<PAGE>   1
                                                                   Exhibit 10.42









                                    CONTRACT

                                     FOR THE

                              CONSTRUCTION AND SALE

                                      OF A

                              JACK-UP DRILLING UNIT

                                 (HULL NO. 2001)

                                      DATED

                                 1 FEBRUARY 2001


<PAGE>   2


                                      INDEX

<TABLE>
<CAPTION>
ARTICLE        SUBJECT                                                     PAGE
-------        -------                                                     ----
<S>                                                                        <C>
I              DESCRIPTION AND CLASSIFICATION                                1

II             CONTRACT PRICE AND TERMS OF PAYMENT                           3

III            DELAYS IN PERFORMANCE                                         8

IV             APPROVAL OF PLANS AND DRAWINGS AND
               INSPECTION DURING CONSTRUCTION                               10

V              MODIFICATIONS                                                12

VI             TESTS AND TRIALS                                             15

VII            DELIVERY DATE AND DELIVERY                                   18

VIII           FORCE MAJEURE DELAYS                                         23

IX             OWNER FURNISHED EQUIPMENT DELAYS                             24

X              WARRANTY OF QUALITY                                          25

XI             CANCELLATION BY BUYER                                        28

XII            SUSPENSION BY BUYER                                          30

XIII           BUYER'S DEFAULT                                              32

XIV            BUILDER'S DEFAULT                                            34

XV             LIABILITIES AND INDEMNITIES                                  37

XVI            INSURANCE                                                    38

XVII           DISPUTE AND ARBITRATION                                      41

XVIII          RIGHTS OF ASSIGNMENT AND VESSEL RECIPIENT
               DESIGNATION                                                  43

XIX            TAXES AND DUTIES                                             44

XX             PATENTS, TRADEMARKS, COPYRIGHTS, ETC.                        44

XXI            ADDRESSES                                                    45

XXII           NOTICES AND LANGUAGE                                         45
</TABLE>


<PAGE>   3

                                      INDEX

<TABLE>
<CAPTION>
ARTICLE        SUBJECT                                                     PAGE
-------        -------                                                     ----
<S>                                                                        <C>
XXIII          EFFECTIVE DATE OF CONTRACT                                   46

XXIV           INTERPRETATION                                               46

XXV            CONFLICT AND AUDIT                                           47

XXVI           PUBLICITY RELEASES                                           49
</TABLE>

EXHIBIT "A"    SCHEDULE OF LABOR AND MATERIAL RATES

EXHIBIT "B"    PROTOCOL OF DELIVERY AND ACCEPTANCE

EXHIBIT "C-1"  IRREVOCABLE STAND-BY LETTER OF CREDIT

EXHIBIT "C-2"  ON DEMAND PERFORMANCE BOND

EXHIBIT "D"    CONTRACT SPECIFICATIONS

EXHIBIT "E"    CONTRACT DRAWINGS LIST


<PAGE>   4

                    CONTRACT FOR THE CONSTRUCTION AND SALE OF
                             A JACK-UP DRILLING UNIT
                                 (HULL NO. 2001)


THIS CONTRACT, made effective this 1st day of February, 2001 by and between PPL
Shipyard Pte. Ltd., a company organized and existing under the laws of
Singapore, having its principal place of business located at 21 Pandan Road,
Singapore 609273 (hereinafter called the "BUILDER") and Santa Fe International
Corporation, a corporation organized and existing under the laws of the Cayman
Islands, with an office at 5420 LBJ Freeway, Suite 1100, Dallas, Texas 75240,
U.S.A. (hereinafter called the "BUYER" or "OWNER").

                                   WITNESSETH:

         WHEREAS, the BUILDER agrees to furnish all necessary labor and
materials to design, construct, equip, complete and test, at its shipyard
located at 21 Pandan Road, Singapore 609273 (hereinafter called the "Shipyard")
and sell and deliver afloat at the Shipyard to the BUYER one (1) Freide and
Goldman JU2000 jack-up drilling unit more fully described in Article I hereof
(hereinafter called the "VESSEL"); and

         WHEREAS, the BUYER agrees to purchase and accept delivery of the VESSEL
at the Shipyard from the BUILDER and to pay for the same, all upon the terms and
conditions hereinafter set forth.

         NOW, THEREFORE, undertaking to perform each party's responsibilities
and to exercise each party's rights with good faith in interpreting this
Contract and the Specifications, the parties hereby agree, in consideration of
the mutual promises and covenants hereinafter contained, as follows:

                                      ARTICLE I - DESCRIPTION AND CLASSIFICATION

1.       Description:

         The VESSEL shall have the BUILDER's Hull No. 2001 and shall be
designed, constructed, equipped and completed in accordance with the provisions
of (i) this Contract, and (ii) the Contract Specifications attached to this
Contract as Exhibit "D" and the Contract Drawings attached to this Contract as
listed in Exhibit "E" (herein collectively called the "Specifications") signed
by each of the parties hereto for identification on even date herewith and
incorporated by reference and made an integral part hereof.


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<PAGE>   5

2.       Dimensions and Characteristics:

         The VESSEL is a Freide and Goldman JU2000 jack-up drilling unit which
will bear BUILDER's Hull No. 2001 of approximate dimensions 231 feet long, 250
feet wide and 31 feet deep at the side. The details of the above particulars as
well as the definitions and method of measurements and calculations are as
indicated in the Specifications.

3.       Classification, Rules and Regulations:

         The VESSEL (including its machinery, equipment and outfitting) shall be
constructed in accordance with good shipbuilding practices and with the American
Bureau of Shipping's, (herein called the "Classification Society") Rules for
Building and Classing Mobile Offshore Drilling Units (the edition and amendments
thereto being in force as of the date of this Contract), the IMO MODU Code 1989,
and other such specific requirements as are set out in this Contract and the
Specifications, and the BUYER's satisfaction. Decisions of the Classification
Society as to compliance or non-compliance with the Classification shall be
final and binding upon both parties hereto.

         The VESSEL shall also meet all requirements of the rules, regulations
and requirements of the International Loadline Convention and other regulatory
bodies as described in the Specifications in effect as of the date of this
Contract. All fees and charges incidental to the classification and with respect
to meeting the requirements of the above-referenced rules, regulations and
requirements, as well as design fees and/or royalties shall be for the account
of BUILDER.

4.       Registration:

         The VESSEL shall be registered by the BUYER at its own cost and expense
under the laws of the Republic of Vanuatu with its home port at Port Vila, or
such other place as the BUYER shall designate at the time of its delivery and
acceptance hereunder. In addition, the BUYER reserves the right, at its sole
discretion, to register the VESSEL under construction at its own cost and
expense under the Laws of the Republic of Vanuatu or such other place as the
BUYER may deem appropriate, at any time following payment of the first
installment of the Contract Price.

5.       Subcontracting:

         The BUILDER may, with BUYER's written approval, which shall not be
unreasonably withheld, at its sole discretion and responsibility subcontract any
portion of the construction work of the VESSEL which is to be performed within
the Republic of Singapore. Subject to BUYER's written approval, the BUILDER may,
at its sole discretion and responsibility, subcontract any portion of the
construction work of the VESSEL which is to be performed outside the Republic of
Singapore. In any event, BUILDER shall retain full responsibility and liability


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<PAGE>   6

as if it did the work itself for any subcontracted work, including warranties,
guarantees and schedule.

6.       Permits and Observance of Applicable Laws:

         BUILDER warrants that it is duly authorized with all applicable
licenses (including but not limited to those required in respect of the Freide
and Goldman JU2000 design) to construct, equip, complete, sell and perform the
entirety of the work covered hereby and to deliver the VESSEL as provided for
herein and that it will obtain in a timely manner all necessary permits,
licenses, and authorizations required for performing such work and making such
delivery. BUILDER further warrants that it and all of its subcontractors will
observe all applicable laws, orders, decrees, ordinances, rules and regulations
of the country of construction and of its subdivisions and all duly constituted
government agencies having jurisdiction.

7.       Design Responsibilities

         It is expressly agreed and understood that the BUILDER shall be
exclusively responsible for all aspects of the design and engineering required
in respect of the construction, equipment and completion of the VESSEL in
accordance with the provisions of this Contract and the Specifications. The
BUILDER shall accordingly be responsible for any additional costs and expenses
of construction, equipment and completion of the VESSEL beyond those originally
envisaged at the time of signature hereof which result from any deficiency or
shortcoming in the Freide and Goldman JU2000 design or any design or engineering
undertaken to develop the same for the purposes of performance of this Contract.

         However, the environmental ratings contained in Section 1.5 of the
Specifications may be amended by official letter from ABS following their
detailed review of the design. Such amendments, if any, will be deemed to be
retroactively incorporated into Section 1.5 of the Specifications. The BUILDER
shall be responsible for not exceeding the weights and heights of the vertical
centers of gravity contained in Section 1.5.8 of the Specifications.

8. Notwithstanding any other provision of this Contract, specifically including
but not limited to the Effective Date as defined in Article XXIII, BUILDER shall
not commence construction of the VESSEL under this Contract prior to 1 March
2001 (the "Construction Commencement Date").

                                ARTICLE II - CONTRACT PRICE AND TERMS OF PAYMENT

1.       Contract Price:

         The contract price of the VESSEL is Seventy-Two Million Three Hundred
Sixty-Nine Thousand Five Hundred United States Dollars (U.S. $72,369,500),
receivable by the BUILDER (herein called the "Contract Price"), subject to
upward or downward adjustment, if any, as set forth in this Contract. Provided,
however, that the Contract Price shall be reduced by One Million Four Hundred
Fifty-Two Thousand United States Dollars (U.S.$1,452,000) if the BUYER elects to
reduce the VESSEL's leg length by fifty-six (56) feet should BUYER give notice
of such election to BUILDER no later than ninety-one (91) calendar days after
the Construction Commencement Date. Should BUYER give BUILDER later notice at
any time up until the last fifty-six (56) feet of the leg sections begin to be
installed on the VESSEL, then the Contract Price shall be reduced by Seven
Hundred Two Thousand United States Dollars (U.S.$702,000) and BUYER shall have
ownership of the leg chord material with BUILDER having ownership of the leg
bracing material.


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<PAGE>   7
2.       Currency:

         Any and all payments required to be made by either party under this
Contract shall be made in United States Dollars. Payments required to be made by
BUYER to BUILDER shall be made as follows:

                                    Citibank N.A., New York
                                    For Account Citibank N.A., Singapore
                                    Favoring:  PPL Shipyard Pte. Ltd.
                                    USD Account Number: 0-812872-028

3.       Terms of Payment:

         The Contract Price shall be paid by the BUYER to the BUILDER in
installments as follows:

(a)      1st Installment:

         The sum of Seven Million Two Hundred Thirty-Six Thousand Nine Hundred
         Fifty United States Dollars (U.S.$7,236,950), equivalent to ten percent
         (10%) of the Contract Price shall be paid upon the second banking day
         next following the Construction Commencement Date or BUILDER's delivery
         of both the irrevocable standby letter of credit and the on demand
         performance bond to the BUYER as required under Article XI, Paragraph
         2, whichever occurs later.

(b)      2nd Installment:

         The sum of Fourteen Million Four Hundred Seventy-Three Thousand Nine
         Hundred United States Dollars (U.S.$14,473,900), equivalent to twenty
         percent (20%) of the Contract Price shall be paid upon the second
         banking day next following the later of (i) the date on which the
         BUILDER has executed and delivered to the BUYER the Assignment as
         contemplated by Clause 8 of that certain Overall Agreement dated on or
         about 1 February 2001 between the BUILDER and the BUYER together with
         the approval and notification to Jurong Town Corporation in the
         prescribed form (including the registration of the particulars of the
         Assignment with the Registry of Companies and Businesses); or (ii)
         laying the keel of the VESSEL, which shall be deemed to require
         completion of the following tasks:

         o     Erection of completed inner bottom blocks 1C1 and 1C2 and
               associated piping, 100% complete including successful NDT, and:

               o    Complete procurement of all main hull structure steel.


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<PAGE>   8
               o    Completion of fabrication / assembly of bulkheads for blocks
                    1C1 and 1C2, 100% complete including successful NDT.

               o    Completion of fabrication / assembly of inner bottom block
                    panels 1C3, 100% complete including successful NDT.

               o    Completion fabrication / assembly of bulkheads for block
                    1C3, 100% complete including successful NDT.

