-----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, L6vvLuY2KdgB63IHq2h4ZwwmI8fOyg7lrwfXMzPJCWJP2qjpLM0h5ywat4qPUqMt qWqDeqkVbVbnEhs/fSTd7w== 0000008411-96-000018.txt : 19960710 0000008411-96-000018.hdr.sgml : 19960710 ACCESSION NUMBER: 0000008411-96-000018 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960624 ITEM INFORMATION: Other events FILED AS OF DATE: 19960709 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ATWOOD OCEANICS INC CENTRAL INDEX KEY: 0000008411 STANDARD INDUSTRIAL CLASSIFICATION: DRILLING OIL & GAS WELLS [1381] IRS NUMBER: 741611874 STATE OF INCORPORATION: TX FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-06352 FILM NUMBER: 96592465 BUSINESS ADDRESS: STREET 1: 15835 PARK TEN PL DR STREET 2: SUITE 200 CITY: HOUSTON STATE: TX ZIP: 77084 BUSINESS PHONE: 7134922929 8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 ________________ Form 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF EARLIEST EVENT REPORTED: JUNE 24, 1996 ATWOOD OCEANICS, INC. (Exact name of registrant as specified in its charter) COMMISSION FILE NUMBER 0-6352 TEXAS 74-1611874 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 15835 Park Ten Place Drive 77084 Houston, Texas (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code: 713-492-2929 _______________ PAGE 2 ITEM 5. OTHER EVENTS On June 24, 1996, Atwood Oceanics, Inc. (the "Company") announced that it has executed a term contract with British-Borneo Petroleum, Inc. for the Atwood Hunter (one of its third-generation semisubmersible drilling units) to conduct drilling operations under a firm two years plus option program. The contract provides for the rig to be upgraded to 3,500 feet water depth capacity and to commence operation in the Gulf of Mexico in 1997. The Company will incur expenditures of approximately $40 million to upgrade the rig for operations in water depths of up to 3,500 feet, and to relocate the rig from Southeast Asia to the Gulf of Mexico. The contract has the potential of providing gross revenues over the firm two year program of approximately $70 million. The operator has a right to extend the term of the contract to three years. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. ATWOOD OCEANICS, INC. (Registrant) James M. Holland Senior Vice President Date: 8 July 1996 EX-10 2 EXHIBIT 10 DAYWORK DRILLING CONTRACT BETWEEN BRITISH-BORNEO PETROLEUM INC. (OPERATOR) AND ATWOOD OCEANICS, INC. (CONTRACTOR) FOR ATWOOD HUNTER (THE DRILLING UNIT) DAYWORK DRILLING CONTRACT TABLE OF CONTENTS SECTION PAGE SUBJECT 1.1 1 DATE AND PARTIES 2.1 1 SCHEDULES 3.1 1 CONTRACTOR'S PERSONNEL 4.1 2 CONTRACTOR'S EQUIPMENT 5.1 2 BASIC AGREEMENT 6.1 2 CONTRACTOR'S REPRESENTATIONS 7.1 2 OPERATOR'S EQUIPMENT 8.1 3 AREA OF OPERATIONS 8.2 3 DRILLING LOCATIONS 9.1 3 DRILLING PROGRAM 10.1 4 OTHER OPERATIONS 11.1 4 CASING PROGRAMS 12.1 4 CORING 13.1 4 TESTING 14.1 5 FORMATION CUTTINGS 15.1 5 MEASUREMENT OF WELL DEPTH 16.1 5 COURSE OF WELL 17.1 5 COMPLETION OR ABANDONMENT 18.1 6 BLOWOUT OR FIRE 19.1 6 COMPENSATION 19.2 6 OPERATING RATE 19.3 6 STANDBY RATE 19.4 8 EQUIPMENT REPAIR RATE i 19.5 8 STAND-BY WITHOUT CREW RATE 19.6 9 RATE ADJUSTMENT 19.7 10 REIMBURSABLE COSTS 19.8 10 MOBILIZATION AND DEMOBILIZATION FEES 20.1 10 PAYMENT OF INVOICES; AUDIT 20.2 11 TIME AND PLACE OF INVOICE PRESENTATION 20.3 12 PLACE AND METHOD OF PAYMENT 21.1 12 LIENS 22.1 12 TAXES OR LEVIES 23.1 12 INSURANCE 23.2 14 SUBCONTRACTOR'S INSURANCE 23.3 14 CONTRACTOR'S EQUIPMENT 23.4 15 OPERATORS EQUIPMENT 23.5 15 EMPLOYEES 23.6 17 THIRD PARTIES 23.7 17 LOSS OF HOLE 23.8 18 BLOWOUT OR CRATER 23.9 18 RESERVOIR LIABILITY 24.1 18 POLLUTION OR CONTAMINATION 24.2 21 PATENT LIABILITY 24.3 21 SOUND LOCATION AND ACCESS 24.4 22 GENERAL DEFENSE, HOLD HARMLESS & INDEMNITY 24.5 23 CLAIMS 24.6 23 CONSEQUENTIAL DAMAGES 24.7 23 OPERATOR'S AUTHORIZED REPRESENTATIVES ii 25.1 24 RECORDS AND REPORTS 25.2 24 CONFIDENTIAL NATURE OF RECORDS 26.1 24 DISCIPLINE AND SAFETY 27.1 25 RELATIONSHIP OF PARTIES 28.1 26 FORCE MAJEURE 29.1 27 REPRESENTATIVES FOR NOTICES 30.1 27 ASSIGNMENT 31.1 27 SPECIFIED CONTRACT TERM; OPTION TO EXTEND 31.2 28 TERMINATION BY OPERATOR 31.3 29 TERMINATION BY CONTRACTOR 32.1 30 UNSATISFACTORY PERFORMANCE 33.1 31 CONFLICT OF INTEREST 34.1 32 SEVERABILITY; WAIVER; TITLE HEADINGS; ENTIRE AGREEMENT; MODIFICATION 35.1 32 REGULATIONS 36.1 33 BANKRUPTCY iii DAYWORK DRILLING CONTRACT 1.1 DATE AND PARTIES: This Contract is made as of June 20, 1996 between British-Borneo Petroleum Inc. (hereinafter called "OPERATOR") and Atwood Oceanics, Inc. (hereinafter called "CONTRACTOR"). 2.1 SCHEDULES: This Contract consists of this writing, signed by the parties, and each of the following Schedules: SCHEDULE "A": CONTRACT SUMMARY SCHEDULE "B": CONTRACTOR'S PERSONNEL AND COMPENSATION SCHEDULE SCHEDULE "C": CONTRACTOR'S RIG AND RELATED EQUIPMENT SCHEDULE "D": EQUIPMENT, SERVICES AND FACILITIES FURNISHED SCHEDULE "E": INSURANCE SCHEDULE "F": FEDERAL CONTRACT PROVISIONS SCHEDULE "G": SEARCH AND SEIZURE POLICY SCHEDULE "H": HUNTER UPGRADE DESIGN CRITERIA 3.1 CONTRACTOR'S PERSONNEL: CONTRACTOR shall furnish, at CONTRACTOR's cost, personnel in the numbers, classifications and work schedules set forth in Schedule "B", Category "A." All such personnel shall be employed directly by CONTRACTOR and are referred to in this Contract as "CONTRACTOR's Personnel". At the request of OPERATOR, CONTRACTOR shall furnish additional personnel as OPERATOR may designate to be part of CONTRACTOR's Personnel and OPERATOR shall reimburse CONTRACTOR for the direct costs and expenses such as hiring benefits, social security, wages and other direct payroll burdens of furnishing all such additional CONTRACTOR's Personnel as set forth in Schedule "B". 1 If, at OPERATOR's request and with CONTRACTOR's consent, CONTRACTOR's Personnel is reduced, OPERATOR shall be credited with the savings thereby effected. CONTRACTOR shall have a full drilling crew, as set forth in Schedule "B", working at all times when receiving pay at any of the day rates set forth in Schedule "A" calling for a full drilling crew. If circumstances beyond the control of CONTRACTOR temporarily prevent CONTRACTOR from having a full drilling crew working, CONTRACTOR shall receive the full applicable rate only if OPERATOR determines in its sole discretion that there is no delay in the progress of work. Otherwise, the applicable rate shall be reduced by the daily rate of pay and benefits for each man that a crew is short. 4.1 CONTRACTOR'S EQUIPMENT: CONTRACTOR shall furnish, at CONTRACTOR's cost, the drilling unit, equipment and facilities and as set forth in Schedule "C". Such unit, equipment and facilities are hereinafter called "CONTRACTOR's Equipment". 5.1 BASIC AGREEMENT: CONTRACTOR shall furnish and operate CONTRACTOR's Equipment and shall furnish CONTRACTOR's Personnel for the purpose of drilling the term as set forth in Schedule "A" on the terms and conditions set forth in this Contract. In the performance of the work contemplated by this contract, time is of the essence. 6.1 CONTRACTOR'S REPRESENTATIONS: CONTRACTOR represents that all of the CONTRACTOR's Equipment including the drilling unit and all supplies furnished by CONTRACTOR in connection therewith shall be in good condition and suitable for the uses intended and that all of CONTRACTOR's 2 Personnel shall be fully qualified and fit for their respective assignments, both in accordance with good oilfield practice and such governmental regulation affecting CONTRACTOR's operations that may, at any time during the life of this Contract, exist. 7.1 OPERATOR'S EQUIPMENT: OPERATOR shall furnish at its cost (or shall reimburse CONTRACTOR for furnishing as set forth in Section 19.7) the equipment and facilities described in Schedule "D". All equipment and facilities supplied under this Section are referred to in this Contract as "OPERATOR's Equipment". CONTRACTOR shall visually examine OPERATOR's Equipment on the drilling unit and shall report to OPERATOR any visible defects in such equipment. OPERATOR's Equipment on the drilling unit shall be maintained in good condition and repair by CONTRACTOR insofar as such equipment may be reasonably so maintained utilizing CONTRACTOR's Personnel. Upon completion of operations under this Contract, those items of OPERATOR's Equipment then on the drilling unit shall be delivered by CONTRACTOR (unless it has been lost or destroyed) to OPERATOR in as good condition as when received by CONTRACTOR, ordinary wear and use excepted, at such location as may be designated by OPERATOR. In delivering same, OPERATOR shall reimburse CONTRACTOR for additional shipping costs incurred and paid. 8.1 AREA OF OPERATIONS: The area of Operations is set forth in Item A-11, Schedule "A". Subject to CONTRACTOR's consent, which shall not be unreasonably withheld, OPERATOR may change said Area of Operations by giving CONTRACTOR reasonable notice. OPERATOR shall also pay or reimburse CONTRACTOR for all CONTRACTOR's added costs and expenses incurred 3 in connection with any change in Area of Operations. Such added costs and expenses shall be documented to OPERATOR's satisfaction. 