Exhibit 10.1

FABRICATION CONTRACT

This Fabrication Contract, together with all exhibits hereto, is made and
entered into by and between Helmerich & Payne International Drilling Co., a
Delaware corporation (hereinafter referred to as “H&P”) and Southeast Texas
Industries, Inc., a Texas corporation (hereinafter referred to as “Fabricator”)
effective this 1st day of December, 2006.

It is agreed as follows:

1.             CONTRACT.  This document, and the documents referred to herein,
which are incorporated herein by reference, including all the documents
contained in H&P’s fabrication specifications which are attached hereto as Annex
1 (as said documents may have been revised for the purposes of this contract),
and all of the Exhibits attached hereto, and the drawings identified in Annex 1
shall constitute the entire contract (hereinafter referred to as the “Contract”)
between the parties with regard to the fabrication and delivery of the work
described herein by Fabricator.

2.             DESCRIPTION OF THE WORK.  Subject to the provisions of Paragraphs
12 and 18 hereof, the work to be performed by Fabricator is described in Annex 1
(the “Work”).  Wherever reference is made herein to the “Work,” such reference
shall be to all or any portion of the Work as applicable under the
circumstances.

Fabricator shall at its sole risk, cost and expense furnish all the labor,
equipment, supplies and materials, except such equipment, supplies, materials
and labor which under the express provisions of the Contract is to be furnished
by H&P, to construct and fabricate the Work, together with accessories, and
auxiliary parts and/or components at Fabricator’s yard facilities located in
Bridge City, Buna, Orange,

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Nederland and Vidor, Texas, and shall construct and fabricate the same in
accordance with the Contract and the plans and specifications identified in
Annex 1.

3.             IDENTIFICATION OF THE CONTRACT.  The Work includes certain
equipment and materials which are to be furnished by H&P, and it is the intent
of this Contract that title to said equipment shall remain at all times in H&P
and that title to the Work and the materials, equipment, parts, and supplies
furnished by Fabricator shall also pass to H&P, as the same are identified to
the Contract.

With respect to the materials, equipment, parts, and supplies furnished by
Fabricator, the same shall be identified to the Contract in the following
manner.  At such time in the process of fabrication of the Work as any
materials, equipment, parts, and supplies to be consumed in fabrication of, to
become a part of, or to be incorporated into the Work reach the Fabricator’s
yard facilities, identification to the Contract of such materials, equipment,
parts, and supplies will have occurred.

During the period from the time any materials, equipment, parts, or supplies
have become identified to the Contract as aforesaid until such time as the Work
is completed and delivered to H&P, such materials, equipment, parts, and
supplies shall remain, to the extent possible, segregated in an area reserved
for H&P in each of Fabricator’s yards (“H&P Area”) and, to the extent possible,
shall not be removed to any other part of Fabricator’s facilities or elsewhere,
or commingled with any materials, equipment, parts, supplies, or other items not
belonging to H&P.  During said period, the H&P Area in each of Fabricator’s
yards shall be used, to the extent possible, exclusively for the storage and the
fabrication of the Work.

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If through the use of reasonable efforts Fabricator is unable to perform all the
Work within the H&P Area, then Fabricator shall remove to other areas of
Fabricator’s yard(s) only those materials, equipment, parts and supplies
necessary to perform such portion of the Work.  In such event, Fabricator shall
not, to the extent possible, commingle outside of the H&P Area any materials,
equipment, parts and supplies which have been identified to the Contract with
any property of Fabricator or third parties.

Fabricator, before bringing any materials, equipment, parts, or supplies into
the H&P Area, shall, to the extent possible, partition off said Area into which
such materials, equipment, parts, or supplies are to be kept from the remainder
of Fabricator’s facilities and shall post conspicuous, legible signs,
satisfactory to H&P, indicating that all such materials, equipment, parts, and
supplies are the property of H&P and are not to be removed from such H&P Area,
and further indicating that any materials, equipment, parts, or supplies other
than those to be consumed by, be incorporated into, or become a part of H&P’s
Work are not to be brought into such Area.

All materials, equipment, parts, and supplies identified to the Contract shall
be labeled and identified by metal tags, metal plates, or metal bands, where
appropriate (and by stenciling or otherwise marking where inappropriate),
bearing the inscription “Helmerich & Payne International Drilling Co.,” or “Rig
Number” as H&P may direct.  H&P shall at all times have the right to inspect
Fabricator’s identification process and procedure.

With respect to any equipment, materials, parts, or supplies furnished by H&P to
Fabricator, the same shall immediately be placed in the H&P Area and shall be
subject

 

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to the same provisions hereinabove set forth with respect to equipment, parts,
materials, and supplies furnished by Fabricator.

