescind the present CONTRACT according to this Clause, it may, at its absolute discretion, withhold the payments of pending invoices, until the CONTRACTOR fulfills the contract condition it has infringed, but such fact will not represent novation nor will it generate rights that may be claimed by the CONTRACTOR........................................................ (End of Clause)............................................................... 40 TWELFTH CLAUSE - FISCAL CHARGES............................................... 12.1. Taxes (taxes, fees, emoluments, fiscal and parafiscal contributions) that are due as a direct or indirect result of the present CONTRACT, or of its fulfillment, will be the exclusive responsibility of the taxpayer, so defined in the tax rule, with no right to reimbursement. PETROBRAS, as the disbursing source, will discount and withhold within the legal time period, from the payments it makes, the taxes it is liable to by the laws in force........................................ 12.1.1. The CONTRACTOR states that, in quoting its prices, it has taken into account the taxes (taxes, fees, emoluments, fiscal and parafiscal contributions) charged on the fulfillment of this CONTRACT, and it cannot make any claim due to error on such evaluation, for the purpose of requesting a price revision or reimbursement of payments set down by the proper authority.................................................. 12.1.2. once found, during the period of validity of the CONTRACT, that the CONTRACTOR has unduly added to its prices amounts corresponding to taxes, fiscal and/or parafiscal contributors and emoluments of any kind that are not charged to the performance of the services agreed upon, such values will be immediately excluded, with the consequence reduction of the prices practiced and reimbursement of 'amounts that may have been paid to the CONTRACTOR............................................... 12.2. If, during the period of validity of this CONTRACT, any of the following events occur: creation of new taxes; extinction of existing taxes; changes in the aliquots; establishment of tax incentives of any kind; and exemption or abatement of federal, state or county taxes; which, provedly come to increase or reduce the burdens of the parties to the contract, the prices will be revised, so as to fit them into the changes made, compensating, at the first opportunity, any differences arising from such changes. However, if it is a question of tax incentives, the advantages arising therefrom will always be for PETROBRAS............. 41 (End of Clause)............................................................... 42 THIRTEENTH CLAUSE - FORCE MAJEURE............................................. 13.1 PETROBRAS and the CONTRACTOR will not be liable for the nonfulfillment of their respective obligations in case of events that characterize an act of God or force majeure defined in the sole paragraph of Article 1.058 of the Brazilian Civil Code. Any suspension of performance due to this item will be limited to the period during which such cause or its consequences exist, and such period will be added to the duration of the CONTRACT mentioned in the Second Clause of the present CONTRACT. However, the CONTRACTOR is assured the right to receive the rate provided for in REF 104 of ATTACHMENT III, with the exception of the exemption from payment set forth in subitem 2.1.4 of the ATTACHMENT II, and the reimbursements mentioned in this CONTRACT, and furthermore, the parties will severally assume their losses............................ 13.2. If the circumstance that justify the invoking of the existence of an act of God or force majeure occurs, the party unable to fulfill its obligations will immediately notify the other party, in writing, on the occurrence and its consequences....................................... 13.3. If the impediment arising from the force majeure lasts for more than 90 (ninety) consecutive days, any of the parties may opt for the termination of the CONTRACT, with both parties complying with their mutual obligations due until the date of the beginning of said impediment............................................................ (End of Clause)............................................................... 43 FOURTEENTH CLAUSE - ASSIGNMENT AND TRANSFER................................... 14.1. The CONTRACTOR cannot assign or transfer, in whole or in part, the present CONTRACT, except with PETROBRAS' prior authorization in writing. 14.2. The CONTRACTOR cannot assign or give in guarantee, at any title, in whole or in part, the credits of any kind, arising or deriving from the present CONTRACT, except with PETROBRAS' prior authorization in writing. The prior authorization will obligatorily state that PETROBRAS imposes upon the assignee of the credits the exceptions that behooves it, mentioning expressly that the payments to the assignee will be conditioned to the fulfillment, by the assignor, of all of its contract obligations.................................................... 14.3. The occurrence of the above mentioned events, duly authorized by PETROBRAS, does not exempt the CONTRACTOR from any of its contract obligations........................................................... 14.4. PETROBRAS may assign or transfer, in whole or in part, the present CONTRACT, under commercial conditions to be agreed upon by the parties. (End of Clause)............................................................... 44 FIFTEENTH CLAUSE - CONTRACT RELATIONSHIPS..................................... 15.1. This CONTRACT is related to another one for chartering the UNIT, signed on this same date between PETROBRAS and MARITIMA NAVEGACAO E ENGENHARIA LTDA. (End of Clause)............................................................... 45 SIXTEENTH CLAUSE - INTERVENIENCE.............................................. 16.1. Clause non-applicable in this Contract................................... (End of Clause)............................................................... 46 SEVENTEENTH CLAUSE - ACCEPTANCE............................................... 17.1. After the services are completed in strict compliance with the conditions set forth in the present deed, PETROBRAS will accept them by means of a DEFINITIVE ACCEPTANCE DEED signed by the parties........ 17.1.1. Before the signature of the DEFINITIVE ACCEPTANCE DEED, the CONTRACTOR will comply with all of the Inspection's requirements regarding claims, without any charge to PETROBRAS....................................... 17.1.2. The signature of the DEFINITIVE ACCEPTANCE DEED does not exempt the CONTRACTOR from the liabilities provided for in this CONTRACT and in the laws in force......................................................... (End of Clause)............................................................... 47 EIGHTEENTH - CLAUSE LIABILITY................................................. 18.1. PETROBRAS' and the CONTRACTOR'S liability f or damages will be limited to the direct damages in accordance with the Brazilian Civil Code and pertinent laws, with exception of loss of profit and indirect damages, the indirect damages being limited to 100% (one hundred percent) of the total contract value.................................................. (End of Clause)............................................................... 48 NINETEENTH CLAUSE - COMPLEMENTARY DOCUMENTS................................... 19.1. The ATTACHMENTS mentioned below are an integral part of the present CONTRACT and, in the event of disagreement between the Attachments and the CONTRACT, the text of the CONTRACT will prevail................... ATTACHMENTS I - Technical specifications of the UNIT................................... II - Applicability of the Rates and Incidents in the Performance............ III - Unit Prices Spreadsheet................................................ IV - Responsibilities in the Performance and Mutual Obligations............. V - List of Specialized Personnel;......................................... VI - Environment Operating Conditions....................................... VII - PETROBRAS' Safety Rules................................................ VIII - Radio Communication and Radio Beacon Frequency Plan.................... IX - Equipment Testing Program.............................................. X - Procedures in the Event of Fatal Accidents............................. (End of Clause)............................................................... 49 TWENTIETH CLAUSE - JURISDICTION............................................... 20.1. The Jurisdiction of the County of the Capital of the State of Rio de Janeiro will be competent to settle any questions arising from the present CONTRACT, with the express waiver, by the parties, of any other, however privileged .............................................. AND BEING THUS AGREED, the parties sign the present deed in 3 (three) copies with the same tenor, with the witnesses below.................. Rio de Janeiro, (blank)....................................................... PETROLEO BRASILEIRO S.A.-PETROBRAS............................................ (SIGNED:) LUIZ EDUARDO G. CARNEIRO............................................ LUIZ EDUARDO G. CARNEIRO-EXECUTIVE SUPERINTENDENT OF EXPLORATION AND PRODUCTION SOUTH - SOUTHEAST............................................................. MARITIMA NAVEGACAO E ENGENHARIA LTDA.......................................... (SIGNED:) GERMAN EFROMOVICH................................................... GERMAN EFROMOVICH - PRESIDENT WITNESSES: (SIGNED:) ANDRE MESQUITA PINTO................................................ CPF No. 299.579.427-49 (SIGNED:) ROBERTA LOMENHA DA COSTA............................................ CPF No. 034.053.477-00........................................................ 50 CONTRACT 101.2.101.97-0....................................................... SERVICES RENDERING ATTACHMENT II APPLICABILITY OF THE RATES AND INCIDENTS IN THE PERFORMANCE. 1 - APPLICABILITY OF THE RATES - DEFINITION OF THE SERVICE RATES PER 24 (TWENTY-FOUR) HOUR DAY........................................................ REF 101 - OPERATION RATE - It will be applied during the activities requiring the use of the UNIT, such as electric logging, formation testing, completion and workover operations, including drilling lines scouring and cutting operations.................................................................... REF 102 - REPAIR RATE - In the periods when there is an interruption of the activities that require the use of the UNIT, mentioned in Ref 101 of this ATTACHMENT and the operations for Moving the UNIT between locations, Ref 105 of this ATTACHMENT, due to maintenance, including replacement of mud pump spare parts, and/or repair in the UNIT's equipment, or in those which supply is the CONTRACTOR' s, responsibility, no rate will be due..................... Note 1. The repair period will be considered as of the interruption of the operation that is being performed, until the return to the same situation when the interruption occurred, except for the periods when the interruption in the repair activities occur due to adverse sea conditions, as set forth in NOTE 2 of Ref. 104........................ Note 2. In the event the CONTRACTOR remains in Repair Rate for an accumulated total of 30% (thirty percent) of the time, for any period of 6 (six) contract months, PETROBRAS may rescind the present CONTRACT, based on subitem 10.1.14 of this CONTRACT..................................... 51 Note 3. It will be considered as repairs the occurrences due to wash outs in the drill pipes and in the other elements of the drill string, belonging the CONTRACTOR, with exception of those arising from the presence of H2S and from abnormal mechanical conditions occurred in the well. Note 4. At the Inspections discretion, for the maintenance of the BOP, the CONTRACTOR may be granted a franchise of up to 24 (twenty-four) hours between the instant the BOP is set of the test stump, until its operational withdrawal, and the moment of its movement for the next lowering in another well, without the CONTRACTOR entering into the repair rate, provided such maintenance is carried out according to international standards. In the period within these 24 (twenty-four) hours intended exclusively for the BOP maintenance, the waiting rate (Ref. 104) will be due............................................... REF. 103 - RATE ADDITIONAL (RA) - The CONTRACTOR will be entitled to the receipt of a Rate Additional ........................................................ REF. 104 - WAITING RATE (TE) - corresponds to 95% (ninety-five percent) of the operation rate (TO) and which will be applied in BAD WEATHER, FORCE MAJEURE and WAITING situations, as defined below: 1) BAD WEATHER SITUATIONS - in the event of stoppage of the operations when environmental conditions are so severe as to endanger the UNIT's operating capacity, the limitations in ATTACHMENT VI, being complied with, making the operations unstable or unsafe or preventing support vessels to have access to the UNIT, or preventing the tugs' operations, at the time of change of locations, although the UNIT may operate normally, in spite of the bad weather.................................................................. 2) FORCE MAJEURE SITUATIONS - during the period when the UNIT cannot operate, due to act of God or force majeure, as defined in the THIRTEENTH CLAUSE of the 52 CONTRACT, until the removal of the impediment or the rescision of the CONTRACT, as the case may be. 3) WAITING - waiting for the arrival, maintenance or availability of materials from PETROBRAS or third parties, under PETROBRAS' responsibility, even if the maintenance is made in the UNIT; waiting for daylight to carry out formation tests; waiting for orders from PETROBRAS, such as, but not limited to: change of programs, definition to proceed with the completion or other production activity, rest for PETROBRAS' team or of those of third party at PETROBRAS' service; waiting for towage or support vessels....... NOTE 1. The period spent in disconnecting the LMRP from the BOP due to environment conditions, will be considered as BAD WEATHER situation, until the return to the previous situation............................ NOTE 2. If a BAD WEATHER situation occurs which interrupts a repair activity, the Waiting Rate (Ref 104) with a 25% (twenty-five percent) reduction, will be due during that period........................................ REF. 105 - MOVING RATE - corresponds to 95% (ninety-five percent) of the Operation Rate (TO) and will be applied during the following periods: a) Beginning of the CONTRACT-After the acceptance of the UNIT's equipment operating conditions, once the general testing provided for in ITEM 3. 1. of the CONTRACT has been carried out, until the spud in of the first well or reentry in a new well (beginning of the running of the first tool for access to the well):......................... b) Between locations-After the end of the drilling operations, completion or intervention in a well, with the arrival of the BOP or tool used in the well (the one which occurs last) in the moon pool, until the spud in or reentry in a new well (beginning of running the first tool for access to the well)................................. 53 NOTE: In this period are included the DP system calibration and tests, always in each new location, and in others in each contract year or at any time, when requested by PETROBRAS....................................... c) End of the Contract-After the end of the spud in or intervention operations in the last well, with the arrival of the BOP or tool used in the well (the one which occurs last) in the moon pool, until the UNIT's arrival in a sheltered waters location, chosen in common agreement between the parties, or, if there is PETROBRAS' equipment still aboard, until the withdrawal of such equipment from the UNIT........................................................... 2 - INCIDENTS IN THE PERFORMANCE.............................................. 2.1. EXEMPTION FROM PAYMENT - PETROBRAS will be exempted from the payment of the rates foreseen in this ATTACHMENT, during the period in which occurs:............................................................... 2.1.1. Interruption of the services due to the CONTRACTOR's duly proven fault arising from operational error and/or lack of material or equipment, inclusive due to the loss of equipment or subaquatic spare parts...... 2.1.2. Stoppage of the services and/or of the UNIT due to measures related to impositions by made the insurers...................................... 2.1.3. CONTRACTOR's refusal to operate under the conditions foreseen in ATTACHMENT VI-Environmental Operation Conditions...................... 2.1.4. Stoppage of the services and/or of the UNIT for inspection or dockage purposes, including surveys and dockages arising from act of God or force majeure, as defined in the THIRTEENTH CLAUSE of the CONTRACT, the corresponding expenses also running for the CONTRACTOR's account...... NOTE 1. The exemption from payment will begin in the moment there is an interruption of the operational continuity object of this CONTRACT, even if the withdrawal of all or part of 54 PETROBRAS' and/or the CONTRACTOR's cargo becomes necessary for the inspection and/or dockage............................................. NOTE 2. The end of the exemption from payment, due to the inspection and/or dockage, will occur: a) On the return to the same location, the moment the operations returns to the previous situation;......................................... b) In the mobilization for another location, the moment the UNIT starts sailing after PETROBRAS' and/or the CONTRACTOR's materials have been put back on board.................................................. 2.1.5. Occurrence of kick, drill string sticking, loss of circulation, fishing or abandonment, caused by the CONTRACTOR's duly proven action or omission, from the moment the problem was ascertained, until the return to the situation prior to its occurrence, or displacement to another location, in the event of abandonment................................. 2.1.5.1.The exemption from payment referred to in 2.1.5 will be limited to a period of 15 (fifteen) days, per event, after which the reduction foreseen in subitem 2.2.3 of this ATTACHMENT will be applied.......... 2.1.6. Occurrence of blow out caused by the CONTRACTOR's duly proven action or omission, from the moment the problem was ascertained, until the return to the situation prior to its occurrence.............................. 2.1.6.1. The exemption from payment referred to in item 2.1.6 will be limited to a period of 45 (forty-five) days, after which the reduction foreseen in subitem 2.2.4 of this ATTACHMENT will be applied................................................................. 2.1.7. Suspension of the services, determined by PETROBRAS' Inspection, based on item 10.1.1 of the CONTRACT........................................ 2.1.8. Interruption of the operations due to a failure occurred in any of the UNIT's equipment, at the time of the testing to be carried out according to item 3.1 of the CONTRACT........................................... 55 2.1.9. In the occurrence of events of exemption from payment provided for in subitems 2.1.1, 2.1.2, 2.1.3, and 2.1.7, for a total accumulated period exceeding 30% (thirty percent) in any 6 (six) month period, PETROBRAS may rescind the present CONTRACT, based on its subitem 11.1.13............................................................... 2.2. REDUCTION IN THE DAILY OPERATION, WAITING AND MOVEMENT RATE........... The rates foreseen in this ATTACHMENT will be reduced in the following cases:. 2.2.1. Total or partial inoperativeness or malfunction of any equipment which delays or hinders the operations, such as, but not limited to, winches, kelly spinner, geolograph, current meter, air compressors, shale shaker, mixing pumps, mud laboratory equipment and bulk receipt and transfer systems, are reason for the reduction of the daily rate provided for in Ref 101, in 1% (one percent), cumulative per equipment, provided the CONTRACTOR is notified in writing in the Daily Drilling Certificate (ADP), by PETROBRAS' Inspection and which, after the time limit the latter has set to repair said equipment, such repair has not been made............................................................... 2.2.2. Low Efficiency-REFERENCE RATES 101 and 105 of this ATTACHMENT will suffer a 20% (twenty percent) reduction, in the event low efficiency is verified, according to the operating efficiency parameters listed below. Such reduction will be applied during the whole corresponding activity period, which low efficiency is verified: Operating Parameters:......................................................... - - - Maneuver of the drill string in a cased well (except BHA):.................. o Inside the riser and 20" casing = 500 m/h............................ o Inside the 13 3/8" casing = 600 m/h.................................. o Inside of 9 5/8" casing = 700 m/h................................ 56 - - - Break of DP's per unit = 25jt/h............................................. - - - Casing string run in the sea/inside the riser/previous casing (joints approximately 12 m long)................................................ o 30" Casing - 2 jt/h.............................. o 20" Casing - 5 jt/h............................. o 13 3/8" Casing - 13 jt/h............................. o 9 5/8" Casing - 18 jt/h............................. o 7" Casing - 15 jt/h............................. - - - Running of drilling riser, excluding normal time for testing (50 ft joint): 45/m/h ................................................................. - - - Pulling of drilling riser (50 ft joints): 60 m/h............................ - - - Installation or pulling of the kill/choke lines/ telescopic joint/stretchers: 6.0h.................................................. - Diverter installation or pulling: 2.0h..................................... - Assembly of the dampening lines in the M.R.: 1.5h.......................... - Assembly of the flexitube equipment: 5.Oh.............................. - Assembly of the production tail: 2.0h.................................... - Tubing running or pulling, per unit-150 m/h................................ - Tubing running or pulling per section-300 m/h.............................. - Completion risers running or pulling-50 m/h................................ - Assembly of terminal head and slings-2.0 h................................. - Moving of ANM to/from the moon pool-3.0 h.................................. - Moving of tree cap or tree running tool to/from the moon pool-2.5h ........ - Assembly of lubricator and wire line BOP-1.5h.............................. NOTE: The above mentioned operating parameters are based on normal weather conditions.............................................................. 2.2.3. Beginning on the 16th (sixteenth day), inclusive, of the occurrence, of kick, drill string sticking, loss of circulation or fishing, caused by the CONTRACTOR's duly proven action or 57 omission until the return to the situation prior to its occurrence, the applicable rate will be reduced by 50%(fifty percent)................. 2.2.4. Beginning on the 46th (forty-sixth) day, inclusive, of the occurrence of Blow-out caused by the CONTRACTOR's duly proven action or omission, until the return to the situation prior to its occurrence the applicable rate will be reduced by 50% (fifty percent)........................... 2.3. Period of Validity of the CONTRACT Rates-the contract rates set forth in this ATTACHMENT will apply in the period set forth below: a) Beginning: release of the UNIT, by PETROBRAS, to sail to the first location, after the equipment general testing provided for in item 3.1 of the CONTRACT has been carried out, with the exception of the provision in its subitem 3.1.1.1................. b) End: after the end of the drilling or completion of the last well, with the UNIT's arrival at a port or sheltered waters chosen by common agreement between the parties, and if there is PETROBRAS' equipment still aboard, with the withdrawal of such equipment from the UNIT........................................... 2.4. Blow-Out - PETROBRAS will be responsible for the well control operation costs, in the event of blow-out and caving caused by the blow-out. Such provisions apply only to the well control costs and do not, apply to the loss of assets, lesions and/or damages caused by the blow-out, which are protected by the provisions of the pertinent items of this CONTRACT. The CONTRACTOR undertakes to place at PETROBRAS' disposal all of its resources in personnel and equipment related to this CONTRACT, without any additional charges to PETROBRAS. If the CONTRACTOR has contributed with duly proven action or omission for the occurrence of the accident, no rate will be due, until the solution of the problem, in compliance with the provisions in subitems 2.1.6 and 2.2.4 of this ATTACHMENT.... 58 (End of ATTACHMENT)........................................................... 59 ATTACHMENT III - UNIT PRICES SPREADSHEET SERVICE RENDERING UNIT PRICES SPREAD SHEET OBJECT OF BID: SERVICES OF COMPLETION, EVALUATION AND OF OIL AND GAS WELLS, BY MEANS OF THE USE OF THE FLOATING UNIT PROVIDED WITH DYNAMIC POSITIONING SYSTEM. PLACE OF OPERATION: BRAZILIAN CONTINENTAL SHELF AND INTERNATIONAL WATERS. UNIT'S NAME: AMETHYST 5 COMPANY'S NAME: MARITIMA NAVEGACAO E ENGENHARIA LTDA. CODE ITEMIZATION UNIT UNIT PRICE. (US$) 07.201.351 OPERATION RATE (REF. 101) DAY 11,512.69 07.201.358 REPAIR RATE (REF. 102) DAY No rate will be due 07.201.362 WAIT. BAD-WEATHER RATE DAY (95% OF REF. 101) 08.201.363 WAIT.-FORCE MAJEURE RATE(REF.104.2) DAY (95% of Ref 101) 07.201.464 WAIT. RATE WAITING (REF.104.3) DAY (95% of Ref. 101) 07.201.366 MOVEMENT RATE (REF. 105) DAY (95% of Ref. 101) 09.252.008 MEALS (ITEM. 3.11. CONT. P.S.) EACH (MAXIMUM R$ 20.00/meal) SIGNATURES DATE OF THE. PROPOSAL PETROBRAS CONTRACTOR 05/13/97 (illegible) German Efromovich 60 SERVICE RENDERING ATTACHMENT IV RESPONSIBILITY IN THE PERFORMANCE AND MUTUAL OBLIGATIONS 1 - RESPONSIBILITIES IN THE PERFORMANCE 1. RESPONSIBILITIES IN THE PERFORMANCE....................................... 1.1. The CONTRACTOR should provide, at its own expenses, pipe inspection according to API-RP 7 G Standard for drill string elements in use, at every 15,000m drilled. This inspection should be necessarily made by personnel accredited by PETROBRAS, and accompanied by PETROBRAS' Inspection which will attest the drill string conditions in accordance with the results of said inspection. The drill string elements rejected by the Inspection will be immediately repaired and/or replaced by the CONTRACTOR, which will assume the corresponding costs................. 1.1.1. The CONTRACTOR should make provisions so that the same numbering of the parts is maintained for the period of validity of the CONTRACT........ 1.1.2. The reports on the inspections made on the drill string, riser column, and handling equipment will be submitted to PETROBRAS immediately after their performance..................................................... 1.1.3. The CONTRACTOR should maintain a control of the elements of the string used in each well, recording at each maneuver, in the driller's log, which parts belong to the BHA in use, mentioning the inspection report numbering............................................................. 1.1.4. The CONTRACTOR will provide, at its expenses, for the inspection of the drill string, when requested in writing by PETROBRAS, in the event of abnormal occurrences, such as wash-out or frequent string breaks... 61 1.1.5. The CONTRACTOR will provide, at its expenses, for the inspection according to API RP-8B standard, in each contract year, in all drill string and casing handling equipment, such as, but not limited to, slips, elevators, travelling tongs, hook, elevator arms, spiders, drilling winch, etc. This inspection should be necessarily accompanied by PETROBRAS' Inspection which will attest the drill string conditions in accordance with the results of said inspection. The equipment rejected by the Inspection will be immediately repaired and/or replaced by the CONTRACTOR..................................................... NOTE: The same procedure described in 1.1.5 will be applied to the riser column and to its handling tools, complying with standard API RP2K.... 1.2. Casing-The CONTRACTOR should measure and run the conductors and the casing strings in accordance with the drilling programs established by PETROBRAS............................................................. 1.2.1. The CONTRACTOR will keep the casing pipes with their respective protectors............................................................ 1.2.2. The CONTRACTOR will exert its best efforts to remove all recoverable casing, when the well is abandoned.................................... 1.3. Cementing, Formation Testing and Electric Logs-the CONTRACTOR will provide facilities and give assistance to third parties, charged by PETROBRAS, for the performance of cementing, electric log, drill string testing, and other related services, complying with the programs and safety rules set down by PETROBRAS.................................... 1.4. Fishing-the CONTRACTOR should carry out all fishing operations that may become necessary...................................................... 1.5. Subsurface Pressures-the CONTRACTOR will exert its best efforts to control subsurface pressures, always maintaining all safety equipment, including, the ancillary ones, in good 62 operating conditions, so as to avoid contamination of the drilling fluid by hydrocarbons and fires resulting from blowouts..................... 1.6. Well Completion and Abandonment-the CONTRACTOR will complete or abandon the wells in safety conditions, according to the programs set down by PETROBRAS............................................................. 1.7. Drilling Reports-the CONTRACTOR undertakes to inform daily to PETROBRAS, until 01:00h of the following day, the progress of the operations, weather conditions, bulk and liquid stock consumption, and the status of the equipment that comprise the vessel's dynamic positioning system, and of others that the Inspection considers necessary, by means of bulletins, reports and records approved by the IADC and/or required by the Inspection........................................................ 1.7.1. The duration of the delays or wastes of time, their reasons, and other facts deemed important, will be recorded in detail in the Daily Drilling Data.................................................................. 1.7.2. Whenever PETROBRAS requests it, the CONTRACTOR will submit detailed reports on the progress of the operations carried out, or on any accident that may have occurred....................................... 1.8. The CONTRACTOR undertakes to inform immediately to PETROBRAS' Inspection when the UNIT enters in a DEGRADED STATE.............................. 1.8.1. The following situations are considered DEGRADED STATE: (to be defined in common agreement between the parties).............................. 1.8.2. In the event of non-fulfillment of Clause 1.8, and the UNIT comes to enter into yellow alert or red alert, a 20% (twenty percent) fine will be charged on the operation rate during the whole period in which the abnormality persists.................................................. 1.9. The CONTRACTOR undertakes to measure the sea current profiles (intensity and direction with reference to the true North) from the surface of the sea down to the sea bottom, carried out at 0600 and 1200 GMT (Greenwich Mean Time), and to deliver daily the data obtained to 63 PETROBRAS. Such profiles should obligatorily cover the following depths: 20, 50, 150, 200, 250, 300, 350, 400m, and at every 100 (one hundred) meters thereafter, until the last depth investigated corresponds to 5 (five) meters from the bottom of the sea............................... 1.9.1. The data should be delivered to PETROBRAS' Inspector, in disk and in a format according to PETROBRAS' instructions........................... 1.10. Maintenance and Conservation-the CONTRACTOR will be responsible for the maintenance, conservation and cleaning services of the UNIT and of all existing equipment and installations, maintaining all safety devices in perfect operating and adjustment conditions........................... 1.10.1. The CONTRACTOR undertakes to keep and maintain PETROBRAS's materials and equipment, aboard the UNIT, as well as all that are object of the loading and unloading operations in the support vessels............... 1.11. Ancillary Services-in equal price, time limit and availability conditions, the CONTRACTOR should give preference to the ancillary services rendered by Brazilian companies, when they become necessary for the rendering of the services object of this CONTRACT................. 1.12. Lubricants-to preferably use lubricants of the make PETROBRAS DISTRIBUIDORA-BR, submitting a justification in the event it uses another make.......................................................... 1.13. Wellhead inclination-the wellhead will not be installed with inclinations exceeding 1 1/2 degree (one and a half degree). If, by the Inspection's decision, the well continues to be drilled with an inclination exceeding that limit, the possible wear of the inner parts of the BOP, Lower Marine Riser, Adapt Riser and Spool, resulting therefrom, will be PETROBRAS' responsibility, provided the CONTRACTOR proves that said wear resulted from the operation in that well with wellhead inclination exceeding 2 degrees (two degrees)................ 64 1.14. The CONTRACTOR should submit a description of its operating procedures for the events of disconnection, formation testing, and BOP and choke manifold testing...................................................... 1.14.1. The procedures to be adopted will be discussed and approved by PETROBRAS............................................................. 1.15. The Board Superintendents, Tool Pushers, and Drillers will be required to have proven technical competence in kick control, attested by a certificate of training in an entity recognized by PETROBRAS.......... 1.16. The CONTRACTOR should carry out well shutoff training exercises every week, on an occasion to be agreed upon with the Inspection, and according to the rules in force in PETROBRAS, which operation should be entered in the Driller's Log.......................................... 1.16.1. The CONTRACTOR should submit a Safety Project for BOP, Choke Manifold and in well shutoff training test, which will be approved by PETROBRAS' Inspection............................................................ 1.17. Drill Riser-the CONTRACTOR will maintain the drill riser inner joints perfectly clean and free from debris and/or rust...................... 1.17.1. The CONTRACTOR should perform the inner cleaning of all drill riser joints, using the proper tool and compressed air, whenever the operation following the riser string run is a completion and/or workover operation............................................................. 65 2. MUTUAL OBLIGATIONS - - -------------------------------------------------------------------------------- DESCRIPTION ON ACCOUNT OF SUPPLIED BY - - ----------------------------------------- --------------- -------------- PET CONT PET CONT ------- ------ ----- ------- 1. Cementing, logging, formation and/or production tests, directional drilling, perforating, wireline, nitrogen unit, flexitube, etc. X X and 2. Welding services necessary for drilling, completion, well abandonment and maintenance operations. X X 3. Technical supervision for manufacturing and control of drilling fluid, completion. X X 4. CONTRACTOR's land support base (office and storehouse). X X 5. Handling and storage of materials and equipment belonging to or supplied by the CONTRACTOR on land or in the UNIT. X X 6. Handling and storage of materials and equipment of PETROBRAS or third parties, aboard the UNIT. X X 7. Land transportation, cargo loading and unloading of materials under the CONTRACTOR's responsibility. X X 8. Fishing services. X X 9. Cleaning and painting services aboard the UNIT, including those of PETROBRAS' materials and equipment installed in the UNIT. X X 10. Mess room, hostelry and meal supply services: - - - CONTRACTOR's personnel X X - - - PETROBRAS' personnel (up to 1300 meals a month) X X - - - PETROBRAS' personnel (exceeding 1300 meals a month) X X 11. BOP and riser lines tests, not programmed, carried out with the Cementing Unit. X X 66 12. Operations with special tools. X X 13. Air or sea transportation of the CONTRACTOR's equipment and personnel in the area of operation. X X 14. Air or sea transportation of the CONTRACTOR's personnel in the area of operation, besides those programmed for shift changes and Supervision personnel. X X or X 15. Air or sea transportation programmed but not used by the CONTRACTOR, without prior notice to PETROBRAS. X X 16. Air or sea transportation of the CONTRACTOR's material and/or personnel, in an emergency character, due to the CONTRACTOR's failure or lack of programming. X X 17. All customs expenses, fees, including agent services, licences, taxes or similar charges regarding the import or shipment to the UNIT of all equipment, spare parts and consumables of the CONTRACTOR. X X 18. All expenses, including those with licences, taxes or similar charges regarding the vessel's adaptation and operation in accordance with the Laws, Rules, Decrees, Administrative Rules and Instructions in force in Brazil. X X 19. Services of submarine inspection, measurement, intervention, etc. with a remote operated submarine vehicle. X X 20 Services to interconnect the boom lines with the burners. X X 21 Special repair and recovery services with qualified welding in equipments and lines belonging to: a) PETROBRAS X X b) CONTRACTOR X X 22. Communication services via satellite, when used by: - PETROBRAS X X or X - the CONTRACTOR X X or X 23. Maintenance of communication service via satellite. X X or X 67 24. Rental of Brasilsat satellite signal X X or X 25. Rental of satellite signal for the DGPS X X 26. Services in the burners supplied by Contractor. - Operation during production tests X X - Maintenance and repairs X X 27. Services for the Remote - Operation Vehicle (ROV): Installation, operation, maintenance and removal of the vehicle X X - Welding services and adaptation work for the installation and removal of the vehicle, winch, command cabin, storehouse and workshop X X End of Attachment)............................................................ 68 ATTACHMENT V LIST OF (MINIMUM) SPECIALIZED PERSONNEL ABOARD - Captain or Barge 1 - Tool Pusher (1 superintendent on board) 2 - Driller 2 - Assistant Driller 2 - Derrickman 2 - Roughneck 6 - Crane operator 2 - Area Man 8 - Welder 2 - Watchstander 2 - Subsea Engineer 1 - Mechanic 3 - Electrician 3 - Radio Operator (Portuguese speaker) 2 - Male nurse 1 - Storekeeper 1 - Safety guard 1 NOTE: Supplementary personnel will be supplied according to the CONTRACTOR's conveniences and needs or to comply with the requirements of government laws.................................................................... (End of Attachment)........................................................... 69 ATTACHMENT VI ENVIRONMENTAL OPERATING CONDITIONS (PERMISSIBLE LIMITS FOR ENVIRONMENTAL CONDITIONS ACTING SIMULTANEOUSLY) - - -------------------------------------------------------------------------------- PITCH HEAVE OR ROLL WIND WAVE CURRENT OPERATIONs (feet) (Degrees) (MPH) (feet) (knots) - - -------------------------------------------------------------------------------- Conductor's jetting/driving 2.0 2.5 30 3.0 1.5 Drilling 2.5 3.0 30 3.0 1.5 Casing running 2.0 3.0 30 3.0 1.5 Casing hanger setting 1.5 2.0 30 2.1 1.5 BOP running 1.5 1.5 19 2.1 1.0 BOP setting 1.5 1.5 19 2.1 0.75 Maneuvering 3.5 3.0 44 8.5 1.5 LMPR disconnection 7 4 51 10.5 1.0 LMRP connection 1.5 1.5 19 2.1 0.75 Formation testing 3.5 4.0 44 8.5 1.5 Operation with boats 2.5 3.0 39 6.7 1.5 Running the ANM (lay-away) 1.5 1.5 19 2.1 0.75 Running the ANM (without lines) 1.5 1.5 19 2.1 0.75 Operation with flexitube 2.0 3.0 30 5.0 1.5 Operation with wire-line 3.0 4.0 44 8.5 1.5 Operation with BAP 2.5 3.0 39 6.7 0.75 (End of Attachment)........................................................... 70 ATTACHMENT VII PETROBRAS' SAFETY RULES 1. Service Rule No. 46/71:_________________________________________________ o Safety Rules for Offshore Operations______________________________ 2 Service Order No. 01/72:________________________________________________ o Operational Safety Rules - Continental Shelf______________________ 3. Service Rule No. 41/72L_________________________________________________ o Electricity-Safety Rules__________________________________________ 4. Service Order No. 01/76:________________________________________________ o Industrial Safety Rules (general)_________________________________ o Industrial Safety Rules (Drilling)________________________________ o Industrial Safety Rules (Production)______________________________ 5. General Safety Manual___________________________________________________ o Safety and Environmental Instruction for Contractors (E&P-BC)____ (End of Attachment)........................................................... 71 ATTACHMENT VIII EQUIPMENT TESTING PROGRAM In order to carry out the UNIT's equipment testing in an easier and more agile manner, the CONTRACTOR is to submit to PETROBRAS, as quickly as required the following documents:............................................. 1. CERTIFICATES............................................................ a) Survey and Appraisal Report, updated and valid for the fiscal year regarding the Unit offered, issued by one of the entities: ABS, NOBLE & DENTON, DNV, LLOYDS or BUREAU VERITAS, and if the report is issued abroad, it will be translated into Portuguese by a sworn public translator and notarized in the Brazilian Consulate......................................................... b) Classification or Class Confirmation Certificate for hull and equipment, compatible with the proposal submitted (certified copy);............................................................ c) Report on claims from the classification societies mentioned in the Class Confirmation Certificate (in the event there are claims);.......................................................... NOTE: PETROBRAS will evaluated the above mentioned documents and will mention in what time limits eventual claims will be settled, and at PETROBRAS' judgment, it can be at the time of the Unit' s inspection or at mobilization after the contract is signed............................ d) Freeboard Certificate;............................................ e) IOOP (International Oil Pollution Prevention) Certificate;........ f) IMO-MUD-CODE Certificate-Mobile Offshore Drilling Unit-latest edition (unnecessary for Drill Ship);............................. g) Cargo Ship Safety Equipment Certificate;.......................... h) Cargo Ship Safety Construction;................................... NOTE: All documents required are to be within their period of validity........ 72 2. INDUSTRIAL SAFETY AND ENVIRONMENTAL CONTROL............................. - Manuals and emergency plans in the Portuguese Language............ 3. STORAGE CAPACITY........................................................ - Complete floor plan of bulk movement system, specifying:......... a) Exclusive lines to move cement;................................... b) Exclusive lines to move bentonite and baritine;................... c) Location and type of bulk line valves and their respective driving systems;.................................................. d) Pneumatic lines for cleaning and clearing bulk lines;............. e) Location of the manometers;....................................... f) Quantity, flow, operation pressure and location of compressors;... g) Quantity, flow, operating pressure and location of the air drying unit(s);.......................................................... h) Schematic drawing of each silo with their respective aeration systems and points of connection with the bulk lines.............. 4. FLUID CIRCULATION AND PROCESSING SYSTEM................................. - Sketch of the system emphasizing pulsation dampers (suction and tamping), safety valves, feed pumps, position of the suction lines in relation to the suction sieves' tanks and filters........ - Floor plan of the drilling fluid feed and discharge lines showing the flexibility in relation to the sand traps and mud tanks....... - Floor plan of the degasser instalation showing the active tank, separate processed mud and gas discharge lines, emphasizing the connection point of this line with the gas discharge line......... 73 - Floor plan of the mud tanks system, emphasizing the supply lines, gun lines, mixture funnel and centrifugal pumps interconnection lines............................................................. 5. WELLHEAD SAFETY EQUIPMENT SYSTEM........................................ - Sketch of the BOP/LMRP, specifying lines, valves and measures/dimensions............................................... - Floor plan of the kill and choke lines from the BOP to the choke manifold, specifying valves, connections, dampener chambers, anchorage points and interconnection with the other systems....... - Floor plan of the atmospheric air separator....................... - Layout, of the trip tank instalation giving the following information:................................................ a) Capacity;.................................................. b) Location;................................................... c) Sensitivity;............................................... d) Measuring system;.......................................... e) Scale type;................................................. f) Driller's scale visualization conditions;.................. g) Supply System for the above item........................... - Floor plan of the stand pipe manifold, specifying lines, valves, manometers and interconnections with the other systems............ - Inspection report on the riser, riser handling tools and connectors, telescopic joint and flexible joint, according to the API RP 2P and RP 2Q standards, with update date not exceeding 1 year.............................................................. NOTE: If the reports indicate the need of repair in some equipment, the service performance certificates will also be submitted................. 74 - Biannual inspection certificate of the BOP, with the manufacturer's approval........................................... - Proof of technical hability of the well drilling and control personnel......................................................... - To supply an internal maintenance and rust prevention program for the marine risers and kill and choke lines........................ 6. ENERGY GENERATION SYSTEM................................................ - Unifilar diagram of the energy generation and distribution system............................................................ 7. STABILITY - To submit the vessel's stability curve, updated in the proposal's conditions, in keeping with the environmental conditions........... 8. DYNAMIC POSITIONING SYSTEM (including the motor generators assembly, thrusters and propellers).............................................. - Schematic diagram of the dynamic positioning system............... - To submit the inspection and tests procedures to be carried out at every new location............................................. - To submit the tests and inspections procedures to be carried out at the end of each contract year.................................. 9. DRILLING STRING AND ACCESSORIES......................................... - Inspection report on all equipment of the drilling and completion strings, subs and accessories (used equipment).................... 75 - Purchase voucher of the drill and completion strings, subs and accessories (for new equipment)................................... 10. FISHING TOOLS AND ACCESSORIES........................................... - Inspection report on all components of the fishing tools (used equipment) or purchase voucher (for new tools).................... 11. SUNDRY SYSTEMS.......................................................... - Winches load test certificate..................................... - Description of the compressed air system, emphasizing compressors, layout of lines, valves and interconnection with the other systems........................................................... - Preventive Maintenance Plans with their respective timecharts - Ballast and sewer flowchart....................................... - Proof will be needed for the existence on board and for the operating capacity of all equipment and accessories listed in Attachments C and D of the chartering and services rendering contracts......................................................... NOTE: Such equipment must be in places of easy access for survey........ A) RECEIPT TEST............................................................ - Proof will be needed for the existence on board and for the operating capacity of all equipment and accessories listed in Attachments C and D of the chartering and services rendering contracts......................................................... NOTE: Such equipment must be in places of easy access for survey........ - The following systems, equipment and tools listed below will be checked, inspected and tested:..................................... 1) DRILL STRING, COMPONENTS AND ACCESSORIES.......................... ---------------------------------------- 76 - The CONTRACTOR will submit recent inspection reports, according to the specification API RP7G for the whole drill string and accessories such as, but not limited to: drill pipes, drill collars, HW, Subs, stabilizers, reamers, bumper subs, lift-sub, kelly, slips, elevators, fishing tools, etc, wich prove the good conditions of the string and its accessories. The information from the reports and the general conditions of the string and its accessories will be checked by PETROBRAS by means of a sampling inspection. In the event of discrepancy between the data submitted by the CONTRACTOR and those checked by PETROBRAS, showing an inadequate condition of the string and its accessories, the CONTRACTOR will carry out another inspection, for its own account............................................... NOTE 1: Any equipment refused by the inspection will be immediately repaired or replaced by the CONTRACTOR, for its own account........... NOTE 2: For the string, components and new accessories, no inspection report will be required, documents proving that such equipment is new will be sufficient ................................................... NOTE 3: The CONTRACTOR's equipment will be stored and arranged so as to facilitate the inspection by sampling to be carried out by PETROBRAS.. - The same procedure will be adopted for the telescopic joints and flexible joints................................................... 2) EXTRACTOR OF SOLIDS............................................... The following will be examined:......................................... - sieves,........................................................... - dessander,........................................................ - degasser - test suction and discharge............................ - centrifugue (if any).............................................. 77 The operation and work pressure, as well as the existence of manometers, will be checked................................................... 3) MUD TANKS AND VALVES.............................................. Water proofness, working of the agitators, mixture funnel and depthgun, besides the existence of fixed marks to control the tanks volume will be checked............................................ 4) CENTRIFUGAL PUMPS................................................ The following will be checked:.......................................... - working, vibration and noises;.................................... - Packing (leaks);.................................................. - Work pressures.................................................... NOTE: Items 3 and 4 will be tested with sea water............................. 5) MUD LABORATORY AND TEST EQUIPMENT................................. The existence on board and the adequacy to the requirements described in Attachments B and C to this CONTRACT will be checked.. 6) DRILLING DERRICK.................................................. Maintenance conditions (corrosion), fastening system and the conditions of the travelling block rails will be examined......... 7) CROWN BLOCK....................................................... The pulleys will be examined as to the profile wear, alignment, clearance, buckling of the axles, lubrication, etc................ 8) MUD PUMPS......................................................... The following will be carried out:................................ - observation of working, vibrations, noises;....................... - pressure and maximum work flows tests for the liner used;......... 78 - safety valve working test;........................................ - checking of the suction and discharge pulsation dampeners;........ - watertightness tests with nominal pressure of the mud pumps and of all manifold valves;........................................... - watertightness tests with nominal pressure of all manifold valves of the stand pipe manifold and of the kelly hose;.......... - random disassembling of the suction for visual inspection of the piston, sleeve, packing, valve and seat........................... 9) SWIVEL............................................................ The mandril, gooseneck, body, etc. will be checked and nominal pressure test with rotation will be performed..................... 10) MOTION COMPENSATOR................................................ The piston alignment, lock bar, alignment in the rail, general conditions, leaks and chains will be checked...................... 11) RISER AND GUIDE LINES TENSIONERS.................................. The general conditions, leaks, pulleys and cables will be inspected......................................................... 12) RISER RECOIL SYSTEM/HANG OFF SYSTEM/ FILL-UP VALVE (if any)........ The systems' operation will be checked ........................... 13) HIGH COMPRESSORS AND AIR RESERVOIRS............................... The general conditions, leaks, lines and system yield will be checked........................................................... 14) TOP DRIVE......................................................... Working tests (connection and disconnection of one or more sections of the DP's) will be carried out and the general conditions will be inspected...................................... 79 15) KELLY SPINNER..................................................... The general conditions, specially the rollers' wear, and working will be checked, and connection and disconnection operation of one or more DP's will be carried out.............................. 16) HOOK.............................................................. The general conditions and the locking system will be checked..... 17) TREAVELLING BLOCK................................................. - The pulleys wear, axles alignment, lubrication system, retraction system, etc., will be inspected.................. 18) DRAWWORKS......................................................... - The operation of the mechanical break system (brake bands), electromagnetic (distance between irons, voltage level and SCR feeder conditions), cooling system and clutches will be checked.................................................. - The operation of the cat-heads and height limitator with the assembly /disassembly of one or more command sections, will be checked.................................................. 19) ROTARY TABLE...................................................... The operation in high and low, brake system, tachometer and lubrication system will be checked............................... 20) TRIO TANK......................................................... Capacity, installation site, sensitivity of the level indicator system, visualization condition and supply system will be inspected......................................................... 21) HYDRAULIC TONGS AND PNEUMATIC SPIDER FOR CASING AND PNEUMATIC TONGS FOR DRILL PIPES............................................. - Operation tests will be made and maintenance conditions will be checked........................................................... 80 22) SAND-LINE OR WIRE-LINE SYSTEM..................................... - Operation of the clutches and brake will be tested by lowering the photo-clinometer inside the drill string coinciding with the photoclinometer overshot test (TOTCO) will be tested. Test to be made on location before the beginning of the operations................................. - The existence of an alignment guide for the sand-line cable in the drum will be checked................................. 23) CHOKE MANIFOLD.................................................... All valves with low pressure (300 psi) and in high pressure (system's work pressure). Manometers, hydraulic choke operation, manual choke, remote control panel, etc. will be tested............ 24) UPPER AND LOWER KELLY COCK, INSIDE BOP AND SAFETY VALVE............ - Drivers will be tested and work pressure tests will be made.. - The end connections of each element will be checked and tested with work pressure. The CONTRACTOR should have end seal plugs adequate for the test............................ 25) KILL AND CHOKE LINE HOSES......................................... The end connections will be checked and tested with the system's work pressure. The CONTRACTOR should have end seal plugs adequate for the test...................................................... 26) DRILL INSTRUMENTATION SYSTEM...................................... The following will be tested:..................................... - geolograph;................................................. - rotary table tachometer;.................................... 81 - manometers;................................................. - stroke counter;............................................. - level control in the mud tanks;............................. - torque indicator ........................................... Their existence on board will be checked, analysing the maintenance conditions of the lines by means of inspection, and the facilities for instalation of the production test equipment system............................................................ 28) BOP SYSTEM........................................................ The following will be carried out:................................ - pressure tests of the slide valves with low pressure and high pressure compatible with the system......................... - pressure tests of the annulars with low pressure and high pressure, compatible with the system........................ - complete function test in both POD's, through all panels.... - choke and kill valves tested with low pressure and high pressure, compatible with the system........................ - working of the shear ram valve will be checked with opening for examination of the blades conditions.................... - the opening and closing of all ram, annular and kill and choke valves chambers will be tested........................ 82 - the hydraulic driving unit will be checked as to: fluid used, fluid low level alarm, low air pressure and low accumulators pressure, maintenance conditions, leaks and mixing systems.............................................. - the volumetric capacity of accumulators and the capacity of electric and pneumatic pumps of the hydraulic unit will be tested...................................................... - the locking system of the ram valve(s) will be tested....... - the SPM valves conditions will be checked by opening and inspecting one of them, chosen at random.................... - the locking/unlocking system of the H-4 hydraulic connectors will be tested............................................. - the surface and bottom accumulators' pre-charge will be checked..................................................... - The operation of the following systems will be tested:...... o Driving back-up........................................... o emergency recovery....................................... o handling.................................................. 29) TRAVELLING TONGS, EZY-TORG, TORQUE SENSOR, SLIPS, ETC............. One or more sections of the drill collars and drill pipes will be assembled/disassembled to check the working of such equipment. The general maintenance conditions, chuck jaws and cables will be checked........................................................... 30) BULK TRANSFER SYSTEM.............................................. The following will be carried out: ............................... - the operation of the compressor will be checked, and noises, oil and air leaks, and maintenance state, filters and dehumidifier will be inspected.......................... 83 - operation and watertightness of valves, lines and silos will be checked, looking for possible clogging.............. - transfer of cement from 1 silo to the daily silo (if any) and from this to the surge-tank will be made............... 31) EMERGENCY ENERGY GENERATION SYSTEM................................ - a black-out in the energy system generation system will be simulated to see if the emergency generator is automatically turned on......................................................... 32) MAIN MOTOR GENERATOR ASSEMBLY..................................... The following will be carried out:................................ - vibration, noises, insulation, leaks, maintenance, etc. will be checked............................................. - generators input and output in the bus bar, synchronisms and load divisions will be tested........................... - load and voltage and frequency regulation will be tested... 33) DESSALTER......................................................... Operation and production capacity will be checked................. 34) CAT-LINES CRANES................................................... The following will be carried out:................................ - operation of the winches and maintenance of the cabled will be checked............................................. - the elevation and rotation system, the operation with flying boom and pulley block and the operation of the boom height pawl will be checked................................. - the report of the last inspection carried out by the Unit's classification society in the winches will be examined...... 35) DEJECTA TREATMENT UNIT............................................ 84 Its operation will be inspected................................... 36) TELECOMMUNICATION SYSTEM.......................................... Operational tests will be made in all radio equipment existing on board, including radio-beacon..................................... 37) OVERHEAD TRAVELLING CRANES........................................ Their operation, and the maintenance conditions of cables and sliders will be examined.......................................... 38) DC/SCR MOTORS..................................................... The maintenance conditions and insulation, as well as the collectors and brushes will be examined........................... - SCR functional test............................................. 39) DIVERTER.......................................................... The following will be tested:..................................... - flow line wing valves;...................................... - diverters and insert packer lock;........................... - the control panel will be checked........................... 40) SAFETY EQUIPMENT.................................................. Salvage........................................................... Fireproof rigid vessels (capsules, whalers):...................... - lowering, motor, fuels, sprinklers, start;.................. - rations, garnishing, hatches, cleaning, fire extinguishers, signalling equipment........................................ Inflatable rafts:................................................. - quantity, capacity, location, height in relation to the sea; 85 - validity of the last inspection, means of access to the sea;........................................................ - conditions of the cocoon.................................... Jackets: - quantity (sufficiency), location, protection, and maintenance................................................. Life-buoys:....................................................... - quantity (sufficiency), location, heaving-lines, lanterns, smudge pots................................................. Escape routes:.................................................... - vertical and horizontal signalling (indicative plates);..... - clearing, lighting (emergency).............................. Water Supply System for Fire Fighting............................. Fire ring:........................................................ - water system for the platform;.............................. - sprinklers system; ......................................... - painting, corrosion, signaling, visual conditions;.......... - valves, hydrants, guns...................................... Fire pumps:....................................................... - operation; ................................................. - motor, fuel, start, panel, tests............................ Fire Fighting Fixed Systems....................................... - Foam system: chambers, tanks, guns, hydrants and carrier liquid...................................................... - Cylinders; conditions, reloading, retesting (C02 or HALON, if any)..................................................... - Lines and diffusers: general conditions..................... - Automatic: feeding, panels, batteries, detectors, tests..... 86 - Manual: commands, interconnections, tests................... - Alarms: interconnections:................................... Fire Extinguishers................................................ - water, carbon dioxyde, chemical powder (portable and carts); - distribution, location, general conditions;................. - revision, recharge, retest, control, meters, replacement.... Fire Posts........................................................ - hose, keys, sprinkler;...................................... - fiber boxes, general conditions, post identification;....... - visual signaling: sufficiency and general conditions....... Emergency Equipment............................................... - autonomous breathing apparatuses,reserve bottles, breathable air fixed system, fire proximity clothing, lantern, ax, safety belt;................................... - distribution, location, general conditions, inventory, maintenance and replacement................................. Communications and Alarms......................................... - telephone (internal, external): Operating capacity;......... - radiophony: VHF. operating capacity;........................ - portable transceptors: quantity; distribution, intrinsic safety;..................................................... - intercom: quantity, distribution, and horns audibility, interconnection with the platform, coding of sound alarm tones, amplifiers;.......................................... - visual signaling: sufficiency, general conditions;.......... 87 - fire alarm, glass breaking type: batteries, bells, tests... Emergency Lighting................................................ - charger, batteries and lanterns............................. Helideck.......................................................... - protection: guns, fireextinguishers, salvage equipment;..... - painting, protection screen, net, landing lights, safety warnings;................................................... - guest welcoming practices................................... Load Lifting...................................................... - winches: general conditions, operation, signaling, maintenance;................................................ - manual and electric tackles: general conditions, operation, signalling, maintenance;......................... - material movement and storage areas......................... Training.......................................................... - abandonment, fire fighting, first aid and brigade........... Manuals and Plans................................................. - emergency; safety;.......................................... - disclosure, knowledge;...................................... - distribution, control, updating;............................ - tasks schedules for emergency and abandonment situations, including in Portuguese..................................... Order and Cleanliness............................................. - installation's general aspect;.............................. - particularly alarming places................................ 88 Smoke, Heat and Gas Detection System.............................. - test of hydrocarbons detection sensors...................... Ballast and Sewer System.......................................... - functional test............................................. 41) ANCHORING SYSTEM.................................................. 42) DYNAMIC POSITIONING SYSTEM........................................ 43) PROPULSION SYSTEM................................................. B) LOCATION MOVING TEST.................................................... To be defined between the CONTRACTOR and PETROBRAS...................... C) BEGINNING OF CONTRACT YEAR TEST......................................... To be defined between the CONTRACTOR and PETROBRAS ..................... (End of Attachment)........................................................... 89 ATTACHMENT IX PROCEDURES IN THE EVENT OF FATAL ACCIDENTS 1. If, during the period of validity of the CONTRACT, a fatal accident occurs with a CONTRACTOR's employee, the CONTRACTOR should:........... 1.1. Notify the Inspection immediately, for the proper measures;........... 1.2. Take measures so that the employee's relatives be notified with the utmost urgency on the event, giving them the social support due;...... 1.3. Formally establish an Investigation Commission, within 48 hours after the accident, in order to, in the maximum time limit of 15 days, identify the causes and recommend the measures deemed necessary to prevent similar accidents............................................. 2. The report should contain, at least, the following information regarding the accident - description;........................................................ - exact location;..................................................... - data regarding the injured persons; ................................ - basic and immediate causes;......................................... - measures to be taken in order to prevent its repetition............. 3. The CONTRACTOR should guarantee the Commission enough authority and autonomy to carry out the investigations without any restrictions..... 4. A PETROBRAS' employee should participate in the Commission, appointed by the authority in charge of the operational office.................... 5. After conclusion of the Commission's work, it will also behoove the CONTRACTOR, at the Inspection's request, to disclose the results of the report, so as to convey the experience from the accident to other contractor companies.................................................. 90 (End of Attachment)........................................................... THESE BEING the precise terms and content of the aforementioned document, I hereby set my Hand and Seal on this Translation, performed on December 22nd, 1997 in this City of Rio de Janeiro, Federative Republic of Brazil............ /s/ MARCIA BARBOSA SERRA ------------------------ Marcia Barbosa Serra Sworn Public Translator EX-10.10(A) 50 EXHIBIT 10.10(A) I, the undersigned, Sworn Public Translator and Commercial Interpreter in and for this City and State of Rio de Janeiro, Federative Republic of Brazil, registered at the Commercial Board of Rio de Janeiro under Number 97, do hereby CERTIFY and ATTEST that a document in the Portuguese Language was submitted to me for translation into English, which I performed according to my Office, as follows: Translation No. 2669/98 (On paper with letterhead of PETROBRAS.) RIDER No. 1 TO CONTRACT 101.2.101.97 -0 ENTERED INTO BETWEEN PETROLEO BRASILEIRO S/A AND THE COMPANY MARITIMA PETROLEO E ENGENHARIA LTDA. PETROLEO BRASILEIRO S.A. - PETROBRAS, a mixed economy company, with head office at Av. Republica do Chile 65, in the City of Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil, enrolled in the General Taxpayers Registry of the Ministry of Finance under No. 33.000.167/0001-01, henceforth called PETROBRAS, represented herein by the Executive Superintendent of Exploration and Production South -Southeast, Luiz Eduardo G. Carneiro, and and the Company MARITIMA PETROLEO E ENGENHARIA LTDA., successor of MARITIMA NAVEGACAO E ENGENHARIA LTDA., with head office at Av. Almirante Barroso, 52, Group 3400, City of Rio de Janeiro, Federative Republic of Brazil, enrolled in the General Taxpayers Registry of the Ministry of Finance under No. 46.828.596/0001/13, henceforth called the CONTRACTOR, represented herein by its President, German Efromovich, have agreed to add a rider to contract 101.2.101.97 -0, according to the following clauses and conditions: FIRST CLAUSE OBJECT. 1. The present Rider has as its object: 1.1. To change the corporate name of the CONTRACTOR from MARITIMA NAVEGACAO E ENGENHARIA LTDA. to MARITIMA PETROLEO E ENGENHARIA LTDA. 1.2. To include as INTERVENIENT PARTY, to the present contract, the company PETRODRILL FIVE LTD., with head office in Omar Hodge Building, Wickhams Cay, Road Town, Tortola, Ilhas Virgens Britanicas, represented by its Director GERMAN EFROMOVICH. 1.3. To change the redaction of items 3.12. l. and 3.21.2, of the THIRD CLAUSE - CONTRACTOR'S RESPONSIBILITIES. 1.4. To change the redaction of item 16.1 of the SIXTEENTH CLAUSE - INTERVENIENCE. SECOND CLAUSE - CONTRACTOR'S OBLIGATIONS. 2.1. The Redaction of items 3.12.1 and 3.21.2. is changed to 3.12.1. "The minimum value of the civil liability insurance is of US$1,000,000.00 (one million dollars), per occurrence, during the period of validity of this CONTRACT and its eventual extension, which amount is to be converted into Brazilian currency on the date of signature of this instrument. THE INTERVENIENT PARTY IS TO APPEAR AS CO -INSURED IN THIS INSURANCE POLICY. 3.21.2. "Exception is made to cases arising from kick, blow -out, surge or formation testing, in which the CONTRACTOR will be kept free and safe from, in the other cases of spillage of oil and other residues in the sea, the CONTRACTOR AND THE INTERVENIENT PARTY WILL BE JOINTLY LIABLE, UP TO THE LIMIT OF US$500,000.00 (FIVE HUNDRED THOUSAND DOLLARS), PER EVENT AND ITS DEVELOPMENTS. THIRD CLAUSE - INTERVENIENCE 3.1. The redaction of item 16.1 is changed to: 16.1. "THE INTERVENIENT PARTY SIGNS THE PRESENT CONTRACT, TOGETHER WITH THE CONTRACTOR, BEING JOINTLY LIABLE WITH IT FOR ALL OBLIGATIONS ARISING FROM THE PRESENT CONTRACT AND ITS EXECUTION, INCLUDING FOR LOSSES. FOURTH CLAUSE - RATIFICATION. 4.1. The parties ratify the other conditions of the CONTRACT that were not changed by the present instrument. And being thus agreed, the parties sign the present Rider in 2 (two) copies of the same tenor and fashion, together with the witnesses below. Rio de Janeiro, August 21, 1998. (Signed:) (Illegible) - Luiz Eduardo G. Carneiro. Executive Superintendent of Exploration and Production South -Southeast. PETROBRAS PETROLEO BRASILEIRO S.A. (Signed:) (Illegible) - German Efromovich. President - MARITIMA PETROLEO E ENGENHARIA LTDA. (Signed:) (Illegible) - German Efromovich. Director - PETRODRILL FIVE LTD. WITNESSES: (Signed:) Elaine Brabo - Name: ELAINE BRABO. (Signed:) Andre de Mesquita Pinto - Name: ANDRE DE MESQUITA PINTO. THESE BEING the precise terms and content of the aforementioned document, I hereby set my Hand and Seal on this Translation, performed on November 26, 1998 in this City of Rio de Janeiro, Federative Republic of Brazil. /s/ MARCIA BARBOSA SERRA Marcia Barbosa Serra Sworn Public Translator EX-10.11 51 EXHIBIT 10.11 1 I, the undersigned, Sworn Public Translator and Commercial Interpreter in and for this City and State of Rio de Janeiro, Federative Republic of Brazil, registered at the Commercial Board of Rio de Janeiro under Number 97, do hereby CERTIFY and ATTEST that a document in the Portuguese Language was submitted to me for translation into English, which I performed according to my Office, as follows: Translation No. 3974/97 (Xerox copy submitted for translation.)....................................... (On paper with letterhead of Petroleo Brasileiro S.A. - PETROBRAS.). PETROLEO BRASILEIRO S.A. - PETROBRAS, a mixed economy company, organized and existing under Law No. 2.004, dated 10/03/53, with head office at Av. Republica do Chile, 65, City of Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil enrolled in the General Taxpayers' Registry of the Ministry of Finance under No. 33.000.167/0001-01, represented herein by the Executive Superintendent of Exploration and Production South and Southeast (SUEX-SSE), Engineer LUIZ EDUARDO G. CARNEIRO, henceforth called PETROBRAS, and the Company MARITIMA NAVEGACAO E ENGENHARIA LTDA., with head office at Avenida Almirante Barroso, No. 42, 34th floor, City of Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil, enrolled in the General Taxpayers' Registry of the Ministry of Finance under No. 46.828.596/0001-13, represented herein by its President, Mr. GERMAN EFROMOVICH, have agreed upon the present Letter of Agreement regarding contracts 101.2.100.97-8 (Chartering) and 101.2.100.97-0 (Rendering of Services) for the Unith Amethyst 5, henceforth called the Unit, as follows: Item New Redaction 2 Chartering/ Services 1.1. - (Chart.) The object of the present CONTRACT is the chartering to PETROBRAS, of the Unit, which, according to the CONTRACTOR, is to be built in a shipyard for the purpose of fulfilling this Contract, in order to be used in the drilling and/or evaluation and/or completion and/or workover of oil and/or gas (vertical, directional and horizontal) wells, in the Brazilian continental shelf, down to a maximum depth of 5,000 (five thousand) meters, in a water depth down to 1,000 (one thousand) meters......................................... 3.17.- (Serv.) To submit to the CONTRACT Manager, up to 30 (thirty) consecutive days after its inception, as foreseen in item 2.2.1, the originals or certified copies of the insurance policies made as a result of this Contract, containing all essential data, such as insurers, time limits, period of validity, amounts insured, and coverage conditions, and with PETROBRAS appearing as co-insured, except in the civil liability insurance, of which it will participate as a third party...... 3.19.- (Chart.) To submit to the Manager of this Contract, up to 30 (thirty) days after the beginning of the performance, as provided for in item 2.2.1, the originals or certified copies of the certificates of the insurances made as a result of this Contract, containing all essential data, such as insurers, time limits, periods of validity, amounts insured, and coverage conditions, and with PETROBRAS appearing as co-insured, except in the civil liability insurance, of which it will participate as a third party.................................... 7.7 (Chart.) The CONTRACTOR agrees that, at PETROBRAS' exclusive option, the payments referring to the chartering object of the present contract can be made through financing by third parties, 3 provided the time limits, currency, amounts and place of payment set forth in the contract are complied with............................................ 12.5 - (Chart.) In the present Contract, it will be considered as act of God the situation in which one of the parties is prevented from fulfilling its obligations, provided it proves that:................................. o the non-fulfillment of the obligation was due to the existence of an impediment beyond its control;.. o the party impeded could not, within its ability, overcome the impediment and its effects, in order to fulfill its contract obligation within the time limit set down, and................................... o the impediment and its effects could not be avoided nor overcome.................................... As an illustration of act of God or force majeure, one may mention wars, strikes, submarine earthquakes, among other facts, which effects were not possible to avoid or prevent................................. AND BEING THUS AGREED, the parties sign the present Letter of Agreement, in 2 (two) copies with the same tenor, with the witnesses below.............................................................. Rio de Janeiro December 5, 1997.......................................... PETROLEO BRASILEIRO S/A - PETROBRAS...................................... (SIGNED:) LUIZ EDUARDO G. CARNEIRO....................................... Luiz Eduardo G. Carneiro - Executive Superintendent of Exploration and Production South-Southeast (SUEX-SSE).................................. MARITIMA NAVEGACAO E ENGENHARIA LTDA. .................................... 4 (SIGNED:) GERMAN EFROMOVICH.............................................. German Efromovich - President............................................ WITNESSES:............................................................... Claudio Fontes Nunes..................................................... (SIGNED:) HAMYLTON P. PADILHA JR. ........................................ Hamylton P. Padilha Jr. .................................................. CPF: 215.551.175-20..................................................... (Two initials appeared on the first page of the document.)......... .-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.- THESE BEING the precise terms and content of the aforementioned document, I hereby set my Hand and Seal on this Translation, performed on the 22nd of December, 1997 in this City of Rio de Janeiro, Federative Republic of Brazil. /s/ MARCIA BARBOSA SERRA ------------------------ Marcia Barbosa Serra Sworn Public Translator EX-10.12 52 EXHIBIT 10.12 MARCIA BARBOSA SERRA Tradutora Publica Juramentada e Interprete Comercial Sworn Public Translator and Commercial Interpreter Rua Aperana, 38 apt #301 - Leblon - 22450 ISS: 1261003-00 CIC: 606442227-00 Tel.: 274-3844 I, the undersigned, Sworn Public Translator and Commercial Interpreter in and for this City and State of Rio de Janeiro, Federative Republic of Brazil, registered at the Commercial Board of Rio de Janeiro under Number 97, do hereby CERTIFY and ATTEST that a document in the Portuguese Language was submitted to me for translation into English, which I performed according to my Office, as follows: Translation No. 4032/98 LETTER OF AGREEMENT (Original submitted for translation.)......................................... (On paper with letterhead of Petroleo Brasileiro S.A. - PETROBRAS.)........... PETROLEO BRASILEIRO S.A. - PETROBRAS, a mixed economy company with head office at Av. Republica do Chile, 65, City of Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil enrolled in the General Taxpayers' Registry of the Ministry of Finance under No. 33.000.167/0001-01, represented herein by the Executive Superintendent of Exploration and Production South - Southeast, Engineer LUIZ EDUARDO G. CARNEIRO, henceforth called PETROBRAS, and the Company MARITIMA PETROLEO E ENGENHARIA LTDA., with head office at Avenida Almirante Barroso, no. 42, 34th floor, City of Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil, enrolled in the General Taxpayers' Registry of the Ministry of Finance under No. 46.828.596/0001-13, represented herein by its President, Mr. GERMAN EFROMOVICH, henceforth called the CONTRACTOR, whereas:...................................................... 1. the parties have entered into two contracts, one under No. 101.2.100.97-8, the object of which is the chartering of the semi-submersible floating Unit, provided with dynamic positioning (DP), called AMETHYST 5, to operate in a water depth of up to 1,200m, and one under No. 101.2.101.97-0, for the rendering of completion, evaluation and workover services................................................... 2. The contract period set forth in subitem 2.2.3 of the second Clause of said contracts is of 6 (six) years, with forecast for extention of the time limit by means of an agreement..................................... THE PARTIES RESOLVE a) that the contract period of 6 (six) years, at its final term, will be automatically extended for 2 (two) more years;.......................... b) that after the 6th (sixth) year of the contract's period of validity, 30 (thirty) days will be granted, remunerated at the Waiting Rate (Ref. 104, of Attachment II to the above-mentioned contracts), to mobilize the Unit for docking, to carry out inspection works and to return with the Unit to the location determined. The selection of the periods when such works will be performed will be made by common agreement between the parties:............................................................ c) that the other clauses of said contract deeds remain unchanged.......... And being thus agreed, the parties sign the present Letter of Agreement, in 2 (two) copies with the same tenor, with the witnesses below................................................................... Rio de Janeiro January 15, 1998............................................... (Signed:) Luiz Eduardo G. Carneiro........................................... Luiz Eduardo G. Carneiro - Executive Superintendent of Exploration and Production South - Southeast............................... PETROLEO BRASILEIRO S/A - PETROBRAS........................................... (Signed:) German Efromovich.................................................. German Efromovich - President................................................. MARITIMA PETROLEO E ENGENHARIA LTDA........................................... WITNESSES: .................................................................. (Signed:) Andre de Mesquita Filho............................................ for/ Claudio Fontes Nunes..................................................... (Signed:) Hamylton P. Padilha Jr............................................. Hamylton P. Padilha Jr........................................................ (Two initials appeared on the first page of the document.).............. - - -------------------------------------------------------------------------------- THESE BEING the precise terms and content of the aforementioned document, I hereby set my Hand and Seal on this Translation, performed on the 17th of February, 1998 in this City of Rio de Janeiro, Federative Republic of Brazil. /s/ MARCIA BARBOSA SERRA __________________________ Marcia Barbosa Serra Sworn Public Translator EX-10.13 53 EXHIBIT 10.13 MARCIA BARBOSA SERRA Tradutora Publica Juramentada e Interprete Comercial Sworn Public Translator and Commercial Interpreter I, THE UNDERSIGNED, SWORN PUBLIC TRANSLATOR AND COMMERCIAL INTERPRETER IN AND FOR THIS CITY AND STATE OF RIO DE JANEIRO, FEDERATIVE REPUBLIC OF BRAZIL, REGISTERED AT THE COMMERCIAL BOARD OF RIO DE JANEIRO UNDER NUMBER 97, DO HEREBY CERTIFY AND ATTEST THAT A DOCUMENT IN THE PORTUGUESE LANGUAGE WAS SUBMITTED TO ME FOR TRANSLATION INTO ENGLISH, WHICH I PERFORMED ACCORDING TO MY OFFICE, AS FOLLOWS: TRANSLATION NO. 2507/97 (Xerox copy submitted for translation.)....................................... (On paper with letterhead of Petroleo Brasileiro S.A. - PETROBRAS.)........... INVITATION TO BID No. 101.2.063.97-8.......................................... CHARTERING CONTRACT CHARTERING CONTRACT OF THE DYNAMIC POSITIONING FLOATING Unit AMETHYST 4, ENTERED INTO BETWEEN PETROLEO BRASILEIRO S.A. - PETROBRAS AND THE COMPANY MARITIMA NAV. E. ENG. LTDA.-- PETROLEO BRASILEIRO S.A. - PETROBRAS, a mixed economy company, organized and existing under Law No. 2.004, dated 10/03/53, with head office at Av. Republica do Chile, 65, City of Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil, enrolled in the General Taxpayers Registry of the Ministry of Finance under No. 33.000.167/0001-01, represented herein by the Executive Superintendent of Exploration and Production (E & P), Engineer LUIZ EDUARDO G. CARNEIRO, hereforth called PETROBRAS, and the Company MARITIMA NAVEGACAO E ENGENHARIA LTDA., with head office at Avenida Almirante Barroso, no. 42, 34th floor, City of 1 Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil, enrolled in the General Taxpayers Registry of the Ministry of Finance under No. 46.828.596/0001-13, henceforth called the CONTRACTOR, represented herein by its President, Mr. GERMAN EFROMOVICH, have agreed upon the present CONTRACT for the chartering of the Dynamic Positioning Floating Unit AMETHYST 4 and its accessories, described in Attachment I, henceforth called the Unit, according to the authorization of PETROBRAS Executive Board (MINUTES No. 4111, Item No. 30, dated 08/14/97) the parties being bound to the terms of the Invitation to Bid No. 101.001.97-7 and subjected to the following Clauses and Conditions:........... (End of the Qualification).................................................... 2 FIRST CLAUSE - OBJECT......................................................... 1.1. The object of the present CONTRACT is the chartering to PETROBRAS, of the Unit, which, according to the CONTRACTOR, will be built in a shipyard with the purpose of fulfilling this contract, in order to be used in the drilling and/or evaluation and/or completion and/or workover of oil and/or gas (vertical, directional and horizontal) wells, in the Brazilian continental shelf, down to a maximum depth of 5,000 (five thousand) meters, in a water depth down to 1,200 (twelve hundred) meters....................................................... 1.1.1. It is included, as an object of the CONTRACT, the performance, by the CONTRACTOR, of any and all operations needed for the perfect fulfillment of the chartering object of the CONTRACT, such as, but not limited to, the performance and supervision of the positioning, ballasting and movement of the Unit................................... 1.2. PETROBRAS may determine that the CONTRACTOR makes the reentry in wells already drilled, and it can install in the Unit equipment and production facilities, the provisions of item 14.1 of this CONTRACT being complied with................................................... 1.3. The chartering object of the present CONTRACT is included in the Annual Activities Plan, under the following codesd:................... B 12000 - Boring - Production Development............................ A 22000 - Boring - Exploratory Drilling.............................. B 13000 - Completion an Intervention for Evaluation - Production Development........................................................... Evaluation - Production Development................................... A 24000 - Intervention for Evaluation - Exploratory Drilling......... (End of Clause)............................................................... 3 SECOND CLAUSE - PERIOD OF VALIDITY AND DURATION............................... 2.1. Period of Validity - The present CONTRACT binds the parties as of its signature, but the payments in foreign currency can only be made after the date of its registry in the Central Bank of Brazil................ 2.2 Duration - The present CONTRACT will have a duration of 2,190 (two thousand one hundred and ninety) days................................. 2.1.1. BEGINNING OF THE CONTRACT - The beginning of the CONTRACT will occur when the Unit is released by PETROBRAS, through a written notice, to begin the operations, after the general equipment testing foreseen in item 3.1 of this CONTRACT is carried out.............................. 2.2.2 AUTOMATIC EXTENSION - If at the end of the duration mentioned in 2.2, some operation is still being performed in a well, the duration of the present CONTRACT will be automatically extended, until the completion of the works in said well, considering as the final limit the Unit's arrival in the port or sheltered waters chosen by common agreement between the parties and, also, in case there are still PETROBRAS' equipment aboard the Unit, the completion of the withdrawal of such equipment will be considered as the final limit.... 2.2.3 This CONTRACT may be extended for successive periods of 365 (three hundred and sixty-five) running days, through a prior agreement between the parties, by means of an Addendum, the other contract conditions being complied with, and limited to a maximum contract period of 2,190 (two thousand one hundred and ninety) day............. 2.3. ARRIVAL IN BRAZIL - The Unit should arrive at the port or in sheltered waters, in Macae - RJ. The beginning of operations should occur up to the date of 06/17/99, the provision set forth in item 8.1 of this CONTRACT being complied with.................................. 4 2.3.1. At the port or in sheltered waters mentioned in 2.3, the customs and helipoint inspections in the Unit will be carried out, as well as the loading/unloading of the CONTRACTOR's and PETROBRAS' materials, and also the general equipment testing will begin, as foreseen in item 3.1 of this CONTRACT.................................................. (End of Clause)............................................................... 5 - - ------------------------------------------------------------------------------ CHARTERING AND SERVICE RENDERING CONTRACT OF THE DYNAMIC POSITIONING FLOATING Unit AMETHYST 2, ENTERED INTO BETWEEN PETROLEO BRASILEIRO S.A. - PETROBRAS AND THE COMPANY MARITIMA NAVEGACAO E ENGENHARIA LTDA. - - ------------------------------------------------------------------------------ 6 THIRD CLAUSE - CONTRACTOR's OBLIGATIONS....................................... 3.1. Before the beginning of the contract, the CONTRACTOR will arrange for a general test of the operational conditions of all of the Unit's equipment, as provided for in Attachment VIII, in the presence of PETROBRAS' Inspection. The occurrences found during the performance of the tests will be duly recorded in the Daily Drilling Certificate (ADP) signed by PETROBRAS' Inspection and by the CONTRACTOR's representative. The Unit will be released to sail to the first location after proving the good operating conditions of the equipment which comprise the drill's main systems, that is, energy generation and distribution system, dynamic positioning system, industrial safety, liquid and bulk storage, fluid circulation and processing, safety and wellhead, column elevation, rotation and handling, columns, instrumentation, formation test equipment and communications system................................................................ 3.1.1. The tests referred to in 3.1 will be made in a period estimated in 3 (three) days, after which the Unit will be released to sail to begin the operations, provided there is nothing pending in the rig's main systems, as set forth in item 3.1..................................... 3.1.1.1.In the event the tests last for a period exceeding 3 (three) days, for reasons ascribed to PETROBRAS, the rate foreseen in REF 104 (Waiting Rate) of Attachment II, will be due, applied as of the fourth day of tests, until the Unit is released. The periods spent with equipment repair will not be calculated for the purposes of counting such duration, and no fees will be due during such periods. 3.1.2. PETROBRAS may opt for the partial or total performance of the receipt tests, in sheltered waters, in the deepest water depth set forth in the Contract, or also in the first location........................... 7 3.2. To maintain, during the contract period, the Unit, its fittings, as well as accessories and replacement elements and personnel, during the contract period, in perfect working conditions in a working regime of 24 (twenty-four) hours a day, 7 (seven) days a week, and to guarantee that the Unit is calculated to carry out the activities object of this contract............................................... 3.2.1. To strictly comply with the recommendations of the equipment manufacturers foreseen in their operation manuals, which will be provided for in the Unit's preventive maintenance plan................ 3.3. TECHNICAL EVALUATION AWARD AND CERTIFICATES - To submit copies of the Registry, Survey, Classification and Technical Award Certificates of the Unit and its fittings, signed by a qualified and well-known organization, not related with the CONTRACTOR, notarized in the Brazilian Consulate and translated by a Sworn Public Translator, if issued abroad, and which should contain:.............................. 3.3.1. Description o the Unit and accessories;............................... 3.3.2. Operational conditions and physical conditions of the Unit;........... 3.3.3. Light displacement of the Unit (Light weight);........................ 3.3.4. Year of construction;................................................. 3.3.5. Year of reconditioning, listing spare parts the parts replaced;....... 3.3.6. Technological difference between the Unit surveyed and a more modern Unit of the same kind;................................................ 3.3.7. Forecast of the average useful life of the good used and its new analog;............................................................... 3.3.8. Market value, of reproduction and replacement;........................ 8 3.3.9. Net weight of the equipment installed in the Unit;.................... 3.3.10. Technical catalogues of the equipment installed in the Unit........... 3.4. To regularize, before the proper authorities, the entry and stay of the Unit in Brazil, arranging, at its expense, for the Release, Surveys, Registries and Temporary Admission........................... 3.4.1. Regarding new equipment and equipment without use, the "Technical Survey and Evaluation Award" referred to in item 3.3 may be replaced by factory catalogues or purchase invoices, with description, year of manufacture, useful life forecast and value of each equipment...................... 3.5. SAFETY, SANITATION AND LABOR MEDICINE - To carry out its operations in strict compliance with the international safety, sanitation and labor medicine standards, being liable for violations committed. To supply, for its account, and maintain in perfect operating conditions, the safety equipment in accordance with the safety plan ("SAFETY PLAN") approved by the Administration of the Unit's Country of Registry, and with the good marine drilling/evaluation/workover practice.............................................................. 3.5.1. The Unit will comply with the IMO - MODU - CODE (Mobile Offshore Drilling Unit) standard............................................... 3.6. SEA OPERATIONS - To manage the Unit in strict compliance with the laws, standards, regulations and administrative rules, as well as the instructions issued by the Shipping Office or by other proper authorities, specially those regarding the spillage of oil and other residues from the Unit into the sea, being liable, as a result, for any charges arising from the violation of such laws, standards, regulations, administrative rules and instructions, the 9 limit established in subitem 3.6.2. being complied with, and with the exception of the cases provided for in item 3.20 of this Contract..... 3.6.1. To plan and carry out operations aiming at preventing and fighting oil and gas blow outs, fires, or other incidents, complying with the provision in item 2.4 of Attachment II to this Contract. Although the CONTRACTOR is considered fully responsible for such operations, it is obliged to discuss the methods to be adopted with PETROBRAS, in order to find the best operating solution............................. 3.6.2. Exception is made of the events arising from kick, blow out, surgings, or formation testing, which the CONTRACTOR will be kept free and safe from. In the other cases of spillage of petroleum, oils and other residues into the sea, the CONTRACTOR will be liable up to the limit of US$500,000.00 (five hundred thousand dollars), per event and its deployments........................................................... 3.7. To comply with all laws, standards, decrees, regulations, administrative rules and instructions in force in Brazil, that govern the exploration and research in the Brazilian submarine shelf, including those regarding environmental protection.................... 3.8. REPLACEMENT AND REPAIRS - The replacement cost for equipment, materials and accessories needed for the Unit's perfect operation, as well as the expenses with repairs of any kind, will run for the CONTRACTOR's account.................................................. 3.8.1. The above mentioned repair cost covers any and all expenses, including taxes and duties due from the time of the purchase of the equipment, spare parts and materials, to their installation and placement in the Unit, with exception of expenses with transportation between the support vessels' port of operation and the Unit........... 10 3.8.2. Regarding the Temporary Admission of the Unit, as well as the import of the equipment, materials and accessories mentioned in item 3.8, the CONTRACTOR will comply with the provisions of the Internal Revenue's Ruling Instruction No. 136/87............................... 3.9. At the end of this CONTRACT or of its extension, to bear the charges arising from the return of the Unit, its fittings, accessories, equipment, spare parts, and materials for replacement or repair, such charges including, but not limited to, the preparation, packing, shipping, transportation, unloading, stay, freight, clearance, storage, wharfage, stowage, insurance and other similar expenses...... 3.10. To maintain, at its expenses, besides the Unit, the crew adequate and sufficient for its operation, being also obliged to comply with the pertinent legal provisions, issued by Brazilian authorities and by those of the CONTRACTOR's country of origin........................... 3.11. To bear all expenses with displacement of the crew mentioned in item 3.10, including transportation form abroad to the port or airport of Macae-RJ, as indicated by PETROBRAS, and the return to the place of origin, and any and all expenses with the crew's stay in Brazil, medical and hospital expenses, meals, passports, and similar expenses. 3.11.1. To maintain PETROBRAS free and safe from any complaints, claims from its employees, representatives, as a result of the present contract... 3.12. To promote, without charges to PETROBRAS, the replacement and immediate withdrawal of any crew member that may be requested in writing by PETROBRAS at any time, due to bad behavior, technical deficiency, inefficiency or health conditions......................... 11 3.13. To maintain a special identification for the crew, so as to distinguish it from PETROBRAS' and other companies' personnel who may eventually work in other services related to the object of the present CONTRACT...................................................... 3.14. RADIO COMMUNICATIONS - To supply, operate and maintain VRH, SSB and Radio-Beacon and portable Transceptor equipment, adequate for PETROBRAS= land communications system, to guide helicopters, so as to comply with the Radio-Communications Plan supplied by PETROBRAS, appearing in Attachment I............................................. 3.14.1. Other Radio Communications systems deemed necessary to support the CONTRACTOR's operations, both in the Unit and on land, will be supplied, installed and operated by it. The CONTRACTOR will be responsible for the obtainment of the licenses and frequencies to operate such equipment................................................ 3.14.2. The CONTRACTOR will maintain, at its expenses, radio operators, fluent in spoken Portuguese, who will remain 24 (twenty-four) hours a day operating the equipment installed in the Unit, whether they belong to PETROBRAS or to the CONTRACTOR.............................. 3.14.3. Immediately after the Unit's arrival, the CONTRACTOR will arrange with the proper authorities the issuing of the "Certificate of Survey" regarding the radio station existing on board................. 3.14.4. The CONTRACTOR will bear any expenses related to the telecommunications equipment and services, with exception of those provided for in item 4.7 of this Contract............................. 3.15. Insurances - To provide for the contracting, at its expenses, of the insurances necessary to fulfill this CONTRACT and the Brazilian Laws, intended for the coverage of all of its 12 accessories, even when they are being transported under PETROBRAS' responsibility, as well as the Civil Liability insurance for damages and losses caused to third parties............................................................... 3.15.1. The CONTRACTOR will appear as co-insured in the Civil Liability Insurance made, by force of item 3.12 of the Service Rendering Policy entered into between that company and PETROBRAS................ 3.15.2. During the period of validity of this Contract, the CONTRACTOR should maintain insurance coverage for the Unit and all of its accessories, according to the conditions of the London Standard Drilling Barge Form - All Risk, or similar........................................... 3.15.3. The redress due to the CONTRACTOR's Civil Liability arising from damages provided for in this Clause, is not limited to the amount set forth in subitem 3.12.1 of the Service Rendering Contract entered into between INTERVENIENT PARTY and PETROBRAS, for the Civil Liability Insurance against Third Parties, and will be ruled by the pertinent Brazilian laws.............................................. 3.16. The franchises that may be established for the insurances mentioned in item 3.15 and in its subitems, as well as the onus arising from the insurers' requirements and/or recommendations will fully run for the CONTRACTOR's account.............................................. 3.17. To keep PETROBRAS free and safe from any and all indemnity claim for damages and/or losses of any kind which the CONTRACTOR may have sustained as a result of this CONTRACT, whether or not it has made adequate and sufficient insurance for such circumstances.............. 3.17.1. PETROBRAS will be equally kept free and safe from any and all indemnity claim for damages and/or losses of any kind which the CONTRACTOR may have caused to third 13 parties for its duly proven grossly negligent action or omission, arising from this CONTRACT, whether or not it has made adequate and sufficient insurance for such circumstances......................................................... 3.17.2. In return, the CONTRACTOR will be kept free and safe from any and all indemnity claim for damages and/or losses of any kind, which PETROBRAS may have sustained from third parties, or has caused to third parties by its duly proven grossly negligent action or omission, as a result of this CONTRACT, whether or not it has made adequate and sufficient insurance for such circumstances.............. 3.18. The CONTRACTOR waives for itself and will required from its Insurers and/or Subcontractors, in any and all insurance made as a result of this CONTRACT, the inclusion, in each policy contracted, the provision assuring the waiver of any right of subrogation against PETROBRAS............................................................. 3.19. To submit to E&P/GETRAT, up to 30 (thirty) days after they have been signed, as provided for in item 2.2.1, the originals, or certified copies of the certificates of the insurances made as a result of this CONTRACT, containing all essential data, such as insurers, time limits, period of validity, amounts insured, and coverage conditions, and with PETROBRAS appearing as co-insured, except in the civil liability insurance, of which it will participate as a third party...................................................... 3.19.1. The certificates mentioned in item 3.19 will contain a provision that the insurances mentioned cannot be amended and/or canceled without PETROBRAS' prior authorization....................... 14 3.20. LOSSES AND DAMAGES - The CONTRACTOR will be liable for losses of and damages to its own equipment and material, and to those which it and its agents may cause to PETROBRAS or to third parties, as a result of its duly proven grossly negligent action or omission, in the following cases:.................................................. 3.20.1 In the event of losses or damages to equipment and/or materials belonging to PETROBRAS and/or third parties, which are aboard the Unit, or during the movement between the Unit and the support vessels, the CONTRACTOR's liability will be limited to the replacement or repair of the equipment so lost or damaged due to the CONTRACTOR's or its employees= duly proven fault. However, the CONTRACTOR will not be liable and will be kept free and safe from in the event of damages to reservoirs, indirect damages or loss of profit of PETROBRAS, losses and damages arising from pollution coming from the well, resulting from kick and/or blow-out;........... 3.20.2. In case of losses and damages caused to the well, arising from the events mentioned in subitem 2.1.5 of Attachment II, the CONTRACTOR will reimburse PETROBRAS the payments it comes to make to third parties referring to cementing, logging, or other.......... 15 3.21.2. developed as a result of this CONTRACT, unless expressly authorized by PETROBRAS............................................................. 3.21.3. The provision of this item 3.21 is a standing obligation, valid even after the termination, in any fashion, of the present CONTRACT... 3.22. UNIT'S HELIPOINT................................................ 3.22.1. To arrange for the release of the Unit's helipoint by the Brazilian proper authorities (Ports and Coast Authority, Civil Aviation Department of the Ministry of Aeronautics, Internal Revenue, Maritime Police, Customs), bearing all expenses arising therefrom..... 3.22.2. The Unit's helipoint should be approved for operations with helicopters of the S-61 type, according to chapter 24 of Administrative Rule No. 005 of the DPC - "Standards and Procedures for Maritime Navigation", dated 01.15.97, which deals with the Construction Installation, Homologation, and Modifications of Helipoint and Operations of Helicopters in Offshore Platforms and Merchant Ships........................................................ 16 To submit to PETROBRAS, at least 30 (thirty) days before the date foreseen for the Unit's arrival in Brazil, the following documents regarding the helipoint:.............................................. 3.23. The CONTRACTOR should adopt procedures that minimize the consumption of fuel and industrial water without prejudice for the operations............................................................ 3.24. The CONTRACTOR should provide installations in the Unit for the training and leisure of all personnel abroad, and which should contain at least the following:....................................... a) Parlor game room;................................................. b) TV room capable of tuning 5 (five) main channels available in Brazil, in any location;.......................................... c) Movie theater with VCR;........................................... d) Two other TV sets to be installed in cabins indicated by PETROBRAS' Inspection............................................. 3.25. Besides sea water, the CONTRACTOR will judiciously use industrial water to clean the Unit, in order to avoid high consumption and always giving priority to its use in the drilling fluid................................................................. 3.26. All documents between the CONTRACTOR and PETROBRAS, when requested by PETROBRAS, will be written and submitted in Portuguese... 3.27. The CONTRACTOR undertakes to maintain all conditions required in the bid stage during all of the fulfillment of the CONTRACT........ 3.28. To redo any and all operation refused by PETROBRAS, with any charge to PETROBRAS, as a result of irregular performance, bearing all costs involved.................................................... 17 3.29. To maintain a representative accredited and accepted by PETROBRAS in the Unit or in a place previously designated by PETROBRAS, to represent the CONTRACTOR in the fulfillment of the CONTRACT.............................................................. 3.31. To comply with the requests contained in the Operation(s) Authorization(s) issued by PETROBRAS.................................. 3.32 To allow, after negotiations between the contracting parties, the provisional installation in the chartered vessel, of complementary equipment such as, but not limited to: pipes or rises in catenary by the J-lay method, or similar, submarine manifolds, provided they do not jeopardize the Vessel's safety and are in accordance with the rules of the Classification Society................................... (End of Clause)............................................................... 18 FOURTH CLAUSE - PETROBRAS' OBLIGATIONS........................................ 4.1. To adopt the measures necessary for the request to register this CONTRACT in the Central Bank of Brazil, soon after the proper documents are received, and the supply of which is the CONTRACTOR's responsibility........................................................ 4.2. To make monthly payments due to the CONTRACTOR as a result of the present CONTRACT, based on Attachment I and Attachment II and on the conditions set forth in Clauses Sixth: Measurement, and Seventh: Form of Payment, and other Attachments, Clauses and Conditions of this CONTRACT being complied with..................................... 4.3. At its exclusive judgment, and without any co-responsibility, PETROBRAS may cooperate with the CONTRACTOR, assisting it before the proper authorities, referring to processes that are going through the procedural stages in the respective Agencies, regarding the Unit, materials and/or equipment pertaining to the object of this Contract. Such cooperation, however, will not lessen the CONTRACTOR's responsibility for the obtainment of the documents and/or benefits that may be the object of the respective proceedings.. 4.4. PETROBRAS will reimburse the CONTRACTOR, by means of submittal, by the latter, of the corroborative documents, in the acquisition currency, the cost of replacement or repair commands and other components of the production string and of the fishing string belonging to the CONTRACTOR, which are lost or damaged, by accident and not due to the normal wear nor to the CONTRACTOR's duly proven grossly negligent action or omission, with the deduction of a 25% depreciation per contract year, with a 20% residual 19 value, applying, for its calculation, the least indemnity cost (Ci) obtained by means of the following formulae:- Ci = Vr.y (1 - 0.02083n), or Ci + Cr, where:......................... Ci - indemnity cost;................................................. Cr - repair cost;.................................................... Vr - replacement value;.............................................. n - number of months or fraction of a month between the date of the beginning of the CONTRACT and the date of the loss (the fraction of a month is counted as a whole month);.......................... y - 1 (for new strings), and 0.9 (for "Premium" strings)............ 4.4.1. In the event there is a renewal of the string or of a part of the elements that comprise the production string (pipes, commands and other components), during the period of validity of the Contract, the depreciation period to be considered - the "n" of the formula, will be the one between the purchase date and the date when the element or the string was lost................................................... 4.4.2. PETROBRAS may, at its discretion and expense, carry out inspection in the drill string, its components and accessories, the CONTRACTOR being obliged to repair or replace, for its account, the equipment rejected.............................................................. 4.5. Transportation:....................................................... 4.5.1. PETROBRAS will provide transportation for all crew members of the Unit from the port or airport as indicated by PETROBRAS in the beginning of this CONTRACT, and vice-versa. At its exclusive discretion, the transportation to be provided will be by helicopter... 20 4.5.2. PETROBRAS will provide transportation of the material and equipment object of this Contract, from the port or airport designated to the Unit and vice-versa................................................... 4.5.3. In any circumstances foreseen in items 4.5.1 and 4.5.2, the granting of insurance coverage will not be PETROBRAS' competence, and the CONTRACTOR waives immediately,, for itself and for its insurers, any return action against PETROBRAS or third parties at its service, as a result of the transportation provided................................. 4.5.4 In the cases when there is need to program exclusive air transportation, for the Unit's inspection by the Navy and/or the Shipping Office, the costs arising therefrom will be charged to the CONTRACTOR............................................................ 4.5.5. PETROBRAS may provide air or sea transportation for the CONTRACTOR's materials, industrial or fresh water and fuel before the beginning of the Contract, as defined in item 2.2.1. The cost arising therefrom will be reimbursed by the CONTRACTOR to PETROBRAS at the time the first invoice is issued............................................... 4.5.6. PETROBRAS will provide tugs and support vessels for the Unit, from the location where the equipment general testing is performed, to the first location, between locations and from the last location to the Brazilian port or sheltered waters closest thereto, which will be chosen in common agreement between the parties........................ 4.5.6.1 PETROBRAS will supply support vessels for the positioning of the Unit in the locations to be drilled under this Contract.................... 4.5.7 PETROBRAS may provide tugs and/or support vessels to load and unload materials and to handle anchors, in a location to be defined by the parties, in the cases of inspection and/or dockages, including those arising from act of God or force majeure, as defined in the 21 Twelfth Clause of this Contract. The costs arising therefrom will be reimbursed by the CONTRACTOR to PETROBRAS............................. 4.6 FUEL AND WATER - To supply, for its account, all fuel and water necessary for the operations, complying with the provision set forth in subitem 4.6.1, from the beginning of the Contract, until its termination, as defined in subitems 2.2.1 and 2.2.2, respectively..... 4.6.1. The supply of water mentioned in item 4.6 includes also the industrial water intended for the cleaning of the Unit, the provision set forth in item 3.23 being complied with............................ 4.6.2. PETROBRAS will supply, for its account, the fuel necessary for the Unit's equipment, up to the limit of (blank)/year. What exceeds this limit the onus will be for the CONTRACTOR's........................... 4.6.2.1.PETROBRAS will carry out the measurement of the fuel existing aboard the Unit, at the beginning of the CONTRACT, at the end of each contract year, and at the end of the CONTRACT, when the average consumption will be calculated. The volume exceeding the established limit will be charged to the CONTRACTOR at the time of the measurement, at the consumer's sales price, on the date PETROBRAS issued the Debt Note, in force in the City of Rio de Janeiro-RJ, duly adjusted in keeping with the different ICMN aliquots in force in the State of Rio de Janeiro and in the State where the Unit is operating.................. 4.6.3. During the Unit's dockage periods, all fuel consumed will run for the CONTRACTOR's full responsibility and cost, from the interruption of the operation until the return to the same previous situation. The fuel cost during that period will be charged to the CONTRACTOR, after the consumption calculation, and at a price to be defined according to the criterium mentioned in 4.6.2.1................................. 22 4.7. To maintain, besides the CONTRACTOR's radio communications equipment, aboard the Unit, equipment exclusively for PETROBRAS' communications with its land bases................................................... 4.8. To notify the CONTRACTOR, in writing, on the application of eventual fines................................................................. 4.9. To issue the Measurement Bulletin (MB), as set forth in the Sixth Clause of this Contract............................................... 4.10. To issue the Operation(s) Authorization(s) with all the information necessary for their performance, such as: location, time limit, amount, scope and beginning and end dates............................. 4.11 PETROBRAS will reimburse the CONTRACTOR, by means of submittal by the latter, of corroborative documents, in the acquisition currency, the cost of replacement of VX rings, VX with Hycar and VX with lead inserts for BOP and ANM connections with wellheads and filter elements, as provided for in items 24, 25 and 34 of Attachment IV - Mutual Obligations of the Chartering Contract......................... (End of Clause)............................................................... 23 FIFTH CLAUSE - PRICES AND VALUE............................................... 5.1. For the chartering of the Unit and its accessories, PETROBRAS will pay the rates set forth in Attachment I and Attachment III I to this CONTRACT, under the conditions set forth in Clauses Sixth: Measurement, and Seventh: Form of Payment............................ 5.1.1. The contract prices include all specified tariffs, supervision, administration, taxes, fiscal emoluments and all expenses that fall directly or indirectly upon the chartering, including profit, needed for its perfect fulfillment, until the end of the contract, no price revision claims being therefore valid................................. 5.2. The total estimated balue of this present CONTRACT is of US$281,743,362.45, equivalent to R$303,662,926.00 (three hundred and three million, six hundred and sixty-two thousand, nine hundred and ninety-six reais), converted at the exchange rate of R$1,060/US$1.,00, referring to the following charges:................. 5.3. PETROBRAS does not undertake to make the payment of the total estimated in item 5.2, but of the amount corresponding to the chartering effectively occurred and accepted by PETROBRAS;............ 5.4. The financial resources necessary for the payment of the chartering object of the present Contract are duly equated, and specifically assured in the current year's budget and provided for in the following ones, so as to cover the total contract period.............. (End of Clause)............................................................... 24 SIXTH CLAUSE - MEASUREMENT OF THE CHARTERING 6.1. Periodicity of the measurement of the chartering and determination of the reimbursable expenses............................................. 6.2. For the chartering, the measurement will be monthly, according to the procedure mentioned below, with the consequent issuing of the respective Measurement Bulletins (MB):................................ a) The initial measurement of the chartering will be made between the date of the beginning of this Contract and the last day of the calendar month;............................................... b) The intermediate measurements of the chartering, corresponding to a given month of the order "m", include the period between day 01 of the month "m" and the last day of the calendar month of the order "m";........................................................ c) The final measurement of the chartering will be made between day 01 of the month "m" and this Contract's termination date.......... 6.1.2. The reimbursable expenses, if foreseen in the Contract, will be determined on any day of the month, according to the vouchers submitted to and accepted by PETROBRAS, and more than one determination can be made in the same period covered by the measurement........................................................... 6.1.2.1.The results found will be submitted to the CONTRACTOR on the 5th (fifth) working day, as of the submittal of said vouchers, by means of a Reimbursement Document (RD), which will be signed by the Manager of this CONTRACT, for invoicing purposes................................. 6.2. Issuing of the Measurement Bulletins (MB)............................. 6.2.1. PETROBRAS, through the Manager of this Contract, at the end of each period as mentioned in the letters of subitem 6.1.1 of this Clause, will carry out the measurement of 25 the chartering, gathering the results found in the Measurement Bulletin (MB), for the signature of the Manager of this Contract and of the CONTRACTOR, complying with the following:........................................................ a) For the initial, intermediate, and final measurements ending on the last day of a given month of the order "m", the CONTRACTOR will receive one of the copies of the MB up to the 5th (fifth) subsequent working day, so that it may submit the respective collection documents, as provided for in subitem 6.3.1 of this Clause;........................................................... b) For the final measurement, when the termination of the Contract does not occur in the last day of the month, the CONTRACTOR will receive one of the copies of the MB, up to the 5th (fifth) working day after the termination of the Contract, so that it may submit the respective collection documents, as provided for in subitem 6.3.1 of this Clause;..................................... c) For each chartering measurement period, only 1 (one) collection document may be issued, being understood that collection documents with partial values regarding said period will not be taken into account for payment purposes;.......................... d) The portions regarding the basic values and the deductions are to be made evident in the Measurement Bulletins (MB), if provided for in the Contract;.............................................. 6.3. Time for the submittal of collection documents........................ Chart on following page 6.3.1. The CONTRACTOR will submit the respective collection documents to PETROBRAS' Financial Department, as mentioned in item 7.1 of this Contract, in the following conditions:................................ - - ------------------------------------------------------------------------------- TYPE OF MEASUREMENT OCCASION FOR THE SUBMITTAL OF MEASUREMENT DOCUMENT COLLECTION DOCUMENTS INITIAL MB Up to the 8th working day following the INTERMEDIATE last day of the chartering performance AND FINAL period, and PETROBRAS' will make the payment on the 30th consecutive day, as of the final date of the measured period, the provision in subitem 6.3.1.1 being complied with.......................... MOBILIZATION MB After the receipt of the MB, and OF THE Unit PETROBRAS will make the payment on the 30th consecutive day, as of the date the Collection Document is submitted........ DETERMINATION RD In the first working day after the RD is OF issued, and the payment will be made REIMBURSABLE within 30 (thirty) days, as of the date EXPENSES of its submittal........................ - - ------------------------------------------------------------------------------- 26 6.3.1.1.The payments due because of this Contract, referring to the chartering, will always occur on the 30th (thirtieth) day after the end of the measured period, included in the MB's, or on the 1st (first) subsequent working day, provided the CONTRACTOR complies with the time limits for the submittal of the Collection Documents set forth herein. In the event of non-compliance, by the CONTRACTOR, with said submittal time limits, the payments will be postponed for the number of days equal to the delay in the delivery of such documents.................. 6.4. Measurements follow-up................................................ 6.4.1. The CONTRACTOR undertakes to follow-up the measurements and the determinations carried out by PETROBRAS, offering, at that time, the impugnations or considerations it deems necessary, which will be submitted to PETROBRAS' appraisal and decision........................ 6.4.2. The CONTRACTOR's signature by its representative before PETROBRAS will imply in the acknowledgment of the accuracy of the Measurement Bulletin (MB) for all legal purposes.................................. (End of Clause)............................................................... 27 SEVENTH CLAUSE - FORM OF PAYMENT.............................................. 7.1. The payments due as a result of this contract will be made by PETROBRAS to the CONTRACTOR, in Brazilian currency, 30 (thirty) consecutive days as of the last day of the period of execution of the service, provided the CONTRACTOR submits the collection documents up to the 8th (eighth) working day following the last day of the period of execution of the services.......................................... 7.1.1. The payments will be made on the basis of the average exchange rate of the American Dollar selling price, in force on the working day immediately beore the date of the effective payment.................. 7.1.2. The payment of eventual difference in readjustment will be made on the same day when the payment of the respective service occurs, provides the CONTRACTOR submits the corresponding collection document up to the 5th (fifty) working day the indexes that permit the issuing of the Readjustment Bulletin (RB) are known........................... 7.1.3. The payment of reimbursable expenses, if any, will be made 30 (thirty) consecutive days after the submittal of the collection documents............................................................. 7.1.4. In the event of non-submittal of the collection documents within the time limits set forth above, the payments will be postponed for the number of days corresponding to those of the delay in the submittal of the collection documents........................................... 7.2. The collection documents should be submitted, together with the original of the documents giving rise to it (MB, RB, RD) in the Docket of the Financial Departments indicated by PETROBRAS, for the purpose of checking the time limits for the payment................... 28 7.3. The collection departments will be issued without erasures, complying with the pertinent laws in force, and will contain obligatorily the following information:................................................ a) Place and date of its emission and number of the collection document;......................................................... b) Number and date of signature of the contract deed;................ c) Number and date of the documents originating them (MB, RB, RD);... d) Gross value of the collection documents, both in numbers and in writing;.......................................................... e) Name and code of the banking establishment, branch and the respective code, and number of the current account of the payee, where the payments will be made;.................................. f) In order that a particular payment is made in a banking establishment different from the one indicated at the time the contract deed was signed, such amendment will obligatorily be preceded by a fax/correspondence from the CONTRACTOR or will appear in the payee's collection document......................... 7.3.1. In the event the collection documents is inaccurate, it will be returned to the CONTRACTOR and the time limit foreseen in item 7.1 will be postponed for as many days as those corresponding to the delay in the submittal of such document............................... 7.3.2. In the event of re-submittal of the collection document, as a result of a previous impugnation, this fact should appear in the history of the collection document............................................... 7.3.3 The CONTRACTOR will obligatorily submit, every month to the Manager of the contract:...................................................... a) Payroll of the CONTRACTOR's employees who are involved in the rendering of the services contracted;............................. b) A photocopy of the Social Security Payment Slip (GRPS), duly settled and authenticated, obligatorily filling out field "8" of the GRPS (other information), the name, CGC of PETROBRAS, number, date and amount of the Invoice or Bill of Sale referring to the services rendered in the month.................................... c) In case of a Cooperative, to submit the payment vouchers of the amounts paid, distributed or to its members as remuneration for the services rendered in the fulfillment of this contract......... 7.3.4 The collection documents will not be accepted by PETROBRAS if submitted with the Income Tax at Source already withheld.............. 7.3.5 It is the responsibility of PETROBRAS' disbursing office the explanations of doubts regarding the issuing of the collection documents............................................................. 7.3.6 Eventual payments made for more or for less by PETROBRAS will be compensated as soon as they are detected, and the respective amounts will be duly corrected................................................ 7.3.7 The CONTRACTOR should indicate the place and fax number, if any, for the receipt of the "Notice of Payment Foreseen"....................... 7.4 The vouchers for reimbursable expenses due to the CONTRACTOR as a result of this contract deed, will be previously submitted to the Manager of the Contract, for checking, besides being duly settled by the respective supplier or service renderer, when such is the case.... 7.4.1 If the originals cannot remain in PETROBRAS' hands, copies thereof may be submitted, which will be checked by the Inspector and/or Manager, and the following should appear in every original document: "Copy Submitted for Reimbursement on.../.../...", followed by 30 the signature and identification by name, position and registry number, and the originals will be returned to the CONTRACTOR. The following text will appear in the copies of each document in PETROBRAS' hands: "Checked With the Original On.../.../...", which the Inspector and/or Manager will sign, identifying the signature by name, position, and registry number....................................................... 7.4.2 The receipt duly formalized by PETROBRAS of any reimbursable expense voucher, does not represent the recognition of the debt, nor the proof that the expenses were made..................................... 7.4.4 The collection of reimbursable expenses can only be made through the issuing of a Services Invoice, after approval of said corroborative documents and issuing by PETROBRAS of the respective Reimbursement Document - DR, which will be issued up to 5 (five) working days, as of the date of submittal of said documents............................ 7.4.4.1 PETROBRAS' Inspection has 3 (three) working days to proceed with the checking of the expense vouchers and to notify its approval to the CONTRACTOR, so that it may issue the Combined Invoice and Bill of Sale.................................................................. 7.4.5 The total amount of the collection document will be obtained by applying the following formula:....................................... VTR = VTD, where ----- 1-ICP VTR = total amount to be reimbursed to the CONTRACTOR;................ VTD = total amount of the reimbursable expenses, effectively authorized;........................................................... ICP = total of the sum of the aliquots of taxes collected, in the decimal form (ISS or ICMS, as the case may be, CONFINS and PIS/PASEP). 31 7.5 The CONTRACTOR agrees that, at PETROBRAS' exclusive option, the payment referring to the chartering object of the present Contract may be made by means of financing by third parties, provided the time limits, currencies, amounts and places for payment set forth in the Contract are complied with............................................ (End of Clause)............................................................... 32 EIGHTH CLAUSE - FINES......................................................... 8.1. Non-compliance, by the CONTRACTOR, after 92 (ninety-one) days beyond the time limit mentioned in item 2.3 of this Contract, will imply in the imposition of fine against the CONTRACTOR, in a written notice, corresponding to 30% (thirty per cent) of the rate provided for in REF 101 of Attachment III, per day of delay........................... 8.2. In the event of non-compliance, by the CONTRACTOR, with the inspection's requirements within the time limit it may set, PETROBRAS may, by a written notice, impose against the CONTRACTOR, per day of non-compliance with such requirements, as of the end of the time limit set, a fine corresponding to 20% (twenty per cent) of the rate provided for in REF 101 of Attachment III. ........................... 8.3. The penalties set forth in this Clause do not exclude any other provided for in the Laws in force and/or in this Contract, nor the CONTRACTOR's liability for damages it may cause to PETROBRAS, as a result of non-fulfillment of the conditions agreed upon herein. 8.4. The amount corresponding to the sum of the basic values of the fines applied is limited to 10% (ten percent) of the estimated value of the present Contract...................................................... 8.5. The penalties to which the CONTRACTOR is subjected to due to the provision set forth in this Clause, will be discounted in the first payment and in the subsequent ones, which the CONTRACTOR is entitled to, after the sanctions are applied by PETROBRAS...................... 8.6. In the event of balance, PETROBRAS reserves itself the right to make or complement the deduction in collection document(s) related to any other contract deed eventually entered into with the CONTRACTOR, or to use any other adequate means to settle the debt, if necessary...... 34 8.7. The CONTRACTOR may appeal against the imposition of the fine, in a declaration, within the non-deferrable time limit of 15 (fifteen) consecutive days as of the date the notice is received................ 8.8. Non-appearance of the CONTRACTOR's personnel for boarding on the date and time agreed upon between PETROBRAS and the CONTRACTOR, will subject the CONTRACTOR to the payment of a fine of US$140.00 per passenger in the case of air transportation, and US$40.00 in the case of sea transportation................................................. 8.8.1. The fine set forth in item 8.8 will not be charged if the CONTRACTOR requests PETROBRAS to change the boarding schedule at least 24 (twenty-four) hours in advance. 8.9 In a written notice and without prejudice of the capacity to rescind the contract, PETROBRAS may impose upon the CONTRACTOR a compensatory fine of 100% (one hundred per cent) of the amount of the conviction, due to default of its labor, social security or tax obligations....... 8.9.1 The payment of said fine will not exempt the CONTRACTOR from the obligation to reimburse PETROBRAS for the amount imposed upon it as a result of an eventual joint conviction passed by a Labor Court or by the proper administrative jurisdictions............................... 8.9.2 The CONTRACTOR will be fined in the percentual of 5% (five percent) on the amount of the invoice in the event it does not submit the GRPS or submits at variance................................................ (End of Clause)............................................................... 35 NINTH CLAUSE - INSPECTION..................................................... 9.1. The inspection of the chartering contracted herein will be carried out by PETROBRAS' representatives, and the CONTRACTOR undertakes to allow their free access to the Unit and to the operations locations, and to comply immediately with the observations of such inspection, which will have ample powers:......................................... 9.1.1. To determine, provided it comes to its knowledge and is within its capacity, the suspension of the operations which perhaps are being carried out in disagreement with the good technique or which threatens the safety of persons or assets of PETROBRAS, third parties and of the CONTRACTOR itself, subitem 2.1.7 of Attachment II being complied with......................................................... 9.1.2. To refuse the employment of equipment and materials, tools and production string components condemned or improper, as well as operations which do not comply with the established programs;......... 9.1.3. To order the withdrawal, from the work site, of any of the CONTRACTOR's employees who, in PETROBRAS' opinion, may endanger the good performance of the operations or hinder its inspecting activities;........................................................... 9.1.4. To certify the accuracy of the information reported daily by the CONTRACTOR;........................................................... 9.1.5. To notify the CONTRACTOR, in writing, on the imposition of the fines provided for in this Contract, including those referring to the CONTRACTOR's action or omission;...................................... 9.1.6. To request from the CONTRACTOR a detailed report on any accident occurred and on any operation or repair performed..................... 36 9.2. However, the responsibility, operation, movement and administration of the Unit will be under the exclusive control and command of the CONTRACTOR or its employees........................................... 9.3. The total or partial action or omission of the Inspection, does not lessen at all the CONTRACTOR's full responsibility for the rendering of the obligations agreed upon herein, nor does it imply in any reduction or change in the CONTRACTOR's obligations in the faithful and perfect fulfillment of the present Contract....................... 9.4. Recording - PETROBRAS' Inspection should record its observations on the Driller=s Log approved by the IADC and on the Daily Drilling Certificate (ADP), to safeguard the rights and responsibilities foreseen in this CONTRACT............................................. 9.5. During the contract period, PETROBRAS will carry out the CONTRACTOR's performance evaluation, covering the groups in equipment and material, human resources, installations, quality and efficiency. The results of the performance evaluations will be notified and consolidated by means of a service performance certificate............ (End of Clause)............................................................... 37 TENTH CLAUSE - REsISSION...................................................... 10.1. PETROBRAS may rescind the present CONTRACT, without the CONTRACTOR being entitled to any right to indemnity and/or withholding in the following cases:...................................................... 10.1.1. Nonfulfillment, or irregular fulfillment of contract clauses, specifications, operations or time limits, as well as the repeated commitment of faults in the fulfillment of the Contract;.............. 10.1.2. Total or partial subcontracting of the object of the present Contract, the association of the CONTRACTOR will another, merger/division or total or partial incorporation, except if allowed for in this Contract, which affects the good fulfillment of this instrument. 10.1.3. Interruption of the operations for more than 60 (sixty) days, in the cases in which an act of God does not clearly apply (clause 12.4)..... 10.1.4. Decree of the CONTRACTOR's bankruptcy................................. 10.1.5. Suspension of the operations for more than 60 (sixty) days............ 10.1.6. When the limit for the imposition of penalties provided for in item 8.4 of this Contract is attained................................. 10.1.7. Slowness in the performance of the works, leading PETROBRAS to prove the impossibility of completing the operations within the established time limits........................................................... 10.1.8. Non-compliance with the determination of PETROBRAS' agent appointed to follow-up and inspect the fulfillment of the CONTRACT, as well as those of his superiors................................................ 10.1.9. The dissolution of the CONTRACTOR..................................... 10.1.10.The social change or the modification of the company's purpose or structure, which in PETROBRAS' opinion, hinders the performance of the operations;........................................................... 38 10.1.11.Delay in the beginning of the fulfillment of the CONTRACT for more than 180 (one hundred and eighty) days..................................... 10.1.12.Rescission of the Services Rendering Contract for drilling and/or Evaluation and/or Completion and/or Workover using the Unit. entered into between PETROBRAS and the INTERVENIENT PARTY..................... 10.1.13.If the limit set forth in subitem 2.1.9 of Attachment II to this Contract is attained. 10.1.14.If the limits set forth in NOTE 2 of REF. 102 of Attachment II to this CONTRACT is attained.................................................. 10.1.15.Non-submittal of the proof of default of labor obligations towards the employees directly involved in the services object of this Contract, including social security contributions and deposits in the FGTS, when requested by the Inspection, or if such default is proved............. 10.1.16.Non-submittal or submittal at variance of the GRPS, when the corresponding invoice is delivered.................................... 10.1.16.1.The rescision for this reason does not prevent PETROBRAS from imposing the respective fine, foreseenm in 8.7.2.;................... 10.2. In the event of rescision of the contract deed for the reasons foreseen in 10.1, PETROBRAS:.......................................... a) will take over the object of the contract deed, on the stage and location where it is found;....................................... b) will enforce the contract guarantee, if any, for the reimbursement of the amounts of fines and indemnities due to it;.. 39 c) will withhold the credits arising from the contract deed, up to the limits of the damages caused to it;........................... 10.3. After the Contract is rescinded, as set forth in this Clause, the CONTRACTOR is liable, in legal and contract fashion, for the violation or inadequate performance which gives rise to the rescision, as well as for the reimbursement of damages which PETROBRAS may come to sustain............................................................... 10.4 After the Contract is rescinded, PETROBRAS, at its exclusive judgment, may adjudicate the operations object thereof to which it deems appropriate, without behoving the CONTRACTOR any consultation or interference, claim and/or indemnity, for whatever title, and the CONTRACTOR will be liable to legal and contract penalties, besides answering for damages PETROBRAS may sustain........................... 10.4.1. The CONTRACTOR is also liable for the pertinent administrative sanctions, its full defense being guaranteed.......................... 10.5. In the event PETROBRAS does not impose the right to rescind the present CONTRACT according to this Clause, it may, at its absolute discretion, withhold the payments of pending invoices, until the CONTRACTOR fulfills the contract condition it has infringed, but such fact will not represent novation nor will it generate rights that may be claimed by the CONTRACTOR.......................................... (End of Clause)............................................................... 40 ELEVENTH CLAUSE - FISCAL CHARGES.............................................. 11.1. Taxes (taxes, fees, emoluments, fiscal and parafiscal contributions) that are due as a direct or indirect result of the present CONTRACT, or its fulfillment, will be the exclusive responsibility of the taxpayer, so defined in the tax rule, with no right to reimbursement. PETROBRAS, as the paying source, will discount and withhold within the legal time period, from the payments it makes, the taxes it is liable to by the laws in force......................................................... 11.1.1. The CONTRACTOR states that, in quoting its prices, it has taken into account the taxes (taxes, fees, emoluments, fiscal and parafiscal contributions) charged on the fulfillment of this Contract, and it cannot make any claim due to error on such evaluation, for the purpose of requesting a price revision [or] reimbursement of payments set down by the proper authority............................................... 11.1.2. Once found, during the period of validity of the Contract, that the CONTRACTOR has unduly added to its prices amounts corresponding to taxes, fiscal and/or parafiscal contributions and emoluments of any kind that are not charged to the performance of the services agreed upon, such values will be immediately excluded, with the consequence reduction of the prices practice and reimbursement of amounts that may have been paid to the CONTRACTOR.................................. 11.2. If, during the period of validity of this CONTRACT, any of the following events occur:............................................... o creation of new taxes;............................................ o extinction of existing taxes;..................................... o changes in the aliquots;.......................................... o establishment of tax incentives of any kind; and.................. 41 o exemption or abatement of federal, state or county taxes;......... which, provedly come to increase or reduce the burdens of the parties to the contract, the prices will be revised, so as to fit them into the changes made, compensating, at the first opportUnity, any differences arising from such changes. However, if it is a question of tax incentives, the advantages arising therefrom will always be for PETROBRAS......................................................... (End of Clause)............................................................... 42 TWELFTH CLAUSE - FORCE MAJEURE................................................ 12.1. PETROBRAS and the CONTRACTOR will not be liable for the nonfulfillment of their respective obligations in case of events that characterize an act of God or force majeure defined in the sole paragraph of Article 1.058 of the Brazilian Civil Code. Any suspension of performance due to such item 12.1 will be limited to the period during which such cause or its consequences exist, and such period will be added to the duration of the Contract mentioned in the Second Clause of the present Contract. However, the CONTRACTOR is assured the right to receive the rate provided for in Ref 104 of Attachment III, with the exception of the exemption from payment set forth in subitem 2.1.4 of the Attachment II, and the reimbursements mentioned in this Contract, and furthermore, the parties will severally assume their losses................................................................ 12.2 If the circumstances that justify the invoking of the existence of an act of God or force majeure occurs, the party unable to fulfill its obligations will immediately notify the other party, in writing, on the occurrence and its consequences................................... 12.3. If the impediment arising from the force majeure lasts for more than 30 (thirty) consecutive days, any of the parties may opt for the termination of the Contract, with both parties complying with their mutual obligations due until the date of the beginning of said impediment............................................................ 12.4 In the present Contract it will be considered as act of God the situation in which one of the parties is prevented from fulfilling its obligations, provided it proves that:............................. the non-fulfillment of the obligation was due to the existence of an impediment beyond its control,........................................ 43 the party impeded could not, within its ability, overcome the impediment and its effects, in order to fulfill its contract obligation within the time limit set down, and........................ the impediment and its effects could not be avoided nor overcome...... (End of Clause)............................................................... 44 THIRTEENTH CLAUSE - ASSIGNMENT AND TRANSFER................................... 13.1. The CONTRACTOR cannot assign or transfer, in whole or in part, the present Contract, except with PETROBRAS' prior authorization in writing............................................................... 13.2. The CONTRACTOR cannot assign or give in guarantee, at any title, in whole or in part, the credits of any kind, arising or deriving from the present CONTRACT, except with PETROBRAS' prior authorization in writing. The prior authorization will obligatorily state that PETROBRAS imposes upon the assignee of the credits the exceptions that behooves it, mentioning expressly that the payments to the assignee will be conditioned to the fulfillment, by the assignor, of all of its contract obligations....................................... 13.3. The occurrence of the above mentioned events, duly authorized by PETROBRAS, does not exempt the CONTRACTOR form any of its contract obligations........................................................... 13.4. PETROBRAS may assign or transfer, in whole or in part, the present Contract, under commercial conditions to be agreed upon by the parties. ............................................................. (End of Clause)............................................................... 45 FOURTEENTH CLAUSE - ADDITIONAL EQUIPMENT...................................... 14.1. PETROBRAS may install in the Unit the additional equipment it deems necessary for research, drilling, completion of wells or production. It is agreed, however, that no structural change will be made in the Unit without the CONTRACTOR's consent in writing. All PETROBRAS' equipment installed in the Unit will remain its property, and it will be removed by it before the end of this Contract. The installation and removal expenses will run for PETROBRAS' account. During the installation and removal of PETROBRAS' equipment, the rate set forth in Ref 104 of Attachment III will be paid if the interruption of the operations becomes necessary.......................................... (End of Clause)............................................................... 46 FIFTEENTH CLAUSE - ATTORNEY OF RECORD......................................... 15.1. The CONTRACTOR undertakes to maintain, in the City of Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil, during the period of validity of the CONTRACT and until the settlement of eventual demands arising from this CONTRACT, a representative with ad-judicia et extra powers, who may receive service of process, inclusive in execution proceedings, and also sign compromise and settlements regarding controversies resulting from this CONTRACT, and the summons can be made by publication, in the event or absence or lack of an Attorney.............................................................. 15.1.1. Within 30 (thirty) days after the signature of the present Contract, the CONTRACTOR will notify PETROBRAS the name, qualification, office and residence of its representative and attorney of record, as set forth in item 15.1.................................................... (End of Clause)............................................................... 47 SIXTEENTH CLAUSE - CONTRACT RELATIONSHIPS..................................... 16.1 This CONTRACT is related to another one for the rendering of services of drilling and/or evaluation and/or completion and/or workover, signed on this same date between PETROBRAS and the INTERVENIENT PARTY........ (End of Clause)............................................................... 48 SEVENTEENTH CLAUSE - INTERVENIENCE............................................ 17.1. The INTERVENIENT PARTY signs the present Contract, together with the CONTRACTOR, being jointly liable with it for all obligations arising from the present Contract and from its fulfillment, including for losses................................................................ (End of Clause)............................................................... 49 EIGHTEENTH CLAUSE - LIABILITY................................................. 18.1. PETROBRAS' and the CONTRACTOR's liability for damages will be limited to the direct damages in accordance with the Brazilian Civil Code and pertinent laws, with exception of loss of profit and indirect damages, the direct damages being limited to 100% (one hundred percent) of the total contract value.................................................. (End of Clause)............................................................... 50 NINETEENTH CLAUSE - COMPLEMENTARY DOCUMENTS 19.l. The AttachmentS mentioned below are an integral part of the present CONTRACT and, in the event of disagreement between the Attachments and the CONTRACT, the text of the CONTRACT will prevail............... Attachments: I - Technical specifications of the Unit ..................................... II - Applicability of the Rates and Incidental in the Performance............. III. - Unit Prices Spreadsheet ............................................... IV - Mutual Obligations ...................................................... V - List of Specialized Personnel............................................. VI - Environmental Operating Conditions VII - PETROBRAS' Safety Rules................................................. VIII - Equipment Testing Program.............................................. IX - Procedures In the Event of Fatal Accidents............................... (End of Clause)............................................................... 51 TWENTIETH CLAUSE - PRICE READJUSTMENT......................................... 20.1. The contract prices are fixed and non-readjustable.................... (End of Clause) .............................................................. 52 TWENTY-FIRST CLAUSE - ACCEPTANCE.............................................. 21.1. After the chartering operations are completed in strict compliance with the conditions set forth in this contract deed, PETROBRAS will accept them by means of a Definite Deed of Receipt, signed by both parties............................................................... 21.2. The signature of the Definite Deed of Receipt does not exempt the CONTRACTOR from the liabilities foreseen in this contract and in the laws in force......................................................... (End of Clause) .............................................................. 53 TWENTY-SECOND CLAUSE - LOSS OR DISAPPEARANCE.................................. 22.1. In the event the Vessel is lost or disappears, no payment regarding the same will be due by PETROBRAS to the CONTRACTOR, as of the day or as of the moment it was last heard of................................. (End of Clause)............................................................... 54 TWENTY-THIRD CLAUSE - GROSS OR GENERAL AVERAGE............................... 23.1. The gross or general average will be ruled in the Port of Rio de Janeiro according to the York and Antuerp Rules/1974.................. (End of Clause) .............................................................. 55 TWENTY-FOURTH CLAUSE - JURISDICTION........................................... 24.1. The Jurisdiction of the County of the Capital of the State of Rio de Janeiro will be competent to settle any questions arising from the present Contract, with the express waiver, by the parties, of any other, however privileged ............................................ (End of Clause) .............................................................. AND BEING THUS AGREED, the parties sign the present deed in 4 (four) copies with the same tenor, with the witnesses below ........................ Rio de Janeiro, (blank) ...................................................... PETROLEO BRASILEIRO S.A. - PETROBRAS (BLANK) LUIZ EDUARDO G. CARNEIRO - EXECUTIVE SUPERINTENDENT OF EXPLORATION AND PRODUCTION SOUTH AND SOUTHEAST (E&P-SSE) ..................................... MARITIMA NAVEGACAO E ENGENHARIA LTDA. (BLANK) GERMAN EFROMOVICH - PRESIDENT ................................................ WITNESSES: (Blank) - CPF No. (Blank) .................................................... (Blank) - CPF No. (Blank) .................................................... (Attachment I not included in the original document.)......................... 56 Attachment "I" TECHNICAL SPECIFICATIONS OF THE Unit AND ITS ACCESSORIES (Attachment I not included in the original document.) 57 CONTRACT 101.2.063.97-8............................................... CHARTERING Attachment II APPLICABILITY OF THE RATES AND, INCIDENTALS IN THE PERFORMANCE. 1 - APPLICABILITY OF THE RATES - DEFINITION OF THE SERVICE RATES PER 24 (TWENTY-FOUR) HOUR DAY ....................................................... Ref 101 - OPERATION RATE - It will be applied during the activities requiring the use of the Unit, such as drilling, coring, electric logging, formation testing, completion and workover operations, including drilling lines scouring and cutting operations......................................... Ref 102 - REPAIR RATE - In the periods when there is an interruption of the activities that require the use of the Unit, mentioned in Ref 101 of this Attachment and the operations for Moving the Unit between locations, Ref 105 of this Attachment, due to maintenance, including replacement of mud pump spare parts, and/or repair in the Unit's equipment, or in those which supply is the CONTRACTOR's responsibility, no rate will be due ...................... NOTE 1. The repair period will be considered as of the interruption of the operation that is being performed, until the return to the same situation when the interruption occurred, except for the periods when the interruption in the repair activities occur due to adverse sea conditions, as set forth in NOTE 2 of Ref. 104 ........................................................... NOTE 2. In the event the CONTRACTOR remains in Repair Rate for an accumulated total of 30% (thirty percent) of the time, for any period of 6 (six) contract months, PETROBRAS may rescind the present Contract, based on subitem 10.1.14 of this Contract ............................................................. 58 NOTE 3. It will be considered as repairs the occurrences due to wash outs in the drill pipes and in the other elements of the drill string, belonging the Contractor, with exception of those arising from the presence of H2S and from abnormal mechanical conditions occurred in the well .......................... NOTE 4. At the Inspections discretion, for the maintenance of the BOP, the CONTRACTOR may be granted a franchise of up to 24 (twenty-four) hours between the instant the BOP is set on the test stump, until its operational withdrawal, and the moment of its movement for the next lowering in another well, without the CONTRACTOR entering into the repair rate, provided such maintenance is carried out according to international standards. In the period within these 24 (twenty-four) hours intended exclusively for the BOP maintenance, the waiting rate (Ref. 104) will be due.......................... Ref. 103 - RATE ADDITIONAL (RA) - In each measurement period, as agreed upon in subitem, 6.1.1 of the CONTRACT, the CONTRACTOR will be entitled to the receipt of a Rate Additional, calculated by the following formulae:........... AT = 0.10 x (NT - NFM - NREP - NIPG-NTOR) X TO .......... for PI (less than or equal to) 0,0300.............................................................. AT =(0.16 - 2 x PI) x (NT= NFM - NREP - NIPG - NTOR) x TO ....... for 0,03 (less than or equal to) PI (less than or equal to) PI 0,0800 AT = Zero .............. to PI>0,800 Where:........................................................................ AT = Rate Additional ......................................................... TO = Operation Rate (REF 101)................................................. PI = Unavailability Proportion, calculated with 4 (four) decimal places, being: ....................................................................... PI= NREP + NIPG + NTOR ------------------ NT - NFM NT = Total number of days in the measurement period considered ............... 59 NFM = Total number of days in which the act of God or force majeure occurs, as defined in the Twelfth Clause of the Contract, in the measurement period considered ................................................................... NREP = Total number of days under repair rate (REF 102) in the measurement period considered ............................................................ NIPG = Total number of days under exemption from payment (according to item 2.1 of this Attachment) in the measurement period considered ................. NTOR = Total number of days with reduced operation rate (according to subitems 2.2.3 and 2.2.4 of this Attachment) in the measurement period considered ................................................................... REF. 104 - WAITING RATE (TE) - corresponds to 95% (ninety-five percent) of the operation rate (TO) and which will be applied in Bad Weather, Force Majeure and Waiting situations, as defined below:............................. 1) Bad Weather Situations - in the event of stoppage of the operations when environmental conditions are so severe as to endanger the Unit's operating capacity, the limitations in Attachment VI, being complied with, making the operations unstable or unsafe or preventing support vessels to have access to the Unit, or preventing the tugs operations, at the time of change of locations, although the Unit may operate normally, in spite of the Bad Weather ................................... 2) Force Majeure Situations - during the period when the Unit cannot operate, due to act of God or force majeure, as defined in the Twelfth Clause of the Contract, until the removal of the impediment or the rescision of the Contract, as the case may be ............................ 3) Waiting - waiting for the arrival, maintenance or availability of materials from PETROBRAS or third parties, under PETROBRAS' responsibility, even if the Maintenance is made in the Unit; waiting for daylight to carry out formation tests; waiting for orders from PETROBRAS, such as, but not limited to, change of programs, definition to proceed with the drilling or other activity, from geology, from production, rest for PETROBRAS' team or of those of third party at PETROBRAS' service; waiting for towage or support vessels.......................................................... 60 NOTE 1. The period spent in disconnecting the LMRP from the BOP due to environmental conditions, will be considered as Bad Weather, until the return to the previous situation .................................................... NOTE 2. If a Bad Weather situation occurs which interrupts a Repair activity, the waiting Rate (REF 104) with a 25% (twenty-five percent) reduction, will be due during that period .................................................... REF. 105 - MOVING RATE - corresponds to 95% of the Operation Rate (TO) and will be applied during the following periods: ................................ a) Beginning of the Contract - After the acceptance of the Unit's equipment operating conditions, once the general testing provided for in Item 3.1. of the Contract has been carried out, until the spud in of the first well or reentry in the first well (beginning of lowering the first tool for access to the well); ................................................ b) Between locations - After the end of the drilling operations, completion or intervention in a well, with the arrival of the BOP or tool used in the well (the one which occurs last) in the moon pool, until the spud in or reentry in a new well (beginning of lowering the first tool for access to the well); .................................................... NOTE: This period includes the DP system calibration and tests, always in each new location, and in others in each contract year or at any time, when requested by PETROBRAS........................................................ c) End of Contract - After the end of spud in or intervention operations in the last well, with the arrival of the BOP or tool used in the well (the one which occurs last) in the moon pool, until the Unit's arrival in a sheltered waters location, chosen in common agreement between the parties, or, if there is PETROBRAS' equipment. still aboard, until the withdrawal of such equipment from the Unit............................................. 61 Ref. 106 MOBILIZATION OF THE Unit (MOB) - No rate will be due for the mobilization of the Unit and its accessories.................................. Ref. 107 DEMOBILIZATION OF THE Unit (DEMOB) - No rate will be due or the demobilization of the Unit and its belongings................................. 2 - INCIDENTS IN THE PERFORMANCE ............................................. 2.1. Exemption from Payment - PETROBRAS will be exempted from the payment of the rates foreseen in this Attachment, during the period in which occurs ............................................................... 2.1.1. Interruption of the services due to the CONTRACTOR's duly proven fault arising from operational error, and/or lack of material or equipment, inclusive due to the loss of equipment or subaquatic spare parts ................................................................ 2.1.2. Stoppage of the services and/or of the Unit due to measures related to impositions by made the insurers .................................. 2.1.3. CONTRACTOR's refusal to operate under the conditions foreseen in Attachment VI - Environmental Operating conditions ................... 2.1.4. Stoppage of the services and/or of the Unit for inspection or dockage purposes, including surveys and dockages arising from act of God or force majeure, as defined in the Twelfth Clause of the Contract, the corresponding expenses also running for the CONTRACTOR's account ..... 62 NOTE 1. The exemption from payment will begin in the moment there is an interruption of the operational continuity object of this Contract, even if the withdrawal of all or part of PETROBRAS' and/or the CONTRACTOR's cargo becomes necessary for the inspection and/or dockage........................... NOTE 2. The end of the exemption from payment, due to the inspection and/or dockage, will occur:.......................................................... a) On the return to the same location, the moment the operation returns to the previous situation;................................ b) In the mobilization for another location, the moment the Unit starts sailing after PETROBRAS' or the CONTRACTOR's materials have been put back on board....................................... 2.1.5. Occurrence of kick, drill string sticking, loss of circulation, fishing or abandonment, caused by the CONTRACTOR's duly proven action or omission, from the moment the problem was ascertained, until the return to the situation prior to its occurrence, or displacement to another location, in the event of abandonment ........................ 