8.2 DRILLING LOCATIONS: OPERATOR shall designate the locations of wells to be drilled under this Contract within the Area of Operations. 9.1 DRILLING PROGRAM: OPERATOR shall prepare and shall deliver to CONTRACTOR a drilling program for the wells contemplated to be drilled under this Contract, and may amend such drilling program or programs at any time. OPERATOR shall provide CONTRACTOR with copies of same in sufficient time for CONTRACTOR to comply. All drilling shall be performed by CONTRACTOR in accordance with OPERATOR's drilling program, and in a diligent, skillful and workmanlike manner in accordance with good oilfield practice, OPERATOR's drilling program(s) and the written and/or verbal instructions of OPERATOR's authorized representatives. CONTRACTOR shall conduct all operations hereunder on a twenty-four (24) hour day/seven (7) day per week basis. 10.1 OTHER OPERATIONS: CONTRACTOR shall repair, redrill, deepen, maintain, rework, perform remedial operations or other operations in any well or wells designated by OPERATOR. Such work shall be performed upon the request of OPERATOR and at the applicable day rate. The drilling of relief wells under this Contract shall be subject to the mutual agreement of OPERATOR and CONTRACTOR depending on the particular facts and circumstances of any such relief well and the blowout or other cause necessitating 4 same. 11.1 CASING PROGRAMS: CONTRACTOR shall drill each well to the depth and shall land, set, cement and test casing of the size and at the depth and using methods specified by OPERATOR. 12.1 CORING: CONTRACTOR shall core between such depths as shall be specified by OPERATOR and shall deliver all cores to OPERATOR or OPERATOR's authorized representative in containers provided by OPERATOR. No one except OPERATOR or OPERATOR's authorized representative shall have access to the core. 13.1 TESTING: If at any time during the course of drilling or upon completion of drilling, OPERATOR desires a test to be made to determine the productivity of any formation(s) encountered, OPERATOR shall designate the testing methods and procedures and CONTRACTOR shall make such test(s) as designated by and under the direction of OPERATOR provided that in the opinion of OPERATOR and CONTRACTOR, there is no unreasonable hazard to personnel and equipment posed by the conduct of such test(s). 14.1 FORMATION CUTTINGS: CONTRACTOR shall save, wash, sack and identify formation cuttings free from contamination and shall place them in separate containers furnished by OPERATOR properly labeled with well name, number and depth. 15.1 MEASUREMENT OF WELL DEPTH: CONTRACTOR shall measure total length of drill string in service to determine well depth with a steel tape by methods and at times 5 designated by OPERATOR (such as before logging, coring, setting casing or liner upon reaching final depth or at any other time when requested by OPERATOR). 16.1 COURSE OF WELL: CONTRACTOR shall use its best efforts, according to the standard provided in Section 9.1, to drill holes which will not deviate from the limits specified by OPERATOR. Measurement of hole angle from vertical shall be made by CONTRACTOR by methods acceptable to OPERATOR at times and intervals as may be directed by OPERATOR. When such measurements show a greater deviation from vertical than that specified by OPERATOR, CONTRACTOR, at OPERATOR's request, shall re-drill the hole to an angle from vertical which is acceptable to OPERATOR. During such re-drilling, CONTRACTOR shall be paid at the applicable day rates as provided in this Contract. CONTRACTOR shall deliver to OPERATOR the data pertaining to all deviation measurements made by CONTRACTOR and all records resulting therefrom. Special services and equipment for such surveying shall be supplied as set forth in Schedule "D". 17.1 COMPLETION OR ABANDONMENT: If OPERATOR directs a well to be completed as a producing well, CONTRACTOR shall complete said well in the manner and using methods specified by and under the direction of OPERATOR. OPERATOR may at any time elect to plug or abandon said well at any depth. CONTRACTOR, upon notice from OPERATOR of such election, shall cease drilling operations and shall proceed to abandon or plug the well in the manner specified by and under the direction of OPERATOR. 6 18.1 BLOWOUT OR FIRE: CONTRACTOR shall observe OPERATOR's and CONTRACTOR's fire and safety regulations, shall maintain its well control equipment in good operating condition at all times and shall use all reasonable means to prevent fires, explosions and blowouts and to protect the hole. Such efforts shall be in accordance with good oilfield practice. During drilling operations, CONTRACTOR shall use blowout prevention equipment as described in Schedule "C." CONTRACTOR shall examine and shall test all blowout prevention devices in accordance with OPERATOR's drilling or testing program and shall record the results of such test on the drilling reports. In the event of fire or blowout, CONTRACTOR shall use all reasonable means to protect the hole and to keep said fire or blowout under control and CONTRACTOR shall cooperate with any third party services employed by OPERATOR to keep the well under control. 19.1 COMPENSATION: OPERATOR shall pay CONTRACTOR certain amounts as provided below at the applicable rate of compensation for work performed hereunder. The applicable rate shall be determined in accordance with Sections 19.2, 19.3, 19.4, 19.5, 19.6 and 19.8 hereunder and shall be calculated to the nearest one-half (l/2) hour. 19.2 OPERATING RATE: Unless the Contract is terminated prior to the end of the specified Contract Term (as defined in Section 31.1) the Operating Rate as specified in Item A-22 of Schedule "A" shall apply during the Contract Term, except for periods during which other rates are applicable or no payment by OPERATOR is required. 19.3 STANDBY RATE: The Standby Rate as specified in Item A-23 of 7 Schedule "A" shall apply to periods during which a full complement of CONTRACTOR's Personnel is on the drilling unit (except that the Standby Rate shall also apply to periods as provided in Section 19.3(d)) but no operations are being conducted for any one or more of the following reasons: (a) OPERATOR has instructed CONTRACTOR not to proceed with operations, and CONTRACTOR is not in default of any of its obligations regarding CONTRACTOR's Equipment or CONTRACTOR's Personnel; (b) CONTRACTOR's Equipment is being moved or is waiting to be moved to or from a well location including movement to the first well location following upgrades to CONTRACTOR's Equipment at a Gulf of Mexico shipyard or between well locations from the last well location to a mutually agreed port in the U.S. Gulf of Mexico at the end of this Contract and no mobilization or demobilization fee is due; (c) Delay caused by OPERATOR or its subcontractors including any delay necessary for repair of damage to CONTRACTOR's Equipment caused by OPERATOR or its subcontractors; (d) Weather conditions or rough water which shall include any period of evacuation of CONTRACTOR's Personnel from the drilling unit due to threat and/or occurrence of storm or hurricane and CONTRACTOR's Personnel are held 8 on standby with pay at the nearest available safe point until conditions permit return to the drilling unit; (e) Failure of OPERATOR to deliver any item of CONTRACTOR's Equipment (after CONTRACTOR has made same available at OPERATOR's shore base with reasonable notice of its requirements) which results in delays or in breakdown of CONTRACTOR's Equipment or delays in repairing same, notwithstanding the provisions of Section 19.4; 19.4 EQUIPMENT REPAIR RATE: In the event it is necessary to shut down CONTRACTOR's Equipment for repairs, excluding routine servicing which CONTRACTOR is performing hereunder, CONTRACTOR shall be allowed the EQUIPMENT REPAIR RATE set forth in Item A-24 of Schedule "A" for each period of shutdown time up to a maximum of twelve (12) hours for any one repair job and a total of twenty-four (24) hours for all periods of shutdown time during each thirty (30) day period for all repairs which are not related to subsea or mooring repairs. Additionally, in the event it is necessary to shut down CONTRACTOR's Equipment for subsea or mooring repairs, CONTRACTOR shall be allowed the Equipment Repair Rate set forth in Item A-24 of Schedule "A" for each period of shutdown time for repairs related to subsea and mooring up to a maximum of twenty-four (24) hours for any one repair job and a total of forty-eight (48) hours for all such periods of shutdown time during each thirty (30) day period. Except as provided above in this Section 19.4, CONTRACTOR shall receive no compensation during periods when 9 CONTRACTOR's Equipment is shutdown due to a breakdown or repair. Shutdown time shall be considered as the duration from time of failure until CONTRACTOR has returned to that particular stage of operations where the repair, breakdown, loss or failure of CONTRACTOR's Equipment occurred. Changing swivel packing, cutting drill line, servicing the rig, testing BOP's, changing pump lines, recalibrating instrumentation, cleaning tanks and repairing OPERATOR furnished equipment shall not be included in computing the number of hours of shutdown time. 19.5 STAND-BY WITHOUT CREW RATE: The Stand-By Without Crew Rate as specified in Item A-25 of Schedule "A" shall apply in the event an extended period of suspended operations occurs hereunder, and OPERATOR requests CONTRACTOR to release all of CONTRACTOR's Personnel not required for the protection and maintenance of CONTRACTOR's Equipment or for the orderly resumption of operations. 