4.             REPRESENTATIONS AND RESPONSIBILITIES OF FABRICATOR.

Fabricator represents and undertakes that:

A.            It has the required skills and capacity to perform, and shall
perform the Work in the best professional manner using state of art techniques
and sound procurement, construction, project management, and supervisory
practice, all in accordance with the requirements of this Contract and with the
highest standards of workmanship for similar kinds of work in the petroleum
industry;

B.            It shall execute the Work continuously and diligently with all due
care and using qualified and competent personnel and shall execute and complete
the Work in accordance with the highest standard of workmanship for similar
kinds of work in the petroleum industry and in strict accordance with the
provisions of this Contract and the plans and specifications identified in Annex
1;

C.            It shall obtain all authorizations, permits and licenses necessary
for the performance of the Work;

D.            It shall perform the Work in compliance with all applicable laws
and regulations that are in effect on the effective date of this Contract and
that have become effective during the performance of the  Work;

E.             It is responsible for safety during the performance of the Work
and shall provide all reasonable and necessary safeguards to ensure the safety
and

 

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protection of Fabricator’s facilities and of all persons and other property
associated with the Work;

F.             It shall arrange for complete handling of all materials,
equipment and other items required for the performance of the Work, including
inspection expediting, shipping, unloading, receiving, temporary storage,
customs clearance and claims, except as may otherwise may be expressly provided
in this Contract;

G.            It shall remove or replace or have removed or replaced any
personnel performing the Work that H&P requests Fabricator to remove or replace,
and H&P shall not unreasonably make any such requests;

H.            It shall use effective quality assurance programs in performing
the Work which shall comply with all codes and practices applicable to the Work
or as may be specified by H&P.  H&P has the right, at any time, to review and
accept or reject such quality assurance programs;

I.              Fabricator shall comply with all immigration laws of the United
States, and it represents to H&P that all Fabricator’s employees or agents
assigned to perform the Work under this Contract who are not United States
citizens are legally entitled to perform the Work;

J.             All the representations of Fabricator and of its subcontractors
required in this Contract are material and will survive the completion of the
Work or termination of this Contract for a period of one (1) year.

 

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5.             PAYMENT.

A.            As full compensation for the Work, H&P shall pay to Fabricator the
Contract Price made up of the Time and Material Rates set forth in Exhibit A. 
The Time and Material Rates shall include all actual and documented costs,
profit, taxes, duties, expenses and charges associated directly or indirectly
with performing the Work and the cost of purchasing services related to any
operating and commissioning supplies, spare parts, storehouse stocks,
maintenance tools and any other items which H&P requests Fabricator to purchase
on a Time and Material Rate basis.

B.            Fabricator shall not be entitled to any payment on account of any
materials, equipment, parts, or supplies that have not become identified to the
Contract, and Fabricator shall not be entitled to any payment on account of any
labor performed as to materials, equipment, parts, or supplies in which such
labor was performed and have not become identified to the Contract.

C.            On the fourth working day of each week after the Effective Date,
Fabricator shall submit to H&P Time and Material invoices earned and/or expended
by Fabricator for the previous week.  Separate Time and Materials invoices shall
be prepared for each rig number and will provide subtotals for the following
categories:

·                  STI Direct Labor Charges

·                  Sub-Contract Fabrication Labor Charges

·                  Material Charges

·                  Machine Shop Charges

·                  Paint Sub-Contractor Charges

·                  Other 3rd Party Charges on a Per Party Basis

·                  Freight Charges

 

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Supporting documentation shall be provided for payments shown to be due in each
invoice based on the actual number of labor hours expended and the actual
expenditures for materials and 3rd party charges.

If, in H&P’s opinion, the actual number of labor hours expended or the actual
expenditures for materials varies at any time from the amounts stated for the
corresponding invoice period, H&P may dispute Fabricator’s invoice.

D.            Within 10 days of H&P’s receipt of an invoice submitted in
accordance with this Paragraph 5, H&P shall pay to Fabricator all amounts shown
on that invoice that are properly owing and due to Fabricator less:

(i)             all amounts of credits then owing to H&P;

(ii)            any previous payments on account made by H&P;

(iii)           any statutory retention required by an applicable lien statute
or any amount claimed by any person under that statute of which H&P has notice
or both;

(iv)          any amount which H&P has notified Fabricator is an amount in
dispute; and

(v)           any withholding amount required to be withheld by any governmental
authority or applicable law.

All invoices submitted to H&P by Fabricator shall be sent to H&P as required by
Paragraph 16 of this Contract.

E.             As to any disputed invoices, or portions thereof, the parties
agree to mediate same, not less than monthly, in an attempt to resolve same
without

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third party intervention.  In the event disputed invoices, not resolved through
mediation, exceed $250,000.00 in the aggregate, the parties agree to submit same
to third party mediation in Harris or Jefferson County, Texas, with mediation to
be scheduled within sixty (60) days of notice from Fabricator that unresolved
disputed invoices (or portions thereof) exceed $250,000.00 in the aggregate. 
The parties will jointly select the third party mediator, who will serve as
mediator for all disputes under this Paragraph 5E.  To the extent disputed
invoices are not resolved through assisted third party mediation, all rights of
the parties under applicable law shall be reserved to be pursued by the parties
as they see fit and the parties shall have no obligation to mediate such dispute
under Paragraph 21B of this Contract.

F.             Pursuant to mutual written agreement of the parties hereto, this
Contract may be amended to provide that certain portions of the Work will be
performed on fixed price basis.  In such event, the parties shall agree to
delivery dates for completion of each phase of the Work and liquidated damages
for late delivery.

