SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-5471
GLOBAL MARINE INC.
(Exact name of registrant as specified in its charter)
Delaware 95-1849298
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
777 N. Eldridge Parkway, Houston, Texas 77079-4493
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (281)596-5100
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
The number of shares of the registrant's Common Stock, par value
$.10 per share, outstanding as of April 30, 1998 was 172,856,500.
<PAGE>
GLOBAL MARINE INC.
TABLE OF CONTENTS TO FORM 10-Q
QUARTER ENDED MARCH 31, 1998
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Report of Independent Accountants 2
Condensed Consolidated Statement of Operations for
the Three Months Ended March 31, 1998 and 1997 3
Condensed Consolidated Balance Sheet as of
March 31, 1998 and December 31, 1997 4
Condensed Consolidated Statement of Cash Flows for
the Three Months Ended March 31, 1998 and 1997 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 14
PART II - OTHER INFORMATION
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURE 17
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Global Marine Inc.
We have made a review of the condensed consolidated balance sheet
of Global Marine Inc. and subsidiaries as of March 31, 1998, and
the related condensed consolidated statements of operations and
cash flows for the three-month periods ended March 31, 1998, and
1997. These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established
by the American Institute of Certified Public Accountants. A review
of interim financial information consists principally of applying
analytical procedures to financial data and making inquiries of
persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the condensed consolidated financial statements
referred to above for them to be in conformity with generally accepted
accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet as of December 31,
1997, and the related consolidated statements of operations, shareholders'
equity, and cash flows for the year then ended (not presented herein); and
in our report dated March 11, 1998, we expressed an unqualified opinion on
those consolidated financial statements. In our opinion, the information
set forth in the accompanying condensed consolidated balance sheet as of
December 31, 1997, is fairly stated, in all material respects, in relation
to the consolidated balance sheet from which it has been derived.
/s/ Coopers & Lybrand L.L.P.
Houston, Texas
May 7, 1998
<PAGE>
GLOBAL MARINE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In millions, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1998 1997
------ ------
<S> <C> <C>
Revenues:
Contract drilling $176.5 $108.7
Drilling management 97.4 99.0
Oil and gas 1.2 2.6
------ ------
Total revenues 275.1 210.3
Expenses:
Contract drilling 60.7 51.8
Drilling management 97.2 85.0
Oil and gas .5 .8
Depreciation, depletion and amortization 20.6 10.6
General and administrative 5.4 4.7
------ ------
Total operating expenses 184.4 152.9
------ ------
Operating income 90.7 57.4
Other income (expense):
Interest expense (8.4) (8.1)
Interest capitalized 5.2 3.3
Interest income .9 1.7
Other - (.1)
------ ------
Total other income (expense) (2.3) (3.2)
------ ------
Income before income taxes 88.4 54.2
Provision (benefit) for income taxes:
Current tax provision 5.1 5.4
Deferred tax provision (benefit) 15.1 (30.0)
------ ------
Total provision (benefit) for
income taxes 20.2 (24.6)
------ ------
Net income $ 68.2 $ 78.8
====== ======
Earnings per share:
Basic $ 0.40 $ 0.46
Diluted $ 0.39 $ 0.45
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
GLOBAL MARINE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
($ in millions)
<TABLE>
ASSETS
<CAPTION>
March 31, December 31,
1998 1997
-------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 62.7 $ 78.9
Marketable securities 1.7 1.7
Accounts receivable, net of allowances 170.3 152.2
Future income tax benefits 70.0 70.0
Costs incurred on turnkey drilling
contracts in progress 40.5 11.7
Prepaid expenses 8.5 3.1
Other current assets 7.6 10.1
-------- --------
Total current assets 361.3 327.7
Properties and equipment:
Rigs and drilling equipment, less
accumulated depreciation of $293.7
and $275.4 at March 31, 1998 and
December 31, 1997, respectively 1,012.1 609.2
Construction in progress 257.3 383.4
Oil and gas properties, full cost
method, less accumulated
depreciation, depletion and
amortization of $30.2 and $29.7 at
March 31, 1998 and December 31,
1997, respectively 7.6 6.4
-------- --------
Net properties and equipment 1,277.0 999.0
Future income tax benefits 64.3 79.4
Other asset 35.7 15.8
-------- --------
Total assets $1,738.3 $1,421.9
======== ========
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
GLOBAL MARINE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (Continued)
($ in millions)
<TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
March 31, December 31,
1998 1997
-------- -----------
<S> <C> <C>
Current liabilities:
Short-term bank debt $ 125.0 $ -
Accounts payable 122.2 115.5
Accrued compensation and related
employee costs 16.3 30.5
Accrued interest 3.2 6.6
Accrued income taxes 12.4 19.5
Other accrued liabilities 6.5 11.4
-------- ---------
Total current liabilities 285.6 183.5
Long-term debt 539.4 399.4
Capital lease obligation 18.4 17.9
Other long-term liabilities 14.4 15.5
Shareholders' equity:
Preferred stock, $0.01 par value,
10 million shares authorized, no
shares issued or outstanding - -
Common stock, $0.10 par value, 300
million shares authorized,
172,711,737 shares and 172,202,785
shares issued and outstanding at
March 31, 1998 and December 31,
1997, respectively 17.3 17.2
Additional paid-in capital 316.7 310.1
Retained earnings 546.5 478.3
-------- --------
Total shareholders' equity 880.5 805.6
-------- --------
Total liabilities and
shareholders' equity $1,738.3 $1,421.9
======== ========
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
GLOBAL MARINE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1998 1997
------ ------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 68.2 $ 78.8
Adjustments to reconcile net income
to net cash flow provided by operating
activities:
Deferred income taxes 15.1 (30.0)
Depreciation, depletion and amortization 20.6 10.6
Increase in accounts receivable (18.7) (13.4)
Decrease (increase) in costs incurred
on turnkey drilling contracts in
progress (28.8) 5.0
Increase in other current assets (2.9) (6.2)
Increase in accounts payable 6.7 9.6
Increase (decrease) in accrued interest (3.4) 7.1
Decrease in other accrued liabilities (20.9) (5.9)
Other, net (.1) .8
------- -------
Net cash flow provided by operating
activities 35.8 56.4
Cash flows from investing activities:
Capital expenditures (320.4) (55.5)
Purchases of held-to-maturity securities (1.0) (19.0)
Proceeds from maturities of
held-to-maturity securities 1.0 15.5
Proceeds from sales of properties
and equipment 2.0 .6
------- -------
Net cash flow used in investing
activities (318.4) (58.4)
Cash flows from financing activities:
Net increase in short-term debt 125.0 -
Increases in long-term debt 200.0 -
Reductions of long-term debt (60.0) (1.1)
Proceeds from exercises of employee
stock options 1.4 3.0
------- -------
Net cash flow provided by financing
activities 266.4 1.9
------- -------
Decrease in cash and cash equivalents (16.2) (.1)
Cash and cash equivalents at beginning
of period 78.9 92.9
------- -------
Cash and cash equivalents at end of
period $ 62.7 $ 92.8
======= =======
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
GLOBAL MARINE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
Note 1 - General
The financial statements reflect all adjustments which are, in the
opinion of management, necessary for a fair statement of the results
for the interim periods. Such adjustments are considered to be of a
normal recurring nature unless otherwise identified.
The year-end condensed consolidated balance sheet was derived from
audited financial statements but does not include all disclosures
required by generally accepted accounting principles. Certain
reclassifications were made to the prior-year period to conform to the
current-period presentation.
The term "Company" refers to Global Marine Inc. and, unless the context
otherwise requires, to the Company's consolidated subsidiaries.
Note 2 - Commitments to Purchase New Drillships
In the first quarter of 1998, the Company entered into agreements with
Harland and Wolff Shipbuilding and Heavy Industries Ltd. for the
construction of two dynamically-positioned deep-water drillships at a
cost of approximately $660 million, including all equipment, financing,
and other associated costs. The new drillships, which are expected to
enter service in the first and second quarters of 2000, respectively,
are intended to be financed with internally generated funds and funds
available under the Company's existing bank credit facilities.
Note 3 - Long-term Debt
Long-term debt as of March 31, 1998 and December 31, 1997 consisted of
the following:
<TABLE>
<CAPTION>
3/31/98 12/31/97
------- --------
(In millions)
<S> <C> <C>
7-1/8% Notes due 2007, net of discount $299.4 $299.4
Borrowings under $240 million bank
revolving credit facility 240.0 100.0
------ ------
Total long-term debt including current
maturities 539.4 399.4
Less current maturities - -
------ ------
Long-term debt $539.4 $399.4
====== ======
</TABLE>
<PAGE>
The weighted average annual rate of interest on borrowings under the
Company's $240 million revolving credit facility was 6.0125% as of
March 31, 1998, as compared to 6.325% as of December 31, 1997.
On January 29, 1998, the Company entered into a one-year unsecured
revolving credit facility in connection with the acquisition of the
offshore drilling rig, Stena Forth. Under the facility, the Company
may borrow up to $150 million at interest rates determinable at the
time of the borrowings. The unused portion of the credit facility is
subject to an annual commitment fee of one-tenth of one percent.
Borrowings under the $150 million credit facility are classified as
short-term bank debt on the accompanying balance sheet and totaled
$125.0 million at March 31, 1998, at an annual interest rate of 6.0875%.
<PAGE>
Note 4 - Income Taxes
The Company's effective tax rate for financial reporting purposes for
the first quarter of 1998 was approximately 23 percent, which was lower
than the U.S. statutory rate of 35 percent, due to the Company's
realignment of the ownership of its foreign operating assets in December
1997. As long as the Company permanently reinvests outside the U.S. its
foreign subsidiaries' earnings that are not otherwise subject to U.S.
taxation, the Company will neither incur nor provide for any U.S. federal
income taxes on such foreign earnings. In the first quarter of 1997, the
Company's effective tax rate differed from the U.S. statutory rate
primarily due to the Company's recognition of the future tax benefits of
a portion of the Company's unused net operating loss ("NOL") carryforwards.
Note 5 - Earnings per Share
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 128, "Earnings per Share," in the fourth quarter of 1997.
As a result, the Company's reported earnings per share for the first
quarter of 1997 have been restated. A reconciliation of the numerators
and denominators of the basic and diluted per-share computations for net
income follows:
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------
1998 1997
---------- ----------
(in millions, except per share data)
<S> <C> <C>
Net income (numerator): $ 68.2 $ 78.8
====== ======
Shares (denominator):
Shares - Basic 172,592,586 170,043,727
Effect of employee stock
options 3,445,740 5,953,919
----------- -----------
Shares - Diluted 176,038,326 175,997,646
=========== ===========
Earnings per share:
Basic $0.40 $0.46
Diluted $0.39 $0.45
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Operating Results
Summary
Operating income increased by $33.3 million to $90.7 million for the
first quarter of 1998 from $57.4 million for the first quarter of 1997,
primarily as a result of higher contract drilling dayrates, partially
offset by lower turnkey profit margins.
Data relating to the Company's operations by business segment follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31, Increase
------------------
1998 1997 (Decrease)
------ ------ --------
($ in millions)
<S> <C> <C> <C>
Revenues:
Contract drilling $181.5 $112.0 62%
Drilling management 98.0 99.0 (1%)
Oil and gas 1.2 2.6 (54%)
Less: Intersegment revenues (5.6) (3.3) 70%
------ ------
$275.1 $210.3 31%
====== ======
Operating income:
Contract drilling $ 96.1 $ 47.2 104%
Drilling management .1 13.9 (99%)
Oil and gas .3 1.3 (77%)
Corporate expenses (5.8) (5.0) 16%
------ ------
$ 90.7 $ 57.4 58%
====== ======
</TABLE>
The Company reported net income of $68.2 million for the first quarter
of 1998 as compared with net income of $78.8 million for the first
quarter of 1997. Net income for the first quarter of 1997 included a
$30.0 million net credit to deferred income taxes due to the recognition
of tax benefits of operating loss carryforwards.
Despite a continuation of low oil prices, which began trending downward
in the fourth quarter of 1997, the market for offshore drilling services
remained firm through the first quarter of 1998. Worldwide utilization
for offshore drilling rigs remained above 99 percent, and dayrates in
substantially all geographic markets in which the Company operates were
at historically high levels. Within the past few weeks, however, dayrates
on some new contracts in the Gulf of Mexico and West Africa have declined.
Should oil prices continue to remain low or decline further, oil and gas
operators may curtail their capital spending programs, causing further
decreases in dayrates.
In March 1998 the Company completed the purchase of a deep-water,
third-generation semisubmersible drilling rig, the Stena Forth, for $150
million. The Stena Forth, renamed the Glomar Arctic IV, is currently
operating in the U.K. sector of the North Sea under a drilling contract
that extends through November 1999.
<PAGE>
In the first quarter of 1998, the Company received two ultra-deep water
drilling commitments, each with a multinational oil company. To fulfill
the Company's obligations under the commitments, the Company entered into
agreements with Harland and Wolff Shipbuilding and Heavy Industries Ltd.
for construction of two dynamically-positioned, deep-water drillships at
a cost of approximately $660 million, including all equipment, financing,
and other associated costs. The first drillship will be capable of drilling
in water depths of 9,000 feet, upgradable to 12,000 feet, and is expected
to enter service in the first quarter of 2000. The second drillship will
be capable of drilling in water depths of 8,000 feet, upgradable to 12,000
feet, and is expected to enter service in the second quarter of 2000.
The Company intends to finance construction of the two ships with internally
generated funds and funds available under existing bank credit facilities.
The Company's deep-water fleet will total ten rigs with the addition of
these two rigs.
Contract Drilling Operations
Data with respect to the Company's contract drilling operations follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31, Increase
------------------
1998 1997 (Decrease)
------ ------ --------
<S> <C> <C> <C>
Contract drilling revenues by
area (in millions): (1)
Gulf of Mexico $ 71.5 $ 47.7 50%
West Africa 59.5 44.3 34%
North Sea 33.5 19.9 68%
Other 17.0 .1 169%
------ ------
$181.5 $112.0 62%
====== ======
Average rig utilization (2) 99% 98%
Fleet average dayrate $69,800 $47,400
- ---------------
(1) Includes revenues earned from affiliates.
(2) Excludes the Glomar Beaufort Sea I concrete island drilling system,
a currently inactive, special-purpose mobile offshore rig designed
for arctic operations, and rigs during the periods they were
being converted to drilling operations from other uses.
</TABLE>
Of the $69.5 million increase in contract drilling revenues for the first
quarter of 1998 as compared with the comparable quarter of 1997, $50.0
million was attributable to increases in dayrates, $18.1 million was
attributable to fleet additions subsequent to the first quarter of 1997,
and $3.1 million was attributable to higher rig utilization, partially
offset by a $1.7 million decrease in non-dayrate revenues.
The mobilization of rigs between the geographic areas shown in the above
table also affected each area's revenues over the periods indicated.
Specifically, the Company mobilized one jackup from the Gulf of Mexico to
Trinidad in June 1997, one jackup from West Africa to California in July
1997 and one jackup from the North Sea to offshore Argentina in September
1997.
The Company's operating profit margin for contract drilling operations
increased to 53 percent for the first quarter of 1998 from 42 percent in
the first quarter of 1997 as a result of higher dayrates. Operating
expenses increased by $20.6 million due to higher depreciation and other
operating costs in connection with the additions to the rig fleet, higher
labor expense and general price-level increases, among other factors.
<PAGE>
In February 1998 the Company completed the conversion of the Glomar Celtic
Sea semisubmersible to drilling operations from an accommodations unit and
began operating the rig in deep waters of the U.S. Gulf of Mexico under
a three-year contract. The conversion of the Glomar Explorer drillship to
a deep-water drilling rig is nearing completion, and the rig is expected
to begin drilling in the U.S. Gulf of Mexico under a five-year contract in
June 1998.
As of April 30, 1998, eleven of the Company's rigs were located in the
U.S. Gulf of Mexico, nine were offshore West Africa, five were in the
North Sea, and one was offshore each of Egypt, Argentina and Trinidad.
In addition, two rigs, the Glomar Adriatic VI and the Glomar Adriatic IV,
were being mobilized to the North Sea from the Gulf of Mexico and
California, respectively. The cost of mobilizing the Glomar Adriatic VI
will be recovered over the two-year term of the drilling contract through
an adjustment to the dayrate. The cost of mobilizing the Glomar
Adriatic IV will be paid for by the customer at the beginning of the
contract period. The Glomar Adriatic VI and Glomar Adriatic IV are
anticipated to commence operations under existing contracts in the North
Sea in May and June 1998, respectively. At April 30, 1998, all of the
Company's active rigs were under contract.
The Company estimates that customer commitments for eight of the
Company's rigs under contract as of April 30, 1998, will be completed
on or prior to August 31, 1998. Over the past several months, the terms
of deep-water drilling contracts for semisubmersibles and drillships
have lengthened as oil and gas operators have attempted to lock in the
availability of rigs to carry out deep-water projects. The drilling
market for jackup rigs in shallow waters, however, particularly in the
U.S. Gulf of Mexico, continues to be characterized by short-term,
well-to-well contracts. Short-term contracts for jackup rigs have been
typical in the industry for more than a decade, and the Company considers
its upcoming contract expirations typical of prevailing market
conditions and consistent with the normal course of business.
Drilling Management Services
Drilling management revenues decreased by $1.0 million to $98.0 million
in the first quarter of 1998 from $99.0 million in the first quarter of
1997, and operating income decreased by $13.8 million to $0.1 million
in the first quarter of 1998 from $13.9 million in the first quarter of
1997. The decrease in revenues consisted of a $12.4 million decrease
attributable to a reduction in the number of turnkey wells drilled to
23 in the first quarter of 1998 from 27 in the first quarter of 1997,
partially offset by a $6.1 million increase attributable to daywork and
other revenues and a $5.3 million increase attributable to higher
average turnkey revenues per well.
Drilling management services operated at breakeven for the first quarter
of 1998. This compares with operating income as a percentage of drilling
management revenues of 14 percent for the first quarter of 1997. The
decrease in profit margin was attributable primarily to estimated losses
totaling $7.3 million on two completed wells and one well in progress at
quarter-end. The Company incurred total estimated losses of $8.3 million
on six wells (four completed and two in progress) in the first quarter
of 1998, compared to a loss of $0.5 million on one well in the first
quarter of 1997. In addition, overall margins were lower than the first
quarter of 1997 due to higher rig rental costs. The higher rig rental
costs were attributable to certain higher-cost, third-party rigs which
the Company had under term contracts for use in its turnkey operations.
At May 7, 1998, these contracts had remaining terms ranging from five to
thirteen months. The higher-cost rigs had capabilities with respect to
water depth and other factors in excess of those required to perform
under the Company's turnkey contracts during the period, causing margins
to be strained, as compared to wells completed in 1997.
<PAGE>
Other Income and Expense
General and administrative expenses increased to $5.4 million in the
first quarter of 1998 from $4.7 million in the first quarter of 1997.
The increase was partially attributable to expenses incurred in
connection with ongoing upgrades of the Company's information systems
and to general price-level increases, among other factors.
The Company capitalized $5.2 million of interest expense in the first
quarter of 1998 and $3.3 million in the first quarter of 1997 in
connection with the conversions of the Glomar Celtic Sea and the
Glomar Explorer.
Interest income decreased to $0.9 million in the first quarter of 1998
from $1.7 million in the first quarter of 1997 due to lower cash balances
and lower interest rates earned thereon.
The Company's effective tax rate for financial reporting purposes for
the first quarter of 1998 was approximately 23 percent, which was lower
than the U.S. statutory rate of 35 percent, due to the Company's
realignment of the ownership of its foreign operating assets in December
1997. As long as the Company permanently reinvests outside the U.S. its
foreign subsidiaries' earnings that are not otherwise subject to U.S.
taxation, the Company will neither incur nor provide for any U.S. federal
income taxes on such foreign earnings. The Company estimates that its
overall effective income tax rate for 1998 will be approximately 25 percent.
Most of the tax expense for 1998 will be noncash because the Company will
use its NOL carryforwards to significantly reduce its current U.S. federal
income tax liability for the year.
In the first quarter of 1997, the Company's effective tax rate differed
from the U.S. statutory rate primarily due to the Company's recognition
of the future tax benefits of a portion of the Company's unused NOL
carryforwards.
Liquidity and Capital Resources
On March 10, 1998, the Company purchased a deep-water, third-generation
semisubmersible drilling rig, the Stena Forth, for $150 million. The
Company financed the purchase through borrowings under its bank credit
facilities. The Stena Forth, renamed the Glomar Arctic IV, is currently
operating in the U.K. sector of the North Sea under a drilling contract
that extends through November 1999. The contract for the Glomar Arctic IV
is expected to generate total revenues of approximately $64 million.
On March 18, 1998, the Company entered into an agreement to purchase from
Transocean ASA, a Norwegian drilling contractor ("Transocean"), the
remaining 43.4 percent interest of the partnership operating the Glomar
Adriatic V, Glomar Adriatic VI, and Glomar Adriatic VII. Under the
agreement, which was effective January 31, 1998, the Company paid
Transocean $20.3 million in cash, which will be amortized over approximately
5-1/2 years. The Company and Transocean previously shared in the net
revenues of the aforementioned rigs and a Transocean rig, the Nordic, as
part of a 1993 rig purchase and sale agreement.
For the three months ended March 31, 1998, $35.8 million of cash flow
was provided by operating activities, $265.0 million was provided from
net borrowings under the Company's bank revolving credit facilities, and
$1.4 million was provided from exercises of employee stock options.
From these amounts, $320.4 million was used for capital expenditures.
<PAGE>
For the three months ended March 31, 1997, $56.4 million of cash flow
was provided by operating activities and $3.0 million was provided from
exercises of employee stock options. From these amounts, $55.5 million
was used for capital expenditures and $3.5 million was used to purchase
marketable securities (net of maturities).
In the first quarter of 1998, the Company entered into agreements with
Harland and Wolff Shipbuilding and Heavy Industries Ltd. for the
construction of two dynamically-positioned drillships in order to fulfill
the Company's obligation under two multi-year, deep-water drilling
contracts. The two drillships are expected to be completed at a cost
of approximately $660 million, of which approximately $270 million in
construction costs and $9 million of capitalized interest are expected
to be incurred in 1998. The Company intends to finance construction of
the drillships with internally generated funds and funds available under
existing bank credit facilities. The Company anticipates the two
drillships will enter service in the first and second quarters of 2000,
respectively.
The first of the new drillships will be used by the customer for thirty
of the first thirty-six months after delivery, followed by two one-year
options. Revenues to be generated over the thirty-month period will
be approximately $186 million. The second of the two drillships is under
contract with a customer for a period of three years and is expected to
generate revenues of approximately $208 million. The customer has the
right to reduce the term to two years prior to July 1, 1998, in which
case the Company may market the drillship for the other year. The
Company may take either the first or second six-month period of the
first year following delivery from the shipyard and another six-month
period following the customer's first year of use.
Capital expenditures for the full year 1998 are anticipated to be $608
million, including $270 million for construction of the new drillships,
$150 million for the purchase of the Glomar Arctic IV, $63 million for
the conversion of the Glomar Explorer, $39 million for the conversion
of the Glomar Celtic Sea, $47 million for improvements to the remainder
of the drilling fleet, $20 million for the Transocean transaction, $16
million for capitalized interest, and $3 million for other expenditures.
As of March 31, 1998, the Company had $64.4 million in cash, cash
equivalents and marketable securities (including $4.5 million which was
restricted from use for general corporate purposes) and $25.0 million
available for borrowings under bank credit facilities. As of December 31,
1997, the Company had $80.6 million in cash, cash equivalents and
marketable securities, including restricted amounts of $1.5 million.
In April 1998 the Company filed with the U.S. Securities and Exchange
Commission a registration statement on Form S-3 under which, together with
a previous filing (together, the "Registration Statements"), the Company
may offer to sell from time to time (i) unsecured debt securities consisting
of notes, debentures or other evidences of indebtedness, (ii) shares of
preferred stock, $0.01 par value per share, and/or (iii) shares of common
stock, $0.10 par value per share, for an aggregate initial public offering
price not to exceed $500 million.
The Company is considering offering for sale approximately $300 million
of long-term debt securities under the Registration Statements in the
second quarter of 1998 and using the proceeds from such an offering to
reduce amounts outstanding under the Company's existing bank credit
facilities, under which the Company had borrowings of $390 million at
May 7, 1998.
<PAGE>
The Company believes that it will be able to meet all of its current
obligations, including capital expenditures and debt service, from its
existing bank credit facilities, its cash flow from operations, and its
cash, cash equivalents and marketable securities. In addition, the
planned debt offering would increase the Company's financial flexibility.
As part of upgrading and expanding its rig fleet and other assets, the
Company considers and pursues the acquisition of suitable additional
rigs and other assets on an ongoing basis. If the Company decides to
undertake an acquisition or the construction of a vessel, the incurrence
of additional debt or issuance of additional shares of stock could be
required.
Forward-Looking Statements
Under the Private Securities Litigation Reform Act of 1995, companies are
provided a "safe harbor" for discussing their expectations regarding
future performance. The Company believes it is in the best interests of
our stockholders to use these provisions and provide such forward-looking
information. We do so in this report and other communications. Our
forward-looking statements include things such as our expectations for
future Company performance, our projections regarding the dates rigs
that are under construction will enter service, statements regarding
future oil and gas prices and demand and future demand for offshore
drilling services, our expectations regarding future income tax rates and
capital expenditures, and other statements that are not historical facts.
Our forward-looking statements speak only as of the date of this report
and are based on currently available industry, financial and economic
data and our operating plans. They are also inherently uncertain, and
investors must recognize that events could turn out to be materially
different from our expectations.
Factors that could cause or contribute to such differences include, but
are not limited to, the Company's ability to generate cash flows or
obtain financing to fund its growth; identify and respond to changes in
the markets for oil and gas and for offshore drilling services, including
decreases in demand for the Company's services which may result from
curtailments of oil and gas operators' drilling programs due to low oil
and gas prices; manage its business in the face of existing or changing
tax laws; respond to challenges in international markets, including
changes in political or economic conditions and trade and regulatory
matters; complete its construction projects on schedule and within budget;
market its services competitively and cost effectively; and manage other
risk factors as may be discussed in the Company's reports filed with the
U.S. Securities and Exchange Commission.
The Company disclaims any obligation or undertaking to disseminate any
updates or revisions to its statements, forward-looking or otherwise, to
reflect changes in the Company's expectations or any change in events,
conditions or circumstances on which any such statements are based.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not significant.
<PAGE>
PART II - OTHER INFORMATION
Item 5. Other Information
On May 5, 1998, Global Marine Inc. announced that it has reluctantly
accepted John G. Ryan's resignation as the company's President and
Chief Operating Officer. As previously announced, Mr. Ryan has been
on medical leave since mid-February.
C. Russell Luigs, Global Marine's Chairman, said, "I cannot imagine
going through the ups and downs of the past 15 years without Jack on
the team. He proved to be an outstanding manager when the company went
through its toughest times, and he was equally effective at managing the
company's growth during the offshore drilling industry's extraordinary
resurgence. It is with a great deal of regret that we have accepted
his resignation. All of us at Global Marine are very pleased, however,
that he has agreed to remain a director."
Mr. Ryan, 45, was a key contributor to every major initiative undertaken
by the company since he joined Global Marine's legal department in 1982.
Named General Counsel in 1984, he successfully undertook the restructuring
of the company's debt during the severe drilling industry downturn of the
1980s. With the offshore drilling industry's resurgence in the 1990s,
Mr. Ryan became Chairman and Chief Executive Officer of Global Marine's
contract drilling subsidiary, Global Marine Drilling Company. While
there, he capitalized on the company's hard-won financial strength and
reestablished its reputation and expertise as a premium deep-water driller.
Later, as President of the parent company, he also oversaw the company's
rise to its present position as the world's dominant provider of offshore
turnkey drilling services.
On May 5, 1998, Global Marine Inc. also announced that its board of
directors has elected Robert E. Rose as the company's new President
and Chief Executive Officer. Mr. Rose has also joined Global Marine's
Board of Directors. In addition, Global Marine announced the promotion
of Jon A. Marshall to Executive Vice President and Chief Operating
Officer. Further, Marion M. Woolie will become President of Global
Marine Drilling Company, and Gary L. Kott will become President of
Global Marine's international drilling subsidiary.
C. Russell Luigs, who will continue as Global Marine's Chairman of
the Board, said, "I am very pleased that Bob Rose, who began his
professional career with Global Marine, has agreed to return to the
company as President and CEO. He is very highly regarded by our
customers, by our peers in the industry, and by the financial
community. Bob is rightly credited with building Diamond Offshore
from a series of strategic acquisitions and then doing an outstanding
management job. I have known Bob for many years as a respected
competitor. His many years of experience make him well-qualified to
lead the company's continuing expansion into deep water."
Mr. Rose, Global Marine's new President and Chief Executive Officer,
said, "Throughout my career, I have always had the highest regard for
Global Marine. I rejoin the company with a strong team already in
place, and I intend to do everything I can to help that team continue
growing Global Marine as the industry's premier contractor and turnkey
driller."
Bob Rose, 59, was a Global Marine executive prior to 1976 and rejoins
the company after holding top executive positions with several other
offshore drillers. For more than a decade he was President and Chief
Executive Officer of Diamond M Company and Diamond Offshore Drilling,
Inc., which he left in
<PAGE>
March. Previously, he held senior executive positions with Kaneb Services,
Inc. and Atwood Oceanics Inc. Mr. Rose's many years of offshore drilling
experience include a particular focus on deep-water drilling, which has
been the focus of Global Marine's expansion over the past several years.
Jon Marshall, Global Marine's new Executive Vice President and Chief
Operating Officer, was promoted from his prior position as Global Marine
Drilling Company's President. Previously, Mr. Marshall was responsible
for Global Marine's turnkey drilling subsidiaries. Marion Woolie, the
new President of Global Marine Drilling Company, was formerly that
subsidiary's Senior Vice President, Sales and Contracts. Gary Kott will
become President of Global Marine's international drilling subsidiary,
after having served most recently as Senior Vice President and Chief
Financial Officer of Global Marine Inc.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Global Marine 1998 Stock Option and Incentive Plan.
10.2 Form of Performance Stock Memorandum dated February
10, 1998 regarding conditional opportunity to acquire
Company stock granted to eight executive officers,
respectively, and dated May 5, 1998 regarding conditional
opportunity to acquire Company stock granted to one
executive officer.
10.3 Letter Employment Agreement dated May 5, 1998, among
the Company, Global Marine Corporate Services Inc.,
and Robert E. Rose.
10.4 Shipbuilding Contract dated 27 February 1998 relating
to Hull No. 1739 between Harland and Wolff Shipbuilding
and Heavy Industries Limited and Global Marine International
Services Corporation.
10.5 Shipbuilding Contract dated 28 March 1998 relating to Hull
No. 1740 between Harland and Wolff Shipbuilding and Heavy
Industries Limited and Global Marine International Services
Corporation.
15.1 Letter of Independent Accountants regarding Awareness
of Incorporation by Reference.
27.1 Financial Data Schedule. (Exhibit 27.1 is being submitted
as an exhibit only in the electronic format of this Quarterly
Report on Form 10-Q being submitted to the Securities and
Exchange Commission. Exhibit 27.1 shall not be deemed filed
for purposes of Section 11 of the Securities Act of 1933,
Section 18 of the Securities Exchange Act of 1934 or Section
323 of the Trust Indenture Act, or otherwise be subject to
the liabilities of such sections, nor shall it be deemed a
part of any registration statement to which it relates.)
b) Reports on Form 8-K
The Company did not file any Reports on Form 8-K during the first
quarter of 1998.
<PAGE>
SIGNATURE
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 thereunto duly authorized.
GLOBAL MARINE INC.
(Registrant)
Dated: May 11, 1998 /s/ Thomas R. Johnson
---------------------------------------
Thomas R. Johnson
Vice President and Corporate Controller
(Duly Authorized Officer and Principal
Accounting Officer of the Registrant)
INDEX TO EXHIBITS
10.1 Global Marine 1998 Stock Option and Incentive Plan.
10.2 Form of Performance Stock Memorandum dated February 10,
1998 regarding conditional opportunity to acquire Company
stock granted to eight executive officers, respectively,
and dated May 5, 1998 regarding conditional opportunity
to acquire Company stock granted to one executive officer.
10.3 Employment Agreement dated May 5, 1998, among the Company,
Global Marine Corporate Services Inc., and Robert E. Rose.
10.4 Shipbuilding Contract dated 27 February 1998 relating to
Hull No. 1739 between Harland and Wolff Shipbuilding and
Heavy Industries Limited and Global Marine International
Services Corporation.
10.5 Shipbuilding Contract dated 28 March 1998 relating to Hull
No. 1740 between Harland and Wolff Shipbuilding and Heavy
Industries Limited and Global Marine International Services
Corporation.
15.1 Letter of Independent Accountants regarding Awareness of
Incorporation by Reference.
27.1 Financial Data Schedule. (Exhibit 27.1 is being submitted
as an exhibit only in the electronic format of this
Quarterly Report on Form 10-Q being submitted to the
Securities and Exchange Commission. Exhibit 27.1 shall
not be deemed filed for purposes of Section 11 of the
Securities Act of 1933, Section 18 of the Securities
Exchange Act of 1934 or Section 323 of the Trust Indenture
Act, or otherwise be subject to the liabilities of such
sections, nor shall it be deemed a part of any registration
statement to which it relates.)
Exhibit 10.1
Global Marine
1998 Stock Option and Incentive Plan
____________________________
SECTION 1 - GENERAL
1.1 PURPOSE. The Global Marine 1998 Stock Option and
Incentive Plan (the "Plan") has been established by Global Marine
Inc. (the "Company") to (i) attract and retain persons eligible
to participate in the Plan, (ii) motivate Participants by means
of appropriate incentives to achieve long-range goals,
(iii) provide incentive compensation opportunities using the
Company's common stock or cash that are competitive with those of
other similar companies, and (iv) further identify Participants'
interests with those of the Company's other stockholders through
compensation that is based on the Company's common stock, thereby
promoting the long-term financial interest of the Company and the
Related Companies, including growth in value of the Company's
equity and enhancement of long-term stockholder return.