19.6 RATE ADJUSTMENT: At the end of the Specified Contract Term (as defined in Section 31.1), if OPERATOR has the option to extend the term of this Contract and exercises such option, the rates set forth in Items A-22, A-23, A-24 and A-25 of Schedule "A" shall be adjusted, if necessary, to reflect the mutual agreement of OPERATOR and CONTRACTOR with respect to such rates as provided in Section 31.1. Additionally, CONTRACTOR's labor and the repairs and maintenance components of the rates shall be subject to review and adjustment after every twelve (12) months period of the Contract. These costs components shall be reviewed in comparison to the Producer Price Index for Oil Equipment and Machinery for the repairs and maintenance 10 components (having a base amount of $3,500 per day) and the US Bureau of Labor Statistics' index of Average Weekly Earnings of Crude Petroleum and Gas Production Workers, SIC Code 131 for the labor components (having a base amount of $8,200 per day). Alternatively, day rate adjustments related to labor cost changes could be made based on an actual documented basis as mutually agreed by the parties. OPERATOR and CONTRACTOR also agree that should a change in U.S. federal, state or local law or regulation (excluding income tax) be proclaimed after commencement of mobilization of the drilling unit which impacts CONTRACTOR's cost of operations related to the Contract, CONTRACTOR shall document to OPERATOR's reasonable satisfaction the net cost increase or decrease to CONTRACTOR and also that the change is being enacted industry-wide in the Gulf of Mexico in the time frame considered. To the extent that such documented cost increase or decrease exceeds an aggregate amount of US$50,000 for any and all occasions, OPERATOR shall reimburse or be credited by CONTRACTOR for any amount exceeding U.S.$50,000. The estimated upgrade costs meet current statutory and classification requirements for operating in the U.S. Gulf of Mexico, including any APIRP75 standards currently being voluntarily met by CONTRACTOR in accordance with its safety manual. 19.7 REIMBURSABLE COSTS: OPERATOR shall reimburse CONTRACTOR for CONTRACTOR's costs of material, equipment, work or services which are designated to be furnished by OPERATOR as provided in Schedule "D" but which for convenience are agreed to be furnished by CONTRACTOR at OPERATOR's request plus the 11 handling charge set forth in Item A-26 of Schedule "A". 19.8 MOBILIZATION AND DEMOBILIZATION FEES: OPERATOR shall pay CONTRACTOR the mobilization and demobilization fees set forth in Items A-20 and A-21 of Schedule "A" in accordance with the provisions of Sections 20.1 and 20.2 herein below. 20.1 PAYMENT OF INVOICES; AUDIT: CONTRACTOR will upon OPERATOR's request furnish OPERATOR with satisfactory evidence of the validity and prior payment by CONTRACTOR of all labor and material claims incurred by CONTRACTOR in connection with this CONTRACT. OPERATOR shall have the right to withhold payment of any invoice or part of invoice wherein there is a bona fide question or dispute as to propriety and/or amount. Subject to this right, (and except for Mobilization Fees "A" and "B"), OPERATOR shall pay undisputed invoices or the undisputed portions of invoices to CONTRACTOR within 30 days of receipt of a proper invoice. Mobilization Fee "A" invoice shall be paid thirty (30) days after receipt by OPERATOR or within five (5) days of when the drilling unit arrives at a Gulf of Mexico shipyard, whichever is later. Mobilization Fee "B" invoice shall be paid thirty (30) days after receipt by OPERATOR or within five (5) days of when the drilling unit is ready to commence operations and is ready to be towed to OPERATOR's first well location, whichever is later. Undisputed invoices not paid within this time frame shall bear interest at one-and-one-half (1-1/2) percent per month until paid. Payment of any invoice shall not prejudice the right of OPERATOR to question the propriety of any charges thereon and OPERATOR, prior to or subsequent to making any payments to 12 CONTRACTOR, shall have the right to audit the books, records and invoices of CONTRACTOR which are involved in the performance of this Contract to verify any and all charges so made by CONTRACTOR; provided, however, OPERATOR, within two (2) years following the calendar year in which it receives any such invoice(s), delivers to CONTRACTOR written notice of objections to or question of the propriety of any item or items thereon. Such notice shall specify the reasons for objections or details of questions regarding the propriety of any item or items thereon. Should OPERATOR within such two (2) year period so notify CONTRACTOR, adjustment shall be made between the parties accordingly as the propriety or impropriety of such items shall be determined. Failure to notify CONTRACTOR within said two (2) year period shall be deemed final approval of said invoice(s). CONTRACTOR shall retain all records pertinent to its invoices for at least two (2) years following the calendar year during which any such invoice(s) are received by OPERATOR. 20.2 TIME AND PLACE OF INVOICE PRESENTATION: Day rate and reimbursable invoices, accompanied by copies of the original vouchers, IADC reports, or other such records as are necessary to properly support them, may be presented to OPERATOR's office as set forth in Item A-5 of Schedule "A", in the original and three (3) copies, on or before the tenth (l0th) day of each month succeeding the month during which the work was performed or the expense incurred. The invoice for Mobilization Fee "A" as referred to in Section A-20 of Schedule A may be prepared by CONTRACTOR and submitted to OPERATOR following the departure of the drilling unit from the last well location in 13 Southeast Asia pursuant to Section A-27 in Schedule A. The invoice for Mobilization Fee "B" as referred to in Section A-20 of Schedule A may be prepared by CONTRACTOR and submitted to OPERATOR while the drilling unit is at a Gulf of Mexico shipyard being upgraded to 3,500 feet water depth capability, but not until at least thirty (30) days prior to the estimated completion date of the upgrades. 20.3 PLACE AND METHOD OF PAYMENT: All payments hereunder shall be made in accordance with Item A-10 of Schedule "A". 21.1 LIENS: CONTRACTOR shall release, defend, indemnify and hold OPERATOR and its co-lessees harmless from, and shall keep OPERATOR's Equipment, the well(s), license and interest therein of production therefrom and work free and clear of all liens, claims, assessments, fines and levies created or committed by CONTRACTOR or by subcontractors of CONTRACTOR. OPERATOR may post on CONTRACTOR's Equipment such notices as it may desire to protect itself against such liens, claims, assessments, fines and levies. 22.1 TAXES OR LEVIES: CONTRACTOR shall bear and pay all income taxes, social security taxes, and social insurance organization charges which may be applicable to or arise from its operations hereunder, shall withhold from wages and salaries of CONTRACTOR's Personnel all sums required by law to be withheld, shall pay the same promptly when due to the proper authorities and shall furnish OPERATOR satisfactory evidence of such payments when required, and, to the satisfaction of OPERATOR. CONTRACTOR shall, at CONTRACTOR's own cost, comply with all accounting and 14 reporting required by any government or governmental agency having jurisdiction. 