(c)      3rd Installment

         The sum of Fourteen Million Four Hundred Seventy-Three Thousand Nine
         Hundred United States Dollars (U.S.$14,473,900), equivalent to twenty
         percent (20%) of the Contract Price shall be paid upon the second
         banking day next following completion of the three leg well modules,
         which shall be deemed to require completion of the following tasks:

         o     Completion of fabrication / assembly of the three leg well blocks
               5, 6 and 7, 100% complete including successful NDT, including:

               o    Completion of fabrication / assembly of the three spud cans,
                    100% complete including successful NDT.

               o    Completion of fabrication / assembly of inner bottom blocks
                    1FS, 1AS, 1FP and 1AP, 100% complete including successful
                    NDT.

               o    Completion fabrication / assembly of bulkheads for blocks
                    1FS, 1AS, 1FP and 1AP, 100% complete including successful
                    NDT.

               o    Completion of erection of center block 1C1/1C2, 1C3, 100%
                    complete including successful NDT.

               o    Completion of fabrication / assembly of inner bottom blocks
                    8, 9, 11 and 12, 100% complete including successful NDT.

               o    Completion fabrication / assembly of bulkheads for blocks 8,
                    9, 11 and 12, 100% complete including successful NDT.

               o    100% completion of detailed engineering drawings for
                    architectural outfitting and 60% of completion of mechanical
                    drawings.

(d)      4th Installment

         The sum of Ten Million Eight Hundred Fifty-Five Thousand Four Hundred
         Twenty-Five United States Dollars (U.S.$10,855,425), equivalent to
         fifteen percent (15%) of the Contract Price shall be paid upon the
         second banking day next following installation of the first section of
         all three (3) legs on the VESSEL, which shall be deemed to require
         completion of the following tasks:

               o    Completion of erection and weld out of all three 1st leg
                    rounds to the completed spud cans, 100% complete including
                    successful NDT sign off of the connection Work, and:


                                       5
<PAGE>   9

               o    Completion fabrication / assembly /machine / erection jack
                    foundations and bracing all three leg wells, 100% complete
                    including successful NDT.

               o    Completion fabrication / assembly / erection accommodation
                    blocks, 100% complete including successful NDT.

               o    Completion fabrication / assembly helicopter deck and
                    support structure, 100% complete including successful NDT.

               o    Completion fabrication / paint / installation steel
                    outfitting below main deck, 100% complete including
                    successful NDT.

               o    Complete blast and paint quarters.

               o    Completion erection of all remaining inner bottoms and
                    bulkheads, 100% complete including successful NDT.

               o    100% completion of detailed engineering drawings for
                    structural, 70% completion for steel outfitting, piping and
                    electrical.

               o    Complete installation electrical cable ways hull, quarters.

(e)      5th Installment

         The sum of Ten Million Eight Hundred Fifty-Five Thousand Four Hundred
         Twenty-Five United States Dollars (U.S.$10,855,425), equivalent to
         fifteen percent (15%) of the Contract Price shall be paid upon the
         second banking day next following launching of the VESSEL which shall
         be deemed to require completion of undocking and jackup the VESSEL
         along side of wharf, including:

               o    Complete consolidation of vesseL hull, proven integrity of
                    hull compartments.

               o    Complete installation quarters equipment.

               o    Completion fabrication / assembly cantilever structure, 100%
                    complete including successful NDT.

               o    Completion fabrication / assembly / erection drill floor /
                    substructure, drawworks shelter / windwall and lower
                    derrick.

               o    Complete fabrication / assembly 2nd and 3rd round of legs.

               o    Complete fabrication / paint / installation of steel
                    outfitting and piping helideck, quarters.

               o    Complete installation machinery deck, intermediate deck and
                    jacking equipment.

               o    Complete fabrication / installation of HVAC ducting in hull.

               o    Complete fabrication / paint / installation piping systems
                    above / below main deck, quarters.

               o    Complete hydro test / flushing hull and quarters piping
                    systems.

               o    Complete fabrication / installation HVAC ducting in
                    accommodation blocks.

(f)      6th Installment


                                       6
<PAGE>   10

         The sum of Seven Million Two Hundred Thirty-Six Thousand Nine Hundred
         Fifty United States Dollars (U.S.$7,236,950), equivalent to ten percent
         (10%) of the Contract Price shall be paid upon the second banking day
         next following installation of the legs on the VESSEL which shall be
         deemed to require completion of the following tasks:

         o     Complete fabrication / assembly and erection of 2nd, 3rd, 4th,
               5th and 6th leg rounds for all 3 legs, 100% complete including
               successful NDT sign off of the connection Work, including:

               o    Complete erection derrick.

               o    Complete erection helideck, cantilever, drill floor on main
                    hull.

               o    Complete installation helideck, drill floor and cantilever
                    equipment.

               o    Complete hydro test deep tanks.

               o    Complete installation maindeck equipment.

               o    Complete blast and paint cantilever, drill floor.

               o    Complete hull installation hull and accommodation
                    architectural outfitting. o Complete mechanical completion,
                    test and commissioning Marine systems.

               o    Complete fabrication / paint / installation piping systems
                    cantilever and drill floor piping systems.

               o    Complete installation electrical cable ways helideck,
                    cantilever and drill floor.

               o    Complete blast and paint drill floor, helideck and
                    cantilever.

               o    Complete fabrication / paint / installation steel outfitting
                    at maindeck and drill floor.

               o    Complete fabrication / installation / hydro test piping
                    systems in spud cans, legs.

               o    Complete hydro test flushing helideck, cantilever and drill
                    floor piping systems.

(g)      7th Installment

         The sum of Seven Million Two Hundred Thirty-Six Thousand Nine Hundred
         Fifty United States Dollars (U.S.$7,236,950), equivalent to ten percent
         (10%) of the Contract Price, plus any increase or minus any decrease
         due to adjustments of the Contract Price hereunder, shall be paid upon
         the second banking day next following completion of the following
         tasks:

         o    Complete install / terminate entire vessel electrical cables.

         o    Complete test and commissioning drilling systems, jacking trials
               and incline experiment.

         o    Completion of compartment closeout and all the VESSEL works.

         o    Completion of all commissioning, tests and trials.

         o    Completion of all discrepancy punch lists.


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<PAGE>   11

         o    Completion of all certification and documentation.

         o    Complete VESSEL preparations necessary for load out.

         o    Complete loading of all VESSEL materials and warehouse.

         o    Completion and delivery of all Delivery Documentation.

         and execution by the parties of the PROTOCOL OF DELIVERY AND ACCEPTANCE
         pursuant to Article VII(2) hereof.

         For avoidance of doubt and for purposes of satisfying the intent of
each of the above-described payment milestone events, they shall not be deemed
to have been fulfilled until such time as all prerequisite tasks and activities
associated with such milestone as described on the BUILDER's Construction
Schedule have been fully completed.

         As used herein, the term "banking day" shall mean any day in which
commercial banks are open for business in Texas or New York and Singapore.

         At least two (2) banking days in advance of the due date of each
installment payment, BUILDER shall give both the BUYER and the BUYER's
Representative written notice by facsimile or registered mail. Each installment
notice shall state: (i) the stage of work achieved as defined by the BUILDER's
Construction Schedule as defined in Article IV, Paragraph 1(c); (ii) that the
work completed complies with the Plans, Specifications and this Contract; (iii)
that there are no liens or claims upon the VESSEL. Each installment notice shall
be executed by an officer of the BUILDER. If BUILDER has any outstanding liens
on the VESSEL, BUYER shall not be obligated to make such payments until the
liens are resolved.

                                             ARTICLE III - DELAYS IN PERFORMANCE

1.       Delivery:

(a)      If any delay in construction of the VESSEL, excepting only Permissible
         Delays, should continue for a period of one hundred eighty (180)
         calendar days during construction (as determined by reference to the
         BUILDER's Construction Schedule defined in Article IV, Paragraph 1
         (c)), then in such event, the BUYER may at its option cancel this
         Contract at any time thereafter in accordance with the provisions of
         Article XI hereof. The BUILDER may, at any time after the expiration of
         the aforementioned one hundred eighty (180) calendar days of delay
         during construction, if the BUYER has not served notice of cancellation
         as provided in Article XI hereof, demand in writing that the BUYER
         shall make an election, in which case the BUYER shall, within thirty
         (30) calendar days after such demand is delivered to the BUYER, notify
         the BUILDER of its intention either to cancel this Contract or to
         consent to the acceptance of the VESSEL at an agreed future date; it
         being understood by the parties


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<PAGE>   12
         hereto that, if the VESSEL is not delivered by such future date or if
         construction is again delayed for one hundred eighty (180) calendar
         days or more (as determined by reference to the BUILDER's Construction
         Schedule defined at Article IV, Paragraph 1(c)), the BUYER shall have
         the same right of cancellation upon the same terms and conditions as
         hereinabove provided.

(b)      If the VESSEL is not delivered by the thirty-first (31st) calendar day
         after the Delivery Date (as such term is defined in Article VII,
         Paragraph 1(a)) for any reason, excepting only force majeure delays (as
         defined in Article VIII) and Permissible Delays as defined in Paragraph
         2, below, then in such event, the BUYER may at its option cancel this
         Contract at any time thereafter in accordance with the provisions of
         Article XI hereof.

(c)      If delivery of the VESSEL is delayed more than sixty-two (62) calendar
         days after the Delivery Date as defined in Article VII below, then, in
         such event, beginning at twelve o'clock midnight of the sixty-second
         (62nd) calendar day after the Delivery Date, the amount otherwise due
         as the final installment shall be reduced by deducting therefrom the
         sum of Thirty Thousand United States Dollars (U.S.$30,000) per calendar
         day, provided that the amount of such reduction shall not exceed One
         Million Eight Hundred Thousand United States Dollars (U.S.$1,800,000).
         In the event the amount of reduction as aforesaid exceeds the sum due
         as the final installment, the excess portion shall be paid to BUYER by
         BUILDER on the actual delivery date of the VESSEL by BUILDER to BUYER
         (it being understood by both parties that any such reduction of payment
         by BUYER is by way of liquidated damages and not by way of penalty).

2.       Definition of Permissible Delay:

         Only such delays as are specifically defined in Article V, Paragraphs
1, 2 and 3, Article VI, Paragraph 2, Article IX, Article XII, Paragraph 2, and
Article XIII, Paragraph 1 of this Contract shall be "Permissible Delays".
Notwithstanding any provision to the contrary in this Contract, if any
Permissible Delay would not have come about but for the prolongation of the work
of construction due to any previous unauthorized delays (or accumulation
thereof), then the latter delay shall not be deemed to be a Permissible Delay.

3.       Effect of Cancellation:

         It is expressly understood and agreed by the parties hereto that in any
case, if the BUYER cancels this Contract under this Article, the BUYER shall not
be entitled to any liquidated damages.


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<PAGE>   13


                                     ARTICLE IV - APPROVAL OF PLANS AND DRAWINGS
                                              AND INSPECTION DURING CONSTRUCTION

1.       Approval of Plans, Drawings and BUILDER's Construction Schedule:

(a)      The BUILDER shall submit to either the BUYER or its Representative (as
         defined in Article IV, Paragraph 2) four (4) copies each of the plans
         and drawings for BUYER's approval. The BUILDER shall simultaneously
         submit to the Classification Society and other applicable agencies the
         plans and drawings which require their approval. The BUYER or its
         Representative shall, within ten (10) working days after receipt
         thereof, return to the BUILDER one (1) copy of such plans and drawings
         with the BUYER's approval or comments, if any, written thereon. If
         comments are received the BUILDER shall modify the plans and drawings
         in accordance with the BUYER's comments and resubmit same to the BUYER.
         Final approval or additional comments for such revised plans or
         drawings must be given within ten (10) working days after receipt by
         the BUYER or its Representative of the BUILDER's revised plans and
         drawings. A list of the plans and drawings to be submitted to the BUYER
         or its Representative by BUILDER, as aforesaid, and a schedule for
         submission of plans and drawings to BUYER for approval shall be
         mutually agreed upon between the parties hereto within thirty (30)
         calendar days of the Construction Commencement Date.