1.2 PARTICIPATION. Subject to the terms and conditions of
the Plan, the Committee shall determine and designate from time
to time, from among the Eligible Individuals, those persons who
will be granted one or more Awards under the Plan and thereby
become "Participants" in the Plan. At the discretion of the
Committee, a Participant may be granted any Award permitted under
the provisions of the Plan, and more than one Award may be
granted to a Participant. Awards may be granted as alternatives
to or in replacement of (a) awards outstanding under the Plan or
any other plan or arrangement of the Company or a Related
Company, or (b) awards outstanding under a plan or arrangement of
a business or entity all or part of which is acquired by the
Company or a Related Company.
1.3 OPERATION AND ADMINISTRATION. The operation and
administration of the Plan, including the Awards made under the
Plan, shall be subject to the provisions of Section 6 (relating
to operation and administration).
1.4 CONSTRUCTION AND DEFINITIONS. Where the context
admits, words in any gender shall include any other gender, words
in the singular shall include the plural and the plural shall
include the singular. Capitalized terms in the Plan shall be
defined as set forth in the Plan, including the definition
provisions of Section 2.
SECTION 2 - DEFINED TERMS
For purposes of the Plan, the terms listed below shall be
defined as follows:
(a) 1989 PLAN. The term "1989 Plan" has the meaning ascribed
to it in paragraph (a) of subsection 6.2.
(b) AGREEMENT. The term "Agreement" has the meaning ascribed
to it in subsection 6.10.
(c) AWARD. The term "Award" means any award or benefit granted
to any Participant under the Plan, including without
limitation the grant of Options, SARs, Stock Awards, and
Cash Awards.
(d) BOARD. The term "Board" means the Board of Directors of
the Company.
(e) CASH AWARD. The term "Cash Award" has the meaning ascribed
to it in subsection 5.1.
(f) CODE. The term "Code" means the Internal Revenue Code of
1986, as amended. A reference to any provision of the Code
shall include reference to any successor provision of the
Code.
(g) COMMITTEE. The term "Committee" has the meaning ascribed
to it in subsection 7.1.
(h) COMPANY. The term "Company" has the meaning ascribed to it
in subsection 1.1.
(i) EFFECTIVE DATE. The term "Effective Date" has the meaning
ascribed to it in subsection 6.1.
(j) ELIGIBLE INDIVIDUAL. The term "Eligible Individual" shall
mean any employee of the Company or a Related Company, any
consultant or other person providing key services to the
Company or a Related Company, and any person to whom an
offer of employment has been made by the Company or a
Related Company; provided, however, that any member of the
Board shall not be an Eligible Individual unless he is also
an employee of the Company or a Related Company.
(k) EXERCISE PRICE. The term "Exercise Price" has the meaning
ascribed to it in subsection 3.2.
(l) FAIR MARKET VALUE. For purposes of determining the "Fair
Market Value" of a share of Stock, the following rules shall
apply:
(i) If the Stock is at the time listed or admitted to
trading on any stock exchange, then the "Fair Market Value"
shall be the mean between the lowest and highest reported
sale prices of the Stock on the date in question on the
principal exchange on which the Stock is then listed or
admitted to trading. If no reported sale of Stock takes
place on the date in question on the principal exchange,
then the reported closing asked price of the Stock on such
date on the principal exchange shall be determinative of
"Fair Market Value."
(ii) If the Stock is not at the time listed or admitted to
trading on a stock exchange, the "Fair Market Value" shall
be the mean between the lowest reported bid price and
highest reported asked price of the Stock on the date in
question in the over-the-counter market, as such prices are
reported in a publication of general circulation selected by
the Committee and regularly reporting the market price of
the Stock in such market.
(iii) If the Stock is not listed or admitted to trading on
any stock exchange or traded in the over-the-counter market,
the "Fair Market Value" shall be as determined in good faith
by the Committee.
(m) INCENTIVE STOCK OPTION. The term "Incentive Stock Option"
has the meaning ascribed to it in paragraph (a) of
subsection 3.1.
(n) NON-QUALIFIED STOCK OPTION. The term "Non-Qualified Stock
Option" has the meaning ascribed to it in paragraph (a) of
subsection 3.1.
(o) OPTION. The term "Option" has the meaning ascribed to it
in paragraph (a) of subsection 3.1.
(p) PARTICIPANT. The term "Participant" has the meaning
ascribed to it in subsection 1.2.
(q) PLAN. The term "Plan" has the meaning ascribed to it in
subsection 1.1.
(r) PRICING DATE. The term "Pricing Date" has the meaning
ascribed to it in subsection 3.2.
(s) RELATED COMPANY. The term "Related Company" means any
subsidiary of the Company and any other business venture in
which the Company has a significant interest as determined
in the discretion of the Committee.
(t) SAR. The term "SAR" has the meaning ascribed to it in
paragraph (b) of subsection 3.1.
(u) STOCK. The term "Stock" means shares of common stock of
the Company.
(v) STOCK AWARD. The term "Stock Award" has the meaning
ascribed to it in subsection 4.1.
SECTION 3 - OPTIONS AND SARS
3.1 DEFINITIONS.
(a) The grant of an "Option" entitles the Participant to
purchase shares of Stock at an Exercise Price established by
the Committee. Options granted under this Section 3 may be
either Incentive Stock Options or Non-Qualified Stock
Options, as determined in the discretion of the Committee.
An "Incentive Stock Option" is an Option that is intended to
satisfy the requirements applicable to an "incentive stock
option" as described in section 422(b) of the Code and shall
comply with, among other things, the requirements of
subsections 3.2, 3.3 and 6.1 of the Plan. A "Non-Qualified
Stock Option" is an Option that is not intended to be an
"incentive stock option" as that term is described in
section 422(b) of the Code.
(b) A stock appreciation right (an "SAR") entitles the
Participant to receive, in cash or Stock (as determined in
accordance with subsection 3.5), value equal to all or a
portion of the excess of: (i) the Fair Market Value of a
specified number of shares of Stock at the time of exercise;
over (ii) an Exercise Price established by the Committee.
3.2 EXERCISE PRICE. The "Exercise Price" of each Option
and SAR granted under this Section 3 shall be established by the
Committee or shall be determined by a method established by the
Committee; provided, however, that the Exercise Price shall not
be less than the Fair Market Value of a share of Stock as of the
Pricing Date. For purposes of the preceding sentence, the
"Pricing Date" shall be the date on which the Option or SAR is
granted, except that the Committee may provide that: (a) the
Pricing Date is the date on which the recipient is hired or
promoted (or similar event), if the grant of the Option or SAR
occurs not more than 90 days after the date of such hiring,
promotion or other event; and (b) if an Option or SAR is granted
in tandem with or in substitution for an outstanding Award, the
Pricing Date is the date of grant of such outstanding Award.
3.3 EXERCISE. Each Option and each SAR shall be
exercisable in accordance with such terms and conditions and
during such periods as may be established by the Committee;
provided, however, that (a) each Option and each SAR shall be
exercisable only during a fixed period of time ending no later
than ten years from the date such Option or SAR is granted, and
(b) to the extent required by the Code, the aggregate Fair Market
Value of the shares of Stock with respect to which Incentive
Stock Options granted to any individual Participant are
exercisable for the first time during any calendar year shall not
exceed $100,000, valued at the date or dates the Options are
granted, and any grant of an Option designated as an Incentive
Stock Option that is in excess of such limit required by the Code
shall be treated as a Non-Qualified Stock Option.
3.4 PAYMENT OF OPTION EXERCISE PRICE. The payment of the
Exercise Price of an Option granted under this Section 3 shall be
subject to the following:
(a) Subject to the following provisions of this subsection 3.4,
the full Exercise Price for shares of Stock purchased upon
the exercise of any Option shall be paid at the time of such
exercise except that, in the case of an exercise arrangement
approved by the Committee and described in paragraph (c) of
this subsection 3.4, payment may be made as soon as
practicable after the exercise.
(b) The Exercise Price shall be payable in cash or by tendering
shares of Stock (by either actual delivery of shares or by
attestation, with such shares being valued at Fair Market
Value as of the day of exercise), excluding any shares
deemed unacceptable for any reason by the Committee, or in
any combination thereof, as determined by the Committee.
(c) The Committee may permit a Participant to elect to pay the
Exercise Price upon the exercise of an Option by authorizing
a third party to sell some or all of the shares of Stock
acquired upon exercise of an Option and remit to the Company
a sufficient portion of the sale proceeds to pay the entire
Exercise Price and any tax withholding resulting from such
exercise.
3.5 SETTLEMENT OF AWARD. Distribution following exercise
of an Option or SAR, and shares of Stock distributed pursuant to
such exercise, shall be subject to such conditions, restrictions
and contingencies as the Committee may establish. Settlement of
SARs may be made in shares of Stock valued at their Fair Market
Value at the time of exercise, in cash, or in any combination
thereof, as determined in the discretion of the Committee. The
Committee may in its discretion impose such conditions,
restrictions and contingencies with respect to shares of Stock
acquired pursuant to the exercise of an Option or an SAR as the
Committee determines to be desirable.
SECTION 4 - OTHER STOCK AWARDS
4.1 DEFINITION. A "Stock Award" is a grant of shares of
Stock or of a right to receive shares of Stock, or their cash
equivalent or a combination of both, in the future.
4.2 RESTRICTIONS ON STOCK AWARDS. Each Stock Award shall
be subject to such terms and conditions, restrictions and
contingencies, if any, as the Committee shall determine.
Restrictions and contingencies limiting the right to receive
shares of Stock, or their cash equivalent or a combination of
both, in the future pursuant to a Stock Award shall limit such
right for a minimum of three years from the date such Stock Award
is granted or be based on the achievement of single or multiple
performance goals over a period ending at least one year from the
date such Stock Award is granted. Such restrictions and/or
contingencies may terminate or be subject to termination before
the passage of the period of time designated and/or the
achievement of such performance goals only in the event of the
death, disability, or retirement from or other non-cause
termination of employment with the Company or a Related Company
of the holder of such Stock Award, or in the event of a change of
control, as defined in the terms of such Stock Award, of the
Company or a Related Company. The performance goals may be
cumulative, annual or end-of-performance period goals, may be
relative to a peer group or based on increases or changes
relative to stated values, and may be based on any one or more of
the following measures: (a) earnings before interest, taxes,
depreciation and amortization; (b) earnings per share; (c) stock
price growth; (d) net income (before or after taxes); (e) cash
flow; and (f) total shareholder return. Any unrestricted grant
of shares of Stock pursuant to a Stock Award shall be made only
in lieu of salary or bonus that otherwise would be payable by the
Company or a Related Company.
SECTION 5 - CASH AWARDS
5.1 DEFINITION. A "Cash Award" is a cash bonus paid
solely on account of the attainment of one or more objective
performance goals that have been preestablished by the Committee.
5.2 RESTRICTIONS ON CASH AWARDS. Each Cash Award shall be
subject to such terms and conditions, restrictions and
contingencies, if any, as the Committee shall determine.
Restrictions and contingencies limiting the right to receive a
cash payment pursuant to a Cash Award shall be based on the
achievement of single or multiple performance goals over a period
of time determined by the Committee. The performance goals may
be cumulative, annual or end-of-period performance goals, may be
relative to a peer group or based on increases or changes
relative to stated values, and may be based on any one or more of
the following measures: (a) earnings before interest, taxes,
depreciation and amortization; (b) earnings per share; (c) stock
price growth; (d) net income (before or after taxes); (e) cash
flow; and (f) total shareholder return. The maximum cash payment
to be made to any one individual pursuant to any Cash Award
during any calendar year shall not exceed $2,000,000.
SECTION 6 - OPERATION AND ADMINISTRATION
6.1 EFFECTIVE DATE AND DURATION. Subject to its approval
by the stockholders of the Company at the Company's 1998 annual
meeting of stockholders, the Plan shall be effective as of
February 10, 1998 (the "Effective Date"); provided, however,
that, to the extent Awards are made under the Plan prior to its
approval by stockholders, they shall be contingent on approval of
the Plan by the stockholders of the Company. The Plan shall be
unlimited in duration and, in the event of Plan termination,
shall remain in effect as long as any Awards under it are
outstanding; provided, however, that, to the extent required by
the Code, no Incentive Stock Options may be granted under the
plan on a date that is more than ten years from the date the Plan
is approved by stockholders.
6.2 SHARES SUBJECT TO PLAN.
(a) (i) Subject to the following provisions of this subsection
6.2, the maximum number of shares of Stock that may be
delivered to Participants and their beneficiaries under the
Plan shall be equal to the sum of: (I) 7,500,000 shares of
Stock; (II) any shares of Stock available for future awards
under the Global Marine Inc. 1989 Stock Option and Incentive
Plan (the "1989 Plan") as of the Effective Date; and (III)
any shares of Stock represented by awards granted under the
1989 Plan that are forfeited, expire or are canceled without
delivery of shares of Stock or which result in the
forfeiture of shares of Stock back to the Company.
(ii) Any shares of Stock granted under the Plan that are
forfeited because of the failure to meet an Award
contingency or condition shall again be available for
delivery pursuant to new Awards granted under the Plan. To
the extent any shares of Stock covered by an Award are not
delivered to a Participant or beneficiary because the Award
is forfeited or canceled, or the shares of Stock are not
delivered because the Award is settled in cash, such shares
shall not be deemed to have been delivered for purposes of
determining the maximum number of shares of Stock available
for delivery under the Plan.
(iii) If the Exercise Price or other purchase price of any
stock option or other award granted under the Plan or the
1989 Plan is satisfied by tendering shares of Stock to the
Company by either actual delivery or by attestation, or if
the tax withholding obligation resulting from the settlement
of any such option or other award is satisfied by tendering
or withholding shares of Stock, only the number of shares of
Stock issued net of the shares of Stock tendered or withheld
shall be deemed delivered for purposes of determining the
maximum number of shares of Stock available for delivery
under the Plan.
(iv) Shares of Stock delivered under the Plan in settlement,
assumption or substitution of outstanding awards or
obligations to grant future awards under the plans or
arrangements of another entity shall not reduce the maximum
number of shares of Stock available for delivery under the
Plan, to the extent that such settlement, assumption or
substitution is a result of the Company or a Related Company
acquiring another entity or an interest in another entity.
(b) Subject to paragraph (c) of this subsection 6.2, the
following additional maximums are imposed under the Plan.
(i) The maximum number of shares of Stock that may be issued
pursuant to Options intended to be Incentive Stock Options
shall be 6,000,000 shares. In the event of an increase in
the number of shares authorized in clause I in the first
sentence of paragraph 6.2(a)(i), said maximum number of
shares will be increased pro rata.
(ii) The maximum number of shares of Stock that may be
issued in conjunction with Awards granted pursuant to
Section 4 (relating to Stock Awards) shall be 2,000,000
shares.
(iii) The maximum number of shares that may be covered by
Awards granted to any one individual during any ten
consecutive calendar years pursuant to this Plan shall be
20% of the shares of Stock authorized in clause I in the
first sentence of paragraph 6.2(a)(i) to be delivered under
the Plan. In the event of an increase in the number of
shares authorized in said clause I, the 20% limitation will
apply to the increased number of shares authorized.
(c) In the event of a corporate transaction involving the
Company (including without limitation any stock divided,
stock split, extraordinary cash dividend, recapitalization,
reorganization, merger, consolidation, split-up, spin-off,
combination or exchange of shares), the Committee may adjust
Awards to preserve the benefits or potential benefits of the
Awards. Action by the Committee may include adjustment of:
(i) the number and kind of shares which may be issued or
delivered under the Plan; (ii) the number and kind of shares
subject to outstanding Awards; and (iii) the Exercise Price
of outstanding Options and SARs; as well as any other
adjustments that the Committee determines to be equitable.
6.3 LIMIT ON DISTRIBUTION. Distribution of shares of
Stock or other amounts under the Plan shall be subject to the
following:
(a) Notwithstanding any other provision of the Plan, the Company
shall have no liability to deliver any shares of Stock under
the Plan or make any other distribution of benefits under
the Plan unless such delivery or distribution would comply
with all applicable laws (including without limitation the
requirements of the Securities Act of 1933) and the
applicable requirements of any securities exchange or
similar entity.
(b) To the extent that the Plan provides for the issuance of
stock certificates to reflect the issuance of shares of
Stock, the issuance may be effected on a non-certificated
basis to the extent not prohibited by applicable law or the
applicable rules of any stock exchange.
6.4 TAX WITHHOLDING. Whenever the Company proposes or is
required to distribute Stock under the Plan, the Company may
require the recipient to remit to the Company or the Company or
any Related Company may withhold from any payments due or
becoming due to the recipient an amount sufficient to satisfy any
Federal, state and local tax withholding requirements prior to
the delivery of any certificate for such shares; provided,
however, that, in the discretion of the Committee, the Company
may withhold from the shares to be delivered shares with a Fair
Market Value sufficient to satisfy all or a portion of such tax
withholding requirements, or the Company may accept delivery of
shares of Stock with a Fair Market Value sufficient to satisfy
all or a portion of such tax withholding requirement, excluding
any shares deemed unacceptable for any reason by the Committee.
Whenever under the Plan payments are to be made to a Participant
or beneficiary in cash, such payments may be net of an amount
sufficient to satisfy any Federal, state and local tax
withholding requirements. At the discretion of the Committee,
the terms and conditions of any Award may provide for a cash
payment to a Participant equal to any tax the Participant must
pay in connection with the settlement of the Award and/or the
disposition of Stock received upon settlement of the Award.
6.5 SHARES AS PAYMENT. Subject to the overall limitation
on the number of shares of Stock that may be delivered under the
Plan, the Committee may use available shares of Stock, valued at
their Fair Market Value, as the form of payment for any
compensation, grants or rights earned or due under any other
compensation plans or arrangements of the Company or a Related
Company.
6.6 DIVIDENDS AND DIVIDEND EQUIVALENTS. An Award may
provide the Participant with the right to receive dividends or
dividend equivalent payments with respect to Stock which may be
either paid currently or credited to an account for the
Participant, and may be settled in cash or Stock as determined by
the Committee. Any such settlements, and any such crediting of
dividends or dividend equivalents or reinvestment in shares of
Stock, may be subject to such conditions, restrictions and
contingencies as the Committee shall establish, including the
reinvestment of such credited amounts in Stock equivalents.
6.7 PAYMENTS. Awards may be settled through cash
payments, the delivery of shares of Stock, the granting of
replacement Awards, or a combination thereof as the Committee
shall determine. Any Award settlement, including payment
deferrals, may be subject to such conditions, restrictions and
contingencies as the Committee shall determine. The Committee
may permit or require the deferral of any Award payment, subject
to such rules and procedures as it may establish, which may
include provisions for the payment or crediting of interest or
dividend equivalents, including converting such credits into
deferred Stock equivalents.
6.8 TRANSFERABILITY. Except as otherwise provided by the
Committee, Awards under the Plan are not transferable except as
designated by the Participant by will or by applicable laws of
descent and distribution.
6.9 FORM AND TIME OF ELECTIONS. Unless otherwise
specified herein, each election required or permitted to be made
by any Participant or other person entitled to benefits under the
Plan, and any permitted modification or revocation thereof, shall
be in writing and filed with the Committee at such times, in such
form, and subject to such restrictions and limitations, not
inconsistent with the terms of the Plan, as the Committee shall
require.
6.10 AGREEMENT WITH COMPANY. At the time of an Award to a
Participant under the Plan, the Committee may require a
Participant to enter into an agreement with the Company (the
"Agreement") in a form specified by the Committee, agreeing to
the terms and conditions of the Plan and to such additional terms
and conditions not inconsistent with the Plan as the Committee
may prescribe in its sole discretion.
6.11 LIMITATION OF IMPLIED RIGHTS.
(a) Neither a Participant nor any other person shall by reason
of the Plan acquire any right in or title to any assets,
funds or property of the Company or any Related Company
whatsoever, including without limitation any specific funds,
assets, or other property which the Company or any Related
Company, in their sole discretion, may set aside in
anticipation of a liability under the Plan. A Participant
shall have only a contractual right to the stock or amounts,
if any, payable under the Plan, unsecured by any assets of
the Company or any Related Company. Nothing contained in
the Plan shall constitute a guarantee that the assets of
such companies shall be sufficient to pay any benefits to
any person.
(b) The Plan does not constitute a contract of employment, and
selection as a Participant and/or the grant or an Award will
not give any employee the right to be retained in the employ
of the Company or any Related Company, the right to receive
any future Award under the Plan, or any right or claim to
any benefit under the Plan, unless such right or claim has
specifically accrued under the terms of the Plan. Except as
otherwise provided in the Plan, no Award under the Plan
shall confer upon the holder thereof any right as a
stockholder of the Company prior to the date on which the
individual fulfills all conditions for receipt of such
right.
6.12 EVIDENCE. Evidence required of anyone under the Plan
may be by certificate, affidavit, document or other information
which the person acting on it considers pertinent, reliable, and
signed, made or presented by the proper party or parties.
6.13 ACTION BY COMPANY OR RELATED COMPANY. Any action
required or permitted to be taken by the Company or any Related
Company shall be by resolution of its board of directors, or by
action of one or more members of the board (including a committee
of the board) who are duly authorized to act for the board, or,
except to the extent prohibited by applicable law or applicable
rules of any stock exchange, by a duly authorized officer of the
company.
6.14 SEPARATE FUND. Neither the Company, the Board or the
Committee has any obligation to create a separate fund for the
performance of any cash payment obligation under the Plan, but
any or all of them may, at their own discretion, create trust
funds or similar arrangements for such purpose.
6.15 LIABILITY FOR CASH PAYMENTS. Each Related Company
shall be liable for payment of cash due under the Plan with
respect to any Participant to the extent that such benefits are
attributable to the services rendered for that Related Company by
the Participant. Any disputes relating to liability of a Related
Company for cash payments shall be resolved by the Committee.
6.16 POOLING OF INTERESTS ACCOUNTING. The Committee may,
in its sole and absolute discretion, declare inoperative anything
in this Plan or in the terms, conditions, restrictions or
contingencies pertaining to any Award, including any outstanding
Award, that adversely affects pooling of interests accounting.
SECTION 7 - COMMITTEE
7.1 ADMINISTRATION. The authority to control and manage
the operation and administration of the Plan shall be vested in a
committee (the "Committee") in accordance with this Section 7.
7.2 SELECTION AND COMPOSITION OF COMMITTEE. The Committee
shall be selected by the Board and shall consist of two or more
members of the Board who are not employees of the Company or a
Related Company.
7.3 POWERS OF COMMITTEE. The authority to manage and
control the operation and administration of the Plan shall be
vested in the Committee, subject to the following:
(a) Subject to the Provisions of the Plan, the Committee will
have the authority and discretion to select from among the
Eligible Individuals those persons who shall receive Awards,
to determine the time or times of receipt, to determine the
types of Awards and the number of shares covered by the
Awards, to establish the terms, conditions, performance
criteria, restrictions, and other provisions of such Awards,
and, subject to the same restrictions imposed upon the Board
by Section 8, to amend, cancel or suspend Awards. In making
such Award determinations, the Committee may take into
account the nature of services rendered by the individual,
the individual's present and potential contribution to the
Company's success, and such other factors as the Committee
deems relevant.
(b) Subject to the provisions of the Plan, the Committee will
have the authority and discretion to determine the extent to
which Awards under the Plan will be structured to conform to
the requirements applicable to performance-based
compensation as described in Code section 162(m) and to take
such action, establish such procedures, and impose such
restrictions at the time such Awards are granted as the
Committee determines to be necessary or appropriate to
conform to such requirements.
(c) The Committee will have the authority and discretion to
establish terms and conditions of Awards as the Committee
determines to be necessary or appropriate to conform to
applicable requirements or practices of jurisdictions
outside of the United States.
(d) The Committee will have the authority and discretion to
interpret the Plan, to establish, amend and rescind any
rules and regulations relating to the Plan, to determine the
terms and provisions of any agreements made pursuant to the
Plan, and to make all other determinations that may be
necessary or advisable for the administration of the Plan.
(e) Any interpretation of the Plan by the Committee and any
decision made by it under the Plan is conclusive, final and
binding.
(f) At its discretion, the Committee may terminate or suspend
the granting of Awards under the Plan at any time or from
time to time.
(g) In controlling and managing the operation and administration
of the Plan, the Committee shall act by a majority of its
then members, by meeting or by writing filed without a
meeting. The Committee shall maintain and keep adequate
records concerning the Plan and concerning its proceedings
and acts in such form and detail as the Committee may
decide.
7.4 DELEGATION BY COMMITTEE. Except to the extent
prohibited by applicable law or the applicable rules of a stock
exchange, the Committee may allocate all or any part of its
responsibilities and powers to any one or more of its members and
may delegate all or any part of its responsibilities and powers
to any person or persons selected by it. Any such allocation or
delegation may be revoked by the Committee at any time.
7.5 INFORMATION TO BE FURNISHED TO COMMITTEE. The Company
and Related Companies shall furnish the Committee with such data
and information as may be required for it to discharge its
duties. The records of the Company and Related Companies as to
an employee's or Participant's employment or other provision of
services, termination of employment or cessation of the provision
of services, leave of absence, re-employment and compensation
shall be conclusive on all persons unless determined to be
incorrect. Participants and other persons entitled to benefits
under the Plan must furnish the Committee such evidence, data or
information as the Committee considers desirable to carry out the
terms of the Plan.
7.6 DUPLICATED SIGNATURES. At its discretion, the
Committee may accept a duplicated signature on any document,
whether faxed, photocopied or otherwise duplicated, which will be
effective to the same extent as an original signature unless
there is a showing of fraud or other wrongdoing, the burden of
making such showing being on the person asserting such fraud or
wrongdoing.
SECTION 8 - AMENDMENT AND TERMINATION
The Board may at any time amend, suspend or terminate the
Plan, provided that, subject to subsection 6.2 (relating to
certain adjustments to shares), no amendment or termination may
(a) in the absence of written consent to the change by the
affected Participant (or, if the Participant is not then living,
the affected beneficiary), adversely affect the rights of any
Participant or beneficiary under any Award granted under the Plan
prior to the date such amendment is adopted by the Board, or (b)
in the absence of proper approval by the Company's stockholders,
increase the share limitations set forth in subsection 6.2 or the
cash limitations set forth in subsection 5.2 or change the
minimum Option and SAR Exercise Prices set forth in subsection
3.2.
EXHIBIT 10.2
[10 February 1998
or 05 May 1998]
TO: ____________
PERFORMANCE STOCK
In order to provide incentive compensation specifically directed
toward achievement of long term performance goals, you have been
granted a conditional right to receive as many as ______ shares of
Global Marine common stock. The company will issue and deliver to
you none, some or all of these shares at the time of the first
regular meeting of the company's board of directors in 2001,
depending on the extent to which the performance objectives set
forth in the attached terms and conditions have been achieved.
This grant amounts to an incremental opportunity to earn
significant compensation, provided that we are able to achieve the
ambitious targets established for cumulative EBITDA, 2000 EPS, and
stock price. This incentive arrangement is designed so that the
management team wins if the company's stockholders win.
The attachment contains the terms and conditions of your grant
under this incentive arrangement. The conditions are based on the
company's performance during the period 1998-2000, as measured
against long term performance goals established by the Compensation
Committee of the Board of Directors.
It is important to note that, in addition to the other conditions
pertaining to your performance stock grant, the grant is contingent
upon approval of the Global Marine 1998 Stock Option and Incentive
Plan by the company's stockholders at the 1998 annual meeting. If
the plan is not approved at the 1998 annual meeting, your grant
will be void and without effect.
I look forward to working with you in an effective mutual effort to
assure that the target goals are more than accomplished.
[Signature]
Attachment
Form 1C(1)
(2-98)
GLOBAL MARINE INC.
TERMS AND CONDITIONS
OF
PERFORMANCE STOCK GRANT
(Performance Period 1998-2000)
GLOBAL MARINE INC. (the "Company"), desiring to afford you a
conditional right to receive shares of the Company's common stock,
$.10 par value per share (the "Common Stock"), as added incentive
to achieve the long-term objectives of the Company and its
subsidiaries, has established the following terms and conditions
under which it will issue and deliver shares of Common Stock to you
under the Global Marine 1998 Stock Option and Incentive Plan (the
"Plan").
___________________________________________________
PLEASE NOTE THAT IN ADDITION TO THE OTHER
CONDITIONS PERTAINING TO YOUR PERFORMANCE
STOCK GRANT, THE GRANT IS CONTINGENT UPON
APPROVAL OF THE GLOBAL MARINE 1998 STOCK
OPTION AND INCENTIVE PLAN BY THE COMPANY'S
STOCKHOLDERS AT THE COMPANY'S 1998 ANNUAL
MEETING OF STOCKHOLDERS. IF THE PLAN IS NOT
APPROVED AT THE 1998 ANNUAL MEETING, THIS
GRANT WILL BE VOID AND WITHOUT EFFECT.
___________________________________________________
1. CONDITIONAL RIGHT TO RECEIVE SHARES. At the time of the first
regular meeting of the Company's board of directors held in
2001, the Company will issue and deliver shares of the Common
Stock to you, up to the full number of shares stated in the
first paragraph of the cover page of this memorandum (the
"Shares"), subject to the terms and conditions outlined in
this memorandum and the terms and conditions of the Plan as
amended from time to time in accordance with its terms.
2. NUMBER OF SHARES TO BE ISSUED AND DELIVERED. The Company will
issue and deliver to you none, some or all of the Shares. The
exact number of Shares to be issued and delivered will depend
on the performance of the Company and its subsidiaries during
the period 1998-2000 as measured against the following long-
term performance goals (the "Performance Goals") established
by the Compensation Committee of the Company's board of
directors (the "Compensation Committee"):
Cumulative EBITDA: Cumulative earnings of the
Company and its subsidiaries on
a consolidated basis before
interest, taxes, depreciation
and amortization for fiscal
years 1998, 1999 and 2000.
Threshold = $1.80 billion;
Target = $2.25 billion.
2000 E.P.S.: Earnings per share of the Company's Common
Stock for fiscal year 2000.
Threshold = $2.20/share; Target = $3.30/share.
Stock Price: Average of the daily closing prices for one
share of the Company's Common Stock during
the fourth quarter of 2000 compared to the
average of the daily closing prices for one
share of the Company's Common Stock during
the fourth quarter of 1997.
Threshold = +30%; Target = +50%.
The total number of Shares stated in the first paragraph of
the cover page of this memorandum has been allocated among the
three Performance Goals as follows: 40% are Cumulative EBITDA
Shares; 40% are 2000 E.P.S. Shares; and 20% are Stock Price
Shares. A percentage of the Shares allocated to each
Performance Goal will be issued and delivered to you,
depending on actual performance as measured against that
respective Performance Goal, as follows:
PERFORMANCE: PERCENTAGE
Below Threshold 0%
At Threshold 25%
Between Threshold A proportionate percentage between
and Target 25% and 100%, based on straight-line
interpolation between the threshold
and target objectives.
At or Above Target 100%
3. NON-TRANSFERABLE. You may not transfer your right to receive
Shares under this memorandum other than by will or by the laws
of descent and distribution.
4. TERMINATION OF EMPLOYMENT. You will not be entitled to
receive any of the Shares after termination of your employment
with the Company and its subsidiaries unless such termination
is by reason of early retirement not objected to by the
Compensation Committee, normal retirement, disability or
death, or unless your employment with the Company and its
subsidiaries is terminated by the Company or any such
subsidiary other than for cause (to mean acts of misconduct
harmful to the Company, inadequate performance or
incompetence). If your employment is terminated by reason of
early retirement not objected to by the Compensation
Committee, normal retirement or disability, or by the Company
or any of its subsidiaries other than for cause, the number of
Shares that the Company would otherwise issue and deliver to
you at the time of the Company's first regular board meeting
held in 2001 will be prorated based on your months of
employment completed during the period 1998-2000 compared to
36 months, and the Company will issue and deliver to you or
your legal representative or representatives, at the time of
said board meeting, a reduced number of Shares based on such
proration. If your employment is terminated by reason of your
death, the total number of Shares stated in the first
paragraph of the cover page of this memorandum will be
multiplied by 50% and the resulting number will be prorated
based on your months of employment completed during the period
1998-2000 compared to 36 months, and the Company will issue
and deliver to the appropriate person or persons named under
your last will and testament or determined under applicable
intestate laws, as soon as practicable following your death,
a reduced number of Shares based on such multiplication and
proration. Termination of your "employment" with the Company
and its subsidiaries will be deemed to occur at the close of
business on the earliest of (i) the last day on which you are
assigned to a position with the Company or any of its
subsidiaries for the purpose of performing your occupation, in
the case of termination by reason of your early or normal
retirement, disability or death, (ii) the last day of the
period during which you are entitled to receive salary
continuation under any agreement, policy, plan or other
arrangement with the Company or any of its affiliates, in the
case of any termination entitling you to such salary
continuation, (iii) the last day of an approved leave of
absence if you do not resume the performance of your
occupation for the Company or any of its subsidiaries on or
before the next business day, and (iv) the last day on which
you are assigned to a position with the Company or any of its
subsidiaries for the purpose of performing your occupation in
any other case. For purposes of this paragraph, the term
"disability" shall mean any physical or mental condition which
totally and permanently prevents you from engaging in any
substantial gainful activity, as reasonably determined in good
faith by the Compensation Committee.
5. ADJUSTMENTS. Except as provided in the following paragraph,
if outstanding shares of the class then subject to the
conditional right to receive Shares outlined herein are
increased, decreased, changed into or exchanged for a
different number or kind of shares or securities of the
Company through reorganization, recapitalization,
reclassification, stock dividend, stock split or reverse stock
split, then there will be substituted for each Share then
subject to such right and for each share upon which any of the
Performance Goals are then based the number and class of
shares or securities into or for which each share of the class
subject to such right shall be so changed or exchanged. Such
adjustments will become effective on the effective date of any
such transaction; except that in the event of a stock dividend
or of a stock split effected by means of a stock dividend or
distribution, such adjustments will become effective
immediately after the record date therefor.
Upon a dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company with
one or more corporations as a result of which the Company is
not the surviving company, your right to acquire Shares and
the obligations of the Company hereunder will terminate,
unless provision is made in writing in connection with such
transaction for the assumption of such obligations, or the
substitution for such obligations of similar obligations
involving the stock of a successor employer corporation, or a
parent or subsidiary thereof, with appropriate adjustments as
to the conditions thereof and the number and kind of Shares
and prices, in which event your right to acquire Shares and
the obligations of the Company hereunder will continue in the
manner and under the terms so provided.
Adjustments under this Section 5 will be made by the
Compensation Committee, whose determination as to what
adjustments will be made, and the extent thereof, will be
final, binding and conclusive. No fractional shares of stock
will be issued pursuant to any right to receive of Shares
hereunder or in connection with any adjustment contemplated
herein.