23.1 INSURANCE: During the life of this CONTRACT, CONTRACTOR shall at CONTRACTOR's expense secure and maintain, with an insurance company or companies authorized to do business in the Area of Operations as set forth in Section 8.1 above and satisfactory to OPERATOR, or through a self-insurance program approved by OPERATOR, insurance coverages of the kind and in the amounts as set forth in Schedule "E". CONTRACTOR's insurance shall be primary to the extent CONTRACTOR has assumed specific risks, liabilities, responsibilities and obligations hereunder and OPERATOR's insurance policies shall not be called upon for contribution in such instances nor shall OPERATOR have any obligation for "sue and labor" in such instances. In each policy under which CONTRACTOR is required to provide hereunder, CONTRACTOR agrees to waive and agrees to have its insurers waive any rights of subrogation they may have against OPERATOR or its officers, directors, employees, or representatives to the extent CONTRACTOR has assumed specific risks, liabilities, responsibilities and obligations hereunder with the exception of federal and state statutory compensation coverages. It is further agreed that all such policies, other than Worker's Compensation policies, shall name OPERATOR as an additional Insured to the extent CONTRACTOR has assumed specific risks, liabilities, responsibilities and obligations hereunder. CONTRACTOR shall be solely responsible for any deductibles required under each such policy. The parties hereto do not intend, however, by such naming of OPERATOR to 15 limit in any way the indemnities provided elsewhere in this contract and CONTRACTOR further agrees that it is the intention of the parties that the insurance coverages herein shall not be a defense to the indemnity obligations of the indemnitor. CONTRACTOR shall furnish, at OPERATOR's request and to OPERATOR's satisfaction, evidence of insurance coverage prior to beginning work hereunder and any material changes thereafter. Each insurance policy shall contain a provision to give OPERATOR written notice of cancellation not less than thirty (30) days prior to the effective date of such cancellation. It is expressly agreed that the amounts of insurance set forth in Schedule "E" of this Contract are minimums only and in no way limit CONTRACTOR's obligations and liabilities with respect to all defense, hold harmless and indemnity obligations assumed by CONTRACTOR under the terms of this Contract. Each of the parties hereto agrees to carry adequate liability insurance to support the indemnities outlined in this Contract. OPERATOR agrees to waive and agrees to have its insurers waive any rights of subrogation they may have against CONTRACTOR or its officers, directors, employees, or representatives to the extent OPERATOR has assumed specific risks, liabilities, responsibilities and obligations hereunder with the exception of federal and state statutory compensation coverages. 23.2 SUBCONTRACTOR'S INSURANCE: CONTRACTOR and OPERATOR shall require their subcontractors to secure and maintain the insurance coverages set forth in Schedule "E" which are deemed necessary and any deficiencies in the coverage or 16 policy limits of such subcontractors' insurance coverages shall be the responsibility of the party engaging such subcontractor. 23.3 CONTRACTOR'S EQUIPMENT: 23.3.1 Equipment on the Surface. CONTRACTOR, except as otherwise specifically provided in this Section 23 and Section 24.3, shall assume liability at all times for damage to or loss or destruction of its surface equipment, including but not limited to the drilling unit, all drilling tools, machinery and appliances for use above the surface and in-hole, subsea and mooring equipment when such equipment is not in the hole or in use below the surface of the water, irrespective of whether such damage, loss or destruction is occasioned, brought about or caused in whole or in part by the negligence of OPERATOR, and CONTRACTOR shall release, defend, indemnify and hold OPERATOR harmless from and against all claims, demands and causes of action of every kind for damage to or loss or destruction of CONTRACTOR's surface equipment and OPERATOR shall be under no liability whatsoever to reimburse CONTRACTOR for such damage, destruction or loss. 23.3.2 Equipment in the Hole or Below the Surface of the Water. OPERATOR assumes responsibility and agrees to replace or to reimburse CONTRACTOR at replacement cost, to the extent not covered by CONTRACTOR's insurance, either F.O.B. the drilling unit or other location designated by CONTRACTOR at no greater shipping/handling cost than F.O.B. the drilling unit, for any loss, damage or destruction to CONTRACTOR's in-hole equipment, subsea and mooring equipment when said equipment is in the hole or in use below the surface of the water, less 17 accumulated depreciation on the basis of two percent (2%) per operating month on drill pipe and 3/4ths (three quarters) of one percent (1%) per operating month on drill collars, subsea and mooring equipment, with maximum allowable depreciation to be deducted to be 50% and the period of depreciation shall commence on the term commencement date of this contract. If such loss, damage or destruction is caused by the sole negligence or willful misconduct of CONTRACTOR, OPERATOR shall have no liability under this section. Property of subcontractors of CONTRACTOR shall be considered CONTRACTOR's Equipment for the purposes of this Section. 23.4 OPERATOR'S EQUIPMENT: OPERATOR shall assume liability at all times and shall release, defend, indemnify and hold CONTRACTOR harmless from and against all claims, demands and causes of action of every kind for damage to or loss or destruction of OPERATOR's property and equipment, including but not limited to any well, platform or structure of OPERATOR, and including removal of wreck or debris. Property of subcontractors of OPERATOR shall be considered OPERATOR's Equipment for the purposes of this Section. 23.5 EMPLOYEES: CONTRACTOR agrees to release, protect, defend, indemnify and hold OPERATOR, its co-lessees, partners, joint ventures, agents, drilling consultants onboard the drilling unit, officers, directors, employees, representatives, insurers, and parent, subsidiary, and affiliated companies, and its and their employees, representatives, agents, officers, directors, insurers, (hereinafter referred to 18 collectively as "Indemnified Parties") harmless from and against all claims, demands, and causes of action, including reasonable attorney's fees, of every type and character, without limit and without regard to the cause or causes thereof, which arise out of or are related in any way to the subject matter of this Contract and which: (a) are asserted by or arise in favor of any of CONTRACTOR's or its subcontractors, invitees, agents, representatives, or employees and/or their spouses or relatives due to bodily injury, personal injury, death, or loss or damage of property or; (b) are asserted for any damage to or destruction of CONTRACTOR's, its subcontractors', its invitees' or employees property or other materials from any cause; whether or not caused by the sole, joint, and/or current negligence of the Indemnified Parties and/or any claim of strict liability and/or the unseaworthiness of any vessel and/or any cause whatsoever, whether predating this Contract or not. OPERATOR agrees to release, protect, defend, indemnify, and hold CONTRACTOR, its officers, directors, employees, representatives, insurers and parent, subsidiary and affiliated companies and their employees, representatives, officers, directors and insurers harmless from and against all claims, demands, and causes of action, including reasonable attorney's fees, of every type and character, without limit and without regard to the cause or causes thereof, which arise out of or are related in any way to the subject matter of this Contract 19 and which: (a) are asserted by or arise in favor of any OPERATOR's or its subcontractor's, agents, representatives, invitees, or employees, and/or their spouses or relatives, due to bodily injury, personal injury, or death, or loss or damage of property; or (b) are asserted for any damage to or destruction of OPERATOR's or its subcontractor's employees, or its invitees property, or other materials from any cause; whether or not caused by the sole, joint, and/or concurrent negligence of CONTRACTOR and/or any claim of strict liability and/or the unseaworthiness of any vessel and/or any cause whatsoever, whether predating this Contract or not. 23.6 THIRD PARTIES: CONTRACTOR shall defend, indemnify and hold OPERATOR, and its subcontractors harmless from and against all claims, demands and causes of action of every kind and character, without limit and without regard to the cause(s) thereof or the negligence of any party or parties (including OPERATOR) arising in connection herewith, for injury to the person or property of, or death or illness of CONTRACTOR's contractors and subcontractors and/or employees of its contractors and subcontractors, or its invitees or visitors. OPERATOR shall defend, indemnify and hold CONTRACTOR harmless from and against all claims, demands and causes of action of every kind and character, without limit and without regard to the cause(s) thereof or the negligence of any party or parties (including CONTRACTOR) arising in connection herewith, for injury to the persons or property of, or illness or death of OPERATOR's 20 contractors (other than CONTRACTOR) and subcontractors, or its invitees or visitors. 23.7 LOSS OF HOLE: In the event the hole should be lost or damaged, OPERATOR shall be responsible for any such loss or damage unless such damage or loss is caused by CONTRACTOR's gross negligence or willful misconduct. CONTRACTOR shall, at OPERATOR's election, drill a new hole on the same location or redrill such section of the hole as OPERATOR may require, in either case subject to all the terms of this Contact, except that in the case of CONTRACTOR's gross negligence or willful misconduct, the Operating Rate shall be reduced to eighty (80) percent of that set forth in Item A-22 of Schedule "A" for the drilling of a new hole or redrilling of such hole section as CONTRACTOR's exclusive liability. 