2.1.5.1.The exemption from payment referred to in 2.1.5 will be limited to a period of 15 (fifteen) days, per event, after which the reduction foreseen in subitem 2.2.3 of this Attachment will be applied.......... 2.1.6. Occurrence of blow out caused by the CONTRACTOR's duly proven action or omission, from the moment the problem was ascertained, until the return to the situation prior to its occurrence ...................... 63 2.1.6.1.The exemption from payment referred to in item 2.1.6 will be limited to a period of 45 (forty-five) days, after which the reduction foreseen in subitem 2.2.4 of this Attachment will be applied...................... 2.1.7. Suspension of the services, determined by PETROBRAS' Inspection, based on item 9.1.1 of the Contract................................... 2.1.8. Interruption of the operations due to a failure occurred in any of the Unit's equipment, at the time of the testing to be carried out according to item 3.1 of the Contract ................................ 2.1.9. In the occurrence of events of exemption from payment provided for in subitem 2.1.1, 2.1.2, 2.1.3, and 2.1.7, for a total accumulated period exceeding 30% (thirty percent) in any 6 (six) month period, PETROBRAS may rescind the present Contract, based on. its subitem 10.1.8 2.2. Reduction in the Daily Operation, Waiting and Movement Rate .......... The rates foreseen in this Attachment will be reduced in the following cases . 2.2.1. Total or partial inoperativeness or malfunction of any equipment which delays or hinders the operation, such as, but not limited to, winches, top drive, kelly spinner, geolograph, current meter, air compressors, shale shaker, desander; desilter, mixing pumps, mud laboratory equipment and bulk receipt and transfer systems, are reason for the reduction of the daily rate provided for in Ref 101, in 1% (one percent), cumulative per equipment, provided the CONTRACTOR is notified in writing in the Daily Drilling Certificate (ADP), by PETROBRAS' Inspection and which, after the time limit the latter has set to repair said equipment, such repair has not been made ................................................................. 64 2.2.2. Low Efficiency - Reference Rates 101 and 105 of this Attachment will suffer a 20% (twenty percent) reduction, in the event low efficiency is verified, according to the operating efficiency parameters listed below. Such reduction will be applied during the whole corresponding activity period in which low efficiency is verified:.................. Operating Parameters: ........................................................ - - - Maneuver of the drill string in a cased well (except BHA): ............... o Inside the riser and 20" casing = 500 m/h......................... o Inside the 13 3/8" casing = 600 m/h .............................. o Inside of 9 5/8" casing = 700 m/h ................................ - - - Break of DP's per Unit - 25jt/h .......................................... - - - Casing string run in the sea/inside the riser/previous casing (joints with approximately 12 m long) ............................................ o 30" Casing - 2 jt/h.......................................... o 20" Casing - 5 jt/h.......................................... o 13 3/8" Casing - 13 jt/h ........................................ o 9 5/8" Casing - 18 jt/h ........................................ o 7" Casing - 15 jt/h......................................... - - - Running of drilling riser, excluding normal time for testing (50 ft joint): 45/m/h ........................................................... - - - Pulling of drilling riser (50 ft joints): 60 m/h.......................... - - - Installation or pulling of the kill/choke lines/telescopic joint/stretchers: 6.0h ................................................... - - - Diverter installation or pulling: 2.0h ................................... - - - Assembly of the dampening lines in the M.R.: 1.5h........................ 65 - - - Assembly of the flexitube equipment: 5.0h. ............................... - - - Assembly of the production tail: 2.0h .................................... - - - Tubing running or pulling, per Unit - 150 m/h ............................ - - - Tubing running or pulling per section - 300 m/h........................... - - - Completion risers running or pulling - 50 m/h ............................ - - - Assembly of terminal head and sling's -2.0 h ............................. - - - Moving of ANM to/from the moon pool - 3.0 h............................... - - - Moving of tree cap or tree running tool to/from the moon pool - 2.5h ..... - - - Assembly of lubricator and wire line SOP - 1.5h NOTE: The above mentioned operating parameters are based on normal weather condition..................................................................... 2.2.3. Beginning on the 16th '(sixteenth day), inclusive, of the occurrence of kick, drill string sticking, loss of circulation or fishing, caused by the CONTRACTOR's duly proven action or omission, until the return to the situation prior to its occurrence, the applicable rate will be reduced by 50% (fifty percent) ............................................... 2.2.4. Beginning on the 46th (forty-sixth) day, inclusive, of the occurrence of Blow out caused by the CONTRACTOR's duly proven action or omission, until the return to the situation prior to its occurrence, the applicable rate will be reduced by 50% (fifty percent)................ 2.3. Period of Validity of the Contract Rates the contract rates set forth in this Attachment will apply in the period set forth below: ......... 66 a) Beginning: release of the Unit, by PETROBRAS, to sail to the first location, after the equipment general testing provided for in item 3.1 of the CONTRACT has been carried out, with the exception of the provision in its subitem 3.1.1.1 ................ b) End: after the end of the drilling or completion of the last well, with this Unit's arrival at a port or sheltered waters chosen by common agreement between the parties, and if there is PETROBRAS' equipment still aboard, with the withdrawal of such equipment from the Unit........................................... 2.4. Blow-Out - PETROBRAS will be responsible for the well control operation costs, in the event of blow-out and caving caused by the blow-out. Such provisions apply only to the well control costs and do not apply to the loss of assets, lesions and/or damages caused by the blow-out, which are protected by the provisions of the pertinent items of this Contract. The CONTRACTOR undertakes to place at PETROBRAS' disposal all of its resources in personnel and equipment related to this COontract without any additional charges to PETROBRAS. If the CONTRACTOR has contributed with duly proven grossly negligent action or omission for the occurrence of the accident, no rate will be due, until the solution of the problem, in compliance with the provisions in subitems, 2.1.6 and 2.2.4 of this Attachment ........................................................... (End of Attachment)........................................................... 67 RENDERING OF SERVICES - - ------------------------------------------------------------------------------- Unit PRICES SPREAD SHEET CONTRACT NO. 101.2.008.97-9 - - ------------------------------------------------------------------------------- OBJECT OF BID: CHARTERING OF THE FLOATING Unit PROVIDED WITH DYNAMIC POSITIONING SYSTEM. - - ------------------------------------------------------------------------------- PLACE OF OPERATION: BRAZILIAN CONTINENTAL SHELF - - ------------------------------------------------------------------------------- Unit'S NAME: AMETHYST 4 - - ------------------------------------------------------------------------------- COMPANY'S NAME: MARITIMA NAVEGACAO E ENGENHARIA LTDA. - - ------------------------------------------------------------------------------- CODE ITEMIZATION Unit Unit PRICE (US$) - - ------------------------------------------------------------------------------- 02.222.305 OPERATION RATE DAY 114,599.70 (REF. 101) - - ------------------------------------------------------------------------------- 02.222.306 REPAIR RATE DAY No Rate Will Be Due (REF. 102) - - ------------------------------------------------------------------------------- 02.222.307 WAIT. BAD DAY (95% OF Ref. 101) WEATHER RATE (REF. 104.1) - - ------------------------------------------------------------------------------- 02.222.308 WAIT. FORCE DAY (95% OF Ref. 101) MAJEURE RATE (REF. 104.2) - - ------------------------------------------------------------------------------- 02.222.309 WAIT. RATE DAY (95% OF Ref. 101) WAITING (REF. 104.3) - - ------------------------------------------------------------------------------- 02.222.310 MOVEMENT RATE DAY (95% OF Ref. 101) (REF. 105) - - ------------------------------------------------------------------------------- 68 - - ------------------------------------------------------------------------------- 02.222.311 MOBILIZATION UNIQUE No Rate Will Be Due RATE (REF. 106) - - ------------------------------------------------------------------------------- SIGNATURES DATE OF THE PROPOSAL - - ------------------------------------------------------------------------------- PETROBRAS CONTRACTOR (blank) 07/07/97 (blank) - - ------------------------------------------------------------------------------- 69 Contract 101.2.063.97-8....................................................... CHARTERING Attachment IV MUTUAL OBLIGATIONS - - ------------------------------------------------------------------------------- DESCRIPTION ON ACCOUNT OF SUPPLIED BY -------------------------------------------- PET CONT PET CONT - - ------------------------------------------------------------------------------- 1. Production Adaptor Base an X X AMN. - - ------------------------------------------------------------------------------- 2. Cement, bentonite, baritine X X and other materials and additives for manufacturing mud and cementing. - - ------------------------------------------------------------------------------- 2. (sic) Cementing and logging Unit: a) Installation and removal X X b) Maintenance X X c) Rent X X - - ------------------------------------------------------------------------------- 3. Equipment and tools specific X X for evaluation, completion and production of wells. - - ------------------------------------------------------------------------------- 4. Fishing tools and replacement materials for pipes and production tools. - - ------------------------------------------------------------------------------- a) Foreseen in X X Attachment I - - ------------------------------------------------------------------------------- b) Not foreseen in X X Attachment I - - ------------------------------------------------------------------------------- 70 - - ------------------------------------------------------------------------------- DESCRIPTION ON ACCOUNT OF SUPPLIED BY -------------------------------------------- PET CONT PET CONT - - ------------------------------------------------------------------------------- 5. Equipment, tools and X X replacement materials needed for the services of logging, formation tests and/or production and/or perforation, not included in Attachment I. - - ------------------------------------------------------------------------------- 6. Lubricants and greases for the X X CONTRACTOR's equipment. - - ------------------------------------------------------------------------------- 7. Industrial and fresh water. X X - - ------------------------------------------------------------------------------- 8. Replacement materials, X X including fishing tools and other CONTRACTOR's equipment listed in Attachment I. - - ------------------------------------------------------------------------------- 9. Consumer equipment and X X materials for completion fluid tests listed in Attachment I. (Note: PETROBRAS will inform inform monthly on the minimum stock needed). - - ------------------------------------------------------------------------------- 10. Steel ropes, slings, sisal X X or nylon ropes and cordate in general, needed for tying towlines, for mooring support vessels and in cargo evaluation completion and handling. - - ------------------------------------------------------------------------------- 11. Boxes for loading and - - ------------------------------------------------------------------------------- 71 - - ------------------------------------------------------------------------------- DESCRIPTION ON ACCOUNT OF SUPPLIED BY -------------------------------------------- PET CONT PET CONT - - ------------------------------------------------------------------------------- unloading of liquids and bulk X X material with connections compatible with those of the supply vessels. - - ------------------------------------------------------------------------------- 12. Materials to make drilling X X and completion fluid. - - ------------------------------------------------------------------------------- 13. Conventional bits. X X - - ------------------------------------------------------------------------------- 14. Safety equipment for X X individual use: gloves, helmets, boots, masks, ear protectors and other personal use equipment for the CONTRACTOR's employees. - - ------------------------------------------------------------------------------- 15. Services, materials and X X equipment to mark locations. - - ------------------------------------------------------------------------------- 16. Surveyinf o the sea bottom, X X if necessary. - - ------------------------------------------------------------------------------- 17. Welding equipment and X X material needed for well completion and abandonment operations. - - ------------------------------------------------------------------------------- 18. Bulls eye for running X X tools - - ------------------------------------------------------------------------------- 19. Warehouses, office and X X storage area for the CONTRACTOR on land. - - ------------------------------------------------------------------------------- 72 - - ------------------------------------------------------------------------------- DESCRIPTION ON ACCOUNT OF SUPPLIED BY -------------------------------------------- PET CONT PET CONT - - ------------------------------------------------------------------------------- 20. Radio-beacon with working X X frequencies compatible with those mentioned in Attachment I. - - ------------------------------------------------------------------------------- 21. Safety and survival equipment, X X including maintenance (subjected to periodical inspection by PETROBRAS - - ------------------------------------------------------------------------------- 22. Screens for mud sieves, X X according to PETROBRAS' specifications. - - ------------------------------------------------------------------------------- 23. Materials for the maintenance X X of equipment and test lines, supplied by the CONTRACTOR, for formation testing and/ or production painting, boiler factor and welding). - - ------------------------------------------------------------------------------- 24. VX ring, VX with HYCAR and VX with lead insert for connection BOP- WELLHEAD, LMRP-BOP STACK: a) In normal operation X X X b) In reinstallation due X X X to problem with the ESCP - - ------------------------------------------------------------------------------- 25. VX ring, VX with X X X HYCAR and VX with - - ------------------------------------------------------------------------------- 73 - - ------------------------------------------------------------------------------- DESCRIPTION ON ACCOUNT OF SUPPLIED BY -------------------------------------------- PET CONT PET CONT - - ------------------------------------------------------------------------------- lead insert for ANM' - - ------------------------------------------------------------------------------- 26. Remote operation submarine vehicle (ROV) a) Installation and removal X X b) Maintenance X X c) Rent X X - - ------------------------------------------------------------------------------- 27. Hydraulic fluid for X X BOP driving and test - - ------------------------------------------------------------------------------- 28. Hydraulic fluid for X X X ANM driving and test - - ------------------------------------------------------------------------------- 29. Special greases for X X pipes and completion equipment - - ------------------------------------------------------------------------------- 30. Individual safety X X equipment for operation in the moon pool. - - ------------------------------------------------------------------------------- 31. Paper and ink for X X microcomputer printer. - - ------------------------------------------------------------------------------- 32. Beacons, hydrophones, X X transducers, transponders, batteries. - - ------------------------------------------------------------------------------- 33. Diesel Oil - - ------------------------------------------------------------------------------- a) up to the limit set X X forth in Clause 4.6.2 - - ------------------------------------------------------------------------------- b) above the limit set X X forth in Clause 4.6.2 - - ------------------------------------------------------------------------------- 34. Filter elements for the X X completion fluid filtering Unit. - - ------------------------------------------------------------------------------- (End of Attachment)........................................................... 74 Attachment V LIST OF (MINIMUM) SPECIALIZED PERSONNEL ABOARD - - ---------------------------------------- Captain or Barge 1 - - ---------------------------------------- Tool Pusher (1 2 superintendent aboard) - - ---------------------------------------- Driller 2 - - ---------------------------------------- Assistant Driller 2 - - ---------------------------------------- Derrickman 2 - - ---------------------------------------- Roughneck 6 - - ---------------------------------------- Crane Operator 2 - - ---------------------------------------- Area Man 8 - - ---------------------------------------- Welder 2 - - ---------------------------------------- Watchstander 2 - - ---------------------------------------- Subsea Engineer 1 - - ---------------------------------------- Mechanic 3 - - ---------------------------------------- Electrician 3 - - ---------------------------------------- Radio Operator 2 (Portuguese speaker) - - ---------------------------------------- 75 - - ---------------------------------------- Male nurse 1 - - ---------------------------------------- Storekeeper 1 - - ---------------------------------------- Safety guard 1 - - ---------------------------------------- NOTE: Supplementary personnel will be supplied according to the CONTRACTOR's conveniences and needs or to comply with the requirements of government laws.. 76 Attachment VI ENVIRONMENTAL OPERATING CONDITIONS (PERMISSIBLE LIMITS FOR ENVIRONMENTAL CONDITIONS ACTING SIMULTANEOUSLY) - - ------------------------------------------------------------------------------- OPERATION HEAVE PITCH WIND WAVE CURRENT (FEET) OR (MPH) (FEET) (KNOTS) ROLL (DEGREES) - - ------------------------------------------------------------------------------- Jetting/driving 2,0 2,5 30 3,0 1,5 - - ------------------------------------------------------------------------------- Drilling 2,5 3,0 30 3,0 1,5 - - ------------------------------------------------------------------------------- Casing Running 2,0 3,0 30 3,0 1,5 - - ------------------------------------------------------------------------------- Casing hanger setting 1,5 2,0 30 2,1 1,5 - - ------------------------------------------------------------------------------- BOP running 1,5 1,5 19 2,1 1,0 - - ------------------------------------------------------------------------------- BOP setting 1,5 1,5 19 2,1 0,75 - - ------------------------------------------------------------------------------- Maneuvering 3,5 3,0 44 8,5 1,5 - - ------------------------------------------------------------------------------- LMPR disconnection 7 4 51 10,5 1,0 - - ------------------------------------------------------------------------------- LMPR connection 1,5 1,5 19 2,1 0,75 - - ------------------------------------------------------------------------------- Formation testing 3,5 4,0 44 8,5 1,5 - - ------------------------------------------------------------------------------- Operation with boats 2,5 3,0 39 6,7 1,5 - - ------------------------------------------------------------------------------- Running the ANM (lay-away) 1,5 1,5 19 2,1 0,75 - - ------------------------------------------------------------------------------- Running the ANM (without 1,5 1,5 19 2,1 0,75 - - ------------------------------------------------------------------------------- 77 - - ------------------------------------------------------------------------------- lines) - - ------------------------------------------------------------------------------- Operation with flexitube 2,0 3,0 30 5,0 1,5 - - ------------------------------------------------------------------------------- Operation with wire-line 3,0 4,0 44 8,5 1,5 - - ------------------------------------------------------------------------------- Operation with BOP 2,5 3,0 39 6,7 0,75 78 Attachment VII PETROBRAS' SAFETY RULES 1. Service Rule No. 46/71: o Safety Rules for Offshore Operations. 2. Service Order No. 01/72: o Operational Safety Rules - Continental Shelf. 3. Service Rule No. 41/72: o Electricity - Safety Rules 4. Service Order No. 01/76: o Industrial Safety Rules (General) o Industrial Safety Rules (Drilling) o Industrial Safety Rules (Production) 5. General Safety Manual: o Safety and Environmental Instruction for Contractors (E&P - BC). 79 Attachment VIII EQUIPMENT TESTING PROGRAM In order to carry out the Unit's equipment testing in an easier and more agile manner, the CONTRACTOR is to submit to PETROBRAS, as quickly as required the following documents:............................................. 1. CERTIFICATES............................................................ a) Survey and Appraisal Report, updated and valid for the fiscal year regarding the Unit offered, issued by one of the entities: ABS, NOBLE & DENTON, DNV, LLOYDS or BUREAU VERITAS, and if the report is issued abroad, it will be translated into Portuguese by a sworn public translator and notarized in the Brazilian Consulate......................................................... b) Classification or Class Confirmation Certificate for hull and equipment, compatible with the proposal submitted (certified copy);............................................................ c) Report on claims from the classification societies mentioned in the Class Confirmation Certificate (in the event there are claims);.......................................................... NOTE:PETROBRAS will evaluate the above mentioned documents and will mention in what time limited eventual claims will be settled, and at PETROBRAS' judgment, it can be at the time of the Unit's inspection or at mobilization after the contract is signed.......................................... d) Freeboard Certificate;............................................ e) IOOP (International Oil Pollution Prevention) Certificate;........ f) IMO-MUDU-CODE - Mobile Offshore Drilling Unit - latest edition (unnecessary for Drill Ship);..................................... 80 g) Cargo Ship Safety Equipment Certificate;.......................... h) Cargo Ship Safety Construction Equipment;......................... NOTE:All documents required are to be within their period of validity.................................................... 2. INDUSTRIAL SAFETY AND ENVIRONMENTAL CONTROL............................. - Manuals and emergency plans in the Portuguese Language............ 3. STORAGE CAPACITY........................................................ - Complete floor plan of bulk movement system, specifying:.......... a) Exclusive lines to move cement;............................. b) Exclusive lines to move bentonite and baritine;............. c) Location and type of bulk line valves and their respective driving systems;............................................ d) Pneumatic lines for cleaning and clearing bulk lines;....... e) Location of the manometers;................................. f) Quantity, flow, operating pressure and location of the air drying Unit(s);............................................. g) Schematic drawing of each silo with their respective aeration systems and points of connection with the bulk lines....................................................... 4. FLUID CIRCULATION AND PROCESSING SYSTEM................................. - Sketch of the system emphasizing pulsation dampers (suction and tamping), safety valves, feed pumps, position of the suction lines in relation to t suction sieves' tanks and filters................ - Floor plan of the drilling fluid feed and discharge lines showing the flexibility in relation to the sand traps and mud tanks....... 81 - Floor plan of the degasser instalation showing the active tank, separate processed mud and gas discharge lines, emphasizing the connection point of this line with the gas discharge line......... - Floor plan of the mud tanks system, emphasizing the supply lines, guns lines, mixture funnel and centrifugal pumps interconnection lines............................................................. 5. WELLHEAD SAFETY EQUIPMENT SYSTEM........................................ - Sketch of the BOP/LMRP, specifying lines, valves and measures/dimensions............................................... - Floor plan of the kill and choke lines from the BOP to the choke manifold, specifying valves, connections, dampener chambers, anchorage points and interconnection with the other systems....... - Floor plan of the atmospheric air separator....................... - Layout of the trip tank installation, giving the following information:...................................................... a) Capacity;................................................... b) Location;................................................... c) Sensitivity;................................................ d) Measuring system;........................................... e) Scale type;................................................. f) Driller=s scale visualization conditions;................... g) Supply System for the above item............................ - Floor plan of the stand pipe manifold, specifying lines, valves, manometers and interconnections with the other systems............ 82 - Inspection report on the riser, riser handling tools and connectors, telescopic joint and flexible joint, according the API RP 2P and RP 2Q standards, with update date not exceeding 1 year.............................................................. NOTE:If the reports indicate the need of repair in some equipment, the service performance certificates will also be submitted................................................ - Biannual inspection certificate of the choke manifold, with the manufacturer's approval................................. - Biannual inspection certificate of the BOP Unit and driving system, with the manufacturer's approval.................... - Biannual inspection certificate of the BOP, with the manufacturer=s approval. - Proof of technical hability of the well drilling and control personnel........................................... - To supply an internal rusting maintenance and prevention plan for the marine risers and kill and choke lines......... 6. ENERGY GENERATION SYSTEM................................................ - Unifilar diagram of the energy generation and distribution system. 7. STABILITY............................................................... - To submit the vessel=s stability curve, updated in the proposal=s conditions, in keeping with the environmental conditions.......... 8. DYNAMIC POSITIONING SYSTEM (INCLUDING THE MONOGENERATORS ASSEMBLY, THRUSTERS AND PROPELLERS)............................................... - Schematic diagram of the dynamic positioning system............... - To submit the inspection and tests procedures to be carried out at every new location. 83 - To submit the tests and inspections procedures to be carried out at the end of each contract year.................................. 9. DRILLING STRING AND ACCESSORIES......................................... - Inspection report on all equipment of the drilling and completion strings, subs and accessories (used equipment).................... - Purchase voucher of the drill and completion strings, subs and accessories (for new equipment)................................... 10. FISHING TOOLS AND ACCESSORIES........................................... - Inspection report on all components of the fishing tools (used equipment) or purchase vouchers (for new tools)................... 11. SUNDRY SYSTEMS.......................................................... - Winches load test certificate..................................... - Description of the compressed air system, emphasizing compressors, layout of lines, valves and interconnection with the other systems..................................................... - Preventive Maintenance Plans with their respective timecharts..... - Proof will be needed for the existence on board and for the operating capacity of all equipment and accessories listed in Attachments C and D of the chartering and service rendering contracts......................................................... NOTE:Such equipment must be in places of easy access for inspection. A) RECEIPT TEST...................................................... 84 - Proof will be needed for the existence on board and for the operating capacity of all equipment and accessories listed in Attachments C and D of the chartering and service rendering contracts. NOTE:Such equipment must be in places of easy access for inspection.................................................. - The following systems, equipment and tools listed below will be checked, inspected and tested:...................... 1) DRILL STRING, COMPONENTS AND ACCESSORIES.................... - The CONTRACTOR will submit recent inspection reports, according to the specification API RP7G for the whole drill string and accessories such as, but not limited to: drill pipes, drill collars, HW, Subs, stabilizers, reamers, bumper subs, lift-sub, kelly, slips, elevators, fishing tools, etc., which proves the good conditions of the string and its accessories. The information from the reports and the general conditions of the string and its accessories will be checked by PETROBRAS by means of a sampling inspection. In the event of discrepancy between the data submitted by the CONTRACTOR and those checked by PETROBRAS, showing an inadequate condition of the string and its accessories, the CONTRACTOR will carry out another inspection, for its own account........................................... NOTE 1: Any equipment refused by the inspection will be immediately repaired or replaced by the CONTRACTOR, for its own account................... 85 NOTE 2: For the string, components and new accessories, no inspection report will be required, documents proving that such equipment is new will be sufficient........................................................ NOTE 3: The CONTRACTOR's equipment will be stored and arranged so as to facilitate the inspection by sampling to be carried out by PETROBRAS. - The same procedure will be adopted for the telescopic joints and flexible joints............................ 2) EXTRACTOR OF SOLIDS......................................... The following will be examined:............................. - sieves,............................................... - desander.............................................. - degasser, test suction and discharge.................. - centrifuge (if any)................................... The operation and work pressure, as well as the existence of manometers, will be checked.............................. 3) MUD TANKS AND VALVES........................................ Waterproofness, working of the agitators, mixture funnel and depth gun, besides the existence of fixed marks to control the tanks volume will be checked.................... 4) CENTRIFUGAL PUMPS........................................... The following will be checked:.............................. - working, vibration and noises;........................ - Packing (leaks);...................................... 86 - Work pressures........................................ NOTE: Items 3 and 4 will be tested with sea water................ 5) MUD LABORATORY AND TEST EQUIPMENT........................... The existence on board and the adequacy to the requirements described in Attachments C and D to this CONTRACT will be checked..................................................... 6) DRILLING DERRICK............................................ Maintenance conditions (corrosion), fastening system and the conditions of the traveling block rails will be examined.................................................... 7) CROWN BLOCK................................................. The pulleys will be examined as to the profile wear, alignment, clearance, buckling of the axles, lubrication, etc......................................................... 8) MUD PUMPS................................................... The following will be carried out:.......................... - observation of working, vibrations, noises;........... - pressure and maximum work flows tests for the liner used;................................................. - safety valve working test;............................ - checking of the suction and discharge pulsation dampeners;............................................ - watertightness tests with nominal pressure of the mud pumps and of all manifold valves;..................... - watertightness tests with nominal pressure of all manifold values of the stand pipe manifold and of the kelly hose;........................................... 87 - random disassembling of the suction for visual inspection of the piston, sleeve, packing, valve and seat.................................................. 9) SWIVEL...................................................... The mandril, gooseneck, body, etc., will be check and nominal pressure test with rotation will be performed....... 10) MOTION COMPENSATOR.......................................... The piston alignment, lock bar, alignment in the rail, general conditions, leaks and chains will be checked........ 11) RISER AND GUIDE LINE TENSIONERS............................. The general conditions, leaks, pulleys and cables will be inspected................................................... 12) RISER RECOIL SYSTEM/HANG OFF SYSTEM/FILL-UP SYSTEM VALVE (IF ANY).................................................... The systems' operation will be checked. 13) HIGH COMPRESSORS AND AIR RESERVOIRS......................... The general conditions, leaks, lines and system yield will be checked.................................................. 14) TOP DRIVE................................................... Working tests (connection and disconnection of one or more sections of the DP's) will be carried out and the general conditions will be inspected................................ 15) KELLY SPINNER............................................... The general conditions, specially the rollers' wear, and working will be checked, and connection and disconnection operation of one or more DP=s will be carried out........... 88 16) HOOK........................................................ The general conditions and the locking system will be checked..................................................... 17) TRAVELLING BLOCK............................................. The pulleys wear, axles alignment, lubrication system, retraction system, etc., will be inspected.................. 18) DRAWWORKS................................................... - The operation of the mechanical break system (brake bands), electromagnetic (distance between irons, voltage level and SCR feeder conditions), cooling system and clutches will be checked................... - The operation of the cat-heads and height limitator with the assembly/ disassembly of one or more command sections, will be checked............................. 19) ROTARY TABLE................................................ The operation in high and low, brake system, tachometer and lubrication system will be checked.......................... 20) TRIP TANK................................................... Capacity, installation site, sensitivity to the level indicator system, visualization condition and supply system will be inspected........................................... 21) HYDRAULIC TONGS AND PNEUMATIC SPIDER FOR CASING AND PNEUMATIC TONGS FOR DRILL PIPES............................. - Operation tests will be made and maintenance conditions will be checked............................ 89 - The existence of an alignment guide for the sand-line cable in the drum will be checked..................... 22) SAND-LINE OF WIRE-LINE SYSTEM............................... - Operation of the clutches and brake will be tested by lowering the photoclinometer inside the drill string coinciding with the photoclinometer overshot test (TOTCO) will be tested. Test to be made on location before the beginning of the operations................................. 23) CHOKE MANIFOLD.............................................. All valves with low pressure (300 psi) and in high pressure (system's work pressure). Manometers, hydraulic choke operation, manual choke, remote control panel, etc. will be tested...................................................... 24) UPPER AND LOWER KELLY COCK, INSIDE BOP AND SAFETY VALUE - Drivers will be tested and work pressure tests will be made............................................... - The end connections of each element will be checked and tested with work pressure. The CONTRACTOR should have end seal plugs adequate for the test............. 25) KILL AND CHOKE LINES HOSES.................................. The end connections will be checked and tested with the system's work pressure. The CONTRACTOR should have end seal plugs adequate for the test............................ 26) DRILL INSTRUMENTATION SYSTEM................................ 90 The following will be tested:............................... - geolograph;........................................... - rotary table tachometer;.............................. - manometers;........................................... - stroke counter;....................................... - level control in the mud tanks;....................... - torque indicator...................................... 27) FLARE PIPE AND BOOMS........................................ Their existence on board will be checked, analyzing the maintenance conditions of the lines by means of inspections, and the facilities for installation of the production test equipment system............................ 28) BOP SYSTEM.................................................. The following will be carried out:.......................... - pressure tests of the slide valves with low pressure and high pressure, compatible with the system......... - pressure tests of the annulars with low pressure and high pressure, compatible with the system............. - complete function test in both POD's, through all panels................................................ - choke and kill valves tested with low pressure and high pressure, compatible with the system............. - working of the shear ram valve will be checked with opening for examination of the blades conditions...... 91 - the opening and closing of all ram, annular a kill and choke valve chambers will be tested............... - the hydraulic driving Unit will be checked as to: fluid used, fluid low level alarm, low air pressure and low accumulators pressure, maintenance conditions, leaks and mixing systems.................. - the volumetric capacity of accumulators and the capacity of electric and pneumatic pumps of the hydraulic Unit will be tested......................... - the locking system of the ram valve(s) will be tested. - the SPM valves conditions will be checked by opening and inspecting one of them, chosen at random.......... - the locking/unlocking system of the H-4 hydraulic connectors will be tested............................. - the surface and bottom accumulators' pre-charge will be checked............................................ - the operation of the following systems will be tested: o driving back-up................................. o emergency recovery.............................. o handling........................................ 29) TRAVELING TONGS, EZY-TORQ, TORQUE SENSOR, SLIPS, ETC........ One or more sections of the drill collars and drill pipes will be assembled/disassembled to check the working of such equipment. The general maintenance conditions, chuck jaws and cables will be checked.................................. 92 30) BULK TRANSFER SYSTEM........................................ The following will be carried out:.......................... - the operation of the compressor will be checked, and noise, oil and air leaks, and maintenance state, filters and dehumidifier will be inspected............ - operation and watertightness of valves, lines and silos will be checked, looking for possible clogging.. - transfer of cement from 1 silo to the daily silo (if any) and from this to the surge- tank will be made.... 31) EMERGENCY ENERGY GENERATION SYSTEM.......................... - a black-out in the energy system generation system will be simulated to see if the emergency generator is automatically turned on............................ 32) MAIN MOTOR-GENERATORS ASSEMBLY.............................. The following will be carried out: - vibration, noises, insulation, leaks, maintenance, etc., will be checked................................. - generators input and output in the bus bar, synchronism and load divisions will be tested......... - load and voltage and frequency regulation will be tested................................................ 33) DESSALTER................................................... Operation and production capacity will be checked........... 34) CAT-LINES CRANES............................................ 93 The following will be carried out: - operation of the winches and maintenance of the cabled will be checked................................ - the elevation and rotation system, the operation with flying boom and pulley block and the operation of the boom height pawl will be checked...................... - the report of the last inspection carried out by the Unit's classification society in the winches will be examined.............................................. 35) DEJECTA TREATMENT Unit...................................... Its operation will be inspected............................. 36) TELECOMMUNICATION SYSTEM.................................... Operational tests will be made in all radio equipment existing on board, including radio-beacon................... 37) OVERHEAD TRAVELING CRANE.................................... Their operation, and the maintenance conditions of cables and sliders will be examined................................ 38) DC/SCR MOTORS............................................... The maintenance conditions and insulation, as well as the collectors and brushes will be examined..................... - SCR functional test................................... 39) DIVERTER.................................................... The following will be tested:............................... 94 - flow line wing valves;................................ - diverters and insert packer lock;..................... - the control panel will be checked..................... 40) SAFETY EQUIPMENT............................................ SALVAGE..................................................... Fireproof rigid vessels (capsules, whalers):................ - lowering, motor, fuels, sprinklers, start;............ - rations, garnishing, hatches, cleaning, fire extinguisher, signaling equipment..................... Inflatable rafts:........................................... - quantity, capacity, location, height in relation to the sea;.............................................. - validity of the last inspection, means of access to the sea;.............................................. - conditions of the cocoon.............................. Jackets:.................................................... - quantity (sufficiency), location, protection, and maintenance........................................... Life-buoys:................................................. - quantity (sufficiency), location, heaving-lines, lanterns, smudge pots................................. Escape routes:.............................................. - vertical and horizontal signaling (indicative plates); - clearing, lighting(emergency)......................... WATER SUPPLY SYSTEM FOR FIRE FIGHTING....................... 95 Fire ring:.................................................. - water system for the platform;........................ - sprinkler system;..................................... - painting, corrosion, signaling, visual conditions;.... - valves, hydrants, guns................................ Fire pumps:................................................. - operation;............................................ - motor, fuel, start, panel, tests...................... FIRE FIGHTING FIXED SYSTEMS................................. - Foam system: chambers, tanks, guns, hydrants and carrier liquid;....................................... - Cylinders; conditions, reloading, retesting (CO2 or HALON, if any);....................................... - Lines and diffusers: general conditions;............. - Automatic: feedings, panels, batteries, detectors, tests;................................................ - Manual: commands, interconnections, tests;........... - Alarms: interconnections............................. FIRE EXTINGUISHERS - water, carbon dioxide, chemical powder (portable and carts);............................................... - distribution, location, general conditions;........... - revision, recharge, retest, control, meters, replacement........................................... FIRE POSTS.................................................. - hose, keys, sprinkler;................................ 96 - fiber boxes, general conditions, post identification;. - visual signaling: sufficiency and general conditions. EMERGENCY EQUIPMENT......................................... - autonomous breathing apparatus, reserve bottles, breathable air fixed system, fire proximity clothing, lantern, ax, safety belts;............................ - distribution, location, general conditions, inventory, maintenance and replacement................ COMMUNICATIONS AND ALARMS................................... - telephone (internal, external): Operating capacity;.. - radiophony: VHF. Operating capacity;................ - portable transceptors: quantity; distribution, intrinsic safety;..................................... - intercom: quantity, distribution, and horns audibility, interconnection with the platform, coding of sound alarm tones, amplifiers;..................... - visual signaling: sufficiency, general conditions;... - fire alarm, glass breaking type: batteries, bells, tests................................................. EMERGENCY LIGHTING.......................................... - charger, batteries and lanterns....................... HELIPOINT................................................... - protection: guns, fire extinguishers, salvage equipment;............................................ - painting, protection screen, net, landing lights, safety warnings;...................................... - guest welcoming practices............................. LOAD LIFTING................................................ 97 - winches: general conditions, operation, signaling, maintenance;.......................................... - manual and electric tackles: general conditions, operation, signaling, maintenance;.................... - material movement and storage areas................... TRAINING.................................................... - abandonment, fire fighting, first aid and brigade..... MANUALS AND PLANS........................................... - emergency; safety;.................................... - disclosure, knowledge;................................ - tasks schedules for emergency and abandonment situations, including in Portuguese................... ORDER AND CLEANLINESS....................................... - installation's general aspect;........................ - particularly alarming places.......................... SMOKE, HEAT AND GAS DETECTION SYSTEM........................ - test of hydrocarbons detection sensors................ BALLAST AND SEWER SYSTEM.................................... - functional test....................................... 41) ANCHORING SYSTEM............................................ 42) DYNAMIC POSITIONING SYSTEM.................................. 43) PROPULSION SYSTEM........................................... B) LOCATION MOVING TEST.............................................. 98 To be defined between the CONTRACTOR and PETROBRAS................ C) BEGINNING OF CONTRACT YEAR TEST................................... To be defined between the CONTRACTOR and PETROBRAS................ 99 Attachment IX PROCEDURES IN THE EVENT OF FATAL ACCIDENTS 1. If, during the period of validity of the CONTRACT, a fatal accident occurs with a CONTRACTOR's employee, the CONTRACTOR should:............. 1.1. Notify the Inspection immediately, for the proper measures;............. 1.2. Take measures so that the employee's relatives be notified with the utmost urgency on the event, giving them the social support due;........ 1.3 Formally establish an Investigation Commission, within 48 hours after the accident, in order to, in the maximum time limit of 15 days, identify the causes and recommend the measures deemed necessary to prevent similar accidents............................................... 2. The report should contain, at least, the following information regarding the accident:................................................. - description;...................................................... - exact location;................................................... - data regarding the injured persons;............................... - basic and immediate causes;....................................... - measures to be taken in order to prevent its repetition........... 3. The CONTRACTOR should guarantee the Commission enough authority and autonomy to carry out the investigations without any restrictions....... 4. A PETROBRAS= employee should participate in the Commission, appointed by the authority in charge of the operational office.................... 100 5. After conclusion of the Commission's work, it will also behoove the CONTRACTOR, at the Inspection's request, to disclose the results of the report, so as to convey the experience from the accident to other contractor companies.................................................... . - . - . - . - . - . - . - . - . - . - . - . - . - . - . - . - . - . - . - . THESE BEING the precise terms and content of the aforementioned document, I hereby set my Hand and Seal on this Translation, performed on September 18, 1997, in this City of Rio de Janeiro, Federative Republic of Brazil. /s/ MARCIA BARBOSA SERRA _____________________________ Marcia Barbosa Serra Sworn Public Translator EX-10.13(A) 54 EXHIBIT 10.13(A) MARCIA BARBOSA SERRA Tradutora Publica Juramentada e Interprete Comercial Sworn Public Translator and Commercial Interpreter Rua Aperana, 38 apt 301 - Leblon - 22450-190 ISS: 1261003-00 - CIC: 606442227-00 Tel.: 274-3844 I, the undersigned, Sworn Public Translator and Commercial Interpreter in and for this City and State of Rio de Janeiro, Federative Republic of Brazil, registered at the Commercial Board of Rio de Janeiro under Number 97, do hereby CERTIFY and ATTEST that a document in the Portuguese Language was submitted to me for translation into English, which I performed according to my Office, as follows: Translation No. 2668/98 (On paper with letterhead of PETROBRAS.)./. RIDER No. 01 FOR THE ASSIGNMENT OF RIGHTS AND OBLIGATIONS ARISING FROM CONTRACT 101.2.063.97-8, ENTERED INTO BETWEEN MARITIMA PETROLEO E ENGENHARIA LTDA., SUCCESSOR OF MARITIMA NAVEGACAO E ENGENHARIA LTDA., and PETRODRILL FOUR LTD., WITH THE CONSENT OF PETROLEO BRASILEIRO S.A. - PETROBRAS./. PETROLEO BRASILEIRO S.A. - PETROBRAS, - a mixed economy company, with head office at Av. Republica do Chile 65, in the City of Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil, enrolled in the General Taxpayers Registry of the Ministry of Finance under No. 33.000.167/0001-01, henceforth called PETROBRAS, represented herein by the Executive Superintendent of Exploration and Production, Luiz Eduardo G. Carneiro, and the Company MARITIMA PETROLEO E ENGENHARIA LTDA., successor of MARITIMA NAVEGACAO E ENGENHARIA LTDA., with head office at Av. Almirante Barroso, 52, 34th floor, in the City of Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil, enrolled in the General Taxpayers Registry of the Ministry of Finance under No. 46.828.596/0001/13, henceforth called the ASSIGNOR, represented herein by its President, German Efromovich, and the company PETRODRILL FOUR LTD., with head office in Omar Hodge Building, Wickhams Cay, Road Town, Tortola, Ilhas Virgens Britanicas, henceforth called the ASSIGNEE, represented herein by its Director, German Efromovich, have agreed to add a rider to contract 101.2.063.97-8 (AMETHYST 4), according to the following clauses and conditions:/. FIRST CLAUSE - OBJECT./. 1.1. The present Rider has as its object:/. 1.1.1. The total assignment, as of the date of the signature of this Rider, henceforth called the ASSIGNMENT DATE, by the ASSIGNOR to the ASSIGNEE of the rights and obligations arising from Contract No. 101.2.063.97-8 and its Attachments./. 1.1.2. To change the contract value foreseen in item 5.2 of the Fifth Clause - PRICES AND VALUE./. 1.1.3. To change the redaction of the Seventh Clause - FORM OF PAYMENT./. 1.1.4. To change the Fourth Clause - PETROBRAS' OBLIGATIONS, including item 4.12./. SECOND CLAUSE - RESPONSIBILITY./. 2.1. The ASSIGNEE, as of the ASSIGNMENT DATE, becomes the CONTRACTOR, being liable, before PETROBRAS for the fulfillment of all contract obligations undertaken by the ASSIGNOR, and will also have all rights arising from the Contract./. 2.2. The ASSIGNEE is liable before PETROBRAS for the fulfillment of all contract obligations undertaken by the ASSIGNOR in the Contract, as well as for eventual losses and damages arising from its acts or omissions./. 2.3. The ASSIGNOR will be jointly liable with the ASSIGNEE for the complete fulfillment of all obligations arising from the Contract./. 2.4. The ASSIGNOR, as of the ASSIGNMENT DATE, will have no right arising from the Contract, giving PETROBRAS, full and complete acquittance for any and all contract value./. THIRD CLAUSE - PRICES AND VALUE./. 3.1. The redaction of item 5.2 and its subitems becomes:/. "5.2. The total estimated value of the present Contract becomes US$ 281,743,362.45 (two hundred and eighty-one million, seven hundred and forty-three thousand, three hundred and sixty-two American dollars and forty-five cents), equivalent to R$ 303,747,519.00 converted at the exchange rate of R$1,0781/US$1,00, referring to the following charges:/. 3.2. Item 5.5 is included with the following redaction:/. "5.5. Besides the value mentioned in 5.2, the appropriation of US$1.000,000.00 is foreseen for the payment of eventual reimbursements"./. FOURTH CLAUSE - PETROBRAS' OBLIGATIONS./. 4.1. Item 4.12 is included, with the following redaction:/. "4.12. To adopt the measures necessary for the request to register this Contract at the Central Bank of Brazil, immediately after the receipt of the legal documents, the supply of which is the CONTRACTOR'S responsibility./. FIFTH CLAUSE - FORM OF PAYMENT./. 5.1. The redaction of the Seventh Clause is changed to:/. "7.1. The payments of the rates foreseen in Attachment II and Attachment III shall be made by PETROBRAS to the CONTRACTOR in American Dollars, by bank remittance to a bank account abroad it indicates, after the present Contract is registered at the Central Bank of Brazil, 30 (thirty) days as of the date of the end of the measuring period considered, provided the CONTRACTOR has fulfilled the time limits set forth in subitem. 6.3.1, for the submittal of the collection documents at the docket of the Financial Department indicated by PETROBRAS, with exception of the provision appearing in subitem 7.2.4./. 7.1.1. For the reimbursable expenses foreseen in this Contract, the instructions contained in item 7.4 and their developments should be complied with, and the payments will be made in the currency of origin of said expenses, within 30 (thirty) days after the submittal of the collection documents at the docket of the Financial Department indicated by PETROBRAS./. 7.1.2. Collection documents comprise any type of billing, such as: Invoice, Invoice with separate Bill of Sale, Service Invoice, besides others foreseen in fiscal laws./. 7.1.3. For payment purposes, the CONTRACTOR shall supply the Contract Manager, after its signature, the following information:./. a) Bank name and number;/. b) Bank branch name and code;/. c) Bank branch address;/. d) CONTRACTOR'S current account number./. 7.1.3.1. Whenever a billing is submitted with information different from those indicated in subitem 7.1.3, these changes will only be considered if accompanied by a formal communication by the CONTRACTOR and shall prevail only for the specific purpose of such payment./. 7.2. The collection documents shall be issued without erasures, complying with the pertinent laws in force, for submittal at the Financial Department indicated in item 7.1 of this Clause, in its original copy, accompanied by 1 (one) copy of the respective Measurement Bulletin (MB), and/or Reimbursement Document (RD), as the case may be, duly approved by this contract's Manager, containing, obligatorily, but not exclusively, the following information:/. a) Number of the collection document;/. b) Place and date of its issuing;/. c) Brief description of the object of this Contract;/. d) Indication of the number and date of this Contract;/. e) Indication of the month/year or period which the collection document refers to;/. f) Number and date of the Measurement Bulletin. (MB) and/or Reimbursement Document (RD)./. g) Place of the rendering and/or execution of the chartering. In the event the chartering has been rendered in different locations, its value should be broken down by locations of performance and the period in which it was rendered at each of the locations shall be indicated;/. h) Gross amount of the collection document, by numbers and in writing;/. i) Place for payment purpose, as provided for in subitem 7.1.3 of this Clause;/. j) Signature by the CONTRACTOR'S representative, accredited before PETROBRAS, above his/her name and position typewritten or above the CONTRACTOR'S company stamp identifying him/her;/. l) In case of Rider or Letter of Agreement to the Contract which implies in payments, mention its number and date of signature, besides the data above./. 7.2.1. The omission of any of the above mentioned data will cause, within 5 (five) working days, the return of the collection documents by PETROBRAS' Financial Department./. 7.2.2. If the above situation occurs and in case the collection document shows errors, it will be returned to the CONTRACTOR, and the time limits of the payment foreseen in item 7.1 and subitem. 7.1.1 shall be added to the period that becomes necessary for the explanation and re-submittal of the collection document./. 7.2.2.1. The above mentioned condition also applies in case the collection document is submitted in another department, and not as indicated in item 7.1./. 7.2.3. Independent of the data above, the invoices in foreign currency shall be also submitted in the Portuguese language, or if issued abroad, they shall be notarized at the Brazilian Consulate, under which jurisdiction the CONTRACTOR is located, and translated by a sworn public translator./. 7.2.4. The CONTRACTOR shall, obligatorily, submit monthly, together with the invoice, the payroll of the CONTRACTOR'S Brazilian crew who are involved in the chartering object of this Contract, as well as with a photocopy of the GRPS (Social Security Payment Slip), duly settled and authenticated, with the data identifying the entity to whom the service was rendered being obligatorily filled out, informing on field 8 of the GRPS (other information) PETROBRAS' name and CGC, number, date, and amount of the invoice or bill of sale referring to the chartering rendered in the month, subitems 8.9, 10.1.15, and 10.1.16 being also complied with./. 7.3. The collection documents referring to reimbursements shall also be issued, itemizing, individually, the reimbursable expenses, their total amount, such itemization also to appear in the respective Reimbursement Document (RD)./. 7.3.1. The original vouchers of the reimbursable expenses due to the CONTRACTOR, by force of the contract instrument, shall be previously submitted to the Contract Manager, for checking, besides being duly paid for by the respective supplier or service rendered, when such is the case./. 7.3.1.1. In the event the original vouchers cannot remain in PETROBRAS' possession, copies thereof may be submitted, which shall be checked by the Contract Manager, and the following text is to be placed on each original document: "COPY SUBMITTED FOR REIMBURSEMENT ON (specify date)", followed by the signature and identification by name, position and registry number, and the original are to be returned to the CONTRACTOR. In the copies that are in PETROBRAS' possession, the following text will be placed on each document: "CHECKED WITH THE ORIGINAL ON (specify the data)" and the Contract Manager will sign, identifying the signature by name, position and registry number./. 7.3.1.2. The receipt, duly made formal by PETROBRAS, of any reimbursable expense voucher, does not represent the recognition of debt, nor the proof that the expense has been made./. 7.3.2. The collection of reimbursable expenses can only be made by means of issuing and submittal, by the CONTRACTOR, of the Bill of Sale for the equipment and accessories, with the respective Reimbursement Document (RD) duly attached thereto, and previously approved by the Contract Manager./. 7.3.2.1. The submittal of the collection document mentioned in subitem 7.3.2, shall comply with the provisions appearing in items 7.1. and 7.2 of this Clause./. 7.3.2.2. The vouchers shall be the legal documents to explain doubts referring to the collections, which shall be settled, as a last resort, by PETROBRAS' Disbursement office, who will be in possession of the vouchers approved by PETROBRAS to prepare the payment process./. 7.4. Eventual payments made for more or for less by PETROBRAS shall be compensated as soon as they are detected, by issuing the Debit/Credit Notes, as the case may be./. 7.5. The amounts corresponding to reimbursable expenses, without budget allotment foreseen in this contract instrument, do not burden this contract's estimated total, but should, however, be foreseen in the Budget Programs of the Executive Superintendence of Exploration and Production (E&P)./. 7.6. The collection documents submitted by the CONTRACTOR, as well as the final collection document, shall be paid with the deduction of amounts that, at any title, under the conditions set forth in the contract, or others specially agreed upon, are due to PETROBRAS./. 7.7. The CONTRACTOR agrees that, at PETROBRAS exclusive option, the present Contract can be paid by means of third party financing, provided the time limits, currency, amounts, and place of payment, and the CONTRACTOR'S rights foreseen in this Contract, are complied with"./. SIXTH CLAUSE-RESPONSIBILITY./. 6.1 The present rider binds the parties as of the date of its signature and enters in force as of the ASSIGNMENT DATE./. SEVENTH-CLAUSE - RATIFICATION./. 7.1. PETROBRAS, the ASSIGNOR and the ASSIGNEE ratify the terms and conditions of the Contract that are not incompatible with the provisions of this instrument./. And being thus agreed, the parties sign the present Rider in 4 (four) copies of the same tenor and fashion, together with the witnesses below./. Rio de Janeiro, July 10, 1998./. (Signed:) (Illegible) - Luiz Eduardo G. Carneiro./. Executive Superintendent of Exploration and Production South-Southeast./. PETROLEO BRASILEIRO S.A./. (Signed:) (Illegible) - German Efromovich./. President - MARITIMA PETROLEO E ENGENHARIA LTDA (ASSIGNOR)./. (Signed:) (Illegible) - German Efromovich./. Director - PETRODRILL FOUR LTD. (ASSIGNEE)./. WITNESSES:/. (Signed:) (Illegible) (Rubber stamp:) Jose Joao Afonso Filho - Administrator - Registry 010979-7./. (Signed:) (Illegible)./. (The rubber stamp and the signature of Jose Joao Afonso Filho appeared on the first page of the document.)./. (Two initials appeared on page 2 and one initial appeared on all other pages of the document.)/. - - -------------------------------------------------------------------------------- THESE BEING the precise terms and content of the aforementioned document, I hereby set my Hand and Seal on this Translation, performed on November 26, 1998 in this City of Rio de Janeiro, Federative Republic of Brazil. /s/ MARCIA BARBOSA SERRA ------------------------ Marcia Barbosa Serra Sworn Public Translator EX-10.14 55 EXHIBIT 10.14 I, the undersigned, Sworn Public Translator and Commercial Interpreter in and for this City and State of Rio de Janeiro, Federative Republic of Brazil, registered at the Commercial Board of Rio de Janeiro under Number 97, do hereby CERTIFY and ATTEST that a document in the Portuguese Language was submitted to me for translation into English, which I performed according to my Office, as follows: Translation No. 2620/97 (Xerox copy submitted for translation.)....................................... (On paper with letterhead of Petroleo Brasileiro S. A. - PETROBRAS.) INVITATION TO BID No. 101.2.064.97-0.......................................... SERVICES RENDERING CONTRACT SERVICE RENDERING CONTRACT ENTERED INTO BETWEEN PETROLEO BRASILEIRO S.A. - PETROBRAS AND THE COMPANY MARITIMA NAV. E ENG. LTDA. PETROLEO BRASILEIRO S.A. - PETROBRAS, a mixed economy company, organized and existing under Law No. 2.004, dated 10/03/53, with head office at Av. Republica do Chile, 65, City of Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil, enrolled in the General Taxpayers' Registry of the Ministry of Finance under No. 33.000.167/0001-01, represented herein by the Executive Superintendent of Exploration and Production (E&P), Engineer LUIZ EDUARDO G. CARNEIRO, henceforth called PETROBAS, and the Company MARITIMA NAVEGACAO E ENGENHARIA LTDA., with head office at Avenida Almirante Barroso, nO 42, 34th floor, City of Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Braail, enrolled in the General Taxpayers' Registry of the Ministry of Finance under No. 46:828.596/0001-13, henceforth called the CONTRACTOR, represented herein by its President, Mr. GERMAN EFROMOVICH, have agreed upon the present CONTRACT to render services, with the use of the Dynamic Positioning Floating Unit AMETHYST 4 and its accessories, described in Attachment I, henceforth called the UNIT, according to authorization of PETROBRAS' Executive Board (MINUTES No. 4111, Item No. 3, dated 08/14/97) the parties being bound to the terms of the Invitation to Bid No. 101.005.97-7 and subjected to the following Clauses and Conditions:....... (End of the Qualification).................................................... FIRST CLAUSE - OBJECT......................................................... 1.1 The object of the present CONTRACT is the rendering, by the CONTRACTOR, of the services of drilling and/or evaluation and/or completion and/or workover of oil and/or gas (vertical, directional and horizontal) wells, in the Brazilian continental shelf, down to a maximum depth of 5,000 (five thousand) meters, in a water depth down to 1,200 (twelve hundred) meters................................................................. 1.1.1 For the fulfillment of the present Contract, the CONTRACTOR is to maintain its bases of operation in the City of Macae-RJ............................................................... 1.2 The services object of the present Contract are contained in the Continental Shelf Activities Plan, Disbursement and Cost Plan, under the following codes:....................................................... B 1200 - Boring - Production Development............................... A 22000 - Boring - Completion an Intervention for Evaluation - Production Development............................................................ A 2400 - Intervention for Evaluation - Exploratory Drilling............ (End of Clause)............................................................... SECOND CLAUSE - PERIOD OF VALIDITY AND DURATION............................... 2.1. PERIOD OF VALIDITY - The present Contract binds the parties as of its signature.............................................................. 2.2. DURATION - The present Contract will have a duration of 2,190 (two thousand one hundred and ninety) days.................................. 2.2.1 BEGINNING OF THE CONTRACT - The beginning of the Contract will occur when the Unit is released by PETROBRAS, through a written notice, to begin the operations, after the general equipment testing foreseen in item 3.1 is carried out............................................................ 2.2.2 AUTOMATIC EXTENSION - If at the end of the duration mentioned in 2.2, some operation is still being performed in a well, the duration of the present Contract will be automatically extended, until the completion of the works in said well, considering as the final limit the Unit's arrival in the port or sheltered waters chosen by common agreement between the parties and, also, in case there are still PETROBRAS' - equipment aboard the Unit, the completion of the withdrawal of such equipment will be considered as the final limit.......................................... 2.2.3 This Contract may be extended for successive periods of 365 (three hundred and sixty-five) running days, through a prior agreement between the parties, by means of an Addendum, the other contract conditions being complied with, and limited to a maximum contract period of 2,190 (two thousand one hundred and ninety)day.................................... 2.3. ARRIVAL IN BRAZIL - The Unit should arrive at the port or in sheltered waters, in Macae-RJ. The beginning of operations should occur up to the date of 06/17/99, the provision set forth in item 8.1 of this contract being complied with................................................................... 2.3.1 At the port or in sheltered waters mentioned in 2.3, the customs and helipoint inspections in the Unit will be carried out, as well as the loading/unloading of the CONTRACTOR's and PETROBRAS' materials, and also the general equipment testing will begin as foreseen in item 3.1 of this CONTRACT............................................................... (End of Clause)............................................................... THIRD CLAUSE - CONTRACTOR'S OBLIGATIONS...................................... 3.1. Before the beginning of the Contract, the CONTRACTOR will arrange for a general test of the operating conditions of all of the Unit's equipment, as provided for in Attachment VIII, in the presence of PETROBRAS' Inspection. The occurrences found during the performance of the tests will be duly recorded in the Daily Drilling Certificate (ADP) signed by PETROBRAS' Inspection and by the CONTRACTOR's representative. The Unit will be released to sail to the first location after proving the good operating conditions of the equipment which comprise the drill's main systems, that is, energy generation and distribution system, dynamic positioning system, industrial safety, liquid and bulk storage, fluid circulation and processing, safety and wellhead, column elevation, rotation and handling, columns, instrumentation, formation test equipment and communications system.............................................. 3.1.1 The tests referred to in 3.1 will be made in a period estimated in 3 (three) days, after which the Unit will be released to said to begin the operations, provided there is nothing pending in the rig's main systems, as set forth in item 3.1............................................... 3.1.1.1. In the event the tests last for a period exceeding 3 (three) days, for reasons ascribed to PETROBRAS, the rate foreseen in Ref 104 (Waiting Rate) of Attachment II, will be due, applied as of the fourth day of tests, until the Unit is released. The periods spent with equipment repair will not be calculated for the purpose of counting such duration, and also no fees will be due during such periods....................... 3.1.2 PETROBRAS may opt for the partial or total performance of the receipt tests, in sheltered waters, in the deepest water depth set forth in the Contract, or also in the first location............................................................... 3.2. OPERATION - To render the services object of this Contract using the Unit and the equipment listed in Attachment I, complying with the other conditions of and Attachments to this Contract, complying with the international standards recommended for services of such nature................................................................. 3.2.1 SAFETY STANDARDS - The CONTRACTOR will carry out the services in strict compliance with the international safety standards for work of such nature, aiming at the protection of personnel, materials and equipment that belong to it, PETROBRAS and third parties. PETROBRAS' Safety Rules, which the CONTRACTOR states to know will be particularly complied with. In the event of conflict between PETROBRAS' standards and the CONTRACTOR's, the CONTRACTOR's Standards will prevail, unless PETROBRAS expressly requires to the contrary in each case................................................................... 3.3. SUPPLY OF MATERIALS - To be responsible for the purchase, when requested by PETROBRAS, in the domestic market, of other materials needed to render the services object of this Contract. The purchase of the materials mentioned in this item will be submitted to the prior approval by PETROBRAS which will reimburse them as set forth in item 4.2.................................................................... 3.3.1 The materials mentioned in item 3.3 will be delivered by the CONTRACTOR to PETROBRAS, at the port or airport the latter indicates.............................................................. 3.3.2 To submit the expense vouchers in the maximum period of 60 (sixty) consecutive days after the actual date of the purchase................. 3.4. SERVICES BY THIRD PARTIES - To request, when asked by PETROBRAS, other specialized services available in Brazil, related to the object of this CONTRACT, behoving the CONTRACTOR all measures for their actual performance, including the obtainment of PETROBRAS' prior and express approval of the costs arising therefrom, which will be reimbursed as set forth in item 4.2...................................................... 3.5. PERSONNEL - To be liable, in its own name, and for its own responsibility and onus, for all personnel needed for the efficient and complete performance of the services object of this CONTRACT which will operate on the basis of 24 (twenty-four) hours a day and 7 (seven) days a week. The list of the minimum personnel to be used by the CONTRACTOR is basically the one mentioned in Attachment V...................................... 3.5.1 The CONTRACTOR guarantees that the personnel mentioned in Attachment V will allow it to fully carry out the performance of the services object of this Contract, running, as a result, for its own account, all charges arising from the need to increase the personnel. 3.5.2 The CONTRACTOR will be liable for the maintenance and cost of the personnel required for the fulfillment of the operational and safety rules and regulations issued by the proper authorities, including the compliance with the provisions of the PORTOMARINST No. 13-02, dated 06/26/85, and of the Navy Department, Ports and Coasts Authority. 3.5.3 The technical personnel should possess proven competence in their specialization, and the CONTRACTOR is to supply PETROBRAS with their respective "curriculum vitae".......................................... 3.5.4 To provide for training and/or recycling of its personnel in the Course on Safety Basic Notions, held by PETROBRAS, according to the program and conditions to be agreed upon between the parties....................... 3.5.4.1. As required by PETROBRAS or by a Training Center approved by the IADC ou IWCS, the qualification in well control is compulsory for the Superintendents on Board, for the Persons in Charge and for the Drillers............................................................... 3.6. To be liable for all charges regarding the contracting of its personnel and any additionals that are or may become due, as well as for the withholding and payment of social, labor and social security contributions set down by the Law, and other charges that may become due at any title, being for all purposes, the sole employer................ 3.6.1 Whenever requested by PETROBRAS, the CONTRACTOR will submit the documents regarding the proof of payment of its labor obligations, including social security contributions (CND - Negative Debt Certificate) and FGTS deposits, regarding its employees...................................... 3.6.2 To make sure that its personnel, who work in activities or operations that subject them to noxious agents, included in the list referred to in Article 58 of the Law No. 8.213/91, are not retired in this special condition, according to the restriction expressly contained in Article 3rd of Law NO. 9.032 dated 04.18.95.................................... 3.7. To bear all measures and expenses with displacement of personnel, such as, but not limited to, transportation from abroad to the port or airport of Macae-RJ, as indicated by PETROBRAS, and the return to the place of origin, and any and all expenses with personnel travel and stay in Brazil, insurances, medical and hospital expenses, meals, passports, as well as for extra expenses caused by delay or cancelling of flights, be it due to bad weather or to the non-availability of planes............. 3.8. To promote, without charges to PETROBRAS, the replacement and immediate withdrawal of any of its employees that may be required by PETROBRAS at any time, due to bad behavior, technical deficiency, inefficiency or health conditions...................................................... 3.9. Whenever requested, to train PETROBRAS' personnel in the services object of the present CONTRACT................................................ 3.10. All correspondence between the CONTRACTOR and PETROBRAS will be written and forwarded in Portuguese............................................ 3.11. To provide, in the UNIT chartered for the performance of the services object of this CONTRACT, lodging, food, mess room services, rendered by a Brazilian company, for PETROBRAS' personnel and those of third parties at PETROBRAS' service, up to the maximum of 26 (twenty-six) persons, being agreed that the CONTRACTOR will freely supply 900 (nine hundred) meals per month. The meals exceeding this number will be paid by PETROBRAS, based on the rate set forth in the Unit Price Spreadsheet appearing in Attachment III......................................................... 3.11.1 The quality of the mess room services and the food supply is the CONTRACTOR's responsibility, which will maintain a permanent supervision by a male nurse on board and eventually by a qualified nutricionist. PETROBRAS may require that the CONTRACTOR takes measures in the event such services show a loss in quality standards......................... 3.12. INSURANCES - To provide, for its account, the contracting of the insurances necessary to fulfill this Contract and the Brazilian laws, intended to cover its assets and its personnel, even when they are in transportation under PETROBRAS' responsibility, as well as the Civil Liability insurance for damages and losses caused to third parties, which will not imply in limiting the CONTRACTOR's liability, and it should also include PETROBRAS as a third party for the purposes of such coverage. 3.12.1 The minimum mandatory value of the civil liability insurance is of US$1,000,000.00 (one million dollars), per event, during the period of validity of this Contract and of its eventual extension, which amount is to be converted into Brazilian currency on the date the present Contract is signed. The INTERVENIENT PARTY is to appear as co-insured in this policy................................................................. 3.13. The franchises which may be established for the insurances mentioned in item 3.12, as well as the onus arising from the insurers' requirements and/or recommendations will fully run for the CONTRACTOR's account..... 3.13.1 The provision of item 3.13 applies also to the insurances of transportation made by the CONTRACTOR, regarding the CONTRACTOR'S equipment, tools, and materials to be transported by PETROBRAS, as set forth item 4.4......................................................... 3.14. The keep PETROBRAS free and safe from any and all indemnity claim for damages and/or losses of any kind which the CONTRACTOR may have sustained as a result of this Contract, whether or not it has made adequate and sufficient insurance for such circumstances............................ 3.14.1 PETROBRAS will be equally kept free and safe from any and all indemnity claim for damages and/or losses of any kind which the CONTRACTOR may have caused to third parties for its duly proven grossly negligent action or omission, arising from this Contract, whether or not it has made adequate and sufficient insurance for such circumstances........................ 3.14.2 In return, the CONTRACTOR will be kept free and safe from any and all indemnity claim for damages and/or losses of any kind, which PETROBRAS may have sustained from third parties, or has caused to third parties by its duly proven grossly negligent action or omission, as a result of this CONTRACT, whether or not it has made adequate and sufficient insurance for such circumstances................................................. 3.15. To assume, up to the limit equivalent to US$500,000.00 (five hundred thousand American dollars) per event, any and all liability for death or damages to persons, provided they are caused by duly proven grossly negligent action or omission on its part and/or its employees and/or personnel.............................................................. 3.16. The CONTRACTOR waives for itself and will require from its Insurers and/or Subcontractors, in any and all insurance made as a result of this CONTRACT, the inclusion, in each policy contracted, the provision assuring the waiver of any right to subrogation against PETROBRAS...... 3.17. To submit to the Contract Manager, up to 30 (thirty) consecutive days after its inception, as provided for in item 2.2.1, the originals of the insurance policies made as a result of this CONTRACT, containing all essential data, such as insurers, time limits, period of validity, amounts insured, and coverage conditions, and with PETROBRAS appearing as co-insured, except in the civil liability insurance, of which it will participate as a third party............... 3.17.1 The policies mentioned in item 3.17 will contain a provision that the insurances mentioned cannot be amended and/or cancelled without PETROBRAS prior authorization.................................................... 3.18. DAMAGES - The CONTRACTOR will be liable for damages to its own equipment and material, and to those which it and its agents may cause to PETROBRAS or to third parties, as a result of its duly proven grossly negligent action or omission, in the following cases:............................ 3.18.1 In the event of losses or damages to equipment and/or materials belonging to PETROBRAS and/or to third parties, which are abroad the Unit, or during their moving between the UNIT and the support vessels, the CONTRACTOR's liability will be limited to the replacement or repair of the equipment so lost or damaged due to the CONTRACTOR's or its employees' duly proven fault. However, the CONTRACTOR will not be liable for and will be kept free and safe from in the event of damages to reservoirs, indirect damages or loss of profit of PETROBRAS, losses and damages arising from pollution coming from the well, resulting from kick and/or blow-out........................................................ 3.18.2 In case of losses and damages caused to the well, arising from the events mentioned in subitem 2.1.5 of Attachment II, the CONTRACTOR will reimburse PETROBRAS the payments it comes to make to third parties referring to cementing, logging or other services related to the object of the present CONTRACT, as well as to materials (cement, casing, bits, completion fluid materials). In the event PETROBRAS opts for the definitive abandonment of the damaged well, the CONTRACTOR will reimburse the expenses made by PETROBRAS to drill that well...................... 3.18.3 In the cases mentioned in subitems 3.18.1. and 3.18.2. the limit for the CONTRACTOR's liability is of US$500,000.00 per event and its deployments............................................................ 3.19. SECRECY - To maintain complete secrecy on the data and information supplied by PETROBRAS, as well as on all of the results and analyses arising from the services referring to the present CONTRACT............ 3.19.1 All data, information and other documents, of any kind, referring to the fulfillment of this CONTRACT, are PETROBRAS' exclusive property........ 3.19.2 The CONTRACTOR and its personnel cannot disclose or supply to third parties any materials or information obtained as a result of this CONTRACT, unless it is expressly authorized by PETROBRAS............... 3.19.3 The provision of this item 3.19 is a standing obligation, valid even after the termination, in any fashion, of the present CONTRACT......... 3.20. The be liable for the violations it commits regarding author's right and the use of materials and/or performance processes protected by trade-marks and patents, as well as for any claims arising from the bad use it makes of them, running for its account the payment of any charges, royalties, fees, commission, indemnities, and any other expenses arising from said violation, including the legal ones.......................... 3.21. SEA OPERATIONS - To render the services object to this CONTRACT in strict compliance with the laws, standards, regulations and administrative rules, as well as the instructions issued by the Shipping Office or by other proper authorities, specially those regarding the spillage of oil and other residues from the UNIT into the sea, being liable, as a result, for any charges arising from the violation of such laws, standards, regulations, administrative rules and instructions, the limit established in subitem 3.21.2 being complied with, and excepting the cases provided for in item 3.20 of this CONTRACT...................................... 3.21.1 To plan and carry out operations intended to prevent and fight oil or gas blow outs, fires, or other accidents, complying with the provision set forth in item 2.4 of the ATTACHMENT I to this CONTRACT. Although the CONTRACTOR is considered fully responsible for such operations, it is obliged to discuss on the methods to be adopted with PETROBRAS, so as to find the best operating solution....................................... 3.21.2 With exception of the cases arising from kick, blow out, surging or formation testing, which the CONTRACTOR will be kept free and safe from, in the other cases of spillage of petroleum, oil and other residues in the sea, the CONTRACTOR will be liable up to the limit of US$500,000.00 (five hundred thousand American dollars) per event and its deployment.. 3.22. The storage aboard the UNIT, as well as the handling aboard, and between the UNIT and support vessels, of materials, equipment, drilling or completion fluid additives, chemical additives belonging to PETROBRAS or to third parties at the service of PETROBRAS, are the CONTRACTOR's responsibility......................................................... 3.23. To bear all expenses, including with diesel oil and transportation of the UNIT to dockages, including those arising from act of God or force majeure, as defined in the Thirteenth Clause of the CONTRACT........... 3.24. To maintain a hospital ward in the UNIT with at least 2 (two) beds, provided with equipment and medicine necessary for the prompt attention to sick and injured persons, as determined by the Shipping Office, such hospital ward being subjected to periodical inspections by PETROBRAS... 3.25. The CONTRACTOR undertakes to maintain all conditions required in the bidding stage, during the performance of the CONTRACTED SERVICES....... 3.26. To maintain an agent accredited and accepted by PETROBRAS in the UNIT or in a place previously designed by PETROBRAS, to represent the CONTRACTOR in the fulfillment of the CONTRACT. 3.27. To comply with the requests contained in the Service Authorization(s) issued by PETROBRAS.................................................... 3.28. To allow, after negotiations between the contracting parties, the provisional installation in the chartered vessel, of complementary equipment with as, but not limited to: pipes or rises in catenary by the J-lay method, or similar, submarine manifolds, provided they do not jeopardize the Vessel's safety and are in accordance with the rules of the Classification Society. ........................................... (End of Clause)............................................................... FOURTH CLAUSE - PETROBRAS OBLIGATIONS......................................... 4.1. To make monthly payments for the services rendered by the CONTRACTOR due to the present CONTRACT; based on the Attachment II and on the conditions set forth in Clauses Sixth: Readjustment - Seventh: Measurement - and Eighth: Form of Payment, the other ATTACHMENTS, Clauses and Conditions of this CONTRACT being complied with...................................... 4.2. To reimburse, by means of submittal of vouchers, the expenses with materials and services of third parties, according to items 3.3 and 3.4 of this CONTRACT. The reimbursement will be comprised of:.............. a) Amount of the bill issued by the supplying and/or service rendering company;............................................................ b) Expenses actually made to place the materials in the UNIT;.......... c) Cost of the insurance for the materials, if authorized by PETROBRAS. In the event PETROBRAS does not authorize such insurance, the CONTRACTOR will not be liable for losses and damages of any kind that they may suffer until their delivery to PETROBRAS at the port or airport it indicates................................................ 4.3 Operations and Locations Program-PETROBRAS will provide the CONTRACTOR with the Operations Program, in writing and with due antecedence, and it also will notify on the locations where the services will be rendered, so that the CONTRACTOR may adopt, in due time, the measures necessary for their performance..................................................... 4.4. TRANSPORTATION:........................................................ 4.4.1. PETROBRAS will provide transportation to the UNIT of all of the CONTRACTOR's personnel involved in the rendering of the services, from the port or airport indicated by PETROBRAS in the beginning of this CONTRACT, and vice-versa. At its exclusive discretion, the transportation to be provided will be by helicopter ou vessel......................... 4.4.2. PETROBRAS will provide transportation for the material and equipment, related to the object of this CONTRACT, from the port or airport designated, to the UNIT and vice-versa. 4.4.3. In any circumstances foreseen in this item, the granting of insurance coverage will not be PETROBRAS' competence, and the CONTRACTOR waives immediately, for itself and for its insurers, any return action against PETROBRAS or third parties at its service, as a result of the transportation provided................................................ 4.4.4. In the event there is need to program exclusive air transportation, to survey the Unit, by the Navy and/or Shipping Office, the costs arising therefrom will be charged to the CONTRACTOR............................ 4.4.5. PETROBRAS may provide air or sea transportation for the CONTRACTOR's materials, industrial or fresh water and fuel before the beginning of the CONTRACT, as defined in item 2.2.1. The costs arising therefrom will be reimbursed by the CONTRACTOR to PETROBRAS.............................. 4.4.6. PETROBRAS will provide tugs and support vessels for the UNIT, from the location where the equipment general testing is performed, to the first location, between locations and from the last location to Brazilian port or sheltered waters closest thereto, which will be chosen in common agreement between the parties.......................................... 4.4.6.1. PETROBRAS will provide the support vessels for the UNIT's positioning in the locations to be drilled during the fulfillment of this CONTRACT............................................................... 4.4.7. PETROBRAS may provide tugs and/or support vessels to load and unload materials and to handle anchors, in a place to be defined by the parties, in cases of inspection and/or dockages, including those arising from act of God or force majeure, as defined in the Thirteenth Clause of this CONTRACT. The costs arising therefrom will be reimbursed by the CONTRACTOR to PETROBRAS................................................ 4.5. FUEL AND WATER - To supply, for its account, all fuel and water necessary for the performance of the services object of the services object of this CONTRACT, from the beginning of the CONTRACT, as provided for in subitem 2.2.1, the provisions of item 3.23 of this CONTRACT being complied with................................................................... 4.5.1. The supply of water mentioned in item 4.5 includes also the industrial water intended for cleaning the UNIT................................... 4.6. COMPLETION FLUID - To maintain the control of the properties of the fluid by an accredited employee, as well as to control the stock of materials necessary for such purpose............................................. 4.7. ANCILLARY SERVICES - To provide, at its expenses and under its responsibility, the ancillary services referring to: cementing, formation testing, electric logging, flexitube operation, nitrogen operation, electric wire operation, wireline operation, when they arise from PETROBRAS' own programming............................................. 4.8. At its exclusive judgment, and without any co-responsibility, PETROBRAS may cooperate with the CONTRACTOR, assisting it before the Foreign Trade Department - Trade Exchange Coordinating Office (CTIC), regarding proceedings submitted to these Agencies, referring to materials and/or equipment pertaining to the rendering of the services object of this CONTRACT. Such cooperation, however, will not lessen the CONTRACTOR's liability for the obtainment of the documents and/or benefits that may be the object of the respective proceedings................................................. 4.9. To issue Service Authorization(s) with all information necessary for their performance, such as: location, time limit, value, scope, and beginning and end dates................................................ 4.10. To notify the CONTRACTOR, in writing, on the application of eventual fines................................................................... 4.11. To issue the Measurement Bulletin (MB), as set forth in the Seventh Clause: Measurement, of this Contract.................................. (End of Clause)............................................................... FIFTH CLAUSE - PRICES AND VALUE............................................... 5.1. For the rendering of the services object of this Contract, PETROBRAS will pay the rates set forth in Attachment II and Attachment III to this Contract, under the conditions set forth in Clauses Sixth - Measurement, and Seventh: Form of Payment........................................... 5.1.1. The contract prices include all specified tariffs, supervision, administration, taxes, fiscal emoluments and all expenses that fall directly or indirectly upon the rendering of the services, including profit, needed for its perfect fulfillment, until the end of the contract, no price revision claims being therefore valid............... 5.2. The total estimated value of this present contract is of R$34,303,151.00 (thirty-four million, three hundred and three thousand and fifty-one reais)................................................................. 5.3. PETROBRAS does not undertake to make the payment of the total estimated in item 5.2, but of the amount corresponding to the services effectively rendered and accepted by PETROBRAS..................................... 5.4. In the event the Unit suffers a delay of up to 90 (ninety) days, as of the date set forth in item 2.3 of the present Contract, the CONTRACTOR will have its daily rate reduced in 10% (ten percent), as of the beginning of the Contract, for a period equal to the number of days of delay.................................................................. 5.5. The financial resources necessary for the payment of the services object of the presente Contract are duly equated and specifically assured in the budget for the present fiscal year and foreseen for the following ones to cover the period for the total rendering of the services................................................................ (End of Clause)............................................................... SIXTH CLAUSE - PRICE READJUSTMENT............................................. 6.1. The contract prices in Brazilian currency, will be readjusted yearly, after 1 (one) year as of the month when the CONTRACTOR's proposal was submitted has elapsed, for more or less, as a result of the variation of the elements that comprise the readjustment formula, set forth in subitems 6.2.1 and 6.2.2 below......................................... 6.1.1. If, during the period of validity of this CONTRACT, new legal provisions are created which permit the reduction of the periodicity referred to in 6.1., the parties will make a new agreement regarding the contract prices, to expurgate eventual overprices arising from the periodicity originally established for the application of the readjustment......... 6.2. The prices set forth in the Unit Prices Spreadsheet - Attachment III to this Contract, will be readjusted by applying the following calculation formulae:.............................................................. 6.2.1. For the prices of Ref 101, 104 and 105 of the Unit Prices Spreadsheet - Attachment III:........................................................ INS USA MEQ PCR=PCI.[0.55 ---- +0.10 ----- + 0.35 ------] ISOo USAo MEQo 6.2.2. For the price referring to extra meals, appearing in the Unit Prices Spreadsheet - Attachment III:.......................................... ABR PR = PCI o [------] where: ABRo PRC = readjustment contract price;........................................... PCI = initial contract price, in force on the date of the CONTRACTOR's proposal;.............................................................. INS = Index number of the National Consumer Price Index (INPC), published by the Brazilian Institute of Geography and Statistics IBGE, corresponding to the months in which the readjustment is due......................... INSo = Index number of the INS defined above, corresponding to the month when the CONTRACTOR's proposal was submitted................................ INSo = Index number of the INS defined above, corresponding to the month when the CONTRACTOR's proposal was submitted;............................... USA = value of the North-American dollar selling rate in the commercial exchange in force on the 30th day of the month in which the readjustment is due; ............................................................... USAo = value of the same rate in force on the 30th day of the month the CONTRACTOR's proposal was submitted;................................... MEQ = definitive value of the Wholesale Index - Domestic Availability - Brazil - Production Goods - Machinery, Vehicles and Equipment-Machinery and Equipment - Column 15 of the Getulio Vargas Foundation's Magazine "Conjuntura Economica", corresponding to the month when the readjustment is due;................................................................ MEQo = definitive value of this same index, corresponding to the month when the CONTRACTOR's proposal was submitted;................................... ABRo = definitive value of this same index, corresponding to the month when the CONTRACTOR's proposal was submitted.................................... 6.2.3. The reference basis of the CONTRACTOR's proposal is the month of July/ 97..................................................................... 6.3. PETROBRAS will make the readjustment calculation, expressing its result, duly made evident, in the Measurement Bulletin (MB) of the services to which it refers, for the purposes of issuing the respective collection document............................................................... 6.4. In the event of delay in the partial or total disclosure of the indexes, a readjustment factor will be provisionally used, calculated on the basis of the last indexes, known by then, at the time the Measurement Bulletin (MB) was issued........................................................ 6.4.1. The eventual difference between the definitive and the provisional readjustment will be invoiced by the CONTRACTOR after the issuing of the Readjustment Bulletin (RB) by PETROBRAS, as provided for in subitem 7.3.1. of this CONTRACT................................................ 6.5. The readjustment will not include the services performed before the date when the reason that justifies it has occurred......................... 6.6. The readjustment factor will be applied with 4 (four) decimal places, without rounding off................................................... 6.7. The CONTRACTOR states that the prices proposed for the performance of the services object of the contract have taken into account all costs, inputs, expenses and other legal obligations for the complete fulfillment of the contract provisions established. (End of Clause)............................................................... SEVENTH CLAUSE - MEASUREMENT.................................................. 7.1. Periodicity of the measurements of the services and determination of the reimbursable expenses............................................ 7.1.1. For the services, the measurement will be made monthly, according to the procedures mentioned below, with the consequent issuing of the respective Measurement Bulletins (MB):............................... a) the initial measurement of the services will be made between the date of the beginning of this CONTRACT and the last day of the calendar month;.................................................. b) The intermediary measurements of the services, corresponding to a given month, of the order "m", include the period between day 01 and the last day of the calendar month of the order "m";......... c) The final measurement of the services will be made between day 01 of the month "m" and the day of the termination of this CONTRACT. 7.1.2. The reimbursable expenses, if provided for in the CONTRACT, will be determined on any day of the month, according to the vouchers submitted to and accepted by PETROBRAS, and more than one determination can be made in the same period included in the measurement. 7.1.2.1. The results found will be submitted to the CONTRACTOR on the 5th (fifth) working day, as of the submittal of said vouchers, by means of a Reimbursement Document (RD), which will be signed by the Manager of this CONTRACT, for invoicing purposes................................ 7.1.2.2. The reimbursable expenses and the deductions, if provided for in the CONTRACT, are to be individually made evident in the Reimbursement Documents (RD)....................................................... 7.2. Issuing of the Measurement - Bulletins (MB).......................... 7.2.1. PETROBRAS, through the Manager of this CONTRACT, at the end of each period as mentioned in the letters of subitem 7.1.1 of this Clause, will carry out the measurement of the services, gathering the results found in the Measurement Bulletin (MB), for the signature of the Manager of this CONTRACT and of the CONTRACTOR, complying with the following:........................................................... a) For the initial, intermediate and final measurements ending on the last day of a given month of the order "m", the CONTRACTOR will receive one of the copies of the MB up to the 5th (fifth) subsequent working day, so that it may submit the respective collection documents, as provided for in subitem 7.4.1 of this Clause;.......................................................... b) For the final measurement, when the termination of the CONTRACT does not occur in the last day of the month, the CONTRACTOR will receive one of the copies of the MB, up to the 5th (fifth) working day after the termination of the CONTRACT, so that it may submit the respective collection documents, as provided for in subitem 7.4.1;.......................................................... c) for each measurement period of the services, only 1 (one) collection document may be issued, being understood that collection documents with partial values regarding said period will not be taken into account for payment purposes, with exception of the cases of collection of differences in readjustment, if any;............................................................. d) In the Measurement Bulletins (MB), the portions regarding the basic and readjustment values, if any, will be made evident, using the last definitive factor known by then, and the deductions, if provided for in the CONTRACT..................................... 7.3. Collection of readjustment difference................................ 7.3.1 For the payment of an eventual readjustment complement, due to the non-availability of indexes at the time the MB is issued, PETROBRAS will issue a Readjustment Bulletin (RB).............................. 7.3.1.1. The Readjustment Bulletin (RB) will be submitted to the CONTRACTOR on the third working day after the disclosure of the indexes applicable to the calculation of the definitive readjustment factor................ 7.4. Time for the submittal of collection documents....................... 7.4.1 The CONTRACTOR will submit the respective collection documents to PETROBRAS Financial Department, as mentioned in item 8.1 of this CONTRACT, in the following conditions:............................... MEASUREMENT OCCASION FOR THE SUBMITTAL TYPE OF MEASUREMENT DOCUMENT OF COLLECTION DOCUMENTS - - ------------------- ----------- ------------------------------------------- INITIAL INTERMEDIATE MB Up to the 8th working day following the AND FINAL last day of the performance of the services, and PETROBRAS will make the payment on the 30th consecutive day, as of the final day of the period measured, the provision in subitem 4.1.1. being complied with............................ INITIAL INTERMEDIATE RB In case of an eventual complement of AND FINAL readjustment difference, the RB will be issued up to the 3rd working day after the index to calculate its issuing is known, together with the payment of the principal, the minimum of 10 (ten) working days between the submittal of the Collection Document and the date of payment being complied with............................ DETERMINATION OF RD In the first working day afte rthe DR is REIMBURSABLE issued, and the payment will be made in a EXPENSES period of 30 (thirty) days, as of the day of its submittal. ....................... 7.4.1.1. The payments due because of this CONTRACT, referring to the services, will always occur on the 30th day after the end of the measure period, included in the MB's, or on the first subsequent working day, provided the CONTRACTOR fulfills the time limits for the submittal of the Collection Documents set forth herein. In the event of non-compliance, by the CONTRACTOR, with said submittal time limits, the payments will be postponed for the number of days equal to the delay in the delivery of such documents.................................................... 7.5. Measurement follow-up................................................ 7.5.1 The CONTRACTOR undertakes to follow-up the measurements and the determinations carried out by PETROBRAS, offering, at that time, the impugnations or considerations it deems necessary, which will be submitted to PETROBRAS' appraisal and decision............................................................. 7.5.2 The CONTRACTOR's signature by its representative before PETROBRAS will imply in the acknowledgement of the accuracy of the Measurement Bulletin (MB) and/or Readjustment Bulletin (RB) for all legal purposes............................................................. (End of Clause)............................................................... EIGHTH CAUSE - FORM OF PAYMENT................................................ 8.1. The monthly payments due as a result of this CONTRACT will be made by PETROBRAS to the CONTRACTOR, in Brazilian currency, 30 (thirty) consecutive days, as of the last day of the period of performance of the services, provided the CONTRACTOR submits the collection documents until the 8th (eighth) working day after the last day of the period of performance of the services.......................................... 8.1.1 The payment of an eventual difference in readjustment will be made on the same day in which the payment of the respective service occurs, provided the CONTRACTOR submits the corresponding collection document up to the 5th (fifty) working day after the indexes that permit the issuing of the Readjustment Bulletin (RB) are known.................. 8.1.2 The payment of reimbursable expenses, if any, will be made 30 (thirty) consecutive days after the submittal of the collection document...... 8.1.3 In the event of non-submittal of the collection documents in the time limits set above, the payment will be postponed for as many consecutive days as correspond to the delay in the delivery of the collection documents............................................................ 8.2. The collection documents will be submitted, together with the original of the document giving rise to them (MB, RB, RD) in the Docket of the Financial Department indicated by PETROBRAS, for the purposes of checking the fulfillment of the time limits for their payment........ 8.3. The collection documents will be issued without erasures, complying with the pertinent laws in force, and will contain obligatorily the following information:............................................... a) Place and date of its emission and number of the collection document;........................................................ b) Number and date of signature of the contract deed;............... c) Number and date of the documents originating them (MB, RB, RD);.. d) Gross value of the collection documents, both in numbers and in writing;......................................................... e) Name and code of the banking establishment, branch and the respective code, and number of the current account of the payee, where the payments will be made;................................. f) In order that a particular payment is made in a banking establishment different from the one indicated at the time the contract deed was signed, such amendment will obligatorily be preceded by a fax/correspondence from the CONTRACTOR or will appear in the payee's collection document..... 8.3.1 In the event the collection document is inaccurate, it will be returned to the CONTRACTOR and the time limit foreseen in item 8.1 will be postponed for as many days as those corresponding to the delay in the submittal of such document........................................... 8.3.2 In the event of re-submittal of the collection document, as a result of a previous impugnation, this fact should appear in the history of the collective document.................................................. 8.3.3 The CONTRACTOR will obligatorily submit, every month to the Manager of the Contract:........................................................ a) Payroll of the CONTRACTOR's employees who are involved in the rendering of the services contracted;............................ b) A photocopy of the Social Security Payment Slip (GRPS), duly settled and authenticated, obligatorily filling out field "8" (other information), the name, CGC of PETROBRAS, number, date and amount of the Invoice or Bill of Sale referring to the services rendered in the month............................................ c) In case of a Cooperative, to submit the payment vouchers of the amounts paid, distributed or credited to its members as a remuneration for the services rendered in the fulfillment of this contract......................................................... 8.3.4. The collection documents will not be accepted by PETROBRAS if submitted with Income Tax at Source already withheld........................... 8.3.5. It is the responsibility of PETROBRAS' disbursing office the explanation of doubts regarding the issuing of the collection documents............................................................ 8.3.6. Eventual payments made for more or for less by PETROBRAS, will be compensated as soon as they are detected, and the respective amounts will be duly corrected............................................... 8.3.7. The CONTRACTOR should indicate the place and fax number, if any, for the receipt of the "Notice of Payment Foreseen."..................... 8.4. The vouchers for the reimbursable expenses due to the CONTRACTOR as a result of this contract deed, will be previously submitted to the Manager of the Contract, for checking, besides being duly settled by the respective supplier or service rendered, when such is the case... 8.4.1. If the original cannot remain in PETROBRAS' hands, copies thereof may be submitted, which will be checked by the Inspector and/or Manager, and the following should appear in every original document: "Copy Submitted for Reimbursement on ___/___/___", followed by the signature and identification by name, position and registry number, and the originals will be returned to the CONTRACTOR. The following text will appear in the copies of each document in PETROBRAS' hands: "Checked With the Original On ___/___/___", which the Inspector and/or Manager will sign, identifying the signature by name, position, and registry number............................................................... 8.4.2. In special cases of reimbursement of import costs (duties and/or expenses), the CONTRACTOR will send a letter submitting the vouchers for such expenses, together with the import proceeding, to the office responsible for its follow-up........................................ 8.4.3. The receipt, duly formalized by PETROBRAS, of any reimbursable expense voucher, does not represent the recognition of the debt, nor the proof that the expenses was made........................................... 8.4.4. The collection of reimbursable expenses can only be made through the issuing of a Services Invoice, after approval by PETROBRAS of the respective Reimbursement Document - RD, which will be issued up to 5 (five) working days, as of the date of submittal of said documents... 8.4.4.1. PETROBRAS' Inspection has 3 (three) working days to proceed with the checking of the expense voucher and to notify its approval to the CONTRACTOR, so that it may issue the Combined Invoice and Bill of Sale................................................................. 8.4.5. The total amount of the collection document will be obtained by applying the following formula: VTD VTR = -------, where: I - ICP VTR = total amount to be reimbursed to the CONTRACTOR;.............. VTD = total amount of the reimbursable expenses, effectively authorized; ICP = total of the sum of the aliquots of taxes collected, in the decimal form (ISS or ICMS, as the case may be, COFFINS and PIS/PASEP).................................................... (End of Clause)............................................................... NINTH CLAUSE - FINES.......................................................... 9.1. Non-compliance, by the CONTRACTOR, after ninety-one days beyond the time limit mentioned in item 2.3 of this Contract, will imply in the imposition of fine against the CONTRACTOR, in a written notice, corresponding to 30% (thirty per cent) of the rate provided for in Ref 101 of Attachment III, per day of delay.............................. 9.2. In the event of non-compliance, by the CONTRACTOR, with the inspection's requirements within the time limit it may set, PETROBRAS may, by a written notice, impose against the CONTRACTOR, per day of non-compliance with such requirements, as of the end of the time limit set, a fine corresponding to 20% (twenty per cent) of the rate provided for in Ref 101 of Attachment III..................................... 9.3. The penalties set forth in this Clause do not exclude any other provided for in the Laws in force and/or in this Contract............ 9.4. The amount corresponding to the sum of the basic values of the fines applied is limited to 10% (ten per cent) of the estimated value of the present Contract..................................................... 9.5. The basic values of the fines will be readjusted by the readjustment factor calculated by the formula shown in subitem 6.2.1 of this Contract and in force in the period of its imposition................ 9.5.1. The fines will be forwarded by the Inspection, for discount by the Disbursing Office, as soon as the pertinent definitive readjustment factors are known.................................................... 9.5.2. In the event of balance, PETROBRAS reserves itself the right to make or complement the deduction in collection document(s) related to any other contract deed eventually entered into with the CONTRACTOR, or to use any other adequate means to settle the debt, if necessary............ 9.6. In a written notice and without prejudice of the capacity to rescind the contract, PETROBRAS may impose upon the CONTRACTOR a compensatory fine of 100% (one hundred per cent) of the amount of the conviction, due to default of its labor, social security or tax obligations...... 9.6.1. The payment of said fine will not exempt the CONTRACTOR from the obligation to reimburse PETROBRAS for the amount imposed upon it as a result of an eventual joint conviction passed by a Labor Court or by the proper administrative jurisdictions.............................. 9.6.2. The CONTRACTOR will be fined in the percentual of 5% (five percent) on the amount of the invoice in the event it does not submit the GRPS or submits at variance.................................................. 9.6.2.1. The GRPS is considered at variance if it does not have proof of payment of social security contributions of all of the CONTRACTOR's Brazilian crew working in the fulfillment of the CONTRACT...................... 9.7. The CONTRACTOR may appeal against the imposition of the fine, in a declaration, within the non-deferrable time limit of 15 (fifteen) consecutive days as of the date the notice is received............... (End of Clause)............................................................... TENTH CLAUSE - INSPECTION..................................................... 10.1 The inspection of the services contracted herein will be carried out by PETROBRAS' representatives, and the CONTRACTOR undertakes to allow their free access to the UNIT and to the service locations, and to comply immediately with the observations of such inspection, which will have ample powers:................................................... 10.1.1. To determine the interruption of the drilling and/or evaluation and/or completion of the well, for the purpose of carrying out formation testing, corings, electric loggings and other services deemed necessary; 10.1.2. To determine, provided it comes to its knowledge and is within its capacity, the suspension of the services which perhaps are being carried out in disagreement with the good technique or which threatens the safety of persons or assets of PETROBRAS, third parties and of the CONTRACTOR itself, complying with subitem 2.1.7 of Attachment I...... 10.1.3. To refuse the use of improper or inadequate techniques, as well as the operations that do not comply with the established programs.......... 10.1.4. To refuse the employment of condemned or improper materials, tools and string components, which do not comply with PETROBRAS' and API's standards............................................................ 10.1.5. To order the withdrawal, from the work site, of any of the CONTRACTOR's employees who, in PETROBRAS' opinion, may endanger the good performance of the services or hinder its inspecting activities.................. 10.1.6. To certify the accuracy of the information reported daily by the CONTRACTOR........................................................... 10.1.7. To notify the CONTRACTOR, in writing, on the imposition of the fines provided for in this CONTRACT, including those referring to the CONTRACTOR's action or omission...................................... 10.1.8. To request from the CONTRACTOR a detailed report on any accident occurred and on any operation or repair performed.................... 10.1.9. To request from the CONTRACTOR the documentation regarding the proof of payment of its labor obligations, including social security contributions (Negative Debt Certificate) and deposits in the FGTS, for the crew members..................................................... 10.2. Recording - PETROBRAS' Inspection should record its observations on the Driller's Log approved by the LADC and on the Daily Drilling Certificate (ADP), to safeguard the rights and liabilities foreseen in this CONTRACT........................................................ 10.3. During the period of validity of the Contract, PETROBRAS will carry out evaluation of the CONTRACTOR's performance, covering the groups in equipment and material, human resources, installations, quality and efficiency. The results of the performance evaluations will be notified and consolidated by means of service performance certificates. (End of Clause)............................................................... ELEVENTH CLAUSE - RESCISION................................................... 11.1. PETROBRAS may rescind the present CONTRACT, without the CONTRACTOR being entitled to any right to indemnity and/or withholding in the following cases: 11.1.1. Nonfulfillment, or irregular fulfillment of contract clauses, specifications, operations and Inspection's requests, provided the fact mentioned isn't solved within the time limit of 60 (sixty) days or the repeated perpetration of faults in the fulfillment of the Contract;.......................................................... 11.1.2. Total or partial subcontracting of the object of the present Contract, the association of the CONTRACTOR will another, merger/division or total or partial incorporation, except if allowed for in this Contract, which affects the good fulfillment of this instrument.................. 11.1.3. Interruption of the operations for more than 60 (sixty) days, in the cases in which an act of God does not clearly apply (clause 12.4).............................................................. 11.1.4. Decree of the CONTRACTOR's bankruptcy.............................. 11.1.5. Suspension of the operations for more than 60 (sixty) days............................................................... 11.1.6. When the limit for the imposition of penalties provided for in item 9.4 of this Contract is attained................................... 11.1.7. Slowness in the performance of the works, leading PETROBRAS to prove the impossibility of completing the services within the established time limits........................................................ 11.1.8. Non-compliance with the determinations of PETROBRAS' agent appointed to follow-up and inspect the fulfillment of the Contract, as well as those of his superiors............................................. 11.1.9. The dissolution of the CONTRACTOR.................................. 11.1.10. The social change or the modification of the company's purpose or structure, which in PETROBRAS' opinion, hinders the performance of the services....................................................... 11.1.11. Delay in the beginning of the fulfillment of the CONTRACT for more than 180 (one hundred and eighty) days............................. 11.1.12. Rescision of the Unit's Chartering Contract entered into between PETROBRAS and the INTERVENIENT PARTY............................... 11.1.13. If the limit set forth in subitem 2.1.9 of Attachment II to this Contract is attained............................................... 11.1.14. If the limits set forth in NOTE 2 of Ref. 102 of Attachment II to this Contract is attained.......................................... 11.1.15. Non-submittal of the proof of default of labor obligations towards the employees directly involved in the services object of this Contract, including social security contributions and deposits in the FGTS, when requested by the Inspection, or if such default is proved............................................................. 11.1.16. Non-submittal or submittal at variance of the GRPS, when the corresponding invoice is delivered................................. 11.1.16.1. The rescision for this reason does not prevent PETROBRAS from imposing the respective fine, foreseen in 8.7.2;................... 11.2. In the event of rescision of the contract deed for the reasons foreseen in 10.1, PETROBRAS:....................................... a) will take over the object of the contract deed, on the stage and location where it is found;..................................... b) will enforce the contract guarantee, if any, for the reimbursement of the amounts of fines and indemnities due to it;.............. c) will withhold the credits arising from the contract deed, up to the limits of the damages caused to it;......................... 11.3. After the Contract is rescinded, as set forth in this Clause, the CONTRACTOR is liable, in legal and contract fashion, for the violation or inadequate performance which gives rise to the rescision, as well as for the reimbursement of damages which PETROBRAS may come to sustain...................................... 11.4. After the Contract is rescinded, PETROBRAS, at its exclusive judgment, may adjudicate the operations object thereof to which it deems appropriate, without behoving the CONTRACTOR any consultation or interference, claim and/or indemnity, for whatever title, and the CONTRACTOR will be liable to legal and contract penalties, besides answering for damages PETROBRAS may sustain........................ 11.4.1. The CONTRACTOR is also liable for the pertinent administrative sanctions, its full defense bein guaranteed........................ 11.5. In the event PETROBRAS does not impose the right to rescind the present CONTRACT according to this Clause, it may, at its absolute discretion, withhold the payments of pending invoices, until the CONTRACTOR fulfills the contract condition it has infringed, but such fact will not represent novation nor will it generate rights that may be claimed by the CONTRACTOR.............. (End of Clause)............................................................... TWELFTH CLAUSE - FISCAL CHARGES............................................... 12.1. Taxes (taxes, fees, emoluments, fiscal and parafiscal contributions) that are due as a direct or indirect result of the present CONTRACT, or of its fulfillment, will be the exclusive responsibility of the taxpayer, so defined in the tax rule, with no right to reimbursement. PETROBRAS, as the paying source, will discount and withhold within the legal time period, from the payments it makes, the taxes it is liable to by the laws in force................................................. 12.1.1 The CONTRACTOR states that, in quoting its prices, it has taken into account the taxes (taxes, fees, emoluments, fiscal and parafiscal contributions) charged on the fulfillment of this Contract, and it cannot make nay claim due to error on such evaluation, for the purpose of requesting a price revision ou reimbursement of payments set down by the proper authority................................................. 12.1.2 Once found, during the period of validity of the Contract, that the CONTRACTOR has unduly added to its prices amounts corresponding to taxes, fiscal and/or parafiscal contributions and emoluments of any kind that are not charged to the performance of the services agreed upon, such values will be immediately excluded, with the consequence reduction of the prices practiced and reimbursement of amounts that may have been paid to the CONTRACTOR..................................... 12.2. If, during the period of validity of this CONTRACT, any of the following events occur:.............................................. - creation of new taxes;............................................. - extinction of existing taxes;...................................... - changes in the aliquots;........................................... - establishment of tax incentives of any kind; and................... - exemption or abatement of federal, state or county taxes;.......... which, provedly come to increase or reduce the burdens of the parties to the contract, the prices will be revised, so as to fit them into the changes made, compensating, at the first opportunity, any differences arising from such changes. However, if it is a question of tax incentives, the advantages arising therefrom will always be for PETROBRAS...................................................... (End of Clause)............................................................... THIRTEENTH CLAUSE - FORCE MAJEURE............................................. 13.1. PETROBRAS and the CONTRACTOR will not be liable for the nonfulfillment of their respective obligations in case of events that characterize an act of God or force majeure defined in the sole paragraph of Article 1.058 of the Brazilian Civil Code. Any suspension of performance due to such item 12.1 will be limited to the period during which such cause or its consequences exist, and such period will be added to the duration of the Contract mentioned in the Second Clause of the present Contract. However, the CONTRACTOR is assured the right to receive the rate provided for in Ref 104 of Attachment III, with the exception of the exemption from payment set forth in subitem 2.1.4 of the Attachment II, and the reimbursements mentioned in this Contract, and furthermore, the parties will severally assume their losses............................ 13.2. If the circumstance that justify the invoking of the existence of an act of God or force majeure occurs, the party unable to fulfill its obligations will immediately notify the other party, in writing, on the occurrence and its consequences....................................... 13.3. If the impediment arising form the force majeure lasts for more than 30 (thirty) consecutive days, any of the parties may opt for the termination of the Contract, with both parties complying with their mutual obligations due until the date of the beginning of said impediment............................................................ 13.4. In the present Contract it will be considered as act of God the situation in which one of the parties is prevented from fulfilling its obligations, provided it proves that:................................. the non-fulfillment of the obligation was due to the existence of an impediment beyond its control;........................................ the party impeded could not, within its ability, overcome the impediment and its effects, in order to fulfill its contract obligation within the time limit set down, and.............................................. the impediment and its effects could not be avoided nor overcome...... (End of Clause)............................................................... FOURTEENTH CLAUSE - ASSIGNMENT AND TRANSFER 14.1. The CONTRACTOR cannot assign or transfer, in whole or in part, the present Contract, except with PETROBRAS' prior authorization in writing. 14.2. The CONTRACTOR cannot assign or give in guarantee, at any title, in whole or in part, the credits of any kind, arising or deriving from the present Contract, except with PETROBRAS' prior authorization in writing. The prior authorization will obligatorily state the PETROBRAS imposes upon the assignee of the credits the exceptions that behooves it, mentioning expressly that the payments to the assignee will be conditioned to the fulfillment, by the assignor, of all of its contract obligations........................................................... 14.3 The occurrence of the above mentioned events, duly authorized by PETROBRAS, does not exempt the CONTRACTOR from any of its contract obligations........................................................... 14.4 PETROBRAS may assign or transfer, in whole or in part, the present Contract, under commercial conditions to be agreed upon by the parties.. (End of Clause)............................................................... FIFTEENTH CLAUSE - CONTRACT RELATIONSHIPS..................................... 15.1. This Contract is related to another one for chartering the Unit, signed on this same date between PETROBRAS and the INTERVENIENT PARTY. (End of Clause)............................................................... SIXTEENTH CLAUSE - INTERVENIENCE.............................................. 16.1. The INTERVENIENT PARTY signs the present Contract, together with the CONTRACTOR, being jointly liable with it for all obligations arising from the present Contract and its fulfillment, including for damages.. (End of Clause)............................................................... SEVENTEENTH CLAUSE - ACCEPTANCE............................................... 17.1. After the services are completed in strict compliance with the conditions set forth in the present deed, PETROBRAS will accept them by means of a Definitive Acceptance Deed signed by the parties. 17.1.1. Before the signature of the Definitive Acceptance Deed, the CONTRACTOR will comply with all of the Inspection's requirements regarding claims, without any charge to PETROBRAS....................................... 17.1.2. The signature of the Definitive Acceptance Deed does not exempt the CONTRACTOR from the liabilities provided for in this CONTRACT and in the laws in force......................................................... (End of Clause)............................................................... EIGHTEENTH CLAUSE - LIABILITY................................................. 18.1. PETROBRAS and the CONTRACTOR's liability for damages will be limited to the direct damages in accordance with the Brazilian Civil Code and pertinent laws, with exception of loss of profit and indirect damages, the indirect damages being limited to 100% (one hundred percent) of the total contract value.................................................. (End of Clause)............................................................... NINETEENTH CLAUSE - COMPLEMENTARY DOCUMENTS................................... 19.1. The Attachments mentioned below are an integral part of the present Contract and, in the event of disagreement between the Attachments and the Contract, the text of the Contract will prevail................... ATTACHMENTS I - Technical specifications of the Unit................................... II - Applicability of the Rates and Incidentals in the Performance.......... III - Unit Prices Spreadsheet................................................ IV - Responsibilities in the Performance and Mutual Obligations............. V - List of Specialized Personnel;......................................... VI - Environmental Operating Conditions..................................... VII - PETROBRAS' Safety Rules................................................ VIII - Radio Communication and Radio-Beacon Frequency Plan.................... IX - Equipment Testing Program.............................................. X - Procedures in the Event of Fatal Accidents.............................. (End of Clause)............................................................... TWENTIETH CLAUSE - JURISDICTION............................................... 20.1. The Jurisdiction of the County of the Capital of the State of Rio de Janeiro will be competent to settle any questions arising from the present CONTRACT, with the express waiver, by the parties, of any other, however privileged............................................... (End of Clause)............................................................... AND BEING THUS AGREED, the parties sign the present deed in 4 (four) copies with the same tenor, with the witnesses below........................... Rio de Janeiro, (blank)....................................................... PETROLEO BRASILEIRO S.A. - PETROBRAS ____________________________________(blank)___________________________________ LUIZ EDUARDO G. CARNEIRO - EXECUTIVE SUPERINTENDENT OF EXPLORATION AND PRODUCTION SOUTH AND SOUTHEAST (E&P-SSE)...................................... MARITIMA NAVEGACAO E ENGENHARIA LTDA. (blank) GERMAN EFROMOVICH - PRESIDENT................................................. WITNESSES: (Blank) - CPF No. (Blank)..................................................... Blank) - CPF No. (Blank)..................................................... (Attachment I not included in the original document.)......................... CONTRACT 101.2.064.97-0....................................................... SERVICES RENDERING ATTACHMENT II APPLICABILITY OF THE RATES AND INCIDENTALS IN THE PERFORMANCE. 1 - APPLICABILITY OF THE RATES - DEFINITION OF THE SERVICE RATES PER 24 (TWENTY-FOUR) HOUR DAY........................................................ REF 101 - OPERATION RATE - It will be applied during the activities requiring the use of the Unit, such as drilling, coring, electric logging, formation testing, completion and workover operations, including drilling lines scouring and cutting operations. REF 102 - REPAIR RATE - In the periods when there is an interruption of the activities that require the use of the Unit, mentioned in Ref 101 of this Attachment and the operations for Moving the Unit between locations, Ref 105 of this Attachment, due to maintenance, including replacement of mud pump spare parts, and/or repair in the Unit's equipment, or in those which supply is the CONTRACTOR's responsibility, no rate will be due....................... NOTE 1. The repair period will be considered as of the interruption of the operation that is being performed, until the return to the same situation when the interruption occurred, except for the periods when the interruption in the repair activities occur due to adverse sea conditions, as set forth in NOTE 2 of Ref. 104........................ NOTE 2. In the event the CONTRACTOR remains in Repair Rate for an accumulated total of 30% (thirty percent) of the time, for any period of 6 (six) contract months, PETROBRAS may rescind the present Contract, based on subitem 10.1.14 of this Contract...................................... NOTE 3. It will be considered as repairs the occurrences due to wash outs in the drill pipes and in the other elements of the drill string, belonging the Contractor, with exception of those arising from the presence of H2S and from abnormal mechanical conditions occurred in the well.................................................................. NOTE 4. At the Inspections discretion, for the maintenance of the BOP, the CONTRACTOR may be granted a franchise of up to 24 (twenty-four) hours between the instant the BOP is set of the test stump, until its operational withdrawal, and the moment of its movement for the next lowering in another well, without the CONTRACTOR entering into the repair rate, provided such maintenance is carried out according to international standards. In the period within these 24 (twenty-four) hours intended exclusively for the BOP maintenance; the waiting rate (Ref. 104) will be due........................................................................... Ref. 103 - Rate Additional (RA) - In each measurement period, as agreed upon in subitem 6.1.1 of the Contract, the CONTRACTOR will be entitled to the receipt of a Rate Additional, calculated by the following formulae:..................................................................... AT = 0.10 x (NT - NFM - NREP - NIPG - NTOR) x TO ...................TO PI (less than or equal to) 0,0300 AT = (0,16 - 2 x PI) x (NT = NFM - NREP - NIPG - NTOR) x TO.... for 0,03 less than or equal to PI less than or equal to PI 0,0800 AT = Zero.............TO PI > 0,0800 Where:........................................................................ AT = Rate Additional.......................................................... TO = Operation Rate (REF 101)................................................. PI = Unavailable Proportion, calculated with 4 (four) decimal places, being:..................................................................... NREP + NIPG + NTOR PI = --------------------- NT - NFM NT = Total number of days in the measurement period considered................ NFM = Total number of days in which the act of God or force majeure occurs, as defined in the Twelfth Clause of the Contract, in the measurement period considered.................................................................... NREP = Total number of days under repair rate (REF 102) in the measurement period considered............................................................. NIPG = Total number of days under exemption from payment (according to item 2.1 of this Attachment) in the measurement period considered.................. NTOR = Total number of days with reduced operation rate (according to subitems 2.2.3 and 2.2.4 of this Attachment) in the measurement period considered.................................................................... Ref. 104 - Waiting Rate (TE) - corresponds to 95% (ninety-five percent) of the operation rate (TO) and which will be applied in Bad Weather, Force Majeure and Waiting situations, as defined below:............................. 1) Bad Weather Situations - in the event of stoppage of the operations when environmental conditions are so severe as to endanger the Unit's operating capacity, the limitations in Attachment VI, being complied with, making the operations unstable or unsafe or preventing support vessels to have access to the Unit, or preventing the tugs' operations, at the time of change of locations, although the Unit may operate normally, in spite of the bad weather...................................................... 2) Force Majeure Situations - during the period when the Unit cannot operate, due to act of God or force majeure, as defined in the Twelfth Clause of the Contract, until the removal of the impediment or the rescision of the Contract, as the case may be........................... 3) Waiting - waiting for the arrival, maintenance or availability of materials from PETROBRAS or third parties, under PETROBRAS' responsibility, even if the maintenance is made in the Unit; waiting for daylight to carry out formation tests; waiting for orders from PETROBRAS, such as, but not limited to: change of programs, definition to proceed with the completion or other production activity, rest for PETROBRAS' team or of those of third party at PETROBRAS' service; waiting for towage or support vessels................................... NOTE 1. The period spent in disconnecting the LMRP from the BOP due to environmental conditions, will be considered as bad weather situation, until the return to the previous situation.............. NOTE 2. If a bad weather situation occurs which interrupts a repair activity, the Waiting Rata (Ref. 104) with a 25% (twenty-five percent) reduction, will be due during that period................. Ref. 105 - Moving Rate - corresponds to 95% (ninety-five percent) of the Operation Rate (TO) and will be applied during the following periods:......... a) Beginning of the Contract - After the acceptance of the Unit's equipment operating conditions, once the general testing provided for in item 3.1 of the Contract has been carried out, until the spud in of the first well or reentry in the first well (beginning of lowering the first tool for access to the well);........................................... b) Between locations - After the end of the drilling operations, completion or intervention in a well, with the arrival of the BOP or tool used in the well (the one which occurs last) in the moon pool, until the spud in or reentry in a new well (beginning of lowering the first tool for access to the well);.................................................................. NOTE: This period includes the DP system calibration and tests, always in each new location, and in others in each contract year or at any time, when requested by PETROBRAS.................................... c) End of Contract - After the end of the spud in or intervention operations in the last well, with the arrival of the BOP or tool used in the well (the one which occurs last) in the moon pool, until the Unit's arrival in a sheltered waters location, chosen in common agreement between the parties, or, if there is PETROBRAS' equipment still aboard, until the withdrawal of such equipment from the Unit...... 2 - INCIDENTS IN THE PERFORMANCE............................................ 2.1. Exemption from Payment - PETROBRAS will be exempted from the payment of the rates foreseen in this ATTACHMENT, during the period in which occurs:............................................................... 2.1.1. Interruption of the services due to the CONTRACTOR's duly proven fault arising from operational error and/or lack of material or equipment, inclusive due to the loss of equipment or subaquatic spare parts................................................................. 2.1.2. Stoppage of the services and/or of the Unit due to measures related to impositions by made the insurers...................................... 2.1.3. Stoppage of the services and/or of the Unit for inspection or dockage purposes, including surveys and dockages arising from act of God or force majeure, as defined in the Twelfth Clause of the Contract, the corresponding expenses also running for the CONTRACTOR's account...... NOTE 1. The exemption from payment will begin in the moment there is an interruption of the operational continuity object of this Contract, even if the withdrawal of all or part of PETROBRAS and/or the CONTRACTOR's cargo becomes necessary for the inspection and/or dockage............................................................. NOTE 2. The end of the exemption from payment, due to the inspection and/or dockage, will occur:................................................ a) On the return to the same location, the moment the operations returns to the previous situation;........................... b) In the mobilization for another location, the moment the Unit starts sailing after PETROBRAS or the CONTRACTOR's materials have been put back on board. 2.1.5. Occurrence of kick, drill string sticking, loss of circulation, fishing or abandonment, caused by the CONTRACTOR's duly proven action or omission, from the moment the problem was ascertained, until the return to the situation prior to its occurrence, or displacement to another location, in the event of abandonment................................. 2.1.5.1. The exemption from payment referred to in 2.1.5 will be limited to a period of 15 (fifteen) days, per event, after which the reduction foreseen in subitem 2.2.3 of this Attachment will be applied.......................................................... 2.1.6. Occurrence of blow out caused by the CONTRACTOR's duly proven action or omission, from the moment the problem was ascertained, until the return to the situation prior to its occurrence......... 2.1.6.1.The exemption from payment referred to in item 2.1.6 will be limited to a period of 45 (forty-five) days, after which the reduction foreseen in subitem 2.2.4 of this Attachment will be applied...... 2.1.7. Suspension of the services, determined by PETROBRAS' Inspection, based on item 10.1.1 of the Contract.............................. 2.1.8. Interruption of the operations due to a failure occurred in any of the Unit's equipment, at the time of the testing to be carried out according to item 3.1 of the Contract......................... 2.1.9. In the occurrence of events of exemption from payment provided for in subitems 2.1.1, 2.1.2, 2.1.3, and 2.1.7, for a total accumulated period exceeding 30% (thirty percent) in any 6 (six) month period, PETROBRAS may rescind the present Contract, based on its subitem 11.1.13............................................ 2.2. Reduction in the Daily Operation, Waiting and Movement Rate....... The rates foreseen in this Attachment will be reduced in the following cases:............................................................ 2.2.1. Total or partial inoperativeness or malfunction of any equipment which delays or hinders the operations, such as, but not limited to, winches, top drive, kelly spinner, geolograph, current meter, air compressors, shale shaker, desander, desilter, mixing pumps, mud laboratory equipment and bulk receipt and transfer systems, are reason for the reduction of the daily rate provided for in Ref 101, in 1% (one percent), cumulative per equipment, provided the CONTRACTOR is notified in writing in the Daily Drilling Certificate (ADP), by PETROBRAS' Inspection and which, after the time limit the latter has set to repair said equipment, such repair has not been made.......................................... 2.2.2. Low Efficiency - Reference Rates 101 and 105 of this Attachment will suffer a 20% (twenty percent) reduction, in the event low efficiency is verified, according to the operating efficiency parameters listed below. Such reduction will be applied during the whole corresponding activity period in which low efficiency is verified:...................................................... Operating Parameters:..................................................... - Maneuver of the drill string in a cased well (except BHA):.............. o Inside the riser and 20" casing = 500 m/h.................... o Inside the 13 3/8" casing = 600 m/h.......................... o Inside of 9 5/8" casing = 700 m/h............................ - - - Break of DP's per unit = 25jt/h......................................... - - - Casing string run in the sea/inside the riser/previous casing (joints approximately 12 m long)................................................ o 30" Casing - 2 jt/h................................... o 20" Casing - 5 jt/h................................... o 13 3/8" Casing - 13 jt/h..................................... o 9 5/8" Casing - 18 jt/h.................................... o 7" Casing - 15 jt/h.................................. - - - Running of drilling riser, excluding normal time for testing (50 ft. joint): 45/m/h............................................................ - - - Pulling of drilling riser (50 ft. joints): 60 m/h......................... - - - Installation or pulling of the kill/choke lines/telescopic joint/stretchers: 6,0h....................................................................... - - - Diverter installation or pulling: 2,Oh.................................... - - - Assembly of the dampening lines in the M.R.: 1,5h......................... - - - Assembly of the flexitube equipment: 5,Oh................................. - - - Assembly of the production tail: 2,Oh.................................... - - - Tubing running or pulling, per unit - 150 m/h.............................. - - - Tubing running or pulling, per section - 300 m/h........................... - - - Completion risers running or pulling - 50 m/h.............................. - - - Assembly of terminal head and slings - 2,Oh................................ - - - Moving of ANM to/from the moon pool - 3,Oh................................. - - - Moving of tree cap or tree running tool to/from the moon pool - 2,5h....... - - - Assembly of lubricator and wire line BOP - 1,5h............................ NOTE: The above mentioned operating parameters are based on normal weather conditions............................................................ 2.2.3 Beginning on the 16th (sixteenth day), inclusive, of the occurrence of kick, drill string sticking, loss of circulation or fishing, caused by the CONTRACTOR's duly proven action or omission, until the return to the situation prior to its occurrence, the applicable rate will be reduced by 50% (fifty percent)................................ 2.2.4 Beginning on the 46th (forty-sixth) day, inclusive, of the occurrence of Blow out caused by the CONTRACTOR's duly proven action or omission, until the return to the situation prior to its occurrence, the applicable rate will be reduced by 50% (fifty percent). 2.3. Period of Validity of the Contract Rates - the contract rates set forth in this Attachment will apply in the period set forth below:.... a) Beginning: release of the Unit, by PETROBRAS, to sail to the first location, after the equipment general testing provided for in item 3.1 of the CONTRACT has been carried out, with the exception of the provision in its subitem 3.1.1.1................ b) End: after the end of the drilling or completion of the last well, with the Unit's arrival at a port or sheltered waters chosen by common agreement between the parties, and if there is PETROBRAS equipment still aboard, with the withdrawal of such equipment from the Unit.......................................... 2.4. Blow-Out - PETROBRAS will be responsible for the well control operation costs, in the event of blow-out and caving caused by the blow-out. Such provisions apply only to the well control costs and do not apply to the loss of assets, lesions and/or damages caused by the blow-out, which are protected by the provisions of the pertinent items of this Contract. The CONTRACTOR undertakes to place at PETROBRAS' disposal all of its resources in personnel and equipment related to this Contract, without any additional charges to PETROBRAS. If the CONTRACTOR has contributed with duly proven grossly negligent action or omission for the occurrence of the accident, no rate will be due, until the solution of the problem, in compliance with the provisions in subitems 2.1.6 and 2.2.4 of this Attachment.............................................. (End of Attachment)........................................................... - - -------------------------------------------------------------------------------- Rendering of Services - - -------------------------------------------------------------------------------- UNIT PRICES SPREAD SHEET CONTRACT No. 101.2.064.97-0 - - -------------------------------------------------------------------------------- OBJECT OF BID: Serviced of Drilling, Completion, Evaluation and Workover of Oil and Gas Wells, by means of using the Floating Unit, provided with Dynamic Positioning System. - - -------------------------------------------------------------------------------- PLACE OF OPERATION: BRAZILIAN CONTINENTAL SHELF - - -------------------------------------------------------------------------------- UNIT'S NAME: AMETHYST 4 - - -------------------------------------------------------------------------------- COMPANY'S NAME: MARITIMA NAVEGACAO E ENGENHARIA LTDA. - - -------------------------------------------------------------------------------- CODE ITEMIZATION UNIT UNIT PRICE (US$) - - -------------------------------------------------------------------------------- 07.201.351 OPERATION RATE DAY 13,771.06 (REF. 101) - - -------------------------------------------------------------------------------- 07.201.358 REPAIR RATE DAY No Rate will be due (REF. 102) - - -------------------------------------------------------------------------------- 07.201.362 WAIT.-BAD WEATHER RATE (REF. 104.1) DAY (95% OF REF. 101) - - -------------------------------------------------------------------------------- 07.201.363 WAIT.-FORCE MAJEURE RATE (REF. 104.2) DAY (95% OF REF. 101) - - -------------------------------------------------------------------------------- WAIT. RATE - WAITING 07.201.364 (REF. 104.3) DAY (95% OF REF. 101) - - -------------------------------------------------------------------------------- 07.201.366 MOVEMENT RATE (REF. 105) DAY (95% OF REF. 101) - - -------------------------------------------------------------------------------- 009.252.008 MEALS (ITEM 3.11 OF THE SERVICE RENDERING CONTRACT EACH 20.00 - - -------------------------------------------------------------------------------- SIGNATURES DATE OF THE PROPOSAL - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- PETROBRAS CONTRACTOR 07/07/97 (BLANK) - - -------------------------------------------------------------------------------- Contract 101.2.064.97-0....................................................... 1 - RESPONSIBILITIES IN THE PERFORMANCE 1. RESPONSIBILITIES IN THE PERFORMANCE..................................... 1.1. The CONTRACTOR should provide, at its own expenses, pipe inspection according to API-RP 7 G Standard for drill string elements in use, at every 15,000m drilled, complying also with item 3.1 of this CONTRACT. This inspection should be necessarily made by personnel accredited by PETROBRAS, and accompanied by PETROBRAS' Inspection which will attest the drill string conditions in accordance with the results of said inspection. The drill string elements rejected by the Inspection will be immediately repaired and/or replaced by the CONTRACTOR, which will assume the corresponding costs......................................... 1.1.1.The CONTRACTOR should make provisions so that the same numbering of the parts is maintained for the period of validity of the CONTRACT......... 1.1.2.The reports on the inspections made on the drill string, riser column, and handling equipment will be submitted to PETROBRAS immediately after their performance............................................................ 1.1.3.The CONTRACTOR should maintain a control of the elements of the string used in each well, recording at each maneuver, in the driller's log, which parts belong to the BHA in use, mentioning the inspection report numbering............................................................... 1.1.4.The CONTRACTOR will provide, at its expenses, for the inspection of the drill string, when requested in writing by PETROBRAS, in the event of abnormal occurrences, such as wash-out or frequent string breaks........ 1.1.5.The CONTRACTOR will provide, at its expenses, for the inspection according to API RP-8B standard, in each contract year, in all drill string and casing handling equipment, such as, but not limited to, slips, elevators, traveling tongs, hook, elevator arms, spiders, drilling winch, etc. This inspection should be necessarily accompanied by PETROBRAS' Inspection which will attest the drill string conditions in accordance with the results of said inspection. The equipment rejected by the Inspection will be immediately repaired and/or replaced by the CONTRACTOR.............................................................. NOTE: The same procedure described in 1.1.5 will be applied to the riser column and to its handling tools, complying with standard API RP2K... 1.2. Casing - The CONTRACTOR should measure and run the conductors and the casing strings in accordance with the drilling programs established by PETROBRAS............................................................... 1.2.1.The CONTRACTOR will keep the casing pipes with their respective protectors. 1.2.2.The CONTRACTOR will exert its best efforts to remove all recoverable casing, when the well is abandoned. 1.3. Cementing, Formation Testing and Electric Logging - the CONTRACTOR will provide facilities and give assistance to third parties, charged by PETROBRAS, for the performance of cementing, electric logging, drill string testing, and other related services, complying with the programs and safety rules set down by PETROBRAS.................................. 1.4 Fishing - the CONTRACTOR should carry out all fishing operations that may become necessary.................................................... 1.5 Subsurface Pressures - the CONTRACTOR will exert its best efforts to control subsurface pressures, always maintaining all safety equipment, including the ancillary ones, in good operating conditions, so as to avoid contamination of the drilling fluid by hydrocarbons and fires resulting from blow-outs................................................ 1.6. Well Completion and Abandonment - the CONTRACTOR will complete or abandon the wells in safety conditions, according to the programs set down by PETROBRAS....................................................... 1.7 Drilling Reports - the CONTRACTOR undertakes to inform daily to PETROBRAS, until 01:00h of the following day, the progress of the operations, weather conditions, bulk and liquid stock consumption, and the status of the equipment that comprise the vessel's dynamic positioning system, and of others that the Inspection considers necessary, by means of bulletins, reports and records approved by the IADC and/or required by the Inspection. 1.7.1.The duration of the delays or wastes of time, their reasons, and other facts deemed important, will be recorded in detail in the Daily Drilling Data........................................................... 1.7.2.Whenever PETROBRAS requests it, the CONTRACTOR will submit detailed reports on the progress of the operations carried out, or on any accident that may have occurred.................................................. 1.8. The CONTRACTOR undertakes to inform immediately to PETROBRAS' Inspection when the Unit enters in a Degraded State................................ 1.8.1.The following situations are considered Degraded State (to be defined in common agreement between the parties)................................... 1.8.2.In the event of non-fulfillment of Clause 1.8, and the Unit comes to enter into yellow alert or red alert, a 20% (twenty percent) fine will be charged on the operation rate during the whole duration of the abnormality period...................................................... 1.9. The CONTRACTOR undertakes to measure the sea current profiles (intensity and direction with reference to the true North) from the surface of the sea down to the sea bottom, carried out at 0600 and 1200 GMT (Greenwich Mean Time), and to deliver daily the obtained data to PETROBRAS. Such profiles should obligatorily cover the following depths: 20, 50, 150, 200, 250, 300, 350, 400m, and at every 100 (one hundred) meters thereafter, until the last depth investigated corresponds to 5 (five) meters from the bottom of the sea. 1.9.1.The data should be delivered to PETROBRAS' Inspector, in disk and in a format according to PETROBRAS' instructions............................. 1.10. Maintenance and Conservation - the CONTRACTOR will be responsible for the maintenance, conservation and cleaning services of the Unit and of all existing equipment and installations, maintaining all safety devices in perfect operating and adjustment conditions.................. 1.10.1.The CONTRACTOR undertakes to keep and maintain PETROBRAS's materials and equipment, aboard the UNIT, as well as all that are object of the loading and unloading operations in the support vessels................. 1.11. Ancillary Services - in equal price, time limit and availability conditions, the CONTRACTOR should give preference to the ancillary services rendered by Brazilian companies, when they become necessary for the rendering of the services object of this CONTRACT............... 1.12. Lubricants - to preferably use lubricants of the make PETROBRAS DISTRIBUIDORA-BR, submitting a justification in the event it uses another make.......................................................... 1.13. Wellhead inclination - the wellhead will not be installed with inclinations exceeding 2(degree) (two degrees). If, by the Inspection's decision, the well continues to be drilled with an inclination exceeding that limit, the possible wear of the inner parts of the BOP, Lower Marine Riser, Adapt Riser and spool, resulting therefrom, will be PETROBRAS' responsibility............................................. 1.14. The CONTRACTOR should submit a description of its operating procedures for the events of disconnection, formation testing, and BOP and choke manifold testing...................................................... 1.14.1. The procedures to be adopted will be discussed and approved by PETROBRAS............................................................. 1.15. The Board Superintendents, Tool Pushers, and Drillers will be required to have proven technical competence in the kick control, attested by a training certificate from an entity recognized by PETROBRAS............................................................. 1.16. The CONTRACTOR should carry out well shutoff training exercises every week, on an occasion to be agreed upon with the Inspection, and according to the rules in force in PETROBRAS. This operation should be entered in the Driller's Log....................................... 1.16.1. The CONTRACTOR should submit a Safety Project for BOP, Choke Manifold and in well shutoff training test, which will be approved by PETROBRAS' Inspection................................................. 1.17. Drill Riser - the CONTRACTOR will maintain the drill riser inner joints perfectly clean and free from debris and/or rust............... 1.17.1. The CONTRACTOR should perform the inner cleaning of all drill riser joints, using the proper tool and compressed air, whenever the operation following the riser string run is a completion and/or workover operation.................................................... 2. MUTUAL OBLIGATIONS - - -------------------------------------------------------------------------------- ON ACCOUNT OF SUPPLIED BY ----------------------------------- DESCRIPTION PET CONT PET CONT - - -------------------------------------------------------------------------------- 1. Cementing, logging, formation and/or production tests, directional drilling, perforating, wireline, nitrogen unit, flexitube, etc. X Xand X - - -------------------------------------------------------------------------------- 2. Welding services necessary for drilling, completion, well abandonment and maintenance operations. X X - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- 3. Technical supervision for manufacturing and control of drilling fluid, completion. X X - - -------------------------------------------------------------------------------- 4. CONTRACTOR's land support base (office and storehouse). X X - - -------------------------------------------------------------------------------- 5. Handling and storage of materials and equipment belonging to or supplied by the CONTRACTOR on land or in the UNIT. X X - - -------------------------------------------------------------------------------- 6. Handling and storage of materials and equipment of PETROBRAS or third parties, abroad the UNIT. X X - - -------------------------------------------------------------------------------- 7. Land transportation, cargo loading and unloading of materials under the CONTRACTOR's responsibility. X X - - -------------------------------------------------------------------------------- 8. Fishing, services. X X - - -------------------------------------------------------------------------------- 9. Cleaning and painting services aboard the Unit, including those of PETROBRAS' materials and equipment installed in the Unit. X X - - -------------------------------------------------------------------------------- 10. Mess room, hostelry and meal supply services: - - - CONTRACTOR's personnel X X - - - PETROBRAS' personnel (up to 900 meals a month) X X - - - PETROBRAS' personnel (exceeding 900 meals a month) X X - - -------------------------------------------------------------------------------- 11. BOP and riser lines tests, not programmed, carried out with the Cementing Unit. X X - - -------------------------------------------------------------------------------- 12. Operations with special tools. X X - - -------------------------------------------------------------------------------- 13. Air or sea transportation of the CONTRACTOR's equipment and personnel in the area of operation. X X - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- 14. Air or sea transportation of the CONTRACTOR's personnel in the area of operation, besides those programmed for shift changes and Supervision personnel. X Xor X - - -------------------------------------------------------------------------------- 15. Air or sea transportation programmed but not used by the CONTRACTOR, without prior notice to PETROBRAS. X X - - -------------------------------------------------------------------------------- 16. Air or sea transportation of the CONTRACTOR's material and/or personnel, in an emergency character, due to the CONTRACTOR's failure or lack of programming. X X - - -------------------------------------------------------------------------------- 17. All customs expenses, fees, including agent services, licences, taxes or similar charges regarding the import or shipment to the Unit of all equipment, spare parts and consumables of the CONTRACTOR. X X - - -------------------------------------------------------------------------------- 18. All expenses, including those with licences, taxes or similar charges regarding the vessel's adaptation and operation in accordance with the Laws, Rules, Decrees, Administrative Rules and Instructions in force in Brazil. X X - - -------------------------------------------------------------------------------- 19. Services of submarine inspection, measurement, intervention, etc. with a remote operated submarine vehicle. X X - - -------------------------------------------------------------------------------- 20. Services to interconnect the boom lines with the burners. X X - - -------------------------------------------------------------------------------- 21. Special repair and recovery services with qualified welding in equipments and lines belonging to: a) PETROBRAS X X b) CONTRACTOR X X - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- 22. Communication service via satellite: - - - when used by PETROBRAS X X or X - - - when used by the CONTRACTOR X X or X - - -------------------------------------------------------------------------------- 23. Maintenance of communication system via satellite. X X or X - - -------------------------------------------------------------------------------- 24. Rental of Brasilsat satellite signal X X or X - - -------------------------------------------------------------------------------- 25. Rental of satellite signal for the DGPS X X - - -------------------------------------------------------------------------------- 26. Services in the Flares supplied by the Contractor. - - - Operation during production tests X X - - - Maintenance and repairs X X - - -------------------------------------------------------------------------------- 27. Services for the Remote-Operation Vehicle (ROV): Installation, operation, maintenance and removal of the ROV. X X - - - Welding services and adaptation works for the installation and withdrawal of the vehicle, winch, command cabine, warehouse and works X X - - -------------------------------------------------------------------------------- (End of Attachment)........................................................... ATTACHMENT V LIST OF (MINIMUM) SPECIALIZED PERSONNEL ABOARD - - - Captain or Barge 1 - - - Tool Pusher (1 superintendent aboard) 2 - - - Driller 2 - - - Assistant Driller 2 - - - Derrickman 2 - - - Roughneck 6 - - - Crane operator 2 - - - Area Man 8 - - - Welder 2 - - - Watchstander 2 - - - Subsea Engineer 1 - - - Mechanic 3 - - - Electrician 3 - - - Radio Operator (Portuguese speaker) 2 - - - Male nurse 1 - - - Storekeeper 1 - - - Safety guard 1 NOTE: Supplementary personnel will be supplied according to the CONTRACTOR's conveniences and needs or to comply with the requirements of government laws....................................... ATTACHMENT VI ENVIRONMENTAL OPERATING CONDITIONS (Permissible limits for environmental conditions acting simultaneously) - - -------------------------------------------------------------------------------- PITCH OR HEAVE ROLL WIND WAVE CURRENT OPERATION (FEET) (DEGREES) (MPH) (FEET) (KNOTS) - - -------------------------------------------------------------------------------- Jetting/ driving 2,0 2,5 30 3,0 1,5 conductor 2,5 3,0 30 3,0 1,5 Drilling 2,5 3,0 30 3,0 1,5 Casing running 1,5 2,0 30 2,1 1,5 Casing hanger 1,5 1,5 19 2,1 1,0 setting 1,5 1,5 19 2,1 0,75 BOP running 3,5 3,0 44 8,5 1,5 BOP setting 7 4 51 10,5 1,0 Maneuvering 1,5 1,5 19 2,1 0,75 LMPR disconnection 3,5 4,0 44 8,5 1,5 LMPR connection 2,5 3,0 39 6,7 1,5 Formatiop testing 1,5 1,5 19 2,1 0,75 Operation with boats 1,5 1,5 19 2,1 0,75 Running the ANM (lay-away) 2,0 3,0 30 5,0 1,5 Running the ANM (without lines) 3,0 4,0 44 8,5 1,5 Operation with flexitube 2,5 3,0 39 6,7 0,75 Operation with wire-line Operation with BAP - - -------------------------------------------------------------------------------- ATTACHMENT VII PETROBRAS' SAFETY RULES 1. Service Rule No. 46/71: o Safety Rules for Offshore Operations. 