6. LIMITATION. You will not be entitled to the privileges of
stock ownership in respect of any of the Shares until they
have been issued and delivered pursuant to the terms and
conditions of this memorandum and the Plan.
7. REQUIREMENTS OF LAW AND STOCK EXCHANGES. Your right to
acquire the Shares and the issuance and delivery of the Shares
will be subject to compliance with all applicable requirements
of law. In addition, the Company will not be required to
issue or deliver any certificate or certificates for any of
the Shares prior to the admission of such Shares to listing on
notice of issuance on any stock exchange on which shares of
the same class are then listed.
By accepting receipt of any of the Shares as contemplated
herein, you will be representing and agreeing for yourself and
your transferees by will or by the laws of descent and
distribution that, unless a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), is
in effect as to the Shares received, any and all Shares so
acquired will be acquired for investment and not for sale or
distribution, and each such acquisition will be accompanied by
a representation and warranty in writing, signed by the person
entitled to make such acquisition, that the Shares are being
so acquired in good faith for investment and not for sale or
distribution. In the event the Company's legal counsel, at
the Company's request, advises it that registration under the
Securities Act of the acquired Shares is required prior to
issuance thereof, the Company will not be required to issue or
deliver the Shares unless and until such legal counsel advises
it that such registration has been completed or is not
required.
By accepting receipt of any of the Shares, you also will be
representing and agreeing for yourself and your transferees by
will or the laws of descent and distribution that if you are
an officer of the Company or any other person who might be
deemed an "affiliate" of the Company under the Securities Act
at the time any Shares that have been acquired are proposed to
be sold, you or they will not sell such Shares (a) without
giving thirty days advance notice in writing to the Company,
and (b) until the Company has advised you or them that such
sale may be made without registration under the Securities Act
or, if such registration is required, that such registration
has been effected.
8. RESTRICTIONS ON SHARE TRANSFER BY CERTAIN PERSONS. In the
case of Cumulative EBITDA Shares and 2000 E.P.S. Shares, until
six months have elapsed after the date of the Company's
unconditional issuance of such Shares to you, or, in the case
of Stock Price Shares, until six months have elapsed after the
date the Compensation Committee approved the recommendation
that you be granted a conditional right to receive such
Shares, you may not transfer such Shares in a transaction that
would constitute a "sale" under Section 16 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), if you
are at the time of the sale a person subject to the provisions
of Section 16 of the Exchange Act.
9. WAGE WITHHOLDING AND EMPLOYMENT TAXES. Your acquisition of
any of the Shares as outlined herein may result in ordinary
income at the time of acquisition. Such ordinary income will
be subject to both wage withholding and employment taxes, and
the Company or your employer may be required to effect such
withholding and/or deduct such taxes. Except as set forth
below, you may make an irrevocable election to satisfy, in
whole or in part, your obligation to reimburse the Company or
your employer for such taxes (an "Election") by (i) making a
cash payment to the Company, (ii) having the Company deduct
the required amount from any cash compensation that the
Company or any of its subsidiaries may owe you, (iii)
surrendering your right to acquire either a specified number
of the Shares or Shares having a specified value, in each case
with a value not in excess of your related tax liability, (iv)
tendering shares previously issued pursuant to the Plan or
other shares of the Company's common stock owned by you, or
(v) combining any or all of the foregoing in any fashion;
provided, however, that, if you are at the time the
withholding obligation arises a person subject to the
provisions of Section 16 of the Exchange Act, you must satisfy
such obligation by surrendering your right to acquire such
number of Shares as will have a value sufficient to satisfy
such obligation, but not in excess of such liability. The
Compensation Committee may disapprove of any Election or
suspend or terminate the right to make Elections at any time
or from time to time. All withheld or surrendered Shares and
other shares tendered in payment will be valued at their Fair
Market Value on the date the withholding obligation arises.
"Fair Market Value" with regard to stock of the Company on a
particular date shall mean the average of the high and low
quotations at which the stock is traded on that particular
date as reported in the "NYSE-Composite Transactions" section
of the Southwest Edition of THE WALL STREET JOURNAL for that
date (corrected for obvious typographical errors), or, if no
prices are quoted for that date, on the last preceding date
for which such prices of shares of stock are so quoted. In
the event "NYSE-Composite Transactions" cease to be reported
as such, or in the event that the Company's stock is no longer
quoted on the New York Stock Exchange, an appropriate
substitute published stock quotation system will be selected
by the Compensation Committee, consistent with appropriate
regulatory provisions.
10. CONTINUED EMPLOYMENT AND FUTURE GRANTS. Neither the granting
to you of a right to receive stock nor the other arrangements
outlined herein give you the right to remain in the employ of
the Company or any of its subsidiaries or to be selected to
receive similar or identical grants in the future.
11. GLOBAL MARINE 1998 STOCK OPTION AND INCENTIVE PLAN, THE BOARD
AND THE COMMITTEE. The conditional right to receive Shares
outlined in this memorandum has been granted to you, and any
issuance and delivery of Shares will be made, under and
pursuant to the Plan as the same shall have been amended from
time to time in accordance with its terms. The decision of
the Company's board of directors or the Committee on any
questions concerning the interpretation or administration of
the Plan or any matters covered in this memorandum will be
final and conclusive. No amendment to the Plan or decision of
the board or the Committee will deprive you, without your
consent, of any rights hereunder.
A copy of the Plan in its present form is available at the
Company's principal office for inspection during business
hours by you or other persons who may be entitled to acquire
any of the Shares as contemplated herein.
References in this Exhibit A to "this memorandum" (and indirect
references such as "hereof," "hereunder" and "herein") refer to the
attached cover page of this memorandum and this Exhibit A, each of
which constitutes an integral part of this memorandum.
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "AGREEMENT"), dated as of May 5, 1998,
is by and between GLOBAL MARINE INC., a Delaware corporation ("GMI"),
GLOBAL MARINE CORPORATE SERVICES INC., a California corporation (the
"COMPANY"), and ROBERT E. ROSE (the "EXECUTIVE").
The Company desires to employ the Executive and the Executive
desires to accept employment with the Company, on the terms and
conditions of this Agreement.
Accordingly, the parties agree as follows:
1. EMPLOYMENT DUTIES AND ACCEPTANCE.
1.1 EMPLOYMENT BY THE COMPANY: DUTIES. GMI and the Company
hereby agree to employ the Executive for a term commencing on
May 5, 1998, and expiring at the end of the day on October 23, 2003
(such date, or later date to which this Agreement is extended in
accordance with the terms hereof, the "TERMINATION DATE"), unless
earlier terminated as provided in Article 4 or unless extended as
provided herein (the "TERM"). During the Term, the Executive shall
initially serve in the capacity of President and Chief Executive
Officer of GMI and shall also serve in those offices and
directorships of the Company, and subsidiary corporations or
entities of GMI, to which he may from time to time be appointed or
elected. During the Term, the Executive shall devote all
reasonable efforts and all of his business time and services to GMI
and the Company, subject to the direction of the Board of Directors
of GMI (the "GMI BOARD") and the Board of Directors of the Company
(the "COMPANY BOARD" and together with the GMI Board, the "BOARDS).
The Executive shall not engage in any other business activities
except for passive investments and his farm and ranching interests
and service on the Boards of Directors of Cardinal Holding Corp.
and Cardinal Services, Inc., which activities shall not materially
interfere with the Executive's obligations hereunder.
1.2 ACCEPTANCE OF EMPLOYMENT BY THE EXECUTIVE. The Executive
hereby accepts such employment and shall render the services and
perform the duties described above.
2. COMPENSATION AND OTHER BENEFITS.
2.1 ANNUAL SALARY. The Company shall pay to the Executive an
annual salary at a rate of five hundred twenty-five thousand
dollars ($525,000) per year (the "ANNUAL SALARY"), subject to
increase at the sole discretion of the Board. The Annual Salary
shall be payable in accordance with the payroll policies of the
Company as from time to time in effect, but in no event less
frequently than once each month, less such deductions as shall be
required to be withheld by applicable law and regulations.
2.2 BONUS. If determined by the GMI Board, the Company may
declare and pay an incentive bonus to the Executive with respect to
the fiscal years ending during the Term (the "INCENTIVE BONUS").
The amount of the Incentive Bonus payable during the Term shall be
determined by the GMI Board, in its sole discretion.
2.3 EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN. Effective as of
the Effective Date, the Executive shall be designated a participant
in the Global Marine Executive Supplemental Retirement Plan (the
"SERP"). For purposes of determining the amount of the Normal
Retirement Benefit and the Executive's eligibility for an Early
Retirement Benefit under the SERP (as such terms are defined
therein), the Executive shall be credited with three years of
employment with the Company for each actual year of employment from
and after the Effective Date. In addition, in the event the
Executive's employment with the Company terminates due to death,
due to disability pursuant to Section 4.5, due to involuntary
termination without cause under Section 4.3, or due to constructive
termination under Section 4.6, he shall be deemed eligible to
receive an Early Retirement Benefit under the SERP calculated as
though the Executive had attained 15 years of employment with the
Company, and in such event his benefits shall be determined on the
basis of the Annual Salary and Incentive Bonus paid during the
twelve-month period preceding his termination of employment.
2.4 PARTICIPATION IN EMPLOYEE BENEFIT PLANS. The Company and
GMI agree to permit the Executive during the Term, if and to the
extent eligible, to participate in any 401k plan, retirement plan,
group life, hospitalization or disability insurance plan, health
program, pension plan, similar benefit plan or other so-called
"fringe benefits" of the Company or GMI (collectively, "BENEFITS")
which may be available to other senior executives of the Company or
GMI on terms no less favorable to the Executive than the terms
offered to such other executives.
2.5 OTHER PERQUISITES. The Executive shall be entitled to
expense reimbursement, office appointments, secretarial support and
other perquisites as are provided in accordance with Company policy
or practice for senior executives of the Company. In addition, the
Company shall provide the Executive with the use of the automobile
which was made available to the Executive by Cardinal Services,
Inc., provided that Cardinal Services, Inc. agrees to an assumption
of the lease agreement for such automobile, or if an assumption of
such lease cannot be mutually agreed, the Company will provide the
Executive with the use of a similar automobile.
3. NON-COMPETITION; NON-SOLICITATION.
3.1 COVENANTS AGAINST COMPETITION. The Executive
acknowledges that (i) his work for GMI and the Company will give
him access to trade secrets of and confidential information
concerning the business of GMI, the Company and their affiliates
(the "Company Business"); and (ii) the agreements and covenants
contained in this Agreement are essential to protect the business
and goodwill of GMI and the Company. Accordingly, the Executive
covenants and agrees as follows:
3.1.1 NON-COMPETE. The Executive shall not during
the Restricted Period (as defined below) in the United States
or any other place where GMI, the Company and their affiliates
conduct operations related to the Company Business, directly
or indirectly (except in the Executive's capacity as an
officer of GMI or the Company): (i) engage or participate in
the Company Business; (ii) enter the employ of, or render any
other services to, any person engaged in the Company Business
except as permitted hereunder; or (iii) become interested in
any such person in any capacity, including, without
limitation, as an individual, partner, shareholder, lender,
officer, director, principal, agent, consultant or trustee
except as permitted hereunder, provided however, that the
Executive may own, directly or indirectly, solely as an
investment, securities of any person traded on any national
securities exchange or listed on the National Association of
Securities Dealers Automated Quotation System if the Executive
is not a controlling person of, or a member of a group which
controls, such person and the Executive does not, directly or
indirectly, own 1% or more of any class of equity securities,
or securities convertible into or exercisable or exchangeable
for 1% or more of any class of equity securities, of such
person. As used herein, the "Restricted Period" shall mean a
period commencing on the date hereof and terminating upon the
first to occur of (a) the date which is one year after the
date on which the Company terminates or is deemed to terminate
the Executive's employment without Cause as defined
hereinafter, (b) the date which is one year after the date on
which the Executive terminates or is deemed to terminate his
employment pursuant to Section 4.6 hereof or (c) the
Termination Date; provided, however, that if the Company shall
have terminated the Executive's employment for Cause and such
Cause in fact exists or if the Executive shall have terminated
his employment with the Company in breach of the terms of this
Agreement, the Restricted Period shall end twelve months
following the termination of the Executive's employment
hereunder.
3.1.2 DISCLOSURE OF INFORMATION. The Executive
recognizes and acknowledges that he will have access to
certain confidential proprietary information of GMI and the
Company which is a valuable, special and unique asset of the
business of GMI, the Company and their affiliates. He
therefore covenants and agrees, which covenant and agreement
is of the essence of this Agreement, that during or after the
term of his employment, he will not reveal to anyone not an
employee, officer, agent or consultant of GMI, the Company and
their affiliates at any time the business methods or secrets
of GMI, the Company and their affiliates, and that upon
termination of his employment, he will return to GMI and the
Company all records and documents (and all copies thereof) and
all other property belonging to GMI and the Company or
relating to GMI and their business.
3.1.3. SOLICITATION AND ENTICEMENT OF EMPLOYEES. The
Executive agrees that during the term of his employment by GMI
and the Company and for a period of one (1) year after
termination of his employment with GMI and the Company, he
will not solicit or entice any other employee of GMI or the
Company to leave GMI or the Company to go to work for any
other business or organization which is in direct or indirect
competition with GMI or the Company.
3.1.4 CUSTOMERS OF THE COMPANY. During the
Restricted Period, the Executive shall not, except by reason
of and in his capacity as an officer of the Company, directly
or indirectly, request or advise a customer of the Company or
its subsidiaries to curtail or cancel such customer's business
relationship with the Company.
3.2 RIGHTS AND REMEDIES UPON BREACH. If the Executive
breaches, or threatens to commit a breach of, any of the provisions
contained in Section 3.1 of this Agreement (the "RESTRICTIVE
COVENANTS"), the Company shall have the following rights and
remedies, each of which rights and remedies shall be independent of
the others and severally enforceable, and each of which is in
addition to, and not in lieu of, any other rights and remedies
available to the Company under law or in equity:
3.2.1 SPECIFIC PERFORMANCE. The right and remedy to
have the Restrictive Covenants specifically enforced by any
court of competent jurisdiction, it being agreed that any
breach or threatened breach of the Restrictive Covenants would
cause irreparable injury to GMI and the Company and that money
damages would not provide an adequate remedy to GMI and the
Company.
3.2.2 ACCOUNTING. The right and remedy to require
the Executive to account for and pay over to the Company all
compensation, profits, monies, accruals, increments or other
benefits derived or received by the Executive as the result of
any action constituting a breach of the Restrictive Covenants.
3.3 SEVERABILITY OF COVENANTS. The Executive acknowledges
and agrees that the Restrictive Covenants are reasonable and valid
in duration and geographical scope and in all other respects. If
any court determines that any of the Restrictive Covenants, or any
part thereof, is invalid or unenforceable, the remainder of the
Restrictive Covenants shall not thereby be affected and shall be
given full effect without regard to the invalid portions.
3.4 BLUE-PENCILLING. If any court determines that any of the
Restrictive Covenants, or any part thereof, is unenforceable
because of the duration or geographical scope of such provision,
such court shall have the power to reduce the duration or scope of
such provision, as the case may be, and, in its reduced form, such
provision shall then be enforceable.
3.5 ENFORCEABILITY IN JURISDICTIONS. GMI, the Company and
the Executive intend to, and hereby do, confer jurisdiction to
enforce the Restrictive Covenants upon the courts of any
jurisdiction within the geographical scope of such Restrictive
Covenants. If the courts of any one or more of such jurisdictions
hold the Restrictive Covenants unenforceable by reason of the
breadth of such scope or otherwise, it is the intention of GMI and
the Company that such determination not bar or in any way affect
the right of GMI and the Company to the relief provided above in
the courts of any other jurisdiction within the geographical scope
of such Restrictive Covenants, as to breaches of such Restrictive
Covenants in such other respective jurisdictions, such Restrictive
Covenants as they relate to each jurisdiction being, for this
purpose, severable into diverse and independent covenants.
4. TERMINATION.
4.1 TERMINATION UPON DEATH. If the Executive dies during the
Term, this Employment Agreement shall terminate, provided,
however, that in any such event, (a) the Company shall pay to the
Executive, or to his estate, an amount in cash equal to three times
Executive's Annual Salary then in effect (or, if the Company has
reduced the Executive's Annual Salary in breach of this Agreement,
the Executive's Annual Salary before such reduction), and any
Benefits that have vested in the Executive at the time of such
termination as a result of his participation in any of the
Company's benefit plans shall be paid to the Executive, or to his
estate or designated beneficiary, in accordance with the provision
of such plan.
4.2 TERMINATION WITH CAUSE. The Company has the right, at
any time during the Term, subject to all of the provisions hereof,
exercisable by serving notice, effective on or after the date of
service of such notice as specified therein, to terminate the
Executive's employment under this Agreement and discharge the
Executive with Cause. If such right is exercised, the Term shall
terminate on the date of such termination and the Company's
obligation to the Executive shall be limited solely to the payment
of unpaid Annual Salary accrued, and subject to the provisions of
the applicable benefit plans, any benefits vested up to the
effective date specified in the Company's notice of termination.
As used in this Agreement, the term "Cause" shall mean and include
(i) chronic alcoholism or controlled substance abuse as determined
by a doctor selected by the Company and reasonably acceptable to
the Executive (subject to the requirements of the Americans with
Disabilities Act), (ii) an act of fraud or dishonesty on the part
of the Executive with respect to the Company or its subsidiaries;
(iii) the Executive's material and continuing failure to perform
(as opposed to unsatisfactory performance of) his duties hereunder
after written notice thereof or a material breach by the Executive
of this Agreement except, in each case, where such failure or
breach is caused by the illness or other similar incapacity or
disability of the Executive; or (iv) conviction of or entry of a
plea of nolo contendere to a misdemeanor involving moral turpitude
or a felony. Prior to the effectiveness of termination for Cause
under subclause (i), (ii), or (iii) above, the Executive shall be
given 30 days' prior notice from the Board specifically identifying
the reasons which are alleged to constitute Cause for any
termination hereunder and an opportunity to be heard by the Board
in the event Executive disputes such allegations.
4.3 TERMINATION WITHOUT CAUSE. The Company has the right, at
any time during the Term, subject to all of the provisions hereof,
exercisable by serving notice, effective on or after the date of
service of such notice as specified therein, to terminate the
Executive's employment under this Agreement and discharge the
Executive without Cause. If the Executive is terminated during the
Term without Cause (including any termination which is deemed to be
a constructive termination without Cause under Section 4.6 hereto),
the Term shall terminate on the date of such termination and the
Company's obligation to the Executive shall be limited solely to
the payment, at the times and upon the terms provided for herein,
of the greater of (i) the Executive's Annual Salary for the number
of full months remaining in the Term of this Agreement had the
Executive not been so terminated and (ii) the Executive's Annual
Salary for a period of 24 months, in each case based on the Annual
Salary of the Executive in effect on the date of termination (or,
if the Company has reduced the Executive's Annual Salary in breach
of this Agreement, the Executive's Annual Salary before such
reduction). In the event of a termination by the Company without
Cause within 180 days after a Change of Control (as hereinafter
defined), including a constructive termination without Cause
pursuant to Section 4.6, the amounts due to the Executive pursuant
to this Section 4.3 shall be due and payable in one lump-sum
payment within 60 days after such termination. In all other cases,
any amounts due to the Executive pursuant to this Section 4.3 shall
be due and payable as and when they would have become due and
payable absent such termination. In addition, any Benefits that
have vested in the Executive at the time of such termination as a
result of his participation in any of the Company's benefit plans
shall be paid to the Executive, or to his estate or designated
beneficiary, subject to the provisions of such plans.
4.4 TERMINATION BY THE EXECUTIVE. Any termination of this
Agreement by the Executive during the Term, except such termination
as is deemed to be a constructive termination without Cause by the
Company under Section 4.6 of this Agreement, shall be deemed to be
a breach of the terms of this Agreement for the purposes of Section
3.1.1 hereof and shall entitle the Company to discontinue payment
of all Annual Salary, Incentive Bonuses and benefits accruing from
and after the date of such termination. Any Benefits that have
vested in the Executive at the time of such termination as a result
of his participation in any of the Company's benefit plans shall be
paid to the Executive, or to his estate or designated beneficiary,
subject to the provisions of such plans.
4.5 TERMINATION UPON DISABILITY. If during the Term the
Executive becomes physically or mentally disabled, whether totally
or partially, as evidenced by the written statement of a competent
physician licensed to practice medicine in the United States who is
mutually acceptable to the Company and the Executive or his closest
relative if he is not then able to make such a choice, so that the
Executive is unable, with reasonable accommodation, substantially
to perform his services hereunder (i) for a period of four
consecutive months, or (ii) for shorter periods aggregating six
months during any twelve-month period, the Company may at any time
after the last day of the four consecutive months of disability or
the day on which the shorter periods of disability equal an
aggregate of six months, by written notice to the Executive,
terminate the Executive's employment hereunder. In the event of
such termination, the Term shall terminate on the date of such
termination and the Company shall (a) pay to the Executive, or to
his estate, an amount in cash equal to three times Executive's
Annual Salary then in effect (or, if the Company has reduced the
Executive's Annual Salary in breach of this Agreement, the
Executive's Annual Salary before such reduction), and (b) any
Benefits that have vested in the Executive at the time of such
termination as a result of his participation in any of the
Company's benefit plans shall be paid to the Executive, or to his
estate or designated beneficiary, subject to the provisions of such
plans.
4.6 CONSTRUCTIVE TERMINATION WITHOUT CAUSE. Notwithstanding
any other provision of this Agreement, the Executive's employment
under this Agreement may be terminated during the Term by the
Executive, which termination shall be deemed to be constructive
termination by the Company without Cause if one of the following
events shall occur without the consent of the Executive: (i) a
failure to elect or reelect or to appoint or reappoint the
Executive to the office of Chief Executive Officer of GMI or other
material change by the Company or GMI which would reduce the
Executive's title or position or assign him responsibilities not in
keeping with the position of Chief Executive Officer and President
described in Section 1 above; (ii) the assignment or reassignment
by the Company or GMI of the Executive to a location outside an
area of metropolitan Houston, Texas; (iii) the liquidation,
dissolution, consolidation or merger of the Company or GMI, or
transfer of all or substantially all of its assets, other than a
transaction in which a successor corporation assumes this Agreement
and all obligations and undertakings of the Company and GMI
hereunder; (iv) a reduction in the Executive's fixed salary; (v) a
Change of Control as hereinafter defined; (vi) the failure by GMI
or the Company to indemnify the Executive in accordance with the
provisions of Attachment A hereto; (vii) the Executive is not
re-elected to the Board immediately after his term on the Board
expires; or (viii) the occurrence of any other material breach of
this Agreement by GMI, the Company or any of their subsidiaries.
Any such termination shall be made by written notice to each member
of the Board, specifying the event relied upon for such termination
and given within 60 days after such event. Any such constructive
termination shall be effective 60 days after the date each member
of the Board has been given such written notice setting forth the
grounds for such termination with specificity; provided, however,
that Executive shall not be entitled to terminate this Agreement in
respect of any of the grounds set forth above if within 60 days
after such notice the action constituting such ground for
termination is no longer continuing. A constructive termination by
the Company without Cause shall terminate the Restrictive Period
hereunder.
4.7 CHANGE OF CONTROL. For the purposes hereof, a "Change of
Control of the Company" shall be deemed to have occurred if after
the effective date (i) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Act) is or becomes the "beneficial
owner" (as defined in Rule d-3 under the Securities Exchange Act of
1934 (the "Act")), directly or indirectly, of securities of GMI
representing 35% or more of the combined voting power of GMI's then
outstanding securities without the prior approval of at least a
majority of the members of the Board in office immediately prior to
such person attaining such percentage interest; (ii) there occurs
a proxy contest or a consent solicitation, or GMI is a party to a
merger, consolidation, sale of assets, plan of liquidation or other
reorganization not approved by at least a majority of the members
of the GMI Board in office, as a consequence of which members of
the GMI Board in office immediately prior to such transaction or
event constitute less than a majority of the GMI Board thereafter;
or (iii) during any period of two consecutive years, other than as
a result of an event described in clause (ii) of this Section 4.7,
individuals who at the beginning of such period constituted the GMI
Board (including for this purpose any new director whose election
or nomination for election by the GMI stockholders was approved by
a vote of at least a majority of the directors then still in office
who were directors at the beginning of such period) cease for any
reason to constitute at least a majority of the Board.
5. LEGAL FEES. In the event of a dispute or disagreement
regarding the right of the Executive to receive any compensation or
other benefit under this Agreement or the amount of such
compensation or other benefit, the Executive shall be reimbursed by
GMI for any and all attorney's fees and other costs and expenses as
and when expended by the Executive in connection with such dispute
or disagreement, regardless of the outcome thereof. Further, in
the event the Executive becomes entitled to any monies or benefits
hereunder, GMI agrees to pay such monies and provide such benefits
without regard to any and all claims, offsets or causes of action
which GMI may have against the Executive until such time, if ever,
as GMI shall have obtained a final judgment in its favor in a court
of competent jurisdiction regarding such claim, offset or cause of
action.
6. INDEMNIFICATION. The Executive shall be entitled to
indemnification of claims arising by reason of the fact that the
Executive is or was a director or officer of GMI or the Company in
accordance with the standard terms of indemnification for officers
of GMI attached hereto as Attachment A.
7. OTHER PROVISIONS.
7.1 CERTAIN DEFINITIONS. As used in this Agreement, the
following terms have the following meanings unless the context
otherwise requires:
7.1.1 "Affiliate" with respect to a person means any
other person controlled by or under common control with such
person but shall not include any stockholder or director of an
entity, as such.
7.1.2 "Person" means any individual, corporation,
partnership, firm, joint Company, association, joint-stock
company, trust, unincorporated organization, governmental or
regulatory body or other entity.
7.1.3 "Subsidiary" means any corporation 50% or more
of the voting securities of which are owned directly or
indirectly by GMI or the Company.
7.2 NOTICES. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered
personally, telegraphed, telexed, sent by facsimile transmission or
sent by certified, registered or express mail, postage prepaid.
Any such notice shall be deemed given when so delivered personally,
telegraphed, telexed or sent by facsimile transmission or, if
mailed, on the date of actual receipt thereof, as follows:
7.2.1 if to the Company and GMI, to:
Global Marine Inc.
777 North Eldridge
Houston, Texas 77079
Attn: Corporate Secretary
7.2.2 if to the Executive, to:
Robert E. Rose
703 St. Ives
Houston, Texas 77079
Any party may change its address for notice hereunder by
notice to the other party hereto.
7.3 ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties with respect to the subject matter
hereof and supersedes all prior agreements, written or oral, with
respect thereto.
7.4 WAIVERS AND AMENDMENTS. This Agreement may be amended,
superseded, canceled, renewed or extended, and the terms and
conditions hereof may be waived, only by a written instrument
signed by the parties hereto or, in the case of a waiver, by the
party waiving compliance. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as
a waiver thereof. Nor shall any waiver on the part of any party of
any such right, power or privilege hereunder, nor any single or
partial exercise of any right, power or privilege hereunder,
preclude any other or further exercise thereof or the exercise of
any other right, power or privilege hereunder.
7.5 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas
(without giving effect to the choice of law provisions thereof)
where the employment of the Executive shall be deemed, in part, to
be performed and enforcement of this Agreement or any action taken
or held with respect to this Agreement shall be taken in the courts
of appropriate jurisdiction in Houston, Texas.
7.6 ASSIGNMENT. This Agreement, and any rights and
obligations hereunder, may not be assigned by the Executive and may
be assigned by GMI and the Company (subject to Section 4.6 (iii)
hereof) only to any successor in interest, whether by merger,
consolidation, acquisition or the like, or to purchasers of
substantially all of the assets of GMI.
7.7 COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which when so executed and delivered shall be
deemed an original, but all of which together shall constitute one
and the same instrument.
7.8 HEADINGS. The headings in this Agreement are for
reference purposes only and shall not in any way affect the meaning
or interpretation of this Agreement.
7.9 NO PRESUMPTION AGAINST INTEREST. This Agreement has been
negotiated, drafted, edited and reviewed by the respective parties,
and therefore, no provision arising directly or indirectly here
from shall be construed against any party as being drafted by said
party.
7.10 VALIDITY CONTEST. The Company shall promptly pay any and
all legal fees and expenses incurred by the Executive from time to
time as a direct result of the Company's contesting the due
execution, authorization, validity or enforceability of this
Agreement.
7.11 BINDING AGREEMENT. This Agreement shall inure to the
benefit of and be binding upon the Company and its respective
successors and assigns and the Executive and his legal
representatives.
7.12 AUTHORIZATION. The Company represents and warrants that
the Board of Directors of the Company has authorized the execution
of this Agreement.
7.13 EXECUTIVE'S REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
7.13.1 The Executive warrants and represents that he was
not terminated from employment with Diamond Offshore Drilling Inc.
for any reason that would be deemed to constitute "cause" within
the meaning of his employment agreement with Diamond Offshore
Drilling Inc.
7.13.2 The Executive warrants that he will not, during the
course of his employment with GMI and the Company, disclose any
confidential or proprietary information obtained during his prior
employment relationships, and will not use such confidential
information in a manner that would violate his contractual
obligations to prior employers. In addition, the Executive
warrants that he will comply with the nonsolicitation of employees
requirement of his prior employment agreement with Diamond Offshore
Drilling Inc.
7.13.3 The Executive warrants that the execution and
performance of this Agreement is not in violation of any existing
agreement to which he is a party.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
GMI
GLOBAL MARINE INC.
By: /s/James L. McCulloch
Name: James L. McCulloch
Title:Vice President - General Counsel
COMPANY
GLOBAL MARINE CORPORATE
SERVICES INC.
By: /s/ James L. McCulloch
Name: James L. McCulloch
Title:Vice President - General Counsel
EXECUTIVE
/s/ Robert E. Rose
Robert E. Rose
HARLAND AND WOLFF SHIPBUILDING
AND HEAVY INDUSTRIES LIMITED
and
GLOBAL MARINE INTERNATIONAL SERVICES CORPORATION
SHIPBUILDING CONTRACT
relating to
Hull No: 1739
INDEX
PARTIES
CLAUSE 1 INTERPRETATION
Definitions
General Interpretation
CLAUSE 2 DESCRIPTION
Principal Particulars
Yard Number
CLAUSE 3 DESIGN RESPONSIBILITY
Owner's Responsibilities
Builder's Responsibilities
Continuing Liability of Builder
Owner's Proprietary Rights
Builder's Proprietary Rights
CLAUSE 4 CLASS AND REGULATIONS
Classification Society and Class
Changes to Classification Requirements
CLAUSE 5 CONSTRUCTION, MATERIALS AND INSPECTION
Construction
Subcontracting
Standard of Construction
Use of Substitute Materials
Lightship Weight and Center of Gravity
Departures from Contemplated Construction
Provision of Lightship Weight Updates
Preparation of Critical Path Project Schedule and
Construction
Critical Path Analysis
Variation of Contractual Price
Right to attend tests and trials
Supervision and Inspection by Owner's
Authorized Representative
Defective Workmanship
Resolution of Disputes by Classification Society
Provision of Offices and Office Equipment
Payment for office facilities
Access to Vessel and Builder's Yard
Standards applicable to Project Managers
Replacement of Authorized Representatives
CLAUSE 6 MODIFICATIONS
Change Request by Owner
Builder's Acceptance and Confirmation
Builder's Proposal
Timing of Owner's Response
Request for Further Information
Change Request by Builder
Changes to Regulatory Requirements
Authority of Project Managers
Owner's Directive
Referral to Appeals Board
Dispute resolution
Classification Society
Appeals Board
Effect of Disputes
Denomination of Project Change Orders and
Directives
CLAUSE 7 OWNER FURNISHED EQUIPMENT
Delivery
Risk
Notice of Arrival and Expenses of Delivery
Storage
Inspection by Builder
Owner's Right to Interest
CLAUSE 8 PRICE AND TERMS OF PAYMENT
Price
Guarantees
Installment Schedule
Notice of Installments Falling Due
Submission of Stage Certificates and Invoices
Payment of increases in the Contract Price
Terms of Payment
Set off of Liquidated Damages
Failure to Take Delivery
CLAUSE 9 PROPERTY AND JURISDICTION
Vesting of Property, Allocation of Risk and
Builder's Lien
Labeling of the Vessel
OFE
Appropriation of Vessel parts
Assembly other than at Builder's Yard
CLAUSE 10 INSURANCE
Owner to Insure
Builder to Insure
Payment of deductible
Insurance Recoveries
Total Loss of Vessel
Partial Loss of Vessel
Other insurances to be effected
Provision of copies of insurances effected
Risk of Vessel
CLAUSE 11 TRIALS AND PERFORMANCE
Arrangements for Trials
Notice of Sea Trials
Failure of Owner's Representative to attend
Unfavourable Weather Conditions
Fuel Consumption
Vessel not Complying with Specifications
Punch List of Defects
CLAUSE 12 DELIVERY
Time and Place
Valid Tender of Delivery
Removal of Vessel
Builder's Bonus and Liquidated Damages
Incomplete Work
CLAUSE 13 FORCE MAJEURE
Force Majeure Delays
Notice of Delays
Revised Contract Delivery Date
Owner's Rights
CLAUSE 14 DEFAULT OF THE OWNER
Events of Default
Builder's right to Cancel
Remedies following cancellation
Claims against Owner
Exercise of such rights
CLAUSE 15 DEFAULT OF THE BUILDER
Events of Default
Owner's Right to Cancel or take possession
Parent Company Guarantee and Letter of Credit
Vesting of Title
Sub-Contract Right
OFE
Set Off
Termination Without Cause
CLAUSE 16 GUARANTEE
Builder's Guarantee
Notice of Guarantee Claims
Inspection by Builder
Transportation of Builder
Remedies
Guarantees from Subcontractors
Holding of Sub-Contract Rights
Exclusion of Implied Guarantees
Builder's Warranty that Works Free from
Encumbrances
Exceptions and Limitations
Guarantee Engineer
Limitation of Guarantees
CLAUSE 17 INDEMNITIES FOR INFORMATION SUPPLIED
Builder's Indemnity
Owner's Indemnity
CLAUSE 18 TAXES AND DUTIES
For account of Builder
For account of Owners
Other Taxes
CLAUSE 19 HEALTH AND SAFETY ENVIRONMENT AND EMPLOYMENT
Precedence of Local Legislation
Compliance with Applicable Government Regulations
Sub-Contractors
CLAUSE 20 LAW AND ARBITRATION
CLAUSE 21 ASSIGNMENT
CLAUSE 22 NOTICES AND COMMUNICATIONS
CLAUSE 23 WAIVER
CLAUSE 24 ENTIRE CONTRACT AND AMENDMENTS
CLAUSE 25 LIABILITY AND INDEMNIFICATION
Definitions
Builder's Responsibilities
Owner's Responsibilities
Consequential Damages
Limit of Indemnities
Allocation of risk
Extension of Indemnities
Range of liabilities
CLAUSE 26 BENEFIT OF INDEMNITIES
Extended to Owner Group
Extended to Builder Group
Agencies for Giving and Receiving Indemnities
EXECUTION
FIRST SCHEDULE - STAGE CERTIFICATE
SECOND SCHEDULE - FINAL STAGE CERTIFICATE
THIRD SCHEDULE - LETTER OF CREDIT
FOURTH SCHEDULE - PARENT COMPANY GUARANTEE
FIFTH SCHEDULE - BUILDER'S PROPOSAL
SIXTH SCHEDULE - CHANGE ORDER REQUEST
SEVENTH SCHEDULE - PROJECT CHANGE ORDER
EIGHTH SCHEDULE - OWNER FURNISHED EQUIPMENT
NINTH SCHEDULE - SPECIFICATIONS
TENTH SCHEDULE - SUBCONTRACTORS LIST
ELEVENTH SCHEDULE - MAKER'S LIST
TWELFTH SCHEDULE - ADJUSTMENTS OF CONTRACT PRICE
BETWEEN ACTUAL AND ESTIMATED STEEL WEIGHTS
THIRTEENTH SCHEDULE -BUILDER'S RATES FOR
PROVISION OF OFFICE FACILITIES
FOURTEENTH SCHEDULE - HEALTH AND SAFETY PROVISIONS
FIFTEENTH SCHEDULE - "PHASE 2 BASIC DESIGN
PACKAGE"
SIXTEENTH SCHEDULE - INSURANCE
THIS CONTRACT is made the 27th day of February,
One Thousand, Nine Hundred and Ninety Eight between:
(1) HARLAND AND WOLFF SHIPBUILDING AND HEAVY INDUSTRIES LIMITED,
a company organized and existing under the laws of Northern
Ireland and having its principal office at Queen's Island,
Belfast, Northern Ireland BT3 9DU (hereinafter called the
"Builder"); and
(2) GLOBAL MARINE INTERNATIONAL SERVICES CORPORATION, a Bahamian
company and having its principal office at c/o McKinney,
Bancroft & Hughes, Mareva House, 4 George Street, P.O. Box
N. 3937, Nassau, Bahamas, (hereinafter called the "Owner").
WHEREBY IT IS AGREED that the Builder will construct,
complete and deliver to the Owner the Vessel described herein and
the Owner shall duly pay the Builder therefor all in accordance
with the following Clauses of this Contract:
CLAUSE 1 - INTERPRETATION
1.1 In this Contract
1.1.1 "Authorized Representative(s)" shall mean any
person who has been advised in writing by the
Owner Project Manager to the Builder or (as the
case may be) by the Builder Project Manager to the
Owner as having authority to act for the Owner or
(as the case may be) the Builder, and the extent
of such authority shall be defined in such advice;
1.1.2 "Appeals Board" shall mean a board comprised in
accordance with Clause 6.10;
1.1.3 NOT USED
1.1.4 "Builder Project Manager" shall mean the person
appointed by Builder, and Notified in writing to
the Owner as having authority to act on behalf of
Builder, in the discharge of Builder's obligations
hereunder. The authority of Builder Project
Manager includes, but is not limited to, the
authority to sign Project Change Orders pursuant
to Clause 6. Builder Project Manager may appoint
Authorized Representatives to act on behalf of
Builder, and shall Notify Owner in writing of such
appointment, defining in such Notice the extent of
the authority of each Authorized Representative;
1.1.5 "Builder's Proposal" shall mean a document in the
form set out at Schedule Five hereto;
1.1.6 Builder's Quarterly Invoices" shall mean invoices,
other than invoices for installment payments of
the Contract Price referred to in Clause 8,
submitted by the Builder to the Owner on a
quarterly basis and in accordance with the
provisions of Clause 8 which shall include, but
not be limited to, facilities charges for
telephone and other services and charges as more
specifically described in Clauses 5.15, 5.16 and
8.10.