23.8 BLOWOUT OR CRATER: In the event a well being drilled shall blowout or crater from any cause, OPERATOR shall bear the entire cost of killing the well or otherwise bringing it under control, and shall release, hold harmless, indemnify and defend CONTRACTOR for any such incident. This assumption applies only to the actual blowout or crater and the cost of bringing the well under control and has no application to the loss of property, injuries or damage caused by such blowout, which are covered elsewhere in this Contract. OPERATOR shall have the right to use all CONTRACTOR's Equipment and CONTRACTOR's Personnel during such times as OPERATOR, or both OPERATOR and CONTRACTOR, are engaged in bringing a well under control. During such time that CONTRACTOR is involved in such efforts to bring a well under control, OPERATOR shall compensate CONTRACTOR under the 21 applicable day rate(s) as determined under this Contract or any other contract for the use of any other equipment of CONTRACTOR 23.9 RESERVOIR LIABILITY: OPERATOR assumes all liability and shall release, indemnify, defend and hold harmless CONTRACTOR for the loss of or damage to any geological formation, strata, or oil, gas or other reservoirs beneath the surface of the earth, which shall also include the loss of any such oil, gas or other substance which escapes above or below the surface. 24.1.A POLLUTION OR CONTAMINATION: CONTRACTOR shall assume all responsibility for, including control and removal of, and shall release, defend, indemnify and hold OPERATOR harmless against and from loss, cost or damage arising from pollution or contamination which originates from the drilling unit above the surface of the land or water: (i) resulting from spills, leaks or dumping of fuels, lubricants, motor oil, pipe dope, paints, solvents, ballasts, bilge, garbage, sewerage, debris, nonbiodegradable objects and other materials exclusive of those covered by section 24.1(ii) immediately below, in CONTRACTOR's possession and control, whether occasioned, brought about or caused in whole or in part by negligence of OPERATOR. (ii) resulting from spills, leaks or dumping of oil emulsion, oil base or chemically treated drilling fluids, contaminated cuttings and lost circulation and fish recovery materials and fluids, when said materials are in 22 CONTRACTOR's possession, although their use or disposition may be at OPERATOR's direction, and such spill, leak or dumping is a result of CONTRACTOR's sole negligence. (iii) resulting from leakage or other uncontrolled flow of oil, gas or water from pipelines, including lines on or in submerged lands, ruptured or damaged by CONTRACTOR's rig, barge, anchors or other equipment, or by CONTRACTOR's operations, whether or not CONTRACTOR is negligent, except that CONTRACTOR shall not be responsible for such pollution when the pipeline rupture or damage is caused by the correct positioning or operation of CONTRACTOR's Equipment within a radius of one thousand (1000) feet beyond the longest deployed anchor leg at a specific location, or on a specific route, designated by OPERATOR, or by the actual positioning of such equipment by OPERATOR, or where OPERATOR fails to advise CONTRACTOR of any known obstructions and mark same as set forth in Section 24.3. 24.1.B POLLUTION OR CONTAMINATION OPERATOR shall assume all responsibility for, including control and removal of, and shall release, defend indemnify and hold CONTRACTOR harmless against and from, any loss, cost or damage arising from pollution or contamination: 23 (i) resulting from fire, blowout, cratering, seepage, or any other uncontrolled flow of oil, gas or water during the conduct of operations hereunder. (ii) resulting, except as provided in section 24.1.A (ii) from possession, use or disposition of oil emulsion, oil base or chemically treated drilling fluids, contaminated cuttings, and lost circulation and fish recovery materials and fluids, including such possession, use or disposition by other contractors. (iii) resulting, as stated in section 24.1 A (iii), when caused by the correct positioning or operation of CONTRACTOR's Equipment at a specific location, or on a specific route, designated by OPERATOR, or by the actual positioning of such equipment by OPERATOR, or where OPERATOR fails to advise CONTRACTOR of any know obstructions and mark same as set forth in Section 24.3. Without relieving CONTRACTOR of any of its obligations above provided, it is agreed that OPERATOR may take part to any degree it deems necessary in the control and removal of any pollution or contamination which is the responsibility of CONTRACTOR under the foregoing provisions and CONTRACTOR shall reimburse OPERATOR for the cost thereof. In addition, OPERATOR reserves the right to perform subsea inspections for pollution 24 and contamination which is the responsibility of CONTRACTOR during operations conducted hereunder. In the event pollution or contamination is discovered through such inspection which is the responsibility of CONTRACTOR as set forth hereinabove, CONTRACTOR agrees to reimburse OPERATOR for the cost of such inspection and the reasonable cost of cleanup. In addition, OPERATOR agrees to make application with and obtain the U.S. Coast Guard for Certificate of Financial Responsibility to cover the drilling unit in order to enable such unit to operate in the U.S. Outer Continental Shelf 24.2 PATENT LIABILITY: CONTRACTOR agrees to release, defend, indemnify and hold harmless OPERATOR against any and all loss or liability arising from infringement or alleged infringement of patents covering CONTRACTOR's Equipment, property, methods or processes furnished by CONTRACTOR. OPERATOR agrees to release, defend, indemnify and hold harmless CONTRACTOR against any and all loss or liability arising from infringement or alleged infringement of patents covering OPERATOR's Equipment, property, methods or processes furnished by OPERATOR. 24.3 SOUND LOCATION AND ACCESS: OPERATOR shall be responsible for a conductor pipe program adequate to prevent soil and sub-soil washout. It is recognized that OPERATOR has knowledge of the access routes to the location, and must coordinate with CONTRACTOR to mutually decide the best access routes to the location, and of any obstructions along such routes or at the location. OPERATOR shall mark such obstructions which CONTRACTOR might encounter while enroute to or from the location, and of any obstructions along such routes or at the location. In 25 the event OPERATOR fails to advise CONTRACTOR of known obstruction(s) and mark same or if known seabed conditions prove unsatisfactory to properly support CONTRACTOR's Equipment and loss or damage to CONTRACTOR's Equipment results therefrom, OPERATOR shall, without regard to other provisions of this Contract, including Section 23.3 hereof, provide suitable tow vessels (and fuel) at OPERATOR's expense to move the drilling unit to a repair location (if required) and reimburse CONTRACTOR, to the extent not covered by CONTRACTOR's insurance, such reimbursement not to exceed $250,000.00, for all such loss or damage. In addition, OPERATOR shall pay to CONTRACTOR during periods of work stoppage or related repair due to such loss or damage at the applicable day rates set forth in Sections 19.2 through 19.5 for a period not to exceed thirty (30) days. 24.4 GENERAL DEFENSE, HOLD HARMLESS & INDEMNITY: It is the specific and expressed intent and agreement of OPERATOR and CONTRACTOR that all release, defense, hold harmless and indemnity obligations and/or liabilities assumed by OPERATOR and CONTRACTOR respectively under terms of this Contract, unless expressly limited or otherwise qualified in this Contract, shall be without limit and without regard to the cause or causes of any incident giving rise to any such obligations and/or liabilities, including the gross, sole, joint or concurrent negligence or fault of any party, breach of contract, the unseaworthiness of any vessels or crafts (including the drilling unit), and/or by ruin or defective premises, equipment, facilities, appurtenances or location of any party under any code, law or other type of strict liability whether or not such ruin or defect predates this 26 Contract and/or is latent, patent or otherwise. As used in sections 24.1 through 24.6, references to "OPERATOR", when such word is used in the context of receiving the benefit of an indemnitee, shall include OPERATOR, and its Indemnified Parties as described in Section 23.5, and the OPERATOR's affiliates (as such term is defined in Regulation C of the Securities Act of 1993) including their respective officers, agents, employees and insurers, and references to "CONTRACTOR" when such word is used in the context of an indemnitee shall include CONTRACTOR's parent and subsidiary companies, and their owners, officers, agents, employees and insurers, and the drilling unit, its owners and insurers. It is further agreed that if it is judicially determined by any lawfully constituted tribunal with jurisdiction over the parties and subject matter of the proceeding, beyond the control of the parties hereto, that the monetary limits of insurance carried by OPERATOR and CONTRACTOR (which shall also be deemed to include any self insurance) or the monetary limits of the hold harmless, defense and indemnity agreements voluntarily and mutually assumed by OPERATOR and CONTRACTOR in this Contract, exceed the maximum limits permitted under applicable law, then said insurance (including self-insurance), release, hold harmless, defense and indemnity agreements shall automatically be amended to conform to the maximum monetary limits permitted under such law. 24.5 CLAIMS: All claims against CONTRACTOR for labor (including but not limited to social benefits, termination pay or similar benefits), services and other items required or 27 used hereunder by CONTRACTOR shall be paid promptly when due and CONTRACTOR shall release, indemnify, defend and hold OPERATOR harmless from and against all liability, demands and expenses from all such claims. 