(b)      When and if the BUYER's Representative shall have arrived at the
         Shipyard in accordance with Paragraph 2 of this Article, the BUILDER
         may submit the remainder, if any, of the plans and drawings in the
         agreed list in accordance with the agreed schedule, to the
         Representative for his approval upon mutual written agreement between
         the parties hereto. The Representative shall, within ten (10) working
         days after receipt thereof, return to the BUILDER one (1) copy of such
         plans and drawings with his approval or comments, if any, written
         thereon. Approval by the Representative of the plans and drawings duly
         submitted to him shall be deemed to be approved by the BUYER for all
         purposes of this Contract.

(c)      The BUILDER shall, within thirty (30) calendar days after the
         Construction Commencement Date, furnish the BUYER or the Representative
         a detailed key event construction schedule showing planned construction
         progress of the VESSEL. After approval of the construction schedule by
         the BUYER or the Representative within ten (10) working days after
         receipt thereof, the construction schedule (herein called either the
         "BUILDER's Construction Schedule" or the "Production Construction
         Schedule") shall be the basis of interpretation of actual construction
         progress of the VESSEL.

(d)      BUYER's approval as aforesaid shall not serve to eliminate or reduce
         the obligations of the BUILDER elsewhere contained in this Contract.


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<PAGE>   14

2.       Appointment of BUYER's Representative:

         The BUYER may send to and maintain at the Shipyard, at the BUYER's own
cost and expense, a representative (herein called the "Representative") who
shall be duly authorized in writing by the BUYER to act on behalf of the BUYER
in connection with modifications of the Specifications, adjustments of the
Contract Price and the Delivery Date, approval of certain plans and drawings,
confirmation of the BUILDER's Construction Schedule, and attendance at the tests
and inspections relating to the VESSEL, for which he is specifically authorized
by the BUYER. The Representative and his assistant(s) shall at all times be
deemed to be employees of the BUYER and not of the BUILDER.

3.       Inspection by Representative:

         The necessary inspection of the VESSEL shall be carried out by the
BUYER's Representative, the Classification Society, other regulatory bodies and
the inspection team of the BUILDER throughout the entire period of construction,
in order to ensure that construction of the VESSEL is duly performed in
accordance with this Contract and the Specifications. During construction of the
VESSEL the Representative shall have the right to inspect all work in process,
wherever in the BUILDER's facilities, or any of BUILDER's subcontractors'
facilities, and to attend all tests and inspections of the VESSEL. The BUILDER's
inspection organization shall not report directly to BUILDER's engineering or
production organizations, and shall have a direct line of responsibility to
BUILDER's executive management.

         The BUILDER shall give notice to the Representative at least one
working day (24 hours) in advance of the date and place of such tests and
inspections to be attended by him. Failure of the Representative to be present
at such tests and inspections, without justifiable reason, after due notice to
him as above provided shall be deemed to be a waiver of his right to be present.
In such case, the BUYER shall be obligated to accept the results of such tests
or inspections on the basis of the BUILDER's certificate, subject to any
required approval of the Classification Society. Notwithstanding any provision
to the contrary in this Contract, the presence or absence of BUYER's
Representative from any such tests or inspections shall not serve to eliminate
or reduce the obligations of the BUILDER elsewhere contained in this Contract.

         In the event that the Representative discovers any construction or
material or workmanship which is not deemed to conform to the requirements of
this Contract and/or the Specifications, the Representative shall promptly give
the BUILDER notice in accordance with Article XXII as to such nonconformity.
Upon receipt of such notice from the Representative, the BUILDER shall promptly
correct such nonconformity. In all working hours during the construction of the
VESSEL until delivery thereof, the Representative and his assistants shall be
given free and ready access to the VESSEL, its equipment and accessories, and to
any other place where work is being done or materials are being processed or
stored in connection with the construction of the VESSEL, including the yards,
workshops, stores and offices of the BUILDER,


                                       11
<PAGE>   15

and the premises of subcontractors of the BUILDER who are doing work or storing
materials in connection with the VESSEL's construction.

         If the BUILDER's Quality Assurance and Quality Control is found to miss
a number of major discrepancies during the construction, the BUYER may as it may
deem appropriate supplement the Quality Control coverage by contracting for an
independent service. BUILDER shall be obligated to pay for all costs for the
third party services and shall make necessary corrections or repairs to the
construction for discrepancies discovered by the independent third party as if
the discrepancies were found by BUILDER's own Quality Assurance and Quality
Control organization.

4.       Facilities:

         The BUILDER shall furnish, at BUILDER's expense and free of charge to
BUYER, the Representative and his assistant(s) with adequate office space and
such other reasonable facilities according to the Specifications in the Shipyard
as may be necessary to enable them to effectively carry out their duties.

5.       Responsibility of BUYER:

         The BUYER's Representative shall carry out his duties hereunder in
accordance with good shipbuilding practice and in such a way as to avoid any
unnecessary increase in building cost or delay in the BUILDER's Construction
Schedule.

         The BUYER has the right to request that BUILDER replace any employee or
subcontractor who is deemed unsuitable and unsatisfactory for the proper
progress of the VESSEL's construction. The BUILDER shall promptly effect such
replacement.

6.       Key Personnel:

         All Key Personnel of BUILDER who are assigned to the design,
procurement and construction of the VESSEL shall have experience on BUILDER'S
prior new build drilling units, or they shall have prior construction experience
on similar drilling units. In addition BUILDER agrees not to replace previously
accepted Key Personnel without the prior written consent of BUYER, which will
not be unreasonably withheld. Key Personnel shall be defined as engineering and
supervisory personnel of the level of foreman and above.

                                                       ARTICLE V - MODIFICATIONS

1.       Modification of Specifications:


                                       12
<PAGE>   16

         Within thirty-four (34) calendar days of the Construction Commencement
Date, the Specifications may be modified and/or changed by BUYER as respects
machinery arrangements and/or systems installations without altering the
Contract Price or the Delivery Date if such modifications or changes do not
necessitate structural changes.

         The Specifications may also be otherwise modified and/or changed at any
time by written agreement of the parties hereto, provided, that the BUYER and
the BUILDER shall first agree to alterations in the Contract Price and the
Delivery Date, if any, occasioned by or resulting from such modifications and/or
changes. Any such alterations in the Delivery Date as may be mutually agreed in
writing shall be understood to be Permissible Delays as contemplated by Article
III, Paragraph 2. In the event the parties are unable to agree upon such
alteration, if any, to the Contract Price or the Delivery Date, BUILDER shall
proceed with such modification or change and any area of disagreement that
cannot subsequently be resolved between BUILDER and BUYER shall be resolved in
accordance with Paragraph 4 of this Article. Within fifteen (15) calendar days
of BUYER's notification to BUILDER to proceed with modifications or changes to
the Specifications, BUILDER shall notify BUYER in writing of any such
modifications or changes that will have an impact on the Contract Price and/or
the Delivery Date or which otherwise would require issuance of a Change Order to
this Contract, including complete details of the nature of such impact. Failure
of BUILDER to so notify BUYER shall be deemed a waiver of BUILDER's right to
subsequently claim for any change in the Contract Price or the Delivery Date or
issuance of any Change Order associated with such modifications or changes.

         Such agreement shall be effected by exchange of letters signed by the
authorized representatives of the parties hereto, which shall constitute
amendments to this Contract and/or Specifications.

         The BUILDER may make minor changes to the Specifications, if found
necessary for introduction of improved production methods or otherwise, provided
that the BUILDER shall first obtain the BUYER's written approval thereof.

2.       Change in Class, etc.:

         In the event that, after the Construction Commencement Date of the
first JU2000 jack-up drilling unit to be constructed by BUILDER for BUYER, any
requirements as to Class, or as to rules and regulations to which the
construction of the VESSEL is required to conform are altered or changed by the
Classification Society or other regulatory bodies authorized to make such
alterations or changes, then either of the parties hereto, upon receipt of such
information from the Classification Society or such other regulatory bodies,
shall promptly transmit the same to the other in writing, and the BUILDER shall
thereupon incorporate such alterations or changes into the construction of the
VESSEL. Any alterations in the Delivery Date as may be mutually agreed in
writing as a result of such changes shall be understood to be Permissible Delays
as contemplated by Article III, Paragraph 2. However, in the event the parties
are unable to agree upon any adjustment to the Contract Price or the Delivery
Date, BUILDER shall proceed with such alterations and/or changes, as aforesaid,
and any area of disagreement that cannot subsequently be resolved


                                       13
<PAGE>   17
between BUYER and BUILDER shall be resolved in accordance with Paragraph 4 of
this Article.

3.       Changes and/or Modifications on a Time and Material Basis:

         In the event the parties agree in writing that any changes,
modifications or alterations are to result in an adjustment of the Contract
Price on a time and materials basis, the labor and material rates applicable
thereto shall be as specified in Exhibit "A" and any change in schedule as may
be agreed in writing shall be understood to constitute Permissible Delays as
contemplated in Article III, Paragraph 2.

         Documentation of Reimbursable Costs:

         The following documentation for reimbursable costs is required to be
submitted with all invoices:

         1.       All labor charges must be supported by original time sheets
                  submitted with BUILDER's invoice.

         2.       The time sheet shall include at a minimum the following
                  information: date Work was performed; name of employee; hours
                  worked; pay classification of worker; and work order number or
                  other reference to the specific work performed on BUYER's
                  behalf.

         3.       Original time sheet shall be signed by a field representative
                  of BUYER. Time sheets without field approval shall be subject
                  to non-reimbursement by BUYER, at BUYER's discretion.

         4.       Materials purchased from third parties shall be supported by
                  the original third party invoice.

         5.       Invoice shall have a copy of the check on which the payment
                  was made, or a reference to the check number or other
                  identifying reference if paid by another method, such as wire
                  transfer.

         6.       Amounts reimbursed shall be net of any discounts or rebates
                  received by BUILDER.

         7.       Invoices for items purchased from companies affiliated with
                  BUILDER shall be so identified.

         8.       Unit prices shall be supported by quantity reports signed by
                  BUYER's representative indicating the units (quantity) or Work
                  performed/provided to which the unit prices apply.

4.       Disputes Concerning Changes or Modifications:


                                       14
<PAGE>   18

         In the event BUYER desires to implement any modifications, changes or
alterations as contemplated under Paragraphs 1, 2 or 3 of this Article and the
parties are unable to agree upon the adjustment in the Contract Price and/or
Delivery Date, if any, BUYER may elect to instruct BUILDER in writing to proceed
with such modifications, changes or alterations and the BUILDER shall promptly
comply with such instruction. In connection with change orders as to which the
parties are unable to agree, BUYER shall have the right to audit at its expense,
either by representative confirmation or original documents, such as time and
material records, or by independent public accountant (or both) all of BUILDER's
records in connection with charges and process of construction. The
determination of the adjustment in the Contract Price and/or Delivery Date
associated with any such alterations and changes which are performed shall, as
respects the areas of disagreement between the parties, be submitted for final
arbitration in accordance with Article XVII hereof. Without prejudice to
Paragraph 1, above, in the event BUILDER and BUYER have not reached agreement by
the Delivery Date upon the adjustment in the Contract Price then any disputed
amount(s) shall be deposited by BUYER in a mutually agreed joint interest
bearing account for BUYER and BUILDER until resolution of such disputed
amount(s). Interest on the principal amount shall be distributed between the
parties in proportion to the amount of principal received upon resolution of the
dispute(s).

5.       Substitution of Materials:

         In the event that any of the materials required by the Specifications
or otherwise under this Contract for the construction of the VESSEL cannot be
procured in time to maintain the Delivery Date of the VESSEL, the BUILDER may,
provided that the BUYER so agrees in writing, supply other materials capable of
meeting the requirements of the Classification Society and of the rules,
regulations and requirements with which the construction of the VESSEL must
comply. Any agreement as to such substitution of materials shall be effected in
the manner provided in Paragraph 1 of this Article, and may, likewise, include
alterations in the Contract Price and other terms and conditions of this
Contract occasioned by or resulting from such substitution.