1.1.7 "Builders Yard" shall mean the premises of the
Builder at Queen's Island, Belfast, Northern
Ireland;
1.1.8 "Change Order Request" shall mean a request in the
form set out at Schedule Six hereto;
1.1.9 "Classification Society" shall mean the American
Bureau of Shipping (also referred to as "ABS");
1.1.10 "Constructability" shall mean, in the context of
the Builder's obligations under Clause 3.2(a),
that the Vessel is physically capable of being
built on the basis of the Phase 2 Basic Design
Package. However, confirmation by the Builder of
such constructability shall not of itself give
rise to any different obligation of the Builder
under this Contract in relation to the performance
characteristics of the Vessel than that which
would otherwise have applied as part of the Works;
1.1.11 "Contract Delivery Date" shall mean 10th October
One Thousand Nine Hundred and Ninety-Nine as from
time to time extended pursuant to this Contract by
Permissible Delay;
1.1.12 "Contract Price" shall mean the price stipulated
in Clause 8.1 as amended by the provisions of this
Contract or any Amendment thereof;
1.1.13 "Delivery" and "Delivery Date" shall mean the date
upon which the Vessel is delivered to and accepted
by the Owner in accordance with the provisions of
Clause 12.2;
1.1.14 "Force Majeure" shall mean any of the
circumstances specified in Clause 13.1;
1.1.15 "Guarantee Period" shall mean the period referred
to in Clause 16.1;
1.1.16 "Letter of Credit" shall mean a letter of credit
in the maximum amount of United States Dollars
Thirty Million (US$30,000,000) substantially in
the form set out at Schedule Three executed by a
first class Bank acceptable in all respects to the
Owner;
1.1.17 "Makers List" shall mean the list attached at
Schedule Eleven hereto;
1.1.18 "Notice" shall mean formal notice as further
provided in Clause 22;
1.1.19 "Owner Furnished Equipment" or "OFE" shall mean
any item of equipment outfit and/or stores for the
Vessel on the list attached at Schedule Eight
hereto and as may otherwise be provided for in the
Specifications;
1.1.20 "Owner Subcontractor" or "Owner Supplier" shall
mean any person under contract to the Owner in
connection with the performance of any of the
obligations of Owner hereunder;
1.1.21 "Owner Project Manager" shall mean the person
appointed by Owner, and Notified in writing to the
Builder as having authority to act on behalf of
Owner, in the discharge of Owner's obligations
hereunder. The authority of Owner Project Manager
includes, but is not limited to, the authority to
sign Project Change Orders pursuant to Clause 6.
Owner Project Manager may appoint Authorized
Representatives to act on behalf of Owner, and
shall notify Builder in writing of such
appointment, defining in such Notice the extent of
the authority of each Authorized Representative;
1.1.22 "Parent Company Guarantee" shall be a guarantee in
the form set out at Schedule Four hereto and
executed by the Parent Company Guarantor;
1.1.23 "Parent Company Guarantor" shall mean Harland and
Wolff Holdings plc, a company having its
registered office at Queen's Island, Belfast, BT3
9DU;
1.1.24 "Permissible Delay" shall mean a delay in the
Delivery of the Vessel on account of causes which
under the terms of this Contract permit
postponement of the Contract Delivery Date which
delay shall be documented by a Project Change
Order countersigned by Owner;
1.1.25 "Port of entry Northern Ireland" shall mean the
point at which the OFE arrives on the territory of
Northern Ireland whether by air or freight;
1.1.26 "Project Change Order" shall mean a document in
the form set out at the Seventh Schedule hereto;
1.1.27 "Regulatory Bodies" shall mean the authorities,
imposing rules and regulations with which the
construction and outfit of the Vessel must comply
in accordance with the Specifications;
1.1.28 "Specifications" shall mean the specifications,
plans and drawings signed by the Builder and the
Owner and attached at the Ninth Schedule hereto
and identified as forming an integral part of this
Contract or such revised or supplemental
specifications, plans or drawings as may
subsequently be agreed between the Owner and the
Builder and signed by the Builder Project Manager
and the Owner Project Manager, in accordance with
Clause 6 and "Specified" shall mean stipulated in
the Specifications;
1.1.29 "Subcontract(s)" shall mean any contract entered
into by Builder for the construction or
manufacture of any materials, machinery, services
or equipment for the Works;
1.1.30 "Subcontractor(s)" shall mean any person under
contract to the Builder for the construction, or
manufacture of any materials, machinery, services
or equipment for the Works;
1.1.31 "Subcontractor's List" shall mean the List
attached at the Tenth Schedule hereto;
1.1.32 "Supplier" shall mean any person under contract to
the Builder for the supply of any materials,
machinery, services or equipment for the Works;
1.1.33 "Valid Tender of Delivery" shall mean a tender of
the Vessel for Delivery in accordance with Clause
12.2;
1.1.34 "Vessel" means the vessel bearing Hull No.1739
which is the subject of this Contract and
generally as described in Clause 2 with all the
machinery, outfit, materials and equipment
appurtenant thereto.
1.1.35 "Work" or "Works" means the works and services
(which expressions shall include the supply of
materials and equipment) to be performed by the
Builder or, to the extent permitted by Clause 5.2,
by its Subcontractors or Suppliers under this
Contract.
1.2 The order of precedence for the documents forming this
Contract shall be:
1.2.1 in case of any inconsistency between any provision
of this Contract and the Specifications, this
Contract shall prevail; and
1.2.2 in case of any inconsistency between the
Specifications and a plan or drawing, the
Specifications shall prevail; and
1.2.3 in case of any inconsistency between one plan or
drawing and another plan or drawing, the later in
date shall prevail;
1.3 Any reference to a Clause is to a Clause of this Contract.
1.4 The Index and Clause headings appearing in this Contract are
inserted for convenience of reference only and shall not
affect the construction of this Contract.
CLAUSE 2 - DESCRIPTION
2.1 The Builder shall construct and deliver to the Owner a
completely outfitted and equipped Drill-ship (being, subject to
Clause 3, of the Owner's design) which is capable of operating as
a dynamically positioned drilling unit in water depths up to
12,000 feet and as otherwise provided for herein and in the
Specifications, including supplying and installing all
materials, labor, machinery, equipment, furnishings, fittings, as
specified in the Specifications save and except to the extent of
Owner Furnished Equipment. In the case of Owner Furnished
Equipment, the Builder shall install same and provide the
necessary foundations, wiring, piping and successfully- tested
and commissioned interface connections to ensure the Owner
Furnished Equipment functions as complete operational systems.
Upon Delivery, the Vessel and all its parts and appurtenances
shall be complete as specified hereinafter.
2.2 The Vessel shall have the Hull No.1739 and this number shall
be placed on the Vessel, her materials and outfit during
construction.
CLAUSE 3 - DESIGN
3.1 The Owner shall be responsible, at no cost to the Builder,
for:
(a) the preparation of the drawings and plans for the
Vessel which drawings and plans are called the "Phase 2
Basic Design Package", a list of which is at Schedule
Fifteen hereto;
(b) obtaining the approval of the Classification Society
and the Regulatory Bodies to the Phase 2 Basic Design
Package; and
(c) furnishing the Builder, in a timely manner, with the
Phase 2 Basic Design Package, and any modifications
thereto as a result of obtaining the approvals
described in (b) above.
The Builder acknowledges that, at the date of this Contract, it
is in receipt of the Phase 2 Basic Design Package together with
evidence of the status of approvals of the Classification
Society.
3.2 The Builder, as part of the Works and at no additional cost
to the Owner, shall be responsible for:
(a) confirming the Constructability of the Phase 2 Basic
Design Package, as provided to it by the Owner, to
ensure that it provides an appropriate basis to perform
the Works hereunder, and, in particular, that the
construction and completion of the Vessel is in
accordance with this Contract and the Specifications.
Builder shall, immediately on discovery of any such
inconsistencies, advise the Owner Project Manager in
writing of any inconsistencies in the Phase 2 Basic
Design Package relative to the Constructability of the
Vessel; and
(b) the preparation of Builder's construction plans and
drawings (the "Builder's Working Drawings") based upon
the Phase 2 Basic Design Package. Such plans and
drawings shall, if required, be submitted to the Owner
and the Classification Society for approval in
accordance with the provisions of this Contract and the
Specifications; and
(c) the performance of the Works on the basis of such plans
and drawings as from time to time are approved by the
Classification Society and the Owner under paragraph
(b) above; and
(d) using all reasonable endeavors to discover any
inaccuracies in plans, drawings, and data provided by
the Owner, or provided by a third party acting on
behalf of the Owner, for the purposes of the Works.
3.3 Builder shall be and remain liable hereunder for:
(a) any defect or deficiency in the preparation of the
Builder's Working Drawings, whether or not the same
have been approved by the Owner or the Classification
Society, save to the extent that such defect or
deficiency is caused by inaccuracies in plans, drawings
and/or data supplied by Owner, unless the Builder shall
have failed to use all reasonable endeavours to
discover detectable inaccuracies in such plans,
drawings or data; and
(b) any design work undertaken by Builder in connection
with a Project Change Order.
3.4 The design of the Vessel and all plans and drawings relating
to the Vessel and all intellectual property rights in the same
(such design, plans and drawings and all intellectual property
rights in the same being herein called the "Owner I.P.R.") shall
at all times be and remain the sole and exclusive property of the
Owner who reserves all proprietary rights in and to the same.
The Builder will not obtain any rights of ownership or other
proprietary rights in connection therewith or any part thereof
and will not act in any way to indicate to any third party that
he has any right in or to.
The Builder shall only be entitled to use the Owner I.P.R.
for the sole purpose of (and for no other purpose than)
performing the Works.
3.5 Notwithstanding anything to the contrary in Clause 3.4
above, the Builder shall retain ownership of all Builder's
Working Drawings and all ownership and intellectual property
rights thereto, except for those which have been developed
directly from drawings, plans or other information supplied by
Owner, Owner Subcontractor, Owner Supplier, or the Phase 2 Basic
Design Package. For the avoidance of doubt, Owner shall own all
Builder's Working Drawings and all ownership and intellectual
property rights thereto, inclusive of those approved by the
Classification Society, which have been developed directly from
drawings, plans or other information supplied by the Owner, Owner
Subcontractor, Owner Supplier or the Phase 2 Basic Design
Package. With respect to all Builder's Working Drawings,
regardless of ownership, the Builder shall:
(a) make copies thereof available to the Owner or
Classification Society (and Owner shall be entitled to
make the same available to Owner Subcontractor or Owner
Supplier or any third party for the purposes described
in this Clause) in the course of performance of the
Works or, at the request of the Owner, to assist the
Owner, or any third party, in the operation, repair or
maintenance of the Vessel after delivery; and
(b) not design or build any drillship or similar vessel to
the Vessel on the basis of "Owner IPR"; and
(c) not disclose Owner IPR nor Builder's Working Drawings
to third parties whether to enable them to effect such
design of any drillship or vessel similar to the Vessel
or otherwise.
CLAUSE 4 - CLASS AND REGULATIONS
4.1 The Vessel shall be built to ABS rules and under their
survey to Class A1-E Mobile Offshore Drilling Unit - DPS-3
AMS, ACCU, R2S and to the specified rules and regulations of the
Regulatory Bodies, including any alterations and modifications
thereto published as at the date of signature of this Contract
and including rules or regulations announced but not in effect on
the date of signature of this Contract provided that they are
scheduled to come into effect prior to the Contract Delivery
Date, so as to enable the Vessel to be registered under the
Panamanian Flag. All fees and charges incidental to
classification and to compliance with the specified rules and
regulations of Regulatory Bodies and the requirements of this
Contract payable in connection with the construction of the
Vessel shall be for the account of the Builder, except for fees,
charges and expenses of the Classification Society incidental to
the approval of the Phase 2 Basic Design Package and registration
of the Vessel which shall be for account of the Owner.
4.2 If, after the date of signature of this Contract, any
requirements of the Classification Society or of the Regulatory
Bodies, with which the construction of the Vessel is required to
conform including requirements announced prior to the date of
signature of this Contract and scheduled to come into effect
prior to the Contract Delivery Date, are altered or changed by
the Classification Society or Regulatory Bodies and the parties
are unable to obtain a dispensation therefrom or waiver of
compliance therewith, the Builder shall comply with any such
alterations or changes (if any) in the construction of the Vessel
occasioned thereby, and any modifications or alterations to the
Contract Price and/or Contract Delivery Date, arising out of the
changes in the rules or regulations shall be determined in
accordance with Clause 6.
CLAUSE 5 - CONSTRUCTION, MATERIALS AND INSPECTION
5.1 The Builder shall commence performance of the Works and
shall proceed with the same with all due diligence, so as to
achieve the completion of the Works and Delivery of the Vessel in
accordance with this Contract and the Specifications and the
Contract Delivery Date.
5.2 The Builder may sub-contract any portion of the Work of the
Vessel to any of the Subcontractors or Suppliers respectively
specified and/or listed in the Subcontractor's List or Maker's
List attached at schedules Ten and Eleven respectively, but shall
not otherwise be entitled to sub-contract such Work without the
Owner's consent which shall not be unreasonably withheld.
5.3 Subject to all the terms of this Contract, the Vessel, her
machinery, outfit, equipment, materials and workmanship shall be
in accordance with this Contract and the Specifications and shall
otherwise be in conformity with first class commercial
shipbuilding practice, as applicable in Western Europe.
5.4 If any specified materials are not available when required
for incorporation in the Vessel, the Builder shall be at liberty
to use other suitable materials in substitution therefor subject
to the approval of the Owner which approval shall not be
unreasonably withheld and (where applicable) to the approval of
the Classification Society and other Regulatory Bodies. If such
approvals are forthcoming, any consequent modification or change
shall be dealt with in accordance with the provisions of Clause
6.
5.5 Within thirty (30) days of the signature of this Contract,
Owner shall supply to Builder all available estimates of weight
and center of gravity of OFE items. Further, Owner shall, upon
its receipt, supply Builder with certified vendor drawings for
OFE as soon as is practically possible. Within sixty (60) days
of the signature of this Contract, Builder shall derive an
estimate of steel weight and the center of gravity of the Vessel
from the Phase 2 Basic Design Package. Within one hundred and
twenty (120) days of the signature of this Contract, Builder
shall submit to the Owner for approval a complete estimate of the
estimated weight and center of gravity of the Vessel. Agreement
shall be reached as quickly as possible between Builder and Owner
as to the baseline lightship weight and center of gravity (herein
referred to as "Baseline Lightship Weight" and "Center of
Gravity"). Any changes in the weight and/or center of gravity as
a result of changes in OFE, shall be dealt with under the change
order procedure in accordance with Clause 6.
5.6 Departures from the construction contemplated in the above
agreement which affect the Baseline Lightship Weight and Center
of Gravity shall not be undertaken until Builder has submitted to
the Owner his estimate of the effect on the lightship weight and
center of gravity of the Vessel and obtained written approval of
Owner to proceed with the departure. Individual departures from
any agreed weight group of 227KG (500lb) or less shall not
require written approval.
5.7 The Builder shall continuously update the lightship weight
as working drawings are produced and approved and the weight of
the equipment becomes available. After the date of the agreement
of the Baseline Lightship Weight and Center of Gravity of the
Vessel, as provided for in Clause 5.5 above, Builder shall submit
to Owner a monthly report which details:
(i) an update of the comprehensive lightship weight and
center of gravity of the Vessel; and
(ii) a tabulation of all departures from the Baseline
Lightship Weight and Center of Gravity of the Vessel
which details their respective cumulative effects
thereto.
5.8 The Builder shall prepare a Primavera level 3 critical path
project schedule within thirty (30) days of signature of this
Contract for submission to Owner, and shall give information to
and cooperate with the Owner Project Manager and the Owner in
this respect in order that all parties are thoroughly familiar
with the progress made and to be made in order that the Vessel
may be completed by the Contract Delivery Date. The scheduled
delivery dates and all delivery requirements of items of
equipment which can affect the critical path project schedule
shall be clearly identified in such critical path project
schedule. The project schedule shall include a critical path
analysis and be updated monthly and submitted to Owner in
conjunction with the monthly report referred to in Clause 5.7
above.
5.9 To the extent that the actual steel weight of the completed
Vessel, as defined in Schedule Twelve hereto, differs from the
estimated steel weights set out at Schedule Twelve hereto the
Contract Price shall be adjusted in accordance with the rates set
out in that Schedule.
5.10 During construction of the Vessel the Builder will permit
Owner's Authorized Representatives to attend tests and trials
which shall be advised in writing to Owner Project Manager as
follows:
(i) in the case of a test or trial where a representative
of Owner Supplier must be present, Builder shall give
thirty (30) days provisional advisement, and seven (7)
days definite advisement of such trial; and
(ii) in the case of a test or trial for which a formal
procedure with acceptance/rejection criteria is
applicable, Builder shall give seventy-two (72) hours
advisement of such trial;
(iii)in the case of a day to day inspection, Builder shall
give reasonable notice and shall use its best
endeavours to give such advisement at least the day
before such test or trial.
Such examination and inspection shall in no way diminish, affect
or impair the obligations, guarantees or undertakings of the
Builder in relation to the due and proper execution of the Work
or the materials employed or guarantees hereinafter mentioned.
The failure of an Owner's Authorized Representative to attend any
test or trial, after receipt of reasonable notice as above, shall
be deemed a waiver of Owner's right to attend same, however
Builder shall furnish to Owner the results of such tests and
trials as soon as practicable thereafter.
5.11 The Builder will also permit Owner's Authorized
Representatives to have access during all working hours to the
facilities of the Builder and its Subcontractors where the Works
are being carried out.
5.12 If during construction and prior to dock and sea trials
the Owner, its Project Manager or Authorized Representatives
becomes aware of any defect or omission in the Vessel or its
machinery arising out of the Works they shall as soon as
practicable specify the same in writing to the Builder Project
Manager and
(i) if the Builder agrees the alleged defect or omission or
if under Clause 6.9 the Classification Society so
decides, the Builder shall at its own cost rectify any
such defect or omission; and
(ii) in any event Owner shall have the right to issue a
directive instructing Builder to rectify the defect or
omission. Builder shall comply with such directive but
such compliance shall not prejudice either Party's
rights under Clause 5.13.
5.13 Any dispute which may arise between Owner and Builder during
the construction of the Vessel in relation to the workmanship,
materials or conformity with the Specifications shall be resolved
in accordance with Clauses 6.9 and 6.10 or if not so resolved,
may be referred to arbitration in accordance with Clause 20.
5.14 The Builder shall provide, without cost to Owner, the
following:
(i) a single office facility at the Builder's Yard, for
fifteen (15) people to enable the Owner Project Manager
and Owner's Authorized Representatives to carry out
their duties. Such facility will comprise suitable
office fittings including drawing tables, stools,
desks, chairs, filing cabinets, toilets, lighting,
heating, hot and cold running water, cleaning, the
installation of telephone (comprising four (4) outside
lines and three (3) internal lines) and fax services
all free of charge to the Owner; and
(ii) Builder shall also supply a heated portable office on
or near the Vessel, with one (1) shipyard phone, one
(1) desk and four (4) chairs; and
(iii)all facilities for a further fifteen (15) people
including offices, heating and light, telephones,
drawing tables, stools, desks, chairs, filing cabinets,
toilets, hot and cold running water facilities, as may
be required for the Owner's operations personnel. Such
facilities for Owner's operations personnel shall be
provided six (6) months prior to the Contract Delivery
Date.
5.15 Telephone rental and unit charges and the installation and
use of any additional communication services or any other
additional accommodation or services or equipment as may be
provided by the Builder at the Owner's request shall be paid for
by the Owner against the Builder's Quarterly Invoices. Builder
shall invoice Owner at its cost without uplift or premium for the
charges mentioned above.
5.16 The Builder shall permit Owner's operations personnel, Owner
Subcontractors and Owner Suppliers, all necessary and appropriate
access to the Vessel for outfitting and rig up purposes. Owner
Project Manager and Builder Project Manager shall liaise and
shall co-operate with each other to minimize any disruption.
Owner's operations personnel, Owner Subcontractors and Owner
Suppliers shall be permitted ready access to the Builder's Yard
to enable them to carry out and complete their work to ensure
that the Vessel is fully operational at Delivery. The Builder
shall provide the necessary facilities and support, which shall
be paid by Owner against Builder's Quarterly Invoices in
accordance with the schedule of rates, attached at Schedule
Thirteen hereto.
5.17 The Owner undertakes that its Project Manager and
Authorized Representatives shall carry out their duties hereunder
in accordance with first class commercial shipbuilding practice
as applicable in Western Europe and in such a way as to avoid any
unnecessary increase in building cost or delay in the Builder's
construction programme.
5.18 Either party shall have the right by written Notice to
request the other to replace its Project Manager or any of its
Authorized Representatives if they are reasonably deemed by the
objecting party to be unsuitable or unsatisfactory for the proper
progress of the Vessel's construction. If the party in receipt
of such Notice shall agree, the replacement of such Project
Manager or Authorized Representative shall take place as soon as
reasonably practicable.
CLAUSE 6 - MODIFICATIONS AND CHANGE ORDERS
6.1 Owner may, at any time prior to Delivery of the Vessel,
issue a Change Order Request in writing to the Builder,
instructing the Builder to modify or change the Specifications.
6.2 If the Builder considers such modification or change can be
carried out without alteration to the Contract Price or Contract
Delivery Date, the Builder shall, within five (5) days confirm
this in writing to the Owner and proceed with such modification
or change.
6.3 If the Builder considers such modification or change cannot
be carried out without alteration to the Contract Price or
Contract Delivery Date, the Builder shall within five (5) days or
where the extent of the modification or change requires a longer
period, such longer period as the parties shall agree, submit to
the Owner in writing a Builder's Proposal which shall detail:
(i) the amount of any increase or decrease to the Contract
Price, representing the reasonable cost or saving for
the relevant modification or change; and
(ii) the extent of any reasonable extension or advancement
in the Contract Delivery Date of the Vessel occasioned
by such change or modification;
(iii)any other impact on the Specifications (including
without limitation, the Baseline Light ShipWeight or
Center of Gravity of the Vessel).
6.4 Within five (5) days, or where the extent of the
modification or change justifies a different period, and in
particular where the Builder deems the item or component to be
modified or changed to be critical to the timely construction of
the Vessel, such other period as the parties shall agree, of
receipt of a Builder Proposal, Owner shall advise Builder in
writing of its acceptance or rejection of the Builder's Proposal.
If the Builder's Proposal is accepted, the Owner shall
countersign a Project Change Order submitted by Builder.
6.5 Owner shall have, in the event that it does not accept the
Builder's Proposal, the right to request such further information
or documentation to substantiate the Builder's Proposal, which
Builder shall promptly supply. Any dispute which may arise
between Owner and Builder during the construction of the vessel
in relation to any modification or change to the Specification,
Contract Price or Contract Delivery Date shall be resolved in
accordance with Clauses 6.9 and 6.10, or if not so resolved may
be referred to arbitration in accordance with Clause 20.
6.6 In the event that the Builder wishes to propose a
modification or change to the Specifications, the Builder shall
advise Owner Project Manager in writing of the suggested
modification or change, and shall submit a Builder's Proposal
complying in all respects with Clause 6.3 above. The Owner shall
have the right to reject or accept the suggested modification or
change in its discretion. In the event of an acceptance, the
Owner shall countersign the Project Change Order submitted by the
Builder.
6.7 Paragraphs 6.2, 6.3 and 6.4 shall apply mutatis mutandis, in
the event that, following the signature of this Contract, any
alterations or modifications are made to the laws, rules,
regulations and enactments (including any rules or regulation or
alterations or modifications thereto announced but not in effect
on the date of signature of this Contract and provided they are
scheduled to come into effect prior to the Contract Delivery
Date), to which the construction of the Vessel is required to
conform, save that each party on becoming aware of such
modification, deletion or addition shall forthwith advise the
other in writing.
6.8 The Builder Project Manager and the Owner Project Manager,
respectively, shall have authority to bind the Builder and Owner,
respectively, in relation to this Clause.
6.9 During the performance of the Works, and prior to the
Delivery of the Vessel, if the value of any dispute in respect of
any matter referred to in Clause 5.12, 5.13, 6.5 or 13.3 is not
more than United States Dollars fifty thousand (US$50,000) (or
equivalent), it shall be referred to the Senior Representative of
the Classification Society on site, acting as an expert and not
as an arbitrator, whose decision shall be final and binding on
the parties. If the value of the dispute exceeds United States
Dollars fifty thousand (US$50,000) (or equivalent), the parties
may by mutual agreement refer the dispute to the Senior
Representative of the Classification Society on site acting as an
expert and not as an arbitrator whose decision, in the event of
such referral, shall be final and binding on the parties.
With respect to any dispute of any matter referred to in Clause
6.5 only which is not more than United States Dollars fifty
thousand (US$50,000) (or equivalent) if the dispute mechanism
outlined hereinabove should be deemed unsatisfactory by either
Party, the Parties will endeavour to establish a mutually-agreed
dispute resolution mechanism for such disputes. Failing the
establishment of the Parties of a mutually-agreed dispute
resolution mechanism for such Clause 6.5 disputes, any and all
such disputes may be referred by either Party to arbitration in
accordance with the terms and conditions of Clause 20 hereof.
6.10 Owner and Builder shall use all reasonable efforts to agree
the necessary alteration to the Contract Delivery Date, Contract
Price or Specifications arising as a consequence of the proposed
modification or change but, if no agreement can be reached,
either party may refer the dispute to an Appeals Board. Such
Appeals Board shall consist of one representative of each party
who is not part of the day to day activities involved in the
performance of the Works. If the Appeal's Board is unable to
reach an agreed decision either party shall be entitled to
initiate arbitration procedures under Clause 20.
6.11 Notwithstanding that Builder Proposal has not been issued or
that a Project Change Order has not been countersigned by Owner
in relation thereto, Owner shall at any time have the right to
issue a directive instructing Builder to proceed with the change
to the Specifications in question. Builder shall comply with
such directive, but such compliance shall not prejudice either
party's rights to refer the dispute to the Senior Representative
of the Classification Society on site in accordance with Clause
6.9, or to the Appeals Board as set forth in Clause 6.10 or to
initiate arbitration proceedings as set forth in Clause 20
hereunder.
6.12 All Project Change Orders and/or the value for any directive
issued by Owner hereunder this Clause 6 shall be denominated in
US Dollars. The US Dollar figure shall be based on the official
exchange rate for British Pounds Sterling in effect at the time
the Project Change Order is signed by both Parties or the Owner
directive is issued.
CLAUSE 7 - OWNER FURNISHED EQUIPMENT
7.1 Owner shall deliver to Builder's Yard all items of Owner
Furnished Equipment in accordance with the delivery date for
such item specified in the initial Primavera critical path
project schedule (as amended from time to time by Permissible
Delay), (the "OFE Scheduled Delivery Date").
7.2 All items of Owner Furnished Equipment shall be at Builder's
risk from arrival at the dock or gates of the Builder's Yard.
7.3 NOT USED
7.4 From time of arrival at Builder's Yard, the Builder shall,
at its own cost, transport and store all items of Owner Furnished
Equipment in secure and appropriate storage in accordance with
Owner Supplier's manual and instructions (and/or Owner's
instructions) in the minimum number of separate warehouse(s) or
area(s) practicable, taking care that the same shall not be
damaged, and shall clearly mark all items of Owner Furnished
Equipment as such and as the property of the Owner.
7.5 On arrival of each item of Owner Furnished Equipment at the
Builder's Yard, the Builder shall inspect the same to ensure that
the items contain no obvious defects or signs of damage, and
shall measure and review the same to ensure that they are in
accordance with the relevant Owner Supplier's specified
dimensions and interfaces. Builder shall promptly advise Owner
Project Manager in writing of any items which are damaged or do
not appear to be in accordance with such specified dimensions or
interfaces.
7.6 Provided that Owner has delivered the item of Owner
Furnished Equipment on or before the OFE Scheduled Delivery Date,
where the value of such an item exceeds United States Dollars
five hundred thousand (US$ 500,000) and unless so instructed by
Owner, where such item is not installed within sixty (60) days
following the Scheduled Delivery Date, Builder shall pay to Owner
interest at the rate of one half per cent (0.5%) of the price of
such item pro rata per month calculated daily from and including
the sixty-first (61st) day and paid monthly. Owner shall be
entitled to set off all sums due to it pursuant to this Clause
against the installment of the Contract Price payable pursuant to
Clause 8.3.5.
CLAUSE 8 - PRICE AND TERMS OF PAYMENT
8.1 The total cost for Drillship No 1739 shall be United States
Dollars Two Hundred and Sixty Seven Million, Seven Hundred and
Ninety Four Thousand, Two Hundred Thirty Four (US$267,794,234)
comprised as follows:
A United States Dollars One Hundred and Sixty One
Million, Five Hundred Eighty Five Thousand, Two Hundred
Thirty Four (US$161,585,234) (the "Contract Price") for
detail design, procurement (exclusive of OFE, see
below), construction, installation of all equipment,
commissioning and setting to work of the total
drillship, all according to this Contract.
B United States Dollars One Hundred Six Million, Two
Hundred Nine Thousand (US$106,209,000) for OFE. Unless
otherwise mutually agreed the Owner shall be
responsible for all payments due in respect of OFE to
Owner Suppliers and Owner Subcontractors.
8.2 Builder shall provide the Parent Company Guarantee and the
Letter of Credit (attached in the forms of the Third and Fourth
Schedules, respectively) to Owner at the date of signature of
this Contract.
8.3 Provided that Owner has received the Parent Company
Guarantee and Letter of Credit, payment of the Contract Price
shall be made by installments from or on behalf of the Owner to
the Builder as follows:-
8.3.1 Twenty percent (20%) of the Contract Price on
signature of this Contract within seven (7) days
of Owner's receipt of Builder's invoice;
8.3.2 Twenty percent (20%) of the Contract Price at the
start of preparation, intended to be the
continuous cutting of steel but not before March
2, 1998;
8.3.3 Twenty percent (20%) of the Contract Price on keel
laying of a minimum of five hundred (500) tons of
steel, but not before September 1, 1998;
8.3.4 Twenty percent (20%) of the Contract Price at
floatation of the Vessel in a condition where it
can be floated without requiring new docking, but
not before April 15, 1999; and
8.3.5 Twenty percent (20%) of the Contract Price, plus
or minus any increases or decreases occasioned in
accordance with the provisions of this Contract or
any Amendment thereof which have not previously
been accounted for by adjustment of this or any
earlier installments, at Delivery of the Vessel,
estimated to be October 10, 1999.