6.             PROPRIETARY INFORMATION.  All drawings, designs, computer models
and other information pertaining to the Work (and the rig to which the Work
relates) including without limitation all information which Fabricator, directly
or indirectly, has acquired or acquires from H&P or its affiliates concerning
the technical and business activities and know-how of H&P or its affiliates,
(“Proprietary Information”) shall be, and remain, the property of H&P. 
Fabricator shall not duplicate said drawings, designs,

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computer models or other Proprietary Information, except as required for
completion of the Work.  Upon completion of the Work, Fabricator shall (i)
remove from its computer system(s) and destroy all electronic images or
information directly or indirectly relating to the design or engineering of the
Work; (ii) deliver to H&P all drawings, designs, diagrams, sepias, computer
models, and other Proprietary Information and all copies of the same, except one
copy of the “as builts” which shall be retained by Fabricator for its files to
be used solely in connection with its warranty hereunder; and (iii) provide to
H&P one set of original “as built” red-line plans covering the Work.  Each such
drawing or diagram retained by Fabricator shall be clearly marked as the
“Property of Helmerich & Payne International Drilling Co.” and shall bear the
legend: “Any use of this drawing or diagram other than with the express consent
of Helmerich & Payne International Drilling Co. is strictly prohibited and
unlawful.”  Fabricator shall not furnish to any third party, without H&P’s
consent, any copy (whether in paper form or electronic form) of any drawing,
design, diagram, sepia or other Proprietary Information prepared as a part of
the Work.  Fabricator shall immediately notify H&P of any design defect or
defects in the specifications and or fabrication, should Fabricator become aware
of the same.

7.             COMPLETION, DELIVERY AND ACCEPTANCE.  Fabricator shall
continuously and diligently complete each portion of the Work and tender
delivery of each portion of the Work to H&P by written notice.

The Work shall not be tendered for delivery to H&P unless:

A.            The Work has been fully completed and constructed in strict
accordance with the plans and specifications heretofore identified (and

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subsequent modifications, if any, made in accordance with the terms of the
Contract); and

B.            The inspections and tests referred to in Paragraph 13 hereof have
been completed to the reasonable satisfaction of H&P, having regard to the plans
and specifications heretofore identified and subsequent modifications, if any,
made in accordance with the terms of the Contract.

H&P shall be deemed to have accepted Fabricator’s written tender of delivery
unless it notifies Fabricator of its rejection of such tender (together with the
reasons therefor) within two (2) business days of H&P’s receipt of Fabricator’s
written tender-of-delivery notice.  Acceptance of the Work shall transfer to H&P
risk of loss.

8.             DELAY.  Fabricator shall not be deemed in default of the
performance of any of its obligations for any delay in the delivery of any
portion of the Work to the extent that such delay is caused by any of the
following occurrences:

A.            Delay caused by change orders as defined in Paragraph 12, provided
that at the time of submission of such change order to H&P, Fabricator has
advised H&P in writing of the probable delay arising from such request and H&P
has agreed to such delay and authorized in writing the requested change to
proceed;

B.            Delay caused by the late delivery of any equipment or parts to be
supplied by H&P;

C.            Delay caused by late delivery of an item of equipment or parts of
the Work to be supplied by Fabricator, only in those cases where (i) H&P has

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requested in writing that such item of equipment or part be supplied by a
particular named third party supplier, other than the supplier specified in
H&P’s fabrication specifications and (ii) Fabricator has notified H&P in writing
not more than three (3) days after receipt of such request that there is good
reason to believe that delivery of the item by the supplier will cause delivery
of the Work to be delayed (in which notice Fabricator shall have set forth the
factual basis for such belief and the time within which the item of equipment
must be received by Fabricator if delivery of the Rig is not to be delayed), and
unless H&P within two (2) days from the date of receipt of such notice, either
names an alternate supplier from whom the item may be purchased or itself
assumes responsibility for ordering the item and obtaining delivery within the
time set forth in such notice;

D.            If any performance of Fabricator under this Contract is prevented,
hindered, delayed or otherwise made impracticable or burdensome by reason of any
of the following events

(a)             Acts of God,

(b)            Riots,

(c)             Fires, or

(d)            Floods,

Fabricator shall be excused from performance to the extent that such performance
is necessarily prevented, hindered, delayed or otherwise made impracticable by
the foregoing event(s) (a) through (d).  Performance of any

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obligation excused under this paragraph shall be resumed as soon as reasonably
practical after the event ceases.

9.             ALLOCATION OF RISK AND INDEMNITIES.

A.            With respect to any loss or damage to property (other than loss or
damage to (i) the Work or damage to property either belonging to or furnished by
H&P and to be incorporated in the Work and (ii) the property described in
Paragraphs C and D of this Paragraph 9) occurring at the facilities of
Fabricator and during the performance of the Contract it is agreed as follows:

(1)          Fabricator agrees to protect, indemnify, defend and hold H&P and
H&P’s parent and affiliates and underwriters and their respective officers,
directors, employees, contractors, and agents free and harmless from and against
any and all losses, costs, claims, causes of action and liabilities (including
without limitation court costs and attorneys’ fees) arising in favor of
Fabricator, Fabricator’s parent and affiliates and underwriters, and/or their
respective employees, agents, principals, officers, directors, invitees,
subcontractors (or their servants) or representatives, or any survivor of any of
the foregoing on account of loss or damage to any property of any of such
persons arising out of, resulting from or relating in any way to the Contract or
activities or omissions in connection therewith, regardless of whether H&P
and/or its parent, affiliates, and/or others may have been wholly, partially or
solely negligent

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or otherwise at fault or any defect in premises, goods, equipment, or materials,
irrespective of whether same preexisted the Contract.