                                                   ARTICLE VI - TESTS AND TRIALS

1.       Notices:

         The BUILDER shall provide the BUYER at least thirty (30) days prior
notice in accordance with Article XXII of the time and place of each of the
jacking trials, equipment trials, and other specified commissioning which is to
be performed at BUILDER's Shipyard (collectively herein referred to as the
"Tests and Trials") of the VESSEL, and the BUYER shall promptly acknowledge
receipt of such notice(s). The BUYER shall have its Representative on board the


                                       15
<PAGE>   19
VESSEL to witness such Tests and Trials. Failure by the Representative of the
BUYER to attend any portion of the Tests and Trials of the VESSEL after due
notice to the BUYER as provided above shall be deemed to be a waiver by the
BUYER of its right to have its Representative on board the VESSEL at such
portion of the Tests and Trials, and the BUILDER may conduct such portion of the
Tests and Trials without the Representative of the BUYER being present, and in
such case the BUYER shall be obligated to accept the VESSEL on the basis of
certificates of the BUILDER and the Classification Society Surveyor that the
VESSEL, upon completion of such portion of the Tests and Trials, is found to
conform to this Contract and the Specifications with respect to such portion of
the Tests and Trials.

2.       Weather Conditions:

         The Tests and Trials shall be carried out under weather conditions
deemed favorable enough in the judgment of the Classification Society Surveyor.
In the event of unfavorable weather on the date(s) specified for the Tests and
Trials, the same shall take place on the first available day thereafter that
weather conditions permit. It is agreed that if during the Tests and Trials of
the VESSEL, the weather should suddenly become so unfavorable that orderly
conduct of the Tests and Trials can no longer be continued in the opinion of the
Classification Society Surveyor, the Tests and Trials shall be discontinued and
postponed until the first favorable weather condition day next following, unless
the BUYER agrees in writing to accept the VESSEL on the basis of the Tests and
Trials already made before such discontinuance occurred.

         Any delay of the Tests and Trials caused by such unfavorable weather
conditions shall operate to postpone the Delivery Date by the period of delay
involved and such delay shall be understood to constitute Permissible Delays as
contemplated in Article III, Paragraph 2.

3.       How Conducted:

         All expenses in connection with the Tests and Trials, including, but
not limited to fuel oil, lubricating oils and greases (the quality and quantity
of which shall be in accordance with applicable engine specifications) shall be
for the account of the BUILDER, and the BUILDER shall provide at its own expense
the necessary crew to comply with conditions of safe navigation. The Tests and
Trials shall be conducted in the manner prescribed in the Specifications, and
shall prove fulfillment of the performance requirements for the Tests and Trials
as set forth in the Specifications. The course of Tests and Trials shall be
determined by the BUILDER.

4.       Method of Acceptance or Rejection:

(a)      Upon completion of the Tests and Trials, the BUILDER shall give the
         BUYER notice in accordance with Article XXII of completion of the Tests


                                       16
<PAGE>   20

         and Trials, as and if the BUILDER considers that the results of the
         Tests and Trials indicate conformity of the VESSEL to this Contract and
         the Specifications in all respects. The BUYER shall, within three (3)
         business days after receipt of such notice from the BUILDER, notify the
         BUILDER in accordance with Article XXII of its acceptance or rejection
         of the VESSEL.

(b)      However, should the results of the Tests and Trials indicate that the
         VESSEL, or any part or equipment thereof, does not fully conform to the
         requirements of this Contract and/or the Specifications, then the
         BUILDER shall promptly take the necessary steps to correct such
         nonconformity. Upon completion of correction of such nonconformity, the
         BUYER may request a second round of Tests and Trials to test the
         nonconformity correction, and in such event the BUILDER shall give the
         BUYER not less than three (3) business days prior notice in accordance
         with Article XXII of the second round of Tests and Trials of the
         VESSEL. Upon successful completion of the second round of Tests and
         Trials, the BUYER shall within three (3) business days after receipt of
         such notice from the BUILDER, notify the BUILDER in accordance with
         Article XXII of its acceptance or rejection of the VESSEL. Any
         additional cost for fuel, oils and greases required for the second, or
         subsequent, round of Tests and Trials shall be for BUILDER's account.

(c)      In the event that the BUYER rejects the VESSEL, the BUYER shall
         indicate in its notice of rejection in what respect the VESSEL, or any
         part or equipment thereof, does not conform to this Contract and/or the
         Specifications.

(d)      The BUILDER may dispute the rejection of the VESSEL by the BUYER under
         this Paragraph, in which case the matter shall be submitted for final
         decision by arbitration in accordance with Article XVII hereof.

5.       Effect of Acceptance:

         Acceptance of the VESSEL as provided above shall be final and binding
and shall preclude the BUYER from refusing tender of delivery of the VESSEL as
hereinafter provided, if the BUILDER complies with all procedural requirements
for delivery as provided in Article VII hereof.

6.       Disposition of Surplus Consumable Stores:

         Should any consumable stores furnished by the BUILDER for the Tests and
Trials remain on board the VESSEL at the time of acceptance thereof by the
BUYER, the BUYER agrees to buy the same from the BUILDER at the original
documented purchase price thereof, and payment by the BUYER shall be effected
within thirty (30) days of receipt from BUILDER of an invoice and supporting
documentation therefore.


                                       17
<PAGE>   21

7.       Installation and Commissioning of OWNER Furnished Equipment:

         The BUILDER is required to deliver to the BUYER a complete fully
functioning drilling unit that meets all of the provisions of this Contract and
the Specifications. All equipment shall be installed in the VESSEL and fully
commissioned and tested by the BUILDER according to the requirements of this
Contract, the Specifications and the manufacturers of all of the OFE and the
BUILDER Furnished Equipment ("BFE"). The OFE and BFE shall be installed by the
BUILDER no later than the times called for in the Construction Schedule. The
Construction Schedule shall be agreed between the BUILDER and the BUYER as
called for in the Contract and shall be structured such that there is sufficient
time after installation of all equipment for hook up, commissioning and testing.
The BUILDER shall be responsible for arranging and conducting all hook up,
commissioning and testing activities. Notwithstanding the provisions of this
Paragraph, it is recognized that the BUYER has specific responsibility for the
following:

o    To arrange for and pay for the attendance during hook up, commissioning and
     testing activities of the appropriate manufacturers representatives.

o    To work with the BUILDER during the development of the commissioning and
     testing plan and schedule.

o    To provide on site resources during hook up, testing and commissioning
     activities to assist the BUILDER particularly with equipment with which he
     is not familiar.

         It is also specifically recognized that non-performance of OFE after it
has been properly installed and tested according to the manufacturers
recommendations and the agreed Construction Schedule shall not be grounds for
the assertion by the BUYER of default by the BUILDER.

                                        ARTICLE VII - DELIVERY DATE AND DELIVERY

1.       Time and Place:

(a)      Delivery Date and Place:

         The VESSEL shall be delivered by the BUILDER to the BUYER jacked down
         and safely afloat secured alongside the wharf at BUILDER's Shipyard or
         another mutually agreed location ready for ocean tow or loadout for dry
         tow as approved by the BUYER's underwriters' surveyors following
         completion of the procedures addressing Tests and Trials in Article VI
         on or before 1 February 2003 provided, however, that in the event of
         Permissible Delays as contemplated by Article III, Paragraph 2,


                                       18
<PAGE>   22

         or delays due to force majeure (as defined in Article VIII), the
         aforementioned date for delivery of the VESSEL shall be postponed
         accordingly. The aforementioned date, or such later date to which the
         requirement of delivery is postponed pursuant to such terms, is herein
         called the "Delivery Date". Notwithstanding the foregoing, BUYER shall
         not be obligated to accept delivery of the VESSEL more than fifteen
         (15) calendar days prior to the Delivery Date unless otherwise mutually
         agreed in writing.

         At the BUYER's option, the VESSEL shall be delivered in a jacked-up
         position at the BUILDER's Shipyard ready for ocean tow or loadout for
         dry tow as approved by the BUYER's underwriters' surveyors.

(b)      Actual Delivery Date:

         The actual delivery date shall mean the date on which the BUILDER shall
         have actually delivered the VESSEL to the BUYER. However, the date on
         which the BUILDER shall have duly tendered the VESSEL for delivery in
         case of the BUYER's default as provided in Paragraph 1 (c) of Article
         XIII, shall be substituted for the actual delivery date, if applicable.

 2.      When and How Effected:

         Provided that the BUYER shall have fulfilled all of its obligations
stipulated under this Contract, delivery of the VESSEL shall be effected
forthwith by the concurrent execution by each of the parties hereto of the
PROTOCOL OF DELIVERY AND ACCEPTANCE in the form attached hereto as Exhibit "B",
acknowledging delivery of the VESSEL by the BUILDER and acceptance thereof by
the BUYER. Notwithstanding any provision in this Contract, it is agreed and
understood that the VESSEL shall be delivered to BUYER when completed and
accepted by BUYER regardless of the existence of any pending disagreement,
dispute or arbitration proceeding, provided that BUYER shall have paid to
BUILDER all undisputed installments due prior to or upon delivery and BUYER
shall deposit any disputed portion of the Contract Price into a joint account as
contemplated in Article V, Paragraph 4, prior to or upon delivery.

3.       Documents to be Delivered to BUYER:

         Upon delivery and acceptance of the VESSEL, the BUILDER shall deliver
to the BUYER all necessary documents, including but not limited to those listed
below, which shall accompany the PROTOCOL OF DELIVERY AND ACCEPTANCE:

(a)      PROTOCOL OF TESTS AND TRIALS of the VESSEL made pursuant to the
         Specifications.


                                       19
<PAGE>   23

(b)      PROTOCOL OF INVENTORY of the equipment of the VESSEL, including spare
         parts and the like, all as specified in the Specifications.

(c)      PROTOCOL OF STORES OF CONSUMABLE NATURE referred to under Paragraph 6
         of Article VI hereof, including the original purchase price thereof.

(d)      ALL CERTIFICATES, including the BUILDER's CERTIFICATE, required to be
         furnished upon delivery of the VESSEL pursuant to this Contract and the
         Specifications. It is agreed that if, through no fault on the part of
         the BUILDER, the classification certificate and/or other certificates
         are not available at the time of delivery of the VESSEL, provisional
         certificates shall be accepted by the BUYER, provided that the BUILDER
         shall furnish the BUYER with the formal certificates as promptly as
         possible after such formal certificates have been issued.

(e)      DOCUMENTS OF ASSIGNMENT, accompanied by original documents of all
         guarantees and warranties from contractors, subcontractors, vendors,
         suppliers, manufacturers and dealers for all equipment, material and
         appurtenances supplied and installed by the BUILDER.

(f)      DECLARATION OF WARRANTY of the BUILDER that the VESSEL is delivered to
         the BUYER free and clear of any liens, charges, rights in rem, claims,
         mortgages, or other encumbrances upon the BUYER's title thereto, and in
         particular, that the VESSEL is absolutely free of all liabilities and
         burdens of any nature, including those which may be related to imposts,
         taxes or charges imposed by governmental authorities of the country of
         construction, as well as of all liabilities of the BUILDER to its
         contractors, subcontractors, employees and crew, and of all liabilities
         arising from the operation of the VESSEL in Sea Trials, or otherwise,
         prior to delivery.

(g)      DRAWINGS AND PLANS pertaining to the VESSEL as stipulated in the
         Specifications, including all plans, specifications, working drawings,
         technical descriptions, calculations, test results and other data, and
         all other such information and documents concerning the design,
         engineering and construction of the VESSEL.

(h)      COMMERCIAL INVOICE AND BILL OF SALE.

4.       Tender of VESSEL:

         If the BUYER fails to take delivery of the VESSEL after completion
thereof according to this Contract and the Specifications without any
justifiable reason, the BUILDER shall have the right to tender the VESSEL for
delivery after compliance with all procedural requirements as provided above.


                                       20
<PAGE>   24

5.       Title, Retention of Title and Risk:

(a)      Following payment of the first installment of the Contract Price:

         (i)              the VESSEL and all parts thereof as it is from time to
                  time constructed; including

         (ii)             all appurtenances and components and any other
                  materials and articles, including but not limited to
                  machinery, equipment, gear, engines and outfit (hereinafter
                  collectively referred to as "Appurtenances and Components")
                  whether wholly or partially finished or unfinished from time
                  to time appropriated or used or intended to be appropriated or
                  used in the construction of the VESSEL or ready to be so
                  appropriated whether within the premises of the BUILDER or any
                  subcontractor or elsewhere and whether or not marked and set
                  aside pursuant to Sub-paragraph (b), below

         shall forthwith become and remain the absolute property of the BUYER
         and shall not be removed from the Shipyard without the written consent
         of the Buyer or its Representative which consent shall not unreasonably
         be withheld. Provided, however, that except as specifically set forth
         in Article XI, Paragraph 3, Owner Furnished Equipment shall at all
         times be and remain the absolute property of the BUYER.