8.4 The Builder shall by not less than seven (7) days advance
Notice in writing advise the Owner of the date upon which any of
the installments referred to in Clauses 8.3.2 to 8.3.5 hereof
shall become payable.
8.5 Payment of each of the installments at 8.3.2 to 8.3.4 above
shall be subject to the receipt by the Owner of
(i) a Stage Certificate (in the form set out in the First
Schedule hereto) signed by the Builder and
countersigned by the Owner and
(ii) following such counter-signature, the Builder's invoice
in the amount of the relevant installment.
8.6 Notwithstanding Clause 8.1, if the aggregate of any
increases in the Contract Price for the Vessel resulting from the
operation of Clause 6 or any Amendment to this Contract amounts
to an increase of more than two percent (2%) in the Contract
Price at any time during the construction of the Vessel (such
increase over and above two (2%) percent being called the
"Excess"), the following shall apply:
(i) if there shall be an Excess on or before payment of the
installment referred to in Clause 8.3.2, forty (40%)
per cent of the Excess shall be paid together with such
installment and sixty (60%) per cent shall be paid in
equal proportions with the installments referred to in
Clauses 8.3.3. to 8.3.5;
(ii) if there shall be an Excess after payment of the
installment referred to in Clause 8.3.2, but on or
before payment of the installment referred to in Clause
8.3.3, sixty (60%) per cent of the Excess shall be paid
together with such installment and forty (40%) per
cent shall be paid in equal proportions with the
installments referred to in Clauses 8.3.4. to 8.3.5;
(iii)if there shall be an Excess after payment of the
installment referred to in Clause 8.3.3, but on or
before payment of the installment referred to in
Clause 8.3.4, eighty (80%) per cent of the Excess shall
be paid together with such installment and twenty
(20%) per cent shall be paid with the installment
referred to in Clause 8.3.5;
For the avoidance of doubt, any Excess occurring following the
payment of the installment referred to in Clause 8.3.4 and/or any
increases that, in aggregate, do not exceed two per cent (2%)
shall be paid together with the installment referred to in Clause
8.3.5.
8.7 The amount of each of the installments referred to in Clause
8.3 hereof shall be paid in US Dollars free of bank charges
together with any VAT and other tax or duty then payable by the
Owner direct to the Builder's Account No: by banker's draft or
telegraphic transfer within seven (7) days following receipt by
Owner of the Builder's invoice in accordance with Clause 8.5,
and, if not so paid shall (without prejudice to any other rights
of the Builder in respect of non payment) bear interest from the
due date until payment at the rate of two percent (2%) over one
month LIBOR from time to time for the particular currency.
8.8 Any amounts for bonuses or liquidated damages under Clause
12 shall be calculated and determined on or before Delivery of
the Vessel and shall be payable on the Delivery Date, and Owner
shall be entitled to net-off such amount(s) against the
installment referred to in Clause 8.3.5 above.
8.9 If the Owner fails to take delivery upon a Valid Tender of
Delivery by the Builder, the Owner shall nevertheless make full
and final payment on the date of such valid tender of Delivery
and shall thereafter reimburse the Builder for all costs and
expenses which the Builder reasonably incurs by reason of the
Owner's failure to take Delivery.
8.10 Other sums due to Builder by Owner hereunder this Contract,
except those payable for bonus or by Amendment, shall be the
subject of Builder's Quarterly Invoices. For each quarter ending
after the date of the signing of this Contract Builder, shall
prepare and submit to Owner an invoice covering sums for and
including, but not limited to, additional services which are
requested by Owner, but are not provided for in any Project
Change Order, and facilities usage for Owner's Subcontractors and
Owner's Suppliers provided for in Clause 5.16, above. Upon its
receipt of Builder's Quarterly Invoices, Owner shall pay the
undisputed portion within thirty (30) days. Undisputed amounts
of Builder's Quarterly Invoices beyond the thirty (30) day period
shall bear interest at the rate of two per cent (2%) over
one-month LIBOR from time to time for the particular currency.
CLAUSE 9 - PROPERTY AND JURISDICTION
9.1 Upon payment of the sum due under Clause 8.3.1 the Vessel,
as it is constructed, and all machinery, equipment and materials
whether wholly or partially finished or unfinished from time to
time appropriated or intended for it in the Builder's Yard or
elsewhere shall become and remain the absolute property of the
Owner (but at the risk of the Builder) notwithstanding that any
such machinery, equipment and materials shall subsequently be
worked upon by the Builder or its Subcontractors or otherwise
processed or incorporated into the Vessel and shall not be within
the ownership or disposition of the Builder, but the Builder
shall at all times have a lien thereon for any part of the
Contract Price which is unpaid and for any sums due from time to
time in accordance with this Contract provided that such lien
shall not continue or be enforceable by or on behalf of the
Builder in any of the circumstances described in Clauses 15.1 or
15.2.
9.2 Immediately upon machinery, equipment or material becoming
the property of the Owner under the provisions of Clause 9.1 the
Builder shall place or cause to be placed thereon the yard number
of the Vessel and shall place such number at the bow of the
Vessel and shall take all reasonable steps to cause all
machinery, equipment and materials for the Vessel to be numbered
as aforesaid by itself or its Subcontractors.
9.3 Any items, other than Owner Furnished Equipment (which shall
be and remain the property of the Owner), not used in the
construction of the Vessel shall after Delivery revert to and
become the property of the Builder.
9.4 Without prejudice to the rights of Owner as provided in
Clause 15, any engines, boilers, machinery or materials which are
part of the Vessel or which are appropriated thereto shall not
after delivery to the premises of the Builder be removed outside
the Builder's Yard except for the purposes of effecting repairs
thereto or obtaining replacements therefor.
9.5 Without prejudice to the rights of Owner as provided in
Clause 15, the Vessel shall not be assembled or floated other
than at the Builder's Yard without the prior approval of the
Owner.
CLAUSE 10 - INSURANCE
10.1 Owner and Builder respectively shall each effect the
insurances listed at the Sixteenth Schedule hereto, on the terms
and conditions therein set out and shall, within fourteen (14)
days of signature of this Contract supply each other with copies
of all such insurances effected.
10.2 Owner's Builder's risk insurance referred to in Schedule 16
contains a deductible of United States Dollars two hundred
thousand (US$ 200,000). Builder shall therefore, in addition to
the insurances listed at Schedule 16, procure insurance from the
date of signature of this Contract in the joint names of Owner
and Builder, in the amount of United States Dollars two hundred
thousand (US$200,000) in respect of each and every claim, with a
deductible of United States Dollars fifty thousand (US$50,000).
10.3 In the event that the Vessel should suffer partial damage
between the date of signature of this Contract and the Delivery
Date, Owner shall be liable to pay to Builder the first United
States Dollars fifty thousand (US$50,000) payable under each and
every claim if the event which has given rise to the claim occurs
as a result of the sole fault of Owner.
10.4 In the event of an actual, constructive, compromised or
arranged total loss of the Vessel prior to the Delivery of the
Vessel, either the Owner or the Builder shall be entitled to
terminate this Contract by serving upon the Builder or the Owner
as the case may be, written Notice of termination, such Notice to
be dispatched within thirty days of the date upon which the
insurers accept that the Vessel has become an actual,
constructive, compromised or arranged total loss.
10.5 In the event of any loss or damage being sustained by the
Vessel prior to Delivery which does not constitute an actual,
constructive, compromised or arranged total loss the Builder
shall repair and make good that loss or damage (hereinafter
referred to as a "partial loss") to the approval of the
Classification Society and reasonable approval of the Owner so
that the Vessel in all respects meets the requirements of this
Contract at the Specifications.
10.6 The proceeds of any claim shall be dealt with as follows:-
10.6.1 in the case of a partial loss, when the insurers are
satisfied that the Builder has made good the loss or damage the
occurrence of which had given rise to the claim or when the
insurers are satisfied that the Builder has made sufficient
progress in repairing or making good the loss or damage the
occurrence of which had given rise to the claim, then the
insurers shall pay to the Builder the whole proceeds where the
repairs are complete or such part of the proceeds as the insurers
may decide as a payment on account of the partial repair.
10.6.2 in the event of an actual, constructive, compromised or
arranged total loss, if refund has not been made pursuant to
Clause 15, any amounts received and retained by the Owner out of
the insurance proceeds shall be set off against any liability of
Builder to Owner pursuant to Clause 15 hereof, and, to the extent
such refund has been made, any proceeds shall be paid to Builder.
CLAUSE 11 - TRIALS AND PERFORMANCE
11.1 Prior to the Vessel's delivery to, and acceptance by the
Owner, the Vessel shall undergo sea trials during a single trip,
at a place appointed by the Builder and in accordance with the
provisions of Specifications. The Vessel shall also undergo dock
trials in accordance with the provisions of the Specifications.
11.2 The Owner shall receive from the Builder at least thirty
(30) days provisional Notice and seven (7) days definite Notice
of the time and place of the sea trials of the Vessel.
11.3 The Authorized Representatives of the Owner who will attend
and witness the performance of the Vessel during such sea trials
shall be present on the date specified in such notice. Failure
of the Owner or any of the Authorized Representatives to be
present after due notice of not less than seven (7) days shall
render the Owner liable for the costs of the abortive sea trial
arrangements and shall constitute a Permissible Delay extending
the Contract Delivery Date of the Vessel by the period of delay
caused by such failure to be present which extension shall be
effected by a Project Change Order in accordance with Clause 6.
11.4 In the event of the weather on the date specified for the
sea trials being in the reasonable opinion of either party
unfavorable, then the same shall take place on the first
available day thereafter that weather conditions permit. If
during the sea trials such changes in weather shall occur as
would, in the opinion of either party , have precluded any
commencement of the sea trials had the change in weather occurred
before the sea trials had started then, in such event, either
party shall have the option to discontinue the sea trials and
require that the date for the sea trials be postponed until the
first favorable day next following unless the Owner shall agree
to accept the Vessel on the basis of the sea trials made prior to
such sudden change in weather condition. Any delay in sea trials
caused by adverse weather conditions shall be a Force Majeure
delay within the terms of Clause 13.
11.5 Prior to dock and sea trials the Owner shall select the fuel
oil and main engine lubricating oils in compliance with the
Specifications and machinery manufacturer's recommendations,
whereupon the Builder shall provide the Vessel with the required
quantity of fuel oil, lubricating oils, grease and other stores
necessary for the conduct of such dock and sea trials. Upon
Delivery of the Vessel, the Owner shall pay to the Builder a sum
equal to the cost of fuel oil and such lubricating oils, greases
and other stores used during such trials and any such fuel oil,
lubricating oils, greases and other stores on board the Vessel at
Delivery.
11.6 If the Vessel fails any of the dock or sea trials for which
the Builder is responsible, the Builder shall rectify any defects
in respect of the Works which caused such failure and shall
conduct additional trials until the Vessel meets or exceeds the
applicable testing criteria.
11.7 No later than two (2) weeks prior to the anticipated
Delivery Date the Owner and the Builder shall prepare a final
punch list of defects. If such list cannot be agreed, any
dispute shall be resolved in accordance with Clauses 6.9 and 6.10
or, if not so resolved, may be referred to arbitration in
accordance with Clause 20.
This sub-clause is without prejudice to Builder's obligation to
deliver the Vessel in accordance with the Contract and the
Specifications.
CLAUSE 12 - DELIVERY
12.1 The Vessel shall be delivered to the Owner by the Builder at
the Builder's Yard on or before the Contract Delivery Date.
12.2 Provided that:
(i) the Vessel is in compliance with the requirements of
the Contract and the Specifications; and
(ii) all the Certificates referred to below are tendered
then Delivery of the Vessel shall be forthwith effected by the
concurrent signature by the Owner and the Builder of a
Certificate of Delivery acknowledging delivery of the Vessel by
the Builder and acceptance thereof by the Owner.
Upon Delivery of the Vessel the Builder shall hand to the Owner,
the Builder's Certificate, the Certificate of the Classification
Society, all other Certificates required to enable the Owner to
operate the Vessel and all other certificates, provisional
certificates and protocols. If the Builder is unable to provide a
final Classification Society Certificate at Delivery he shall be
entitled to provide an interim certificate, provided that the
Builder shall furnish Owner with the final certificate as
promptly as possible thereafter.
If the relevant certificates, provisional certificates and/or
protocols are not available due to delay in the provision by
Owner, Owner Subcontractors or Owner Suppliers of the operations
manuals including stability book, necessary to obtain the same,
provided such delay was not occasioned by failure of Builder or
its Subcontractors or Suppliers, to provide Owner, in a timely
manner, with the necessary information and data to compile such
operations manuals, Builder shall nevertheless be deemed,
provided it has complied in all other respects with this Clause
12.2, to have achieved a Valid Tender of Delivery
12.3 The Owner shall take possession of the Vessel immediately
upon Delivery and, except as otherwise mutually agreed in writing
in advance, remove the Vessel within seven (7) days of Delivery
from the Builder's Yard. If Owner fails to remove the Vessel
within seven (7) days, Owner shall reimburse Builder for any
actual and direct costs incurred by Builder as a result of such
failure to remove after seven (7) days.
12.4 Upon Delivery of the Vessel, the following shall occur:
12.4. 1If Delivery occurs on or before fifteen (15) days
prior to the Contract Delivery Date, Owner shall pay to
Builder the sum of United States Dollars Three Million (USD
$3,000,000) as a bonus for early delivery;
12.4.2 If Delivery occurs between the period of fourteen
(14) days prior to Contract Delivery Date and fifteen (15)
days after Contract Delivery Date, the bonus referred to in
Section 12.5.1, above, shall be reduced by the sum of United
States Dollars One Hundred Thousand (USD $100,000) per day
such that no bonus may be earned by the Builder after the
expiry of such thirty (30) days.
12.4.3 There shall be a grace period of fifteen (15) days
from the sixteenth (16th) through the thirtieth (30th) day
after the Contract Delivery Date where no bonus may be
earned by the Builder and no liquidated damages shall become
due and payable to the Owner.
12.4.4 If Delivery occurs on or after the thirty-first
day after the Contract Delivery Date, Builder shall pay to
the Owner as liquidated damages, but not as a penalty, the
sum of United States Dollars Fifty Thousand (USD $50,000)
per day for a period not to exceed thirty (30) days.
12.4.5 If Delivery occurs on or after the sixty-first
(61st) day after the Contract Delivery Date, Builder shall
pay to Owner as liquidated damages, but not as a penalty,
the sum of United States Dollars One Hundred Thousand (USD
$100,000) per day for a period not to exceed thirty (30)
days.
12.4.6 If Delivery has not occurred within the period of
ninety (90) days after the Contract Delivery Date, no
further or other liquidated damages shall be payable by
Builder and Builder's liability to pay liquidated damages
under this Clause 12.5 shall be limited to the aggregate
amount of United States Dollars, Four Million Five Hundred
Thousand (USD $4,500,000), payable under clauses 12.4.4 and
12.4.5 the liquidated damages payable thereunder being, for
the avoidance of doubt, cumulative. In this event, Owner
shall be entitled to exercise the rights and remedies
available to it under Clause 15.
12.5 If any items on the Vessel are incomplete when the Vessel is
otherwise ready for Delivery and the Owner and the Builder agree
that such items:
(i) do not materially affect the operation of the Vessel;
and
(ii) are not likely to cause damage or deterioration; and
(iii)do not constitute such a number that whilst not
individually giving rise to such material effect, nor
likely to cause damage or deterioration, are in
aggregate material to the condition of the Vessel,
then the Owner will take Delivery of the Vessel. Owner shall in
any event have such items completed in a manner to be mutually
agreed upon between the Builder and the Owner. Dispatch to the
Vessel by sea freight, or if practicable by air freight in the
case of emergency, of items completed and/or received at the
Builder's Yard subsequent to departure of the Vessel therefrom
shall be at the expense of the Builder excepting items of Owner
Furnished Equipment the cost of dispatch of which shall be at
the expense of the Owner.
CLAUSE 13 - FORCE MAJEURE
13.1 A Force Majeure occurrence shall mean any of the following
occurrences beyond the control and without the fault or
negligence of the party affected and which by the exercise of
reasonable diligence the said party is unable to prevent or
provide against and which delays the construction of the Vessel:
13.1.1 Act of God, fire, inclement weather of abnormal
severity and/or duration;
13.1.2 war (whether declared or not), riots,
insurrections or malicious damage;
13.1.3 damage to Vessel which constitutes a partial loss
and is repaired from the proceeds of insurance under the
provisions of Clauses 10.5 and 10.6.1;
13.1.4 requisition order, control, direction,
intervention or requirement by or of any Government or body
acting under the authority of any Government;
13.1.5 cessation, curtailment or interruption of fuel,
power, gas, water or any other essential services; and
13.1.6 except where due to the fault or negligence of the
Builder or its Subcontractors or Suppliers, any delay in or short
delivery of, or defects in materials machinery services or
equipment for the Vessel (provided that the Builder demonstrates
that they are critical to construction of the Vessel at the time
of delay and that they were ordered in due time);
PROVIDED HOWEVER THAT the Builder shall not be entitled to rely
upon any of the causes of delay listed in Clause 13.1 unless the
Builder has taken all reasonable steps to mitigate their effect
upon the construction of the Vessel.
13.2 The Builder shall, within two (2) days of becoming aware
that the occurrence of any event of the nature specified above
is likely to cause delay, Notify the Owner in writing thereof.
The Builder shall also advise the Owner in writing after any such
occurrence of which Notice was given in accordance with the
provisions of this Clause ceases within two (2) days of such
cessation and shall then provide the Owner with the Builder's
best estimate of the likely period of delay resulting therefrom.
Failure of the Builder to provide due Notice as provided for in
this Contract shall be deemed a waiver of Builder's right to
claim Force Majeure.
13.3 A delay to the Contract Delivery Date caused by Force
Majeure shall constitute Permissible Delay and issues as to (i)
whether an event constitutes Force Majeure and (ii) the extent of
any delay due to Force Majeure, shall be documented, agreed
and/or resolved in accordance with Clause 6. The revised
Contract Delivery Date resulting from Permissible Delays due to
Force Majeure causes shall be established by extending the
Contract Delivery Date by one day for each day of Force Majeure
calculated after making full provision for concurrent delays and
mitigation by the Builder.
13.4 In the event of a period of Force Majeure lasting more than
forty-five (45) consecutive days, or period or periods thereof of
more than sixty (60) days in the aggregate, the Owner shall be
entitled to exercise the rights afforded to it under Clause 15.2.
CLAUSE 14 - DEFAULT OF THE OWNER
14.1 The Owner shall be in default and this Contract may be
cancelled by the Builder by Notice in writing to the Owner if:
14.1.1 the Owner fails to pay any installment of the
Contract Price within seven (7) days of its
becoming due and payable in accordance with Clause
8; or
14.1.2 the Owner without due cause fails to pay all sums
due on delivery within three days of a Valid
Tender of Delivery.
Notice of cancellation by the Builder under this Clause shall be
given by facsimile and confirmed in writing and shall (unless
the Owner shall have then remedied the default) be effective
fourteen (14) days after receipt thereof by the Owner whereupon
the Builder shall be entitled to exercise the rights provided for
in Clauses 14.2 and 14.3 and in which event title to the Vessel
shall forthwith revest in the Builder, provided that the Builder
shall not be entitled to exercise such rights in respect of any
amount in dispute, where that dispute has been referred to the
Senior Representative of the Classification Society, to the
Appeals Board, or to arbitration or Court proceedings.
14.2 The Builder shall be entitled to cancel this Contract
forthwith by notice given by facsimile and confirmed in writing
upon an order being made or an effective resolution being passed
for the winding up of the Owner (otherwise than a members
voluntary winding up for the purpose of amalgamation or
reconstruction) or a receiver or administrator being appointed of
the whole or any part of the undertaking of the Owner.
14.3 If the Builder shall cancel this Contract under Clause 14.1
or 14.2 the Builder shall be entitled (in addition to interest
as provided in Clause 8.7) to the proved loss resulting from the
Owner's default. The Builder shall sell the Vessel by public
auction or tender or private sale at its discretion and shall
apply the proceeds of sale (after deducting the expenses of sale
including the cost of completing the Vessel for sale) together
with any installments of the Contract Price paid under Clause 8
as follows:
14.3.1 in satisfaction of the balance due to the Builder
under this Contract.
14.3.2the balance, if any, shall belong to the Owner.
14.4 If the proceeds of the sale of the Vessel when added to the
installments received prior to cancellation are less than the
aggregate of the Contract Price and the expenses of resale, the
deficiency shall be paid by Owner to Builder and if not so paid
shall be recoverable by action against Owner.
14.5 However, notwithstanding any of the foregoing, the Builder
shall not be entitled to exercise its rights under this Clause if
the Owner has already commenced the exercise of its rights
pursuant to Clause 15.
CLAUSE 15 - DEFAULT OF THE BUILDER
15.1 Upon the occurrence of any of the following events the
Builder shall be in default:
15.1.1 the Vessel becomes a total loss in accordance with
Clause 10.4; or
15.1.2 the Vessel is requisitioned by the British
Government; or
15.1.3 the Builder without just cause refuses to proceed
with the construction of the Vessel; or
15.1.4 an order is made or an effective resolution is
passed for the winding up of the Builder
(otherwise than a members' voluntary winding up
for the purpose of amalgamation or reconstruction)
or a receiver or administrator is appointed of the
whole or any part of the undertaking of the
Builder; or
15.1.5 If at any time during this Contract, following
receipt of request to do so from Owner, the
Builder, utilising the Primavera level 3 critical
path project schedule, is unable to demonstrate to
the Owner's satisfaction that it has sufficient
additional capacity, including sub-contracted
labor, and/or materials, and/or has developed a
recovery plan that would enable him to deliver the
Vessel within ninety (90) days following the
Contract Delivery Date and that the Builder is
implementing such plan and/or utilizing such
additional capacity and exercising all necessary
due diligence to achieve Delivery within such
period.
15.2 In circumstances of Builder's default as described in Clause
15.1 or in the circumstances set out in Clauses 12.4.6 or 13.4,
the Owner, without prejudice to its rights under the Parent
Company Guarantee, shall be entitled by Notice to the Builder
EITHER:
(i) to cancel this Contract in which event Builder shall
forthwith refund to the Owner (a) the aggregate amount
of all sums paid pursuant to Clause 8, (b) any amount
reasonably and properly paid by Owner to any Owner
Subcontractors and (c) any and all amounts reasonably
and properly paid by Owner for Owner Furnished
Equipment which has been incorporated in the Vessel,
all together with interest thereon at the rate of two
(2%) percent over one-month LIBOR from time to time for
the particular currency, calculated in each case from
the date of payment by Owner to the date such refund is
made.
However, the proceeds of any insurance claim previously
received by Owner shall be deducted from the amount to
be refunded under this sub-clause (i). Upon such
refund as aforesaid being made in full, all the
obligations, duties and liabilities of each of the
parties hereto to the other under this Contract shall
forthwith be completely discharged and title to the
Vessel shall be vested in Builder; OR
(ii) to take possession of the Vessel in its unfinished
state and complete the Vessel in accordance with this
Contract and the Specifications either at the Builder's
Yard or elsewhere, at Owner's sole option. In the event
that Owner decides to complete the Vessel at Builder's
Yard, Owner and its agents or Owner Subcontractors
shall be entitled to use Builder's Yard, buildings,
plant, machinery, tools and implements and all
materials appropriated to or ordered for the Vessel and
shall not be liable for breakage or damage thereto. In
this case, in the event that the cost of completing the
Vessel is more than the amount of the outstanding
installments, Builder shall pay to Owner on demand an
amount equal to the amount of such excess from the time
of demand with interest thereon at two (2) % per cent
over one month LIBOR from time to time for the
particular currency calculated from the date of demand
until the date of refund.
15.3 In the circumstances set out in Clause 15.2:
(i) Owner shall be entitled, in the event that it elects to
cancel this Contract pursuant to Clause 15.2(i) above,
and no refund is made in full by Builder within five
(5) days of receipt of Notice of such cancellation, to
make demand under the Letter of Credit and/or the
Parent Company Guarantee, in Owner's sole option; and
(ii) Owner shall be entitled, in the event that it elects to
take possession pursuant to Clause 15.2(ii), then or at
any time thereafter to make demand under the Letter of
Credit for the full amount thereof and to utilise the
same for the purposes of completing the Vessel (in
accordance with the terms of this Contract and the
Specifications) and shall account to Builder for any
unutilised amounts following such completion, and/or to
make demand under the Parent Company Guarantee and to
utilise all sums from time to time received thereunder
for the purposes of completing the Vessel (in
accordance with the terms of this Contract and the
Specifications).
15.4 Subject always to the provisions of Clause 15.2(ii), 15.3
and 15.5, in the event of the cancellation, rescission or
termination of this Contract by the Owner, the property in the
Vessel and all its materials, machinery and equipment shall,
following receipt by the Owner of the full amount of all
installments paid up to the date of such cancellation, rescission
or termination of the Contract and all other amounts payable by
the Builder to the Owner hereunder, be transferred to and vest in
the Builder.
15.5 In the event that the Owner elects to take possession of the
Vessel pursuant to Clause 15.2(ii), the Builder shall assign (or
procure the assignment of) the Subcontracts, Supplier contracts
and/or any rights arising thereunder to the Owner and shall do
and execute such assurances, acts and documentation required or
desirable for vesting the Subcontracts and/or any rights arising
thereunder in the Owner.
15.6 All items of Owner's Furnished Equipment not incorporated in
the Vessel shall be made available to Owner.
15.7 In the event that Owner elects to take possession of the
Vessel pursuant to Clause 15.2(ii), any sums due from Builder to
Owner by way of liquidated damages already incurred at the date
of Notice shall be set off against any remaining installments due
from Owner to Builder.
15.8 Notice of cancellation by the Owner under Clause 15.2 as a
result of Builder's default with 15.1.2, 15.1.3, or 15.1.5 shall
be given by facsimile confirmed in writing and shall be effective
fourteen (14) days after receipt by the Builder unless the
Builder shall have demonstrated that it can speedily remedy the
default, and is exercising the necessary due diligence to do so.
Any other Notice of cancellation under 15.2 shall be effective
forthwith upon service.
15.9 TERMINATION BY OWNER WITHOUT CAUSE. Notwithstanding any
other provision herein contained Owner may, at its sole
discretion and without cause, terminate the Contract at any time
by giving written notice to Builder.
15.9.1 If Owner should elect to terminate the Contract
pursuant to Clause 15.9:
15.9.1.1 Builder, unless the notice directs otherwise,
shall cease performance of the work and shall
perform only such work as is necessary in order to
preserve and protect the permanent works, and
shall, if at Builder's Yard, store the same at
Owner's risk and expense, until such time as it is
removed from Builder's Yard.
15.9.1.2 The Builder shall deliver and transfer to the
Owner in accordance with the Owner's instructions
all materials, supplies and other items for which
Builder is entitled to receive reimbursement
according to the Contract, together with all
plans, drawings, specifications and other
documents which Owner is entitled to according to
the Contract.
15.9.1.3 Builder, shall, if requested by Owner, undertake
all reasonable endeavours to cancel any or all of
its outstanding orders or Subcontracts upon such
terms as may be approved by the Owner. When such
terms are not approved, or if Owner shall so
request, Builder shall assign such orders or
Subcontracts to Owner and take such actions as may
be necessary in order to secure for Owner the
rights of Builder therein.
15.9.2 In the event of termination by Owner in accordance
with this Clause 15.9, Owner shall pay to Builder
the following amounts in full and final settlement
of all amounts due under or in any way arising
from the amounts due under or in any way arising
from the Contract, less all amounts previously
paid:
15.9.2.1 an amount, by way of termination fee, which is six
percent (6%) of the amounts in Clauses 15.9.2.2
and 15.9.2.3, respectively and below, but is not
less than United States Dollars Five Million (US
$5,000,000);
15.9.2.2 an amount for the cost and expenses incurred by
the Builder for materials and equipment being in
conformity with the Contract and which are ordered
for incorporation into the Work, together with all
direct costs for work performed up to the date of
the notice of termination hereunder, inclusive of
overhead recovery;
15.9.2.3 an amount for all other documented costs which the
Builder is legally obliged to pay Subcontractors
or Suppliers, or in respect of liabilities or
costs which Builder has undertaken in good faith
in connection with the work; and
15.9.2.4 an amount for all costs, charges and expenses
directly attributable to the orderly close out of
the performance of the Work, such as the cost
incurred for personnel in order to satisfy the
requirements of law and labour agreements.
15.9.3 The Owner shall, within fourteen (14) days of
notice of termination, at its cost and expense,
remove the permanent works or any part thereof
from the Builder's Yard, but in no case any longer
than thirty (30) days. If any of Owner's property
remains in Builder's Yard longer than thirty (30)
days from the notice of termination under this
Clause 15.9, and Owner and Builder are unable to
mutually agree on the disposition of Owner's
property, then Builder may remove, at Owner's
expense, all remaining Owner's property which
obstructs Builder's activities within Builder's
Yard.
CLAUSE 16 - GUARANTEE
16.1 The Builder, for the whole of the Guarantee Period,
guarantees the Works against all defects which are due to
defective design (to the extent that Builder has responsibility
for such design pursuant to Clause 3), defective material, poor
workmanship and/or the Works not having been performed in
accordance with this Contract. The Guarantee Period shall be for
a period of twelve (12) months from Delivery of the Vessel
provided always that, in respect of any repairs or replacements
or such additional works as are referred to in Clause 16.6, the
Guarantee Period shall be twelve (12) months after completion of
such repairs, replacements and additional works. The Guarantee
Period shall not in any event exceed twenty four (24) months in
total from Delivery.
16.2 The Owner shall give Notice to the Builder confirmed in
writing within fourteen (14) days after discovery of any defect
by any supervisory personnel on board the Vessel for which a
claim is made under this Clause 16. The Owner's written Notice
shall include full details as to the nature of the defect and the
extent of the damage caused thereby. The Builder shall be freed
from all liability under this Clause 16 for any defects
discovered prior to the expiry of the Guarantee Period, unless
Notice thereof is given by the Owner not later than fourteen (14)
days after the expiry of the Guarantee Period. The Builder shall
have no liability in respect of defects discovered after the
expiry of the Guarantee Period.
16.3 Without prejudice to Clause 16.6, upon receipt of Notice
under Clause 16.2 the Builder shall be entitled to arrange for
inspection of the Vessel on its own behalf. The Owner shall make
available to the representatives of the Builder at such
inspection the Vessel's logbooks and any other relevant documents
and information and shall supply such certified copies of such
log books, documents and information as may reasonably be
requested by the Builder.
16.4 If Builder needs to travel to the Vessel in connection with
Clause 16, Owner shall provide transportation between shore base
and Vessel for Builder's personnel and equipment, to the extent
that Owner is able to obtain same without cost to Owner.
16.5 The Builder shall have no liability for errors, omissions
or defects in the Works arising from inaccuracy of data provided
by the Owner, or from a third party acting on behalf of the Owner
for the purposes of the Works, unless the Builder shall have
failed to use all reasonable endeavours to discover detectable
inaccuracies of said data.
16.6 The Builder shall remedy at its own expense any defect
arising during the Guarantee Period against which the Works are
guaranteed under this Contract and which is Notified by Owner to
Builder in accordance with Clause 16.2, by making all necessary
repairs and replacements and by performing such additional works
as may be required to remedy such defect (including without
prejudice to the foregoing generality the provision of such
personnel as the parties may agree). Further, if the Owner deems
that it would be inconvenient to bring the Vessel back to the
Builder's Yard, Owner shall have the right to complete repair
work at other shipyards and Builder shall pay to Owner the actual
cost to Owner of the repairs. Builder shall have the right to
be consulted prior to the commencement of such repair work by
another party, as to its extent and cost, provided that Owner
shall be entitled following notification and consultation to
effect such repairs by such other party whether or not the same
are agreed by Builder. If the repairs are carried out by a third
party, the Builder shall pay the cost of such repairs, but
Builder shall not be liable for the efficacy of the same.
16.7 The Builder shall obtain guarantees of not less than
twelve (12) months from Delivery or such longer period as Builder
is able to obtain at no extra cost from its Subcontractors or
Suppliers.
16.8 The Builder shall hold the benefit of all warranties,
guarantees, liquidated damages clauses and other rights and
remedies under contracts entered into with Subcontractors and
Suppliers in trust for and in accordance with the Owner's
instructions, and at the Owner's cost. At the end of the
Guarantee Period the Builder shall assign to the Owner the
benefit of any remaining Subcontractors' or Suppliers'
guarantee(s), or warranties.
16.9 The guarantees and remedies contained in this Clause 16
concerning the defects which are covered by this Clause 16 are
the sole and exclusive guarantees and remedies in favor of the
Owner concerning such matters. All guarantees and remedies
concerning such matters which would otherwise be implied by law
(whether under the Sale of Goods Act or otherwise) and all
remedies in tort, (including but not limited to negligence), are
expressly excluded. For the avoidance of doubt, this Clause has
no application to warranties concerning title or intellectual
property rights.
16.10 The Builder warrants that the Works will be delivered
to the Owner free and clear of any liens, charges, claims,
mortgages, or other encumbrances of whatever nature upon the
Owner's title thereto, and in particular, that the Works will be
absolutely free of all burdens in the nature of imposts, taxes or
charges and the Builder shall indemnify the Owner in respect of
any liability arising as a consequence of the Builder's breach of
this sub-clause.
16.11 The Builder's guarantee does not extend to loss or
damage or expense to the extent arising from wear and tear,
perils of the sea, accident, negligence or misuse on the part of
the Owner or any third party.
16.12 The Builder has the right to appoint or nominate on
Delivery of the Vessel upon terms and conditions to be agreed a
competent guarantee engineer acceptable to the Owner to sail with
the Vessel as guarantee engineer during the whole or any part of
the Guarantee Period and, if the Owner has reason to be
dissatisfied with the guarantee engineer so appointed, shall from
time to time replace him by another competent guarantee engineer
free of cost to the Owner. The wages and expenses and
repatriation expenses of the guarantee engineer shall be paid by
the Builder . The Owner and its employees shall give such
guarantee engineer full co-operation in carrying out his duties
as the Builder's representative on board the Vessel.