24.6 CONSEQUENTIAL DAMAGES: Neither party shall be liable to the other for special, indirect or consequential damages resulting from or arising out of this Contract, its performance or breach, which shall be deemed to include without limitation, loss of profit, delay in or loss of production or business interruptions, however same may be caused. 24.7 OPERATOR'S AUTHORIZED REPRESENTATIVES: OPERATOR shall furnish CONTRACTOR a list of OPERATOR's representatives and employees authorized to receive all information pertaining to logs, records, reports, cores, core data and any other information on wells drilled or any work performed under this Contract. OPERATOR and its authorized representatives and employees shall have the right at all times to receive all information, to inspect all work performed hereunder, to witness and to check all measurements and tests and to have free access to the drilling unit. 25.1 RECORDS AND REPORTS: CONTRACTOR shall furnish and shall prepare a complete and accurate record on the IADC-API Daily Drilling Report form of all work performed under this Contract on any well and shall furnish OPERATOR with two (2) legible carbon copies of said report properly signed by CONTRACTOR's and OPERATOR's representatives. One (1) of the aforementioned copies shall be attached and made a part of CONTRACTOR's invoice for the work hereunder. CONTRACTOR shall 28 keep and provide OPERATOR, in the manner specified by OPERATOR, with delivery tickets and any other warehouse records covering any materials or supplies furnished to OPERATOR for which CONTRACTOR shall be reimbursed by OPERATOR. The quantity, description and condition of material and supplies shall be properly recorded by CONTRACTOR. 25.2 CONFIDENTIAL NATURE OF RECORDS: All logs, cores, core data, cuttings, reports and records pertaining to the performance under the Contract shall be open at all times to the inspection of OPERATOR and its authorized representatives and employees and shall not be exhibited nor the contents divulged by CONTRACTOR or CONTRACTOR's Personnel to any other person, without OPERATOR's prior written consent. 26.1 DISCIPLINE AND SAFETY: CONTRACTOR shall, at all times, maintain strict discipline and good order among its employees in the use of hazardous/toxic chemicals, safety equipment and proper work procedures for the purpose of doing everything reasonably possible to prosecute the work contemplated by this Contract in a good and workmanlike manner, and to protect against personal injury and damage to equipment and the hole. CONTRACTOR shall establish safety rules and procedures and require that employees observe same as well as any that may be issued by OPERATOR (to the extent they do not conflict with those of CONTRACTOR) and any safety or other regulations issued by agencies of any government having jurisdiction. Without limiting the generality of the foregoing, CONTRACTOR agrees to comply with the requirements contained in any "right to know" laws of any state, which are now or may become applicable to operations 29 caused by this Contract or arising out of the performance of such operations, regarding hazardous/toxic chemicals. CONTRACTOR shall take all measures necessary to provide safe working conditions. No smoking or open flame or matches or lighters shall be permitted on the drilling unit except in areas designated by CONTRACTOR in consultation with OPERATOR as areas wherein smoking or open flame are permitted. CONTRACTOR as a matter of policy does not allow and shall use its best efforts to prevent the existence of any alcoholic beverages, drugs and firearms (or other weapons) aboard the drilling unit. CONTRACTOR shall conduct safety drills aboard the drilling unit for all personnel and shall report same on the IADC-API Daily Drilling Report. CONTRACTOR shall furnish OPERATOR promptly with a report of each accident which may occur, and shall notify all Government agencies of accidents as required by law. 27.1 RELATIONSHIP OF PARTIES: CONTRACTOR is an independent contractor; neither CONTRACTOR, its employees, CONTRACTOR's subcontractors or their employees are agents or employees of OPERATOR. The entire performance, including but not limited to operation, management and control of the drilling unit and other items of CONTRACTOR's Equipment, shall be under the exclusive control and command of CONTRACTOR. It shall be the sole and exclusive duty of CONTRACTOR to determine by CONTRACTOR's own inspection that all supplies and items of equipment are loaded and stored aboard said drilling unit in a proper manner and that said drilling unit is in all respects able to undertake any contemplated operation under then existing conditions in accordance with Section 6.1. OPERATOR's prime interest is in the 30 results to be obtained by CONTRACTOR's performance under this Contract as an independent contractor. 28.1 FORCE MAJEURE: Except as otherwise provided in this Section, each party to this Contract shall be excused from performing under the terms of this Contract if and for so long as such performance is hindered or prevented by occurrences, or the resulting effects therefrom, such as, but not limited to, riots, labor disputes, strikes, lock-outs, wars (declared or undeclared), insurrections, rebellions, terrorist acts, civil disturbances, dispositions or orders of governmental authority, whether such authority be actual or assumed, acts of God (other than adverse sea or weather conditions), inability to obtain equipment, supplies or fuel, or by any other act or cause which is reasonably beyond the control of such party, any such event and the effect or results of such, being herein sometimes called "Force Majeure". If performance is prevented by failure to comply with any governmental law, rule, regulation, disposition or order as aforesaid and the affected party is operating in accordance with good oilfield practice in the Area of Operations and is making reasonable efforts to comply with such law, rule, regulation, disposition or order, the matter shall be deemed beyond the control of the affected party. In the event that either party hereto is rendered unable, wholly or in part, by any such occurrence, or the resulting effects therefrom, to carry out its obligations under this Contract, it is agreed that such party shall give notice and details of Force Majeure and its resulting effects in writing to the other party as promptly as possible after its occurrence. In such cases, the obligations of the 31 parties shall be suspended during the continuance of any inability so caused. In the event of suspension of operations under Force Majeure, this Contract shall extend beyond the original Contract term for the pro-rata suspended period. In the event that OPERATOR is the party giving notice of a Force Majeure event, OPERATOR shall be required to pay CONTRACTOR the Equipment Repair Rate, the Stand-By Rate or the Stand-By Without Crew Rate provided for in this contract as may be applicable and subject to any limitations associated until the applicable rate for a period of thirty (30) days after such notification. In order to protect the interests of CONTRACTOR, if a Force Majeure event continues after the expiration of the thirty (30) day period referred to above, CONTRACTOR shall acquire a Business Interruption Insurance Policy (Policy) which will provide no greater than $40,000,000.00 coverage for the first year and no greater than $20,000,000.00 coverage the second year with a daily indemnity payment, net of any coinsurance payments by CONTRACTOR, of $52,000.00 per day . The effective date of the Policy shall be identical to the effective date of this Contract. The cost of the premium for such Policy shall be reimbursed by OPERATOR to CONTRACTOR within fifteen (15) days after receipt by OPERATOR of the Certificate of Insurance from CONTRACTOR. In no event shall the premium be greater than $600,000.00 for the first year of coverage and $300,000.00 for the second year of coverage and OPERATOR and CONTRACTOR agree to use their best efforts on a joint basis to acquire a reasonable Policy at the lowest premium available on the market within the premium limits stated in this Section 28.1. In the event that a 32 Force Majeure event is not capable of being covered under a Policy and that particular Force Majeure event occurs which causes notification under this Article, OPERATOR agrees to pay the sum of $52,000.00 per day until the earlier of 1) the termination of the Force Majeure event and resumption of day rate operations, 2) the end of the contract period or 3) ninety (90) days in addition to the thirty (30) day period stated above or a total of one hundred twenty (120) days after the notification of the Force Majeure event. Furthermore, CONTRACTOR agrees not to terminate this contract at any time during a Force Majeure event while it is receiving payments either through Policy reimbursements or directly from OPERATOR under this Article subject to the time limitations stated below. Also at the point in time when CONTRACTOR is no longer receiving payments during a Force Majeure event, CONTRACTOR shall have the right to terminate this contract. In the event of Force Majeure, OPERATOR and CONTRACTOR agree to meet in an effort to reach a mutually acceptable solution to the Force Majeure event and such meeting shall occur prior to a period of one hundred fifty (150) days after notification of the Force Majeure event or before zero (0) rate occurs if earlier than one hundred fifty (150) days. In the event that the parties cannot agree as to a date for resumption of normal dayrate operations, then either party can terminate the Contract after one hundred fifty (150) days or earlier if CONTRACTOR is on zero (0) dayrate and CONTRACTOR shall continue to receive any dayrate payments provided through the Business Interruption Insurance Policy. 