(2)            H&P agrees to protect, indemnify, defend and hold Fabricator and
Fabricator’s affiliates and underwriters free and harmless from and against any
and all losses, costs, claims, causes of action and liabilities (including
without limitation court costs and attorneys’ fees) arising in favor of H&P
and/or its officers, employees, agents, principals, affiliates, invitees,
subcontractors (or their servants) or representatives on account of loss or
damage to any property of any such persons arising out of, resulting from or
relating in any way to the Contract or activities or omissions in connection
therewith, regardless of whether Fabricator and/or its affiliates and/or others
may have been wholly, partially or solely negligent or otherwise at fault or any
defect in premises, goods, equipment, or materials, irrespective of whether same
preexisted the Contract.

B.            With respect to bodily injuries or death resulting from
occurrences at the facilities of Fabricator during performance of the Contract
is agreed as follows:

(1)            Fabricator agrees to protect, indemnify, defend and hold H&P and
H&P’s parent, affiliates, and underwriters and their respective officers,
directors, employees, contractors, and agents free and harmless from and against
any and all losses, costs, claims, causes of action and

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liabilities (including without limitation court costs and attorneys’ fees)
arising in favor of Fabricator, Fabricator’s parent and affiliates and
underwriters, and/or their respective employees, agents, principals, officers,
directors, invitees, subcontractors (or their servants) or representatives, or
any survivor of any of the foregoing on account of injury to or death of any
such persons arising out of, resulting from or relating in any way to the
Contract or activities or omissions in connection therewith, regardless of
whether H&P and/or its parent, affiliates, and/or others may be wholly,
partially or solely negligent or otherwise at fault, or any defect in goods,
equipment, or materials, irrespective of whether same preexisted the Contract.

(2)            H&P agrees to protect, indemnify, defend and hold Fabricator and
Fabricator’s affiliates and underwriters free and harmless from and against any
and all losses, costs, claims, causes of action and liabilities (including
without limitation, court costs and attorney fees) arising in favor of H&P
and/or any of H&P’s employees, agents, principals, officers, affiliates,
invitees, subcontractors (other than Fabricator) or representatives, or any
survivor of any of the foregoing, on account of injury to or death of any such
persons arising out of, resulting from or relating in any way to the Contract or
activities or omissions in connection therewith, regardless of whether
Fabricator and/or its affiliates and/or others may be wholly, partially or
solely negligent or otherwise at fault, or

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any defect in premises, goods, equipment, or materials, irrespective of whether
same preexisted the Contract.

C.            All machinery, tools, material, and equipment furnished by H&P or
otherwise identified to the Contract and not incorporated into the Work shall,
at the completion or abandonment of the Work, be returned or incorporated in the
Work and delivered to H&P in as good condition as when received by Fabricator. 
Fabricator, except for reasonable wear occasioned by use in performance of the
Work hereunder, shall be liable to H&P for any loss or damage to such machinery,
tools, material and equipment provided that Fabricator’s liability to compensate
H&P shall not exceed the amount of Fabricator’s insurance as specified herein.

D.            Fabricator shall examine visually all equipment, machinery, tools,
and or other items furnished by H&P and if any defects are found therein,
sufficient to make the use of any such items unsuitable or unsafe, Fabricator
shall immediately notify H&P of such defect or defects and H&P shall replace the
defective items.  Should Fabricator fail to make such examination or fail to
report a defect or defects in such an item or items, Fabricator shall be deemed
to have assumed all risks and all liability for any mishap which may occur by
reason of failure or defects in such equipment, machinery, tools, or other items
except for failure due to latent defects that could not be ascertained from a
visual inspection.  Fabricator shall have the right to insist on an inspection
of any such equipment, materials and or other items by H&P’s representative
before

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accepting the same or incorporating it in the Work, on notification to H&P’s
representative of the arrival of the same.

10.           INSURANCE.  At all times during the performance of Work hereunder,
Fabricator agrees to carry and maintain in force at least the following types of
insurance:

A.            Workmen’s Compensation Insurance in accordance with the laws of
the appropriate state and federal jurisdiction in which the Work is to be
performed.  This coverage shall contain the following special endorsements:

(1)            Employer’s Liability coverage with limits of not less than
$1,000,000 per accident.

(2)            U.S. Longshoremen and Harbor Workers’ Act coverage and Outer
Continental Shelf Lands Act coverage, if applicable to the Work.

(3)            Employers’ Liability arising out of Maritime operations including
coverage for benefits and damages under the Jones Act with limits of $1,000,000
per accident.

(4)            “Borrowed Servant” endorsement providing that a Worker’s
Compensation claim brought against H&P by a Fabricator employee will be treated
as a claim against Fabricator.

(5)            “In rem” endorsement providing that a claim “in rem” shall be
treated as a claim against Fabricator.

 

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B.            Comprehensive General Liability Insurance, including contractual
liability with combined single limits of $1,000,000 for injuries to or death of
persons and damage to property per occurrence.