16.13 Notwithstanding the foregoing the Builder's Guarantee
under this Clause 16 shall be limited to the terms of guarantees
provided to the Builder by its Subcontractors or Suppliers in the
case, where the Owner has specifically negotiated the
sub-contract or purchase order in question or where the Owner has
specifically requested a Subcontractor or Supplier not on the
Subcontractor's List or the Maker's List.
CLAUSE 17 - INDEMNITIES FOR INFORMATION SUPPLIED
17.1 The Builder shall indemnify the Owner from and against all
claims of third parties arising by reason of the use by Owner or
Owner Subcontractor or Owner Supplier of any information supplied
to Owner, Owner Subcontractors or Owner Suppliers by Builder in
connection with the performance of the Works, and from all costs
and expenses (including costs and expenses of litigation)
incurred by Owner by reason of such claim, except for claims or
liabilities arising in connection with any matter to which Clause
17.2 applies.
17.2 The Owner shall indemnify the Builder from and against all
claims of third parties arising by reason of the use by the
Builder of the Specifications and of any document or information
supplied to the Builder or its Subcontractors by the Owner, Owner
Subcontractors or Owner Suppliers in connection with the design,
construction and the building of the Vessel or the construction
or installation of the machinery or equipment thereof or the
provision of Owners Furnished Equipment and from all costs and
expense (including costs and expenses of litigation) incurred by
the Builder by reason of any such claim.
CLAUSE 18 - TAXES AND DUTIES, ETC
18.1 The Builder shall bear any taxes and duties applicable to
materials or equipment supplied by the Builder, its
Subcontractors or Suppliers.
18.2 The Owner shall bear any taxes and duties applicable to
materials or equipment supplied by the Owner, Owner
Subcontractors and Suppliers.
18.3 The Owner shall bear all other taxes, duties, commissions,
fees and expenses incurred in connection with this Contract,
including those incurred in arranging finance, mortgage
facilities and registration formalities.
CLAUSE 19 - HEALTH AND SAFETY ENVIRONMENT AND EMPLOYMENT
19.1 The Builder and Owner shall and shall cause their respective
Subcontractors and Suppliers while at the Builders Yard to
observe and comply with the Health and Safety provisions of
Schedule Fourteen hereto.
19.2 In all circumstances compliance with local legislative
requirements and/or obligations shall take precedence over the
requirements of Schedule Fourteen hereto.
19.3 The Builder and Owner and their respective Subcontractors
shall comply with all laws, rules and regulations of Government
having jurisdiction over the area in which the Works are
undertaken to the extent that they are now, or may become
applicable to them during the performance of this Contract.
CLAUSE 20 - LAW AND ARBITRATION
20.1 This Contract shall be governed by and construed in
accordance with the Law of England.
20.2 Any dispute or difference touching or concerning this
Contract or arising thereof, other than disputes to be referred
to an expert by the provisions of this Contract shall be referred
to the arbitration in London (or such other place as may be
agreed between the parties) of a single arbitrator to be
appointed by agreement between the parties or, (failing agreement
within 14 days after either party has given to the other a
written request to concur in the appointment of a single
arbitrator) of three arbitrators, one to be appointed by each
party and an umpire chosen by the two arbitrators so appointed.
Any such reference shall be a submission to arbitration in
accordance with the Arbitration Act 1996 or any statutory
variation, modification or re-enactment thereof for the time
being in force.
CLAUSE 21 - ASSIGNMENT OF CONTRACT
Except by the Owner to the ultimate parent company of Owner or an
associated company of the Owner, neither of the parties hereto
shall be entitled to assign or transfer any of its rights or
duties hereunder without prior Notice to, and the prior written
consent of, the other who shall not unreasonably withhold such
consent. PROVIDED THAT in the event of an assignment, except to
the ultimate parent company of Owner, Owner shall remain
responsible for and guarantee the performance and observance of
the assigned obligations by any such associated company. For the
purposes of this Clause associated "company" means and includes
any holding company, whether direct or indirect, or any
subsidiary, whether direct or indirect, of the Owner or of such
holding company, "holding company" and "subsidiary" having the
meanings assigned to these terms by Section 736 of the Companies
Act 1985.Any assignment permitted under this Clause shall be at
the cost of the Assignor.
CLAUSE 22 - NOTICES AND COMMUNICATIONS
22.1 Any Notice or Notification to be given hereunder to the
Owner shall be delivered to the Owner's Project Manager on site
at the Builder's Yard and :
Global Marine International Services Corporation c/o
McKinney, Bancroft & Hughes
Mareva House, 4 George Street
P.O. Box N. 3937
Nassau, Bahamas
Attention:President
With copies to:
Global Marine International Services Corporation c/o
Global Marine UK Limited
Standbrook House, 2/5 Old Bond Street
London, England W1X 4QH
Attention:F. L. Matthews, Vice President
and
Global Marine Drilling Company
777 N. Eldridge Parkway
Houston, Texas 77079
Attention:John A. Thorson, Manager Construction and
Marine Projects Facsimile Number:
281-596-5179
or such other person, address or facsimile number as the Owner
may from time to time by notice in writing to the Builder
designate for that purposes.
22.2 Any notice to be given hereunder to the Builder shall be
addressed to,
The Project Manager
Ship No: 1739
Harland and Wolff Shipbuilding and Heavy Industries Limited
Queen's Island
BELFAST
BT3 9DU
Northern Ireland
Facsimile:01232-458515
or such other person, address or facsimile number as the Builder
may from time to time by notice in writing to the Owner designate
for that purpose.
22.3 Any Notice or other document to be given or served hereunder
may be delivered by hand or sent by facsimile or posted by
first-class mail (for inland mail) or airmail (for overseas mail)
prepaid post, addressed to the address or facsimile number of the
respective party as given in Clause 22.1 and 22.2. Any such
Notices or documents sent by post in the manner specified above
shall be deemed served two (for inland mail) or seven (for
overseas mail) business days after posting. Where a Notice or
document is transmitted by facsimile the document shall be deemed
served when transmitted by the sending party.
CLAUSE 23 - WAIVER
Any waiver by or neglect or forbearance by either party to
require or enforce any of the provisions of this Contract at any
time given by either party shall not prejudice or affect any
right of that party afterwards, with regard to any other failure
to comply with the provisions of this Contract whether or not of
a similar nature, to act strictly in accordance with the
provisions herein contained.
CLAUSE 24 - ENTIRE CONTRACT AND AMENDMENTS
This Contract constitutes the entire agreement of the Builder and
the Owner in relation to the construction and purchase of the
Vessel and neither any representation, warranty or statement made
by or on behalf of the Builder or the Owner prior to the date
hereof shall affect the terms of this Contract or the rights or
duties of the Builder or the Owner hereunder nor shall any
modification of the terms of this Contract be of any effect
unless made in writing and signed by the Owner and the Builder or
their respective Authorized Representatives or Project Managers
(in case of Project Change Orders).
CLAUSE 25 - LIABILITY AND INDEMNIFICATION
25.1 As used in Clauses 25 and 26 of this Contract:
(a)"Owner Group" means the following persons and entities,
individually and collectively:
(i) Owner, its Parent, subsidiary, affiliated, associated
Companies;
(ii) Owner Subcontractors and Owner Suppliers and other
parties contracting with Owner (excepting Builder and
Builder's Subcontractors);
(iii)The respective Officers, Directors, Employees, Agents,
Owners, Shareholders, Servants, Representatives and
Insurers of each of the parties set forth in Clauses
25.1 (a) (i) and 25.1 (a) (ii).
(b) "Builder Group" means the following persons and entities,
individually and collectively:
(i) Builder, its Parent, Subsidiary, Affiliated, Associated
Companies;
(ii) Builder's Subcontractors, Suppliers and other parties
contracting with Builder (excepting Owner); and
(iii)The respective Officers, Directors, Employees, Agents,
Owners, Shareholders, Servants, Representatives and
Insurers of each of the parties set forth in Clauses
25.1 (b) (i) and 25.1 (b) (ii).
25.2 Builder shall at all times be responsible for and shall
release, protect, indemnify, defend (including payment of
reasonable attorney's fees and costs of litigation) and hold
Owner Group harmless from and against any and all costs, losses,
liabilities, claims, demands, causes of action, damages,
penalties, judgments and awards of every kind and character,
without limit and without regard to the cause or causes thereof
or the negligence or fault of any party or parties (including
without limitation the active, passive, concurrent or solely
negligent acts or omissions of any member of Owner Group) arising
in connection herewith:
(a) In favour of the officers, directors, employees, agents,
servants, representatives or invitees of Builder Group on
account of sickness, bodily injury or death; and/or
(b) On account of damage to or loss of Builder Group equipment
or property; and/or
(c) From pollution or contamination occurring prior to Delivery
(including without limitation the control and/or removal
thereof) which originates from Builder's Yard or equipment,
the equipment of Builder's Subcontractors or materials under
the control of Builder's Subcontractors, including but not
limited to fuels, lubricants, motor oils, pipe dope, paints,
solvents, garbage or debris.
(d) From the storage, transportation and/or disposal of any and
all waste generated during the performance of the Work by
Builder or Builder Group.
25.3 Owner shall at all times be responsible for and shall
release, protect, indemnify, defend (including payment of
reasonable attorney's fees and costs of litigation) and hold
Builder Group harmless from and against any and all costs,
losses, liabilities, claims, demands, causes of action, damages,
judgments and of every kind and character, without limit and
without regard to the cause or causes thereof or the negligence
or fault of any party or parties (including without limitation
the active, passive, concurrent or solely negligent acts or
omissions of any member of Builder Group) arising in connection
herewith:
(a) In favor of the officers, directors, employees, agents,
servants, representatives or invitees of Owner Group on
account of sickness, bodily injury or death; and/or
(b) On account of damage to or loss of the equipment and/or
property of Owner Group, save for the Vessel and OFE in
relation to which the other provisions of this Contract
shall apply; and/or
(c) From pollution or contamination arising from the Vessel
following Delivery.
25.4 Notwithstanding anything to the contrary, expressed or
implied, in this Contract, inclusive of any amendments or Project
Change Orders, in tort or otherwise at law, neither party shall
be liable to the other for special, indirect, or consequential
damages including, without limitation, loss of profits or
business interruptions resulting from or arising out of this
Contract or the performance of any work or services, however same
may be caused including the negligence or fault of any party or
parties and whether or not within the contemplation of the
parties before, after or on the date of signature of this
Contract.
25.5 Except as otherwise expressly limited in this Contract, it
is the express intention of the parties hereto that all indemnity
obligations and/or liabilities assumed by the parties under
articles 25.2, 25.3 and 25.4 shall be without limit and without
regard to the cause or causes thereof, including, but not limited
to, preexisting conditions, whether such conditions be patent or
latent; the unseaworthiness of any vessel or vessels, whether or
not the preexisting breach of representation or warranty (express
or implied); strict liability and/or ruin or defective premises,
equipment, facilities, or appurtenances of any party under any
code law or other type of strict liability, whether or not
preexisting, and/or is latent, patent or otherwise; breach of
contract; tort, breach of duty (statutory, contractual, common
law or otherwise) or the negligence or fault of any party or
parties, including, but not limited to, that of the indemnified
parties, whether such be sole, joint or concurrent, active or
passive; or any other theory of legal liability.
25.6 It is the express intention of the parties hereto that the
provisions of this Contract shall exclusively govern the
allocation of risks and liabilities of said parties, it being
acknowledged that the agreement reflected herein has been based
upon such express understanding.
25.7 All persons or entities who are or who may become a person
or entity designated in Clause 25.1 (a) and (b), other than Owner
and Builder, shall be deemed to be third party beneficiaries of
this Contract for the purposes solely of enforcing an indemnity
expressed to be for their benefit.
25.8 The indemnifications set forth in this Contract shall apply
to all types of liabilities specifically covered by the
indemnifications whether such liabilities are incurred directly
by the indemnitees or indirectly through the operation of an
indemnification agreement with another party provided that the
liability for which such indemnification is sought, arose from or
occurred as the result of or incidental to the performance of the
parties' obligations hereunder.
CLAUSE 26 - BENEFIT OF INDEMNITIES
26.1 The indemnities given by Builder to Owner or Owner Group
under Clause 25 are hereby agreed to be extended to and for the
benefit of Owner Group as defined in Clause 25.1(a).
26.2 The indemnities given by Owner to Builder or Builder Group
under Clause 25 are hereby agreed to be extended to and for the
benefit of Builder Group as defined in Clause 25.1(b).
26.3 Owner hereby agrees to the appointment of Builder as its
agent and trustee solely for the giving and receiving of the
indemnities specified in Clause 25.3, which agency is solely for
the purpose of permitting the indemnified party to make its claim
against the indemnifying party and all duties, liabilities and
obligations which would otherwise be imposed on or incurred by
Owner by virtue of the agency are expressly excluded.
26.4 Builder hereby agrees to the appointment of Owner as its
agent and trustee solely for the giving and receiving of the
indemnities specified in Clause 25.2, which agency is solely for
the purpose of permitting the indemnified party to make its claim
against the indemnifying party and all duties, liabilities and
obligations which would otherwise be imposed on or incurred by
Builder by virtue of the agency are expressly excluded.
IN WITNESS WHEREOF, this Contract has been executed by duly
authorized representatives of the Parties hereto in duplicate
originals effective as of the date and year first above written.
GLOBAL MARINE INTERNATIONAL SERVICES HARLAND AND WOLFF SHIPBUILDING D
CORPORATION AND HEAVY INDUSTRIES LIMITED
By: /s/John A. Thorson By: /s/ Per M. Nielsen
John A. Thorson Per M. Nielsen
Attorney-in-Fact Chief Executive Officer
HARLAND AND WOLFF SHIPBUILDING
AND HEAVY INDUSTRIES LIMITED
and
GLOBAL MARINE INTERNATIONAL SERVICES CORPORATION
SHIPBUILDING CONTRACT
relating to
Hull No: 1740
INDEX
PARTIES
CLAUSE 1 INTERPRETATION
Definitions
General Interpretation
CLAUSE 2 DESCRIPTION
Principal Particulars
Yard Number
CLAUSE 3 DESIGN RESPONSIBILITY
Owner's Responsibilities
Builder's Responsibilities
Continuing Liability of Builder
Owner's Proprietary Rights
Builder's Proprietary Rights
CLAUSE 4 CLASS AND REGULATIONS
Classification Society and Class
Changes to Classification Requirements
CLAUSE 5 CONSTRUCTION, MATERIALS AND INSPECTION
Construction
Subcontracting
Standard of Construction
Use of Substitute Materials
Lightship Weight and Center of Gravity
Departures from Contemplated Construction
Provision of Lightship Weight Updates
Preparation of Critical Path Project Schedule and Construction
Critical Path Analysis
Variation of Contractual Price
Right to attend tests and trials
Supervision and Inspection by Owner's
Authorized Representative
Defective Workmanship
Resolution of Disputes by Classification Society
Provision of Offices and Office Equipment
Payment for office facilities
Access to Vessel and Builder's Yard
Standards applicable to Project Managers
Replacement of Authorized Representatives
CLAUSE 6 MODIFICATIONS
Change Request by Owner
Builder's Acceptance and Confirmation
Builder's Proposal
Timing of Owner's Response
Request for Further Information
Change Request by Builder
Changes to Regulatory Requirements
Authority of Project Managers
Owner's Directive
Referral to Appeals Board
Dispute resolution
Classification Society
Appeals Board
Effect of Disputes
Denomination of Project Change Orders and Directives
CLAUSE 7 OWNER FURNISHED EQUIPMENT
Delivery
Risk
Notice of Arrival and Expenses of Delivery
Storage
Inspection by Builder
Owner's Right to Interest
CLAUSE 8 PRICE AND TERMS OF PAYMENT
Price
Guarantees
Installment Schedule
Notice of Installments Falling Due
Submission of Stage Certificates and Invoices
Payment of increases in the Contract Price
Terms of Payment
Set off of Liquidated Damages
Failure to Take Delivery
CLAUSE 9 PROPERTY AND JURISDICTION
Vesting of Property, Allocation of Risk and Builder's Lien
Labeling of the Vessel
OFE
Appropriation of Vessel parts
Assembly other than at Builder's Yard
CLAUSE 10 INSURANCE
Owner to Insure
Builder to Insure
Payment of deductible
Insurance Recoveries
Total Loss of Vessel
Partial Loss of Vessel
Other insurances to be effected
Provision of copies of insurances effected
Risk of Vessel
CLAUSE 11 TRIALS AND PERFORMANCE
Arrangements for Trials
Notice of Sea Trials
Failure of Owner's Representative to attend
Unfavourable Weather Conditions
Fuel Consumption
Vessel not Complying with Specifications
Punch List of Defects
CLAUSE 12 DELIVERY
Time and Place
Valid Tender of Delivery
Removal of Vessel
Builder's Bonus and Liquidated Damages
Incomplete Work
CLAUSE 13 FORCE MAJEURE
Force Majeure Delays
Notice of Delays
Revised Contract Delivery Date
Owner's Rights
CLAUSE 14 DEFAULT OF THE OWNER
Events of Default
Builder's right to Cancel
Remedies following cancellation
Claims against Owner
Exercise of such rights
CLAUSE 15 DEFAULT OF THE BUILDER
Events of Default
Owner's Right to Cancel or take possession
Parent Company Guarantee and Letter of Credit
Vesting of Title
Sub-Contract Right
OFE
Set Off
Termination Without Cause
CLAUSE 16 GUARANTEE
Builder's Guarantee
Notice of Guarantee Claims
Inspection by Builder
Transportation of Builder
Remedies
Guarantees from Subcontractors
Holding of Sub-Contract Rights
Exclusion of Implied Guarantees
Builder's Warranty that Works Free from Encumbrances
Exceptions and Limitations
Guarantee Engineer
Limitation of Guarantees
CLAUSE 17 INDEMNITIES FOR INFORMATION SUPPLIED
Builder's Indemnity
Owner's Indemnity
CLAUSE 18 TAXES AND DUTIES
For account of Builder
For account of Owners
Other Taxes
CLAUSE 19 HEALTH AND SAFETY ENVIRONMENT AND EMPLOYMENT
Precedence of Local Legislation
Compliance with Applicable Government Regulations
Sub-Contractors
CLAUSE 20 LAW AND ARBITRATION
CLAUSE 21 ASSIGNMENT
LAUSE 22 NOTICES AND COMMUNICATIONS
CLAUSE 23 WAIVER
CLAUSE 24 ENTIRE CONTRACT AND AMENDMENTS
CLAUSE 25 LIABILITY AND INDEMNIFICATION
Definitions
Builder's Responsibilities
Owner's Responsibilities
Consequential Damages
Limit of Indemnities
Allocation of risk
Extension of Indemnities
Range of liabilities
CLAUSE 26 BENEFIT OF INDEMNITIES
Extended to Owner Group
Extended to Builder Group
Agencies for Giving and Receiving Indemnities
EXECUTION
FIRST SCHEDULE - STAGE CERTIFICATE
SECOND SCHEDULE - FINAL STAGE CERTIFICATE
THIRD SCHEDULE - LETTER OF CREDIT
FOURTH SCHEDULE - PARENT COMPANY GUARANTEE
FIFTH SCHEDULE - BUILDER'S PROPOSAL
SIXTH SCHEDULE - CHANGE ORDER REQUEST
SEVENTH SCHEDULE - PROJECT CHANGE ORDER
EIGHTH SCHEDULE - OWNER FURNISHED EQUIPMENT
NINTH SCHEDULE - SPECIFICATIONS
TENTH SCHEDULE - SUBCONTRACTORS LIST
ELEVENTH SCHEDULE - MAKER'S LIST
TWELFTH SCHEDULE - ADJUSTMENTS OF CONTRACT PRICE BETWEEN ACTUAL
AND ESTIMATED STEEL WEIGHTS
THIRTEENTH SCHEDULE -BUILDER'S RATES FOR PROVISION OF OFFICE
FACILITIES
FOURTEENTH SCHEDULE - HEALTH AND SAFETY PROVISIONS
FIFTEENTH SCHEDULE - "PHASE 2 BASIC DESIGN PACKAGE"
SIXTEENTH SCHEDULE - INSURANCE
THIS CONTRACT is made the 28th day of March, One Thousand, Nine Hundred
and Ninety Eight between:
(1) HARLAND AND WOLFF SHIPBUILDING AND HEAVY INDUSTRIES LIMITED,
a company organized and existing under the laws of Northern Ireland
and having its principal office at Queen's Island, Belfast, Northern
Ireland BT3 9DU (hereinafter called the "Builder"); and
(2)GLOBAL MARINE INTERNATIONAL SERVICES CORPORATION, a Bahamian
company and having its principal office at c/o McKinney, Bancroft
& Hughes, Mareva House, 4 George Street, P.O. Box N. 3937, Nassau,
Bahamas, (hereinafter called the "Owner").
WHEREBY IT IS AGREED that the Builder will construct,
complete and deliver to the Owner the Vessel described herein and the Owner
shall duly pay the Builder therefor all in accordance with the following
Clauses of this Contract:
CLAUSE 1 - INTERPRETATION
1.1 In this Contract
1.1.1 "Authorized Representative(s)" shall mean any person who has
been advised in writing by the Owner Project Manager to the Builder or (as
the case may be) by the Builder Project Manager to the Owner as having
authority to act for the Owner or (as the case may be) the Builder, and the
extent of such authority shall be defined in such advice;
1.1.2 "Appeals Board" shall mean a board comprised in accordance
with Clause 6.10;
1.1.3 NOT USED
1.1.4 "Builder Project Manager" shall mean the person appointed by
Builder, and Notified in writing to the Owner as having authority to act on
behalf of Builder, in the discharge of Builder's obligations hereunder. The
authority of Builder Project Manager includes, but is not limited to,
the authority to sign Project Change Orders pursuant to Clause 6.
Builder Project Manager may appoint Authorized Representatives to act on
behalf of Builder, and shall Notify Owner in writing of such appointment,
defining in such Notice the extent of the authority of each Authorized
Representative;
1.1.5 "Builder's Proposal" shall mean a document in the form set
out at Schedule Five hereto;
1.1.6 Builder's Quarterly Invoices" shall mean invoices, other
than invoices for installment payments of the Contract Price referred to in
Clause 8, submitted by the Builder to the Owner on a quarterly basis and in
accordance with the provisions of Clause 8 which shall include, but not be
limited to, facilities charges for telephone and other services and charges
as more specifically described in Clauses 5.15, 5.16 and 8.10.
1.1.7 "Builders Yard" shall mean the premises of the Builder at
Queen's Island, Belfast, Northern Ireland;
1.1.8 "Change Order Request" shall mean a request in the form set out at
Schedule Six hereto;
1.1.9"Classification Society" shall mean the American Bureau of Shipping
(also referred to as "ABS");
1.1.10 "Constructability" shall mean, in the context of the Builder's
obligations under Clause 3.2(a), that the Vessel is physically capable of being
built on the basis of the Phase 2 Basic Design Package. However, confirmation
by the Builder of such constructability shall not of itself give rise to any
different obligation of the Builder under this Contract in relation to the
performance characteristics of the Vessel than that which would otherwise
have applied as part of the Works;
1.1.11 "Contract Delivery Date" shall mean 10th February Two Thousand as
from time to time extended pursuant to this Contract by Permissible Delay;
1.1.12 "Contract Price" shall mean the price stipulated in Clause 8.1 as
amended by the provisions of this Contract or any Amendment thereof;
1.1.13 "Delivery" and "Delivery Date" shall mean the date upon which the
Vessel is delivered to and accepted by the Owner in accordance with the
provisions of Clause 12.2;
1.1.14"Force Majeure" shall mean any of the circumstances specified in
Clause 13.1;
1.1.15 "Guarantee Period" shall mean the period referred to in Clause 16.1;
1.1.16 "Letter of Credit" shall mean a letter of credit in the maximum
amount of United States Dollars Forty Million (US$40,000,000) substantially in
the form set out at Schedule Three executed by a first class Bank acceptable
in all respects to the Owner;
1.1.17 "Makers List" shall mean the list attached at Schedule Eleven hereto;
1.1.18 "Notice" shall mean formal notice as further provided in Clause 22;
1.1.19 "Owner Furnished Equipment" or "OFE" shall mean any item of
equipment outfit and/or stores for the Vessel on the list attached at Schedule
Eight hereto and as may otherwise be provided for in the Specifications;
1.1.20 "Owner Subcontractor" or "Owner Supplier" shall mean any person
under contract to the Owner in connection with the performance of any of the
obligations of Owner hereunder;
1.1.21 "Owner Project Manager" shall mean the person appointed by
Owner, and Notified in writing to the Builder as having authority to act on
behalf of Owner, in the discharge of Owner's obligations hereunder. The
authority of Owner Project Manager includes, but is not limited to, the
authority to sign Project Change Orders pursuant to Clause 6.
Owner Project Manager may appoint Authorized Representatives to act on behalf
of Owner, and shall notify Builder in writing of such appointment, defining in
such Notice the extent of the authority of each Authorized Representative;
1.1.22 "Parent Company Guarantee" shall be a guarantee in the form set out
at the Fourth Schedule hereto and executed by the Parent Company Guarantor;
1.1.23 "Parent Company Guarantor" shall mean Harland and Wolff Holdings plc,
a company having its registered office at Queen's Island, Belfast, BT3 9DU;
1.1.24 "Permissible Delay" shall mean a delay in the Delivery of the
Vessel on account of causes which under the terms of this Contract permit
postponement of the Contract Delivery Date which delay shall be documented by
a Project Change Order countersigned by Owner;
1.1.25 NOT USED
1.1.26 "Project Change Order" shall mean a document in the form
set out at the Seventh Schedule hereto;
1.1.27 "Regulatory Bodies" shall mean the authorities, imposing rules and
regulations with which the construction and outfit of the Vessel must comply
in accordance with the Specifications;
1.1.28 "Specifications" shall mean the specifications, plans and
drawings signed by the Builder and the Owner and attached at the Ninth Schedule
hereto and identified as forming an integral part of this Contract or such
revised or supplemental specifications, plans or drawings as may subsequently
be agreed between the Owner and the Builder and signed by the Builder
Project Manager and the Owner Project Manager, in accordance with Clause 6
and "Specified" shall mean stipulated in the Specifications;
1.1.29 "Subcontract(s)" shall mean any contract entered into by Builder
for the construction or manufacture of any materials, machinery, services
or equipment for the Works;
1.1.30 "Subcontractor(s)" shall mean any person under contract to the
Builder for the construction, or manufacture of any materials, machinery,
services or equipment for the Works;
1.1.31 "Subcontractor's List" shall mean the List attached
at the Tenth Schedule hereto;
1.1.32 "Supplier" shall mean any person under contract to the
Builder for the supply of any materials, machinery, services or equipment
for the Works;
1.1.33 "Valid Tender of Delivery" shall mean a tender of the
Vessel for Delivery in accordance with Clause 12.2;
1.1.34 "Vessel" means the vessel bearing Hull No.1740 which
is the subject of this Contract and generally as described in Clause 2
with all the machinery, outfit, materials and equipment appurtenant thereto.
1.1.35 "Work" or "Works" means the works and services (which expressions
shall include the supply of materials and equipment) to be performed by the
Builder or, to the extent permitted by Clause 5.2, by its Subcontractors or
Suppliers under this Contract.
1.2 The order of precedence for the documents forming this
Contract shall be:
1.2.1 in case of any inconsistency between any provision of this
Contract and the Specifications, this Contract shall prevail; and
1.2.2 in case of any inconsistency between the Specifications and a plan
or drawing, the Specifications shall prevail; and
1.2.3 in case of any inconsistency between one plan or drawing and
another plan or drawing, the later in date shall prevail;
1.3 Any reference to a Clause is to a Clause of this Contract.
1.4 The Index and Clause headings appearing in this Contract are inserted
for convenience of reference only and shall not affect the construction of
this Contract.
CLAUSE 2 - DESCRIPTION
2.1 The Builder shall construct and deliver to the Owner a completely
outfitted and equipped Drill-ship (being, subject to Clause 3, of the Owner's
design) which is capable of operating as a dynamically positioned drilling
unit in water depths up to 12,000 feet and as otherwise provided for herein
and in the Specifications, including supplying and installing all materials,
labor, machinery, equipment, furnishings, fittings, as specified in the
Specifications save and except to the extent of Owner Furnished Equipment.
In the case of Owner Furnished Equipment, the Builder shall install same and
provide the necessary foundations, wiring, piping and successfully-
tested and commissioned interface connections to ensure the Owner Furnished
Equipment functions as complete operational systems. Upon Delivery, the
Vessel and all its parts and appurtenances shall be complete as specified
hereinafter.
2.2 The Vessel shall have the Hull No.1740 and this number shall be placed
on the Vessel, her materials and outfit during construction.
CLAUSE 3 - DESIGN
3.1 The Owner shall be responsible, at no cost to the Builder, for:
(a) the preparation of the drawings and plans for the Vessel
which drawings and plans are called the "Phase 2 Basic
Design Package", a list of which is at the Fifteenth Schedule
hereto;
(b) obtaining the approval of the Classification Society and
the Regulatory Bodies to the Phase 2 Basic Design Package; and
(c) furnishing the Builder, in a timely manner, with the Phase 2
Basic Design Package, and any modifications thereto as a result
of obtaining the approvals described in (b) above.
The Builder acknowledges that, at the date of this Contract, it is in
receipt of the Phase 2 Basic Design Package together with evidence of the
status of approvals of the Classification Society.
3.2 The Builder, as part of the Works and at no additional cost to the
Owner, shall be responsible for:
(a) confirming the Constructability of the Phase 2 Basic Design
Package, as provided to it by the Owner, to ensure that it
provides an appropriate basis to perform the Works
hereunder, and, in particular, that the construction and
completion of the Vessel is in accordance with this Contract
and the Specifications. Builder shall, immediately on discovery
of any such inconsistencies, advise the Owner Project Manager in
writing of any inconsistencies in the Phase 2 Basic Design Package
relative to the Constructability of the Vessel; and
(b) the preparation of Builder's construction plans and drawings
(the "Builder's Working Drawings") based upon the Phase 2 Basic
Design Package. Such plans and drawings shall, if required, be
submitted to the Owner and the Classification Society for
approval in accordance with the provisions of this Contract and
the Specifications; and
(c) the performance of the Works on the basis of such plans and
drawings as from time to time are approved by the Classification
Society and the Owner under paragraph (b) above; and
(d) using all reasonable endeavors to discover any inaccuracies in
plans, drawings, and data provided by the Owner, or provided by a
third party acting on behalf of the Owner, for the purposes of
the Works.
3.3 Builder shall be and remain liable hereunder for:
(a) any defect or deficiency in the preparation of the Builder's Working
Drawings, whether or not the same have been approved by the Owner or the
Classification Society, save to the extent that such defect or deficiency is
caused by inaccuracies in plans, drawings and/or data supplied by Owner, unless
the Builder shall have failed to use all reasonable endeavours to discover
detectable inaccuracies in such plans, drawings or data; and
(b) any design work undertaken by Builder in connection with a Project
Change Order.
3.4 The design of the Vessel and all plans and drawings relating to the
Vessel and all intellectual property rights in the same (such design, plans and
drawings and all intellectual property rights in the same being herein called
the "Owner I.P.R.") shall at all times be and remain the sole and exclusive
property of the Owner who reserves all proprietary rights in and to the
same. The Builder will not obtain any rights of ownership or other
proprietary rights in connection therewith or any part thereof and will not
act in any way to indicate to any third party that he has any right in or to.
The Builder shall only be entitled to use the Owner I.P.R. for the sole
purpose of (and for no other purpose than) performing the Works.
3.5 Notwithstanding anything to the contrary in Clause 3.4 above, the
Builder shall retain ownership of all Builder's Working Drawings and all
ownership and intellectual property rights thereto, except for those which
have been developed directly from drawings, plans or other information
supplied by Owner, Owner Subcontractor, Owner Supplier, or the Phase 2 Basic
Design Package. For the avoidance of doubt, Owner shall own all Builder's
Working Drawings and all ownership and intellectual property rights thereto,
inclusive of those approved by the Classification Society, which have been
developed directly from drawings, plans or other information supplied by the
Owner, Owner Subcontractor, Owner Supplier or the Phase 2 Basic Design
Package. With respect to all Builder's Working Drawings, regardless of
ownership, the Builder shall:
(a) make copies thereof available to the Owner or Classification
Society (and Owner shall be entitled to make the same available to
Owner Subcontractor or Owner Supplier or any third party for the
purposes described in this Clause) in the course of performance of
the Works or, at the request of the Owner, to assist the Owner, or
any third party, in the operation, repair or maintenance of the Vessel
after delivery; and
(b) not design or build any drillship or similar vessel to the Vessel on
the basis of "Owner IPR"; and
(c) not disclose Owner IPR nor Builder's Working Drawings to third
parties whether to enable them to effect such design of any drillship
or vessel similar to the Vessel or otherwise.
CLAUSE 4 - CLASS AND REGULATIONS
4.1The Vessel shall be built to ABS rules and under their survey to Class
( A1-E Mobile Offshore Drilling Unit - DPS-3 AMS, ACCU, R2S and to the
specified rules and regulations of the Regulatory Bodies, including any
alterations and modifications thereto published as at the date
of signature of this Contract and including rules or regulations
announced but not in effect on the date of signature of this Contract provided
that they are scheduled to come into effect prior to the Contract Delivery
Date, so as to enable the Vessel to be registered under the Panamanian Flag.
All fees and charges incidental to classification and to compliance with the
specified rules and regulations of Regulatory Bodies and the requirements of
this Contract payable in connection with the construction of the Vessel shall
be for the account of the Builder, except for fees, charges and
expenses of the Classification Society incidental to the approval
of the Phase 2 Basic Design Package and registration of the Vessel which
shall be for account of the Owner.
4.2 If, after the date of signature of this Contract, any
requirements of the Classification Society or of the Regulatory Bodies, with
which the construction of the Vessel is required to conform including
requirements announced prior to the date of signature of this Contract and
scheduled to come into effect prior to the Contract Delivery
Date, are altered or changed by the Classification Society or Regulatory Bodies
and the parties are unable to obtain a dispensation therefrom or waiver of
compliance therewith, the Builder shall comply with any such alterations
or changes (if any) in the construction of the Vessel occasioned
thereby, and any modifications or alterations to the Contract Price and/or
Contract Delivery Date, arising out of the changes in the rules or
regulations shall be determined in accordance with Clause 6.