2. Service Rule No. 01/72: o Operational Safety Rules - Continental Shelf. 3. Service Rule No. 41/72: o Electricity - Safety Rules 4. Service Order No. 01/76: o Industrial Safety Rules (general) o Industrial Safety Rules (Drilling) o Industrial Safety Rules (Production) 5. General Safety Manual: o Safety and Environmental Instruction for Contractors (E&P - BC). ATTACHMENT VIII EQUIPMENT TESTING PROGRAM In order to carry out the UNIT's equipment testing in an easier and more agile manner, the CONTRACTOR is to submit to PETROBRAS, as quickly as required the following documents:............................................. 1. CERTIFICATES............................................................ a) Survey and Appraisal Report, updated and valid for the fiscal year regarding the Unit offered, issued by one of the entities: ABS, NOBLE & DENTON, DNV, LLOYDS or BUREAU VERITAS, and if the report is issued abroad, it will be translated into Portuguese by a sworn public translator and notarized in the Brazilian Consulate........ b) Classification or Class Confirmation Certificate for hull and equipment, compatible with the proposal submitted (certified copy);............................................................ c) Report on claims from the classification societies mentioned in the Class Confirmation Certificate (in the event there are claims);.......................................................... NOTE: PETROBRAS will evaluate the above mentioned documents and will mention in what time limited eventual claims will be settled, and at PETROBRAS' judgment, it can be at the time of the Unit's inspection or at mobilization after the contract is signed............................... d) Freeboard Certificate;............................................ e) IOOP (International Oil Pollution Prevention) Certificate;........ f) IMO-MUDU-CODE Certificate - Mobile Offshore Drilling Unit - latest edition (unnecessary for Drill Ship);...................... g) Cargo Ship Safety Equipment Certificate;.......................... h) Cargo Ship Safety Construction Equipment;......................... NOTE: All documents required are to be within their period of validity........ 2. INDUSTRIAL SAFETY AND ENVIRONMENTAL CONTROL............................. - Manuals and emergency plans in the Portuguese Language............ 3. STORAGE CAPACITY........................................................ - Complete floor plan of bulk movement system, specifying:.......... a) Exclusive lines to move cement;................................... b) Exclusive lines to move bentonite and baritine;................... c) Location and type of bulk line valves and their respective driving systems;.................................................. d) Pneumatic lines for cleaning and clearing bulk lines;............. e) Location of the manometers;....................................... f) Quantity, flow, operating pressure and location of the air drying unit(s);.......................................................... h) Schmematic drawing of each silo with their respective aeration systems and points of connection with the bulk lines..... 4. FLUID CIRCULATION AND PROCESSING SYSTEM - Sketch of the system emphasizing pulsation dampers (suction and tamping), safety valves, feed pumps, position of the suction lines in relation to the suction sieves' tanks and filters.............. - Floor plan of the drilling fluid feed and discharge lines showing the flexibility in relation to the sand traps and mud tanks....... - Floor plan of the degasser installation showing the active tank, separate processed mud and gas discharge lines, emphasizing the connection point of this line with the gas discharge line......... - Floor plan of the mud tanks system, emphasizing the supply lines, guns lines, mixture funnel and centrifugal pumps interconnection lines............................................................. 5. WELLHEAD SAFETY EQUIPMENT SYSTEM........................................ - Sketch of the BOP/LMRP, specifying lines, valves and measures/dimensions............................................... - Floor plan of the kill and choke lines from the BOP to the choke manifold, specifying valves, connections, dampener chambers, anchorage points and interconnection with the other systems....... - Floor plan of the atmospheric air separator....................... - Layout of the trip tank installation, giving the following information:...................................................... a) Capacity;................................................... b) Location;................................................... c) Sensitivity;................................................ d) Measuring system;........................................... e) Scale type;................................................. f) Driller's scale visualization conditions;................... g) Supply System for the above item............................ - Floor plan of the stand pipe manifold, specifying lines, valves, manometers and interconnections with the other systems............ - Inspection report on the riser, riser handling tools and connectors, telescopic joint and flexible joint, according to the API RP 2P and RP 2Q standards, with update date not exceeding 1 year.............................................................. NOTE: If the reports indicate the need of repair in some equipment, the service performance certificates will also be submitted................. - Biannual inspection certificate of the choke manifold, with the manufacturer's approval........................................... - Biannual inspection certificate of the BOP unit and driving system, with the manufacturer's approval.......................... - Biannual inspection certificate of the BOP, with the manufacturer's approval........................................... - Proof of technical hability of the well drilling and control personnel......................................................... - To supply an internal rusting maintenance and prevention plan for the marine risers and kill and choke lines........................ 6. ENERGY GENERATION SYSTEM................................................ - Unifilar diagram of the energy generation and distribution system. 7. STABILITY............................................................... - To submit the vessel's stability curve, updated in the proposal's conditions, in keeping with the environmental conditions.......... 8. DYNAMIC POSITIONING SYSTEM (including the monogenerators assembly, thrusters and propellers)............................................... - Schematic diagram of the dynamic positioning system............... - To submit the inspection and tests procedures to be carried out at every new location............................................. - To submit the tests and inspections procedures to be carried out at the end of each contract year.................................. 9. DRILLING STRING AND ACCESSORIES......................................... - Inspection report on all equipment of the drilling and completion strings, subs and accessories (used equipment).................... - Purchase voucher of the drill and completion strings, subs and accessories (for new equipment)................................... 10. FISHING TOOLS AND ACCESSORIES........................................... - Inspection report on all components of the fishing tools (used equipment) or purchaser voucher (for new tools)................... 11. SUNDRY SYSTEMS.......................................................... - Winches load test certificate..................................... - Description of the compressed air system, emphasizing compressors, layout of lines, valves and interconnection with the other systems..................................................... - Preventive Maintenance Plans with their respective timecharts..... - Proof will be needed for the existence on board and for the operating capacity of all equipment and accessories listed in Attachments C and D of the chartering and service rendering contracts......................................................... NOTE: Such equipment must be in places of easy access for inspection.......... A) RECEIPT TEST............................................................ - Proof will be needed for the existence on board and for the operating capacity of all equipment and accessories listed in Attachments C and D of the chartering and service rendering contracts. NOTE: Such equipment must be in places of easy access for inspection.......... - The following systems, equipment and tools listed below will be checked, inspected and tested:.................................... 1) DRILL STRING, COMPONENTS AND ACCESSORIES.......................... - The CONTRACTOR will submit recent inspection reports, according to the specification API RP7G for the whole drill string and accessories such as, but not limited to: drill pipes, drill collars, HW, Subs, stabilizers, reamers, bumper subs, lift-sub, kelly, slips, elevators, fishing tools, etc., which proves the good conditions of the string and its accessories. The information from the reports and the general conditions of the string and its accessories will be checked by PETROBRAS by means of a sampling inspection. In the event of discrepancy between the data submitted by the CONTRACTOR and those checked by PETROBRAS, showing an inadequate condition of the string and its accessories, the CONTRACTOR will carry out another inspection, for its own account............................. NOTE 1: Any equipment refused by the inspection will be immediately repaired or replaced by the CONTRACTOR, for its own account................... NOTE 2: For the string, components and new accessories, no inspection report will be required, documents proving that such equipment is new will be sufficient........................................................ NOTE 3: The CONTRACTOR's equipment will be stored and arranged so as to facilitate the inspection by sampling to be carried out by PETROBRAS. - The same procedure will be adoted for the telescopic joints and flexible joints................................................... 2) EXTRACTOR OF SOLIDS............................................... The following will be examined:................................... - sieves,..................................................... - dessander,.................................................. - degasser - test suction and discharge....................... - centrifuge (if any)......................................... The operation and work pressure, as well as the existence of manometers, will be checked....................................... 3) MUD TANKS AND VALVES Waterproofness, working of the agitators, mixture funnel and depth gun, besides the existence of fixed marks to control the tanks volume will be checked...................................... 4) CENTRIFUGAL PUMPS................................................. The following will be checked:.................................... - working, vibration and noises;.............................. - Packing (leaks);............................................ - Work pressures.............................................. NOTE: Items 3 and 4 will be tested with sea water............................ 5) MUD LABORATORY AND TEST EQUIPMENT................................. The existence on board and the adequacy to the requirements described in Attachments C and D to this Contract will be checked. 6) DRILLING DERRICK.................................................. Maintenance conditions (corrosion), fastening system and the conditions of the travelling block rails will be examined......... 7) CROWN BLOCK....................................................... The pulleys will be examined as to the profile wear, alignment, clearance, buckling of the axles, lubrication, etc................ 8) MUD PUMPS......................................................... The following will be carried out:................................ - observation of working, vibrations, noises;................. - pressure and maximum work flows tests for the liner used;... - safety valve working test;.................................. - checking of the suction and discharge pulsation dampeners;.. - watertightness tests with nominal pressure of the mud pumps and of all manifold valves;................................. - watertightness tests with nominal pressure of all manifold valves of the stand pipe manifold and of the kelly hose;.... - random disassembling of the suction for visual inspection of the piston, sleeve, packing, valve and seat.............. 9) SWIVEL............................................................ The mandril, gooseneck, body, etc. will be checked and nominal pressure test with rotation will be performed..................... 10) MOTION COMPENSATOR................................................ The piston alignment, lock bar, alignment in the rail, general conditions, leaks and chains will be checked...................... 11) RISER AND GUIDE LINE TENSIONERS................................... The general conditions, leaks, pulleys and cables will be inspected......................................................... 12) RISER RECOIL SYSTEM/HANG OFF SYSTEM/FILL-UP SYSTEM VALVE (IF ANY). The systems' operation will be checked. 13) HIGH COMPRESSORS AND AIR RESERVOIRS............................... The general conditions, leaks, lines and system yield will be checked........................................................... 14) TOP DRIVE......................................................... Working tests (connection and disconnection of one or more sections of the DP's) will be carried out and the general conditions will be inspected...................................... 15) KELLY SPINNER..................................................... The general conditions, specially the rollers' wear, and working will be checked, and connection and disconnection operation of one or more DP's will be carried out.............................. 16) HOOK.............................................................. The general conditions and the locking system will be checked..... 17) TRAVELLING BLOCK.................................................. The pulleys wear, axles alignment, lubrication system, retraction system, etc., will be inspected................................... 18) DRAWWORKS......................................................... - The operation of the mechanical break system (brake bands), electromagnetic (distance between irons, voltage level and SCR feeder conditions), cooling system and clutches will be checked..................................................... - The operation of the cat-heads and height imitator with the assembly/disassembly of one or more command sections, will be checked.................................................. 19) ROTARY TABLE...................................................... The operation in high and low, brake system, tachometer and lubrication system will be checked................................ 20) TRIP TANK......................................................... Capacity, installation site, sensitivity of the level indicator system, visualization condition and supply system will be inspected......................................................... 21) HYDRAULIC TONGS AND PNEUMATIC SPIDER FOR CASING AND PNEUMATIC TONGS FOR DRILL PIPES............................................. - Operation tests will be made and maintenance conditions will be checked............................................. - The existence of an alignment guide for the sand-line cable in the drum will be checked................................. 22) SAND-LINE OR WIRE-LINE SYSTEM..................................... - Operation of the clutches and brake will be tested by lowering the photoclinometer inside the drill string coinciding with the photoclinometer overshot test (TOTCO) will be tested. Test to be made on location before the beginning of the operations........... 23) CHOKE MANIFOLD.................................................... All valves with low pressure (300 psi) and in high pressure (system's work pressure). Manometers, hydraulic choke operation, manual choke, remote control panel, etc. will be tested........... 24) UPPER AND LOWER KELLY COCK, INSIDE BOP AND SAFETY VALVE........... - Drivers will be tested and work pressure tests will be made. - The end connections of each element will be checked and tested with work pressure. The CONTRACTOR should have end seal plugs adequate for the test............................ 25) KILL AND CHOKE LINES HOSES........................................ The end connections will be checked and tested with the system's work pressure. The CONTRACTOR should have end seal plugs adequate for the test............................................. 26) DRILL INSTRUMENTATION SYSTEM...................................... The following will be tested:..................................... - geolograph;................................................. - rotary table tachometer;.................................... - manometers;................................................. - stroke counter;............................................. - level control in the mud tanks;............................. - torque indicator............................................ 27) FLARE PIPE AND BOOMS Their existence on board will be checked, analysing the maintenance conditions of the lines by means of inspection, and the facilities for installation of the production test equipment system............................................................ 28) BOP SYSTEM........................................................ The following will be carried out:................................ - pressure tests of the slide valves with low pressure and high pressure, compatible with the system................... - pressure tests of the annulars with low pressure and high pressure, compatible with the system........................ - complete function test in both POD's, through all panels.... - choke and kill valves tested with low pressure and high pressure, compatible with the system........................ - working of the shear ram valve will be checked with opening for examination of the blades conditions.................... - the opening and closing of all ram, annular a kill and choke valves chambers will be tested........................ - the hydraulic driving unit will be checked as to: fluid used, fluid low level alarm, low air pressure and low accumulators pressure, maintenance conditions, leaks and mixing systems.............................................. - the volumetric capacity of accumulators and the capacity of electric and pneumatic pumps of the hydraulic unit will be tested...................................................... - the locking system of the ram valve(s) will be tested....... - the SPM valves conditions will be checked by opening and inspecting one of them, chosen at random.................... - the locking/unlocking system of the H-4 hydraulic connectors will be tested................................... - the surface and bottom accumulators' pre-charge will be checked..................................................... - the operation of the following systems will be tested:...... o driving back-up....................................... o emergency recovery.................................... o handling.............................................. 29) TRAVELLING TONGS, EZY-TORQ, TORQUE SENSOR, SLIPS, ETC............. One or more sections of the drill collars and drill pipes will be assembled/disassembled to check the working of such equipment. The general maintenance conditions, chuck jaws and cables will be checked........................................................... 30) BULK TRANSFER SYSTEM.............................................. The following will be carried out:................................ - the operation of the compressor will be checked, and noises, oil and air leaks, and maintenance state, filters and dehumidifier will be inspected.......................... - operation and watertightness of valves, lines and silos will be checked, looking for possible clogging.............. - transfer of cement from 1 silo to the daily silo (if any) and from this to the surge-tank will be made................ 31) EMERGENCY ENERGY GENERATION SYSTEM - a black-out in the energy system generation system will be simulated to see if the emergency generator is automatically turned on..................................... 32) MAIN MOTOR-GENERATORS ASSEMBLY.................................... The following will be carried out: - vibration, noises, insulation, leaks, maintenance, etc., will be checked............................................. - generators input and output in the bus bar, synchronism and load divisions will be tested............................... - load and voltage and frequency regulation will be tested.... 33) DESSALTER Operation and production capacity will be checked................. 34) CAT-LINES CRANES.................................................. The following will be carried out: - operation of the winches and maintenance of the cabled will be checked.................................................. - the elevation and rotation system, the operation of flying boom and pulley block and the operation of the boom height pawl will be checked........................................ - the report of the last inspection carried out by the Unit's classification society in the winches will be examined...... 35) DEJECTA TREATMENT UNIT............................................ Its operation will be inspected................................... 36) TELECOMMUNICATION SYSTEM.......................................... Operational tests will be made in all radio equipment existing on board, including radio-beacon..................................... 37) OVERHEAD TRAVELLING CRANE......................................... Their operation, and the maintenance conditions of cables and sliders will be examined.......................................... 38) DC/SCR MOTORS..................................................... The maintenance conditions and insulation, as well as the collectors and brushes will be examined........................... - SCR functional test......................................... 39) DIVERTER.......................................................... The following will be tested:..................................... - flow line wing valves;...................................... - diverters and inset packer lock;............................ - the control panel will be checked........................... 40) SAFETY EQUIPMENT.................................................. SALVAGE........................................................... Fireproof rigid vessels (capsules, whalers):...................... - lowering, motor, fuels, sprinklers, start;.................. - rations, garnishing, hatches, cleaning, fire extinguishers, signaling equipment......................................... Inflatable rafts:................................................. - quantity, capacity, location, height in relation to the sea; - validity of the last inspection, means of access to the sea; - conditions of the cocoon.................................... Jackets:.......................................................... - quantity (sufficiency), location, protection, and maintenance................................................. Life-buoys:....................................................... - quantity (sufficiency), location, heaving-lines, lanterns, smudge pots................................................. Escape routes:.................................................... - vertical and horizontal signaling (indicative plates);...... - clearing, lighting (emergency).............................. WATER SUPPLY SYSTEM FOR FIRE FIGHTING............................. Fire ring:........................................................ - water system for the platform;.............................. - sprinklers system;.......................................... - painting, corrosion, signaling, visual conditions;.......... - valves, hydrants, guns...................................... Fire pumps:....................................................... - operation;.................................................. - motor, fuel, start, panel, tests............................ FIRE FIGHTING FIXED SYSTEMS....................................... - Foam system: chambers, tanks, guns, hydrants and carrier liquid. - Cylinders; conditions, reloading, retesting (CO2 or HALON, if any). - Lines and diffusers: general conditions.................... - Automatic: feeding, panels, batteries, detectors, tests.... - Manual: commands, interconnections, tests.................. - Alarms: interconnections................................... FIRE EXTINGUISHERS................................................ - water, carbon dioxide, chemical powder (portable and carts); - distribution, location, general conditions;................. - revision, recharge, retest, control, meters, replacement.... FIRE POSTS........................................................ - hose, keys, sprinkler;...................................... - fiber boxes, general conditions, post identifications....... - visual signaling: sufficiency and general conditions....... EMERGENCY EQUIPMENT............................................... - autonomous breathing apparatus, reserve bottles, breathable air fixed system, fire proximity clothing, lantern, ax, safety belt;................................................ - distribution, location, general conditions, inventory, maintenance and replacement................................. COMMUNICATIONS AND ALARMS......................................... - telephone (internal, external): Operating capacity;........ - radiophony: VHF. Operating capacity;...................... - portable transceptors: quantity; distribution, intrinsic safety;..................................................... - intercom: quantity, distribution, and horns audibility, interconnection with the platform, coding of sound alarm tones, amplifiers;.......................................... - visual signaling: sufficiency, general conditions;......... - fire alarm, glass breaking type: batteries, bells, tests... EMERGENCY LIGHTING................................................ - charger, batteries and lanterns............................. HELIPOINT......................................................... - protection: guns, fire extinguishers, salvage equipment;... - painting, protection screen, net, landing lights, safety warnings;................................................... - guest welcoming practices................................... LOAD LIFTING...................................................... - winches: general conditions, operation, signaling, maintenance;................................................ - manual and electric tackles: general conditions, operation, signaling, maintenance;..................................... - material movement and storage areas......................... TRAINING.......................................................... - abandonment, fire fighting, first aid and brigade........... MANUALS AND PLANS................................................. - emergency; safety;.......................................... - disclosure, knowledge;...................................... - tasks schedules for emergency and abandonment situations, including in Portuguese..................................... ORDER AND CLEANLINESS............................................. - installation's general aspect;.............................. - particularly alarming places................................ SMOKE, HEAT AND GAS DETECTION SYSTEM.............................. - test of hydrocarbons detection sensors...................... BALLAST AND SEWER SYSTEM.......................................... - functional test............................................. 41) ANCHORING SYSTEM.................................................. 42) DYNAMIC POSITIONING SYSTEM........................................ 43) PROPULSION SYSTEM................................................. B) LOCATION MOVING TEST.................................................... To be defined between the CONTRACTOR and PETROBRAS...................... C) BEGINNING OF CONTRACT YEAR TEST......................................... To be defined between the CONTRACTOR and PETROBRAS...................... ATTACHMENT IX PROCEDURES IN THE EVENT OF FATAL ACCIDENTS 1. If, during the period of validity of the CONTRACT, a fatal accident occurs with a CONTRACTOR's employee, the CONTRACTOR should:............. 1.1. Notify the Inspection immediately, for the proper measures;............. 1.2. Take measures so that the employee's relatives be notified with the utmost urgency on the event, giving them the social support due;........ 1.3. Formally establish an Investigation Commission, within 48 hours after the accident, in order to, in the maximum time limit of 15 days, identify the causes and recommend the measures deemed necessary to prevent similar accidents............................................... 2. The report should contain, at least, the following information regarding the accident: - description;...................................................... - exact location;................................................... - data regarding the injured persons;............................... - basic and immediate causes;....................................... - measures to be taken in order to prevent its repetition........... 3. The CONTRACTOR should guarantee the Commission enough authority and autonomy to carry out the investigations without any restrictions....... 4. A PETROBRAS' employee should participate in the Commission, appointed by the authority in charge of the operational office....................... 5. After conclusion of the Commission's work, it will also behoove the CONTRACTOR, at the Inspection's request, to disclose the results of the report, so as to convey the experience from the accident to other contractor companies.................................................... . ~ . ~ . ~ . ~ . ~ . ~ . ~ . ~ . ~ . ~ . ~ . ~ . ~ . ~ . ~ . ~ . ~ . ~ . ~ . THESE BEING the precise terms and content of the aforementioned document, I hereby set my Hand and Seal on this Translation, performed on September 18, 1997 in this City of Rio de Janeiro, Federative Republic of Brazil. /s/ MARCIA BARBOSA SERRA ------------------------ Marcia Barbosa Serra Sworn Public Translator EX-10.14(A) 56 EXHIBIT 10.14(A) I, the undersigned, Sworn Public Translator and Commercial Interpreter in and for this City and State of Rio de Janeiro, Federative Republic of Brazil, registered at the Commercial Board of Rio de Janeiro under Number 97, do hereby CERTIFY and ATTEST that a document in the Portuguese Language was submitted to me for translation into English, which I performed according to my Office, as follows: Translation No. 2667/98 (On paper with letterhead of PETROBRAS.) RIDER No. 1 TO CONTRACT 101.2.064.97-0 ENTERED INTO BETWEEN PETROLEO BRASILEIRO S/A AND THE COMPANY MARITIMA PETROLEO E ENGENHARIA LTDA. PETROLEO BRASILEIRO S.A. PETROBRAS.- a mixed economy company, with head office at Av. Republica do Chile 65, in the City of Rio de Janeiro, State Of Rio de Janeiro, Federative Republic of Brazil, enrolled in the General Taxpayers Registry of the Ministry of Finance under No. 33.000.167/0001-01, henceforth called PETROBRAS, represented herein by the Executive Superintendent of Exploration and Production South-Southeast, Luiz Eduardo G. Carneiro, and the Company MARITIMA PETROLEO E ENGENHARIA LTDA., successor of MARITIMA NAVEGACAO E ENGENHARIA LTDA., with head office at Av. Almirante Barroso, 52, Group 3400, City of Rio de Janeiro, Federative Republic of Brazil, enrolled in the General Taxpayers Registry of the Ministry of Finance under No. 46.828.596/0001/13, henceforth called the CONTRACTOR, represented herein by its President, German Efromovich, have agreed to add a rider to contract 101.2.064.97-0, according to the following, clauses and conditions: FIRST CLAUSE - OBJECT 1. The present Rider has as its object: 1.1. To change the corporate name of the CONTRACTOR from MARITIMA NAVEGACAO E ENGENHARIA LTDA. to MARITIMA PETROLEO E ENGENHARIA LTDA. 1.2. To include as INTERVENIENT PARTY, to the present contract, the company PETRODRILL FOUR LTD., with head office in Omar Hodge Building, Wickhams Cay, Road Town, Tortola, Ilhas Virgens Britanicas, represented by its Director GERMAN EFROMOVICH. 1.3. To change the redaction of items 3.12. 1. and 3.21.2, of the THIRD CLAUSE - - -- CONTRACTOR'S RESPONSIBILITIES. 1.4. To change the redaction of item 16.1 of the SIXTEENTH CLAUSE - INTERVENIENCE. SECOND CLAUSE - CONTRACTOR'S OBLIGATIONS. 2.1. The Redaction of items 3.12.1 and 3.21.2. is changed to: 3.12.1. "The minimum value of the civil liability insurance is of US$1,000,000.00 (one million dollars), per occurrence, during the period of validity of this CONTRACT and its eventual extension, which amount is to be converted into Brazilian currency on the date of signature of this instrument. The INTERVENIENT PARTY is to appear as co-insured in this insurance policy. 3.21.2. "Exception is made to cases arising from kick, blow-out, surge or formation testing, in which the CONTRACTOR will be kept free and safe from, in the other cases of spillage of oil and other residues in the sea, the CONTRACTOR and the INTERVENIENT PARTY will be jointly liable, up to the limit of US$500,000.00 (five hundred thousand dollars), per event and its developments. THIRD CLAUSE - INTERVENIENCE. 3.1. The redaction of item 16.1 is changed to: 16.1. "THE INTERVENIENT PARTY SIGNS THE PRESENT CONTRACT, TOGETHER WITH THE CONTRACTOR, BEING JOINTLY LIABLE WITH IT FOR ALL OBLIGATIONS ARISING FROM THE PRESENT CONTRACT AND ITS EXECUTION, INCLUDING FOR LOSSES. FOURTH CLAUSE - RATIFICATION. 4.1. The parties ratify the other conditions of the CONTRACT that were not changed by the present instrument. And being thus agreed, the parties sign the present Rider in 2 (two) copies of the same tenor and fashion, together with the witnesses below. Rio de Janeiro, August 21, 1998. (Signed:) (Illegible) - Luiz Eduardo G. Carneiro. Executive Superintendent of Exploration and Production South-Southeast. PETROBRAS - PETROLEO BRASILEIRO S.A. (Signed:) (Illegible) - German Efromovich. President - MARITIMA PETROLEO E ENGENHARIA LTDA. (Signed:) (Illegible) - German Efromovich. Director - PETRODRILL FOUR LTD. WITNESSES: (Signed:) Elaine Brabo - Name: ELAINE BRABO. (Signed:) Andre de Mesquita Pinto - Name: ANDRE DE MESQUITA PINTO. - - -------------------------------------------------------------------------------- THESE BEING the precise terms and content of the aforementioned document, I hereby set my Hand and Seal on this Translation, performed on November 26, 1998 in this City of Rio de Janeiro, Federative Republic of Brazil. /s/ MARCIA BARBOSA SERRA ------------------------ Marcia Barbosa Serra Sworn Public Translator EX-10.15 57 EXHIBIT 10.15 I, the undersigned, Sworn Public Translator and Commercial Interpreter in and for this City and State of Rio de Janeiro, Federative Republic of Brazil, registered at the Commercial Board of Rio de Janeiro under Number 97, do hereby CERTIFY and ATTEST that a document in the Portuguese language was submitted to me for translation into English, which I performed according to my Office, as follows: Translation No. 3999/98 (Xerox copy submitted for translation.)......................................... (On paper with letterhead of Petroleo Brasileiro S.A. - PETROBRAS.)............. LETTER OF AGREEMENT PETROLEO BRASILEIRO S.A. - PETROBRAS, a mixed economy company, organized and existing under Law No. 2.004, dated 10/03/53, with head office at Av. Republica do Chile, 65, City of Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil enrolled in the General Taxpayers' Registry of the Ministry of Finance under No. 33.000.167/0001-01, represented herein by the Executive Superintendent of Exploration and Production South and Southeast, Engineer LUIA EDUARDO G. CARNEIRO, henceforth called PETROBRAS, and the Company MARITIMA NAVEGACAO E ENGENHARIA LTDA., with head office at Avenida Almirante Barroso, no. 42, 34th floor, City of Rio de Janeiro, State of Rio de Janeiro, Federative Republic of Brazil, enrolled in the General Taxpayers' Registry of the Ministry of Finance under No. 46.828.596/0001-13, represented herein by its President, Mr. GERMAN EFROMOVICH, have agreed upon the present Letter of Agreement regarding contracts 101.2.063.97-2 (Chartering) and 101.2.064.97-2 (Rendering of Services) for the Unit Amethyst 4, henceforth called the Unit, as follows:........................................................................ Item New Redaction 1.1. Chartering The object of the present CONTRACT is the chartering to PETROBRAS, of the Unit, which, according to the CONTRACTOR, is to be built in a shipyard for the purpose of fulfilling this contract, in order to be used in the drilling and/or completion and/or workover of oil and/or gas (vertical, directional and horizontal) wells, in the Brazilian continental shelf, down to a maximum depth of 5,000 (five thousand) meters, in a water depth down to 1,000 (one thousand) meters............................................. 3.17.- (Serv.) To submit to the contract Manager, up to 30 days after its inception, as foreseen in item 2.2.1, the originals or certified copies of the insurance policies made as a result of this contract, containing all essencial data, such as insurers, time limits, period of validity, amounts insured, and coverage conditions, and with PETROBRAS appearing as co-insured, except in the civil liability insurance, of which it will participate as a third party......................... 3.19.- (Chart) To submit to the Manager of this contract, up to 30 (thirty) days after the beginning of the performance, as foreseen in item 2.2.1, the originals or certified copies of the certificates of the insurances made as a result of this contract, containing all essential data, such as insurers, time limits, periods of validity, amounts insured, and coverage conditions, and with PETROBRAS appearing as co-insured, except in the civil liability insurance, of which it will participate as a third party......................... 7.7 (Chart) The CONTRACTOR agrees that, at PETROBRAS' exclusive option, the payments referring to the chartering object of the present contract can be made through financing by third parties, provided the time limits, currency, amounts and place of payment set forth in the contract are complied with......................................................... 12.5- (Chart.) In the present contract, it will 13.5- (Serv.) be considered as act of God the situation in which one of the parties is prevented form fulfilling its obligations, provided it proves that:..................................... o the non-fulfillment of the obligation was due to the existence of an impediment beyond its control;............... o the party impeded could not, within its ability, overcome the impediment and its effects, in order to fulfill its contract obligation within the time limit set down, and............... As an illustration of act of God or force majeure, one may mention wars, strikes, submarine earthquakes, among other facts, which effects were not possible to avoid or prevent...................... AND BEING THUS AGREED, the parties sign the present Letter of Agreement, in 2 (two) copies with the same tenor, with the witnesses below................................................................... Rio de Janeiro December 5, 1997................................................. PETROLEO BRASILEIRO S/A - PETROBRAS............................................. (SIGNED:) LUIZ EDUARDO G. CARNEIRO.............................................. Luiz Eduardo G. Carneiro - Executive Superintendent of Exploration and Production South - Southeast.................................................... MARITIMA NAVEGACAO E ENGENHARIA LTDA............................................ (SIGNED:) GERMAN EFROMOVICH..................................................... German Efromovich - President................................................... WITNESSES: ..................................................................... Claudio Fontes Nunes............................................................ (SIGNED:) HAMYLTON P. PADILHA JR. .............................................. Hamylton P. Padilha Jr. ........................................................ (Three initials appeared on the first page of the document.)............... THESE BEING the precise terms and content of the aforementioned document, I hereby set my Hand and Seal on this Translation, performed on the 6th of January 1998 in this City of Rio de Janeiro, Federative Republic of Brazil. /s/ MARCIA BARBOSA SERRA ------------------------ Marcia Barbosa Serra Sworn Public Translator EX-10.16 58 EXHIBIT 10.16 BR PETROLEO BRASILEIRO B.A. PETROBRAS E&P/SUEX-SSE-048-98 Rio de Janeiro, 28 May 1998 MARITIMA - PETROLEO E ENGENHARIA LTDA. Av. Almirante Barroso, 52 - Gr. 3400 Centro - Rio de Janeiro - RJ Ref.: Amethyst-class rigs - Charter and Service Contracts Dear Sirs, We refer to the six charter contracts (the "Charter Contracts") and the six service rendering contracts (the "Service Contracts") between yourselves and ourselves regarding six Amethyst-class semi-submersible drilling rigs (each, a "Rig"). Notwithstanding the information which has come to our attention in connection with the financing of the Rigs, that the period allocated under the Charter Contracts and the Service Contracts for the construction of the Rigs will need to be extended, we inform you that, due to legal reasons, no extension in such period shall be acceptable. Thus, in case of delay in the arrival of one Rig, the fines established in the Contracts shall be applied. According to the contractual terms, these fines, set in Articles Eight (Charter Contract) and Nine (Service Contract), are payable in the beginning of the Contracts. However, in order to reduce their impact, it has been a policy of this Superintendency to negociate with CONTRACTOR other forms of payments, such as an agreed installment plan, as well as the discount of the fines from the back end of the Contract. We also confirm we do not see any reason for not to apply the same rules in the Contracts under reference, after the approval of PETROBRAS' Board of Directors. Regarding our rights to terminate a Charter Contract or a Service Contract, we hereby agree that we will exercise such rights only if there is a delay in the arrival of the Rig subject to the Charter Contract or Service Contract or the beginning of the fulfillment of such contract for more than 540 days, and we further agree not to exercise such right at that time, if contractor can demonstrate to PETROBRAS that it is using its best endeavors to deliver the rigs. In addition, we would like to take this opportunity to clarify that certain sections of these Contracts providing for the termination of a Charter Contract or Service Contract in the event of the non-fulfillment, or irregular fulfillment of the contract clauses, specifications, operations or time limits, as well as the repeated commitment of faults in the fulfillment of such contract are to be interpreted given other provisions of these Contracts providing for notice of non-compliance and the imposition of fines and penalties. Specifically, we hereby confirm our understanding that prior to terminating a Charter Contract or Service Contract for a non-fulfillment, irregular fulfillment or repeated faults, we will notify you such non-compliance and follow the procedures for the impositions of fines provided in such Contracts. In accordance with Articles Thirteen (Charter Contract) and Fourteen (Service Contract) - "ASSIGNMENT" - we hereby confirm that, at any time, CONTRACTOR may assign the Contracts upon prior written authorization from PETROBRAS. Specifically for the Service Contract, once CONTRACTOR is notified about PETROBRAS intention to terminate the Contracts, based on the conditions established therein, CONTRACTOR shall have the right to assign the instrument to a company registered to do similar business with PETROBRAS to fulfill all the requirements for qualification set forth in the edict which originated the Contracts. Very truly yours, /s/ LUIZ EDUARDO G. CARNEIRO LUIZ EDUARDO G. CARNEIRO Executive Superintendent of Exploration and Production South-Southeast PETROLEO BRASILEIRO S.A. - PETROBRAS Agreed as of the date first above written: MARITIMA PETROLEO E ENGENHARIA LTDA. EX-10.17 59 EXHIBIT 10.17 HULL NO 3015 CONTRACT FOR CONSTRUCTION AND SALE OF A DYNAMIC POSITIONED SEMI-SUBMERSIBLE DRILLING VESSEL BETWEEN DAEWOO CORPORATION & DAEWOO HEAVY INDUSTRIES LTD AND PETRODRILL CONSTRUCTION INC. 1 INDEX PAGE DEFINITIONS 1. PURPOSE OF THIS CONTRACT 2. DESIGN: PRINCIPAL DIMENSIONS AND CHARACTERISTICS: CLASSIFICATION: MANDATORY REGULATIONS: REGISTRATION 3. CONTRACT PRICE 4. PAYMENT SCHEDULE 5. APPROVAL OF PLANS: SUBCONTRACTING 6. VARIABLE LOAD CAPACITY 7. MODIFICATIONS AND ALTERATIONS 8. INSPECTION 9. PLANNED PROGRAMME, PROGRESS CONTROL AND REPORTING 10. TITLE 11. RISK AND INSURANCE 12. LOSS OR DAMAGE TO THE VESSEL 13. TRIALS: TECHNICAL ACCEPTANCE 14. DELIVERY OF THE VESSEL 15. EXTENSION OF TIME FOR DELIVERY: PERMISSIBLE DELAY 16. DELAY IN DELIVERY 17. DEFECTS AND BUILDER'S GUARANTEE 18. DEFAULT BY THE PURCHASER 19. DEFAULT BY THE BUILDER 20. PATENT INDEMNITY 21. NOT USED 22. TAXES AND DUTIES 23. ASSIGNMENT 24. PRIORITY OF DOCUMENTS 2 25. NOTICES 26. RECORDS AND AUDITS 27. LAW 28. DISPUTES 29. MISCELLANEOUS 30. SPARE PARTS 31. SAFETY AND HEALTH STANDARDS 32. EFFECTIVENESS APPENDICES APPENDIX I LIST OF PRINCIPAL DRAWINGS AND OTHER CONTRACT DOCUMENTS APPENDIX II PLANNED PROGRAMME APPENDIX IIA LISTED ITEMS APPENDIX III FORM OF PROTOCOL OF DELIVERY AND ACCEPTANCE APPENDIX IV FORM OF REFUND GUARANTEE APPENDIX V FORM OF STAGE CERTIFICATE APPENDIX VI SCHEDULE OF LABOUR COSTS FOR MODIFICATIONS APPENDIX VII LIST OF CERTIFICATES TO BE SUPPLIED ON DELIVERY OF THE VESSEL APPENDIX VIII MAKERS LIST 3 CONTRACT FOR CONSTRUCTION AND SALE OF A DYNAMIC POSITIONED SEMI-SUBMERSIBLE DRILLING VESSEL This CONTRACT made this 9th day of April 1998, by and between:- DAEWOO CORPORATION & DAEWOO HEAVY INDUSTRIES LTD both corporations organised under the laws of Republic of Korea (hereinafter jointly and severally called "Builder"), both having their principal offices at 541, 5-GA, Namdaemunro, Jung-Gu, Seoul, Korea, and PETRODRILL CONSTRUCTION INC a corporation organised under the laws of Bahamas (hereinafter called "Purchaser"), having its principal office at: Suite 205, Saffrey Square PO Box N8188, Nassau, Bahamas WITNESSETH THAT THE PARTIES HAVE AGREED AS FOLLOWS:- DEFINITIONS In this Contract the following expressions shall have the meanings hereby assigned to them:- "Banking Day" means any day on which banks in each of London, New York and Seoul are open for the transaction of normal banking business; "Basic Design" means the drawings as detailed in section 99000 Appendix to the Specification. "Classification Society" means Lloyds Register of Shipping; "Classification Surveyor" shall mean any surveyor appointed by the Classification Society to supervise the Vessel's construction; "Contract Price" means the price stated in Clause 3.1; "Contractual Delivery Date" means the date referred to in Clause 14.1 as the same may from time to time be extended in accordance with the provisions of this Contract; "Contract Documents" means the Specifications, the Principal Drawings and the other documents listed in Appendix I; "Delivery" means the delivery by the Builder, and acceptance by the Purchaser, of the Vessel pursuant to Clause 14.2; "LIBOR" means the interest rate per annum which Citibank, London is offering to prime banks in the London Interbank market for deposits in United States Dollars for a three month period, determined at 11.00 a.m. London time, as quoted on the date from which interest is accrued under this Contract. All interest hereunder shall be calculated on the basis of a 360 day year and compounded quarterly and shall be paid on the date when payment is made of the sum on which interest is accrued: "Makers' List" means the list of contractors approved by the Purchaser and set out in Appendix VIII to the Specifications: "Mandatory Regulations" has the meaning assigned to it in Clause 2.7; 4 "Materials" means all materials and supplies, including, without limitation, all machinery, equipment, outfittings and spare parts (but excluding the Listed Items and Purchaser's Supplies), intended for the Vessel's construction to the extent that the same have been appropriated to, or incorporated in, the Vessel; "Planned Programme" means the programme for performance of this Contract by the Builder detailed in Appendix II hereto: "Plans" means those drawings, documents and specifications which are required under this Contract and the Specifications to be submitted to the Purchaser for approval; "Principal Drawings" means the drawings initialled by or on behalf of the Purchaser and the Builder and listed in Appendix I; "Purchasers Supplies" means all equipment supplied by the Purchaser for its own use on board the vessel which specifically excludes the Listed Items. "Specifications" means:- (a) Specification no P-95019 Jan 1998 rev I plus Addendum as issued March 1998 initialled by or on behalf of the Purchaser and the Builder on 1st April 1998; and (b) any additions or amendments thereto hereafter agreed between the parties; "Stage Certificate" means a certificate in the form set out in Appendix V, "Statutory Modifications" means modifications applicable to the Vessel as a result of changes to any of (i) the rules, regulations and requirements of the Classification Society or (ii) the Mandatory Regulations; "Working Day" means any day (other than Saturdays or Sundays) on which work is normally carried out at the Shipyard. Further terms used in this Contract are defined hereinafter. 1. PURPOSE OF THIS CONTRACT 1.1. Upon the terms and conditions set out in this Contract, the Builder, as an independent contractor. undertakes to design, construct, build, launch, equip, complete, test and load out at its shipyard at Okpo Korea (hereinafter called the "Shipyard") and sell and deliver to Purchaser or the Purchaser's nominee for the Contract Price referred to in Clause 3 below, one (1) fully operational and fit for purpose self-propelled Dynamic Positioned Semi-Submersible Drilling Vessel (hereinafter called the "Vessel") more fully described in Clause 2 below. Subject to the performance of the Builder's obligations hereunder, the Purchaser agrees to purchase and take delivery of the Vessel when duly completed. 1.2. References herein to the Vessel shall, except where otherwise expressly provided, be deemed to include all Materials. 2. DESIGN: PRINCIPAL DIMENSIONS AND CHARACTERISTICS: CLASSIFICATION: MANDATORY REGULATIONS: REGISTRATION 2.1. The Vessel, which is to be assigned the Builder's Hull No 3015, shall be designed, constructed and completed in all respects in accordance with the Specifications. To the extent not defined in the Specifications, the Vessel's construction is to meet the generally acceptable offshore semi-submersible construction standards and practices, including without limitation such standards and practices relating to Quality Assurance. At the time of Delivery hereunder, the Vessel, which shall conform strictly with the terms and conditions of this Contract and the 5 Specifications, shall be delivered safely afloat and ready for sail-out as a self-propelled Dynamic Positioned Semi Submersible Drilling Vessel. DESIGN 2.2. The basic elements of the Vessel's design (the "Basic Design") will be delivered by the Purchaser to the Builder. If the Builder considers that any aspect of the Basic Design might prevent the Vessel when constructed from complying with the requirements of Clause 2, it will inform the Purchaser accordingly and the Purchaser may either procure the modification of the Basic Design to remedy this deficiency or may require the Builder to modify the Basic Design to remedy this deficiency. If the Purchaser shall require the Builder to modify the Basic Design, the work required to do so shall constitute an Purchaser's Modification for the purposes of Clause 7 of this Contract. 2.3. The Builder shall develop a detailed design from the delivered Basic Design. It is expressly understood that the Purchaser shall be solely responsible for any errors, omissions and inconsistencies in the Basic Design. The Builder shall accept responsibility for its own work of developing the detailed working drawings from the Basic Design and all other design development work it shall perform in connection with this Contract. PRINCIPAL DIMENSIONS AND CHARACTERISTICS 2.4. The Vessel shall have the dimensions and characteristics stated in the Specifications. CLASSIFICATION 2.5. The Vessel shall be constructed under Special Survey of the Classification Society and in accordance with its rules, regulations and requirements current at the date of execution of this Contract, incorporating all additions and amendments thereof applicable to the Vessel in force or announced but awaiting ratification, enactment or implementation, so as to achieve on Delivery the following notation:- "Unrestricted Service O.U. +100A1, +LMC, UMS, DP (AA), PC, DRILL, OIWS with the descriptive notation Semi Submersible, self propelled drilling vessel" free of all recommendations, reservations and qualifications of any nature whatsoever. 2.6. Decisions of the Classification Society as to whether or not the Vessel complies with its rules, regulations and requirements shall be final and shall bind both parties to this Contract. MANDATORY REGULATIONS 2.7. The Vessel shall also comply with (i) all requirements of the regulatory bodies listed in the Specifications and (ii) the following rules, regulations and requirements, in each case current at the date of execution of this Contract ((i) and (ii) being known herein jointly as the "Mandatory Regulations"):- a. IMO, Resolution A 649 (16) adopted on 19 October 1989, Code for the Construction and Equipment of Mobile Offshore Drilling Units. b. International Convention for the Safety of Life at Sea SOLAS 1974, protocols of 1978, 1981,1983 and all Amendments in force. c. International Convention of Load Lines, 1966 with resolutions A 231 (VII) and A 320 (IX). d. International Telecommunication Convention and Radio Regulation 1973, 1976 and 1982 and latest GMDSS Rules for radio communications. 6 e. International Convention for Tonnage Measurement 1967/1969. f. Suez Canal Tonnage Regulations. g. International Convention for the Prevention of Pollution from Ships (MARPOL) 1974/1978, Consolidation Edition, IMO, 1991, including 1992 amendments to Annex 1. h. International Regulations for Preventing Collision at Sea, 1972 including amendments. i. International Labour Organisation (ILO) Convention No. 92 and No. 133 for crew accommodation. j. International Electronical Commission (IEC), Electrical Installation in Ship Publication No. 92. k. API specifications as applicable. REGISTRATION 2.8 Vessel shall upon Delivery fly the Dutch Antilles flag and be registered in the Register of Shipping. Registration of the Vessel as aforesaid shall be effected by the Purchaser and all costs and expenses thereof shall be for the Purchaser's account. 3. CONTRACT PRICE 3.1. In consideration of the performance by the Builder of all its obligations under this Contract the Purchaser shall pay to the Builder a Contract Price comprised of two elements:- a. US $ 85,000,000 (the "Construction Price") which shall include the cost of installation of the Listed Items, and b. a further amount, to be agreed between the parties hereto, in respect of the purchase cost of the Listed Items. The parties have provisionally budgeted this cost at US S 51 million and the aggregate of the same and the Construction Price is known herein as the "Provisional Contract Price" which is US $136,000,000 3.2. The Construction Price, which is exclusive of the cost of the Listed Items and Purchaser's Supplies, shall be a fixed price subject to upward or downward adjustment only in accordance with the provisions of Clause 7 hereof. It includes:- a. the cost of the Vessel completed in accordance with the requirements of this Contract and the Specifications; b. the cost of all tests and trials of the Vessel to be performed by the Builder in accordance with the specification; c. the cost of procuring the classification of the Vessel and of obtaining all certificates and documents which are required to be delivered pursuant to this Contract and the Specifications; and d. all other costs and expenses of the Builder as provided for herein or otherwise incurred by the Builder unless expressly provided herein as being for the Purchaser's account. 4. PAYMENT SCHEDULE 4.1. The Purchaser shall pay the Contract Price to the Builder in five instalments as follows, the pre-delivery instalments being paid as advances and not as deposits:- 7 FIRST INSTALMENT: 10 per cent (ten %) of the Provisional Contract Price, being $13,600.000 shall be paid within three Banking Days of the Effective Date. SECOND INSTALMENT: 30 per cent (thirty %) of the Provisional Contract Price, being $40,800,000, shall be paid within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorised Representative (or, in default thereof, the Classification Surveyor ), certifying that it is 6 months after the Effective Date of the contract has taken place. THIRD INSTALMENT: 20 per cent (twenty %) of the Provisional Contract Price, being $27,200,000 shall be paid within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorised Representative (or, in default thereof, the Classification Surveyor), certifying that Keel laying has taken place. FOURTH INSTALMENT: 20 per cent (twenty %) of the Provisional Contract Price $27,200,000, shall be paid within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorised Representative (or, in default thereof, the Classification Surveyor), certifying that launch [ float out ] has taken place. FIFTH INSTALMENT: 20 percent(twenty %)of the Provisional Contract Price, together with the aggregate of (i) any excess of the Contract Price over the Provisional Contract Price and (ii) any increase or any decrease of the Contract Price arising from the provisions of Clauses 7 and 16 below, shall be paid upon Delivery. 4.2. The Builder shall notify the Purchaser in writing ten Banking Days in advance of the estimated dates of occurrence of each of the events before Delivery referred to above, excluding the First Instalment. REFUND GUARANTEE 4.3. The Builder shall at its own expense supply to the Purchaser concurrently with payment of the First Instalment of the Contract Price a letter of guarantee in favour of the Purchaser in the form attached as Appendix IV (the "Refund Guarantee"). Such guarantee shall be unconditional and be given by the Export-Import Bank of Korea as approved by the Purchaser. PAYMENT FOR MODIFICATIONS AND OTHER ITEMS 4.4. Any sums due to either parry under Clause 7 as a result of Purchaser's Modifications and/or Statutory Modifications shall be paid with the Instalment payment which becomes due on a milestone payment coming first after agreement on such modification. PAYMENT FOR FUELS ETC AND LIQUIDATED DAMAGES 4.5. All amounts due to the Purchaser (i) under Clause 13-2 hereof and (ii) by way of liquidated damages in respect of delay in Delivery under Clause 16 shall be calculated and determined before Delivery and shall be paid on, and as a condition of, Delivery. 8 PAYMENT PROCEDURES 4.6. Payment of sums due to the Builder in accordance with the provisions of this Contract shall be made, by telex transfer to the account of the Export-Import Bank of Korea Account No 04-029-695 at the Bankers Trust Company of New York. Church Street Station, New York, NY 10015, USA in favour of the Daewoo Corporation, free of all transfer charges. 4.7. If the date on which any payment is due in accordance with the provisions of this Contract does not fall on a Banking Day, payment shall be made on the immediately succeeding Banking Day. 5. APPROVAL OF PLANS: SUBCONTRACTING APPROVAL OF PLANS 5.1. In respect of all Plans required for the completion of the works envisaged by this Contract, the same shall be submitted to the Purchaser in four copies as soon as possible following their production. The Purchaser shall, within fourteen (14) Calendar Days after receipt thereof, return to the Builder one copy of such Plans with the Purchaser's approval or the Purchaser's remarks and amendments (if any) written thereon. The approval of plans by the Purchaser shall not relieve the Builder of any of its obligations under this contract. 5.2. In the event that the Purchaser shall fail to return the Plans to the Builder within the time limit as herein above provided, such Plans shall be deemed to have been approved without comment. 5.3. The Builder shall take due note of the Purchaser's remarks and amendments (if any) on Plans submitted pursuant to this Clause and, if such remarks or amendments are not of such a nature or extent as to constitute modifications of the Specifications within the meaning of Clause 7 hereof, then the Builder shall commence or continue construction of the Vessel in accordance with the corrected or amended Plans. If such remarks or amendments are not clearly specified or detailed, the Builder shall in all cases seek clarification of the same from the Purchaser before implementing the same. 5.4. Copies of all correspondence to and the Classification Society and the regulatory authorities referred to in the Specifications, together with all Plans approved by the Classification Society, shall be furnished to the Purchaser by the Builder as soon as practicable upon dispatch and receipt. SUBCONTRACTING 5.5. Save as regards those works delegated to those Subcontractors defined in the Makers' List, the Builder shall not, without the Purchaser's prior approval in writing, subcontract any part of the works contemplated by this Contract which exceed in value US $100,000 or its equivalent in local currency. Where such approval has been given, the Builder shall nevertheless remain fully responsible for the performance of the same as if it had personally undertaken such works. MAKER'S LIST 5.6. The Builder shall select for the supply of each of the Materials listed in the Makers' List the Subcontractor named therein in relation to the same. Where the Makers' List provides for more than one Subcontractor to supply any element of the Materials, the Builder shall, with reasonable notice, provide the Purchaser with a copy of the Purchase Order to be issued to its intended choice of Subcontractor before any subcontract is awarded. The Makers' List shall indicate Purchasers preferred Sub-contractor (if any) for a given element. Where there is a Purchase preferred subcontractor stated, such Purchase Order shall contain full technical and commercial details and also a comparison of same with Purchaser's preferred Subcontractor. If within 5 days thereafter, the Purchaser shall request the Builder to order that element of the Materials from Purchaser's preferred Subcontractor named in the Makers' List in relation thereto, then the Builder will take all reasonable steps to comply with such request and the Purchaser shall reimburse to the Builder any difference in price between that quoted by the Builder's chosen 9 Subcontractor and the Subcontractor chosen by the Purchaser together with an adjustment in the Delivery Date if any. NOMINATED SUBCONTRACTORS 5.7. Unless the Purchaser shall otherwise agree, the Builder shall supply those items of Materials set out in Appendix II (the "Listed Items") from suppliers and subcontractors nominated by the Purchaser. The Purchaser, as agent for and on behalf of the Builder, shall negotiate with each of the Nominated Subcontractors terms for the supply of the Listed Items set out in Appendix II. It is, however, expressly agreed that the Purchaser shall contract with each of the suppliers of the Listed Items as agent for and on behalf of the Builder and the ownership in such Listed Items shall vest with the Builder. 5.8. The price for the Listed Items, including delivery to the Builders yard, negotiated by the Purchaser, on behalf of the Builder, with the Nominated Subcontractors shall be included in the contract price based on the overall budget as set out in Appendix II. In the event of any variations in the actual price then the Provisional Contract Price shall be increased or decreased by an amount equal to the amount of such variations. Any such variations shall be payable by the Purchaser by means of an adjustment of the final instalment of the Provisional Contract Price. 5.9. Furthermore, in the event that delivery to the Builder of any Listed Item is delayed beyond the Target Delivery Date for the same set out in Appendix IIA, the Builder shall be entitled to a postponement of the Contractual Delivery Date for a period as it shall demonstrate, by reference to the "critical path", that the Vessel's construction and completion has actually been delayed. Delays in delivery of more than Listed Item occurring simultaneously shall have give rise only to concurrent (rather than consecutive) extensions. 5.10. Furthermore, acting on behalf of the Builder, the Purchaser shall ensure that all the articles to be supplied as per clause 5.7 above shall be supplied to the Builder at the Shipyard in a condition read, for installation. In addition, in order to facilitate the installation of the Listed Items by the Builder, the Purchaser shall ensure that the Nominated Subcontractors furnish the Builder with instruction books, test reports, certificates and vendor furnished information as required by applicable rules or regulations. 5.11. On the basis that the Purchaser has price, delivery and quality risk in terms of clauses 5.8, 5.9 and 5.10 above, Builder acknowledges that, not withstanding that it is the party to the contract with the Nominated Subcontractor, the Purchaser shall be fully entitled to liase with the Nominated Subcontractors on pricing, quality and delivery issues and Builder appoints Purchaser as its agent for this purpose. 5.12. It is also agreed that any costs incurred by the Builder in the repair of Listed Items occasioned by their defective material or poor workmanship or failure to perform, or by damage caused to them during transportation to the Shipyard shall be for the Purchasers account. ASSIGNMENT OF EXISTING SUBCONTRACTS / LETTER OF INTENT In relation to the following "long lead" items of Materials, it is understood that the Purchaser has already entered into agreements with certain suppliers. 5.13. Concurrently with signature of this Contract, the benefit together with the burden of all such contracts are to be assigned by the Purchaser to the Builder, whereupon the Materials to which they relate are to be treated as Builders supply . The Builder shall, upon assignment of each such subcontract, reimburse to the Purchaser all of the instalments of the contract price paid by the latter in respect thereof. 5.14. Packages included under this provision cover items supplied by LIPS, Caterpillar and GEC Alsthom. OBLIGATIONS UNAFFECTED 5.15 Nothing in this Clause shall affect the other obligations of the Builder under this Contract nor diminish the responsibility of the Builder in respect of the Materials, design or workmanship required hereunder. 10 6. VARIABLE LOAD CAPACITY 6.1. The Builders commitment to the lightship weight excluding the weight and centre of gravity of the Listed Items shall be 8,950 metric ton at a VCG of 21.43 m ( the "Required Lightship Weight" ). A detailed Light Weight Estimation and VCG Calculation justifying the Required Lightship Weight, shall be included as part of the "Basic Design" to be provided by the Purchaser. 6.2. The lightship weight and centre of gravity of the Vessel shall be verified by an Inclining Experiment prior to Delivery. 6.3. The results of the Inclining Experiment referred to in Clause 6.2 shall be used to demonstrate a Variable Load Capacity (Deck and Column) in the conditions referred to in the Specifications as a minimum of 3,500 metric tons in the operational condition 6.4. Builder shall pay liquidated damages to the Purchaser as follows if the lightship weight increases above the Required Lightship Weight. Excess from 1% to 2% : USD 5,000 per ton Excess from 2% to 4% : USD 7,500 per ton Excess 4% and above : USD 10,000 per ton In any event the Builder's liability, for the above liquidated damages shall be limited to 5% of the Construction Price. 6.5. The Purchaser shall pay to the Builder a bonus if the lightship weight is below the Required Lightship Weight on the same basis as the liquidated damages in 6.4 above but without the application of any grace. 6.6. The Purchaser shall have no obligation to accept delivery of the Vessel if the ship lightweight, as defined in 6.2 above, is more than 400 tonnes over the Required Lightship Weight. The Builder shall, however, in such context be entitled to make modifications to the Vessel in order to either reduce the weight or ensure that the VLC is restored to its original level provided that the same (i) are approved in advance by the Classification Society and the Purchaser, such approval not to be unreasonably withheld, (ii) do not significantly affect the motion characteristics or operational capability of the Vessel. 7. MODIFICATIONS PURCHASER'S MODIFICATIONS 7.1. The Purchaser may at any time after the date hereof submit a request in writing to the Builder for changes (the "Purchaser's Modifications") to be made to the Specifications and shall supply with such request sufficient particulars, documentation and details to describe the change requested. 7.2. If the change so requested (the "Requested Change") can be reasonably undertaken having regard to the stage of construction of the Vessel and the Planned Programme, then the Builder shall be obliged to effect the same but shall be entitled to any increase (and shall concede any decrease) in construction cost or adjustment of the Contractual Delivery Date or any other provisions of his Contract or the Specifications which the Requested Change reasonably necessitates and which is agreed in writing by the Builder and the Purchaser. The Builder shall notify the Purchaser in writing no later than seven Working Days after receipt of the written request for the Requested Change, of any such adjustments which it will require. 7.3. On the basis of such notification the Purchaser shall no later than fifteen Working Days thereafter elect in writing to: 11 a. agree to the adjustments notified, in which case the Builder shall construct the Vessel in accordance with the Requested Change; b. contest the reasonableness of the adjustment notified, in which case subc1ause 7.5 below shall apply; or c. withdraw the Requested Change. in which case the Vessel shall be built without reference to the same. 7.4. If within fifteen Working Days after such notification the Purchaser has made no election as aforesaid, then the Requested Change shall be deemed to have been withdrawn by the Purchaser. 7.5. If, however, the Purchaser notifies the Builder in writing that the Purchaser wishes to implement the Requested Change but disputes the reasonableness of the adjustments, the matters shall be determined by an expert. acting as such and not as an arbitrator, to be appointed by agreement between the parties. In the event that the parties are unable to agree as to any appointment within thirty days of the Purchaser's written notice, the appointment shall be made, upon the written application of either party, by the Classification Society. The decision of the said expert shall be final and binding upon the parties and the costs of such expert in reaching his decision shall be shared by the Parties. Pending the decision of the aforesaid expert, the Builder shall continue construction of the Vessel in accordance with the Requested Change. 7.6. The agreed extra cost of any Requested Change or that decided by the expert shall be paid by the Purchaser and any cost savings by the Builder as a result of any Requested Change shall be paid to the Purchaser in accordance with Clause 4.4. STATUTORY MODIFICATIONS 7.7. In the event of any Statutory Modifications arising the Builder shall within seven Working Days of its becoming aware of the same, give notice to the Purchaser of:- a. the change required to be made to the Specifications (the "Required Change"); b. any estimated extra or reduced cost of construction of the Vessel in accordance with the Required Change together with any documentation substantiating such cost which the Purchaser reasonably requires; and c. the effect of the Required Change on any other provisions of this Contract or the Specifications (including without limitation any change to the Contractual Delivery Date). 7.8. The Purchaser may apply for a formal waiver of compliance with the Required Change from the body having power to grant such waiver if the Purchaser considers that the operation of the Vessel in its intended service would permit of such waiver, and shall notify the Builder as soon as possibly after receiving the decision of such body. In applying for any waiver, the Purchaser may call upon the Builder for assistance and the Builder will provide reasonably co-operation to the Purchaser in this respect. 7.9. If no waiver has been obtained and notified by the Purchaser to the Builder within thirty Working Days of the receipt by the Purchaser of the notice referred to above, the Builder shall build the Vessel in accordance with the Required Change and the reasonable extra cost thereof, if any, shall be paid by the Purchaser. Before the expiry of such time the Builder shall continue with tile construction of the Vessel in accordance with the Required Change but it shall, in so doing, use its best endeavours to minimise any costs and loss of time which might arise if a waiver were obtained. 7.10. If the Purchaser notifies the Builder in writing that the Purchaser disputes the reasonableness of the extension or variation notified, the issue of what is a reasonable extension or variation may be put, by the Purchaser or the Builder to an expert, acting as such and not as arbitrator, to be appointed by agreement between the parties. In the event that the parties are unable to agree as to an appointment within thirty days of the Purchaser's written notice as aforesaid the appointment shall be made, upon the written application of either party, by the Classification Society. The decision of the expert shall be final and binding upon the parties and the costs of such expert in 12 reaching his decision shared by the Parties. Pending the decision of the said expert, the Builder shall continue construction of the Vessel in accordance with the Required Change. PRICING OF MODIFICATIONS 7.11. In relation both to Purchaser's Modifications and Statutory Modifications as aforesaid, the Builder's quotations in respect of any increase or decrease in the Contract Price relating thereto shall, if requested in writing by the Purchaser, be calculated both on "lump sum" and a "time and materials" basis. In relation to quotations effected on a "time and materials" basis, the Builder shall apply the following parameters:- a. labour costs shall be charged at the agreed hourly rates set out in Appendix VI; b. the cost of all materials and equipment shall not exceed one hundred and ten per cent (110%) of the cost to the Builder of the same (inclusive of the costs of delivery of those materials and equipment to the Shipyard); provided, however, that the Builder shall in all cases endeavour to obtain the best price terms and trade discounts from suppliers and subcontractors for the benefit of the Purchaser. SUBSTITUTION OF MATERIALS 7.12. If at any time during the construction of the Vessel, any Materials are not available (other than as the result of any neglect or omission on the part of the Builder) then, subject to the prior approval in writing of the Purchaser and, where necessary, of the Classification Society, the Builder may use or install other Materials provided that such other Materials used or installed in substitution for those specified are equivalent in quality to, or better than, those specified, and which meet the requirements of the Classification Society and the other requirements of this Contract. 8. INSPECTION AUTHORISED REPRESENTATIVES 8.1. The Purchaser shall have the right to retain up to fifteen supervisors "Authorised Representatives"), whose names and scope of authority shall be notified in writing to the Builder, permanently at the Shipyard during all times until Delivery. The Builder shall provide suitable office accommodation (including adequate parking spaces), photocopying and canteen facilities and the installation of telephones and telefax machines with reasonable and safe access to work areas for, and permit and afford every facility to, the Authorised Representatives from time to time and at all times whilst work is proceeding to examine and inspect the work being done under this Contract and every part thereof, together with the materials being used or about to be used thereon, and to call for and witness such tests as may be required. The costs of telecommunication facilities outside the country in which the Shipyard is located and the use of the canteen shall be for the Purchaser's account. 8.2. In addition to the Authorised Representatives, the Purchaser may from time to time employ further personnel and contractors on site and the Builder shall afford the same facilities to them on the basis set out above. 8.3. The Authorised Representatives shall have the right to attend all tests, trials and inspections of the Vessel, her machinery and equipment, which shall in each case be conducted within the Shipyard's normal working hours. The Builder shall give notice to the Authorised Representatives in advance of the date and place of such tests, trials and inspections in accordance with the provisions of the Specifications. Failure of the Purchaser or its Authorised Representatives to be present at such tests, trials and inspections after due notice as above provided shall be deemed to be a waiver of the Purchaser's right to be present. The Builder shall obtain for the Purchaser and the Authorised Representatives rights of access to the Subcontractors' premises for the purpose of inspection of workmanship and Materials. 8.4. The Builder shall carry out in strict compliance with the Specifications all the tests and trials of the Vessel and commissioning of the Materials which are detailed therein so as to demonstrate that the same are in accordance with the requirements of the Specifications and that all of her systems function in their intended manner. Any Materials or workmanship found to be faulty or inadequate shall be replaced or made good by the Builder prior to 13 Delivery, at its expense and without additional expense to the Purchaser, by suitable and sound Materials and workmanship. 8.5. Nothing done or omitted to be done by or on behalf of the Purchaser under this Clause shall be deemed to be a waiver of any objection to, or an acceptance of, faulty or inadequate Materials or workmanship, or an admission that any Materials or workmanship are of the standard required for due performance of this Contract. 8.6. The Authorised Representatives shall be deemed to be employees of the Purchaser and not the Builder. The Builder shall be under no liability to the Authorised Representatives for death, personal injury or damage to their property during the time when they are engaged in the duties contemplated under this Contract either on the Vessel or within the premises of the Builder or its Subcontractors unless such death, personal injury or damage to property was caused by the wilful act, omission or negligence of the Builder, or any of its employees, agents or Subcontractors. QUALITY ASSURANCE SYSTEM AUDITS 8.7. Quality Assurance System Audits may be carried out by the Purchaser, and regulatory authorities to verify compliance with the quality requirements stipulated in this Contract and with regulatory requirements. Such requirements shall include but not necessarily be limited to quality records, personnel and procedure qualifications records, material traceability records, inspection plans etc. The Builder is required to provide to the Purchaser any documentation and administrative systems necessary to verify compliance. Inspection and testing and Quality Assurance System Audits by the Purchaser as described in this Clause or otherwise shall not imply any diminution of the Builder's responsibilities and obligations under this Contract. 9. PLANNED PROGRAMME, PROGRESS CONTROL AND REPORTING PLANNED PROGRAMME 9.1. The Vessel shall be constructed by the Builder in accordance with the Planned Programme set out in Appendix II hereof A detailed copy of this plan, including the sub-level planning identifying critical paths, shall be made available to the Purchaser and updated on a regular basis. The plan will define certain stages of the construction process ("Milestones") which must be completed by the dates specified therein. The Planned Programme will include a comprehensive statement of the dates on which the Listed Items are required to be delivered to the Shipyard. PROGRESS CONTROL AND REPORTING 9.2. At the commencement of the contract a "kick off' meeting shall be held during which the major parameters by which performance of the Builder will be measured are to be mutually agreed. These shall include, but not necessarily be limited to a detailed weight budget, a steel procurement and processing schedule, an engineering schedule, outfitting targets, manning schedules etc. Unless mutually agreed otherwise such meeting shall be held within 30 days on contract signature. 9.3. During the course of performance of this Contract the Builder shall submit to the Purchaser on a fortnightly basis, commencing on the date failing fourteen days after the "kick off meeting" and thereafter fortnightly. a. a status report on the Vessel's construction as compared with the Planned Programme, including the critical path; b. a report setting out the actual progress in performance of this Contract during the previous month as compared with the Planned Programme; Such report to identify progress against the agreed performance parameters. 14 c. a report setting out the forecast lightship weight, identifying any variances from the agreed weight budget and in the case of negative variations including proposals for reducing the variance to within acceptable levels. d. a list of Purchaser's Modifications and Statutory Modifications (if any) agreed or resolved by an expert during the previous month, as the case may be, including adjustments, if any, agreed or resolved by an expert, to the Contract; e. a report on the delivery of sub-contracted Materials during the pervious month (the precise nature of which report shall be agreed, from time to time, between the Purchaser and the Builder). 9.4. Without prejudice to the Builder's obligations under this Contract, if the construction of the Vessel should for any reason whatsoever be delayed beyond the time-frame envisaged in the Planned Programme, the Builder shall immediately notify the Purchaser and shall within seven Working Days thereof provide to the Purchaser a schedule indicating, in so far as the delay which has occurred is not Permissible Delay, the steps (including any appropriate increase in manpower and material resources) the Builder intends to take to recover the time so lost. The Builder and the Purchaser shall thereafter meet at the earliest opportunity to discuss the schedule and the Builder's detailed plans for implementation of the same. 9.5. The Builder shall take monthly progress photographs illustrating the progress of the Vessel's construction up to and including trials and delivery. The Builder shall also supply the Purchaser with sufficient number of photographs (size: approximately 18 x 24 cms) depicting the final stage of the Vessel as delivered: this set will be at least 25 percent colour prints. One set of standard transparencies will be supplied, free of charge to the Purchaser. Additional copies of photographs and transparencies will be made available by Builder, at the Purchaser's request and expense. 10. TITLE 10.1. Title to the Vessel shall pass to the Purchaser upon Delivery. Subject to the provisions of this Contract, title to the Purchaser's Supplies shall, however, remain with the Purchaser at all times. 11. RISK AND INSURANCE RISK 11.1. The Vessel and all Materials (including, from the time of their delivery to the Shipyard, the Purchaser's Supplies) shall remain at the risk of the Builder until Delivery. INSURANCE 11.2. The Builder undertakes to keep the Vessel and all Materials (including the Listed Items) in its or its Subcontractors' custody fully insured at all times and until Delivery at its own cost with first class insurers approved by the Purchaser in the amount of the higher of (1) the value of the Vessel as from time to time constructed and (2) the aggregate of (i) the instalments of the Contract Price for the time being paid by the Purchaser to the Builder, (ii) the interest payable to the Purchaser on such instalments in the event of the Purchaser's termination of this Contract and (iii) the value of the Purchaser's Supplies delivered to the Shipyard or built into or installed in or upon the Vessel. 11.3. The policy or policies (the "Stipulated Insurances"), which shall be subject to English law and jurisdiction, shall incorporate the following clauses:- a. the Institute of London Underwriters ("ILU") Clauses for Builder's Risks: b. the ILU Strikes Clauses - Builder's Risks; and 15 c. (from the date of the Vessel's launching) the ILU War Clauses - Builder's Risks. 11.4. The policies shall be taken out in the joint names of the Purchaser and the Builder but on terms that the Builder alone shall be responsible for all premiums payable thereunder. The Builder shall furnish the Purchaser promptly with certified copies of the policies and the originals shall be made available to the Purchaser, its employees or agents for inspection at all reasonable times. 11.5. The policies taken out shall contain a provision to the effect that, in the event of an actual, constructive, arranged or compromised total loss, such insurance proceeds as the Purchaser is entitled to hereunder shall be payable to the Purchaser and such policies shall be so endorsed as to enable the Purchaser by its brokers or agents or personally to collect such proceeds pursuant to the provisions of this Clause. In addition, all such policies shall include provision that they shall not be capable of cancellation by the insurers without not less than thirty (30) days' prior written notice being given to the Purchaser and that not less than ten (10) days' prior written notice of non-renewal or lapse shall be given by the insurers to the Purchaser before the same shall take effect. 12. LOSS OR DAMAGE TO THE VESSEL 12.1. Should the Vessel or any items insured pursuant to the provisions of Clause 11 sustain loss or damage prior to Delivery and should such loss or damage not make the Vessel a total loss, actual, constructive, arranged or compromised, the Builder shall, at its own expense and with all due despatch, make good such damage to the satisfaction of the Purchaser and (if applicable) the Classification Surveyor, and any monies payable in respect of any insurance effected under Clause II shall be payable to the Builder. 12.2. Should the Vessel sustain loss or damage prior to Delivery hereunder such that it is either conceded by the insurers liable therefor, or determined by a court of competent jurisdiction, that the Vessel has become a total loss, actual, constructive, arranged or compromised, then the Builder shall not be liable to repair the damage or replace the Vessel but, where the Purchaser has not made recovery of such sums under the Stipulated Insurances within twenty-one Working Days of the total loss, the Builder shall:- a. refund promptly to the Purchaser in full the aggregate amount of instalments of the Contract Price already paid by the Purchaser with interest thereon at a fixed rate of 10 percent from the date of payment of each instalment until the date of refund (calculated on the same basis as a commercial banking transaction in London ); and b. return to the Purchaser all Purchaser's Supplies or refund to the Purchaser a sum equivalent to the value of any of same which have been lost or which cannot be removed in a sound condition from the Vessel. 12.3. When the conditions set out in sub-clause (2) above have been satisfied by the Builder, the Purchaser shall instruct the insurers to pay to the Builder or, as the case may be, if instructed by the Builder to the Export-Import Bank of Korea any further sums due and payable under the Stipulated Insurances in respect of the total loss but subject to a limit equal to the cost to the Builder of those parts of the works which were already undertaken as at the date of the casualty giving rise to the total loss. Save as elsewhere herein specifically provided to the contrary, the parties' obligations under this Contract shall thereupon cease and terminate. 13. TRIALS: TECHNICAL ACCEPTANCE 13.1. At least 120 days before the scheduled commencement of the same the Builder shall submit to the Purchaser for approval comprehensive testing and trials programmes covering the Full Scale Test and Trials (collectively the "Trials") as generally described in Section 03000 of the Specifications, including (i) Workshop Tests, (ii) Quayside Trials (including the Inclining Test), and (iii) Sea Trials (including trial runs and all other tests at sea). 13.2. The Trials shall be conducted at the risk and expense of the Builder which shall provide and pay for the personnel necessary for the safe management and navigation of the Vessel during the same. The Builder shall also provide and pay for all necessary ballast and fresh water and shall meet all other costs associated with the Trials. 16 The fuels, lubricants and consumable stores required for the Trials shall be specified, supplied and paid for by the Purchaser, who shall upon Delivery be entitled to reimbursement from the Builder of the costs of such fuels, lubricants and consumable stores as are consumed during the Trials. 13.3. The Builder shall give the Purchaser not less than seven Working Days' notice of the date and place of commencement of each of the Trials and representatives of the Purchaser shall be afforded every opportunity to observe and determine the performance of the Vessel during the same. Failure by the Purchaser to attend any Trial following due notice shall be deemed to be a waiver by the Purchaser of its rights of attendance in respect of such Trial. SEA TRIALS 13.4. The Sea Trials shall be carried out following satisfactory conclusion of all other Trials and after the Vessel's construction has been completed with only minor items of work outstanding which are agreed by the Authorised Representatives as suitable for completion after the Sea Trials but before Delivery. 13.5. The Sea Trials shall have the objective of permitting the Builder to demonstrate fulfilment of the quality and performance requirements for the Vessel as set forth in the Specifications. The course to be followed during the Sea Trials shall be determined by the Builder, but shall be in open waters off Korea. The Purchaser shall be allowed to maintain a shadow crew and other necessary personnel on board the Vessel during the sea trials to familiarise themselves with the Vessel and its operation. 13.6. The safe management and navigation of the Vessel in transit to, during and from the Sea Trials shall remain the sole responsibility of the Builder. Neither the Purchaser nor any of its representatives shall bear or be liable for loss or damage of any description done by or to the Vessel, or personal injury or loss of life arising from any cause whatsoever during the same, except where such liability is directly attributable to the Purchaser as a result of a wilful act by any representative of the Purchaser on board the Vessel during such trials; the Builder shall pay for and indemnify the Purchaser and its representatives against all such loss, damage and the consequences of personal injury and loss of life as aforesaid. 13.7. Should the weather conditions at the time scheduled for the Sea Trials be such that they cannot be carried out properly, the Builder shall postpone them or such part of them as necessary to the earliest possible time when suitable weather conditions occur to ensure that all readings and results are obtained in a manner satisfactory to the Purchaser. Any delay to the Sea Trials caused by such unfavourable weather conditions, if the delay exceeds five (5) days, shall operate to postpone the Contractual Delivery Date by the period of delay. involved and such delay shall be deemed to be Permissible Delay. 13.8. If during the Sea Trials any, breakdown occurs which entails interruption or irregular performance and the breakdown can be repaired by the normal means available on board, this shall be done as soon as possible and the trial shall be continued after repairs are completed. However, if the Vessel must return to a port to enable the breakdown to be remedied, a further complete trial shall be undertaken at the earliest opportunity. 13.9. On completion of the Sea Trials to the satisfaction of the Purchaser the Vessel shall be brought back to a berth in the Shipyard, or elsewhere as may be agreed, for the inspection of the machinery required in the Specifications, and during this period all defects or omissions found in the Vessel shall be remedied and made good by the Builder to the satisfaction of the Purchaser, and the machinery closed up by the Builder ready for sea at its expense and without expense to the Purchaser. TECHNICAL ACCEPTANCE 13.10. Within three Working Days of completion of the Trials and the closing up of machinery referred to in sub-clause 9 above, the Builder shall notify the Purchaser in writing of the results of the Trials and shall, where the same is appropriate, confirm to the Purchaser that the Vessel conforms with the requirements of the Contract and Specifications. If the Purchaser is in agreement with the Builder, the Purchaser shall, within four (4) Working Days 17 of receipt of the Builder's notice as aforesaid, advise the Builder in writing of its Technical Acceptance of the Vessel. 13.11. If, however, in the view of the Purchaser the Vessel or any part thereof does not conform to the requirements of this Contract and/or the Specifications, the Purchaser shall so advise the Builder (again within four (4) Working Days of the receipt of the Builder's notice as aforesaid) and shall specify the respects in which the Vessel fails to conform with the requirements of this Contract and Specifications. The Builder shall thereupon take the necessary steps to correct such non-conformities and, upon completion of such works, the Builder shall advise the Purchaser who shall, in the reasonable exercise of its discretion, be entitled to require the Builder to undertake further trials of the Vessel; in such event the Builder shall give the Purchaser three Working Days' notice of such further trials. 13.12. Upon satisfactory completion of such remedial works and/or trials, the Purchaser shall, within four (4) Working Days after receipt of a further notice from the Builder that the Vessel conforms with the requirements of the Contract and Specifications, notify the Builder of its Technical Acceptance of the Vessel or the respects in which the Vessel still fails to conform with the requirements of this Contract and the Specifications. This process shall be repeated until the earlier of (a) the Purchaser's Technical Acceptance of the Vessel or (b) the valid and proper termination or rescission of this Contract by either the Purchaser or the Builder. 13.13. If the Purchaser fails to notify the Builder in writing of its Technical Acceptance or otherwise of the Vessel within the periods as provided above the Purchaser shall be deemed to have accepted the Vessel. 13.14. The Purchaser's Technical Acceptance of the Vessel as above provided shall preclude the Purchaser from refusing Delivery of the Vessel as hereinafter provided, if the Builder complies with the procedural requirements for Delivery of the Vessel as provided in Clause 14 hereof. 14. DELIVERY OF THE VESSEL DELIVERY 14.1. The Vessel shall be delivered by the Builder to the Purchaser at the Shipyard (or other place as may be agreed with unrestricted access to the open sea) on 9th February 2000 except that, in the event of Permissible Delay as defined in Clause 15.2 hereof, the aforementioned date shall be postponed accordingly. The aforementioned date, or such later date to which requirement to deliver may be postponed, is herein called the "Contractual Delivery Date". 14.2. Delivery shall take place on a Working/Banking Day to be nominated by the Builder following Technical Acceptance of the Vessel by the Purchaser and with not less than thirty (30) Working Days' advance notice to the Purchaser. Delivery shall be effected by the execution by the Parties of a Protocol of Delivery and Acceptance in the form set out in Appendix III, acknowledging delivery by the Builder and acceptance thereof by the Purchaser. The Builder shall give the Purchaser at least ninety (90) days' (plus or minus seven (7) days) calendar notice of the estimated date of Delivery. 14.3. The Builder guarantees that at the time of Delivery title to the Vessel and every part thereof shall pass to the Purchaser free and clear of any and all liens, claims, mortgages or other encumbrances upon it and in particular, but without limitation, that she shall be free of all burdens in the nature of imposts, taxes or charges imposed by any liabilities arising from the construction of the Vessel or from its operation on Trials or otherwise. DOCUMENTS TO BE PROVIDED TO THE PURCHASER 14.4. The Builder shall provide to the Purchaser the following documents prior to Delivery failing which the Purchaser may refuse to accept Delivery. a. Records of inventory of the Vessel's equipment including spare gear and the like as detailed in the Specifications; 18 b. Records of any and all fuels, lubricants, consumable stores and fresh water supplied to this Contract by either the Builder or the Purchaser together with such quantities same as remain on board at Delivery; c. All certificates (including Class and other regulatory certificates) required to be furnished prior to or upon Delivery of the Vessel pursuant to the Specifications; such certificates are to be clean and free of all qualifications, reservations and recommendations whatsoever; d. Declaration of Warranty of the Builder in accordance with Clause 14.3 above; e. The following technical documentation:- e.1. Four (4) copies and one reproducible of all the "As Built" drawings of the Vessel required for its operation and maintenance in accordance with its design and purpose. e.2. Four (4) complete documentation and instructions (Operation and Maintenance) books covering builder supplied equipment. e.3. Four (4) sets of Operating Manuals and Instruction Books according to MODU CODE 1989 with all the necessary data including sea preparation and any other data or documents required by Owner's insurers. e.4. Four (4) copies of a complete maintenance guide including all drawings. e.5. One (1) copy of all the test and commissioning trials and results which have been done prior to delivery. e.6. Lightship weight, variable load and centre of gravity of lightship weight calculations. f. The certificates listed in Appendix VII, together with (i) Builder's Certificate or (at the Purchaser's option) Bill of Sale in favour of the Purchaser notarised and legalised to permit registration of the Vessel on the [ ] Register of Shipping and (ii) any other document relating to the condition and/or performance of the Vessel which the Purchaser may reasonably require provided the same is requested no later than seven Working Days prior to Delivery. 14.5. The documents listed in sub-clauses 14.4.e. 1-6 above are also to be supplied as a diskette in a format to be agreed between the Parties. REMOVAL OF THE VESSEL 14.6. Following Delivery of the Vessel, the Purchaser shall in seven (7) Working Days remove her from the Shipyard. If the Purchaser fails to remove the Vessel within this period, it shall pay to the Builder reasonable mooring charges thereafter until removal. 15. EXTENSION OF TIME FOR DELIVERY: PERMISSIBLE DELAY CAUSES OF DELAY 15.1. If at any time before the Contractual Delivery Date the construction of the Vessel is delayed due to Acts of God, acts of princes or rulers, war or other hostilities or preparations therefor, blockade, civil commotion or riots, strike, epidemics, floods, hurricanes, earthquakes, tidal waves, landslides, fires, lightning, explosions, collisions or strandings, shortage of materials or equipment other than resulting from any act, omission or improvidence of the Builder or its Subcontractors, prolonged failure, shortage or restriction of electric current, oil or gas or destruction of or damage to the Shipyard or works of the Builder or its Subcontractors by any causes herein described and other causes or accidents beyond control of the Builder or its major subcontractors or suppliers of similar nature, the 19 Contractual Delivery Date and any Milestones not then achieved shall be postponed for the period of time during which construction of the Vessel is directly and unavoidably delayed by the same. 15.2. Any periods of time by which the Contractual Delivery Date of the Vessel and any Milestones not then achieved is properly and justifiably claimed by the Builder to be extended by reason of matters falling within (a) subclause I above or (b) Clauses 5.6, 5.9, 7, 13.7 or 18.2 hereof shall be defined herein as "Permissible Delay". 15.3. The Builder's entitlement to a Permissible Delay shall, however, be subject to:- a. the delay in respect of which the Builder is claiming relief not being within its control or contemplation at the date of signing of this Contract nor caused or contributed to by its error, neglect, act or omission or that of its agents, employees or Subcontractors: b. the delay affecting the "critical path" of the Vessel's construction as the time of commencement of the event; c. since the occurrence of the event in respect of which relief is claimed, the Builder having taken all steps open to it to mitigate the effect of the event upon the Contractual Delivery Date and any Milestones not then achieved; and d. the Builder having duly given all the notices required under sub-clause 15.4 below within the time-limits therein laid down. NOTICES 15.4. Upon the occurrence of any of the events potentially constituting permissible delay listed in sub-clause (1) above, the Builder shall:- a. within seven (7) Working Days of the date on which it became aware of the event, give the Purchaser notice in writing of the occurrence of the event; b. as soon as possible thereafter, and in any event not more than seven (7) Working Days after the giving of the said notice, submit to the Purchaser a statement in writing, specifying as far as possible, with full particulars, the nature and the cause of the event, the effect on the item involved, the likely overall effect computed from the Planned Programme upon the Contractual Delivery Date and any Milestones not then achieved and the steps which are being taken by it to mitigate any delay which may result from the event; c. within seven (7) Working Days after the date on which it becomes aware that the event is at an end, give the Purchaser notice in writing of the date when the event ended; d. within seven (7) Working Days of the date of the Builder's notice under sub-paragraph (c), notify the Purchaser of the period of time by which it claims the Contractual Delivery Date of the Vessel and any Milestones not then achieved should be extended by reason of the event. 16. DELAY IN DELIVERY LIQUIDATED DAMAGES 16.1. In the event that Delivery should be delayed beyond midnight local time on the Contractual Delivery Date, the Builder shall, subject to the provisions of Clause 15 above, pay to the Purchaser by way of liquidated damages, not by way of penalty, for loss of use of the Vessel, the amounts set out below:- 1 - 150 days of delay US$ 42,500 per day 20 However, the total amount of the liquidated damages shall not be more than as would be the case for a delay of 150 days. The liquidated damages shall be due at the date of actual delivery of the vessel. TERMINATION FOR DELAY IN DELIVERY 16.2. Furthermore, if Delivery should not have occurred prior to either:- a. the expiry of 90 days from the Contractual Delivery Date (as extended by Permissible Delays); or b. The expiry of 180 days from the Contractual Delivery Date extended by such days of Permissible Delay as are attributable to the Purchasers fault. the Purchaser, as an alternative to receiving the above mentioned liquidated damages, may elect to rescind this Contract. If the Purchaser elects to rescind this Contract, then the Purchaser shall give notice in writing to the Builder in which case Clause 19.2 shall apply. Such notice, which shall be effective from receipt thereof by the Builder, shall operate without prejudice to the Purchaser's rights at law generally, but exclusive of its right to liquidated damages. 17. DEFECTS AND BUILDER'S GUARANTEE GUARANTEE PERIOD 17.1 The Builder guarantees the Vessel for a period of twelve months from Delivery or, in respect of individual items as provided for in the Specification, for such greater period as may be agreed, against all defects whether attributable to Materials, workmanship, construction or detail design, and against all physical damage caused to the Vessel thereby. The aforesaid period of twelve months from Delivery shall be known herein as the "Guarantee Period". 17.2. This guarantee shall not extend to Listed Items or to any damage caused by any defect therein not attributable to the Builder, but it shall extend to defects in Materials, workmanship or design and to physical damage caused therein resulting from the Builder's installation of the Listed Items. 17.3. The Builder guarantees repairs or replacements to the Vessel made under the guarantee in sub-clause (1) above for a further period of twelve months from the date of completion of such repair or replacement, provided that the total guarantee period shall not exceed twenty-four months from Delivery. REMEDY OF DEFECTS 17.4. The Purchaser shall notify the Builder in writing within thirty days after discovery of any defect or physical damage falling within the provisions of this Clause 17. The Purchaser's notice shall include such particulars as can reasonably be given as to the nature of such defect or physical damage, the date of discovery and the place at which the Vessel can be made available for earliest inspection by or on behalf of the Builder. The Purchaser shall furnish to the Builder as soon as practicable copies of any relevant survey or inspection reports. 17.5. The Purchaser may require the Builder to make good any defect or physical damage for which the Builder is liable under this Clause 17 by giving notice of such requirement to the Builder. Any parts replaced shall on their removal become the property of and shall be at the risk of the Builder whilst the replacement parts fitted to the Vessel shall upon fitting become the property of the Purchaser. 17.6. The Builder shall execute the necessary work including the carrying out of any essential dismantling and reassembling with the utmost despatch in accordance with the quality standards which are applicable hereunder to the Vessel's original construction. 17.7. In the event that the Builder is unable to make good any defect at the Shipyard, it shall forthwith nominate a yard suitable for such purpose for the Purchaser's approval, and should the Purchaser consider such yard 21 acceptable the Builder shall arrange for the making good of the defect and the carrying out of any essential dismantling and reassembling at its own expense. 17.8. Should the Purchaser consider the yard nominated by the Builder unacceptable, or should the Purchaser elect to have the work referred to above carried out elsewhere than at the Shipyard, the Purchaser shall nominate a yard acceptable to it. In such case the Builder shall pay to the Purchaser for repairs and/or replacements such sum as would equate to the costs of effecting such repairs at a first-class North-West European shipyard. The Builder may, at its own expense, have its representative in attendance during execution of the work. The Purchaser shall ensure that any parts replaced under this sub-clause are returned to the Builder (if required by the Builder) at the Builder's expenses, and in such case those parts returned shall on their replacement become the property of and shall be at the risk of the Builder. 17.9. In the event of defects arising which fall within the provisions of this Clause 17, whether or not such defects require the Vessel to be dry-docked, the Builder shall pay for any costs incurred by the Purchaser in making the Vessel available to the Builder or to any other yard for the making good of any such defect as aforesaid. Such additional costs shall include, but shall not be limited to, port charges and the cost of fuels, lubricants and consumable stores consumed in excess of those which would have been consumed had the Vessel not deviated to allow the Builder to make good any such defects as aforesaid. The Purchaser shall use all reasonable endeavours to mitigate the incidence of such costs chargeable to the Builder's account. Excepting the abovesaid additional costs, the Builder shall not be responsible or liable for any exceptional or special losses, damages or expenses including, but not limited to, loss of time, loss of profit or earning or demurrage directly or due to repairs or other works done to the Vessel to remedy such defects. 17.10. In the event that the Vessel is idle for more than 15 days in total accumulated time due to defects under this Clause 17 the Guarantee Period shall be extended by the number of all days during which the Vessel is idle commencing with the sixteenth day, whether or not other work is undertaken simultaneously with the guarantee work. GUARANTEE ENGINEER 17.11. Where so requested by the Purchaser, the Builder shall appoint a suitably qualified English-speaking Guarantee Engineer to serve on the Vessel as the representative of the Builder for such portion of the Guarantee Period as the Purchaser shall require, the Purchaser and its employees shall give the Guarantee Engineer full co-operation in carrying out his duties as the representative of the Builder on board the Vessel. In particular, the Purchaser shall accord the Guarantee Engineer treatment and subsistence on board the Vessel comparable to the Vessel's Chief Engineer (except that the Purchaser shall provide him accommodation in a standard passenger cabin) at no cost to the Builder. 17.12. The Purchaser shall pay the expenses of the Guarantee Engineer's repatriation by air to Korea upon termination of his services on the Vessel. However, save as aforesaid, the Purchaser shall be responsible for no other expenses in connection with the Guarantee Engineer, who shall at all times be conclusively deemed an employee of the Builder. The Builder shall indemnify and hold harmless the Purchaser from and against personal injury, including death, of, or loss of or damage to property of the Guarantee Engineer unless the same shall been caused by the gross negligence of the Purchaser or any of its employees, agents or sub-contractors. If the Purchaser has reason to be dissatisfied with the conduct or competence of the Guarantee Engineer, the Builder, on receiving particulars of the complaint, shall promptly investigate the matter and, if the complaint is found to be justified, make a change in the appointment. ASSIGNMENT OF SUBCONTRACTORS' GUARANTEES 17.13. The Builder agrees upon the expiry of the Guarantee Period to assign (to the extent to which it may validly do so) to the Purchaser, or as the Purchaser may direct, all the right, title and interest of the Builder in and to all guarantees or warranties given by the Subcontractors save insofar as the same relate to existing claims by the Purchaser against the Builder. 22 ASSIGNMENT OF BUILDER'S GUARANTEE 17.14. It is expressly agreed and understood that the benefit of this Guarantee shall be capable of transfer by the Purchaser to any Assignee. The Builder shall in such circumstances enter into any documentation reasonably requested by either the Purchaser or the Assignee to evidence such transfer and the vesting in the Assignee pursuant to such assignment of all rights in respect of this Guarantee. 18. DEFAULT BY THE PURCHASER EVENTS OF PURCHASER'S DEFAULT 18.1. The Purchaser shall be deemed to be in default of performance of its obligations under this Contract in the following cases: a. if the Purchaser fails to pay the amount of any of the Instalments of the Contract Price due to the Builder in the period prior to Delivery on the due date for payment thereof, b. if the Purchaser fails without legal justification to take delivery of the Vessel in accordance with Clause 14 and to pay the instalment of the Contract Price due thereon; c. if an order or an effective resolution is passed for the winding up of the Purchaser (otherwise than for the purposes of a reconstruction or amalgamation previously approved by the Builder) or if a receiver is appointed over the whole or any part of the undertaking or property of the Purchaser or if the Purchaser becomes insolvent or suspends payment generally of its debts or ceases to carry on its business or makes any special arrangement composition with its creditors. 18.2. If the Purchaser is in default as to the payment of any instalment as provided in (a) or (b) of sub-clause (1) above, then without prejudice to any other rights of the Builder or of the Purchaser, the Purchaser shall be liable to pay interest at 2 % per cent over LIBOR on the unpaid amount from the day from which the same became due to the Builder up until the date of actual payment thereof. The Builder shall further be entitled to claim as Permissible Delay within the meaning of Clause 15.2 any period of time during which the construction or completion of the Vessel has been delayed in consequence of the Purchaser's default as aforesaid. TERMINATION BY THE BUILDER 18.3. If default on the part of the Purchaser continues for a period of thirty days, the Builder shall have the right at its sole discretion to rescind this Contract by giving written notice to the Purchaser. The Builder shall in such event be entitled to retain all of the instalments received from the Purchaser. Upon completion of this Contract in accordance with this clause, title to the Vessel shall be temporarily transferred to the joint ownership of the Builder and the Purchaser and remain as such until disposal of the Vessel by the Builder in accordance with this clause. 18.4. In the event of rescission of this Contract in accordance with this Clause the Builder shall have the right and power either to complete or not to complete the Vessel as it deems fit but in any event shall sell the Vessel (either in its complete or incomplete form) at the best available price at a public or private sale on such reasonable terms and conditions. If the Builder sells the Vessel in an incomplete form then the Builder shall give credit to the Purchaser for any and all savings which arise from not having to complete the construction of the Vessel. 18.5. In the event of the sale of the Vessel in its completed state the proceeds of sale received by the Builder shall be applied to payment of all expenses attending such sale and otherwise incurred by the Builder as a result of the Purchaser's default and then to payment of all unpaid instalments of the Contract Price and interest on such instalments at the rate of 2 per cent above LIBOR from the respective due dates thereof to the date of application. 18.6. In the event of sale of the Vessel in its incomplete state the proceeds of sale received by the Builder shall be applied first to all expenses attending such sale incurred by the Builder as result of the Purchaser's default and then 23 to payment of all costs of part-construction of the Vessel less the instalments retained by the Builder and compensation to the Builder for damages suffered by the Builder in consequence of such default. 18.7. In either of the above events of sale, if the proceeds of sale exceed the sums to which such proceeds are to be applied as aforesaid the Builder shall promptly pay any such excess to [he Purchaser without interest thereon and shall at the same time either permit the Purchaser to remove the Purchaser's Supplies from the Shipyard or pay to the Purchaser the full value thereof. 18.8. If the proceeds of sale of the Vessel are insufficient to pay such total amounts payable as aforesaid the Purchaser shall be liable to pay to the Builder upon demand the amount of such deficiency. 19. DEFAULT BY THE BUILDER EVENTS OF BUILDER'S DEFAULT 19.1. In the event that any of the following events should occur:- a. the Builder shall without legal justification fail to proceed with construction of the Vessel with all reasonable despatch so that it fails to meet two consecutive Milestones within ninety days of the respective dates agreed for the same; b. the Builder shall commit any material breach of this Contract and shall fail to initiate the remedy work for the same within five Working Days of receipt by the Builder of written notice from the Purchaser; c. the making of any order or the passing of an effective resolution for the winding-up of the Builder (other than for the purposes of reconstruction or amalgamation which has been previously approved in writing by the Purchaser such approval not to be unreasonably withheld), or the appointment of a receiver of the undertaking or property of the Builder, or the insolvency of or a suspension of payment by the Builder, or the cessation of the carrying on of business by the Builder, or the making by the Builder of any special arrangement or composition with creditors of the Builder, and failure by the Builder the Purchaser may elect either (a) to rescind this Contract or (b) to exercise its option to purchase the Vessel pursuant to sub-clause.3 hereof. If the Purchaser elects to rescind this Contract. then the Purchaser shall give notice in writing to the Builder in which case the provisions of sub-clause 2 below shall apply. Such notice shall be effective from receipt thereof by the Builder. RESCISSION BY THE PURCHASER 19.2. If, in accordance with (1) the provisions of sub-clause 1 above or (2) Clause 16.3 above the Purchaser exercises its right to rescind this Contract, then the Builder shall, without prejudice to the Purchaser's general remedies at law, promptly repay to the Purchaser the amount of all monies paid by the Purchaser on account of the Contract Price together with interest thereon at a fixed rate of 10% p.a. from the date when such monies were paid by the Purchaser to the Builder up to the date of the repayment thereof calculated on the same basis as an commercial inter-bank transaction carried out in London. The Builder shall also redeliver to the Purchaser at the Shipyard all of the Purchaser's Supplies delivered to the Builder at the time of the Purchaser's rescission. Upon such refund by the Builder to the Purchasers, all obligations, duties and liabilities of each of the parties to the other under this Contract shall be completely discharged. PURCHASE OF THE VESSEL 19.3. In the event that the Purchaser shall exercise its option to purchase the Vessel, the Builder shall give notice in writing to the Builder. The Builder shall thereupon: a. secure the immediate discharge of all liens, claims, mortgages or other encumbrances upon the Vessel; 24 b. complete at its own cost all works required as a minimum to permit the Vessel to depart from the Shipyard in a safe and seaworthy condition, remove its employees, agents and contractors, together with their equipment, from the Vessel and render all necessary assistance to the Vessel in leaving the Shipyard at the earliest moment convenient to the Purchaser; c. execute and deliver to the Purchaser an original of the Protocol of Delivery and Acceptance together with any and all documentation (including but not limited to a bill of sale or builder's certificate) in such form and such manner as the Purchaser shall in its absolute discretion determine shall be required or desirable for the purposes of transferring to the Purchaser title to the Vessel in her then current state of construction; and d. execute and deliver to the Purchaser all of the documentation listed in Clause 14.4 hereof to the extent that the same is at that time capable of production by the Builder. 19.4. Title to the Vessel, and all risk of loss thereof, shall in such circumstances transfer to the Purchaser upon execution by the Purchaser of the Protocol of Delivery and Acceptance following receipt of all of the documentation received above. The Purchaser may, however, elect to execute the Protocol of Delivery and Acceptance notwithstanding the Builder's failure to deliver all or part of the other documentation required to be delivered by the Builder pursuant to subclause 3 above. 19.5. The Purchaser shall thereafter be entitled to retain and apply any balance which may be otherwise due under this Contract by it to the Builder, or such part thereof as may be necessary to meet the cost of completing the works envisaged under this Contract elsewhere, together with the supervision thereof (the "Completion Costs"). If the Completion Costs exceed the balance which would otherwise have been due from the Purchaser to the Builder hereunder, the Builder shall pay the amount of such excess to the Purchaser. However, if the Completion Costs are less than the balance which would otherwise have been due from the Purchaser to the Builder, the Builder shall be entitled to receive from Purchaser an amount equal to the difference between such price and the Completion Costs. NON-PAYMENT BY THE BUILDER 19.6. Should the Builder default in payment of any amount due under this Contract (including, without limitation, payment of liquidated damages), then the Builder shall pay to the Purchaser interest thereon at the rate of 2 percent over LIBOR from the date when the amount became due to the Purchaser to the date of the payment thereof. 20. PATENT INDEMNITY 20.1. The Builder warrants that the Purchaser and its successors in title shall enjoy quiet possession of the Vessel and that the Purchaser's possession, ownership or operation of the Vessel shall not at any time infringe any patent rights, utility model rights, trade mark rights or copyrights in any country. The purchaser shall protect, defend, hold harmless and indemnity the Builder in respect of any claim or infringement of a patent right, utility model rights, trade mark rights or copyrights related to the basic design, Listed Items or material or equipment provided by the Purchaser to the Builder. 20.2. The Builder shall indemnify and hold the Purchaser harmless against any loss, damage, claim, demand, proceeding or liability whatsoever arising out of relating to: a. any lawful claims of superior title by a third party against the Purchaser's quiet possession of the Vessel and b. the infringement of any of the rights set out in sub-clause (1) above by reason of the Purchaser's possession, ownership or operation of the Vessel. 20.3. The loss referred to in sub-clause (2) above shall include, but shall not be limited to: a. the costs and expenses of considering and defending any claim, demand or proceeding; 25 b. any sum paid or payable by the Purchaser in respect of any settlement or any such claim, demand or proceeding; c. any sum paid or payable by the Purchaser to acquire a license under any of the rights set out in sub-clause (1) above; and d. any sum paid or payable by the Purchaser to its servants or agents or to any operator of the Vessel to indemnify them or any of them against any such loss, damage, claim demand, processing or liability or the cost of acquiring a license under any of the such rights. 21. TAXES AND DUTIES 21.1. The Builder shall pay or cause to be paid all taxes, duties, fees and stamp duties of whatsoever nature imposed in Korea in connection with the execution and performance of this Contract, However personal income taxes imposed by Korean Authority upon employees of the Purchaser, if any, shall be the Purchasers account. 21.2. The Purchaser shall pay or cause to be paid all taxes, duties, fees and stamp duties of whatsoever nature imposed outside Korea in connection with the execution and performance of this Contract. 22. ASSIGNMENT 22.1. The Purchaser may transfer, by assignment or novation, to any third party or parties (herein "Assignee(s)") any of its rights and/or obligations under this Contract. Provided, however, that, to the extent that any such assignment or novation transfers to an Assignee the obligations of this Contract, the purchaser shall be responsible, jointly and severally with the Assignee, to perform the obligations of this Contract. 22.2. The Builder may, with the prior written approval of the Purchaser assign the benefit of this Contract. 23. PRIORITY OF DOCUMENTS 23.1. The Appendices hereto shall form an integral part of this Contract as if the same were expressly set out herein. 23.2. If there is any discrepancy between the following documents priority between them shall be as follows:- a. between the terms of this Contract (excluding the Specifications) and the terms of the Specifications, the terms of the former shall prevail; b. between the Principal Drawings and the Specifications, the Specifications shall prevail; c. between the Principal Drawings, in the order of precedence contained in Appendix I; d. between one approved Plan and another approved Plan, the later in date shall prevail; 24. NOTICES 24.1. Every notice, consent or approval (individually and collectively called "Communications" for the purposes of this Clause 24) given or required, whether expressly or impliedly, under this Contract shall be in writing. 24.2. Communications shall be given by the Builder to the Purchaser as follows: Address: to be advised Attn: Facsimile 24.3. Communications shall be given by the Purchaser to the Builder as follows: Address: to be advised 26 Attn: Facsimile 25. RECORDS AND AUDITS 25.1. The Builder shall maintain true and complete records in connection with the construction of the Vessel and all transactions related thereto, and shall retain all such records for not less than twenty-four (24) months following Delivery. 25.2. No director, employee or agent of the Builder shall give or receive any commission, fee, rebate, gift or entertainment of significant cost or value in connection with the work under this Contract, or enter into any business arrangement with any director, employee or agent of the Purchaser. 25.3. If any violation of sub-clause (2) above is found to have occurred prior to the date of signing this Contact and such violation is determined to have resulted directly or indirectly in the Purchaser's consent to enter into this Contract with the Builder the Purchaser may rescind this Contract by notice in writing to the Builder in which case the provisions of Clause 19.2 shall apply. 25.4. The Builder shall use its best endeavours to procure that all Subcontractors:- a. maintain records in accordance with sub-clause (1) above; b. enter into obligations with the Builder, to the like intent and effect as those which bind the Builder as above. The Builder shall promptly notify the Purchaser of any violation of such obligations involving Subcontractors which comes to the Builder's notice. 26. LAW 26.1. The construction, validity and performance of this Contract shall be governed by English Law. 27. DISPUTES 27.1. Any claim, difference or dispute which may arise out of this Contract shall be decided by the Commercial Court of the Queen's Bench Division of the High Court of England and Wales to whose exclusive jurisdiction the parties hereby agree. 27.2. For the purposes of any proceedings pursuant to sub-clause (1) above, the parties hereby irrevocably appoint the following as their agents for the service of process: THE BUILDER To be advised Ref: [ ] THE PURCHASER To be advised Ref: [ ] 27 27.3. Without prejudice to the generality of sub-clause (1) above and without prejudice to any express provision contained herein for referral of any matter to an expert, any dispute or difference of opinion between the parties relating to conformity of the construction of the Vessel, Materials or workmanship with this Contract, the Specifications and the other Contract Documents may, by agreement between the Parties, be referred to an expert, acting as an expert and not an arbitrator, to be appointed by agreement between them and whose opinion on the matter shall be final and binding upon the parties hereto. 27.4. If the parties shall fail to agree either (i) to submit the dispute to a technical expert or (ii) upon the identity of a mutually acceptable technical expert as aforesaid, such dispute shall be settled in the manner as defined in sub-clause 1 above. 28. MISCELLANEOUS 28.1 The terms of this Contract are to remain confidential to the parties and no disclosure of the same may be made to any third party other than for the purposes of permitting or ensuring its due performance by either party hereto. This obligation shall survive termination of this Contract for any reason whatsoever. 28.2. The Builder undertakes to ensure that all its supervisory staff, both on and off the construction site, are fluent in the English language and are capable of understanding any written or verbal instructions in the English language. 29. SPARE PARTS 29.1. The Builder shall furnish spare parts and maintenance tools of the kind and in at least the specified quantities in accordance with the Specifications, Classification Society requirements, and the maker's standards, for items furnished by the Builder. The cost of these spare parts is included in the Contract Price. 29.2. In addition, the Builder shall supply to the Purchaser a list of the maker's recommended spare parts for two (2) years of continuous operations covering items supplied by Builder, at least six months prior to the Vessel's completion. 29.3. The spare parts furnished by the Builder shall be properly protected against physical decay, corrosion and mechanical damage and shall be properly listed so that replacements may be readily ordered. 29.4. The Builder shall complete the storage spaces installation in time to enable to positioning, labelling and listing of all spare parts (the Builder and Purchaser supplied) prior to Delivery. The Builder at his own cost shall be responsible for handling, bringing on board and storage on the Vessel of all spare parts, tools and supplies under instruction and supervision of Purchaser's Representative. 30. SAFETY AND HEALTH STANDARDS 30.1. The Purchaser's Representative will have authority to monitor the performance of the work done by the Builder to ensure safe and workmanlike performance. 30.2. It is the Purchaser's policy not only to comply with the safety and health measures required by law but to act positively to prevent injury, ill health, damages and loss arising from its operations. The Purchaser requires the Builder and his sub-contractors to apply health, safety and local environmental standards in order to achieve high levels of performance. it is essential that the Builder and his sub-contractors undertaking work consistently show a high level of safety awareness and prove that they are capable of conducting themselves in a safe and competent manner in their area of activity. 30.3. The Builder acknowledges the Purchaser's strong commitment to safety and affirms that he has a written safety policy which has been signed and is actively supported and endorsed by Builder's management. The Builder further affirms that his safety policy is widely disseminated, understood and implemented by and among Builder's 28 and Builder's sub-contractors' employees. This policy shall be in English and such other language(s) as required. A copy of Builder's Safety Policy shall be furnished to the Purchaser prior to start of the work. 30.4. It is essential that good housekeeping is maintained by the Builder's employees throughout the term of this Contract. The working areas shall be kept tidy at all times, access ways kept clear and surplus/scrap material removed daily. Cleaning up at end of the job is not considered sufficient. Spillage of oil or chemicals shall be cleared up immediately to avoid fire hazards, slippery surfaces, contact with toxic substance and other hazards. Appropriate safety precautions shall be taken during cleaning up. No oil grade with flash points lower than 55 degrees C shall be used for cleaning purposes. 30.5. Asbestos containing products are not to be applied on board the Vessel. Substitutes therefor shall be applied only after authorisation by the Purchaser. 30.6. The Builder shall report immediately to the Purchaser all accidents occurring during the term of this Contract and related to work thereunder, that result in injury to or death of any person and/or damage to or loss of property. Accidents are defined as "Unintentional or unplanned events that may or may not result in personal injury or equipment, plant, or property damage, or any combination of these. The Purchaser reserves the right to stop part or all of the work at no cost to the Purchaser until relevant unsafe acts and situations have been rectified and the period work is so stopped shall not be a permitted reason for extending the of Delivery Date. Any such stoppage of work shall be confirmed to the Builder in writing by the Purchaser stating the reasons for stoppage and the actions that the Builder has to implement for work to be permitted to resume. For minor violation of safety regulations the Purchaser may choose not to require work stoppage provided that the Builder promptly rectifies such violation. 30.7. The Purchaser may require the Builder to permanently remove and replace any of Builder's or Builder's sub-contractors' employees who violate safety regulations and any equipment which is obviously unsafe. 30.8. The Builder shall, at his own expense, supply his personnel and his sub-contractors' personnel with adequate protective personal clothing, safety helmets, safety shoes, and other protective equipment required for the type of work to be carried out. 31. EFFECTIVENESS 31.1. This Contract is subject to, and shall become effective and legally binding on the parties as at the date of execution. 31.2. The date upon which the above conditions shall all have been satisfied shall be known hereunder as the "Effective Date". 29 IN WITNESS WHEREOF the parties hereto have caused this Contract to be duly executed the day and year first above written. THE PURCHASER: THE BUILDER: PETRODRILL CONSTRUCTION INC. DAEWOO CORPORATION /s/ DEREK LEACH /s/ YOUNG-KYUN SHIN By: Derek Leach By: Young-Kyun Shin Title: Attorney-in-Fact Title: Attorney-in-Fact DAEWOO HEAVY INDUSTRIES LTD /s/ YOUNG-KYUN SHIN By: Young-Kyun Shin Title: President 30 APPENDIX III FORM OF PROTOCOL OF DELIVERY AND ACCEPTANCE It is this day agreed that m.v. [ ], built by the Builder as Hull No.[ ] at its[ ] yard in [ ] under a Contract dated [ ] 1998 and made between the Builder and the Purchaser therein described has today been delivered by the Builder and accepted by the Purchaser. Dated: Signed .................... for [ ]. The Builder Signed .................... for [ ]. The Purchaser 31 APPENDIX VII LIST OF CERTIFICATES TO BE SUPPLIED ON DELIVERY OF THE VESSEL The Builder shall furnish, at the Builder's expense, to the Purchaser the following certificates upon delivery of the Vessel: From the Classification Society: a. Classification certificates for hull, machinery and electricals of the Vessel. b. Safety radio telegraph certificate. c. Load line certificate. d. Register tonnage certificate. e. Suez Canal tonnage certificate. f. MODU CODE certificate. g. Safety Construction certificate. h. Certificate of Navigation Lights. i. Certificate of Lifesaving Equipment, Fire Fighting and Fire Detection System. j. Compass Certificate. k. Compass Deviation Table. 1. MARPOL International Oil Pollution Prevention Certificate (IOPPC). m. Load test and lifting appliances certificate. n. Test Certificate of Pressure Vessels. From the Local Government Authority: a. De-ratting exemption certificate. b. Potable water analysis certificate. 32 APPENDIX VIII MAKERS LIST In accordance with Clause 5.6 of the contract the following maker's list details the Purchaser's preference based on (1) being the preferred supplier. - - ------------------------------------------------------------------------------- AMETHYST - APPROVED SUPPLIERS LSIT - - ------------------------------------------------------------------------------- Steel Suppliers (2) British Steel (1) Inexa (2) Posco Sumitomo NSC - - ------------------------------------------------------------------------------- Casting "TBA" - - ------------------------------------------------------------------------------- 16.000 Helideck (3) Baynards (2) Raufoss (1) Marine Aluminium - - ------------------------------------------------------------------------------- 19.000 Painting (4) Sigma (3) Hempel (5) Carboline (3) International (1) Jotun - - ------------------------------------------------------------------------------- 19.000 Cathodic Protection (3) Wilson Walton (1) Jotun (4) Impalloy (2) Electrocataltic - - ------------------------------------------------------------------------------- 32.200 Mooring winches - Capstans (4) Navel (2) Norwinch (1) Ulstein (3) Pusness (6) Zicom (5) Plimsol - - ------------------------------------------------------------------------------- 34.010 Liferafts (2) Zodiac 34.200 (1) Viking (3) Beaufort (4) RFD Lifeboats (1) Norsafe (3) Harding (2) Schat-Watercraft - - ------------------------------------------------------------------------------- 34.150 Fire Detection (1) Thom Security (4) Minervia (2) Autronica (3) Siemens - - ------------------------------------------------------------------------------- 34.520 C02 system (1) Unitor (2) LPG (3) Walter Kidde (4) Heisn Larsen - - ------------------------------------------------------------------------------- 36.000 Air Conditioning (4) ABB Flakt Marine (5) Semco (1) Stork - - ------------------------------------------------------------------------------- 33 - - ------------------------------------------------------------------------------- 73.000 Fuel Transfer Pumps (2) Hamworthy (3) Allweiler (1) IMO - - ------------------------------------------------------------------------------- 75.000 Fresh water pumps (1) Hamworthy 76.000 Sea water pumps (5) Grundfoss 81.000 Ballast pumps (6) Allweiler (4) Kvaerner (7) Shinko (2) Iron (3) Itvr - - ------------------------------------------------------------------------------- 81.500 Bilge / Dirty Oil Separator (4) Gefico (3) Blohm & Voss (2) Alfa Laval (1) Hermond Marine - - ------------------------------------------------------------------------------- 88.300 Fresh water makers (1) Alfa-laval (2) Atlas - - ------------------------------------------------------------------------------- 34 EX-10.17(A) 60 EXHIBIT 10.17(A) SIDE LETTER NO. 1. 9th April 1998 Petrodrill Construction Inc. Suite 205 Saffrey Square PO Box N 8188 Nassau Bahamas Daewoo Corporation & Daewoo Heavy Industries Ltd. Gentlemen, Hull No 3015 We refer to the contract executed between us today in respect of the above hull. This letter serves to confirm the agreement between us that, not withstanding the terms of the said contract, that portion of the First Instalment which is calculated as the balance between 10% of the Construction Price and 10% of the Provisional Contract Price shall only become payable on the Sixtieth day after the Effective Date of the contract. Similarly that portion of the Fifth Instalment which is calculated as the balance between 10% of the Construction Price and 10% of the Provisional Contract Price shall become payable within seven days of receipt from your notice, in good-faith that delivery of the Vessel is anticipated within sixty days. Further we jointly agree to enter into a formal amendment to the contract and to the amendment of the KEXIM Refund Guarantee to reflect this arrangement if so required. Yours faithfully /s/ DEREK LEACH Derek Leach Attorney-in-Fact ACCEPTED ON BEHALF OF DAEWOO CORPORATION AND DAEWOO HEAVY INDUSTRIES LTD. /s/ YOUNG-KYUN SHIN YOUNG-KYUN SHIN ATTORNEY-IN-FACT 9TH APRIL 9, 1998 EX-10.17(B) 61 EXHIBIT 10.17(B) SIDE LETTER NO. 2. 9th April 1998 Petrodrill Construction Inc. Suite 205 Saffrey Square PO Box N 8188 Nassau Bahamas Daewoo Corporation & Daewoo Heavy Industries Ltd. Gentlemen, Hull No 3015 You have expressed a desire to make us an alternative proposal after the commencement of the contract regarding "neutral funding" of the Listed Items to be procured under the terms of the contract. We confirm that we will be prepared to positively consider such a proposal provided that we are satisfied that: a) the funding proposed does indeed constitute "neutral funding" with no gain or loss being made by you; and b) that the KEXIM Refundment Guarantee provided in the terms of the contract is in no way prejudiced as regards either the Listed Items or the Construction Price. Yours faithfully /s/ DEREK LEACH Derek Leach Attorney-in-Fact ACCEPTED ON BEHALF OF DAEWOO CORPORATION AND DAEWOO HEAVY INDUSTRIES LTD. /s/ YOUNG-KYUN SHIN Young-Kyun Shin ATTORNEY-IN-FACT 9TH APRIL 9, 1998 EX-10.17(C) 62 EXHIBIT 10.17(C) NOVATION AGREEMENT This NOVATION AGREEMENT is made the 4th day of December 1998 between: (1) DAEWOO CORPORATION whose principal office is at 541, 5-Ga, Namdaemunro, Jung-Gu, Seoul, Korea; (2) DAEWOO HEAVY INDUSTRIES LTD. (together with Daewoo Corporation the "BUILDER" whose principal office is at 541, 5-Ga, Namdaemunro, Jung-Gu, Seoul, Korea.; (3) PETRODRILL OFFSHORE, INC. (formerly "PETRODRILL CONSTRUCTION INC.") (the "PURCHASER") whose principal office is at Suite 205, Saffrey Square, P.O. Box N8188, Nassau, Bahamas; and (4) PETRODRILL SEVEN LIMITED (the "NEW PURCHASER") whose registered office is at Arias Fabrega & Fabrega, Omar Hodge Building, 2nd Floor, Wickam's Cay 1, Road Town, Tortola, British Virgin Islands. (together referred to as the PARTIES) WHEREAS (A) The Builder and the Purchaser are parties to an agreement relating to the construction and sale of a dynamic positioned semi-submersible drilling vessel with Builders Hull No. 3016 dated 9 April 1998 (including any amendments included in the associated memorandum, meeting minute and/or side letter made from time to time thereto) (herein called the "AGREEMENT" which expression shall mean the said Agreement as amended by this Novation Agreement. (B) The Parties hereto have agreed to novate the Agreement upon the terms and subject to the conditions set out herein. NOW IT IS AGREED THAT, WITH EFFECT FROM THE DATE OF THIS NOVATION AGREEMENT: (1) Terms and expressions defined in the Agreement shall, unless the context otherwise requires, have the same meanings when used in this Novation Agreement. (2) Upon and with effect from the date of this Novation Agreement, the Purchaser releases and discharges and agrees to release and discharge the Builder from the various covenants, undertakings, warranties and other obligations contained in the Agreement which are enjoyed by the Purchaser, and from all claims and demands whatsoever arising out of or in respect of the Agreement whether prior to, on or subsequent to the date of this Novation Agreement. (3) Upon and with effect from the date of this Novation Agreement, the Builder releases and discharges and agrees to release and discharge the Purchaser from the various covenants, undertakings, warranties and other obligations contained in the Agreement which are enjoyed by the Builder, and from all claims and demands whatsoever arising out of or in respect of the Agreement whether prior to, on or subsequent to the date of the Novation Agreement whether prior to, on or subsequent to the date of the Novation Agreement. -1- (4) Upon and with effect from the date of this Novation Agreement, the New Purchaser accepts and agrees to accept the liabilities of the Purchaser under the Agreement and agrees to perform all the duties and to discharge all the obligations of the Purchaser under it and to be bound by all the terms and conditions of this Agreement in every way as if the New Purchaser were named in the Agreement as a party ab initio in place of the Purchaser. Without limiting the generality of the foregoing, the New Purchaser acknowledges and agrees that the Builder shall have the right to enforce the Agreement and pursue all claims and demands (future or existing) whatsoever arising out of or in respect of the Agreement whether prior to, on or subsequent to the date of this Novation Agreement. (5) Upon and with effect from the date of this Novation Agreement, the Builder agrees to perform all its duties and to discharge all its obligations under the Agreement and to be bound by all the terms and conditions of the Agreement in every way as if the New Purchaser were named in the Agreement as a party ab initio in place of the Purchaser. Without limiting the generality of the foregoing, the Builder acknowledges and agrees that the New Purchaser shall have the right to enforce the Agreement and pursue all claims and demands (future or existing) whatsoever arising out of or in respect of the Agreement whether prior to, on or subsequent to the date of this Novation Agreement. (6) The New Purchaser confirms that it has received a copy of the Agreement and that it is familiar with the terms thereof. (7) Each Party shall take all steps, execute all documents and do everything reasonably required by any other Party to give effect to the transactions contemplated by this Novation Agreement provided that the Purchaser and the New Purchaser shall jointly and severally reimburse the Builder on a full indemnity basis for all reasonable costs and expenses (including legal fees) incurred by the Builder pursuant to this Clause 7 or otherwise howsoever in connection with the negotiation and execution of this Novation Agreement. (8) If the second Instalment of the Contract Price is not received by the Builder by 15 December 1998, the Builder shall be entitled immediately thereafter to rescind the Agreement by giving written notice to the New Purchaser and to exercise all the Builder's rights under the Agreement. -2- SIGNED by DAEWOO CORPORATION on behalf of BUILDER in the presence of: /s/ YOUNG-KYUN SHIN Young-Kyun Shin Attorney-In-Fact SIGNED by DAEWOO HEAVY INDUSTRIES LTD. on behalf of BUILDER in the presence of: /s/ YOUNG-KYUN SHIN Young-Kyun Shin President SIGNED by PETRODRILL OFFSHORE INC. on behalf of PURCHASER in the presence of: /s/ STEVE ASSITER Steve Assiter Attorney-In-Fact SIGNED by PETRODRILL SEVEN LIMITED on behalf of NEW PURCHASER in the presence of: /s/ STEVE ASSITER Steve Assiter Attorney-In-Fact -3- EX-10.17(D) 63 EXHIBIT 10.17(D) DAEWOO CORPORATION & DAEWOO HEAVY INDUSTRIES LTD AND PETRODRILL SEVEN LIMITED. MAIN CONTRACT AMENDMENT AGREEMENT HULL 3015 This Agreement made and entered into this day of December, 1998 by and between: 1. Daewoo Corporation & Daewoo Heavy Industries Ltd., both corporations organised and existing under the laws of Republic of Korea and having their principal offices at 541, Namdaemun-Ro 5-Ga, Chung-Gu, Seoul, Korea (hereinafter jointly and severally referred to as "BUILDER") of the first Part; 2. Petrodrill Seven Limited a corporation organised under the laws of the British Virgin Islands having its principal office at 325 Waterfront Drive, Omar Hodge Building, 2nd Floor Wickham's Cay 1, PO Box 985, Road Town, Tortola, British Virgin Islands ("PURCHASER") of the Second Part; 3. Petrodrill Offshore Inc (formerly Petrodrill Construction Inc.) a corporation organised under the laws of the Bahamas having its principal office at Suite 205, Saffrey Square, PO Box N8188, Nassau, Bahamas ("CONSENTOR"). WHEREAS, (1) Builder and Purchaser are parties to a contract dated 9 April 1998 for the construction and sale of a dynamic positioned semi-submersible drilling vessel Hull No. 3015 (the "MAIN CONTRACT") as novated in the Purchasers favour by the Novation Agreement dated 4th December 1998 (THE NOVATION AGREEMENT). (2) Builder and Purchaser wish to amend certain of the payment provisions and the delivery date specified in the Main Contract in the manner hereinafter written. NOW, THEREFORE, in consideration of the mutual promises herein contained, it is agreed as follows: 1.0 - MAIN CONTRACT AMENDMENT 1.1 The payment date for the Second Instalment under Clause 4.1 of the Main Contract is to be amended to reflect that payment will be made on the 23rd December 1998: 1.2 Clause 14.1 of the Main Contract is amended as follows: "The Vessel shall be delivered by the Builder to the Purchaser at the Shipyard (or other place as may be agreed with unrestricted access to the open sea) on the 30th June 2000 except that, in the event of Permissible Delay, as defined in Clause 15.2 hereof, the aforementioned date shall be postponed accordingly. The aforementioned date, or such later date to which requirement to deliver may be postponed, is herein called the "Contract Delivery Date". 2 MISCELLANEOUS: 2.1 This Agreement is supplemental to the Main Contract. Except as expressly amended as set out herein the Main Contract remains in full force and effect. 2.2 The amendments contained in Clause 1.0 hereof shall be deemed to have been in effect from the 9th April 1998, notwithstanding the date of this Agreement. 2.3 The construction, validity and performance of this Agreement shall be governed by English law. - - -------------------------------------------------------------------------------- Daewoo Main Contract Amendment II -- Hull 3015 16-Dec-98 - 1 - 2.4 This Agreement may be signed in any number of counterparts all of which when taken together will constitute one and the same document. 3 NOVATION AGREEMENT CORRECTION: 3.1 The Parties hereto and the Consentor acknowledge that the Novation Agreement erroneously referred, to "Hull 3016" in its description of the Main Contract in Recital (A) thereof, where as its correct designation is "Hull 3015" and the Parties and the Consentor hereby agree that the Novation Agreement should be construed and deemed amended accordingly. 4 CONDITION SUBSEQUENT 4.1 This Agreement is entirely conditional upon the Purchaser making payment of the Second Instalment by the date specified in Clause 1.1 hereof, otherwise this Agreement shall be deemed null and void and the Main Contract shall have effect unamended. IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly executed the day and year first above written. For and on behalf of For and on behalf of DAEWOO CORPORATION PETRODRILL SEVEN LIMITED /s/ KYU-SANG SHIM /s/ D. LEACH Name: KYU-SANG SHIM Name: D. Leach Title: Attorney-in-Fact Title: Attorney For and on behalf of For and on behalf of DAEWOO HEAVY INDUSTRIES LTD. PETRODRILL OFFSHORE Inc /s/ KYU-SANG SHIM /s/ D. LEACH Name: KYU-SANG SHIM Name: D. Leach Title: Attorney-in-Fact Title: Attorney We THE EXPORT-IMPORT BANK of KOREA hereby acknowledge the terms of this Amendment: ______________________________ Name: Title: Date - - -------------------------------------------------------------------------------- Daewoo Main Contract Amendment II -- Hull 3015 16-Dec-98 - 2 - [DAEWOO LETTERHEAD] POWER OF ATTORNEY Know All Men By These Presents: That DAEWOO HEAVY INDUSTRIES LTD., a corporation duly organized and existing under the laws of the Republic of Korea (the "Korea") and having its principal office at 541, Namdaemun-no 5-ga, Chung-gu, Seoul, Korea (the "Company"), hereby authorizes anyone of the following people: Kyu-Sang Shim/Executive Director and Wan-Soo Ryu/General Manager of the Company to discuss, negotiate and/or sign individually in the name and on behalf of the Company the Construction Contracts for two (2) Dynamic Positioned Semi-Submersible Drilling Vessels Identified as Daewoo Hull Nos. 3015 and 3016 between PETRODRILL CONSTRUCTION INC. a corporation duly organized and existing under the laws of Bahamas, having its principal office at Suite 205, Saffrey Square PO Box N8188, Nassau, Bahamas, (hereinafter called "Purchaser"), or its nominee and the Company, and all documents, including any of Specifications, Amendments, Addenda, Memoranda and Agreements etc. to be executed/entered into in respect to/in connection with the aforesaid Construction Contracts. This Power of Attorney shall remain in full force and effect unless this authority shall be revoked and notice of such revocation shall be received by you. IN WITNESS WHEREOF, I have hereunto set may hand and signature this April 6, 1998. Daewoo Heavy Industries Ltd. By : /s/ Y. K. SHIN Name : Young-Kyun Shin Title: President [DAEWOO CORPORATION LETTERHEAD] POWER OF ATTORNEY We, Daewoo Corporation, a corporation duly organized and existing under the laws of the Republic of Korea and having its principal office at 541, Namdaemun-ro 5-Ga, Jung-Gu, Seoul, Korea (hereinafter called "Company"), hereby authorize each of Young-Kyun Shin/President, Kyu-Sang Shim/Executive Director and Wan-Soo Ryu/General Manager of Daewoo Heavy Industries Ltd. to discuss, negotiate and/or sign not jointly but separately in the name and on behalf of the Company THE CONTRACT FOR CONSTRUCTION OF DYNAMIC POSITIONED SEMI-SUBMERSIBLE DRILLING VESSELS between PETRODRILL N.V. and the company, and all documents including any of specifications, amendments, addenda, agreements, etc. to be executed/entered into in respect to/in connection with the aforesaid Contract. This Power of Attorney shall remain in full force and effect unless this authority shall be revoked and notice of such revocation shall be received by you. IN WITNESS WHEREOF, I have hereto set my hand and signature this April 6, 1998. Yours faithfully, For Daewoo Corporation /s/ BYUNG-JU CHANG Byung-Ju Chang President EX-10.17(E) 64 EXHIBIT 10.17(E) DAEWOO CORPORATION & DAEWOO HEAVY INDUSTRIES LTD AND PETRODRILL SEVEN LTD. MAIN CONTRACT AMENDMENT AGREEMENT II HULL 3015 This Agreement made and entered into this 28th day of January, 1999 by and between: 1 Daewoo Corporation & Daewoo Heavy Industries Ltd., both corporations organised and existing under the laws of Republic of Korea and having their principal offices at 541, Namdaemun-Ro 5-Ga, Chung-Gu, Seoul, Korea (hereinafter jointly and severally referred to as "BUILDER"); and 2 Petrodrill Seven Limited, a corporation organised under the laws of the British Virgin Islands having its principle office at 325 Waterfront Drive, Omar Hodge Building, 2nd Floor Wickhams Cay 1, PO Box 985, Road Town, Tortola, British Virgin Islands. ("PURCHASER"). WHEREAS, (1) Builder and Purchaser are parties to a contract dated 9 April 1998 for the construction and sale of a dynamic positioned semi-submersible drilling vessel Hull No. 3015 (the "MAIN CONTRACT"). (2) Builder and Purchaser are parties to the Main Contract Amendment Agreement dated 17 December 1998. (3) Builder and Purchaser wish to amend the payment terms set out in the Main Contract in accordance with the terms and conditions set out in this Agreement. (4) The Export-Import Bank of Korea ("KEXIM") has by a Refund Guarantee dated 16 April 1998 (the "REFUND GUARANTEE") guaranteed certain repayment obligations of the Builder to the Purchaser under the Main Contract. (5) The parties have agreed that this Agreement and the things contemplated by it are in all respects subject to and conditional upon KEXIM issuing a letter of amendment to the Refund Guarantee in the form required by this Agreement. (6) The parties wish to record the terms of their agreements on the terms and conditions set out in this Agreement. NOW, THEREFORE, in consideration of the mutual promises herein contained, it is agreed as follows: 1 CONDITION PRECEDENT This Agreement is in all respects subject to and conditional upon the Builder obtaining from KEXIM and delivering to the Purchaser a letter of amendment to the Refund Guarantee in the form attached as Appendix A duly executed on behalf of KEXIM. 2 MAIN CONTRACT AMENDMENT 2.1 Clause 4.1 of the Main Contract is amended as follows: "4.1 The Purchaser shall pay the Construction Price to the Builder in five instalments as follows, the pre-delivery instalments being paid as advances and not as deposits: FIRST INSTALMENT Ten percent (10%) of the Construction Price, being $8,500,000 shall be paid within three Banking Days of the Effective Date. SECOND INSTALMENT Thirty percent (30%) of the Construction Price, being $25,500,000, shall be paid within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorized Representative (or, in default thereof, the Classification Surveyor), certifying that it is 6 months after the Effective Date of the contract has taken place. THIRD INSTALMENT Twenty percent (20%) of the Construction Price, being $17,000,000 shall be paid within three Banking Days of receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an - - -------------------------------------------------------------------------------- Daewoo Main Contract Amendment II -- Hull 3015 -- Petrodrill Seven Ltd 28-Jan-99 - 2 - Authorised Representative (or, in default thereof, the Classification Surveyor), certifying that Keel laying has taken place. FOURTH INSTALMENT: Twenty percent (20%) of the Construction Price, being $17,000,000 shall be paid within three Banking Days of receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorised Representative (or, in default thereof, the Classification Surveyor), certifying that launch [float out] laying has taken place. FIFTH INSTALMENT: Twenty percent (20% of the Construction Price, together with any increase or any decrease of the Construction Price arising from the Provisions of Clauses 7 and 16 below, shall be paid upon Delivery." 2.2 A new provision is inserted as Clause 4.1A of the Main Contract as follows: "4.1A The Purchaser shall pay the difference between the Construction Price and the Provisional Contract Price (the "LISTED ITEMS PRICE") to the Builder in nine instalments as follows, the pre-delivery instalments being paid as advances and not as deposits: FIRST INSTALMENT: Ten percent (10%) of the Listed Items Price, being $5,100,000, shall be paid on or before 9th June 1998. SECOND INSTALMENT: Fifteen percent (15%) of the Listed Items Price, being $7,650,000 shall be paid on or before 17th March 1999. THIRD INSTALMENT: Five percent (5%) of the Listed Items Price, being $2,550,000, shall be paid on or before 30th March 1999. FOURTH INSTALMENT: Ten percent (10%) of the Listed Items Price, being $5,100,000 shall be paid on or before 30 April 1999. FIFTH INSTALMENT Fifteen percent (15%) of the Listed Items Price, being $7,650,000, shall be paid on or before 30 June 1999. SIXTH INSTALMENT Ten percent (10%) of the Listed Items Price, being $5,100,000, shall be paid on or before 30 August 1999. SEVENTH INSTALMENT Ten percent (10%) of the Listed Items Price, being $5,100,000, shall be paid on or before 30 October 1999. EIGHTH INSTALMENT: Ten percent (10%) of the Listed Items Price, being $5,100,000, shall be paid on or before 30 December 1999. NINTH INSTALMENT: Ten percent (10%) of the Listed Items Price, being $5,100,000, shall be paid on or before 28th February 2000. - - -------------------------------------------------------------------------------- Daewoo Main Contract Amendment II -- Hull 3015 -- Petrodrill Seven Ltd 28-Jan-99 - 3 - TENTH INSTALMENT: Five percent (5%) of the Listed Items Price, being $2,550,000 together with (or minus) any anticipated excess or (shortfall) of the Listed Items Price over (or under) the provisional Listed Items Price, shall be paid on or before 30 April 2000." 23. Clause 5.7 of the Main Contract is amended as follows: 5.7 Unless the Purchaser shall otherwise agree the Builder shall supply those items of Materials set out in Appendix IIA (the Listed Items) from suppliers and subcontractors nominated by the Purchaser. The Purchaser, as agent for and on behalf of the Builder, shall negotiate terms and expedite equipment with each of the Nominated Subcontractors in order to supply the Listed Items set out in Appendix IIA. It is however, expressly agreed that the Purchaser shall contract and expedite with each of the suppliers of the Listed Items as agent for and on behalf of the Builder and the ownership in such Listed Items shall vest with the Builder. 2.4 Clause 5.8 of the Main Contract is amended as follows: "5.8 The price for the Listed Items, including delivery to the Builder's yard, negotiated by the Purchaser, on behalf of the Builder, with the Nominated Subcontractors shall be included in the contract price based on the overall budget as set out in Clause 3.1 (b). In the event of any variations in the actual price then the Listed Items Price shall be increased or decreased by an amount equal to the amount of such variations. Any such variations shall be payable by the Purchaser by means of an adjustment of the final instalments of the Construction Price." 2.5 Clause 5.9 of the Main Contract is amended as follows: 5.9 Furthermore, in the event that delivery to the Builder of any Listed Item is delayed beyond the Target Delivery Date for the same set out in Appendix IIA, the Builder shall be entitled to a postponement of the Contractual Delivery Date for a period as it shall demonstrate, by reference to the "critical path" that the Vessel's construction and completion has actually been delayed. Delays in delivery of more than one Listed Item occurring simultaneously, shall have given rise only to concurrent (rather than consecutive) extensions. Any verified and documented delays caused, or contributed to by the Builder taking more than 14 days, after receipt, to pay approved Nominated Subcontractors invoices that have been submitted by the Purchaser in the agreed format will become cause for an adjustment in the delivery date of the Listed Items as detailed in Appendix IIA. Such adjustments shall reflect the ultimate delay in the arrival of the Listed Item at the Builder's yard. 3. MISCELLANEOUS 3.1 Any capitalised terms in this Agreement not defined in this Agreement shall have the same meaning as defined in the Main Contract. 3.2 This Agreement shall become effective as soon as executed by all parties subject to Clause 1 of this Agreement. 3.3 This Agreement is supplemental to the Main Contract and the Main Contract Amendment Agreement. Except as expressly amended as set out herein the Main Contract and the Main Contract Amendment Agreement remain in full force and effect. 