C.            Automobile Liability Insurance for liability arising out of all
owned, non-owned and hired vehicles with combined single limits of $1,000,000
for injuries to or death of persons and damage to property per occurrence.

D.            In the event watercraft are used by Fabricator, Fabricator shall
carry or require owners of such watercraft to carry Protection and Indemnity
Insurance in an amount of not less than the market value of the vessel or
$1,000,000, whichever is greater, with Charterer’s Limitation Clause deleted.

E.             Excess Liability coverage with limits of Five Million and no/100
Dollars ($5,000,000) excess of all primary liability coverage.

Fabricator’s insurance described herein shall be endorsed to provide that the
underwriters waive their right of subrogation against H&P and its insurer,
parent, subsidiaries affiliated companies, co-venturers and their respective
employees and agents, in respect of the risks assumed by Fabricator hereunder. 
H&P will, as well, cause its insurers to waive subrogation against Fabricator in
respect of the risks assumed by H&P hereunder.  All policies of insurance
provided by Fabricator shall be carried with insurance companies which are
satisfactory to H&P, and such policies and shall be primary as to any other
valid and collectible insurance which may be carried by H&P in respect of the
risks assumed by Fabricator hereunder.  Fabricator shall cause H&P, its parent,
and

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their respective agents, employees and affiliates to be named as additional
insured on all of said policies except those in Section A above.

H&P and Fabricator hereby waive the right to subrogate against each other.

Prior to the commencement of the Work, Fabricator or any of its subcontractors,
will provide H&P with Certificates of Insurance evidencing that Fabricator or
its subcontractors are in compliance with all of the above requirements.  Said
Certificate will provide that H&P will be given thirty (30) days’ prior notice
of cancellation or material alteration of any of the insurance policies
specified in the Certificate.  Upon request, Fabricator shall permit H&P to
examine any of the insurance policies specified herein.  Fabricator shall
require its subcontractors to obtain, maintain and keep in force during the time
in which they are engaged in performing any Work hereunder insurance coverage
acceptable to Fabricator and furnish Fabricator acceptable evidence of such
insurance.  Fabricator shall require all insurance policies carried by
subcontractors to contain endorsements waiving insurers’ rights of subrogation
against H&P and its insurers, parent, subsidiaries, affiliated companies,
co-venturers and their respective employees and agents.

11.           PATENT INDEMNITY.  Fabricator agrees to indemnify and hold
harmless H&P against claims of third persons for damage sustained by reason of
the infringement of patent rights with respect to materials, processes,
machinery or equipment selected and used by Fabricator in performing its Work;
and H&P agrees to

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indemnify and hold Fabricator harmless against claims of third persons for
damages sustained by reason of infringement of patent rights with respect to
materials, processes, machinery or equipment supplied or selected or
specifically required by H&P or other party on behalf of H&P and against claims
arising out of any plans or drawings provided to Fabricator by H&P, provided,
however, that the indemnitee shall notify the indemnitor of the filing of any
suit so as to permit the timely filing of an answer thereto, and upon such
notice the indemnitor shall have the obligation to assume the full defense as
such suit with attorneys of the indemnitor’s selection and shall have the right
to settle such suit in the indemnitee’s name, and further provided that the
indemnitee will fully cooperate with the indemnitor in the defense of such suit.

12.           CHANGES IN WORK AND CHANGE ORDERS.

A.            H&P retains the right at any time to (i) make changes to all or
any portion of the Work, (ii) change the sequence of Fabricator’s performance or
delivery of any portion of the Work, and (iii) eliminate any portion of the Work
from this Contract and transfer such Work to other fabricators.  Fabricator will
immediately notify H&P if a proposed change in all or any portion of the Work or
in the delivery sequence of such Work will potentially delay the scheduled
delivery of such Work.

B.            In the event that this Contract is amended to provide that all or
a portion of the Work will be performed on a fixed price basis, then any change
to such fixed price work must be initiated by change order as provided in this
Paragraph 12B.  For work performed on a fixed price basis, a change order will

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be defined as: “A change in the construction or fabrication effort beyond the
original scope of the Work which increases or decreases Fabricator’s expense.” 
Fabricator will submit in writing to H&P a change order (together with
supporting sketches, drawings and instructions reasonably describing the change
order), which shall specify the increase (or decrease) in cost associated with
the “change” within such time as is reasonable and will not result in delays. 
H&P will approve or reject said change order within a seventy-two (72) hour
period.  Should the “Change” decrease Fabricator’s expense, Fabricator will
submit to H&P in a change order the cost decrease including prorated profit
associated with the “change.”  In the event that H&P and Fabricator cannot agree
upon the extra cost or cost savings of such change, then at the option of H&P,
to be exercised within said seventy-two (72) hour period, the change or addition
will be performed (or the decrease will be calculated) on a time and material
basis having regard to industry standards and practices and at labor rates and
material rates as set forth in Exhibit A.   H&P will not be required to grant,
nor will it consider, requests for increased compensation due to “changes”
unless its authorized representative at the site has signed the change order
either approving Fabricator’s specified increased cost, or has signed the same
approving the change on a time and material basis, in advance of the performance
of the Work incorporating the change.  With regard to time and material change
orders, all personnel time cards and equipment charge sheets shall be submitted
to H&P for approval within forty-eight (48) hours of labor being

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performed or equipment being used.  In the event such time cards or charge
sheets are not submitted to H&P within such forty-eight (48) hour period, then
H&P shall have no obligation to pay Fabricator for such costs.