CLAUSE 5 - CONSTRUCTION, MATERIALS AND INSPECTION
5.1 The Builder shall commence performance of the Works and shall proceed
with the same with all due diligence, so as to achieve the completion of the
Works and Delivery of the Vessel in accordance with this Contract and the
Specifications and the Contract Delivery Date.
5.2 The Builder may sub-contract any portion of the Work of the
Vessel to any of the Subcontractors or Suppliers respectively specified and/or
listed in the Subcontractor's List or Maker's List attached at schedules Ten
and Eleven respectively, but shall not otherwise be entitled to sub-contract
such Work without the Owner's consent which shall not be unreasonably
withheld.
5.3 Subject to all the terms of this Contract, the Vessel, her machinery,
outfit, equipment, materials and workmanship shall be in accordance with this
Contract and the Specifications and shall otherwise be in conformity with
first class commercial shipbuilding practice, as applicable in Western Europe.
5.4 If any specified materials are not available when required
for incorporation in the Vessel, the Builder shall be at liberty to use other
suitable materials in substitution therefor subject to the approval of the
Owner which approval shall not be unreasonably withheld and (where
applicable)to the approval of the Classification Society and other
Regulatory Bodies. If such approvals are forthcoming, any consequent
modification or change shall be dealt with in accordance with the
provisions of Clause 6.
5.5 Within thirty (30) days of the signature of this Contract,
Owner shall supply to Builder all available estimates of weight and center
of gravity of OFE items. Further, Owner shall, upon its receipt, supply
Builder with certified vendor drawings for OFE as soon as is practically
possible. Within sixty (60) days of the signature of this Contract, Builder
shall derive an estimate of steel weight and the center of gravity of the
Vessel from the Phase 2 Basic Design Package. Within one hundred and twenty
(120) days of the signature of this Contract, Builder shall submit to the
Owner for approval a complete estimate of the estimated weight and center of
gravity of the Vessel. Agreement shall be reached as quickly as possible
between Builder and Owner as to the baseline lightship weight and center of
gravity (herein referred to as "Baseline Lightship Weight" and "Center of
Gravity"). Any changes in the weight and/or center of gravity as a result of
changes in OFE, shall be dealt with under the change order procedure in
accordance with Clause 6.
5.6 Departures from the construction contemplated in the above
agreement which affect the Baseline Lightship Weight and Center of Gravity
shall not be undertaken until Builder has submitted to the Owner his
estimate of the effect on the lightship weight and center of gravity of
the Vessel and obtained written approval of Owner to proceed with
the departure. Individual departures from any agreed weight group of 227KG
(500lb) or less shall not require written approval.
5.7 The Builder shall continuously update the lightship weight as working
drawings are produced and approved and the weight of the equipment becomes
available. After the date of the agreement of the Baseline Lightship Weight
and Center of Gravity of the Vessel, as provided for in Clause 5.5 above,
Builder shall submit to Owner a monthly report which details:
(i) an update of the comprehensive lightship weight and center of
gravity of the Vessel; and
(ii) a tabulation of all departures from the Baseline Lightship Weight
and Center of Gravity of the Vessel which details their respective cumulative
effects thereto.
5.8 The Builder shall prepare a Primavera level 3 critical path project
schedule within thirty (30) days of signature of this Contract for submission
to Owner, and shall give information to and cooperate with the Owner Project
Manager and the Owner in this respect in order that all parties are thoroughly
familiar with the progress made and to be made in order that the Vessel may be
completed by the Contract Delivery Date. The scheduled delivery dates and
all delivery requirements of items of equipment which can affect the critical
path project schedule shall be clearly identified in such critical path
project schedule. The project schedule shall include a critical path analysis
and be updated monthly and submitted to Owner in conjunction with the
monthly report referred to in Clause 5.7 above.
5.9 To the extent that the actual steel weight of the completed Vessel, as
defined in the Twelfth Schedule hereto, differs from the estimated steel
weights set out at Twelfth Schedule hereto the Contract Price shall be
adjusted in accordance with the rates set out in that Schedule.
5.10 During construction of the Vessel the Builder will permit Owner's
Authorized Representatives to attend tests and trials which shall be advised
in writing to Owner Project Manager as follows:
(i) in the case of a test or trial where a representative of
Owner Supplier must be present, Builder shall give thirty
(30) days provisional advisement, and seven (7) days definite
advisement of such trial; and
(ii)in the case of a test or trial for which a formal
procedure with acceptance/rejection criteria is applicable,
Builder shall give seventy-two (72) hours advisement of such
trial;
(iii)in the case of a day to day inspection, Builder shall
give reasonable notice and shall use its best endeavours to give
such advisement at least the day before such test or trial.
Such examination and inspection shall in no way diminish, affect or impair
the obligations, guarantees or undertakings of the Builder in relation to the
due and proper execution of the Work or the materials employed or guarantees
hereinafter mentioned. The failure of an Owner's Authorized Representative
to attend any test or trial, after receipt of reasonable notice as above,
shall be deemed a waiver of Owner's right to attend same, however
Builder shall furnish to Owner the results of such tests and trials as soon
as practicable thereafter.
5.11 The Builder will also permit Owner's Authorized Representatives to have
access during all working hours to the facilities of the Builder and its
Subcontractors where the Works are being carried out.
5.12 If during construction and prior to dock and sea trials the Owner, its
Project Manager or Authorized Representatives becomes aware of any defect or
omission in the Vessel or its machinery arising out of the Works they shall
as soon as practicable specify the same in writing to the Builder Project
Manager and
(i) if the Builder agrees the alleged defect or omission or if
under Clause 6.9 the Classification Society so decides, the
Builder shall at its own cost rectify any such defect or omission;
and
(ii)in any event Owner shall have the right to issue a directive
instructing Builder to rectify the defect or omission. Builder
shall comply with such directive but such compliance shall not
prejudice either Party's rights under Clause 5.13.
5.13 Any dispute which may arise between Owner and Builder during
the construction of the Vessel in relation to the workmanship, materials
or conformity with the Specifications shall be resolved in accordance with
Clauses 6.9 and 6.10 or if not so resolved, may be referred to arbitration
in accordance with Clause 20.
5.14 The Builder shall provide, without cost to Owner, the following:
(i) a single office facility at the Builder's Yard, for
fifteen (15) people to enable the Owner Project Manager and
Owner's Authorized Representatives to carry out their duties.
Such facility will comprise suitable office fittings including
drawing tables, stools, desks, chairs, filing cabinets, toilets,
lighting, heating, hot and cold running water, cleaning, the
installation of telephone (comprising four (4) outside lines
and three (3) internal lines) and fax services all free of
charge to the Owner; and
(ii)Builder shall also supply a heated portable office on
or near the Vessel, with one (1) shipyard phone, one (1) desk and
four (4) chairs; and
(iii)all facilities for a further fifteen(15) people
including offices, heating and light, telephones, drawing tables, stools,
desks, chairs, filing cabinets, toilets, hot and cold running
water facilities, as may be required for the Owner's operations
personnel. Such facilities for Owner's operations personnel shall be provided
six (6) months prior to the Contract Delivery Date.
5.15 Telephone rental and unit charges and the installation and use of any
additional communication services or any other additional accommodation or
services or equipment as may be provided by the Builder at the Owner's
request shall be paid for by the Owner against the Builder's Quarterly Invoices.
Builder shall invoice Owner at its cost without uplift or premium for the
charges mentioned above.
5.16 The Builder shall permit Owner's operations personnel, Owner
Subcontractors and Owner Suppliers, all necessary and appropriate access to
the Vessel for outfitting and rig up purposes. Owner Project Manager and
Builder Project Manager shall liaise and shall co-operate with each other to
minimize any disruption. Owner's operations personnel, Owner Subcontractors and
Owner Suppliers shall be permitted ready access to the Builder's
Yard to enable them to carry out and complete their work to ensure that
the Vessel is fully operational at Delivery. The Builder shall provide
the necessary facilities and support, which shall be paid by Owner
against Builder's Quarterly Invoices in accordance with the schedule of
rates, attached at the Thirteenth Schedule hereto.
5.17 The Owner undertakes that its Project Manager and Authorized
Representatives shall carry out their duties hereunder in accordance
with first class commercial shipbuilding practice as applicable in
Western Europe and in such a way as to avoid any unnecessary increase
in building cost or delay in the Builder's construction programme.
5.18 Either party shall have the right by written Notice to
request the other to replace its Project Manager or any of its Authorized
Representatives if they are reasonably deemed by the objecting party to
be unsuitable or unsatisfactory for the proper progress of the Vessel's
construction. If the party in receipt of such Notice shall agree, the
replacement of such Project Manager or Authorized Representative shall take
place as soon as reasonably practicable.
CLAUSE 6 - MODIFICATIONS AND CHANGE ORDERS
6.1 Owner may, at any time prior to Delivery of the Vessel, issue a Change
Order Request in writing to the Builder, instructing the Builder to modify or
change the Specifications.
6.2 If the Builder considers such modification or change can be carried out
without alteration to the Contract Price or Contract Delivery Date, the Builder
shall, within five (5) days confirm this in writing to the Owner and proceed
with such modification or change.
6.3 If the Builder considers such modification or change cannot
be carried out without alteration to the Contract Price or Contract
Delivery Date, the Builder shall within five (5) days or where the extent of
the modification or change requires a longer period, such longer period as
the parties shall agree, submit to the Owner in writing a Builder's
Proposal which shall detail:
(i) the amount of any increase or decrease to the Contract Price,
representing the reasonable cost or saving for the relevant modification or
change; and
(ii)the extent of any reasonable extension or advancement in the
Contract Delivery Date of the Vessel occasioned by such change or modification;
(iii )any other impact on the Specifications (including without
limitation, the Baseline Light ShipWeight or Center of Gravity of the Vessel).
6.4 Within five (5) days, or where the extent of the modification or change
justifies a different period, and in particular where the Builder deems the
item or component to be modified or changed to be critical to the timely
construction of the Vessel, such other period as the parties shall agree, of
receipt of a Builder Proposal, Owner shall advise Builder in writing of its
acceptance or rejection of the Builder's Proposal. If the Builder's Proposal
is accepted, the Owner shall countersign a Project Change Order submitted by
Builder.
6.5 Owner shall have, in the event that it does not accept the Builder's
Proposal, the right to request such further information or documentation
to substantiate the Builder's Proposal, which Builder shall promptly supply.
Any dispute which may arise between Owner and Builder during the
construction of the vessel in relation to any modification or change to the
Specification, Contract Price or Contract Delivery Date shall be resolved in
accordance with Clauses 6.9 and 6.10, or if not so resolved may be referred
to arbitration in accordance with Clause 20.
6.6 In the event that the Builder wishes to propose a modification or
change to the Specifications, the Builder shall advise Owner Project
Manager in writing of the suggested modification or change, and shall
submit a Builder's Proposal complying in all respects with Clause 6.3
above. The Owner shall have the right to reject or accept the suggested
modification or change in its discretion. In the event of an acceptance,
the Owner shall countersign the Project Change Order submitted by the
Builder.
6.7 Paragraphs 6.2, 6.3 and 6.4 shall apply mutatis mutandis, in
the event that, following the signature of this Contract, any alterations
or modifications are made to the laws, rules, regulations
and enactments (including any rules or regulation or alterations
or modifications thereto announced but not in effect on the date of
signature of this Contract and provided they are scheduled to come
into effect prior to the Contract Delivery Date), to which the
construction of the Vessel is required to conform, save that each party on
becoming aware of such modification, deletion or addition shall forthwith
advise the other in writing.
6.8 The Builder Project Manager and the Owner Project Manager,
respectively, shall have authority to bind the Builder and Owner,
respectively, in relation to this Clause.
6.9 During the performance of the Works, and prior to the
Delivery of the Vessel, if the value of any dispute in respect of any
matter referred to in Clause 5.12, 5.13, 6.5 or 13.3 is not more than
United States Dollars fifty thousand (US$50,000) (or equivalent),
it shall be referred to the Senior Representative of the Classification
Society on site, acting as an expert and not as an arbitrator,
whose decision shall be final and binding on the parties. If the
value of the dispute exceeds United States Dollars fifty thousand (US$50,000)
(or equivalent), the parties may by mutual agreement refer the dispute to
the Senior Representative of the Classification Society on site acting as an
expert and not as an arbitrator whose decision, in the event of
such referral, shall be final and binding on the parties.
With respect to any dispute of any matter referred to in Clause 6.5 only
which is not more than United States Dollars fifty thousand (US$50,000)
(or equivalent) if the dispute mechanism outlined hereinabove should be
deemed unsatisfactory by either Party, the Parties will endeavour
to establish a mutually-agreed dispute resolution mechanism for
such disputes. Failing the establishment of the Parties of a
mutually-agreed dispute resolution mechanism for such Clause 6.5 disputes,
any and all such disputes may be referred by either Party to arbitration
in accordance with the terms and conditions of Clause 20 hereof.
6.10 Owner and Builder shall use all reasonable efforts to agree the
necessary alteration to the Contract Delivery Date, Contract Price or
Specifications arising as a consequence of the proposed modification or
change but, if no agreement can be reached, either party may refer the
dispute to an Appeals Board. Such Appeals Board shall consist of one
representative of each party who is not part of the day to day activities
involved in the performance of the Works. If the Appeal's Board is unable
to reach an agreed decision either party shall be entitled to initiate
arbitration procedures under Clause 20.
6.11 Notwithstanding that Builder Proposal has not been issued or
that a Project Change Order has not been countersigned by Owner in
relation thereto, Owner shall at any time have the right to
issue a directive instructing Builder to proceed with the change
to the Specifications in question. Builder shall comply with such directive,
but such compliance shall not prejudice either party's
rights to refer the dispute to the Senior Representative of the
Classification Society on site in accordance with Clause 6.9, or to the
Appeals Board as set forth in Clause 6.10 or to initiate
arbitration proceedings as set forth in Clause 20 hereunder.
6.12 All Project Change Orders and/or the value for any directive
issued by Owner hereunder this Clause 6 shall be denominated in US Dollars.
The US Dollar figure shall be based on the official exchange rate for British
Pounds Sterling in effect at the time the Project Change Order is
signed by both Parties or the Owner directive is issued.
CLAUSE 7 - OWNER FURNISHED EQUIPMENT
7.1 Owner shall deliver to Builder's Yard all items of Owner
Furnished Equipment in accordance with the delivery date for such item
specified in the initial Primavera critical path project schedule (as
amended from time to time by Permissible Delay), (the "OFE Scheduled
Delivery Date").
7.2 All items of Owner Furnished Equipment shall be at Builder's
risk from arrival at the dock or gates of the Builder's Yard.
7.3 NOT USED
7.4 From time of arrival at Builder's Yard, the Builder shall,
at its own cost, transport and store all items of Owner Furnished
Equipment in secure and appropriate storage in accordance
with Owner Supplier's manual and instructions (and/or Owner's
instructions) in the minimum number of separate warehouse(s) or area(s)
practicable, taking care that the same shall not be damaged, and shall
clearly mark all items of Owner Furnished Equipment as such and as the
property of the Owner.
7.5 On arrival of each item of Owner Furnished Equipment at the
Builder's Yard, the Builder shall inspect the same to ensure that the
items contain no obvious defects or signs of damage, and
shall measure and review the same to ensure that they are in
accordance with the relevant Owner Supplier's specified dimensions and
interfaces. Builder shall promptly advise Owner Project
Manager in writing of any items which are damaged or do not
appear to be in accordance with such specified dimensions or interfaces.
7.6 Provided that Owner has delivered the item of Owner Furnished
Equipment on or before the OFE Scheduled Delivery Date, where the value of
such an item exceeds United States Dollars five hundred thousand
(US$ 500,000) and unless so instructed by Owner, where such item is not
installed within sixty (60) days following the Scheduled Delivery Date,
Builder shall pay to Owner interest at the rate of one half per cent
(0.5%) of the price of such item pro rata per month calculated daily
from and including the sixty-first (61st) day and paid monthly. Owner
shall be entitled to set off all sums due to it pursuant to this Clause
against the installment of the Contract Price payable pursuant to Clause 8.3.5.
CLAUSE 8 - PRICE AND TERMS OF PAYMENT
8.1 The total cost for Drillship No 1740 shall be United States Dollars
Two Hundred and Sixty Million, Seven Hundred Fifty Nine Thousand, Two Hundred
Thirty Four (US$260,759,234) comprised as follows:
A United States Dollars One Hundred and Fifty Three Million,
Eight Hundred Fifty Nine Thousand, Two Hundred Thirty Four
(US$153,859,234) (the "Contract Price") for detail
design, procurement (exclusive of OFE, see below), construction,
installation of all equipment, commissioning and setting to work
of the total drillship, all according to this Contract.
B United States Dollars One Hundred Six Million, Two Hundred
Nine Thousand (US$106,209,000) for OFE. Unless otherwise
mutually agreed the Owner shall be responsible for
all payments due in respect of OFE to Owner Suppliers and Owner
Subcontractors.
8.2 Builder shall provide the Parent Company Guarantee and the Letter of
Credit (attached in the forms of the Third and Fourth Schedules,
respectively) to Owner at the date of signature of this Contract.
8.3 Provided that Owner has received the Parent Company Guarantee and
Letter of Credit, payment of the Contract Price shall be made by installments
from or on behalf of the Owner to the Builder as follows:
8.3.1 Twenty percent (20%) of the Contract Price on signature of
this Contract within seven (7) days of Owner's receipt of
Builder's invoice;
8.3.2 Twenty percent (20%) of the Contract Price at the start of
preparation, intended to be the continuous cutting of steel but
not before July 2, 1998;
8.3.3 Twenty percent (20%) of the Contract Price on keel laying of a
minimum of five hundred (500) tons of steel, but not before
January 1, 1999;
8.3.4 Twenty percent (20%) of the Contract Price at floatation of
the Vessel in a condition where it can be floated without
requiring new docking, but not before August 15, 1999; and
8.3.5 Twenty percent (20%) of the Contract Price, plus or minus any
increases or decreases occasioned in accordance with the
provisions of this Contract or any Amendment thereof which
have not previously been accounted for by adjustment of this
or any earlier installments, at Delivery of the Vessel,
estimated to be February 10, 2000.
8.4 The Builder shall by not less than seven (7) days advance Notice in
writing advise the Owner of the date upon which any of the installments
referred to in Clauses 8.3.2 to 8.3.5 hereof shall become payable.
8.5 Payment of each of the installments at 8.3.2 to 8.3.4 above shall be
subject to the receipt by the Owner of
(i) a Stage Certificate (in the form set out in the First
Schedule hereto) signed by the Builder and countersigned by
the Owner; and
(ii) following such counter-signature, the Builder's invoice in
the amount of the relevant installment.
8.6 Notwithstanding Clause 8.1, if the aggregate of any increases in the
Contract Price for the Vessel resulting from the operation of Clause 6 or any
Amendment to this Contract amounts to an increase of more than two percent
(2%) in the Contract Price at any time during the construction of the Vessel
(such increase over and above two (2%) percent being called the
"Excess"), the following shall apply:
(i) if there shall be an Excess on or before payment of the
installment referred to in Clause 8.3.2, forty (40%)
per cent of the Excess shall be paid together with such
installment and sixty (60%) per cent shall be paid in
equal proportions with the installments referred to in
Clauses 8.3.3. to 8.3.5;
(ii) if there shall be an Excess after payment of the installment
referred to in Clause 8.3.2, but on or before payment of
the installment referred to in Clause 8.3.3, sixty (60%)
per cent of the Excess shall be paid together with such
installment and forty (40%) per cent shall be paid in equal
proportions with the installments referred to in Clauses 8.3.4.
to 8.3.5; and
(iii) if there shall be an Excess after payment of the installment
referred to in Clause 8.3.3, but on or before payment of the
installment referred to in Clause 8.3.4, eighty (80%) per
cent of the Excess shall be paid together with such installment
and twenty (20%) per cent shall be paid with the installment
referred to in Clause 8.3.5.
For the avoidance of doubt, any Excess occurring following the payment of
the installment referred to in Clause 8.3.4 and/or any increases that, in
aggregate, do not exceed two per cent (2%) shall be paid together with
the installment referred to in Clause 8.3.5.
8.7 The amount of each of the installments referred to in Clause
8.3 hereof shall be paid in US Dollars free of bank charges together with
any VAT and other tax or duty then payable by the Owner direct to the
Builder's Account No: by banker's draft or telegraphic transfer within seven
(7) days following receipt by Owner of the Builder's invoice in
accordance with Clause 8.5, and, if not so paid shall (without prejudice to
any other rights of the Builder in respect of non payment) bear interest
from the due date until payment at the rate of two percent (2%) over one
month LIBOR from time to time for the particular currency.
8.8 Any amounts for bonuses or liquidated damages under Clause 12 shall
be calculated and determined on or before Delivery of the Vessel and shall be
payable on the Delivery Date, and Owner shall be entitled to net-off such
amount(s) against the installment referred to in Clause 8.3.5 above.
8.9 If the Owner fails to take delivery upon a Valid Tender of Delivery
by the Builder, the Owner shall nevertheless make full and final payment
on the date of such valid tender of Delivery and shall thereafter reimburse
the Builder for all costs and expenses which the Builder reasonably
incurs by reason of the Owner's failure to take Delivery.
8.10 Other sums due to Builder by Owner hereunder this Contract,
except those payable for bonus or by Amendment, shall be the subject of
Builder's Quarterly Invoices. For each quarter ending after the date of the
signing of this Contract Builder, shall prepare and submit to Owner an
invoice covering sums for and including, but not limited to, additional
services which are requested by Owner, but are not provided for in any
Project Change Order, and facilities usage for Owner's Subcontractors and
Owner's Suppliers provided for in Clause 5.16, above. Upon its receipt of
Builder's Quarterly Invoices, Owner shall pay the undisputed portion
within thirty (30) days. Undisputed amounts of Builder's Quarterly
Invoices beyond the thirty (30) day period shall bear interest at the rate
of two per cent (2%) over one-month LIBOR from time to time for the
particular currency.
CLAUSE 9 - PROPERTY AND JURISDICTION
9.1 Upon payment of the sum due under Clause 8.3.1 the Vessel,
as it is constructed, and all machinery, equipment and materials whether
wholly or partially finished or unfinished from time to time appropriated
or intended for it in the Builder's Yard or elsewhere shall become and
remain the absolute property of the Owner (but at the risk of the
Builder) notwithstanding that any such machinery, equipment and materials
shall subsequently be worked upon by the Builder or its
Subcontractors or otherwise processed or incorporated into the Vessel and
shall not be within the ownership or disposition of the Builder, but the
Builder shall at all times have a lien thereon for any part of the
Contract Price which is unpaid and for any sums due from time to time in
accordance with this Contract provided that such lien shall not
continue or be enforceable by or on behalf of the Builder in any of the
circumstances described in Clauses 15.1 or 15.2.
9.2 Immediately upon machinery, equipment or material becoming the property
of the Owner under the provisions of Clause 9.1 the Builder shall place or
cause to be placed thereon the yard number of the Vessel and shall place
such number at the bow of the Vessel and shall take all reasonable steps
to cause all machinery, equipment and materials for the Vessel to be
numbered as aforesaid by itself or its Subcontractors.
9.3 Any items, other than Owner Furnished Equipment (which shall be and
remain the property of the Owner), not used in the construction of the
Vessel shall after Delivery revert to and become the property of the Builder.
9.4 Without prejudice to the rights of Owner as provided in Clause 15,
any engines, boilers, machinery or materials which are part of the Vessel
or which are appropriated thereto shall not after delivery to the premises
of the Builder be removed outside the Builder's Yard except for the
purposes of effecting repairs thereto or obtaining replacements therefor.
9.5 Without prejudice to the rights of Owner as provided in Clause 15,
the Vessel shall not be assembled or floated other than at the Builder's
Yard without the prior approval of the Owner.
CLAUSE 10 - INSURANCE
10.1 Owner and Builder respectively shall each effect the
insurances listed at the Sixteenth Schedule hereto, on the terms and
conditions therein set out and shall, within fourteen (14) days
of signature of this Contract supply each other with copies of
all such insurances effected.
10.2 Owner's Builder's risk insurance referred to in Schedule 16
contains a deductible of United States Dollars two hundred thousand
(US$ 200,000). Builder shall therefore, in addition to the
insurances listed at Schedule 16, procure insurance from the date
of signature of this Contract in the joint names of Owner and Builder,
in the amount of United States Dollars two hundred thousand (US$200,000)
in respect of each and every claim, with a deductible of United States
Dollars fifty thousand (US$50,000).
10.3 In the event that the Vessel should suffer partial damage between
the date of signature of this Contract and the Delivery Date, Owner
shall be liable to pay to Builder the first United States Dollars fifty
thousand (US$50,000) payable under each and every claim if the event
which has given rise to the claim occurs as a result of the sole fault of
Owner.
10.4 In the event of an actual, constructive, compromised or arranged
total loss of the Vessel prior to the Delivery of the Vessel, either the
Owner or the Builder shall be entitled to terminate this Contract by
serving upon the Builder or the Owner as the case may be, written Notice of
termination, such Notice to be dispatched within thirty days of the date
upon which the insurers accept that the Vessel has become an actual,
constructive, compromised or arranged total loss.
10.5 In the event of any loss or damage being sustained by the Vessel prior
to Delivery which does not constitute an actual, constructive, compromised or
arranged total loss the Builder shall repair and make good that loss or damage
(hereinafter referred to as a "partial loss") to the approval of the
Classification Society and reasonable approval of the Owner so that the
Vessel in all respects meets the requirements of this Contract at the
Specifications.
10.6 The proceeds of any claim shall be dealt with as follows:
10.6.1 in the case of a partial loss, when the insurers are
satisfied that the Builder has made good the loss or damage the
occurrence of which had given rise to the claim or when the insurers
are satisfied that the Builder has made sufficient progress in
repairing or making good the loss or damage the occurrence of which
had given rise to the claim, then the insurers shall pay to the
Builder the whole proceeds where the repairs are complete or such
part of the proceeds as the insurers may decide as a payment on account
of the partial repair.
10.6.2 in the event of an actual, constructive, compromised or
arranged total loss, if refund has not been made pursuant to
Clause 15, any amounts received and retained by the Owner out of
the insurance proceeds shall be set off against any liability of
Builder to Owner pursuant to Clause 15 hereof, and, to the extent
such refund has been made, any proceeds shall be paid to Builder.
CLAUSE 11 - TRIALS AND PERFORMANCE
11.1 Prior to the Vessel's delivery to, and acceptance by the
Owner, the Vessel shall undergo sea trials during a single trip, at a
place appointed by the Builder and in accordance with the
provisions of Specifications. The Vessel shall also undergo dock
trials in accordance with the provisions of the Specifications.
11.2 The Owner shall receive from the Builder at least thirty
(30) days provisional Notice and seven (7) days definite Notice of the
time and place of the sea trials of the Vessel.
11.3 The Authorized Representatives of the Owner who will attend and
witness the performance of the Vessel during such sea trials shall be present
on the date specified in such notice. Failure of the Owner or any of the
Authorized Representatives to be present after due notice of not less than
seven (7) days shall render the Owner liable for the costs of the abortive
sea trial arrangements and shall constitute a Permissible Delay extending
the Contract Delivery Date of the Vessel by the period of delay caused by
such failure to be present which extension shall be effected by a Project
Change Order in accordance with Clause 6.
11.4 In the event of the weather on the date specified for the
sea trials being in the reasonable opinion of either party unfavorable, then
the same shall take place on the first available day thereafter that weather
conditions permit. If during the sea trials such changes in weather shall
occur as would, in the opinion of either party , have precluded any
commencement of the sea trials had the change in weather occurred before
the sea trials had started then, in such event, either party shall have the
option to discontinue the sea trials and require that the date for the sea
trials be postponed until the first favorable day next following
unless the Owner shall agree to accept the Vessel on the basis of the sea
trials made prior to such sudden change in weather condition. Any
delay in sea trials caused by adverse weather conditions shall be a Force
Majeure delay within the terms of Clause 13.
11.5 Prior to dock and sea trials the Owner shall select the fuel
oil and main engine lubricating oils in compliance with the Specifications
and machinery manufacturer's recommendations, whereupon the Builder shall
provide the Vessel with the required quantity of fuel oil, lubricating
oils, grease and other stores necessary for the conduct of such dock and
sea trials. Upon Delivery of the Vessel, the Owner shall pay to the
Builder a sum equal to the cost of fuel oil and such lubricating oils,
greases and other stores used during such trials and any such fuel oil,
lubricating oils, greases and other stores on board the Vessel at
Delivery.
11.6 If the Vessel fails any of the dock or sea trials for which
the Builder is responsible, the Builder shall rectify any defects in
respect of the Works which caused such failure and shall
conduct additional trials until the Vessel meets or exceeds the
applicable testing criteria.
11.7 No later than two (2) weeks prior to the anticipated Delivery Date
the Owner and the Builder shall prepare a final punch list of defects.
If such list cannot be agreed, any dispute shall be resolved in accordance
with Clauses 6.9 and 6.10 or, if not so resolved, may be referred to
arbitration in accordance with Clause 20.
This sub-clause is without prejudice to Builder's obligation to deliver
the Vessel in accordance with the Contract and the Specifications.
CLAUSE 12 - DELIVERY
12.1 The Vessel shall be delivered to the Owner by the Builder at the
Builder's Yard on or before the Contract Delivery Date.
12.2 Provided that:
(i) the Vessel is in compliance with the requirements of the
Contract and the Specifications; and
(ii) all the Certificates referred to below are tendered
then Delivery of the Vessel shall be forthwith effected by the
concurrent signature by the Owner and the Builder of a Certificate of
Delivery acknowledging delivery of the Vessel by the Builder
and acceptance thereof by the Owner.
Upon Delivery of the Vessel the Builder shall hand to the Owner,
the Builder's Certificate, the Certificate of the Classification Society,
all other Certificates required to enable the Owner to operate the
Vessel and all other certificates, provisional certificates and protocols.
If the Builder is unable to provide a final Classification Society
Certificate at Delivery he shall be entitled to provide an interim
certificate, provided that the Builder shall furnish Owner with the final
certificate as promptly as possible thereafter.
If the relevant certificates, provisional certificates and/or
protocols are not available due to delay in the provision by Owner,
Owner Subcontractors or Owner Suppliers of the operations manuals
including stability book, necessary to obtain the same, provided
such delay was not occasioned by failure of Builder or its Subcontractors
or Suppliers, to provide Owner, in a timely manner, with
the necessary information and data to compile such operations
manuals, Builder shall nevertheless be deemed, provided it has complied
in all other respects with this Clause 12.2, to have achieved a
Valid Tender of Delivery.
12.3 The Owner shall take possession of the Vessel immediately
upon Delivery and, except as otherwise mutually agreed in writing in
advance, remove the Vessel within seven (7) days of
Delivery from the Builder's Yard. If Owner fails to remove the
Vessel within seven (7) days, Owner shall reimburse Builder for any
actual and direct costs incurred by Builder as a result of
such failure to remove after seven (7) days.
12.4 Upon Delivery of the Vessel, the following shall occur:
12.4.1 If Delivery occurs on or before fifteen (15) days prior
to the Contract Delivery Date, Owner shall pay to Builder the sum
of United States Dollars Three Million (USD $3,000,000) as a bonus
for early delivery;
12.4.2 If Delivery occurs between the period of fourteen (14)
days prior to Contract Delivery Date and fifteen (15) days after
Contract Delivery Date, the bonus referred to in Section
12.5.1, above, shall be reduced by the sum of United States
Dollars One Hundred Thousand (USD $100,000) per day such that no
bonus may be earned by the Builder after the expiry of such
thirty (30) days.
12.4.3 There shall be a grace period of fifteen (15) days from the
sixteenth (16th) through the thirtieth (30th) day after the Contract
Delivery Date where no bonus may be earned by the Builder and no
liquidated damages shall become due and payable to the Owner.
12.4.4 If Delivery occurs on or after the thirty-first day after
the Contract Delivery Date, Builder shall pay to the Owner as
liquidated damages, but not as a penalty, the sum of United States
Dollars Fifty Thousand (USD $50,000) per day for a period not to
exceed fifteen (15) days.
12.4.5 If Delivery occurs on or after the forty-sixth day after
the Contract Delivery Date, Builder shall pay to the Owner as
liquidated damages, but not as a penalty, the sum of United
States Dollars Seventy Five Thousand (USD $75,000) per day for a
period not to exceed fifteen (15) days.
12.4.6 If Delivery occurs on or after the sixty-first (61st) day
after the Contract Delivery Date, Builder shall pay to Owner as
liquidated damages, but not as a penalty, the sum of United
States Dollars One Hundred Thousand (USD $100,000) per day for a
period not to exceed thirty (30) days.
12.4.7 If Delivery has not occurred within the period of ninety
(90) days after the Contract Delivery Date, no further or other
liquidated damages shall be payable by Builder and
Builder's liability to pay liquidated damages under this Clause
12.5 shall be limited to the aggregate amount of United States Dollars,
Four Million, Eight Hundred Seventy Five Hundred Thousand
(USD $4,875,000), payable under clauses 12.4.4, 12.4.5, and 12.4.6,
respectively, the liquidated damages payable thereunder being, for the
avoidance of doubt, cumulative. In this event, Owner shall be entitled
to exercise the rights and remedies available to it under Clause 15.
12.5 If any items on the Vessel are incomplete when the Vessel is
otherwise ready for Delivery and the Owner and the Builder agree that such
items:
(i) do not materially affect the operation of the Vessel;
(ii) are not likely to cause damage or deterioration; and
(iii) do not constitute such a number that whilst not
individually giving rise to such material effect,
nor likely to cause damage or deterioration, are
in aggregate material to the condition of the Vessel;
then the Owner will take Delivery of the Vessel. Owner shall in
any event have such items completed in a manner to be mutually agreed
upon between the Builder and the Owner. Dispatch to the Vessel by sea
freight, or if practicable by air freight in the case of emergency, of items
completed and/or received at the Builder's Yard subsequent to departure of
the Vessel therefrom shall be at the expense of the Builder excepting items
of Owner Furnished Equipment the cost of dispatch of which shall be at the
expense of the Owner.