(b)               The intention of the BUILDER to transfer the property in the
         VESSEL including any Appurtenances and Components to the BUYER in
         accordance with this Sub-paragraph shall be evidenced by the BUILDER
         taking or causing the supplier of the goods or materials to take any of
         the following actions:

         (i)              Upon such Appurtenances and Components being
                  substantially ready for delivery to the Shipyard, suitably
                  marking with the VESSEL's yard number or otherwise plainly
                  identifying or permitting the BUYER or its Representative to
                  suitably so mark or plainly identify such Appurtenances and
                  Components so as to show that (A) their destination is the
                  Shipyard, and (B) that they are the property of the BUYER and
                  (C) (where they are not stored at the Shipyard or premises of
                  the BUILDER) to whose order they are held; or

         (ii)             setting aside and storing such Appurtenances and
                  Components so marked or identified to the satisfaction of the
                  BUYER; or


                                       21
<PAGE>   25
         (iii)            sending the BUYER or its representative a schedule
                  listing and giving the value of every item of the
                  Appurtenances and Components so set aside and stored; or

         (iv)             inviting the Buyer to inspect the Appurtenances and
                  Components.

(c)               The BUILDER hereby represents and warrants that there shall
         not be any retention of title clauses in force and applying to any
         Appurtenances and Components provided by the BUILDER and shall use its
         best efforts to ensure the same for any Appurtenances and Components
         provided by any subcontractor or any other person for incorporation
         into the VESSEL. The BUILDER shall promptly (but in any event within
         two (2) calendar days) notify the BUYER's Representative in writing in
         the event that more than Two Hundred Fifty Thousand United States
         Dollars (U.S.$250,000) of Appurtenances and Components under this
         Contract are subject to retention of title clauses at any point in time
         prior to the Delivery Date.

(d)               Neither the BUILDER nor any subcontractor nor any other person
         shall have a lien on any part of the VESSEL, including its
         Appurtenances and Components, which have vested in the BUYER under
         Article VII, Paragraph 5, or otherwise under this Contract, or on OWNER
         Furnished Equipment, for any sum due to the BUILDER, subcontractor or
         any other person and the BUILDER shall take all such steps as may be
         necessary to ensure that the title of the BUYER and the exclusion of
         any such lien are brought to the notice of all subcontractors and other
         persons dealing with or transporting any such Appurtenances and
         Components, or OWNER Furnished Equipment, which shall include but not
         be limited to such notification being contained in all purchase orders
         and other documents emanating from the BUILDER.

(e)               No mortgages, charges, liens or encumbrances of whatsoever
         nature shall be created or registered against the VESSEL or any part
         thereof including its Appurtenances and Components without the prior
         written consent of the BUYER.

(f)               The BUILDER shall fully indemnify, defend and hold the BUYER,
         its parent, holding and affiliated companies harmless against all and
         any consequences including all costs, claims, causes of action,
         liabilities, damages and expenses whatsoever arising from such breach
         of warranty.

(g)               Notwithstanding the foregoing, the BUYER shall not be liable
         at any time for the loss of or damage to the VESSEL or any part thereof
         or any of the Appurtenances and Components or any OWNER Furnished
         Equipment and the BUILDER shall be responsible for any loss of or
         damage to the same and for the cost of storing, handling and
         transporting


                                       22
<PAGE>   26
         the same and shall effect such additional insurance as may be necessary
         to cover the risk of such loss or damage from any cause whatsoever.

(h)               The risk of loss of or damage to the VESSEL, including all
         Appurtenances and Components (as defined in this Paragraph 5) and all
         OWNER Furnished Equipment shall pass to the BUYER only upon delivery
         and acceptance thereof having been completed as stated above; it being
         expressly understood that, until such delivery by BUILDER and
         acceptance by BUYER is effected, any and all risk of loss of or damage
         to the VESSEL, including all Appurtenances and Components (as defined
         in this Paragraph 5) and all OWNER Furnished Equipment shall be in the
         BUILDER.

6.       Removal of VESSEL:

         The BUYER shall take possession of the VESSEL immediately upon delivery
and acceptance thereof and shall remove the VESSEL from the premises of the
Shipyard within thirty (30) calendar days after delivery and acceptance thereof
is effected. If the BUYER shall not remove the VESSEL from the premises of the
Shipyard within the aforesaid thirty (30) calendar days, then, in such event
commencing on the thirty-first (31st) calendar day the BUYER shall pay to the
BUILDER the reasonable mooring charges of the VESSEL.

7.       Export License:

         If required, the BUILDER shall be obligated to secure export license(s)
for the VESSEL and shall exercise its best efforts to secure prompt issuance of
any such export license(s) as well as any other required governmental approvals
or authorizations required for removal of the VESSEL from the country of
construction, including the territorial waters thereof. In the event BUILDER has
not secured any required export license(s) for the VESSEL within thirty (30)
calendar days of the Effective Date of this Contract, as defined in Article
XXIII, then BUILDER shall be deemed to be in default under Article XIV and BUYER
may elect, at any time thereafter, to cancel this Contract as provided in
Article XI.

                                             ARTICLE VIII - FORCE MAJEURE DELAYS

1.       Causes of Delay:

         If, at any time before actual delivery of the VESSEL, either the
construction of the VESSEL or any performance required as a prerequisite to
delivery of the VESSEL is delayed due to Acts of God; acts of princes or rulers;
requirements of government authorities; war or other hostilities or preparations


                                       23
<PAGE>   27
therefor; revolution, sabotages, general strikes, general lockouts or other
general labor disturbances; floods, typhoons, hurricanes, tornadoes, windstorms,
lightning or other abnormal weather conditions which prevent work for at least
three (3) consecutive days; earthquakes, tidal waves, explosions, collisions or
strandings, embargoes, import restrictions, defects in materials, machinery or
equipment which could not have been detected by the BUILDER using reasonable
care (provided same did not result from the BUILDER's failure to take the
reasonably necessary measures to avoid any such delay); casting or forging
rejects or the like not due to negligence; unusual delays caused by the
Classification Society or other bodies whose documents are required (provided
same did not result from BUILDER's failure to take the reasonably necessary
measures to avoid any such delay); destruction of or damage to the Shipyard or
works of the BUILDER, its contractors, subcontractors or suppliers, or of or to
the VESSEL or any part thereof, by any causes herein described which in turn
necessarily and actually delay the construction of the VESSEL or the BUILDER's
performance under this Contract, and which could not have been prevented by the
exercise of reasonable diligence on the part of BUILDER, its contractors,
subcontractors or suppliers; then and in any such case, subject to the
provisions of Paragraph 2 below, the date by which the BUYER may either cancel
this Contract under Article III, Paragraph (1)(b) or impose liquidated damages
under Article III, Paragraph 1(c), shall be postponed for a period of time which
shall not exceed the total accumulated time of all such delay, provided in no
event shall local strikes or labor disturbances involving BUILDER's or its
contractors' or subcontractors' employees, acts or defaults of BUILDER's
contractors, subcontractors or suppliers or breach of BUILDER's, its
contractors', subcontractors', or suppliers' warranties or guarantees be
considered as an allowable delay.

2.       Notice of Delay:

         As soon as possible and in no event more than five (5) working days
after the date of discovery by the BUILDER of an occurrence of any cause of
delay, on account of which the BUILDER claims that it is entitled under this
Contract to delay, the BUILDER shall notify the BUYER in accordance with Article
XXII of the date such causes of delay occurred and the nature thereof. As soon
as the ending of such cause of delay is known, the BUILDER shall notify the
BUYER in accordance with Article XXII of the date such cause of delay ended. The
BUILDER shall also notify the BUYER in accordance with Article XXII of the
period by which the BUILDER claims an allowable delay by reason of such cause of
delay with all reasonable dispatch after it has been determined. Failure by
BUILDER to give the required notice shall preclude BUILDER's right in such case
to claim allowable delay under this Article.

                                   ARTICLE IX - OWNER FURNISHED EQUIPMENT DELAYS


                                       24
<PAGE>   28
         OWNER shall furnish or cause to be furnished to BUILDER at BUILDER's
Shipyard those items of machinery, material and equipment as set forth in the
Specifications to be furnished by OWNER (herein referred to as "OWNER Furnished
Equipment" or "OFE") on or before the time specified for such delivery in the
Contract Specifications (Exhibit "D"). However, BUILDER shall not require OWNER
Furnished Equipment to be delivered to BUILDER's Shipyard prior to the time that
said OWNER Furnished Equipment is required, in BUILDER's reasonable opinion, to
meet the BUILDER's Construction Schedule, as defined herein.

         If OWNER's failure to timely deliver OWNER Furnished Equipment to
BUILDER's Shipyard directly causes any delays in the BUILDER's Construction
Schedule, then such delays shall be understood to be Permissible Delays as
contemplated by Article III, Paragraph 2, and the Delivery Date shall be
extended by the equivalent number of days of delay in delivery of such OWNER
Furnished Equipment to BUILDER's Shipyard. (BUILDER agrees, however, to use its
best efforts to proceed with its work on the VESSEL so as to minimize the delay
that may be incurred by reason of late delivery of OWNER Furnished Equipment).
In order to enable BUILDER to efficiently and economically proceed with its work
on the VESSEL, OWNER shall give BUILDER notice of any actual or anticipated
delay in the delivery of OWNER Furnished Equipment to BUILDER's Shipyard.

         Should OWNER fail to timely deliver OWNER Furnished Equipment to
BUILDER at BUILDER's Shipyard due to causes other than force majeure (which
shall in this context have the same general meaning as the causes specified in
Paragraph 1 of this Article) and such delay directly results in increased costs
to BUILDER attributable to additional unavoidable physical work on the VESSEL,
OWNER shall reimburse BUILDER for its actual documented cost of such additional
work. BUILDER's entitlement to such reimbursement shall be applicable only in
the event that BUILDER has submitted prior written notice to OWNER that the
delay in delivery of OWNER Furnished Equipment will or may require additional
physical work to be performed on the VESSEL.

                                                 ARTICLE X - WARRANTY OF QUALITY

1.       Warranty:

         Subject to the provisions hereinafter set forth, the BUILDER warrants
the VESSEL and all components thereof fabricated and/or furnished by the BUILDER
and/or its contractors and/or subcontractors to be free of defects in
workmanship and materials, and the BUILDER undertakes to remedy, free of charge
to the BUYER, any defects in the VESSEL (which term shall include her hull,
legs, machinery, equipment and gear) which are due to defective material and/or
improper workmanship on the part of the BUILDER and/or its contractors and/or
subcontractors as well as any error and/or inadequacy in BUILDER's design work,
if any, and any defects or discrepancies resulting from the failure of


                                       25
<PAGE>   29

the VESSEL to either function properly in accordance with the standards set
forth in the Specifications or to meet the Specifications, provided that the
defects, errors or inadequacies are discovered within a period of twelve (12)
months commencing upon the actual delivery date of the VESSEL.

         However, the BUILDER's warranty under and pursuant to this Article
shall not include any defects of or due to machinery and equipment supplied by
BUYER, and installed on the VESSEL, except as respects the consequences of the
BUILDER's and/or its contractors' and/or subcontractors' defective material,
improper workmanship and/or failure to install or incorporate any such equipment
into the VESSEL in a good and workmanlike manner so as to function properly and
in accordance with the Specifications. The BUILDER agrees to deliver and assign
to the BUYER all guarantees and warranties received by it in the purchase of
said machinery and equipment.

2.       Notice of Defects:

         The BUYER shall promptly notify the BUILDER in accordance with Article
XXII of any defects for which claim is made under this warranty after the
discovery thereof. The BUYER's notice shall describe the nature and extent of
the defects to the extent known to BUYER. The BUILDER shall promptly acknowledge
receipt of any such notice from BUYER. The BUILDER shall have no obligation for
any defects discovered prior to the expiry date of the said Warranty Period,
unless notice of such defects is received by the BUILDER not later than thirty
(30) days after expiry thereof.

3.       Remedy of Defects:

(a)      The BUILDER shall remedy, at its expense, any defects against which the
         VESSEL is warranted under this Article by making all necessary repairs
         or replacements at the Shipyard.