3.4 The construction, validity and performance of this Agreement shall be governed by English law. 3.5 This Agreement may be signed in any number of counterparts all of which when taken together will constitute one and the same document. - - -------------------------------------------------------------------------------- Daewoo Main Contract Amendment II -- Hull 3015 -- Petrodrill Seven Ltd 28-Jan-99 - 4 - IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly executed the day and year first above written. For and on behalf of For and on behalf of DAEWOO CORPORATION PETRODRILL SEVEN Limited. /s/ K. S. SHIM /s/ D. LEACH Name: K. S. SHIM Name: D. Leach Title: Attorney-in-fact Title: Attorney-in-fact Attested by Attested by For and on behalf of DAEWOO HEAVY INDUSTRIES LTD. /s/ K. S. SHIM Name: K. S. SHIM Title: Managing Director Attested by - - -------------------------------------------------------------------------------- Daewoo Main Contract Amendment II -- Hull 3015 -- Petrodrill Seven Ltd 28-Jan-99 - 5 - EX-10.18 65 EXHIBIT 10.18 THE EXPORT-IMPORT BANK OF KOREA [LETTERHEAD] REFUND GUARANTEE To: PETRODRILL CONSTRUCTION INC April 16, 1998 Daewoo Heavy Industries Ltd's Hull Number 3015 We hereby issue our irrevocable guarantee No.M0902-804-LG-00040 in favour of yourselves, Petrodrill Construction Inc, for the account of Daewoo Corporation and Deawoo Heavy Industries Ltd (hereinafter called the "Builder") in connection with the shipbuilding contract dated 9th April 1998 (hereinafter called the "Contract") made by and between yourselves and the Builder for the construction and sale of one Dynamic Positioned Semi-Submersible Drilling Vessel having Builder's Hull No.3015 (hereinafter called the "Vessel"). Other terms and expressions employed herein shall bear the same meaning as in the Contract, a copy of which has been provided to us. Under the terms of the Contract you are to pay to the Builder a Contract Price for the Vessel in five instalments payable as follows:- (a) FIRST INSTALMENT: 10 percent (ten %) of the Provisional Contract Price, being $13,600,000 shall be paid within three Banking Days of the Effective Date. (b) SECOND INSTALMENT: 30 percent (thirty %) of the Provisional Contract Price, being $40,800,000 shall be paid within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorised Representative (or, in default thereof, the Classification Surveyor), certifying that it is 6 months after the Effective Date of the contract has taken place. (c) THIRD INSTALMENT: 20 percent (twenty %) of the Provisional Contract Price, being $27,200,000 shall be paid within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorised Representative (or, in default thereof, the Classification Surveyor), certifying that Keel laying has taken place. -- Continued on Page 2 -- -- Page 2 -- (d) FOURTH INSTALMENT: 20 percent (twenty %) of the Provisional Contract Price, being $27,200,000 shall be paid within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorised Representative (or, in default thereof, the Classification Surveyor), certifying that launcing [float out] has taken place. (e) FIFTH INSTALMENT: 20 percent (twenty %) of the Provisional Contract Price, together with the aggregate of (i) any excess of the Contract Price over the Provisional Contract Price and (ii) any increase or any decrease of the Contract Price arising from the provisions of Clauses 7 and 16 below, shall be paid upon Delivery. In accordance with the terms of the Contract you are entitled either upon your rescission therof or upon a Total Loss of the Vessel to repayment of the instalments of the Contract Price paid by you prior to such rescission, together with interest thereon at a fixed rate of 10% p.a. (calculated on the same basis as any London inter-bank commercial transaction) from the date of payment by the Purchaser to the date such instalments plus interest are returned to the Purchaser. In the event that the Builder shall fail to make such repayment, we shall pay to you the sum or sums due to you from the Builder against your written statement (or that of your assignee) that demand for repayment has been made and that the Builder has within thirty(30) Business Days of such demand failed to comply therewith. Such written statement shall identify (i) the number and amount of Instalments in respect of which repayment has not been received and (ii) the total interest payable in respect of the same on the assumption that payment of the principal sum outstanding is made by us thirty (30) Business Days from the date of receipt of such statement. This guarantee shall initially secure repayment of the First Instalment of the Contract Price (plus interest thereon as hereinbefore provided) from the date of receipt of the same by the Builder. The maximum sum claimable by you hereunder will thereafter be automatically increased upon Builder's receipt of each further Instalment of the Contract Price payable prior to Delivery of the Vessel, each time by the amount of such Instalment plus interest thereon as hereinbefore provided, but in any eventuality our total liability hereunder shall not exceed the sum of US$108,800,000 plus interest thereon as hereinbefore provided. -- Continued on Page 3 -- -- Page 3 -- THE EXPORT-IMPORT BANK OF KOREA [LETTERHEAD] Notwithstanding the provisions here in above in case we receive notification from you or the Builder stating that the question of your rescission of the Contract or your claim for refundment thereunder has been disputed and referred to the Commercial Court in accordance with the provisions of the Contract, this Guarantee shall be valid until 30 days after the final judgement shall be rendered in said Court. In such case this Guarantee shall only be available to the extent of a final judgement in your favour by such Court justifying your claim for refundment as presented to us or specifying such lesser amount as the Court may determine as being due to you. Our liability hereunder shall not be affected by any alteration to, or variation of, the terms of the Contract you may hereafter agree with the Builder or any other matter or circumstance which would, but for this clause, operate to exclude or limit our liability hereunder. This guarantee shall be fully assignable by you. It shall expire and become null and void upon the earliest of (i) receipt by you or your assignee of the amount guaranteed hereunder and (ii) Delivery of the Vessel in accordance with the provisions of the Contract or (iii) valid rescission by the Builder in accordance with the terms of the Contract. In such case, this guarantee shall be returned to us. This guarantee shall be governed by, and construed in accordance with English law, and we hereby (i) agree for your exclusive benefit that any legal action or proceeding arising hereunder may be brought in the High Court of Justice in England (ii) irrevocably submit to the jurisdiction of that court and (iii) irrevocably designate, appoint and empower London Representative Office of The Export-Import Bank of Korea (the present address of whose registered office is 3rd floor Boston House, 63 New Broad Street, London EC2M 1JJ, United Kingdom) to receive for us and on our behalf of process in England. Yours very truly, For and on behalf of The Export-Import Bank of Korea By: /s/ WON-YOUNG CHUN By: /s/ JONG BOK LEE Name: Won-Young Chun Name: Jong Bok Lee Title: Senior Manager & Title: Assistant Manager & Senior Loan Officer Loan Officer /Ship Export Credit Dept. /Ship Export Credit Dept. THE EXPORT-IMPORT BANK OF KOREA LIST OF AUTHORIZED SIGNATURES THE EXPORT-IMPORT BANK OF KOREA INSTRUCTIONS This booklet contains the facsimile signatures in alphabetical order of the officers, who are authorized to sign on behalf of this bank. 1. Each member of the Board of Executive Directors has full and complete authority to sign alone for this bank. 2. The transactions mentioned below in excess of U$10,000 (or the equivalent thereof in other currency) shall be signed by two officers, at least one of whom must be an officer in A Class. A. Issuance of check, bill of exchange or promissory note. B. Instructions to effect the payment or transfer of funds not involving the documentary letter of credit. C. Opening and amendment of letter of guarantee. D. Opening and amendment of clean letter of credit. We will inform you of any change of list whenever it occurs. - 1 - THE EXPORT-IMPORT BANK OF KOREA Chang-Jin Chong A /s/ CHANG-JIN CHONG 049 Won-Young Chun A /s/ WON-YOUNG CHUN 050 Chang-Ho Chung B /s/ CHANG-HO CHUNG 051 Chul-Choong Chung A /s/ CHUL-CHOONG CHUNG 052 THE EXPORT-IMPORT BANK OF KOREA Young-Kon Kim B /s/ YOUNG-KON KIM Hyung-Ju Lee B /s/ HYUNG-JU LEE Jae-Hong Lee B /s/ JAE-HONG LEE Jong-Bok Lee B /s/ JONG-BOK LEE EX-10.18(A) 66 EXHIBIT 10.18(A) NOVATION AGREEMENT This NOVATION AGREEMENT is made the 4 day of Dec 1998 between: (1) THE EXPORT-IMPORT BANK OF KOREA (the Bank) whose principal office is at 16-1, Yoidodong, Youngdungpo Gu, Seoul, Korea; (2) PETRODRILL OFFSHORE INC. (formerly Petrodrill Construction Inc.) (the BENEFICIARY) whose principal office is at Suite 205, Saffrey Square, PO Box N8188, Nassau, Bahamas; and (3) PETRODRILL SEVEN LIMITED (the NEW BENEFICIARY ), whose registered office is at Arias, Fabrega & Fabrega, Omar Hodge Building, 2nd Floor, Wickham's Cay 1, PO BOX 986, Road Town, Tortola, British Virgin Islands. (together referred to as the PARTIES) Whereas (A) The Bank and the Beneficiary are parties to a Refund Guarantee dated 16 April 1998 securing the obligations of Daewoo Corporation & Daewoo Heavy Industries Ltd. In respect of the construction and sale of a dynamic positioned semi-submersible drilling vessel with Builders Hull No. 3015 (including any amendments described in the associated memorandum, meeting minute and/or side letter made from time to time thereto) (the Guarantee). (B) The Parties hereto have agreed to novate the Guarantee. Now it is agreed that, with effect from the date of this Novation Agreement: (1) Terms and expressions defined in the Guarantee shall, unless the context otherwise requires, have the same meanings in this Novation Agreement. (2) The Beneficiary releases and discharges the Bank from the various covenants, undertakings, warranties and other obligations contained in the Guarantee which are enjoyed by the Beneficiary, and from all claims and demands whatsoever arising out of or in respect of the Guarantee whether prior to, on or subsequent to the date of this Novation Agreement. (3) The Bank agrees to perform all its duties and to discharge all its obligations under the Guarantee and to be bound by all the terms and conditions of the Guarantee in every way as if the New Beneficiary were named in the Guarantee as a party AB INITIO in place of the Beneficiary. Without limiting the generality of the foregoing, the Bank acknowledges and agrees that the New Beneficiary shall have the right to enforce the Guarantee and pursue all claims and demands (future or existing) whatsoever arising out of or in respect of the Guarantee whether arising prior to, on or subsequent to the date of this Novation Agreement. -1- (4) Each party shall take all steps, execute all documents and do everything reasonably required by any other Party to give effect to the transactions contemplated by this Novation Agreement. (5) This Novation Agreement is governed by and shall be construed in accordance with the laws of England and the Parties hereby submit to the exclusive jurisdiction of the courts of England. In witness whereof this Novation Agreement has been signed on behalf of the Parties the day and year first before written. SIGNED on behalf of EXPORT-IMPORT BANK OF KOREA in the presence of: )/s/ Illegible )/s/ Illegible SIGNED on behalf of PETRODRILL OFFSHORE INC. in the presence of: )/s/ DEREK LEACH D. Leach Attorney )/s/ H. STEPHEN ASSITER H.S. Assiter Witness SIGNED on behalf of PETRODRILL SEVEN LIMITED in the presence of: )/s/ DEREK LEACH D. Leach Attorney )/s/ H. STEPHEN ASSITER H.S. Assiter Witness -2- EX-10.18(B) 67 EXHIBIT 10.18(B) THE EXPORT-IMPORT BANK OF KOREA [LETTERHEAD] TO: PETRODRILL SEVEN Ltd. April 6, 1999 Re: Daewoo Heavy Industries Ltd.'s Hull Number 3015 1. We refer to our irrevocable guarantee No. M0902-804-LG-00040 (the "Refund Guarantee") in favour of yourselves, Petrodrill Seven Limited, for the account of Daewoo Corporation and Daewoo Heavy Industries Ltd. (the "Builder") in connection with the shipbuilding contract dated 9th April, 1998 made by and between yourselves and the Builder for the construction and sale of one Dynamic Positioned Semi-Submersible Drilling Vessel having Builder's Hull No. 3015. Other terms and expressions employed herein shall bear the same meaning as in the Contract, a copy of which has been provided to us. 2. In consideration for your entering into a Main Contract Amendment Agreement dated 28th January, 1999 between yourselves and the Builder, we hereby agree that from the date of this letter the Refund Guarantee is amended as follows: 2.1 The second paragraph shall read as follows: "Under the terms of the Contract you are to pay to the Builder a Contract Price, comprising the Construction Price and the Listed Items Price, for the Vessel as follows: (a) The Construction Price in five installments as follows: (i) First Instalment: Ten Percent (10%) of the Construction Price, being $8,500,000, shall be paid within three Banking Days of the Effective Date. (ii) Second Instalment: Thirty percent (30%) of the Construction Price, being $25,500.00, shall be paid within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorised Representative (or, in default thereof, the Classification Surveyor), certifying that it is 6 months after the Effective Date of the contract has taken place. (iii) Third Instalment: Twenty percent (20%) of the Construction Price, being $17,000,000, shall be paid within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorised Representative (or, in default thereof, the Classification Surveyor), certifying that Keel laying has taken place. (iv) Fourth Instalment: Twenty percent (20%) of the Construction Price, being $17,000,000, shall be paid within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorised Representative (or, in default thereof, the Classification Surveyor), certifying that launching [float out] has taken place. (v) Fifth Instalment: Twenty percent (20%) of the Construction Price, together with any increase or any decrease of the Construction Price arising from the provisions of Clauses 7 and 16 of the Contract, shall be paid upon Delivery. (b) The Listed Items Price in ten instalments as follows: -- Continued on Page 2 -- THE EXPORT-IMPORT BANK OF KOREA [LETTERHEAD] -- Page 2 -- (i) First Instalment: Ten percent (10%) of the Listed Items Price, being $5,100,000, shall be paid on or before 9th June 1998. (ii) Second Instalment: Fifteen percent (15%) of the Listed Items Price, being $7,650,000, shall be paid on or before 17th March 1999. (iii) Third Instalment: Five percent (5%) of the Listed Items Price, being $2,550,000, shall be paid on or before 30th March 1999. (iv) Fourth Instalment: Ten percent (10%) of the Listed Items Price, being $5,100,000, shall be paid on or before 30th April 1999. (v) Fifth Instalment: Fifteen percent (15%) of the Listed Items Price, being $7,650,000, shall be paid on or before 30th June 1999. (vi) Sixth Instalment: Ten percent (10%) of the Listed Items Price, being $5,100,000, shall be paid on or before 30th August 1999. (vii) Seventh Instalment: Ten percent (10%) of the Listed Items Price, being $5,100,000, shall be paid on or before 30th October 1999. (viii) Eighth Instalment: Ten percent (10%) of the Listed Items Price, being $5,100,000, shall be paid on or before 30th December 1999. (ix) Ninth Instalment: Ten percent (10%) of the Listed Items Price, being $5,100,000, shall be paid on or before 28th February 2000. (x) Tenth Instalment: Five percent (5%) of the Listed Items Price, being $2,550,000, together with (or minus) any excess (or shortfall) of the Listed Items Price over (or under) the provisional Listed Items Price, shall be paid on or before 30th April 2000. 2.2 In the fourth paragraph, the sum of "US$108,800,000" is deleted and replaced by the sum of "US$119,000,000." 3. We confirm that, except as expressly amended herein, the Refund Guarantee remains in full force and effect. 4. The terms of this letter shall be governed by, and construed in accordance with, English law. 5. Please sign and return the attached copy of this letter to signify your acceptance of the terms set out herein. -- Continued on Page 3 -- THE EXPORT-IMPORT BANK OF KOREA [LETTERHEAD] -- Page 3 -- Yours very truly, For and on behalf of The Export-Import Bank of Korea By: /s/ JONG-BOK LEE By; /s/ WON-YOUNG CHUN Jong-Bok Lee Won-Young Chun Assistant Manager & Senior Manager & Loan Officer Senior Loan Officer /Ship Export Credit Dept. /Ship Export Credit Dept. We hereby agree to the terms set out herein. /s/ D LEACH For and on behalf of Petrodrill Seven Limited EX-10.19 68 EXHIBIT 10.19 HULL NO 3016 CONTRACT FOR CONSTRUCTION AND SALE OF A DYNAMIC POSITIONED SEMI-SUBMERSIBLE DRILLING VESSEL BETWEEN DAEWOO CORPORATION & DAEWOO HEAVY INDUSTRIES LTD AND PETRODRILL CONSTRUCTION INC. INDEX PAGE DEFINITIONS ........................................................... 4 1. PURPOSE OF THIS CONTRACT .............................................. 2 2. DESIGN: PRINCIPAL DIMENSIONS AND CHARACTERISTICS: CLASSIFICATION: MANDATORY REGULATIONS: REGISTRATION ................... 2 3. CONTRACT PRICE ........................................................ 2 4. PAYMENT SCHEDULE ...................................................... 2 5. APPROVAL OF PLANS: SUBCONTRACTING ..................................... 2 6. VARIABLE LOAD CAPACITY ................................................ 2 7. MODIFICATIONS.......................................................... 2 8. INSPECTION ............................................................ 2 9. PLANNED PROGRAMME, PROGRESS CONTROL AND REPORTING ..................... 2 10. TITLE ................................................................. 2 11. RISK AND INSURANCE .................................................... 2 12. LOSS OR DAMAGE TO THE VESSEL .......................................... 2 13. TRIALS: TECHNICAL ACCEPTANCE ......................................... 2 14. DELIVERY OF THE VESSEL ................................................ 2 15. EXTENSION OF TIME FOR DELIVERY: PERMISSIBLE DELAY ..................... 2 16. DELAY IN DELIVERY ..................................................... 2 17. DEFECTS AND BUILDER'S GUARANTEE ....................................... 2 18. DEFAULT BY THE PURCHASER .............................................. 2 19. DEFAULT BY THE BUILDER ................................................ 2 20. PATENT INDEMNITY ...................................................... 2 21. TAXES AND DUTIES ...................................................... 2 22. ASSIGNMENT ............................................................ 2 23. PRIORITY OF DOCUMENTS ................................................. 2 24. NOTICES ............................................................... 2 25. RECORDS AND AUDITS .................................................... 2 26. LAW ................................................................... 2 27. DISPUTES .............................................................. 2 28. MISCELLANEOUS ......................................................... 2 29. SPARE PARTS ........................................................... 2 30. SAFETY AND HEALTH STANDARDS ........................................... 2 31. EFFECTIVENESS ......................................................... 2 APPENDICES APPENDIX I LIST OF PRINCIPAL DRAWINGS AND OTHER CONTRACT DOCUMENTS APPENDIX II PLANNED PROGRAMME APPENDIX IIA LISTED ITEMS APPENDIX III FORM OF PROTOCOL OF DELIVERY AND ACCEPTANCE APPENDIX IV FORM OF REFUND GUARANTEE APPENDIX V FORM OF STAGE CERTIFICATE APPENDIX VI SCHEDULE OF LABOUR COSTS FOR MODIFICATIONS APPENDIX VII LIST OF CERTIFICATES TO BE SUPPLIED ON DELIVERY OF THE VESSEL APPENDIX VIII MAKERS LIST CONTRACT FOR CONSTRUCTION AND SALE OF A DYNAMIC POSITIONED SEMI-SUBMERSIBLE DRILLING VESSEL This CONTRACT made this 9th day of April 1998, by and between:- DAEWOO CORPORATION & DAEWOO HEAVY INDUSTRIES LTD both corporations organised under the laws of Republic of Korea (hereinafter jointly and severally called "Builder"), both having their principal offices at 541, 5-GA, Namdaemunro, Jung-Gu, Seoul, Korea, and PETRODRILL CONSTRUCTION INC. a corporation organised under the laws of Bahamas (hereinafter called "Purchaser"), having its principal office at: Suite 205, Saffrey Square PO Box N8188, Nassau, Bahamas. WITNESSETH THAT THE PARTIES HAVE AGREED AS FOLLOWS:- DEFINITIONS In this Contract the following expressions shall have the meanings hereby assigned to them:- "Banking Day" means any day on which banks in each of London, New York and Seoul are open for the transaction of normal banking business; "Basic Design" means the drawings as detailed in section 99000 Appendix to the Specification. "Classification Society" means Lloyds Register of Shipping; "Classification Surveyor" shall mean any surveyor appointed by the Classification Society to supervise the Vessel's construction; "Contract Price" means the price stated in Clause 3. 1; "Contractual Delivery Date" means the date referred to in Clause 14.1 as the same may from time to time be extended in accordance with the provisions of this Contract; "Contract Documents" means the Specifications, the Principal Drawings and the other documents listed in Appendix 1; "Delivery" means the delivery by the Builder, and acceptance by the Purchaser, of the Vessel pursuant to Clause 14.2; "LIBOR" means the interest rate per annum which Citibank, London is offering to prime banks in the London Interbank market for deposits in United States Dollars for a three month period, determined at 11.00 a.m. London time, as quoted on the date from which interest is accrued under this Contract. All interest hereunder shall be calculated on the basis of a 360 day year and compounded quarterly and shall be paid on the date when payment is made of the sum on which interest is accrued: "Makers' List" means the list of contractors approved by the Purchaser and set out in Appendix VIII to the Specifications; "Mandatory Regulations" has the meaning assigned to it in Clause 2.7; "Materials" means all materials and supplies, including, without limitation, all machinery, equipment, outfittings and spare parts (but excluding the Listed Items and Purchaser's Supplies), intended for the Vessel's construction to the extent that the same have been appropriated to, or incorporated in, the Vessel; "Planned Programme" means the programme for performance of this Contract by the Builder detailed in Appendix II hereto: "Plans" means those drawings, documents and specifications which are required under this Contract and the Specifications to be submitted to the Purchaser for approval; "Principal Drawings" means the drawings initialled by or on behalf of the Purchaser and the Builder and listed in Appendix I; "Purchasers Supplies" means all equipment supplied by the Purchaser for its own use oil board the vessel which specifically excludes the Listed Items. "Specifications" means:- (a) Specification no P-95019 Jan 1998 rev 1 plus Addendum as issued March 1998 initialled by or on behalf of the Purchaser and the Builder on 1st April 1998; and (b) any additions or amendments thereto hereafter agreed between the parties; "Stage Certificate" means a certificate in the form set out in Appendix V; "Statutory Modifications" means modifications applicable to the Vessel as a result of changes to any of (i) the rules, regulations and requirements of the Classification Society or (ii) the Mandatory Regulations; "Working Day" means any day (other than Saturdays or Sundays) on which work is normally carried out at the Shipyard. Further terms used in this Contract are defined hereinafter. 1. PURPOSE OF THIS CONTRACT 1.1. Upon the terms and conditions set out in this Contract, the Builder, as an Independent contractor, undertakes to design, construct, build, launch, equip, complete, test and load out at its shipyard at Okpo Korea (hereinafter called the "Shipyard") and sell and deliver to Purchaser or the Purchaser's nominee for the Contract Price referred to in Clause 3 below, one (1) fully operational and fit for purpose self-propelled Dynamic Positioned Semi-Submersible Drilling Vessel (hereinafter called the "Vessel") more fully described in Clause 2 below. Subject to the performance of the Builder's obligations hereunder, the Purchaser agrees to purchase and take delivery of the Vessel when duly completed. 1.2. References herein to the Vessel shall, except where otherwise expressly provided, be deemed to include all Materials. 2. DESIGN: PRINCIPAL DIMENSIONS AND CHARACTERISTICS: CLASSIFICATION: MANDATORY REGULATIONS: REGISTRATION 2.1. The Vessel, which is to be assigned the Builder's Hull No 3016, shall be designed, constructed and completed in all respects in accordance with the Specifications. To the extent not defined in the Specifications, the Vessel's construction is to meet the generally acceptable offshore semi-submersible construction standards and practices, including without limitation such standards and practices relating to Quality Assurance. At the time of Delivery hereunder, the Vessel, which shall conform strictly with the terms and conditions of this Contract and the Specifications, shall be delivered safely afloat and ready for sail-out as a self-propelled Dynamic Positioned Semi-Submersible Drilling Vessel. DESIGN 2.2. The basic elements of the Vessel's design (the "Basic Design") will be delivered by tile Purchaser to the Builder. If the Builder considers that any aspect of the Basic Design might prevent the Vessel when constructed from complying with the requirements of Clause 2, it will inform the Purchaser accordingly and the Purchaser may either procure the modification of the Basic Design to remedy this deficiency or may require the Builder to modify the Basic Design to remedy this deficiency. If the Purchaser shall require the Builder to modify the Basic Design, the work required to do so shall constitute an Purchaser's Modification for the purposes of Clause 7 of this Contract. 2.3. The Builder shall develop a detailed design from the delivered Basic Design. It is expressly understood that the Purchaser shall be solely responsible for any errors, omissions and inconsistencies in the Basic Design. The Builder shall accept responsibility for its own work of developing the detailed working drawings from the Basic Design and all other design development work it shall perform in connection with this Contract. PRINCIPAL DIMENSIONS AND CHARACTERISTICS 2.4. The Vessel shall have the dimensions and characteristics stated in the Specifications. CLASSIFICATION 2.5. The Vessel shall be constructed under Special Survey of the Classification Society and in accordance with its rules, regulations and requirements current at the date of execution of this Contract, incorporating all additions and amendments thereof applicable to tile Vessel in force or announced but awaiting ratification, enactment or implementation, so as to achieve on Delivery the following notation:- "Unrestricted Service O.U. + 100A1, +LMC, UMS, DP (AA), PC, DRILL, OIWS with the descriptive notation Semi Submersible, self propelled drilling vessel" free of all recommendations, reservations and qualifications of any nature whatsoever. 2.6. Decisions of the Classification Society as to whether or not the Vessel complies with its rules, regulations and requirements shall be final and shall bind both parties to this Contract. MANDATORY REGULATIONS 2.7. The Vessel shall also comply with (i) all requirements of the regulatory bodies listed in the Specifications and (ii) the following rules, regulations and requirements, in each case current at the date of execution of this Contract ((i) and (ii) being known herein jointly as the "Mandatory Regulations"):- a. IMO, Resolution A 649 (16) adopted on 19 October 1989, Code for the Construction and Equipment of Mobile Offshore Drilling Units. b. International Convention for the Safety of Life at Sea SOLAS 1974, protocols of 1978, 1981, 1983 and all Amendments in force. c. International Convention of Load Lines, 1966 with resolutions A 231 (VII) and A 320 (IX). d. International Telecommunication Convention and Radio Regulation 1973, 1976 and 1982 and latest GMDSS Rules for radio communications. e. International Convention for Tonnage Measurement 1967/1969. f. Suez Canal Tonnage Regulations. g. International Convention for the Prevention of Pollution from Ships (MARPOL) 1974/1978, Consolidation Edition, IMO, 1991, including 1992 amendments to Annex 1. h. International Regulations for Preventing Collision at Sea, 1972 including amendments. i. International Labour Organisation (ILO) Convention No. 92 and No. 133 for crew accommodation. j. International Electronical Commission (IEC), Electrical Installation in Ship Publication No. 92. k. API specifications as applicable. REGISTRATION 2.8. The Vessel shall upon Delivery fly the Dutch Antilles flag and be registered in the [ ] Register of Shipping. Registration of the Vessel as aforesaid shall be effected by the Purchaser and all costs and expenses thereof shall be for the Purchaser's account. 3. CONTRACT PRICE 3.1. In consideration of the performance by the Builder of all its obligations under this Contract the Purchaser shall pay to the Builder a Contract Price comprised of two elements:- a. US $ 85,000,000 (the "Construction Price") which shall include the cost of installation of the Listed Items; and b. a further amount, to be agreed between the parties hereto, in respect of the purchase cost of the Listed Items. The parties have provisionally budgeted this cost at US $ 51 million and the aggregate of the same and the Construction Price is known herein as the "Provisional Contract Price" which is US $136,000,000 3.2. The Construction Price, which is exclusive of the cost of the Listed Items and Purchaser's Supplies, shall be a fixed price subject to upward or downward adjustment only in accordance with the provisions of Clause 7 hereof. It includes:- a. the cost of the Vessel completed in accordance with the requirements of this Contract and the Specifications; b. the cost of all tests and trials of the Vessel to be performed by the Builder in accordance with the specification; c. the cost of procuring the classification of the Vessel and of obtaining all certificates and documents which are required to be delivered pursuant to this Contract and the Specifications; and d. all other costs and expenses of the Builder as provided for herein or otherwise incurred by the Builder unless expressly provided herein as being for the Purchaser's account. 4. PAYMENT SCHEDULE 4.1. The Purchaser shall pay the Contract Price to the Builder in five instalments as follows, the pre-delivery instalments being paid as advances and not as deposits:- FIRST INSTALMENT: 10 per cent (ten %) of the Provisional Contract Price, being $ 13,600.000 shall be paid within three Banking Days of the Effective Date. SECOND INSTALMENT: 30 per cent (thirty %) of the Provisional Contract Price, being $40,800,000, shall be paid within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorised Representative (or, in default thereof, the Classification Surveyor), certifying that it is 6 months after the Effective Date of the contract has taken place. THIRD INSTALMENT: 20 per cent (twenty %) of the Provisional Contract Price, being $ 27,200,000 shall be paid within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorised Representative (or, in default thereof, the Classification Surveyor), certifying that Keel laying has taken place. FOURTH INSTALMENT: 20 per cent ( twenty %) of the Provisional Contract Price, being $27,200,000, shall be paid within three Banking Days from receipt by the Purchaser of a telefax. notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorised Representative (or, in default thereof, the Classification Surveyor), certifying that launch [ float out ] has taken place. FIFTH INSTALMENT: 20 per cent ( twenty %) of the Provisional Contract Price, together with the aggregate of (i) any excess of the Contract Price over the Provisional Contract Price and (ii) any increase or any decrease of the Contract Price arising from the provisions of Clauses 7 and 16 below, shall be paid upon Delivery. 4.2. The Builder shall notify the Purchaser in writing ten Banking Days in advance of the estimated dates of occurrence of each of the events before Delivery referred to above, excluding the First Instalment. REFUND GUARANTEE 4.3. The Builder shall at its own expense supply to the Purchaser concurrently with payment of the First Instalment of the Contract Price a letter of guarantee in favour of the Purchaser in the form attached as Appendix IV (the "Refund Guarantee"). Such guarantee shall be unconditional and be given by the Export-Import Bank of Korea as approved by the Purchaser. PAYMENT FOR MODIFICATIONS AND OTHER ITEMS 4.4. Any sums due to either party under Clause 7 as a result of Purchaser's Modifications and/or Statutory Modifications shall be paid with the Instalment payment which becomes due on a milestone payment coming first after agreement on such modification. PAYMENT FOR FUELS ETC AND LIQUIDATED DAMAGES 4.5. All amounts due to the Purchaser (i) under Clause 13.2 hereof and (ii) by way of liquidated damages in respect of delay in Delivery under Clause 16 shall be calculated and determined before Delivery and shall be paid on, and as a condition of, Delivery. PAYMENT PROCEDURES 4.6. Payment of sums due to the Builder in accordance with the provisions of this Contract shall be made, by telex transfer to the account of the Export-Import Bank of Korea Account No 04-029695 at the Bankers Trust Company of New York, Church Street Station, New York, NY 1000 15, USA in favour of the Daewoo Corporation, free of all transfer charges. 4.7. If the date on which any payment is due in accordance with the provisions of this Contract does not fall on a Banking Day, payment shall be made on the immediately succeeding Banking Day. 5. APPROVAL OF PLANS: SUBCONTRACTING APPROVAL OF PLANS 5.1. In respect of all Plans required for the completion of the works envisaged by this Contract, the same shall be submitted to the Purchaser in four copies as soon as possible following their production. The Purchaser shall, within fourteen (14) Calendar Days after receipt thereof, return to the Builder one copy of such Plans with the Purchaser's approval or the Purchaser's remarks and amendments (if any) written thereon. The approval of plans by the Purchaser shall not relieve the Builder of any of its obligations under this contract. 5.2. In the event that the Purchaser shall fail to return the Plans to the Builder within the time limit as hereinabove provided, such Plans shall be deemed to have been approved without comment. 5.3. The Builder shall take due note of the Purchaser's remarks and amendments (if any) on Plans submitted pursuant to this Clause and, if such remarks or amendments are not of such a nature or extent as to constitute modifications of the Specifications within the meaning of Clause 7 hereof, then the Builder shall commence or continue construction of the Vessel in accordance with the corrected or amended Plans. If such remarks or amendments are not clearly specified or detailed, the Builder shall in all cases seek clarification of the same from the Purchaser before implementing the same. 5.4. Copies of all correspondence to and from the Classification Society and the regulatory authorities referred to in the Specifications, together with all Plans approved by the Classification Society, shall be furnished to the Purchaser by the Builder as soon as practicable upon dispatch and receipt. SUBCONTRACTING 5.5. Save as regards those works delegated to those Subcontractors defined in the Makers' List, the Builder shall not, without the Purchaser's prior approval in writing, subcontract any part of the works contemplated by this Contract which exceed in value US $ 100,000 or its equivalent in local currency. Where such approval has been given, the Builder shall nevertheless remain fully responsible for the performance of the same as if it had personally undertaken such works. MAKER'S LIST 5.6. The Builder shall select for the supply of each of the Materials listed in the Makers' List the Subcontractor named therein in relation to the same. Where the Makers' List provides for more than one Subcontractor to supply any element of the Materials, the Builder shall, with reasonable notice, provide the Purchaser with a copy of the Purchase Order to be issued to its intended choice of Subcontractor before any subcontract is awarded. The Makers' List shall indicate Purchasers preferred Sub-contractor (if any) for a given element. Where there is a Purchase preferred subcontractor stated, such Purchase Order shall contain full technical and commercial details and also a comparison of same with Purchaser's preferred Subcontractor. If within 5 days thereafter, the Purchaser shall request the Builder to order that element of the Materials from Purchaser's preferred Subcontractor named in the Makers' List in relation thereto, then the Builder will take all reasonable steps to comply with such request and the Purchaser shall reimburse to the Builder any difference in price between that quoted by the Builder's chosen Subcontractor and the Subcontractor chosen by the Purchaser together with an adjustment in the Delivery Date if any. NOMINATED SUBCONTRACTORS 5.7. Unless the Purchaser shall otherwise agree, the Builder shall supply those items of Materials set out in Appendix II (the "Listed Items") from suppliers and subcontractors nominated by the Purchaser. The Purchaser, as agent for and on behalf of the Builder, shall negotiate with each of the Nominated Subcontractors terms for the supply of the Listed Items set out in Appendix II. It is, however, expressly agreed that the Purchaser shall contract with each of tile suppliers of the Listed Items as agent for and on behalf of the Builder and the ownership in such Listed Items shall vest with the Builder. 5.8. The price for the Listed Items, including delivery to the Builders yard, negotiated by the Purchaser, on behalf of tile Builder, with the Nominated Subcontractors shall be included in the contract price based on the overall budget as set out in Appendix II. In the event of any variations in the actual price then the Provisional Contract Price shall be increased or decreased by an amount equal to the amount of such variations. Any such variations shall be payable by tile Purchaser by means of an adjustment of the final instalment of the Provisional Contract Price. 5.9. Furthermore, in the event that delivery to the Builder of any Listed Item is delayed beyond the Target Delivery Date for the same set out in Appendix IIA, the Builder shall be entitled to a postponement of the Contractual Delivery Date for a period as it shall demonstrate, by reference to the "critical path", that the Vessel's construction and completion has actually been delayed. Delays in delivery of more than Listed Item occurring simultaneously shall have give rise only to concurrent (rather than consecutive) extensions. 5.10. Furthermore, acting on behalf of the Builder, tile Purchaser shall ensure that all the articles to be supplied as per clause 5.7 above shall be supplied to the Builder at the Shipyard in a condition ready for installation. In addition, in order to facilitate the installation of the Listed Items by the Builder, the Purchaser shall ensure that the Nominated Subcontractors furnish the Builder with instruction books, test reports, certificates and vendor furnished information as required by applicable rules or regulations. 5.11. On the basis that the Purchaser has price, delivery and quality risk in terms of clauses 5.8, 5.9 and 5. 10 above, Builder acknowledges that, not withstanding that it is the party to the contract with the Nominated Subcontractor, the Purchaser shall be fully entitled to liase with the Nominated Subcontractors on pricing, quality and delivery issues and Builder appoints Purchaser as its agent for this purpose. 5.12. It is also agreed that any costs incurred by the Builder in the repair of Listed Items occasioned by their defective material or poor workmanship or failure to perform, or by damage caused to them during transportation to the Shipyard shall be for the Purchasers account. ASSIGNMENT OF EXISTING SUBCONTRACTS / LETTER OF INTENT In relation to the following "long lead" items of Materials, it is understood that the Purchaser has already entered into agreements with certain suppliers. 5.13. Concurrently with signature of this Contract, the benefit together with the burden of all such contracts are to be assigned by the Purchaser to the Builder, whereupon the Materials to which they relate are to be treated as Builders supply . The Builder shall, upon assignment of each such subcontract, reimburse to the Purchaser all of the instalments of the contract price paid by the latter in respect thereof. 5.14. Packages included under this provision cover items supplied by LIPS, Caterpillar and GEC Alsthom. OBLIGATIONS UNAFFECTED 5.15. Nothing in this Clause shall affect the other obligations of the Builder under this Contract nor diminish the responsibility of the Builder in respect of the Materials, design or workmanship required hereunder. 6. VARIABLE LOAD CAPACITY 6.1. The Builders commitment to the lightship weight excluding the weight and centre of gravity of the Listed Items shall be 8,950 metric ton at a VCG of 21.43 m ( the "Required Lightship Weight" ). A detailed Light Weight Estimation and VCG Calculation justifying the Required Lightship Weight, shall be included as part of the "Basic Design" to be provided by the Purchaser. 6.2. The lightship weight and centre of gravity of the Vessel shall be verified by an Inclining Experiment prior to Delivery. 6.3. The results of the Inclining Experiment referred to in Clause 6.2 shall be used to demonstrate a Variable Load Capacity (Deck and Column) in the conditions referred to in the Specifications as a minimum of 3,500 metric tons in the operational condition 6.4. Builder shall pay liquidated damages to the Purchaser as follows if the lightship weight increases above the Required Lightship Weight. Excess from 1% to 2% USD 5,000 per ton Excess from 2% to 4% USD 7,500 per ton Excess 4% and above USD 10,000 per ton In any event the Builder's liability for the above liquidated damages shall be limited to 5% of the Construction Price. 6.5. The Purchaser shall pay to the Builder a bonus if the lightship weight is below the Required Lightship Weight on the same basis as the liquidated damages in 6.4 above but without the application of any grace. 6.6. The Purchaser shall have no obligation to accept delivery of the Vessel if the ship lightweight, as defined in 6.2 above, is more than 400 tonnes over the Required Lightship Weight. The Builder shall, however, in such context be entitled to make modifications to the Vessel in order to either reduce the weight or ensure that the VLC is restored to its original level provided that the same (i) are approved in advance by the Classification Society and the Purchaser, such approval not to be unreasonably withheld, (ii) do not significantly affect the motion characteristics or operational capability of the Vessel. 7. MODIFICATIONS 7.1. Purchaser's Modifications 7.2. The Purchaser may at any time after the date hereof submit a request in writing to the Builder for changes (the "Purchaser's Modifications") to be made to the Specifications and shall supply with such request sufficient particulars, documentation and details to describe the change requested. 7.3. If the change so requested (the "Requested Change") can be reasonably undertaken having regard to the stage of construction of the Vessel and the Planned Programme, then the Builder shall be obliged to effect the same but shall be entitled to any increase (and shall concede any decrease) in construction cost or adjustment of the Contractual Delivery Date or any other provisions of his Contract or the Specifications which the Requested Change reasonably necessitates and which is agreed in writing by the Builder and the Purchaser. The Builder shall notify the Purchaser in writing no later than seven Working Days after receipt of the written request for the Requested Change, of any such adjustments which it will require. 7.4. On the basis of such notification the Purchaser shall no later than fifteen Working Days thereafter elect in writing to: a. agree to the adjustments notified, in which case the Builder shall construct the Vessel in accordance with tile Requested Change; b. contest the reasonableness of the adjustment notified, in which case subclause 7.5 below shall apply; or c. withdraw the Requested Change, in which case the Vessel shall be built without reference to the same. 7.5. If within fifteen Working Days after such notification the Purchaser has made no election as aforesaid, then the Requested Change shall be deemed to have been withdrawn by the Purchaser. 7.6. If, however, the Purchaser notifies the Builder in writing that the Purchaser wishes to implement the Requested Change but disputes the reasonableness of the adjustments, the matters shall be determined by an expert, acting as such and not as an arbitrator, to be appointed by agreement between the parties. In the event that the parties are unable to agree as to any appointment within thirty days of the Purchaser's written notice, the appointment shall be made, upon the written application of either party, by the Classification Society. The decision of the said expert shall be final and binding upon the parties and the costs of such expert in reaching his decision shall be shared by the Parties. Pending the decision of the aforesaid expert, the Builder shall continue construction of the Vessel in accordance with the Requested Change. 7.7. The agreed extra cost of any Requested Change or that decided by the expert shall be paid by the Purchaser and any cost savings by the Builder as a result of any Requested Change shall be paid to the Purchaser in accordance with Clause 4.4. STATUTORY MODIFICATIONS 7.8. In the event of any Statutory Modifications arising the Builder shall within seven Working Days of its becoming aware of the same, give notice to the Purchaser of.- a. the change required to be made to the Specifications (the "Required Change"); b. any estimated extra or reduced cost of construction of the Vessel in accordance with the Required Change together with any documentation substantiating such cost which the Purchaser reasonably requires; and c. the effect of the Required Change on any other provisions of this Contract or the Specifications (including without limitation any change to the Contractual Delivery Date). 7.9. The Purchaser may apply for a formal waiver of compliance with the Required Change from the body having power to grant such waiver. If the Purchaser considers that the operation of the Vessel in its intended service would permit of such waiver, and shall notify the Builder as soon as possible after receiving the decision of such body. In applying for any waiver, the Purchaser may call upon the Builder for assistance and the Builder will provide reasonable co-operation to the Purchaser in this respect. 7.10. If no waiver has been obtained and notified by the Purchaser to the Builder within thirty Working Days of the receipt by the Purchaser of the notice referred to above, the Builder shall build the Vessel in accordance with the Required Change and the reasonable extra cost thereof, if any, shall be paid by the Purchaser. Before the expiry of such time the Builder shall continue with the construction of the Vessel in accordance with the Required Change but it shall, in so doing, use its best endeavours to minimise any costs and loss of time which might arise if a waiver were obtained. 7.11. If the Purchaser notifies the Builder in writing that the Purchaser disputes the reasonableness of the extension or variation notified, the issue of what is a reasonable extension or variation may be put, by the Purchaser or the Builder, to an expert, acting as such and not as arbitrator, to be appointed by agreement between the parties. In the event that the parties are unable to agree as to an appointment within thirty days of the Purchaser's written notice as aforesaid the appointment shall be made, upon the written application of either party, by the Classification Society. The decision of the expert shall be final and binding upon the parties and the costs of such expert in reaching his decision shared by the Parties. Pending the decision of the said expert, the Builder shall continue construction of the Vessel in accordance with the Required Change. PRICING OF MODIFICATIONS 7.12. In relation both to Purchaser's Modifications and Statutory Modifications as aforesaid, the Builder's quotations in respect of any increase or decrease in the Contract Price relating thereto shall, if requested in writing by the Purchaser, be calculated both on "lump sum" and a "time and materials" basis. In relation to quotations effected on a "time and materials" basis, the Builder shall apply tile following parameters:- a. labour costs shall be charged at the agreed hourly rates set out in Appendix VI; b. the cost of all materials and equipment shall not exceed one hundred and ten per cent (10%) of the cost to the Builder of the same (inclusive of the costs of delivery of those materials and equipment to the Shipyard); provided, however, that the Builder shall in all cases endeavour to obtain the best price terms and trade discounts from suppliers and subcontractors for the benefit of the Purchaser. SUBSTITUTION OF MATERIALS If at any time during the construction of the Vessel, any Materials are not available (other than as the result of any neglect or omission on the part of the Builder) then, subject to the prior approval in writing of the Purchaser and, where necessary, of the Classification Society, the Builder may use or install other Materials provided that such other Materials used or installed in substitution for those specified are equivalent in quality to, or better than, those specified, and which meet the requirements of the Classification Society and the other requirements of this Contract, 8. INSPECTION AUTHORISED REPRESENTATIVES 8.1. The Purchaser shall have the right to retain up to fifteen supervisors ("Authorised Representatives"), whose names and scope of authority shall be notified in writing to the Builder, permanently at the Shipyard during all times until Delivery. The Builder shall provide suitable office accommodation (including adequate parking spaces), photocopying and canteen facilities and the installation of telephones and telefax machines with reasonable and safe access to work areas for, and permit and afford every facility to, the Authorised Representatives from time to time and at all times whilst work is proceeding to examine and inspect the work being done under this Contract and every part thereof, together with the materials being used or about to be used thereon, and to call for and witness such tests as may be required. The costs of telecommunication facilities outside the country in which the Shipyard is located and the use of the canteen shall be for the Purchaser's account. 8.2. In addition to the Authorised Representatives, the Purchaser may from time to time employ further personnel and contractors on site and the Builder shall afford the same facilities to them on the basis set out above. 8.3. The Authorised Representatives shall have the right to attend all tests, trials and inspections of the Vessel, her machinery and equipment, which shall in each case be conducted within the Shipyard's normal working hours. The Builder shall give notice to the Authorised Representatives in advance of the date and place of such tests, trials and inspections in accordance with the provisions of the Specifications. Failure of the Purchaser or its Authorised Representatives to be present at such tests, trials and inspections after due notice as above provided shall be deemed to be a waiver of the Purchaser's right to be present. The Builder shall obtain for the Purchaser and the Authorised Representatives rights of access to the Subcontractors' premises for the purpose of inspection of workmanship and Materials. 8.4. The Builder shall carry out in strict compliance with the Specifications all the tests and trials of the Vessel and commissioning of the Materials which are detailed therein so as to demonstrate that the same are in accordance with the requirements of the Specifications and that all of her systems function in their intended manner. Any Materials or workmanship found to be faulty or inadequate shall be replaced or made good by the Builder prior to Delivery, at its expense and without additional expense to the Purchaser, by suitable and sound Materials and workmanship. 8.5. Nothing done or omitted to be done by or on behalf of the Purchaser under this Clause shall be deemed to be a waiver of any objection to, or an acceptance of, faulty or inadequate Materials or workmanship, or an admission that any Materials or workmanship are of the standard required for due performance of this Contract. 8.6. The Authorised Representatives shall be deemed to be employees of the Purchaser and not the Builder. The Builder shall be under no liability to the Authorised Representatives for death, personal injury or damage to their property during the time when they are engaged in the duties contemplated under this Contract either on the Vessel or within the premises of the Builder or Its Subcontractors unless such death, personal injury or damage to property was caused by the wilful act, omission or negligence of the Builder, or any of its employees, agents or Subcontractors. QUALITY ASSURANCE SYSTEM AUDITS 8.7. Quality Assurance System Audits may be carried out by the Purchaser, and regulatory authorities to verify compliance with the quality requirements stipulated in this Contract and with regulatory requirements. Such requirements shall include but not necessarily be limited to quality records, personnel and procedure qualifications records, material traceability records, inspection plans etc. The Builder is required to provide to the Purchaser any documentation and administrative systems necessary to verify compliance. Inspection and testing and Quality Assurance System Audits by the Purchaser as described in this Clause or otherwise shall not imply any diminution of the Builder's responsibilities and obligations under this Contract. 9. PLANNED PROGRAMME, PROGRESS CONTROL AND REPORTING PLANNED PROGRAMME 9.1. The Vessel shall be constructed by the Builder in accordance with the Planned Programme set out in Appendix II hereof A detailed copy of this plan , including the sub-level planning identifying critical paths, shall be made available to the Purchaser and updated on a regular basis. The plan will define certain stages of the construction process ("Milestones") which must be completed by the dates specified therein. The Planned Programme will include a comprehensive statement of the dates on which the Listed Items are required to be delivered to tile Shipyard. PROGRESS CONTROL AND REPORTING 9.2. At the commencement of the contract a "kick off" meeting shall be held during which the major parameters by which performance of the Builder will be measured are to be mutually agreed. These shall include, but not necessarily be limited to a detailed weight budget, a steel procurement and processing schedule, an engineering schedule, outfitting targets, manning schedules etc. Unless mutually agreed otherwise such meeting shall be held within 30 days on contract signature. 9.3. During the course of performance of this Contract the Builder shall submit to the Purchaser on a fortnightly basis, commencing on the date failing fourteen days after the "kick off meeting" and thereafter fortnightly a. a status report on the Vessel's construction as compared with the Planned Programme, including the critical path; b. a report setting out the actual progress in performance of this Contract during the previous month as compared with the Planned Programme; Such report to identify progress against the agreed performance parameters. c. a report setting out the forecast lightship weight, identifying any variances from the agreed weight budget and in the case of negative variations including proposals for reducing the variance to within acceptable levels. d. a list of Purchaser's Modifications and Statutory Modifications (if any) agreed or resolved by an expert during the previous month, as the case may be, including adjustments, if any, agreed or resolved by an expert, to the Contract; e. a report on the delivery of sub-contracted Materials during the previous month (the precise nature of which report shall be agreed, from time to time, between the Purchaser and the Builder). 9.4. Without prejudice to the Builder's obligations under this Contract, if the construction of the Vessel should for any reason whatsoever be delayed beyond the time-frame envisaged in the Planned Programme, the Builder shall immediately notify the Purchaser and shall within seven Working Days thereof provide to the Purchaser a schedule indicating, in so far as the delay which has occurred is not Permissible Delay, the steps (including any appropriate increase in manpower and material resources) the Builder intends to take to recover the time so lost. The Builder and the Purchaser shall thereafter meet at the earliest opportunity to discuss the schedule and the Builder's detailed plans for implementation of the same. 9.5. The Builder shall take monthly progress photographs illustrating the progress of the Vessel's construction up to and including trials and delivery. The Builder shall also supply the Purchaser with sufficient number of photographs (size: approximately 18 x 24 cms) depicting the final stage of the Vessel as delivered: this set will be at least 25 percent colour prints. One set of standard transparencies will be supplied, free of charge to the Purchaser. Additional copies of photographs and transparencies will be made available by Builder, at the Purchaser's request and expense. 10. TITLE 10.1. Title to the Vessel shall pass to the Purchaser upon Delivery. Subject to the provisions of this Contract, title to the Purchaser's Supplies shall, however, remain with the Purchaser at all times. 11. RISK AND INSURANCE RISK 11.1. The Vessel and all Materials (including, from the time of their delivery to the Shipyard, the Purchaser's Supplies) shall remain at the risk of the Builder until Delivery. INSURANCE 11.2. The Builder undertakes to keep the Vessel and all Materials (including the Listed Items) in its or its Subcontractors' custody fully insured at all times and until Delivery at its own cost with first class insurers approved by the Purchaser in the amount of the higher of (1) the value of the Vessel as from time to time constructed and (2) the aggregate of (i) the instalments of the Contract Price for the time being paid by the Purchaser to the Builder, (ii) the interest payable to the Purchaser on such instalments in the event of the Purchaser's termination of this Contract and (iii) the value of the Purchaser's Supplies delivered to the Shipyard or built into or installed in or upon the Vessel. 11.3. The policy or policies (the "Stipulated Insurances"), which shall be subject to English law and jurisdiction, shall incorporate the following clauses:- a. the Institute of London Underwriters ("ILU") Clauses for Builder's Risks: b. the ILU Strikes Clauses - Builder's Risks; and c. (from the date of the Vessel's launching) the ILU War Clauses - Builder's Risks. 11.4. The policies shall be taken out in the joint names of the Purchaser and the Builder but on terms that the Builder alone shall be responsible for all premiums payable thereunder. The Builder shall furnish the Purchaser promptly with certified copies of the policies and the originals shall be made available to the Purchaser, its employees or agents for inspection at all reasonable times. 11.5. The policies taken out shall contain a provision to the effect that, in the event of an actual, constructive, arranged or compromised total loss, such insurance proceeds as the Purchaser is entitled to hereunder shall be payable to the Purchaser and such policies shall be so endorsed as to enable the Purchaser by its brokers or agents or personally to collect such proceeds pursuant to the provisions of this Clause. In addition, all such policies shall include provision that they shall not be capable of cancellation by the insurers without not less than thirty (30) days' prior written notice being given to the Purchaser and that not less than ten (10) days' prior written notice of non-renewal or lapse shall be given by the insurers to the Purchaser before the same shall take effect. 12. LOSS OR DAMAGE TO THE VESSEL 12.1. Should the Vessel or any items insured pursuant to the provisions of Clause 11 sustain loss or damage prior to Delivery and should such loss or damage not make the Vessel a total loss, actual, constructive, arranged or compromised, the Builder shall, at its own expense and with all due despatch, make good such damage to the satisfaction of the Purchaser and (if applicable) the Classification Surveyor, and any monies payable in respect of any insurance effected under Clause 11 shall be payable to the Builder. 12.2. Should the Vessel sustain loss or damage prior to Delivery hereunder such that it is either conceded by the insurers liable therefor, or determined by a court of competent jurisdiction, that the Vessel has become a total loss, actual, constructive, arranged or compromised, then the Builder shall not be liable to repair the damage or replace the Vessel but, where the Purchaser has not made recovery of such sums under the Stipulated Insurances within twenty-one Working Days of the total loss, the Builder shall:- a. refund promptly to the Purchaser in full the aggregate amount of instalments of the Contract Price already paid by the Purchaser with interest thereon at a fixed rate of 10 percent from the date of payment of each instalment until the date of refund ( calculated on the same basis as a commercial banking transaction in London ); and b. return to the Purchaser all Purchaser's Supplies or refund to the Purchaser a sum equivalent to the value of any of same which have been lost or which cannot be removed in a sound condition from the Vessel. 12.3. When the conditions set out in sub-clause (2) above have been satisfied by the Builder, the Purchaser shall instruct the insurers to pay to the Builder or, as the case may be, if instructed by the Builder to the Export-Import Bank of Korea any further sums due and payable under the Stipulated Insurances in respect of the total loss but subject to a limit equal to the cost to the Builder of those parts of the works which were already undertaken as at the date of the casualty giving rise to the total loss. Save as elsewhere herein specifically provided to the contrary, the parties' obligations under this Contract shall thereupon cease and terminate. 13. TRIALS: TECHNICAL ACCEPTANCE 13.1. At least 120 days before the scheduled commencement of the same the Builder shall submit to the Purchaser for approval comprehensive testing and trials programmes covering the Full Scale Test and Trials (collectively the "Trials") as generally described in Section 03000 of the Specifications, including (i) Workshop Tests, (ii) Quayside Trials (including the Inclining Test), and (iii) Sea Trials (including trial runs and all other tests at sea). 13.2. The Trials shall be conducted at the risk and expense of the Builder which shall provide and pay for the personnel necessary for the safe management and navigation of tile Vessel during the same. The Builder shall also provide and pay for all necessary ballast and fresh water and shall meet all other costs associated with the Trials. The fuels, lubricants and consumable stores required for the Trials shall be specified, supplied and paid for by the Purchaser, who shall upon Delivery be entitled to reimbursement from the Builder of the costs of such fuels, lubricants and consumable stores as are consumed during the Trials. 13.3. The Builder shall give the Purchaser not less than seven Working Days' notice of the date and place of commencement of each of the Trials and representatives of the Purchaser shall be afforded every opportunity to observe and determine the performance of the Vessel during the same. Failure by the Purchaser to attend any Trial following due notice shall be deemed to be a waiver by the Purchaser of its rights of attendance in respect of such Trial. SEA TRIALS 13.4. The Sea Trials shall be carried out following satisfactory conclusion of all other Trials and after the Vessel's construction has been completed with only minor items of work outstanding which are agreed by the Authorised Representatives as suitable for completion after the Sea Trials but before Delivery. 13.5. The Sea Trials shall have the objective of permitting the Builder to demonstrate fulfilment of the quality and performance requirements for the Vessel as set forth in the Specifications. The course to be followed during the Sea Trials shall be determined by the Builder, but shall be in open waters off Korea. The Purchaser shall be allowed to maintain a shadow crew and other necessary personnel on board the Vessel during the sea trials to familiarise themselves with the Vessel and its operation. 13.6. The safe management and navigation of the Vessel in transit to, during and from the Sea Trials shall remain the sole responsibility of the Builder. Neither the Purchaser nor any of its representatives shall bear or be liable for loss or damage of any description done by or to the Vessel, or personal injury or loss of life arising from any cause whatsoever during the same, except where such liability is directly attributable to the Purchaser as a result of a wilful act by any representative of the Purchaser on board the Vessel during such trials; the Builder shall pay for and indemnify tile Purchaser and its representatives against all such loss, damage and the consequences of personal injury and loss of life as aforesaid. 13.7. Should the weather conditions at the time scheduled for the Sea Trials be such that they cannot be carried out properly, the Builder shall postpone them or such part of them as necessary to the earliest possible time when suitable weather conditions occur to ensure that all readings and results are obtained in a manner satisfactory to the Purchaser. Any delay to the Sea Trials caused by such unfavourable weather conditions, if the delay exceeds five (5) days, shall operate to postpone the Contractual Delivery Date by the period of delay involved and such delay shall be deemed to be Permissible Delay. 13.8. If during the Sea Trials any breakdown occurs which entails interruption or irregular performance and the breakdown can be repaired by the normal means available on board, this shall be done as soon as possible and the trial shall be continued after repairs are completed. However, if the Vessel must return to a port to enable the breakdown to be remedied, a further complete trial shall be undertaken at the earliest opportunity. 13.9. On completion of the Sea Trials to the satisfaction of the Purchaser the Vessel shall be brought back to a berth in the Shipyard, or elsewhere as may be agreed, for the inspection of the machinery required in the Specifications, and during this period all defects or omissions found in the Vessel shall be remedied and made good by the Builder to the satisfaction of the Purchaser, and the machinery closed up by the Builder ready for sea at its expense and without expense to the Purchaser. TECHNICAL ACCEPTANCE 13.10. Within three Working Days of completion of the Trials and the closing up of machinery referred to in sub-clause 9 above, the Builder shall notify the Purchaser in writing of the results of the Trials and shall, where the same is appropriate, confirm to the Purchaser that the Vessel conforms with the requirements of the Contract and Specifications. If the Purchaser is in agreement with the Builder, the Purchaser shall, within four (4) Working Days of receipt of the Builder's notice as aforesaid, advise the Builder in writing of its Technical Acceptance of the Vessel. 13.11. If, however, in the view of the Purchaser the Vessel or any part thereof does not conform to the requirements of this Contract and/or the Specifications, the Purchaser shall so advise the Builder (again within four (4) Working Days of the receipt of the Builder's notice as aforesaid) and shall specify the respects in which the Vessel falls to conform with the requirements of this Contract and Specifications. The Builder shall thereupon take the necessary steps to correct such non-conformities and, upon completion of such works, the Builder shall advise the Purchaser who shall, in the reasonable exercise of its discretion, be entitled to require the Builder to undertake further trials of the Vessel; in such event the Builder shall give the Purchaser three Working Days' notice of such further trials. 13.12. Upon satisfactory completion of such remedial works and/or trials, the Purchaser shall, within four (4) Working Days after receipt of a further notice from the Builder that the Vessel conforms with the requirements of the Contract and Specifications, notify the Builder of its Technical Acceptance of the Vessel or the respects in which the Vessel still fails to conform with the requirements of this Contract and the Specifications. This process shall be repeated until the earlier of (a) the Purchaser's Technical Acceptance of the Vessel or (b) the valid and proper termination or rescission of this Contract by either the Purchaser or the Builder. 13.13. If the Purchaser falls to notify the Builder in writing of its Technical Acceptance or otherwise of the Vessel within the periods as provided above the Purchaser shall be deemed to have accepted the Vessel. 13.14. The Purchaser's Technical Acceptance of the Vessel as above provided shall preclude the Purchaser from refusing Delivery of the Vessel as hereinafter provided, if the Builder complies with the procedural requirements for Delivery of the Vessel as provided in Clause 14 hereof. 14. DELIVERY OF THE VESSEL DELIVERY 14.1. The Vessel shall be delivered by the Builder to the Purchaser at the Shipyard (or other place as may be agreed with unrestricted access to the open sea) on 9th March 2000 except that, in the event of Permissible Delay as defined in Clause 15.2 hereof, the aforementioned date shall be postponed accordingly. The aforementioned date, or such later date to which requirement to deliver may be postponed, is herein called the "Contractual Delivery Date." 14.2. Delivery shall take place on a Working/Banking Day to be nominated by the Builder following Technical Acceptance of the Vessel by the Purchaser and with not less than thirty (30) Working Days' advance notice to the Purchaser. Delivery shall be effected by the execution by the Parties of a Protocol of Delivery and Acceptance in the form set out in Appendix III, acknowledging delivery by the Builder and acceptance thereof by the Purchaser. The Builder shall give the Purchaser at least ninety (90) days' (plus or minus seven (7) days) calendar notice of the estimated date of Delivery. The Builder guarantees that at the time of Delivery title to the Vessel and every part thereof shall pass to the Purchaser free and clear of any and all liens, claims, mortgages or other encumbrances upon it and in particular, but without limitation, that she shall be free of all burdens in the nature of imposts, taxes or charges imposed by any liabilities arising from the construction of the Vessel or from its operation on Trials or otherwise. DOCUMENTS TO BE PROVIDED TO THE PURCHASER 14.3. The Builder shall provide to tile Purchaser the following documents prior to Delivery failing which the Purchaser may refuse to accept Delivery a. Records of inventory of the Vessel's equipment including spare gear and the like as detailed in the Specifications; b. Records of any and all fuels, lubricants, consumable stores and fresh water supplied pursuant to this Contract by either the Builder or the Purchaser together with such quantities of the same as remain on board at Delivery; c. All certificates (including Class and other regulatory certificates) required to be furnished prior to or upon Delivery of the Vessel pursuant to the Specifications; such certificates are to be clean and free of all qualifications, reservations and recommendations whatsoever. d. Declaration of Warranty of the Builder in accordance with Clause 14.3 above; e. The following technical documentation:- e.1. Four (4) copies and one reproducible of all the "As Built" drawings of tile Vessel required for its operation and maintenance in accordance with its design and purpose. e.2. Four (4) complete documentation and instructions (Operation and Maintenance) books covering builder supplied equipment e.3. Four (4) sets of Operating Manuals and Instruction Books according to MODU CODE 1989 with all the necessary data including sea preparation and any other data or documents required by Owner's insurers. e.4. Four (4) copies of a complete maintenance guide including all drawings. e.5. One (1) copy of all the test and commissioning trials and results which have been done prior to delivery. e.6. Lightship weight, variable load and centre of gravity of lightship weight calculations. f. The certificates listed in Appendix VII, together with (i) Builder's Certificate or (at the Purchaser's option) Bill of Sale in favour of the Purchaser notarised and legalised to permit registration of tile Vessel on the [ ] Register of Shipping and (ii) any other document relating to the condition and/or performance of the Vessel which the Purchaser may reasonably require provided the same is requested no later than seven Working Days prior to Delivery. 14.4. The documents listed in sub-clauses 14.4.e.1-6 above are also to be supplied as a diskette in a format to be agreed between the Parties. REMOVAL OF THE VESSEL 14.5. Following Delivery of the Vessel, the Purchaser shall in seven (7) Working Days remove her from the Shipyard. If the Purchaser falls to remove the Vessel within this period, it shall pay to the Builder reasonable mooring charges thereafter until removal. 15. EXTENSION OF TIME FOR DELIVERY: PERMISSIBLE DELAY CAUSES OF DELAY 15.1. If at any time before the Contractual Delivery Date the construction of the Vessel is delayed due to Acts of God, acts of princes or rulers, war or other hostilities or preparations therefor, blockade, civil commotion or riots, strike, epidemics, floods, hurricanes, earthquakes, tidal waves, landslides, fires, lightning, explosions, collisions or strandings, shortage of materials or equipment other than resulting from any act, omission or improvidence of the Builder or its Subcontractors, prolonged failure, shortage or restriction of electric current, oil or gas or destruction of or damage to the Shipyard or works of the Builder or its Subcontractors by any causes herein described and other causes or accidents beyond control of the Builder or its major subcontractors or suppliers of similar nature, the Contractual Delivery Date and any Milestones not then achieved shall be postponed for the period of time during which construction of the Vessel is directly and unavoidably delayed by the same. 15.2. Any periods of time by which the Contractual Delivery Date of the Vessel and any Milestones not then achieved is properly and justifiably claimed by the Builder to be extended by reason of matters falling within (a) subclause 1 above or (b) Clauses 5.6, 5.9, 7, 13.7 or 18.2 hereof shall be defined herein as "Permissible Delay". 15.3. The Builder's entitlement to a Permissible Delay shall, however, be subject to:- a. the delay in respect of which the Builder is claiming relief not being within its control or contemplation at the date of signing of this Contract nor caused or contributed to by its error, neglect, act or omission or that of its agents, employees or Subcontractors: b. the delay affecting the "critical path" of the Vessel's construction as the time of commencement of the event; c. since the occurrence of the event in respect of which relief is claimed, the Builder having taken all steps open to it to mitigate the effect of the event upon the Contractual Delivery Date and any Milestones not then achieved; and d. the Builder having duly given all the notices required under sub-clause 15.4 below within the time-limits therein laid down. NOTICES 15.4. Upon the occurrence of any of the events potentially constituting permissible delay listed in sub-clause (1) above, the Builder shall:- a. within seven (7) Working Days of the date on which it became aware of the event, give the Purchaser notice in writing of the occurrence of the event; b. as soon as possible thereafter, and in any event not more than seven (7) Working Days after the giving of the said notice, submit to the Purchaser a statement in writing, specifying as far as possible, with full particulars, the nature and the cause of the event, the effect on the item involved, the likely overall effect computed from the Planned Programme upon the Contractual Delivery Date and any Milestones not then achieved and the steps which are being taken by it to mitigate any delay which may result from the event; c. within seven (7) Working Days after the date on which it becomes aware that the event is at an end, give the Purchaser notice in writing of the date when the event ended; d. within seven (7) Working Days of the date of the Builder's notice under sub-paragraph (c), notify the Purchaser of the period of time by which it claims the Contractual Delivery Date of the Vessel and any Milestones not then achieved should be extended by reason of the event. 16. DELAY IN DELIVERY LIQUIDATED DAMAGES 16.1. In the event that Delivery should be delayed beyond midnight local time on the Contractual Delivery Date, the Builder shall, subject to the provisions of Clause 15 above, pay to the Purchaser by way of liquidated damages, not by way of penalty, for loss of use of the Vessel, the amounts set out below:- 1 - 150 days of delay US$ 42,500 per day However, the total amount of the liquidated damages shall not be more than as would be the case for a delay of 150 days. The liquidated damages shall be due at the date of actual delivery of the vessel. TERMINATION FOR DELAY IN DELIVERY 16.2. Furthermore, if Delivery should not have occurred prior to either:- a. the expiry of 90 days from the Contractual Delivery Date (as extended by Permissible Delays); or b. The expiry of 180 days from the Contractual Delivery Date extended by such days of Permissible Delay as are attributable to the Purchasers fault. the Purchaser, as all alternative to receiving the above mentioned liquidated damages, may elect to rescind this Contract. If the Purchaser elects to rescind this Contract, then tile Purchaser shall give notice in writing to the Builder in which case Clause 19.2 shall apply. Such notice, which shall be effective from receipt thereof by the Builder, shall operate without prejudice to the Purchaser's rights at law generally, but exclusive of its right to liquidated damages. 17. DEFECTS AND BUILDER'S GUARANTEE GUARANTEE PERIOD 17.1. The Builder guarantees the Vessel for a period of twelve months from Delivery or, in respect of individual items as provided for in the Specification, for such greater period as may be agreed, against all defects whether attributable to Materials, workmanship, construction or detail design, and against all physical damage caused to the Vessel thereby. The aforesaid period of twelve months from Delivery shall be known herein as the "Guarantee Period." 17.2. This guarantee shall not extend to Listed Items or to any damage caused by any defect therein not attributable to the Builder, but it shall extend to defects in Materials, workmanship or design and to physical damage caused therein resulting from the Builder's installation of the Listed Items. 17.3. The Builder guarantees repairs or replacements to the Vessel made under the guarantee in sub-clause (I ) above for a further period of twelve months from the date of completion of such repair or replacement, provided that the total guarantee period shall not exceed twenty-four months from Delivery REMEDY OF DEFECTS 17.4. The Purchaser shall notify the Builder in writing within thirty days after discovery of any defect or physical damage failing within the provisions of this Clause 17. The Purchaser's notice shall include such particulars as can reasonably be given as to the nature of such defect or physical damage, the date of discovery and the place at which the Vessel can be made available for earliest inspection by or on behalf of the Builder. The Purchaser shall furnish to the Builder as soon as practicable copies of any relevant survey or inspection reports. 17.5 The Purchaser may require the Builder to make good any defect or physical damage for which the Builder is liable under this Clause 17 by giving notice of such requirement to the Builder. Any parts replaced shall on their removal become the property of and shall be at the risk of the Builder whilst the replacement parts fitted to the Vessel shall upon fitting become the property of the Purchaser. 17.6. The Builder shall execute the necessary work including the carrying out of any essential dismantling and reassembling with the utmost despatch in accordance with the quality standards which are applicable hereunder to the Vessel's original construction. 17.7. In the event that the Builder is unable to make good any defect at the Shipyard, it shall forthwith nominate a yard suitable for such purpose for the Purchaser's approval, and should the Purchaser consider such yard acceptable the Builder shall arrange for the making good of the defect and the carrying out of any essential dismantling and reassembling at its own expense. 17.8. Should the Purchaser consider the yard nominated by the Builder unacceptable, or should the Purchaser elect to have the work referred to above carried out elsewhere than at the Shipyard, the Purchaser shall nominate a yard acceptable to it. In such case the Builder shall pay to the Purchaser for repairs and/or replacements such sum as would equate to the costs of effecting such repairs at a first- class North-West European shipyard. The Builder may, at its own expense, have its representative in attendance during execution of the work. The Purchaser shall ensure that any parts replaced under this sub-clause are returned to the Builder (if required by the Builder) at the Builder's expenses, and in such case those parts returned shall on their replacement become the property of and shall be at the risk of the Builder. 17.9. In the event of defects arising which fall within the provisions of this Clause 17, whether or not such defects require the Vessel to be dry-docked, the Builder shall pay for any costs incurred by the Purchaser in making the Vessel available to the Builder or to any other yard for the making good of any such defect as aforesaid. Such additional costs shall include, but shall not be limited to, port charges and the cost of fuels, lubricants and consumable stores consumed in excess of those which would have been consumed had the Vessel not deviated to allow the Builder to make good any such defects as aforesaid. The Purchaser shall use all reasonable endeavours to mitigate the incidence of such costs chargeable to the Builder's account. Excepting the abovesaid additional costs, the Builder shall not be responsible or liable for any exceptional or special losses, damages or expenses including, but not limited to, loss of time, loss of profit or earning or demurrage directly or due to repairs or other works done to the Vessel to remedy such defects. 17.10. In the event that the Vessel is idle for more than 15 days in total accumulated time due to defects under this Clause 17 the Guarantee Period shall be extended by the number of all days during which the Vessel is idle commencing with the sixteenth day, whether or not other work is undertaken simultaneously with the guarantee work. GUARANTEE ENGINEER 17.11. Where so requested by the Purchaser, the Builder shall appoint a suitably qualified English-speaking Guarantee Engineer to serve on the Vessel as the representative of the Builder for such portion of the Guarantee Period as the Purchaser shall require; the Purchaser and its employees shall give the Guarantee Engineer full co-operation in carrying out his duties as the representative of the Builder on board the Vessel. In particular, the Purchaser shall accord the Guarantee Engineer treatment and subsistence on board the Vessel comparable to the Vessel's Chief Engineer (except that the Purchaser shall provide him accommodation in a standard passenger cabin) at no cost to the Builder. 17.12. The Purchaser shall pay the expenses of the Guarantee Engineer's repatriation by air to Korea upon termination of his services on the Vessel. However, save as aforesaid, the Purchaser shall be responsible for no other expenses in connection with the Guarantee Engineer, who shall at all times be conclusively deemed an employee of the Builder. The Builder shall indemnify and hold harmless the Purchaser from and against personal injury, including death, of, or loss of or damage to property of the Guarantee Engineer unless the same shall been caused by the gross negligence of the Purchaser or any of its employees, agents or sub-contractors. If the Purchaser has reason to be dissatisfied with the conduct or competence of the Guarantee Engineer, the Builder, on receiving particulars of the complaint, shall promptly investigate the matter and, if the complaint is found to be justified, make a change in the appointment. ASSIGNMENT OF SUBCONTRACTORS' GUARANTEES 17.13. The Builder agrees upon the expiry of the Guarantee Period to assign (to the extent to which it may validly do so) to the Purchaser, or as the Purchaser may direct, all the right, title and interest of the Builder in and to all guarantees or warranties given by the Subcontractors save insofar as the same relate to existing claims by the Purchaser against the Builder. ASSIGNMENT OF BUILDER'S GUARANTEE 17.14. It is expressly agreed and understood that the benefit of this Guarantee shall be capable of transfer by the Purchaser to any Assignee. The Builder shall in such circumstances enter into any documentation reasonably requested by either the Purchaser or the Assignee to evidence such transfer and the vesting in the Assignee pursuant to such assignment of all rights in respect of this Guarantee. 18. DEFAULT BY THE PURCHASER EVENTS OF PURCHASER'S DEFAULT 18.1. The Purchaser shall be deemed to be in default of performance of its obligations under this Contract in the following cases: a. if the Purchaser fails to pay the amount of any of the Instalments of the Contract Price due to the Builder in the period prior to Delivery on the due date for payment thereof, b. if the Purchaser fails without legal justification to take delivery of the Vessel in accordance with Clause 14 and to pay the instalment of the Contract Price due thereon; c. if an order or an effective resolution is passed for the winding up of the Purchaser (otherwise than for the purposes of a reconstruction or amalgamation previously approved by the Builder) or if a receiver is appointed over the whole or any part of the undertaking or property of the Purchaser or if the Purchaser becomes insolvent or suspends payment generally of its debts or ceases to carry on its business or makes any special arrangement or composition with its creditors. 18.2. If the Purchaser is in default as to the payment of any instalment as provided in (a) or (b) of sub-clause (1) above, then without prejudice to any other rights of the Builder or of the Purchaser, the Purchaser shall be liable to pay interest at 2 % per cent over LIBOR on the unpaid amount from the day from which the same became due to the Builder up until the date of actual payment thereof. The Builder shall further be entitled to claim as Permissible Delay within the meaning of Clause 15.2 any period of time during which the construction or completion of the Vessel has been delayed in consequence of the Purchaser's default as aforesaid. TERMINATION BY THE BUILDER 18.3. If default on the part of the Purchaser continues for a period of thirty days, the Builder shall have the right at its sole discretion to rescind this Contract by giving written notice to the Purchaser. The Builder shall in such event be entitled to retain all of the instalments received from the Purchaser. Upon recession of this Contract in accordance with this clause, title to the Vessel shall be temporarily transferred to the joint ownership of the Builder and the Purchaser and remain as such until disposal of the Vessel by the Builder in accordance with this clause. 18.4. In the event of rescission of this Contract in accordance with this Clause the Builder shall have the right and power either to complete or not to complete the Vessel as it deems fit but in any event shall sell the Vessel (either in its complete or incomplete form) at the best available price at a public or private sale on such reasonable terms and conditions. If the Builder sells the Vessel in an incomplete form then the Builder shall give credit to the Purchaser for any and all savings which arise from not having to complete the construction of the Vessel. 18.5. In the event of the sale of the Vessel in its completed state the proceeds of sale received by the Builder shall be applied to payment of all expenses attending such sale and otherwise incurred by the Builder as a result of the Purchaser's default and then to payment of all unpaid instalments of the Contract Price and interest on such instalments at the rate of 2 per cent above LIBOR from the respective due dates thereof to the date of application. 18.6. In the event of sale of the Vessel in its incomplete state the proceeds of sale received by the Builder shall be applied first to all expenses attending such sale incurred by the Builder as result of the Purchaser's default and then to payment of all costs of part-construction of the Vessel less the instalments retained by the Builder and compensation to the Builder for damages suffered by the Builder in consequence of such default. 18.7. In either of the above events of sale, if the proceeds of sale exceed the sums to which such proceeds are to be applied as aforesaid the Builder shall promptly pay any such excess to the Purchaser without interest thereon and shall at the same time either permit the Purchaser to remove the Purchaser's Supplies from the Shipyard or pay to the Purchaser the full value thereof. 18.8. If the proceeds of sale of the Vessel are insufficient to pay such total amounts payable as aforesaid the Purchaser shall be liable to pay to the Builder upon demand the amount of such deficiency. 19. DEFAULT BY THE BUILDER EVENTS OF BUILDER'S DEFAULT 19.1. In the event that any of the following events should occur:- a. the Builder shall without legal justification fail to proceed with construction of the Vessel with all reasonable despatch so that it fails to meet two consecutive Milestones within ninety days of the respective dates agreed for the same; b. the Builder shall commit any material breach of this Contract and shall fail to initiate the remedy work for the same within five Working Days of receipt by the Builder of written notice from the Purchaser; c. the making of any order or tile passing of an effective resolution for the winding-up of the Builder (other than for the purposes of reconstruction or amalgamation which has been previously approved in writing by the Purchaser such approval not to be unreasonably withheld), or the appointment of a receiver of the undertaking or property of the Builder, or the insolvency of or a suspension of payment by the Builder, or the cessation of the carrying oil of business by the Builder, or the making by the Builder of any special arrangement or composition with creditors of the Builder, and failure by the Builder the Purchaser may elect either (a) to rescind this Contract or (b) to exercise its option to purchase the Vessel pursuant to sub-clause 3 hereof. If the Purchaser elects to rescind this Contract, then the Purchaser shall give notice in writing to the Builder in which case the provisions of sub-clause 2 below shall apply. Such notice shall be effective from receipt thereof by the Builder. RESCISSION BY THE PURCHASER 19.2. If, in accordance with (1) the provisions of sub-clause I above or (2) Clause 16.3 above the Purchaser exercises its right to rescind this Contract, then the Builder shall, without prejudice to the Purchaser's general remedies at law, promptly repay to the Purchaser the amount of all monies paid by the Purchaser on account of the Contract Price together with interest thereon at a fixed rate of 10% p.a. from the date when such monies were paid by the Purchaser to the Builder up to the date of the repayment thereof calculated on the same basis as an commercial inter-bank transaction carried out in London. The Builder shall also redeliver to the Purchaser at the Shipyard all of the Purchaser's Supplies delivered to the Builder at the time of the Purchaser's rescission. Upon such refund by the Builder to the Purchasers, all obligations, duties and liabilities of each of the parties to the other under this Contract shall be completely discharged. PURCHASE OF THE VESSEL 19.3. In the event that the Purchaser shall exercise its option to purchase the Vessel, the Builder shall give notice in writing to the Builder. The Builder shall thereupon- a. secure the immediate discharge of all liens, claims, mortgages or other encumbrances upon the Vessel; b. complete at its own cost all works required as a minimum to permit the Vessel to depart from the Shipyard in a safe and seaworthy condition, remove its employees, agents and contractors, together with their equipment, from the Vessel and render all necessary assistance to the Vessel in leaving the Shipyard at the earliest moment convenient to the Purchaser; c. execute and deliver to the Purchaser an original of the Protocol of Delivery and Acceptance together with any and all documentation (including but not limited to a bill of sale or builder's certificate) in such form and such manner as the Purchaser shall in its absolute discretion determine shall be required or desirable for the purposes of transferring to the Purchaser title to the Vessel in her then current state of construction; and d. execute and deliver to the Purchaser all of the documentation listed in Clause 14.4 hereof to the extent that tile same is at that time capable of production by the Builder. 19.4. Title to the Vessel, and all risk of loss thereof, shall in such circumstances transfer to the Purchaser upon execution by the Purchaser of the Protocol of Delivery and Acceptance following receipt of all of the documentation received above. The Purchaser may, however, elect to execute the Protocol of Delivery and Acceptance notwithstanding the Builder's failure to deliver all or part of the other documentation required to be delivered by the Builder pursuant to subclause 3 above. 19.5. The Purchaser shall thereafter be entitled to retain and apply any balance which may be otherwise due under this Contract by it to the Builder, or such part thereof as may be necessary to meet the cost of completing the works envisaged under this Contract elsewhere, together with the supervision thereof (the "Completion Costs"). If the Completion Costs exceed the balance which would otherwise have been due from the Purchaser to the Builder hereunder, the Builder shall pay the amount of such excess to the Purchaser. However, if the Completion Costs are less than the balance which would otherwise have been due from the Purchaser to the Builder, the Builder shall be entitled to receive from Purchaser an amount equal to the difference between such price and the Completion Costs. NON-PAYMENT BY THE BUILDER 19.6. Should the Builder default in payment of any amount due under this Contract (including, without limitation, payment of liquidated damages), then the Builder shall pay to the Purchaser interest thereon at the rate of 2 percent over LIBOR from the date when the amount became due to the Purchaser to the date of the payment thereof. 20. PATENT INDEMNITY 20.1. The Builder warrants that the Purchaser and its successors in title shall enjoy quiet possession of the Vessel and that the Purchaser's possession, ownership or operation of the Vessel shall not at any time infringe any patent rights, utility model rights, trade mark rights or copyrights in any country. The purchaser shall protect, defend, hold harmless and indemnify the Builder in respect of any claim or infringement of a patent right, utility model rights, trade mark rights or copyrights related to the basic design, Listed Items or material or equipment provided by the Purchaser to the Builder. 20.2. The Builder shall indemnify and hold the Purchaser harmless against any loss, damage, claim, demand, proceeding or liability whatsoever arising out of relating to: a. any lawful claims of superior title by a third party against the Purchaser's quiet possession of the Vessel; and b. the infringement of any of the rights set out in sub-clause (1) above by reason of the Purchaser's possession, ownership or operation of the Vessel. 20.3. The loss referred to in sub-clause (2) above shall include, but shall not be limited to: a. the costs and expenses of considering and defending any claim, demand or proceeding; b. any sum paid or payable by the Purchaser in respect of any settlement or any such claim, demand or proceeding; c. any sum paid or payable by the Purchaser to acquire a license under any of the rights set out in sub-clause (1) above; and d. any sum paid or payable by the Purchaser to its servants or agents or to any operator of the Vessel to indemnify them or any of them against any such loss, damage, claim, demand, proceeding or liability or the cost of acquiring a license under any of the such rights. 21. TAXES AND DUTIES 21.1. The Builder shall pay or cause to be paid all taxes, duties, fees and stamp duties of whatsoever nature imposed in Korea in connection with the execution and performance of this Contract, However personal income taxes imposed by Korean Authority upon employees of the Purchaser, if any, shall be the Purchasers account. 21.2. The Purchaser shall pay or cause to be paid all taxes, duties, fees and stamp duties of whatsoever nature imposed outside Korea in connection with the execution and performance of this Contract. 22. ASSIGNMENT 22.1. The Purchaser may transfer, by assignment or novation, to any third party or parties (herein "Assignee(s)") any of its rights and/or obligations under this Contract. Provided, however, that, to the extent that any such assignment or novation transfers to an Assignee the obligations of this Contract, the purchaser shall be responsible, jointly and severally with the Assignee, to perform the obligations of this Contract. 22.2. The Builder may, with the prior written approval of the Purchaser, assign the benefit of this Contract. 23. PRIORITY OF DOCUMENTS 23.1. The Appendices hereto shall form an integral part of this Contract as if the same were expressly set out herein. 23.2. If there is any discrepancy between the following documents priority between them shall be as follows:- a. between the terms of this Contract (excluding the Specifications) and the terms of the Specifications, the terms of the former shall prevail; b. between the Principal Drawings and the Specifications, the Specifications shall prevail; c. between the Principal Drawings, in the order of precedence contained ill Appendix I; d. between one approved Plan and another approved Plan, the later in date shall prevail; 24. NOTICES 24.1. Every notice, consent or approval (individually and collectively called "Communications" for the purposes of this Clause 24) given or required, whether expressly or impliedly, under this Contract shall be in writing. 24.2. Communications shall be given by the Builder to the Purchaser as follows: Address: to be advised Attn: Facsimile 24.3. Communications shall be given by the Purchaser to the Builder as follows: Address: to be advised Attn: Facsimile 25. RECORDS AND AUDITS 25.1. The Builder shall maintain true and complete records in connection with the construction of the Vessel and all transactions related thereto, and shall retain all such records for not less than twenty-four (24) months following Delivery. 25.2. No director, employee or agent of the Builder shall give or receive any commission, fee, rebate, gift or entertainment of significant cost or value in connection with the work under this Contract, or enter into any business arrangement with any director, employee or agent of the Purchaser. 25.3. If any violation of sub-clause (2) above is found to have occurred prior to the date of signing this Contact and such violation is determined to have resulted directly or indirectly in tile Purchaser's consent to enter into this Contract with the Builder the Purchaser may rescind this Contract by notice in writing to the Builder in which case the provisions of Clause 19.2 shall apply. 25.4. The Builder shall use its best endeavours to procure that all Subcontractors:- a. maintain records in accordance with sub-clause (1) above; b. enter into obligations with the Builder, to the like intent and effect as those which bind the Builder as above. The Builder shall promptly notify the Purchaser of any violation of such obligations involving Subcontractors which comes to the Builder's notice. 26. LAW 26.1. The construction, validity and performance of this Contract shall be governed by English Law. 27. DISPUTES 27.1. Any claim, difference or dispute which may arise out of this Contract shall be decided by the Commercial Court of the Queen's Bench Division of the High Court of England and Wales to whose exclusive jurisdiction the parties hereby agree. 27.2. For the purposes of any proceedings pursuant to sub-clause (1) above, the parties hereby irrevocably appoint the following as their agents for the service of process:- THE BUILDER To be advised Ref: [ ] THE PURCHASER To be advised Ref: [ ] 27.3. Without prejudice to the generality of sub-clause (1) above and without prejudice to any express provision contained herein for referral of any matter to an expert, any dispute or difference of opinion between the parties relating to conformity of the construction of the Vessel, Materials or workmanship with this Contract, the Specifications and the other Contract Documents may, by agreement between the Parties, be referred to an expert, acting as an expert and not an arbitrator, to be appointed by agreement between them and whose opinion on the matter shall be final and binding upon the parties hereto. 27.4. If the parties shall fail to agree either (i) to submit the dispute to a technical expert or (ii) upon the identity of a mutually acceptable technical expert as aforesaid, such dispute shall be settled in the manner as defined in sub-clause 1 above. 28. MISCELLANEOUS 28.1. The terms of this Contract are to remain confidential to the parties and no disclosure of the same may be made to any third party other than for the purposes of permitting or ensuring its due performance by either party hereto. This obligation shall survive termination of this Contract for any reason whatsoever. 28.2. The Builder undertakes to ensure that all its supervisory staff, both on and off the construction site, are fluent in the English language and are capable of understanding any written or verbal instructions in the English language. 29. SPARE PARTS 29.1. The Builder shall furnish spare parts and maintenance tools of the kind and in at least the specified quantities in accordance with the Specifications, Classification Society requirements, and the maker's standards, for items furnished by the Builder. The cost of these spare parts is included in the Contract Price. 29.2. In addition, the Builder shall supply to the Purchaser a list of the maker's recommended spare parts for two (2) years of continuous operations covering items supplied by Builder, at least six months prior to the Vessel's completion. 29.3. The spare parts furnished by the Builder shall be properly protected against physical decay, corrosion and mechanical damage and shall be properly listed so that replacements may be readily ordered. 29.4. The Builder shall complete the storage spaces installation in time to enable to positioning, labelling and listing of all spare parts (the Builder and Purchaser supplied) prior to Delivery. The Builder at his own cost shall be responsible for handling, bringing on board and storage on the Vessel of all spare parts, tools and supplies under instruction and supervision of Purchaser's Representative. 30. SAFETY AND HEALTH STANDARDS 30.1. The Purchaser's Representative will have authority to monitor the performance of the work done by the Builder to ensure safe and workmanlike performance. 30.2. It is the Purchaser's policy not only to comply with the safety and health measures required by law but to act positively to prevent injury, ill health, damages and loss arising from its operations. The Purchaser requires the Builder and his sub-contractors to apply health, safety and local environmental standards in order to achieve high levels of performance. It is essential that the Builder and his sub-contractors undertaking work consistently show a high level of safety awareness and prove that they are capable of conducting themselves in a safe and competent manner in their area of activity. 30.3. The Builder acknowledges the Purchaser's strong commitment to safety and affirms that lie has a written safety policy which has been signed and is actively supported and endorsed by Builder's management. The Builder further affirms that its safety policy is widely dissefilinated, understood and implemented by and among Builder's and Builder's sub-contractors' employees. This policy shall be in English and such other language(s) as required. A copy of Builder's Safety Policy shall be furnished to the Purchaser prior to start of tile work. 30.4. It is essential that good housekeeping is maintained by the Builder's employees throughout the term of this Contract. The working areas shall be kept tidy at all times, access ways kept clear and surplus/scrap material removed daily. Cleaning up at end of the Job is not considered Sufficient. Spillage of oil or chemicals shall be cleared up immediately to avoid fire hazards, slippery surfaces, contact with toxic substance and other hazards. Appropriate safety precautions shall be taken during cleaning up. No oil grade with flash points lower than 550C shall be used for cleaning purposes. 30.5. Asbestos containing products are not to be applied on board the Vessel. Substitutes therefor shall be applied only after authorisation by the Purchaser. 30.6. The Builder shall report immediately to the Purchaser all accidents occurring during the term of this Contract and related to work thereunder, that result in injury to or death of any person and/or damage to or loss of property. Accidents are defined as "Unintentional or unplanned events that may or may not result in personal injury or equipment, plant, or property damage, or any combination of these". The Purchaser reserves the right to stop part or all of the work at no cost to the Purchaser until relevant unsafe acts and situations have been rectified and the period work is so stopped shall not be a permitted reason for extending the of Delivery Date. Any such stoppage of work shall be confirmed to the Builder in writing by the Purchaser stating the reasons for stoppage and the actions that the Builder has to implement for work to be permitted to resume. For minor violation of safety regulations the Purchaser may choose not to require work stoppage provided that the Builder promptly rectifies such violation. 30.7. The Purchaser may require the Builder to permanently remove and replace any of Builder's or Builder's sub-contractors' employees who violate safety regulations and any equipment which is obviously unsafe. 30.8. The Builder shall, at his own expense, supply his personnel and his sub-contractors' personnel with adequate protective personal clothing, safety helmets, safety shoes, and other protective equipment required for the type of work to be carried out. 31. EFFECTIVENESS 31.1. This Contract is subject to, and shall become effective and legally binding oil tile parties as at the date of execution. 31.2. Tile date upon which the above conditions shall all have been satisfied shall be known hereunder as the "Effective Date". IN WITNESS WHEREOF the parties hereto have caused this Contract to be duly executed the day and year first above written. THE PURCHASER: THE BUILDER: PETRODRILL CONSTRUCTION INC DAEWOO CORPORATION /s/ DEREK LEACH /s/ YOUNG-KYUN SHIN By: Derek Leach By: Young-Kyun Shin Title: Attorney-in-Fact Title: Attorney-in-Fact DAEWOO HEAVY INDUSTRIES LTD /s/ YOUNG-KYUN SHIN By: Young-Kyun Shin Title: President APPENDIX I PRINCIPAL DRAWINGS AND OTHER CONTRACT DOCUMENTS Are as defined in section 99.000 of the specification AMETHYST 4 SEMI - SUBMERSIBLE DRILLING VESSEL PROJECT MASTER SCHEDULE (23 MONTH) APPENDIX IIA LISTED ITEMS For this purpose "Listed Items" shall mean those items identified as Owner Furnished Equipment in tile attached Specification. The budget for such items, delivered to the Builder shall be US $51.0 million. Reference clause 5.8 the following target delivery dates shall apply however reasonable endeavours shall be made to improve such dates in order to fit with the Builders overall construction schedule. - - -------------------------------------------------------------------------------- ITEM REFERENCE DATE - - -------------------------------------------------------------------------------- Derrick 25100 1/9/99 - - -------------------------------------------------------------------------------- Racking System 25100 1/9/99 - - -------------------------------------------------------------------------------- Heave Compensating System 25100/71110 1/9/99 - - -------------------------------------------------------------------------------- Hoisting 25100 1/9/99 - - -------------------------------------------------------------------------------- Top Drive System 25100 1/9/99 - - -------------------------------------------------------------------------------- Drawworks Assembly 25110 15/9/99 - - -------------------------------------------------------------------------------- Rotary System 25200 1/9/99 - - -------------------------------------------------------------------------------- Winches 25200 1/9/99 - - -------------------------------------------------------------------------------- Drilling Controls 25210/56400 1/9/99 - - -------------------------------------------------------------------------------- Drill Floor Handling 25220 1/11/99 - - -------------------------------------------------------------------------------- Choke Manifold 25220 1/9/99 - - -------------------------------------------------------------------------------- Diverter System 25220 1/9/99 - - -------------------------------------------------------------------------------- BOP Control Unit 25230 15/10/99 - - -------------------------------------------------------------------------------- HP Mud and Cement System 25300 1/6/99 - - -------------------------------------------------------------------------------- Mud Process 25300/25320/25330/25920 15/2/99 - - -------------------------------------------------------------------------------- BOP 18 3/4 25400 15/1/20 - - -------------------------------------------------------------------------------- Riser Tensioner 25500/71110 15/7/99 - - -------------------------------------------------------------------------------- Risers 25600/25700 15/1/20 - - -------------------------------------------------------------------------------- Production Equipment 25800 1/11/99 - - -------------------------------------------------------------------------------- Offshore Cranes 33050 1/10/99 - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- BOP Handling 33600/33700 1/10/99 - - -------------------------------------------------------------------------------- Riser Handling 33800 1/10/99 - - -------------------------------------------------------------------------------- Electrical System 51110 1/6/99 - - -------------------------------------------------------------------------------- Subsea Instrumentation 56400 1/9/99 - - -------------------------------------------------------------------------------- Miscellaneous Instrumentation 56400/57700 1/5/99 - - -------------------------------------------------------------------------------- APPENDIX III FORM OF PROTOCOL OF DELIVERY AND ACCEPTANCE. It is this day agreed that m.v. [ ], built by the Builder as Hull No.[ ] at its [ ] yard in [ ] under a Contract dated [ ] 1998 and made between the Builder and the Purchaser therein described has today been delivered by the Builder and accepted by the Purchaser. Dated: Signed ...................... for [ ]. The Builder Signed ...................... for [ ]. The Purchaser APPENDIX IV FORM OF GUARANTEE To: PETRODRILL CONSTRUCTION INC [date] ([SHIPYARD COMPANY]) HULL NUMBER 3016 We hereby issue our irrevocable guarantee No. [ ] in favour of yourselves, Petrodrill Construction Inc, for the account of Daewoo Corporation and Deawoo Heavy Industries Ltd (hereinafter called the "Builder") in connection with the shipbuilding contract dated 9th April 1998 (hereinafter called the "Contract") made by and between yourselves and the Builder for the construction and sale of one Dynamic Positioned Semi-Submersible Drilling Vessel having Builder's Hull No.3016 (hereinafter called the "Vessel"). Other terms and expressions employed herein shall bear the same meaning as in the Contract, a copy of which has been provided to us. Under the terms of the Contract you are to pay to the Builder a Contract Price for the Vessel six instalments payable as follows:- a) FIRST INSTALMENT: 10 per cent (ten %) of the Provisional Contract Price, being $ 13,600,000 shall be paid within three Banking Days of the Effective Date. b) SECOND INSTALMENT: 30 per cent (thirty %) of the Provisional Contract Price, being $40,800,000, shall be paid within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorised Representative (or, in default thereof, the Classification Surveyor), certifying that it is 6 months after the Effective Date of the contract has taken place. c) THIRD INSTALMENT: 20 per cent (twenty %) of the Provisional Contract Price, being $ 27,200,000 shall be paid within three Banking Days from receipt by the Purchaser of a telefax. notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorised Representative (or, in default thereof, the Classification Surveyor), certifying that Keel laying has taken place. d) FOURTH INSTALMENT: 20 per cent (twenty %) of the Provisional Contract Price, being $27,200,000, shall be paid within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorised Representative (or, in default thereof, the Classification Surveyor), certifying that launching [float out] has taken place. e. FIFTH INSTALMENT: 20 percent(twenty %)of the Provisional Contract Price, together with the aggregate of (i) any excess of the Contract Price over the Provisional Contract Price and (ii) any increase or any decrease of the Contract Price arising from the provisions of Clauses 7 and 16 below, shall be paid upon Delivery. In accordance with the terms of the Contract you are entitled either upon your rescission thereof or upon a Total Loss of the Vessel to repayment of the instalments of the Contract Price paid by you prior to such rescission, together with interest thereon at a fixed rate of 10 % p.a. ( calculated on the same basis as any London inter-bank commercial transaction ) from the date of payment by the Purchaser to the date such installments plus interest are returned to the Purchaser. In the event that the Builder shall fail to make such repayment, we shall pay to you the sum or sums due to you from the Builder against your written statement (or that of your assignee) that demand for repayment has been made and that the Builder has within thirty (30) Business Days of such demand failed to comply therewith. Such written statement shall identify (i) the number and amount of Instalments in respect of which repayment has not been received and (ii) the total interest payable in respect of the same on the assumption that payment of the principal sum outstanding is made by us thirty (30) Business Days from the date of receipt of such statement. This guarantee shall initially secure repayment of the First Instalment of the Contract Price (plus interest thereon as here in before provided) from the date of receipt of the same by the Builder. The maximum sum claimable by you hereunder will thereafter be automatically increased upon Builder's receipt of each further Instalment of the Contract Price payable prior to Delivery of the Vessel, each time by the amount of such Instalment plus interest thereon as here in before provided, but in any eventuality our total liability hereunder shall not exceed the sum of US $ [ ] plus interest thereon as here in before provided. Not withstanding the provisions here in above in case we receive notification from you or the Builder stating that the question of your rescission of the Contract or your claim for refundment thereunder has been disputed and referred to the Commercial Court in accordance with the provisions of the Contract, this Guarantee shall be valid until 30 days after the final judgement shall be rendered in said Court. In such case this Guarantee shall only be available to the extent of a final judgement in your favour by such Court justifying your claim for refundment as presented to us or specifying such lesser amount as the Court may determine as being due to you. Our liability hereunder shall not be affected by any alteration to, or variation of, the terms of the Contract you may hereafter agree with the Builder or any other matter or circumstance which would, but for this clause, operate to exclude or limit our liability hereunder. This guarantee shall be fully assignable by you. It shall expire and become null and void upon the earliest of (i) receipt by you or your assignee of the amount guaranteed hereunder and (ii) Delivery of the Vessel in accordance with the provisions of the Contract or (iii) valid rescission by the Builder in accordance with the terms of the Contract. In such case, this guarantee shall be returned to us. This guarantee shall be governed by, and construed in accordance with English law, and we hereby (i) agree for your exclusive benefit that any legal action or proceeding arising hereunder may be brought in the High Court of Justice in England (ii) irrevocably submit to the jurisdiction of that court and (iii) irrevocably designate, appoint and empower ( ) (the present address of whose registered office is ( ), London, England) to receiver for us and on our behalf of process in England. (Bank) By: (Title)(Name) APPENDIX V FORM OF STAGE CERTIFICATE Hull No [ ] under a Contract dated the day of 1998, made between (Purchaser) and (Builder) We hereby certify in connection with the building of the above Vessel that [[ ] has taken place] [the Vessel has successfully been launched] For and on behalf of Builder ........................... Dated [ ] 199 . For and on behalf of Purchaser ........................... (Authorised Representative) Dated [ ] 199 . For and on behalf of Classification Society ........................... Dated [ ] 199 . APPENDIX VI SCHEDULE OF LABOUR COSTS FOR MODIFICATIONS APPENDIX VI UNIT RATE FOR MODIFICATIONS I. STEEL UNIT RATE FOR STEEL WORK MILD HIGH-TON ---- -------- a. Unit rate for hull steel work : U$ 2,585 / Ton U$ 2,750 / Ton b. Unit rate for outfitting steel work : U$ 4,125 / Ton U$ 4,290 / Ton The steel unit rates above shall include the cost of steel, labour, facilities, consumables and all other general expenses except engineering cost related to such steel work which shall be calculated by engineering manhours and unit rates of the same provided in item II below. The steel unit rate shall be used only for steelwork. II. LABOR UNIT RATE UNIT PRICE UNIT OF WORKING DESCRIPTION MEASUREMENT (USD) ----------- ----------- ---------- A. ENGINEERING Engineering Manager Hour 110 ----------- Project Engineer Hour 110 ----------- Civil/Structural/Architectural Engineer Hour 87 ----------- Mechanical Equipment Engineer Hour 80 ----------- Electrical Engineer Hour 80 ----------- Controls Systems Engineer Hour 80 ----------- Plant Layout & Piping Engineer Hour 80 ----------- Process Engineer Hour 80 ----------- Subsea Systems Engineer Hour 80 ----------- Offshore Structural Engineer Hour 80 ----------- Process & Utility Systems Engineer Hour 80 ----------- Production Systems Engineer Hour 80 ----------- Loss Prevention Engineer Hour 80 ----------- Vessels Engineer Hour 80 ----------- Automation Technology Operations Engineer Hour 103 ----------- Project Manager Hour 150 ----------- Quality Assurance Engineer Hour 94 ----------- Construction Manager Hour 80 ----------- Start-up & Facility Operations Engineer Hour 103 ----------- Project Accountant Hour 93 ----------- Project Procurement Manager Hour 88 ----------- Purchasing Engineering Hour 88 ----------- Subcontracts Engineer Hour 94 ----------- Supplier Quality Engineer Hour 80 ----------- Expediting Engineer Hour 80 ----------- Logistics/Traffic Engineer Hour 80 ----------- Technical Services Manager Hour 80 ----------- Estimator Hour 93 ----------- Cost/Scheduling Supervisor Hour 93 ----------- Cost Engineer Hour 93 ----------- Planning & Scheduling Engineer Hour 93 ----------- Engineering Coordinator Hour 93 ----------- Documentation Engineer Hour 93 ----------- Instrumentation Engineer Hour 93 ----------- CAD Draftsman Hour 93 ----------- Draftsman (Table) Hour 67 ----------- B. LABOR Supervisor/Foreman Hour 93 ----------- Skilled Labor Hour 55 ----------- Driver Hour 55 ----------- Crane Operator Hour 55 ----------- Unskilled Labor Hour 50 ----------- QA/QC Inspector Hour Hour 93 ----------- The labor unit rate in this item II above shall include all yard expenses except material cost provided in Item III below and extra facility and equipment cost specified in item IV below. III. MATERIAL COST 1. Materials supplied by Builder 1) Invoices up to 1,000 USD: CIF price actually purchased by Builder plus 15% of CIF price as handling charge. 2) Invoices over 1,000 USD: CIF price actually purchased by Builder plus 10% of CEF price as handling charge. 2. Materials supplied by Owner: 10% of CIF price as handling charge. IV. EXTRA FACILITY AND EQUIPMENT COST 1. Extra Facility Unit Rate UNIT PRICE UNIT OF WORKING DESCRIPTION CAPA. MEASUREMENT (USD) ----------- ---- ----------- ---------- Goliath Crane 900 Ton Hour 7053 450 Ton Hour 2500 -------- Crawler Crane 450 Ton Hour 972 -------- 300 Ton Hour 620 -------- 225 Ton Hour 518 -------- Jib Crane 200 Ton Hour 1126 -------- 50 Ton Hour 945 -------- 30 Ton Hour 463 -------- Tire Crane 200 Ton Hour 98 -------- 80 Ton Hour 63 -------- 55 Ton Hour 56 -------- 30 Ton Hour 42 -------- 18 Ton Hour 35 -------- Tower Crane 10 Ton Hour 146 -------- 12 Ton Hour 163 -------- 60 Ton Hour 371 -------- Overhead Shop Crane 10 Ton Hour 58 -------- 15 Ton Hour 75 -------- 20 Ton Hour 99 -------- 25 Ton Hour 123 -------- 30 Ton Hour 147 -------- 35 Ton Hour 158 -------- 40 Ton Hour 179 -------- Fork Lift 37 Ton Hour 111 -------- 25 Ton Hour 84 -------- 15 Ton Hour 59 -------- 10 Ton Hour 41 -------- 7 Ton Hour 26 -------- 5 Ton Hour 24 -------- 3.5 Ton Hour 21 -------- 2.5 Ton Hour 17 -------- Transporter 500 Ton Hour 536 -------- 300 Ton Hour 414 -------- 200 Ton Hour 276 -------- 100 Ton Hour 137 -------- Tractor 110 Hour 56 -------- 53 Ton Hour 45 -------- Trailers 50 Ton Hour 136 -------- 32 Ton Hour 125 -------- 25 Ton Hour 96 -------- 11 Ton Hour 67 -------- 4.5 Ton Hour 42 -------- Hydraulic Jacks 200 Ton Hour 132 -------- 100 Ton Hour 65 -------- 50 Ton Hour 46 -------- 30 Ton Hour 35 -------- Plat Form 40 m Hour 77 -------- 33 m Hour 54 -------- 26 m Hour 42 -------- 23 m Hour 37 -------- 21 m Hour 33 -------- 18 m Hour 28 -------- Table Lift 12 - 14 m Hour 21 -------- 9.4 m Hour 20 -------- Excavator 1.0 m3 Hour 39 -------- 0.28 m3 Hour 25 -------- 0.12 m3 Hour 21 -------- Loader 2.9 m3 Hour 41 -------- 0.30 m3 Hour 19 -------- Dozer 4.5 Ton Hour 25 -------- Dump Truck 15 Ton Hour 40 -------- AC Manual Metal ARC Welding Machine Hour 20 -------- DC Manual Metal ARC Welding Machine Hour 20 -------- Tig Welding Machine (Manual) Hour 12 Gouging Machine (Manual) Hour 20 Co2 Welding Machine (Semi Auto.) Hour 20 Mig Welding Machine (Semi Auto.) Hour 35 Sport Welding Machine (Semi Auto.) Hour 35 Stud Welding Machine (Semi Auto.) Hour 35 Column & Boom Welding (Auto.) Hour 77 Elec. Gas Welding Machine (Auto.) Hour 35 Elec. Slag Welding Machine (Auto.) Hour 35 Self Power Welding Machine (Auto.) Hour 35 Sub Welding Machine (Auto.) Hour 132 Under Water Welding Machine (Auto.) Hour 35 Pre-heating Device Hour 29 Radio Graphic (X-ray Irradiator 300 KVP) Hour 68 -------- Radio Graphic (X-ray Irradiator 250 KVP) Hour 47 -------- U/T Machine Hour 33 MIT Machine Hour 33 Cutting Machine Hour 36 Auto FP Cutting Machine Hour 116 Profile Pipe Cutting Machine Hour 118 1500 Press Machine Hour 86 -------- Magnetic Drill Hour 29 Heavy Roll Bending Machine Hour 83 Grinder Hour 20 Theodolite Hour 20 Agitator Hour 11 Chipping Hammer Hour 10 Automatic Sandblast Equipment Hour 43 Airless Paint Spray Equipment Hour 33 Turning Roller (200 Ton) 200 Ton Hour 33 -------- 50 Ton Hour 12 -------- 20 Ton Hour 10 -------- Tug Boat 2600 HP Day 12000 -------- 3000 HP Day 12000 -------- Barge (without Tug Boat) 600 Ton Day 400 -------- 800 Ton Day 470 The facility unit rate in this Item IV above shall include operation cost, maintenance cost and all other expenses related to such facilities but not include labor cost. 2. Leased or Rended Equipment If there are any leased or rented equipment for modification, changes and extras.. Owner shall bear the cost actually incurred by Builder plus 15% of such lease or rent expense as handling charge. APPENDIX VI SCHEDULE OF LABOUR COSTS FOR MODIFICATIONS APPENDIX VII LIST OF CERTIFICATES TO BE SUPPLIED ON DELIVERY OF THE VESSEL The Builder shall furnish, at the Builder's expense, to the Purchaser the following certificates upon delivery of the Vessel: From the Classification Society: a. Classification certificates for hull, machinery and electricals of the Vessel. b. Safety radio telegraph certificate. c. Load line certificate. d. Register tonnage certificate. e. Suez Canal tonnage certificate. f MODU CODE certificate. g. Safety Construction certificate. h. Certificate of Navigation Lights. i. Certificate of Lifesaving Equipment, Fire Fighting and Fire Detection System. j. Compass Certificate. k. Compass Deviation Table. l. MARPOL International Oil Pollution Prevention Certificate (IOPPC). m. Load test and lifting appliances certificate. n. Test Certificate of Pressure Vessels. From the Local Government Authority: a. De-ratting exemption certificate. b. Potable water analysis certificate. APPENDIX VII LIST OF CERTIFICATES TO BE SUPPLIED ON DELIVERY OF THE VESSEL The Builder shall furnish, at the Builder's expense, to the Purchaser the following certificates upon delivery of the Vessel: From the Classification Society: a. Classification certificates for hull, machinery and electricals of the Vessel. b. Safety radio telegraph certificate. c. Load line certificate. d. Register tonnage certificate. e. Suez Canal tonnage certificate. f. MODU CODE certificate. g. Safety Construction certificate. h. Certificate of Navigation Lights. i. Certificate of Lifesaving Equipment, Fire Fighting and Fire Detection System. j. Compass Certificate. k. Compass Deviation Table. l. MARPOL International Oil Pollution Prevention Certificate (IOPPC). m. Load test and lifting appliances certificate. n. Test Certificate of Pressure Vessels. From the Local Government Authority: a. De-ratting exemption certificate. b. Potable water analysis certificate. APPENDIX VIII MAKERS LIST In accordance with Clause 5.6 of the contract the following maker's list details the Purchaser's preference based on (1) being the preferred supplier. - - -------------------------------------------------------------------------------- AMEHTYST - APPROVED SUPPLIERS LIST - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- Steel Suppliers (2) British Steel (1) Inexa (3) Posco Sumitomo NSC - - -------------------------------------------------------------------------------- Casting TBA - - -------------------------------------------------------------------------------- 16.000 Helideck (3) Baynards (2) Raufoss (1) Marine Aluminium - - -------------------------------------------------------------------------------- 19.000 Painting (4) Sigma (3) Hempel (5) Carboline (2) International (1) Jotun - - -------------------------------------------------------------------------------- 19.000 Cathodic Protection (3) Wilson Walton (1) Jotun (4) Impalloy (2) Electrocataltic - - -------------------------------------------------------------------------------- 32.200 Mooring winches - Capstans (4) Navel (2) Norwinch (1) Ulstein (3) Pusness (6) Zicom (5) Plimsol - - -------------------------------------------------------------------------------- 34.010 Liferafts (2) Zodiac 34.200 (1) Viking (3) Beaufort (4) RFD Lifeboats (I) Norsafe (3) Harding (2) Schat- Watercraft - - -------------------------------------------------------------------------------- 34.150 Fire Detection (1) Thom Security (4) Minervia (2) Autronica (3) Siemens - - -------------------------------------------------------------------------------- 34.520 CO2 system (1) Unitor (2) LPG (3) Walter Kidde (4) He Isn La:sen - - -------------------------------------------------------------------------------- 36.000 Air Conditioning (4) ABB Flakt Marine (5) Semco (1) Stork (6) Direct (Australia) (3) Carrier (7) Nam irei (8) Novenco Hi-press (2) Heinen Hopman - - -------------------------------------------------------------------------------- High Voltage Generator & Switch 51.100 boards GEC Alsthom - - -------------------------------------------------------------------------------- 51.200 Transformers GEC Alslitom - - -------------------------------------------------------------------------------- 52.000 Generators Leroy Somer - - -------------------------------------------------------------------------------- 53.000 Thruster electric motors GEC Alsthom - - -------------------------------------------------------------------------------- 54.000 Communication Equipment Racal Decca Kelvin Hughes Sailor Siemens Raytheon Skanti - - -------------------------------------------------------------------------------- 54.400 PA System (1) GEC AlsthomAkusta Redifon Vingtor Phonetec Steenhans - - -------------------------------------------------------------------------------- 55.000 Positioning equipment Raytheon Sait Kongsberg - Simrad Cegelec - - -------------------------------------------------------------------------------- 58.000 Vessel Management System Autronic 58.100 ABB 58.200 (1) GEC-Alsthom Simrad - - -------------------------------------------------------------------------------- 58.400 Alarm System Siemens Autronic ABB (1) GEC Alshtom Cerberus - - -------------------------------------------------------------------------------- 61.000 Diesel Engines Caterpillar - - -------------------------------------------------------------------------------- 64.000 Thruster units LIPS - - -------------------------------------------------------------------------------- 71.000 Air Compressors (1) Ingersoll Rand (3) Tanabe (2) Compair Luchard Atlas Copco - - -------------------------------------------------------------------------------- 71.000 Air Dryers (5) Deno (3) Atlas Copco (4) Auxitrol (2) Compair Luchard (6) Norgen Martonair (1) Ingersol Rand - - -------------------------------------------------------------------------------- 72.000 Fuel Oil Separators (2) Mitsubishi (1) Alfa-Laval (3) Westfalia - - -------------------------------------------------------------------------------- 73.000 Lube Oil, Separators (2) Mitsubishi (1) Alfa-Laval (3) Westfalia - - -------------------------------------------------------------------------------- 72.000 Oil Pumps (4) Worthington 73.000 Fuel Transfer Pumps (2) Hamworthy (3) Allweiler (1) IMO - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- 75.000 Fresh water pumps (1) Hamworthy 76.000 Sea water pumps (5) Grundfoss 81.000 Ballast pumps (6) Allweiler (4) Kvaerner (7) Shinko (2) Iron (3) Itvr - - -------------------------------------------------------------------------------- 81.500 Bilge / Dirty Oil Separator (4) Gefico (3) Blohm & Voss (2)Alfa Laval (1) Hern-lond Marine - - -------------------------------------------------------------------------------- 88.300 Fresh water makers (1) Alfa-laval (2) Atlas - - ------------------------------------------------------------------------------- EX-10.19(A) 69 EXHIBIT 10.19(A) SIDE LETTER NO. 1. 9th April 1998 Petrodrill Construction Inc. Suite 205 Saffrey Square PO Box N 8188 Nassau Bahamas Daewoo Corporation & Daewoo Heavy Industries Ltd. Gentlemen, Hull No 3016 We refer to the contract executed between us today in respect of the above hull. This letter serves to confirm the agreement between us that, not withstanding the terms of the said contract, that portion of the First Instalment which is calculated as the balance between 10% of the Construction Price and 10% of the Provisional Contract Price shall only become payable on the Sixtieth day after the Effective Date of the contract. Similarly that portion of the Fifth Instalment which is calculated as the balance between 10% of the Construction Price and 10% of the Provisional Contract Price shall become payable within seven days of receipt from your notice, in good-faith that delivery of the Vessel is anticipated within sixty days. Further we jointly agree to enter into a formal amendment to the contract and to the amendment of the KEXIM Refund Guarantee to reflect this arrangement if so required. Yours faithfully /s/ DEREK LEACH Derek Leach Attorney-in-Fact ACCEPTED ON BEHALF OF DAEWOO CORPORATION AND DAEWOO HEAVY INDUSTRIES LTD. /s/ YOUNG-KYUN SHIN YOUNG-KYUN SHIN ATTORNEY-IN-FACT 9TH APRIL 9, 1998 EX-10.19(B) 70 EXHIBIT 10.19(B) SIDE LETTER NO. 2. 9th April 1998 Petrodrill Construction Inc. Suite 205 Saffrey Square PO Box N 8188 Nassau Bahamas Daewoo Corporation & Daewoo Heavy Industries Ltd. Gentlemen, Hull No 3016 You have expressed a desire to make us an alternative proposal after the commencement of the contract regarding "neutral funding" of the Listed Items to be procured under the terms of the contract. We confirm that we will be prepared to positively consider such a proposal provided that we are satisfied that: a) the funding proposed does indeed constitute "neutral funding" with no gain or loss being made by you; and b) that the KEXIM Refundment Guarantee provided in the terms of the contract is in no way prejudiced as regards either the Listed Items or the Construction Price. Yours faithfully /s/ DEREK LEACH Derek Leach Attorney-in-Fact ACCEPTED ON BEHALF OF DAEWOO CORPORATION AND DAEWOO HEAVY INDUSTRIES LTD. /s/ YOUNG-KYUN SHIN YOUNG-KYUN SHIN ATTORNEY-IN-FACT 9TH APRIL 9, 1998 EX-10.19(C) 71 EXHIBIT 10.19(C) NOVATION AGREEMENT This NOVATION AGREEMENT is made the 4th day of December 1998 between: (1) DAEWOO CORPORATION whose principal office is at 541, 5-Ga, Namdaemunro, Jung-Gu, Seoul, Korea; (2) DAEWOO HEAVY INDUSTRIES LTD. (together with Daewoo Corporation the "BUILDER") whose principal office is at 541, 5-Ga, Namdaemunro, Jung-Gu, Seoul, Korea; (3) PETRODRILL OFFSHORE, INC. (formerly PETRODRILL CONSTRUCTION INC.) (the "PURCHASER") whose principal office is at Suite 205, Saffrey Square, P.O. Box N8188, Nassau, Bahamas; and (4) PETRODRILL SIX LIMITED (the "NEW PURCHASER"), whose registered office is at Arias Fabrega & Fabrega, Omar Hodge Building, 2nd Floor, Wickam's Cay 1, Road Town, Tortola, British Virgin Islands. (together referred to as the PARTIES) WHEREAS (A) The Builder and the Purchaser are parties to an agreement relating to the construction and sale of a dynamic positioned semi-submersible drilling vessel with Builder's Hull No. 3015 dated 9 April 1998 (including any amendments included in the associated memorandum, meeting minute and/or side letter made from time to time thereto) (herein called the "AGREEMENT") which expression shall mean the said Agreement as amended and novated by this Novation Agreement. (B) The Parties hereto have agreed to novate the Agreement upon the terms and subject to the conditions set out herein. NOW IT IS AGREED AS FOLLOWS: (1) Terms and expressions defined in the Agreement shall, unless the context otherwise requires, have the same meanings when used in this Novation Agreement. (2) Upon and with effect from the date of this Novation Agreement the Purchaser releases and discharges and agrees to release and discharge the Builder from the various covenants, undertakings, warranties and other obligations contained in the Agreement which are enjoyed by the Purchaser, and from all claims and demands whatsoever arising out of or in respect of the Agreement whether prior to, on or subsequent to the date of this Novation Agreement. (3) Upon and with effect from the date of this Novation Agreement, the Builder releases and discharges and agrees to release and discharge the Purchaser from the various covenants, undertakings, warranties and other obligations contained in the Agreement which are enjoyed by the Builder, and from all claims and demands whatsoever arising out of or in respect of the Agreement whether prior to, on or subsequent to the date of this Novation Agreement. -1- (4) Upon and with effect from the date of this Novation Agreement, the New Purchaser accepts and agrees to accept the liabilities of the Purchaser under the Agreement and agrees to perform all the duties and to discharge all the obligations of the Purchaser under it and to be bound by all the terms and conditions of this Agreement in every way as if the New Purchaser were named in the Agreement as a party ab initio in place of the Purchaser. Without limiting the generality of the foregoing, the New Purchaser acknowledges and agrees that the Builder shall have the right to enforce the Agreement and pursue all claims and demands (future or existing) whatsoever arising out of or in respect of the Agreement whether prior to, on or subsequent to the date of this Novation Agreement. (5) Upon and with effect from the date of this Novation Agreement, the Builder agrees to perform all its duties and to discharge all its obligations under the Agreement and to be bound by all the terms and conditions of the Agreement in every way as if the New Purchaser were named in the Agreement as a party ab initio in place of the Purchaser. Without limiting the generality of the foregoing, the Builder acknowledges and agrees that the New Purchaser shall have the right to enforce the Agreement and pursue all claims and demands (future or existing) whatsoever arising out of or in respect of the Agreement whether prior to, on or subsequent to the date of this Novation Agreement. (6) The New Purchaser confirms that it has received a copy of the Agreement and that it is familiar with the terms thereof. (7) Each Party shall take all steps, execute all documents and do everything reasonably required by any other Party to give effect to the transactions contemplated by this Novation Agreement provided that the Purchaser and the New Purchaser shall jointly and severally reimburse the Builder on a full indemnity basis for all reasonable costs and expenses (including legal fees) incurred by the Builder pursuant to this Clause 7 or otherwise howsoever in connection with the negotiation and execution of this Novation Agreement. (8) If the second Instalment of the Contract Price is not received by the Builder by 15 December 1998, the Builder shall be entitled immediately thereafter to rescind the Agreement by giving written notice to the New Purchaser and to exercise all the Builder's rights under the Agreement. -2- SIGNED by DAEWOO CORPORATION on behalf of BUILDER in the presence of: /s/ YOUNG KYUN SHIN Young Kyun Shin Attorney-InFact SIGNED by DAEWOO HEAVY INDUSTRIES LTD. on behalf of BUILDER in the presence of: /s/ YOUNG KYUN SHIN Young Kyun Shin Attorney-In-Fact SIGNED by PETRODRILL OFFSHORE INC. on behalf of PURCHASER in the presence of: /s/ STEVE ASSITER Steve Assiter Attorney-In-Fact SIGNED by PETRODRILL SIX LIMITED on behalf of NEW PURCHASER in the presence of: /s/ STEVE ASSITER Steve Assiter Attorney-In-Fact -3- EX-10.19(D) 72 EXHIBIT 10.19(D) DAEWOO CORPORATION & DAEWOO HEAVY INDUSTRIES LTD AND PETRODRILL SIX LIMITED. MAIN CONTRACT AMENDMENT AGREEMENT HULL 3016 This Agreement made and entered into this day of December, 1998 by and between: 1. Daewoo Corporation & Daewoo Heavy Industries Ltd., both corporations organised and existing under the laws of Republic of Korea and having their principal offices at 541, Namdaemun-Ro 5-Ga, Chung-Gu, Seoul, Korea (hereinafter jointly and severally referred to as "BUILDER") of the First Part; 2. Petrodrill Six Limited a corporation organised under the laws of the British Virgin Islands having its principal office at 325 Waterfront Drive, Omar Hodge Building, 2nd Floor Wickham's Cay 1, PO Box 985, Road Town, Tortola, British Virgin Islands ("PURCHASER") of the Second Part: 3. Petrodrill Offshore Inc. (formerly Petrodrill Construction Inc.) a corporation organised under the laws of the Bahamas having its principle office at Suite 205, Saffrey Square, PO Box N8188, Nassau, Bahamas ("CONSENTOR") WHEREAS, (1) Builder and Purchaser are parties to a contract dated 9 April 1998 for the construction and sale of a dynamic positioned semi-submersible drilling vessel Hull No. 3016 (THE MAIN CONTRACT) as novated in the Purchasers favour by the Novation Agreement dated 4th December 1998 (THE NOVATION AGREEMENT). (2) Builder and Purchaser wish to amend certain of the payment provisions and the delivery date specified in the Main Contract in the manner hereinafter written. NOW, THEREFORE, in consideration of the mutual promises herein contained, it is agreed as follows: 1.0 - MAIN CONTRACT AMENDMENT 1.1 The payment date for the Second Instalment under Clause 4.1 of the Main Contract is to be amended to reflect that payment will be made on the 23rd December 1998 1.2 Clause 14.1 of the Main Contract is amended as follows: "The Vessel shall be delivered by the Builder to the Purchaser at the Shipyard (or other place as may be agreed with unrestricted access to the open sea) on the 30th July 2000 except that, in the event of Permissible Delay, as defined in Clause 15.2 hereof, the aforementioned date shall be postponed accordingly. The aforementioned date, or such later date to which requirement to deliver may be postponed, is hereinafter called the "Contract Delivery Date" 2 MISCELLANEOUS: 2.1 This Agreement is supplemental to the Main Contract. Except as expressly amended as set out herein the Main Contract remains in full force and effect. 2.2 The amendments contained in clause 1.0 hereof shall be deemed to have been in effect from the 9th April 1998, notwithstanding the date of this Agreement. 2.3 The construction, validity and performance of this Agreement shall be governed by English law. - - -------------------------------------------------------------------------------- Daewoo Main Contract Amendment II -- Hull 3016 16-Dec-98 - 1 - 2.4 This Agreement may be signed in any number of counterparts all of which when taken together will constitute one and the same document. 3 NOVATION AGREEMENT CORRECTION: 3.1 The Parties hereto and the Consentor acknowledge that the Novation Agreement erroneously referred, to "Hull 3015", in its description of the Main Contract in Recital (A) thereof, where as its correct designation is "Hull 3016" and the Parties and the Consentor hereby agree that the Novation Agreement should be construed and deemed amended accordingly. 4. CONDITION SUBSEQUENT 4.1 This Agreement is entirely conditional upon the Purchaser making payment of the Second Instalment by the date specified in clause 1.1 hereof, otherwise this Agreement shall be deemed null and void and the Main Contract shall have effect unamended. IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly executed the day and year first above written. For and on behalf of For and on behalf of DAEWOO CORPORATION PETRODRILL SIX LIMITED. /s/ KYU-SANG SHIM /s/ D. LEACH Name: Kyu-Sang Shim Name: D. Leach Title: Attorney-in-Fact Title: Attorney For and on behalf of For and on behalf of DAEWOO HEAVY INDUSTRIES LTD. PETRODRILL OFFSHORE Inc. /s/ KYU-SANG SHIM /s/ D. LEACH Name: Kyu-Sang Shim Name: D. Leach Title: Attorney-in-Fact Title: Attorney We THE EXPORT-IMPORT BANK of KOREA hereby acknowledge the terms of this Amendment ______________________________ Name: Title: Date: - - -------------------------------------------------------------------------------- Daewoo Main Contract Amendment -- Hull 3016 16-Dec-98 - 2 - EX-10.19(E) 73 EXHIBIT 10.19(E) DAEWOO CORPORATION & DAEWOO HEAVY INDUSTRIES LTD AND PETRODRILL SIX LTD. MAIN CONTRACT AMENDMENT AGREEMENT II HULL 3016 This Agreement made and entered into this 28th day of January, 1999 by and between: 1 Daewoo Corporation & Daewoo Heavy Industries Ltd., both corporations organised and existing under the laws of Republic of Korea and having their principal offices at 541, Namdaemun-Ro 5-Ga, Chung-Gu, Seoul, Korea (hereinafter jointly and severally referred to as "BUILDER"); and 2 Petrodrill Six Limited, a corporation organised under the laws of the British Virgin Islands having its principle office at 325 Waterfront Drive, Omar Hodge Building, 2nd Floor Wickhams Cay 1, PO Box 985, Road Town, Tortola, British Virgin Islands. ("PURCHASER"). WHEREAS, (1) Builder and Purchaser are parties to a contract dated 9 April 1998 for the construction and sale of a dynamic positioned semi-submersible drilling vessel Hull No. 3016 (the "MAIN CONTRACT"). (2) Builder and Purchaser are parties to the Main Contract Amendment Agreement dated 17 December 1998. (3) Builder and Purchaser wish to amend the payment terms set out in the Main Contract in accordance with the terms and conditions set out in this Agreement. (4) The Export-Import Bank of Korea ("KEXIM") has by a Refund Guarantee dated 16 April 1998 (the "REFUND GUARANTEE") guaranteed certain repayment obligations of the Builder to the Purchaser under the Main Contract. (5) The parties have agreed that this Agreement and the things contemplated by it are in all respects subject to and conditional upon KEXIM issuing a letter of amendment to the Refund Guarantee in the form required by this Agreement. (6) The parties wish to record the terms of their agreements on the terms and conditions set out in this Agreement. NOW, THEREFORE, in consideration of the mutual promises herein contained, it is agreed as follows: 1 CONDITION PRECEDENT This Agreement is in all respects subject to and conditional upon the Builder obtaining from KEXIM and delivering to the Purchaser a letter of amendment to the Refund Guarantee in the form attached as Appendix A duly executed on behalf of KEXIM. 2 MAIN CONTRACT AMENDMENT 2.1 Clause 4.1 of the Main Contract is amended as follows: "4.1 The Purchaser shall pay the Construction Price to the Builder in five instalments as follows, the pre-delivery instalments being paid as advances and not as deposits: FIRST INSTALMENT: Ten percent (10%) of the Construction Price, being $8,500,000 shall be paid within three Banking Days of the Effective Date. SECOND INSTALMENT: Thirty percent (30%) of the Construction Price, being $25,500,000, shall be paid within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorized Representative (or, in default thereof, the Classification Surveyor), certifying that it is 6 months after the Effective Date of the contract has taken place. THIRD INSTALMENT: Twenty percent (20%) of the Construction Price, being $17,000,000 shall be paid within three Banking Days of receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, - - -------------------------------------------------------------------------------- Daewoo Main Contract Amendment II -- Hull 3016 -- Petrodrill Six Ltd 28-Jan-99 - 2 - countersigned by an Authorised Representative (or, in default thereof, the Classification Surveyor), certifying that Keel laying has taken place. FOURTH INSTALMENT: Twenty percent (20%) of the Construction Price, being $17,000,000 shall be paid within three Banking Days of receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorised Representative (or, in default thereof, the Classification Surveyor), certifying that launch [float out] laying has taken place. FIFTH INSTALMENT: Twenty percent (20% of the Construction Price, together with any increase or any decrease of the Construction Price arising from the Provisions of Clauses 7 and 16 below, shall be paid upon Delivery." 2.2 A new provision is inserted as Clause 4.1A of the Main Contract as follows: "4.1A The Purchaser shall pay the difference between the Construction Price and the Provisional Contract Price (the "LISTED ITEMS PRICE") to the Builder in nine instalments as follows, the pre-delivery instalments being paid as advances and not as deposits: FIRST INSTALMENT: Ten percent (10%) of the Listed Items Price, being $5,100,000, shall be paid on or before 9th June 1998. SECOND INSTALMENT: Fifteen percent (15%) of the Listed Items Price, being $7,650,000 shall be paid on or before 26th February 1999. THIRD INSTALMENT: Five percent (5%) of the Listed Items Price, being $2,550,000, shall be paid on or before 30 March 1999. FOURTH INSTALMENT: Ten percent (10%) of the Listed Items Price, being $5,100,000 shall be paid on or before 30 May 1999. FIFTH INSTALMENT: Fifteen percent (15%) of the Listed Items Price, being $7,650,000, shall be paid on or before 30 July 1999. SIXTH INSTALMENT: Ten percent (10%) of the Listed Items Price, being $5,100,000, shall be paid on or before 30 September 1999. SEVENTH INSTALMENT: Ten percent (10%) of the Listed Items Price, being $5,100,000, shall be paid on or before 30 November 1999. EIGHTH INSTALMENT: Ten percent (10%) of the Listed Items Price, being $5,100,000, shall be paid on or before 30 January 2000. NINTH INSTALMENT: Ten percent (10%) of the Listed Items Price, being $5,100,000, shall be paid on or before 30th March 2000. TENTH INSTALMENT: - - -------------------------------------------------------------------------------- Daewoo Main Contract Amendment II -- Hull 3016 -- Petrodrill Six Ltd 28-Jan-99 - 3 - Five percent (5%) of the Listed Items Price, being $2,550,000 together with (or minus) any anticipated excess (or shortfall) of the Listed Items Price over (or under) the provisional Listed Items Price, shall be paid on or before 30 May 2000." 23. Clause 5.7 of the Main Contract is amended as follows: 5.7 Unless the Purchaser shall otherwise agree the Builder shall supply those items of Materials set out in Appendix IIA (the Listed Items) from suppliers and subcontractors nominated by the Purchaser. The Purchaser, as agent for and on behalf of the Builder, shall negotiate terms and expedite equipment with each of the Nominated Subcontractors in order to supply the Listed Items set out in Appendix IIA. It is however, expressly agreed that the Purchaser shall contract and expedite with each of the suppliers of the Listed Items as agent for and on behalf of the Builder and the ownership in such Listed Items shall vest with the Builder. 2.4 Clause 5.8 of the Main Contract is amended as follows: "5.8 The price for the Listed Items, including delivery to the Builder's yard, negotiated by the Purchaser, on behalf of the Builder, with the Nominated Subcontractors shall be included in the contract price based on the overall budget as set out in Clause 3.1 (b). In the event of any variations in the actual price then the Listed Items Price shall be increased or decreased by an amount equal to the amount of such variations. Any such variations shall be payable by the Purchaser by means of an adjustment of the final instalments of the Construction Price." 2.5 Clause 5.9 of the Main Contract is amended as follows: 5.9 Furthermore, in the event that delivery to the Builder of any Listed Item is delayed beyond the Target Delivery Date for the same set out in Appendix IIA, the Builder shall be entitled to a postponement of the Contractual Delivery Date for a period as it shall demonstrate, by reference to the "critical path" that the Vessel's construction and completion has actually been delayed. Delays in delivery of more than one Listed Item occurring simultaneously, shall have given rise only to concurrent (rather than consecutive) extensions. Any verified and documented delays caused, or contributed to, by the Builder taking more than 14 days, after receipt, to pay approved Nominated Subcontractors invoices that have been submitted by the Purchaser in the agreed format will become cause for an adjustment in the delivery date of the Listed Items as detailed in Appendix IIA. Such adjustment shall reflect the ultimate delay in the arrival of the Listed Item at the Builders yard. 3. MISCELLANEOUS 3.1 Any capitalised terms in this Agreement not defined in this Agreement shall have the same meaning as defined in the Main Contract. 3.2 This Agreement shall become effective as soon as executed by all parties subject to Clause 1 of this Agreement. 3.3 This Agreement is supplemental to the Main Contract and the Main Contract Amendment Agreement. Except as expressly amended as set out herein the Main Contract and the Main Contract Amendment Agreement remain in full force and effect. 3.4 The construction, validity and performance of this Agreement shall be governed by English law. - - -------------------------------------------------------------------------------- Daewoo Main Contract Amendment II -- Hull 3016 -- Petrodrill Six Ltd 28-Jan-99 - 4 - 3.5 This Agreement may be signed in any number of counterparts all of which when taken together will constitute one and the same document. IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly executed the day and year first above written. For and on behalf of For and on behalf of DAEWOO CORPORATION PETRODRILL SIX Limited. /s/ K. S. SHIM /s/ D. LEACH Name: K. S. Shim Name: D. Leach Title: Attorney in Fact Title: Attorney in Fact Attested by Attested by For and on behalf of DAEWOO HEAVY INDUSTRIES LTD. /s/ K. S. SHIM Name: K. S. Shim Title: Managing Director Attested by - - -------------------------------------------------------------------------------- Daewoo Main Contract Amendment II -- Hull 3016 -- Petrodrill Six Ltd 28-Jan-99 - 5 - EX-10.20 74 EXHIBIT 10.20 THE EXPORT-IMPORT BANK OF KOREA [LETTERHEAD] REFUND GUARANTEE To: PETRODRILL CONSTRUCTION INC April 16, 1998 Daewoo Heavy Industries Ltd's Hull Number 3016 We hereby issue our irrevocable guarantee No.M0902-804-LG-00057 in favour of yourselves, Petrodrill Construction Inc, for the account of Daewoo Corporation and Daewoo Heavy Industries Ltd (hereinafter called the "Builder") in connection with the shipbuilding contract dated 9th April 1998 (hereinafter called the "Contract") made by and between yourselves and the Builder for the construction and sale of one Dynamic Positioned Semi-Submersible Drilling Vessel having Builders' Hull No.3016 (hereinafter called the "Vessel"). Other terms and expressions employed herein shall bear the same meaning as in the Contract, a copy of which has been provided to us. Under the terms of the Contract you are to pay to the Builder a Contract Price for the Vessel in five instalments payable as follows:- (a) FIRST INSTALMENT: 10 percent (ten %) of the Provisional Contract Price, being $13,600,000 shall be paid within three Banking Days of the Effective Date. (b) SECOND INSTALMENT: 30 percent (thirty %) of the Provisional Contract Price, being $40,800,000 shall be paid within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorised Representative (or, in default thereof, the Classification Surveyor), certifying that it is 6 months after the Effective Date of the contranct has taken place. (c) THIRD INSTALLMENT: 20 percent (twenty %) of the Provisional Contract Price, being $27,200,000 shall be paid within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorised Representative (or, in default thereof, the Classification Surveyor), certifying that Keel laying has taken place. -- Continued on Page 2 -- -- Page 2 -- (d) FOURTH INSTALMENT: 20 percent (twenty %) of the Provisional Contract Price, being $27,200,000 shall be paid within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorised Representative (or, in default thereof, the Classification Surveyor), certifying that launcing[float out] has taken place. (e) FIFTH INSTALMENT: 20 percent (twenty %) of the Provisional Contract Price, together with the aggregate of (i) any excess of the Contract Price over the Provisional Contract Price and (ii) any increase or any decrease of the Contract Price arising from the provisions of Clauses 7 and 16 below, shall be paid upon Delivery. In accordance with the terms of the Contract you are entitled either upon your rescission thereof or upon a Total Loss of the Vessel to repayment of the instalments of the Contract Price paid by you prior to such rescission, together with interest thereon at a fixed rate of 10% p.a. (calculated on the same basis as any London inter-bank commercial transaction) from the date of payment by the Purchaser to the date such instalments plus interest are returned to the Purchaser. In the event that the Builder shall fail to make such repayment, we shall pay to you the sum or sums due to you from the Builder against your written statement (or that of your assignee) that demand for repayment has been made and that the Builder has within thirty (30) Business Days of such demand failed to comply therewith. Such written statement shall identify (i) the number and amount of Instalments in respect of which repayment has not been received and (ii) the total interest payable in respect of the same on the assumption that payment of the principal sum outstanding is made by us thirty (30) Business Days from the date of receipt of such statement. This guarantee shall initially secure repayment of the First Instalment of the Contract Price (plus interest thereon as here in before provided) from the date of receipt of the same by the Builder. The maximum sum claimable by you hereunder will thereafter by automatically increased upon Builder's receipt of each further Instalment of the Contract Price payable prior to Delivery of the Vessel, each time by the amount of such Instalment plus interest thereon as hereinbefore provided, but in any eventuality our total liability hereunder shall not exceed the sum of US$108,800,000 plus interest thereon as here in before provided. -- Continued on Page 3 -- -- Page 3 -- THE EXPORT-IMPORT BANK OF KOREA [LETTERHEAD] Notwithstanding the provisions here in above in case we receive notification from you or the Builder stating that the question of your rescission of the Contract or your claim for refundment thereunder has been disputed and referred to the Commercial Court in accordance with the provisions of the Contract, this Guarantee shall be valid until 30 days after the final judgement shall be rendered in said Court. In such case this Guarantee shall only be available to the extent of a final judgement in your favour by such Court justifying your claim for refundment as presented to us or specifying such lesser amount as the Court may determine as being due to you. Our liability hereunder shall not be affected by any alteration to, or variation of, the terms of the Contract you may hereafter agree with the Builder or any other matter or circumstance which would, but for this clause, operate to exclude or limit our liability hereunder. This guarantee shall be fully assignable by you. It shall expire and become null and void upon the earliest of (i) receipt by you or your assignee of the amount guaranteed hereunder and (ii) Delivery of the Vessel in accordance with the provisions of the Contract or (iii) valid rescission by the Builder in accordance with the terms of the Contract. In such case, this guarantee shall be returned to us. This guarantee shall be governed by, and construed in accordance with English law, and we hereby (i) agree for your exclusive benefit that any legal action or proceeding arising hereunder may be brought in the High Court of Justice in England (ii) irrevocably submit to the jurisdiction of that court and (iii) irrevocably designate, appoint and empower London Representative Office of The Export-Import Bank of Korea (the present address of whose registered office is 3rd floor Boston House, 63 New Broad Street, London EC2M 1JJ, United Kingdom) to receive for us and on our behalf of process in England. Yours very truly, For and on behalf of The Export-Import Bank of Korea By: /s/ WON-YOUNG CHUN Name: Won-Young Chun Title : Senior Manager & Senior Loan Officer /Ship Export Credit Dept. By: /s/ JONG BOK LEE Name: Jong Bok Lee Title : Assistant Manager & Loan Officer /Ship Export Credit Dept. THE EXPORT-IMPORT BANK OF KOREA LIST OF AUTHORIZED SIGNATURES THE EXPORT-IMPORT BANK OF KOREA INSTRUCTIONS This booklet contains the facsimile signatures in alphabetical order of the officers, who are authorized to sign on behalf of this bank. 1. Each member of the Board of Executive Directors has full and complete authority to sign alone for this bank. 2. The transactions mentioned below in excess of U$10,000 (or the equivalent thereof in other currency) shall be signed by two officers, at least one of whom must be an officer in A Class. A. Issuance of check, bill of exchange or promissory note. B. Instructions to effect the payment or transfer of funds not involving the documentary letter of credit. C. Opening and amendment of letter of guarantee. D. Opening and amendment of clean letter of credit. We will inform you of any change of list whenever it occurs. - 1 - THE EXPORT-IMPORT BANK OF KOREA Chang-Jin Chong A /s/ CHANG-JIN CHONG 049 Won-Young Chun A /s/ WON-YOUNG CHUN 050 Chang-Ho Chung B /s/ CHANG-HO CHUNG 051 Chul-Choong Chung A /s/ CHUL-CHOONG CHUNG 052 THE EXPORT-IMPORT BANK OF KOREA Young-Kon Kim B /s/ YOUNG-KON KIM Hyung-Ju Lee B /s/ HYUNG-JU LEE Jae-Hong Lee B /s/ JAE-HONG LEE Jong-Bok Lee B /s/ JONG-BOK LEE EX-10.20(A) 75 EXHIBIT 10.20(A) NOVATION AGREEMENT This NOVATION AGREEMENT is made the 4 day of Dec 1998 between: (1) THE EXPORT-IMPORT BANK OF KOREA (the Bank) whose principal office is at 16-1, Yoidodong, Youngdungpo Gu, Seoul, Korea; (2) PETRODRILL OFFSHORE INC. (formerly Petrodrill Construction Inc.) (the BENEFICIARY) whose principal office is at Suite 205, Saffrey Square, PO Box N8188, Nassau, Bahamas; and (3) PETRODRILL SIX LIMITED (the NEW BENEFICIARY) whose registered office is at Arias, Fabrega & Fabrega, Omar Hodge Building, 2nd Floor, Wickham's Cay 1, PO Box 985, Road Town, Tortola, British Virgin Islands, (together referred to as the PARTIES) Whereas (A) The Bank and the Beneficiary are parties to a Refund Guarantee dated 16 April 1998 securing the obligations of Daewoo Corporation & Daewoo Heavy Industries Ltd. In respect of the construction and sale of a dynamic positioned semi-submersible drilling vessel with Builders Hull No. 3016 (including any amendments described in the associated memorandum, meeting minute and/or side letter made from time to time thereto) (the Guarantee). (B) The Parties hereto have agreed to novate the Guarantee. Now it is agreed that, with effect from the date of this Novation Agreement: (1) Terms and expressions defined in the Guarantee shall, unless the context otherwise requires, have the same meanings in this Novation Agreement. (2) The Beneficiary releases and discharges the Bank from the various covenants, undertakings, warranties and other obligations contained in the Guarantee which are enjoyed by the Beneficiary, and from all claims and demands whatsoever arising out of or in respect of the Guarantee whether prior to, on or subsequent to the date of this Novation Agreement. (3) The Bank agrees to perform all its duties and to discharge all its obligations under the Guarantee and to be bound by all the terms and conditions of the Guarantee in every way as if the New Beneficiary were named in the Guarantee as a party AB INITIO in place of the Beneficiary. Without limiting the generality of the foregoing, the Bank acknowledges and agrees that the New Beneficiary shall have the right to enforce the Guarantee and pursue all claims and demands (future or existing) whatsoever arising out of or in respect of the Guarantee whether arising prior to, on or subsequent to the date of this Novation Agreement. -1- (4) Each party shall take all steps, execute all documents and do everything reasonably required by any other Party to give effect to the transactions contemplated by this Novation Agreement. (5) This Novation Agreement is governed by and shall be construed in accordance with the laws of England and the Parties hereby submit to the exclusive jurisdiction of the courts of England. In witness whereof this Novation Agreement has been signed on behalf of the Parties the day and year first before written. SIGNED on behalf of EXPORT-IMPORT BANK OF KOREA in the presence of: )/s/ Illegible )/s/ Illegible SIGNED on behalf of PETRODRILL OFFSHORE INC. in the presence of: )/s/ DEREK LEACH D. Leach Attorney )/s/ H. STEPHEN ASSITER H.S. Assiter Witness SIGNED on behalf of PETRODRILL SIX LIMITED in the presence of: )/s/ DEREK LEACH D. Leach Attorney )/s/ H. STEPHEN ASSITER H.S. Assiter Witness -2- EX-10.20(B) 76 EXHIBIT 10.20(B) THE EXPORT-IMPORT BANK OF KOREA [LETTERHEAD] TO: PETRODRILL SIX Ltd. April 6, 1999 Re: Daewoo Heavy Industries Ltd.'s Hull Number 3016 1. We refer to our irrevocable guarantee No. M0902-804-LG-00057 (the "Refund Guarantee") in favour of yourselves, Petrodrill Six Limited, for the account of Daewoo Corporation and Daewoo Heavy Industries Ltd. (the "Builder") in connection with the shipbuilding contract dated 9th April, 1998 made by and between yourselves and the Builder for the construction and sale of one Dynamic Positioned Semi-Submersible Drilling Vessel having Builder's Hull No. 3016. Other terms and expressions employed herein shall bear the same meaning as in the Contract, a copy of which has been provided to us. 2. In consideration for your entering into a Main Contract Amendment Agreement dated 28th January, 1999 between yourselves and the Builder, we hereby agree that from the date of this letter the Refund Guarantee is amended as follows: 2.1 The second paragraph shall read as follows: "Under the terms of the Contract you are to pay to the Builder a Contract Price, comprising the Construction Price and the Listed Items Price, for the Vessel as follows: (a) The Construction Price in five installments as follows: (i) First Instalment: Ten Percent (10%) of the Construction Price, being $8,500,000, shall be paid within three Banking Days of the Effective Date. (ii) Second Instalment: Thirty percent (30%) of the Construction Price, being $25,500.00, shall be paid within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorised Representative (or, in default thereof, the Classification Surveyor), certifying that it is 6 months after the Effective Date of the contract has taken place. -- Continued on Page 2 -- THE EXPORT-IMPORT BANK OF KOREA [LETTERHEAD] -- Page 2 -- (iii) Third Instalment: Twenty percent (20%) of the Construction Price, being $17,000,000, shall be paid within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorised Representative (or, in default thereof, the Classification Surveyor), certifying that Keel laying has taken place. (iv) Fourth Instalment: Twenty percent (20%) of the Construction Price, being $17,000,000, shall be paid within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorised Representative (or, in default thereof, the Classification Surveyor), certifying that launching [float out] has taken place. (v) Fifth Instalment: Twenty percent (20%) of the Construction Price, together with any increase or any decrease of the Construction Price arising from the provisions of Clauses 7 and 16 of the Contract, shall be paid upon Delivery. (b) The Listed Items Price in ten instalments as follows: (i) First Instalment: Ten percent (10%) of the Listed Items Price, being $5,100,000, shall be paid on or before 9th June 1998. (ii) Second Instalment: Fifteen percent (15%) of the Listed Items Price, being $7,650,000, shall be paid on or before 26th February 1999. (iii) Third Instalment: Five percent (5%) of the Listed Items Price, being $2,550,000, shall be paid on or before 30th March 1999. -- Continued on Page 3 -- THE EXPORT-IMPORT BANK OF KOREA [LETTERHEAD] -- Page 3 -- (iv) Fourth Instalment: Ten percent (10%) of the Listed Items Price, being $5,100,000, shall be paid on or before 30th May 1999. (v) Fifth Instalment: Fifteen percent (15%) of the Listed Items Price, being $7,650,000, shall be paid on or before 30th July 1999. (vi) Sixth Instalment: Ten percent (10%) of the Listed Items Price, being $5,100,000, shall be paid on or before 30th September 1999. (vii) Seventh Instalment: Ten percent (10%) of the Listed Items Price, being $5,100,000, shall be paid on or before 30th November 1999. (viii) Eighth Instalment: Ten percent (10%) of the Listed Items Price, being $5,100,000, shall be paid on or before 30th January 2000. (ix) Ninth Instalment: Ten percent (10%) of the Listed Items Price, being $5,100,000, shall be paid on or before 30th March 2000. (x) Tenth Instalment: Five percent (5%) of the Listed Items Price, being $2,550,000, together with (or minus) any excess (or shortfall) of the Listed Items Price over (or under) the provisional Listed Items Price, shall be paid on or before 30 May 2000. 2.2 In the fourth paragraph, the sum of "US$108,800,000" is deleted and replaced by the sum of "US$119,000,000." 3. We confirm that, except as expressly amended herein, the Refund Guarantee remains in full force and effect. 4. The terms of this letter shall be governed by, and construed in accordance with, English law. -- Continued on Page 4 -- THE EXPORT-IMPORT BANK OF KOREA [LETTERHEAD] -- Page 4 -- 5. Please sign and return the attached copy of this letter to signify your acceptance of the terms set out herein. Yours very truly, For and on behalf of The Export-Import Bank of Korea By: /s/ JONG-BOK LEE By: /s/ WON-YOUNG CHUN Jong-Bok Lee Won-Young Chun Assistant Manager & Senior Manager & Loan Officer Senior Loan Officer /Ship Export Credit Dept. /Ship Export Credit Dept. We hereby agree to the terms set out herein. /s/ D LEACH For and on behalf of Petrodrill Six Limited. EX-10.21 77 EXHIBIT 10.21 TDI-HALTER/PETRODRILL CONTRACT HULL NO. 1829 CONTRACT FOR CONSTRUCTION OF A DYNAMIC POSITIONED SEMI-SUBMERSIBLE DRILLING VESSEL BETWEEN TDI-HALTER, L.P. AND PETRODRILL CONSTRUCTION, INC. HULL NUMBER 1829 INDEX PAGE DEFINITIONS.............................................................4 1. PURPOSE OF THIS CONTRACT................................................5 2. DESIGN: PRINCIPAL DIMENSIONS AND CHARACTERISTICS: CLASSIFICATION: MANDATORY REGULATIONS: REGISTRATION.....................................6 3. CONTRACT PRICE..........................................................8 4. PAYMENT SCHEDULE: PERFORMANCE BOND/PARENT GUARANTEE: PAYMENT FOR MODIFICATIONS AND OTHER ITEMS: PAYMENT FOR FUELS ETC AND LIQUIDATED DAMAGES: PAYMENT PROCEDURES.............................................8 5. APPROVAL OF PLANS: SUBCONTRACTING: MAKER'S LIST: NOMINATED SUBCONTRACTORS: ASSIGNMENT OF EXISTING SUBCONTRACTS: OBLIGATIONS UNAFFECTED.............................................................11 6. LIGHTSHIP WEIGHT.......................................................14 7. MODIFICATIONS: PURCHASER'S MODIFICATIONS: STATUTORY MODIFICATIONS: PRICING OF MODIFICATIONS: SUBSTITUTION OF MATERIALS....................14 8. INSPECTION: AUTHORISED REPRESENTATIVES: QUALITY ASSURANCE SYSTEM AUDITS: INDEPENDENT CONTRACTOR, INDEMNITY AND LIABILITY PROVISIONS.....17 9. PLANNED PROGRAMME, PROGRESS CONTROL AND REPORTING......................22 10. TITLE..................................................................23 11. RISK AND INSURANCE.....................................................24 12. LOSS OR DAMAGE TO THE VESSEL...........................................25 13. SEA TRIALS: TECHNICAL ACCEPTANCE.......................................26 14. DELIVERY OF THE VESSEL: DOCUMENTS TO BE PROVIDED TO THE PURCHASER: REMOVAL OF THE VESSEL..................................................28 15. EXTENSION OF TIME FOR DELIVERY: PERMISSIBLE DELAY: CAUSES OF DELAY: NOTICES...............................................30 16. DELAY IN DELIVERY: LIQUIDATED DAMAGES: TERMINATION FOR DELAY IN DELIVERY............................................................31 17. DEFECTS AND BUILDER'S GUARANTEE WARRANTY: GUARANTEE ENGINEER: ASSIGNMENT OF BUILDER'S GUARANTEE......................................32 18. DEFAULT BY THE PURCHASER: EVENTS OF PURCHASER'S DEFAULT: TERMINATION BY THE BUILDER.........................................................35 19. DEFAULT BY THE BUILDER: EVENTS OF BUILDER'S DEFAULT: RECISSION BY THE PURCHASER..............................................................36 20. PATENT INDEMNITY: PATENT NUMBERS AND TRADEMARKS: HOLD HARMLESS, THE PURCHASER: HOLD HARMLESS, THE BUILDER: DESIGNS AND PROPERTY OF THE PURCHASER..............................................................39 21. OWNER FURNISHED EQUIPMENT: DELIVERY OF OWNER FURNISHED EQUIPMENT: RESPONSIBILITY OF THE BUILDER..........................................40 22. TAXES AND DUTIES.......................................................41 23. ASSIGNMENT.............................................................41 2 24. PRIORITY OF DOCUMENTS..................................................42 25. NOTICES................................................................42 26. RECORDS AND AUDITS.....................................................43 27. LAW....................................................................44 28. DISPUTES...............................................................44 29. MISCELLANEOUS..........................................................44 30. SPARE PARTS............................................................45 31. SAFETY AND HEALTH STANDARDS............................................45 32. EFFECTIVENESS..........................................................46 APPENDICES APPENDIX I LIST OF PRINCIPAL DRAWINGS AND OTHER CONTRACT DOCUMENTS APPENDIX II PLANNED PROGRAMME APPENDIX IIA OWNER FURNISHED EQUIPMENT APPENDIX III FORM OF PROTOCOL OF DELIVERY AND ACCEPTANCE APPENDIX IV FORM OF PERFORMANCE BOND APPENDIX V FORM OF STAGE CERTIFICATE APPENDIX VI SCHEDULE OF LABOUR COSTS FOR MODIFICATIONS APPENDIX VII LIST OF CERTIFICATES TO BE SUPPLIED ON DELIVERY OF THE VESSEL APPENDIX VIII LIST OF BASIC DESIGN DRAWINGS APPENDIX IX FORM OF PARENT COMPANY GUARANTEE 3 CONTRACT FOR CONSTRUCTION AND SALE OF A DYNAMIC POSITIONED SEMI-SUBMERSIBLE DRILLING VESSEL This CONTRACT made this 9th day of April, 1998, by and between:- TDI-Halter, L.P. a limited partnership organised under the laws of the State of Louisiana (hereinafter called "Builder"), having its principal office at 1601 South Childers Road, Orange, Texas 77631, and Petrodrill Construction, Inc. a corporation organised under the laws of Bahamas (hereinafter called Purchaser"), having its principal office at Suite 205, Saffrey Square, P.O. Box N8188, Nassau, Bahamas. WITNESSETH THAT THE PARTIES HAVE AGREED AS FOLLOWS:- DEFINITIONS In this Contract the following expressions shall have the meanings hereby assigned to them:- "Basic Design" means the design drawings provided by the Purchaser listed Section 99000 in Appendix VIII; "Banking Day" means any day on which banks in each of London, New York and Houston are open for the transaction of normal banking business; "Classification Society" means Lloyds Register of Shipping; "Classification Surveyor" shall mean any surveyor appointed by the Classification Society to supervise the Vessel's construction; "Contract Price" means the price stated in Clause 3.1; "Contractual Delivery Date" means the date referred to in Clause 14.1 as the same may from time to time be extended in accordance with the provisions of this Contract; "Contract Documents" means the Specifications, the Principal Drawings and the other documents listed in Appendix I; "Delivery" means the delivery by the Builder, and acceptance by the Purchaser, of the Vessel pursuant to Clause 14.2; 4 "LIBOR" means the interest rate per annum. which Citibank, London is offering to prime banks in the London Interbank market for deposits in United States Dollars for a three month period, determined at 11.00 a.m. London time, as quoted on the date from which interest is accrued under this Contract. All interest hereunder shall be calculated on the basis of a 360 day year and compounded quarterly and shall be paid on the date when payment is made of the sum on which interest is accrued: "Makers' List" means the list of contractors approved by the Purchaser and set out in Appendix X hereto; "Mandatory Regulations" has the meaning assigned to it in Clause 2.7; "Materials" means all materials and supplies, including, without limitation, all machinery, equipment, outfittings and spare parts (but excluding the Owner Furnished Equipment), intended for the Vessel's construction to the extent that the same have been appropriated to, or incorporated in, the Vessel; "Planned Programme" means the programme for performance of this Contract by the Builder detailed in Appendix H hereto: "Plans" means those drawings, documents and specifications which are required under this Contract and the Specification (Section 990 10) to be submitted to the Purchaser for approval; "Specifications" means:- (a) Specification no 95019 initialled by or on behalf of the Purchaser and the Builder on April 1", 1998; and (b) any additions or amendments thereto hereafter agreed between the parties; "Stage Certificate" means a certificate in the form set out in Appendix V; "Statutory Modifications" means modifications applicable to the Vessel as a result of changes to any of (i) the rules, regulations and requirements of the Classification Society or (ii) the Mandatory Regulations; "Working Day" means any day (other than Saturdays or Sundays) on which work is normally carried out at the Shipyard. Further terms used in this Contract are defined hereinafter. 