CLAUSE 13 - FORCE MAJEURE
13.1 A Force Majeure occurrence shall mean any of the following
occurrences beyond the control and without the fault or negligence of
the party affected and which by the exercise of reasonable diligence the
said party is unable to prevent or provide against and which delays the
construction of the Vessel:
13.1.1 Act of God, fire, inclement weather of abnormal severity
and/or duration;
13.1.2 war (whether declared or not), riots, insurrections or
malicious damage;
13.1.3 damage to Vessel which constitutes a partial loss and is
repaired from the proceeds of insurance under the provisions of
Clauses 10.5 and 10.6.1;
13.1.4 requisition order, control, direction, intervention or
requirement by or of any Government or body acting under the authority of
any Government;
13.1.5 cessation, curtailment or interruption of fuel, power,
gas, water or any other essential services; and
13.1.6 except where due to the fault or negligence of the Builder
or its Subcontractors or Suppliers, any delay in or short delivery of,
or defects in materials machinery services or equipment for the Vessel
(provided that the Builder demonstrates that they are critical to
construction of the Vessel at the time of delay and that they
were ordered in due time);
PROVIDED HOWEVER THAT the Builder shall not be entitled to rely
upon any of the causes of delay listed in Clause 13.1 unless the Builder
has taken all reasonable steps to mitigate their effect upon the
construction of the Vessel.
13.2 The Builder shall, within two (2) days of becoming aware
that the occurrence of any event of the nature specified above is likely
to cause delay, Notify the Owner in writing thereof. The
Builder shall also advise the Owner in writing after any such occurrence
of which Notice was given in accordance with the provisions of this
Clause ceases within two (2) days of such cessation and shall then provide
the Owner with the Builder's best estimate of the likely period of
delay resulting therefrom. Failure of the Builder to provide due
Notice as provided for in this Contract shall be deemed a waiver of Builder's
right to claim Force Majeure.
13.3 A delay to the Contract Delivery Date caused by Force Majeure shall
constitute Permissible Delay and issues as to (i) whether an event
constitutes Force Majeure and (ii) the extent of any delay due to Force
Majeure, shall be documented, agreed and/or resolved in accordance with
Clause 6. The revised Contract Delivery Date resulting from
Permissible Delays due to Force Majeure causes shall be established
by extending the Contract Delivery Date by one day for each day of Force
Majeure calculated after making full provision for concurrent delays
and mitigation by the Builder.
13.4 In the event of a period of Force Majeure lasting more than
forty-five (45) consecutive days, or period or periods thereof of more
than sixty (60) days in the aggregate, the Owner shall be entitled
to exercise the rights afforded to it under Clause 15.2.
CLAUSE 14 - DEFAULT OF THE OWNER
14.1 The Owner shall be in default and this Contract may be
cancelled by the Builder by Notice in writing to the Owner if:
14.1.1 the Owner fails to pay any installment of the Contract
Price within seven (7) days of its becoming due and payable in
accordance with Clause 8; or
14.1.2 the Owner without due cause fails to pay all sums due on
delivery within three days of a Valid Tender of Delivery.
Notice of cancellation by the Builder under this Clause shall be given by
facsimile and confirmed in writing and shall (unless the Owner shall have
then remedied the default) be effective fourteen (14) days after receipt
thereof by the Owner whereupon the Builder shall be entitled to exercise
the rights provided for in Clauses 14.2 and 14.3 and in which event title
to the Vessel shall forthwith revest in the Builder, provided that the
Builder shall not be entitled to exercise such rights in respect of
any amount in dispute, where that dispute has been referred to the Senior
Representative of the Classification Society, to the Appeals Board, or
to arbitration or Court proceedings.
14.2 The Builder shall be entitled to cancel this Contract forthwith
by notice given by facsimile and confirmed in writing upon an order
being made or an effective resolution being passed for the winding up
of the Owner (otherwise than a members voluntary winding up for the
purpose of amalgamation or reconstruction) or a receiver or administrator
being appointed of the whole or any part of the undertaking of the Owner.
14.3 If the Builder shall cancel this Contract under Clause 14.1
or 14.2 the Builder shall be entitled (in addition to interest as
provided in Clause 8.7) to the proved loss resulting from the
Owner's default. The Builder shall sell the Vessel by public auction or
tender or private sale at its discretion and shall apply the proceeds of
sale (after deducting the expenses of sale including the cost of
completing the Vessel for sale) together with any installments of the
Contract Price paid under Clause 8 as follows:
14.3.1 in satisfaction of the balance due to the Builder under
this Contract.
14.3.2 the balance, if any, shall belong to the Owner.
14.4 If the proceeds of the sale of the Vessel when added to the
installments received prior to cancellation are less than the aggregate
of the Contract Price and the expenses of resale, the deficiency shall
be paid by Owner to Builder and if not so paid shall be recoverable by
action against Owner.
14.5 However, notwithstanding any of the foregoing, the Builder shall not
be entitled to exercise its rights under this Clause if the Owner has
already commenced the exercise of its rights pursuant to Clause 15.
CLAUSE 15 - DEFAULT OF THE BUILDER
15.1 Upon the occurrence of any of the following events the Builder shall
be in default:
15.1.1 the Vessel becomes a total loss in accordance with Clause
10.4; or
15.1.2 the Vessel is requisitioned by the British Government; or
15.1.3 the Builder without just cause refuses to proceed with the
construction of the Vessel; or
15.1.4 an order is made or an effective resolution is passed for
the winding up of the Builder (otherwise than a members'
voluntary winding up for the purpose of amalgamation or
reconstruction) or a receiver or administrator is appointed of
the whole or any part of the undertaking of the Builder; or
15.1.5 If at any time during this Contract, following receipt of
request to do so from Owner, the Builder, utilising the Primavera
level 3 critical path project schedule, is unable to demonstrate
to the Owner's satisfaction that it has sufficient additional
capacity, including sub-contracted labor, and/or materials,
and/or has developed a recovery plan that would enable
him to deliver the Vessel within ninety (90) days following the
Contract Delivery Date and that the Builder is implementing such
plan and/or utilizing such additional capacity and exercising
all necessary due diligence to achieve Delivery within such
period.
15.2 In circumstances of Builder's default as described in Clause
15.1 or in the circumstances set out in Clauses 12.4.6 or 13.4, the Owner,
without prejudice to its rights under the Parent Company Guarantee, shall
be entitled by Notice to the Builder EITHER:
(i) to cancel this Contract in which event Builder shall
forthwith refund to the Owner (a) the aggregate amount
of all sums paid pursuant to Clause 8, (b) any amount
reasonably and properly paid by Owner to any Owner
Subcontractors and (c) any and all amounts reasonably
and properly paid by Owner for Owner Furnished Equipment
which has been incorporated in the Vessel, all
together with interest thereon at the rate of two (2%) percent
over one-month LIBOR from time to time for the particular
currency, calculated in each case from the date of payment by
Owner to the date such refund is made.
However, the proceeds of any insurance claim previously received
by Owner shall be deducted from the amount to be refunded under
this sub-clause (i). Upon such refund as aforesaid being made
in full, all the obligations, duties and liabilities of each
of the parties hereto to the other under this Contract shall
forthwith be completely discharged and title to the Vessel
shall be vested in Builder; OR
(ii) to take possession of the Vessel in its unfinished state and
complete the Vessel in accordance with this Contract and the
Specifications either at the Builder's Yard or elsewhere, at
Owner's sole option. In the event that Owner decides to complete
the Vessel at Builder's Yard,Owner and its agents or Owner
Subcontractors shall be entitled to use Builder's Yard,
buildings, plant, machinery, tools and implements and all
materials appropriated to or ordered for the Vessel
and shall not be liable for breakage or damage thereto. In this
case, in the event that the cost of completing the Vessel is more
than the amount of the outstanding installments, Builder shall
pay to Owner on demand an amount equal to the amount of such excess
from the time of demand with interest thereon at two (2 % per
cent over one month LIBOR from time to time for the particular
currency calculated from the date of demand until the date of
refund.
15.3 In the circumstances set out in Clause 15.2:
(i) Owner shall be entitled, in the event that it elects to
cancel this Contract pursuant to Clause 15.2(i) above, and no
refund is made in full by Builder within five (5) days of receipt of
Notice of such cancellation, to make demand under the Letter of
Credit and/or the Parent Company Guarantee, in Owner's sole
option; and
(ii) Owner shall be entitled, in the event that it elects to take
possession pursuant to Clause 15.2(ii), then or at any time
thereafter to make demand under the Letter of Credit for the full
amount thereof and to utilise the same for the purposes of
completing the Vessel (in accordance with the terms of this
Contract and the Specifications) and shall account to Builder
for any unutilised amounts following such completion, and/or to
make demand under the Parent Company Guarantee and to utilise all
sums from time to time received thereunder for the purposes of
completing the Vessel (in accordance with the terms of this
Contract and the Specifications).
15.4 Subject always to the provisions of Clause 15.2(ii), 15.3 and 15.5,
in the event of the cancellation, rescission or termination of this Contract
by the Owner, the property in the Vessel and all its materials, machinery
and equipment shall, following receipt by the Owner of the full amount of
all installments paid up to the date of such cancellation, rescission or
termination of the Contract and all other amounts payable by the Builder to
the Owner hereunder, be transferred to and vest in the Builder.
15.5 In the event that the Owner elects to take possession of the
Vessel pursuant to Clause 15.2(ii), the Builder shall assign (or procure
the assignment of) the Subcontracts, Supplier contracts and/or any rights
arising thereunder to the Owner and shall do and execute such
assurances, acts and documentation required or desirable for vesting the
Subcontracts and/or any rights arising thereunder in the Owner.
15.6 All items of Owner's Furnished Equipment not incorporated in
the Vessel shall be made available to Owner.
15.7 In the event that Owner elects to take possession of the
Vessel pursuant to Clause 15.2(ii), any sums due from Builder to Owner by
way of liquidated damages already incurred at the date of Notice shall be
set off against any remaining installments due from Owner to Builder.
15.8 Notice of cancellation by the Owner under Clause 15.2 as a result of
Builder's default with 15.1.2, 15.1.3, or 15.1.5 shall be given by
facsimile confirmed in writing and shall be effective fourteen (14) days
after receipt by the Builder unless the Builder shall have demonstrated
that it can speedily remedy the default, and is exercising the necessary
due diligence to do so. Any other Notice of cancellation under 15.2 shall
be effective forthwith upon service.
15.9 TERMINATION BY OWNER WITHOUT CAUSE. Notwithstanding any
other provision herein contained Owner may, at its sole discretion and without
cause, terminate the Contract at any time by giving written notice to Builder.
15.9.1 If Owner should elect to terminate the Contract pursuant
to Clause 15.9:
15.9.1.1 Builder, unless the notice directs otherwise, shall
cease performance of the work and shall perform only
such work as is necessary in order to preserve and
protect the permanent works, and shall, if at Builder's
Yard, store the same at Owner's risk and expense,
until such time as it is removed from Builder's Yard.
15.9.1.2 The Builder shall deliver and transfer to the Owner in
accordance with the Owner's instructions all materials,
supplies and other items for which Builder is entitled
to receive reimbursement according to the Contract,
together with all plans, drawings, specifications and
other documents which Owner is entitled to according to
the Contract.
15.9.1.3 Builder, shall, if requested by Owner, undertake all
reasonable endeavours to cancel any or all of its
outstanding orders or Subcontracts upon such terms as
may be approved by the Owner. When such terms are not
approved, or if Owner shall so request, Builder shall
assign such orders or Subcontracts to Owner and take
such actions as may be necessary in order to secure
for Owner the rights of Builder therein.
15.9.2 In the event of termination by Owner in accordance with
this Clause 15.9, Owner shall pay to Builder the following
amounts in full and final settlement of all amounts due under or
in any way arising from the amounts due under or in any way
arising from the Contract, less all amounts previously paid:
15.9.2.1 an amount, by way of termination fee, which is six
percent (6%) of the amounts in Clauses 15.9.2.2 and
15.9.2.3, respectively and below, but is not
less than United States Dollars Five Million
(US $5,000,000);
15.9.2.2 an amount for the cost and expenses incurred by the
Builder for materials and equipment being in conformity
with the Contract and which are ordered for
incorporation into the Work, together with all
direct costs for work performed up to the
date of the notice of termination hereunder,
inclusive of overhead recovery;
15.9.2.3 an amount for all other documented costs which the
Builder is legally obliged to pay Subcontractors or
Suppliers, or in respect of liabilities or
costs which Builder has undertaken in good faith in
connection with the work; and
15.9.2.4 an amount for all costs, charges and expenses directly
attributable to the orderly close out of the performance
of the Work, such as the cost incurred for personnel
in order to satisfy the requirements of law and labour
agreements.
15.9.3 The Owner shall, within fourteen (14) days of notice of
termination, at its cost and expense, remove the permanent
works or any part thereof from the Builder's Yard, but in no case
any longer than thirty (30) days. If any of Owner's property
remains in Builder's Yard longer than thirty (30) days from the
notice of termination under this Clause 15.9, and Owner and
Builder are unable to mutually agree on the disposition of
Owner's property, then Builder may remove, at Owner's expense,
all remaining Owner's property which obstructs Builder's
activities within Builder's Yard.
CLAUSE 16 - GUARANTEE
16.1 The Builder, for the whole of the Guarantee Period, guarantees the
Works against all defects which are due to defective design (to the
extent that Builder has responsibility for such design pursuant to
Clause 3), defective material, poor workmanship and/or the Works not having
been performed in accordance with this Contract. The Guarantee
Period shall be for a period of twelve (12) months from Delivery of the
Vessel provided alwaysthat, in respect of any repairs or replacements or
such additional works as are referred to in Clause 16.6, the Guarantee Period
shall be twelve (12) months after completion of such repairs, replacements
and additional works. The Guarantee Period shall not in any event exceed
twenty four (24) months in total from Delivery.
16.2 The Owner shall give Notice to the Builder confirmed in writing within
fourteen (14) days after discovery of any defect by any supervisory
personnel on board the Vessel for which a claim is made under this Clause 16.
The Owner's written Notice shall include full details as to the nature
of the defect and the extent of the damage caused thereby. The Builder
shall be freed from all liability under this Clause 16 for any defects
discovered prior to the expiry of the Guarantee Period, unless Notice
thereof is given by the Owner not later than fourteen (14) days after the
expiry of the Guarantee Period. The Builder shall have no liability in
respect of defects discovered after the expiry of the Guarantee Period.
16.3 Without prejudice to Clause 16.6, upon receipt of Notice under
Clause 16.2 the Builder shall be entitled to arrange for inspection of
the Vessel on its own behalf. The Owner shall make available to the
representatives of the Builder at such inspection the Vessel's
logbooks and any other relevant documents and information and shall
supply such certified copies of such log books, documents and information
as may reasonably be requested by the Builder.
16.4 If Builder needs to travel to the Vessel in connection with
Clause 16, Owner shall provide transportation between shore base and Vessel
for Builder's personnel and equipment, to the extent that Owner is able to
obtain same without cost to Owner.
16.5 The Builder shall have no liability for errors, omissions or defects
in the Works arising from inaccuracy of data provided by the Owner, or from
a third party acting on behalf of the Owner for the purposes of the Works,
unless the Builder shall have failed to use all reasonable endeavours to
discover detectable inaccuracies of said data.
16.6 The Builder shall remedy at its own expense any defect arising during
the Guarantee Period against which the Works are guaranteed under this
Contract and which is Notified by Owner to Builder in accordance with
Clause 16.2, by making all necessary repairs and replacements and by
performing such additional works as may be required to remedy such defect
(including without prejudice to the foregoing generality the provision
of such personnel as the parties may agree). Further, if the Owner deems
that it would be inconvenient to bring the Vessel back to the Builder's
Yard, Owner shall have the right to complete repair work at other shipyards
and Builder shall pay to Owner the actual cost to Owner of the repairs.
Builder shall have the right to be consulted prior to the commencement of
such repair work by another party, as to its extent and cost, provided that
Owner shall be entitled following notification and consultation to
effect such repairs by such other party whether or not the same are agreed
by Builder. If the repairs are carried out by a third party, the Builder
shall pay the cost of such repairs, but Builder shall not be liable for the
efficacy of the same.
16.7 The Builder shall obtain guarantees of not less than twelve (12) months
from Delivery orsuch longer period as Builder is able to obtain at no extra
cost from its Subcontractors or Suppliers.
16.8 The Builder shall hold the benefit of all warranties, guarantees,
liquidated damages clauses and other rights and remedies under contracts
entered into with Subcontractors and Suppliers in trust for and in accordance
with the Owner's instructions, and at the Owner's cost. At the end of
the Guarantee Period the Builder shall assign to the Owner the benefit of
any remaining Subcontractors' or Suppliers' guarantee(s), or warranties.
16.9 The guarantees and remedies contained in this Clause 16
concerning the defects which are covered by this Clause 16 are the sole and
exclusive guarantees and remedies in favor of the Owner concerning such
matters. All guarantees and remedies concerning such matters which
would otherwise be implied by law (whether under the Sale of Goods Act or
otherwise) and all remedies in tort, (including but not limited to
negligence), are expressly excluded. For the avoidance of doubt, this
Clause has no application to warranties concerning title or intellectual
property rights.
16.10 The Builder warrants that the Works will be delivered to the
Owner free and clear of any liens, charges, claims, mortgages, or other
encumbrances of whatever nature upon the Owner's title thereto, and in
particular, that the Works will be absolutely free of all burdens in the
nature of imposts, taxes or charges and the Builder shall indemnify the
Owner in respect of any liability arising as a consequence of the Builder's
breach of this sub-clause.
16.11 The Builder's guarantee does not extend to loss or damage or
expense to the extent arising from wear and tear, perils of the sea,
accident, negligence or misuse on the part of the Owner or any third party.
16.12 The Builder has the right to appoint or nominate on Delivery of the
Vessel upon terms and conditions to be agreed a competent guarantee engineer
acceptable to the Owner to sail with the Vessel as guarantee engineer during
the whole or any part of the Guarantee Period and, if the Owner has reason to
be dissatisfied with the guarantee engineer so appointed, shall from time to
time replace him by another competent guarantee engineer free of cost to
the Owner. The wages and expenses and repatriation expenses of the guarantee
engineer shall be paid by the Builder. The Owner and its employees shall give
such guarantee engineer full co-operation in carrying out his duties as the
Builder's representative on board the Vessel.
16.13 Notwithstanding the foregoing the Builder's Guarantee under
this Clause 16 shall be limited to the terms of guarantees provided to the
Builder by its Subcontractors or Suppliers in the case, where the Owner has
specifically negotiated the sub-contract or purchase order in question or
where the Owner has specifically requested a Subcontractor or Supplier not on
the Subcontractor's List or the Maker's List.
CLAUSE 17 - INDEMNITIES FOR INFORMATION SUPPLIED
17.1 The Builder shall indemnify the Owner from and against all claims of
third parties arising,by reason of the use by Owner or Owner Subcontractor
or Owner Supplier of any information supplied to Owner, Owner Subcontractors
or Owner Suppliers by Builder in connection with the performance of the
Works, and from all costs and expenses (including costs and expenses of
litigation) incurred by Owner by reason of such claim, except for
claims or liabilities arising in connection with any matter to which
Clause 17.2 applies.
17.2 The Owner shall indemnify the Builder from and against all
claims of third parties arising by reason of the use by the Builder of the
Specifications and of any document or information supplied to the Builder or
its Subcontractors by the Owner, Owner Subcontractors or Owner Suppliers in
connection with the design, construction and the building of the Vessel or
the construction or installation of the machinery or equipment
thereof or the provision of Owners Furnished Equipment and from all costs
and expense (including costs and expenses of litigation) incurred by the
Builder by reason of any such claim.
CLAUSE 18 - TAXES AND DUTIES, ETC
18.1 The Builder shall bear any taxes and duties applicable to
materials or equipment supplied by the Builder, its Subcontractors or
Suppliers.
18.2 The Owner shall bear any taxes and duties applicable to
materials or equipment supplied by the Owner, Owner Subcontractors and
Suppliers.
18.3 The Owner shall bear all other taxes, duties, commissions,
fees and expenses incurred in connection with this Contract, including
those incurred in arranging finance, mortgage facilities and registration
formalities.
CLAUSE 19 - HEALTH AND SAFETY ENVIRONMENT AND EMPLOYMENT
19.1 The Builder and Owner shall and shall cause their respective
Subcontractors and Suppliers while at the Builders Yard to observe and
comply with the Health and Safety provisions of Schedule Fourteen hereto.
19.2 In all circumstances compliance with local legislative requirements
and/or obligations shall take precedence over the requirements of Schedule
Fourteen hereto.
19.3 The Builder and Owner and their respective Subcontractors
shall comply with all laws, rules and regulations of Government having
jurisdiction over the area in which the Works are undertaken to the extent
that they are now, or may become applicable to them during the performance of
this Contract.
CLAUSE 20 - LAW AND ARBITRATION
20.1 This Contract shall be governed by and construed in accordance with
the Law of England.
20.2 Any dispute or difference touching or concerning this
Contract or arising thereof, other than disputes to be referred to an expert
by the provisions of this Contract shall be referred to the arbitration in
London (or such other place as may be agreed between the parties) of a
single arbitrator to be appointed by agreement between the parties or,
(failing agreement within 14 days after either party has given to the other a
written request to concur in the appointment of a single arbitrator) of three
arbitrators, one to be appointed by each party and an umpire chosen by the
two arbitrators so appointed. Any such reference shall be a submission to
arbitration in accordance with the Arbitration Act 1996 or any statutory
variation, modification or re-enactment thereof for the time being in force.
CLAUSE 21 - ASSIGNMENT OF CONTRACT
Except by the Owner to the ultimate parent company of Owner or an
associated company of the Owner, neither of the parties hereto shall be
entitled to assign or transfer any of its rights or duties hereunder
without prior Notice to, and the prior written consent of, the other who
shall not unreasonably withhold such consent. PROVIDED THAT in the event
of an assignment, except to the ultimate parent company of Owner, Owner
shall remain responsible for and guarantee the performance and observance of
the assigned obligations by any such associated company. For the purposes
of this Clause associated "company" means and includes any holding company,
whether direct or indirect, or any subsidiary, whether direct or indirect,
of the Owner or of such holding company, "holding company" and "subsidiary"
having the meanings assigned to these terms by Section 736 of the Companies
Act 1985.Any assignment permitted under this Clause shall be at the cost
of the Assignor.
CLAUSE 22 - NOTICES AND COMMUNICATIONS
22.1 Any Notice or Notification to be given hereunder to the
Owner shall be delivered to the Owner's Project Manager on site at the
Builder's Yard and :
Global Marine International Services Corporation c/o
McKinney, Bancroft & Hughes
Mareva House, 4 George Street
P.O. Box N. 3937
Nassau, Bahamas
Attention: President
With copies to:
Global Marine International Services Corporation c/o
Global Marine UK LimitedStandbrook House, 2/5 Old Bond Street
London, England W1X 4QH
Attention: F. L. Matthews, Vice President
and
Global Marine Drilling Company
777 N. Eldridge Parkway
Houston, Texas 77079
Attention: John A. Thorson, Manager Construction and Marine
Projects Facsimile Number: 281-596-5179
or such other person, address or facsimile number as the Owner
may from time to time by notice in writing to the Builder designate for
that purposes.
22.2 Any notice to be given hereunder to the Builder shall be
addressed to,
The Project Manager
Ship No: 1740
Harland and Wolff Shipbuilding and Heavy Industries Limited
Queen's Island
BELFAST
BT3 9DU
Northern Ireland
Facsimile:01232-458515
or such other person, address or facsimile number as the Builder
may from time to time by notice in writing to the Owner designate for that
purpose.
22.3 Any Notice or other document to be given or served hereunder
may be delivered by hand or sent by facsimile or posted by first-class mail
(for inland mail) or airmail (for overseas mail) prepaid post, addressed to
the address or facsimile number of the respective party as given in
Clause 22.1 and 22.2. Any such Notices or documents sent by post in the
manner specified above shall be deemed served two (for inland mail) or seven
(for overseas mail) business days after posting. Where a Notice or document
is transmitted by facsimile the document shall be deemed served when
transmitted by the sending party.
22.4 Except as may be required by applicable law, the Parties agree that
no public disclosures and/or press releases regarding the announcement of
this Contract shall be made without first obtaining the written consent
of the other.
CLAUSE 23 - WAIVER
Any waiver by or neglect or forbearance by either party to require or
enforce any of the provisions of this Contract at any time given by
either party shall not prejudice or affect any right of that party
afterwards, with regard to any other failure to comply with the provisions
of this Contract whether or not of a similar nature, to act strictly in
accordance with the provisions herein contained.
CLAUSE 24 - ENTIRE CONTRACT AND AMENDMENTS
This Contract constitutes the entire agreement of the Builder and
the Owner in relation to the construction and purchase of the Vessel and
neither any representation, warranty or statement made by or on behalf
of the Builder or the Owner prior to the date hereof shall affect the
terms of this Contract or the rights or duties of the Builder or the Owner
hereunder nor shall any modification of the terms of this Contract be of
any effect unless made in writing and signed by the Owner and the Builder
or their respective Authorized Representatives or Project Managers (in
case of Project Change Orders).
CLAUSE 25 - LIABILITY AND INDEMNIFICATION
25.1 As used in Clauses 25 and 26 of this Contract:
(a) "Owner Group" means the following persons and entities, individually
and collectively:
(i) Owner, its Parent, subsidiary, affiliated, associated
Companies;
(ii) Owner Subcontractors and Owner Suppliers and other parties
contracting with Owner (excepting Builder and Builder's Subcontractors);
(iii) The respective Officers, Directors, Employees, Agents, Owners,
Shareholders, Servants, Representatives and Insurers of each of the parties
set forth in Clauses 25.1 (a) (i) and 25.1 (a) (ii).
(b) "Builder Group" means the following persons and entities,
individually and collectively:
(i) Builder, its Parent, Subsidiary, Affiliated, Associated
Companies;
(ii) Builder's Subcontractors, Suppliers and other parties
contracting with Builder (excepting Owner); and
(iii) The respective Officers, Directors, Employees, Agents,
Owners, Shareholders, Servants, Representatives and Insurers of each of
the parties set forth in Clauses 25.1 (b) (i) and 25.1 (b) (ii).
25.2 Builder shall at all times be responsible for and shall release,
protect, indemnify, defend (including payment of reasonable attorney's
fees and costs of litigation) and hold Owner Group harmless from and
against any and all costs, losses, liabilities, claims, demands, causes
of action, damages, penalties, judgments and awards of every kind and
character, without limit and without regard to the cause or causes thereof
or the negligence or fault of any party or parties (including without
limitation the active, passive, concurrent or solely negligent acts or
omissions of any member of Owner Group) arising in connection herewith:
(a) In favour of the officers, directors, employees, agents, servants,
representatives or invitees of Builder Group on account of sickness,
bodily injury or death; and/or
(b) On account of damage to or loss of Builder Group equipment or
property; and/or
(c) From pollution or contamination occurring prior to Delivery
(including without limitation the control and/or removal thereof)
which originates from Builder's Yard or equipment, the equipment of
Builder's Subcontractors or materials under the control of Builder's
Subcontractors, including but not limited to fuels, lubricants,
motor oils, pipe dope, paints, solvents, garbage or debris.
(d) From the storage, transportation and/or disposal of any and
all waste generated during the performance of the Work by Builder or
Builder Group.
25.3 Owner shall at all times be responsible for and shall release,
protect, indemnify, defend (including payment of reasonable attorney's
fees and costs of litigation) and hold Builder Group harmless from
and against any and all costs, losses, liabilities, claims, demands,
causes of action, damages, judgments and of every kind and character,
without limit and without regard to the cause or causes thereof or
the negligence or fault of any party or parties (including without
limitation the active, passive, concurrent or solely negligent acts
or omissions of any member of Builder Group) arising in connection
herewith:
(a) In favor of the officers, directors, employees, agents, servants,
representatives or invitees of Owner Group on account of sickness,
bodily injury or death; and/or
(b) On account of damage to or loss of the equipment and/or property of
Owner Group, save for the Vessel and OFE in relation to which the
other provisions of this Contract shall apply; and/or
(c) From pollution or contamination arising from the Vessel
following Delivery.
25.4 Notwithstanding anything to the contrary, expressed or implied, in
this Contract, inclusive of any amendments or Project Change Orders, in tort
or otherwise at law, neither party shall be liable to the other for special,
indirect, or consequential damages including, without limitation, loss of
profits or business interruptions resulting from or arising out of this
Contract or the performance of any work or services, however same may be
caused including the negligence or fault of any party or parties and whether
or not within the contemplation of the parties before, after or on the date
of signature of this Contract.
25.5 Except as otherwise expressly limited in this Contract, it
is the express intention of the parties hereto that all indemnity
obligations and/or liabilities assumed by the parties under articles
25.2, 25.3 and 25.4 shall be without limit and without regard to the
cause or causes thereof, including, but not limited to, preexisting
conditions, whether such conditions be patent or latent; the unseaworthiness
of any vessel or vessels, whether or not the preexisting breach of
representation or warranty (express or implied); strict liability
and/or ruin or defective premises, equipment, facilities, or appurtenances
of any party under any code law or other type of strict liability,
whether or not preexisting, and/or is latent, patent or otherwise;
breach of contract; tort,breach of duty (statutory, contractual, common
law or otherwise)or the negligence or fault of any party or parties,
including, but not limited to, that of the indemnified parties, whether
such be sole, joint or concurrent, active or passive; or any other theory
of legal liability.
25.6 It is the express intention of the parties hereto that the provisions
of this Contract shall exclusively govern the allocation of risks and
liabilities of said parties, it being acknowledged that the agreement
reflected herein has been based upon such express understanding.
25.7 All persons or entities who are or who may become a person or entity
designated in Clause 25.1 (a) and (b), other than Owner and Builder,
shall be deemed to be third party beneficiaries of this Contract for
the purposes solely of enforcing an indemnity expressed to be for
their benefit.
25.8 The indemnifications set forth in this Contract shall apply to
all types of liabilities specifically covered by the indemnifications
whether such liabilities are incurred directly by the indemnitees or
indirectly through the operation of an indemnification agreement
with another party provided that the liability for which such
indemnification is sought, arose from or occurred as the result of
or incidental to the performance of the parties' obligations hereunder.
CLAUSE 26 - BENEFIT OF INDEMNITIES
26.1 The indemnities given by Builder to Owner or Owner Group
under Clause 25 are hereby agreed to be extended to and for the benefit of
Owner Group as defined in Clause 25.1(a).
26.2 The indemnities given by Owner to Builder or Builder Group
under Clause 25 are hereby agreed to be extended to and for the benefit of
Builder Group as defined in Clause 25.1(b).
26.3 Owner hereby agrees to the appointment of Builder as its agent and
trustee solely for the giving and receiving of the indemnities specified in
Clause 25.3, which agency is solely for the purpose of permitting the
indemnified party to make its claim against the indemnifying party and
all duties, liabilities and obligations which would otherwise be
imposed on or incurred by Owner by virtue of the agency are expressly
excluded.
26.4 Builder hereby agrees to the appointment of Owner as its
agent and trustee solely for the giving and receiving of the indemnities
specified in Clause 25.2, which agency is solely for the purpose of
permitting the indemnified party to make its claim against the
indemnifying party and all duties, liabilities and obligations which
would otherwise be imposed on or incurred by Builder by virtue of the
agency are expressly excluded.
IN WITNESS WHEREOF, this Contract has been executed by duly authorized
representatives of the Parties hereto in duplicate originals effective as
of the date and year first above written.
GLOBAL MARINE INTERNATIONAL SERVICES HARLAND AND WOLFF SHIPBUILDING D
CORPORATION AND HEAVY INDUSTRIES LIMITED
By: /s/ F. Luke Matthews By: /s/ Per M. Nielsen
F. L. Matthews Per M. Nielsen
Vice President Chief Executive
Officer
EXHIBIT 15.1
ACCOUNTANTS' AWARENESS LETTER
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re:Global Marine Inc. Registration Statements
We are aware that our report dated May 7, 1998, on our review of
the condensed consolidated interim financial information of
Global Marine Inc. and subsidiaries for the three months ended
March 31, 1998, and included in this Quarterly Report on Form
10-Q is incorporated by reference in (i) the prospectus
constituting part of the Company's Registration Statements on
Form S-8 (Registration Nos. 33-32088, 33-40961, and 33-63326),
respectively, for the Global Marine Inc. 1989 Stock Option and
Incentive Plan, (ii) the prospectus constituting part of the
Company's Registration Statement on Form S-8 (Registration No.
33-40266) for the Global Marine Savings Incentive Plan, (iii) the
prospectus constituting part of the Company's Registration
Statement on Form S-8 (Registration No. 33-40961) for the Global
Marine Inc. 1990 Non-Employee Director Stock Option Plan, (iv)
the prospectus constituting part of the Company's Registration
Statement on Form S-8 (Registration No. 33-57691) for the Global
Marine Inc. 1994 Non-Employee Stock Option and Incentive Plan and
(v) the prospectus constituting part of the Company's Registration
Statement on Form S-3 (Registration No. 33-58577)for the proposed
offering of up to $75,000,000 of debt securities, preferred stock
and/or common stock. Pursuant to Rule 436(c) under the Securities
Act of 1933, this report should not be considered a part of any of
said registration statements prepared or certified by us within
the meaning of Sections 7 and 11 of that Act.
/s/ Coopers & Lybrand L.L.P.
Houston, Texas
May 11, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated balance sheet of Global Marine Inc. and subsidiaries as
of 3-31-98 and the related condensed consolidated statement of operations for
the three months ended 3-31-98, and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 62,700
<SECURITIES> 1,700
<RECEIVABLES> 173,800
<ALLOWANCES> 3,500
<INVENTORY> 0
<CURRENT-ASSETS> 361,300
<PP&E> 1,600,900
<DEPRECIATION> 323,900
<TOTAL-ASSETS> 1,738,300
<CURRENT-LIABILITIES> 285,600
<BONDS> 299,400
0
0
<COMMON> 17,300
<OTHER-SE> 863,200
<TOTAL-LIABILITY-AND-EQUITY> 1,738,300
<SALES> 1,200
<TOTAL-REVENUES> 275,100
<CGS> 900
<TOTAL-COSTS> 179,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,400
<INCOME-PRETAX> 88,400
<INCOME-TAX> 20,200
<INCOME-CONTINUING> 68,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 68,200
<EPS-PRIMARY> 0.40
<EPS-DILUTED> 0.39
</TABLE>