(b)      However, if it is impractical to bring the VESSEL to the Shipyard, the
         BUYER may cause the necessary repairs or replacements to be made
         elsewhere which is deemed by BUYER to be suitable for the purpose,
         provided that, in such event, the BUILDER may, at its own expense,
         forward or supply replacement parts or materials to the VESSEL, unless
         forwarding or supplying thereof to the VESSEL would impair or delay the
         operation or working schedule of the VESSEL. In the event that the
         BUYER proposes to cause the necessary repairs or replacements to be
         made to the VESSEL at any other shipyard or location than the Shipyard,
         the BUYER shall first, but in all events as soon as possible, give the
         BUILDER notice in accordance with Article XXII of the time and place
         such repairs will be made, and if the VESSEL is not thereby delayed, or
         her operation or working schedule is not thereby impaired, the BUILDER
         shall have the right to verify at its own cost and by its own
         representative(s) the nature and extent of the defects complained of.
         The


                                       26
<PAGE>   30
         BUILDER shall, in such case, promptly notify the BUYER in accordance
         with Article XXII after such examination has been completed of its
         acceptance or rejection of the defects as ones that are covered by the
         warranty herein provided. Upon the BUILDER's acceptance of the defects
         as justifying remedy under this Article, or upon award of the
         arbitration so determining, the BUILDER shall immediately pay to the
         BUYER all documented costs incurred for such repairs or replacements.
         Provided, that the costs chargeable to BUILDER for repairs or
         replacements under this Article shall not exceed three (3) times the
         amount that such repairs and replacements would have cost if they had
         been carried out by BUILDER at its Shipyard based on BUILDER's normal
         rates as published at the time of repairs and/or replacement. Interest
         on any unpaid balance due hereunder shall be paid at the rate of ten
         percent (10%) per annum, commencing thirty (30) calendar days after
         BUILDER's receipt of BUYER's invoice for any amounts due under this
         Article and continuing until payment has been remitted to BUYER.

(c)      In any case, the VESSEL shall be taken at the BUYER's cost and
         responsibility to the place elected, ready in all respects for such
         repairs or replacements.

(d)      Any work performed or any material supplied by BUILDER under this
         Article shall be further warranted for the balance of the warranty
         period specified in Paragraph 1 of this Article or six (6) months after
         completion of such work or supply, whichever is later.

(e)      Any dispute under this Article shall be referred to arbitration in
         accordance with the provisions of Article XVII hereof.

4.       Extent of BUILDER's Responsibility:

(a)      The BUILDER shall have no responsibility or liability for any defects
         whatsoever in the VESSEL other than the defects specified in this
         Article. Nor shall the BUILDER in any circumstances be responsible or
         liable for any consequential or special losses, damages or expenses
         including, but not limited to, loss of time, loss of profit or earnings
         directly or indirectly occasioned to the BUYER due to the defects
         specified in this Article or due to repairs or other works done to the
         VESSEL to remedy such defects.

(b)      The BUILDER shall not be responsible for any defects in any part of the
         VESSEL which have been caused subsequent to delivery of the VESSEL by
         any replacement or repair work performed by any other contractor, or
         for any defects to the extent the same have been caused by use in
         excess of specified design limitations or improper maintenance of the
         VESSEL on the part of the BUYER, its servants or agents or by ordinary
         wear and tear.


                                       27
<PAGE>   31

(c)      Subject always to the terms of Article XV, the warranty contained
         hereinabove in this Article replaces and excludes any other liability,
         guarantee, warranty and/or condition imposed or implied by the law,
         customary, statutory or otherwise, by reason of the construction and
         sale of the VESSEL by the BUILDER for and to the BUYER.

5.       Guarantee Engineer:

         The BUILDER shall have the right to appoint a Guarantee Engineer to
serve on the VESSEL as its representative for such portion of the warranty
period as the BUILDER may decide at BUILDER's cost and risk. The BUYER and its
employees shall give the Guarantee Engineer full cooperation in carrying out his
duties as the representative of the BUILDER on board the VESSEL. The BUYER shall
accord the Guarantee Engineer the treatment reasonably comparable to the
VESSEL's Chief Engineer and shall provide him with suitable accommodations and
subsistence at no cost to the BUILDER and/or the Guarantee Engineer.

                                              ARTICLE XI - CANCELLATION BY BUYER

1.       Notice:

         The installments and other payments made by the BUYER prior to the
delivery of the VESSEL shall be in the nature of advances to the BUILDER. In the
event that the BUYER shall exercise its right of cancellation of this Contract
under and pursuant to any of the provisions of this Contract specifically
permitting the BUYER to do so, then the BUYER shall notify the BUILDER in
accordance with Article XXII and such cancellation shall be effective as of the
date when notice thereof is received by the BUILDER.

2.       Refund by BUILDER:

         Within five (5) business days of receipt of BUYER's notice of
cancellation of this Contract the BUILDER shall refund to the BUYER in U.S.
Dollars the sum of: (a) the full amount of all sums paid by the BUYER to the
BUILDER on account of the VESSEL; and (b) the cost delivered at BUILDER'S
Shipyard of all OWNER Furnished Equipment which has been delivered to BUILDER's
Shipyard for installation in the Vessel unless the BUILDER proceeds to
arbitration under the provisions of Article XVII hereof.

         In such event, the BUILDER shall pay the BUYER interest at the rate of
ten percent (10%) per annum on the amount required herein to be refunded to the
BUYER, computed from the respective dates on which either such sums were paid by
the BUYER to the BUILDER or the respective items of OWNER


                                       28
<PAGE>   32
Furnished Equipment were delivered to BUILDER's Shipyard, to the date of
remittance by wire transfer of such refund to the BUYER by the BUILDER.

         For purposes of the provisions addressing the BUYER's rights under this
Contract, on or before the Construction Commencement Date the BUILDER shall
provide to the BUYER as partial security for BUILDER's obligations under this
Contract both (i) an irrevocable stand-by letter of credit confirmed by a bank
in the United States acceptable to BUYER, in an amount equivalent to ten percent
(10%) of the Contract Price as defined in Article II, Paragraph 1, and in the
form annexed as Exhibit "C-1", and (ii) an on demand performance bond issued by
underwriters of recognized responsibility and which are subject to written
approval by BUYER, which approval shall not be unreasonably withheld, in an
amount equivalent to ten percent (10%) of the Contract Price as defined in
Article II, Paragraph 1, and in the form annexed as Exhibit "C-2", both of which
are to be provided in order to partially assure refund to the BUYER of such sums
as are contemplated in this Contract due to any event of BUILDER's default
hereunder including warranties pursuant to Article X.

3.       Discharge of Obligations:

         Upon such refund by the BUILDER to the BUYER, and the BUYER's receipt
thereof, title to the VESSEL and all OWNER Furnished Equipment which has been
delivered to the BUILDER's shipyard for installation in the VESSEL shall be
transferred from the BUYER to the BUILDER and the BUYER shall at that time
release the stand-by letter of credit and the performance bond and thereafter
all obligations, duties and liabilities of each of the parties hereto to the
other under this Contract (excluding only the provisions of Articles X, XI, XV,
XVII and XX) shall be forthwith completely discharged.

4.       Termination for BUYER's Convenience:

         Notwithstanding any other provision of this Contract, in addition to
any other right that the BUYER may have under the Contract to cancel the
Contract, the BUYER shall have the right to terminate the Contract, at its sole
option, upon notifying the BUILDER in accordance with Article XXII, which notice
may be given at any time prior to actual delivery of the VESSEL by the BUILDER
to the BUYER and acceptance of the VESSEL by the BUYER. In the event the BUYER
exercises such right of termination at any time after the Construction
Commencement Date, the BUYER shall pay the BUILDER within thirty (30) calendar
days of the BUILDER's receipt of such notice BUILDER's documented costs
(including overhead costs and project closure costs) up to the date of
termination, less any installment payments received by BUILDER, plus a lump sum
termination fee calculated as twenty percent (20%) of any remaining installment
payments which are not yet due and payable under the terms of this Contract as
of the date of termination. Provided, however, that the total amount payable by
the BUYER to the BUILDER shall never exceed the Contract Price. Provided,
further, that no fee or cost shall be payable by the BUYER to the


                                       29
<PAGE>   33
BUILDER in respect of BUYER's termination of either this Contract or any other
contracts for construction of a vessel between the BUILDER and the BUYER in
respect of which, at the time of BUYER's notice of termination, the Construction
Commencement Date for such contract has not occurred.

         The termination fee as described in the preceding paragraph shall be
the BUYER's sole financial obligation to the BUILDER and the BUILDER's exclusive
remedy in the event of such termination of the Contract. Upon payment by the
BUYER of the applicable termination fee to the BUILDER (or refund by the BUILDER
to the BUYER, as the case may be), the BUILDER shall release the BUYER from any
liability or obligation to reimburse the BUILDER for any costs or damages,
including without limitation, loss of profits or revenues that the BUILDER may
suffer or incur from such termination and the BUYER shall at that time release
the stand-by letter of credit and the performance bond.

                                               ARTICLE XII - SUSPENSION BY BUYER

1.       Suspension of performance for BUYER's convenience:

         At the BUYER's sole discretion, the BUYER shall have the recurring
right, exercisable at any time, subject to giving forty-five (45) calendar days
written notice to the BUILDER, to suspend performance under this Contract in
which case the BUILDER shall promptly forward to the BUYER all completed or
uncompleted drawings, reports and other documents related to the BUILDER's
performance under this Contract and the following provisions shall apply:

         -    The BUYER shall pay the BUILDER the sum of (i) progress payments
              due under the terms of the Contract prior to the date of
              suspension (to the extent not already paid), (ii) the BUILDER's
              audited additional costs, including overhead, directly related to
              this Contract up to the date of suspension; (iii) the BUILDER's
              audited direct costs, including overhead, to mothball the VESSEL
              in preparation for the suspension period; (iv) a fee of Twenty
              Thousand United States Dollars (U.S.$20,000) per day during the
              period of suspension; and (v) (the BUILDER's audited direct costs,
              including overhead, to reactivate the construction of the VESSEL.

         -    The BUILDER shall immediately and in consultation with the BUYER
              revise its work schedule or program so as to reduce as much as
              possible the consequences to the BUYER flowing or which may flow
              from such suspension.

         -    The BUILDER shall use its best endeavors to maintain, redeploy,
              transfer or retain its personnel and equipment in any part of the
              work not suspended at the same time or in any other work for the
              BUYER or its affiliates under other contracts.


                                       30
<PAGE>   34

         -    However, no fee or cost shall be payable by the BUYER to the
              BUILDER in respect of either this VESSEL or any other vessels that
              the BUILDER may have contracted to build for the BUYER in respect
              of which at the time of BUYER's notice of suspension the
              Construction Commencement Date for such vessel has not occurred.

         -    The BUILDER shall notify the BUYER in writing immediately upon the
              BUILDER's performance hereunder being suspended, of the date and
              time on which the services were suspended and forward to the BUYER
              all other particulars which the BUILDER may rely on in making any
              claim under this Article.

         -    The BUYER's right to suspend the Contract as provided herein shall
              be without prejudice to its right to terminate this Contract at
              any time in accordance with the provisions of Article XI,
              Paragraph 4.

         -    The period of suspension shall not be greater than six (6) months
              unless otherwise mutually agreed in writing.

2.       Recommencement of performance at BUYER's convenience:

         -    At the BUYER's sole discretion, the BUYER shall have the recurring
              right, exercisable at any time, subject to giving forty-five (45)
              calendar days written notice to the BUILDER, to require the
              BUILDER to recommence performance which has been suspended under
              this Contract in which case the BUILDER shall promptly recommence
              all or such part of the performance as specified by BUYER in said
              notice.

         -    The BUILDER shall notify the BUYER in writing immediately upon the
              BUILDER's performance hereunder recommencing following suspension,
              of the date and time on which the services were recommenced and
              forward to the BUYER all other particulars which the BUILDER may
              rely on in making a claim under the Article.

         -    The Delivery Date, as defined in Article VII, Paragraph 1(a),
              shall be extended for a period corresponding to the period of the
              suspension caused or requested by the BUYER, which shall be
              understood to constitute Permissible Delays as contemplated by
              Article III, Paragraph 2.