1. PURPOSE OF THIS CONTRACT 1.1. Upon the terms and conditions set out in this Contract, the Builder, as an independent contractor, undertakes to engineer, construct, build, launch, equip, complete, and test at various 5 of its shipyards at located on the U.S. Gulf Coast, exact locations to be determined later (hereinafter called the "Shipyard") and deliver to Purchaser or the Purchaser's nominee, as defined in Clause 23 below, for the Contract Price referred to in Clause 2 below, one (1) fully operational and complete self-propelled Dynamic Positioned Semi-Submersible Drilling Vessel (hereinafter called the "Vessel") more fully described in Clause 2 below. Subject to the performance of the Builder's obligations hereunder, the Purchaser expressly agrees to take delivery of the Vessel when duly completed and to pay Builder all amounts due Builder. 1.2. References herein to the Vessel shall, except where otherwise expressly provided, be deemed to include all Materials. 2. DESIGN: PRINCIPAL DIMENSIONS AND CHARACTERISTICS: CLASSIFICATION: MANDATORY REGULATIONS: REGISTRATION 2.1. The Vessel, which is to be assigned the Builder's Hull No 1829, shall be constructed and completed in all respects in accordance with the Specifications. To the extent not defined in the Specifications, the Vessel's construction is to meet good offshore construction standards and practices. At the time of Delivery hereunder, the Vessel, which shall conform strictly with the terms and conditions of this Contract and the Specification and shall be delivered safely afloat. DESIGN 2.2. The basic elements of the Vessel's design (the "Basic Design") will be delivered by the Purchaser to the Builder. It is expressly understood that the Purchaser shall be solely responsible for the suitability of the vessel design supplied by it and for any errors, omissions and inconsistencies in the Basic Design. If the Purchaser shall require the Builder to modify the Basic Design, the work required to do so shall constitute an Purchaser's Modification for the purposes of Clause 7 of this Contract. 2.3. The Builder shall develop all required detailed engineering from the delivered Basic Deign. The Builder shall accept responsibility for its own work of developing the detailed working drawings from the Basic Design and all other engineering it shall perform in connection with this Contract. If the Builder considers during such detailed engineering that any aspect of the Basic Design might prevent the Vessel when constructed from complying with the requirements of Clause 2, it will inform the Purchaser accordingly and the Purchaser may either procure the modification of the Basic Design to remedy this deficiency or may require the Builder to modify the Basic Design to remedy this deficiency. PRINCIPAL DIMENSIONS AND CHARACTERISTICS 2.4. The Vessel shall have the dimensions and characteristics stated in the Specifications. CLASSIFICATION 2.5. The Vessel shall be constructed according to the rules and regulations of the Classification Society current at the date of execution of this Contract, incorporating all additions and 6 amendments thereof applicable to the Vessel in force or published, so as to achieve on Delivery the following notation:- Unrestricted Service OU +100A1, +LMC, UMS, DP(AAA), PC, DRILL, IWS with the description notation semi- submersible, self propelled drilling vessel Provided that the Purchaser shall not be entitled to refuse delivery where such recommendations etc. are of such a minor nature as not to adversely affect the operation of the Vessel. In any event, such recommendations etc. shall be remedied by the Builder within 90 days of Delivery or such other period as the parties may mutually agree and Purchaser shall be entitled to retain $250,000 pending such rectification. 2.6. Decisions of the Classification Society as to whether or not the Vessel complies with its rules, regulations and requirements shall be final and shall bind both parties to this Contract. MANDATORY REGULATIONS 2.7. The Vessel shall also comply with (i) all requirements of the regulatory bodies listed in the Specifications and (ii) the following rules, regulations and requirements, in each case current at the date of execution of this Contract (i) and (ii) being known herein jointly as the "Mandatory Regulations"):- a. IMO, Resolution A 649 (16) adopted on 19 October 1989, Code for the Construction and Equipment of Mobile Offshore Drilling Units. b. International Convention for the Safety of Life at Sea SOLAS 1974, protocols of 1978, 1981, 1983 and all Amendments in force. c. International Convention of Load Lines, 1966 with resolutions A 231 (VII) and A 320 (IX). d. International Telecommunication Convention and Radio Regulation 1973, 1976 and 1982 and latest GMDSS Rules for radio communications. e. International Convention for Tonnage Measurement 1967/1969. f. Suez Canal Tonnage Regulations. g. International Convention for the Prevention of Pollution from Ships (MARPOL) 1974/1978, Consolidation Edition, IMO, 1991, including 1992 amendments to Annex 1. h. International Regulations for Preventing Collision at Sea, 1972 including amendments. 7 i. International Labour Organisation (ILO) Convention No. 92 and No. 133 for crew accommodation. j. International Electronical Commission (IEC), Electrical Installation in Ship Publication No. 92 or IEEE 45 Subject to the Purchaser's prior approval, such approval not to be unreasonably withheld. k. API specifications as applicable. REGISTRATION 2.8. The Vessel shall upon Delivery fly the Netherland Antilles flag and be registered in the Netherland Antilles Register of Shipping. Registration of the Vessel as aforesaid shall be effected by thePurchaser and all costs and expenses thereof shall be for the Purchaser's account. 3. CONTRACT PRICE 3.1. In consideration of the performance by the Builder of all its obligations under this Contract the Purchaser shall pay to the Builder the price of Eighty-four Million United State Dollars (US $ 84,000,000), (the "Contract Price"), which shall include the cost of installation of the Owner Furnished Equipment. 3.2. The Contract Price, which is exclusive of the cost of the Owner Furnished Equipment, shall be a fixed price subject to upward or downward adjustment only in accordance with the provisions of Clause 7 hereof. It includes:- a. the cost of the Vessel completed in accordance with the requirements of this Contract and the Specifications; b. the cost of all tests and trials of the Vessel to be performed by the Builder; c. the cost of procuring the classification of the Vessel and of obtaining all certificates and documents (save for those in respect of the Owner Furnished Equipment), which are required to be delivered pursuant to this Contract and the Specifications; and d. all other costs and expenses of the Builder as provided for herein or otherwise incurred by the Builder unless expressly provided herein as being for the Purchaser's account. 4. PAYMENT SCHEDULE 4.1. The Purchaser shall pay the Contract Price to the Builder in ten (10) instalments as follows:- FIRST INSTALMENT: Ten per cent (10%) of the Contract Price, being Eight Million Four Hundred Thousand U.S. Dollars, (US$ 8,400,000) shall be paid within three Banking Days of the Execution Date. 8 SECOND INSTALMENT: Ten per cent (10%) of the Contract Price, being Eight Million Four Hundred Thousand U.S. Dollars, (US$ 8,400,000) shall be paid within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorised Representative (or, in default thereof, the Classification Surveyor), certifying that Builder has placed the orders for the major equipment, herein defined as the Main Engines, the Thrusters, and the Electrical Integration Subcontract. THIRD INSTALMENT: Ten per cent (10%) of the Contract Price, being Eight Million Four Hundred Thousand U.S. Dollars, (US$ 8,400,000) shall be paid within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorised Representative (or, in default thereof, the Classification Surveyor), certifying that Start of Fabrication has taken place. FOURTH INSTALMENT: Fifteen per cent (15%) of the Contract Price, being Twelve Million Six Hundred Thousand U.S. Dollars, (US$ 12,600,000) shall be paid within three Banking Days from receipt by the Purchaser of a telefax. notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorised Representative (or, in default thereof, the Classification Surveyor), certifying that the keel laying for the pontoons has taken place. FIFTH INSTALMENT: Ten per cent (10%) of the Contract Price, being Eight Million Four Hundred Thousand U.S. Dollars, (US$ 8,400,000) within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorised Representative (or, in default thereof, the Classification Surveyor), certifying that the Pontoons of the Vessel have successfully been launched. SIXTH INSTALMENT: Five per cent (5%) of the Contract Price, being Four Million Two Hundred Thousand U.S. Dollars, (US$ 4,200,000) within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorised Representative (or, in default thereof, the Classification Surveyor), certifying that the Substructure has successfully been erected on the Deck Box. SEVENTH INSTALMENT: 9 Five per cent (5%) of the Contract Price, being Four Million Two Hundred Thousand U.S. Dollars, (US$ 4,200,000) within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorised Representative (or, in default thereof, the Classification Surveyor), certifying that the Pontoons have successfully been joined. EIGHTH INSTALMENT: Ten per cent (10%) of the Contract Price, being Eight Million Four Hundred Thousand U.S. Dollars, (US$ 8,400,000) within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorised Representative (or, in default thereof, the Classification Surveyor), certifying that the Deck Box has been launched and successfully mated with the Pontoons and Columns. NINTH INSTALMENT: Ten per cent (10%) of the Contract Price, being Eight Million Four Hundred Thousand U.S. Dollars, (US$ 8,400,000) within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorised Representative (or, in default thereof, the Classification Surveyor), certifying that the Main Engines have been started. TENTH INSTALMENT: Fifteen per cent (15 %) of the Contract Price, being Twelve Million Six Hundred Thousand U.S. Dollars, (US$ 12,600,000) together with any increase or any decrease of the Contract Price arising from the provisions of Clauses 6, and 16 below, shall be paid upon Delivery. 4.2. The Builder shall notify the Purchaser in writing ten Banking Days in advance of the estimated dates of occurrence of each of the events before Delivery referred to above, excluding the First Instalment. Not withstanding anything to the contrary contained herein, or in Appendix V hereto, if Purchaser fails to execute any Stage Certificate and such Stage Certificate has been executed by the Classification Surveyor, then Purchaser shall be obligated to pay such Instalment within three banking days of execution by the Classification Surveyor. In addition, in no event shall the Second or Third Instalments be paid prior to a date ninety (90) days from the Execution Date. PERFORMANCE BOND/PARENT GUARANTEE 10 4.3. The Builder shall at its own expense supply to the Purchaser concurrently with payment of the First Instalment of the Contract Price a Performance Bond, for an amount equal to 100% of the Contract Price, in the form specified in Appendix IV and given by Fireman's Fund Insurance Company, California, USA. The Builder shall also, at the same time, provide a form of Parent Guarantee from its ultimate parent company substantially similar to that contained in Appendix IX hereto. PAYMENT FOR MODIFICATIONS AND OTHER ITEMS 4.4. Any sums due to either party under Clause 7 as a result of Purchaser's Modifications and/or Statutory Modifications shall be payable upon builder achieving certain milestones and in conjunction with the above payment schedule, and shall be payable on or before the Delivery Date. PAYMENT FOR FUELS ETC AND LIQUIDATED DAMAGES 4.5. All amounts due to the Purchaser (i) under Clause 13.2 hereof and (ii) by way of liquidated damages in respect of delay in Delivery under Clause 16 shall be calculated and determined before Delivery and shall be paid on, and as a condition of, Delivery. PAYMENT PROCEDURES 4.6. Payment of sums due to the Builder in accordance with the provisions of this Contract shall be made, by telex transfer to the Builder's account with Hibernia National Bank, New Orleans, Louisiana, free of all transfer charges. 4.7. If the date on which any payment is due in accordance with the provisions of this Contract does not fall on a Banking Day, payment shall be made on the immediately succeeding Banking Day. 5. APPROVAL OF PLANS: SUBCONTRACTING APPROVAL OF PLANS 11 5.1. In respect of all Plans required for the completion of the works envisaged by this Contract, the same shall be submitted to the Purchaser in four copies as soon as possible following their production. The Purchaser shall, within ten ( 10 ) Working Days after receipt thereof, return to the Builder one copy of such Plans with the Purchaser's approval or the Purchaser's remarks and amendments (if any) written thereon. 5.2. Should the Builder elect to enter into a subcontract to purchase the detail engineering with a Shipyard also contracted with the Purchaser who is constructing a vessel of the same design and in the event that Purchaser elects to remark or comment previously approved drawings, such remarks or amendments shall be dealt with under the modification procedure within the meaning of clause 7 hereof. 5.3. In the event that the Purchaser shall fail to return the Plans to the Builder within the time limit as hereinabove provided, such Plans shall be deemed to have been approved without comment. 5.4. The Builder shall take due note of the Purchaser's remarks and amendments (if any) on Plans submitted pursuant to this Clause and, if such remarks or amendments are not of such a nature or extent as to constitute a modification within the meaning of Clause 7 hereof, then the Builder shall commence or continue construction of the Vessel in accordance with the corrected or amended Plans. If such remarks or amendments are not clearly specified or detailed, the Builder shall in all cases seek clarification of the same from the Purchaser before implementing the same. 5.5. Copies of all correspondence to and from the Classification Society and the regulatory authorities referred to in the Specifications, together with all Plans approved by the Classification Society, shall be furnished to the Purchaser by the Builder as soon as practicable upon dispatch and receipt. SUBCONTRACTING 5.6. Save as regards those works delegated to those Subcontractors defined in the Makers' List, the Builder shall not, without the Purchaser's prior approval in writing , which shall not be unreasonably with held, subcontract any part of the works contemplated by this Contract which exceed in value US $ 100,000 or its equivalent in local currency. Where such approval has been given, the Builder shall nevertheless remain fully responsible for the performance of the same as if it had personally undertaken such works. MAKER'S LIST 5.7. The Builder shall select for the supply of each of the Materials listed in the Makers' List the Vendor named therein in relation to the same. Where the Makers' List provides for more than one Vendor to supply any element of the Materials, the Builder shall with reasonable notice provide the Purchaser with a copy of the Purchase Order to be issued to its intended choice of Subcontractor before any subcontract is awarded. Such purchase order shall contain full technical and commercial details. If thereafter, the Purchaser shall request the Builder to order 12 that element of the Materials from another Subcontractor named in the Makers' List in relation thereto, then the Builder will take all reasonable steps to comply with such request and the Purchaser shall reimburse to the Builder any difference in price between that quoted by the Builder's chosen Subcontractor and the Subcontractor chosen by the Purchaser. NOMINATED SUBCONTRACTORS 5.8. ASSIGNMENT OF EXISTING SUBCONTRACTS In relation to the following "long lead" items of Materials, (the cost of which is included in the Contract Price) it is understood that the Purchaser has had advanced negotiations with the following suppliers and the Builder will enter into subcontracts for the following based on the references below: SUPPLIER NAME SUPPLIED ITEM REFERENCE - - ------------------------------------------- Caterpillar Engine Generator Sets Fax transmission between Caterpillar and Petrodrill on the 11th and 29th January plus 6th February GEC Alsthom Electrical Integrator Offer No. P354-A01 5.9. The Purchaser has also entered into an agreement with LIPS Thrusters BV for the supply of thrusters Ref Petrodrill PO No. 1.9001/Lips order No. T07387/94 for Dutch Guilders 6.2 Million per set delivered Europe. Concurrently with the receipt of the First Instalment, the benefit together with the burden of all such existing contracts are to be assigned by the Purchaser to the Builder, to the extent that it relates to only one shipset of equipment, where upon the Materials to which they relate are to be treated as Builder's supply. The Builder shall, upon assignment of each sub-contract, reimburse to the Purchaser all of the instalments of the contract price paid by the latter in respect thereof. It being understood that the cost of said thrusters is included in the Contract Price. OBLIGATIONS UNAFFECTED Nothing in this Clause shall affect the other obligations of the Builder under this Contract nor diminish the responsibility of the Builder in respect of the Materials, detailed engineering or workmanship required hereunder. 13 6. LIGHTSHIP WEIGHT 6.1. The Builder shall meet the target figures set out for Lightship Weight and Centre of Gravity as specified in section 12000 page 3 of the Addendum to Rev 3 P-95019 of the Specification. 6.2. The lightship weight and centre of gravity of the Vessel shall be verified by an Inclining Experiment prior to Delivery. 6.3. The results of the Inclining Experiment referred to in Clause 6.2 shall be used to demonstrate a Lightship Weight in the conditions referred to in the Specifications. 6.4. The Builder shall have no liability for the Owner Furnished Equipment lightweight and centre of gravity as specified in section 12000 page 3 of the Addendum to Rev 3 P-95019 of the specification. If the remaining lightship weight so demonstrated is more than 9075 metric tons the Builder shall pay to the Purchaser on Delivery as liquidated damages US $12,500 per full metric tons of the increase above 9075 metric tonnes up to a maximum of 2.5 million U.S. Dollars, (U.S.$2,500,000). 6.5. The Purchaser shall have no obligation to accept delivery of the Vessel if the ship lightweight as defined on page 3 of the addendum to the specification is more than 9,275 metric tons. The Builder shall, however, in such context be entitled to make modifications to the Vessel in order to either reduce the weight or ensure that the Operational VLC is restored to its original level provided that the same (i) are approved in advance by the Classification Society and (ii) do not significantly affect the motion characteristics or operational performance of the Vessel. 6.6. In the event that the lightship weight demonstrated as a result of Clause 6.2 is less than 8,875 tonnes the Purchaser shall pay the Builder $12,500 per tonne for each complete tonne that the weight is below 8,875 tonnes up to a maximum of 3.0 million U.S. Dollars, (U.S. $3,000,000). 6.7. The Builders shall also have the option of exercising its rights as per clause 6.5 in the event that the liquidated damages due is in excess of $ 1.0 million. In this case the level of liquidated damages that is finally paid will be reduced from the calculated level by the same percentage that the Builder is able to recover the VDL that has been lost as a result of the changes in the lightship weight. 6.8. The parties hereto agree that the above liquidated damages shall ( subject always to the provisions of clause 16.2 and 16.3 below ) be the sole and exclusive remedy for damages being due as a result of increases in lightship weight as set forth in this section. 6.9. The weights described in this Section 6 shall be adjusted for any Modifications pursuant to Section 7. 7. MODIFICATIONS PURCHASER'S MODIFICATIONS 14 7.1. The Purchaser may at any time after the date hereof submit a request in writing to the Builder for changes (the "Purchaser's Modifications") to be made to the Specifications and shall supply with such request sufficient particulars, documentation and details to describe the change requested. If the change so requested (the "Requested Change") can be reasonably undertaken having regard to the stage of construction of the Vessel and the Planned Programme, then the Builder shall be obliged to effect the same but shall be entitled to any increase (and shall concede any decrease) in construction cost or adjustment of the Contractual Delivery Date or any other provisions of this Contract or the Specifications which the Requested Change reasonably necessitates and which is agreed in writing by the Builder and the Purchaser. The Builder shall notify the Purchaser in writing no later than ten (10) Working Days after receipt of the written request for the Requested Change, of any such adjustments which it will require. On the basis of such notification the Purchaser shall no later than seven (7) Working Days thereafter elect in writing to: a. agree to the adjustments notified, in which case the Builder shall construct the Vessel in accordance with the Requested Change; b. contest the reasonableness of the adjustment notified, in which case subclause 7.5 below shall apply; or c. withdraw the Requested Change, in which case the Vessel shall be built without reference to the same. 7.2. If within seven (7) Working Days after such notification the Purchaser has made no election as aforesaid, then the adjustments notified by the Builder shall be deemed to have been withdrawn by the Purchaser. 7.3. If, however, the Purchaser notifies the Builder in writing that the Purchaser wishes to implement the Requested Change but disputes the reasonableness of the adjustments, the matters shall be determined by an expert, acting as such and not as an arbitrator, to be appointed by agreement between the parties. In the event that the parties are unable to agree as to any appointment within thirty days of the Purchaser's written notice, the appointment shall be made, upon the written application of either party, by Det Norske Veritas. The decision of the said expert shall be final and binding upon the parties and the costs of such expert in reaching his decision shall be shared by the parties. Pending the decision of the aforesaid expert, the Builder shall continue construction of the Vessel in accordance with the Requested Change. 7.4. The agreed extra cost of any Requested Change or that decided by the expert shall be paid by the Purchaser and any cost savings by the Builder as a result of any Requested Change shall be paid to the Purchaser in accordance with Clause 4.4. STATUTORY MODIFICATIONS 15 7.5. In the event of any Statutory Modifications arising the Builder shall within seven Working Days of its becoming aware of the same, give notice to the Purchaser of:- a. the change required to be made to the Specifications (the "Required Change"); b. any estimated extra or reduced cost of construction of the Vessel in accordance with the Required Change together with any documentation substantiating such cost which the Purchaser reasonably requires; and c. the effect of the Required Change on any other provisions of this Contract or the Specifications (including without limitation any change to the Contractual Delivery Date). 7.6. The Purchaser may apply for a formal waiver of compliance with the Required Change from the body having power to grant such waiver if the Purchaser considers that the operation of the Vessel in its intended service would permit such waiver, and shall notify the Builder as soon as possible after receiving the decision of such body. In applying for any waiver, the Purchaser may call upon the Builder for assistance and the Builder will provide reasonable co-operation to the Purchaser in this respect. 7.7. If no waiver has been obtained and notified by the Purchaser to the Builder within thirty Working Days of the receipt by the Purchaser of the notice referred to above, the Builder shall build the Vessel in accordance with the Required Change and the reasonable extra cost thereof, if any, shall be paid by the Purchaser. Before the expiry of such time the Builder shall continue with the construction of the Vessel in accordance with the Required Change but it shall, in so doing, use its best endeavours to minimise any costs and loss of time which might arise if a waiver were obtained. 7.8. If the Purchaser notifies the Builder in writing that the Purchaser disputes the reasonableness of the extension or variation notified, the issue of what is a reasonable extension or variation may be put, by the Purchaser or the Builder, to an expert, acting as such and not as arbitrator, to be appointed by agreement between the parties. In the event that the parties are unable to agree as to an appointment within thirty days of the Purchaser's written notice as aforesaid the appointment shall be made, upon the written application of either party, by Det Norske Veritas. The decision of the expert shall be final and binding upon the parties and the costs of such expert in reaching his decision shall be shared by the parties. Pending the decision of the said expert, the Builder shall continue construction of the Vessel in accordance with the Required Change. PRICING OF MODIFICATIONS 16 7.9. In relation both to Purchaser's Modifications and Statutory Modifications as aforesaid, the Builder's quotations in respect of any increase or decrease in the Contract Price relating thereto shall, if requested in writing by the Purchaser, be calculated both on "lump sum" and a "time and materials" basis. In relation to quotations effected on a "time and materials" basis, the Builder shall apply the following parameters:- a. labour costs shall be charged at the agreed hourly rates set out in Appendix VI; b. the cost of all materials and equipment shall not exceed one hundred and fifteen per cent (115%) of the cost to the Builder of the same (inclusive of the costs of delivery of those materials and equipment to the Shipyard); provided, however, that the Builder shall in all cases endeavour to obtain the best price terms and trade discounts from suppliers and subcontractors for the benefit of the Purchaser. SUBSTITUTION OF MATERIALS 7.10. If at any time during the construction of the Vessel, any Materials are not available (other than as the result of any neglect or omission on the part of the Builder) then, subject to the prior approval in writing of the Purchaser and, where necessary, of the Classification Society, the Builder may use or install other Materials provided that such other Materials used or installed in substitution for those specified are equivalent in quality to, or better than, those specified, and which meet the requirements of the Classification Society and the other requirements of this Contract. 8. INSPECTION AUTHORISED REPRESENTATIVES 17 8.1. The Purchaser shall have the right to retain up to fifteen supervisors ("Authorised Representatives"), whose names and scope of authority shall be notified in writing to the Builder, permanently at the Shipyard during all times until Delivery. The Builder shall provide suitable office accommodation (including adequate parking spaces), photocopying and canteen facilities where available and the installation of telephones and telefax machines with reasonable and safe access to work areas for, and permit and afford every facility to, the Authorised Representatives from time to time and at all times whilst work is proceeding to examine and inspect the work being done under this Contract and every part thereof, together with the materials being used or about to be used thereon, and to call for and witness such tests as may be required. The costs of telecommunication facilities outside the local area in which the Shipyard is located and the use of the canteen shall be for the Purchaser's account. Purchaser shall designate one Representative authorised to make contractual decisions and/or commitments on behalf of the Purchaser and likewise Builder shall designate one Representative authorised to make contractual decisions and/or commitments on behalf of the Builder. Builder and Purchaser shall notify each other of the name of their respective designated Representative within thirty (30) days of the Execution Date. To the extent that Builder or Purchaser elects to change its designated Representative, it shall notify of such change, in writing, within five (5) Working Days of such change. 8.2. In addition to the Authorised Representatives, the Purchaser may from time to time employ further personnel and contractors on site. 8.3. The Authorised Representatives shall have the right to attend all tests, trials and inspections of the Vessel, her machinery and equipment, which shall in each case be conducted within the Shipyard's normal working hours. The Builder shall give notice to the Authorised Representatives in advance of the date and place of such tests, trials and inspections in accordance with the provisions of the Specifications. Failure of the Purchaser or its Authorised Representatives to be present at such tests, trials and inspections after due notice as above provided shall be deemed to be a waiver of the Purchaser's right to be present. The Builder shall obtain for the Purchaser and the Authorised Representatives rights of access to the Subcontractors' premises, within normal working hours, for the purpose of inspection of workmanship and Materials. 8.4. The Builder shall carry out in strict compliance with the Specifications all the tests and trials of the Vessel and commissioning of the Materials which are detailed therein so as to demonstrate that the same are in accordance with the requirements of the Specifications and that all of her systems function in their intended manner. Any Materials or workmanship found to be faulty or inadequate shall be replaced or made good by the Builder prior to Delivery, at its expense and without additional expense to the Purchaser, by suitable and sound Materials and workmanship. 8.5. Nothing done or omitted to be done by or on behalf of the Purchaser under this Clause shall be deemed to be a waiver of any objection to, or an acceptance of, faulty or inadequate Materials or workmanship, or an admission that any Materials or workmanship are of the standard required for due performance of this Contract. 18 8.6. The Authorised Representatives shall be deemed to be employees of the Purchaser and not the Builder. The Builder shall be under no liability to the Authorised Representatives for death, personal injury or damage to their property during the time when they are engaged in the duties contemplated under this Contract either on the Vessel or within the premises of the Builder or its Subcontractors. QUALITY ASSURANCE SYSTEM AUDITS 8.7. Quality Assurance System Audits may be carried out by the Purchaser, and/or regulatory authorities to verify compliance with the quality requirements stipulated in this Contract and with regulatory requirements. Such requirements shall include but not necessarily be limited to quality records, personnel and procedure qualifications, material traceability records, inspection plans etc. The Builder is required to provide to the Purchaser any documentation and administrative systems necessary to verify compliance. Inspection and testing and Quality Assurance System Audits by the Purchaser as described in this Clause or otherwise shall not imply any diminution of the Builder's responsibilities and obligations under this Contract. INDEPENDENT CONTRACTOR, INDEMNITY AND LIABILITY PROVISIONS 8.8. It is understood that Builder is an independent contractor as to all Work performed hereunder and that the detailed manner and method of doing the Work and the areas of the Vessel where the Work is being performed shall be under the exclusive control of the Builder. Purchaser shall have the right to supervise the performance of the Work as to the results to be achieved and the compliance of the Contractor with the terms of this Contract and the specifications. A. Indemnification a.1. BUILDER INDEMNIFICATION a.l.a.Builder Personnel and Property Builder shall release, defend, indemnify, and hold Purchaser, its parent or affiliated companies, and their respective officers, directors, employees, contractors, subcontractors, invitees, licensees and agents, except any of the foregoing which are part of the Builder Group (hereinafter called the Purchaser Group) harmless from and against all liability, claims, losses, damages, punitive damages, costs, expenses, attorney's fees, demands, suits and causes of action of every kind and character (the "claims"), arising in favor of any officer, director, or employee of the Builder or its sublessees, contractors and subcontractors, their respective parent and affiliated companies, and their respective officers, directors, employees, vendors, invitees, licensees and agents (hereinafter collectively called the "Builder Group") on account of personal injury or death or damage to property owned by any member of the Builder Group, or, prior to Delivery, the Vessel and/or Owner Furnished Equipment in Builder's care, custody and control, in any way incident to or in connection with or arising out of or under this Contract, regardless of the sole, joint or concurrent negligence, negligence per se, gross negligence, statutory fault, or strict liability of any member of the Purchaser Group or the unseaworthiness of the Vessel or any vessel owned operated or chartered by any member of the Purchaser Group 19 that may have caused or contributed to the claims, to the extent such indemnity obligations are not prohibited by applicable law. a.1.b. Third Parties Prior to the Delivery of the Vessel, Builder shall release, defend, indemnify, and hold the Purchaser Group harmless from and against all liability, claims, losses, damages, punitive damages, costs, expenses, attorney's fees, demands, suits and causes of action of every kind and character (the "claims"), arising in favor of any Third Party on account of personal injury or death and/or damage to Third Party property in any way incident to or in connection with or arising out of or under this Contract, resulting from the joint or concurrent negligence, negligence per se, gross negligence, (collectively "negligence") statutory fault or strict liability of any member of the Builder Group or the unseaworthiness of the Vessel or any vessel owned operated or chartered by any member of the Builder Group, to the extent such claims were caused by the negligence or other legal liability of any member of the Builder Group. As used herein, a Third Party is any person of entity not included in either the Purchaser Group or the Builder Group. a.1.c. Pollution Notwithstanding anything to the contrary herein, Builder shall release, defend, indemnify, and hold the Purchaser Group harmless from and against all, claims, demands, suits, causes of action, damages, natural resource damage assessments, response, clean up, containment or disposal expenses and other liabilities, including but not limited to attorney's fees and the costs of litigation or administrative proceedings but excluding any claim covered by a. 1. or a.2. above (the "Purchaser pollution claims"), arising from any spill, discharge, escape, release of or exposure to any waste, rubbish, petroleum, chemical or hazardous substance, whether solid, liquid or gas, originating from any equipment, facility or property of the Builder Group and, prior to Delivery, from the Vessel, or from handling, removal, transportation or disposal thereof, except to the extent such claims may have resulted from the negligence of a member of the Purchaser Group. a.2. PURCHASER INDEMNIFICATION a.2.a.Purchaser Personnel and Property Purchaser shall release, defend, indemnify, and hold the Builder Group harmless from and against all liability, claims, losses, damages, punitive damages, costs, expenses, attorney's fees, demands, suits and causes of action of every kind and character (the "claims"), arising in favor of any officer, director, or employee of the Purchaser Group on account of personal injury or death or damage to property owned by any member of the Purchaser Group except, prior to Delivery, the Vessel and/or Owner Furnished Equipment in Builders care, custody and control, in any way incident to or in connection with or arising out of or under this Contract, regardless of the sole, joint or concurrent negligence, negligence per se, gross negligence, (collectively "negligence") statutory fault, or strict liability of any member of the Builder Group or the unseaworthiness of the Vessel or any vessel owned operated or chartered by any member of the Builder Group 20 that may have caused or contributed to the claims, to the extent such indemnity obligations are not prohibited by applicable law. a.2.b. Third Parties Purchaser shall release, defend, indemnify, and hold the Builder Group harmless from and against all liability, claims, losses, damages, punitive damages, costs, expenses, attorney's fees, demands, suits and causes of action of every kind and character (the "claims"), arising in favor of any Third Party on account of personal injury or death and/or damage to Third Party property in any way incident to or in connection with or arising out of or under this Contract, resulting from the joint or concurrent negligence, negligence per se, gross negligence, statutory fault, or strict liability of any member of the Purchaser Group or the unseaworthiness of the Vessel or any vessel owned operated or chartered by any member of the Purchaser Group, to the extent such claims were caused by the negligence or other legal liability of any member of the Purchaser Group. As used herein, a Third Party is any person of entity not included in either the Purchaser Group or the Builder Group. a.2.c. Pollution Notwithstanding anything to the contrary herein, Purchaser shall release, defend, indemnify, and hold the Builder Group harmless from and against all, claims, demands, suits, causes of action, damages, natural resource damage assessments, response, clean up, containment or disposal expenses and other liabilities, including but not limited to attorney's fees and the costs of litigation or administrative proceedings but excluding any claim covered by a.2.a. or a.2.b. above (the "Builder pollution claims"), arrising from any spill, discharge, escape, release of or exposure to any waste, rubbish, petroleum, chemical or hazardous substance, whether solid, liquid or gas, originating from any equipment, facility or property of the Purchaser Group including, after Delivery, from the Vessel or from handling, removal, transportation or disposal thereof, except to the extent such claims may have resulted from the negligence of a member of the Builder Group. B. Builder shall indemnify Purchaser for loss of or damage to Purchaser's property intended to be incorporated into or used in the Vessel to be performed while in Builder's care, custody or control prior to installation aboard the Vessel provided such loss or damage does not result from the negligence of any member of the Purchaser Group. C. Risk of loss of the Vessel shall rest with the Builder at all times prior to acceptance of the Vessel by Purchaser. D. In no event, except for the liquidated damages as provided in Sections 6 and 16 shall any member of the Purchaser Group, or the Builder Group be liable to each other for any incidental, consequential or special damages incurred by the other, including but not limited to, loss of profit, loss of business opportunities, loss of earnings or downtime, arising directly or indirectly out of or relating in any way to this Contract or any activities or omissions or delays in connection herewith, whether arising out of the negligence (in 21 whole or in part), gross negligence or strict liability of either Party or the unseaworthiness of the Vessel or otherwise. The Purchaser Group and Builder Group hereby mutually release each other from all such losses. 9. PLANNED PROGRAMME, PROGRESS CONTROL AND REPORTING PLANNED PROGRAMME 9.1. The Vessel shall be constructed by the Builder in accordance with the Planned Programme set out in Appendix II hereof. A detailed copy of this plan, including sub level planning identifying critical paths, shall be made available to the Purchaser and updated on a regular basis. The plan will define certain stages of the construction process ("Milestones") which must be completed by the dates specified therein. The Planned Programme will include a comprehensive statement of the dates on which the Owner Furnished Equipment are required to be delivered to the Shipyard. PROGRESS CONTROL AND REPORTING 9.2. At the commencement of the contract a "kick off " meeting shall be held during which the major parameters by which performance of the Builder will be measured are to be mutually agreed. These shall include but not necessarily be limited to a detailed weight budget, a steel procurement and processing schedule, an engineering schedule, outfitting targets, manning schedules etc . Unless mutually agreed otherwise such meeting shall be held within 30 days of contract signature. 9.3. During the course of the performance of this Contract the Builder shall submit to the Purchaser on a fortnightly basis, commencing on the date falling fourteen days after the kick off meeting and thereafter fortnightly a. a status report on the Vessel's construction as compared with the Planned Programme, including the critical path; b. a report setting out the actual progress in performance of this Contract during the previous month as compared with the Planned Programme. Such report to identify progress against the agreed performance parameters c. a report setting out the forecast lightship weight, identifying any variances from the agreed weight budget and in the case of negative variations including proposals for reducing the variance to within acceptable levels d. a list of Purchaser's Modifications and Statutory Modifications (if any) agreed or resolved by an expert during the previous month, as the case may be, including adjustments, if any, agreed or resolved by an expert, to the Contract; 22 e. a report on the delivery of sub-contracted Materials during the previous month (the precise nature of which report shall be agreed, from time to time, between the Purchaser and the Builder). 9.4. Without prejudice to the Builder's obligations under this Contract, if the construction of the Vessel should for any reason whatsoever be delayed beyond the time-frame envisaged in the Planned Programme, the Builder shall immediately notify the Purchaser and shall within seven Working Days thereof provide to the Purchaser a schedule indicating, in so far as the delay which has occurred is not Permissible Delay, the steps (including any appropriate increase in manpower and material resources) the Builder intends to take to recover the time so lost. The Builder and the Purchaser shall thereafter meet at the earliest opportunity to discuss the schedule and the Builder's detailed plans for implementation of the same. 9.5. The Builder shall take monthly progress photographs illustrating the progress of the Vessel's construction up to and including trials and delivery. The Builder shall also supply the Purchaser with sufficient number of photographs (size: approximately 18 x 24 cms) depicting the final stage of the Vessel as delivered: this set will be at least 25 percent colour prints. One set of standard transparencies will be supplied, free of charge to the Purchaser. Additional copies of photographs and transparencies will be made available by Builder, at the Purchaser's request and expense. 10. TITLE 10.1. To the extent Builder has been paid by the Purchaser, therefore the Vessel and all Materials from time to time purchased by Builder for use in connection with this Contract whether unfinished or partly or wholly finished and whether at the Shipyard or at the premises of the Builder's subcontractors shall become and remain the absolute property of the Purchaser. The Purchaser shall be entitled to mortgage the Vessel to the extent title to the Vessel has passed to Purchaser as aforesaid in connection with the financing of its purchase of the Vessel and the Builder will execute any reasonable and necessary documentation required by the Purchaser to effect such mortgage. The Builder shall have no authority or entitlement to create any lien, encumbrance or charge over the Vessel, the Material or the Owner Furnished Equipment at any time except to the extent said lien or encumbrance is created by applicable law. 10.2. In furtherance of the provisions of Clause 10. 1 above the Builder shall (i) use all reasonable endeavours to procure that all subcontracts placed with all suppliers and manufacturers of Materials contain provisions similar to the above and (ii) ensure that all substantial items of Materials and owner Furnished Equipment shall be clearly marked with the notation "Hull 1829" immediately upon their appropriation for use in connection with this Contract and in no circumstances more than twenty-four hours following their delivery to the Shipyard. Title to the Owner Furnished Equipment shall at all times from the date hereof vest in the Purchaser absolutely. 23 11. RISK AND INSURANCE RISK 11.1. The Vessel and all Materials (including, from the time of their delivery to the Shipyard, the Owner Furnished Equipment) shall remain at the risk of the Builder until Delivery, INSURANCE 11.2. The Builder undertakes to keep the Vessel and all Materials (including the Owner Furnished Equipment) in its or its Subcontractors' custody fully insured at all times and until Delivery at its own cost with first class insurers approved by the Purchaser, such approval not to be unreasonably withheld, in the amount of the higher of (1) the value of the Vessel as from time to time constructed or (i) the instalments of the Contract Price for the time being paid by the Purchaser to the Builder, (ii) the value of the Owner Furnished Equipment delivered to the Shipyard or built into or installed in or upon the Vessel. 11.3. The policy or policies (the "Stipulated Insurances"), which shall be subject to English law and jurisdiction, shall incorporate the following clauses:- a. the Institute of London Underwriters ("ILU") Clauses for Builder's Risks: b. the ILU Strikes Clauses - Builder's Risks; and c. (from the date of the Vessel's launching) the ILU War Clauses - Builder's Risks. 24 11.4. The policies shall name the Purchaser and the Builder as joint loss payees as their interest may appear but on terms that the Builder alone shall be responsible for all premiums payable thereunder. The Builder shall furnish the Purchaser promptly with certificates evidencing coverage and upon request copies of the policies. The originals shall be made available to the Purchaser, its employees or agents for inspection at Builder's corporate offices in Gulfport, Mississippi at all reasonable times. 11.5. The policies taken out shall contain a provision to the effect that, in the event of an actual, constructive, arranged or compromised total loss, such insurance proceeds as the Purchaser is entitled to hereunder shall be payable to the Purchaser as its interest may appear and such policies shall be so endorsed as to enable the Purchaser by its brokers or agents or personally to collect such proceeds pursuant to the provisions of this Clause. In addition, all such policies shall include provision that they shall not be capable of cancellation by the insurers without not less than thirty (30) days' prior written notice being given to the Purchaser and that not less than ten (10) days' prior written notice of non-renewal or lapse shall be given by the insurers to the Purchaser before the same shall take effect. 12. LOSS OR DAMAGE TO THE VESSEL 12.1. Should the Vessel or any items insured pursuant to the provisions of Clause 11 sustain loss or damage prior to Delivery and should such loss or damage not make the Vessel a total loss, actual, constructive, arranged or compromised, the Builder shall, at its own expense and with all due despatch, make good such damage to the satisfaction of the Purchaser and (if applicable) the Classification Surveyor, and any monies payable in respect of any insurance effected under Clause 11 shall be payable to the Builder. 12.2. Should the Vessel sustain loss or damage prior to Delivery hereunder such that it is either conceded by the insurers liable therefor, or determined by a court of competent jurisdiction, that the Vessel has become a total loss, actual, constructive, arranged or compromised, then the Builder shall not be liable to repair the damage or replace the Vessel and insurance proceeds shall be payable to Purchaser and Builder as their interest may appear. but, to the extent that the Purchaser has not made recovery of such sums under the Stipulated Insurances within sixty (60) Working Days of the total loss, the Builder shall:- a. refund promptly to the Purchaser in full the aggregate amount of instalments of the Contract Price, already paid by the Purchaser: and b. return to the Purchaser all Owner Furnished Equipment or refund to the Purchaser a sum equivalent to the value of any of same which have been lost or which cannot be removed in a sound condition from the Vessel. 25 12.3. When the conditions set out in sub-clause (2) above have been satisfied by the Builder, the Purchaser shall instruct the insurers to pay to the Builder all sums due and payable under the Stipulated Insurances in respect of the total loss. Save as elsewhere herein specifically provided to the contrary, the parties' obligations under this Contract shall thereupon cease and terminate. 13. TRIALS: TECHNICAL ACCEPTANCE 13.1. At least 120 days before the scheduled commencement of the same the Builder shall submit to the Purchaser for approval comprehensive testing and trials programmes covering the Full Scale Test and Trials (collectively the "Trials") described in Chapter 03000 of the Specifications, including (i) Workshop Tests, (ii) Quayside Trials (including the Inclining Test), and (iii) Sea Trials (including trial runs and all other tests at sea). 13.2. The Trials shall be conducted at the risk and expense of the Builder which shall provide and pay for the personnel necessary for the safe management and navigation of the Vessel during the same. The Builder shall also provide and pay for all necessary ballast and fresh water and shall meet ALL other costs associated with the Trials. The fuels, lubricants and consumable stores required for the Trials shall be specified, supplied and paid for by the Purchaser, who shall upon Delivery be entitled to reimbursement from the Builder of the costs of such fuels, lubricants and consumable stores as are consumed during the Trials. 13.3. The Builder shall give the Purchaser not less than seven Working Days' notice of the date and place of commencement of each of the Trials and representatives of the Purchaser shall be afforded every opportunity to observe and determine the performance of the Vessel during the same. Failure by the Purchaser to attend any Trial following due notice shall be deemed to be a waiver by the Purchaser of its rights of attendance in respect of such Trial. SEA TRIALS 13.4. The Sea Trials shall be carried out following satisfactory conclusion of all other Trials and after the Vessel's construction has been completed with only minor items of work outstanding which are agreed by the Authorised Representatives as suitable for completion after the Sea Trials but before Delivery. 13.5. The Sea Trials shall have the objective of permitting the Builder to demonstrate fulfilment of the quality and performance requirements for the Vessel as set forth in the Specifications. The course to be followed during the Sea Trials shall be determined by the Builder, but shall be in open waters off the Gulf Coast of the United States. The Purchaser shall be allowed to maintain a shadow crew and other necessary personnel on board the Vessel during the sea trials to familiarise themselves with the Vessel and its operation. 13.6. The safe management and navigation of the Vessel in transit to, during and from the Sea Trials shall remain the sole responsibility of the Builder. 13.7. Should the weather conditions at the time scheduled for the Sea Trials be such that they cannot be carried out properly, the Builder shall postpone them or such part of them as necessary 26 to the earliest possible time when suitable weather conditions occur to ensure that all readings and results are obtained in a manner satisfactory to the Purchaser. Any delay to the Sea Trials caused by such unfavourable weather conditions, if the delay exceeds a total of seven (7) days, shall operate to postpone the Contractual Delivery Date by the period of delay involved and such delay shall be deemed to be Permissible Delay. 13.8. If during the Sea Trials any breakdown occurs which entails interruption or irregular performance and the breakdown can be repaired by the normal means available on board, this shall be done as soon as possible and the trial shall be continued after repairs are completed. However, if the Vessel must return to a port to enable the breakdown to be remedied, a further complete trial shall be undertaken at the earliest opportunity. 13.9. On completion of the Sea Trials to the satisfaction of the agreed Trial Procedure the Vessel shall be brought back to a berth in the Shipyard, or elsewhere as may be agreed, for the inspection of the machinery required in the Specifications, and during this period all defects or omissions found in the Vessel shall be remedied and made good by the Builder to the reasonable satisfaction of the Purchaser, and the machinery closed up by the Builder ready for sea at its expense and without expense to the Purchaser. TECHNICAL ACCEPTANCE 13.10. Within three (3) Working Days of completion of the Trials and the closing up of machinery referred to in sub-clause 9 above, the Builder shall notify the Purchaser in writing of the results of the Trials and shall, where the same is appropriate, confirm to the Purchaser that the Vessel conforms with the requirements of the Contract and Specifications. If the Purchaser is in agreement with the Builder, the Purchaser shall, within three (3) Working Days of receipt of the Builder's notice as aforesaid, advise the Builder in writing of its Technical Acceptance of the Vessel. 13.11. If, however, in the view of the Purchaser the Vessel or any part thereof does not conform to the requirements of this Contract and/or the Specifications, the Purchaser shall so advise the Builder (again within seven (7) Working Days of the receipt of the Builder's notice as aforesaid) and shall specify the respects in which the Vessel fails to conform with the requirements of this Contract and Specifications. The Builder shall thereupon take the necessary steps to correct such non-conformities and, upon completion of such works, the Builder shall advise the Purchaser who shall, in the reasonable exercise of its discretion, be entitled to require the Builder to undertake further trials of the Vessel; in such event the Builder shall give the Purchaser three Working Days' notice of such further trials. 13.12. Upon satisfactory completion of such remedial works and/or trials, the Purchaser shall, within four (4) Working Days after receipt of a further notice from the Builder that the Vessel conforms with the requirements of the Contract and Specifications, notify the Builder of its Technical Acceptance of the Vessel or the respects in which the Vessel still fails to conform with the requirements of this Contract and the Specifications. This process shall be repeated until 27 the earlier of (a) the Purchaser's Technical Acceptance of the Vessel or (b) the valid and proper termination or rescission of this Contract by either the Purchaser or the Builder. 13.13. If the Purchaser fails to notify the Builder in writing of its Technical Acceptance or otherwise of the Vessel within the periods as provided above the Purchaser shall be deemed to have accepted the Vessel. 13.14. The Purchaser's Technical Acceptance of the Vessel as above provided shall preclude the Purchaser from refusing Delivery of the Vessel as hereinafter provided, if the Builder complies with the procedural requirements for Delivery of the Vessel as provided in Clause 14 hereof. 14. DELIVERY OF THE VESSEL DELIVERY 14.1. The Vessel shall be delivered by the Builder to the Purchaser at the Shipyard (or other place as may be agreed with unrestricted access to the open sea) on 9th February, 2000 except that, in the event of Permissible Delay as defined in Clause 15.4 hereof, the aforementioned date shall be postponed accordingly. The aforementioned date, or such later date to which requirement to deliver may be postponed, is herein called the "Contractual Delivery Date." 14.2. Delivery shall take place on a Working/Banking Day to be nominated by the Builder following Technical Acceptance of the Vessel by the Purchaser and with not less than five (5) Working Days' advance notice to the Purchaser. Delivery shall be effected by the execution by the Parties of a Protocol of Delivery and Acceptance in the form set out in Appendix II, acknowledging delivery by the Builder and acceptance thereof by the Purchaser. The Builder shall give the Purchaser at least sixty (60 ) days' (plus or minus seven (7) days) calendar notice of the estimated date of Delivery. 14.3. The Builder guarantees that at the time of Delivery title to the Vessel (to the extent not already transferred to Purchaser) and every part thereof shall pass to the Purchaser free and clear of any and all liens, except liens created by Purchaser, claims, mortgages or other encumbrances upon it and in particular, but without limitation, that she shall be free of all burdens in the nature of imposts, taxes or charges imposed by any liabilities arising from the construction of the Vessel or from its operation on Trials or otherwise. DOCUMENTS TO BE PROVIDED TO THE PURCHASER 14.4. The Builder shall provide to the Purchaser the following documents prior to Delivery failing which the Purchaser may refuse to accept Deliver;- a. Records of inventory of the Vessel's equipment including spare gear and the like as detailed in the Specifications; 28 b. Records of any and all fuels, lubricants, consumable stores and fresh water supplied pursuant to this Contract by either the Builder or the Purchaser together with such quantities of the same as remain on board at Delivery; c. All certificates (including Class and other regulatory certificates) required to be furnished prior to or upon Delivery of the Vessel pursuant to the Specifications; such certificates save as noted in clause 2.5 are to be clean and free of all qualifications, reservations and recommendations whatsoever. d. Declaration of Warranty of the Builder in accordance with Clause 14.3 above; e. The following technical documentation:- e.1. Four (4) copies and one reproducible of all the "As Built" drawings of the Vessel required for its operation and maintenance in accordance with its design and purpose. e.2. Four (4) complete documentation and instructions (Operation and Maintenance) books covering builder supplied equipment. e.3. Four (4) sets of Operating Manuals and Instruction Books according to MODU CODE 1989 with all the necessary data including sea preparation e.4. Four (4) copies of a complete maintenance guide including all drawings. e.5. One (1) copy of all the test and commissioning trials and results which have been done prior to delivery. e.6. Lightship weight, variable load and centre of gravity of lightship weight calculations. f. The certificates listed in Appendix VII, together with (i) Builder's Certificate or (at the Purchaser's option) Bill of Sale in favour of the Purchaser notarised and legalised to permit registration of the Vessel on the Netherland Antilles Register of Shipping and (ii) any other document relating to the condition and/or performance of the Vessel which the Purchaser may reasonably require provided the same is requested no later than seven Working Days prior to Delivery. 14.5. The documents listed in sub-clauses 14.4.e. 1-6 above are also to the extent that is practical to be supplied as a diskette in a format to be agreed between the Parties. REMOVAL OF THE VESSEL 29 14.6. Following Delivery of the Vessel, the Purchaser shall in seven (7) Working Days remove her from the Shipyard. If the Purchaser fails to remove the Vessel within this period, it shall pay to the Builder reasonable mooring charges thereafter until removal. 15. EXTENSION OF TIME FOR DELIVERY: PERMISSIBLE DELAY CAUSES OF DELAY 15.1. If at any time before the Contractual Delivery Date the construction of the Vessel is delayed due to Acts of God, acts of princes or rulers, war or other hostilities or preparations therefor, blockade, civil commotion or riots, epidemics, floods, hurricanes, earthquakes, tidal waves, landslides, fires, lightning, explosions, unusually severe inclement weather which stops production at the yard and can be shown to be in excess of the a five year statistical average, collisions or strandings, shortage of materials or equipment (other than resulting from any act, omission or improvidence of the Builder or its Subcontractors / Suppliers ), prolonged failure, shortage or restriction of electric current, oil or gas or destruction of or damage to the Shipyard or works of the Builder or its Subcontractors / Suppliers by any causes herein described, the Contractual Delivery Date and any Milestones not then achieved shall be postponed for the period of time during which construction of the Vessel is directly and unavoidably delayed by the same. 15.2. Any periods of time by which the Contractual Delivery Date of the Vessel and any Milestones not then achieved is properly and justifiably claimed by the Builder to be extended by reason of matters falling within (a) subclause 1 above or (b) Clauses 7.1-7.12, 13.7, 18.2 or 21.2 hereof shall be defined herein as "Permissible Delay." 15.3. The Builder's entitlement to a postponement of the Contractual Delivery Date and any Milestones not then achieved shall, however, be subject to:- a. the delay in respect of which the Builder is claiming relief not being within its reasonable control or contemplation at the date of signing of this Contract nor caused or contributed to by its error, neglect, act or omission or that of its agents, employees, suppliers or Subcontractors. Provided, however that in respect of suppliers / subcontractors for i) the "long lead" items identified in clause 5.12 above, together with ii) the Builders requirement for minimum tolerance steel as identified in the Specification and if applicable, (iii) the detailed engineering sub-contractor referred to in clause 5.2 above where the Builder can show it exercised all due diligence in the placing and prosecuting of the orders and the management of these suppliers / subcontractors, errors, neglect, act or omission of such suppliers / subcontractors shall not preclude the Builders entitlement to a Permissible Delay b. the delay affecting the "critical path" of the Vessel's construction as at the time of commencement of the event; 30 c. since the occurrence of the event in respect of which relief is claimed, the Builder having taken all reasonable steps open to it to mitigate the effect of the event upon the Contractual Delivery Date and any Milestones not then achieved; and d. the Builder having duly given all the notices required under sub-clause (3) below within the time-limits therein laid down. NOTICES 15.4. Upon the occurrence of any of the events listed in sub-clause (1) above, the Builder shall:- a. within seven (7) Working Days of the date on which it became aware of the event, give the Purchaser notice in writing of the occurrence of the event; b. as soon as possible thereafter, and in any event not more than seven (7) Working Days after the giving of the said notice, submit to the Purchaser a statement in writing, specifying as far as possible, with full particulars, the nature and the cause of the event, the effect on the item involved, the likely overall effect computed from the Planned Programme upon the Contractual Delivery Date and any Milestones not then achieved and the steps which are being taken by it to mitigate any delay which may result from the event; c. within seven (7) Working Days after the date on which it becomes aware that the event is at an end, give the Purchaser notice in writing of the date when the event ended; d. within seven (7) Working Days of the date of the Builder's notice under sub-paragraph (c), notify the Purchaser of the period of time by which it claims the Contractual Delivery Date of the Vessel and any Milestones not then achieved should be extended by reason of the event. 16. DELAY IN DELIVERY LIQUIDATED DAMAGES 16.1. In the event that Delivery should be delayed beyond midnight local time on the Contractual Delivery Date, and any permitted extension thereof, the Builder shall, subject to the provisions of sub-clauses 4 and 5 of this Clause 15, pay to the Purchaser by way of liquidated damages for loss of use of the Vessel the amounts set out below:- 16.2. If the delivery of the Vessel is delayed, then, in such event, beginning at twelve o'clock midnight on the Delivery Date, the Builder shall pay to the Purchaser as agreed liquidated damages and not by way of penalty, the following amounts:- a. 1 - 30 days of delay US$ 10,000 per day 31 b. 31 - to actual delivery US$ 20,000 per day It being understood that in no event shall the Builder's obligation for such liquidated damages exceeds 1,000,000.-. In this connection, the parties acknowledge that if the Vessel is not delivered by the Delivery Date, as allowed for extension, Purchaser will suffer damages from such later delivery and that Purchaser should be compensated for such damages. The parties further acknowledge, however, that it is not possible to accurately calculate such damages at this time and that therefore the parties agree that the liquidated damages are a fair and reasonable forecast of anticipated actual damages under the circumstances and will provide just compensation for the harm that is caused to Purchaser as a result of any late delivery. In the event of any such delays in delivery the said liquidated damages shall be deducted from the amounts otherwise due to Builder at the time of execution of the Protocol of Acceptance and Delivery. Parties hereto agree that the above shall be the sole and exclusive remedy for damages due to the late delivery save as set forth in section 16.3 TERMINATION FOR DELAY IN DELIVERY 16.3. Furthermore, if Delivery should not have occurred prior to the expiry of one hundred thirty five (135) days from the Contractual Delivery Date (as extended by Permissible Delays) the Builder shall be in default, in which case Clause 19.2 shall apply. 17. DEFECTS AND BUILDER'S GUARANTEE WARRANTY: 17.1. From the date of this Contract until the expiration of the Warranty Period (subject to Purchaser's right to report any defect, claim or loss within 30 days of the expiration of the Warranty Period pursuant to the term of the following paragraph), Builder warrants that all labor furnished by Builder hereunder shall have been performed in a good and workmanlike manner. The provisions set forth herein as to the liabilities of the Builder are to apply also to all labor and workmanship furnished by any sub-contractor in Builder's performance of this Contract. Builder shall have no responsibility whatsoever with respect to any defect, claim, or loss of the Vessel not reported in writing to Builder within three hundred and sixty-five (365) days from the Delivery Date (as specifically defined in Sections 14 and 15) (such 365 day period being hereinafter referred to as the "Warranty Period"); provided, however, Purchaser may report to Builder warranty claims arising during the final thirty (30) days of the Warranty Period within thirty (30) days of the expiration of the Warranty Period. The warranty granted to Purchaser by Builder shall extend only to those claims reported in writing to Builder within such Warranty Period or within thirty (30) days thereafter (as set forth above). For purposes solely for this Section 17, "Delivery Date" shall be defined as the earlier of the following: (1) fourteen (14) days after date of the final invoice from Builder upon completion of the Vessel, or (2) the date of actual delivery and acceptance of the Vessel. In the event Purchaser notifies Builder of any claim covered under this Warranty, Builder will make repairs and/or replacement at its option, at one of Builder's yards without expense to Builder for 32 transporting the Vessel, or any component thereof, to or from that yard; provided, however, that if it is not practical to have the Vessel proceed to such yard, purchaser may, with prior written consent of Builder, have such repairs and/or replacement made elsewhere, and, in such event, Builder shall reimburse Purchaser a sum equivalent to (i) the amount Builder would have expended, at its own yard at Builder's then Prevailing rates, or (ii) the amount actually expended by purchaser, whichever is less. In no event shall Builder be responsible for any sum in excess of the cost of the repairs and/or replacement as specified herein, and Builder shall in no event be responsible for any claims to property, persons, and/or punitive or consequential damages, including, but not limited to claims for bodily injury, illness, disease, death, loss of service, loss of society, maintenance, cure wages, and any other consequential or punitive damages arising out of any breach of this Contract or faulty or negligent performance thereof. As to the installation of all third-party supplied components, materials or equipment, if the manufacturer or supplier has a representative at the job site during such installation, and if the installation is completed to the satisfaction of such representative, with all requirements of such representative having been satisfied by Builder, it shall be conclusively presumed that such installation has been completed by Builder in accordance with the manufacturer's recommendations, in a proper and satisfactory manner. Builder does not warrant that any equipment or materials purchased by it from a supplier or manufacturer for installation in the Vessel is free from manufacturers' defects and deficiencies and Purchaser specifically releases Builder from any such implied warranty of fitness or workmanship or freedom from defects relating thereto. To the extent available, Builder agrees to transfer and assign to Purchaser, without warranty of Builder with respect thereto, any warranties relative to material, equipment and/or labor furnished by others which warranties shall not be adversely affected by any limitation period set forth herein. Builder agrees that Manufacturer's Warranty on major components, including, but not limited to, main engines, gears, jacks, winches, generators, pumps, etc., shall be a minimum of six (6) months after the Delivery Date of the Vessel. Should Purchaser be required to enforce-any such warranty, Builder will cooperate with Purchaser's efforts, short of instituting legal action on Purchaser's behalf and/or incurring other legal fees. Nothing contained herein shall obligate Builder at any time to repair or replace the Vessel, or any component part thereof, where such repair and/or replacement is caused, in whole or in part, by normal wear or unusual handling, by the negligent operation or maintenance of the Vessel, or its equipment or by abuse, rough weather, accident, fire, by Purchaser or Purchaser's agents, employees or representatives. With respect to paint, Builder warrants that it will purchase paint of good marine quality and that it will apply the paint in accordance with the manufacturer's specifications, recommendations, and inspection, and Builder makes no warranty, express or implied, with respect to the fitness of the paint or the manufacturer's specifications and recommendations. For any claim for damages to or loss of the Vessel, and/or damages to persons and/or property (including, but not limited to claims, demands, or actions for bodily injury, illness, disease, 33 death, loss of service, loss of society, maintenance and cure, wages or property) made as a result of any defect in the Vessel, or any component parts thereof, after the said Warranty Period, Purchaser shall have no claim or actions whatsoever against Builder, regardless of any negligence, tort, fault, strict liability or otherwise of Builder, its employees or sub-contractors, and Purchaser hereby waives and releases Builder and its employees and sub-contractors from and against any and all liability and any and all damages resulting therefrom, including, but not limited to, for personal injury, death, property damage, damage to and/or loss of the Vessel, delay, demurrage, loss of profits, loss of use, or any other consequential or punitive damages of any kind, whether such claim is based in contract, redhibition, negligence, strict liability, or otherwise, arising out of any defect and/or negligent design, the selection or choice of specifications and/or materials and/or component parts, manufacture, construction, fabrication, workmanship, labor and/or installation of equipment, materials and/or components or from any unseaworthy condition or any other defective condition of the Vessel, it being specifically understood and agreed that any such defects reported and/or occurring after the Warranty Period and all damages, loss of profits, demurrages, delay, losses of use or other consequential or punitive damages of any kind whatsoever resulting therefrom, shall not be the responsibility of Builder, but shall be borne exclusively by Purchaser. "THIS WARRANTY IS EXPRESSLY IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR THAT THE VESSELS, MATERIAL OR SERVICES ARE FIT FOR ANY PARTICULAR PURPOSE OR USE, AND SPECIFICALLY IN LIEU OF ALL INDIRECT, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES." 17.2. This guarantee shall not extend to Owner Furnished Equipment or to any damage caused by any defect therein not attributable to the Builder. GUARANTEE ENGINEER 17.3. Where so requested by the Purchaser, the Builder shall appoint a suitably qualified English-speaking Guarantee Engineer to serve on the Vessel as the representative of the Builder for such portion of the Guarantee Period as the Purchaser shall require; the Purchaser and its employees shall give the Guarantee Engineer full co-operation in carrying out his duties as the representative of the Builder on board the Vessel. In particular, the Purchaser shall accord the Guarantee Engineer treatment and subsistence on board the Vessel comparable to the Vessel's Chief Engineer (except that the Purchaser shall provide him accommodation in a standard passenger cabin) at no cost to the Builder. 17.4. The Purchaser shall pay the expenses of the Guarantee Engineer's repatriation by air to the point of origin upon termination of his services on the Vessel together with a daily rate of US$ 700 per day worked.. However, save as aforesaid, the Purchaser shall be responsible for no other expenses in connection with the Guarantee Engineer, who shall at all times be conclusively deemed an employee of the Builder. The Builder shall indemnify and hold harmless the Purchaser from and against personal injury, including death, of, or loss of or damage to property 34 of the Guarantee Engineer unless the same shall been caused by the gross negligence of the Purchaser or any of its employees, agents or sub-contractors. If the Purchaser has reason to be dissatisfied with the conduct or competence of the Guarantee Engineer, the Builder, on receiving particulars of the complaint, shall promptly investigate the matter and, if the complaint is found to be justified, make a change in the appointment. ASSIGNMENT OF BUILDER'S GUARANTEE 17.5. It is expressly agreed and understood that the benefit of this Guarantee shall be capable of transfer by the Purchaser to any Assignee. The Builder shall in such circumstances enter into any documentation reasonably requested by either the Purchaser or the Assignee to evidence such transfer and the vesting in the Assignee pursuant to such assignment of all rights in respect of this Guarantee. 18. DEFAULT BY THE PURCHASER EVENTS OF PURCHASER'S DEFAULT 18.1. The Purchaser shall be deemed to be in default of performance of its obligations under this Contract in the following cases: a. if the Purchaser fails to pay the amount of any of the Instalments of the Contract Price due to the Builder in the period prior to Delivery on the due date for payment thereof, b. if the Purchaser fails without legal justification to take delivery of the Vessel in accordance with Clause 14 and to pay the instalment of the Contract Price due thereon; c. if an order or an effective resolution is passed for the winding up of the Purchaser (otherwise than for the purposes of a reconstruction or amalgamation previously approved by the Builder) or if a receiver is appointed over the whole or any part of the undertaking or property of the Purchaser or if the Purchaser becomes insolvent or suspends payment generally of its debts or ceases to carry on its business or makes any special arrangement or composition with its creditors. 18.2. If the Purchaser is in default as to the payment of any instalment as provided in (a) or (b) of sub-clause (1) above, then without prejudice to any other rights of the Builder or of the Purchaser, the Purchaser shall be liable to pay interest at 2% per cent above LIBOR on the unpaid amount from the day from which the same became due to the Builder up until the date of actual payment thereof. The Builder shall further be entitled to claim as Permissible Delay within the meaning of Clause 14.4 any period of time during which the construction or completion of the Vessel has been delayed in consequence of the Purchaser's default as aforesaid. TERMINATION BY THE BUILDER 18.3. If default on the part of the Purchaser continues for a period of thirty days, the Builder shall have the right at its sole discretion to rescind this Contract by giving written notice to the 35 Purchaser. The Builder shall in such event hold all of the installments received from the Purchaser in trust both for itself and the Purchaser until disposal of the Vessel whereupon the same shall either be retained by the Builder to compensate it for any shortfall between the Contract Price and the actual price obtained for the Vessel on disposal together. 18.4. In the event of rescission of this Contract in accordance with this Clause the Builder shall have the right and power either to complete or not to complete the Vessel as it deems fit but in any event shall sell the Vessel (either in its complete or incomplete form) at the best available price at a public or private sale on such reasonable terms and conditions. If the Builder sells the Vessel in an incomplete form then the Builder shall give credit to the Purchaser for any and all savings which arise from not having to complete the construction of the Vessel. 18.5. In the event of the sale of the Vessel in its completed state the proceeds of sale received by the Builder shall be applied to payment of all expenses attending such sale and otherwise incurred by the Builder as a result of the Purchaser's default and then to payment of all unpaid instalments of the Contract Price and interest on such instalments at the rate of 2 per cent above LIBOR from the respective due dates thereof to the date of application. 18.6. In the event of sale of the Vessel in its incomplete state the proceeds of sale received by the Builder shall be applied first to all expenses attending such sale incurred by the Builder as result of the Purchaser's default and then to payment of all costs of part-construction of the Vessel less the instalments retained by the Builder and compensation to the Builder for damages suffered by the Builder as a result of such default. 18.7. In either of the above events of sale, if the proceeds of sale exceed the sums to which such proceeds are to be applied as aforesaid the Builder shall promptly pay any such excess to the Purchaser without interest thereon and shall at the same time either permit the Purchaser to remove the Owner Furnished Equipment from the Shipyard or pay to the Purchaser the full value thereof. 18.8. If the proceeds of sale of the Vessel are insufficient to pay such total amounts payable as aforesaid the Purchaser shall be liable to pay to the Builder upon demand the amount of such deficiency. 19. DEFAULT BY THE BUILDER EVENTS OF BUILDER'S DEFAULT 19.1. In the event that any of the following events should occur:- a. the Builder shall without legal justification fail to proceed with construction of the Vessel with all reasonable despatch so that it fails to meet two consecutive Milestones within one hundred and thirty five days of the respective dates agreed for the same as extended by permissible delays; 36 b. the Builder shall commit any material breach of this Contract and shall fail to remedy the same within five Working Days of receipt by the Builder of written notice from the Purchaser; c. the making of any order or the passing of an effective resolution for the winding-up of the Builder (other than for the purposes of reconstruction or amalgamation which has been previously approved in writing by the Purchaser), or the appointment of a receiver of the undertaking or property of the Builder, or the insolvency of or a suspension of payment by the Builder, or the cessation of the carrying on of business by the Builder, or the making by the Builder of any special arrangement or composition with creditors of the Builder, and failure by the Builder The purchaser may by notice in writing to the Builder elect to rescind this Contract. RESCISSION BY THE PURCHASER 19.2. In the event that the Purchaser shall exercise its option to rescind this Contract, the Purchaser shall give notice in writing to the Builder. the Builder shall thereupon immediately comply with either the provisions of clause 19.3 or clause 19.6 below as may be elected by Purchased in said notice:- 19.3. The Builder shall: a. secure the immediate discharge of all liens (including its own), claims, mortgages or other encumbrances upon the Vessel other than in favour of the Purchaser and/or its financiers; b. complete all works required as a minimum to permit the Vessel to depart from the Shipyard in a safe and seaworthy condition, remove its employees, agents and contractors, together with their equipment, from the Vessel and render all necessary assistance to the Vessel in leaving the Shipyard at the, earliest moment convenient to the Purchaser; c. execute and deliver to the Purchaser an original of the Protocol of Delivery and Acceptance together with any and all documentation (including but not limited to a bill of sale or builder's certificate) in such form and such manner as the Purchaser shall in its absolute discretion determine shall be required for the purposes of registration of the Vessel in a shipbuilding or shipowning register other than the Newbuilding registry; and d. execute and deliver to the Purchaser all of the documentation listed in Clause 14.4 hereof to the extent that the same is at that time capable of production by the Builder. 19.4. All risk of loss of or damage to the Vessel shall where Purchaser elects to proceed per clause transfer to the Purchaser upon execution by the Purchaser of the Protocol of Delivery and Acceptance following receipt of all of the documentation received above. The Purchaser may, however, elect to execute the Protocol of Delivery and Acceptance notwithstanding the Builder's 37 failure to deliver all or part of the other documentation required to be delivered by the Builder pursuant to subclauses 19.3.c and d above. 19.5. In the event that the Purchaser elects to proceed per clause 19.3 the Builder shall remain liable: - a. to pay all liquidated damages to which the Purchaser may have become entitled to prior to the election to rescind; b. To indemnify the purchaser for any infringement for which the Builder would have been liable for pursuant to Clause 20 hereof but excluding liability for work done or Materials supplied other than by the Builder or its subcontractors pursuant to this Contract; and c. pursuant to its guarantee contained in Clause 17 hereof excluding liability for work done or Materials supplied other than by the Builder or its subcontractors pursuant to this Contract. d. if the reasonable expense of completion of the Work plus any reasonable expense incurred as a result of the Event of Default of Builder exceeds the balance of the Contract Price remaining unpaid, then such excess shall be immediately due and payable by Builder to Purchaser. The rights and remedies available to Purchaser under this Section shall not be exclusive, but shall be in addition to any and all rights and remedies available to Purchaser under this Contract or applicable law or equity practice. Furthermore, the designation of specific events of default of Builder and certain rights and remedies therefor shall not preclude Purchaser from exercising any rights or remedies available to it under this Contract for any breach of this Contract by Builder not constituting an Event of Default of Builder. 38 19.6. As an alternative to clause 19.3 if Purchaser so elects per clause 19.2 Builder shall promptly ( but no later than seven days of such receipt of such notice ) repay to the Purchaser the amount of all monies paid by the Purchaser in respect of the Contract Price together with interest thereon at a rate of 2 % over LEBOR from the date when such monies were paid by the Purchaser to the Builder up to the date of the repayment therefore. Upon receipt of such repayment, Purchaser shall execute all documentation required to vest title in the Vessel in its then condition to Builder. 19.7. In the event that Purchaser elects to proceed per clause 19.6, the Builder shall additionally purchase from the Purchaser and/or alternatively accept assignment / novation of purchase orders of such of the Owner Furnished Equipment as the Purchaser shall evidence it has either purchased or has a binding commitment to purchaser. The price payable for such OFE shall be evidenced by the Purchaser as what the Purchaser has expended plus interest from the date of such expenditure at two percent over LIBOR. Payment shall be made by the Builder within seven days of such evidence by the Purchaser. Upon such payment, Purchaser shall execute all documentation required to transfer title in such OFE to the Builder. 20. PATENT INDEMNITY PATENT NUMBERS AND TRADEMARKS 20.1. Machinery and equipment of the Vessel may bear the patent numbers, trademarks or trade names of the manufacturer. Nothing contained herein shall be construed as transferring any patent or trademark rights or copyrights in equipment covered by this Agreement, and all such rights are hereby expressly reserved to the true and lawful of Purchaser thereof. HOLD HARMLESS, THE PURCHASER 20.2. The Purchaser shall defend the Builder and hold it harmless in respect of infringement of any patent rights, copy rights or other intellectual property on account of the Purchaser Furnished Equipment or the Basic Design. HOLD HARMLESS, THE BUILDER 20.3. The Builder shall defend the Purchaser and hold it harmless in respect of infringement of any patent rights, copy rights or other intellectual property of the Vessel or construction components or equipment for the Vessel furnished by the Builder, except to the extent the Specifications require Builder to use the infringing method of work or construction of components or equipment. DESIGNS AND PROPERTY OF THE PURCHASER 20.4. The Builder agrees that the designs, drawings, specifications and ideas submitted by the Purchaser to the Builder are the property of the Purchaser, some of which are protected by U.S. or other, foreign patents and the remainder of which constitutes the trade secrets and know-how of the Purchaser. These designs, drawings, specifications and ideas shall not be copied or used in 39 whole or in part by the Builder or divulged by the Builder to others for any purpose other than the proper performance of this Agreement. The Builder further agrees to notify its employees and subcontractors of the confidential nature of this property and the limitations upon its use. The parties expressly agree that the obligations of the builder under this Section 20 shall survive and remain effective notwithstanding the cancellation or termination of this Agreement for any reason whatsoever. 21. OWNER FURNISHED EQUIPMENT DELIVERY OF OWNER FURNISHED EQUIPMENT 21.1. The Purchaser shall, at its own expense, supply all articles specifically listed in Appendix II as ("Owner Furnished Equipment") to the Builder at the Shipyard in a condition ready for installation and by the date listed in Appendix IIa 21.2. Should the Purchaser fail to deliver to the Builder any item of Owner Furnished Equipment by the date so notified, any delay in the construction or completion of the Vessel thereby resulting shall be deemed Permissible Delay within the meaning of Clause 15.4. 21.3. In order to facilitate the installation of Owner Furnished Equipment by the Builder, the Purchaser shall at its own expense furnish the Builder with Vendor Information which shall generally consist of , necessary plans, instruction books, test reports and certificates required by applicable rules or regulations, and if necessary and if requested by the Builder, shall use all reasonable endeavours, at its own expense, to cause the manufacturers of Owner Furnished Equipment to assist the Builder in the installation thereof or to make any necessary adjustment thereto at the Shipyard. In the event that any manufacturers representatives incur unnecessary standby time while attending at the Builders request such standby time shall be at the Builders expense. 21.4. The Purchaser shall be liable for the cost incurred by the Builder in the repair of Owner Furnished Equipment occasioned by their defective material or poor workmanship or failure to perform, or by damage caused to them during transportation to the Shipyard. 21.5. Any Owner Furnished Equipment found to be faulty or defective which require replacement or retesting shall be for the purchaser's account. Furthermore, delays or damage resulting from faulty or defective equipment shall be considered Permissible Delays under the terms of Section 15 of this Contract. RESPONSIBILITY OF THE BUILDER 40 21.6. The Builder shall be responsible for storing and handing Owner Furnished Equipment after their delivery to the Shipyard and shall install them on board the Vessel at the Builder's expense. The Owner Furnished Equipment shall be at the Builder's risk from the time of their delivery to the Shipyard until the time of their redelivery to the Purchaser either as part of the Vessel or otherwise. 21.7. Upon delivery of the Owner Furnished Equipment the Builder shall check by external inspection that the items appear to be in accordance with the relevant order and undamaged and if any item is not delivered with a weight certificate issued by a reputable body the Builder shall weigh the same in order to incorporate the actual weight and the actual weight control procedure. The Builder shall promptly inform the Purchaser if any item of the Owner Furnished Equipment does not conform to the relevant purchase order to enable the Purchaser to take corrective action. If the Builder fails to comply with this requirement, any additional cost shall be for the Builder's account and any delay shall not count as Permissible Delay hereunder. 21.8. In the event of termination or rescission of this Contract by the Purchaser and election by the Purchaser under clause 19.3 above, the Builder shall, at his own expense return to the Purchaser all Owner Furnished Equipment. 22. TAXES AND DUTIES 22.1. The Builder shall pay or cause to be paid all taxes, duties, fees and stamp duties of whatsoever nature imposed by any state of the United States in connection with its performance of its obligations under this Contract, excluding any taxes, duties, fees and stamp duties imposed in by any state of the United States upon the Owner Furnished Equipment. 22.2. The Purchaser shall pay or cause to be paid all taxes, duties, fees and stamp duties of whatsoever nature imposed outside [ the United States in connection with the execution and performance of this Contract, except for taxes, duties, fees and stamp duties imposed upon those items and services to be procured by the Builder and further excluding any taxes measured by he net income of the Builder. 23. ASSIGNMENT 23.1. The Purchaser may transfer, by assignment or novation, to any third party or parties (herein "Assignee(s)") any of its rights and/or obligations under this Contract. Provided, however, that, to the extent that any such assignment or novation transfers to an Assignee the obligations of this Contract, the Purchaser shall guarantee in a form acceptable to the Builder the performance by such Assignee of any of its obligations. 23.2. The Builder may, with the prior written approval of the Purchaser, assign the benefit of this Contract. 41 24. PRIORITY OF DOCUMENTS 24.1. The Appendices hereto shall form an integral part of this Contract as if the same were expressly set out herein. 24.2. If there is any discrepancy between the following documents priority between them shall be as follows:- a. between the terms of this Contract (excluding the Specifications) and the terms of the Specifications, the terms of the former shall prevail; b. between the Principal Drawings and the Specifications, the Specifications shall prevail; c. between the Principal Drawings, in the order of precedence contained in Appendix I; d. between one approved Plan and another approved Plan, the later in date shall prevail; 25. NOTICES 25.1. Every notice, consent or approval (individually and collectively called "Communications" for the purposes of this Clause 25) given or required, whether expressly or impliedly, under this Contract shall be in writing. 25.2. Communications shall be given by the Builder to the Purchaser as follows: Address: Suite 205, Saffrey Square P.O. Box N8188 Nassau, Bahamas Attn: Company Secretary Facsimile: To be provided 25.3. Communications shall be given by the Purchaser to the Builder as follows: Address: 13085 Industrial Seaway Rd. Gulfport, Mississippi 39503 Attn: Mr. Daniel J. Mortimer Facsimile: 228-897-4803 with copy to: 42 1601 S. Childers Rd. Orange, Texas 77631 Attn: Mr. Don O. Covington Facsimile: 409-882-9010 26. RECORDS AND AUDITS 26.1. The Builder shall maintain true and complete records in connection with the construction of the Vessel and all transactions related thereto, and shall retain all such records for not less than twenty-four (24) months following Delivery. 26.2. No director, employee or agent of the Builder shall give or receive any commission, fee, rebate, gift or entertainment of significant cost or value in connection with the work under this Contract, or enter into any business arrangement with any director, employee or agent of the Purchaser. 26.3. If any violation of sub-clause (2) above is found to have occurred prior to the date of signing this Contact and such violation is determined to have resulted directly or indirectly in the Purchaser's consent to enter into this Contract with the Builder the Purchaser may terminate this Contract in which case the provisions of Clause 19.2 shall apply. 26.4. The Builder shall use its best endeavours to procure that all Subcontractors:- a. maintain records in accordance with sub-clause (1) above; b. enter into obligations with the Builder, to the like intent and effect as those which bind the Builder as above. The Builder shall promptly notify the Purchaser of any violation of such obligations involving Subcontractors which comes to the Builder's notice. 43 27. LAW 27.1. The construction, validity and performance of this Contract shall be governed by English Law. 28. DISPUTES 28.1. Any claim, difference or dispute which may arise out of this Contract shall be decided by the Commercial Court of the Queen's Bench Division of the High Court of England and Wales to whose exclusive jurisdiction the parties hereby agree. 28.2. For the purposes of any proceedings pursuant to sub-clause (1) above, the parties hereby irrevocably appoint the following as their agents for the service of process:- THE BUILDER: Hewett Battersby of St. Michael's Rectory Cornhill, London EC3V 9DS United Kingdom THE PURCHASER: Ince & Co., Solicitors Knollys House #11 Byward Street London EC3R 5EN United Kingdom 28.3. Without prejudice to the generality of sub-clause (1) above and without prejudice to any express provision contained herein for referral of any matter to an expert, any dispute or difference of opinion between the parties relating to conformity of the construction of the Vessel, Materials or workmanship with this Contract, the Specifications and the other Contract Documents may, by agreement between the Parties, be referred to an expert, acting as an expert and not an arbitrator, to be appointed by agreement between them and whose opinion on the matter shall be final and binding upon the parties hereto. 28.4. If the parties shall fail to agree either (i) to submit the dispute to a technical expert or (ii) upon the identity of a mutually acceptable technical expert as aforesaid, such dispute shall be settled in the manner as defined in sub-clause 1 above. 29. MISCELLANEOUS 29.1. The terms of this Contract are to remain confidential to the parties and no disclosure of the same may be made to any third party other than for the purposes of permitting or ensuring its due performance by either party hereto or financial reporting as may be required under the applicable laws and regulations governing said financial reports. This obligation shall survive 44 termination of this Contract for any reason whatsoever. The parties agree that within twenty-four hours of the execution of this Contract that the parties will use their reasonable endeavours to agree upon language of a press release to be jointly published. 30. SPARE PARTS 30.1. The Builder shall furnish spare parts and maintenance tools of the kind and in at least the specified quantities in accordance with the Specifications, Classification Society requirements, and the maker's standards, for items furnished by the Builder. The cost of these spare parts is included in the Contract Price. 30.2. In addition, the Builder shall supply to the Purchaser a list of the maker's recommended spare parts for two (2) years of continuous operations covering items supplied by Builder, at least six months prior to the Vessel's completion. 30.3. The spare parts furnished by the Builder shall be properly protected against physical decay, corrosion and mechanical damage and shall be properly listed so that replacements may be readily ordered. 30.4. The Builder shall complete the storage spaces installation in time to enable to positioning, labeling and listing of all spare parts (the Builder and Purchaser supplied) prior to Delivery. The Builder at his own cost shall be responsible for handling, bringing on board and storage on the Vessel of all spare parts, tools and supplies under instruction and supervision of Purchaser's Representative. 31. SAFETY AND HEALTH STANDARDS 31.1. The Purchaser's Representative will have authority to monitor the performance of the work done by the Builder to ensure safe and workmanlike performance. 31.2. It is the Purchaser's policy not only to comply with the safety and health measures required by law but to act positively to prevent injury, ill health, damages and loss arising from its operations. The Purchaser requires the Builder and his sub-contractors to apply health, safety and local environmental standards in order to achieve high levels of performance. It is essential that the Builder and his sub-contractors undertaking work consistently show a high level of safety awareness and demonstrate that they are capable of conducting themselves in a safe and competent manner in their area of activity. 31.3. The Builder acknowledges the Purchaser's strong commitment to safety and affirms that he has a written safety policy which has been signed and is actively supported and endorsed by Builder's management. The Builder further affirms that his safety policy is widely disseminated, understood and implemented by and among Builder's and Builder's sub-contractors' employees. This policy shall be in English and such other language(s) as required. A copy of Builder's Safety Policy shall be furnished to the Purchaser prior to start of the work. 45 31.4. It is essential that good housekeeping is maintained by the Builder's employees throughout the term of this Contract. The working areas shall be kept tidy at all times, access ways kept clear and surplus/scrap material removed daily. Cleaning up at end of the job is not considered sufficient. Spillage of oil or chemicals shall be cleared up immediately to avoid fire hazards, slippery surfaces, contact with toxic substance and other hazards. Appropriate safety precautions shall be taken during cleaning up. No oil grade with flash points lower than 55*C shall be used for cleaning purposes. 31.5. Asbestos containing products are not to be applied on board the Vessel. Substitutes therefor shall be applied only after authorisation by the Purchaser. 31.6. The Builder shall report immediately to the Purchaser all accidents occurring during the term of this Contract and related to work thereunder, that result in injury to or death of any person and/or damage to or loss of property. Accidents are defined as "Unintentional or unplanned events that may or may not result in personal injury or equipment, plant, or property damage, or any combination of these". Purchaser and Builder agree to cooperate to reach mutually agreeable resolutions and immediate rectification of any perceived unsafe practices. 31.7. The Purchaser may require the Builder to permanently remove and replace any of Builder's or Builder's sub-contractors' employees who violate safety regulations and any equipment which is obviously unsafe. 31.8. The Builder shall, at his own expense, supply his personnel and his sub-contractors' personnel with adequate protective personal clothing, safety helmets, safety shoes, and other protective equipment required for the type of work to be carried out. 32. EFFECTIVENESS 32.1. This Contract is subject to, and shall become effective and legally binding on the parties at the date of execution. 32.2. The date upon which the above conditions shall all have been satisfied shall be known hereunder as the "Execution Date." IN WITNESS WHEREOF the parties hereto have caused this Contract to be duly executed the day and year first above written. THE PURCHASER: THE BUILDER: BY: Derek Leach BY: Richard M. Currence, Jr. Title: Attorney-in-Fact Title /s/ DEREK LEACH /s/ RICHARD M. CURRENCE, JR. - - -------------------------------- -------------------------------- 46 APPENDIX VII LIST OF CERTIFICATES TO BE SUPPLIED ON DELIVERY OF THE VESSEL The Builder shall furnish, at the Builder's expense, to the Purchaser the following certificates upon delivery of the Vessel: From the Classification Society: a. Classification certificates for hull, machinery and electricals of the Vessel. b. Safety radio telegraph certificate. c. Load line certificate. d. Register tonnage certificate. e. Suez Canal tonnage certificate. f. MODO CODE certificate. g. Safety Construction certificate. h. Certificate of Navigation Lights. i. Certificate of Lifesaving Equipment, Fire Fighting and Fire Detection System. j. Compass Certificate. k. Compass Deviation Table. l. MARPOL International Oil Pollution Prevention Certificate (IOPPC). m. Load test and lifting appliances certificate. n. Test Certificate of Pressure Vessels. From the Local Government Authority: a. De-ratting exemption certificate. b. Potable water analysis certificate. APPENDIX VIII BASIC DESIGN As per Section 99000 of the Specification. APPENDIX IX PARENT COMPANY GUARANTEE PARENT GUARANTEE In order to induce PETRODRILL, N.V. and/or any AMU e or sister company of Petrodrill, N.V., to enter into that those certain Vessel Connection Contract(s) (the "Contract' between Purchaser and TDI-HALTER, L.P. ("Builder"), dated on or about April 8, 1998, Halter Marine, Inc., a Nevada corporation ("Guarantor") represented herein by its duly authorized President and CEO, John Dane III, does hereby unconditionally and irrevocably guarantee to Purchaser pro t and faithful performance of, and compliance with, all obligations, covenants, terms, conditions and undertakings of Builder contained in the Contract in accordance with the respective terms thereof. Such guarantee is an absolute, unconditional, present and continuing guarantee of performance and compliance. IN WITNESS WHEREOF, Guarantor has executed this Parent Guarantee as of this 7" day of April, 1998. HALTER MARINE, INC. By:____________________ John Dane III President and CEO EX-10.21(A) 78 EXHIBIT 10.21(A) SIDE LETTER NO 1. 9TH APRIL 1998 - - -------------------------------------------------------------------------------- Petrodrill Construction Inc Suite 205 Saffrey Square PO Box N 8188 Nassau Bahamas TDI-Halter L.P. 1800 West Loop South Houston Texas 77027 Gentlemen, Hull No 1829 We refer to the contract executed between us today in respect of the above hull. With respect to the target figures referred to in clause 6 of the contract it is agreed that these shall be amended to reflect those ultimately agreed between the Purchaser and Davie Industries in respect of Amethyst 2 & 3. Yours faithfully /s/ DEREK LEACH Derek Leach Attorney-in-Fact WE HEREBY ACKNOWLEDGE OUR UNDERSTANDING AND ACCEPTANCE OF THIS LETTER: /s/ RICHARD M CURRENCE JNR. RICHARD M CURRENCE JNR. TDI-HALTER INC. 9TH APRIL 9, 1998 EX-10.21(B) 79 EXHIBIT 10.21(B) SIDE LETTER NO 2. 9TH APRIL 1998 - - -------------------------------------------------------------------------------- Petrodrill Construction Inc Suite 205 Saffrey Square PO Box N 8188 Nassau Bahamas TDI-Halter L.P. 1800 West Loop South Houston Texas 77027 Gentlemen, Hull No 1829 We refer to the contract executed between us today in respect of the above hull. This letter serves to confirm the agreement between us that we shall have the option by way of Purchasers Modification, to delete the provision of Builders All Risk Insurance per clause 11.2 from your workscope and provide same ourselves. In this event you confirm that you will provide us with a credit against the Contract Price which will reflect the higher of your evidenced quoted cost for the same or USD 400,000. Yours faithfully /s/ DEREK LEACH Derek Leach Attorney-in-Fact WE HEREBY ACKNOWLEDGE OUR UNDERSTANDING AND ACCEPTANCE OF THIS LETTER: /s/ RICHARD M CURRENCE JNR. RICHARD M CURRENCE JNR. TDI-HALTER INC. 9TH APRIL 9, 1998 EX-10.21(C) 80 EXHIBIT 10.21(C) SIDE LETTER NO 3. 9TH APRIL 1998 - - -------------------------------------------------------------------------------- Petrodrill Construction Inc Suite 205 Saffrey Square PO Box N 8188 Nassau Bahamas TDI-Halter L.P. 1800 West Loop South Houston Texas 77027 Gentlemen, Hull No 1829 We refer to the contract executed between us today in respect of the above hull. It is hereby recognised by the Purchaser that the contract between the Builder and Purchaser for the supply of the Amethyst drilling units includes a budget of $8.6 million in respect to the electrical integrators package defined in clause 5.8 of the main contract. The package is related to GEC Alsthom offer No P354-A01 as discussed with the Builder on the 28th March in Rotterdam and modified in the meeting notes dated March 28th. The Purchaser and Builder will jointly finalise the technical and commercial requirements included in the offer and in the event that the final price of the package, delivered to the Builders yard, is less than $8.6 million the Purchaser will receive a credit from the Builder to the extent of 80% of any such variance. Yours faithfully /s/ DEREK LEACH Derek Leach Attorney-in-Fact WE HEREBY ACKNOWLEDGE OUR UNDERSTANDING AND ACCEPTANCE OF THIS LETTER: /s/ RICHARD M CURRENCE JNR. RICHARD M CURRENCE JNR. TDI-HALTER INC. 9TH APRIL 9, 1998 EX-10.21(D) 81 EXHIBIT 10.21(D) SIDE LETTER NO 4. 9TH APRIL 1998 - - -------------------------------------------------------------------------------- Petrodrill Construction Inc Suite 205 Saffrey Square PO Box N 8188 Nassau Bahamas TDI-Halter L.P. 1800 West Loop South Houston Texas 77027 Gentlemen, Hull No 1829 We refer to the contract executed between us today in respect of the above hull. It is agreed between the parties hereto that in lieu of the Warranty in Section 17 of the Contract the Purchaser, at its option, may elect to purchase from the Builder a more extensive warranty than that which is currently in the contract, for the price of $500,000 per vessel, or alternatively, again at its option to enter into an Escrow/Warranty Reserve Agreement. Under the terms of the Warranty Reserve agreement, the Purchaser would pay the additional $500,000 into an Escrow Account to be drawn down upon by direct warranty costs. Funds remaining in the account at the end of the warranty period would be split evenly between the parties, any funds used, over and above the $500,000 would be for the Purchaser's account. Attached hereto is the agreed language for the more extensive warranty which would replace the existing Clause 17 and which defines the scope of work supplied, should the Purchaser elect to purchase this warranty for an additional $500,000. Yours faithfully /s/ DEREK LEACH Derek Leach Attorney-in-Fact WE HEREBY ACKNOWLEDGE OUR UNDERSTANDING AND ACCEPTANCE OF THIS LETTER: /s/ RICHARD M. CURRENCE JNR. Richard M Currence Jnr. TDI-Halter Inc. 9th April 9, 1998 - - -------------------------------------------------------------------------------- Side Letter No 4 Page 1 of 4 OPTION WARRANTY 17. DEFECTS AND BUILDER'S GUARANTEE GUARANTEE PERIOD 17.1. The Builder guarantees the Vessel for a period of twelve months from Delivery or, in respect of individual items as provided for in the Specification, for such greater period as may be agreed, against all defects whether attributable to Materials, workmanship, construction or detailed engineering, caused to the Vessel thereby. The aforesaid period of twelve months from Delivery shall be known herein as the "Guarantee Period". 17.2. This guarantee shall not extend to Owner Furnished Equipment or to any damage caused by any defect therein not attributable to the Builder, but it shall extend to defects in Materials, workmanship, installation engineering and to physical damage caused therein resulting from the Builder's installation of the Owner Furnished Equipment. 17.3. The Builder guarantees repairs or replacements to the Vessel made under the guarantee in sub-clause (1) above for a further period of twelve months from the date of completion of such repair or replacement subject to a maximum of 24 months. REMEDY OF DEFECTS 17.4. The Purchaser shall notify the Builder in writing within thirty days after discovery of any defect falling within the provisions of this Clause 17. The Purchaser's notice shall include such particulars as can reasonably be given as to the nature of such defect, the date of discovery and the place at which the Vessel can be made available for earliest inspection by or on behalf of the Builder. The Purchaser shall furnish to the Builder as soon as practicable copies of any relevant survey or inspection reports. 17.5. The Purchaser may require the Builder to make good any defect or physical damage for which the Builder is liable under this Clause 17 by giving notice of such requirement to the Builder. Any parts replaced shall on their removal become the property of and shall be at the risk of the Builder whilst the replacement parts fitted to the Vessel shall upon fitting become the property of the Purchaser. 17.6. The Builder shall execute the necessary work including the carrying out of any essential dismantling and reassembling with the utmost despatch in accordance with the quality standards which are applicable hereunder to the Vessel's original construction. 17.7. In the event that the Builder is unable to make good any defect at the Shipyard, it shall forthwith nominate a yard suitable for such purpose for the Purchaser's approval, and should the Purchaser consider such yard acceptable the Builder shall arrange for the making good of the defect and the carrying out of any essential dismantling and reassembling at its own expense. 17.8. Should the Purchaser consider the yard nominated by the Builder unacceptable, or should the Purchaser elect to have the work referred to above carried out elsewhere than at the Shipyard, the Purchaser shall nominate a yard acceptable to it. In such case the Builder shall pay to the Purchaser for repairs and/or replacements such sum as would equate to the costs of effecting such repairs at a first-class US Gulf Coast Commercial shipyard. The Builder may, at its own expense, have its representative in attendance during execution of the work. The Purchaser shall ensure that any parts replaced under this sub-clause are returned to the Builder (if required by the Builder) at the Builder's expenses, and in such case those parts returned shall on their replacement become the property of and shall be at the risk of the Builder. 17.9. In the event of defects arising which fall within the provision of this Clause 17, whether or not such defects require the Vessel to be drydocked, the Builder shall pay for any costs incurred by the Purchaser in making the Vessel available to the Builder or to any other yard for the making good of any such defect as aforesaid. Such additional costs shall exclude however the costs of transportation, port charges and the cost - - -------------------------------------------------------------------------------- Side Letter No 4 Page 2 of 4 of fuels, lubricants and consumable stores consumed in excess of those which would have been consumed had the Vessel not deviated to allow the Builder to make good any such defects as aforesaid. 17.10. In the event that the Vessel is idle for more than 15 days in total accumulated time due to defects under this Clause 17 the Guarantee Period shall be extended by the number of all days during which the Vessel is idle commencing with the sixteenth day, whether or not other work is undertaken simultaneously with the guarantee work. 17.11. Nothing contained herein shall obligate Builder at any time to repair or replace the Vessel, or any component part therof, where such repair and/or replacement is caused, in whole or in part, by normal wear or unusual handling, by the negligent operation or maintenance of the Vessel, or its equipment or by abuse, rough weather, accident, fire, by Purchaser or Purchaser's agents, employees or representatives. 17.12. With respect to paint, Builder warrants that it will purchase paint of good marine quality and that it will apply the paint in accordance with the manufacturer's specifications, recommendations, and inspection, and Builder makes no warranty, express or implied, with respect to the fitness of the paint or the manufacturer's specifications and recommendations. The Builder will purchase paint insurance for the Purchaser. 17.13. For any claim for damages to or loss of the Vessel, and/or damages to persons and/or property (including, but not limited to claims, demands, or actions for bodily injury, illness, disease, death, loss of service, loss of society, maintenance and cure, wages or property) made as a result of any defect in the Vessel, or any component parts thereof, after the said Warranty Period, Purchaser shall have no claim or actions whatsoever against Builder, regardless of any negligence, tort, fault, strict liability or otherwise of Builder, its employees or subcontractors, and Purchaser hereby waives and releases Builder and its employees and subcontractors from and against any and all liability and any and all damages resulting therefrom, including, but not limited to, for personal injury, death, property damage, damage to and/or loss of the Vessel, delay, demurrage, loss of profits, loss of use, or any other consequential or punitive damages of any kind, whether such claim is based in contract, redhibition, negligence, strict liability, or otherwise, arising out of any defect and/or negligent design, the selection or choice of specifications and/or materials and/or component parts, manufacture, construction, fabrication, workmanship, labor and/or installation of equipment, materials and/or components or from any unseaworthy condition or any other defective condition of the Vessel, it being specifically understood and agreed that any such defects reported and/or occurring after the Warranty Period and all damages, loss of profits, demurrages, delay, losses of use or other consequential or puntive damages of any kind whatsoever resulting therefrom, shall not be the responsibility of Builder, but shall be borne exclusively by Purchaser. "THIS WARRANTY IS EXPRESSLY IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR THAT THE VESSELS, MATERIAL OR SERVICES ARE FIT FOR ANY PARTICULAR PURPOSE OR USE, AND SPECIFICALLY IN LIEU OF ALL INDIRECT, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES". - - -------------------------------------------------------------------------------- Side Letter No 4 Page 3 of 4 ASSIGNMENT OF SUBCONTRACTOR'S GUARANTEES 17.13. The Builder agrees upon the expiry of the Guarantee Period to assign (to the extent to which it may validly do so) to the Purchaser, or as the Purchaser may direct, all the right, title and interest of the Builder in and to all guarantees or warranties given by the Subcontractors save insofar as the same relate to existing claims by the Purchaser against the Builder. - - -------------------------------------------------------------------------------- Side Letter No 4 Page 4 of 4 EX-10.21(E) 82 EXHIBIT 10.21(E) SIDE LETTER NO 5. 9TH APRIL 1998 - - -------------------------------------------------------------------------------- Petrodrill Construction Inc Suite 205 Saffrey Square PO Box N 8188 Nassau Bahamas TDI-Halter L.P. 1800 West Loop South Houston Texas 77027 Gentlemen, Hull No 1829 We refer to the contract executed between us today in respect of the above hull. This letter serves to confirm your undertaking to us that you will procure that without prejudice to the provisions of clause 17 of the Contract you will, at your own cost, procure a paint warranty insurance policy in amounts and on terms that we shall reasonably agree and you shall further procure that we shall have full benefit of and access to such insurance. Yours faithfully /s/ DEREK LEACH Derek Leach Attorney-in-Fact WE HEREBY ACKNOWLEDGE OUR UNDERSTANDING AND ACCEPTANCE OF THIS LETTER: /s/ RICHARD M. CURRENCE JNR. Richard M Currence Jnr. TDI-Halter Inc. 9th April 9, 1998 EX-10.21(F) 83 EXHIBIT 10.21(F) NOVATION AGREEMENT THIS DEED (THE "NOVATION AGREEMENT")is made the 9th day of December, 1998 between: (1) TDI-HALTER, LIMITED PARTNERSHIP, a Louisiana limited partnership (the "BUILDER"), whose principal office is at 1601 South Childers Road, Orange, Texas 77631 (2) PETRODRILL OFFSHORE, INC. (formerly PETRODRILL CONSTRUCTION INC. ) (the "PURCHASER"), a corporation organised under the laws of Bahamas, whose principal office is at Suite 205, Saffrey Square, PO Box N8188, Nassau, Bahamas; and (3) PETRODRILL FIVE LIMITED (the "NEW PURCHASER"), a limited company organised under the laws of British Virgin Islands, whose registered office is at Arias Fabrega & Fabrega, Omar Hodge Building, 2nd Floor, Wickams City, Tortola, British Virgin Islands. (together referred to as the PARTIES) Whereas (A) Builder and the Purchaser are parties to an agreement relating to the construction and sale of a dynamic positioned semi-submersible drilling vessel with Builder's Hull No. 1829 dated 9 April 1998 (including any amendments included in the associated memorandum, meeting minutes and/or side letters made from time to time thereto (herein called the "AGREEMENT") which expression shall mean the said Agreement as transferred by this Novation Agreement. (B) The parties hereto have agreed that in consideration for entering into this Novation Agreement the Purchaser may transfer to the New Purchaser its rights and obligations under the Agreement upon the terms and subject to the conditions set out herein. NOW IT IS AGREED AS FOLLOWS: (1) Terms and expressions defined in the Agreement shall, unless the context otherwise requires, have the same meanings when used in this Novation Agreement. (2) Upon and with effect from the date of this Novation Agreement and subject to clause 6 of this Novation Agreement, Purchaser does hereby transfer to the New Purchaser all of its obligations, liabilities, rights, title and interest in and to the Agreement. Upon and with effect from the date of this Novation Agreement, the Purchaser releases and discharges and agrees to release and discharge the Builder from the various covenants, undertakings, warranties and other obligations contained in the Agreement which are enjoyed by the Purchaser, and from all claims and demands whatsoever arising out of or in respect of the Agreement whether prior to, on or subsequent to the date of this Novation Agreement. -1- (3) Upon and with effect from the date of this Novation Agreement and subject to clause 6 of this Novation Agreement, the New Purchaser accepts and agrees to accept the transfer of all liabilities and obligations of the Purchaser under the Agreement (whether now existing or hereafter arising) and agrees to perform all the duties and to discharge all the liabilities and obligations of the Purchaser under the Agreement (whether now existing or hereafter arising. (4) Upon and with effect from the date of this Novation Agreement, the Builder agrees to perform all its duties and to discharge all of its obligations under the Agreement and to be bound by all the terms and conditions of the Agreement in every way as if the New Purchaser were named in the Agreement as a party ab initio in place of the Purchaser. Without limiting the generality of the foregoing, the Builder acknowledges and agrees that the New Purchaser shall have the right to enforce the Agreement and pursue all claims and demands (future or existing) whatsoever arising out of or in respect of the Agreement. The New Purchaser agrees and acknowledges that Builder's satisfactory performance of any obligation under the Agreement for the benefit of the Purchaser shall be deemed to satisfy the Builder's obligations to perform the obligations for the New Purchaser. (5) The New Purchaser confirms that it has received a copy of the Agreement and that it is familiar with the terms thereof. (6) Notwithstanding the above clauses it shall be a condition precedent to this Novation Agreement that the Purchaser shall provide to the Builder a Guarantee in the form attached in the schedule hereto, and this Novation Agreement shall not become effective until the Guarantee is provided by the Purchaser to the Builder in the form that appears in the schedule. (7) Each Party shall take all steps, execute all documents and do everything reasonably required by any other Party to give effect to the transactions contemplated by this Novation Agreement provided that the Purchaser and the New Purchaser shall jointly and severally reimburse the Builder on a full indemnity basis for all reasonable costs and expenses (including legal fees) incurred by the Builder pursuant to this Clause 7 or otherwise howsoever in connection with the negotiation and execution of this Novation Agreement. (8) The construction, validity and performance of this Novation Agreement shall be governed by English Law. Any claim, difference or dispute which may arise out of this Novation Agreement shall be decided by the commercial Court of the Queen's Bench Division of the High Court of England and Wales to whose exclusive jurisdiction the parties hereto agree. Nothing contained in this Novation Agreement shall waive any rights or remedies of the Builder under the Agreement including without limitation any rights or remedies related to any default under the Agreement or any event, act or omission which with the passing of time or the giving of notice would constitute a default under the Agreement. -2- SIGNED by TDI-HALTER LIMITED PARTNERSHIP on behalf of the BUILDER in the presence of: /s/ Illegible SIGNED by PETRODRILL OFFSHORE INC. on behalf of the PURCHASER in the presence of: /s/ Illegible SIGNED by PETRODRILL FIVE LIMITED on behalf of NEW PURCHASER in the presence of: /s/ Illegible -3- EX-10.21(G) 84 EXHIBIT 10.21(G) EXHIBIT 6 TO SECURITY AGREEMENT DOCUMENT 18 AMENDMENT NO. 1 TO SEMI-SUBMERSIBLE DRILLING VESSEL CONSTRUCTION CONTRACT BETWEEN TDI-HALTER, LIMITED PARTNERSHIP AND PETRODRILL FIVE LIMITED DATED APRIL 9, 1999 This Amendment No. 1 is entered into this 9th day of April, 1999, between TDI-HALTER, LIMITED PARTNERSHIP ("Builder"), and PETRODRILL FIVE LIMITED ("Purchaser") to that Semi-Submersible Drilling Vessel Construction Contract dated April 9, 1998 (Hull No. 1829) (the "Original Contract"). WHEREAS, the Original Contract was novated by PETRODRILL OFFSHORE, INC. (formerly Petrodrill Construction Inc.) to Purchaser by Novation Agreement dated as of December 9, 1998; WHEREAS, on the Closing Date the Purchaser will issue its United States Government Guaranteed Export Ship Financing Obligations, AMETHYST 5 Series (the "Obligations"), in order to finance the construction of the Vessel which is the subject of the Original Contract; WHEREAS, the United States of America, represented by the Secretary of Transportation, acting by and through the Maritime Administrator, is guaranteeing the payment of the outstanding principal of and interest on the Obligations pursuant to Title XI of the Merchant Marine Act, 1936, as amended; WHEREAS, the proceeds of the Obligations will be used for payment to the Builder in accordance with the terms of this Contract; and WHEREAS, the Purchaser and the Builder in order to induce the Secretary to guarantee the Obligations, wish to amend the Original Contract as detailed herein; NOW THEREFORE, in consideration of these premises, the mutual benefit set forth herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Purchaser and Builder agree as follows: 1. INSPECTION BY THE SECRETARY'S REPRESENTATIVES. The Builder shall permit inspection by, supply information to, and cooperate with representatives of the Secretary at its yard where the assembly of the Vessel is now taking place and at such other yards of the Builder, its affiliates and subcontractors where parts of the Construction Contract or subcontracts may be performed. Builder acknowledges that such cooperation may include, but is not limited, to providing the Secretary 1) reasonable access to the Vessel and areas of the Builder where work related to the Vessel is being performed by the Builder, its contractors and subcontractors, at all reasonable times during normal working hours to inspect performance of the Work and to observe trials and other tests, 2) copies of detailed production schedules for the Vessel along with changes to such schedules as they occur, 3) reasonable access to contract plans and specifications for the Vessel, 4) reasonable access to Builder's production manager or supervisor, 5) information on the origination and source of materials, and 6) reasonable access to progress payment and construction milestone information for the purpose of verifying (i) completion in accordance with the representations made to the Secretary, including, but not limited to, representations concerning the Vessel's Actual Cost, as defined in the Security Agreement, and (ii) compliance of the construction with the plans and specifications and the other terms of the Construction Contract. In conjunction with any such inspections by the Secretary, the Builder will furnish, on a temporary basis, reasonable space at its yard for the Secretary representatives and communication, copying and other facilities as appropriate. The Secretary's access to the Vessel shall be at the Secretary's and Purchaser's sole risk. The Builder assumes no responsibility save for its own gross negligence or intentional acts, and Purchaser assumes full liability for any injury that the Secretary or its representatives, agent or contractor may sustain on the Vessel during its construction and the Purchaser hereby fully releases and discharges the Builder from any liability with respect thereto. 2. CHANGES IN CONSTRUCTION CONTRACT. Notwithstanding anything to the contrary contained in the Construction Contract, the Construction Contract shall not be amended, modified or terminated after April 9, 1999, except in writing duly signed by the Builder and Purchaser with the prior written consent of the Secretary, provided that the Secretary's prior written consent shall not be necessary, but written notice to the Secretary shall be given, for (a) any mandatory change to the Construction Contract as a result of any requirements of any governmental agency, or (b) any non-mandatory changes that Builder and Purchaser desire to make which do not exceed, with respect to any item of the Vessel's construction, one (1%) percent of the Vessel's Contract Price and which do not, in the aggregate, cause the Vessel's Contract Price to be increased more than five (5%) percent or the delivery and completion date of the Vessel to be extended more than ten (10) days. Notwithstanding the foregoing, no change shall be made in the general dimensions and/or characteristics of the Vessel which would diminish the capacity of the Vessel to perform as originally intended by the Construction Contract, without the prior written consent of the Secretary. -2- 3. INSURANCE. a. Until each Vessel has been completed, physically delivered at the place of delivery and accepted by Purchaser, Purchaser shall cause such Vessel and all materials, outfitting, equipment and appliances to be installed in the Vessel including all materials, outfitting, equipment and appliances provided by the Builder or Purchaser and delivered to Builder for the construction of the Vessel or in the construction thereof, to be insured under a full form Builder's Risk Policy under the latest American Institute Builder's Risk Form in force and effect at the time that the construction of the Vessel is commenced when the Vessel's keel is laid, all at Purchaser's expense. Such policy(ies) shall name the Builder, the Purchaser and the United States of America as assureds. The policy(ies) shall provide that there shall be no recourse against the Builder and the United States of America for payment of any premiums; provided, however, the United States of America and Builder shall be subject to cancellation upon 30 days prior written notice as set forth below. The policy(ies) shall also provide a 30 day prior written notice of cancellation or material change in the policy to the Builder and the United States of America (U.S. Department of Transportation, Maritime Administration 400 Seventh St. S.W., Washington D.C. 20590 Attention, Chief, Division of Marine Insurance). The amounts, terms and conditions, deductibles and underwriters of the Builder's Risk Policy(ies) shall at all times be satisfactory to the Builder and the Secretary. b. The Builder's Risk policy(ies) shall provide that all losses in excess of $500,000 shall be paid to the Secretary for distribution by him to himself, the Builder and the Purchaser in accordance with the Security Agreement between the Purchaser and the Secretary, MA-13511, dated April 9, 1999, involving the Vessel and the Construction Contract. c. Builder shall also purchase and maintain, at its expense, during the life of the Construction Contract, Worker's Compensation Insurance at statutory amounts, with Longshoreman & Harbor Workers Compensation Act coverage endorsements and Employer's Liability Insurance in the amount of at least Two Million Dollars ($2,000,000). d. A satisfactory confirmation of insurance outlining the pertinent terms and conditions of the Builder's Risk Policy(ies) referred to above shall be provided to the Builder and the Secretary. The Purchaser shall be furnished a certificate of insurance for all other policies required hereunder. The original of the said Builder's Risk Policy shall be available in the Purchaser's office. All of the policies of insurance and certificates referred to herein shall contain a provision requiring the insurer at risk to give Purchaser, Builder and the Secretary thirty (30) days' notice, in writing prior to cancellation of any such insurance. 4. PROGRESS PAYMENTS. The Construction Contract shall contain provisions for making periodic payments for the work performed based performance milestones related to the construction of the Vessel, after such milestones are certified by the Purchaser and the Builder, or as otherwise provided in Clauses 4.1 and 4.2 of the Construction Contract. -3- 5. CERTIFICATE OF NO LIENS. At the time of Closing, now scheduled for April 9, 1999, and at the time of delivery of the Vessel and from time to time as payments will be requested from amounts held in escrow by the Secretary or from drawdowns from the Credit Facility established by the Credit Agreement, the Builder agrees, on behalf of itself, or any party claiming through the Builder, to execute certificates of no liens, in form and substance satisfactory to the Secretary to the extent that the Builder has been paid for such items but with exception for any liens, claims, security interests and encumbrances which may have been placed thereon by Purchaser in favor of a third party other than the Builder or its employees, and liens for non-delinquent payments arising in the ordinary course of Builder's business which liens Builder hereby warrants will be discharged by Builder when due, with respect to the applicable Vessel, hull or component parts for which payment is requested and with respect to all work that has previously been accomplished. 6. SUBORDINATION. The Builder agrees to, and does hereby fully subordinate to the rights of the Secretary all liens and security rights and remedies to enforce such rights which the Builder has or may have with respect to (i) all work, materials and components, incorporated in, or to be incorporated in the hull and the Vessel ("the Equipment") to which title has passed to Purchaser, and (ii) the Equipment that has not been paid for by the Purchaser only to the extent that such unpaid for Equipment has actually been incorporated into other Equipment, part of which has actually been paid for by Purchaser. Prior to the Closing Date, the Builder shall provide to the Secretary either (1) the release or subordination of any claim to a security interest or other encumbrance relating to the Equipment, and the remedies to enforce such rights, held or claimed by any of the Builder's lenders (which release or subordination shall be in form and substance satisfactory to the Secretary), or (2) an officer's certificate that the Builder has no lenders with any claim to a security interest or other encumbrance relating to the Equipment. 7. EQUIPMENT PROCEEDS. a. In the event that prior to delivery of the Vessel, following the occurrence or during the continuance of any default by Purchaser under any agreements with the Secretary, including but not limited to the Security Agreement (the "Secretary's Documents") or by the Builder under the Construction Contract, the Secretary shall have the sole right to sell the Equipment, provided that the Secretary complies with Section 7(c) of this Amendment. Any proceeds the Secretary receives from the sale of the Equipment, after deducting any fees or costs it incurs in connection with the enforcement of its rights under the Secretary's Documents, shall be distributed promptly between the Builder and the Secretary on a Pro Rata Basis (as defined below) based on the "Amount Due" (as defined below) to the Builder and the Secretary. b. For the purposes of this section, the "Amount Due" to the Builder shall include all payments then due to the Builder for materials purchased or work performed, provided, however, if the Builder is in material default under the Construction Contract as amended, such "Amount Due" to the Builder shall be zero. For the purposes of this section, the "Amounts Due" to the Secretary shall include all amounts secured by the Secretary's Documents -4- related to the Equipment. For the purposes of this section, the share to be distributed to a party under the Pro Rata Basis shall be the net amount realized from the sale of the Equipment times a fraction equal to the Amount Due that party divided by the sum of the Amount Due both parties. c. In the event of a Purchaser default and an enforcement of the Secretary's Documents, the Secretary shall use reasonable efforts to expedite the enforcement and foreclosure process for the enforcement of the Secretary's Documents. 8. CONSENT OF BUILDER. The Builder will separately enter into a Consent of Shipyard to the assignment by Purchaser to the Secretary, for purposes of security, of all of Purchaser's right, title and interest in the Construction Contract, and the proceeds thereof, if any such exist, or shall exist in the future. Such proceeds include any amounts that may be due to be refunded to Purchaser by the Builder or by any subcontractor or supplier to the Builder arising out of the Construction Contract, as amended, and any subcontracts or supply contracts into which the Builder has entered into or may enter into as a part of construction process. In the event of a default of the Builder under the Construction Contract, the Secretary may enforce Purchaser's rights hereunder. In the event of any discrepancy between a position of the Secretary and a position of the Purchaser, the Secretary's decision shall be binding on the Purchaser. 9. DISTINCT OBLIGATIONS. Builder hereby agrees and acknowledges that the obligations of Purchaser under the Construction Contract with regard to the Vessel are separate, distinct and independent of any other obligation or agreement of Purchaser and that a default by Purchaser under such other obligation or agreement shall not in any way affect the obligations of Builder under the Construction Contract with regard to the Vessel or permit Builder to exercise any right of set-off or other remedy (all of which Builder expressly waives and agrees not to assert) which could materially adversely affect the Construction Contract, the Vessel or the construction thereof. 10. RIGHT TO CURE. Notwithstanding anything to the contrary contained in the Construction Contract, Builder agrees to give the Secretary written notice, concurrent with any notice given to the Purchaser under the Construction Contract of any default by Purchaser and hereby grants the Secretary thirty (30) days from the receipt of any such notice to cure any default under the Construction Contract, and Builder agrees to take no action to enforce its rights pursuant to the Construction Contract until the elapse of said thirty (30) days. 11. SHIPYARD PLANS. Upon the delivery of the Vessel, or earlier if feasible, upon the Secretary's request, Builder and Purchaser agree (at Purchaser's expense) to submit to the Secretary one set of Builder plans, in form and substance satisfactory to the Secretary, for the Vessel as built. The Secretary shall not release the Plans to any third party unless required to do so by court order; provided that the Secretary shall give notice to the Purchaser and Builder of any request for such an order. Purchaser shall use its best efforts to include a provision setting forth the terms of this Paragraph 11 in the Security Agreement between the Secretary and the Purchaser. -5- 12. NOTICES. Any, notice or other communication required or permitted to the Secretary under shall be sent by (i) certified mail, postage prepaid, (ii) by nationally recognized overnight courier service, (iii) or by facsimile transmission, confirmed by certified mail postage prepaid or by nationally recognized overnight courier service, addressed as follows: United States Maritime Administration 400 Seventh Street, S.W. Washington, D.C. 20590 Attention: Office of Ship Finance 13. FURTHER AMENDMENTS TO CONTRACT. The Contract is further amended as follows: (a) REGISTRATION. The first sentence of Clause 2.8 is revised to read as follows: The Vessel shall upon delivery fly the flag of the Commonwealth of The Bahamas and be registered in the Register of Shipping in the Commonwealth of The Bahamas, all in accordance with Purchaser's Modification Request number 1829-0001. The price for this change order shall be determined in accordance with Clause 7 of the Contract. (b) PAYMENT SCHEDULE. The provisions relating to the Third through Tenth Installments in Clause 4.1 are revised to read as follows: THIRD INSTALLMENT: Ten percent (10%) of the Contract Price, being Eight Million Four Hundred Thousand U.S. Dollars (US$ 8,400,000), shall be paid within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorized Representative (or, in default thereof, the Classification Surveyor), certifying that Start of Fabrication has taken place, which is defined as the welding together of the first two plates on the basis that it is the start of a continuous production program. FOURTH INSTALLMENT: Fifteen percent (15%) of the Contract Price, being Twelve Million Six Hundred Thousand U.S. Dollars (US $12,600,000), shall be paid within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorized Representative (or, in default thereof, the Classification -6- Surveyor), certifying that the keel laying for the pontoons has taken place, which is defined as 200 tons of steel having been erected which can either be in one or two pontoons. FIFTH INSTALLMENT: Ten percent (10%) of the Contract Price, being Eight Million Four Hundred Thousand U.S. Dollars (US $8,400,000), within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorized Representative (or, in default thereof, the Classification Surveyor), certifying that 60% of the total 2400 tons for the pontoons (or 1440 tons) of steel have been erected. SIXTH INSTALLMENT: Five percent (5%) of the Contract Price, being Four Million Two Hundred Thousand U.S. Dollars (US $4,200,000), within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorized Representative (or, in default thereof, the Classification Surveyor), certifying that the Pontoons of the Vessel have successfully been launched, which is defined as the pontoons being afloat without any global structural damage having been incurred. For the sake of clarification, localized structural damage shall not constitute a reason for non-payment of the milestone. SEVENTH INSTALLMENT: Five percent (5%) of the Contract Price, being Four Million Two Hundred Thousand U.S. Dollars (US $4,200,000), within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorized Representative (or, in default thereof, the Classification Surveyor), certifying that the main engines have been started, which is defined as all engines having been started and run for a period of at least 4 hours. EIGHTH INSTALLMENT: Ten percent (10%) of the Contract Price, being Eight Million Four Hundred Thousand U.S. Dollars (US $8,400,000), within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorized Representative (or, in default thereof, the Classification Surveyor), certifying that -7- the substructure and drillfloor has been installed on the deckbox, which is defined as the drillfloor having been fitted upon its supports, tacked in place and being ready for permanent welding. NINTH INSTALLMENT: Ten percent (10%) of the Contract Price, being Eight Million Four Hundred Thousand U.S. Dollars (US $8,400,000), within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorized Representative (or, in default thereof, the Classification Surveyor), certifying that the deckbox has been launched and successfully mated with the Pontoons and Columns, which is defined as the deckbox having been fitted up, tacked in place and the rig safely returned to the quayside with all barges removed and being ready to start permanent welding of the deck box connections. TENTH INSTALLMENT: Seven and a half percent (7.5%) of the Contract Price, being Six Million Three Hundred Thousand U.S. Dollars (US $6,300,000), within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorized Representative (or, in default thereof, the Classification Surveyor), certifying that Seatrials have commenced, which is defined as the Vessel having left the quayside to commence trials at sea. ELEVENTH INSTALLMENT: Seven and a half percent (7.5%) of the Contract Price, being Six Million Three Hundred Thousand U.S. Dollars (US $6,300,000), together with any increase or any decrease of the Contract Price arising from the provisions of Clauses 4.8, 6, and 16 below, shall be paid upon delivery. (c) BONUS SCHEDULE. A new Clause 4.8 is added to read as follows: If the Vessel is delivered prior to the Contractual Delivery Date (as amended by this Amendment No. 1 and as extended by Permissible Delays), the Purchaser shall pay to Builder Sixty Thousand U.S. Dollars ($60,000) for each day that the Vessel is delivered before the Contractual Delivery Date (as amended by this Amendment No. 1 and as extended by Permissible Delays). (d) THIRD INSTALLMENT. Not withstanding any other provision of the Contract, -8- the parties agree that the Third Installment shall be due April 11, 1999. (e) LIGHTSHIP WEIGHT. With respect to Clause 6, the Purchaser will at its own cost and expense engineer the detailed design of blisters as a contingency measure. The size of each blister will be as large as possible with the existing constraints of the Vessel such that it does not significantly effect the Vessel's motion characteristics or operational performance. In the event that such blisters are required to be installed, Purchaser will not exercise its rights to rescind the Contract by reason of delay for the fabrication, installation or testing of the blisters under Clause 16.3 for an additional period of ninety (90) days, beyond the date that Builder is in default under Clause 16.3 of the Contract provided that Builder has otherwise completed its scope of work for the Vessel except for the fabrication, installation or testing of the blisters, and except as a result of any scope of work that cannot be completed as a result of the need to install the blisters, such as sea trials. (f) DELIVERY. The first sentence of Clause 14.1 of the contract is revised to read as follows: The Vessel shall be delivered by the Builder to the Purchaser at the Shipyard (or other place as may be agreed with unrestricted access to the open sea) on 9th August, 2000, except that, in the event of Permissible Delay as defined in Clause 15.4 hereof, the aforementioned date shall be postponed accordingly. (g) LIQUIDATED DAMAGES. The first two sentences of Clause 16.2 are revised to read as follows: If the delivery of the Vessel is delayed, then, in such event, beginning at twelve o'clock midnight on the Contractual Delivery Date, the Builder shall pay to the Purchaser as agreed liquidated damages and not by way of penalty, the following amounts: a. 1- 30 days of delay USD $20,000 per day b. 31-to actual delivery USD $40,000 per day It being understood that in no event shall the Builder's obligations for such liquidated damages exceed USD $2,000,000. (h) ENGINEERING. The Purchaser shall use its best efforts to assist the Builder in the completion of Builder's engineering, and to advise Builder of preferred solutions, all in order to expedite the engineering process in as efficient a manner as possible. Builder and Purchaser agree to address these issues in a separate Teaming Agreement. -9- 14. DEFINITIONS. As used in this Amendment No. 1: "Secretary" means the Secretary of Transportation or any official or official body from time to time duly authorized to perform the duties and functions of the Secretary of Transportation under Title XI of the Act (including the Maritime Administration, the Acting Maritime Administrator, and to the extent so authorized, the Deputy Maritime Administrator and other officials of the Maritime Administration). "Security Agreement" means the security agreement, Contract No. MA-13511, with respect to the Vessel, executed by the Purchaser and the Secretary. Capitalized terms not otherwise defined herein shall have the meaning set forth in the Security Agreement. -10- IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1 as of the date set forth above. WITNESS: TDI-HALTER, LIMITED PARTNERSHIP Builder BY: MARITIME HOLDINGS, INC., ITS GENERAL PARTNER /s/ CHRISTINE B. ZUCKMAN By: /s/ CHUCK DE CUIR - - ------------------------------ ----------------------------- Vice President WITNESS: PETRODRILL FIVE LIMITED Purchaser /s/ ROBERT W. RANDALL By: /s/ EARL W. MCNIEL - - ------------------------------ ----------------------------- Secretary Treasurer AGREED AND APPROVED: Secretary of Transportation Maritime Administrator By: /s/ JOEL C. RICHARD - - ------------------------------ Secretary Maritime Administration -11- EX-10.22 85 EXHIBIT 10.22 Bond No. SC 111 3329 7124 PERFORMANCE BOND KNOW ALL MEN BY THESE PRESENTS: That we, TDI-Halter, L.P. (hereinafter called "Principal") as Principal, and Fireman's Fund Insurance Company, a corporation organized and existing under the laws of the State of California, and authorized to transact business in the State of Mississippi (hereinafter called "Surety"), as Surety, are held firmly bound unto Petrodrill Construction, Inc. (hereinafter called "Obligee"), as Obligee, in the penal sum of Eighty Four Million and no/100 US Dollars ($84,000,000.00), good and lawful money of the United States of America, for the payment of which, well and truly to be made, we bind ourselves, our heirs, administrators, executors, successors, and assigns, jointly and severally, firmly by these presents. Signed, Sealed and Dated this 13th day of April, 1998. Whereas, the above bounden Principal has entered into a certain written contract with the above-named Obligee, dated the 9th day of April, 1998 for One (1) fully operational and complete self-propelled Dynamic Positioned Semi-Submersible Drilling Vessel - Hull Number 1829 which contract is hereby referred to and made a part hereof as fully and to the same extent as if copied at length herein. NOW, THEREFORE, THE CONDITION OF THE ABOVE OBLIGATION IS SUCH That if the above bounden Principal shall well and truly keep, do and perform, each and every, all and singular, the matters and things in said contract set forth and specified to be by the said Principal kept, done and performed at the time and in the manner in said contract specified, and shall pay over, make good and reimburse to the above-named Obligee, all loss and damage which said Obligee may sustain by reason of failure or default on the part of said Principal, then this obligation shall be void; otherwise to be and remain in full force and effect. TDI-Halter, L.P. Principal By: /s/ Illegible ________________________________________ Fireman's Fund Insurance Company Surety By: /s/ Illegible ________________________________________ Attorney-in-Fact Tomi J. Braun GENERAL POWER OF ATTORNEY FIREMAN'S FUND INSURANCE COMPANY KNOW ALL MEN BY THESE PRESENTS: That FIREMAN'S FUND INSURANCE COMPANY, a Corporation duly organized and existing under the laws of the State of California, and having its principal office in the County of Marin, State of California, has made, constituted and appointed, and does by these presents make, constitute and appoint JERRY P. ROSE, TOMI J. BRAUN, DON E. CORNELL, L. RAY PITTS, JR., ROBBI MORALES, jointly or severally, DALLAS TX its true and lawful Attorney(s)-in-Facet, with full power and authority hereby conferred in its name, place and stead, to execute, seal, acknowledge and deliver any and all bonds, undertaking, recognizances or other written obligations in the nature thereof, and to bind the Corporation thereby as fully and to the same extent as if such bonds were signed by the President, sealed with the corporate seal of the Corporation and duly attested by its Secretary, hereby ratifying and confirming all that the said Attorney(s)-in-Fact may do in the premises. This power of attorney is granted pursuant to Article VII, Sections 45 and 46 of By-laws of FIREMAN'S FUND INSURANCE COMPANY now in full force and effect. "ARTICLE VII. APPOINTMENT AND AUTHORITY OF RESIDENT SECRETARIES, ATTORNEY-IN-FACT AND AGENTS TO ACCEPT LEGAL PROCESS AND MAKE APPEARANCES. SECTION 45. APPOINTMENT. THE CHAIRMAN OF THE BOARD OF DIRECTORS, THE PRESIDENT, ANY VICE-PRESIDENT OR ANY OTHER PERSON AUTHORIZED BY THE BOARD OF DIRECTORS, THE CHAIRMAN OF THE BOARD OF DIRECTORS, THE PRESIDENT OR ANY VICE-PRESIDENT MAY, FROM TIME TO TIME, APPOINT RESIDENT ASSISTANT SECRETARIES AND ATTORNEYS-IN-FACT TO REPRESENT AND ACT FOR AND ON BEHALF OF THE CORPORATION AND AGENTS TO ACCEPT LEGAL PROCESS AND MAKE APPEARANCES FOR AN ON BEHALF OF THE CORPORATION. SECTION 46. AUTHORITY. THE AUTHORITY OF SUCH RESIDENT ASSISTANT SECRETARIES, ATTORNEYS-IN-FACT AND AGENTS SHALL BE AS PRESCRIBED IN THE INSTRUMENT EVIDENCING THEIR APPOINTMENT. ANY SUCH APPOINTMENT AND ALL AUTHORITY GRANTED THEREBY MAY BE REVOKED AT ANY TIME BY THE BOARD OF DIRECTORS OR BY ANY PERSON EMPOWERED TO MAKE SUCH APPOINTMENT" This power of attorney is signed and sealed under and by the authority of the following Resolution adopted by the Board of Directors of FIREMAN'S FUND INSURANCE COMPANY at a meeting duly called and held on the 7th day of August, 1984, and said Resolution has not been amended or repealed: "RESOLVED, that the signature of any Vice-President, Assistant Secretary, and Resident Assistant Secretary of this Corporation, and the seal of this Corporation may be affixed or printed on any power of attorney, on any revocation of any power of attorney, or on any certificate relating thereto, by facsimile, and any power of attorney, any revocation of any power of attorney, or certificate bearing such facsimile signature or facsimile seal shall be valid and binding upon the Corporation." IN WITNESS WHEREOF, FIREMAN'S FUND INSURANCE COMPANY has caused these presents to be signed by its Vice-President, and its corporate seal to be hereunto affixed this 23rd day of September, 1997. FIREMAN'S FUND INSURANCE COMPANY By /s/ Illegible ____________________________________________________ Vice-President STATE OF CALIFORNIA ) ) ss. COUNTY OF MARIN ) On this 23rd day of September, 1997, before me personally came M. A. Mallonee, to me known, who, being by me duly sworn, did depose and say: that he is Vice-President of FIREMAN'S FUND INSURANCE COMPANY, the Corporation described in and which executed the above instrument; that he knows the seal of said Corporation; that the seal affixed to the said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said Corporation and that he signed his name thereto by like order. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal, the day and year herein first above written. /s/ Illegible ______________________________________________ Notary Public CERTIFICATE STATE OF CALIFORNIA ) ) ss. COUNTY OF MARIN ) I, the undersigned, Resident Assistant Secretary of FIREMAN'S FUND INSURANCE COMPANY, a CALIFORNIA Corporation, DO HEREBY CERTIFY that the foregoing and attached POWER OF ATTORNEY remains in full force and has not been revoked; and furthermore that Article VII, Sections 45 and 46 of the By-laws of the Corporation, and the Resolution of the Board of Directors; set forth in the Power of Attorney, are now in force. Signed and sealed at the County of Marin. Dated the 13th day of April, 1998. /s/ Illegible ________________________________________________ Resident Assistant Secretary EX-10.23 86 EXHIBIT 10.23 LABOR & MATERIAL PAYMENT BOND THIS BOND IS ISSUED SIMULTANEOUSLY WITH PERFORMANCE BOND IN FAVOR OF THE OWNER CONDITIONED ON THE FULL AND FAITHFUL PERFORMANCE OF THE CONTRACT KNOW ALL MEN BY THESE PRESENTS: That TDI-HALTER, L.P. (Here insert full name and address or legal title of Contractor) 1601 SOUTH CHILDERS ROAD, ORANGE, TEXAS 77631 as Principal, hereinafter called Principal, and FIREMAN'S FUND INSURANCE COMPANY 777 SAN MARIN DR., NOVATO, CA 94998 (Here insert full name and address or legal title of Surety) as Surety, hereinafter called Surety, are held and firmly bound unto PETRODRILL CONSTRUCTION, INC. SUITE 205, SAFFREY SQUARE, P.O. BOX N8188 NASSAU, BAHAMAS (Here insert full name and address or legal title of Owner) as Obligee, hereinafter called Owner, for the use and benefit of claimants as hereinbelow defined, in the amount of Eighty Four Million And NO/100 US DOLLARS ($84,000,000.00), (Here insert a sum equal to at least one-half of the contract price) for the payment whereof Principal and Surety bind themselves, their heirs, executors, administrators, successors and assigns, jointly and severally, firmly by these presents. WHEREAS, Principal has by written agreement dated APRIL 9, 1998 entered into a contract with Owner for ONE (1) FULLY OPERATIONAL AND COMPLETE SELF-PROPELLED DYNAMIC POSITIONED SEMI-SUBMERSIBLE DRILLING VESSEL - HULL NUMBER 1829 in accordance with drawings and specifications prepared by PETRODRILL CONSTRUCTION, INC. (Here insert full name and address or legal title of Architect) which contract is by reference made a part hereof, and is hereinafter referred to as the Contract. NOW, THEREFORE, THE CONDITION OF THIS OBLIGATION is such that, if Principal shall promptly make payment to all claimants as hereinafter defined, for all labor and material used or reasonably required for use in the performance of the Contract, then this obligation shall be void; otherwise it shall remain in full force and effect, subject, however, to the following conditions: 1. A claimant is defined as one having a direct contract with the Principal or with a Subcontractor of the Principal for labor, material, or both, used or reasonably required for use in the performance of the Contract, labor and material being construed to include that part of water, gas, power, light, heat, oil, gasoline, telephone service or rental of equipment directly applicable to the Contract. 2. The above named Principal and Surety hereby jointly and severally agree with the Owner that every claimant as herein defined, who has not been paid in full before the expiration of a period of ninety (90) days after the date on which the last of such claimant's work or labor was done or performed, or materials were furnished by such claimant, may sue on this bond for the use of such claimant, prosecute the suit to final judgment for such sum or sums as may be justly due claimant, and have execution thereon. The Owner shall not be liable for the payment of any costs or expenses of any such suit. 3. No suit or action shall be commenced hereunder by any claimant: a) Unless claimant, other than one having a direct contract with the Principal, shall have given written notice to any two of the following: The Principal, the Owner, or the Surety above named, within ninety (90) days after such claimant did or performed the last of the work or labor, or furnished the last of the materials for which said claim is made, stating with substantial accuracy the amount claimed and the name of the party to whom the materials were furnished, or for whom the work or labor was done or performed. Such notice shall be served by mailing the same by registered mail or certified mail, postage prepaid, in an envelope addressed to the Principal, Owner or Surety, at any place where an office is regularly maintained for the transaction of business, or served in any manner in which legal process may be served in the state in which the aforesaid project is located, save that such service need not be made by a public officer. b) After the expiration of one (1) year following the date on which Principal ceased Work on said Contract, it being understood, however, that if any limitation embodied in this bond is prohibited by any law controlling the construction hereof such limitation shall be deemed to be amended so as to be equal to the minimum period of limitation permitted by such law. (c) Other than in a state court of competent jurisdiction in and for the county or other political subdivision of the state in which the Project, or any part thereof, is situated, or in the United States District Court for the district in which the Project, or any part thereof, is situated and not elsewhere. 4. The amount of this bond shall be reduced by and to the extent of any payment or payments made in good faith hereunder, inclusive of the payment by Surety of mechanics' liens which may be filed of record against said improvement, whether or not claim for the amount of such lien be presented under and against this bond. Signed and sealed this 13TH day of APRIL A.D. 1998 TDI HALTER, L.P. ______________________________________ (Principal) (Seal) /s/ Illegible ___________________________________ (Witness) By: /s/ Illegible __________________________________ (Title) FIREMAN'S FUND INSURANCE COMPANY /s/ Illegible ______________________________________ __________________________________ (Surety) (Seal) By: /s/ Illegible __________________________________ Tomi J. Braun Attorney-in-Fact GENERAL POWER OF ATTORNEY FIREMAN'S FUND INSURANCE COMPANY KNOW ALL MEN BY THESE PRESENTS: That FIREMAN'S FUND INSURANCE COMPANY, a Corporation duly organized and existing under the laws of the State of California, and having its principal office in the County of Marin, State of California, has made, constituted and appointed, and does by these presents make, constitute and appoint JERRY P. ROSE, TOMI J. BRAUN, DON E. CORNELL, L. RAY PITTS, JR., ROBBI MORALES, jointly or severally DALLAS, TX its true and lawful Attorney(s)-in-Fact, with full power and authority hereby conferred in its name, place and stead, to execute, seal, acknowledge and deliver any and all bonds, undertaking, recognizances or other written obligations in the nature thereof------------------------ and to bind the Corporation thereby as fully and to the same extent as if such bonds were signed by the President, sealed with the corporate seal of the Corporation and duly attested by its Secretary, hereby ratifying and confirming al that the said Attorney(s)-in-Fact may do in the premises. This power of attorney is granted pursuant to Article VII, Sections 45 and 46 of By-laws of FIREMAN'S FUND INSURANCE COMPANY now in full force and effect. "ARTICLE VII. APPOINTMENT AND AUTHORITY OF RESIDENT SECRETARIES, ATTORNEY-IN-FACT AND AGENTS TO ACCEPT AND MAKE APPEARANCES. SECTION 45. APPOINTMENT. THE CHAIRMAN OF THE BOARD OF DIRECTORS, THE PRESENT, ANY VICE-PRESIDENT OR ANY OTHER PERSON AUTHORIZED BY THE BOARD OF DIRECTORS, THE CHAIRMAN OF THE BOARD OF DIRECTORS, THE PRESIDENT OR ANY VICE-PRESIDENT MAY, FROM TIME TO TIME, APPOINT RESIDENT ASSISTANT SECRETARIES AND ATTORNEYS-IN-FACT TO REPRESENT AND ACT FOR AND ON BEHALF OF THE CORPORATION AND AGENTS TO ACCEPT LEGAL PROCESS AND MAKE APPEARANCES FOR AN ON BEHALF OF THE CORPORATION. SECTION 46. AUTHORITY. THE AUTHORITY OF SUCH RESIDENT ASSISTANT SECRETARIES, ATTORNEYS-IN-FACT AND AGENTS SHALL BE AS PRESCRIBED IN THE INSTRUMENT EVIDENCING THEIR APPOINTMENT. ANY SUCH APPOINTMENT AND ALL AUTHORITY GRANTED THEREBY MAY BE REVOKED AT ANY TIME BY THE BOARD OF DIRECTORS OR BY ANY PERSON EMPOWERED TO MAKE SUCH APPOINTMENT." This power of attorney is signed and sealed under and by the authority of the following Resolution adopted by the Board of Directors of FIREMAN'S FUND INSURANCE COMPANY at a meeting duly called and held on the 7th day of August 1984, and said Resolution has not been amended or repealed: "RESOLVED, that the signature of any Vice-President, Assistant Secretary, and Resident Assistant Secretary of this Corporation, and the seal of this Corporation may be affixed or printed on any power of attorney, on any revocation of any power of attorney, or on any certificate relating thereto, by facsimile, and any power of attorney, any revocation of any power of attorney, or certificate bearing such facsimile signature or facsimile seal shall be valid and binding upon the Corporation." IN WITNESS WHEREOF, FIREMAN'S FUND INSURANCE COMPANY has caused these presents to be signed by its Vice-President, and its corporate seal to be hereunto affixed this 23RD day of SEPTEMBER , 1997. FIREMAN'S FUND INSURANCE COMPANY By /s/ Illegible _______________________________ Vice-President STATE OF CALIFORNIA COUNTY OF MARIN ss. On this 23RD day of SEPTEMBER , 1997, before me personally came M.A. MALLONEE , to me known, who, being by me duly sworn, did depose and say: that he is Vice-President of FIREMAN'S FUND INSURANCE COMPANY, the Corporation described in and which executed the above instrument; that he knows the seal of said Corporation; that the seal affixed to the said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said Corporation and that he signed his name thereto by like order. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal, the day and year herein first above written. By /s/ Illegible _______________________________ Notary Public CERTIFICATE STATE OF CALIFORNIA COUNTY OF MARIN ss. I, the undersigned, Resident Assistant Secretary of FIREMAN'S FUND INSURANCE COMPANY, a CALIFORNIA Corporation, DO HEREBY CERTIFY that the foregoing and attached POWER OF ATTORNEY remains in full force and has not been revoked; and furthermore that Article VII, Sections 45 and 46 of the By-laws of the Corporation, and the Resolution of the Board of Directors; set forth in the Power of Attorney, are now in force. Signed and sealed at the County of Marin. Date the 13TH day of APRIL , 1998. By /s/ Illegible _______________________________ Resident Assistant Secretary EX-10.24 87 EXHIBIT 10.24 PETRODRILL CONSTRUCTION, INC. HULL 1829 PARENT GUARANTEE In order to induce PETRODRILL, CONSTRUCTION, INC. (Purchaser) and/or any affiliate or sister company of Petrodrill Construction, Inc. to enter into that/those certain Vessel Construction Contract(s) (the "Contract") between Purchaser and TDI-HALTER, L.P. ("Builder"), dated on or about April 9, 1998, Halter Marine Group, Inc. a Delaware corporation ("Guarantor") represented herein by its duly authorized Chief Operating Officer (COO), Daniel J. Mortimer, does hereby unconditionally and irrevocably guarantee to Purchaser prompt and faithful performance of, and compliance with, all obligations, covenants, terms, conditions and undertakings of Builder contained in the Contract in accordance with the respective terms thereof. Such guarantee is an absolute, unconditional, present and continuing guarantee of performance and compliance. IN WITNESS WHEREOF, Guarantor has executed this Parent Guarantee as of this 15th day of April, 1998. HALTER MARINE GROUP, INC. By: /s/ DANIEL J. MORTIMER Daniel J. Mortimer Chief Operating Officer EX-10.25 88 EXHIBIT 10.25 TDI-HALTER/PETRODRILL CONTRACT HULL NO. 1828 CONTRACT FOR CONSTRUCTION OF A DYNAMIC POSITIONED SEMI-SUBMERSIBLE DRILLING VESSEL BETWEEN TDI-HALTER, L.P. AND PETRODRILL CONSTRUCTION, INC. HULL NUMBER 1828 INDEX PAGE DEFINITIONS...........................................................5 1. PURPOSE OF THIS CONTRACT..............................................6 2. DESIGN: PRINCIPAL DIMENSIONS AND CHARACTERISTICS: CLASSIFICATION: MANDATORY REGULATIONS: REGISTRATION...................................7 3. CONTRACT PRICE........................................................9 4. PAYMENT SCHEDULE: PERFORMANCE BOND/PARENT GUARANTEE: PAYMENT FOR MODIFICATIONS AND OTHER ITEMS: PAYMENT FOR FUELS ETC AND LIQUIDATED DAMAGES: PAYMENT PROCEDURES...........................................9 5. APPROVAL OF PLANS: SUBCONTRACTING: MAKER'S LIST: NOMINATED SUBCONTRACTORS: ASSIGNMENT OF EXISTING SUBCONTRACTS: OBLIGATIONS UNAFFECTED ..........................................................12 6. LIGHTSHIP WEIGHT.....................................................14 7. MODIFICATIONS: PURCHASER'S MODIFICATIONS: STATUTORY MODIFICATIONS: PRICING OF MODIFICATIONS: SUBSTITUTION OF MATERIALS..................15 8. INSPECTION: AUTHORISED REPRESENTATIVES: QUALITY ASSURANCE SYSTEM AUDITS: INDEPENDENT CONTRACTOR, INDEMNITY AND LIABILITY PROVISIONS...18 9. PLANNED PROGRAMME, PROGRESS CONTROL AND REPORTING....................22 10. TITLE................................................................23 11. RISK AND INSURANCE...................................................24 12. LOSS OR DAMAGE TO THE VESSEL.........................................25 13. SEA TRIALS: TECHNICAL ACCEPTANCE.....................................25 14. DELIVERY OF THE VESSEL: DOCUMENTS TO BE PROVIDED TO THE PURCHASER: REMOVAL OF THE VESSEL................................................28 15. EXTENSION OF TIME FOR DELIVERY: PERMISSIBLE DELAY: CAUSES OF DELAY: NOTICES.............................................29 16. DELAY IN DELIVERY: LIQUIDATED DAMAGES: TERMINATION FOR DELAY IN DELIVERY..........................................................31 17. DEFECTS AND BUILDER'S GUARANTEE: WARRANTY: GUARANTEE ENGINEER: ASSIGNMENT OF BUILDER'S GUARANTEE....................................32 18. DEFAULT BY THE PURCHASER: EVENTS OF PURCHASER'S DEFAULT: TERMINATION BY THE BUILDER.......................................................35 19. DEFAULT BY THE BUILDER: EVENTS OF BUILDER'S DEFAULT: RECISSION BY THE PURCHASER............................................................36 20. PATENT INDEMNITY: PATENT NUMBERS AND TRADEMARKS: HOLD HARMLESS, THE PURCHASER: HOLD HARMLESS, THE BUILDER: DESIGNS AND PROPERTY OF THE PURCHASER............................................................38 21. OWNER FURNISHED EQUIPMENT: DELIVERY OF THE OWNER FURNISHED EQUIPMENT: RESPONSIBILITY OF THE BUILDER........................................39 22. TAXES AND DUTIES.....................................................40 2 23. ASSIGNMENT...........................................................41 24. PRIORITY OF DOCUMENTS................................................41 25. NOTICES..............................................................41 26. RECORDS AND AUDITS...................................................42 27. LAW..................................................................42 28. DISPUTES.............................................................43 29. MISCELLANEOUS........................................................43 30. SPARE PARTS..........................................................44 31. SAFETY AND HEALTH STANDARDS..........................................44 32. EFFECTIVENESS........................................................45 3 APPENDICES APPENDIX I LIST OF PRINCIPAL DRAWINGS AND OTHER CONTRACT DOCUMENTS APPENDIX II PLANNED PROGRAMME APPENDIX IIA OWNER FURNISHED EQUIPMENT APPENDIX III FORM OF PROTOCOL OF DELIVERY AND ACCEPTANCE APPENDIX IV FORM OF PERFORMANCE BOND APPENDIX V FORM OF STAGE CERTIFICATE APPENDIX VI SCHEDULE OF LABOUR COSTS FOR MODIFICATIONS APPENDIX VII LIST OF CERTIFICATES TO BE SUPPLIED ON DELIVERY OF THE VESSEL APPENDIX VIII LIST OF BASIC DESIGN DRAWINGS APPENDIX IX FORM OF PARENT COMPANY GUARANTEE 4 CONTRACT FOR CONSTRUCTION AND SALE OF A DYNAMIC POSITIONED SEMI-SUBMERSIBLE DRILLING VESSEL This CONTRACT made this 9th day of April, 1998, by and between:- TDI-Halter, L.P. a limited partnership organised under the laws of the State of Louisiana (hereinafter called "Builder"), having its principal office at 1601 South Childers Road, Orange, Texas 77631, and Petrodrill Construction, Inc. a corporation organised under the laws of Bahamas (hereinafter called "Purchaser"), having its principal office at Suite 205, Saffrey Square, P.O. Box N8188, Nassau, Bahamas. WITNESSETH THAT THE PARTIES HAVE AGREED AS FOLLOWS:- DEFINITIONS In this Contract the following expressions shall have the meanings hereby assigned to them:- "Basic Design" means the design drawings provided by the Purchaser listed Section 99000 in Appendix VIII; "Banking Day" means any day on which banks in each of London, New York and Houston are open for the transaction of normal banking business; "Classification Society" means Lloyds Register of Shipping; "Classification Surveyor" shall mean any surveyor appointed by the Classification Society to supervise the Vessel's construction; "Contract Price" means the price stated in Clause 3.1; "Contractual Delivery Date" means the date referred to in Clause 14.1 as the same may from time to time be extended in accordance with the provisions of this Contract; "Contract Documents" means the Specifications, the Principal Drawings and the other documents listed in Appendix I; "Delivery" means the delivery by the Builder, and acceptance by the Purchaser, of the Vessel pursuant to Clause 14.2; "LIBOR" means the interest rate per annum which Citibank, London is offering to prime banks in the London Interbank market for deposits in United States Dollars for a three month period, determined at 11.00 a.m. London time, as quoted on the date from which 5 interest is accrued under this Contract. All interest hereunder shall be calculated on the basis of a 360 day year and compounded quarterly and shall be paid on the date when payment is made of the sum on which interest is accrued: "Makers' List" means the list of contractors approved by the Purchaser and set out in Appendix X hereto; "Mandatory Regulations" has the meaning assigned to it in Clause 2.7; "Materials" means all materials and supplies, including, without limitation, all machinery, equipment, outfittings and spare parts (but excluding the Owner Furnished Equipment), intended for the Vessel's construction to the extent that the same have been appropriated to, or incorporated in, the Vessel; "Planned Programme" means the programme for performance of this Contract by the Builder detailed in Appendix II hereto: "Plans" means those drawings, documents and specifications which are required under this Contract and the Specification (Section 99010) to be submitted to the Purchaser for approval; "Specifications" means:- (a) Specification no 95019 initialled by or on behalf of the Purchaser and the Builder on April 1st, 1998; and (b) any additions or amendments thereto hereafter agreed between the parties; "Stage Certificate" means a certificate in the form set out in Appendix V; "Statutory Modifications" means modifications applicable to the Vessel as a result of changes to any of (i) the rules, regulations and requirements of the Classification Society or (ii) the Mandatory Regulations; "Working Day" means any day (other than Saturdays or Sundays) on which work is normally carried out at the Shipyard. Further terms used in this Contract are defined hereinafter. 