Notwithstanding anything to the contrary in this Paragraph 12B, Fabricator must
provide H&P with an invoice for each approved time and materials change order
within thirty (30) days of the completion of the work attributable to each such
change order.  The invoice amount shall not exceed the total aggregate amount of
H&P-approved personnel time cards and equipment charge sheets.  If Fabricator
fails to provide such invoice within such thirty (30) day period, then
Fabricator shall have waived the right to receive all compensation attributable
to such time and materials change order.

If such changes or additions involve a change in the delivery date, H&P and
Fabricator shall mutually agree in writing in the change order of the amount of
time that the delivery date will be extended.  Extensions of time due to changes
increasing the time to do the Work shall be subject to offset by any changes
reducing the time.  Unless Fabricator requests such an extension of time in the
written change order prior to proceeding with the change, it shall not be
entitled to any extension of time, irrespective of cause.  If the parties are
unable to agree to an extension of time, then at H&P’s option (i) the change in
the Work will be performed without prejudice to the claim of either party on the
issue of extension of time, but such change shall not proceed without the
express written election of H&P to proceed or (ii) H&P shall furnish, at H&P’s

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cost, sufficient non-Fabricator personnel to perform such change order work and
no surcharge or other fee shall be charged by Fabricator with regard to such
work.

H&P may from time to time require Fabricator to make reasonable studies,
proposals, or estimates related to the Work described herein or related to the
functioning of the Work.  Fabricator will furnish the same to H&P within a
reasonable period of time.

No waiver by H&P of any of the change order provisions described in this
Paragraph 12B for any particular change order shall constitute a waiver of H&P’s
rights to enforce the change order provisions with regard to all other change
orders.  In addition, no failure on the part of H&P to exercise and no delay in
exercising and no course of dealing with respect to any right, power or
privilege under this Paragraph 12B shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, power or privilege thereunder
preclude any other or further exercise thereof or exercise of any other right,
power or privilege under this Paragraph 12B.

13.           INSPECTION AND TESTS.  During fabrication, tests and trials, H&P
or its accredited representatives shall have access to inspect the Work at all
reasonable times.  H&P shall bear the costs involved in such access and
inspection but shall not be required to compensate Fabricator for reasonable use
of Fabricator’s facilities in connection therewith.  Fabricator will perform all
of the tests and trials required of Fabricator in any of the contract documents,
and shall give H&P at least one (1) days

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written notice or facsimile notice of the date thereof on all major equipment. 
This shall be coordinated with H&P’s on-site DNV representative.

All of the workmanship and material required under this Contract, while the same
is in the process of fabrication, erection, construction, installation, and
performance, shall be inspected promptly by H&P’s representative, who shall be
given adequate notice by Fabricator before the material or workmanship is
covered, concealed or obscured, and who shall promptly accept or reject the same
in accordance with the Contract and the plans and specifications.  All
workmanship and operational practices of Fabricator shall be in accordance with
the highest standards of workmanship for similar kinds of work in the petroleum
industry, and all material, machinery and equipment supplied by Fabricator and
incorporated in the Work shall be in accordance with the Contract.

14.           WARRANTIES.

A.            With respect to any and all equipment obtained from third parties
by Fabricator and incorporated in the Work, Fabricator hereby transfers to H&P,
to whatever extent Fabricator can legally do so, all warranties and guarantees
made by the manufacturers thereon and Fabricator’s vendors and suppliers
thereof, and such transfers (to be evidenced by additional instruments that H&P
may reasonably require) shall constitute full performance by Fabricator of
Fabricator’s obligations with regard to such equipment, all other responsibility
and any warranty on the part of Fabricator in connection therewith being
expressly excluded and negated.  Fabricator will use all reasonable efforts and

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will cooperate with H&P in order to enforce any claims against manufacturer’s
defects or under warranties that may occur.  Notwithstanding the foregoing,
Fabricator warrants that the Work will be fabricated and completed in strict
accordance with the Contract.

Fabricator shall obtain a one-year transferable written warranty which shall
warrant that all steel included in the Work shall be free of defects.  Such
warranty shall be fully transferable to H&P without cost to H&P.

B.            Fabricator will be responsible for (i) faulty or defective
material or workmanship, and (ii) all materials, equipment and workmanship that
does not meet the specifications described in this Contract (including Annex 1
attached hereto) and furnished by Fabricator or its subcontractors or
representatives (but subject to the exclusions and limitations of Fabricator’s
responsibility set forth in Paragraph A above).  Fabricator will warrant the
items described in 14B(i) and (ii) for a period of 360 days from the date that
the Work is accepted by H&P.  In the event that written notice to Fabricator of
a claim against the warranties specified in this Paragraph 14B is sent within
such 360-day period, then such notice shall constitute the proper filing of a
warranty claim by H&P.  Fabricator reserves the right to inspect and verify the
nature of the warranty claim at its sole cost and expense, before any action is
taken.  Such verification shall be undertaken within seventy-two (72) hours of
receipt of such claim.  H&P’s commitment to a seventy-two (72) hour delay is,
however, subject to such delay not prejudicing H&P in its contractual
relationship with and obligations to the Operator of the rig.