29.1 REPRESENTATIVES FOR NOTICES: OPERATOR and 33 CONTRACTOR shall each designate a representative to receive notices as set forth in Items A4 and A-7 of Schedule "A". Such representatives may be changed by written notice to the other party. 30.1 ASSIGNMENT: OPERATOR, at its option, may assign this Contract, for all or any part of the term remaining, to any entity qualified by the Minerals Management Service to operate in the Outer Continental Shelf of the Gulf of Mexico, but only with the prior written approval of CONTRACTOR which shall not be unreasonably withheld. In order for this assignment to be effective under the terms of this CONTRACT, OPERATOR must provide CONTRACTOR with written notice of the assignment within ten (10) days after the effective date of the assignment. CONTRACTOR, at its option, may assign this Contract for all or part of term remaining to any other party, but only with the prior written approval of OPERATOR, which shall not be unreasonably withheld. In order for this assignment to be effective under the terms of this CONTRACT, CONTRACTOR must provide OPERATOR with written notice of the assignment within ten (10) days after the effective date of the assignment. 31.1 SPECIFIED CONTRACT TERM; OPTION TO EXTEND: This Contract shall become effective upon signature by parties hereto on the day set forth in Item A-1 of Schedule "A". Work shall begin under this contract as outlined in item A-15 of schedule "A" (Term Commencement Date). The Term of this contract shall be for the minimum period set forth in Item A-16 of Schedule "A". OPERATOR shall have the option of extending the term of this Contract for the period set forth in Item A-33 of 34 Schedule "A" upon OPERATOR giving CONTRACTOR written notice of its desire to extend the Contract on or before the end of the fifteenth (15th) month after the Term Commencement Date. The fifteen (15) month option exercise deadline shall also include the requirement for the mutual agreement of the parties respecting dayrates for the option period. The Specified Contract Term or any extension (if such option is exercised by OPERATOR) shall be extended automatically from day to day for the time necessary to complete any particular well or related operations in progress upon expiration of the specified contract term or any extension. 31.2 TERMINATION BY OPERATOR: Subject to the fulfillment of all then existing obligations under this Contract and except as hereinafter provided, OPERATOR may terminate this Contract, effective upon delivery to CONTRACTOR of written notice of such termination (a) At any time after the drilling unit becomes incapable of performing the work contemplated by this Contract, for reasons within CONTRACTOR's control and cannot be made capable of performing such work within twenty (20) days following written notice of termination, or (b) After thirty (30) days from notice relating to Force Majeure and subject to Section 28.1 above, or (c) At any time if, in OPERATOR's sole 35 opinion and after written notice and opportunity for correction by CONTRACTOR within ten (10) days of such notice, CONTRACTOR has failed to commence to conduct its operations under this Contract in accordance with good oilfield practice as a result of causes within the control of CONTRACTOR, or CONTRACTOR has failed to furnish or maintain CONTRACTOR's Equipment in good condition and/or suitable for the use intended for under this Contract and as such is detrimental to the normal operational efficiency of OPERATOR's drilling program or any of CONTRACTOR's Personnel or other personnel engaged by CONTRACTOR which OPERATOR considers to be incompetent or otherwise detrimental to the normal operational efficiency of OPERATOR's drilling program, have not been replaced by CONTRACTOR after receipt of the appropriate written notice from OPERATOR or (d) At any time for any other reason after the Term Commencement Date by prior thirty (30) days written notice to CONTRACTOR as per Item A-35 of Schedule "A", provided that OPERATOR shall pay to 36 CONTRACTOR for the Stand-By or Stand-By-Without-Crew Rate, as applicable, from the date of termination for the remaining balance of unused days of dayrate operations less than the firm period as specified in Schedule "A", Item A-16 of the Contract. In this event, CONTRACTOR shall exert every reasonable effort to find alternate employment for the drilling unit. In the event OPERATOR terminates this Contract in accordance with section 31.2 (a),or (c), such termination shall be without penalty to OPERATOR and CONTRACTOR shall not be entitled to any early termination compensation. To the extent of any conflict between the provisions of this Section and the terms and provisions of the remainder of this Contract, the provisions of this Section shall control. 31.3 TERMINATION BY CONTRACTOR: Subject to the provisions of Section 20.1, in the event that any payments due (except any invoices or portions of invoices that are in dispute or in the process of being settled by arbitration) are not paid when due, CONTRACTOR shall notify OPERATOR of nonpayment and shall give OPERATOR twenty (20) days from receipt of said notice to pay. In the event OPERATOR fails to pay within the said twenty (20) day period, CONTRACTOR may terminate ten (10) days after receipt of the latter notice, unless payment of all invoices then overdue and not in dispute is received by CONTRACTOR prior to the expiration of said ten (10) day period. 37 In the event the Contract is terminated pursuant to this Section, CONTRACTOR shall be under no obligation to finish any well or work in progress and any actions taken by CONTRACTOR pursuant to this Section 31.3 shall be without prejudice to any of CONTRACTOR's other legal rights or remedies. 32.1 UNSATISFACTORY PERFORMANCE: If, in the sole opinion of OPERATOR, CONTRACTOR has failed to conduct its operations under this Contract in accordance with good oilfield practice as a result of causes within the control of CONTRACTOR, or CONTRACTOR has failed to furnish or to maintain CONTRACTOR's Equipment in good condition and/or suitable for the use intended, or members of CONTRACTOR's Personnel or other personnel engaged by CONTRACTOR are considered by OPERATOR to be incompetent or otherwise detrimental to OPERATOR's drilling program, OPERATOR may give CONTRACTOR written notice in which the causes of dissatisfaction shall be specified. Should CONTRACTOR fail, refuse or not commence to remedy the matters complained of within ten (10) days after written notice is received by CONTRACTOR, OPERATOR may (i) terminate this Contract with no penalty or early termination compensation as provided in Section 31.2(c) above or (ii) take over the exclusive operation of CONTRACTOR's Equipment and Personnel for the purpose of conducting operations hereunder notwithstanding anything to the contrary contained in this Contract. In the event operations are taken over by OPERATOR: (a) OPERATOR shall pay CONTRACTOR the Stand-By-Without-Crew Rate set forth in Item A-25 of Schedule "A" plus the value of any drilling supplies belonging to CONTRACTOR and 38 used by OPERATOR for the period of such operations by OPERATOR. (b) OPERATOR shall pay all costs and wages (but not handling charges) in connection with CONTRACTOR's Equipment and Personnel. (c) OPERATOR shall return CONTRACTOR's Equipment to CONTRACTOR in as good a condition as when taken over by OPERATOR, however, normal wear and use shall be excepted. (d) All operations shall be at OPERATOR's risk, and any representations and indemnity provisions of this Contract whereby CONTRACTOR undertakes to protect, to indemnify or to hold harmless OPERATOR, in any respect (other than Patent Liability set forth in Section 24.2 above) shall be suspended; provided, however, that such protection, indemnity or hold harmless provisions shall survive and be applicable to the extent that any loss, harm or damage occurring during the period when operations have been taken over by OPERATOR is caused, in whole or in part, by acts or events which transpired before operations were taken over by OPERATOR. OPERATOR shall release, defend, indemnify and hold harmless CONTRACTOR, its parent, subsidiary and affiliated companies, and their respective officers, directors, employees and agents 39 harmless from and against any and all claims, damages, expenses (including reasonable attorneys' fees) and judgements, arising from personal injury, death or property damage suffered or incurred by any person (including CONTRACTOR's employees) in any way related to such operations conducted by OPERATOR, CONTRACTOR's insurance shall not apply during such period with all provision hereof regarding primary insurance, additional named insured and waiver of subrogation having no effect. 