1. PURPOSE OF THIS CONTRACT 1.1. Upon the terms and conditions set out in this Contract, the Builder, as an independent contractor, undertakes to engineer, construct, build, launch, equip, complete, and test at various of its shipyards at located on the U.S. Gulf Coast, exact locations to be determined later (hereinafter called the "Shipyard") and deliver to Purchaser or the Purchaser's nominee, as defined in Clause 23 below, for the Contract Price referred to in Clause 2 below, one (1) fully operational and complete self-propelled Dynamic Positioned Semi-Submersible Drilling Vessel 6 (hereinafter called the "Vessel") more fully described in Clause 2 below. Subject to the performance of the Builder's obligations hereunder, the Purchaser expressly agrees to take delivery of the Vessel when duly completed and to pay Builder all amounts due Builder. 1.2. References herein to the Vessel shall, except where otherwise expressly provided, be deemed to include all Materials. 2. DESIGN: PRINCIPAL DIMENSIONS AND CHARACTERISTICS: CLASSIFICATION: MANDATORY REGULATIONS: REGISTRATION 2.1. The Vessel, which is to be assigned the Builder's Hull No 1828, shall be constructed and completed in all respects in accordance with the Specifications. To the extent not defined in the Specifications, the Vessel's construction is to meet good offshore construction standards and practices. At the time of Delivery hereunder, the Vessel, which shall conform strictly with the terms and conditions of this Contract and the Specification and shall be delivered safely afloat. DESIGN 2.2. The basic elements of the Vessel's design (the "Basic Design") will be delivered by the Purchaser to the Builder. It is expressly understood that the Purchaser shall be solely responsible for the suitability of the vessel design supplied by it and for any errors, omissions and inconsistencies in the Basic Design. If the Purchaser shall require the Builder to modify the Basic Design, the work required to do so shall constitute an Purchaser's Modification for the purposes of Clause 7 of this Contract. 2.3. The Builder shall develop all required detailed engineering from the delivered Basic Design. The Builder shall accept responsibility for its own work of developing the detailed working drawings from the Basic Design and all other engineering it shall perform in connection with this Contract. If the Builder considers during such detailed engineering that any aspect of the Basic Design might prevent the Vessel when constructed from complying with the requirements of Clause 2, it will inform the Purchaser accordingly and the Purchaser may either procure the modification of the Basic Design to remedy this deficiency or may require the Builder to modify the Basic Design to remedy this deficiency. PRINCIPAL DIMENSIONS AND CHARACTERISTICS 2.4. The Vessel shall have the dimensions and characteristics stated in the Specifications. CLASSIFICATION 2.5. The Vessel shall be constructed according to the rules and regulations of the Classification Society current at the date of execution of this Contract, incorporating all additions and amendments thereof applicable to the Vessel in force or published, so as to achieve on Delivery the following notation:- 7 Unrestricted Service OU +100A1, +LMC, UMS, DP(AAA), PC, DRILL, IWS with the description notation semi-submersible, self propelled drilling vessel Provided that the Purchaser shall not be entitled to refuse delivery where such recommendations etc. are of such a minor nature as not to adversely affect the operation of the Vessel. In any event, such recommendations etc. shall be remedied by the Builder within 90 days of Delivery or such other period as the parties may mutually agree and Purchaser shall be entitled to retain $250,000 pending such rectification. 2.6. Decisions of the Classification Society as to whether or not the Vessel complies with its rules, regulations and requirements shall be final and shall bind both parties to this Contract. MANDATORY REGULATIONS 2.7. The Vessel shall also comply with (i) all requirements of the regulatory bodies listed in the Specifications and (ii) the following rules, regulations and requirements, in each case current at the date of execution of this Contract (i) and (ii) being known herein jointly as the "Mandatory Regulations"):- a. IMO, Resolution A 649 (16) adopted on 19 October 1989, Code for the Construction and Equipment of Mobile Offshore Drilling Units. b. International Convention for the Safety of Life at Sea SOLAS 1974, protocols of 1978, 198 1, 1983 and all Amendments in force. c. International Convention of Load Lines, 1966 with resolutions A 231 (VII) and A 320 (IX). d. International Telecommunication Convention and Radio Regulation 1973, 1976 and 1982 and latest GMDSS Rules for radio communications. e. International Convention for Tonnage Measurement 1967/1969. f. Suez Canal Tonnage Regulations. g. International Convention for the Prevention of Pollution from Ships (MARPOL) 1974/1978, Consolidation Edition, IMO, 1991, including 1992 amendments to Annex 1. h. International Regulations for Preventing Collision at Sea, 1972 including amendments. i. International Labour Organisation (ILO) Convention No. 92 and No. 133 for crew accommodation. 8 j. International Electronical Commission (IEC), Electrical Installation in Ship Publication No. 92 or IEEE 45 Subject to the Purchaser's prior approval, such approval not to be unreasonably withheld. k. API specifications as applicable. REGISTRATION 2.8. The Vessel shall upon Delivery fly the Netherland Antilles flag and be registered in the Netherland Antilles Register of Shipping. Registration of the Vessel as aforesaid shall be effected by the Purchaser and all costs and expenses thereof shall be for the Purchaser's account. 3. CONTRACT PRICE 3.1. In consideration of the performance by the Builder of all its obligations under this Contract the Purchaser shall pay to the Builder the price of Eighty-four Million United State Dollars (US $ 84,000,000), (the "Contract Price"), which shall include the cost of installation of the Owner Furnished Equipment. 3.2. The Contract Price, which is exclusive of the cost of the Owner Furnished Equipment, shall be a fixed price subject to upward or downward adjustment only in accordance with the provisions of Clause 7 hereof. It includes:- a. the cost of the Vessel completed in accordance with the requirements of this Contract and the Specifications; b. the cost of all tests and trials of the Vessel to be performed by the Builder; c. the cost of procuring the classification of the Vessel and of obtaining all certificates and documents (save for those in respect of the Owner Furnished Equipment), which are required to be delivered pursuant to this Contract and the Specifications; and d. all other costs and expenses of the Builder as provided for herein or otherwise incurred by the Builder unless expressly provided herein as being for the Purchaser's account. 4. PAYMENT SCHEDULE 4.1. The Purchaser shall pay the Contract Price to the Builder in ten (10) instalments as follows:- FIRST INSTALMENT: Ten per cent ( 10 %) of the Contract Price, being Eight Million Four Hundred Thousand U.S. Dollars, (US$ 8,400,000) shall be paid within three Banking Days of the Execution Date. SECOND INSTALMENT: Ten per cent (10 %) of the Contract Price, being Eight Million Four Hundred Thousand U.S. Dollars, (US$ 8,400,000) shall be paid within three Banking Days from receipt by the Purchaser 9 of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorised Representative (or, in default thereof, the Classification Surveyor), certifying that Builder has placed the orders for the major equipment, herein defined as the Main Engines, the Thrusters, and the Electrical Integration Subcontract. THIRD INSTALMENT: Ten per cent (10 %) of the Contract Price, being Eight Million Four Hundred Thousand U.S. Dollars, (US$ 8,400,000) shall be paid within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorised Representative (or, in default thereof, the Classification Surveyor), certifying that Start of Fabrication has taken place. FOURTH INSTALMENT: Fifteen per cent ( 15 %) of the Contract Price, being Twelve Million Six Hundred Thousand U.S. Dollars, (US$ 12,600,000) shall be paid within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorised Representative (or, in default thereof, the Classification Surveyor), certifying that the keel laying for the pontoons has taken place. FIFTH INSTALMENT: Ten per cent ( 10 %) of the Contract Price, being Eight Million Four Hundred Thousand U.S. Dollars, (US$ 8,400,000) within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorised Representative (or, in default thereof, the Classification Surveyor), certifying that the Pontoons of the Vessel have successfully been launched. SIXTH INSTALMENT: Five per cent (5 %) of the Contract Price, being Four Million Two Hundred Thousand U.S. Dollars, (US$ 4,200,000) within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorised Representative (or, in default thereof, the Classification Surveyor), certifying that the Substructure has successfully been erected on the Deck Box. SEVENTH INSTALMENT: Five per cent ( 5 %) of the Contract Price, being Four Million Two Hundred Thousand U.S. Dollars, (US$ 4,200,000) within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorised Representative (or, in default thereof, the Classification Surveyor), certifying that the Pontoons have successfully been joined. 10 EIGHTH INSTALMENT: Ten per cent ( 10 %) of the Contract Price, being Eight Million Four Hundred Thousand U.S. Dollars, (US$ 8,400,000) within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorised Representative (or, in default thereof, the Classification Surveyor), certifying that the Deck Box has been launched and successfully mated with the Pontoons and Columns. NINTH INSTALMENT: Ten per cent ( 10 %) of the Contract Price, being Eight Million Four Hundred Thousand U.S. Dollars, (US$ 8,400,000) within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorised Representative (or, in default thereof, the Classification Surveyor), certifying that the Main Engines have been started. TENTH INSTALMENT: Fifteen per cent (15 %) of the Contract Price, being Twelve Million Six Hundred Thousand U.S. Dollars, (US$ 12,600,000) together with any increase or any decrease of the Contract Price arising from the provisions of Clauses 6, and 16 below, shall be paid upon Delivery. 4.2. The Builder shall notify the Purchaser in writing ten Banking Days in advance of the estimated dates of occurrence of each of the events before Delivery referred to above, excluding the First Instalment. Not withstanding anything to the contrary contained herein, or in Appendix V hereto, if Purchaser fails to execute any Stage Certificate and such Stage Certificate has been executed by the Classification Surveyor, then Purchaser shall be obligated to pay such Instalment within three banking days of execution by the Classification Surveyor. In addition, in no event shall the Second or Third Instalments be paid prior to a date ninety (90) days from the Execution Date. PERFORMANCE BOND/PARENT GUARANTEE 4.3. The Builder shall at its own expense supply to the Purchaser concurrently with payment of the First Instalment of the Contract Price a Performance Bond, for an amount equal to 100% of the Contract Price, in the form specified in Appendix IV and given by.Fireman's Fund Insurance Company, California, USA. The Builder shall also, at the same time, provide a form of Parent Guarantee from its ultimate parent company substantially similar to that contained in Appendix IX hereto. PAYMENT FOR MODIFICATIONS AND OTHER ITEMS 4.4. Any sums due to either party under Clause 7 as a result of Purchaser's Modifications and/or Statutory Modifications shall be payable upon builder achieving certain milestones and in conjunction with the above payment schedule, and shall be payable on or before the Delivery Date. 11 PAYMENT FOR FUELS ETC AND LIQUIDATED DAMAGES 4.5. All amounts due to the Purchaser (i) under Clause 13.2 hereof and (ii) by way of liquidated damages in respect of delay in Delivery under Clause 16 shall be calculated and determined before Delivery and shall be paid on, and as a condition of, Delivery. PAYMENT PROCEDURES 4.6. Payment of sums due to the Builder in accordance with the provisions of this Contract shall be made, by telex transfer to the Builder's account with Hibernia National Bank, New Orleans, Louisiana, free of all transfer charges. 4.7. If the date on which any payment is due in accordance with the provisions of this Contract does not fall on a Banking Day, payment shall be made on the immediately succeeding Banking Day. 5. APPROVAL OF PLANS: SUBCONTRACTING APPROVAL OF PLANS 5.1. In respect of all Plans required for the completion of the works envisaged by this Contract, the same shall be submitted to the Purchaser in four copies as soon as possible following their production. The Purchaser shall, within ten (10) Working Days after receipt thereof, return to the Builder one copy of such Plans with the Purchaser's approval or the Purchaser's remarks and amendments (if any) written thereon. 5.2. Should the Builder elect to enter into a subcontract to purchase the detail engineering with a Shipyard also contracted with the Purchaser who is constructing a vessel of the same design and in the event that Purchaser elects to remark or comment previously approved drawings, such remarks or amendments shall be dealt with under the modification procedure within the meaning of clause 7 hereof. 5.3. In the event that the Purchaser shall fail to return the Plans to the Builder within the time limit as hereinabove provided, such Plans shall be deemed to have been approved without comment. 5.4. The Builder shall take due note of the Purchaser's remarks and amendments (if any) on Plans submitted pursuant to this Clause and, if such remarks or amendments are not of such a nature or extent as to constitute a modification within the meaning of Clause 7 hereof, then the Builder shall commence or continue construction of the Vessel in accordance with the corrected or amended Plans. If such remarks or amendments are not clearly specified or detailed, the Builder shall in all cases seek clarification of the same from the Purchaser before implementing the same. 5.5. Copies of all correspondence to and from the Classification Society and the regulatory authorities referred to in the Specifications, together with all Plans approved by the 12 Classification Society, shall be furnished to the Purchaser by the Builder as soon as practicable upon dispatch and receipt. SUBCONTRACTING 5.6. Save as regards those works delegated to those Subcontractors defined in the Makers' List, the Builder shall not, without the Purchaser's prior approval in writing , which shall not be unreasonably with held, subcontract any part of the works contemplated by this Contract which exceed in value US $ 100,000 or its equivalent in local currency. Where such approval has been given, the Builder shall nevertheless remain fully responsible for the performance of the same as if it had personally undertaken such works. MAKER'S LIST 5.7. The Builder shall select for the supply of each of the Materials listed in the Makers' List the Vendor named therein in relation to the same. Where the Makers' List provides for more than one Vendor to supply any element of the Materials, the Builder shall with reasonable notice provide the Purchaser with a copy of the Purchase Order to be issued to its intended choice of Subcontractor before any subcontract is awarded. Such purchase order shall contain full technical and commercial details. If thereafter, the Purchaser shall request the Builder to order that element of the Materials from another Subcontractor named in the Makers' List in relation thereto, then the Builder will take all reasonable steps to comply with such request and the Purchaser shall reimburse to the Builder any difference in price between that quoted by the Builder's chosen Subcontractor and the Subcontractor chosen by the Purchaser. NOMINATED SUBCONTRACTORS 5.8. ASSIGNMENT OF EXISTING SUBCONTRACTS In relation to the following "long lead" items of Materials, (the cost of which is included in the Contract Price) it is understood that the Purchaser has had advanced negotiations with the following suppliers and the Builder will enter into subcontracts for the following based on the references below: - - -------------------------------------------------------------------------------- SUPPLIER NAME SUPPLIED ITEM REFERENCE - - -------------------------------------------------------------------------------- Caterpillar Engine Generator Sets Fax transmission between Caterpillar and Petrodrill on the 11th and 29th January plus 6th February - - -------------------------------------------------------------------------------- GEC Alsthom Electrical Integrator Offer No. P354-A0I - - -------------------------------------------------------------------------------- 5.9. The Purchaser has also entered into an agreement with LIPS Thrusters BV for the supply of thrusters Ref Petrodrill PO No. 1.900l/Lips order No. T07387/94 for Dutch Guilders 6.2 Million per set delivered Europe. 13 Concurrently with the receipt of the First Instalment, the benefit together with the burden of all such existing contracts are to be assigned by the Purchaser to the Builder, to the extent that it relates to only one shipset of equipment, where upon the Materials to which they relate are to be treated as Builder's supply. The Builder shall, upon assignment of each sub-contract, reimburse to the Purchaser all of the instalments of the contract price paid by the latter in respect thereof. It being understood that the cost of said thrusters is included in the Contract Price. OBLIGATIONS UNAFFECTED Nothing in this Clause shall affect the other obligations of the Builder under this Contract nor diminish the responsibility of the Builder in respect of the Materials, detailed engineering or workmanship required hereunder. 6. LIGHTSHIP WEIGHT 6.1. The Builder shall meet the target figures set out for Lightship Weight and Centre of Gravity as specified in section 12000 page 3 of the Addendum to Rev 3 P-95019 of the Specification. 6.2. The lightship weight and centre of gravity of the Vessel shall be verified by an Inclining Experiment prior to Delivery. 6.3. The results of the Inclining Experiment referred to in Clause 6.2 shall be used to demonstrate a Lightship Weight in the conditions referred to in the Specifications. 6.4. The Builder shall have no liability for the Owner Furnished Equipment lightweight and centre of gravity as specified in section 12000 page 3 of the Addendum to Rev 3 P-95019 of the specification. If the remaining lightship weight so demonstrated is more than 9075 metric tons the Builder shall pay to the Purchaser on Delivery as liquidated damages US$ 12,500 per full metric tons of the increase above 9075 metric tonnes up to a maximum of 2.5 million U.S. Dollars, (U.S$ 2,500,000). 6.5. The Purchaser shall have no obligation to accept delivery of the Vessel if the ship lightweight as defined on page 3 of the addendum to the specification is more than 9,275 metric tons. The Builder shall, however, in such context be entitled to make modifications to the Vessel in order to either reduce the weight or ensure that the Operational VLC is restored to its original level provided that the same (i) are approved in advance by the Classification Society and (ii) do not significantly affect the motion characteristics or operational performance of the Vessel. 6.6. In the event that the lightship weight demonstrated as a result of Clause 6.2 is less than 8,875 tonnes the Purchaser shall pay the Builder $12,500 per tonne for each complete tonne that the weight is below 8,875 tonnes up to a maximum of 3.0 million U.S. Dollars, (U.S. $3,000,000). 6.7. The Builders shall also have the option of exercising its rights as per clause 6.5 in the event that the liquidated damages due is in excess of $1.0 million. In this case the level of liquidated damages that is finally paid will be reduced from the calculated level by the same 14 percentage that the Builder is able to recover the VDL that has been lost as a result of the changes in the lightship weight. 6.8. The parties hereto agree that the above liquidated damages shall ( subject always to the provisions of clause 16.2 and 16.3 below ) be the sole and exclusive remedy for damages being due as a result of increases in lightship weight as set forth in this section. 6.9. The weights described in this Section 6 shall be adjusted for any Modifications pursuant to Section 7. 7. MODIFICATIONS PURCHASER'S MODIFICATIONS 7.1. The Purchaser may at any time after the date hereof submit a request in writing to the Builder for changes (the "Purchaser's Modifications") to be made to the Specifications and shall supply with such request sufficient particulars, documentation and details to describe the change requested. If the change so requested (the "Requested Change") can be reasonably undertaken having regard to the stage of construction of the Vessel and the Planned Programme, then the Builder shall be obliged to effect the same but shall be entitled to any increase (and shall concede any decrease) in construction cost or adjustment of the Contractual Delivery Date or any other provisions of this Contract or the Specifications which the Requested Change reasonably necessitates and which is agreed in writing by the Builder and the Purchaser. The Builder shall notify the Purchaser in writing no later than ten (10) Working Days after receipt of the written request for the Requested Change, of any such adjustments which it will require. On the basis of such notification the Purchaser shall no later than seven (7) Working Days thereafter elect in writing to: a. agree to the adjustments notified, in which case the Builder shall construct the Vessel in accordance with the Requested Change; b. contest the reasonableness of the adjustment notified, in which case subclause 7.5 below shall apply; or c. withdraw the Requested Change, in which case the Vessel shall be built without reference to the same. 7.2. If within seven (7) Working Days after such notification the Purchaser has made no election as aforesaid, then the adjustments notified by the Builder shall be deemed to have been withdrawn by the Purchaser. 7.3. If, however, the Purchaser notifies the Builder in writing that the Purchaser wishes to implement the Requested Change but disputes the reasonableness of the adjustments, the matters shall be determined by an expert, acting as such and not as an arbitrator, to be appointed 15 by agreement between the parties. In the event that the parties are unable to agree as to any appointment within thirty days of the Purchaser's written notice, the appointment shall be made, upon the written application of either party, by Det Norske Veritas . The decision of the said expert shall be final and binding upon the parties and the costs of such expert in reaching his decision shall be shared by the parties . Pending the decision of the aforesaid expert, the Builder shall continue construction of the Vessel in accordance with the Requested Change. 7.4. The agreed extra cost of any Requested Change or that decided by the expert shall be paid by the Purchaser and any cost savings by the Builder as a result of any Requested Change shall be paid to the Purchaser in accordance with Clause 4.4. STATUTORY MODIFICATIONS 7.5. In the event of any Statutory Modifications arising the Builder shall within seven Working Days of its becoming aware of the same, give notice to the Purchaser of:- a. the change required to be made to the Specifications (the "Required Change"); b. any estimated extra or reduced cost of construction of the Vessel in accordance with the Required Change together with any documentation substantiating such cost which the Purchaser reasonably requires; and c. the effect of the Required Change on any other provisions of this Contract or the Specifications (including without limitation any change to the Contractual Delivery Date). 7.6. The Purchaser may apply for a formal waiver of compliance with the Required Change from the body having power to grant such waiver if the Purchaser considers that the operation of the Vessel in its intended service would permit such waiver, and shall notify the Builder as soon as possible after receiving the decision of such body. In applying for any waiver, the Purchaser may call upon the Builder for assistance and the Builder will provide reasonable co-operation to the Purchaser in this respect. 7.7. If no waiver has been obtained and notified by the Purchaser to the Builder within thirty Working Days of the receipt by the Purchaser of the notice referred to above, the Builder shall build the Vessel in accordance with the Required Change and the reasonable extra cost thereof, if any, shall be paid by the Purchaser. Before the expiry of such time the Builder shall continue with the construction of the Vessel in accordance with the Required Change but it shall, in so doing, use its best endeavours to minimise any costs and loss of time which might arise if a waiver were obtained. 7.8. If the Purchaser notifies the Builder in writing that the Purchaser disputes the reasonableness of the extension or variation notified, the issue of what is a reasonable extension or variation may be put, by the Purchaser or the Builder, to an expert, acting as such and not as arbitrator, to be appointed by agreement between the parties. In the event that the parties are unable to agree as to an appointment within thirty days of the Purchaser's written notice as aforesaid the appointment shall be made, upon the written application of either party, by Det 16 Norske Veritas. The decision of the expert shall be final and binding upon the parties and the costs of such expert in reaching his decision shall be shared by the parties. Pending the decision of the said expert, the Builder shall continue construction of the Vessel in accordance with the Required Change. PRICING OF MODIFICATIONS 7.9. In relation both to Purchaser's Modifications and Statutory Modifications as aforesaid, the Builder's quotations in respect of any increase or decrease in the Contract Price relating thereto shall, if requested in writing by the Purchaser, be calculated both on "lump sum" and a "time and materials" basis. In relation to quotations effected on a "time and materials" basis, the Builder shall apply the following parameters:- a. labour costs shall be charged at the agreed hourly rates set out in Appendix VI; b. the cost of all materials and equipment shall not exceed one hundred and fifteen per cent (115%) of the cost to the Builder of the same (inclusive of the costs of delivery of those materials and equipment to the Shipyard); provided, however, that the Builder shall in all cases endeavour to obtain the best price terms and trade discounts from suppliers and subcontractors for the benefit of the Purchaser. SUBSTITUTION OF MATERIALS 7.10. If at any time during the construction of the Vessel, any Materials are not available (other than as the result of any neglect or omission on the part of the Builder) then, subject to the prior approval in writing of the Purchaser and, where necessary, of the Classification Society, the Builder may use or install other Materials provided that such other Materials used or installed in substitution for those specified are equivalent in quality to, or better than, those specified, and which meet the requirements of the Classification Society and the other requirements of this Contract. 8. INSPECTION AUTHORISED REPRESENTATIVES 8.1. The Purchaser shall have the right to retain up to fifteen supervisors ("Authorised Representatives"), whose names and scope of authority shall be notified in writing to the Builder, permanently at the Shipyard during all times until Delivery. The Builder shall provide suitable office accommodation (including adequate parking spaces), photocopying and canteen facilities where available and the installation of telephones and telefax machines with reasonable and safe access to work areas for, and permit and afford every facility to, the Authorised Representatives from time to time and at all times whilst work is proceeding to examine and inspect the work being done under this Contract and every part thereof, together with the materials being used or about to be used thereon, and to call for and witness such tests as may be required. The costs of telecommunication facilities outside the local area in which the Shipyard is located and the use of the canteen shall be for the Purchaser's account. Purchaser shall designate one Representative authorised to make contractual decisions and/or commitments on behalf of the 17 Purchaser and likewise Builder shall designate one Representative authorised to make contractual decisions and/or commitments on behalf of the Builder. Builder and Purchaser shall notify each other of the name of their respective designated Representative within thirty (30) days of the Execution Date. To the extent that Builder or Purchaser elects to change its designated Representative, it shall notify of such change, in writing, within five (5) Working Days of such change. 8.2. In addition to the Authorised Representatives, the Purchaser may from time to time employ further personnel and contractors on site. 8.3. The Authorised Representatives shall have the right to attend all tests, trials and inspections of the Vessel, her machinery and equipment, which shall in each case be conducted within the Shipyard's normal working hours. The Builder shall give notice to the Authorised Representatives in advance of the date and place of such tests, trials and inspections in accordance with the provisions of the Specifications. Failure of the Purchaser or its Authorised Representatives to be present at such tests, trials and inspections after due notice as above provided shall be deemed to be a waiver of the Purchaser's right to be present. The Builder shall obtain for the Purchaser and the Authorised representatives rights of access to the Subcontractors' premises, within normal working hours, for the purpose of inspection of workmanship and Materials. 8.4. The Builder shall carry out in strict compliance with the Specifications all the tests and trials of the Vessel and commissioning of the Materials which are detailed therein so as to demonstrate that the same are in accordance with the requirements of the Specifications and that all of her systems function in their intended manner. Any Materials or workmanship found to be faulty or inadequate shall be replaced or made good by the Builder prior to Delivery, at its expense and without additional expense to the Purchaser, by suitable and sound Materials and workmanship. 8.5. Nothing done or omitted to be done by or on behalf of the Purchaser under this Clause shall be deemed to be a waiver of any objection to, or an acceptance of, faulty or inadequate Materials or workmanship, or an admission that any Materials or workmanship are of the standard required for due performance of this Contract. 8.6. The Authorised Representatives shall be deemed to be employees of the Purchaser and not the Builder. The Builder shall be under no liability to the Authorised Representatives for death, personal injury or damage to their property during the time when they are engaged in the duties contemplated under this Contract either on the Vessel or within the premises of the Builder or its Subcontractors. QUALITY ASSURANCE SYSTEM AUDITS 8.7. Quality Assurance System Audits may be carried out by the Purchaser, and/or regulatory authorities to verify compliance with the quality requirements stipulated in this Contract and with regulatory requirements. Such requirements shall include but not necessarily be limited to quality records, personnel and procedure qualifications, material traceability 18 records, inspection plans etc. The Builder is required to provide to the Purchaser any documentation and administrative systems necessary to verify compliance. Inspection and testing and Quality Assurance System Audits by the Purchaser as described in this Clause or otherwise shall not imply any diminution of the Builder's responsibilities and obligations under this Contract. INDEPENDENT CONTRACTOR, INDEMNITY AND LIABILITY PROVISIONS 8.8. It is understood that Builder is an independent contractor as to all Work performed hereunder and that the detailed manner and method of doing the Work and the areas of the Vessel where the Work is being performed shall be under the exclusive control of the Builder. Purchaser shall have the right to supervise the performance of the Work as to the results to be achieved and the compliance of the Contractor with the terms of this Contract and the specifications. a. Indemnification a.1. Builder Indemnification a.1.a. Builder Personnel and Property Builder shall release, defend, indemnify, and hold Purchaser, its parent or affiliated companies, and their respective officers, directors, employees, contractors, subcontractors, invitees, licensees and agents, except any of the foregoing which are part of the Builder Group (hereinafter called the Purchaser Group) harmless from and against all liability, claims, losses, damages, punitive damages, costs, expenses, attorney's fees, demands, suits and causes of action of every kind and character (the "claims"), arising in favor of any officer, director, or employee of the Builder or its sublessees, contractors and subcontractors, their respective parent and affiliated companies, and their respective officers, directors, employees, vendors, invitees, licensees and agents (hereinafter collectively called the "Builder Group") on account of personal injury or death or damage to property owned by any member of the Builder Group, or, prior to Delivery, the Vessel and/or Owner Furnished Equipment in Builder's care, custody and control, in any way incident to or in connection with or arising out of or under this Contract, regardless of the sole, joint or concurrent negligence, negligence per se, gross negligence, statutory fault, or strict liability of any member of the Purchaser Group or the unseaworthiness of the Vessel or any vessel owned operated or chartered by any member of the Purchaser Group that may have caused or contributed to the claims, to the extent such indemnity obligations are not prohibited by applicable law. a.1.b. Third Parties Prior to the Delivery of the Vessel, Builder shall release, defend, indemnify, and hold the Purchaser Group harmless from and against all liability, claims, losses, damages, punitive damages, costs, expenses, attorney's fees, demands, suits and causes of action of every kind and character (the "claims"), arising in favor of any Third Party on account of personal injury or death and/or damage to Third Party property in any way incident to or in connection 19 with or arising out of or under this Contract, resulting from the joint or concurrent negligence, negligence per se, gross negligence, (collectively "negligence") statutory fault, or strict liability of any member of the Builder Group or the unseaworthiness of the Vessel or any vessel owned operated or chartered by any member of the Builder Group, to the extent such claims were caused by the negligence or other legal liability of any member of the Builder Group. As used herein, a Third Party is any person of entity not included in either the Purchaser Group or the Builder Group. a.1.c. Pollution Notwithstanding anything to the contrary herein, Builder shall release, defend, indemnify, and hold the Purchaser Group harmless from and against all, claims, demands, suits, causes of action, damages, natural resource damage assessments, response, clean up, containment or disposal expenses and other liabilities, including but not limited to attorney's fees and the costs of litigation or administrative proceedings but excluding any claim covered by a. 1. or a.2. above (the "Purchaser pollution claims"), arising from any spill, discharge, escape, release of or exposure to any waste, rubbish, petroleum, chemical or hazardous substance, whether solid, liquid or gas, originating from any equipment, facility or property of the Builder Group and, prior to Delivery, from the Vessel, or from handling, removal, transportation or disposal thereof, except to the extent such claims may have resulted from the negligence of a member of the Purchaser Group. a.2. Purchaser Indemnification a.2.a. Purchaser Personnel and Property Purchaser shall release, defend, indemnify, and hold the Builder Group harmless from and against all liability, claims, losses, damages, punitive damages, costs, expenses, attorney's fees, demands, suits and causes of action of every kind and character (the "claims"), arising in favor of any officer, director, or employee of the Purchaser Group on account of personal injury or death or damage to property owned by any member of the Purchaser Group except, prior to Delivery, the Vessel and/or Owner Furnished Equipment in Builders care, custody and control, in any way incident to or in connection with or arising out of or under this Contract, regardless of the sole, joint or concurrent negligence, negligence per se, gross negligence, (collectively "negligence") statutory fault, or strict liability of any member of the Builder Group or the unseaworthiness of the Vessel or any vessel owned operated or chartered by any member of the Builder Group that may have caused or contributed to the claims, to the extent such indemnity obligations are not prohibited by applicable law. a.2.b. Third Parties Purchaser shall release, defend, indemnify, and hold the Builder Group harmless from and against all liability, claims, losses, damages, punitive damages, costs, expenses, attorney's fees, demands, suits and causes of action of every kind and character (the "claims"), arising in favor of any Third Party on account of personal injury or death and/or damage to Third Party property in any way incident to or in connection with or arising out of or under this 20 Contract, resulting from the joint or concurrent negligence, negligence per se, gross negligence, statutory fault, or strict liability of any member of the Purchaser Group or the unseaworthiness of the Vessel or any vessel owned operated or chartered by any member of the Purchaser Group, to the extent such claims were caused by the negligence or other legal liability of any member of the Purchaser Group. As used herein, a Third Party is any person of entity not included in either the Purchaser Group or the Builder Group. a.2.c. Pollution Notwithstanding anything to the contrary herein, Purchaser shall release, defend, indemnify, and hold the Builder Group harmless from and against all, claims, demands, suits, causes of action, damages, natural resource damage assessments, response, clean up, containment or disposal expenses and other liabilities, including but not limited to attorney's fees and the costs of litigation or administrative proceedings but excluding any claim covered by a.2.a. or a.2.b. above (the "Builder pollution claims"), arising from any spill, discharge, escape, release of or exposure to any waste, rubbish, petroleum, chemical or hazardous substance, whether solid, liquid or gas, originating from any equipment, facility or property of the Purchaser Group including, after Delivery, from the Vessel or from handling, removal, transportation or disposal thereof, except to the extent such claims may have resulted from the negligence of a member of the Builder Group. b. Builder shall indemnify Purchaser for loss of or damage to Purchaser's property intended to be incorporated into or used in the Vessel to be performed while in Builder's care, custody or control prior to installation aboard the Vessel provided such loss or damage does not result from the negligence of any member of the Purchaser Group. c. Risk of loss of the Vessel shall rest with the Builder at all times prior to acceptance of the Vessel by Purchaser. d. In no event, except for the liquidated damages as provided in Sections 6 and 16 shall any member of the Purchaser Group, or the Builder Group be liable to each other for any incidental, consequential or special damages incurred by the other, including but not limited to, loss of profits, loss of business opportunities, loss of earnings or downtime, arising directly or indirectly out of or relating in any way to this Contract or any activities or omissions or delays in connection herewith, whether arising out of the negligence (in whole or in part), gross negligence or strict liability of either Party or the unseaworthiness of the Vessel or otherwise. The Purchaser Group and Builder Group hereby mutually release each other from all such losses. 9. PLANNED PROGRAMME, PROGRESS CONTROL AND REPORTING PLANNED PROGRAMME 9.1. The Vessel shall be constructed by the Builder in accordance with the Planned Programme set out in Appendix II hereof. A detailed copy of this plan, including sub level planning identifying critical paths, shall be made available to the Purchaser and updated on a regular basis. The plan will define certain stages of the construction process ("Milestones") 21 which must be completed by the dates specified therein. The Planned Programme will include a comprehensive statement of the dates on which the Owner Furnished Equipment are required to be delivered to the Shipyard. PROGRESS CONTROL AND REPORTING 9.2. At the commencement of the contract a "kick off " meeting shall be held during which the major parameters by which performance of the Builder will be measured are to be mutually agreed. These shall include but not necessarily be limited to a detailed weight budget, a steel procurement and processing schedule, an engineering schedule, outfitting targets, manning schedules etc . Unless mutually agreed otherwise such meeting shall be held within 30 days of contract signature. 9.3. During the course of the performance of this Contract the Builder shall submit to the Purchaser on a fortnightly basis, commencing on the date falling fourteen days after the kick off meeting and thereafter fortnightly a. a status report on the Vessel's construction as compared with the Planned Programme, including the critical path; b. a report setting out the actual progress in performance of this Contract during the previous month as compared with the Planned Programme. Such report to identify progress against the agreed performance parameters c. a report setting out the forecast lightship weight, identifying any variances from the agreed weight budget and in the case of negative variations including proposals for reducing the variance to within acceptable levels d. a list of Purchaser's Modifications and Statutory Modifications (if any) agreed or resolved by an expert during the previous month, as the case may be, including adjustments, if any, agreed or resolved by an expert, to the Contract; e. a report on the delivery of sub-contracted Materials during the previous month (the precise nature of which report shall be agreed, from time to time, between the Purchaser and the Builder). 9.4. Without prejudice to the Builder's obligations under this Contract, if the construction of the Vessel should for any reason whatsoever be delayed beyond the time-frame envisaged in the Planned Programme, the Builder shall immediately notify the Purchaser and shall within seven Working Days thereof provide to the Purchaser a schedule indicating, in so far as the delay which has occurred is not Permissible Delay, the steps (including any appropriate increase in manpower and material resources) the Builder intends to take to recover the time so lost. The Builder and the Purchaser shall thereafter meet at the earliest opportunity to discuss the schedule and the Builder's detailed plans for implementation of the same. 9.5. The Builder shall take monthly progress photographs illustrating the progress of the Vessel's construction up to and including trials and delivery. The Builder shall also supply the 22 Purchaser with sufficient number of photographs (size: approximately 18 x 24 cms) depicting the final stage of the Vessel as delivered: this set will be at least 25 percent colour prints. One set of standard transparencies will be supplied, free of charge to the Purchaser. Additional copies of photographs and transparencies will be made available by Builder, at the Purchaser's request and expense. 10. TITLE 10.1. To the extent Builder has been paid by the Purchaser, therefore the Vessel and all Materials from time to time purchased by Builder for use in connection with this Contract, whether unfinished or partly or wholly finished and whether at the Shipyard or at the premises of the Builder's subcontractors shall become and remain the absolute property of the Purchaser. The Purchaser shall be entitled to mortgage the Vessel to the extent title to the Vessel has passed to Purchaser as aforesaid in connection with the financing of its purchase of the Vessel and the Builder will execute any reasonable and necessary documentation required by the Purchaser to effect such mortgage. The Builder shall have no authority or entitlement to create any lien, encumbrance or charge over the Vessel, the Material or the Owner Furnished Equipment at any time except to the extent said lien or encumbrance is created by applicable law. 10.2. In furtherance of the provisions of Clause 10. 1 above the Builder shall (i) use all reasonable endeavours to procure that all subcontracts placed with all suppliers and manufacturers of Materials contain provisions similar to the above and (ii) ensure that all substantial items of Materials and Owner Furnished Equipment shall be clearly marked with the notation "Hull 1828" immediately upon their appropriation for use in connection with this Contract and in no circumstances more than twenty-four hours following their delivery to the Shipyard. Title to the Owner Furnished Equipment shall at all times from the date hereof vest in the Purchaser absolutely. 11. RISK AND INSURANCE RISK 11.1. The Vessel and all Materials (including, from the time of their delivery to the Shipyard, the Owner Furnished Equipment) shall remain at the risk of the Builder until Delivery. INSURANCE 11.2. The Builder under-takes to keep the Vessel and all Materials (including the Owner Furnished Equipment) in its or its Subcontractors' custody fully insured at all times and until Delivery at its own cost with first class insurers approved by the Purchaser, such approval not to be unreasonably withheld, in the amount of the higher of (1) the value of the Vessel as from time to time constructed or (i) the instalments of the Contract Price for the time being paid by the Purchaser to the Builder, (ii) the value of the Owner Furnished Equipment delivered to the Shipyard or built into or installed in or upon the Vessel. 23 11.3. The policy or policies (the "Stipulated Insurances"), which shall be subject to English law and jurisdiction, shall incorporate the following clauses:- a. the Institute of London Underwriters ("ILU") Clauses for Builder's Risks: b. the ILU Strikes Clauses - Builder's Risks; and c. (from the date of the Vessel's launching) the ILU War Clauses - Builder's Risks. 11.4. The policies shall name the Purchaser and the Builder as joint loss payees as their interest may appear but on terms that the Builder alone shall be responsible for all premiums payable thereunder. The Builder shall furnish the Purchaser promptly with certificates evidencing coverage and upon request copies of the policies. The originals shall be made available to the Purchaser, its employees or agents for inspection at Builder's corporate offices in Gulfport, Mississippi at all reasonable times. 11.5. The policies taken out shall contain a provision to the effect that, in the event of an actual, constructive, arranged or compromised total loss, such insurance proceeds as the Purchaser is entitled to hereunder shall be payable to the Purchaser as its interest may appear and such policies shall be so endorsed as to enable the Purchaser by its brokers or agents or personally to collect such proceeds pursuant to the provisions of this Clause. In addition, all such policies shall include provision that they shall not be capable of cancellation by the insurers without not less than thirty (30) days' prior written notice being given to the Purchaser and that not less than ten (10) days' prior written notice of non-renewal or lapse shall be given by the insurers to the Purchaser before the same shall take effect. 12. LOSS OR DAMAGE TO THE VESSEL 12.1. Should the Vessel or any items insured pursuant to the provisions of Clause 11 sustain loss or damage prior to Delivery and should such loss or damage not make the Vessel a total loss, actual, constructive, arranged or compromised, the Builder shall, at its own expense and with all due despatch, make good such damage to the satisfaction of the Purchaser and (if applicable) the Classification Surveyor, and any monies payable in respect of any insurance effected under Clause 11 shall be payable to the Builder. 12.2. Should the Vessel sustain loss or damage prior to Delivery hereunder such that it is either conceded by the insurers liable therefor, or determined by a court of competent jurisdiction, that the Vessel has become a total loss, actual, constructive, arranged or compromised, then the Builder shall not be liable to repair the damage or replace the Vessel and insurance proceeds shall be payable to Purchaser and Builder as their interest may appear. but, to the extent that the Purchaser has not made recovery of such sums under the Stipulated Insurances within sixty (60) Working Days of the total loss, the Builder shall:- a. refund promptly to the Purchaser in full the aggregate amount of instalments of the Contract Price already paid by the Purchaser: and 24 b. return to the Purchaser all Owner Furnished Equipment or refund to the Purchaser a sum equivalent to the value of any of same which have been lost or which cannot be removed in a sound condition from the Vessel. 12.3. When the conditions set out in sub-clause (2) above have been satisfied by the Builder, the Purchaser shall instruct the insurers to pay to the Builder all sums due and payable under the Stipulated Insurances in respect of the total loss. Save as elsewhere herein specifically provided to the contrary, the parties' obligations under this Contract shall thereupon cease and terminate. 13. TRIALS: TECHNICAL ACCEPTANCE 13.1. At least 120 days before the scheduled commencement of the same the Builder shall submit to the Purchaser for approval comprehensive testing and trials programmes covering the Full Scale Test and Trials (collectively the "Trials") described in Chapter 03000 of the Specifications, including (i) Workshop Tests, (ii) Quayside Trials (including the Inclining Test), and (iii) Sea Trials (including trial runs and all other tests at sea). 13.2. The Trials shall be conducted at the risk and expense of the Builder which shall provide and pay for the personnel necessary for the safe management and navigation of the Vessel during the same. The Builder shall also provide and pay for all necessary ballast and fresh water and shall meet all other costs associated with the Trials. The fuels, lubricants and consumable stores required for the Trials shall be specified, supplied and paid for by the Purchaser, who shall upon Delivery be entitled to reimbursement from the Builder of the costs of such fuels, lubricants and consumable stores as are consumed during the Trials. 13.3. The Builder shall give the Purchaser not less than seven Working Days' notice of the date and place of commencement of each of the Trials and representatives of the Purchaser shall be afforded every opportunity to observe and determine the performance of the Vessel during the same. Failure by the Purchaser to attend any Trial following due notice shall be deemed to be a waiver by the Purchaser of its rights of attendance in respect of such Trial. SEA TRIALS 13.4. The Sea Trials shall be carried out following satisfactory conclusion of all other Trials and after the Vessel's construction has been completed with only minor items of work outstanding which are agreed by the Authorised Representatives as suitable for completion after the Sea Trials but before Delivery. 13.5. The Sea Trials shall have the objective of permitting the Builder to demonstrate fulfilment of the quality and performance requirements for the Vessel as set forth in the Specifications. The course to be followed during the Sea Trials shall be determined by the Builder, but shall be in open waters off the Gulf Coast of the United States. The Purchaser shall be allowed to maintain a shadow crew and other necessary personnel on board the Vessel during the sea trials to familiarise themselves with the Vessel and its operation. 25 13.6. The safe management and navigation of the Vessel in transit to, during and from the Sea Trials shall remain the sole responsibility of the Builder. 13.7. Should the weather conditions at the time scheduled for the Sea Trials be such that they cannot be carried out properly, the Builder shall postpone them or such part of them as necessary to the earliest possible time when suitable weather conditions occur to ensure that all readings and results are obtained in a manner satisfactory to the Purchaser. Any delay to the Sea Trials caused by such unfavourable weather conditions, if the delay exceeds a total of seven (7) days, shall operate to postpone the Contractual Delivery Date by the period of delay involved and such delay shall be deemed to be Permissible Delay. 13.8. If during the Sea Trials any breakdown occurs which entails interruption or irregular performance and the breakdown can be repaired by the normal means available on board, this shall be done as soon as possible and the trial shall be continued after repairs are completed. However, if the Vessel must return to a port to enable the breakdown to be remedied, a further complete trial shall be undertaken at the earliest opportunity. 13.9. On completion of the Sea Trials to the satisfaction of the agreed Trial Procedure the Vessel shall be brought back to a berth in the Shipyard, or elsewhere as may be agreed, for the inspection of the machinery required in the Specifications, and during this period all defects or omissions found in the Vessel shall be remedied and made good by the Builder to the reasonable satisfaction of the Purchaser, and the machinery closed up by the Builder ready for sea at its expense and without expense to the Purchaser. TECHNICAL ACCEPTANCE 13.10. Within three (3) Working Days of completion of the Trials and the closing up of machinery referred to in sub-clause 9 above, the Builder shall notify the Purchaser in writing of the results of the Trials and shall, where the same is appropriate, confirm to the Purchaser that the Vessel conforms with the requirements of the Contract and Specifications. If the Purchaser is in agreement with the Builder, the Purchaser shall, within three (3) Working Days of receipt of the Builder's notice as aforesaid, advise the Builder in writing of its Technical Acceptance of the Vessel. 13.11. If, however, in the view of the Purchaser the Vessel or any part thereof does not conform to the requirements of this Contract and/or the Specifications, the Purchaser shall so advise the Builder (again within seven (7) Working Days of the receipt of the Builder's notice as aforesaid) and shall specify the respects in which the Vessel fails to conform with the requirements of this Contract and Specifications. The Builder shall thereupon take the necessary steps to correct such non-conformities and, upon completion of such works, the Builder shall advise the Purchaser who shall, in the reasonable exercise of its discretion, be entitled to require the Builder to undertake further trials of the Vessel; in such event the Builder shall give the Purchaser three Working Days' notice of such further trials. 13.12. Upon satisfactory completion of such remedial works and/or trials, the Purchaser shall, within four (4) Working Days after receipt of a further notice from the Builder that the 26 Vessel conforms with the requirements of the Contract and Specifications, notify the Builder of its Technical Acceptance of the Vessel or the respects in which the Vessel still fails to conform with the requirements of this Contract and the Specifications. This process shall be repeated until the earlier of (a) the Purchaser's Technical Acceptance of the Vessel or (b) the valid and proper termination or rescission of this Contract by either the Purchaser or the Builder. 13.13. If the Purchaser fails to notify the Builder in writing of its Technical Acceptance or otherwise of the Vessel within the periods as provided above the Purchaser shall be deemed to have accepted the Vessel. 13.14. The Purchaser's Technical Acceptance of the Vessel as above provided shall preclude the Purchaser from refusing Delivery of the Vessel as hereinafter provided, if the Builder complies with the procedural requirements for Delivery of the Vessel as provided in Clause 14 hereof. 14. DELIVERY OF THE VESSEL DELIVERY 14.1. The Vessel shall be delivered by the Builder to the Purchaser at the Shipyard (or other place as may be agreed with unrestricted access to the open sea) on 9th December, 1999 except that, in the event of Permissible Delay as defined in Clause 15.4 hereof, the aforementioned date shall be postponed accordingly. The aforementioned date, or such later date to which requirement to deliver may be postponed, is herein called the "Contractual Delivery Date". 14.2. Delivery shall take place on a Working/Banking Day to be nominated by the Builder following Technical Acceptance of the Vessel by the Purchaser and with not less than five (5) Working Days' advance notice to the Purchaser. Delivery shall be effected by the execution by the Parties of a Protocol of Delivery and Acceptance in the form set out in Appendix II, acknowledging delivery by the Builder and acceptance thereof by the Purchaser. The Builder shall give the Purchaser at least sixty (60 ) days' (plus or minus seven (7) days) calendar notice of the estimated date of Delivery. 14.3. The Builder guarantees that at the time of Delivery title to the Vessel (to the extent not already transferred to Purchaser) and every part thereof shall pass to the Purchaser free and clear of any and all liens, except liens created by Purchaser, claims, mortgages or other encumbrances upon it and in particular, but without limitation, that she shall be free of all burdens in the nature of imposts, taxes or charges imposed by any liabilities arising from the construction of the Vessel or from its operation on Trials or otherwise. DOCUMENTS TO BE PROVIDED TO THE PURCHASER 14.4. The Builder shall provide to the Purchaser the following documents prior to Delivery failing which the Purchaser may refuse to accept Delivery;- 27 a. Records of inventory of the Vessel's equipment including spare gear and the like as detailed in the Specifications; b. Records of any and all fuels, lubricants, consumable stores and fresh water supplied pursuant to this Contract by either the Builder or the Purchaser together with such quantities of the same as remain on board at Delivery; c. All certificates (including Class and other regulatory certificates) required to be furnished prior to or upon Delivery of the Vessel pursuant to the Specifications; such certificates save as noted in clause 2.5 are to be clean and free of all qualifications, reservations and recommendations whatsoever. d. Declaration of Warranty of the Builder in accordance with Clause 14.3 above; e. The following technical documentation:- e.1. Four (4) copies and one reproducible of all the "As Built" drawings of the Vessel required for its operation and maintenance in accordance with its design and purpose. e.2. Four (4) complete documentation and instructions (Operation and Maintenance) books covering builder supplied equipment e.3. Four (4) sets of Operating Manuals and Instruction Books according to MODU CODE 1989 with all the necessary data including sea preparation e.4. Four (4) copies of a complete maintenance guide including all drawings. e.5 One (1) copy of all the test and commissioning trials and results which have been done prior to delivery. e.6. Lightship weight, variable load and centre of gravity of lightship weight calculations. f. The certificates listed in Appendix VII, together with (i) Builder's Certificate or (at the Purchaser's option) Bill of Sale in favour of the Purchaser notarised and legalised to permit registration of the Vessel on the Netherland Antilles Register of Shipping and (ii) any other document relating to the condition and/or performance of the Vessel which the Purchaser may reasonably require provided the same is requested no later than seven Working Days prior to Delivery. 14.5. The documents listed in sub-clauses 14.4.e. 1-6 above are also to the extent that is practical to be supplied as a diskette in a format to be agreed between the Parties. REMOVAL OF THE VESSEL 28 14.6. Following Delivery of the Vessel, the Purchaser shall in seven (7) Working Days remove her from the Shipyard. If the Purchaser fails to remove the Vessel within this period, it shall pay to the Builder reasonable mooring charges thereafter until removal. 15. EXTENSION OF TIME FOR DELIVERY: PERMISSIBLE DELAY CAUSES OF DELAY 15.1. If at any time before the Contractual Delivery Date the construction of the Vessel is delayed due to Acts of God, acts of princes or rulers, war or other hostilities or preparations therefor, blockade, civil commotion or riots, epidemics, floods, hurricanes, earthquakes, tidal waves, landslides, fires, lightning, explosions, unusually severe inclement weather which stops production at the yard and can be shown to be in excess of the a five year statistical average, collisions or strandings, shortage of materials or equipment (other than resulting from any act, omission or improvidence of the Builder or its Subcontractors / Suppliers ), prolonged failure, shortage or restriction of electric current, oil or gas or destruction of or damage to the Shipyard or works of the Builder or its Subcontractors / Suppliers by any causes herein described, the Contractual Delivery Date and any Milestones not then achieved shall be postponed for the period of time during which construction of the Vessel is directly and unavoidably delayed by the same. 15.2. Any periods of time by which the Contractual Delivery Date of the Vessel and any Milestones not then achieved is properly and justifiably claimed by the Builder to be extended by reason of matters falling within (a) subclause 1 above or (b) Clauses 7.1-7.12, 13.7, 18.2 or 21.2 hereof shall be defined herein as "Permissible Delay". 15.3. The Builder's entitlement to a postponement of the Contractual Delivery Date and any Milestones not then achieved shall, however, be subject to:- a. the delay in respect of which the Builder is claiming relief not being within its reasonable control or contemplation at the date of signing of this Contract nor caused or contributed to by its error, neglect, act or omission or that of its agents, employees, suppliers or Subcontractors. Provided, however that in respect of suppliers / subcontractors for i) the "long lead" items identified in clause 5.12 above, together with ii) the Builders requirement for minimum tolerance steel as identified in the Specification and if applicable, iii) the detailed engineering sub-contractor referred to in clause 5.2 above where the Builder can show it exercised all due diligence in the placing and prosecuting of the orders and the management of these suppliers / subcontractors, errors, neglect, act or omission of such suppliers / subcontractors shall not preclude the Builders entitlement to a Permissible Delay b. the delay affecting the "critical path" of the Vessel's construction as at the time of commencement of the event; 29 c. since the occurrence of the event in respect of which relief is claimed, the Builder having taken all reasonable steps open to it to mitigate the effect of the event upon the Contractual Delivery Date and any Milestones not then achieved; and d. the Builder having duly given all the notices required under sub-clause (3) below within the time-limits therein laid down. NOTICES 15.4. Upon the occurrence of any of the events listed in sub-clause (1) above, the Builder shall:- a. within seven (7) Working Days of the date on which it became aware of the event, give the Purchaser notice in writing of the occurrence of the event; b. as soon as possible thereafter, and in any event not more than seven (7) Working Days after the giving of the said notice, submit to the Purchaser a statement in writing, specifying as far as possible, with full particulars, the nature and the cause of the event, the effect on the item involved, the likely overall effect computed from the Planned Programme upon the Contractual Delivery Date and any Milestones not then achieved and the steps which are being taken by it to mitigate any delay which may result from the event; c. within seven (7) Working Days after the date on which it becomes aware that the event is at an end, give the Purchaser notice in writing of the date when the event ended; d. within seven (7) Working Days of the date of the Builder's notice under sub-paragraph (c), notify the Purchaser of the period of time by which it claims the Contractual Delivery Date of the Vessel and any Milestones not then achieved should be extended by reason of the event. 16. DELAY IN DELIVERY LIQUIDATED DAMAGES 16.1. In the event that Delivery should be delayed beyond midnight local time on the Contractual Delivery Date, and any permitted extension thereof, the Builder shall, subject to the provisions of sub-clauses 4 and 5 of this Clause 15, pay to the Purchaser by way of liquidated damages for loss of use of the Vessel the amounts set out below:- 16.2. If the delivery of the Vessel is delayed, then, in such event, beginning at twelve o'clock midnight on the Delivery Date, the Builder shall pay to the Purchaser as agreed liquidated damages and not by way of penalty, the following amounts:- a. I - 30 days of delay US$ 10,000 per day b. 31 - to actual delivery US$ 20,000 per day 30 It being understood that in no event shall the Builder's obligation for such liquidated damages exceed $1,000,000.-. In this connection, the parties acknowledge that if the Vessel is not delivered by the Delivery Date, as allowed for extension, Purchaser will suffer damages from such later delivery and that Purchaser should be compensated for such damages. The parties further acknowledge, however, that it is not possible to accurately calculate such damages at this time and that therefore the parties agree that the liquidated damages are a fair and reasonable forecast of anticipated actual damages under the circumstances and will provide just compensation for the harm that is caused to Purchaser as a result of any late delivery. In the event of any such delays in delivery the said liquidated damages shall be deducted from the amounts otherwise due to Builder at the time of execution of the Protocol of Acceptance and Delivery. Parties hereto agree that the above shall be the sole and exclusive remedy for damages due to the late delivery save as set forth in section 16.3 TERMINATION FOR DELAY IN DELIVERY 16.3. Furthermore, if Delivery should not have occurred prior to the expiry of one hundred thirty five (135) days from the Contractual Delivery Date (as extended by Permissible Delays) the Builder shall be in default, in which case Clause 19.2 shall apply. 17. DEFECTS AND BUILDER'S GUARANTEE WARRANTY: 17.1. From the date of this Contract until the expiration of the Warranty Period (subject to Purchaser's right to report any defect, claim or loss within 30 days of the expiration of the Warranty Period pursuant to the terms of the following paragraph), Builder warrants that all labor furnished by Builder hereunder shall have been performed in a good and workmanlike manner. The provisions set forth herein as to the liabilities of the Builder are to apply also to all labor and workmanship furnished by any sub-contractor in Builder's performance of this Contract. Builder shall have no responsibility whatsoever with respect to any defect, claim, or loss of the Vessel not reported in writing to Builder within three hundred and sixty-five (365) days from the Delivery Date (as specifically defined in Sections 14 and 15) (such 365 day period being hereinafter referred to as the "Warranty Period"); provided, however, Purchaser may report to Builder warranty claims arising during the final thirty (30) days of the Warranty Period within thirty (30) days of the expiration of the Warranty Period. The Warranty granted to Purchaser by Builder shall extend only to those claims reported in writing to Builder within such Warranty Period or within thirty (30) days thereafter (as set forth above). For purposes solely for this Section 17, "Delivery Date" shall be defined as the earlier of the following: (1) fourteen (14) days after date of the final invoice from Builder upon completion of the Vessel, or (2) the date of actual delivery and acceptance of the Vessel. In the event Purchaser notifies Builder of any claim covered under this Warranty, Builder will make repairs and/or replacement at its option, at one of Builder's yards without expense to Builder for 31 transporting the Vessel, or any component thereof, to or from that yard; provided, however, that if it is not practical to have the Vessel proceed to such yard, Purchaser may, with prior written consent of Builder, have such repairs and/or replacement made elsewhere, and, in such event, Builder shall reimburse Purchaser a sum equivalent to (i) the amount Builder would have expended, at its own yard at Builder's then prevailing rates, or (ii) the amount actually expended by Purchaser, whichever is less. In no event shall Builder be responsible for any sum in excess of the cost of the repairs and/or replacement as specified herein, and Builder shall in no event be responsible for any claims to property, persons, and/or punitive or consequential damages, including, but not limited to claims for bodily injury, illness, disease, death, loss of service, loss of society, maintenance, cure wages, and any other consequential or punitive damages arising out of any breach of this Contract or faulty or negligent performance thereof. As to the installation of all third-party supplied components, materials or equipment, if the manufacturer or supplier has a representative at the job site during such installation, and if the installation is completed to the satisfaction of such representative, with all requirements of such representative having been satisfied by Builder, it shall be conclusively presumed that such installation has been completed by Builder in accordance with the manufacturer's recommendations, in a proper and satisfactory manner. Builder does not warrant that any equipment or materials purchased by it from a supplier or manufacturer for installation in the Vessel is free from manufacturers' defects and deficiencies and Purchaser specifically releases Builder from any such implied warranty of fitness or workmanship or freedom from defects relating thereto. To the extent available, Builder agrees to transfer and assign to Purchaser, without warranty of Builder with respect thereto, any warranties relative to material, equipment and/or labor furnished by others which warranties shall not be adversely affected by any limitation period set forth herein. Builder agrees that Manufacturer's Warranty on major components, including, but not limited to, main engines, gears, jacks, winches, generators, pumps, etc., shall be a minimum of six (6) months after the Delivery Date of the Vessel. Should Purchaser be required to enforce any such warranty, Builder will cooperate with Purchaser's efforts, short of instituting legal action on Purchaser's behalf and/or incurring other legal fees. Nothing contained herein shall obligate Builder at any time to repair or replace the Vessel, or any component part thereof, where such repair and/or replacement is caused, in whole or in part, by normal wear or unusual handling, by the negligent operation or maintenance of the Vessel, or its equipment or by abuse, rough weather, accident, fire, by Purchaser or Purchaser's agents, employees or representatives. With respect to paint, Builder warrants that it will purchase paint of good marine quality and that it will apply the paint in accordance with the manufacturer's specifications, recommendations, and inspection, and Builder makes no warranty, express or implied, with respect to the fitness of the paint or the manufacturer's specifications and recommendations. For any claim for damages to or loss of the Vessel, and/or damages to persons and/or property (including, but not limited to claims, demands, or actions for bodily injury, illness, disease, death, loss of service, loss of society, maintenance and cure, wages or property) made as a result of any 32 defect in the Vessel, or any component parts thereof, after the said Warranty Period, Purchaser shall have no claim or actions whatsoever against Builder, regardless of any negligence, tort, fault, strict liability or otherwise of Builder, its employees or sub-contractors, and Purchaser hereby waives and releases Builder and its employees and sub-contractors from and against any and all liability and any and all damages resulting therefrom, including, but not limited to, for personal injury, death, property damage, damage to and/or loss of the Vessel, delay, demurrage, loss of profits, loss of use, or any other consequential or punitive damages of any kind, whether such claim is based in contract, redhibition, negligence, strict liability, or otherwise, arising out of any defect and/or negligent design, the selection or choice of specifications and/or materials and/or component parts, manufacture, construction, fabrication, workmanship, labor and/or installation of equipment, materials and/or components or from any unseaworthy condition or any other defective condition of the Vessel, it being specifically understood and agreed that any such defects reported and/or occurring after the Warranty Period and all damages, loss of profits, demurrages, delay, losses of use or other consequential or punitive damages of any kind whatsoever resulting therefrom, shall not be the responsibility of Builder, but shall be borne exclusively by Purchaser. "THIS WARRANTY IS EXPRESSLY IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR THAT THE VESSELS, MATERIAL OR SERVICES ARE FIT FOR ANY PARTICULAR PURPOSE OR USE, AND SPECIFICALLY IN LIEU OF ALL INDIRECT, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES". 17.2. This guarantee shall not extend to Owner Furnished Equipment or to any damage caused by any defect therein not attributable to the Builder. GUARANTEE ENGINEER 17.3. Where so requested by the Purchaser, the Builder shall appoint a suitably qualified English-speaking Guarantee Engineer to serve on the Vessel as the representative of the Builder for such portion of the Guarantee Period as the Purchaser shall require; the Purchaser and its employees shall give the Guarantee Engineer full co-operation in carrying out his duties as the representative of the Builder on board the Vessel. In particular, the Purchaser shall accord the Guarantee Engineer treatment and subsistence on board the Vessel comparable to the Vessel's Chief Engineer (except that the Purchaser shall provide him accommodation in a standard passenger cabin) at no cost to the Builder. 17.4. The Purchaser shall pay the expenses of the Guarantee Engineer's repatriation by air to the point of origin upon termination of his services on the Vessel together with a daily rate of US$ 700 per day worked.. However, save as aforesaid, the Purchaser shall be responsible for no other expenses in connection with the Guarantee Engineer, who shall at all times be conclusively deemed an employee of the Builder. The Builder shall indemnify and hold harmless the Purchaser from and against personal injury, including death, of, or loss of or damage to property of the Guarantee Engineer unless the same shall been caused by the gross negligence of the Purchaser or any of its employees, agents or sub-contractors. If the Purchaser has reason to be 33 dissatisfied with the conduct or competence of the Guarantee Engineer, the Builder, on receiving particulars of the complaint, shall promptly investigate the matter and, if the complaint is found to be justified, make a change in the appointment. ASSIGNMENT OF BUILDER'S GUARANTEE 17.5. It is expressly agreed and understood that the benefit of this Guarantee shall be capable of transfer by the Purchaser to any Assignee. The Builder shall in such circumstances enter into any documentation reasonably requested by either the Purchaser or the Assignee to evidence such transfer and the vesting in the Assignee pursuant to such assignment of all rights in respect of this Guarantee. 18. DEFAULT BY THE PURCHASER EVENTS OF PURCHASER'S DEFAULT 18.1. The Purchaser shall be deemed to be in default of performance of its obligations under this Contract in the following cases: a. if the Purchaser fails to pay the amount of any of the Instalments of the Contract Price due to the Builder in the period prior to Delivery on the due date for payment thereof; b. if the Purchaser fails without legal justification to take delivery of the Vessel in accordance with Clause 14 and to pay the instalment of the Contract Price due thereon; c. if an order or an effective resolution is passed for the winding up of the Purchaser (otherwise than for the purposes of a reconstruction or amalgamation previously approved by the Builder) or if a receiver is appointed over the whole or any part of the undertaking or property of the Purchaser or if the Purchaser becomes insolvent or suspends payment generally of its debts or ceases to carry on its business or makes any special arrangement or composition with its creditors. 18.2. If the Purchaser is in default as to the payment of any instalment as provided in (a) or (b) of sub-clause (1) above, then without prejudice to any other rights of the Builder or of the Purchaser, the Purchaser shall be liable to pay interest at 2% per cent above LIBOR on the unpaid amount from the day from which the same became due to the Builder up until the date of actual payment thereof. The Builder shall further be entitled to claim as Permissible Delay within the meaning of Clause 14.4 any period of time during which the construction or completion of the Vessel has been delayed in consequence of the Purchaser's default as aforesaid. TERMINATION BY THE BUILDER 18.3. If default on the part of the Purchaser continues for a period of thirty days, the Builder shall have the right at its sole discretion to rescind this Contract by giving written notice to the Purchaser. The Builder shall in such event hold all of the instalments received from the Purchaser in trust both for itself and the Purchaser until disposal of the Vessel whereupon the 34 same shall either be retained by the Builder to compensate it for any shortfall between the Contract Price and the actual price obtained for the Vessel on disposal together. 18.4. In the event of rescission of this Contract in accordance with this Clause the Builder shall have the right and power either to complete or not to complete the Vessel as it deems fit but in any event shall sell the Vessel (either in its complete or incomplete form) at the best available price at a public or private sale on such reasonable terms and conditions. If the Builder sells the Vessel in an incomplete form then the Builder shall give credit to the Purchaser for any and all savings which arise from not having to complete the construction of the Vessel. 18.5. In the event of the sale of the Vessel in its completed state the proceeds of sale received by the Builder shall be applied to payment of all expenses attending such sale and otherwise incurred by the Builder as a result of the Purchaser's default and then to payment of all unpaid instalments of the Contract Price and interest on such instalments at the rate of 2 per cent above LIBOR from the respective due dates thereof to the date of application. 18.6. In the event of sale of the Vessel in its incomplete state the proceeds of sale received by the Builder shall be applied first to all expenses attending such sale incurred by the Builder as result of the Purchaser's default and then to payment of all costs of part-construction of the Vessel less the instalments retained by the Builder and compensation to the Builder for damages suffered by the Builder as a result of such default. 18.7. In either of the above events of sale, if the proceeds of sale exceed the sums to which such proceeds are to be applied as aforesaid the Builder shall promptly pay any such excess to the Purchaser without interest thereon and shall at the same time either permit the Purchaser to remove the Owner Furnished Equipment from the Shipyard or pay to the Purchaser the full value thereof. 18.8. If the proceeds of sale of the Vessel are insufficient to pay such total amounts payable as aforesaid the Purchaser shall be liable to pay to the Builder upon demand the amount of such deficiency. 19. DEFAULT BY THE BUILDER EVENTS OF BUILDER'S DEFAULT 19.1. In the event that any of the following events should occur:- a. the Builder shall without legal justification fail to proceed with construction of the Vessel with all reasonable despatch so that it fails to meet two consecutive Milestones within one hundred and thirty five days of the respective dates agreed for the same as extended by permissible delays; b. the Builder shall commit any material breach of this Contract and shall fail to remedy the same within five Working Days of receipt by the Builder of written notice from the Purchaser; 35 c. the making of any order or the passing of an effective resolution for the winding-up of the Builder (other than for the purposes of reconstruction or amalgamation which has been previously approved in writing by the Purchaser), or the appointment of a receiver of the undertaking or property of the Builder, or the insolvency of or a suspension of payment by the Builder, or the cessation of the carrying on of business by the Builder, or the making by the Builder of any special arrangement or composition with creditors of the Builder, and failure by the Builder The Purchaser may by notice in writing to the Builder elect to rescind this Contract. RESCISSION BY THE PURCHASER 19.2. In the event that the Purchaser shall exercise its option to rescind this Contract, the Purchaser shall give notice in writing to the Builder. The Builder shall thereupon immediately comply with either the provisions of clause 19.3 or clause 19.6 below as may be elected by Purchased in said notice:- 19.3. The Builder shall: a. secure the immediate discharge of all liens (including its own), claims, mortgages or other encumbrances upon the Vessel other than in favour of the Purchaser and/or its financiers; b. complete all works required as a minimum to permit the Vessel to depart from the Shipyard in a safe and seaworthy condition, remove its employees, agents and contractors, together with their equipment, from the Vessel and render all necessary assistance to the Vessel in leaving the Shipyard at the earliest moment convenient to the Purchaser; c. execute and deliver to the Purchaser an original of the Protocol of Delivery and Acceptance together with any and all documentation (including but not limited to a bill of sale or builder's certificate) in such form and such manner as the Purchaser shall in its absolute discretion determine shall be required for the purposes of registration of the Vessel in a shipbuilding or shipowning register other than the Newbuilding registry; and d. execute and deliver to the Purchaser all of the documentation listed in Clause 14.4 hereof to the extent that the same is at that time capable of production by the Builder. 19.4. All risk of loss of or damage to the Vessel shall where Purchaser elects to proceed per clause transfer to the Purchaser upon execution by the Purchaser of the Protocol of Delivery and Acceptance following receipt of all of the documentation received above. The Purchaser may, however, elect to execute the Protocol of Delivery and Acceptance notwithstanding the Builder's failure to deliver all or part of the other documentation required to be delivered by the Builder pursuant to subclauses 19.3.c and d above, 19.5. In the event that the Purchaser elects to proceed per clause 19.3 the Builder shall remain liable:- 36 a. to pay all liquidated damages to which the Purchaser may have become entitled to prior to the election to rescind; b. To indemnify the purchaser for any infringement for which the Builder would have been liable for pursuant to Clause 20 hereof but excluding liability for work done or Materials supplied other than by the Builder or its subcontractors pursuant to this Contract; and c. pursuant to its guarantee contained in Clause 17 hereof excluding liability for work done or Materials supplied other than by the Builder or its subcontractors pursuant to this Contract. d. if the reasonable expense of completion of the Work plus any reasonable expense incurred as a result of the Event of Default of Builder exceeds the balance of the Contract Price remaining unpaid, then such excess shall be immediately due and payable by Builder to Purchaser. The rights and remedies available to Purchaser under this Section shall not be exclusive, but shall be in addition to any and all rights and remedies available to Purchaser under this Contract or applicable law or equity practice. Furthermore, the designation of specific events of default of Builder and certain rights and remedies therefor shall not preclude Purchaser from exercising any rights or remedies available to it under this Contract for any breach of this Contract by Builder not constituting an Event of Default of Builder. 19.6. As an alternative to clause 19.3 if Purchaser so elects per clause 19.2 Builder shall promptly ( but no later than seven days of such receipt of such notice ) repay to the Purchaser the amount of all monies paid by the Purchaser in respect of the Contract Price together with interest thereon at a rate of 2 % over LIBOR from the date when such monies were paid by the Purchaser to the Builder up to the date of the repayment therefore. Upon receipt of such repayment, Purchaser shall execute all documentation required to vest title in the Vessel in its then condition to Builder. 19.7. In the event that Purchaser elects to proceed per clause 19.6, the Builder shall additionally purchase from the Purchaser and/or alternatively accept assignment / novation of purchase orders of such of the Owner Furnished Equipment as the Purchaser shall evidence it has either purchased or has a binding commitment to purchaser. The price payable for such OFE shall be evidenced by the Purchaser as what the Purchaser has expended plus interest from the date of such expenditure at two percent over LIBOR. Payment shall be made by the Builder within seven days of such evidence by the Purchaser. Upon such payment, Purchaser shall execute all documentation required to transfer title in such OFE to the Builder. 20. PATENT INDEMNITY PATENT NUMBERS AND TRADEMARKS 20.1. Machinery and equipment of the Vessel may bear the patent numbers, trademarks or trade names of the manufacturer. Nothing contained herein shall be construed as transferring any patent or trademark rights or copyrights in equipment covered by this Agreement, and all 37 such rights are hereby expressly reserved to the true and lawful Purchaser thereof. HOLD HARMLESS, THE PURCHASER 20.2. The Purchaser shall defend the Builder and hold it harmless in respect of infringement of any patent rights, copy rights or other intellectual property on account of the Purchaser Furnished Equipment or the Basic Design. HOLD HARMLESS, THE BUILDER 20.3. The Builder shall defend the Purchaser and hold it harmless in respect of infringement of any patent rights, copy rights or other intellectual property of the Vessel or construction components or equipment for the Vessel furnished by the Builder, except to the extent the Specifications require Builder to use the infringing method of work or construction of components or equipment. DESIGNS AND PROPERTY OF THE PURCHASER 20.4. The Builder agrees that the designs, drawings, specifications and ideas submitted by the Purchaser to the Builder are the property of the Purchaser, some of which are protected by U.S. or other, foreign patents and the remainder of which constitutes the trade secrets and know-how of the Purchaser. These designs, drawings, specifications and ideas shall not be copied or used in whole or in part by the Builder or divulged by the Builder to others for any purpose other than the proper performance of this Agreement. The Builder further agrees to notify its employees and subcontractors of the confidential nature of this property and the limitations upon its use. The parties expressly agree that the obligations of the builder under this Section 20 shall survive and remain effective notwithstanding the cancellation or termination of this Agreement for any reason whatsoever. 21. OWNER FURNISHED EQUIPMENT DELIVERY OF OWNER FURNISHED EQUIPMENT 21.1. The Purchaser shall, at its own expense, supply all articles specifically listed in Appendix II as ("Owner Furnished Equipment") to the Builder at the Shipyard in a condition ready for installation and by the date listed in Appendix IIa 21.2. Should the Purchaser fail to deliver to the Builder any item of Owner Furnished Equipment by the date so notified, any delay in the construction or completion of the Vessel thereby resulting shall be deemed Permissible Delay within the meaning of Clause 15.4. 21.3. In order to facilitate the installation of Owner Furnished Equipment by the Builder, the Purchaser shall at its own expense furnish the Builder with Vendor Information which shall generally consist of , necessary plans, instruction books, test reports and certificates required by applicable rules or regulations, and if necessary and if requested by the Builder, shall use all reasonable endeavours, at its own expense, to cause the manufacturers of Owner 38 Furnished Equipment to assist the Builder in the installation thereof or to make any necessary adjustment thereto at the Shipyard. In the event that any manufacturers representatives incur unnecessary standby time while attending at the Builders request such standby time shall be at the Builders expense. 21.4. The Purchaser shall be liable for the cost incurred by the Builder in the repair of Owner Furnished Equipment occasioned by their defective material or poor workmanship or failure to perform, or by damage caused to them during transportation to the Shipyard. 21.5. Any Owner Furnished Equipment found to be faulty or defective which require replacement or retesting shall be for the Purchaser's account. Furthermore, delays or damage resulting from faulty or defective equipment shall be considered Permissible Delays under the terms of Section 15 of this Contract. RESPONSIBILITY OF THE BUILDER 21.6. The Builder shall be responsible for storing and handing Owner Furnished equipment after their delivery to the Shipyard and shall install them on board the Vessel at the Builder's expense. The Owner Furnished Equipment shall be at the Builder's risk from the time of their delivery to the Shipyard until the time of their redelivery to the Purchaser either as part of the Vessel or otherwise. 21.7. Upon delivery of the Owner Furnished Equipment the Builder shall check by external inspection that the items appear to be in accordance with the relevant order and undamaged and if any item is not delivered with a weight certificate issued by a reputable body the Builder shall weigh the same in order to incorporate the actual weight and the actual weight control procedure. The Builder shall promptly inform the Purchaser if any item of the Owner Furnished Equipment does not conform to the relevant purchase order to enable the Purchaser to take corrective action. If the Builder fails to comply with this requirement, any additional cost shall be for the Builder's account and any delay shall not count as Permissible Delay hereunder. 21.8. In the event of termination or rescission of this Contract by the Purchaser and election by the Purchaser under clause 19.3 above, the Builder shall, at his own expense return to the Purchaser all Owner Furnished Equipment. 22. TAXES AND DUTIES 22.1. The Builder shall pay or cause to be paid all taxes, duties, fees and stamp duties of whatsoever nature imposed by any state of the United States in connection with its performance of its obligations under this Contract, excluding any taxes, duties, fees and stamp duties imposed in by any state of the United States upon the Owner Furnished Equipment. 22.2. The Purchaser shall pay or cause to be paid all taxes, duties, fees and stamp duties of whatsoever nature imposed outside [ the United States in connection with the execution and performance of this Contract, except for taxes, duties, fees and stamp duties imposed upon those items and services to be procured by the Builder and further excluding any taxes measured by he net income of the Builder. 39 23. ASSIGNMENT 23.1. The Purchaser may transfer, by assignment or novation, to any third party or parties (herein "Assignee(s)") any of its rights and/or obligations under this Contract. Provided, however, that, to the extent that any such assignment or novation transfers to an Assignee the obligations of this Contract, the Purchaser shall guarantee in a form acceptable to the Builder the performance by such Assignee of any of its obligations. 23.2. The Builder may, with the prior written approval of the Purchaser, assign the benefit of this Contract. 24. PRIORITY OF DOCUMENTS 24.1. The Appendices hereto shall form an integral part of this Contract as if the same were expressly set out herein. 24.2. If there is any discrepancy between the following documents priority between them shall be as follows:- a. between the terms of this Contract (excluding the Specifications) and the terms of the Specifications, the terms of the former shall prevail; b. between the Principal Drawings and the Specifications, the Specifications shall prevail; c. between the Principal Drawings, in the order of precedence contained in Appendix 1; d. between one approved Plan and another approved Plan, the later in date shall prevail; 25. NOTICES 25.1. Every notice, consent or approval (individually and collectively called "Communications" for the purposes of this Clause 25) given or required, whether expressly or impliedly, under this Contract shall be in writing. 25.2. Communications shall be given by the Builder to the Purchaser as follows: Address: Suite 205, Saffrey Square P.O. Box N8188 Nassau, Bahamas Attn: Company Secretary Facsimile: To be provided 40 25.3. Communications shall be given by the Purchaser to the Builder as follows: Address: 13085 Industrial Seaway Rd. Gulfport, Mississippi 39503 Attn: Mr. Daniel J. Mortimer Facsimile: 228-897-4803 with copy to: 1601 S. Childers Rd. Orange, Texas 77631 Attn: Mr. Don 0. Covington Facsimile: 409-882-9010 26. RECORDS AND AUDITS 26.1. The Builder shall maintain true and complete records in connection with the construction of the Vessel and all transactions related thereto, and shall retain all such records for not less than twenty-four (24) months following Delivery. 26.2. No director, employee or agent of the Builder shall give or receive any commission, fee, rebate, gift or entertainment of significant cost or value in connection with the work under this Contract, or enter into any business arrangement with any director, employee or agent of the Purchaser. 26.3. If any violation of sub-clause (2) above is found to have occurred prior to the date of signing this Contact and such violation is determined to have resulted directly or indirectly in the Purchaser's consent to enter into this Contract with the Builder the Purchaser may terminate this Contract in which case the provisions of Clause 19.2 shall apply. 26.4. The Builder shall use its best endeavours to procure that all Subcontractors: a. maintain records in accordance with sub-clause (1) above; b. enter into obligations with the Builder, to the like intent and effect as those which bind the Builder as above. 'he Builder shall promptly notify the Purchaser of any violation of such obligations involving Subcontractors which comes to the Builder's notice. 27. LAW 41 27.1. The construction, validity and performance of this Contract shall be governed by English Law. 28. DISPUTES 28.1. Any claim, difference or dispute which may arise out of this Contract shall be decided by the Commercial Court of the Queen's Bench Division of the High Court of England and Wales to whose exclusive jurisdiction the parties hereby agree. 28.2. For the purposes of any proceedings pursuant to sub-clause (1) above, the parties hereby irrevocably appoint the following as their agents for the service of process:- THE BUILDER: Hewett Battersby of St. Michael's Rectory Cornhill, London EC3V 9DS United Kingdom THE PURCHASER: Ince & Co., Solicitors Knollys House #11 Byward Street London EOR 5EN United Kingdom 28.3. Without prejudice to the generality of sub-clause (1) above and without prejudice to any express provision contained herein for referral of any matter to an expert, any dispute or difference of opinion between the parties relating to conformity of the construction of the Vessel, Materials or workmanship with this Contract, the Specifications and the other Contract Documents may, by agreement between the Parties, be referred to an expert, acting as an expert and not an arbitrator, to be appointed by agreement between them and whose opinion on the matter shall be final and binding upon the parties hereto. 28.4. If the parties shall fail to agree either (i) to submit the dispute to a technical expert or (ii) upon the identity of a mutually acceptable technical expert as aforesaid, such dispute shall be settled in the manner as defined in sub-clause 1 above. 29. MISCELLANEOUS 29.1. The terms of this Contract are to remain confidential to the parties and no disclosure of the same may be made to any third party other than for the purposes of permitting or ensuring its due performance by either party hereto or financial reporting as may be required under the applicable laws and regulations governing said financial reports. This obligation shall survive termination of this Contract for any reason whatsoever. The parties agree that within twenty-four hours of the execution of this Contract that the parties will use their reasonable endeavours to agree upon language of a press release to be jointly published. 42 30. SPARE PARTS 30.1. The Builder shall furnish spare parts and maintenance tools of the kind and in at least the specified quantities in accordance with the Specifications, Classification Society requirements, and the maker's standards, for items furnished by the Builder. The cost of these spare parts is included in the Contract Price. 30.2. In addition, the Builder shall supply to the Purchaser a list of the maker's recommended spare parts for two.(2) years of continuous operations covering items supplied by Builder, at least six months prior to the Vessel's completion. 30.3. The spare parts furnished by the Builder shall be properly protected against physical decay, corrosion and mechanical damage and shall be properly listed so that replacements may be readily ordered. 30.4. The Builder shall complete the storage spaces installation in time to enable to positioning, labelling and listing of all spare parts (the Builder and Purchaser supplied) prior to Delivery. The Builder at his own cost shall be responsible for handling, bringing on board and storage on the Vessel of all spare parts, tools and supplies under instruction and supervision of Purchaser's Representative. 31. SAFETY AND HEALTH STANDARDS 31.1. The Purchaser's Representative will have authority to monitor the performance of the work done by the Builder to ensure safe and workmanlike performance. 31.2. It is the Purchaser's policy not only to comply with the safety and health measures required by law but to act positively to prevent injury, ill health, damages and loss arising from its operations. The Purchaser requires the Builder and his sub-contractors to apply health, safety and local environmental standards in order to achieve high levels of performance. It is essential that the Builder and his sub-contractors undertaking work consistently show a high level of safety awareness and demonstrate that they are capable of conducting themselves in a safe and competent manner in their area of activity. 31.3. The Builder acknowledges the Purchaser's strong commitment to safety and affirms that he has a written safety policy which has been signed and is actively supported and endorsed by Builder's management. The Builder further affirms that his safety policy is widely disseminated, understood and implemented by and among Builder's and Builder's sub-contractors' employees. This policy shall be in English and such other language(s) as required. A copy of Builder's Safety Policy shall be furnished to the Purchaser prior to start of the work. 31.4. It is essential that good housekeeping is maintained by the Builder's employees throughout the term of this Contract. The working areas shall be kept tidy at all times, access ways kept clear and surplus/scrap material removed daily. Cleaning up at end of the job is not considered sufficient. Spillage of oil or chemicals shall be cleared up immediately to avoid fire hazards, slippery surfaces, contact with toxic substance and other hazards. Appropriate safety 43 precautions shall be taken during cleaning up. No oil grade with flash points lower than 55 degrees C shall be used for cleaning purposes. 31.5. Asbestos containing products are not to be applied on board the Vessel. Substitutes therefor shall be applied only after authorisation by the Purchaser. 31.6. The Builder shall report immediately to the Purchaser all accidents occurring during the term of this Contract and related to work thereunder, that result in injury to or death of any person and/or damage to or loss of property. Accidents are defined as "Unintentional or unplanned events that may or may not result in personal injury or equipment, plant, or property damage, or any combination of these". Purchaser and Builder agree to cooperate to reach mutually agreeable resolutions and immediate rectification of any perceived unsafe practices. 31.7. The Purchaser may require the Builder to permanently remove and replace any of Builder's or Builder's sub-contractors' employees who violate safety regulations and any equipment which is obviously unsafe. 31.8. The Builder shall, at his own expense, supply his personnel and his sub-contractors' personnel with adequate protective personal clothing, safety helmets, safety shoes, and other protective equipment required for the type of work to be carried out. 32. EFFECTIVENESS 32.1. This Contract is subject to, and shall become effective and legally binding on the parties at the date of execution. 32.2. The date upon which the above conditions shall all have been satisfied shall be known hereunder as the "Execution Date". IN WITNESS WHEREOF the parties hereto have caused this Contract to be duly executed the day and year first above written. THE PURCHASER: THE BUILDER: BY: Derek Leach BY: Richard M. Currence, Jr. Title: Attorney-in-Fact Title /s/ Illegible /s/ Illegible _____________________________ _______________________________ 44 EX-10.25(A) 89 EXHIBIT 10.25(A) SIDE LETTER NO 1. 9TH APRIL 1998 - - -------------------------------------------------------------------------------- Petrodrill Construction Inc Suite 205 Saffrey Square PO Box N 8188 Nassau Bahamas TDI-Halter L.P. 1800 West Loop South Houston Texas 77027 Gentlemen, Hull No 1828 We refer to the contract executed between us today in respect of the above hull. With respect to the target figures referred to in clause 6 of the contract it is agreed that these shall be amended to reflect those ultimately agreed between the Purchaser and Davie Industries in respect of Amethyst 2 & 3. Yours faithfully /s/ DEREK LEACH Derek Leach Attorney-in-Fact WE HEREBY ACKNOWLEDGE OUR UNDERSTANDING AND ACCEPTANCE OF THIS LETTER: /s/ RICHARD M. CURRENCE JNR. RICHARD M CURRENCE JNR. TDI-HALTER INC. 9TH APRIL 9, 1998 EX-10.25(B) 90 EXHIBIT 10.25(B) SIDE LETTER NO 2. 9TH APRIL 1998 - - -------------------------------------------------------------------------------- Petrodrill Construction Inc Suite 205 Saffrey Square PO Box N 8188 Nassau Bahamas TDI-Halter L.P. 1800 West Loop South Houston Texas 77027 Gentlemen, Hull No 1828 We refer to the contract executed between us today in respect of the above hull. This letter serves to confirm the agreement between us that we shall have the option by way of Purchasers Modification, to delete the provision of Builders All Risk Insurance per clause 11.2 from your workscope and provide same ourselves. In this event you confirm that you will provide us with a credit against the Contract Price which will reflect the higher of your evidenced quoted cost for the same or USD 400,000. Yours faithfully /s/ DEREK LEACH Derek Leach Attorney-in-Fact WE HEREBY ACKNOWLEDGE OUR UNDERSTANDING AND ACCEPTANCE OF THIS LETTER: /s/ RICHARD M. CURRENCE JNR. RICHARD M CURRENCE JNR. TDI-HALTER INC. 9TH APRIL 9, 1998 EX-10.25(C) 91 EXHIBIT 10.25(C) SIDE LETTER NO 3. 9TH APRIL 1998 - - -------------------------------------------------------------------------------- Petrodrill Construction Inc Suite 205 Saffrey Square PO Box N 8188 Nassau Bahamas TDI-Halter L.P. 1800 West Loop South Houston Texas 77027 Gentlemen, Hull No 1828 We refer to the contract executed between us today in respect of the above hull. It is hereby recognised by the Purchaser that the contract between the Builder and Purchaser for the supply of the Amethyst drilling units includes a budget of $8.6 million in respect to the electrical integrators package defined in clause 5.8 of the main contract. The package is related to GEC Alsthom offer No P354-A01 as discussed with the Builder on the 28th March in Rotterdam and modified in the meeting notes dated March 28th. The Purchaser and Builder will jointly finalise the technical and commercial requirements included in the offer and in the event that the final price of the package, delivered to the Builders yard, is less than $8.6 million the Purchaser will receive a credit from the Builder to the extent of 80% of any such variance. Yours faithfully /s/ DEREK LEACH Derek Leach Attorney-in-Fact WE HEREBY ACKNOWLEDGE OUR UNDERSTANDING AND ACCEPTANCE OF THIS LETTER: /s/ RICHARD M. CURRENCE JNR. RICHARD M CURRENCE JNR. TDI-HALTER INC. 9TH APRIL 9, 1998 EX-10.25(D) 92 EXHIBIT 10.25(D) SIDE LETTER NO. 4. 9TH APRIL 1998 - - -------------------------------------------------------------------------------- Petrodrill Construction Inc Suite 205 Saffrey Square PO Box N 8188 Nassau Bahamas TDI-Halter L.P. 1800 West Loop South Houston Texas 77027 Gentlemen, Hull No 1828 We refer to the contract executed between us today in respect of the above hull. It is agreed between the parties hereto that in lieu of the Warranty in Section 17 of the Contract the Purchaser, at its option, may elect to purchase from the Builder a more extensive warranty than that which is currently in the contract, for the price of $500,000 per vessel, or alternatively, again at its option to enter into an Escrow/Warranty Reserve Agreement. Under the terms of the Warranty Reserve Agreement, the Purchaser would pay the additional $500,000 into an Escrow Account to be drawn down upon by direct warranty costs. Funds remaining in the account at the end of the warranty period would be split evenly between the parties, any funds used, over and above the $500,000 would be for the Purchaser's account. Attached hereto is the agreed language for the more extensive warranty which would replace the existing Clause 17 and which defines the scope of work supplied, should the Purchaser elect to purchase this warranty for an additional $500,000. Yours faithfully /s/ DEREK LEACH Derek Leach Attorney-in-Fact WE HEREBY ACKNOWLEDGE OUR UNDERSTANDING AND ACCEPTANCE OF THIS LETTER: /s/ RICHARD M. CURRENCE JNR. RICHARD M CURRENCE JNR. TDI-HALTER INC. 9TH APRIL 9, 1998 - - -------------------------------------------------------------------------------- Side Letter No 4 Page 1 of 4 OPTION WARRANTY 17. DEFECTS AND BUILDER'S GUARANTEE GUARANTEE PERIOD 17.1. The Builder guarantees the Vessel for a period of twelve months from Delivery or, in respect of individual items as provided for in the Specification, for such greater period as may be agreed, against all defects whether attributable to Materials, workmanship, construction or detailed engineering, caused to the Vessel thereby. The aforesaid period of twelve months from Delivery shall be known herein as the "Guarantee Period". 17.2. This guarantee shall not extend to Owner Furnished Equipment or to any damage caused by any defect therein not attributable to the Builder, but it shall extend to defects in Materials, workmanship, installation engineering and to physical damage caused therein resulting from the Builder's installation of the Owner Furnished Equipment. 17.3. The Builder guarantees repairs or replacements to the Vessel made under the guarantee in sub-clause (1) above for a further period of twelve months from the date of completion of such repair or replacement subject to a maximum of 24 months. REMEDY OF DEFECTS 17.4. The Purchaser shall notify the Builder in writing within thirty days after discovery of any defect falling within the provisions of this Clause 17. The Purchaser's notice shall include such particulars as can reasonably be given as to the nature of such defect, the date of discovery and the place at which the Vessel can be made available for earliest inspection by or on behalf of the Builder. The Purchaser shall furnish to the Builder as soon as practicable copies of any relevant survey or inspection reports. 17.5. The Purchaser may require the Builder to make good any defect or physical damage for which the Builder is liable under this Clause 17 by giving notice of such requirement to the Builder. Any parts replaced shall on their removal become the property of and shall be at the risk of the Builder whilst the replacement parts fitted to the Vessel shall upon fitting become the property of the Purchaser. 17.6. The Builder shall execute the necessary work including the carrying out of any essential dismantling and reassembling with the utmost despatch in accordance with the quality standards which are applicable hereunder to the Vessel's original construction. 17.7. In the event that the Builder is unable to make good any defect at the Shipyard, it shall forthwith nominate a yard suitable for such purpose for the Purchaser's approval, and should the Purchaser consider such yard acceptable the Builder shall arrange for the making good of the defect and the carrying out of any essential dismantling and reassembling at its own expense. 17.8. Should the Purchaser consider the yard nominated by the Builder unacceptable, or should the Purchaser elect to have the work referred to above carried out elsewhere than at the Shipyard, the Purchaser shall nominate a yard acceptable to it. In such case the Builder shall pay to the Purchaser for repairs and/or replacements such sum as would equate to the costs of effecting such repairs at a first-class US Gulf Coast Commercial shipyard. The Builder may, at its own expense, have its representative in attendance during execution of the work. The Purchaser shall ensure that any parts replaced under this sub-clause are returned to the Builder (if required by the Builder) at the Builder's expenses, - - -------------------------------------------------------------------------------- Side Letter No 4 Page 2 of 4 and in such case those parts returned shall on their replacement become the property of and shall be at the risk of the Builder. 17.9. In the event of defects arising which fall within the provisions of this Clause 17, whether or not such defects require the Vessel to be drydocked, the Builder shall pay for any costs incurred by the Purchaser in making the Vessel available to the Builder or to any other yard for the making good of any such defect as aforesaid. Such additional costs shall exclude however the costs of transportation, port charges and the cost of fuels, lubricants and consumable stores consumed in excess of those which would have been consumed had the Vessel not deviated to allow the Builder to make good any such defects as aforesaid. 17.10. In the event that the Vessel is idle for more than 15 days in total accumulated time due to the defects under this Clause 17 the Guarantee Period shall be extended by the number of all days during which the Vessel is idle commencing with the sixteenth day, whether or not other work is undertaken simultaneously with the guarantee work. 17.11. Nothing contained herein shall obligate Builder at any time to repair or replace the Vessel, or any component part thereof, where such repair and/or replacement is caused, in whole or in part, by normal wear or unusual handling, by the negligent operation or maintenance of the Vessel, or its equipment or by abuse, rough weather, accident, fire, by Purchaser or Purchaser's agents, employees or representatives. 17.12. With respect to paint, Builder warrants that it will purchase paint of good marine quality and that it will apply the paint in accordance with the manufacturer's specifications, recommendations, and inspection, and Builder makes no warranty, express or implied, with respect to the fitness of the paint or the manufacturer's specifications and recommendations. The Builder will purchase paint insurance for the Purchaser. 17.13. For any claim for damages to or loss of the Vessel, and/or damages to persons and/or property (including, but not limited to claims, demands, or actions for bodily injury, illness, disease, death, loss of service, loss of society, maintenance and cure, wages or property) made as a result of any defect in the Vessel, or any component parts thereof, after the said Warranty Period, Purchaser shall have no claim or actions whatsoever against Builder, regardless of any negligence, tort, fault, strict liability or otherwise of Builder, its employees or subcontractors, and Purchaser hereby waives and releases Builder and its employees and subcontractors from and against any and all liability and any and all damages resulting therefrom, including, but not limited to, for personal injury, death, property damage, damage to and/or loss of the Vessel, delay, demurrage, loss of profits, loss of use, or any other consequential or punitive damages of any kind, whether such claim is based in contract, redhibition, negligence, strict liability, or otherwise, arising out of any defect and/or negligent design, the selection or choice of specifications and/or materials and/or component parts, manufacture, construction, fabrication, workmanship, labor and/or installation of equipment, materials and/or components or from any unseaworthy condition or any other defective condition of the Vessel, it being specifically understood and agreed that any such defects reported and/or occurring after the Warranty Period and all damages, loss of profits, demurrages, delay, losses of use or other consequential or punitive damages of any kind whatsoever resulting therefrom, shall not be the responsibility of Builder, but shall be borne exclusively by Purchaser. "THIS WARRANTY IS EXPRESSLY IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR THAT THE VESSELS, MATERIAL OR SERVICES ARE FIT FOR ANY PARTICULAR PURPOSE OR USE, AND SPECIFICALLY IN LIEU OF ALL INDIRECT, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES". - - -------------------------------------------------------------------------------- Side Letter No 4 Page 3 of 4 ASSIGNMENT OF SUBCONTRACTORS' GUARANTEES 17.14. The Builder agrees upon the expiry of the Guarantee Period to assign (to the extent to which it may validly do so) to the Purchaser, or as the Purchaser may direct, all the right, title and interest of the Builder in and to all guarantees or warranties given by the Subcontractors save insofar as the same relate to existing claims by the Purchaser against the Builder. - - -------------------------------------------------------------------------------- Side Letter No 4 Page 4 of 4 EX-10.25(E) 93 EXHIBIT 10.25(E) SIDE LETTER NO. 5. 9TH APRIL 1998 Petrodrill Construction Inc Suite 205 Saffrey Square PO Box N 8188 Nassau Bahamas TDI-Halter L.P. 1800 West Loop South Houston Texas 77027 Gentlemen, Hull No 1828 We refer to the contract executed between us today in respect of the above hull. This letter serves to confirm your undertaking to us that you will procure that without prejudice to the provisions of clause 17 of the Contract you will, at your own cost, procure a paint warranty insurance policy in amounts and on terms that we shall reasonably agree and you shall further procure that we shall have full benefit of and access to such insurance. Yours faithfully /s/ DEREK LEACH Derek Leach Attorney-in-Fact WE HEREBY ACKNOWLEDGE OUR UNDERSTANDING AND ACCEPTANCE OF THIS LETTER: /s/ RICHARD M CURRENCE JNR. RICHARD M CURRENCE JNR. TDI-HALTER INC. 9TH APRIL 9, 1998 EX-10.25(F) 94 EXHIBIT 10.25(F) NOVATION AGREEMENT THIS DEED (THE "NOVATION AGREEMENT") is made the 9th day of December, 1998 between: (1) TDI-HALTER, LIMITED PARTNERSHIP, a Louisiana limited partnership (the "Builder"), whose principal office is at 1601 South Childers Road, Orange, Texas 77631; (2) PETRODRILL OFFSHORE, INC. (formerly PETRODRILL CONSTRUCTION INC.) (the "PURCHASER"), a corporation organised under the laws of Bahamas, whose principal office is at Suite 205, Saffrey Square, P.O. Box N8188, Nassau, Bahamas; and (3) PETRODRILL FOUR LIMITED (the "NEW PURCHASER") a limited company organised under the laws of British Virgin Islands, whose registered office is at Arias Fabrega & Fabrega, Omar Hodge Building, 2nd Floor, Wickams City, Tortola, British Virgin Islands. (together referred to as the PARTIES) Whereas (A) Builder and the Purchaser are parties to an agreement relating to the construction and sale of a dynamic positioned semi-submersible drilling vessel with Builder's Hull No. 1828 dated 9 April 1998 (including any amendments included in the associated memorandum, meeting minutes and/or side letters made from time to time thereto (herein called the "AGREEMENT") which expression shall mean the said Agreement as transferred by this Novation Agreement. (B) The parties hereto have agreed that in consideration for entering into this Novation Agreement the Purchaser may transfer to the New Purchaser its rights and obligations under the Agreement upon the terms and subject to the conditions set out herein. Now it is agreed as follows: (1) Terms and expressions defined in the Agreement shall, unless the context otherwise requires, have the same meanings when used in this Novation Agreement. (2) Upon and with effect from the date of this Novation Agreement and subject to clause 6 of this Novation Agreement, Purchase does hereby transfer to the New Purchaser all of its obligations, liabilities, rights, title and interest in and to the Agreement. Upon and with effect from the date of this Novation Agreement, the Purchaser releases and discharges and agrees to release and discharge the Builder from the various covenants, undertakings, warranties and other obligations contained in the Agreement which are enjoyed by the Purchaser, and from all claims and demands whatsoever arising out of or in respect of the Agreement whether prior to, on or subsequent to the date of this Novation Agreement. -1- (3) Upon and with effect from the date of this Novation Agreement and subject to clause 6 of this Novation Agreement, the New Purchaser accepts and agrees to accept the transfer of all liabilities and obligations of the Purchaser under the Agreement (whether now existing or hereafter arising) and agrees to perform all the duties and to discharge all the liabilities and obligations of the Purchaser under the Agreement (whether now existing or hereafter arising). (4) Upon and with effect from the date of this Novation Agreement, the Builder agrees to perform all its duties and to discharge all of its obligations under the Agreement and to be bound by all the terms and conditions of the Agreement in every way as if the New Purchaser were named in the Agreement as a party ab initio in place of the Purchaser. Without limiting the generality of the foregoing, the Builder acknowledges and agrees that the New Purchaser shall have the right to enforce the Agreement and pursue all claims and demands (future or existing) whatsoever arising out of or in respect of the Agreement. The New Purchaser agrees and acknowledges that Builder's satisfactory performance of any obligation under the Agreement for the benefit of the Purchaser shall be deemed to satisfy the Builder's obligations to perform the obligations for the New Purchaser. (5) The New Purchaser confirms that it has received a copy of the Agreement and that it is familiar with the terms thereof. (6) Notwithstanding the above clauses it shall be a condition precedent to this Novation Agreement that the Purchaser shall provide to the Builder a Guarantee in the form attached in the schedule hereto, and this Novation Agreement shall not become effective until the Guarantee is provided by the Purchaser to the Builder in the form that appears in the schedule. (7) Each Party shall take all steps, execute all documents and do everything reasonably required by any other Party to give effect to the transactions contemplated by this Novation Agreement provided that the Purchaser and the New Purchaser shall jointly and severally reimburse the Builder on a full indemnity basis for all reasonable costs and expenses (including legal fees) incurred by the Builder pursuant to this Clause 7 or otherwise howsoever in connection with the negotiation and execution of this Novation Agreement. (8) The construction, validity and performance of this Novation Agreement shall be governed by English Law. Any claim, difference or dispute which may arise out of this Novation Agreement shall be decided by the commercial Court of the Queen's Bench Division of the High Court of England and Wales to whose exclusive jurisdiction the parties whereto agree. Nothing contained in this Novation Agreement shall waive any rights or remedies of the Builder under the Agreement including without limitation any rights or remedies related to any default under the Agreement or any event, act or omission which with the passing of time or the giving of notice would constitute a default under the Agreement. -2- SIGNED by TDI-HALTER LIMITED PARTNERSHIP on behalf of the BUILDER in the presence of: /s/ Illegible SIGNED by PETRODRILL OFFSHORE, INC. on behalf of the PURCHASER in the presence of: /s/ Illegible SIGNED by PETRODRILL FOUR LIMITED on behalf of the NEW PURCHASER in the presence of: /s/ Illegible -3- EX-10.25(G) 95 EXHIBIT 10.25(G) EXHIBIT 6 TO SECURITY AGREEMENT DOCUMENT 18 AMENDMENT NO. 1 TO SEMI-SUBMERSIBLE DRILLING VESSEL CONSTRUCTION CONTRACT BETWEEN TDI-HALTER, LIMITED PARTNERSHIP AND PETRODRILL FOUR LIMITED DATED APRIL 9, 1999 This Amendment No. 1 is entered into this 9th day of April, 1999, between TDI-HALTER, LIMITED PARTNERSHIP ("Builder"), and PETRODRILL FOUR LIMITED ("Purchaser") to that Semi-Submersible Drilling Vessel Construction Contract dated April 9, 1998 (Hull No. 1828) (the "Original Contract"). WHEREAS, the Original Contract was novated by PETRODRILL OFFSHORE, INC. (formerly Petrodrill Construction Inc.) to Purchaser by Novation Agreement dated as of December 9, 1998; WHEREAS, on the Closing Date the Purchaser will issue its United States Government Guaranteed Export Ship Financing Obligations, AMETHYST 4 Series (the "Obligations"), in order to finance the construction of the Vessel which is the subject of the Original Contract; WHEREAS, the United States of America, represented by the Secretary of Transportation, acting by and through the Maritime Administrator, is guaranteeing the payment of the outstanding principal of and interest on the Obligations pursuant to Title XI of the Merchant Marine Act, 1936, as amended; WHEREAS, the proceeds of the Obligations will be used for payment to the Builder in accordance with the terms of this Contract; and WHEREAS, the Purchaser and the Builder in order to induce the Secretary to guarantee the Obligations, wish to amend the Original Contract as detailed herein; NOW THEREFORE, in consideration of these premises, the mutual benefit set forth herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Purchaser and Builder agree as follows: 1. INSPECTION BY THE SECRETARY'S REPRESENTATIVES. The Builder shall permit inspection by, supply information to, and cooperate with representatives of the Secretary at its yard where the assembly of the Vessel is now taking place and at such other yards of the Builder, its affiliates and subcontractors where parts of the Construction Contract or subcontracts may be performed. Builder acknowledges that such cooperation may include, but is not limited, to providing the Secretary 1) reasonable access to the Vessel and areas of the Builder where work related to the Vessel is being performed by the Builder, its contractors and subcontractors, at all reasonable times during normal working hours to inspect performance of the Work and to observe trials and other tests, 2) copies of detailed production schedules for the Vessel along with changes to such schedules as they occur, 3) reasonable access to contract plans and specifications for the Vessel, 4) reasonable access to Builder's production manager or supervisor, 5) information on the origination and source of materials, and 6) reasonable access to progress payment and construction milestone information for the purpose of verifying (i) completion in accordance with the representations made to the Secretary, including, but not limited to, representations concerning the Vessel's Actual Cost, as defined in the Security Agreement, and (ii) compliance of the construction with the plans and specifications and the other terms of the Construction Contract. In conjunction with any such inspections by the Secretary, the Builder will furnish, on a temporary basis, reasonable space at its yard for the Secretary representatives and communication, copying and other facilities as appropriate. The Secretary's access to the Vessel shall be at the Secretary's and Purchaser's sole risk. The Builder assumes no responsibility save for its own gross negligence or intentional acts, and Purchaser assumes full liability for any injury that the Secretary or its representatives, agent or contractor may sustain on the Vessel during its construction and the Purchaser hereby fully releases and discharges the Builder from any liability with respect thereto. 2. CHANGES IN CONSTRUCTION CONTRACT. Notwithstanding anything to the contrary contained in the Construction Contract, the Construction Contract shall not be amended, modified or terminated after April 9, 1999, except in writing duly signed by the Builder and Purchaser with the prior written consent of the Secretary, provided that the Secretary's prior written consent shall not be necessary, but written notice to the Secretary shall be given, for (a) any mandatory change to the Construction Contract as a result of any requirements of any governmental agency, or (b) any non-mandatory changes that Builder and Purchaser desire to make which do not exceed, with respect to any item of the Vessel's construction, one (1%) percent of the Vessel's Contract Price and which do not, in the aggregate, cause the Vessel's Contract Price to be increased more than five (5%) percent or the delivery and completion date of the Vessel to be extended more than ten (10) days. Notwithstanding the foregoing, no change shall be made in the general dimensions and/or characteristics of the Vessel which would diminish the capacity of the Vessel to perform as originally intended by the Construction Contract, without the prior written consent of the Secretary. -2- 3. INSURANCE. a. Until each Vessel has been completed, physically delivered at the place of delivery and accepted by Purchaser, Purchaser shall cause such Vessel and all materials, outfitting, equipment and appliances to be installed in the Vessel including all materials, outfitting, equipment and appliances provided by the Builder or Purchaser and delivered to Builder for the construction of the Vessel or in the construction thereof, to be insured under a full form Builder's Risk Policy under the latest American Institute Builder's Risk Form in force and effect at the time that the construction of the Vessel is commenced when the Vessel's keel is laid, all at Purchaser's expense. Such policy(ies) shall name the Builder, the Purchaser and the United States of America as assureds. The policy(ies) shall provide that there shall be no recourse against the Builder and the United States of America for payment of any premiums; provided, however, the United States of America and Builder shall be subject to cancellation upon 30 days prior written notice as set forth below. The policy(ies) shall also provide a 30 day prior written notice of cancellation or material change in the policy to the Builder and the United States of America (U.S. Department of Transportation, Maritime Administration 400 Seventh St. S.W., Washington D.C. 20590 Attention, Chief, Division of Marine Insurance). The amounts, terms and conditions, deductibles and underwriters of the Builder's Risk Policy(ies) shall at all times be satisfactory to the Builder and the Secretary. b. The Builder's Risk policy(ies) shall provide that all losses in excess of $500,000 shall be paid to the Secretary for distribution by him to himself, the Builder and the Purchaser in accordance with the Security Agreement between the Purchaser and the Secretary, MA-13505, dated April 9, 1999, involving the Vessel and the Construction Contract. c. Builder shall also purchase and maintain, at its expense, during the life of the Construction Contract, Worker's Compensation Insurance at statutory amounts, with Longshoreman & Harbor Workers Compensation Act coverage endorsements and Employer's Liability Insurance in the amount of at least Two Million Dollars ($2,000,000). d. A satisfactory confirmation of insurance outlining the pertinent terms and conditions of the Builder's Risk Policy(ies) referred to above shall be provided to the Builder and the Secretary. The Purchaser shall be furnished a certificate of insurance for all other policies required hereunder. The original of the said Builder's Risk Policy shall be available in the Purchaser's office. All of the policies of insurance and certificates referred to herein shall contain a provision requiring the insurer at risk to give Purchaser, Builder and the Secretary thirty (30) days' notice, in writing prior to cancellation of any such insurance. 4. PROGRESS PAYMENTS. The Construction Contract shall contain provisions for making periodic payments for the work performed based performance milestones related to the construction of the Vessel, after such milestones are certified by the Purchaser and the Builder, or as otherwise provided in Clauses 4.1 and 4.2 of the Construction Contract. -3- 5. CERTIFICATE OF NO LIENS. At the time of Closing, now scheduled for April 9, 1999, and at the time of delivery of the Vessel and from time to time as payments will be requested from amounts held in escrow by the Secretary or from drawdowns from the Credit Facility established by the Credit Agreement, the Builder agrees, on behalf of itself, or any party claiming through the Builder, to execute certificates of no liens, in form and substance satisfactory to the Secretary to the extent that the Builder has been paid for such items but with exception for any liens, claims, security interests and encumbrances which may have been placed thereon by Purchaser in favor of a third party other than the Builder or its employees, and liens for non-delinquent payments arising in the ordinary course of Builder's business which liens Builder hereby warrants will be discharged by Builder when due, with respect to the applicable Vessel, hull or component parts for which payment is requested and with respect to all work that has previously been accomplished. 6. SUBORDINATION. The Builder agrees to, and does hereby fully subordinate to the rights of the Secretary all liens and security rights and remedies to enforce such rights which the Builder has or may have with respect to (i) all work, materials and components, incorporated in, or to be incorporated in the hull and the Vessel ("the Equipment") to which title has passed to Purchaser, and (ii) the Equipment that has not been paid for by the Purchaser only to the extent that such unpaid for Equipment has actually been incorporated into other Equipment, part of which has actually been paid for by Purchaser. Prior to the Closing Date, the Builder shall provide to the Secretary either (1) the release or subordination of any claim to a security interest or other encumbrance relating to the Equipment, and the remedies to enforce such rights, held or claimed by any of the Builder's lenders (which release or subordination shall be in form and substance satisfactory to the Secretary), or (2) an officer's certificate that the Builder has no lenders with any claim to a security interest or other encumbrance relating to the Equipment. 7. EQUIPMENT PROCEEDS. a. In the event that prior to delivery of the Vessel, following the occurrence or during the continuance of any default by Purchaser under any agreements with the Secretary, including but not limited to the Security Agreement (the "Secretary's Documents") or by the Builder under the Construction Contract, the Secretary shall have the sole right to sell the Equipment, provided that the Secretary complies with Section 7(c) of this Amendment. Any proceeds the Secretary receives from the sale of the Equipment, after deducting any fees or costs it incurs in connection with the enforcement of its rights under the Secretary's Documents, shall be distributed promptly between the Builder and the Secretary on a Pro Rata Basis (as defined below) based on the "Amount Due" (as defined below) to the Builder and the Secretary. b. For the purposes of this section, the "Amount Due" to the Builder shall include all payments then due to the Builder for materials purchased or work performed, provided, however, if the Builder is in material default under the Construction Contract as amended, such "Amount Due" to the Builder shall be zero. For the purposes of this section, the "Amounts Due" to the Secretary shall include all amounts secured by the Secretary's Documents related to the Equipment. For the purposes of this section, the share to be distributed to a party under the Pro Rata Basis shall be the net amount realized from the sale of the Equipment times a fraction equal to the Amount Due that party divided by the sum of the Amount Due both parties. -4- c. In the event of a Purchaser default and an enforcement of the Secretary's Documents, the Secretary shall use reasonable efforts to expedite the enforcement and foreclosure process for the enforcement of the Secretary's Documents. 8. CONSENT OF BUILDER. The Builder will separately enter into a Consent of Shipyard to the assignment by Purchaser to the Secretary, for purposes of security, of all of Purchaser's right, title and interest in the Construction Contract, and the proceeds thereof, if any such exist, or shall exist in the future. Such proceeds include any amounts that may be due to be refunded to Purchaser by the Builder or by any subcontractor or supplier to the Builder arising out of the Construction Contract, as amended, and any subcontracts or supply contracts into which the Builder has entered into or may enter into as a part of construction process. In the event of a default of the Builder under the Construction Contract, the Secretary may enforce Purchaser's rights hereunder. In the event of any discrepancy between a position of the Secretary and a position of the Purchaser, the Secretary's decision shall be binding on the Purchaser. 9. DISTINCT OBLIGATIONS. Builder hereby agrees and acknowledges that the obligations of Purchaser under the Construction Contract with regard to the Vessel are separate, distinct and independent of any other obligation or agreement of Purchaser and that a default by Purchaser under such other obligation or agreement shall not in any way affect the obligations of Builder under the Construction Contract with regard to the Vessel or permit Builder to exercise any right of set-off or other remedy (all of which Builder expressly waives and agrees not to assert) which could materially adversely affect the Construction Contract, the Vessel or the construction thereof. 10. RIGHT TO CURE. Notwithstanding anything to the contrary contained in the Construction Contract, Builder agrees to give the Secretary written notice, concurrent with any notice given to the Purchaser under the Construction Contract of any default by Purchaser and hereby grants the Secretary thirty (30) days from the receipt of any such notice to cure any default under the Construction Contract, and Builder agrees to take no action to enforce its rights pursuant to the Construction Contract until the elapse of said thirty (30) days. 11. SHIPYARD PLANS. Upon the delivery of the Vessel, or earlier if feasible, upon the Secretary's request, Builder and Purchaser agree (at Purchaser's expense) to submit to the Secretary one set of Builder plans, in form and substance satisfactory to the Secretary, for the Vessel as built. The Secretary shall not release the Plans to any third party unless required to do so by court order; provided that the Secretary shall give notice to the Purchaser and Builder of any request for such an order. Purchaser shall use its best efforts to include a provision setting forth the terms of this Paragraph 11 in the Security Agreement between the Secretary and the Purchaser. -5- 12. NOTICES. Any, notice or other communication required or permitted to the Secretary under shall be sent by (i) certified mail, postage prepaid, (ii) by nationally recognized overnight courier service, (iii) or by facsimile transmission, confirmed by certified mail postage prepaid or by nationally recognized overnight courier service, addressed as follows: United States Maritime Administration 400 Seventh Street, S.W. Washington, D.C. 20590 Attention: Office of Ship Finance 13. FURTHER AMENDMENTS TO CONTRACT. The Contract is further amended as follows: (a) REGISTRATION. The first sentence of Clause 2.8 is revised to read as follows: The Vessel shall upon delivery fly the flag of the Commonwealth of The Bahamas and be registered in the Register of Shipping in the Commonwealth of The Bahamas, all in accordance with Purchaser's Modification Request number 1828-0001. The price for this change order shall be determined in accordance with Clause 7 of the Contract. (b) PAYMENT SCHEDULE. The provisions relating to the Third through Tenth Installments in Clause 4.1 are revised to read as follows: THIRD INSTALLMENT: Ten percent (10%) of the Contract Price, being Eight Million Four Hundred Thousand U.S. Dollars (US$ 8,400,000), shall be paid within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorized Representative (or, in default thereof, the Classification Surveyor), certifying that Start of Fabrication has taken place, which is defined as the welding together of the first two plates on the basis that it is the start of a continuous production program. FOURTH INSTALLMENT: Fifteen percent (15%) of the Contract Price, being Twelve Million Six Hundred Thousand U.S. Dollars (US $12,600,000), shall be paid within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorized Representative (or, in default thereof, the Classification -6- Surveyor), certifying that the keel laying for the pontoons has taken place, which is defined as 200 tons of steel having been erected which can either be in one or two pontoons. FIFTH INSTALLMENT: Ten percent (10%) of the Contract Price, being Eight Million Four Hundred Thousand U.S. Dollars (US $8,400,000), within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorized Representative (or, in default thereof, the Classification Surveyor), certifying that 60% of the total 2400 tons for the pontoons (or 1440 tons) of steel have been erected. SIXTH INSTALLMENT: Five percent (5%) of the Contract Price, being Four Million Two Hundred Thousand U.S. Dollars (US $4,200,000), within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorized Representative (or, in default thereof, the Classification Surveyor), certifying that the Pontoons of the Vessel have successfully been launched, which is defined as the pontoons being afloat without any global structural damage having been incurred. For the sake of clarification, localized structural damage shall not constitute a reason for non-payment of the milestone. SEVENTH INSTALLMENT: Five percent (5%) of the Contract Price, being Four Million Two Hundred Thousand U.S. Dollars (US $4,200,000), within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorized Representative (or, in default thereof, the Classification Surveyor), certifying that the main engines have been started, which is defined as all engines having been started and run for a period of at least 4 hours. EIGHTH INSTALLMENT: Ten percent (10%) of the Contract Price, being Eight Million Four Hundred Thousand U.S. Dollars (US $8,400,000), within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorized Representative (or, in default thereof, the Classification Surveyor), certifying that -7- the substructure and drillfloor has been installed on the deckbox, which is defined as the drillfloor having been fitted upon its supports, tacked in place and being ready for permanent welding. NINTH INSTALLMENT: Ten percent (10%) of the Contract Price, being Eight Million Four Hundred Thousand U.S. Dollars (US $8,400,000), within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorized Representative (or, in default thereof, the Classification Surveyor), certifying that the deckbox has been launched and successfully mated with the Pontoons and Columns, which is defined as the deckbox having been fitted up, tacked in place and the rig safely returned to the quayside with all barges removed and being ready to start permanent welding of the deck box connections. TENTH INSTALLMENT: Seven and a half percent (7.5%) of the Contract Price, being Six Million Three Hundred Thousand U.S. Dollars (US $6,300,000), within three Banking Days from receipt by the Purchaser of a telefax notice from the Builder attaching a Stage Certificate in the form of the draft attached as Appendix V, countersigned by an Authorized Representative (or, in default thereof, the Classification Surveyor), certifying that Seatrials have commenced, which is defined as the Vessel having left the quayside to commence trials at sea. ELEVENTH INSTALLMENT: Seven and a half percent (7.5%) of the Contract Price, being Six Million Three Hundred Thousand U.S. Dollars (US $6,300,000), together with any increase or any decrease of the Contract Price arising from the provisions of Clauses 4.8, 6, and 16 below, shall be paid upon delivery. (c) BONUS SCHEDULE. A new Clause 4.8 is added to read as follows: If the Vessel is delivered prior to the Contractual Delivery Date (as amended by this Amendment No. 1 and as extended by Permissible Delays), the Purchaser shall pay to Builder Sixty Thousand U.S. Dollars ($60,000) for each day that the Vessel is delivered before the Contractual Delivery Date (as amended by this Amendment No. 1 and as extended by Permissible Delays). (d) FOURTH INSTALLMENT. Not withstanding any other provision of the -8- Contract, the parties agree that the Fourth Installment shall be due April 11, 1999 and that the Builder will not exercise its right to rescind the Contract under Clause 18.3, prior to April 11, 1999. (e) LIGHTSHIP WEIGHT. With respect to Clause 6, the Purchaser will at its own cost and expense engineer the detailed design of blisters as a contingency measure. The size of each blister will be as large as possible with the existing constraints of the Vessel such that it does not significantly effect the Vessel's motion characteristics or operational performance. In the event that such blisters are required to be installed, Purchaser will not exercise its rights to rescind the Contract by reason of delay for the fabrication, installation or testing of the blisters under Clause 16.3 for an additional period of ninety (90) days, beyond the date that Builder is in default under Clause 16.3 of the Contract provided that Builder has otherwise completed its scope of work for the Vessel except for the fabrication, installation or testing of the blisters, and except as a result of any scope of work that cannot be completed as a result of the need to install the blisters, such as sea trials. (f) DELIVERY. The first sentence of Clause 14.1 of the contract is revised to read as follows: The Vessel shall be delivered by the Builder to the Purchaser at the Shipyard (or other place as may be agreed with unrestricted access to the open sea) on 9th June, 2000, except that, in the event of Permissible Delay as defined in Clause 15.4 hereof, the aforementioned date shall be postponed accordingly. (g) LIQUIDATED DAMAGES. The first two sentences of Clause 16.2 are revised to read as follows: If the delivery of the Vessel is delayed, then, in such event, beginning at twelve o'clock midnight on the Contractual Delivery Date, the Builder shall pay to the Purchaser as agreed liquidated damages and not by way of penalty, the following amounts: a. 1- 30 days of delay USD $20,000 per day b. 31-to actual delivery USD $40,000 per day It being understood that in no event shall the Builder's obligations for such liquidated damages exceed USD $2,000,000. (h) ENGINEERING. The Purchaser shall use its best efforts to assist the Builder in the completion of Builder's engineering, and to advise Builder of preferred solutions, all in order to expedite the engineering process in as efficient a manner as possible. -9- Builder and Purchaser agree to address these issues in a separate Teaming Agreement. 14. DEFINITIONS. As used in this Amendment No. 1: "Secretary" means the Secretary of Transportation or any official or official body from time to time duly authorized to perform the duties and functions of the Secretary of Transportation under Title XI of the Act (including the Maritime Administration, the Acting Maritime Administrator, and to the extent so authorized, the Deputy Maritime Administrator and other officials of the Maritime Administration). "Security Agreement" means the security agreement, Contract No. MA-13505, with respect to the Vessel, executed by the Purchaser and the Secretary. Capitalized terms not otherwise defined herein shall have the meaning set forth in the Security Agreement. -10- IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1 as of the date set forth above. WITNESS: TDI-HALTER, LIMITED PARTNERSHIP Builder BY: MARITIME HOLDINGS, INC., ITS GENERAL PARTNER /s/ CHRISTINE B. ZUCKMAN By: /s/ CHUCK DECUIR - - ------------------------------ ----------------------------- Vice President WITNESS: PETRODRILL FOUR LIMITED Purchaser /s/ ROBERT W. RANDALL By: /s/ EARL W. MCNIEL - - ------------------------------ ----------------------------- Secretary Treasurer AGREED AND APPROVED: Secretary of Transportation Maritime Administrator By: /s/ JOEL C. RICHARD - - ------------------------------ Secretary Maritime Administration -11- EX-10.26 96 EXHIBIT 10.26 Bond No. SC 111 3329 7116 PERFORMANCE BOND KNOW ALL MEN BY THESE PRESENTS: That we, TDI-Halter, L.P. (hereinafter called "Principal") as Principal, and Fireman's Fund Insurance Company, a corporation organized and existing under the laws of the State of California, and authorized to transact business in the State of Mississippi (hereinafter called "Surety"), as Surety, are held firmly bound unto Petrodrill Construction, Inc. (hereinafter called "Obligee"), as Obligee, in the penal sum of Eighty Four Million and no/100 US Dollars ($84,000,000.00), good and lawful money of the United States of America, for the payment of which, well and truly to be made, we bind ourselves, our heirs, administrators, executors, successors, and assigns, jointly and severally, firmly by these presents. Signed, Sealed and Dated this 13th day of April, 1998. Whereas, the above bounden Principal has entered into a certain written contract with the above-named Obligee, dated the 9th day of April, 1998 for One (1) fully operational and complete self-propelled Dynamic Positioned Semi-Submersible Drilling Vessel - Hull Number 1828 which contract is hereby referred to and made a part hereof as fully and to the same extent as if copied at length herein. NOW, THEREFORE, THE CONDITION OF THE ABOVE OBLIGATION IS SUCH, That if the above bounden Principal shall well and truly keep, do and perform, each and every, all and singular, the matters and things in said contract set forth and specified to be by the said Principal kept, done and performed at the time and in the manner in said contract specified, and shall pay over, make good and reimburse to the above-named Obligee, all loss and damage which said Obligee may sustain by reason of failure or default on the part of said Principal, then this obligation shall be void; otherwise to be and remain in full force and effect. TDI-HALTER, L.P. ________________________________ Principal /s/ Illegible FIREMAN'S FUND INSURANCE COMPANY ________________________________ Surety By /s/ Illegible ________________________________ Tomi J. Braun, Attorney-in-Fact GENERAL POWER OF ATTORNEY FIREMAN'S FUND INSURANCE COMPANY KNOW ALL MEN BY THESE PRESENTS: That FIREMAN'S FUND INSURANCE COMPANY, a Corporation duly organized and existing under the laws of the State of California, and having its principal office in the County of Marin, State of California, has made, constituted and appointed, and does by these presents make, constitute and appoint JERRY P. ROSE, TOMI J. BRAUN, DON E. CORNELL, L. RAY PITTS, JR., ROBBI MORALES, jointly or severally, Dallas, TX its true and lawful Attorney(s)-in-Fact, with full power and authority hereby conferred in its name, place and stead, to execute, seal, acknowledge and deliver any and all bonds, undertaking, recognizances or other written obligations in the nature thereof and to bind the Corporation thereby as fully and to the same extent as if such bonds were signed by the President, sealed with the corporate seal of the Corporation and duly attested by its ecretary, hereby ratifying and confirming all that the said Attorney(s)-in-Fact may do in the premises. This power of attorney is granted pursuant to Article VII, Sections 45 and 46 of By-laws of FIREMAN'S FUND INSURANCE COMPANY now in full force and effect. "Article VII. APPOINTMENT AND AUTHORITY OF RESIDENT SECRETARIES, ATTORNEY-IN-FACT AND AGENTS TO ACCEPT LEGAL PROCESS AND MAKE APPEARANCES. Section 45. APPOINTMENT. The Chairman of the Board of Directors, the President, any Vice-President or any other person authorized by the Board of Directors, the Chairman of the Board of Directors, the President or any Vice-President may, from time to time, appoint Resident Assistant Secretaries and Attorneys-in-Fact to represent and act for and on behalf of the Corporation and Agents to accept legal process and make appearances for and on behalf of its Corporation. Section 46. AUTHORITY. The authority of such Resident Assistant Secretaries, Attorneys-in-Fact and Agents shall be as prescribed in the instrument evidencing their appointment. Any such appointment and all authority granted thereby may be revoked at any time by the Board of Directors or by any person empowered to make such appointment." This power of attorney is signed and sealed under and by the authority of the following Resolution adopted by the Board of Directors of FIREMAN'S FUND INSURANCE COMPANY at a meeting duly called and held on the 7th day of August, 1984, and said Resolution has not been amended or repealed: "RESOLVED, that the signature of any Vice-President, Assistant Secretary, and Resident Assistant Secretary of this Corporation, and the seal of this Corporation may be affixed or printed on any power of attorney, on any revocation of any power of attorney, or on any certificate relating thereto, by facsimile, and any power of attorney, and revocation of any power of attorney, or certificate bearing such facsimile signature or facsimile seal shall be valid and binding upon the Corporation." IN WITNESS WHEREOF, FIREMAN'S FUND INSURANCE COMPANY has caused these presents to be signed by its Vice-President, and its corporate seal to be hereunto affixed this 23rd day of September, 1997. FIREMAN'S FUND INSURANCE COMPANY By /s/ Illegible ____________________________________ Vice-President STATE OF CALIFORNIA ss. ss. COUNTY OF MARIN ss. On this 23rd day of September, 1997, before me personally came M.A. Mallonee, to me known, who, being by me duly sworn, did depose and say: that he is Vice-Ptesident of FIREMAN'S FUND INSURANCE COMPANY, the Corporation described in and which executed the above instrument; that he knows the seal of said Corporation; that the seal affixed to the said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said Corporation and that he signed his name thereto by like order. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal, the day and year herein first above written. /s/ Illegible ____________________________________ Notary Public CERTIFICATE STATE OF CALIFORNIA ss. ss. COUNTY OF MARIN ss. I, the undersigned, Resident Assistant Secretary of FIREMAN'S FUND INSURANCE COMPANY, a CALIFORNIA Corporation, DO HEREBY CERTIFY that the foregoing and attached POWER OF ATTORNEY remains in full force and has not been revoked; and furthermore that Article VII, Sections 45 and 46 of the By-laws of the Corporation, and the Resolution of the Board of Directors; set forth in the Power of Attorney, are now in force. Signed and sealed at the County of Marin. Dated the 13th day of April, 1998. /s/ ILLEGIBLE ____________________________________ Resident Assistant Secretary EX-10.27 97 EXHIBIT 10.27 LABOR & MATERIAL PAYMENT BOND THIS BOND IS ISSUED SIMULTANEOUSLY WITH PERFORMANCE BOND IN FAVOR OF THE OWNER CONDITIONED ON THE FULL AND FAITHFUL PERFORMANCE OF THE CONTRACT KNOW ALL MEN BY THESE PRESENTS: That TDI-Halter, L.P., 1601 South Childers Road, Orange Texas 77631 as Principal, hereinafter called Principal, and Fireman's Fund Insurance Company, 777 San Marin Dr., Novato, CA 94998, as Surety, hereinafter called Surety, are held and firmly bound unto Petrodrill Construction, Inc., Suite 205, Saffrey Square, P.O. Box N8188, Nassau, Bahamas as Obligee, hereinafter called Owner, for the use and benefit of claimants as hereinbelow defined, in the amount of Eighty Four Million and no/100 US Dollars ($84,000,000.00), for the payment whereof Principal and Surety bind themselves, their heirs, executors, administrators, successors and assigns, jointly and severally, firmly by these presents. WHEREAS, Principal has by written agreement dated April 9, 1998 entered into a contract with Owner for One (1) fully operational and complete self-propelled Dynamic Positioned Semi-Submersible Drilling Vessel - Hull Number 1828 in accordance with drawings and specifications prepared by Petrodrill Construction, Inc. which contract is by reference made a part hereof, and is hereinafter referred to as the Contract. NOW THEREFORE, THE CONDITION OF THIS OBLIGATION is such that, if Principal shall promptly make payment to all claimants as hereinafter defined, for all labor and material used or reasonably required for use in the performance of the Contract, then this obligation shall be void; otherwise it shall remain in full force and effect, subject, however, to the following conditions: 1. A claimant is defined as one having a direct contract with the Principal or with a Subcontractor of the Principal for labor, material, or both, used or reasonably required for use in the performance of the Contract, labor and material being construed to include that part of water, gas, power, light, heat, oil, gasoline, telephone service or rental of equipment directly applicable to the Contract. 2. The above named Principal and Surety hereby jointly and severally agree with the Owner that every claimant as herein defined, who has not been paid in full before the expiration of a period of ninety (90) days after the date on which the last of such claimant's work or labor was done or performed, or materials were furnished by such claimant, may sue on this bond for the use of such claimant, prosecute the suit to final judgment for such sum or sums as may be justly due claimant, and have execution thereon. The Owner shall not be liable for the payment of any costs or expenses of any such suit. 3. No suit or action shall be commenced hereunder by any claimant: 1 (a) Unless claimant, other than one having a direct contract with the Principal, shall have given written notice to any two of the following: The Principal, the Owner, or the Surety above named, within ninety (90) days after such claimant did or performed the last of the work or labor, or furnished the last of the materials for which said claim is made, stating with substantial accuracy the amount claimed and the name of the party to whom the materials were furnished, or for whom the work or labor was done or performed. Such notice shall be served by mailing the same by registered mail or certified mail, postage prepaid, in an envelope addressed to the Principal Owner or Surety, at any place where an office is regularly maintained for the transaction of business, or served in any manner in which legal process may be served in the state in which the aforesaid project is located, save that such service need not be made by a public officer. (b) After the expiration of one (1) year following the date on which Principal ceased Work on said Contract, it being understood, however, that if any limitation embodied in this bond is prohibited by any law controlling the construction hereof such limitation shall be deemed to be amended so as to be equal to the minimum period of limitation permitted by such law. (c) Other than in a state court of competent jurisdiction in and for the county or other political subdivision of the state in which the Project, or any part thereof, is situated, or in the United States District Court for the district in which the Project, or any part thereof, is situated, and not elsewhere. 4. The amount of this bond shall be reduced by and to the extent of any payment or payments made in good faith hereunder, inclusive of the payment by Surety of mechanics' liens which may be filed of record against said improvement, whether or not claim for the amount of such lien be presented under and against this bond. Signed and sealed this 13th day of April A.D. 1998. /s/ illegible _____________________________ TDI-Halter, L.P. (Principal) (Seal) By: /s/ Illegible ________________________________________ Title /s/ Illegible _____________________________ Fireman's Fund Insurance Company (Surety) (Seal) By /s/ Illegible _________________________________________ Tomi J. Braun Attorney-in-Fact 2 GENERAL POWER OF ATTORNEY FIREMAN'S FUND INSURANCE COMPANY KNOW ALL MEN BY THESE PRESENTS: That the FIREMAN'S FUND INSURANCE COMPANY, a Corporation duly organized and existing under the laws of the State of California, and having its principal office in the County of Marin, State of California, has made, constituted and appointed, and does by these presents, make, constitute and appoint JERRY P. ROSE, TOMI J. BRAUN, DON E. CORNELL, L. RAY PITTS, JR., ROBBI MORALES, jointly or severally, DALLAS, TEXAS its true and lawful Attorney(s)-in-Fact, with full power and authority hereby conferred in its name, place and stead, to execute, seal, acknowledge and deliver any and all bonds, undertaking, recognizances or other written obligations in the nature thereof and to bind the Corporation thereby as fully and to the same extent as if such bonds were signed by the President, sealed with the corporate seal of the Corporation and duly attested by its Secretary, hereby ratifying and confirming all that the said Attorney(s)-in-Fact may do in the premises. This power of attorney is granted pursuant to Article VII, Sections 45 and 46 of By-laws of FIREMAN'S FUND INSURANCE COMPANY now in full force and effect. "Article VII. Appointment and Authority of Resident Secretaries, Attorney-in-Fact and Agents to accept Legal Process and Make Appearances. Section 45. Appointment. The Chairman of the Board of Directors, the President any Vice-President or any other person authorized by the Board of Directors, the Chairman of the Board of Directors, the President or any Vice-President may, from time to time, appoint Resident Assistant Secretaries and Attorneys-in-Fact to represent and act for an on behalf of the Corporation and Agents to accept legal process and make appearances for and on behalf of the Corporation. Section 46. Authority. The authority of such Resident Assistant Secretaries, Attorneys-in-Fact and Agents shall be as prescribed in the instrument evidencing their appointment. Any such appointment and all authority granted thereby may be revoked at any time by the Board of Directors or by any person empowered to make such appointment." This power of attorney is signed and sealed under and by the authority of the following Resolution adopted by the Board of Directors of FIREMAN'S FUND INSURANCE COMPANY at a meeting duly called and held on the 7th day of August, 1984, and said Resolution has not been amended or repealed: "RESOLVED, that the signature of any Vice-President, Assistant Secretary, and Resident Assistant Secretary of this Corporation, and the seal of this Corporation may be affixed or printed on any power of attorney, on any revocation of any power of attorney, or on any certificate relating thereto, by facsimile, and any power of attorney, any revocation of any power 3 of attorney, or certificate bearing such facsimile signature or facsimile seal shall be valid and binding upon the Corporation." IN WITNESS WHEREOF, FIREMAN'S FUND INSURANCE COMPANY has caused these presents to be signed by its Vice-President, and its corporate seal to be hereunto affixed this 23rd day of September, 1997. FIREMAN'S FUND INSURANCE COMPANY By /s/ Illegible _____________________________________________ Vice President STATE OF CALIFORNIA ss. ss. COUNTY OF MARIN ss. On this 23rd day of September, 1997, before me personally came M.A. Mallonee to me known, who, being by me duly sworn, did depose and say: that he is Vice-President of FIREMAN'S FUND COMPANY, the Corporation described in and which executed the above instrument; that he knows the seal of said Corporation; that the seal affixed to the said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said Corporation and that he signed his name thereto by like order. IN WITNESS WHEREOF, I have hereunto set my hand and affixed by official seal, the day and year herein first above written. /s/ Illegible (SEAL) _____________________________________________ Notary Public CERTIFICATE STATE OF CALIFORNIA ss. ss. COUNTY OF MARIN ss. I, the undersigned, Resident Assistant Secretary of FIREMAN'S FUND INSURANCE COMPANY, a CALIFORNIA Corporation, DO HEREBY CERTIFY that the foregoing and attached POWER OF ATTORNEY remains in full force and has not been revoked; and furthermore that Article VII, Sections 45 and 46 of the By-laws of the Corporation, and the Resolution of the Board of Directors; set forth in the Power of Attorney, are now in force. 4 Signed and sealed at the County of Marin. Dated the 13th day of April, 1998. /s/ Illegible ____________________________________________ Resident Assistant Secretary 5 EX-10.28 98 EXHIBIT 10.28 PETRODRILL CONSTRUCTION, INC. HULL 1828 PARENT GUARANTEE In order to induce PETRODRILL, CONSTRUCTION, INC. (Purchaser) and/or any affiliate or sister company of Petrodrill Construction, Inc. to enter into that/those certain Vessel Construction Contract(s) (the "Contract") between Purchaser and TDI-HALTER, L.P. ("Builder"), dated on or about April 9, 1998, Halter Marine Group, Inc. a Delaware corporation ("Guarantor") represented herein by its duly authorized Chief Operating Officer (COO), Daniel J. Mortimer, does hereby unconditionally and irrevocably guarantee to Purchaser prompt and faithful performance of, and compliance with, all obligations, covenants, terms, conditions and undertakings of Builder contained in the Contract in accordance with the respective terms thereof. Such guarantee is an absolute, unconditional, present and continuing guarantee of performance and compliance. IN WITNESS WHEREOF, Guarantor has executed this Parent Guarantee as of this 15th day of April, 1998. HALTER MARINE GROUP, INC. By: /s/ DANIEL J. MORTIMER Daniel J. Mortimer Chief Operating Officer EX-10.29 99 EXHIBIT 10.29 PETRODRILL SEVEN LIMITED - AND - PETRODRILL ENGINEERING N.V. ------------------------------------------------ AMETHYST 7 CONSTRUCTION MANAGEMENT AGREEMENT ------------------------------------------------ THIS AGREEMENT is made the 5th day of November 1998, BETWEEN: 1. PETRODRILL SEVEN LIMITED., a company incorporated in the British Virgin Islands with its registered office at Arias, Fabrega & Fabrega, P.O. Box 985, Omar Hodge Building, Wickhams Cay, Road Town, Tortola, British Virgin Islands (such company or its assignee pursuant to a Construction Contract Assignment hereinafter referred to as the Owner ); and 2. PETRODRILL ENGINEERING N.V., a company incorporated in the Netherlands Antilles under registration number 77521 with its registered office at Anthony Veder Building, Kaya Jacob Posner, Willemstad, Curacao, Netherlands Antilles (hereinafter referred to as the Construction Manager ). The Owner and the Construction Manager are also hereinafter referred to individually as Party and collectively as Parties . WHEREAS: A. The Owner has entered into a contract, (the SHIPBUILDING CONTRACT ) with Daewoo Heavy Industries (the BUILDER ), for the construction and sale of a dynamically positioning semi-submersible drilling unit (a VESSEL ). B. The Owner appoints the Construction Manager and the Construction Manager accepts the appointment in relation to the Vessels under the terms and conditions set forth in this Agreement. NOW IT IS AGREED as follows : 1. DEFINITIONS Capitalized terms used but not otherwise defined herein shall have the same meanings assigned to such terms in the Amethyst Financial Company Ltd. s Shareholders Agreement among Drillpetro Inc., Techdrill Inc. and Westville Management Corporation. DELIVERY means in relation to the Vessel the date of the Protocol of Delivery and Acceptance signed by the Builder and the Owner, pursuant to the Shipbuilding Contract. MANAGEMENT SERVICES means the construction supervision, managing, accounting and budgeting, facilities and related services more particularly described in this Agreement. OWNER S PROJECT MANAGERS means the person appointed in writing by the Owner to represent Owner in all dealings between the Owner and the Construction Manager. 2 2. APPOINTMENT 2.1 With effect from the date hereof and continuing until terminated in accordance with the provisions of this Agreement, the Owner hereby appoints the Construction Manager and the Construction Manager hereby accepts appointment in accordance with the provisions hereof. 2.2 The Construction Manager undertakes to provide the Management Services specified in Clause 2.3 below with respect to the Rig on behalf of the Owner in an efficient manner and to protect and promote the interests of the Owner in all matters relating to the construction of the Vessel. 