                                       31
<PAGE>   35

                                                  ARTICLE XIII - BUYER'S DEFAULT

1.       Definition of Default:

         The BUYER shall be deemed to be in default of performance of its
obligations under this Contract in the following cases:

(a)      If the BUYER fails to pay any installments to the BUILDER within five
         (5) business days after receipt of notice in accordance with Article
         XXII that any such installment became due and payable under the
         provisions of Article II hereof; or

(b)      If the BUYER fails to pay the final installment to the BUILDER
         concurrently with the delivery of the VESSEL by the BUILDER and
         acceptance thereof by the BUYER as provided in Article VII hereof; or

(c)      If the BUYER fails to take delivery of the VESSEL, when the VESSEL is
         duly tendered for delivery by the BUILDER under the provisions of
         Article VII hereof; or

(d)      If the BUYER goes into liquidation, whether voluntary or compulsory, or
         enters into a scheme of arrangement, or makes a general assignment of
         its assets for the benefit of its creditors, or appoints a receiver or
         receivers of any kind whatsoever, whether temporary or permanent, for
         the property of the BUYER, or if the BUYER institutes proceedings for
         its reorganization or such proceedings are instituted by creditors and
         approved by the court, whether proposed by a creditor, a stockholder or
         any other person whomsoever, or if BUYER suffers any execution against
         a major portion of its assets which is not satisfied within seven (7)
         days.

         If any default by BUYER under Paragraphs (a), (b) or (c) above
 necessarily and actually causes delays in either the construction of the VESSEL
 or any performance required as a prerequisite to delivery of the VESSEL, such
 delays shall be understood to be Permissible Delays as contemplated by Article
 III, Paragraph 2.

2.       Interest and Charges:

         If the BUYER has not made payment as to any installment as provided in
Paragraph 1 (a) and (b) of this Article on its due date, the BUYER shall pay
interest on such installment at the rate of ten percent (10%) per annum from the
due date thereof to the date of payment to the BUILDER of the full amount of
such installments, including interest. In case the BUYER shall fail to take
delivery of the VESSEL as provided in Paragraph 1(c) of this Article, the BUYER
shall pay interest upon the final installment at the same rate as aforesaid from
and including the day upon which the VESSEL is duly tendered for delivery by the
BUILDER. In the event a due date falls on a non-business day of either


                                       32
<PAGE>   36
BUILDER or BUYER, the payment with respect thereto shall be due on the next
succeeding business day of both BUILDER and BUYER.

3.       Effect of BUYER's Default:

(a)      If any default by the BUYER occurs as defined in Paragraph 1 (a), (b)
         and (c) of this Article, the Delivery Date shall be automatically
         postponed for the period of continuance of such default by the BUYER.

(b)      If any such default by the BUYER continues for a period of five (5)
         business days, the BUILDER may, at its option, notify BUYER in
         accordance with Article XXII of BUILDER's intention to cancel the
         Contract, and if BUYER does not remedy the default within thirty (30)
         business days after receipt of such notice, BUILDER may cancel this
         Contract by giving notice to such effect to the BUYER in accordance
         with Article XXII.

         In the event of such cancellation of this Contract, the BUILDER shall
         be entitled to retain any installment or installments previously paid
         by the BUYER to the BUILDER on account of this Contract (it being
         understood by both parties that retention of any such installments by
         BUILDER is by way of liquidated damages and not by way of penalty).

(c)      BUYER shall not under any circumstances be responsible or liable to
         BUILDER, its contractors or subcontractors, for any consequential or
         special losses, damages or expenses including, but not limited to, loss
         of time, loss of profit or earnings whether directly or indirectly
         arising out of this Contract.

4.       Sale of VESSEL:

(a)      In the event of default by the BUYER pursuant to this Contract as set
         forth above, the BUILDER shall have the right either to complete or not
         to complete the VESSEL as it deems fit, and to sell the VESSEL at a
         public or private sale, upon ten (10) business days prior written
         notice to the BUYER in accordance with Article XXII, on such terms and
         conditions as the BUILDER deems fit, without being answerable for any
         loss or damage.

(b)      In the event of the sale of the VESSEL in a completed state, the
         proceeds of sale received by the BUILDER shall be applied first to
         payment of all documented expenses attending such sale and otherwise
         incurred by the BUILDER as a result of the BUYER's default, and then to
         payment of all unpaid installments of the Contract Price and interest
         on such installments at the rate of ten percent (10%) per annum from
         the respective due dates thereof to the date of application.


                                       33
<PAGE>   37

(c)      In the event of sale of the VESSEL in an incompleted state, the
         proceeds of sale received by the BUILDER shall be applied first to all
         documented expenses attending such sale and otherwise incurred by the
         BUILDER as a result of the BUYER's default, and then to payment of all
         costs of construction of the VESSEL less the installments so retained
         by the BUILDER.

(d)      If the proceeds of sale are insufficient to pay such total amounts
         payable as aforesaid, the BUYER shall promptly pay the deficiency to
         the BUILDER upon written request with interest at the rate of ten
         percent (10%) per annum from the date of BUILDER's written request for
         payment to the date of BUYER's payment to BUILDER.

(e)      In either of the above events of sale, if the proceeds of sale exceed
         the total of amounts to which such proceeds are to be applied as
         aforesaid, the BUILDER shall promptly pay the excess to the BUYER with
         interest at the rate of ten percent (10%) per annum from the date of
         sale to the date of payment to BUYER.

         The rights conferred upon the BUILDER under the terms of this Article
         XIII shall be in lieu of any rights which the BUILDER would have either
         at law or in equity upon the happening of the events of default
         specified herein, or upon any failure on the part of the BUYER to
         perform the undertakings, agreements, and covenants on its part to be
         performed hereunder. The failure of the BUILDER to exercise the rights
         conferred upon it hereunder in any one or more instances of the
         occurrence of an event of default, as hereinabove defined, shall not
         constitute a waiver of BUILDER's right subsequently to exercise such
         rights under this Contract.

                                                 ARTICLE XIV - BUILDER'S DEFAULT

1.       Definition of Default:

         The BUILDER shall be deemed to be in default of its obligations under
this Contract if, after BUYER gives five (5) calendar days written notice in
accordance with Article XXII to correct the same, the BUILDER fails in any
respect to observe the provisions of this Contract.

         Subject always to the provisions of Article III, so long as BUILDER
takes prompt and reasonable action toward the cure or correction of the
condition complained of, and continues diligently to pursue the said cure or
correction, BUILDER shall not be considered to be in default on account thereof
if it is not possible to correct the breach or defect within said five day
period.

         The following shall also be considered to be events of default:


                                       34
<PAGE>   38

(a)      (i)      insolvency or inability of the BUILDER to pay its debts as and
                  when they fall due; or

         (ii)     presentation of a winding-up petition (except for the purpose
                  of amalgamation or reconstruction when solvent); or

         (iii)    issuance of a notice of meeting of members or shareholders for
                  the passing of a resolution for winding-up or reconstruction
                  (except for the purpose of amalgamation or reconstruction when
                  solvent); or

         (iv)     making of a statutory declaration by the directors or similar
                  officers of the BUILDER that the BUILDER cannot by reason of
                  its liabilities continue its business; or

         (v)      presentation of a petition for judicial management; or

         (vi)     making of a proposal to the BUILDER's creditors for a
                  composition in satisfaction of its debts or a scheme of
                  arrangement of its affairs; or

         (vii)    making a general assignment of the BUILDER's assets for the
                  benefit of its creditors; or

         (viii)   the appointment of a receiver, receiver or manager, or
                  provisional liquidator; or

         (ix)     execution or other process issued on a judgment, direction,
                  decree or order of any court in favour of a creditor of the
                  BUILDER is returned unsatisfied in whole or in part; or

         (x)      taking of steps to enter into a standstill or similar
                  arrangement whereby creditors of the BUILDER agree to give the
                  BUILDER more time to pay its debts or restructure its debts
                  either by making installment payments or otherwise; or

         (xi)     additionally similar or analogous processes or events under
                  any applicable law affecting the BUILDER, its assets or its
                  liabilities; or

(b)      The BUILDER having met or exceeded the allowable delay periods as
         provided in Article III, Paragraphs 1(a) or 1(b); or

(c)      Any event of default under any other contracts for the construction of
         a vessel between BUILDER, or any of its affiliates, and BUYER, its
         parent, holding or affiliated companies or a joint venture in which
         BUYER or any one or more of such related companies of BUYER owns at
         least a fifty percent (50%) equity interest, which entitles the BUYER
         or such other


                                       35
<PAGE>   39
         parent, holding, affiliated or joint venture companies of BUYER to
         terminate in accordance with the terms thereof; or

(d)      Notwithstanding that the BUILDER hereby represents and warrants that no
         circumstances exist that will cause the Singapore governmental
         authorities to terminate the BUILDER's lease(s) for its Singapore
         shipyard premises while one or more vessels are under construction, if
         the BUILDER's rights under such lease(s) are lost or impaired for any
         reason other than compulsory acquisition of such property by Singapore
         governmental authorities, which loss or impairment prevents or
         interferes with BUILDER's performance under this Contract, then the
         BUILDER shall pay the BUYER Fifteen Million United States Dollars
         (U.S.$15,000,000). It is understood by both parties that such payment
         by the BUILDER is by way of liquidated damages and not by way of
         penalty. However, the BUILDER shall not be required to pay such sum if
         BUILDER meets all of its obligations under this Contract without loss
         of quality at an alternative shipyard facility and at no additional
         cost to the BUYER. The foregoing liquidated damages shall be in
         addition to and without prejudice to the BUYER's rights and remedies
         elsewhere set forth in this Contract, specifically including but not
         limited to BUYER's rights under Paragraph 2, below.

2.       Effect of BUILDER's Default:

(a)      If any default by the BUILDER occurs as defined in Paragraph 1 of this
         Article, BUYER may, at its election, either cancel this Contract as
         provided in Article XI, or require BUILDER to deliver possession of the
         VESSEL and all of its Appurtenances and Components (as defined in
         Article VII, Paragraph 5) to BUYER (and title thereto, to the extent
         that title to any such items is not already vested in the BUYER), in
         whatever state of completion the same may be at the date of such
         election. If BUYER elects to take possession of the VESSEL (and title
         thereto, to the extent that title to any such items is not already
         vested in the BUYER), as aforesaid, then BUYER may bring such workers
         to the Shipyard as BUYER chooses and perform such work as may be
         necessary to prepare the VESSEL for removal, and may so remove the
         VESSEL from BUILDER's Shipyard to another location for completion or
         disposal.

         BUYER may thereafter proceed to contract with or employ any other
         person or persons to complete the work or any part thereof and provide
         any equipment, materials and labor as may be necessary for such
         completion.

         Upon completion of the work by the BUYER, the BUYER shall document the
         cost to the BUYER of completing the work including all expenses,
         charges, losses and damages incurred by the BUYER in consequence of and
         incidental to the default of the BUILDER.


                                       36
<PAGE>   40

         Once BUYER has documented BUYER's cost to complete, BUILDER shall be
         entitled to receive, (or shall be required to repay to BUYER, as the
         case may be) a sum arrived at in the following manner:

         The sum of (a) all progress payments paid by BUYER to BUILDER, plus (b)
         BUYER's documented cost of completion, as aforesaid, subtracted from
         the Contract Price set forth in Article II, including interest on the
         amount receivable (or payable, as the case may be) hereunder at the
         rate of ten percent (10%) per annum computed from the time BUYER has
         documented its cost to complete the VESSEL to BUILDER until remittance
         of the amounts receivable or payable.

         The rights conferred upon the BUYER under the terms of this Article XIV
         shall be in addition to, and not in substitution for, any rights which
         the BUYER would have in either law or equity upon the happening of the
         events of default specified herein, or upon any failure on the part of
         the BUILDER to perform the undertakings, agreements, and covenants on
         its part to be performed hereunder. The failure of the BUYER to
         exercise the rights conferred upon it hereunder in any one or more
         instances of the occurrence of an event of default, as hereinabove
         defined, shall not constitute a waiver of BUYER's right subsequently to
         exercise such rights under this Contract.