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H&P may require Fabricator to make repairs or replacements at the rig location
where the Work is located.

If, in H&P’s judgment, the repairs cannot be reasonably effected at said rig
location, then Fabricator will make repairs or replacements (as may be
appropriate) at one of its yard facilities located at Buna, Bridge City, Orange,
Nederland or Vidor, Texas, with the expense of transporting the Rig and/or rig
components to or from said yard to be borne by H&P.

H&P may have such repairs or replacements made elsewhere if H&P deems necessary,
but shall consult in advance with Fabricator before making the same, and
Fabricator shall pay the cost of such repairs or replacements no later than 15
days from the date of H&P’s invoice therefore.  Fabricator shall have no
responsibility whatsoever with respect to any defective or faulty workmanship
not reported in writing to Fabricator within said three hundred sixty (360) day
period; deficiencies reported after said three hundred sixty (360) day period
shall be the exclusive responsibility of H&P.

Fabricator makes no warranties or representations whatsoever other than those
expressly set forth in this Contract, and any other warranties, which might
otherwise be implied, are hereby expressly excluded and negated.

15.           TAXES AND PERMITS.  Fabricator agrees to pay all taxes, licenses,
and fees levied or assessed in connection with or incident to, the performance
of this Contract by the state in which the Work is to be performed or by the
federal government for unemployment compensation insurance, old age benefits,
social security, or any other taxes upon wages of Fabricator, its agents,
employees, and representatives.

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Fabricator agrees to reimburse H&P on demand for all such taxes or government
charges, state or federal, which H&P may be required or deem it necessary to pay
on account of employees of Fabricator or any subcontractor and to furnish H&P
with the information required to make necessary reports and to pay such taxes or
charges, and at its election, H&P is authorized to deduct all sums so paid for
taxes and governmental charges from such amounts as may be or become due or
owing to Fabricator hereunder.

Fabricator agrees to be responsible for the acquisition of all necessary permits
from regulatory bodies having jurisdiction over the Work to be performed
hereunder and for required and necessary permits covering related facilities. 
Fabricator is to notify H&P in detail of all conditions imposed by such bodies
in connection with issuance of such permits.  Fabricator shall be solely
responsible for compliance therewith to the extent of its obligations hereunder
and shall indemnify and hold H&P harmless from and against all fines, penalties,
losses, claims, and demands, or judgments arising out of, or in any way
connected with the noncompliance with any such conditions.  Fabricator agrees to
obtain and maintain all necessary up-to-date permits and certificates relative
to its equipment, machinery, tools and other appliances.

Fabricator agrees to pay all claims for labor, material, services, and supplies
furnished by Fabricator hereunder and agrees to allow no lien or charges to be
fixed upon the Work, equipment, machinery, materials or other property connected
with the Work and Fabricator agrees to indemnify, protect, and save H&P harmless
from and against all such claims of liens.  Before any payments are made by H&P
to Fabricator,

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H&P may require Fabricator to furnish evidence satisfactory to H&P that there
are no unsatisfied claims for labor, materials, equipment, and supplies or for
injuries to persons or property not covered by insurance.

16.           NOTICES.  All notices or communications hereunder shall be in
writing and shall be express mailed postage prepaid or hand delivered as
follows:

If to H&P:

 

Helmerich & Payne International Drilling Co.

 

 

1437 South Boulder Avenue, Suite 1400

 

 

Tulsa, OK  74119-3623

 

 

 

 

 

Attention:  Alan Orr and Jim Bishop

 

 

 

 

 

With a copy to: General Counsel

 

 

 

If to Fabricator:

 

Southeast Texas Industries, Inc.

 

 

P.O. Box 1449

 

 

Buna, Texas 77612

 

 

 

 

 

Attention: Paul Spence and Jim Wimberley

 

 

McPherson, Monk, Hughes, Wimberley & Steele

 

 

3120 Central Mail Drive

 

 

Port Arthur, TX  77642

17.           TAKEOVER.  In the event (i) of unreasonably slow progress,
carelessness, inattention, or incompetency (as determined by H&P in its sole
judgment) on the part of Fabricator in the performance of the Work; (ii) that a
bankruptcy petition is filed against Fabricator, a receiver is appointed for
Fabricator, or Fabricator becomes insolvent; or (iii) of Fabricator’s failure to
comply with its obligations under this Contract, Fabricator shall be afforded a
reasonable period of time, not to exceed a maximum of ten (10) days, to correct
or remedy the matters complained of by H&P.  Should Fabricator, within the time
afforded by H&P, fail to correct or remedy such matters to H&P’s satisfaction,
then Fabricator will automatically be deemed to be in default of this

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Contract and H&P shall have the right to take possession of the Work (including
such partially constructed equipment or materials as have been generated or
supplied by either party hereto) or discontinue the Work.  If H&P so elects, it
may take possession of the Work (including, at no additional cost, so much of
Fabricator’s yard as H&P believes is necessary to complete the Work), as well as
any or all of Fabricator’s tools, machinery, and equipment reasonably necessary
to continue the Work, and through H&P’s employees or employees of other
contractors complete the Work contemplated by this Contract.  In the event that,
at the time of notice of H&P’s dissatisfaction, a condition is present which
represents, in H&P’s opinion, an imminent danger or hazard to the Work, H&P
shall have the right to immediately take over the Work and choose to
discontinue, abandon, or continue the Work as described above.  In the event of
any such takeover, H&P shall be entitled to recover damages equal to the amount
paid by H&P to complete the Work in excess of the Contract price set forth in
Paragraph 1 hereof, together with reasonable attorney’s fees.  Nothing in this
Paragraph 17 shall be in derogation of H&P’s other rights under this Contract.