2.3 Prior to the commencement of construction of the Vessel under the Shipbuilding Contract, the Construction Manager undertakes to perform the following (non-exclusive) functions with respect to the Vessel: 2.3.1 informing itself of the provisions of the Shipbuilding Contract, a copy of which has been provided to it; 2.3.2 liasing with the appointed design consultants (if any) in respect of the Vessel s drawings and the basic design of the Vessel s substructure in consultation with the Owner and the Owner s Project Manager and the other contractors of the Owner, as instructed by the Project Manager; 2.3.3 obtaining all necessary permissions, consents and authorisations in respect of the Vessel s drawings from the relevant, Classification Society and other relevant agencies; 2.3.4 submitting of documentation, information and drawings to the Builder as provided in the Shipbuilding Contract; 2.3.5 liasing with the Builder during the entire period of the construction of the Vessel in relation to any requests for information/classification which he may have; and 2.3.6 making all necessary arrangements, in liaison with the Builder and the Owner s Project Manager for effective performance of the Shipbuilding Contract. 2.4 During the construction of the Vessel under the Shipbuilding Contract, the Construction Manager will appoint, with respect to the Vessel, the Owner s Representative (as referred to in the Shipbuilding Contract) and undertakes to perform, with respect to the Vessel, the following (non-exclusive) functions: 2.4.1 to notify the Builder without delay of any materials or workmanship which do not conform to the requirements of the Shipbuilding Contract and to oversee the satisfactory rectification by the Builder of all defective materials or workmanship. 3 The Owner s Project Manager shall be kept promptly and fully informed of all defects identified by the Construction Manager, including details of the rectification thereof. The initial Owner s representative will be Mr J.P. Durand. Where the Construction Manager is required by the provisions of this Agreement to notify or inform the Owner s Project Manager of any matter, such notification shall be made in writing; 2.4.2 the Construction Manager shall promptly inform the Owner s Project Manager of any change in existing laws, rules, regulations or governmental requirements or Classification Society s requirements which may require any alteration to the specifications or drawings attached to the Vessel to ensure its compliance with such requirements; 2.4.3 in the event of any alteration or modification which is necessary under Clause 2.4.2 being accepted by the Owner s Project Manager, the Construction Manager will advise him on any consequential alterations in the Contract price and change in the Construction schedule and/or Delivery of the Vessel; 2.4.4 to allow any reasonable substitution of materials which the Builder wishes to make in accordance with the Shipbuilding Contract, provided these are acceptable to the Classification Society or by normal standards of marine construction practice. The Construction Manager before making any such decision must inform the Owner s Project Manager of proposed substitution and obtain his written consent thereto; 2.4.5 in the event of the Vessel (including her machinery, engines or materials appropriated to her) sustaining damages before Delivery, to advise the Owner s Project Manager on the steps which in the Construction Manager s opinion (subject to the approval of the Classification Society Surveyors) need to be taken to make good such damage with an estimate of the likely cost and any other implications; 2.4.6 to advise the Owner s Project Manager of any amount to be paid to the Builder in respect of any fuel, lubricating oils and consumable stores remaining onboard the Vessel after Delivery by the Builder; 2.4.7 to advise the Owner s Project Manager and make recommendations as to whether the Vessel has been completed in accordance with the Specification, is fully commissioned and is ready for Delivery; 2.4.8 to procure as agent for and on behalf of the Owner the Owner Furnished Equipment on terms previously agreed with the Owner. The Construction Manager shall procure that any Owner Furnished Equipment shall be marked as the Owner s property; 2.4.9 to check and verify with the Builder that the Owner Furnished Equipment has been received in good condition, complete and undamaged and in accordance with related purchase orders. Where applicable, to immediately inform the Owner s Project Manager of any damage to or deficiency in such equipment or any deviation from the relevant purchase order; 4 2.4.10to prepare a cash requirement schedule for submission to the Owner s Project Manager to obtain the necessary approval and financing so that sufficient funds are available for procurement; 2.4.11to open and operate a disbursement account in the name of the Owner for payment of Owner Furnished Equipment and other agreed disbursements. 2.4.12the Construction Manager shall provide to the Owner s Project Manager, as soon as possible a critical path analysis setting out all tasks to be performed in connection with the construction of the Vessel and the procurement of Owner Furnished Equipment; 2.4.13to procure any necessary equipment which is not budgeted for by the Owner and to approve any change order without first referring to the Owner s Project Manager PROVIDED THAT the cost of such equipment/change order is below US$10,000.00 and/or the aggregate in any one month is below US$100,000; 2.4.14in the event of delay in the Construction Schedule due to late delivery of Owner Furnished Equipment, the Construction Manager shall advise the Owner s Project Manager of any claim made by the Builder for an extension of the Delivery; 2.4.15to immediately advise the Owner s Project Manager and copy to him any notice which may be given by the Builder under the Shipbuilding Contract; 2.4.16to submit to the Owner s Project Manager every fourteen days a detailed construction-in-progress report covering all aspects of the Vessel s construction and equipment. These reports must bring to the attention of the Owner s Project Manager any problems or delay or anticipated delay of which the Construction Manager is aware; 2.4.17to ensure that the Builder delivers to the Owner s Project Manager all required certificates, upon Delivery, as specified in the Shipbuilding Contract and Specification thereto; 2.4.18to observe all relevant tests and trials conducted by the Shipyard on all Shipyard Furnished Equipment and report to the Owner s Project Manager accordingly; and 2.4.19to sub-contract if so instructed by the Owner s Project Manager, all functioning, commissioning and trial s to Formaritima N.V., the Owner s Manager at least two months prior to anticipated date of Delivery. 5 3. PAYMENT FOR SERVICES AND EXPENSES The Owner shall pay to the Construction Manager for its services under this Agreement only the actual expenses incurred by the Construction Manager in rendering those services. Reasonable requests for cash advances to ensure that aforesaid expenses are not required to be carried/financed by the Construction Manager, shall be complied with by the Owner and upon signature hereof the Owner will pay to the Construction Manager the sum of US$100,000 (one hundred thousand US Dollars) for the Vessel, to be accounted for by the Construction Manager on an IMPREST basis. 4. DUTIES OF THE CONSTRUCTION MANAGER 4.1 PERSONNEL 4.1.1 The Construction Manager shall procure and use sufficient qualified personnel, in order to ensure that the construction supervision of the Vessel is at all times undertaken effectively and safely and in compliance with the instructions of the Owner s Project Manager(s), and in accordance with any regulations from relevant regulatory bodies, authorities or Classification Societies and the provisions of the Shipbuilding Contract. 4.1.2 The Construction Manager shall: (a) use all reasonable endeavours to protect the Owner s interests with respect to claims by or against third parties, including the personnel employed in connection with the Services to be provided hereunder; and (b) keep the Owner fully informed regarding incidents which give rise to claims by or against third parties. 4.1.3 The Construction Manager shall ensure that it is entered as having a noted interest in the Owner s insurance and shall procure that it and Owner shall be so noted on the Builders policies. 4.1.4 Each Owner s Project Manager shall be entitled, upon serving notice in writing on the Construction Manager, to require the Construction Manager to remove any individual from his role within the Construction Manager s supervision team if the relevant Owner s Project Manager is of the opinion that such individual is incompetent or unsuited to his assigned role. 4.2 INSURANCE 4.2.1 The Construction Manager in consultation with the Owner shall ensure that, at all times during its construction, the Vessel is kept adequately and appropriately insured with reputable underwriters. 6 4.2.2 The Construction Manager shall ensure that the insurance, where appropriate and subject to the provisions of the Shipbuilding Contracts, shall be maintained in the name of the Owner. However, the Construction Manager, the Owner and the Builders shall be listed as co-insured in all insurance policies. The Construction Manager shall ensure that Builders insurance brokers, hull underwriters and Protection and Indemnity representatives (if applicable) shall provide full co-operation to the Owner s appointed insurance brokers in connection with relevant insurance. 4.2.3 The Construction Manager shall arrange such additional insurance as may from time to time instructed by any of the Owner s Project Manager. The arrangement and maintenance of such additional insurance shall not prejudice the arrangement or maintenance of any insurance referred to in Clause 4.2.1. 4.2.4 The Construction Manager shall report as soon as practicable, accidents or damage involving the Vessel and/or sickness or accident of a serious nature, to any Owner s Project Manager and shall not authorise or negotiate for repair or settle any claims in excess of US$50,000 resulting from the same, without his written consent. 4.2.5 All insurance policies placed by the Owner or the Construction Manager with respect to the Vessel shall provide for a waiver of subrogation against the Construction Manager and the Owner. 5. BUDGETS The Construction Manager shall prepare a budget for the Vessel on a monthly basis and, not later than 7 days prior to the beginning of each month, shall submit a draft budget for that month to the Owner s Project Managers for approval. 6. CONSTRUCTION MANAGER S RIGHT TO SUB-CONTRACT The Construction Manager shall not sub-contract any of its obligations hereunder to a third party without the prior written consent of the relevant Owner s Project Manager (such consent not to be unreasonably withheld or delayed). 7. GENERAL ADMINISTRATION 7.1 The Construction Manager shall handle and settle all claims arising out of the Management Services hereunder and keep each Owner s Project Manager informed regarding any incident of which the Construction Manager becomes aware which gives or may give rise to claims or disputes involving third parties. 7.2 The Construction Manager shall, as instructed by the relevant Owner s Project Manager, bring or defend actions, suits or proceedings in connection with matters entrusted to the Construction Manager according to this Agreement. 7.3 The Construction Manager shall be entitled to obtain legal, technical or other expert advice in relation to the handling and settlement of claims and disputes or all other matters affecting the interests of the Owner in respect of the construction of the Vessels Provided that in circumstances where the claim or dispute is more than US$10,000 the Manager shall first obtain the relevant Owner s Project Manager s written consent. 7 7.4 Any costs properly incurred by the Construction Manager in carrying out its obligations under this Clause 7 shall be reimbursed by the Owner. 7.5 The Owner shall be entitled at all times during the period of this Agreement to have audited the Construction Manager s accounts in respect of all purchases of Owner Furnished Equipment and all disbursements incurred with regard to this Agreement. 8. RATIFICATION OF ACTS OF CONSTRUCTION MANAGER AND INDEMNITIES 8.1 The Owner hereby ratifies, confirms and undertakes at all times to ratify and confirm whatever may be done or caused to be done lawfully and properly by the Construction Manager in the course of or in the provision of the services hereby undertaken to be performed. 8.2 The Owner shall indemnify and hold harmless and the Construction Manager shall indemnify and hold harmless its sub-contractors and their personnel from and against all actions, proceedings, claims, demands or liabilities whatsoever that may be brought against or incurred by its sub-contractors or their personnel in relation to any matters arising out of such sub-contracts unless the same has arisen from the gross negligence or wilful misconduct of its sub-contractors or their personnel, in which event the liability of such sub-contractor shall be limited to the aggregate amount of the management fee received by such sub-contractor(s) in the preceding 12 months. 8.3 LIABILITIES BETWEEN THE PARTIES 8.3.1 The Construction Manager shall hold harmless and indemnify the Owner from and against all claims, costs expenses or liabilities arising from or connected with the performance of this Agreement in respect of: (i) death of or personal injury to any of the personnel of the Construction Manager s Group; (ii) loss of or damage to the property of the Construction Manager s Group; (iii) any consequential or economic loss or damage suffered by the Construction Manager s Group; howsoever arising and irrespective of negligence or other breach of legal duty by the Owner s Group. 8.3.2 The Owner shall hold harmless and indemnify the Construction Manager from and against all claims, costs, expenses or liabilities arising from or connected with the performance of this Agreement in respect of: (i) death of or personal injury to any of personnel of the Owner s Group; (ii) loss of or damage to the property of the Owner s Group; and 8 (iii)any consequential or economic loss or damage suffered by the Owner s Group; howsoever arising and irrespective of negligence or other breach of legal duty by the Construction Manager s Group. 8.3.3 For the purposes of this Clause, the Owner s Group means the Owner, its associated companies, its other sub-contractors and suppliers, Petrobras, and the officers, employees and agents of any of them. 8.3.4 For the purposes of this Clause the Construction Manager s Group means the Construction Manager, its associated companies, its sub-contractors and suppliers and the officers, employees and agents of any of them. 8.3.5 For the express purposes of this Clause 8.3, Liabilities Between the Parties, of this Agreement only, the Owner contracts on its own behalf and expressly as agent on behalf of and as trustee for the benefit of all persons who are or may be from time to time within the Owner s Group and all such persons shall to this extent be deemed to be parties to this Agreement. 8.3.6 For the express purposes of this Clause 8.3, Liabilities Between the Parties, of this Agreement only, the Construction Manager contracts on its own behalf and expressly as agent on behalf of and as trustee for the benefit of all persons who are or may be from time to time within the Construction Manager s Group and all such persons shall to this extent be deemed to be parties to this Agreement. 9. COMPLIANCE WITH LAW AND REGULATIONS The Construction Manager will not do or permit anything to be done which might cause any breach or infringement of the laws and regulations of any relevant jurisdiction. 10. DURATION OF THE AGREEMENT 10.1 Save as provided below, this Agreement shall come into effect with respect to the Vessel on the date hereof and shall continue for one year after the Delivery of the Vessel. Thereafter, it shall continue until terminated by either party giving to the other notice of termination, in which event the Agreement shall terminate upon the expiration of a period of three months from the date upon which such notice is given. 10.2 Notwithstanding Clause 10.1 above, this Agreement may be terminated by a Party if the other Party commits a material breach of its obligations under this Agreement. 9 10.3 In the event of termination of this Agreement with respect to the Vessel, the Owner shall pay to the Construction Manager such amounts (if any) as the Construction Manager (notwithstanding its best efforts to minimise the effects of any such termination) may become legally liable to pay under any contract of employment or by reason of any regulation or legislation for employee protection to personnel who may have been employed by the Construction Manager to perform any part of the services to be provided under this Agreement and who shall become redundant as a result of such termination. 10.4 If this Agreement is terminated for any reason whatsoever with respect to any Vessel the Construction Manager hereby undertakes as follows:- (a) to return to the relevant Owner s Project Manager all budgets, forecasts and other documents relating to the construction of each Vessel which it acquired during its appointment as Construction Manager hereunder; and (b) not to disclose to any person any confidential information regarding the construction of each Vessel or concerning the Owner. 11. NOTICES 11.1 Any notice, demand or other communication to be made or delivered by the amu Project Manager to the Construction Manager pursuant to this Agreement shall (unless the Construction Manager has by 15 days written notice to it specified another address) be made or delivered to the Construction Manager at its registered office for the time being which is at present at Petrodrill Engineering N.V. Anthony Veder Building, Kaya Jacob Posner, Willemstad, Curacao, Netherlands Antilles (Fax 599 9461 6491) - marked for the attention of the Managing Director. 11.2 Any notice, demand or other communication to be made or delivered by the Construction Manager to the Owner s Project Manager pursuant to this Agreement shall be made or delivered to the Owner at Petrodrill Seven Limited c/o Arias, Fabrega & Fabrega, P.O. Box 985, Omar Hodge Building, Wickham s Cay, Road Town, Tortola, British Virgin Islands, marked for the attention of the Technical Director. 11.3 All notices shall be sent by telefax and a copy of each shall be sent to the addressee by prepaid express registered airmail. Change of address shall be notified at least five calendar days in advance. 12. ASSIGNMENT The rights and obligations of the Parties hereunder may not be assigned without the prior written consent of the other Party. 13. FORCE MAJEURE A Party shall not be liable to the other for any failure to perform any or all of its obligations under this Agreement (other than an obligation to make payment) resulting directly or indirectly from a cause beyond the reasonable control (force majeure) of that Party. In the event of any of the foregoing the Party seeking to rely on the same shall use all reasonable endeavours to find a mutually acceptable solution to the cause of such event of force majeure with a view to resuming performance of its obligations hereunder as soon as possible. 10 14. LAW AND ARBITRATION 14.1 This Agreement shall in all respects be governed, construed and interpreted in accordance with English law. 14.2 Any dispute or difference arising in connection with this Agreement shall if possible be settled by mutual amicable agreement. 14.3 Any dispute between the Parties shall be settled by arbitration in London in accordance with the provisions of the Arbitration Acts 1950-1996 and any statutory modifications or re-enactments thereof for the time being in force and shall be referred to a single arbitrator (an Arbitrator ) to be appointed by the Parties hereto. If the Parties cannot agree upon the appointment of the single Arbitrator the dispute shall be settled by three Arbitrators, each Party appointing one arbitrator, the third being appointed by the Chairman for the time being of the London Maritime Arbitrators Association. 14.4 If either of the appointed Arbitrators refuses or is incapable of acting, the Party who appointed him shall appoint a new Arbitrator in his place. 14.5 If one of the Parties fails to appoint an Arbitrator, either originally or by way of substitution, for two weeks after the other party having appointed his Arbitrator has sent the party making default notice by mail or facsimile to make the appointment, the Party appointing the third Arbitrator shall, after application from the Party having appointed his Arbitrator, also appoint an Arbitrator on behalf of the Party making default. 14.6 The award rendered by the Arbitration Court shall be final and binding upon the Parties and may if necessary be enforced by the Court or other competent authority in the same manner as a judgment in the Court of Justice. 14.7 Performance under this Agreement shall, if reasonably possible, continue during the Arbitration proceedings. 15. ENTIRE AGREEMENT This Agreement constitutes the entire Agreement between the Parties hereto and supersedes all prior negotiations, representations or agreements relating to the subject matter of this Agreement whether written or oral. No changes, alterations or modifications to this Agreement shall be affected unless in writing and signed by the Parties hereto. 16. COUNTERPARTS This Agreement may be executed simultaneously in any number of counterparts each of which, when so executed, shall be deemed to be an original and all of which taken together shall constitute one and the same Agreement. IN WITNESS WHEREOF the Parties have executed this Agreement the day and year first above written. 11 SIGNED by )/s/ Illegible for and on behalf of )German Efromovich PETRODRILL SEVEN LIMITED )/s/ Illegible in the presence of: )Illegible SIGNED by )/s/ Illegible for and on behalf of )Illegible PETRODRILL ENGINEERING N.V. )/s/ Frida A. Martinez in the presence of: )Frida A. Martinez 12 EX-10.33 100 EXHIBIT 10.33 PETRODRILL ENGINEERING N.V. - and - PRIDE-FORAMER S.A. ------------------------------------- AMETHYST 7 SUPPLY AGREEMENT ------------------------------------ THIS AGREEMENT is made the 5th day of November 1998. BETWEEN: 1. PETRODRILL ENGINEERING N.V. a company incorporated in the Netherlands Antilles under registration number 77521 and having its registered office at Anthony Veder Building, Kaya Jacob Posner, Willemstad, Curacao, Netherlands Antilles (hereinafter referred to as the Construction Manager); and 2. PRIDE-FORAMER S.A. a company incorporated in France with its registered office at 16 bis, rue Grange Dame Rose, 78143 Velizy-Villacoublay (hereinafter referred to as Foramer). The Construction Manager and Foramer are also hereinafter referred to collectively as Parties and individually as Party. WHEREAS: A. The Construction Manager has entered into an agreement with Petrodrill Seven Limited. (such company or its assignee pursuant to a Construction Contract Agreement, the Owner) of even date herewith (the Construction Management Agreement) whereby the Construction Manager has been appointed by the Owner to oversee the construction of the Owner of a dynamically positioned semisubmersible drilling or workover unit (the Vessels). B. The Construction Manager is desirous that Foramer should provide to the Construction Manager personnel in accordance with the terms and conditions of this Agreement to assist the Construction Manager with various of the technical services required by the Owner to be provided during the period of the construction of the Vessel by the relevant shipyards (the Builder) pursuant to the shipbuilding contract (the Shipbuilding Contract). NOW, THEREFORE in consideration of the mutual covenants and obligations hereafter set forth, it is hereby agreed between the Parties as follows: 1. DEFINITIONS Capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Amethyst Financial Company Ltd.s Shareholders Agreement of even date herewith among Drillpetro Inc., Westville Management Corporation and Techdrill Inc. 2. OBJECT The object of this Agreement is the supply by Foramer to the Construction Manager of personnel such as, but not limited to, specified in Clause 4 of this Agreement. 3. TERM The term of this Agreement is for the period of the construction of the Vessel by the Builder until delivery of the Vessel by the Builder to the Owner. However, the Agreement may be terminated by the Construction Manager at any time, for whatever cause, by written notice to Foramer of not less than (90) days counted from the date following the receipt of such written notice of termination. 2 4. SCOPE OF SERVICES PROVIDED BY FORAMER Foramer shall provide to the Construction Manager such personnel (the Technical Personnel) as are requested by the Construction Manager to assist the Construction Manager in relation to the construction of the Vessel as a drilling or workover unit and the fulfilment of the Construction Managers obligations to the Owner as set out in the Construction Management Agreement. The provision of the Technical Personnel shall be on the following basis: 4.1 the Technical Personnel provided by Foramer shall be suitably qualified to advise and assist in connection with matters relating to the construction of the Vessel as a drilling or workover unit; 4.2 at no time shall the Technical Personnel be deemed to be employees, either temporarily or permanent, of the Construction Manager and shall at all times be deemed to be employees of Foramer; 4.3 Foramer shall have the sole responsibility for the preparation of payroll and the payment of the Technical Personnel wages, compensation, remittance, allowance, insurance and indemnities of whatever kind and in complying with all applicable labour and local taxation regulations. 4.4 Both Parties agree to refrain from any and all actions, direct or indirect, that may lead to employment by such Party of an employee of the other Party, unless such Party obtains the prior written approval of the other Party, which approval shall not unreasonably be withheld. 4.5 Foramer shall be entitled to invoice the Construction Manager for the travel, accommodation and repatriation of the Technical Personnel during the period of construction of the Vessel. 4.6 The Technical Personnel shall assist the Construction Manager in the fulfilment of its obligations as set out in Clause 4 of the Construction Management Agreement. 4.7 The Construction Manager may, if it is reasonably dissatisfied with any of the Technical Personnel, make a request in writing to Foramer that such Technical Personnel be replaced with another suitably qualified person and Foramer shall provide the same forthwith PROVIDED ALWAYS that Foramer shall only do so if in its reasonable opinion the request of the Construction Manager is justified. 4.8 In the event that the Construction Manager requires such Technical Personnel to undertake tasks not included within the scope of the services to be provided as set out in Clause 4 of the Construction Management Agreement and agreed hereunder then the Construction Manager shall seek the prior written consent of Foramer which consent shall not be unreasonably withheld and Foramer shall instruct the Technical Personnel concerned to comply with such request of the Construction Manager. 4.9 Foramer shall only be required to provide to the Construction Manager such Technical Personnel as are available at the time that the Construction Manager requires them and the choice/identity of such Technical Personnel shall be decided upon by Foramer in its absolute discretion and PROVIDED ALWAYS that the provision of such 3 Technical Personnel from time to time shall not materially disrupt or adversely affect Foramers own business in which case Foramer shall be entitled to postpone the supply of such Technical Personnel until such time as it is more able to comply with the requirements of the Construction Manager. 5. COMPENSATION/REMUNERATION 5.1 All Technical Personnel are to be provided by Foramer to the Construction Manager on an open book, at cost basis, duly justified by direct reference to industry standards. For the supply of the Technical Personnel forming the object of this Agreement, the Construction Manager will pay Foramer the rates stipulated in Appendix A herein increased on an annual basis by 3% unless otherwise agreed. 5.2 In the case of disputed invoice, the Construction Manager will inform Foramer of the item under dispute specifying the complaint within fifteen (15) days of receipt of such invoice but will pay the undisputed part. The disputed item will be paid as may be mutually agreed. 5.3 Payments shall be made to a bank account nominated on each invoice. 6. TAXES Any taxes or charges incurred by Foramer in connection with its duties and obligations hereunder whilst supplying the Technical Services shall be for the account of Foramer. 7. LIABILITIES 7.1 COMPLIANCE WITH LAW AND REGULATION Foramer represents that the provision by it of the Technical Personnel under this Agreement will comply with all applicable laws and regulations in France and the jurisdictions in which the Technical Personnel are required to operate. 7.2 LIABILITIES BETWEEN THE PARTIES 7.2.1 Foramer shall hold harmless and indemnify the Construction Manager from and against all claims, costs expenses or liabilities arising from or connected with the performance of this Agreement in respect of: (i) death of or personal injury to any of the personnel of the Foramer Group; (ii) loss of or damage to the property of the Foramer Group; (iii) any consequential or economic loss or damage suffered by the Foramer Group; howsoever arising and irrespective of negligence or other breach of legal duty by the Construction Manager Group. 4 7.2.2 The Construction Manager shall hold harmless and indemnify Foramer from and against all claims, costs, expenses or liabilities arising from or connected with the performance of this Agreement in respect of: (i) death of or personal injury to any of personnel of the Construction Manager Group; (ii) loss of or damage to the property of the Construction Manager Group; and (iii) any consequential or economic loss or damage suffered by the Construction Manager Group; howsoever arising and irrespective of negligence or other breach of legal duty by the Foramer Group. 7.2.3 For the purposes of this Clause 7.2, the Construction Manager Group means the Construction Manager, its associated companies, its other sub-contractors and suppliers, the Owner, Petrobras, and the officers, employees and agents of any of them. 7.2.4 For the purposes of this Clause 7.2 the Foramer Group means Foramer, its associated companies, its sub-contractors and suppliers and the officers, employees and agents of any of them. 7.2.5 For the express purposes of Clause 7 of this Agreement only, the Construction Manager contracts on its own behalf and expressly as agent on behalf of and as trustee for the benefit of all persons who are or may be from time to time within the Construction Manager Group (as defined in Clause 7.2.3) and all such persons shall to this extent be deemed to be parties to this Agreement. 7.2.6 For the express purposes of Clause 7 of this Agreement only, Foramer contracts on its own behalf and expressly as agent on behalf of and as trustee for the benefit of all persons who are or may be from time to time within the Foramer Group (as defined in Clause 7.2.4) and all such persons shall to this extent be deemed to be parties to this Agreement. 7.3 INDEMNITY FOR OPERATIONS Save as is provided in Article 7.2. above, the Construction Manager shall indemnify and hold harmless and shall procure that Owner shall indemnify and hold harmless Foramer from and against all actions, proceedings, claims, demands or liabilities whatsoever that may be brought by any other person against, or incurred by Foramer in relation to or in connection with its performance of this Agreement unless same has arisen from the gross negligence or wilful misconduct of Foramer, in which event the liability of Foramer shall be limited to the aggregate of the management fee received by Foramer in the preceding 12 months. 8. CONFIDENTIAL INFORMATION 5 All information related to this Agreement regardless or whether such information concerns the Construction Manager, its clients, its associated companies or its contractors shall be treated as confidential and shall not be divulged by Foramer or the Technical Personnel to any third party without the prior written consent of the Construction Manager. The hereabove obligations shall survive the termination of the Agreement and shall remain in force for so long as the information covered by confidentiality has not otherwise become public knowledge. 9. INSURANCE 9.1 FORAMERS INSURANCES Foramer undertakes that it will take out all insurance policies to cover its liabilities and those of the Technical Personnel as set forth in Article 7 of this Agreement, such insurances shall include but not be limited to the following: 9.1.1 Workmens Compensation insurance and Employers Liability insurance for damage suffered by its personnel in amounts not less than those required by applicable laws in France and the jurisdiction in which the Technical Personnel are required to operate. 9.1.2 Comprehensive general liability insurance for its responsibility to third parties. 9.1.3 All insurance policies as required to cover its equipment and/or materials and those belonging to any service companies and for which Foramer is responsible. 9.2 CONSTRUCTION MANAGER INSURANCE The Construction Manager will take out insurance policies to cover the Construction Managers responsibilities including but not limited to those responsibilities set out in Clause 5.2 of the Construction Management Agreement. 9.3 GENERAL PROVISIONS For all insurance policies taken out: 9.3.1 Foramer shall comply with the relevant insurance regulations in force. 9.3.2 The Construction Manager shall bear the costs of the premiums, deductibles, fees and expenses relative to all policies effected pursuant to the provisions of this Agreement. 9.3.3 Each Party shall procure that the other Party shall be named as co-assured to the extent permitted so as to give effect to the provisions of Article 7 of this Agreement. 9.3.4 All of the insurance policies taken out shall state the underwriters waiver of subrogation to give effect to the provisions of Article 7 of this Agreement. 6 10. AUDIT Foramer shall keep and cause its Technical Personnel, its contractor(s) and subcontractor(s) to keep the books, payrolls, receipts, vouchers, financial records, personnel records and any document related to the work thereunder and required for administration purposes for the term of the Agreement and for a limited period of two (2) years after termination hereof. The Construction Manager, through its duly authorised representatives, shall have free access with 15 days notice with no restriction, to such information, whenever required by the Construction Manager, and it shall also have the right, at any time subject to previous notification to Foramer, to perform the audits it deems necessary of the aforementioned books, payrolls, receipts, vouchers, records and files in general. The Construction Manager reserves the right to audit the activities of Foramer and/or the Technical Personnel as deemed necessary and/or appropriate by the Construction Manager, in order to check the contents and compliance with the terms herein. Notwithstanding the foregoing, in no event shall the Construction Managers right of audit be construed as a release or waiver of any of Foramers obligations under this Agreement. 11. MISCELLANEOUS 11.1 FORCE MAJEURE 11.1.1 Each Party to this Agreement shall be relieved from complying with any term of this Agreement to the extent that, and only so long as, such compliance is prevented or delayed by force majeure, which is defined as civil or labour disturbances, riots, strikes (other than a strike limited to the employees of either Party), wars (declared or undeclared), military actions, insurrections, rebellion, acts of any governmental or military agency and actual or assumed authority, action of elements, floods, storm or other acts of God or any cause beyond the control of either Party, whether or not similar to the matters herein specifically enumerated and provided that the event shall not have been caused by the action or negligence of that Party. That Party and/or the Parties affected shall do its, or their, utmost to remedy the above circumstances. 11.1.2 Any Party claiming force majeure shall promptly notify the other Party, with the evidence of the occurrence of such event. 11.1.3 If either Party hereto is prevented from or delayed in performing all or any of its obligations thereunder as a direct result of force majeure, such non-performance shall not be considered as a breach of this Agreement and that Party shall be relieved from such obligation which shall suspend payment by the other Party for the duration of such force majeure. 7 11.2 BANKRUPTCY OR ABANDONMENT OF OPERATIONS Should Foramer become insolvent or enter into any arrangement with or for the benefit of its creditors or become unable or refuse or neglect to perform its obligations hereunder or if Foramers equipment is seized or taken in execution, the Construction Manager may, by notice in writing to Foramer, terminate this Agreement without thereby affecting in other respects the obligations or liabilities of Foramer. 11.3 ASSIGNMENT OF AGREEMENT Neither Party may assign this Agreement, either wholly or in part, except with the prior written authorisation of the other Party, which authorisation may not be unreasonably withheld. 12. NOTICE All notices, invoices and other communications required pursuant to this Agreement shall be in writing and deemed to have been sufficiently given or made if delivered by hand or send by fax to the addressee at the address set out below; in the case of the Construction Manager to: PETRODRILL ENGINEERING N.V. c/o Winkel, Sliana & Grul Attn: Thoma Aardenburg Pietermaai 23 Postbus 113 Curacao Netherlands Antilles Fax: 011 599 9 465 2890 in the case of Foramer to: PRIDE-FORAMER 16 BIS, RUE Grange Dame Rose - BP 100 78143 Velizy-Villacoublay France Fax: 011 33 1 39 46 39 25 with copies to: WESTVILLE MANAGEMENT CORPORATION Attn: Jonathan Talbot 5847 San Felipe, Suite 3300 Houston, Texas 77057 Fax: 713 914 9796 or to such other address as the relevant Party may from time to time notify to the other. 8 13. GOVERNING LAW AND ARBITRATION 13.1 This Agreement shall be governed by and construed in all respects in accordance with the laws of England. 13.2 Any dispute or difference arising in connection with this Agreement shall if possible be settled by mutual amicable agreement. 13.3 If any dispute should arise in connection with the interpretation and fulfilment of this Agreement the same shall be decided by arbitration in the city of London and shall be referred to a single arbitrator (an Arbitrator) to be appointed by the Parties hereto. If the Parties cannot agree upon the appointment of the single Arbitrator the dispute shall be settled by three Arbitrators, each Party appointing one Arbitrator, the third being appointed by the Chairman for the time being of the London Maritime Arbitrators Association. 13.4 If either of the appointed Arbitrators refuses or is incapable of acting, the Party who appointed him shall appoint a new Arbitrator in his place. 13.5 If one of the Parties fails to appoint an Arbitrator, either originally or by way of substitution, for two weeks after the other Party having appointed his Arbitrator has sent the Party making default notice by mail or facsimile to make the appointment, the Party appointing the third Arbitrator shall, after application from the Party having appointed his Arbitrator, also appoint an Arbitrator on behalf of the Party making default. 13.6 The award rendered by the Arbitration Court shall be final and binding upon the Parties and may if necessary be enforced by the Court or other competent authority in the same manner as a judgment in the Court of Justice. 13.7 Work under this Agreement shall, if reasonably possible, continue during the arbitration proceedings. IN WITNESS WHEREOF this Agreement has been executed in two duplicate originals by or on behalf of the Parties hereto the day and year first above written. SIGNED by )/s/ Illegible for and on behalf of )Illegible PETRODRILL ENGINEERING N.V. )/s/ Frida A. Martinez in the presence of:- )Frida A. Martinez 9 SIGNED by )/s/ Illegible for and on behalf of )Illegible PRIDE-FORAMER S.A. )/s/ )FRIDA A. MARTINEZ in the presence of:- )Frida A. Martinez 10 APPENDIX A SCHEDULE OF RATES POSITION COST PER WORKING DAY US$/DAY Construction Manager 595 Engineering Manager 595 Procurement Manager 375 Drilling Engineer 350 Cost Controller/Accountant 465 Mechanical Engineer 485 Drilling Co-ordinator 485 Engineering Co-ordinator 465 NOTES All prices above are inclusive of salaries, social security costs, insurance, provision for holidays and travel days. All prices are exclusive of direct flight and travel charges, accommodation. The prices shown are valid for 12 months commencing 1st January 1998 and are subject to annual revision of 3% unless otherwise agreed. 11 EX-10.37 101 EXHIBIT 10.37 PETRODRILL ENGINEERING N.V. - AND - MARITIMA PETROLEO E ENGENHARIA LTDA --------------------------------- AMETHYST 7 SUPPLY AGREEMENT --------------------------------- THIS AGREEMENT is made the 5th day of November 1998. BETWEEN: 1. PETRODRILL ENGINEERING N.V. a company incorporated in the Netherlands Antilles under registration number 77521 and having its registered office at Anthony Veder Building, Kaya Jacob Posner, Willemstad, Curacao, Netherlands Antilles (hereinafter referred to as the Construction Manager ); and 2. MARITIMA PETROLEO E ENGENHARIA LTDA a company incorporated in Brazil with its registered office at Avenida Almirante Barroso 52, 3400 GR, 20031-000 Centro, Rio de Janeiro, Brazil (hereinafter referred to as Maritima ). The Construction Manager and Maritima are also hereinafter referred to collectively as PARTIES and individually as PARTY . WHEREAS: A. The Construction Manager has entered into an agreement with Petrodrill Seven Limited ( the Owner ) of even date herewith ( the Construction Management Agreement ) whereby the Construction Manager has been appointed by the Owner to oversee the construction of the Owner's dynamically positioned semisubmersible drilling or workover units ( the Vessel ). B. The Construction Manager is desirous that Maritima should provide to the Construction Manager personnel in accordance with the terms and conditions of this Agreement to assist the Construction Manager with various of the technical services required by the Owner to be provided during the period of the construction of the Vessel by the relevant shipyard ( the Builder ) pursuant to the shipbuilding contract ( the Shipbuilding Contract ). NOW, THEREFORE in consideration of the mutual covenants and obligations hereafter set forth, it is hereby agreed between the Parties as follows: 1. DEFINITIONS Capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Amethyst Financial Company Ltd.s Shareholders Agreement of even date herewith among Drillpetro Inc., Westville Management Corporation and Techdrill Inc. 2. OBJECT The object of this Agreement is the supply by Maritima to the Construction Manager of personnel such as, but not limited to, specified in Clause 4 of this Agreement. 3. TERM The term of this Agreement is for the period of the construction of the Vessel by the Builder until delivery of the Vessel by the Builder to the Owner. However, the Agreement may be terminated by the Construction Manager at any time, for whatever cause, by written notice to Maritima of not less than ninety (90) days counted from the date following the receipt of such written notice of termination. 2 4. SCOPE OF SERVICES PROVIDED BY MARITIMA Maritima shall provide to the Construction Manager such personnel (the Technical Personnel ) as are requested by the Construction Manager to assist the Construction Manager in relation to the construction of the Vessel and the fulfilment of the Construction Manager's obligations to the Owner as set out in the Construction Management Agreement. The provision of the Technical Personnel shall be on the following basis: 4.1 The Technical Personnel provided by Maritima shall be suitably qualified to advise and assist in connection with matters relating to the construction and proposed operation of the Vessels as drilling or workover units; 4.2 At no time shall the Technical Personnel be deemed to be employees, either temporarily or permanent, of the Construction Manager and shall at all times be deemed to be employees of Maritima; 4.3 Maritima shall have the sole responsibility for the preparation of payroll and the payment of the Technical Personnel wages, compensation, remittance, allowance, insurance and indemnities of whatever kind and in complying with all applicable labour and local taxation regulations. 4.4 Both Parties agree to refrain from any and all actions, direct or indirect, that may lead to employment by such Party of an employee of the other Party, unless such Party obtains the prior written approval of the other Party, which approval shall not unreasonably be withheld. 4.5 Maritima shall be entitled to invoice the Construction Manager for the travel, accommodation and repatriation of the Technical Personnel during the period of construction of the Vessel. 4.6 The Technical Personnel shall assist the Construction Manager in the fulfilment of its obligations as set out in Clause 4 of the Construction Management Agreement. 4.7 The Construction Manager may, if it is reasonably dissatisfied with any of the Technical Personnel, make a request in writing to Maritima that such Technical Personnel be replaced with another suitably qualified person and Maritima shall provide the same forthwith PROVIDED ALWAYS that Maritima shall only do so if in its reasonable opinion the request of the Construction Manager is justified. 4.8 In the event that the Construction Manager requires such Technical Personnel to undertake tasks not included within the scope of the services to be provided as set out in Clause 3 of the Construction Management Agreement and agreed hereunder then the Construction Manager shall seek the prior written consent of Maritima which consent shall not be unreasonably withheld and Maritima shall instruct the Technical Personnel concerned to comply with such request of the Construction Manager. 4.9 Maritima shall only be required to provide to the Construction Manager such Technical Personnel as are available at the time that the Construction Manager requires them and the choice/identity of such Technical Personnel shall be decided upon by Maritima in its absolute discretion and PROVIDED ALWAYS that the provision of such Technical Personnel from time to time shall not materially disrupt or adversely affect Maritimas own business in which case Maritima shall be entitled to postpone the supply of such Technical Personnel until such time as it is more able to comply with the requirements of the Construction Manager. 3 5. COMPENSATION / REMUNERATION 5.1 All Technical Personnel are to be provided by Maritima to the Construction Manager on an open book, at cost basis, duly justified by direct reference to industry standards. For the supply of the Technical Personnel forming the object of this Agreement, the Construction Manager will pay Maritima the rates stipulated in Appendix A herein increased on an annual basis by 3% unless otherwise agreed. 5.2 In the case of disputed invoice, the Construction Manager will inform Maritima of the item under dispute specifying the complaint within fifteen (15) days of receipt of such invoice but will pay the undisputed part. The disputed item will be paid as may be mutually agreed. 5.3 Payments shall be made to a bank account nominated on each invoice. 6. TAXES Any taxes or charges incurred by Maritima in connection with its duties and obligations hereunder whilst supplying the Technical Services shall be for the account of Maritima. 7. LIABILITIES 7.1 COMPLIANCE WITH LAW AND REGULATION Maritima represents that the provision by it of the Technical Personnel under this Agreement will comply with all applicable laws and regulations in France and the jurisdictions in which the Technical Personnel are required to operate. 7.2 LIABILITIES BETWEEN THE PARTIES Maritima shall hold harmless and indemnify the Construction Manager from and against all claims, costs expenses or liabilities arising from or connected with the performance of this Agreement in respect of: (i) death of or personal injury to any of the personnel of the Maritima Group; (ii) loss of or damage to the property of the Maritima Group; (iii) any consequential or economic loss or damage suffered by the Maritima Group; howsoever arising and irrespective of negligence or other breach of legal duty by the Construction Manager Group. 7.2.2 The Construction Manager shall hold harmless and indemnify Maritima from and against all claims, costs, expenses or liabilities arising from or connected with the performance of this Agreement in respect of: 4 (i) death of or personal injury to any of personnel of the Construction Manager Group; (ii) loss of or damage to the property of the Construction Manager Group; and (iii) any consequential or economic loss or damage suffered by the Construction Manager Group; howsoever arising and irrespective of negligence or other breach of legal duty bY the Maritima Group. 7.2.3 For the purposes of this Clause 7.2, the Construction Manager Group means the Construction Manager, its associated companies, its other sub-contractors and suppliers, the Owner, Petrobras, and the officers, employees and agents of any of them. 7.2.4 For the purposes of this Clause 7.2 the Maritima Group means Maritima, its associated companies, its sub-contractors and suppliers and the officers, employees and agents of any of them. 7.2.5 For the express purposes of Clause 7 of this Agreement only, the Construction Manager contracts on its own behalf and expressly as agent on behalf of and as trustee for the benefit of all persons who are or may be from time to time within the Construction Manager Group (as defined in Clause 7.2.3) and all such persons shall to this extent be deemed to be parties to this Agreement. 7.2.6 For the express purposes of Clause 7 of this Agreement only, Maritima contracts on its own behalf and expressly as agent on behalf of and as trustee for the benefit of all persons who are or may be from time to time within the Maritima Group (as defined in Clause 7.2.4) and all such persons shall to this extent be deemed to be parties to this Agreement. 7.3 INDEMNITY FOR OPERATIONS Save as is provided in Article 7.2. above, the Construction Manager shall indemnify and hold harmless and shall procure that Owner shall indemnify and hold harmless Maritima from and against all actions, proceedings, claims, demands or liabilities whatsoever that may be brought by any other person against, or incurred by Maritima in relation to or in connection with its performance of this Agreement unless same has arisen from the gross negligence or wilful misconduct of Maritima, in which event the liability of Maritima shall be limited to the aggregate of the management fee received by Maritima in the preceding 12 months. 5 8. CONFIDENTIAL INFORMATION All information related to this Agreement regardless or whether such information concerns the Construction Manager, its clients, its associated companies or its contractors shall be treated as confidential and shall not be divulged by Maritima or the Technical Personnel to any third party without the prior written consent of the Construction Manager. The here above obligations shall survive the termination of the Agreement and shall remain in force for so long as the information covered by confidentiality has not otherwise become public knowledge. 9. INSURANCE 9.1 MARITIMAS INSURANCES Maritima undertakes that it will take out all insurance policies to cover its liabilities and those of the Technical Personnel as set forth in Article 7 of this Agreement, such insurances shall include but not be limited to the following: 9.1.1 Workmens Compensation insurance and Employers Liability insurance for damage suffered by its personnel in amounts not less than those required by applicable laws in Brazil and the jurisdiction in which the Technical Personnel are required to operate. 9.1.2 Comprehensive general liability insurance for its responsibility to third parties. 9.1.3 All insurance policies as required to cover its equipment and/or materials and those belonging to any service companies and for which Maritima is responsible. 9.2 CONSTRUCTION MANAGER INSURANCE The Construction Manager will take out insurance policies to cover the Construction Managers responsibilities including but not limited to those responsibilities set out in Clause 5.2 of the Construction Management Agreement. 9.3 GENERAL PROVISIONS For all insurance policies taken out: 9.3.1 Maritima shall comply with the relevant insurance regulations in force. 9.3.2 The Construction Manager shall bear the costs of the premiums, deductibles, fees and expenses relative to all policies effected pursuant to the provisions of this Agreement. 9.3.3 Each Party shall procure that the other Party shall be named as co-assured to the extent permitted so as to give effect to the provisions of Article 7 of this Agreement. 9.3.4 All of the insurance policies taken out shall state the underwriters waiver of subrogation to give effect to the provisions of Article 7 of this Agreement. 6 10. AUDIT Maritima shall keep and cause its Technical Personnel, its contractor(s) and subcontractor(s) to keep the books, payrolls, receipts, vouchers, financial records, personnel records and any document related to the work thereunder and required for administration purposes for the term of the Agreement and for a limited period of two (2) years after termination hereof. The Construction Manager, through its duly authorised representatives, shall have free access with 15 days notice with no restriction, to such information, whenever required by the Construction Manager, and it shall also have the right, at any time subject to previous notification to Maritima, to perform the audits it deems necessary of the aforementioned books, payrolls, receipts, vouchers, records and files in general. The Construction Manager reserves the right to audit the activities of Maritima and/or the Technical Personnel as deemed necessary and/or appropriate by the Construction Manager, in order to check the contents and compliance with the terms herein. Notwithstanding the foregoing, in no event shall the Construction Managers right of audit be construed as a release or waiver of any of Maritimas obligations under this Agreement. 11. MISCELLANEOUS 11.1 FORCE MAJEURE 11.1.1 Each Party to this Agreement shall be relieved from complying with any term of this Agreement to the extent that, and only so long as, such compliance is prevented or delayed by force majeure, which is defined as civil or labour disturbances, riots, strikes (other than a strike limited to the employees of either Party), wars (declared or undeclared), military actions, insurrections, rebellion, acts of any governmental or military agency and actual or assumed authority, action of elements, floods, storm or other acts of God or any cause beyond the control of either Party, whether or not similar to the matters herein specifically enumerated and provided that the event shall not have been caused by the action or negligence of that Party. That Party and/or the Parties affected shall do its, or their, utmost to remedy the above circumstances. 11.1.2 Any Party claiming force majeure shall promptly notify the other Party, with the evidence of the occurrence of such event. 11.1.3 If either Party hereto is prevented from or delayed in performing all or any of its obligations thereunder as a direct result of force majeure, such non-performance shall not be considered as a breach of this Agreement and that Party shall be relieved from such obligation which shall suspend payment by the other Party for the duration of such force majeure. 11.2 BANKRUPTCY OR ABANDONMENT OF OPERATIONS Should Maritima become insolvent or enter into any arrangement with or for the benefit of its creditors or become unable or refuse or neglect to perform its obligations hereunder or if Maritimas equipment is seized or taken in execution, the Construction Manager may, by notice in writing to Maritima, terminate this Agreement without thereby affecting in other respects the obligations or liabilities of Maritima. 7 11.3 ASSIGNMENT OF AGREEMENT Neither Party may assign this Agreement, either wholly or in part, except with the prior written authorisation of the other Party, which authorisation may not be unreasonably withheld. 12. NOTICE All notices, invoices and other communications required pursuant to this Agreement shall be in writing and deemed to have been sufficiently given or made if delivered by hand or send by fax to the addressee at the address set out below; in the case of the Construction Manager to: PETRODRILL ENGINEERING N.V. c/o Winkel, Sliana & Grul Attn: Thoma Aardenburg Pietermaai 23 Postbus 113 Curacao Netherlands Antilles Fax: 011 599 9 465 2890 in the case of Maritima to: MARITIMA Avenida Almirante Barroso 52 3400 GR 20031-000 Centro Rio de Janeiro Brazil Fax: 011 55 21 220 6566 with copies to: WESTVILLE MANAGEMENT CORPORATION Attn: Jonathan Talbot 5847 San Felipe, Suite 3300 Houston, Texas 77057 Fax: 713 914 9796 or to such other address as the relevant Party may from time to time notify to the other. 8 13. GOVERNING LAW AND ARBITRATION 13.1 This Agreement shall be governed by and construed in all respects in accordance with the laws of England. 13.2 Any dispute or difference arising in connection with this Agreement shall if possible be settled by mutual amicable agreement. 13.3 If any dispute should arise in connection with the interpretation and fulfilment of this Agreement the same shall be decided by arbitration in the city of London and shall be referred to a single Arbitrator to be appointed by the Parties hereto. If the Parties cannot agree upon the appointment of the single arbitrator (an Arbitrator ) the dispute shall be settled by three Arbitrators, each Party appointing one Arbitrator, the third being appointed by the Chairman for the time being of the London Maritime Arbitrators Association. 13.4 If either of the appointed Arbitrators refuses or is incapable of acting, the Party who appointed him shall appoint a new Arbitrator in his place. 13.5 If one of the Parties fails to appoint an Arbitrator, either originally or by way of substitution, for two weeks after the other Party having appointed his Arbitrator has sent the Party making default notice by mail or facsimile to make the appointment, the Party appointing the third Arbitrator shall, after application from the Party having appointed his Arbitrator, also appoint an Arbitrator on behalf of the Party making default. 13.6 The award rendered by the Arbitration Court shall be final and binding upon the Parties and may if necessary be enforced by the Court or other competent authority in the same manner as a judgment in the Court of Justice. 13.7 Work under this Agreement shall, if reasonably possible, continue during the Arbitration proceedings. IN WITNESS WHEREOF this Agreement has been executed in two duplicate originals by or on behalf of the Parties hereto the day and year first above written. SIGNED by )/s/ Illegible for and on behalf of )Illegible PETRODRILL ENGINEERING N.V. )/s/ FRIDA A. MARTINEZ in the presence of:- )Frida A. Martinez 9 SIGNED by )/s/ GERMAN EFROMOVICH for and on behalf of )German Efromovich MARITIMA PETROLEO E ENGENHARIA LTDA )/s/ Illegible in the presence of:- )Illegible 10 APPENDIX A RATES FOR TECHNICAL PERSONNEL 11 EX-10.41 102 EXHIBIT 10.41 PETRODRILL ENGINEERING N.V. - AND - WORKSHIPS CONTRACTORS B.V. ----------------------------------- SUPPLY AGREEMENT ----------------------------------- THIS AGREEMENT is made the 5th day of November 1998, BETWEEN: 1. PETRODRILL ENGINEERING N.V. a company incorporated in the Netherlands Antilles under registration number 77521 and having its registered office at Anthony Veder Building, Kaya Jacob Posner, Willemstad, Curacao, Netherlands Antilles (hereinafter referred to as the Construction Manager); and 2. WORKSHIPS CONTRACTORS B.V. a corporation incorporated in the Netherlands of KP Van Der Mandeleaan 34, 3062 MD Rotterdam (Brainpark), The Netherlands (Workships). The Construction Manager and Workships are also hereinafter referred to collectively as PARTIES and individually as PARTY. WHEREAS: A. The Construction Manager has entered into an agreement with Petrodrill Seven Limited (such company as its assignee pursuant to a Construction Contract Assignment, the Owner) of even date herewith (the Construction Management Agreement) whereby the Construction Manager has been appointed by the Owner to oversee the construction of the Owner's dynamically positioned semisubmersible drilling unit (the Vessel). B. The Construction Manager is desirous that Workships should provide to the Construction Manager personnel in accordance with the terms and conditions of this Agreement to assist the Construction Manager with various of the technical services required by the Owner to be provided during the period of the construction of the Vessel by the shipyard (the Builder) pursuant to a different shipbuilding contract (the Shipbuilding Contract). NOW, THEREFORE in consideration of the mutual covenants and obligations hereafter set forth, it is hereby agreed between the Parties as follows: 1. DEFINITIONS Capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Amethyst Financial Company Ltd.'s Shareholders' Agreement of every date herewith among Drillpetro Inc., Westville Management Corporation and Techdrill Inc. 2. OBJECT The object of this Agreement is the supply by Workships to the Construction Manager of personnel such as, but not limited to, specified in Clause 4 of this Agreement. 3. TERM The term of this Agreement is for the period of the construction of the Vessel by the Builder. -2- 4. SCOPE OF SERVICES PROVIDED BY WORKSHIPS Workships shall provide to the Construction Manager such personnel (the Technical Personnel) as are requested by the Construction Manager to assist the Construction Manager in relation to the marine construction of the Vessel and the fulfilment of the Construction Manager's obligations to the Owner as set out in the Construction Management Agreement. The provision of the Technical Personnel shall be on the following basis: 4.1 the Technical Personnel provided by Workships shall be suitably qualified to advise and assist in connection with matters relating to the construction of the Vessel as a drilling or workover unit; 4.2 at no time shall the Technical Personnel be deemed to be employees, either temporarily or permanent, of the Construction Manager and shall at all times be deemed to be employees of Workships; 4.3 Workships shall have the sole responsibility for the preparation of payroll and the payment of the Technical Personnel wages, compensation, remittance, allowance, insurance and indemnities of whatever kind and in complying with all applicable labour and local taxation regulations. 4.4 Both Parties agree to refrain from any and all actions, direct or indirect, that may lead to employment by such Party of an employee of the other Party, unless such Party obtains the prior written approval of the other Party, which approval shall not unreasonably be withheld. 4.5 Workships shall be entitled to invoice the Construction Manager for the travel, accommodation and repatriation of the Technical Personnel during the period of construction of the Vessel. 4.6 The Technical Personnel shall assist the Construction Manager in the fulfilment of its obligations as set out in Clause 4 of the Construction Management Agreement. 4.7 The Construction Manager may, if it is reasonably dissatisfied with any of the Technical Personnel, make a request in writing to Workships that such Technical Personnel be replaced with another suitably qualified person and Workships shall provide the same forthwith PROVIDED ALWAYS that Workships shall only do so if in its reasonable opinion the request of the Construction Manager is justified. 4.8 In the event that the Construction Manager requires such Technical Personnel to undertake tasks not included within the scope of the services to be provided as set out in Clause 4 of the Construction Management Agreement and agreed hereunder then the Construction Manager shall seek the prior written consent of Workships which consent shall not be unreasonably withheld and Workships shall instruct the Technical Personnel concerned to comply with such request of the Construction Manager. -3- 4.9 Workships shall only be required to provide to the Construction Manager such Technical Personnel as are available at the time that the Construction Manager requires them and the choice/identity of such Technical Personnel shall be decided upon by Workships in its absolute discretion and PROVIDED ALWAYS that the provision of such Technical Personnel from time to time shall not materially disrupt or adversely affect Workships's own business in which case Workships shall be entitled to postpone the supply of such Technical Personnel until such time as it is more able to comply with the requirements of the Construction Manager. 5. COMPENSATION / REMUNERATION 5.1 All Technical Personnel are to be provided by Workships to the Construction Manager on an open book, at cost basis, duly justified by direct reference to industry standards. For the supply of the Technical Personnel forming the object of this Agreement, the Construction Manager will pay Workships the rates stipulated in Appendix A herein increased on an annual basis by 3% unless otherwise agreed. 5.2 Workships shall receive compensation from the Construction Manager in the amount of US $2,083.33 per month as from May 1, 1998 for services provided hereunder. This amount is due at the end of each month. 5.3 In the case of disputed invoice, the Construction Manager will inform Workships of the item under dispute specifying the complaint within fifteen (15) days of receipt of such invoice but will pay the undisputed part. The disputed item will be paid as may be mutually agreed. This amount is due at the end of each month. 5.4 Payments shall be made to a bank account nominated on each invoice. 5.5 In case of sale of the Vessels Clause 5.2 of the contract shall remain in place for the total period of 24 months. Any outstanding amount shall be discounted at the rate of ten percent (10%). 6. TAXES Any taxes or charges incurred by Workships in connection with its duties and obligations hereunder whilst supplying the Technical Services shall be for the account of Workships. 7. LIABILITIES 7.1 COMPLIANCE WITH LAW AND REGULATION Workships represents that the provision by it of the Technical Personnel under this Agreement will comply with all applicable laws and regulations in France, the Netherlands, Brazil and the jurisdictions in which the Technical Personnel are required to operate. 7.2 LIABILITIES BETWEEN THE PARTIES 7.2.1 Workships shall hold harmless and indemnify the Construction Manager from and against all claims, costs expenses or liabilities arising from or connected with the performance of this Agreement in respect of: (i) death of or personal injury to any of the personnel of the Workships Group; -4- (ii) loss of or damage to the property of the Workships Group; (iii) any consequential or economic loss or damage suffered by the Workships Group; howsoever arising and irrespective of negligence or other breach of legal duty by the Construction Manager Group. 7.2.2 The Construction Manager shall hold harmless and indemnify Workships from and against all claims, costs, expenses or liabilities arising from or connected with the performance of this Agreement in respect of: (i) death of or personal injury to any of personnel of the Construction Manager Group; (ii) loss of or damage to the property of the Construction Manager Group; and (iii) any consequential or economic loss or damage suffered by the Construction Manager Group; howsoever arising and irrespective of negligence or other breach of legal duty bY the Workships Group. 7.2.3 For the purposes of this Clause 7.2, the Construction Manager Group means the Construction Manager, its associated companies, its other sub-contractors and suppliers, the Owner, Petrobras, and the officers, employees and agents of any of them. 7.2.4 For the purposes of this Clause 7.2 the Workships Group means Workships, its associated companies, its sub-contractors and suppliers and the officers, employees and agents of any of them. 7.2.5 For the express purposes of Clause 7 of this Agreement only, the Construction Manager contracts on its own behalf and expressly as agent on behalf of and as trustee for the benefit of all persons who are or may be from time to time within the Construction Manager Group (as defined in Clause 7.2.3) and all such persons shall to this extent be deemed to be parties to this Agreement. 7.2.6 For the express purposes of Clause 7 of this Agreement only, Workships contracts on its own behalf and expressly as agent on behalf of and as trustee for the benefit of all persons who are or may be from time to time within the Workships Group (as defined in Clause 7.2.4) and all such persons shall to this extent be deemed to be parties to this Agreement. -5- 7.3 INDEMNITY FOR OPERATIONS Save as is provided in Article 7.2. above, the Construction Manager shall indemnify and hold harmless and shall procure that Owner shall indemnify and hold harmless Workships from and against all actions, proceedings, claims, demands or liabilities whatsoever that may be brought by any other person against, or incurred by Workships in relation to or in connection with its performance of this Agreement unless same has arisen from the gross negligence or wilful misconduct of Workships, in which event the liability of Workships shall be limited to the aggregate of the management fee received by Workships in the preceding 12 months. 8. CONFIDENTIAL INFORMATION All information related to this Agreement regardless or whether such information concerns the Construction Manager, its clients, its associated companies or its contractors shall be treated as confidential and shall not be divulged by Workships or the Technical Personnel to any third party without the prior written consent of the Construction Manager. The hereabove obligations shall survive the termination of the Agreement and shall remain in force for so long as the information covered by confidentiality has not otherwise become public knowledge. 9. INSURANCE 9.1 WORKSHIPS'S INSURANCES Workships undertakes that it will take out all insurance policies to cover its liabilities and those of the Technical Personnel as set forth in Article 7 of this Agreement, such insurances shall include but not be limited to the following: 9.1.1 Workmen's Compensation insurance and Employer's Liability insurance for damage suffered by its personnel in amounts not less than those required by applicable laws in The Netherlands and the jurisdiction in which the Technical Personnel are required to operate. 9.1.2 Comprehensive general liability insurance for its responsibility to third parties. 9.1.3 All insurance policies as required to cover its equipment and/or materials and those belonging to any service companies and for which Workships is responsible. 9.2 CONSTRUCTION MANAGER INSURANCE The Construction Manager will take out insurance policies to cover the Construction Manager's responsibilities including but not limited to those responsibilities set out in Clause 5.2 of the Construction Management Agreement. 9.3 GENERAL PROVISIONS For all insurance policies taken out: 9.3.1 Workships shall comply with the relevant insurance regulations in force. 9.3.2 Construction Manager shall bear the costs of the premiums, deductibles, fees and expenses relative to all policies effected pursuant to the provisions of this Agreement. -6- 9.3.3 Each Party shall procure that the other Party shall be named as co-assured to the extent permitted so as to give effect to the provisions of Article 6 of this Agreement. 9.3.4 All of the insurance policies taken out shall state the underwriter's waiver of subrogation to give effect to the provisions of Article 6 of this Agreement. 10. AUDIT Workships shall keep and cause its Technical Personnel, its contractor(s) and subcontractor(s) to keep the books, payrolls, receipts, vouchers, financial records, personnel records and any document related to the work thereunder and required for administration purposes for the term of the Agreement and for a limited period of two (2) years after termination hereof. The Construction Manager, through its duly authorised representatives, shall have free access with 15 days notice with no restriction, to such information, whenever required by the Construction Manager, and it shall also have the right, at any time subject to previous notification to Workships, to perform the audits it deems necessary of the aforementioned books, payrolls, receipts, vouchers, records and files in general. The Construction Manager reserves the right to audit the activities of Workships and/or the Technical Personnel as deemed necessary and/or appropriate by the Construction Manager, in order to check the contents and compliance with the terms herein. Notwithstanding the foregoing, in no event shall the Construction Manager's right of audit be construed as a release or waiver of any of Workships's obligations under this Agreement. 11. MISCELLANEOUS 11.1 FORCE MAJEURE 11.1.1 Each Party to this Agreement shall be relieved from complying with any term of this Agreement to the extent that, and only so long as, such compliance is prevented or delayed by force majeure, which is defined as civil or labour disturbances, riots, strikes (other than a strike limited to the employees of either Party), wars (declared or undeclared), military actions, insurrections, rebellion, acts of any governmental or military agency and actual or assumed authority, action of elements, floods, storm or other acts of God or any cause beyond the control of either Party, whether or not similar to the matters herein specifically enumerated and provided that the event shall not have been caused by the action or negligence of that Party. That Party and/or the Parties affected shall do its, or their, utmost to remedy the above circumstances. 11.1.2 Any Party claiming force majeure shall promptly notify the other Party, with the evidence of the occurrence of such event. 11.1.3 If either Party hereto is prevented from or delayed in performing all or any of its obligations thereunder as a direct result of force majeure, such non-performance shall not be considered as a breach of this Agreement and that Party shall be relieved from such obligation which shall suspend payment by the other Party for the duration of such force majeure. -7- 11.2 BANKRUPTCY OR ABANDONMENT OF OPERATIONS Should Workships become insolvent or enter into any arrangement with or for the benefit of its creditors or become unable or refuse or neglect to perform its obligations hereunder or if Workships's equipment is seized or taken in execution, the Construction Manager may, by notice in writing to Workships, terminate this Agreement without thereby affecting in other respects the obligations or liabilities of Workships. 11.3 ASSIGNMENT OF AGREEMENT Neither Party may assign this Agreement, either wholly or in part, except with the prior written authorisation of the other Party, which authorisation may not be unreasonably withheld. 12. NOTICE All notices, invoices and other communications required pursuant to this Agreement shall be in writing and deemed to have been sufficiently given or made if delivered by hand or send by fax to the addressee at the address set out below; in the case of the Construction Manager to: PETRODRILL ENGINEERING N.V. c/o Winkel, Sliana & Grul Attn: Thoma Aardenburg Pietermaai 23 Postbus 113 Curacao Netherlands Antilles Fax: 011 599 9 465 2890 with copies to: WESTVILLE MANAGEMENT CORPORATION Attn: John C.G. O'Leary 5847 San Felipe, Suite 3300 Houston, Texas 77057 Fax: 713 914 9796 -8- in the case of Workships to: WORKSHIPS CONTRACTORS B.V. KP Van Der Mandeleaan 34 3062 MD Rotterdam (Brainpark) The Netherlands Fax: 011 31 10 452 8176 or to such other address as the relevant Party may from time to time notify to the other. 13. GOVERNING LAW AND ARBITRATION 13.1 This Agreement shall be governed by and construed in all respects in accordance with the laws of England. 13.2 Any dispute or difference arising in connection with this Agreement shall if possible be settled by mutual amicable agreement. 13.3 If any dispute should arise in connection with the interpretation and fulfilment of this Agreement the same shall be decided by arbitration in the city of London and shall be referred to a single arbitrator (an Arbitrator) to be appointed by the Parties hereto. If the Parties cannot agree upon the appointment of the single Arbitrator the dispute shall be settled by three Arbitrators, each Party appointing one Arbitrator, the third being appointed by the Chairman for the time being of the London Maritime Arbitrators' Association. 13.4 If either of the appointed Arbitrators refuses or is incapable of acting, the Party who appointed him shall appoint a new Arbitrator in his place. 13.5 If one of the Parties fails to appoint an Arbitrator, either originally or by way of substitution, for two weeks after the other Party having appointed his Arbitrator has sent the Party making default notice by mail or facsimile to make the appointment, the Party appointing the third Arbitrator shall, after application from the Party having appointed his Arbitrator, also appoint an Arbitrator on behalf of the Party making default. 13.6 The award rendered by the Arbitration Court shall be final and binding upon the Parties and may if necessary be enforced by the Court or other competent authority in the same manner as a judgment in the Court of Justice. 13.7 Work under this Agreement shall, if reasonably possible, continue during the arbitration proceedings. IN WITNESS WHEREOF this Agreement has been executed in two duplicate originals by or on behalf of the Parties hereto the day and year first above written. -9- SIGNED by )/s/ Illegible for and on behalf of ) PETRODRILL ENGINEERING N.V. ) in the presence of: )/s/ Illegible SIGNED by )/s/ Illegible for and on behalf of ) WORKSHIPS CONTRACTORS B.V. ) in the presence of: )/s/ Illegible -10- APPENDIX 1 SCHEDULE OF RATES - - -------------------------------------------------------------------------------- NAME COST PER WORKING DAY US$/DAY - - -------------------------------------------------------------------------------- Grob B.H.M. 500 - - -------------------------------------------------------------------------------- Minnes R.A. 569 - - -------------------------------------------------------------------------------- Charalampopoulos M. 111 - - -------------------------------------------------------------------------------- Jolles W. 519 - - -------------------------------------------------------------------------------- Nijs J. de 469 - - -------------------------------------------------------------------------------- Hogg T. 474 - - -------------------------------------------------------------------------------- Bugel A. 582 - - -------------------------------------------------------------------------------- Notes: All prices above are inclusive of salaries, social security costs, insurance, provision for holidays and travel days. All prices are exclusive of direct flight and travel charges, accomodations. The prices shown are valid for 12 months commencing 1st January 1998 and are subject to annual revision of 3% (three percent) unless otherwise agreed. -12- EX-10.45 103 EXHIBIT 10.45 PETRODRILL SEVEN LIMITED - AND - FORMARITIMA LTD. ----------------------------------------------- AMETHYST 7 MANAGEMENT AGREEMENT ------------------------------------------------ THIS AGREEMENT is made as of the 5th day of November 1998, BETWEEN: 1. PETRODRILL SEVEN LIMITED, a company incorporated in the British Virgin Islands with its registered office located at Arias, Fabrega & Fabrega, P.O. Box 985, Omar Hodge Building, Wickham s Cay, Road Town, Tortola, British Virgin Islands. hereafter referred to as Petrodrill ; and 2. FORMARITIMA LTD. a company incorporated in the British Virgin slands and having its principal office at c/o Arias, Fabrega & Fabrega Trust Co., Omar Hodge Building, Wickham s Cay, Road Town, Tortola, British Virgin Islands hereafter referred to as Manager . Petrodrill and Manager are hereinafter also referred to individually as Party and collectively as Parties . WHEREAS: A. Petrodrill will be the legal owner of a dynamically positioned semi-submersible drilling vessel (hereinafter called the Vessel ) and intends to carry out worldwide offshore drilling and workover operations using the Vessel, subsequent to its delivery to appropriate Project Companies pursuant to a contract for construction and sale between Petrodrill and Daewoo Heavy Industries as amended from time to time ( the Construction Contract ). B. The Manager possesses the know-how and skilled personnel to enable it to manage the operation and maintenance of the Vessel and to market the Vessel world-wide. C. The Manager will support and render services relevant to the mobilization of the Vessel to Brazil and operations pursuant to a certain charter agreement between Petroleo Brasileiro S.A. (hereinafter referred to as PETROBRAS ) and Maritima Navegaco e Engenharia Ltda as novated and assigned to Petrodrill (the CHARTER AGREEMENT ) and thereafter worldwide. D. Manager has been provided with a copy of the aforesaid Charter Agreement and Construction Contracts. Petrodrill is desirous of contracting with the Manager for the provision of the services in accordance with the terms and conditions set out herein. 2 NOW IT IS HEREBY AGREED BETWEEN THE PARTIES AS FOLLOWS: 1. DEFINITIONS Capitalized terms used herein but not otherwise defined shall have the meanings assigned to such terms in Petrodrill s Shareholders Agreement among Drillpetro Inc., Techdrill Inc. and Westville Management Corporation. 2. TERM OF AGREEMENT This Agreement shall take effect from the date hereof and shall continue unless terminated pursuant to the provisions of Clause 7. 3. COMMENCEMENT AND PERFORMANCE 3.1 PRESENT CONDITION OF VESSEL: The parties acknowledge as at the date of signing of this Agreement that the Vessel is to be constructed. Petrodrill undertakes to provide the Manager with copies of all relevant documentation in respect of the Vessel in the English language, including detailed drilling equipment lists. 3.2 DELIVERY: This Agreement shall commence with respect to the Vessel prior to commencement of sea trials under the relevant Construction Contract. The Manager will furnish the relevant personnel and services to assist during the sea trials. 3.3 PERFORMANCE BY MANAGER: The Manager shall at all times maintain proper and adequate office and technical facilities and a competent and sufficient staff for the performance of its duties, and shall, on behalf of Petrodrill and at Petrodrill s risk and expense, manage and maintain the Vessel in accordance with good oil industry practice, efficiently and economically, to the best of its professional ability in regard to performance, safety and shipshape appearance, and will arrange, at all times, technical supervision to ensure that the Vessel is kept in a seaworthy condition and with valid certificates. Notwithstanding the foregoing, Petrodrill has, subject only to the provisions of Clause 6, ultimate and complete responsibility for the Vessel and shall indemnify the Manager in accordance with Clause 6. 4. OPERATIONAL DUTIES AND RESPONSIBILITIES OF THE MANAGER 4.1 MANAGER S PERSONNEL AND SERVICES TO BE RENDERED BY OTHER CONTRACTORS OF PETRODRILL 4.1.1 The Manager shall provide a sufficient number of relevantly qualified personnel in order to ensure that the operations of the Vessel is at all times undertaken safely and in accordance with good oil industry practice and in compliance with the lawful and proper instructions of any client contracting for use of the services of the Vessel and in accordance with the contract with such client and any regulations from relevant regulatory bodies, authorities or classification societies. 3 4.1.2 The Manager shall ensure at all times that it has an adequate pool of qualified personnel available to cover vacancies due to leave requirements, sickness, injury, replacement of personnel as contemplated by the provisions of Clause 4.1.3 or for any other reason whatsoever. 4.1.3 Should Petrodrill be dissatisfied with the performance of any of the personnel provided by the Manager, Petrodrill shall notify the Manager thereof, stating the reasons for its dissatisfaction. Should the cause of Petrodrill s dissatisfaction remain unremedied for a period of twenty days from the giving of Petrodrill s said notice, Petrodrill shall have the right to request the replacement of the personnel concerned and in such event the Manager shall, as soon as practicable thereafter replace the personnel concerned. 4.1.4 The Manager shall: (a) keep Petrodrill fully informed regarding incidents which give or could give rise to claims by or against third parties including damage to the Vessel or serious sickness of personnel; and (b) use all reasonable endeavours to protect Petrodrill s interests with respect to claims by or against third parties, including personnel employed aboard the Vessel. 4.2 MARKETING AND CONTRACT NEGOTIATIONS To the extent required by Petrodrill; 4.2.1 The Manager shall, and as may be appropriate, conduct and ensure the best possible world wide marketing of the Vessel and shall keep Petrodrill regularly and fully informed as to all available suitable work. 4.2.2 (a) Manager s responsibility to market the Vessel under this Agreement shall include making commercial proposals to all potential clients with the view to being awarded contracts for the employment of the Vessel after release from employment under their respective Charter Agreements, all obligations to Petrobras having been duly performed. (b) The Manager shall, prior to making any commercial proposal to a potential client, notify Petrodrill of the terms and conditions of such commercial proposal. These shall include a budget setting out an estimate of the expenditure, whether of a capital or income nature, to be incurred in connection with the performance of any contract of employment of the Vessel that may result from such commercial proposal, the revenue (including mobilisation/demobilisation and day rates) expected to arise therefrom and also any projected profit. Petrodrill shall, within 5 working days (that is days, other than Saturdays, Sundays and public holidays in either Rio de Janeiro or Paris) ( Working Days ) from the date of the giving of the notice concerned by the Manager notify the Manager whether or not it 4 agrees such proposal. If Petrodrill so notifies the Manager that it agrees such proposal, it shall be forthwith made to the potential client but if it so notifies the Manager that it does not agree such proposal, it shall not be made to the potential client. If Petrodrill shall fail so to notify the Manager whether or not it agrees the proposal within the period aforesaid Petrodrill shall be deemed to have agreed the proposal and the Manager shall thereupon make the same to the potential client. 4.2.3 When seeking employment for the Vessel, the Manager shall not give preferential treatment to other rigs under its management. If the Manager shall wish to submit a competing commercial proposal in respect of any other drilling unit owned or managed by the Manager, it shall be entitled to do so but shall notify Petrodrill of such intention immediately such intention is formed. In the event that the Manager shall intend to submit a competing commercial proposal in respect of such a unit, Petrodrill shall be entitled itself to submit its commercial proposal in respect of the Vessel to the potential client and to conduct all negotiations in connection therewith to the exclusion of the Manager, and without being under any obligation to disclose to the Manager the details of the commercial proposal or any variations thereof. 4.3 OPERATIONS EQUIPMENT MAINTENANCE 4.3.1 The Manager shall arrange for the operation of the Vessel and all equipment used on or from the Vessel. 4.3.2 The Manager shall carry out all the functions which, in accordance with good oil industry practice, would be performed by persons conducting the operations of the Vessel. 4.3.3 The Manager is authorised to act, on behalf of Petrodrill, in respect of all matters that may pertain to the everyday operation of the drilling and workover services. Notwithstanding the foregoing, where in connection with such operation, the Manager will or is likely to incur expenditure not contemplated by or greater than the amount specified in respect thereof in any budget as is referred to in Clause 4.5.2 and where any such expenditure will or is likely to exceed US$50,000 or, in any calendar month, sums which, in the aggregate, are in excess of US$50,000. the Manager shall, prior to incurring such expenditure, obtain the consent of Petrodrill so to do. Nevertheless the Manager shall, in any case where, in its reasonable opinion, it is necessary to take immediate action to avert danger to life or health or loss or damage to the Vessel or other property of Petrodrill, be entitled and obligated to take such action without the prior consent of Petrodrill but, in every such case, the Manager shall promptly notify Petrodrill of the action so taken by it and of the amount of expenditure incurred by it in so doing. 5 4.3.4 Subject to Clauses 4.3.3 and 4.5.2 the Manager shall procure the supply of all equipment and materials required in connection with the operation and maintenance of the Vessel including an adequate supply of spare parts, stock for stores and catering, and generally so as to ensure that the Manager will at all times be able to fulfil its obligations hereunder. The Manager will use its best endeavours to ensure, that materials and equipment procured by it are purchased on the most economical terms available, as to price and payment, and having regard to the quality and availability of the materials and equipment concerned. 4.3.5 The Manager shall provide for technical supervision, repairs, classification, customary maintenance and, in all other respects, use its best endeavours so that, at all times and subject to the provisions of clauses 4.6.2 and 4.6.3, the Vessel is kept duly operational and seaworthy, and maintain their certificates and permissions for maritime and drilling and workover operations all in accordance with good oil industry practice. Minimum personnel will be maintained during periods of lay up in order to minimise cost to Petrodrill. 4.3.6 Petrodrill s representatives shall be entitled to board the Vessel for the purpose of examining the Vessel and its operations subject, at all times, to the consent of the client where applicable. 4.3.7 The Manager will provide, if required by any client or relevant authority, an internal control system (Quality Assurance and Quality Control), which is approved by relevant certifying authorities and regulating bodies. 4.3.8 The Manager will not by act or omission of Manager cause Petrodrill to be in breach of any provision of the mortgage registered over the Vessel and has been provided with a copy of said mortgage and will provide such confirmation as may be reasonably required by the Vessel s lenders. 4.4 INSURANCE 4.4.1 The Manager, on behalf of Petrodrill, shall ensure and provide that the Vessel and all consumable, materials and equipment thereof and the Manager's and Petrodrill's employees are at all times adequately insured with reputable underwriters on the best possible terms. Manager shall ensure that such insurance shall be fully in compliance with the requirements of the holder of the mortgage on the Vessel. Subject to the foregoing, the following minimum insurance coverage will be maintained by the Manager on behalf of Petrodrill at all times: (a) All Risks Hull and Machinery Insurance (including underwater and in-hole equipment) against marine and war risks, to the full market value of the Vessel; and 6 (b) Full Protection and Indemnity Insurance, or equivalent, in respect of liabilities of Petrodrill and/or the Manager to third parties including but not limited to pollution or contamination, removal of wreck and recovery of equipment lost overboard. 4.4.2 Insurances in respect of the personnel (such as workmens' compensation and employers liability) whether employed on board the Vessel or not will be the responsibility of the employers of such personnel. 4.4.3 The Manager, on behalf of Petrodrill, shall use its best endeavours to arrange additional or alternative insurance coverage to those specified in Clause 4.4.1 as may from time to time be required for the fulfilment of any contract of employment entered into for the employment of the Vessel. The arrangement and maintenance of such additional or alternative insurance coverage shall not prejudice the arrangement and maintenance of any insurance referred to in Clause 4.4.1. 4.4.4 It is agreed that all deductibles paid under such insurances shall be considered as Operating Costs. 4.4.5 It is further agreed and the Manager shall arrange that the insurances effected on behalf of Petrodrill shall be endorsed with a statement that the Manager is co-assured and that the underwriters waive their rights of subrogation and/or recourse, whether express or implied, against the Manager and/or its subcontractors and its affiliated companies and against any party designated in writing by the Manager with whom the Manager has entered into a hold harmless agreement or otherwise in respect to the Vessel and operations involving the Vessel. This Agreement shall be copied by Manager to the relevant underwriters and their written approval that the indemnities herein contained are acceptable as being normal in the oil industry shall be obtained by the Manager. 4.4.6 Manager shall provide Petrodrill with copies of the relevant policy(ies) of insurance and with evidence of the payment of the relevant insurance premiums. 4.4.7 (a) In the event of an accident or incident which will or may give rise to a claim the Manager shall immediately notify Petrodrill and the relevant insurance underwriters. (b) The Manager, on behalf of Petrodrill, shall liaise with Petrodrill s insurers, underwriters, agents, surveyors, loss adjusters and/or as may be required and prepare all documentation necessary in connection therewith. (c) The responsibility of making a claim shall be that of the Manager on behalf of Petrodrill. (d) The Manager shall not authorise repairs or settle any claims without first obtaining Petrodrill s consent. 7 Petrodrill and the Manager agree to cooperate to the fullest possible extent in order to speed up insurance claims processing. 4.4.8 The Manager shall take out and maintain all statutory employer s liability insurance to cover the Manager s employees in compliance with applicable laws. To ensure that the actions of such personnel are insured at all times while working on or in relation to the Vessel, Petrodrill, if possible, shall be entered as co-assured in the Manager s insurances. 4.4.9 The premiums payable by Manager in respect of all insurance effected shall be for the account of Petrodrill. 4.5 ADMINISTRATION AND ACCOUNTS 4.5.1 The Manager will prepare and submit to Petrodrill at least sixty days prior to the Vessel being delivered to the Manager a budget of operating income and expenditure for the period of twelve calendar months following that delivery. At least sixty days prior to each anniversary of the date of aforesaid delivery, the Manager shall prepare and submit to Petrodrill a budget of operating income and expenditure and any contemplated capital expenditure, for the following twelve months. Each budget shall contain sufficient detail of likely expenditure as will enable Petrodrill to check actual costs when they are incurred against estimates. All assumptions shall be clearly stated. The budgets shall be subject to Petrodrill s approval but when approved, Petrodrill shall promptly notify the Manager thereof. Petrodrill will provide details of costs in respect of personnel and any other services to be provided by Petrodrill. In addition to the aforesaid budgets the Manager will prepare and submit to Petrodrill budgets referred to in Clause 4.2.2. 4.5.2 Quarterly reports and accounts shall be presented to Petrodrill as soon as reasonably possible after the end of each three month period following the delivery referred to in 4.5.1. but no later than 40 calendar days after the end of such period. The quarterly report shall contain the following: Brief marketing status and work prospects Major repairs/capital investments The accounts/financial reports shall contain the following in a format to be mutually acceptable to both parties, Petrodrill from time to time to provide the Manager with a copy of its preferred format: Quarterly actual and year to date results compared with the budget 8 Description/analysis of variances actual/budget Cash flow/fund requirements Estimates for the year In addition, the Manager shall provide Petrodrill with a copy of the monthly report from the Vessel containing a brief summary on safety, client relationship, invoices and revenue. 4.5.3 Subject to the provisions of Clause 4.3.3. the Manager shall utilise funds credited to or standing in the Disbursement Account (defined in 4.5.4) to meet the following expenses and disbursements inter alia, hereinafter referred to as the Operating Costs: Cost of Manager provided personnel; Travel costs for Petrodrill and Manager provided personnel; Purchases of materials, supplies, equipment, parts and storage, transport and assembling thereof, and cost of subcontractors in connection with specific assignments; Expenses incurred for keeping the Vessel in line with certification and classification requirements (This will apply for Annual surveys only. Expenses for Special Periodic survey are not included in Operating Costs but will be shown in each relevant budget submitted under the provisions of this Agreement); Professional services for all analysis or technical assistance required to the extent that such services qualitatively cannot be performed by the Manager or the Manager s own employees; Direct Internal Quality and Safety audit costs when carried out on board the Vessel; Shore base expenses including payroll and payroll related expenses to shore base staff, storage, transportation, office and warehouse upkeep at shore base site including mobilization and demobilization of the same; Expenses for catering; Customs duties, corporate taxes, withholding taxes, and other taxes of whatsoever nature levied on Petrodrill of an Operating Company and arising solely from contracts entered into in respect of the Vessel and levied in jurisdictions where the Vessel is located from time to time and/or in connection with this Agreement; Budget approved brokerage, commission and agency fees to third parties, if any; All other reasonable expenses and costs of similar nature which are budgeted and such other reasonable costs and expenses that the Manager in its discretion 9 considers to be necessary to ensure the safety of the personnel on the Vessel or the Vessel itself as well as mitigation of non- performance under the Charter Agreements subject to a limitation of US$250,000; and Insurance costs including deductibles. 4.5.4 The Manager shall be required, pursuant to its duties under this Agreement, to open and keep a separate bank account in the name of Petrodrill ( the Disbursement Account ) and books, records and accounts relating to the management of the operation and maintenance of the Vessel in accordance with internationally accepted applicable accounting principles and in the English language. All such books, records, accounts and other related documents mentioned above shall be available to Petrodrill or its appointees for inspection at all reasonable times. In addition to the reports referred to in Clause 4.5.3. the Manager shall furnish to Petrodrill all information (financial or otherwise) reasonably required throughout the year by Petrodrill for its own accounts or audits and any assistance required to be given to its auditors. 4.6 BANK ACCOUNTS AND FLOW OF FUNDS Subject always to such other instructions as Petrodrill may give to the Manager pursuant to arrangement with the holder of the mortgage over the Vessel, or otherwise: 4.6.1 Petrodrill undertakes to transfer a sum of US$1,000,000 (the minimum working capital ) into the Disbursement Account within 30 days prior to commencement of the services by Manager under this Agreement. The Manager undertakes to procure that income (and other revenue items) payable to Petrodrill in connection with the Vessel is credited without set-offs or deduction, other than those set-offs and deductions compulsorily imposed on amounts received by the Manager according to applicable laws in the country where the Vessel is employed, to the Disbursement Account. 4.6.2 The Manager will provide Petrodrill not less than seven working days prior to the end of each month with a statement of its working capital requirements in respect of the Vessel and the Manager s obligations hereunder for the next month. If the funds received from the Vessel s operations are insufficient at any time to meet the Manager s costs, as listed under 4.5.4. and 5 or any other expenditure rightfully incurred, the Manager shall notify Petrodrill of its cash requirements by giving at least ten Working Days notice. Petrodrill is obliged, at all times, to ensure that the Manager s request for adequate working capital is met within the said notice period of 10 Working Days and to maintain that the minimum working capital balance is maintained in the Disbursement Account. 10 4.6.3 Any funds credited to the Disbursement Account in excess of necessary working capital to meet expenses listed under Clauses 4.5.3. and 5. shall be promptly paid over to such account as Petrodrill may specify from to time unless. Petrodrill requests the Manager to temporarily administer such spare funds in consultation with Petrodrill. 4.6.4 The Manager will provide Petrodrill on a monthly basis with copies of all Disbursement Account statements. 4.6.5 Any interest earned/or payable in respect of the Disbursement Account shall be for the credit of the Disbursement Account. 4.6.6 Under no circumstances shall the Manager, without the prior written approval of Petrodrill (which approval may be withheld at Petrodrill s sole discretion), be entitled to borrow funds or enter into any agreement to borrow funds in such a manner as to bind Petrodrill PROVIDED ALWAYS that a requirement for funds to meet a safety obligation shall supersede this provision. 5. MANAGEMENT FEE 5.1 With effect from start of pre-delivery sea trials of the Vessel, the Manager shall be paid a fee (the Fee ) of US$1,250 per day for the duration of this Agreement. The Fee shall be paid against invoice to Petrodrill such invoice to be rendered by the tenth day of the month following the month in which the Fee was earned. 5.2 In the event of a sale of theVessel and termination of this Agreement with respect to the Vessel pursuant to Clause 7.6 and the purchaser not accepting an assignment of the rights and obligations of Petrodrill under this Agreement, the Fee shall be deemed earned by the Manager and shall be paid as compensation to the Manager in respect of the aggregate number of days of management fee lost with respect to the Vessel each day between date of sale and the final day of the firm term of the relevant Charter Agreement discounted at ten per cent (10%) per annum. 5.3 In the case of a disputed invoice, Petrodrill will advise the Manager of the item under dispute specifying the complaint within fifteen (15) days of receipt of such invoice but will pay the undisputed part. The disputed item will be paid as may be mutually agreed. 6. INDEMNITIES 6.1 Except to the extent that the Manager would be liable under Clause 6.2, Petrodrill hereby undertakes to keep the Manager indemnified and to hold the Manager harmless against all actions, proceedings, claims, demands or liabilities whatsoever which may be brought against or incurred by the Manager in relation to any act or thing done or caused to be done as aforesaid, and against all costs, damages and expenses which the Manager may suffer or incur in defending or settling the same. 11 6.2 Subject to Clause 6.4. below, Petrodrill indemnifies and holds harmless the Manager against all liability whatsoever, whether in law, tort or in contract or otherwise, and Petrodrill shall be solely liable for any damage, loss or claim of whatsoever nature and howsoever arising, whether relating to the Vessel, its hirers and users (including, without prejudice to the generality of the foregoing, for damage to or loss of property, including the Vessel, and all direct and consequential loss) unless the same is proved to have resulted solely from the gross negligence or wilful default of the Manager, its employees, agents or subcontractors in which case the Manager s liability during any one year of the term of this Agreement shall not exceed the aggregate of the Fee received by the Manager in the preceding twelve months with respect to the Vessel. 6.3 The Manager shall be under no liability whatsoever in respect of any consequential loss (including without prejudice to the generality of the foregoing liability due to detention of or delay of theVessel or otherwise) arising out of or in connection with the management and/or operation of the Vessel. 6.4 LIABILITIES BETWEEN THE PARTIES 6.4.1 The Manager shall hold harmless and indemnify Petrodrill from and against all claims, costs expenses or liabilities arising from or connected with the performance of this Agreement in respect of: (i) death of or personal injury to any of the personnel of the Manager s Group; (ii) loss of or damage to the property of the Manager s Group; (iii) any consequential or economic loss or damage suffered by the Manager s Group; howsoever arising and irrespective of negligence or other breach of legal duty by Petrodrill s Group. 6.4.2 Petrodrill shall hold harmless and indemnify the Manager from and against all claims, costs, expenses or liabilities arising from or connected with the performance of this Agreement in respect of: (i) death of or personal injury to any of personnel of Petrodrill s Group; (ii) loss of or damage to the property of Petrodrill s Group; and (iii) any consequential or economic loss or damage suffered by Petrodrill s Group; howsoever arising and irrespective of negligence or other breach of legal duty bY the Manager s Group. 12 6.4.3 For the purposes of this Clause 6.4, Liabilities Between the Parties, Petrodrill s Group means Petrodrill, its associated companies, its other sub-contractors and suppliers, Petrobras, and the officers, employees and agents of any of them. 6.4.4 For the purposes of this Clause 6.4, Liabilities Between the parties, the Manager s Group means the Manager, its associated companies, its sub-contractors and suppliers and the officers, employees and agents of any of them. 6.4.5 For the express purposes of Clause 6.4, Liabilities Between the Parties, of this Agreement only, Petrodrill contracts on its own behalf and expressly as agent on behalf of and as trustee for the benefit of all persons who are or may be from time to time within Petrodrill s Group and all such persons shall to this extent be deemed to be parties to this Agreement. 6.4.6 For the express purposes of Clause 6.4, Liabilities Between the Parties, of this Agreement only, the Manager contracts on its own behalf and expressly as agent on behalf of and as trustee for the benefit of all persons who are or may be from time to time within the Manager s Group and all such persons shall to this extent be deemed to be parties to this Agreement. 6.5 INDEMNITY FOR OPERATIONS Save as is provided in Article 5.4 above, Petrodrill shall indemnify and hold harmless the Manager from and against all actions, proceedings, claims, demands or liabilities whatsoever that may be brought by any other person against, or incurred by the Manager in relation to or in connection with its performance of this Agreement with respect to each Rig unless same has arisen from the gross negligence or wilful misconduct of the Manager, in which event the liability of the Manager shall be limited to the aggregate of the management fee received by the Manager in the preceding 12 months with respect to each Rig. 7. TERMINATION 7.1 Petrodrill may terminate this Agreement at any time if: 7.1.1 Petrodrill is dissatisfied, with sound reasons, with the performance of Manager on account of incompetence of the Manager or unsatisfactory performance of its duties and obligations hereunder as a result of causes reasonably within the Manager s control, and the Manager, after having been given, by Petrodrill, written notice in which Petrodrill shall have specified in detail the grounds for its dissatisfaction, shall fail to take effective steps to remedy the matters complained of within thirty days after the giving of the said written notice. Petrodrill shall, if its right to terminate shall arise as aforesaid, have the right to terminate this Agreement effective ninety (90) days after a date specified by Petrodrill without any further compensation to the Manager other than any money due and owing at date this Agreement is to terminate. 13 7.1.2 The Manager shall go into liquidation (otherwise than voluntarily for the purpose of reorganization or reconstruction), make an assignment for the benefit of creditors, make an arrangement, composition or compromise with its creditors or have a receiver or administrator appointed in respect of the whole or any part of its assets or shall otherwise be unable to pay its debts as and when they become due. 7.1.3 The Manager ceases or threatens to cease to carry on its business. 7.2 This Agreement shall be terminated with respect to the Vessel in the event of the actual or constructive or compromised or arranged total loss or requisition for title of the Vessel on the date four months after such total loss occurs or is agreed with insurance underwriters (as the case may be, or such other date as may be agreed). 7.3 (a) In the event of the termination of this Agreement pursuant to Clause 6.1 or 6.2 of this Agreement, Petrodrill shall pay to the Manager all such amounts to which the Manager may be entitled pursuant to the provisions of Clause 5.1 as and when such amounts fall due for payment; (b) In addition, Petrodrill shall pay such amounts (if any) as the Manager (notwithstanding the Manager s best efforts to minimize the effects to any such termination) may become legally liable to pay under any contract of employment or by reason of any regulation or legislation for employee protection to personnel who may have been employed by the Manager or its group companies on the Vessel to perform any part of the services to be provided under this Agreement and who shall become redundant as a result of such termination. Petrodrill s exposure under this Clause 7.4 is limited to a maximum of three months salary per employee in the employ of the Manager at the time of receipt of notice of termination. Petrodrill is only responsible for any redundancy payments or equivalent for the period of time the Manager s personnel have been employed on the Vessel from the date of this Agreement and provided timely notice is issued to all affected personnel, Manager shall make its best efforts to assist and support Petrodrill or Petrodrill s nominee in procuring the services of such employees or sub-contractors as Petrodrill may wish to employ. 7.4 If the Vessel is sold, Petrodrill shall be entitled to terminate this Agreement with respect to the Vessel by giving notice to the Manager, such notice to expire on such date as Petrodrill may specify. 7.5 If Petrodrill fails to pay the remuneration payable to the Manager within thirty days of the due date, the Manager may at any time thereafter terminate this Agreement by thirty calendar days prior written notice to Petrodrill. In the event that Petrodrill fails to make payment on due date to the Manager of any moneys owing to the Manager under this Agreement, Petrodrill agrees that the amount unpaid for the time being shall bear interest at a rate of two percentage point units above the three months LIBOR rate as quoted in the Financial Times on the due date. 14 7.6 Termination of this Agreement under any circumstances shall be without prejudice to any outstanding claims hereunder which either Petrodrill or the Manager may have against the other. 7.7 Upon any termination of this Agreement with respect to the Vessel, the Manager shall use its best endeavours to assist in a smooth transfer of the Vessel to any new manager and/or Petrodrill. 8. ASSIGNMENT AND SUBCONTRACTING 8.1 The rights and obligations of a party hereunder may not be assigned without the prior written consent of the other party (such consent not to be unreasonably withheld). 8.2 Either party may however assign such rights to any subsidiary, affiliate or other group company designated by it PROVIDED THAT such Party effecting the assignment shall remain responsible for the proper performance of this Agreement. 8.3 The Manager may, wherever necessary, engage subcontractors on an arms length basis for the performance of specific assignments, without thereby in any way being relieved of its responsibility for the performance, administration and direction of these services. The indemnity as contained in 6 above shall, as between Petrodrill and the Manager, apply in respect of actions or omissions of aforesaid sub-contractors and may be passed on to the sub-contractor in the discretion of the Manager. 9. FORCE MAJEURE 9.1 Each Party to this Agreement shall be relieved from complying with any term of this Agreement to the extent that, and only so long as, such compliance is prevented or delayed by force majeure, which is defined as civil or labour disturbances, riots, strikes (other than a strike limited to the employees of either Party), wars (declared or undeclared), military actions, insurrections, rebellion, acts of any governmental or military agency under actual or assumed authority, action of elements, floods, storm or other acts of God or any cause beyond the control of either Party, whether or not similar to the matters herein specifically enumerated and provided that the event shall not have been caused by the action or negligence of either of the Parties, and that the Party and/or the Parties affected shall do its, or their, utmost to remedy the above circumstances. 9.2 Any Party claiming force majeure shall promptly notify the other Party, with the evidence of the occurrence of such event. 9.3 If either Party hereto is prevented from or delayed in performing all or any of its obligations thereunder as a direct result of force majeure, such non 15 performance shall not be considered as a breach of this Agreement and that Party shall be relieved from such obligation which shall suspend payment by the other Party for the duration of such force majeure. 9.4 Notwithstanding the foregoing to the extent that the event claimed as force majeure impacts upon or would impact upon the performance of any Charter Agreement, such event must be recognised as a force majeure event in terms of such Charter Agreement before it can qualify as a force majeure event hereunder. 10. LAW AND ARBITRATION 10.1 This Agreement shall be governed by and construed in all respects in accordance with the laws of England. 10.2 Any dispute or difference arising in connection with this Agreement shall if possible be settled by mutual amicable agreement. 10.3 If any dispute should arise in connection with the interpretation and fulfilment of this Agreement the same shall be decided by arbitration in the city of London and shall be referred to a single arbitrator (an Arbitrator ) to be appointed by the Parties hereto. If the Parties cannot agree upon the appointment of the single Arbitrator the dispute shall be settled by three Arbitrators, each Party appointing one Arbitrator, the third being appointed by the Chairman for the time being of the London Maritime Arbitrators Association. 10.4 If either of the appointed Arbitrators refuses or is incapable of acting, the Party who appointed him shall appoint a new Arbitrator in his place. 10.5 If one of the Parties fails to appoint an Arbitrator, either originally or by way of substitution, for two weeks after the other Party having appointed his Arbitrator has sent the Party making default notice by mail or facsimile to make the appointment, the Party appointing the third Arbitrator shall, after application from the Party having appointed his Arbitrator, also appoint an Arbitrator on behalf of the Party making default. 10.6 The award rendered by the Arbitration Court shall be final and binding upon the Parties and may if necessary be enforced by the Court or other competent authority in the same manner as a judgment in the Court of Justice. 10.7 Performance under this Agreement shall, if reasonably possible, continue during the Arbitration proceedings. 11. NOTICES 11.1 All communications and notices in relation to this Agreement and obligations to be performed hereunder shall be in writing and delivered by fax or by hand and if given to Petrodrill addressed to: 16 PETRODRILL SEVEN LIMITED C/O ARIAS, FABREGA & FABREGA OMAR HODGE BUILDING WICKHAM S CAY ROAD TOWN, TORTOLA BRITISH VIRGIN ISLANDS Fax: 1 809 494 4980 with a copy to: PRIDE INTERNATIONAL, INC. MARITIMA ATTENTION: PRESIDENT ATTN: GERMAN EFROMOVICH 5847 SAN FELIPE, SUITE 3300 AVENIDA ALMTE BARROSO HOUSTON, TEXAS 77057 52 GR 3400 U.S.A. CENTRO RJ, BRAZIL Fax: 1 713 914 9796 Fax: 55 21 544 4044 and if given to the Manager addressed to: FORMARITIMA LTD. c/o Arias, Fabrega & Fabrega Omar Hodge Building Wickham s Cay Road Town, Tortola British Virgin Islands Fax: 1 809 494 4980 11.2 Either party may give reasonable notice to the other parties of any change of address at any time. 11.3 A notice by fax shall be deemed to have been received at the time of dispatch provided that if the day of dispatch is not a Working Day in the country of the addressee or if the time of dispatch is after close of business in the country of the addressee, it shall be deemed to have been received at the opening of business on the next such Working Day. 12. ENTIRE AGREEMENT This Agreement constitutes the entire agreement between the parties hereto and supersedes all prior negotiations, representations or agreements relating directly to the subject matter of this Agreement whether written or oral. No changes, alterations or modifications to this Agreement shall be affected unless in writing and signed by the Parties hereto. IN WITNESS whereof the parties have executed this Agreement the day and year first above written. 17 SIGNED by )/s/ GERMAN EFROMOVICH for and on behalf of )German Efromovich PETRODRILL SEVEN LIMITED )/s/ MARCELO VIOLLAND in the presence of: )Marcelo Violland SIGNED by )/s/ JOHN O'LEARY for and on behalf of ) FORMARITIMA LTD. )/s/ FRIDA A. MARTINEZ in the presence of: ) 18 EX-10.49 104 EXHIBIT 10.49 FORMARITIMA LTD. - and - PRIDE-FORAMER S.A. ------------------------------------- AMETHYST 7 TECHNICAL SERVICES AGREEMENT ------------------------------------ THIS AGREEMENT is made the 5th day of November 1998, BETWEEN: 1. FORMARITIMA LTD., a company incorporated in the the British Virgin Islands having its principal office at Arias Fabrega & Fabrega Trust Co. BVI Limited, P.O. Box 985, Wickham's Cay, Road Town, Tortola, British Virgin Islands, (hereafter referred to as "Formaritima"), being represented by Mr. German Efromovich, duly entitled. 2. PRIDE-FORAMER S.A., a company incorporated in France with its registered office at 16 bis, rue Grange Dame Rose 78143 Velizy-Villacoublay (hereafter referred to as "Foramer"), being represented by Mr. Gerard Godde, duly entitled. FORMARITIMA and PRIDE-FORAMER are hereinafter referred to collectively as "PARTIES" and individually as "PARTY". WHEREAS: A. Formaritima is a 50/50 joint venture company set up by Foramer of France and Maritima Petroleo e Engenharia Ltda of Brazil (hereinafter referred to as "Maritima") for the provision of services to operate drilling and workover rigs. B. Maritima has been awarded a charter contract (hereinafter referred to as the "Charter") by Petroleo Brasileiro S.A. (hereinafter referred to as "PETROBRAS") eachfor the provision of a dynamically positioned semi-submersible drilling or workover rig (hereinafter referred to as a "RIG") pursuant to an invitation to bid. The obligations and rights under the Charter have been or will be assigned to Petrodrill Seven Limited (hereinafter referred to as an "OWNER"). C. The Owner has entered into a management agreement (hereinafter the "Management Agreement") with Formaritima for the management of the Rigs and the provision of certain technical services in order to assist the Owners to perform their obligations pursuant to the Charter. NOW, THEREFORE in consideration of the mutual covenants and obligations hereafter set forth, it is hereby agreed between the Parties as follows: 1. DEFINITIONS Capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Amethyst Financial Company Ltd.s Shareholders Agreement of even date herewith among Drillpetro Inc., Westville Management Corporation and Techdrill Inc. 2. OBJECT 2 The Object of the Agreement is the supply by Foramer to Formaritima of services such as, but not limited to, the services specified in Clause 4 of this Agreement. 3. TERM 3.1 The term of the Agreement shall be the same as the Management Agreement. However: 3.1.1 This Agreement shall be terminated with respect to the Rig in the event of the actual or constructive or compromised or arranged total loss or requisition for title of the Rig on the date four months after such total loss occurs or is agreed with Lenders (as the case may be, or such other date as may be agreed). 3.1.2 The Agreement may by terminated by Formaritima at any time, upon a notice period of seven (7) days, if Formaritima is not satisfied for sound reasons with Foramer s performance, having given Foramer notice of its deficiencies and the opportunity to correct these within a period of 15 days. In such case, no payment shall become due by Formaritima to Foramer for unperformed services. 3.1.3 It is agreed by the Parties that the effective performance of the Agreement shall include, without limitation, sea trials and mobilization of the Rig to Brazil prior to the commencement of the Charter, the assistance to demobilize upon termination of the Charter and the resolution of any outstanding unresolved contractual issues at the end of the Charter. 3.2 NOT USED 4. SCOPE OF SERVICES PROVIDED BY FORAMER The scope of services (the "Technical Services") to be provided by Foramer for each Rig is set out in Appendix 1. 5. COMPENSATION/REMUNERATION 5.1 All services are to be provided by Foramer to Formaritima on an open book, "at cost" basis, duly justified by direct reference to industry standards. Formaritima will pay Foramer for the Technical Services the rates stipulated in Appendix 4 herein. 5.2 Formaritima will pay Foramer a management fee amounting to US$1,250 per day for the Rig, commencing at the start of pre-delivery sea trials and ending on the last day of drilling or workover operations under each Charter or upon demobilization of the Rig thereunder, whichever is later, or upon any prior termination of the Agreement. 5.3 Foramer will be responsible for the provision of budgets associated with the Technical Services. The first operating budget concerning costs associated with sea trials and mobilization will be presented by Foramer to Formaritima six months in advance of the anticipated date of arrival of the Rig at Macae, Brazil or such other 3 place as which may be notified by Petrobras. The Parties will meet on a quarterly basis and Foramer will present to Formaritima the provisional monthly budgets. Formaritima will review the budget and, if in agreement, will approve the budget. The approval of said budget for each quarterly period will be given by Formaritima prior to 31st December, 31st March, 30th June and 30th September of each year, respectively, provided always that the said budget is presented by Foramer to Formaritima prior to the 30th of November, 28th of February, 31st of May and 31st of August, respectively. 5.4 In the case of a disputed invoice, Formaritima will advise Foramer of the item under dispute specifying the complaint within fifteen (15) days of receipt of such invoice but will pay the undisputed part. The disputed item will be paid as may be mutually agreed. 5.5 Payments shall be made to a bank account nominated on each invoice. 6. TAXES Any taxes or charges applied by local authorities in France to Foramer shall be for Foramer's account. 7. LIABILITIES 7.1 COMPLIANCE WITH LAW AND REGULATION Foramer undertakes that in performance of its obligations under this Agreement it will comply with all applicable laws and regulations in Brazil and France of any Governmental Authority. 7.2 LIABILITIES BETWEEN THE PARTIES 7.2.1 Foramer shall hold harmless and indemnify Formaritima from and against all claims, costs expenses or liabilities arising from or connected with the performance of this Agreement in respect of: (i) death of or personal injury to any of the personnel of the Foramer Group; (ii) loss of or damage to the property of the Foramer Group; and (ii) any consequential or economic loss or damage suffered by the Foramer Group; howsoever arising and irrespective of negligence or other breach of legal duty by the Formaritima Group. 4 7.2.2 Formaritima shall hold harmless and indemnify Foramer from and against all claims, costs, expenses or liabilities arising from or connected with the performance of this Agreement in respect of: (i) death of or personal injury to any of personnel of the Formaritima Group; (ii) loss of or damage to the property of the Formaritima Group; and (iii) any consequential or economic loss or damage suffered by the Formaritima Group; howsoever arising and irrespective of negligence or other breach of legal duty by the Foramer Group. 7.2.3 For the purposes of this Clause 7.2, the Formaritima Group means Formaritima, its associated companies, its other sub-contractors and suppliers, the Owner, Petrobras, and the officers, employees and agents of any of them. 7.2.4 For the purposes of this Clause 7.2 the Foramer Group means Foramer, its associated companies, its sub-contractors and suppliers and the officers, employees and agents of any of them. 7.2.5 For the express purposes of Clause 7 of this Agreement only, Formaritima contracts on its own behalf and expressly as agent on behalf of and as trustee for the benefit of all persons who are or may be from time to time within the Formaritima Group (as defined in Clause 7.2.3) and all such persons shall to this extent be deemed to be parties to this Agreement. 7.2.6 For the express purposes of Clause 7 of this Agreement only, Foramer contracts on its own behalf and expressly as agent on behalf of and as trustee for the benefit of all persons who are or may be from time to time within the Foramer Group (as defined in Clause 7.2.4) and all such persons shall to this extent be deemed to be parties to this Agreement. 7.3 INDEMNITY FOR OPERATIONS Save as is provided in Article 7.2. above, Formaritima shall indemnify and hold harmless and shall procure that Owners shall indemnify and hold harmless Foramer from and against all actions, proceedings, claims, demands or liabilities whatsoever that may be brought by any other person against, or incurred by Foramer in relation to or in connection with its performance of this Agreement with has arisen from the gross negligence or willful misconduct of Foramer, in which event the liability of Foramer shall be limited to the aggregate of the management fee received by Foramer in the preceding 12 months for the Rig. 8. CONFIDENTIAL INFORMATION 5 All information related to this Agreement, regardless of whether such information concerns Formaritima, its clients, its associated companies, or its contractors, shall be treated as confidential and shall not be divulged by Foramer to any third party without the prior written consent of Formaritima. The hereabove obligations shall survive termination of the Agreement and shall remain in force for so long as the information covered by confidentiality has not otherwise become public knowledge. 9. EMPLOYMENT OF PERSONNEL No Foramer personnel shall be deemed to be employees, either temporary or permanent of Formaritima and shall at all times be deemed employed by Foramer. Foramer shall have the sole responsibility for the preparation of payroll and the payment of Foramer personnel, wages, compensation, remittance, allowance, insurance and indemnities of whatever kind and in complying with all applicable labour and local taxation regulations. In particular and depending of the regulation for employing the French personnel or any of Foramer personnel, extra charge may be imposed when changing of zone of operations or lay off charges may have to be paid when changing of zone of operations or when a Charter terminates. Foramer shall be liable for and agrees to protect, defend and hold Formaritima harmless from and against any loss suit or claim of any kind whatsoever which may arise as a consequence of or related to the payment of these charges. 10. INSURANCE 10.1 FORAMERS INSURANCES Foramer undertakes that it will take out all insurance policies to cover its liabilities as set forth in Article 7 of this Agreement and as required of Owners under the terms of the Charters, such insurances shall include but not be limited to the following: (a) Workmen's Compensation insurance and Employer s Liability insurance for damage suffered by its personnel in amounts not less than those required by applicable laws in France. (b) Comprehensive general liability insurance for its responsibility to third parties in amount not less than those required for any one occurrence by the Charters. (c) All insurance policies as required to cover its equipment and/or materials and those belonging to any service companies and for which Foramer is responsible. 10.2 NOT USED 10.3 GENERAL PROVISIONS 6 For all insurance policies taken out: (a) Foramer shall comply with the insurance regulations in force in Brazil and France. (b) Formaritima shall bear the costs of the premiums, deductibles, fees and expenses relative to all policies effected pursuant to the provisions of this Agreement. (c) Each Party shall procure that the other Party shall be named as co-assured to the extent permitted so as to give effect to the provisions of Article 7 of this Agreement. (d) All of the insurance policies taken out shall state the underwriter's waiver of subrogation to give effect to the provisions of Clause 7 of this Agreement. (e) Foramer shall, on request by Formaritima, furnish copies of the insurance policies it is bound to take out pursuant to Clause 10 of this Agreement. 11. AUDIT Foramer shall keep and cause its contractor(s) and subcontractor(s) to keep the books, payrolls, receipt, vouchers, financial records, personnel records and any document related to the work thereunder and required for administration purposes for the term of the Agreement and for a limited period of two (2) years after termination hereof. Formaritima, through its duly authorized representatives, shall have free access with 15 days notice with no restriction, to such information, whenever required by Formaritima, and it shall also have the right, at any time subject to previous notification to Foramer, to perform the audits it deems necessary of the aforementioned books, payrolls, receipts, vouchers, records and files in general. Formaritima reserves the right to audit Foramer's activities as deemed necessary and/or appropriate by Formaritima, in order to check the contents and compliance with the terms herein. Notwithstanding the foregoing, in no event shall Formaritimas right of audit be construed as a release or waiver of any of Foramers obligations under the Agreement. 12. MISCELLANEOUS 12.1.1 Each party to this Agreement shall be relieved from complying with any term of this Agreement to the extent that, and only so long as, such compliance is prevented or delayed by force majeure, which is defined as civil or labour disturbances, riots, strikes (other than a strike limited to the employees of either Party), wars (declared or undeclared), military actions, insurrections, rebellion, acts of any governmental or military agency under actual or assumed authority, action of elements, floods, storm or other acts of God or any cause beyond the control of either Party, whether or not 7 similar to the matters herein specifically enumerated and provided that the event shall not have been caused by the action or negligence of that Party and/or the Parties affected shall do its, or their, utmost to remedy the above circumstances. 12.1.2 Any Party claiming force majeure shall promptly notify the other Party, with the evidence of the occurrence of such event. 12.1.3 If either Party hereto is prevented from or delayed in performing all or any of its obligations thereunder as a direct result of force majeure, such non performance shall not be considered as a breach of this Agreement and that Party shall be relieved from such obligation which shall suspend payment by the other Party for the duration of such force majeure. 12.1.4 Notwithstanding the foregoing to the extent that the event claimed as force majeure impacts upon or would impact upon the performance of any Charter, such event must be recognized as a force majeure event in terms of the relevantCharter before it can qualify as a force majeure event hereunder. 12.2 BANKRUPTCY OR ABANDONMENT OF OPERATIONS Should Foramer become insolvent or enter into any arrangement with or for the benefit of its creditors or become unable or refuse or neglect to perform its obligations hereunder or if Foramer s equipment is seized or taken in execution, Formaritima may, by notice in writing to Foramer, terminate this Agreement without thereby affecting in other respects the obligations or liabilities of Foramer. 12.3 ASSIGNMENT OF AGREEMENT Neither Party may assign the Agreement, either wholly or in part, except with the prior written authorization of the other Party, which authorization may not be unreasonably withheld. 13. NOTICE All notices, invoices and other communications required pursuant to this Agreement shall be in writing and deemed to have been sufficiently given or made if delivered by hand or send by fax to the addressee at the address set out below; in the case of Formaritima to: with a copy to: 8 FORMARITIMA LTD. PRIDE INTERNATIONAL, INC. Arias Fabrega & Fabrega c/o John O Leary Trust Co. BVI Limited, 5847 San Felipe P. O. Box 985 Suite 3300 Wickham s Cay, Road Town Houston, TX 77057-3011 Tortola, British Virgin Island Tel: (713)789-1400 Tel: (284)494-4977 Fax: (713)784-3702 Fax: (284)494-4980 in the case of Foramer to: PRIDE-FORAMER S.A 16 bis, rue Grange Dame Rose - B.P. 100 78143 Velizy-Villacoublay, France Tel: 011 33 1 30 70 58 58 Fax: 011 33 1 39 46 39 25 or to such other address as the relevant Party may from time to time notify to the other. 14. GOVERNING LAW AND ARBITRATION 14.1 This Agreement shall be governed by and construed in all respects in accordance with the laws of England. 14.2 Any dispute or difference arising in connection with this Agreement, shall if possible, be settled by mutual amicable agreement. 14.3 If any dispute should arise in connection with the interpretation and fulfilment of this Agreement the same shall be decided by arbitration in the city of London and shall be referred to a single arbitrator (an Arbitrator) to be appointed by the Parties hereto. If the Parties cannot agree upon the appointment of the single a Arbitrator the dispute shall be settled by three Arbitrators, each Party appointing one Arbitrator, the third being appointed by the Chairman for the time being of the London Maritime Arbitrators Association. 14.4 If either of the appointed Arbitrators refuses or is incapable of acting, the Party who appointed him shall appoint a new Arbitrator in his place. 14.5 If one of the Parties fails to appoint an Arbitrator, either originally or by way of substitution, for two weeks after the other Party having appointed his Arbitrator has sent the Party making default notice by mail or facsimile to make the appointment, the Party appointing the third Arbitrator shall, after application from the Party having appointed his Arbitrator, also appoint an Arbitrator on behalf of the Party making default. 9 14.6 The award rendered by the Arbitration Court shall be final and binding upon the Parties and may, if necessary, be enforced by the Court or other competent authority in the same manner as a judgment in the Court of Justice. 14.7 Performance under this Agreement shall, if reasonably possible, continue during the Arbitration proceedings. IN WITNESS WHEREOF this Agreement has been executed by or on behalf of the Parties hereto the day and year first above written. Signed in two duplicate originals in SIGNED by /s/ Illegible ) for and on behalf of ) FORMARITIMA LTD. ) in the presence of:/S/ FRIDA A. MARTINEZ ) SIGNED by /s/ Illegible ) for and on behalf of ) PRIDE-FORAMER S.A. ) in the presence of:/S/ FRIDA A. MARTINEZ ) 10 APPENDIX 1 SCOPE OF SERVICES PROVIDED BY FORAMER 1. Contractor shall supply the PERSONNEL to perform the services specified in Appendix 2. The PERSONNEL shall perform the services required hereunder on the Rig or such other place needed under the Charter in accordance with the Work Schedule as set out in Appendix 3. Foramer shall carry out the assistance according to its own methods in so far as they shall comply with the terms of the Charter, without prejudice to Foramer s right to inspect, supervise and give instruction. 2. All services shall be provided with personnel of a standard approved by Formaritima, Foramer shall remove and replace within the shortest possible time any member of the PERSONNEL, after having been requested to do so by Formaritima if, in the opinion of Formaritima, such member is negligent, incompetent or unable to work or is working and/or behaving in an unacceptable manner at the work-site. Consecutive replacement extra cost will be for Foramer's account. Foramer will furnish other services to Formaritima such as but not limited to: (a) Support in provision of non-local insurance and settling of non-local insurance disputes. (b) International freight forwarding. (c) Marketing advice and services. (d) International procurement services. (e) Head office technical assistance and support in France to the operation of the Rig. (f) Provision of monthly budgets on a semi-annual basis. Reconciliation of actual US/FF monthly costs against monthly budgets proposed in a format required by Formaritima General Manager. 11 APPENDIX 2 POSITIONS OF PERSONNEL ONSHORE: Manager Rig Manager OFFSHORE Site Manager Toolpusher Nightpusher Driller Asst. Driller Chief Engineer Chief Electrician Asst. Chief Electrician Chief Mechanic BOP Engineer Electronician Bosun Materials Man ___________ 12 APPENDIX 3 WORK SCHEDULE OF PERSONNEL ONSHORE: 10 months work / 2 months leave or 5 months work / 1 month leave Offshore: 4 weeks on / 4 weeks off. 12 hour shifts. 13 APPENDIX 4 PRICE OF PERSONNEL SUPPLIED BY FORAMER TO FORMARITIMA ONSHORE US$/DAY General Manager 650.00 Rig Manager 536.00 OFFSHORE US$/DAY ONLY Site Manager 756.00 Tool Pusher 678.00 Night Pusher 539.00 Driller 409.00 Assistant Driller 361.00 Chief Engineer 688.00 Chief Mechanic 518.00 Chief Electrician 514.00 BOP Engineer 518.00 Electronic Technician 620.00 Hydraulic Technician 375.00 Materials Man 432.00 Bosun 452.00 Captain 600.00 DP Operator 462.00 14 Prices include salaries all overhead and allowances, French social charges, medical cares, training, travel allowances. Prices are exclusive of travel and accommodation related costs between the point of origin and rig-site. Prices are exclusive of any taxes in Brazil. Prices are of an indicative nature only based on rates at 01/01/98 and shall be revised annually based on actual market costs of personnel. 15 EX-10.53 105 EXHIBIT 10.53 FORMARITIMA LTD. - AND - MARITIMA PETROLEO E ENGENHARIA LTDA ------------------------------------- AMETHYST 7 LOCAL SERVICES AGREEMENT ------------------------------------- THIS AGREEMENT is made the day 5th of November,1998 BETWEEN: 1. FORMARITIMA LTD. a company incorporated in the British Virgin Islands under and having its principal office at Arias Fabrega & Fabrega Trust Co. BVI Limited, Omar Hodge Building, P.O. Box 985; Wickham s Cay, Road Town, Tortola, British Virgin Islands, (hereafter referred to as FORMARITIMA ), and 2. MARITIMA PETROLEO E ENGENHARIA LTDA, (formerly Maritima Navegaceo e Engenharia Ltda., company incorporated in Brazil with its registered office at Avenida Almirante Barroso 52, 3400 GR, 20031-000, Centro, Rio de Janeiro, Brazil (hereafter referred to as MARITIMA ). FORMARITIMA and MARITIMA are also hereinafter referred to collectively as PARTIES and individually as PARTY . WHEREAS: A. Formaritima is a 50 / 50 joint venture company set up by Pride-Foramer S.A. of France and Maritima Petroleo e Engenharia Ltda of Brazil for the provision of services to operate drilling and workover rigs. B. Maritima has been awarded a charter contract (hereinafter referred to as the Charter ) by Petroleo Brasileiro S.A. (hereinafter referred to as PETROBRAS ), each for the provision of a dynamically positioned semi-submersible drilling rig (hereinafter referred to as the RIG ) pursuant to an invitation to bid. The obligations and rights under the Charter have been assigned to Petrodrill Seven Limited (hereinafter referred to as OWNER ). C. The Owner has entered into a management agreement (hereinafter referred to as the MANAGEMENT AGREEMENT ) with Formaritima for the management of the Rig and the provision of certain technical services in order to assist the Owner to perform its obligations pursuant to the Charter. D. Maritima has been awarded by Petrobras a contract for supply of services, pursuant to an invitation to bid (hereinafter referred to as the CONTRACT ), for the supply of local services with respect to a Rig for the duration of the Contract and will perform those services independently of its obligations under the present agreement (hereinafter referred to as the AGREEMENT ). E. The Parties have decided that local services shall be provided by Maritima to Formaritima as per the terms and conditions of the AGREEMENT. 2 NOW THEREFORE in consideration of the mutual covenant and obligations hereafter set forth, it is hereby agreed between the Parties as follows : 1. DEFINITIONS Capitalized terms used herein but not otherwise defined shall have the same meanings assigned to such terms in the Shareholders Agreement for the Amethyst Financial Company Ltd. date of even date herewith between Drillpetro Inc., Techdrill Inc. and Westville Management Corporation. 2. OBJECT The object of the Agreement is the supply by Maritima to Formaritima of services such as, but not limited to, the services specified in Clause 4 of the Agreement. 3. TERM 3.1 The term of the Agreement shall be the same as the Management Agreement. However: 3.1.1 This Agreement shall be terminated with respect to the Rig in the event of the actual or constructive or compromised or arranged total loss or requisition for title of such Rig on the date four months after such total loss occurs or is agreed with Lenders (as the case may be, or such other date as may be agreed). 3.1.2 The Agreement may by terminated by Formaritima at any time, (x) upon a notice period of seven (7) days, if Formaritima is not satisfied for sound reasons, with Maritima s performance, having given Maritima notice of its deficiencies and the opportunity to correct these within a period of 15 days or (y) immediately with respect to the Rig upon termination or assignment of the Rig s Contract. In such case, no payment shall become due by Formaritima to Maritima for unperformed services. 3.1.3 It is agreed by the Parties that the effective performance of the Agreement shall include, without limitation, sea trials and mobilization of the Rigs to Brazil prior to the commencement of the Contract, assistance to demobilize upon termination of the Contract and the resolution of any outstanding unresolved contractual issues at the end of the Contract. 3.2 NOT USED. 4. SCOPE OF SERVICES PROVIDED BY MARITIMA The scope of services (the Local Services ) to be provided by Maritima for the Rig is as set out in Appendix 1. Maritima covenants and agrees to perform and comply with all of its obligations under each Contract. 3 5. COMPENSATION / REMUNERATION 5.1 All services are to be provided by Maritima to Formaritima on an open book, at cost basis, duly justified by direct reference to industry standards. For the supply of services forming the object of this Agreement, Formaritima will pay Maritima the rates set out in Appendix 2. All amounts received by Maritima pursuant to the Contracts shall only be used to pay costs and expenses for providing the services described herein. Any excess amounts shall be treated in accordance with Clause 5.2.2. 5.2 Formaritima will pay Maritima a management fee amounting to US$1,250 per day for the Rig, commencing at the start of pre-delivery sea trials and ending on the last day of drilling operations for the relevant Rig under the Management Agreement or, subject to Clause 3.2, upon any prior termination of the Agreement. 5.2.1 If Maritima s monthly income arising from the Contract is less than the provisional monthly budgeted costs and the management fee, calculated on a monthly basis, agreed in advance by Formaritima, Formaritima will pay Maritima the documented shortfall within 30 days of receipt of written notice from Maritima. 5.2.2 If Maritima s monthly income arising from the Contract is greater than the actual monthly costs plus the management fee, calculated on a monthly basis, Maritima will pay Formaritima the difference outstanding within 30 days of receipt from Petrobras of monies arising from the Contract. 5.3 Maritima will be responsible for the provision of budgets associated with the Local Services. The first operating budget concerning costs associated with sea mob and mobilisation will be presented by Maritima to Formaritima six months in advance of the anticipated date of arrival of each Rig at Macae, Brazil or such other place as which may be notified by Petrobras. The Parties will meet on a quarterly basis and Maritima will present to Formaritima the provisional monthly budgets. Formaritima will review the budgets and, if in agreement, will approve the budgets. The said approval of the budgets for each quarterly period will be given by Formaritima prior to 31st December, 31st March, 30th June and 30th September of each year, respectively, provided always that the said budgets are presented by Maritima to Formaritima prior to 30th November, 28th February, 31st May and 31st August, respectively. 5.4 Maritima shall endeavour to maximise the payments of costs and expenses in Reais and notably to substitute expenditures in Reais for expenditures in US$ to the maximum extent possible. 5.5 In the case of a disputed invoice, Formaritima will advise Maritima of the item under dispute specifying the complaint within fifteen (15) days of receipt of such invoice but will pay the undisputed part. The disputed item will be paid as may be mutually agreed. 4 5.6 Payments shall be made to a bank account nominated on each invoice. 6. TAXES Any taxes or charges applied by local authorities in Brazil which are due under the Contract with Petrobras shall be for Maritima s account. 7. LIABILITIES 7.1 COMPLIANCE WITH LAW AND REGULATION Maritima undertakes that in performance of its obligations under this Agreement it will comply with all applicable laws and regulations in Brazil and all governmental authority. 7.2 LIABILITIES BETWEEN THE PARTIES 7.2.1 Maritima shall hold harmless and indemnify Formaritima from and against all claims, costs expenses or liabilities arising from or connected with the performance of this Agreement in respect of: death of or personal injury to any of the personnel of the Maritima Group defined in Clause 7.2.4; loss of or damage to the property of the Maritima Group; any consequential or economic loss or damage suffered by the Maritima Group; howsoever arising and irrespective of negligence or other breach of legal duty by the Formaritima Group. 7.2.2 Formaritima shall hold harmless and indemnify Maritima from and against all claims, costs, expenses or liabilities arising from or connected with the performance of this Agreement in respect of: death of or personal injury to any of personnel of the Formaritima Group defined in Clause 7.2.3; loss of or damage to the property of the Formaritima Group; and any consequential or economic loss or damage suffered by the Formaritima Group; howsoever arising and irrespective of negligence or other breach of legal duty by the Maritima Group. 7.2.3 For the purposes of this Clause 7.2, the Formaritima Group means Formaritima, its associated companies, its other sub-contractors and suppliers, the Owner, Petrobras, and the officers, employees and agents of any of them working under this Agreement. 7.2.4 For the purposes of this Clause 7.2 the Maritima Group means Maritima, its associated companies, its other sub-contractors and suppliers, and the officers, employees and agents of any of them working under this Agreement. 72.5 For the express purposes of Clause 7 of this Agreement only, Formaritima contracts on its own behalf and expressly as agent on behalf of and as trustee for the benefit of all persons who are or may be from time to time within the Formaritima Group (as defined in Clause 7.2.3) and all such persons shall to this extent be deemed to be parties to this Agreement. 5 7.2.6 For the express purposes of Clause 7 of this Agreement only, Maritima contracts on its own behalf and expressly as agent on behalf of and as trustee for the benefit of all persons who are or may be from time to time within the Maritima Group (as defined in Clause 7.2.4) and all such persons shall to this extent be deemed to be parties to this Agreement. 7.3 INDEMNITY FOR OPERATIONS Save as is provided in Clause 7.2. above, Formaritima shall indemnify and hold harmless and shall procure that Owner shall indemnify and hold harmless Maritima from and against all actions, proceedings, claims, demands or liabilities whatsoever that may be brought by any other person against, or incurred by Maritima in relation to or in connection with its performance of this Agreement with respect to the Rig unless same has arisen from the gross negligence or wilful misconduct of Maritima, in which event the liability of Maritima shall be limited to the aggregate of the management fee received by Maritima in the preceding 12 months for the Rig 8. CONFIDENTIAL INFORMATION All information related to this Agreement, regardless of whether such information concerns Formaritima, its clients, its associated companies, or its contractors, shall be treated as confidential and shall not be divulged by Maritima to any third party without the prior written consent of Formaritima. The hereabove obligations shall survive termination of the Agreement and shall remain in force for so long as the information covered by confidentiality has not otherwise become public knowledge. 9. EMPLOYMENT OF PERSONNEL No Maritima personnel shall be deemed to be employees, either temporary or permanent of Formaritima and shall at all time be deemed employed by Maritima. Maritima shall have the sole responsibility for the preparation of payroll and the payment of Maritima personnel, wages, compensation, remittance, allowance, insurance and indemnities of whatever kind and in complying with all applicable labor and local taxation regulations. Both Parties agree to refrain from any and all actions, direct or indirect, that may lead to employment by such Party of an employee of the other Party, unless such party obtains the prior written approval of the other Party, which approval shall not unreasonably be withheld. 10. INSURANCE 10.1 MARITIMA S INSURANCES Maritima undertakes that it will take out all insurance policies to cover its liabilities as set forth in Article 7 of this Agreement and as required under the terms of the Contract, such insurances shall include but not be limited to the following: 6 Workman Compensation insurance and Employer s Liability insurance for damage suffered by its personnel in amount not less than those required by applicable laws in Brazil. Comprehensive general liability insurance for its responsibility to third parties in amount not less than those required for any one occurrence by article 3.12.1 of the Contract. All insurance policies as required to cover its equipment and/or materials and those belonging to any service companies and for which Maritima is responsible. 10.2 FORMARITIMA/OWNER INSURANCE In addition, Formaritima will procure that insurance policies are taken out to cover Formaritima s responsibilities including but not limited to the responsibilities set out in Article 3.4.1. of the Management Agreement between Formaritima and the Owner. 10.3 GENERAL PROVISIONS For all insurance policies taken out : Maritima shall comply with the insurance regulations in force in Brazil. Formaritima shall bear the costs of the premiums, deductibles, fees and expenses relative to all policies effected pursuant to the provisions of this Agreement. Each Party shall procure that the other party shall be named as co-assured to the extent permitted so as to give effect to the provisions of Article 6 of this Agreement. All of the insurance policies taken out shall state the underwriter s waiver of subrogation to give effect to the provisions of Article 7 of this Agreement. Maritima shall on request by Formaritima, furnish copies of the insurance policies it is bound to take out pursuant to Article 10 of this Agreement. 11. ASSIGNMENT OF CONTRACT The Parties agree that, if requested by Formaritima, Maritima will procure that the Contract will be assigned to Formaritima or its nominee. 12. AUDIT Maritima shall keep and cause its contractor(s) and sub-contractor(s) to keep the books, payrolls, receipts, vouchers, financial records, personnel records and any document related to the work thereunder and required for administration purposes for the term of the Agreement and for a limited period of two (2) years after termination hereof. Formaritima, through its duly authorised representatives, shall have free access with 15 days notice with no restriction, to such information, whenever required by Formaritima, and it shall also have the right, at any time subject to previous notification to Maritima, to perform the audits it deems necessary of the aforementioned books, payrolls, receipts, vouchers, records and files in general. 7 Formaritima reserves the right to audit Maritima s activities as deemed necessary and/or appropriate by Formaritima, in order to check the contents and compliance with the terms herein. Notwithstanding the foregoing, in no event shall Formaritima s right of audit be construed as a release or waiver of any of Maritima s obligations under the Agreement. 13. MISCELLANEOUS 13.1 FORCE MAJEURE 13.1.1 Each Party to this Agreement shall be relieved from complying with any term of this Agreement to the extent that, and only so long as, such compliance is prevented or delayed by force majeure, which is defined as civil or labor disturbances, riots, strikes (other than a strike limited to the employees of either Party), wars (declared or undeclared), military actions, insurrections, rebellion, acts of any governmental or military agency under actual or assumed authority, action of elements, floods, storm or other acts of God or any cause beyond the control of either Party, whether or not similar to the matters herein specifically enumerated and provided that the event shall not have been caused by the action or negligence of either of the Parties, and that the Party and/or the Parties affected shall do its, or their, utmost to remedy the above circumstances. 13.1.2 Any Party claiming force majeure shall promptly notify the other Party, with the evidence of the occurrence of such event. 13.1.3 If either Party hereto is prevented from or delayed in performing all or any of its obligations thereunder as a direct result of force majeure, such non performance shall not be considered as a breach of this Agreement and that Party shall be relieved from such obligation which shall suspend payment by the other Party for the duration of such force majeure. 13.1.4 Notwithstanding the foregoing to the extent that the event claimed as force majeure impacts upon or would impact upon the performance of the Contract, such event must be recognised as a force majeure event in terms of the Contract before it can qualify as a force majeure event hereunder. 13.2 BANKRUPTCY OR ABANDONMENT OF OPERATIONS Should Maritima become insolvent or enter into any arrangement with or for the benefit of its creditors or become unable or refuse or neglect to perform its obligations hereunder or if Maritima s equipment is seized or taken in execution, Formaritima may, by notice in writing to Maritima, terminate this Agreement without thereby affecting in other respects the obligations or liabilities of Maritima. 13.3 ASSIGNMENT OF AGREEMENT Neither Party may assign the Agreement, either wholly or in part, except with the prior written authorisation of the other Party, which authorisation may not be unreasonably withheld. 8 14. NOTICE All notices, invoices and other communications required pursuant to this Agreement shall be in writing and deemed to have been sufficiently given or made if delivered by hand of send by fax to the addressee at the address set out below; in the case of Formaritima to: and with a copy to: FORMARITIMA LTD. John O Leary Arias Fabrega & Fabrega Pride International, Inc. Trust Co. BVI Limited 5847 San Felipe, P.O. Box 985 Suite 3300 Wickham s Cay, Road Town Houston, TX 77057-3011 Tortola, British Virgin Islands Tel: (713)789-1400 Tel: (284) 494-4977 Fax: (713)784-3702 Fax: (284) 494-4980 in the case of Maritima to: MARITIMA PETROLEO E ENGENHARIA LTDA, Avenida Almirante Barroso 52 3400 GR 20031-000 Centro RIO DE JANEIRO BRAZIL Tel: 011-55-21-262-5055 Fax: 011-55 21 220 6566 or to such other address as the relevant Party may from time to time notify to the other. 15. GOVERNING LAW AND ARBITRATION 15.1 This Agreement shall be governed by and construed in all respects in accordance with the laws of England. 15.2 Any dispute or difference arising in connection with this Agreement shall if possible be settled by mutual amicable agreement. 15.3 If any dispute should arise in connection with the interpretation and fulfilment of this Agreement the same shall be decided by arbitration in the city of London and shall be referred to a single Arbitrator to be appointed by the Parties hereto. If the Parties cannot agree upon the appointment of the single Arbitrator the dispute shall be settled by three Arbitrators, each party appointing one Arbitrator, the third being appointed by the Chairman for the time being of the London Maritime Arbitrators Association. 15.4 If either of the appointed Arbitrators refuses or is incapable of acting, the Party who appointed him shall appoint a new Arbitrator in his place. 9 15.5 If one of the Parties fails to appoint an Arbitrator, either originally or by way of substitution, for two weeks after the other Party having appointed his Arbitrator has sent the Party making default notice by mail or facsimile to make the appointment, the Party appointing the third Arbitrator shall, after application from the Party having appointed his Arbitrator, also appoint an Arbitrator on behalf of the Party making default. 15.6 The award rendered by the Arbitration Court shall be final and binding upon the Parties and may if necessary be enforced by the Court or other competent authority in the same manner as a judgment in the Court of Justice. 15.7 Performance under this Agreement shall, if reasonably possible, continue during the arbitration proceedings. IN WITNESS WHEREOF this Agreement has been executed by or on behalf of the Parties hereto the day and year first above written. Signed in two duplicate originals in SIGNED by )/s/ JOHN O'LEARY for and on behalf of ) FORMARITIMA LTD. ) in the presence of: ) /s/ FRIDA A. MARTINEZ SIGNED by )/s/ GERMAN EFROMOVICH for and on behalf of )German Efromovich MARITIMA PETROLEO ENGENHARIA LTDA )/s/ MARCELO VIOLLAND in the presence of: )Marcelo Violland 10 APPENDIX 1 SCOPE OF SERVICES PROVIDED BY MARITIMA Maritima will procure services in Brazil (hereinafter referred to as the LOCAL SERVICES )to Formaritima. The Local Services to include but not be limited to the provision of: Logistics Local rig personnel (as per the personnel and payment schedule attached in Appendix 2). Local base personnel (as per the personnel and payment schedule as attached in Appendix 3). Local base and yard space and services required for such spaces. Commercial services. Offices. Customs clearance for rig, equipment and spare parts. Accounting and cost control with presentation of accounts by Maritima to Formaritima in a US GAAP format or other format to be agreed with Formaritima. Provision of monthly budgets on a semi-annual basis. Reconciliation of actual local monthly costs against monthly budgets proposed, in a format required by Formaritima Area Manager. Provision of local insurance. Settling of local insurance disputes. Assistance with administration of the Contract and the Central Bank of Brazil administration. Local freight forwarding. Local purchase of parts, services and supplies. Administration of invoicing for the Contract. Consularisation and assistance to complying with Brazilian laws and procedures. Marketing advice and service. If required by Formaritima, the provision of a bank account in Maritima s name to be used and operated exclusively by Formaritima s Area Manager who will have the joint signatory powers concerning the said bank account with his deputy. Visas, work permits application and formalities. Legal assistance concerning rig and base operational health, safety and environmental issues. Assistance and advice to minimise the impact of customs duties and import taxes. FORMARITIMA WILL HAVE THE RIGHT TO REFUSE SUB-CONTRACTORS PROPOSED BY MARITIMA AND TO NOMINATE OTHER SUB-CONTRACTORS IN THEIR PLACE. 11 APPENDIX 2 MARITIMA NAVEGACAO E ENGENHARIA LTDA WAGES REF. OCT 97 OPERATION OF DP SEMISUBMERSIBLE TOTAL US$/ FUNCTION MAN ON BOARD STOREKEEPER/MATERIALSMAN 238,00 SAFETY MAN 353,00 NURSE 183,00 RADIO OPERATOR 202,00 BARGE ENGINEER 499,00 BCO/BOSUN 454,00 TOOL PUSHER/DRILL ENGINEER 827,00 TOOL PUSHER/DRILL ENGINEER 547,00 DRILLER 521,00 ASS. DRILLER 315,00 DERRICKMAN 199,00 FLOORMAN 152,00 ROUSTABOUT 95,00 CRANE OPERATOR 222,00 DECK FOREMAN/AUX TECH./ENGINEER JR 261,00 ELECTRICIAN/MECHANIC 274,00 CHIEF MECHANIC/ELECTRICIAN 479,00 WELDER 202,00 CHIEF PAINTER 105,00 PAINTER 95,00 12 Prices include salaries, all overheads and allowances, and Brazilian social charges but exclude travel/accommodation from point of origin to the rig. The salary component is indicative only based upon 1997 rates and shall be revised annually based upon actual market costs of personnel. 13 APPENDIX 3 LOCAL BASE PERSONNEL 14 EX-10.57 106 EXHIBIT 10.57 FORMARITIMA LTD - AND - WORKSHIPS CONTRACTORS B.V. -------------------------------------------------- AMETHYST 7 MARINE AND NAUTICAL SERVICES AGREEMENT -------------------------------------------------- THIS AGREEMENT is made as of the 5th day of November 1998, BETWEEN: 1. FORMARITIMA LTD, a company incorporated in the British Virgin Islands and having its principal office at c/o Arias, Fabrega & Fabrega Trust Co., Omar Hodge Building, Wickham s Cay, Road Town, Tortola, British Virgin Islands (hereinafter referred to as "Formaritima"); and 2. WORKSHIPS CONTRACTORS B.V., a company incorporated in the Netherlands having its principal office at K.P. van der Mandelelaan 34, 3062 MB Rotterdam (hereinafter referred to as "the Manager"). Formaritima and the Manager are hereinafter also referred to individually as "Party" and collectively as "Parties". WHEREAS: A. Formaritima will be the direct or indirect legal owner of a dynamically positioned semi-submersible drilling vessel (each hereinafter called "the Vessel") and intends to carry out worldwide offshore drilling operations using the Vessel, subsequent to its Delivery to Formaritima. B. The Manager possesses the know-how and skilled personnel to enable it to manage the Marine and Nautical operation and maintenance of the Vessel. C. The Manager will support and render services relevant to the mobilization of the Vessel to Brazil and operations pursuant to assigned charter agreement between Petroleo Brasileiro S.A. (hereinafter referred to as "Petrobras") and Maritima as novated and assigned to Formaritima (together the "Charter Agreements"). D. Manager has been provided with a copy of the aforesaid Charter Agreements. E. Formaritima is desirous of contracting with the Manager for the provision of the services in accordance with the terms and conditions set out herein. IT IS HEREBY AGREED BETWEEN THE PARTIES AS FOLLOWS: 1. DEFINITIONS Capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Amethyst Financial Company Ltd. s Shareholders Agreement of even date herewith among Drillpetro Inc., Westville Management Corporation and Techdrill Inc. 2. TERMS OF AGREEMENT 2.1 This Agreement shall take effect from the date hereof and shall continue unless terminated pursuant to the provisions of Clause 7. 2.2 The effective performance of this Agreement shall include without limitation the preparations in Brazil prior to the commencement of the Charters and the assistance to demobilize upon termination of the Charters and the resolution of any outstanding unresolved contractual issues at the end of the Charters. 3. COMMENCEMENT AND PERFORMANCE 3.1 The Parties acknowledge as at the date of signing of this Agreement that the Vessel is to be constructed. Formaritima undertakes to provide the Manager with copies of all relevant documentation in respect of the Vessel in the English language, including detailed drilling equipment lists. 3.2 This Agreement shall commence with respect to the Vessel prior to commencement of the sea trials under the relevant Construction and Sale Contracts. 3.3 The Manager will furnish the relevant personnel and services to assist during the sea trials. 3.4 The Manager shall at all times maintain proper and adequate office and technical facilities and a competent and sufficient staff for the performance of its duties, and shall, on behalf of Formaritima and at Formaritima s risk and expense, manage and maintain the Vessel in accordance with good marine practice, efficiently and economically, to the best of its professional ability in regard to performance, safety and shipshape appearance, and will arrange, at all times, technical supervision to ensure that the Vessel is kept in a seaworthy condition and with valid certificates. 3.5 Notwithstanding the foregoing, Formaritima has, subject only to the provisions of Clause 6, ultimate and complete responsibility for the Vessel and shall indemnify the Manager in accordance with Clause 6. 4. OPERATIONAL DUTIES AND RESPONSIBILITIES OF THE MANAGER The object of this Agreement is the supply of by the Manager to Formaritima of services with respect to the Rig including, but not limited to, those specified in Appendix 1 to this Agreement. 4.1 MANAGER S PERSONNEL 4.1.1 The Manager shall provide a sufficient number of relevantly qualified personnel in order to ensure that the marine operations of the Vessel is at all times undertaken safely and in accordance with good industry practice and in compliance with the lawful and proper instructions of any client contracting for use of the services of the Vessel and in accordance with the contract with such client and any regulations from relevant regulatory bodies, authorities or Classification Societies and in particular compliance with ISM code. 3 4.1.2 The Manager shall ensure at all times that it has an adequate pool of qualified personnel available to cover vacancies due to leave requirements, sickness, injury, replacement of personnel as contemplated by the provisions of Clause 4.1.3 or for any other reason whatsoever. 4.1.3 Should Formaritima be dissatisfied with the performance of any of the personnel provided by the Manager, Formaritima shall notify the Manager thereof, stating the reasons for its dissatisfaction. Should the cause of Formaritima s dissatisfaction remain unremedied for a period of twenty days from the giving of Formaritima s said notice, Formaritima shall have the right to request the replacement of the personnel concerned and in such event the Manager shall, as soon as practicable thereafter, replace the personnel concerned. 4.1.4 The Manager shall: (a) keep Formaritima fully informed regarding incidents which give or could give rise to claims by or against third parties including damage to the Vessel or serious sickness of personnel; and (b) use all reasonable endeavours to protect Formaritima s interests with respect to marine claims by or against third parties, including personnel employed aboard the Vessel. 4.1.5 Formaritima has entered into a contract with Formaritima Ltd. for the provision of Technical Management Services to the Vessel. 4.1.6 No personnel of the Manager shall be deemed to be employees, either temporary or permanent, of Formaritima and shall at all times be deemed employed by the Manager. The Manager shall have the sole responsibility for the preparation of payroll and the payment of Manager personnel, wages, compensation, remittance, allowance, insurance and indemnities of whatever kind and in complying with all applicable labour and local taxation regulations. In particular and depending upon the regulations for employing Dutch personnel or any of Manager personnel, an extra charge may be imposed when changing of zone of operations or lay off charges may have to be paid when changing of zone of operations or when each Charter terminates. The Manager shall be liable for and agrees to protect, defend and hold Formaritima harmless from and against any lawsuit or claim of any kind whatsoever which may arise as a consequence of or related to the payment of these charges. Both Parties agree to refrain from any and all actions, direct or indirect, that may lead to employment by such Party of an employee of the other Party, unless such Party obtains the prior written approval of the other Party, which approval shall not unreasonably be withheld. 4 4.2 MARINE EQUIPMENT MAINTENANCE 4.2.1 The Manager shall arrange for the marine operation of the Vessel and all marine equipment used on or from the Vessel. 4.2.2 The Manager is authorised to act, on behalf of Formaritima , in respect of all matters that may pertain to the everyday operation of the marine services. Notwithstanding the foregoing, where in connection with such operation, the Manager will or is likely to incur expenditure not contemplated by or greater than the amount specified in respect thereof in any budget as is referred to in Clause 4.5.2 and where any such expenditure will or is likely to exceed US$50,000 or, in any calendar month, sums which, in the aggregate, are in excess of US$50,000, the Manager shall, prior to incurring such expenditure, obtain the consent of Formaritima so to do. Nevertheless the Manager shall, in any case where, in its reasonable opinion, it is necessary to take immediate action to avert danger to life or health or loss or damage to any Vessel or other property of Formaritima , be entitled and obligated to take such action without the prior consent of Formaritima but, in every such case, the Manager shall promptly notify Formaritima of the action so taken by it and of the amount of expenditure incurred by it in so doing. 