33.1 CONFLICT OF INTEREST: CONTRACTOR shall not pay any fee, commission, rebate or anything of value to or for the benefit of any employee or representative of OPERATOR. CONTRACTOR shall use its best efforts not to permit any of its employees to engage in any activities contrary or detrimental to the best interests of OPERATOR. 34.1 SEVERABILITY; WAIVER; TITLE HEADINGS; ENTIRE AGREEMENT; MODIFICATION: No failure or failures on the part of either party to enforce, from time to time, all or any portion of the terms or conditions of this Contract shall be interpreted as a waiver of such terms or conditions. Title headings contained in this Contract are for identification and reference only, and shall not be used in interpreting any part of this Contract. This Contract, together with the Schedules incorporated and made a part of this Contract by reference, constitute the entire agreement of the parties; no other writings or conversations 40 shall be considered a part of this Contract. No promises, representations or inducements not expressed in this Contract were made or relied upon by any party hereto. This Contract can only be modified by written instrument properly executed by duly authorized representatives of the respective parties. This Contract shall be construed and the relations between the parties determined in accordance with the laws as set forth in Item A-31 of Schedule "A". If any word, phrase, clause, paragraph or other provision of this Contract is now or deemed, adjudicated or otherwise found to be against public policy, void or otherwise unenforceable, then said provision shall be deleted or modified, in keeping with the express intent of the parties hereto, as necessary to render all the remainder of this Contract valid and enforceable. All such deletions or modifications shall be the minimum required to effect the foregoing. 35.1 REGULATIONS: CONTRACTOR represents that all of CONTRACTOR's Equipment shall comply with design criteria and specification of all governmental authorities having jurisdiction. CONTRACTOR agrees to comply with all laws, rules and regulations, Federal, State or municipal, which are now or may become applicable to operations covered by this Contract or arising out of the performance of such operations including OPERATOR's Search and Seizure policy (Schedule G). The terms or Schedule "F", attached hereto, where applicable shall apply to this Contract. In the event that a change of law(s) or regulation(s) should occur after the commencement of mobilization hereunder, it shall be documented in accordance with Section 19.6. 41 36.1 BANKRUPTCY: Should CONTRACTOR or OPERATOR become insolvent or make an assignment for the benefit of creditors or be adjudicated as bankrupt or admit in writing its inability to pay its debts generally as the same become due, or should any proceedings be instituted by CONTRACTOR or OPERATOR under any State or Federal Law for relief of debtors or for the appointment of a receiver, trustee or liquidator of CONTRACTOR or OPERATOR, or should a voluntary petition in bankruptcy or for a reorganization or for an adjudication of CONTRACTOR or OPERATOR as an insolvent or a bankrupt be filed, or should an attachment be levied upon the CONTRACTOR's or OPERATOR's Equipment and not removed within ten (10) days therefrom, then upon the occurrence of any such event, OPERATOR or CONTRACTOR shall thereupon have the right to cancel this Contract and to terminate immediately all work then being performed thereunder. 42 OPERATOR British-Borneo Petroleum, Inc. WITNESS: By: /s/ Ian A. Thornley /s/ D. M. Adams Name: Ian A. Thornley /s/ Glen P. Kelley Title: President CONTRACTOR Atwood Oceanics, Inc. WITNESS: /s/ D. M. Adams By: /s/ John R. Irwin /s/ Glen P. Kelley Name: John R. Irwin Title: President 43 SCHEDULE "A" CONTRACT SUMMARY A-1 Contract Dated as of (1.1) June 20, 1996 A-2 OPERATOR British-Borneo Petroleum, Inc. A-3 OPERATOR's Address 1000 Louisiana, Suite 1200, Houston, Texas 77002-5009 Facsimile Number 713/650-1053 Telephone Number 713/650-8292 A-4 OPERATOR's Representative (29.1) Mike Adams A-5 OPERATOR's Address For Invoice 1000 Louisiana, Presentation (20.2) Suite 1200, Houston,TX 77002-5009 A-6 CONTRACTOR Atwood Oceanics, Inc. A-7 CONTRACTOR's Representative (29.1) Glen Kelley or Larry Till A-8 Facsimile Number 713/578-3253 Telephone Number 713/492-2929 A-9 CONTRACTOR's Address 15835 Park Ten Place Drive, Suite 200 Houston, TX 77084 A-10 CONTRACTOR's Address or Bank FIRST NATIONAL BANK OF and Account Number and Method CHICAGO for Invoice Payments (20.3) Chicago, Illinois for the account of ATWOOD OCEANICS; INC. Acct. No. 57-18163 ABA No. 071000013 A-11 Area of Operations (8.1) Federal waters, O.C.S., U.S. Gulf of Mexico unless otherwise agreed. A-12 Location of Well or Wells (8.2) Blocks to be advised by OPERATOR. A-13 Name of Drilling Unit ATWOOD HUNTER 1 A-14 Type of Drilling Unit Semisubmersible Drilling Unit A-15 Term Commencement Date (31.1) Last anchor bolstered at [the drilling unit's then existing location] a Gulf of Mexico shipyard following upgrade of the drilling unit to 3,500 feet water depth capability, and the drilling unit is ready for tow to Operator's initial designated location. A-16 Specified Contract Term: (31.1) Two (2) years firm at rates specified herein Minimum of: A-17 Number of Wells N/A A-18 Maximum Water Depth 3,500 feet A-19 Maximum Well Depth 20,000 feet (nominal design) A-20 Mobilization Fee (19.8) A. Four and one-half million dollars (US$4,500,000) payable upon the entry of the drilling unit into a shipyard for water depth upgrade to 3,500 feet. B. Five and one-half million dollars (US$5,500,000) payable when the drilling unit is ready to leave the shipyard and is ready to commence operations hereunder. A-21 Demobilization Fee (19.8) $ In the event the drilling unit continues to be on contract for OPERATOR for the subsequent one (1) or two (2) year operation, or the unit is released directly to another operator, for immediate ongoing work, the demobilization fee will be Zero (0). Otherwise, OPERATOR shall be obligated to provide appropriate boats and fuel at its own cost to move the drilling 2 unit at the Standby Rate to a mutually agreed port in the U.S. Gulf of Mexico." A-22 Operating Rate: $/Day (19.1 & 19.2) $ 88,400 if the drilling unit is ready to commence drilling operations after June 1, 1997, or. $88,900 if the drilling unit is readv to commence drilling operations on or before June 1, 1997. A-23 Stand-By Rate: $/Day (19.1 & 19.3) $ 86,600 A-24 Equipment Repair Rate: $/Day $ 79,560 (19.1 & 19.4) A-25 Stand-By-Without-Crew Rate: $/Day $78,400 (19.1 & 19.5) A-26 Handling Charge on Items Supplied five percent (5%) By CONTRACTOR (19.7) A-27 Port or Place at which the Mobilization (A): mobilization of the Drilling Southeast Asia Unit shall commence Mobilization (B): U.S. Gulf of Mexico shipyard A-28 Commencing of Day Rates When the last anchor is bolstered at a Gulf of Mexico shipyard following upgrade of the drilling unit to 3,500 feet water depth capability and is ready for tow to OPERATOR's first designated location. A-29 Cessation of Day Rates After completion of the work, when the drilling unit has been moved and is safely moored and 3 properly secured at a mutually agreeable port location in the Gulf of Mexico with all British-Borneo & British-Borneo third party equipment and supplies offloaded. In the event the drilling unit is released directly to another operator, cessation of dayrates will be the time when the last anchor is bolstered with all British- Borneo and British- Borneo third party equipment and supplies are offloaded, and the rig is ready for tow to the next operator's drilling location. A-30 Redrilling Penalty (23.7) See Section 23.7 A-31 Governing Law (34.1 & 37.1) U.S. General Maritime A-32 Location of shore base port As designated by facilities OPERATOR A-33 Term of Contract Extension, One (1) option of Operator's option (31.1) one (1) or two (2) years at mutually agreed rates A-34 Time of Notice to Exercise Within fifteen (15) months of the Term Commencement Date A-35 OPERATOR Notice for Early Thirty (30) days Termination (31.2(d) 4 -----END PRIVACY-ENHANCED MESSAGE-----