18.           TERMINATION.  H&P may in its sole discretion terminate this
Contract,  with or without cause for any reason whatsoever at any time by giving
written notice of termination to Fabricator.  In the event of such termination,
Fabricator shall be paid, pursuant to the terms of the Contract, for the Work
performed and materials received up to the date of termination.  Fabricator
shall allow H&P to review sufficient records, accounts, receipts, invoices and
other documents so that H&P can satisfy itself that the amount due to Fabricator
is reasonable.  Termination by H&P is not a breach of this

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Contract and does not entitle Fabricator to any damages or claims except as
expressly stated in this Paragraph 18.

Notwithstanding anything to the contrary in Paragraphs 12A and 18 of this
Contract, unless H&P terminates this Contract for cause, then H&P shall not have
the right to terminate this Contract until Fabricator has constructed and has
been paid for the construction of ten (10) of the rigs described in Annex 1.

19.           INTERPRETATION.  The various documents comprising the Contract
shall be interpreted so as to give meaning to each document and its separate
provisions, as an integral part of the whole, PROVIDED, HOWEVER, where any
irreconcilable inconsistency or conflict exists between any of the matters
contained in one or more of the documents of the Contract and any other document
thereof, then the terms, provisions and other matters contained in this Contract
shall prevail over any of such matters contained in any of the other documents.

20.           CONSEQUENTIAL DAMAGES.  Neither Fabricator nor H&P shall be liable
to the other for loss of profits, loss of business, loss of anticipated revenue
or any other indirect or consequential damages or loss arising out of this
Contract.

21.           GENERAL CONDITIONS.

A.            This Contract represents the entire agreement between the parties
and supersedes all prior negotiations and agreements.  Any amendment hereof
shall be in writing and signed by the party against whom it is sought to be
enforced.

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B.            This Contract shall be construed in accordance with the laws of
the State of Oklahoma, and exclusive jurisdiction shall be vested in the federal
court located in the Northern District of Oklahoma.  Notwithstanding the
foregoing in this paragraph 21B, the parties will in good faith attempt to
mediate any dispute arising under this Contract prior to instituting
litigation.  The party desiring to mediate a dispute shall immediately provide a
written mediation notice to the other party.  In the event that the parties are
unable to resolve any particular dispute within sixty (60) days from the date of
the mediation notice, then any further requirement to mediate is waived and the
parties shall have the right to seek all available lawful remedies, including
litigation.

C.            In the event any provision of this Contract, especially with
regard to the indemnities for personal injury and death specified herein, are
inconsistent with or contrary to any applicable federal, state or local law,
rule or regulation, said provision shall be deemed to be modified only to the
extent required to comply with said law, rule or regulation and as so modified,
said provision and the Contract shall continue in full force and effect.

D.            H&P shall have the right, upon seventy-eight hours (78) prior
notice, to audit during normal business hours at Fabricator’s office, that
portion of Fabricator’s books and records covering the Work.  H&P’s audit rights
shall continue for a period of two (2) years from the date of H&P’s acceptance
of all the Work.

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E.             No waiver by Fabricator or H&P of any default, breach of warranty
or covenant hereunder, whether intentional or not, shall be deemed to extend to
any prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of such
occurrence.  Neither the failure nor any delay by any party hereto in exercising
any right, power or privilege under this Contract will operate as a waiver of
any other such right, power or privilege, and no single or partial exercise of
any right, power or privilege will preclude any other or further exercise of
such right, power or privilege or the exercise of any other right, power or
privilege.

F.             Fabricator shall not subcontract any of the Work to third parties
without the prior written consent of H&P.  This Contract shall not be assigned
by Fabricator without the prior written consent of H&P.

G.            Notwithstanding anything to the contrary in this Contract, the
parties acknowledge that H&P shall have the right, in its sole discretion, to
have STI subcontractors (including without limitation machine shops, metal/steel
preparation contractors, paint contractors) perform services directly for H&P
without STI intervention or assistance.

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IN WITNESS WHEREOF, the parties hereto have executed this Contract as of the
day, month and year first written above.

HELMERICH & PAYNE INTERNATIONAL

WITNESS:

DRILLING CO.

 

 

 

 

/s/ Judy E. Kidd

 

By

/s/ Steven R. Mackey

 

 

Steven R. Mackey

 

Executive Vice President

 

 

 

SOUTHEAST TEXAS INDUSTRIES, INC.

WITNESS:

 

 

 

/s/ Gail Garrett

 

By

/s/ Paul Spence

 

 

 

Paul Spence

 

 

 

President

 

 

 

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