4.2.3 Subject to Clauses 4.2.2 and 4.4.3 the Manager shall procure the supply of all equipment and materials required in connection with the marine operation and maintenance of the Vessel including an adequate supply of spare parts, stock for stores, and generally so as to ensure that the Manager will at all times be able to fulfil its obligations hereunder. The Manager will use its best endeavours to ensure that materials and equipment procured by it are purchased on the most economical terms available, as to price and payment, and having regard to the quality and availability of the materials and equipment concerned. 4.2.4 The Manager shall provide for technical supervision, repairs, classification, customary maintenance and, in all other respects, use its best endeavours so that, at all times and subject to the provisions of Clauses 4.5.2 and 4.5.3, the Vessel is kept duly seaworthy, and maintain its certificates and permissions for maritime operations all in accordance with good oil industry practice. Minimum personnel will be maintained during periods of lay up in order to minimise cost to Formaritima. 4.2.5 Formaritima s representatives shall be entitled to board the Vessel for the purpose of examining the Vessel and its operations subject, at all times, to the consent of the client where applicable. 4.2.6 The Manager will not by act or omission of the Manager cause Formaritima to be in breach of any provision of the mortgage registered over the Vessel and has been provided with a copy of said mortgage, and will provide such confirmation as may be reasonably required by the Lenders. 5 4.3 INSURANCE 4.3.1 Formaritima shall ensure and provide that the Vessel and all consumable materials and equipment thereof and the Manager s and Formaritima s employees are at all times adequately insured with reputable underwriters on the best possible terms. Formaritima shall ensure that such insurance shall be fully in compliance with the requirements of the holder of any mortgage on the Vessel. Subject to the foregoing, the following minimum insurance coverage will be maintained by Formaritima at all times: (a) All Risks Hull and Machinery Insurance (including underwater and in-hole equipment) against marine and war risks, to the full market value of each Vessel; and (b) Full Protection and Indemnity Insurance, or equivalent, in respect of liabilities of Formaritima and/or the Manager to third parties including but not limited to pollution or contamination, removal of wreck and recovery of equipment lost overboard. 4.3.2 The insurance effected on behalf of Formaritima and Manager shall be endorsed with a statement that each is co-assured and that the underwriters waive their rights of subrogation and/or recourse, whether express or implied, against the other party and/or its subcontractor and against any party designated in writing by such party with whom the such party has entered into a hold harmless agreement or otherwise in respect of a Vessel and operations involving such Vessel. This Agreement shall be copied by such party to the relevant underwriters and their written approval that the indemnities herein contained are acceptable as being normal in the oil industry shall be obtained by each party. 4.3.3 The Manager undertakes that it will take out and maintain all insurance policies to cover its liabilities as set forth in Clause 6 of this Agreement and as required of Formaritima under the terms of the Charter, such insurances shall include but not be limited to the following: (a) Workmen s Compensation insurance and Employer s Liability insurance for damage suffered by its personnel in amounts not less than those required by applicable laws in Brazil. (b) Comprehensive general liability insurance for its responsibility to third parties in amount not less than those required for any one occurrence by the Charters. (c) All insurance policies as required to cover its equipment and/or materials and those belonging to any service companies and for which Manager is responsible. 6 4.3.4 GENERAL PROVISIONS For all insurance policies taken out: (a) Manager shall comply with the insurance regulations in force in Brazil. (b) Formaritima shall bear the costs of the premiums, deductibles, fees and expenses relative to all policies effected pursuant to the provisions of this Agreement. (c) Each Party shall procure that the other Party shall be named as co-assured to the extent permitted so as to give effect to the provisions of Clause 8 of this Agreement. (d) All of the insurance policies taken out shall state the underwriter s waiver of subrogation to give effect to the provisions of Clause 8 of this Agreement. (e) Manager shall, on request by Formaritima , furnish copies of the insurance policies it is bound to take out 4.4 ADMINISTRATION AND ACCOUNTS 4.4.1 The Manager will prepare and submit to Formaritima at least sixty days prior to the commencement of marine operations a budget of marine related expenditures for the period of twelve calendar months following that commencement. At least sixty days prior to each anniversary of the date of aforesaid commencement, the Manager shall prepare and submit to Formaritima a budget of operating income and expenditure and any contemplated capital expenditure, for the following twelve months. Each budget shall contain sufficient detail of likely expenditure as will enable Formaritima to check actual costs when they are incurred against estimates. All assumptions shall be clearly stated. The budgets shall be subject to Formaritima s approval but when approved, Formaritima shall promptly notify the Manager thereof. Formaritima will provide details of costs in respect of personnel and any other services to be provided by Formaritima. 4.4.2 Quarterly reports and accounts shall be presented to Formaritima as soon as reasonably possible after the end of each three month period following the commence of operations but no later than 40 calendar days after the end of such period. The quarterly report shall contain the following: Major repairs/capital investments. The accounts/financial reports shall contain the following in a format to be mutually acceptable to both Parties, Formaritima from time to time to provide the Manager with a copy of its preferred format: Quarterly actual and year to date costs compared with the budget; Description/analysis of variances actual/budget; Cash flow/fund requirements; Estimates for the year. 7 4.4.3 Subject to the provisions of Clause 4.2.2 the Manager shall utilize funds credited to or standing in the Disbursement Account (defined in Clause 4.4.4 to meet the following expenses and disbursements, inter alia, the Operating Costs: - Cost of Manager provided personnel; - Travel costs for Manager provided personnel; - Purchases of materials, supplies, equipment, parts and storage, transport and assembling thereof, and cost of subcontractors in connection with specific marine related assignments; - Expenses incurred for keeping the Vessel in compliance with certification and classification requirements. This will apply for annual surveys only. Expenses for Special Periodic surveys are not included in Operating Costs but will be shown in each relevant budget submitted under the provisions of this Agreement; - Professional services for all analysis or technical assistance required to the extent that such services qualitatively cannot be performed by the Manager or the Manager s own employees; - Direct Internal Quality and Safety audit costs when carried out on board the Vessel; - Customs duties, corporate taxes, withholding taxes, and other taxes of whatsoever nature arising solely from contracts entered into in respect of the Vessel and levied in jurisdictions where the Vessel are located from time to time and/or in connection with this Agreement; - All other reasonable expenses and costs of similar nature which are budgeted and such other reasonable costs and expenses that the Manager in its discretion considers to be necessary to ensure the safety of the personnel on the Vessel itself, as well as mitigation of non-performance under the Charter subject to a limitation of US$250,000; and - Insurance costs including deductibles. 4.4.4 The Manager shall be required, pursuant to its duties under this Agreement, to open and keep a separate bank account in the name of Formaritima (the "Disbursement Account") and books, records and accounts relating to the marine management of the operation and marine maintenance of the Vessel in accordance with internationally accepted applicable accounting principles and in the English language. All such books, records, accounts and other related documents mentioned above shall be available to Formaritima or its appointees for inspection at all reasonable times. In addition to the reports referred to in Clause 2.4.3 the Manager shall furnish to Formaritima all information (financial or otherwise) reasonably required throughout the year by Formaritima for its own accounts or audits and any assistance required to be given to its auditors. 8 4.5 BANK ACCOUNTS AND FLOW OF FUNDS Subject always to such other instructions as Formaritima may give to the Manager pursuant to arrangement with the holder of the mortgage over the Vessel, or otherwise: 4.5.1 Formaritima undertakes to transfer a sum of US$500,000 for the Vessel (the "minimum working capital") into the Disbursement Account within 30 days prior to commencement of the services by the Manager under this Agreement with respect to the Vessel. 4.5.2 The Manager will provide Formaritima not less than seven working days prior to the end of each month with a statement of its working capital requirements in respect of the Vessel and the Manager s obligations hereunder for the next month. If the funds received from the Vessel s operations are insufficient at any time to meet the Manager s costs, as listed under 4.4.4 and 5 or any other expenditure rightfully incurred, the Manager shall notify Formaritima of its cash requirements by giving at least ten (10) working days notice. Formaritima is obliged, at all times, to ensure that the Managers request for adequate working capital is met within the said notice period of ten (10) working days and to maintain that the minimum working capital balance is maintained in the Disbursement Account. 4.5.3 Any funds credited to the Disbursement Account in excess of necessary working capital to meet expenses listed under Clauses 2.4.3 and 3 shall be promptly paid over to such account as Formaritima may specify from to time unless Formaritima requests the Manager to temporarily administer such spare funds in consultation with Formaritima . 4.5.4 The Manager will provide Formaritima on a monthly basis with copies of all Disbursement Account statements. 4.5.5 Any interest earned/or payable in respect of the Disbursement Account shall be for the credit of the Disbursement Account. 4.5.6 Under no circumstances shall the Manager, without the prior written approval of Formaritima (which approval may be withheld at Formaritima s sole discretion), be entitled to borrow funds or enter into any agreement to borrow funds in such a manner as to bind Formaritima PROVIDED ALWAYS that a requirement for funds to meet a safety obligation shall supersede this provision. 5. MANAGEMENT FEE 5.1 With effect from start of pre-delivery sea trials of the Vessel the Manager shall be paid a fee (the "Fee") of US$1,250 per day for the Vessel for the duration of this Agreement. The Fee shall be paid against invoice to Formaritima such invoice to be rendered by the tenth day of the month following the month in which the Fee was earned. 9 5.2 In the event of a sale of the Vessel and termination of this Agreement pursuant to Clause 7.4 and the purchaser not accepting an assignment of the rights and obligations of Formaritima under this Agreement, the Fee shall be deemed earned by the Manager and shall be paid as compensation to the Manager in respect of the aggregate number of days of management fee lost in respect of the Vessel each day between date of sale and the final day of the firm term of the Charter Agreement discounted at ten per cent (10%) per annum. 5.3 In the case of a disputed invoice, Formaritima will advise the Manager of the item under dispute specifying the complaint within fifteen (15) days of receipt of such invoice but will pay the undisputed part. The disputed item will be paid as may be mutually agreed. 5.4 Payments shall be made to a Bank account nominated on each invoice. 6. INDEMNITIES 6.1 Except to the extent that the Manager would be liable under Clause 5.2, Formaritima hereby undertakes to keep the Manager indemnified and to hold the Manager harmless against all actions, proceedings, claims, demands or liabilities whatsoever which may be brought against or incurred by the Manager in relation to any act or thing done or caused to be done as aforesaid, and against all costs, damages and expenses which the Manager may suffer or incur in defending or settling the same. 6.2 Subject to Clause 6.4 below, Formaritima indemnifies and holds harmless the Manager against all liability whatsoever, whether in law, tort or in contract or otherwise, and Formaritima shall be solely liable for any damage, loss or claim of whatsoever nature and howsoever arising, whether relating to the Vessel, their hirers and users (including, without prejudice to the generality of the foregoing, for damage to or loss of property, including the Vessel, and all direct and consequential loss) unless the same is proved to have resulted solely from the gross negligence or wilful default of the Manager, its employees, agents or subcontractors in which case the Manager s liability during any one year of the term of this Agreement shall not exceed the aggregate of the Fee received by the Manager in the preceding twelve months. 6.3 The Manager shall be under no liability whatsoever in respect of any consequential loss (including without prejudice to the generality of the foregoing liability due to detention of or delay of the Vessel or otherwise) arising out of or in connection with the management and/or operation of the Vessel. 6.4 Liabilities Between the Parties 6.4.1 The Manager shall hold harmless and indemnify Formaritima from and against all claims, costs expenses or liabilities arising from or connected with the performance of this Agreement in respect of: (i) death of or personal injury to any of the personnel of the Manager s Group; (ii) loss of or damage to the property of the Manager s Group; (iii) any consequential or economic loss or damage suffered by the Manager s Group; howsoever arising and irrespective of negligence or other breach of legal duty by Formaritima s Group. 10 6.4.2 Formaritima shall hold harmless and indemnify the Manager from and against all claims, costs, expenses or liabilities arising from or connected with the performance of this Agreement in respect of: (i) death of or personal injury to any of personnel of Formaritima s Group; (ii) loss of or damage to the property of Formaritima s Group; and (iii) any consequential or economic loss or damage suffered by Formaritima s Group; howsoever arising and irrespective of negligence or other breach of legal duty by the Manager s Group. 6.4.3 For the purposes of this Clause 6.4, Liabilities Between the Parties, "Formaritima s Group" means Formaritima, its associated companies, its other subcontractors and suppliers, Petrobras, and the officers, employees and agents of any of them. 6.4.4 For the purposes of this Clause 6.4, Liabilities Between the Parties, "the Manager s Group" means the Manager, its associated companies, its subcontractors and suppliers and the officers, employees and agents of any of them. 6.4.5 For the express purposes of Clause 6.4, Liabilities Between the Parties, of this Agreement only, Formaritima contracts on its own behalf and expressly as agent on behalf of and as trustee for the benefit of all persons who are or may be from time to time within Formaritima s Group and all such persons shall to this extent be deemed to be parties to this Agreement. 6.4.6 For the express purposes of Clause 6.4, Liabilities Between the Parties, of this Agreement only, The Manager contracts on its own behalf and expressly as agent on behalf of and as trustee for the benefit of all persons who are or may be from time to time within the Manager s Group and all such persons shall to this extent be deemed to be parties to this Agreement. 6.5 INDEMNITY FOR OPERATIONS Save as is provided in Article 6.4 above, Liabilities Between the Parties, Formaritima shall indemnify and hold harmless the Manager from and against all actions, proceedings, claims, demands or liabilities whatsoever that may be brought by any other person against, or incurred by the Manager in relation to or in connection with its performance of this Agreement unless same has arisen from the gross negligence or wilful misconduct of the Manager, in which event the liability of the Manager shall be limited to the aggregate of the management fee received by the Manager in the preceding 12 months. 11 7. TERMINATION 7.1 Formaritima may terminate this Agreement at any time if: 7.1.1 Formaritima is dissatisfied, with sound reasons, with the performance of the Manager because of incompetence of the Manager or unsatisfactory performance of its duties and obligations hereunder the Manager s control, and the Manager, after having been given, by Formaritima , written notice in which Formaritima shall have specified in detail the grounds for its dissatisfaction, shall fail to take effective steps to remedy the matters complained of within thirty days after the giving of the said written notice, Formaritima shall have the right to terminate this Agreement effective thirty (30) days after a date specified by Formaritima without any further compensation to the Manager other than any money due and owing at the date this Agreement is to terminate. 7.1.2 The Manager shall go into liquidation (otherwise than voluntarily for the purpose of reorganisation or reconstruction), make an assignment for the benefit of creditors, make an arrangement, composition or compromise with its creditors or have a receiver or administrator appointed in respect of the whole or any part of its assets or shall otherwise be unable to pay its debts as and when they become due. 7.1.3 The Manager ceases to carry on its business. 7.2 This Agreement shall be terminated with respect to the Vessel in the event of the actual or constructive or compromised or arranged total loss or requisition for title of the Vessel on the date four months after such total loss occurs or is agreed with insurance underwriters (as the case may be, or such other date as may be agreed). 7.3 (a) In the event of the termination of this Agreement pursuant to Clause 7.1 or Clause 7.2, Formaritima shall pay to the Manager all such amounts to which the Manager may be entitled pursuant to the provisions of Clause 5.1 as and when such amounts fall due for payment; (b) In addition, Formaritima shall pay such amounts (if any) as the Manager (notwithstanding the Manager s best efforts to minimise the effects to any such termination) may become legally liable to pay under any contract of employment or by reason of any regulation or legislation for employee protection to personnel who may have been employed by the Manager or its group companies on the Vessel to perform any part of the services to be provided under this Agreement and who shall become redundant as a result of such termination. Formaritima s exposure under this Clause 7.2.2 is limited to a maximum of three months salary per employee in the employ of the Manager at the time of receipt of notice of termination. Formaritima is only responsible for any redundancy payments or equivalent for the period of time the Manager s personnel have been employed on the Vessel from the date of this Agreement and provided timely notice is issued to all affected personnel, Manager shall make its best efforts to assist and support Formaritima or Formaritima s nominee in procuring the services of such employees or sub-contractors as Formaritima may wish to employ. 12 7.4 If the Vessel is sold, Formaritima shall be entitled to terminate this Agreement by giving notice to the Manager, such notice to expire on such date as Formaritima may specify. 7.5 If Formaritima fails to pay the remuneration payable to the Manager within thirty (30) days of the due date, the Manager may at any time thereafter terminate this Agreement by thirty calendar days prior written notice to Formaritima. In the event that Formaritima fails to make payment on due date to the Manager of any moneys owing to the Manager under this Agreement, Formaritima agrees that the amount unpaid for the time being shall bear interest at a rate of two percentage point units above the three months LIBOR rate as quoted in the Financial Times on the due date. 7.6 Termination of this Agreement under any circumstances shall be without prejudice to any outstanding claims hereunder which either Formaritima or the Manager may have against the other. 7.7 Upon any termination of this Agreement with respect to the Vessel, the Manager shall use its best endeavours to assist in a smooth transfer of the Vessel to any new manager and/or Formaritima . 8. ASSIGNMENT AND SUBCONTRACTING 8.1 The rights and obligations of a Party hereunder may not be assigned without the prior written consent of the other Party (such consent not to be unreasonably withheld). 8.2 Either Party may however assign such rights to any subsidiary, affiliate or other group company designated by it PROVIDED THAT such Party effecting the assignment shall remain responsible for the proper performance of this Agreement. 8.3 The Manager may with the approval of Formaritima , wherever necessary, engage subcontractors on an arms length basis for the performance of specific assignments, without thereby in any way being relieved of its responsibility for the performance, administration and direction of these services. The indemnity as contained in 6 above shall, as between Formaritima and the Manager, apply in respect of actions or omissions of aforesaid sub-contractors and may be passed on to the sub-contractor in the discretion of the Manager. 9. TAXES Any taxes or charges applied by local authorities in the Netherlands or the Netherlands Antilles shall be for the Manager s account. 13 10. FORCE MAJEURE 10.1 Each Party to this Agreement shall be relieved from complying with any term of this Agreement to the extent that, and only so long as, such compliance is prevented or delayed by force majeure, which is defined as civil or labour disturbances, riots, strikes (other than a strike limited to the employees of either Party), wars (declared or undeclared), military actions, insurrections, rebellion, acts of any governmental or military agency under actual or assumed authority, action of elements, floods, storm or other acts of God or any cause beyond the control of either Party, whether or not similar to the matters herein specifically enumerated and provided that the event shall not have been caused by the action or negligence of either of the Parties, and that the Party and/or the Parties affected shall do its, or their, utmost to remedy the above circumstances. 10.2 Any Party claiming force majeure shall promptly notify the other Party, with the evidence of the occurrence of such event. 10.3 If either Party hereto is prevented from or delayed in performing all or any of its obligations thereunder as a direct result of force majeure, such non performance shall not be considered as a breach of this Agreement and that Party shall be relieved from such obligation which shall suspend payment by the other Party for the duration of such force majeure. 10.4 Notwithstanding the foregoing to the extent that the event claimed as force majeure impacts upon or would impact upon the performance of any Charter Agreement, such event must be recognised as a force majeure event in terms of such Charter Agreement before it can qualify as a force majeure event hereunder. 11. LAW AND ARBITRATION 11.1 This Agreement shall be governed by and construed in all respects in accordance with the laws of England. 11.2 Any dispute or difference arising in connection with this Agreement shall if possible be settled by mutual amicable agreement. 11.3 If any dispute should arise in connection with the interpretation and fulfilment of this Agreement the same shall be decided by arbitration in the city of London and shall be referred to a single arbitrator (an "Arbitrator") to be appointed by the Parties hereto. If the Parties cannot agree upon the appointment of the single Arbitrator the dispute shall be settled by three Arbitrators, each Party appointing one Arbitrator, the third being appointed by the Chairman of the London Maritime Arbitrators Association. 11.4 If either of the appointed Arbitrators refuses or is incapable of acting, the Party who appointed him shall appoint a new Arbitrator in his place. 11.5 If one of the Parties fails to appoint an Arbitrator, either originally or by way of substitution, for two weeks after the other Party having appointed his Arbitrator has sent the Party making default notice by mail or facsimile to make the appointment, the Party appointing the third Arbitrator shall, after application from the Party having appointed his Arbitrator, also appoint an Arbitrator on behalf of the Party making default. 14 11.6 The award rendered by the Arbitration Court shall be final and binding upon the Parties and may if necessary be enforced by the Court or other competent authority in the same manner as a judgment in the Court of Justice. 11.7 Performance under this Agreement shall, if reasonably possible, continue during the Arbitration proceedings. 12. CONFIDENTIAL INFORMATION All information related to this Agreement, regardless of whether such information concerns Formaritima, its clients, its associated companies, or its contractors, shall be treated as confidential and shall not be divulged by the Manager to any third party without the prior written consent of Formaritima . The hereinabove obligations shall survive termination of this Agreement and shall remain in force for so long as the information covered by confidentiality has not otherwise become public knowledge. 13. NOTICES 13.1 All communications and notices in relation to this Agreement and obligations to be performed hereunder shall be in writing and delivered by fax or by hand and if given to Formaritima addressed to: with a copy to: FORMARITIMA LTD WESTVILLE MANAGEMENT c/o Arias, Fabrega & Fabrega CORPORATION Omar Hodge Building President Wickham's Cay 5847 San Felipe, Suite 3300 Road Town, Tortola Houston, Texas 77057 British Virgin Islands Fax: (284) 494 4980 Fax: (713) 914-9796 and if given to the Manager addressed to: WORKSHIPS CONTRACTORS B.V. K.P. van der Mandelelaan 34 3062 MB Rotterdam (Brainpark) The Netherlands Fax: 31 10 452 81 76 13.2 Either Party may give reasonable notice to the other Parties of any change of address at any time. 13.3 A notice by fax shall be deemed to have been received at the time of dispatch provided that if the day of dispatch is not a Working Day in the country of the addressee or if the time of dispatch is after close of business in the country of the addressee, it shall be deemed to have been received at the opening of business on the next such Working Day. 15 14. ENTIRE AGREEMENT This Agreement constitutes the entire agreement between the Parties hereto and supersedes all prior negotiations, representations or agreements relating directly to the subject matter of this Agreement whether written or oral. No changes, alterations or modifications to this Agreement shall be affected unless in writing and signed by the Parties hereto. IN WITNESS WHEREOF the Parties have signed this Agreement the day and year first above written. SIGNED by ) /s/ GERMAN EFROMOVICH for and on behalf of ) FORMARITIMA LTD ) in the presence of: ) /s/ MARCELO VIOLLAND SIGNED by ) /s/ Illegible for and on behalf of ) WORKSHIPS CONTRACTORS B.V. ) in the presence of: ) /s/ Illegible 16 APPENDIX 1 SCOPE OF SERVICES PROVIDED BY THE MANAGER - - - Marine Operations and Technical Support - - - Logistics - - - Marine and Technical Personnel (as per the personnel and payment schedule attached as Appendix 2). - - - Local base personnel for Marine Operations and Technical Support at industry standard dayrates - - - Liaison with Marine subcontractors and suppliers - - - Purchase of parts, services and supplies. - - - Procurement of Visas, work permit applications and formalities. - - - Assistance and advice to minimise the impact of customs duties and import taxes. - - - Assistance in providing Vessel insurances and settling claims 17 APPENDIX 2 PERSONNEL AND RATES FUNCTIONS TO BE TECHNICAL CREW US$ PER DAY SUPPLIED ON BOARD (*) - - -------------- ----------- --------------------- Chief Engineer 605 1 2nd Engineer 503 1 3rd Engineer 455 2 4th Engineer 412 2 Electrical Supervision 465 1 Assistant or Rig Electrician 267 1 Electronic Engineer 329 1 Rig Mechanic 467 1 MARINE CREW - - ----------- Captain 615 1 Chief Mate 545 1 DP Operator 435 2 Warehouse Man 431 1 Crane Operator 375 1 The above dayrates are payable for each day worked on the vessel, based on a 28/28 rata. Dayrates are inclusive of salaries, overheads and allowances, costs related to social security and medical care. Dayrates are exclusive of travel and accommodation related costs between the point of origin and rig site, visa costs and personnel taxes which are or may become applicable in Brazil. In case of delays in Brazil, all related costs including dayrate are for Formaritima s account. Dayrates are exclusive of any taxes in Brazil. Dayrates are at cost and of an indicative nature only based on rates at 01/01/98 and shall be revised annually based on actual market costs of personnel. o The positions on board could be changed at the request of Formaritima at its discretion, with at least three months notice for replacement of the same. This should not result in an unreasonable crewing functions mixture. 18 EX-10.61 107 EXHIBIT 10.61 BIGEM HOLDINGS N.V. - and - PETRODRILL SEVEN LIMITED ---------------------------- LICENSING AGREEMENT ---------------------------- THIS LICENCING AGREEMENT, is entered into this 5th of November 1998, BETWEEN: (1) BIGEM HOLDINGS N.V. a Corporation incorporated in accordance with\ the laws of the Netherlands Antilles and having its registered office at Anthony Veder Building, Kaya Richard Posner, Willemstad, Curacao, Netherlands Antilles (the Licensor ) and (2) PETRODRILL SEVEN LIMITED a Company incorporated in accordance with the laws of the British Virgin Islands c/o Arias, Fabrega & Fabrega, P.O. Box 985, Omar Hodge Building, Wickham s Cay, Road Town, Tortola, B.V.I. (the Licencee ). WHEREAS: A. Scheepswerf de Hoop Lobith B.V. ( the Designer ) has designed and built a semi-submersible drilling platform AMETHYST 1 and has developed the AMETHYST 1 design into a revised design for the AMETHYST 2 . B. Pursuant to an agreement dated 31st October 1997 the Designer assigned to the Licensor the whole right title and interest in and to the above mentioned design. C. The Licencee desires to construct a platform in accordance with the Licensor s design data. D. The Licensor is willing to grant to the Licencee a licence to use the said design data on the terms and conditions set out in this Agreement. IN CONSIDERATION of the mutual covenants and obligations hereinafter set forth, it is hereby agreed between the Licensor and Licencee as follows:- 1. GRANT OF LICENCE 1.1 For the consideration hereinafter mentioned, the Licensor agrees to and does hereby grant to the Licencee, and the Licencee accepts, an irrevocable, non exclusive, perpetual licence to construct or procure the construction by a shipyard ( the Contractor ) of a dynamically positioned semi-submersible drilling or workover unit, ( the Unit ) in accordance with a design developed by the Designer for the construction of the Amethyst 1 and revised in the construction of the Amethyst 2 (hereinafter referred to as the Design ). The Licensor shall provide to the Licencee for use by the Licencee and the Contractor the design documentation, documentation and specifications listed in Annex A attached hereto ( the Design Documentation ). 1.2 The Licensor agrees to supply the Licencee with any additional documentation pertaining to the design of the Unit where such documentation is necessary to supplement the Design Documentation in order to enable the Contractor to build the Unit or give guidance to the Licencee in its construction program. Such documentation may include but shall not be limited to, detailed engineering documentation, bills of material, purchase specifications and orders, planning, quality assurance and production information as used by the Designer in the construction of the Amethyst 1. 2 1.3 The Licensor agrees to carry out to the extent agreed any additional design tasks, including modification of the Design Documentation, if so requested by the Licencee, in accordance with Clause 3.4 hereunder. 2. TIME SCHEDULED FOR PROVISION OF DESIGN DOCUMENTATION The Licensor shall provide the Design Documentation for transfer to the Licencee in accordance with the following provisions:- 2.1 All Design Documentation shall be delivered to the Licencee within seven (7) working days of the execution of this Agreement. 2.2 Any additional documentation referred to in Clause 1.2 will stay at the premises of the Designer and the Licensor will procure that it is at any time accessible to the Licencee. The Design Documentation shall at all times remain the property of the Licensor who shall keep the same fully confidential. 2.3 Information or assistance requested in accordance with Clause 1.3 of this Agreement shall be given to the Licencee promptly by the Licensor on a best efforts basis. 2.4 The Design Documentation shall be forwarded to the Licencee at the Licensor s expense, by which ever method is the preference of the Licencee. 3. FEES In consideration for granting the licence and the provision of services described in this Agreement the Licencee shall pay to the Licensor a fee of total US$1,583,333 for the Unit ( the Fee ) payable as follows:- 3.1 US$166,667 within five (5) banking days of each construction contract for a Unit (a Construction Contract ) becoming effective. 3.2 US$1,250,000 within thirty (30) banking days of each Construction Contract becoming effective. 3.3 The balance of the Fee shall be payable in four (4) equal semi-annual instalments commencing on delivery of each Unit in accordance with the Construction Contract. 3.4 Additional design tasks or contract design modifications as may be requested by the Licencee in accordance with Clause 1.3 of this Agreement shall be paid for by the Licencee according to an agreed number of man hours charged at the rates given in Annex B. 3.5 Technical support and assistance shall be charged according to the level of effort agreed based on the rates and expenses given in Annex B. 3 4. CONDITIONS FOR DESIGN 4.1 All documentation to be submitted by the Licensor to the Licencee under this agreement shall be presented in a clear, legible manner and according to best international offshore practice. All the Design Documentation shall be in the English language. Where this is not possible the Licensor shall assist the Licencee by procuring from the Designer suitable translations. 4.2 The Licensor agrees to keep the Licencee informed of any design developments or modifications to design features or details carried out by the Designer as soon as such become available. 4.3 The Licensor hereby warrants that the Design Documentation shall be free of errors and omissions and that provided that the Design Documentation is adhered to by the Contractor, the Unit shall meet the performance requirements of the outlined specifications. 4.4 The Licensor agrees that it will correct promptly, at its own expense, any errors or omissions and return correct documentation to the Licencee as soon as possible after such error or omission has been rectified. 5. CONDITIONS 5.1 The Licensor shall take all necessary steps to enforce the terms and conditions contained in an assignment dated 31st October 1997 between the Designer and the Licensor ( the Assignment ). 6. LAW AND JURISDICTION 6.1 This Agreement shall in all respects be construed and interpreted in accordance with English law. 67.2 Any dispute arising under or by virtue of this Agreement and/or the Design Documentation, or any difference in opinion between the Parties hereto concerning their rights and obligations under this Agreement and/or the Design Documentation shall be settled in the first place by mutual amicable agreement. 6.3 Should the settling of matters under dispute not be possible by amicable agreement, any dispute or difference shall be settled by arbitration in London in accordance with provisions of the Arbitration Act 1996 or any statutory modifications or re-enactment thereof for the time being in force and shall be referred to a single arbitrator (an Arbitrator ) to be appointed by the Parties hereto. If the Parties cannot agree upon the appointment of a single Arbitrator the dispute shall be settled by three Arbitrators, each Party appointing one arbitrator, the third being appointed by the Chairman for the time being of the London Maritime Arbitrators Association. 6.4 If either of the appointed Arbitrators refuses or is incapable of acting, the Party who appointed him shall appoint a new Arbitrator in his place. 4 6.5 If one of the Parties fails to appoint an Arbitrator, either originally or by way of substitution, for two weeks after the other Party having appointed his Arbitrator has sent the Party making default notice by mail or facsimile to make the appointment, the Party appointing the third Arbitrator shall, after application from the Party having appointed his Arbitrator, also appoint an Arbitrator on behalf of the Party making default. 6.6 The award rendered by the Arbitration Court shall be final and binding upon the Parties and may if necessary be enforced by the Court or other competent authority in the same manner as a judgment in the Court of Justice. 6.7 Work under this Agreement shall, if reasonably possible, continue during the arbitration proceedings. 7. MISCELLANEOUS This Agreement which incorporates all prior negotiations and understandings related to the subject matter hereof, sets forth the entire agreement of the parties hereto and shall not be modified except by written instrument executed by duly authorised representatives of the Parties. The failure of either Party to insist upon strict performance of any provision hereof shall not constitute a waiver of, or estoppel against asserting, the right to require such performance in the future, nor shall a waiver or estoppel in any one instance constitute a waiver or estoppel with respect to a latter breach of a similar nature or otherwise. 8. NOTICES All notices, invoices and other communications required pursuant to this Agreement shall be in writing and deemed to have been sufficiently given or made if delivered by hand or sent by fax to the addressee at the address set out below; in the case of the Licensor: with a copy to: The Managing Director President BiGem Holdings N.V. Pride International, Inc. Anthony Veder Building 5847 San Felipe, Suite 3300 Kaya Richard Posner Houston, Texas 77057 Willemstad Curacao Fax: 713 914 9796 Netherlands Antilles Fax: 599 9461 6491 in the case of the Licencee: 5 The Managing Director Petrodrill Offshore, Inc. Saffrey Square, Suite 205 Bank Lane, P. O. Box N8188 Nassau, Bahamas Fax: 011 44 1481 710254 or to such other address as the relevant Party may from time to time notify to the other. 9. CONFIDENTIALITY All information related to this Agreement regardless of whether such information concerns the Licensor, its clients, its associated companies or its contractors shall be treated as confidential and shall not be divulged by the Licencee to any third party without the prior written consent of the Licensor. The hereabove obligations shall survive the termination of the Agreement and shall remain in force for so long as the information covered by confidentiality has not otherwise become public knowledge. IN WITNESS WHEREOF, the Parties hereto have executed this Agreement the day and year first above written. SIGNED by /s/ GERMAN EFROMOVICH ) for and on behalf of German Efromovich ) BIGEM HOLDINGS N.V. ) in the presence of:- /s/ Illegible ) SIGNED by /s/ GERMAN EFROMOVICH ) for and on behalf of German Efromovich ) PETRODRILL OFFSHORE INC. ) in the presence of:- /s/ Illegible ) 6 ANNEX A DESIGN DOCUMENTATION The Design documentation package delivered by the Licensor will consist of: Outline specification General Arrangement (Version p95019 A-N) Intact stability with principal loading conditions Preliminary Damage Stability Weight Distribution Main scantling drawings pontoons, columns and deckbox approved by LR Preliminary Electrical Balance Principal schematics of pipe systems Ballast system Bilge system Drain system Compressed air system Fuel System Lube oil transfer system Salt water cooling system Low temperature freshwater cooling system High temperature freshwater cooling system Fire and deckwash system Baryte/Bentonite system Dry bulk cement system Brine transfer system Fire system, deluge system and sprinkler system Technical freshwater/drillwater transfer system Sanitary system Hydrostatics Lines plan REFERENCE DOCUMENTATION This concerns all information available on AMETHYST 1 . This information is available at the premises of [the Licensor/the Designer] and copies will be made available to representatives of the Licencee upon request. 7 ANNEX B REMUNERATION The work performed in accordance with this Agreement in Clauses 3.3 and 3.4 shall be remunerated as follows:- Each working day of 8 hours US$850 Excluded Tax, VAT if any Excluded are costs for proper travelling and accommodation. Maximum continuous period outside [Holland] 21 days. Costs to be paid within 30 days after receipt of invoice. EX-10.65 108 EXHIBIT 10.65 DRILLPETRO INC. - AND - TECHDRILL INC. - AND - WESTVILLE MANAGEMENT CORPORATION ________________________________________________________________________________ AMETHYST FINANCIAL COMPANY LTD.'S SHAREHOLDERS' AGREEMENT ________________________________________________________________________________ 1 THIS AGREEMENT is made the 5th day of November 1998, BETWEEN: (1) DRILLPETRO INC. A company incorporated in the Bahamas of Saffrey Square Suite 205 Bank Lane P.O. Box N 8188 Nassau ("DRILLPETRO") (2) TECHDRILL INC. A company incorporated in the Bahamas of Saffrey Square Suite 205 Bank Lane P.O. Box N 8188 Nassau ("TECHDRILL") (3) WESTVILLE MANAGEMENT CORPORATION A corporation incorporated in the British Virgin Islands of c/o Arias Fabrega & Fabrega Trust Co of Omar Hodge Building Wickhams Cay - Road Town Tortola British Virgin Islands ("WESTVILLE") DRILLPETRO, TECHDRILL and WESTVILLE shall hereinafter collectively be known as "Shareholders" or "Parties" and individually as "Shareholder" or "Party." WHEREAS: (A) The Parties have agreed to co-operate in the construction, ownership and operation of six dynamically positioned semi-submersible drilling units named or to be named "Amethyst II" through "Amethyst VII" (the "Vessels") through the medium of Amethyst Financial Company Ltd., a corporation registered in the British Virgin Islands (the "Holding Company") and its six wholly owned subsidiaries (the "Operating Companies"). 2 (B) The Parties have agreed to enter into this Agreement for the purposes of recording the terms and conditions of their joint venture and of regulating their relationship with each other and certain aspects of the affairs of and their dealings with the Holding Company. NOW THEREFORE IN CONSIDERATION OF THE MUTUAL COVENANTS HEREIN, THE SHAREHOLDERS AGREE TO THE RECITALS ABOVE AND AS FOLLOWS: 1. DEFINITIONS "AFFILIATE" of a Party means a company which owns, or is owned by, or which is owned by an entity which owns that Party; owns and owned mean in this definition the ownership directly or indirectly of at least 30% of the voting shares. "AMETHYST II DESIGN" means the design purchased by BiGem from De Hoop that will be used to construct the Vessels. "BUILDER(S)" means the relevant shipyard which has been selected or will be selected to construct each Vessel. "CONSTRUCTION AND SALE CONTRACT" means the contract between the Holding Company and each Builder for the construction and sale of the Vessel. "CONSTRUCTION CONTRACT ASSIGNMENT" means, where applicable, the assignment by the Holding Company to an Operating Company of all of the Holding Company's rights under the Construction and Sale Contract, including title to the Vessel. "DAY" means a calendar day. "EQUITY" means any and all risk bearing capital provided to the Holding Company by its shareholders in the form of share capital, subordinated loans or otherwise. "FORAMER" means Pride-Foramer S.A. "FORMARITIMA" means Formaritima Ltd., a company to be incorporated in the British Virgin Islands, to be a 50/50 joint venture company to be formed by Pride and Maritima for the provision of services to operate drilling and workover rigs. "HOLDING COMPANY" means Amethyst Financial Company Ltd., a company incorporated in the British Virgin Islands, Arias, Fabrega & Fabrega, P.O. Box 985, Omar Hodge Building, Wickhams Cay, Road Town, Tortola, B.V.I. "LENDERS" means the financial institutions or bond purchasers which may finance up to 90% of the construction, equipping and mobilization cost of each of the Vessels and includes their respective successors in title and transferees. 3 "LOAN AGREEMENT" means the pre-delivery and post-delivery loan contracts and indentures between the Holding Company and the Lenders and any related offering documents and prospectuses in respect of, inter alia, the financing of the construction, equipping and mobilization of the Vessels. "MARITIMA" means Maritima Petroleo e Engenharia Ltda., a company incorporated under Brazilian Laws; of Avenida Almirante Barroso, 52, 3400 GR, 20031-000 Centro, Rio de Janeiro, Brazil. "OPERATING COMPANIES" means Petrodrill Two Limited, Petrodrill Three Limited, Petrodrill Four Limited, Petrodrill Five Limited, Petrodrill Six Limited and Petrodrill Seven Limited, each a corporation registered in the British Virgin Islands and each a wholly owned subsidiary of the Holding Company. "THE PETROBRAS CHARTER" means the relevant Charter Agreement between Maritima and Petroleo Brasileiro S.A. (hereinafter referred to as Petrobras ) for the provision of each Vessel, as assigned or to be assigned in respect of the rights and obligations to the relevant Operating Company. "PETRODRILL ENGINEERING" means Petrodrill Engineering N.V., a company incorporated in the Netherlands Antilles under registration number 77521 with its registered office at Anthony Veder Building, Kaya Jacob Posner, Willemstad, Curacao, acting as construction manager on behalf of the relevant Project Company during the period of construction of the Vessels. "PROJECT" means all arrangements, including all financing arrangements with the Lenders, by the Parties to have the Vessels constructed and delivered to the Operating Companies for the purpose of performing the Petrobras Charters. "PROJECT COMPANIES" means the Holding Company and the Operating Companies. "PROJECT GROUP" means the Holding Company, BiGem and Petrodrill Engineering. "RELATED AGREEMENTS" means all the following agreements with regard to each Vessel:- (i) Local Services Agreement between Maritima and Formaritima. (ii) Management Agreement between Formaritima and the Holding Company (the "Formaritima Management Agreement"). (iii) Technical Services Agreement between Foramer and Formaritima N.V. (iv) Agreement between Scheepswerf De Hoop Lobith B.V. ("DeHoop") and BiGem Holdings N.V. ("BiGem"). 4 (v) Construction Management Agreement between the Holding Company and Petrodrill Engineering B.V. (vi) Shareholders Agreement for BiGem among Westville, Drillpetro and Techdrill. (vii) Marine and Nautical Services Agreement between the Holding Company and a third party. (viii) Supply Agreement between Petrodrill Engineering and Foramer. (ix) Supply Agreement between Petrodrill Engineering and Maritima. (x) Supply Agreement between Petrodrill Engineering and a third party. (xi) Licencing Agreement between BiGem and the Holding Company together with (i) Shareholders Agreement for Petrodrill Engineering among Westville, Drillpetro and Techdrill. (ii) Shareholder s Agreement for Formaritima between Westville and Maritima. (iii) Matters Relating to the Petrobras Amethyst Contracts. (iv) Agency Agreement between the Holding Company and Barrier Enterprise and Rapisardi Investments Ltd. "VESSEL(S)" means semi-submersible dynamically positioned drilling or workover units to be owned by the Operating Companies for the purpose of the Project and built using the DeHoop Amethyst II Design licensed to the Holding Company by BiGem. 2. EFFECTIVENESS This Agreement shall be effective as at the date hereof 3. SCOPE AND PURPOSE The Shareholders hereby enter into this Agreement for the purpose of managing and operating their joint venture through the Holding Company, the main objects being to ensure that the Holding Company purchases, owns and operates the Vessels, directly or through the Operating Companies, for not only the initial purpose of making them available for performance under the Petrobras Charters, but also thereafter, always in the best interests of the Holding Company. 5 4. CAPITAL OF THE HOLDING COMPANY 4.1 Upon effectiveness the authorised share capital of the Holding Company will be US$1,000 with US$1,000 paid up and divided into 1,000 ordinary shares of US$1 each. On Completion the Shareholders shall acquire, subscribe and pay up in full for cash at par for shares in the Holding Company so that their respective legal and beneficial ownership of ordinary shares shall be: DRILLPETRO: a Fifty-five per cent (55%) interest in the Holding Company; TECHDRILL: a Fifteen per cent (15%) interest in the Holding Company; and WESTVILLE: a Thirty per cent (30%) interest in the Holding Company. The appropriate share certificates shall be issued by the Holding Company in favour of each of the Shareholders. 4.2 Any increase or decrease in the authorised or issued share capital of the Holding Company shall be decided by the unanimous consent of the Shareholders. Increases shall be contributed to by the Shareholders in full and in cash, in the same proportions as they are required to contribute to the initial issued capital of the Holding Company pursuant to Clause 4.1 above, unless the Shareholders unanimously agree otherwise in writing. 4.3 No capital as aforesaid shall carry interest for the Shareholders, nor shall it be withdrawn by the Shareholders once deposited, except with the unanimous written consent of the Shareholders and the approval by any appropriate regulatory authority. FINANCING OF THE HOLDING COMPANY 5.1 Each Shareholder shall contribute to the capital/operating budget of the Holding Company, in proportion to its respective shareholding, those amounts stipulated in Appendix 1 through Appendix 6 hereto. The Shareholders undertake to advance such amounts on the dates/times stipulated in the said Appendix, and in any event within ten (10) Days of such date/time. 5.2 Each Shareholder shall also contribute to any overruns in the capital/operating budget of the Holding Company as and when the same shall become necessary, in the same manner as for the capital/operating budget referred to in Clause 5.1 above, save that such contributions shall be made within ten (10) Days of notice having been given by the Board of Directors of the Holding Company of the amount required. In the event of a failure of the Board of Directors to give such notice, the General Assembly acting by simple majority, may issue the said notice. 6 5.3 If each of the Parties complies with their obligations under Clauses 5.1 and 5.2 hereof on the dates and at the times specified therein then the amounts advanced by each of the Parties shall be treated as subordinated loans repayable only following amortisation of any outstanding amounts owing to any applicable financing institutions PROVIDED ALWAYS THAT if one or more of the Parties fails to comply with its obligations under Clause 5.1 or Clause 5.2 then any contributions made by the performing Parties pursuant to the provisions of Clause 5.1 and Clause 5.2 above shall be made in return for the issue of further shares in the Holding Company and shall not be interest bearing. 5.4 In the event that one or more Parties fails to advance the amounts required on the dates and at the times on which such contributions are required to be made (or within the grace period referred to in Clause 5.1 or 5.2 hereof) then the Parties performing their obligations under this Clause 5 shall be entitled within a further period of ten (10) Days to contribute towards the outstanding amount in proportion to their respective shareholding whereupon the number of shares which would have been issued to the Party concerned shall be allocated to those Parties performing their obligations under this Clause 5 in proportion to their existing shareholding. 5.5 All amounts required by the Holding Company in respect of its capital and operational needs, as approved from time to time by the Board of Directors of the Holding Company shall be incorporated in the Budget. 6. PROFITS AND LOSSES The profits or loss for each financial year of the Holding Company shall be determined by audited financial statements drawn up in accordance with US Generally Accepted Accounting Principles and practices (US GAAP) and shall be submitted for approval by the Shareholders in Annual General Meeting. 7. ACCOUNTS 7.1 Proper books of accounts of the Holding Company shall be maintained in accordance with US GAAP approved by its auditors for the time being. All such books of account shall be made available for inspection at all reasonable times by a Shareholder or its authorised representative. 7.2 The financial year of the Holding Company shall run from January 1st through to December 31st. The first financial year, however, shall commence upon the date of incorporation of the Holding Company. Financial statements (balance sheet and profit/loss account) shall be prepared within three months of the end of each financial year. Forthwith thereafter such statements shall be audited by the auditors for the Holding Company and upon approval of the same by the Board of Directors shall be submitted to the Shareholders in Annual General Assembly and upon approval by the Shareholders become binding on the Shareholders (except that 7 a Shareholder shall be entitled to require the rectification of any manifest error discovered therein within three months of the date on which such accounts were certified by the auditors and submitted by the Board of Directors to the Shareholders in Annual General Meeting). Ninety percent (90%) of the profits shown in an audited profit and loss account and available for distribution shall unless otherwise required by loan covenants of the Holding Company be distributed to the Shareholders following approval by the Holding Company's auditors of the relevant audited accounts and 10% shall not be distributed. The Shareholders recognise that until the Lenders have been repaid under the Loan Agreements no distribution shall be made to the Shareholders. 7.3 BANK ACCOUNTS Bank accounts shall be opened in London and elsewhere as decided by the Management Committee and pursuant to a Resolution of the Board of Directors and maintained in the name of the Holding Company in which shall be placed all sums received by the Holding Company and from which all disbursements on behalf of the Holding Company shall be made. The signatories to the accounts shall be appointed by the Board of Directors and all financial transactions above such amount as may from time to time be specified by the Board of Directors will require 3 authorised signatories, one to be appointed by each of the Shareholders. Closing of bank accounts shall take place exclusively pursuant to a decision to that effect by the Management Committee and a Resolution of the Board of Directors. 8. AUDITORS The auditors of the Holding Company shall be a firm of accountants of international standing decided upon by the Management Committee and appointed by the Board of Directors. 9. GENERAL ASSEMBLY Any Shareholder holding a 5% or greater interest in the Holding Company may require a Shareholders Meeting at any time to be held by providing 7 days prior written notice of same. A unanimous written resolution of the Shareholders shall be as effective as a resolution adopted at a meeting of the Shareholders. No business shall be transacted at any General Assembly Meeting of the Shareholders nor shall any resolutions be passed there unless one representative of each of the Shareholders is present PROVIDED ALWAYS that if the absence of one or more representatives of each shareholder prevents the passing of any resolution, then those representatives present may reconvene the meeting in question at the same location and on a date falling not earlier than 10 days nor 8 later than 30 days after the date of the failed meeting and shall give notice of such reconvened meeting to all the shareholders and of the agenda, proposed therefor, including all resolutions proposed for adoption at such meeting which shall be the same as the resolutions proposed for passing at the failed meeting. At such reconvened meeting the members present shall be entitled to deal with all items of business on the agenda and pass the resolutions proposed for such reconvened meeting provided that the members representing the majority of the issued shares in the Holding Company vote in favour of such resolution. 10. OVERALL SUPERVISION AND CONTROL 10.1 Subject as herein otherwise provided, the Shareholders shall delegate to the Board of Directors the overall supervision and control of the Holding Company and all the powers requisite and necessary to enable the said Board of Directors to carry out its duties in that regard. The Board shall meet at least once every two months during the construction of the Vessel and at least once every three months thereafter. Subject to Clause 10.2 decisions in respect of the supervision and control of the Holding Company shall be shall be taken by way of a simple majority of the shares held in the Holding Company as voted by the holding shareholder. In the event of a disagreement concerning a matter proposed by one or more shareholder(s) constituting a majority of the shares in the Holding Company and provided that the matter does not require unanimity of the Board of Directors per Clause 10.2 below, then the matter will be resolved in the following order: 1. The Parties will further discuss and use their best efforts to reach a consensus the matter within 5 business days; or 2. Failing agreement under 1 above, the Party or Parties proposing the matter for decision will withdraw the proposal and/or modify it to the satisfaction of the disagreeing Party; or 3. Failing resolution after 2 above within a period of 5 business days, any disagreeing Party will, at its option, either accept the proposed matter or have the right to exercise a put option over its interest in the Holding Company to the Party or Parties proposing the matter whereupon the Party or Parties proposing the matter will be obliged to purchase the disagreeing Party's or Parties' interest. The put option price will be the aggregate of (a) the amount paid by the disagreeing party for its shares in the Holding Company and (b) the principal amount outstanding under any shareholders loan of the disagreeing Party to the Holding Company and (c) 12% interest per annum accrued on (a) and (b). For the avoidance of doubt, any dispute regarding the financing of the construction of the Vessel shall be dealt with under this Clause 10.1. 9 10.2 The Shareholders shall exercise all voting rights and other powers of control available to them in relation to the Holding Company so as to procure (insofar as they are able by the exercise of such rights and powers) that the Holding Company shall not, without the unanimous consent of the Board of Directors: (a) enter into or agree to any variation, amendments, cancellation or termination to the Related Agreements or any of them or the Petrobras Charters; (b) create any fixed or floating charge or debenture, lien (other than a lien arising by operation of law) or other encumbrance over the whole or any part of the undertaking, property or assets of the Holding Company except for the purpose of securing the indebtedness of the Company to its bankers/lenders for sums borrowed in the ordinary course of business or in connection with the initial financing of the construction of the Vessels; (c) borrow any sum (except from the Holding Company's bankers in the ordinary and proper course of business or in connection with the initial finance of the construction of the Vessels) in excess of a maximum aggregate sum outstanding at any time of US$500,000; (d) give any guarantee or indemnity to secure the liabilities or obligations of any person other than in the ordinary course of business; (e) sell, transfer, lease, assign or otherwise dispose of a material part of the undertaking, property and/or assets of the Holding Company or contract so to do; (f) engage any new employees at remuneration which could exceed the rate of US$125,000 per annum; (g) alter any rights attaching to any class of share in the capital of the Holding Company; (h) consolidate, sub-divide or convert any of the Holding Company's share capital or in any way alter the rights attaching thereto; (i) issue renounceable allotment letters or permit any person entitled to receive an allotment of shares to nominate another person to receive such allotment except on terms that no such renunciation or nomination shall be registered unless the renounces or person nominated is approved by the Board of Directors; or (j) create, acquire or dispose of any subsidiary or of any shares in any subsidiary; (k) enter into any partnership or profit sharing agreement with any person; 10 (l) do or permit to be done any act or thing whereby the Holding Company may be wound up (whether voluntarily or compulsorily) save as otherwise expressly provided for in this Agreement; (m) issue any securities convertible into shares or debentures or any share warrants or any options in respect of shares; (n) acquire, purchase or subscribe for any shares, debentures, mortgages or securities (or any interest therein) in any company, trust or other body; (o) appoint or dismiss any Director but without prejudice to the rights conferred on each of the Shareholders pursuant to Clause 10.3 to appoint and remove Directors; (p) create any contract or obligation to pay money or money's worth to any Shareholder or to any Affiliate of such Shareholder or to any other subsidiary of such Affiliate or to any person as a nominee or associate of any such Shareholder (including any renewal thereof or any variation in the terms of any existing contract or obligation); (q) issue any shares, options, warrants, rights of pre-emption or any similar rights otherwise than pursuant to the provisions of Clause 5; (r) carry on any business or activity other than the construction, ownership, chartering and operation of the Vessel; (s) make any loans; or (t) pass any resolutions altering the Holding Company's Statutes. 10.3 COMPOSITION Unless and until the Shareholders shall otherwise unanimously agree to the contrary, the Board of Directors shall consist of four (4) persons of whom two shall be appointed by Drillpetro and one each shall be appointed by and represent Techdrill and Westville. Each Shareholder may at any time and from time to time by notice in writing to the others revoke the appointment of the Director(s) appointed by it and appoint another person in his place, and the Shareholders agree to use all their votes in General Meeting to procure such appointment or revocation in accordance herewith. 10.4 MEMBERS AND OFFICERS The first members of the Board of Directors of the Holding Company under this joint venture shall be appointed by the Shareholders within 15 days of the signing hereof 11 10.5 ALTERNATES Each of the Shareholders may appoint any person (including a person who is already a Director) to be the alternate of a Director appointed by it. An alternate who is also a Director in his own right shall be entitled when acting as an alternate to a separate vote on behalf of the Director whom he represents in addition to his own vote. A Shareholder may at any time revoke the appointment of an alternate appointed by it and appoint another person in his place. An alternate shall cease to be an alternate upon the revocation of the appointment of the Director for whom he acts as alternate. 10.6 APPOINTMENT AND REVOCATION All appointments and revocations of appointment of Directors and their alternates shall be notified in writing by the Shareholder(s) making or revoking the same to the other Shareholders. 10.7 MEETINGS The Board of Directors shall meet at least once in every financial year. The Board shall be convened by the President (or his alternate) either on his own initiative or at the request of any other member of the Board of Directors or a Shareholder on 7 days written notice to all Directors. Meetings shall be held at the principal place of business of the Holding Company or at such other place or places as the Board of Directors shall decide. The meeting of the Board of Directors shall be chaired by a Director nominated by Drillpetro. The Board shall keep and maintain in writing minutes of its meetings and a record of all decisions taken thereat, which, minutes shall be signed by the President and those Directors or their alternates who attended the meeting. The language used in the meeting of the Board of Directors shall be English and all minutes and covering letters shall be written in English. The Directors/Officers of the Holding Company shall, unless otherwise agreed in writing, be entitled to no remuneration or fees and shall not be entitled to charge the Holding Company with any travelling, accommodation and other expenses incurred by them in connection with the meetings of the Holding Company. 10.8 QUORUM Every Director for the time being shall be entitled to receive 7 days written notice of and to attend any meeting of the Board of Directors unless notice is waived in writing by all the Directors entitled to attend and vote. No such meeting shall be validly held unless attended by all four Directors or their alternates. 12 10.9 VOTES A decision of the Board of Directors shall be by resolution of the Directors passed (unless the provisions of Clause 10.10 shall apply) at a duly constituted Board Meeting. A meeting for which the 7 days notice period has not been observed (whether waived in writing in accordance with Clause 10.8 or not) but at which all Directors either personally or through their alternates are present may pass valid resolutions. However, a Director, or an alternate thereof, shall not be eligible to vote at a meeting of the Board of Directors until and unless the Shareholder whom he represents has contributed in full that amount of other capital contribution from time to time required to be deposited by such Shareholder pursuant to the provisions of this Agreement. Subject to the provisions of Clause 10.2 above, a resolution of the Board of Directors shall be valid if the majority of the votes validly cast on such resolution at the meeting are in favour thereof after following the procedures set forth in Clause 10. 1. 10.10 WRITTEN RESOLUTION Without the Directors meeting as provided in Clause 10.9 above, an unanimous resolution confirmed in writing by all the Directors or their alternates shall be as effective as a resolution adopted at a meeting of the Board of Directors. 11. MANAGEMENT COMMITTEE 11.1 The Shareholders may form a management committee (the "Management Committee") to supervise the operations in connection with the construction of the Vessel and subsequent operations. Each Party will appoint one representative to the Management Committee and each representative will have one vote. The Management Committee will meet at least once every two months during the construction of the Vessel and once every six months during the duration of the Petrobras Charter and subsequent drilling contracts. All decisions of the Management Committee shall be unanimous. In the event of deadlock in the Management Committee the matter will be referred to the board of the Holding Company for determination. 12. COVENANTS AND UNDERTAKINGS OF THE SHAREHOLDERS 12.1 Each Shareholder warrants its power and authority to enter into this Agreement and agrees and undertakes with the other Shareholders that: 12.1.1Save as may otherwise be agreed in writing between the Shareholders or specifically provided in this Agreement, it will not without the prior written approval of the other Shareholders, sell, mortgage, charge, assign, transfer or otherwise dispose of its interests in this Agreement or in the Holding Company. 13 12.1.2Notwithstanding the provisions of Clause 12.1.1 hereof, a Shareholder may transfer to an Affiliate all of its rights duties and obligations under and pursuant to this Agreement provided that the assigning Shareholder shall throughout the duration of this Agreement remain primarily liable for proper performance by its Affiliate. 12.2 The Shareholders shall keep strictly secret and confidential and shall not disclose or communicate to any third party whatsoever any technical, economic, financial, commercial or other information whether or not acquired in an official manner from the other Shareholders or from the Holding Company except if the disclosure of such information is expressly permitted by this Agreement or required by law. The Shareholders also undertake not to use for themselves or for other activities the information obtained from the other Shareholder(s) or from the Holding Company without the prior written approval of the Party from whom the information was obtained and each of the Shareholders undertakes to obtain from their employees having access to such information any undertaking to respect the same secrecy obligation. The secrecy obligations arising from this Clause 12.2 do not apply to information which is or which may become public or which was already known to the Shareholder(s) when the information was transmitted or which has been received by a third party having power to disclose it. The secrecy obligations provided hereinabove will apply after the expiry or the termination of this Agreement for any reason whatsoever during the period of 5 years under the same conditions as those applying during the term of this Agreement. 12.3 The Shareholders shall use their best endeavours to develop the activities of the Holding Company and to further its goodwill within the framework of the laws and regulations applicable to the Holding Company and in the spirit of co-operation which forms the basis of this Agreement. 12.4 CROSS UNDERTAKINGS BY SHAREHOLDERS Each shareholder (the "Non Performing Shareholder") agrees to indemnify the other Shareholder or Shareholders ("the Performing Shareholder(s)") in the event of nonperformance or partial performance by the Non Performing Shareholder of any obligation undertaken towards the Lenders under any guarantee if the other shareholder or shareholders voluntarily or by virtue of any counter indemnity or counter guarantee given by it or them to the Lenders performs the obligation on behalf of the Non Performing Shareholder. 14 13. EXIT MECHANISM 13.1 The Parties agree that one or a combination of the following exit mechanisms could apply for the realisation of their investments in the Holding Company: (a) the sale of any Vessel and/or all the shares in the Holding Company to a third party. (b) the purchase by Westville or its nominee of the interests of Drillpetro and Techdrill in any Vessel or in the Holding Company, (c) the flotation of the Holding Company on a public market; and/or (d) the exchange of the interests held in the Holding Company by Drillpetro and Techdrill for shares in Pride International at terms to be agreed and based on industry practice. The exit mechanisms to come into effect as and from September 2001. In the event, of a difference of opinion as to the optimum exit strategy, the Parties agree to appoint Jefferies and Company, Inc., investment bankers, to provide advice on the various alternatives in order to maximise each of the Shareholders short term return on investment giving priority to liquidity. Except as otherwise provided herein and unless otherwise advised by Jefferies and Company, Inc., disposition or reduction by a Shareholder of its interest in the Holding Company shall not affect the rights and obligations of any party to the Formaritima Management Agreement. 13.2 Notwithstanding anything contained herein to the contrary, Foramer and Maritima shall at all times each have preemption purchase rights to purchase the others or the others Affiliates direct or indirect interests or beneficial interests in the Project Companies and the Joint Venture in accordance with the procedure in Clause 14. 14. TRANSFER OF SHARES PROCEDURE 14.1 Save where the transfer of shares and quasi equity (the Interest is not authorized pursuant to Clause 12 for a given period as defined therein, any Shareholder may be authorized to seek to dispose of all its Interest - and not only part of it - to a non Affiliate, by the remaining Shareholders under the following conditions and procedure. FIRST, the Shareholder wishing to dispose of all its Interest must have received from a bona fide non Affiliate an offer to buy all of its Interest in the Holding Company together with an acceptance to be bound by all the terms and conditions of this Agreement including where relevant the performance of any guarantee or other outstanding obligation, which is due by the Shareholder wishing to sell by way of substitution of guarantee or Counter Guarantee Indemnity (if approved by the Lenders). 15 SECOND, upon receipt of such offer the Shareholder wishing to sell shall inform forthwith the Holding Company and each Shareholder in writing ("Transfer Notice") of its intention to dispose of all its Interest in the Holding Company together with the sale price and conditions of sale, the name and particulars of the non Affiliate ready to purchase and request authorisation to do so. THIRD, the other Shareholders shall have a period of 21 days to consider the proposed sale of Interest. At the expiry of the said 21 days period, each of the other Shareholders shall notify to the Shareholder wishing to sell their decision either approving the sale, in which case the sale shall proceed subject to the non Affiliate entering into a Deed of Adherence in the agreed form given in Appendix 2, or disapproving the sale to the non Affiliate. FOURTH, in the case where all of the other Shareholders disapprove of the sale, these other Shareholders shall be obliged to purchase all of the Interest of the disposing Shareholder at the conditions specified in the offer of the non Affiliate - the sale to the remaining shareholders shall be done prorata with their existing Interest in the Holding Company. Should not all of the other Shareholders accept to purchase the offered Interest, it shall be sold to the accepting Shareholder in exchange for payment of the sale price in full. However, should the accepting Shareholder not be prepared to take all of the offered Interest, the offering Shareholder will be permitted to sell all of its Interest only to the non Affiliate who made the original bona fide offer. FIFTH, the sale to the incoming Shareholder shall only be registered in the Register of Shareholders of the Holding Company when payment has been made in full and the Deed of Adherence entered into and the documentation relating to outstanding obligations of the disposing Shareholder have been transferred to the acquiring Shareholder and have been completed and are in force. 14.2 Provided always that where the Loan Agreements restricts in any way and whatever form such transfer of Interest, the Shareholders shall not (i) transfer their Interest without prior written approval from the Lenders and (ii) do anything which may cause an Event of Default under the Loan Agreement. 15. TERMINATION FOR BANKRUPTCY, RECEIVERSHIP, ADMINISTRATION OR LIQUIDATION If at any time any Shareholder shall become bankrupt or go into receivership, administration or liquidation whether compulsory or voluntary or enter into any scheme of arrangement or composition with its creditors (except for the purpose of a bona fide reconstruction or amalgamation) then its interest in the Holding Company shall be disposed of in accordance with the procedure set out in Clause 14 unless that procedure cannot, in law, be followed. 16 16. DEADLOCK 16.1 This Clause shall apply in any case where a matter relating to the affairs of the Holding Company has been considered by the Board of Directors but the Board of Directors is unable to reach a unanimous decision where required by Clause 10.2, on the matter or in the event that a meeting of the Board of Directors has been convened in accordance with 10.7 herein and no quorum in accordance with 10.8 has been achieved at said meeting or subsequent reconvened meeting called within the next 10 Days. Any such case is hereinafter referred to as a "deadlock". For purposes of this Clause 16, Drillpetro and Techdrill shall be deemed to be one Shareholder for as long as they are under common control. 16.2 In any case of deadlock, each of the Shareholders shall within seven (7) Days of such deadlock having arisen or become apparent, cause its appointees on the Board of Directors to prepare and circulate to the other Shareholders and other Directors a memorandum or other form of statement setting out its position on the matter in dispute and its reasons for adopting such position. Each such memorandum or statement shall be considered by the Managing Director (or equivalent officer) of each Shareholder then holding office who shall respectively use their reasonable endeavours to resolve such dispute. If they agree upon a resolution or disposition of the matter they shall jointly execute a statement setting forth the terms of such resolution or disposition and the Shareholders shall exercise the voting rights and other powers of control available to them in relation to the Holding Company to procure that such resolution or disposition is fully and promptly carried into effect. 16.3 If the dispute has not been resolved in accordance with the provisions set out above within fifteen (15) Days after delivery of the memorandum or statement mentioned herein or such longer period as the Shareholders may agree in writing then any Shareholder (the "Offeror") may serve a notice in writing (the "Offer Notice") on both of the other Shareholders (the "Offerees") of its desire to resolve the position by offering to sell its Shares (the "Offerors Shares") to the Offerees pro-rata to each of the Offerees participation in the Holding Company or, failing which, to purchase one or both of the Offerees, Shares at the same price. 16.4 The Offer Notice shall be expressed to: (i) constitute an offer, open for acceptance by each Offeree for 90 Days from the date of service of the Offer Notice ("Offeree Purchase Period") by the Offeror to sell at a specified price (the "Sale Price") (but on no other conditions) all (but not some only) of the Offeror's Shares to each of the Offerees pro-rata to the Offerees participation in the Holding Company; (ii) constitute an Offer by the Offeror to purchase all (but not some only) of each of the Offeree's Shares at the Sale Price in accordance with the provisions of this paragraph on the business day (as defined in Clause 20.3) falling 30 Days after the 17 end of the Offeree Purchase Period provided that such Offeree has not exercised its right to purchase the Offerors Shares before the end of the Offeree Purchase Period; and (iii) be irrevocable without the written consent of all Shareholders. 16.5 Each Offeree may at any time before the expiry of the Offeree Purchase Period serve notice in writing upon the Offeror of its desire to purchase all (but not some only) of the Offeror's Shares offered to it at the Sale Price (the "Offeree Purchase Notice") which may not be expressed to be subject to the fulfillment of any conditions whatsoever. Upon service of an Offeree Purchase Notice on the Offeror, the Offeror shall be bound to sell, and the Offeree shall be bound to purchase, all the Offerors Shares offered to it at the Sale Price, which the Offeror shall transfer free from all claims, equities, liens and encumbrances together with all rights attached thereto, 16.6 If either Offeree does not serve an Offeree Purchase Notice before the expiry of the Offeree Purchase Period, it shall be deemed to have declined the offer constituted by the Offer Notice to sell the Offeror Shares to the Offeree and such Offeree shall be bound to sell, and the Offeror shall be bound to purchase, all such Offeree's Shares at the Sale Price and which such Offeree shall transfer free from all claims, equities, liens, charges and encumbrances together with all rights attached thereto. 16.7 Completion of any sales and purchases contemplated by this Clause 16 shall take place within fourteen Days of such sale and purchase obligation becoming binding as above written and the selling party(ies) shall deliver to the purchasing party(ies) executed transfer(s) and documents of title in exchange for a banker's draft drawn on a first class U.S. bank for an amount equal to the relevant Sale Price. Each of the Shareholders appoints the other Shareholders irrevocably and by way of security for the performance of their respective obligations under this Clause 16 its attorney to execute any necessary document required to be executed by it under the provision of this Clause 16. 16.8 In the event that more than one Offer Notice is served, the notice first served shall prevail. In the event that more than one Offer Notice is served simultaneously, then the Offer Notice with the higher Sale Price shall prevail. 16.9 In the event that, at the time of any failure to find a resolution or disposition in accordance with sub-clause 16.3 above, there are only two Shareholders, the provisions of this Clause 16 shall apply mutatis mutandis. 16.10 In the event that a Party, pursuant to the provisions of this Clause 16 or those of Clause 14 (Transfer of Shares), has disposed or is disposing of the whole of its interest in the Holding Company (the "Disposing Party"), then if the Disposing Party has during the course of its participation in the joint venture been required to provide to any Lender or Lenders guarantee(s) of the performance by the Holding Company of any of its obligations under any loan or security documentation executed in favour of such 18 Lender(s) or any counter indemnities in favour of any third party(ies) and such guarantee(s) or counter indemnities is/are still outstanding and in full force and effect at the time of the disposition by the Disposing Party of its interest in the Holding Company, then at the option of the Disposing Party and having regard to the requirements of any Lender(s), either:- (i) the acquirer of such interest from the Disposing Party or the remaining Shareholder(s) shall issue replacement guarantee(s)/counter indemnities in favour of and satisfactory to such Lender(s)/third party(ies) on the same terms as those guarantee(s)/counter indemnities originally provided to such Lender(s)/third party(ies) by the Disposing Party whose guarantee(s)/counter indemnities shall then be deemed terminated; or (ii) the acquirer of such interest or the remaining Shareholder(s) shall be obliged to procure the issue of an indemnity in favour of the Disposing Party and its Affiliate(s) in respect of such guarantee(s)/counter indemnities by a company of substance or reputable bank or lending institution acceptable to the Disposing Party and in a form reasonably satisfactory to the Disposing Party. 16.11 In the event that a Party, has pursuant to the provisions of this Clause 16 or those of Clause 14, disposed of the whole of its Interest in the Holding Company, that Party shall be entitled to receive for the benefit of its relevant Affiliate from the acquirer or acquirers of aforesaid interest an early termination fee for termination of management (if that occurs) equal to the aggregate of the number of Days of management fee lost between date of transfer of sale of shares and the final date of the firm term of the Charter discounted at ten per cent (10%) per annum. 17. DISSOLUTION OF THE HOLDING COMPANY 17.1 Upon the dissolution of the Holding Company pursuant to this Agreement the Shareholders shall each forthwith account to the Holding Company for any unpaid capital or other indebtedness owing by them to the Holding Company and the assets of the Holding Company shall be applied and distributed in the following manner and order of distribution: 17.1.1 To the payment of all debts and liabilities (if any) of the Holding Company exclusive of capital contributions of the Shareholders. 17.1.2 To the repayment to the Shareholders rateably of the net amount of capital contributed by the Shareholders and which has not already been withdrawn; and 17.1.3 The surplus, if any, of the assets then remaining shall be divided between the Shareholders in accordance with the proportions in which they contributed to the capital at the time immediately prior to liquidation. 19 17.1.4 All accounting decisions and accounting of termination shall be in accordance with US GAAP approved or adopted by the auditors for the time being of the Holding Company. 17.1.5 Nothing in this Clause 17 shall be deemed a satisfaction, waiver or discharge of any claims or causes of action by one Shareholder against the others except to the extent that the same may have been agreed as having been taken into account in any computation or adjustment made pursuant to this Clause. 18. FREEDOM OF ACTION Nothing contained in this Agreement shall be construed as constituting the Shareholders the partners of each other, nor as restricting the Shareholders (or any of them) in the conduct of their separate businesses. 19. FEES AND EXPENSES 19.1 The Shareholders shall each bear all legal fees and other expenses incurred by them in negotiating this Agreement. 19.2 During the construction of the Vessel each Shareholder shall invoice the Holding Company at an agreed rate of US$150,000 per annum (pro rated for partial years) in respect of its internal administration costs etc in relation to its support to the Holding Company. 20. NOTICE Any notice or communication required pursuant to this Agreement shall be in writing and shall be deemed to have been sufficiently given or made: 20.1 On the next business day after the same shall have been delivered by hand to the relevant Shareholder(s) against receipt at the addresses specified below or immediately if sent by fax: The addresses for service shall be as follows: (a) in the case of DRILLPETRO Saffrey Square Suite 205 Bank Lane P O Box N8188 Nassau Bahamas Fax: 44 1481 710254 20 (b) in the case of TECHDRILL Saffrey Square Suite 205 Bank Lane P O Box N8188 Nassau Bahamas Fax: 44 1481 710254 (c) in the case of WESTVILLE WITH A COPY TO: c/o Arias Fabrega & Fabrega Trust Co Pride International, Inc. Omar Hodge Building President Wickhams Cay 5847 San Felipe, Suite 3300 Road Town Houston, Texas 77057 Tortola Fax: 1 713 914 9796 British Virgin Islands Fax: 1809 494 4980 20.2 A Shareholder may from time to time notify to the others within five Days prior notice of a change of address and/or fax. Any notice sent by fax shall also be promptly confirmed by prepaid registered mail. 20.3 For the purpose of Clause 20.1 "business day" shall be a day on which Banks and similar financial institutions are open for business in the United States of America, England, France and Brazil. 21. MISCELLANEOUS 21.1 The Shareholders may waive specifically but only in writing, any breaches of this Agreement, but no such waiver shall be deemed to constitute a waiver of similar, subsequent or other breaches. 21.2 No alterations to the provisions of this Agreement shall be effected unless made in writing duly executed by or on behalf of each of the Shareholders. 21.3 Each Shareholder shall at all times execute such further documents and carry out such further actions as may be requisite for giving full effect to the provisions of this Agreement. 21.4 The clause and other headings contained in this Agreement are for reference only and shall not affect its interpretation. 21.5 The provisions of this Agreement shall prevail over any provision of the constitution of the Holding Company and each Shareholder undertakes to do whatever is required to give effect to that intention. 21 22. LAW AND ARBITRATION 22.1 This Agreement shall be governed by and construed in all respects in accordance with the laws of England, 22.2 Subject to the provisions of Clause 5 and Clause 16 hereof any dispute or difference arising in connection with this Agreement shall if possible be settled by mutual amicable agreement. 22.3 Should such settlement not be possible the dispute or difference shall be referred to Arbitration in London in accordance with the provisions of the Arbitration Act 1996 and any statutory modifications or re-enactments thereof for the time being in force and shall be referred to a single arbitrator (an "Arbitrator") to be appointed by the Parties hereto. If the Parties cannot agree upon the appointment of the single Arbitrator the dispute shall be settled by three Arbitrators, with Drillpetro appointing one Arbitrator and Westville appointing one Arbitrator and the third being appointed by the Chairman of the London Maritime Arbitrators Association. 22.4 If any of the appointed Arbitrators refuses or is incapable of acting, the Party who appointed him shall appoint a new Arbitrator in his place. 22.5 If a Party or parties fails to appoint an Arbitrator, either originally or by way of substitution, for two weeks after the other party or parties having appointed its/their Arbitrators have sent the party(ies) making default notice by mail or facsimile to make the appointment, the non defaulting Party(ies) may apply to the Chairman for the time being of the London Maritime Arbitrators Association to appoint an Arbitrator on behalf of the Party(ies) making default. 22.6 The award rendered by the Arbitration Court shall be final and binding upon the Parties and may if necessary be enforced by the Court or other competent authority in the same manner as a judgment in the Court of Justice. 22.7 Performance under this Agreement shall, as far as is reasonably possible, continue during the Arbitration proceedings. 23. PREVAILING AGREEMENT If there is a conflict between any of the terms of this Agreement, and the terms of the Articles of Incorporation and By-Laws of the Holding Company, the terms of this Agreement shall prevail as between the Shareholders, and the Shareholders shall take all such action as shall be necessary for the purpose of this Clause to ensure that the terms of this Agreement prevail. Notwithstanding the foregoing or anything else contained herein or in any other Related Agreement, the Shareholders acknowledge that they and their respective Affiliates will jointly participate with representatives of the Lenders in the negotiation and preparation of the Loan Agreement. If and to the extent there are any 22 discrepancies or conflicts between the terms of this Agreement or other Related Agreements and Statements made in the Loan Agreement, then the Loan Agreement will control. 24. ANNOUNCEMENTS No public announcement or communication (other than to the extent required by law or by any other regulation) concerning the transactions referred to in this Agreement shall be made or issued by any Party to this Agreement without the prior written consent of all the Parties but such approval shall not be unreasonably withheld or delayed. 25. INVALIDITY If at any time any one or more of the provisions of this Agreement is or becomes invalid, illegal or unenforceable in any respect under any law or regulation, the validity, legality and enforceability of the remaining provisions of this Agreement shall not as a result be in any way affected or impaired. 26. CONDITION PRECEDENT It is a condition precedent to the coming into effect of this Agreement and the Related Documents that Drillpetro shall have procured the assignment to the Holding Company of the Petrobras Agreement. 27. FCPA The Parties recognize that Westville and Foramer are both subsidiaries of the U.S. Holding Company, Pride International, Inc. All parties are familiar with the U.S. Foreign Corrupt Practices Act ("FCPA") and its purposes. In particular, all parties are familiar with FCPA's prohibition of the payment of or the giving of anything of value, either directly or indirectly, by a United States Company or any of its subsidiaries to an official of a foreign government for the purpose of influencing an act or decision in his official capacity, or inducing him to use his influence with a foreign government to assist a company in obtaining or retaining business for or with or directing business to any person. If there is reason to believe that any monies being paid by or on behalf of the Joint Venture are being used for improper purposes, including, but not limited to, direct or indirect payments to a government official, any member of a ruling family, political party, government official or employee or agent of a government controlled oil company for the purposes of influencing any act which may result in any of the Project Companies or the Project Group obtaining or retaining business, the non-offending Parties shall have the right to sell or otherwise dispose of all or a part of their interest in the Project Company and/or any of the Project Group to the offending Party or Parties or any third party, subject to the pre-emption provisions in the Related Agreements, and any cost or expenses created by a forced sale or the early sale of such interest in order to avoid any 23 claim for violation of the FCPA shall be for the account of the offending Party or Parties or any third party transferee. IN WITNESS WHEREOF this Agreement has been executed by or on behalf of the Parties hereto the day and year first above. SIGNED by /s/ GERMAN EFROMOVICH ) for and on behalf of ) DRILLPETRO INC. /s/ Illegible ) in the presence of: ) SIGNED by /s/ GERMAN EFROMOVICH ) for and on behalf of German Efromovich ) TECHDRILL INC. /s/ Illegible ) in the presence of: ) SIGNED by /s/ Illegible ) for and on behalf of ) WESTVILLE MANAGEMENT CORPORATION ) in the presence of: /s/ FRIDA MARTINEZ ) 24 APPENDIX 1 PETRODRILL SEVEN LIMITED I. BUDGET PROJECTION: (Amounts SOURCES OF FUNDS in Thousands) Net Proceeds from Issuance of the Notes Equity Contribution Investment Earnings Mobilization Fees TOTAL SOURCES OF FUNDS USES OF FUNDS Completion and Delivery Costs(1) Shipyard Costs Owner-Furnished Equipment Basic Design Engineering Insurance Mobilization Costs Total Interest Expense During Completion and Delivery(2) Spare Parts, Manuals and Training Contingency Total Completion and Delivery Costs Development Costs and Fees Debt Service Reserve TOTAL USES OF FUNDS II. SHAREHOLDER CONTRIBUTIONS: DRILLPETRO (55%) TECHDRILL (15%) WESTVILLE (30%) TOTAL CONTRIBUTION ________ 1 Assumes no late delivery penalties will be payable on delivery of the Rigs to Petrobras, either against the mobilization or otherwise. 2 Assumes a weighted average interest rate of 10.15% per annum. 25 III. OVERRUNS: Notwithstanding Clause 5.2 of the Agreement, the Shareholders agree that in the event of any overruns in the capital/operating budget, each Shareholder shall immediately contribute their pro-rata share of any such overrun amount up to US$50,000,000 without any further action by the Board of Directors or General Assembly, subject only to the other conditions of Clause 5 of the Agreement. 26 EX-10.66 109 EXHIBIT 10.66 AGENCY AND BROKERAGE AGREEMENT THIS AGREEMENT IS MADE BY AND BETWEEN: PETRODRILL SEVEN LIMITED, a company incorporated in the British Virgin Islands with its registered office at c/o Arias Fabrega & Fabrega Trust Co. BVI Limited, 325 Waterfront Drive, Omar Hodge Building, 2nd floor, Wickhams Cay, Road Town, Tortola, British Virgin Islands, according to its statutes and registered bylaws, hereinafter designated as PETRODRILL SEVEN. U.K. GUARANTY & BONDING CORP. LIMITED, a company incorporated in the Bahamas with its registered office at Providence House, East Hill Street, P.O. Box N-3944, Nassau, Bahamas, according to its statutes and registered bylaws, hereinafter designated AGENT ONE and RAPISARDI INVESTMENT LIMITED, a company incorporated in the British Virgin Islands, with headquarters in Akara Building, 24 De Castro Street, Wickhams Cay 1, Road Town, Tortola, British Virgin Islands, according with its statutes and registered by laws, hereinafter designated AGENT TWO. WHEREAS 1. MARITIMA PETROLEO E ENGENHARIS LTDA, a company incorporated in Brazil with headquarters at Av. Almirante Barroso, 52/34(0) floor, Centro, Rio de Janeiro, 20031-000, Brazil, was successful in being awarded a contract by PETROBRAS the Brazilian Oil Company, contract n(0) 101.2.155.97-9, for the provision of a semi-submersible drilling unit as a result of an international tender ("THE CONTRACT"). 2. PETRODRILL SEVEN is a company that, will own a semisubmersible drilling or workover unit identified as AMETHYST 7, hereinafter designated as the RIG. 3. AGENTS have long worked in close relationship with PETROBRAS and also have extensive knowledge and experience regarding the Brazilian offshore drilling market. 4. The AGENTS have provided MARITIMA during the course of the tender process with help and counseling which contributed to MARITIMA's success in being awarded the PETROBRAS CONTRACT. 5. MARITIMA had previously agreed with the AGENTS to pay the sum afterwritten in consideration for such help and counseling and for such other on-going services. 6. MARITIMA has subsequently assigned all of its rights and obligations in terms of the CONTRACT to PETRODRILL SEVEN and PETRODRILL SEVEN has agreed in part consideration of such assignment to pay the AGENTS the sums afterwritten in settlement of MARITIMA's firm commitment -1- NOW THEREFORE THE PARTIES HAVE MUTUALLY AGREED THAT 7. PETRODRILL SEVEN hereby assumes the obligation to pay (in accordance with item 8 below) as agency fee and/or commission for the services rendered with respect to such CONTRACT, to AGENT ONE the amount in US$ equivalent of 2.0% (two percent) of the total RIG dayrate value of such CONTRACT and to AGENT TWO the amount in US$ equivalent of 3.0% (three percent) of the total RIG dayrate value of such CONTRACT. 8. PETRODRILL SEVEN will pay to the two AGENTS, IN US$, according with item 7, above, a total percentage of 5.0% (five percent) of the total RIG dayrate agreed with PETROBRAS (i.e., excluding bonus increase or reductions due to poor performance/downtime) with respect to the CONTRACT in consideration for the execution of such CONTRACT, such payment to be made every month by PETRODRILL SEVEN, within 2 (two) business days of receiving the monthly installment from PETROBRAS with respect to the relevant CONTRACT through wire deposit to the bank accounts indicated by AGENTS. 9. These fees will continue to be paid monthly to AGENTS throughout the firm period of the CONTRACT within 2 (two) days of the receipt by PETRODRILL SEVEN of the monthly installments made by PETROBRAS relating to such CONTRACT. In case of contract extension or re-negotiation by PETRODRILL SEVEN, the aforesaid agency fees and/or commissions will apply based on the same percentage of the then applicable RIG dayrates. 10. The obligation to pay the agency fees and/or commissions mentioned in this contract will start, with respect to the CONTRACT, on the first day after PETRODRILL SEVEN receives the monthly installment from PETROBRAS mentioned in items 8 & 9 and will be in effect for the period that the RIG is chartered under such CONTRACT, including any extensions thereto. 11. Each of the AGENTS may invoice the above-mentioned agency fees and/or commissions on a monthly basis to PETRODRILL SEVEN, which will pay the invoices within 2 (two) business days after the respective monthly payments from PETROBRAS to PETRODRILL SEVEN and/or its affiliated firms, are received. 12. Each AGENT will present to PETRODRILL SEVEN, by enclosed letter, co-signed by PETRODRILL SEVEN, the bank account where the payments must be made. The AGENTS have the right to change these bank accounts, informing PETRODRILL SEVEN in writing, of the new address 10 days before a payment must be made. 13. This agreement is a binding and valid contract between the parties, of mandatory execution; and obliges and binds also heirs' successors, subject to the condition precedent to effectiveness with respect to the CONTRACT that such CONTRACT be confirmed -2- between PETRODRILL SEVEN and PETROBRAS. This CONTRACT is made in three originals, all signed by the parties and replaces any previous agreement of the same scope. 14. AGENT ONE and AGENT TWO each represents and warrants to PETRODRILL SEVEN that AGENT ONE and AGENT TWO have full power and authority to enter into this agreement and all transactions contemplated by this agreement and are to be bound by all obligations and liabilities on their part contained in this agreement and that the performance of the obligations of AGENT ONE and AGENT TWO, arising under this agreement and each of the transactions contemplated by this agreement will not at the time of the performance constitute a breach of any existing law binding upon or regulation, bylaw or provision of the constitution of AGENT ONE and AGENT TWO. In addition, AGENT ONE and AGENT TWO each represents and warrants to PETRODRILL SEVEN that their performance of the obligations under this agreement will not involve the payment or giving of anything of value, either directly or indirectly, to an official of a non-U.S. government for the purpose of influencing an act or decision in his official capacity or inducing him to use his influence with a non-U.S. government to assist PETRODRILL SEVEN, any AGENT or any other company in obtaining or retaining business for or with any person or directing business to themselves or any other person. AGENT ONE and AGENT TWO acknowledge that PETRODRILL SEVEN is entering into an agreement in reliance upon such representations and warranties. The above-mentioned representations and warranties are also back to back from PETRODRILL SEVEN to AGENTS. 15. TERMINATION 15.1) By either party with respect to the RIG, forthwith and without any prior notice in the event of the institution of any action or proceeding, to be admitted by a competent court, against the other party under any bankruptcy or insolvency law or any law for the relief creditors, or in the event of the appointment of a receiver or trustee for the benefit of creditors of such party; in each case, to the extent such action, proceeding or appointment would cause the termination of such RIG'S CONTRACT. 15.2) With respect to the RIG, forthwith and without prior notice in case of a constructive, arranged or total loss of the RIG, provided that such RIG will not be replaced by PETRODRILL SEVEN in order to continue the relevant CONTRACT; 15.3) With respect to a RIG, forthwith and without notice in the event of termination of such RIG'S CONTRACT; 15.4) By the non-offending party, forthwith and without prior notice in the event that the performance of either party under this Agreement would result in a violation by any party or any of its affiliates of the U.S. Foreign Corrupt Practices Act, with -3- which all parties hereto are familiar, or in the event of breach of any warranties and representation made in item 16 above, which representations survive for the tem of this Agreement. 16. LAW AND ARBITRATION This Agreement shall be governed by English Law and any dispute arising out of this Agreement shall be referred to arbitration in London, England. Signed this 30th day of April 1998. /s/ GERMAN EFROMOVICH /s/ G. WILLIAMS ------------------------------ --------------------------- By: PETRODRILL SEVEN By: AGENT ONE Name: German Efromovich Name: Standard Nominees Limited Title: Director Title: Director By: Gary Williams /s/ PAULO VILLAS BOAS ------------------------------- By: AGENT TWO Name: Paulo Calmon Villas Boas Title: Lawful Attorney-in-fact -4- EX-10.70 110 EXHIBIT 10.70 MINUTES OF AGREEMENT RELATING TO THE PETROBRAS AMETHYST CONTRACTS This Agreement is made the 2nd day of July 1998 BETWEEN: (1) DRILLPETRO INC. ("Drillpetro") (2) TECHDRILL INC. ("Techdrill") and (3) WESTVILLE MANAGEMENT CORPORATION ("Westville") The parties agree to procure that Petrodrill Offshore Inc. and/or any of the Operating Companies owned by it (the relevant company, "Petrodrill"), as appropriate, give effect to the following provisions, namely: 1) The parties agree that Drillpetro will be paid a lump sum fee of $5,000,000 as a non-accountable reimbursement of costs and expenses (including its legal and travel costs) it incurred to date in connection with development of the Amethyst project, the development of conceptual and design engineering, related shipyard negotiations and technical negotiations with the client. The lump sum fee will be allocated and paid in five installments as set out in column 2 of schedule A hereunder within three days of receipt of the corresponding mobilization payments under the relevant Petrobras contracts or, in the event of no mobilization fee, within 45 days of delivery to and acceptance of the rig by Petrobras. 2) In consideration for the assignment of the Petrobras contracts for the Amethysts 2 and 3 (as amended for the rigs to be upgraded to 1,500m water depth) and the Petrobras contracts for Amethysts 4, 5, 6 and 7 to the joint venture or its nominee(s), and, further, in consideration for the increased duties, obligations and related expenses to be undertaken by Drillpetro throughout the firm contract periods, the parties agree to procure that Petrodrill pay to Drillpetro the consultancy and management fees outlined in columns 3 and 4 of Schedule A hereunder. SCHEDULE A LUMP SUM FEE % OF DAY RATE DAILY FEE excluding bonuses when operating Amethyst No. 2 $1,000,000 0 $4,000 Amethyst No. 3 $1,500,000 0 $4,000 Amethyst No. 4 $0 1.00% $2,000 Amethyst No. 5 $500,000 0 $2,000 Amethyst No. 6 $1,000,000 2.00% $4,000 Amethyst No. 7 $1,000,000 2.00% $4,000 The parties agree that the improved economic returns to be achieved from the increased day rates, extended contractual commencement dates, and extended firm periods are integral to the parties' agreement to procure that Petrodrill pay to Drillpetro the amounts set out in Schedule A. Consequently, the said consultancy and management fees and lump sum fees are contingent upon Drillpetro achieving the rates, fees and contractual durations as set out in Schedule B hereunder and further achieving the contractual commencement dates for the rigs under the Petrobras contracts that are compatible with the shipyard delivery dates, thereby alleviating potential penalties for late delivery. The latter point is also of vital importance for the successful raising of the bond financing. SCHEDULE B RIG MOB FEE DAY RATE BONUS TERM YEARS Amethyst No. 2 $4,000,000 $123,888 20% 7 Amethyst No. 3 $4,000,000 $123,888 20% 7 Amethyst No. 4 $0 $127,333 10% 6 Amethyst No. 5 $6,500,000 $108,000 0% 8 Amethyst No. 6 $0 $133,333 10% 7 Amethyst No. 7 $0 $143,333 10% 7 ---------------------------------------------------------------------------- All of the above fees, except the lump sum reimbursable fees which will be governed by 1 above, will be payable to Drillpetro within three days of receipt of corresponding amounts under the Petrobras contracts. No fees will be due or payable on amounts not received by the joint venture from Petrobras. 3) Notwithstanding anything contained herein to the contrary but subject to the immediately following sentence, all payments hereunder shall be waived and not paid unless and until such time as the Petrobras contracts for the Amethyst No. 2 and the Amethyst No. 3 have been amended to increase the dayrates from US$93,000 and US$97,000, respectively, to the amounts set forth with respect to such contracts in Schedule B. In the event that the contractual dayrates achieved in respect of the Amethyst No. 2 and Amethyst No. 3 are less than the amount indicated in Schedule B, payments shall be made hereunder with respect to each rig based on the achieved dayrates as from such date in the amount of the product of (a) a fraction having a denominator of 57,776 and a numerator equal to the difference between (i) the sum of the dayrates achieved with respect to the Amethyst No. 2 and the Amethyst No. 3 and (ii) 190,000 and (b) the amounts set forth in Schedule A for each of the management and consultancy fees and lump sum fees. Notwithstanding the fact that dayrates higher than those set forth in Schedule B may be achieved for the Amethyst No. 2 and Amethyst No. 3, in no event shall the management and consultancy fees and lump sum fees payable hereunder exceed the amounts set forth for those fees in Schedule A. 4) This Agreement shall be governed by English law and any dispute arising hereunder shall be referred to arbitration in London, England. 5) This Agreement constitutes the entire agreement among the parties in connection with its subject matter and wholly supersedes and cancels all previous negotiations, commitments or agreements in such respects. 6) Each party represents and warrants to the other parties that its performance of the obligations under this agreement will not involve the payment or giving of anything of value, either directly or indirectly, to an official of a non-U.S. government for the purpose of influencing an act or decision in his official capacity or inducing him to use his influence with a non-U.S. government to assist any party, its affiliates or any other company in obtaining or retaining business for or with any person or directing business to themselves or any other person. Each party acknowledges that the other parties are entering into an agreement in reliance upon such representation and warranty, which representation survives for the term of this Agreement. This agreement may be terminated by the non-offending party, forthwith and without prior notice, in the event that the performance of either party under this Agreement would result in a violation by any party or any of its affiliates of the U.S. Foreign Corrupt Practices Act. IN WITNESS WHEREOF this Agreement has been executed on the day and year first above written. /s/ Illegible __________________________________ For Drillpetro /s/ Illegible __________________________________ For Techdrill /s/ Illegible __________________________________ For Westville EX-15 111 EXHIBIT 15 AWARENESS LETTER OF INDEPENDENT ACCOUNTANTS Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 RE: Pride International, Inc. Quarterly Reports on Form 10-Q We are aware that our reports dated May 14, 1999, August 13, 1999 and November 12, 1999 on our reviews of interim financial information of Pride International, Inc. for the three-month periods ended March 31, 1999 and 1998, six-month periods ended June 30, 1999 and 1998 and nine-month periods ended September 30, 1999 and 1998, respectively, and included in Pride International, Inc.'s quarterly report on Forms 10-Q for the quarters ended March 31, 1999, June 30, 1999 and September 30, 1999 are incorporated by reference in its Registration Statement on Form S-4 filed on December 8, 1999. Very truly yours, PricewaterhouseCoopers LLP Houston, Texas December 8, 1999 EX-21 112 EXHIBIT 21 LIST OF SUBSIDIARIES As of November 30, 1999, Amethyst Financial Company Ltd. has the following subsidiaries, each of which is an international business company incorporated under the laws of the British Virgin Islands: Petrodrill Four Limited Petrodrill Five Limited Petrodrill Six Limited Petrodrill Seven Limited EX-23.1 113 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in this Registration Statement on Form F-4 of Amethyst Financial Company Ltd. and Form S-4 of Pride International, Inc. of our report (which contains an explanatory paragraph relating to the Company's ability to continue as a going concern as described in Notes 1 and 5 to the financial statements) dated October 15, 1999 relating to the financial statements of Amethyst Financial Company Ltd., which appears in this Registration Statement. We also consent to the references to us under the headings "Experts" and "Independent Public Accountants" in this Registration Statement. PRICEWATERHOUSECOOPERS N.V. Rotterdam, The Netherlands December 8, 1999 EX-23.2 114 EXHIBIT 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in this Registration Statement on Form F-4 of Amethyst Financial Company Ltd. and Form S-4 of Pride International, Inc. of our report dated March 30, 1999 relating to the financial statements of Pride International, Inc., which appears in Pride International, Inc.'s 1998 Annual Report to Shareholders, which is incorporated by reference in its Annual Report on Form 10-K for the year ended December 31, 1998. We also consent to the reference to us as contained in Appendix A to the prospectus contained in this Registration Statement. PRICEWATERHOUSECOOPERS LLP Houston, Texas December 8, 1999 EX-23.4 115 EXHIBIT 23.4 CONSENT OF PEDRO CALMON FILHO & ASSOCIADOS We hereby consent to the references to our firm under the captions "Prospectus Summary--Threatened Cancellation of Our Charters," "Risk Factors--Risk Factors Relating to Our Business," "Business--Threatened Cancellation of Our Charters" and "Business--The Petrobras Contracts--Overview" and in Note 5 of the Notes to the Consolidated Financial Statements of Amethyst Financial Company Ltd. in the prospectus included in this Registration Statement on Forms F-4 and S-4 of Amethyst Financial Company Ltd. and Pride International, Inc. PEDRO CALMON FILHO & ASSOCIADOS Rio de Janeiro, Brazil December 8, 1999 EX-23.7 116 EXHIBIT 23.7 CONSENT OF HIGGS & JOHNSON We hereby consent to the references to our firm under the captions "Risk Factors--Risk Factors Relating to Our Business" and "Description of New Notes--Enforceability of Judgments" in the prospectus included in this Registration Statement on Forms F-4 and S-4 of Amethyst Financial Company Ltd. and Pride International, Inc. HIGGS & JOHNSON Nassau, The Bahamas December 8, 1999 EX-23.8 117 EXHIBIT 23.8 CONSENT OF INDEPENDENT ENGINEERS We hereby consent to the references to us and to our report under the captions "Business--Report of Independent Engineers" and "Independent Engineers" in the prospectus included in this Registration Statement on Forms F-4 and S-4 of Amethyst Financial Company Ltd. and Pride International, Inc. BENNETT & ASSOCIATES, L.L.C. New Orleans, Louisiana December 8, 1999 EX-99.1 118 EXHIBIT 99.1 AMETHYST FINANCIAL COMPANY LTD. LETTER TO CLIENTS FOR TENDER OF ALL OUTSTANDING - - -------------------------------------------------------------------------------- 11 3/4% SENIOR SECURED NOTES DUE 2001 IN EXCHANGE FOR REGISTERED 11 3/4% SENIOR SECURED NOTES DUE 2001 - - -------------------------------------------------------------------------------- - - ------------------------------------------------------------------------------- THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ________, 2000, UNLESS EXTENDED (THE "EXPIRATION DATE"). OUTSTANDING NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE FOR THE EXCHANGE OFFER. - - ------------------------------------------------------------------------------- To Our Clients: We are enclosing with this letter a prospectus dated _______, 2000 of Amethyst Financial Company Ltd. (the "Company") and the related letter of transmittal. These two documents together constitute the Company's offer to exchange its 11 3/4% Senior Secured Notes due 2001 (the "New Notes"), the issuance of which has been registered under the Securities Act of 1933, as amended (the "Securities Act"), for a like principal amount of its issued and 11 3/4% Senior Secured Notes due 2001 (the "Old Notes"), (the "Exchange Offer"). We are the holder of record of Old Notes held by us for your own account. A tender of such Old Notes can be made only by us as the record holder and pursuant to your instructions. The letter of transmittal is furnished to you for your information only and cannot be used by you to tender Old Notes held by us for your account. We request instructions as to whether you wish to tender any or all of the Old Notes held by us for your account pursuant to the terms and conditions of the Exchange Offer. We also request that you confirm that we may on your behalf make the representations contained in the letter of transmittal. Pursuant to the letter of transmittal, each holder of Old Notes will represent to the Company that (i) any New Notes received are being acquired in the ordinary course of business of the person receiving such New Notes, (ii) such person does not have an arrangement or understanding with any person to participate in the distribution of the Old Notes or the New Notes within the meaning of the Securities Act and (iii) such person is not an "affiliate," as defined in Rule 405 under the Securities Act, of the Company or, if it is such an affiliate, it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. In addition, each holder of Old Notes will represent to the Company that (i) if such person is not a broker-dealer, it is not engaged in, and does not intend to engage in, a distribution of New Notes and (ii) if such person is a broker-dealer that will receive New Notes for its own account in exchange for Old Notes that were acquired as a result of market-making activities or other trading activities, it will deliver a prospectus in connection with any resale of such New Notes; however, by so acknowledging and by delivering a prospectus, it will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. Very truly yours, PLEASE RETURN YOUR INSTRUCTIONS TO US IN THE ENCLOSED ENVELOPE WITHIN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE APPLICABLE EXPIRATION DATE. INSTRUCTION TO BOOK-ENTRY TRANSFER PARTICIPANT To Participant of the DTC: The undersigned hereby acknowledges receipt and review of the prospectus dated _______, 2000 of Amethyst Financial Company Ltd. ( the "Company") and the related letter of transmittal. These two documents together constitute the Company's offer to exchange its 11 3/4% Senior Secured Notes due 2001 (the "New Notes"), the issuance of which has been registered under the Securities Act of 1933, as amended (the "Securities Act"), for a like principal amount of its issued and outstanding 11 3/4% Senior Secured Notes due 2001 (the "Old Notes"), (the "Exchange Offer"). This will instruct you, the registered holder and DTC participant, as to the action to be taken by you relating to the Exchange Offer for the Old Notes held by you for the account of the undersigned. The aggregate principal amount of the Old Notes held by you for the account of the undersigned is (FILL IN AMOUNT): Title of Series Principal Amount -------------------------------- --------------------------------- 11 3/4% Senior Secured Notes due 2001 -------------------------------- --------------------------------- WITH RESPECT TO THE EXCHANGE OFFER, THE UNDERSIGNED HEREBY INSTRUCTS YOU (CHECK APPROPRIATE BOX): [ ] TO TENDER ALL OLD NOTES HELD BY YOU FOR THE ACCOUNT OF THE UNDERSIGNED. [ ] TO TENDER THE FOLLOWING AMOUNT OF OLD NOTES HELD BY YOU FOR THE ACCOUNT OF THE UNDERSIGNED: Title of Series Principal Amount Tendered -------------------------------- --------------------------------- 11 3/4% Senior Secured Notes due 2001 -------------------------------- --------------------------------- [ ] NOT TO TENDER ANY OLD NOTES HELD BY YOU FOR THE ACCOUNT OF THE UNDERSIGNED. 2 IF NO BOX IS CHECKED, A SIGNED AND RETURNED INSTRUCTION TO BOOK-ENTRY TRANSFER PARTICIPANT WILL BE DEEMED TO INSTRUCT YOU TO TENDER ALL OLD NOTES HELD BY YOU FOR THE ACCOUNT OF THE UNDERSIGNED. If the undersigned instructs you to tender the Old Notes held by you for the account of the undersigned, it is understood that you are authorized to make, on behalf of the undersigned (and the undersigned, by its signature below, hereby makes to you), the representations contained in the letter of transmittal that are to be made with respect to the undersigned as a beneficial owner, including, but not limited to, the representations that (i) any New Notes received are being acquired in the ordinary course of business of the undersigned; (ii) the undersigned does not have an arrangement or understanding with any person to participate in the distribution of the Old Notes or the New Notes within the meaning of the Securities Act; (iii) the undersigned is not an "affiliate," as defined in Rule 405 under the Securities Act, of the Company or, if it is such an affiliate, it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable; (iv) if the undersigned is not a broker-dealer, it is not engaged in, and does not intend to engage in, a distribution of New Notes and (v) if the undersigned is a broker-dealer that will receive New Notes for its own account in exchange for Old Notes that were acquired as a result of market-making activities or other trading activities, it will deliver a prospectus in connection with any resale of such New Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. SIGN HERE Name of beneficial owner(s):__________________________________________________ Signature(s):_________________________________________________________________ Name(s) (please print):_______________________________________________________ Address:______________________________________________________________________ Telephone Number:_____________________________________________________________ Taxpayer Identification or Social Security Number:____________________________ Date:_________________________________________________________________________ 3 EX-99.2 119 EXHIBIT 99.2 AMETHYST FINANCIAL COMPANY LTD. DEPOSITORY TRUST COMPANY PARTICIPANTS FOR TENDER OF ALL OUTSTANDING - - -------------------------------------------------------------------------------- 11 3/4% SENIOR SECURED NOTES DUE 2001 IN EXCHANGE FOR REGISTERED 11 3/4% SENIOR SECURED NOTES DUE 2001 - - -------------------------------------------------------------------------------- - - ------------------------------------------------------------------------------- THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ________, 2000, UNLESS EXTENDED (THE "EXPIRATION DATE"). OUTSTANDING NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE FOR THE EXCHANGE OFFER. - - ------------------------------------------------------------------------------- To Depository Trust Company Participants: We are enclosing herewith the material listed below relating to the offer by Amethyst Financial Company Ltd. (the "Company") to exchange its 11 3/4% Senior Secured Notes due 2001 (the "New Notes"), the issuance of which has been registered under the Securities Act of 1933, as amended (the "Securities Act"), for a like principal amount of its issued and outstanding 11 3/4% Senior Secured Notes due 2001 (the "Old Notes"), (the "Exchange Offer"), upon the terms and subject to the conditions set forth in the Company's prospectus dated ________, 2000 and the related letter of transmittal. We are enclosing copies of the following documents: 1. Prospectus dated ______, 2000 2. Letter of transmittal (together with accompanying Substitute Form W-9 Guidelines) 3. Notice of guaranteed delivery 4. Letter that may be sent to your clients for whose account you hold Old Notes in your name or in the name of your nominee, with space provided for obtaining such client's instruction with regard to the Exchange Offer. We urge you to contact your clients promptly. Please note that the Exchange Offer will expire at 5:00 p.m., New York City time, _______ , 2000, unless extended. Pursuant to the letter of transmittal, each holder of Old Notes will represent to the Company that (i) any New Notes received are being acquired in the ordinary course of business of the person receiving such New Notes, (ii) such person does not have an arrangement or understanding with any person to participate in the distribution of the Old Notes or the New Notes within the meaning of the Securities Act and (iii) such person is not an "affiliate," as defined in Rule 405 under the Securities Act, of the Company or, if it is such an affiliate, it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. In addition, each holder of Old Notes will represent to the Company that (i) if such person is not a broker-dealer, it is not engaged in, and does not intend to engage in, a distribution of New Notes and (ii) if such person is a broker-dealer that will receive New Notes for its own account in exchange for Old Notes that were acquired as a result of market-making activities or other trading activities, it will deliver a prospectus in connection with any resale of such New Notes; however, by so acknowledging and by delivering a prospectus, it will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The enclosed Letter to Clients contains an authorization by the beneficial owners of the Old Notes for you to make the foregoing representations. The Company will not pay any fee or commission to any broker or dealer or to any other person (other than the Exchange Agent) in connection with the solicitation of tenders of Old Notes pursuant to the Exchange Offer. The Company will pay or cause to be paid any transfer taxes payable on the transfer of Old Notes to it, except as otherwise provided in Instruction 7 of the enclosed Letter of Transmittal. Additional copies of the enclosed material may be obtained from us. Very truly yours, Wilmington Trust Company 2 EX-99.3 120 EXHIBIT 99.3 AMETHYST FINANCIAL COMPANY LTD. NOTICE OF GUARANTEED DELIVERY FOR TENDER OF ALL OUTSTANDING - - -------------------------------------------------------------------------------- 11 3/4% SENIOR SECURED NOTES DUE 2001 IN EXCHANGE FOR REGISTERED 11 3/4% SENIOR SECURED NOTES DUE 2001 - - -------------------------------------------------------------------------------- This form, or one substantially equivalent hereto, must be used by a holder to accept the Exchange Offer of Amethyst Financial Company Ltd. (the "Company") and to tender 11 3/4% Senior Secured Notes due 2001 (the "Old Notes") to the Exchange Agent pursuant to the guaranteed delivery procedures described in "The Exchange Offer -- Guaranteed Delivery Procedures" of the Company's prospectus dated _______, 2000 and in Instruction 2 to the related letter of transmittal. Any holder who wishes to tender Old Notes pursuant to such guaranteed delivery procedures must ensure that Wilmington Trust Company, as exchange agent (the "Exchange Agent"), receives this notice of guaranteed delivery, properly completed and duly executed, prior to the Expiration Date (as defined below) of the Exchange Offer. Capitalized terms used but not defined herein have the meanings ascribed to them in the letter of transmittal. - - ------------------------------------------------------------------------------- THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ________, 2000, UNLESS EXTENDED (THE "EXPIRATION DATE"). OUTSTANDING NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE FOR THE EXCHANGE OFFER. - - ------------------------------------------------------------------------------- DELIVER TO THE EXCHANGE AGENT: WILMINGTON TRUST COMPANY (301) 651-1562 BY HAND, COURIER OR MAIL (IF BY MAIL, REGISTERED OR CERTIFIED MAIL RECOMMENDED): Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, Delaware 19890-0001 Attn: Corporate Trust Operations BY FACSIMILE TRANSMISSION (ELIGIBLE INSTITUTIONS ONLY): (302) 651-1079 Attention: Corporate Trust Department CONFIRM BY TELEPHONE: (302) 651-1562 ------------------- DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS NOTICE OF GUARANTEED DELIVERY SHOULD BE READ CAREFULLY BEFORE THE NOTICE OF GUARANTEED DELIVERY IS COMPLETED. This notice of guaranteed delivery is not to be used to guarantee signatures. If a signature on a letter of transmittal is required to be guaranteed by an "Eligible Institution" under the instructions thereto, such signature guarantee must appear in the applicable space in the box provided on the letter of transmittal for guarantee of signatures. Ladies and Gentlemen: The undersigned hereby tenders to the Company, in accordance with the Company's offer, upon the terms and subject to the conditions set forth in the prospectus and the related letter of transmittal, receipt of which is hereby acknowledged, the principal amount of Old Notes set forth below pursuant to the guaranteed delivery procedures set forth in the prospectus under the caption "The Exchange Offer -- Guaranteed Delivery Procedures" and in Instruction 2 of the letter of transmittal. The undersigned hereby tenders the Old Notes listed below: CERTIFICATE NUMBER(S) (IF KNOWN) OF OLD NOTES AGGREGATE TITLE OF OR ACCOUNT NUMBER AGGREGATE PRINCIPAL PRINCIPAL SERIES AT THE DTC AMOUNT REPRESENTED AMOUNT TENDERED - - --------------- ------------------- ------------------- --------------- 11 3/4% Senior Secured Notes due 2001 - - ------------------------------------------------------------------------------- PLEASE SIGN AND COMPLETE Names of Record Holder(s):__________________ Signature(s):___________________ Address:_____________________________ Area Code and Telephone Number(s):___________ Dated:______, 2000 - - ------------------------------------------------------------------------------- --------------------- THIS NOTICE OF GUARANTEED DELIVERY MUST BE SIGNED BY THE REGISTERED HOLDER(S) OF OLD NOTES EXACTLY AS THE NAME(S) OF SUCH PERSON(S) APPEAR(S) ON CERTIFICATES FOR OLD NOTES OR ON A SECURITY POSITION LISTING AS THE OWNER OF OLD NOTES, OR BY PERSON(S) AUTHORIZED TO BECOME HOLDER(S) BY ENDORSEMENTS AND DOCUMENTS TRANSMITTED WITH THIS NOTICE OF GUARANTEED DELIVERY. IF SIGNATURE IS BY A TRUSTEE, EXECUTOR, ADMINISTRATOR, GUARDIAN, ATTORNEY-IN-FACT, OFFICER OR OTHER PERSON ACTING IN A FIDUCIARY OR REPRESENTATIVE CAPACITY, SUCH PERSON MUST PROVIDE THE FOLLOWING INFORMATION: 2 PLEASE PRINT NAME(S) AND ADDRESS(ES) Name(s): _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ Capacity: _______________________________________________________________________________ Address(es): _______________________________________________________________________________ _______________________________________________________________________________ GUARANTEE (Not to be used for signature guarantee) The undersigned, a firm which is a member of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or a trust company having an office or correspondent in the United States, or an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, hereby guarantees deposit with the Exchange Agent of the letter of transmittal (or facsimile thereof or agent's message in lieu thereof), together with the Old Notes tendered hereby in proper form for transfer (or confirmation of the book-entry transfer of such Old Notes into the Exchange Agent's account at the DTC described in the prospectus under the caption "The Exchange Offer C Book-Entry Transfer" and in the letter of transmittal) and any other required documents, all by 5:00 p.m., New York City time, within three New York Stock Exchange trading days following the Expiration Date. Name of Firm:__________________________ ________________________________ (AUTHORIZED SIGNATURE) Address:____________________________ (INCLUDE ZIP CODE) Name:___________________________ Area Code and Tel. Number: Title:__________________________ (PLEASE TYPE OR PRINT) Date:_____________________, 2000 DO NOT SEND OLD NOTES WITH THIS FORM. ACTUAL SURRENDER OF OLD NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS. 3 INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY 1. DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY. A properly completed and duly executed copy of this notice of guaranteed delivery (or facsimile hereof or an agent's message and notice of guaranteed delivery in lieu hereof) and any other documents required by this notice of guaranteed delivery with respect to the Old Notes must be received by the Exchange Agent at its address set forth herein prior to the Expiration Date of the Exchange Offer. Delivery of such notice of guaranteed delivery may be made by facsimile transmission, mail or hand delivery. THE METHOD OF DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY AND ANY OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE RISK OF THE HOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. If delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. As an alternative to delivery by mail, the holders may wish to consider using an overnight or hand delivery service. In all cases, sufficient time should be allowed to assure timely delivery. For a description of the guaranteed delivery procedures, see Instruction 2 of the letter of transmittal. 2. SIGNATURES ON THIS NOTICE OF GUARANTEED DELIVERY. If this notice of guaranteed delivery (or facsimile hereof) is signed by the registered holder(s) of the Old Notes referred to herein, the signature(s) must correspond exactly with the name(s) as written on the face of the Old Notes without alteration, enlargement or any change whatsoever. If this notice of guaranteed delivery (or facsimile hereof) is signed by a participant in the DTC whose name appears on a security position listing as the owner of the Old Notes, the signature must correspond with the name as it appears on the security position listing as the owner of the Old Notes. If this notice of guaranteed delivery (or facsimile hereof) is signed by a person other than the registered holder(s) of any Old Notes listed or a participant of the DTC, this notice of guaranteed delivery must be accompanied by appropriate bond powers, signed as the name(s) of the registered holder(s) appear(s) on the Old Notes or signed as the name(s) of the participant appears on the DTC's security position listing. If this notice of guaranteed delivery (or facsimile hereof) is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing and submit herewith evidence satisfactory to the Exchange Agent of such person's authority to so act. 3. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for assistance and requests for additional copies of the prospectus and this notice of guaranteed delivery may be directed to the Exchange Agent at the address set forth on the cover page hereof. Holders may also contact their broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Exchange Offer. 4 EX-99.4 121 AMETHYST FINANCIAL COMPANY LTD. LETTER OF TRANSMITTAL FOR TENDER OF ALL OUTSTANDING 11 3/4% SENIOR SECURED NOTES DUE 2001 IN EXCHANGE FOR REGISTERED 11 3/4% SENIOR SECURED NOTES DUE 2001 - - ------------------------------------------------------------------------------- THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ________, 2000, UNLESS EXTENDED (THE "EXPIRATION DATE"). OUTSTANDING NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE FOR THE EXCHANGE OFFER. - - ------------------------------------------------------------------------------- DELIVER TO THE EXCHANGE AGENT: WILMINGTON TRUST COMPANY (301) 651-1562 BY HAND, COURIER OR MAIL (IF BY MAIL, REGISTERED OR CERTIFIED MAIL RECOMMENDED): Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, Delaware 19890-0001 Attn: Corporate Trust Operations BY FACSIMILE TRANSMISSION (ELIGIBLE INSTITUTIONS ONLY): (302) 651-1079 Attention: Corporate Trust Department CONFIRM BY TELEPHONE: (302) 651-1562 ------------------- DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THE LETTER OF TRANSMITTAL IS COMPLETED. The undersigned hereby acknowledges receipt and review of the prospectus dated _______, 2000 of Amethyst Financial Company Ltd. ( the "Company") and this letter of transmittal. These two documents together constitute the Company's offer to exchange its 11 3/4% Senior Secured Notes due 2001 (collectively, the "New Notes"), the issuance of which has been registered under the Securities Act of 1933, as amended (the "Securities Act"), for a like principal amount of its issued and outstanding 11 3/4% Senior Secured Notes due 2001 (collectively, the "Old Notes"), respectively, which offer consists of separate, independent offers to exchange the New Notes for Old Notes (the "Exchange Offer"). The Company reserves the right, at any time or from time to time, to extend the period of time during which the Exchange Offer for the Old Notes is open, at its discretion, in which event the term "Expiration Date" shall mean the latest date to which the Exchange Offer is extended. The Company shall notify Wilmington Trust Company (the "Exchange Agent") of any extension by oral or written notice and shall make a public announcement thereof no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. This letter of transmittal is to be used by a holder of Old Notes (i) if certificates of Old Notes are to be forwarded herewith or (ii) if delivery of Old Notes is to be made by book-entry transfer to the account maintained by the Exchange Agent at The Depository Trust Company (the "DTC") pursuant to the procedures set forth in the prospectus under the caption "The Exchange Offer -- Book-Entry Transfer" and an "agent's message" is not delivered as described in the prospectus under the caption "The Exchange Offer -- Procedures for Tendering - - -- Tendering Though DTC's Automated Tender Offer Program." Tenders by book-entry transfer may also be made by delivering an agent's message in lieu of this letter of transmittal. Holders of Old Notes whose Old Notes are not immediately available, or who are unable to deliver their Old Notes, this letter of transmittal and all other documents required hereby to the Exchange Agent on or prior to the Expiration Date for the Exchange Offer, or who are unable to complete the procedure for book-entry transfer on a timely basis, must tender their Old Notes according to the guaranteed delivery procedures set forth in the prospectus under the caption "The Exchange Offer -- Guaranteed Delivery Procedures." See Instruction 2. DELIVERY OF DOCUMENTS TO THE DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. The term "holder" with respect to the Exchange Offer for Old Notes means any person in whose name such Old Notes are registered on the books of the Company, any person who holds such Old Notes and has obtained a properly completed bond power from the registered holder or any participant in the DTC system whose name appears on a security position listing as the holder of such Old Notes and who desires to deliver such Old Notes by book-entry transfer at DTC. The undersigned has completed, executed and delivered this letter of transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer. Holders who wish to tender their Old Notes must complete this letter of transmittal in its entirety (unless such Old Notes are to be tendered by book-entry transfer and an agent's message is delivered in lieu hereof). PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY BEFORE CHECKING ANY BOX BELOW. THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT. List below the Old Notes to which this letter of transmittal relates. If the space below is inadequate, list the registered numbers and principal amounts on a separate signed schedule and affix the list to this letter of transmittal. DESCRIPTION OF OLD NOTES TENDERED - - -------------------------------------------------------------------------------- OLD NOTES TENDERED ------------------------------------------------- NAME(S) AND ADDRESS(ES) OF HOLDER(S) EXACTLY AS NAME(S) REGISTERED APPEAR(S) ON OLD AGGREGATE PRINCIPAL PRINCIPAL NOTES (PLEASE FILL IN, IF REGISTERED AMOUNT REPRESENTED AMOUNT BLANK) NUMBER(S)* BY NOTE(S) TENDERED** - - ---------------------------- ---------- ------------------- ---------- ---------- ------------------- ---------- ---------- ------------------- ---------- ---------- ------------------- ---------- ---------- ------------------- ---------- TOTAL - - ---------------------------- ---------- ------------------- ---------- * Need not be completed by book-entry holders. ** Unless otherwise indicated, any tendering holder of Old Notes will be deemed to have tendered the entire aggregate principal amount represented by such Old Notes. All tenders must be in integral multiples of $1,000. 2 [ ] CHECK HERE IF TENDERED OLD NOTES ARE ENCLOSED HEREWITH. [ ] CHECK HERE AND COMPLETE THE FOLLOWING IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE DTC (FOR USE BY ELIGIBLE INSTITUTIONS ONLY): Name of Tendering Institution:__________________________________________________________________ DTC Account Number(s):____________________________________________________________________ Transaction Code Number(s):____________________________________________________________________ [ ] CHECK HERE AND COMPLETE THE FOLLOWING IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY EITHER ENCLOSED HEREWITH OR PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT (COPY ATTACHED) (FOR USE BY ELIGIBLE INSTITUTIONS ONLY): Name(s) of Registered holder(s) of Old Notes:_________________________________________________________________ Date of Execution of Notice of Guaranteed Delivery:__________________________________________________________ Window Ticket Number (if available):_______________________________________________________________ Name of Eligible Institution that Guaranteed Delivery:__________________________________________________________ DTC Account Number(s) (if delivered by book-entry transfer):_________________________________________________________ Transaction Code Number(s) (if delivered by book-entry transfer):_________________________________________________________ Name of Tendering Institution (if delivered by book-entry transfer):_________________________________________________________ [ ] CHECK HERE AND COMPLETE THE FOLLOWING IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO: Name:_________________________________________________________________________ Address:______________________________________________________________________ If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of New Notes. If the undersigned is a broker-dealer that will receive New Notes for its own account in exchange for Old Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such New Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. 3 SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: Subject to the terms and conditions of the Exchange Offer, the undersigned hereby tenders to the Company for exchange the principal amount of Old Notes indicated above. Subject to and effective upon the acceptance for exchange of the principal amount of Old Notes tendered in accordance with this letter of transmittal, the undersigned hereby exchanges, assigns and transfers to, or upon the order of, the Company all right, title and interest in and to such Old Notes tendered for exchange hereby. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent the true and lawful agent and attorney-in-fact for the undersigned (with full knowledge that said Exchange Agent also acts as the agent for the Company in connection with the Exchange Offer) with respect to the tendered Old Notes with full power of substitution to (i) deliver such Old Notes, or transfer ownership of such Old Notes on the account books maintained by the DTC, to the Company and deliver all accompanying evidences of transfer and authenticity, and (ii) present such Old Notes for transfer on the books of the Company and receive all benefits and otherwise exercise all rights of beneficial ownership of such Old Notes, all in accordance with the terms of the Exchange Offer. The power of attorney granted in this paragraph shall be deemed to be irrevocable and coupled with an interest. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, exchange, assign and transfer the Old Notes tendered hereby and to acquire the New Notes issuable upon the exchange of such tendered Old Notes, and that the Company will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim, when the same are accepted for exchange by the Company. The undersigned acknowledges that the Exchange Offer is being made in reliance upon interpretations set forth in no-action letters issued to third parties by the staff of the Securities and Exchange Commission (the "SEC"), including Exxon Capital Holdings Corporation (available May 13, 1988), Morgan Stanley & Co. Incorporated (available June 5, 1991), Mary Kay Cosmetics, Inc. (available June 5, 1991) and similar no-action letters (the "Prior No-Action Letters"), that the New Notes issued in exchange for the Old Notes pursuant to the Exchange Offer may be offered for resale, resold and otherwise transferred by holders thereof (other than any such holder that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, PROVIDED that such New Notes are acquired in the ordinary course of such holders business and such holders are not engaging in, do not intend to engage in and have no arrangement or understanding with any person to participate in a distribution of such New Notes. The SEC has not, however, considered the Exchange Offer in the context of a no-action letter, and there can be no assurance that the staff of the SEC would make a similar determination with respect to the Exchange Offer as in other circumstances. The undersigned hereby further represents to the Company that (i) any New Notes received are being acquired in the ordinary course of business of the person receiving such New Notes, whether or not the undersigned, (ii) neither the undersigned nor any such other person has an arrangement or understanding with any person to participate in the distribution of the Old Notes or the New Notes within the meaning of the Securities Act and (iii) neither the holder nor any such other person is an "affiliate," as defined in Rule 405 under the Securities Act, of the Company or, if it is such an affiliate, it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. 4 If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of New Notes. If the undersigned is a broker-dealer that will receive New Notes for its own account in exchange for Old Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such New Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The undersigned acknowledges that if the undersigned is tendering Old Notes in the Exchange Offer with the intention of participating in any manner in a distribution of the New Notes (i) the undersigned cannot rely on the position of the staff of the SEC set forth in the Prior No-Action Letters and, in the absence of an exemption therefrom, must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction of the New Notes, in which case the registration statement must contain the selling security holder information required by Item 507 or Item 508, as applicable, of Regulation S-K of the SEC, and (ii) failure to comply with such requirements in such instance could result in the undersigned incurring liability under the Securities Act for which the undersigned is not indemnified by the Company. The undersigned will, upon request, execute and deliver any additional documents deemed by the Exchange Agent or the Company to be necessary or desirable to complete the exchange, assignment and transfer of the Old Notes tendered hereby, including the transfer of such Old Notes on the account books maintained by the DTC. For purposes of the Exchange Offer, the Company shall be deemed to have accepted for exchange validly tendered Old Notes when, as and if the Company gives oral or written notice thereof to the Exchange Agent. Any tendered Old Notes that are not accepted for exchange pursuant to the Exchange Offer for any reason will be returned, without expense, to the undersigned as promptly as practicable after the Expiration Date for the Exchange Offer. All authority conferred or agreed to be conferred by this letter of transmittal shall survive the death, incapacity or dissolution of the undersigned, and every obligation of the undersigned under this letter of transmittal shall be binding upon the undersigned's successors, assigns, heirs, executors, administrators, trustees in bankruptcy and legal representatives. The undersigned acknowledges that the Company's acceptance of properly tendered Old Notes pursuant to the procedures described under the caption "The Exchange Offer -- Procedures for Tendering" in the prospectus and in the instructions hereto will constitute a binding agreement between the undersigned and the Company upon the terms and subject to the conditions of the Exchange Offer. The Exchange Offer is subject to certain conditions set forth in the prospectus under the caption "The Exchange Offer -- Conditions to the Exchange Offer." The undersigned recognizes that as a result of these conditions (which may be waived, in whole or in part, by the Company), the Company may not be required to exchange any of the Old Notes tendered hereby. Unless otherwise indicated under "Special Issuance Instructions," please issue the New Notes issued in exchange for the Old Notes accepted for exchange, and return any Old Notes not tendered or not exchanged, in the name(s) of the undersigned (or, in the case of a book-entry delivery of Old Notes, please credit the account indicated above maintained at the DTC). Similarly, unless otherwise indicated under "Special Delivery Instructions," please mail or deliver the New Notes issued in exchange for the Old Notes accepted for exchange and any Old Notes not tendered or not exchanged (and accompanying documents, as appropriate) to the undersigned at the address shown below the undersigned's signature(s). In the event that both "Special Issuance Instructions" and "Special Delivery Instructions" are completed, please issue the New Notes issued in exchange for the Old Notes accepted for exchange in the name(s) of, and return any Old Notes not tendered or not exchanged to, the person(s) (or account(s)) so indicated. The undersigned recognizes that the Company has no obligation pursuant to the "Special Issuance Instructions" and "Special Delivery Instructions" to transfer any Old Notes from the name of the registered holder(s) thereof if the Company does not accept for exchange any of the Old Notes so tendered for exchange. 5 --------------------------------------- -------------------------------------- SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 5 AND 6) (SEE INSTRUCTIONS 5 AND 6) To be completed ONLY (i) if Old Notes To be completed ONLY if Old Notes in in a principal amount not tendered, a principal amount not tendered, or or New Notes issued in exchange for New Notes issued in exchange for Old Old Notes accepted for exchange, are Notes accepted for exchange, are to to be issued in the name of someone be mailed or delivered to someone other than the undersigned, or (ii) other than the undersigned, or to if Old Notes tendered by book-entry the undersigned at an address other transfer which are not exchanged are than that shown below the to be returned by credit to an undersigned's signature. Mail or account maintained at the DTC other deliver New Notes and/or Old Notes than the DTC Account Number set forth to: above. Issue New Notes and/or Old Notes to: Name:_________________________________ Name:_________________________________ Address:______________________________ Address:______________________________ ______________________________________ ______________________________________ (INCLUDE ZIP CODE) (INCLUDE ZIP CODE) ______________________________________ ______________________________________ (Tax Identification or Social (Tax Identification or Social Security Security Number) Number) (PLEASE TYPE OR PRINT) (PLEASE TYPE OR PRINT) --------------------------------------- -------------------------------------- [ ] Credit unexchanged Old Notes delivered by book-entry transfer to the DTC set forth below: DTC Account Number:___________________________________________________________ 6 IMPORTANT PLEASE SIGN HERE WHETHER OR NOT OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY (Complete Accompanying Substitute Form W-9 Below) =>_____________________________________________________________________________ =>_____________________________________________________________________________ (Signature(s) of Registered Holder(s) of Old Notes) Dated____________________, 2000 (The above lines must be signed by the registered holder(s) of Old Notes as your name(s) appear(s) on the Old Notes or on a security position listing, or by person(s) authorized to become registered holder(s) by a properly completed bond power from the registered holder(s), a copy of which must be transmitted with this letter of transmittal. If Old Notes to which this letter of transmittal relate are held of record by two or more joint holders, then all such holders must sign this letter of transmittal. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, then such person must (i) set forth his or her full title below and (ii) unless waived by the Company, submit evidence satisfactory to the Company of such person's authority so to act. See Instruction 5 regarding the completion of this letter of transmittal, printed below.) Name(s):_______________________________________________________________________ (Please Type or Print) Capacity:______________________________________________________________________ Address:_______________________________________________________________________ _______________________________________________________________________________ (Include Zip Code) Area Code and Telephone Number:________________________________________________ Taxpayer Identification or Social Security Number:_____________________________ _______________________________________________________________________________ MEDALLION SIGNATURE GUARANTEE (If Required by Instruction 5) Certain signatures must be guaranteed by an Eligible Institution. Signature(s) Guaranteed by an Eligible Institution:__________________________________________________________ (Authorized Signature) _______________________________________________________________________________ (Title) _______________________________________________________________________________ (Name of Firm) _______________________________________________________________________________ (Address, Include Zip Code) _______________________________________________________________________________ (Area Code and Telephone Number) Dated __________________________ , 2000 7 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OLD NOTES OR AGENT'S MESSAGE AND BOOK-ENTRY CONFIRMATIONS. All physically delivered Old Notes or any confirmation of a book-entry transfer to the Exchange Agent's account at the DTC of Old Notes tendered by book-entry transfer (a "Book-Entry Confirmation"), as well as a properly completed and duly executed copy of this letter of transmittal or facsimile hereof (or an agent's message in lieu hereof), and any other documents required by this letter of transmittal, must be received by the Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City time, on the Expiration Date for the Exchange Offer, or the tendering holder must comply with the guaranteed delivery procedures set forth below. THE METHOD OF DELIVERY OF THE TENDERED OLD NOTES, THIS LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE HOLDER AND, EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT THE HOLDER USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY. 2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Old Notes and (a) whose Old Notes are not immediately available, (b) who cannot deliver their Old Notes, this letter of transmittal or any other documents required hereby to the Exchange Agent prior to the applicable Expiration Date or (c) who are unable to comply with the applicable procedures under the DTC's Automated Tender Offer Program on a timely basis, must tender their Old Notes according to the guaranteed delivery procedures set forth in the prospectus. Pursuant to such procedures: (i) such tender must be made by or through a firm which is a member of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or a trust company having an office or correspondent in the United States or an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution"); (ii) prior to the applicable Expiration Date, the Exchange Agent must have received from the Eligible Institution a properly completed and duly executed notice of guaranteed delivery (by facsimile transmission, mail or hand delivery) or a properly transmitted agent's message and notice of guaranteed delivery setting forth the name and address of the holder of the Old Notes, the registration number(s) of such Old Notes and the total principal amount of Old Notes tendered, stating that the tender is being made thereby and guaranteeing that, within three New York Stock Exchange trading days after such Expiration Date, this letter of transmittal (or facsimile hereof or an agent's message in lieu hereof) together with the Old Notes in proper form for transfer (or a Book-Entry Confirmation) and any other documents required hereby, will be deposited by the Eligible Institution with the Exchange Agent; and (iii) this letter of transmittal (or facsimile hereof or an agent's message in lieu hereof) together with the certificates for all physically tendered Old Notes in proper form for transfer (or Book-Entry Confirmation, as the case may be) and all other documents required hereby are received by the Exchange Agent within three New York Stock Exchange trading days after such Expiration Date. Any holder of Old Notes who wishes to tender Old Notes pursuant to the guaranteed delivery procedures described above must ensure that the Exchange Agent receives the notice of guaranteed delivery prior to 5:00 p.m., New York City time, on the applicable Expiration Date. Upon request of the Exchange Agent, a notice of guaranteed delivery will be sent to holders who wish to tender their Old Notes according to the guaranteed delivery procedures set forth above. See "The Exchange Offer -- Guaranteed Delivery Procedures" section of the prospectus. 3. TENDER BY HOLDER. Only a holder of Old Notes may tender such Old Notes in the Exchange Offer. Any beneficial holder of Old Notes who is not the registered holder and who wishes to tender should arrange with the registered holder to execute and deliver this letter of transmittal on his behalf or must, prior to completing and executing this letter of transmittal and delivering his Old Notes, either make appropriate arrangements to register ownership of the Old Notes in such holder's name or obtain a properly completed bond power from the registered holder. 8 4. PARTIAL TENDERS. Tenders of Old Notes will be accepted only in integral multiples of $1,000. If less than the entire principal amount of any Old Notes is tendered, the tendering holder should fill in the principal amount tendered in the fifth column of the box entitled "Description of Old Notes Tendered" above. The entire principal amount of Old Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. If the entire principal amount of all Old Notes is not tendered, then Old Notes for the principal amount of Old Notes not tendered and New Notes issued in exchange for any Old Notes accepted will be returned to the holder as promptly as practicable after the Old Notes are accepted for exchange. 5. SIGNATURES ON THIS LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS; MEDALLION GUARANTEE OF SIGNATURES. If this letter of transmittal (or facsimile hereof) is signed by the record holder(s) of the Old Notes tendered hereby, the signature(s) must correspond exactly with the name(s) as written on the face of the Old Notes without alteration, enlargement or any change whatsoever. If this letter of transmittal (or facsimile hereof) is signed by a participant in the DTC, the signature must correspond with the name as it appears on the security position listing as the holder of the Old Notes. If this letter of transmittal (or facsimile hereof) is signed by the registered holder(s) of Old Notes listed and tendered hereby and the New Notes issued in exchange therefor are to be issued (or any untendered principal amount of Old Notes is to be reissued) to the registered holder(s), the said holder(s) need not and should not endorse any tendered Old Notes, nor provide a separate bond power. In any other case, such holder(s) must either properly endorse the Old Notes tendered or transmit a properly completed separate bond power with this letter of transmittal, with the signatures on the endorsement or bond power guaranteed by an Eligible Institution. If this letter of transmittal (or facsimile hereof) or any Old Notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Company, evidence satisfactory to the Company of their authority to act must be submitted with this letter of transmittal. NO SIGNATURE GUARANTEE IS REQUIRED IF (I) THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF) IS SIGNED BY THE REGISTERED HOLDER(S) OF THE OLD NOTES TENDERED HEREIN (OR BY A PARTICIPANT IN THE DTC WHOSE NAME APPEARS ON A SECURITY POSITION LISTING AS THE OWNER OF THE TENDERED OLD NOTES) AND THE NEW NOTES ARE TO BE ISSUED DIRECTLY TO SUCH REGISTERED HOLDER(S) (OR, IF SIGNED BY A PARTICIPANT IN THE DTC, DEPOSITED TO SUCH PARTICIPANT'S ACCOUNT AT THE DTC) AND NEITHER THE BOX ENTITLED "SPECIAL DELIVERY INSTRUCTIONS" NOR THE BOX ENTITLED "SPECIAL REGISTRATION INSTRUCTIONS" HAS BEEN COMPLETED, OR (II) SUCH OLD NOTES ARE TENDERED FOR THE ACCOUNT OF AN ELIGIBLE INSTITUTION. IN ALL OTHER CASES, ALL SIGNATURES ON THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF) MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION. 6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders should indicate, in the applicable box or boxes, the name and address to which New Notes or substitute Old Notes for principal amounts not tendered or not accepted for exchange are to be issued or sent, if different from the name and address of the person signing this letter of transmittal. In the case of issuance in a different name, the taxpayer identification or social security number of the person named must also be indicated. Holders tendering Old Notes by book-entry transfer may request that Old Notes not exchanged be credited to such account maintained at the DTC as such noteholder may designate hereon. If no such instructions are given, such Old Notes not exchanged will be returned to the name and address (or account number) of the person signing this letter of transmittal. 7. TRANSFER TAXES. The Company will pay all transfer taxes, if any, applicable to the exchange of Old Notes pursuant to the Exchange Offer. If, however, New Notes or Old Notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be registered or issued in the name of, any person other than the registered holder of the Old Notes tendered hereby, or if tendered Old Notes are registered in the name of any person other than the person signing this letter of transmittal, or if a transfer tax is imposed for any reason other than the exchange of Old Notes pursuant to the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with this letter of transmittal, the amount of such transfer taxes will be billed directly to such tendering holder and the Exchange Agent will retain possession of an amount of New Notes with a face amount at least equal to the amount of such transfer taxes due by such tendering holder pending receipt by the Exchange Agent of the amount of such taxes. 9 8. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a holder of any Old Notes or New Notes must provide the Company (as payor) with its correct taxpayer identification number ("TIN"), which, in the case of a holder who is an individual is his or her social security number. If the Company is not provided with the correct TIN, the holder may be subject to a $50 penalty imposed by the Internal Revenue Service and backup withholding of 31% on interest payments on the New Notes. To prevent backup withholding, each tendering holder must provide such holder=s correct TIN by completing the Substitute Form W-9 set forth herein, certifying that the TIN provided is correct (or that such holder is awaiting a TIN), and that (i) the holder has not been notified by the Internal Revenue Service that such holder is subject to backup withholding as a result of failure to report all interest or dividends or (ii) the Internal Revenue Service has notified the holder that such holder is no longer subject to backup withholding. If the New Notes will be registered in more than one name or will not be in the name of the actual owner, consult the instructions on Internal Revenue Service Form W-9, which may be obtained from the Exchange Agent, for information on which TIN to report. Certain foreign individuals and entities will not be subject to backup withholding or information reporting if they submit a Form W-8, signed under penalties of perjury, attesting to their foreign status. A Form W-8 can be obtained from the Exchange Agent. If such holder does not have a TIN, such holder should consult the instructions on Form W-9 concerning applying for a TIN, check the box in Part 3 of the Substitute Form W-9, write "applied for" in lieu of its TIN and sign and date the form and the Certificate of Awaiting Taxpayer Identification Number. Checking this box, writing "applied for" on the form and signing such certificate means that such holder has already applied for a TIN or that such holder intends to apply for one in the near future. If such holder does not provide its TIN to the Company within 60 days, backup withholding will begin and continue until such holder furnishes its TIN to the Company. The Company reserves the right in its sole discretion to take whatever steps are necessary to comply with the Company's obligations regarding backup withholding. 9. VALIDITY OF TENDERS. All questions as to the validity, form, eligibility, time of receipt, acceptance and withdrawal of tendered Old Notes will be determined by the Company in its sole discretion, which determination will be final and binding. The Company reserves the absolute right to reject any and all Old Notes not properly tendered or any Old Notes the Company's acceptance of which might, in the opinion of the Company's counsel, be unlawful. The Company also reserves the absolute right to waive any conditions of the Exchange Offer or defects or irregularities of tenders as to particular Old Notes. The Company's interpretation of the terms and conditions of the Exchange Offer (including this letter of transmittal and the instructions hereto) shall be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Old Notes must be cured within such time as the Company shall determine. Neither the Company, the Exchange Agent nor any other person shall be under any duty to give notification of defects or irregularities with respect to tenders of Old Notes nor shall any of them incur any liability for failure to give such notification. 10. WAIVER OF CONDITIONS. The Company reserves the absolute right to waive, in whole or part, any of the conditions to the Exchange Offer set forth in the prospectus. 11. NO CONDITIONAL TENDER. No alternative, conditional, irregular or contingent tender of Old Notes will be accepted. 12. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES. Any holder whose Old Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated above for further instructions. This letter of transmittal and related documents cannot be processed until the procedures for replacing lost, stolen or destroyed Old Notes have been followed. 13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance or for additional copies of the prospectus or this letter of transmittal may be directed to the Exchange Agent at the address or telephone number set forth on the cover page of this letter of transmittal. Holders may also contact their broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Exchange Offer. 14. WITHDRAWAL. Tenders may be withdrawn only pursuant to the limited withdrawal rights set forth in the prospectus under the caption "The Exchange Offer -- Withdrawal of Tenders." IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE HEREOF OR AN AGENT'S MESSAGE IN LIEU HEREOF (TOGETHER WITH THE OLD NOTES DELIVERED BY BOOK-ENTRY TRANSFER OR IN ORIGINAL HARD COPY FORM) MUST BE RECEIVED BY THE EXCHANGE AGENT, OR THE NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT, PRIOR TO THE EXPIRATION DATE. 10
- - ---------------------------------------------------------------------------------------------------------------- PART 1 -- PLEASE PROVIDE YOUR TIN ______________________________ SUBSTITUTE IN THE BOX AT RIGHT AND CERTIFY SOCIAL SECURITY NUMBER FORM W-9 BY SIGNING AND DATING BELOW OR ______________________________ EMPLOYER IDENTIFICATION NUMBER PART 2 -- CERTIFICATION -- UNDER PART 3 -- PENALTIES OF PERJURY, I CERTIFY THAT: (1) THE NUMBER SHOWN ON THIS FORM AWAITING TIN [ ] IS MY CORRECT TAXPAYER IDENTIFICATION NUMBER (OR I HAVE CHECKED THE BOX IN PART 3 AND EXECUTED THE CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER BELOW) AND ______________________________ (2) I AM NOT SUBJECT TO BACK PLEASE COMPLETE THE CERTIFICATE OF NAME WITHHOLDING EITHER BECAUSE I AWAITING TAXPAYER IDENTIFICATION HAVE NOT BEEN NOTIFIED BY THE NUMBER BELOW. ______________________________ INTERNAL REVENUE SERVICE ADDRESS (NUMBER AND STREET) ("IRS") THAT I AMSUBJECT TO BACKUP WITHHOLDING AS A RESULT ______________________________ OF FAILURE TO REPORT ALL CITY, STATE AND ZIP CODE INTEREST OR DIVIDENDS,OR BECAUSE THE IRS HAS NOTIFIED ME THAT I AM NO LONGER SUBJECT TO BACKUP WITHHOLDINGS. DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE PAYOR'S REQUEST FOR CERTIFICATE INSTRUCTIONS -- YOU MUST CROSS OUT ITEM(2) IN PART 2 ABOVE IF TAXPAYER IDENTIFICATION YOU HAVE BEEN NOTIFIED BY THE IRS THAT YOU ARE SUBJECT TO BACKUP NUMBER (TIN) WITHHOLDING BECAUSE OF UNDERREPORTING INTEREST OR DIVIDENDS ON YOUR TAX RETURN. HOWEVER, IF AFTER BEING NOTIFIED BY THE IRS THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING YOU RECEIVED ANOTHER NOTIFICATION FROM THE IRS STATING THAT YOU ARE NO LONGER SUBJECT TO BACKUP WITHHOLDING, DO NOT CROSS OUT ITEM (2). SIGNATURE_________________________________ DATE_________________________,2000 - - ----------------------------------------------------------------------------------------------------------------
FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU WITH RESPECT TO THE NEW NOTES. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9 - - -------------------------------------------------------------------------------- CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I CERTIFY UNDER PENALTIES OF PERJURY THAT A TAXPAYER IDENTIFICATION NUMBER HAS NOT BEEN ISSUED TO ME, AND EITHER (A) I HAVE MAILED OR DELIVERED AN APPLICATION TO RECEIVE A TAXPAYER IDENTIFICATION NUMBER TO THE APPROPRIATE INTERNAL REVENUE SERVICE CENTER OR SOCIAL SECURITY ADMINISTRATION OFFICE OR (B) I INTEND TO MAIL OR DELIVER AN APPLICATION IN THE NEAR FUTURE. I UNDERSTAND THAT IF I DO NOT PROVIDE A TAXPAYER IDENTIFICATION NUMBER TO THE PAYOR WITHIN 60 DAYS, 31% OF ALL REPORTABLE PAYMENTS MADE TO ME THEREAFTER WILL BE WITHHELD UNTIL I PROVIDE A NUMBER. SIGNATURE_________________________________ DATE________________________, 2000 - - -------------------------------------------------------------------------------- 11 -----END PRIVACY-ENHANCED MESSAGE-----