                                        ARTICLE XV - LIABILITIES AND INDEMNITIES

1.       Liability of BUILDER:

         BUILDER hereby agrees to defend, indemnify and hold harmless BUYER, its
parent, holding and affiliated companies, the owner and operator of the VESSEL,
their employees, directors, officers and agents, including the VESSEL and all
other vessels in the same or associated ownership, against all claims, demands
or causes of action, by all parties or persons whomsoever and whatsoever
including, without limitation, BUILDER and its employees, directors, officers,
agents, contractors and subcontractors and all third persons based on personal
injury, disease or death or property damage or destruction occurring prior to
the delivery to and acceptance by BUYER of the VESSEL arising out of or in any
way related to the performance by BUILDER or any of its contractors or
subcontractors of the work hereunder, regardless of cause, including the sole or
concurrent negligence or fault of BUYER, its employees, directors, officers,
agents or subcontractors, or of a third party, or an event of force majeure.
Notwithstanding the foregoing, the BUILDER shall be under no liability
whatsoever to the BUYER, the Representative, his assistant(s) or BUYER's
contractors (other than BUILDER) or invitees for personal injuries, including


                                       37
<PAGE>   41
disease and death, suffered by the Representative, his assistant(s) or BUYER's
contractors (other than BUILDER) or invitees during the time when he or they are
on the VESSEL, or within the premises of either the BUILDER or its contractors
or subcontractors, or are otherwise engaged in and about the construction of the
VESSEL, unless such personal injuries, including disease and death, were caused
by the gross negligence or willful misconduct of the BUILDER, any of its
employees, agents, contractors or subcontractors. BUYER hereby agrees to defend,
indemnify and hold harmless BUILDER, its employees, directors, officers and
agents against all claims, demands or causes of action for personal injuries,
including disease and death, suffered by BUYER's employees during the time when
they are on the VESSEL, or within the premises of either the BUILDER or its
contractors or subcontractors, or are otherwise engaged in and about the
construction of the VESSEL, unless such personal injuries, including disease and
death, were caused by the gross negligence or willful misconduct of the BUILDER,
any of its employees, agents, contractors or subcontractors. The BUILDER shall
assume liability to the BUYER, the Representative and his assistant(s), BUYER's
contractors (other than BUILDER) and BUYER's invitees for damage to, loss or
destruction of property of the BUYER's Representative, his assistant(s), BUYER's
contractors (other than BUILDER) or BUYER's invitees if such damage, loss or
destruction was caused by the gross negligence or willful misconduct of the
BUILDER, or of any of its employees, agents, contractors or subcontractors. For
purposes of this Contract, the terms "gross negligence" and "willful misconduct"
are defined as "an intentional act or omission in disregard of harmful avoidable
consequences, or a reckless act or omission in disregard of harmful avoidable
consequences".

2.       Scope of Indemnities:

         In all circumstances where responsibility is allocated herein, the
indemnifying party shall be obligated to bear the expense of the investigations
and expenses of all claims or demands or causes of action arising therefrom and
to pay the full amount of any judgment rendered against the indemnified parties,
it being stipulated that all obligations of indemnity assumed herein shall
survive the termination of this Contract, regardless of how such termination is
effected. The indemnifying party shall have the control of the defense and
settlement of all such claims and lawsuits including the selection of attorneys,
the expense of all which shall be borne by it. The indemnified parties shall
provide reasonable assistance to the indemnifying party in relation to the
defense of claims which are subject to indemnity hereunder. Nothing herein
contained shall prevent the indemnified parties from participating at their own
expense with counsel of their own choosing in any such defense or settlement.

                                                         ARTICLE XVI - INSURANCE

1.       Extent of Insurance Coverage:


                                       38
<PAGE>   42
         From the time of Contract signing until the VESSEL is completed,
delivered to and accepted by the BUYER, the BUILDER shall, at its own cost and
expense, keep the VESSEL and all machinery, materials and equipment either
delivered to the Shipyard or being handled by BUILDER for the VESSEL or built
into, or installed in or upon the VESSEL (including all Appurtenances and
Components and all OWNER Furnished Equipment as defined in Article IX), fully
insured under coverage satisfactory to BUYER and corresponding to the American
Institute Clauses for Builder's Risks.

         Said Builder's Risks insurance shall include supplemental coverage for
war risks, strikes and earthquakes but BUILDER may elect to self insure such
supplemental coverage for the mutual benefit of BUILDER and BUYER unless it
appears that a circumstance of political instability is imminent, at which time
BUILDER shall cause the standard Builder's Risks policy required hereunder to be
augmented with coverage for war risks, strikes, locked-out workmen, labor
disturbances, riots, civil commotion without deletions of protection and
indemnity and collision clauses, and earthquakes.

         The amount of such insurance coverage shall, up to and including the
date and time of delivery of the VESSEL, be in an amount at least equal to, but
not limited to, the aggregate of the payments made by the BUYER to the BUILDER
and the value of any OWNER Furnished Equipment (as defined in Article IX)
delivered to the Shipyard, which OWNER Furnished Equipment (as defined in
Article IX) shall not exceed a delivered value of Forty Million United States
Dollars (U.S. $40,000,000).

         The policy referred to hereinabove shall be taken out in the joint
names of the BUILDER and the BUYER and all losses under such policy shall be
payable to the BUILDER and/or the BUYER in accordance with their respective
interests. Any deductible under this insurance policy shall be for the account
of BUILDER.

         Notwithstanding the above, the BUYER shall compensate the BUILDER for
the increased insurance cost and expense under or pursuant to any part of this
Article, if any, incurred by the BUILDER due to the BUYER's Default as specified
in Article XIII hereof.

2.       Application of Recovered Amount:

(a)      Partial Loss:

         In the event the VESSEL shall be damaged by any insured cause
         whatsoever prior to acceptance thereof by the BUYER and in the further
         event that such damage shall not constitute an actual or a constructive
         total loss of the VESSEL, the BUILDER and/or BUYER shall apply the
         amount recovered under the insurance policy referred to in Paragraph 1
         of this Article to the repair of such damage satisfactory to the BUYER
         and


                                       39
<PAGE>   43
         the Classification Society and the regulatory bodies, and the BUYER
         shall accept the VESSEL under this Contract if completed in accordance
         with this Contract and Specifications.

(b)      Total Loss:

         However, in the event that the VESSEL is determined to be an actual or
         constructive total loss, the BUILDER shall by the mutual agreement
         between the parties hereto, either:

         (i)      Proceed in accordance with the terms of this Contract, in
                  which case the amount recovered under said insurance policy
                  shall be applied to the reconstruction of the VESSEL's damage,
                  provided the parties hereto shall have first agreed in writing
                  as to such reasonable postponement of the Delivery Date and
                  adjustment of other terms of this Contract including the
                  Contract Price as may be necessary for the completion of such
                  reconstruction; or

         (ii)     Refund to the BUYER the amount of all installments paid to the
                  BUILDER under this Contract plus the value of all OWNER
                  Furnished Equipment (as defined in Article IX) delivered to
                  the Shipyard with interest at the rate of ten percent (10%)
                  per annum computed from the date of loss of the VESSEL until
                  paid to BUYER, whereupon this Contract shall be deemed to be
                  terminated and all rights, duties, liabilities and obligations
                  of each of the parties to the other except as contemplated
                  under Articles XI, XV, XVII and XX shall terminate forthwith.

         If the parties hereto fail to reach agreement as contemplated under
         Sub-paragraph (b)(i), above, within two (2) months after the VESSEL is
         determined to be an actual or constructive total loss, the provisions
         of Sub-paragraph (b) (ii), above, shall apply.

3.       Termination of BUILDER's Obligation to Insure:

         The BUILDER's obligation to insure the VESSEL hereunder shall cease and
terminate forthwith upon delivery thereof and acceptance by the BUYER.

4.       Supplemental Insurance:

         In addition, from the time of Contract signing until the completion,
delivery and acceptance of the VESSEL, BUILDER and its contractors and
subcontractors shall, at their own cost, maintain the following insurances:

(a)      Worker's Compensation and Employer's Liability Insurance affording
         benefits as provided by applicable Worker's Compensation Statutes in
         the jurisdiction where work is performed, and providing indemnity with
         respect


                                       40
<PAGE>   44
         to Employer's Liability with limits as required by local laws, but in
         no event less than Two Million Five Hundred Thousand United States
         Dollars (U.S.$2,500,000) any one claim arising from any one event.

(b)      Third Party Liability Insurance covering all of BUILDER's operations
         and including Automotive, Contractual Liability and Contractor's
         Protective Liability with a combined single limit of not less than Five
         Million United States Dollars (U.S.$5,000,000) per occurrence of bodily
         injury and/or property damage.

(c)      All of the insurances specified in this Article, excepting only
         Statutory Worker's Compensation Insurance, shall name BUYER as an
         additional assured.

(d)      The underwriters shall be of recognized responsibility and the
         policies, the terms of the policies, the insurance companies and
         underwriters shall be subject to written approval by BUYER, which
         approval shall not be unreasonably withheld. Upon BUYER's request at
         any time, BUYER shall be furnished copies of such policies or other
         evidence of insurance satisfactory to BUYER when obtained by BUILDER
         from the underwriters and the receipt for the payment of the current
         year's premium.

(e)      Each policy specified in this Article shall include an endorsement
         under which the underwriters waive rights of subrogation against the
         BUYER, its parent, holding and affiliated companies.

(f)      If the BUILDER shall fail to keep itself insured to the satisfaction of
         the BUYER or to produce any such policy or receipt as aforesaid, the
         BUYER shall be entitled at the expense of the BUILDER to take up such
         insurance or insurances as the BUYER in its absolute discretion deems
         necessary to protect its interest and the BUILDER shall be liable to
         pay, indemnify and/or reimburse the BUYER forthwith on demand any sums
         expended and/or incurred by the BUYER for such purpose.

(g)      The BUILDER shall not do or allow to be done any act or thing which
         might invalidate any insurance taken out pursuant to this Agreement.

                                          ARTICLE XVII - DISPUTE AND ARBITRATION

1.       Proceedings:

         In the event of any dispute between the parties hereto as to any matter
arising out of or relating to this Contract or any stipulations herein or with
respect hereto which cannot be settled by the parties themselves, such dispute
shall be finally settled by arbitration in London, England, pursuant to the
rules of arbitration of the English Arbitration Acts of 1950 to 1979 and any
statutory


                                       41
<PAGE>   45
provisions amending the same. Either party may demand arbitration of any such
dispute by giving notice to the other party in accordance with Article XXII. Any
demand for arbitration by either of the parties hereto shall state specifically
the question(s) as to which such party is demanding arbitration. On any question
properly submitted to arbitration, either party may submit any evidence and may
be represented by counsel or other authorized representative if desired.

         The arbitrators shall be entitled, but not bound, to consider all
documents, papers or other evidence which the parties may submit, even though
not presented so as to be admissible as evidence in a court of law. The award of
a majority of the arbitrators on any questions so submitted to it shall be
final, binding and conclusive upon the parties hereto and their respective
successors and assigns, and each agrees to abide by such decision.

2.       Notice of Award:

         Notice of any award shall immediately be given in writing, or by
telefax confirmed in writing, to the BUYER and the BUILDER.

3.       Expenses of Arbitration:

         The arbitrators shall determine in the award which party shall bear the
expenses of the arbitration, or the proportion of such expenses which each party
shall bear. Notwithstanding the foregoing, each party shall bear the expenses of
presenting its own witnesses and evidence to the arbitrators, including counsel
fees.

4.       Entry in Court:

         Judgment on an award by the arbitrators may be entered in any court of
competent jurisdiction for enforcement thereof.

5.       Alteration of Delivery of the VESSEL:

         In the event of the arbitration of any dispute or disputes arising or
occurring prior to delivery to or acceptance by the BUYER of the VESSEL, the
award by the arbitrators of said dispute or disputes shall include a finding as
to whether or not the Delivery Date of the VESSEL should as a result of such
dispute be in any way altered.

6.       During the arbitration of any dispute or issue under this Contract
prior to delivery to and acceptance by the BUYER of the VESSEL, it is understood
and agreed that the BUILDER shall diligently continue the construction of the
VESSEL.


                                       42
<PAGE>   46

7.       For the purposes of any proceedings pursuant to this Article, the
parties hereby irrevocably appoint the following as their agents within England
for the service of process:

         SFIC
         Simon Curtis
         Curtis Davis Garrard
         Bedfont Cross, Stanwell Road
         Heathrow Airport, Feltham TW14 8NY U.K.

         The Builder
         HFW Nominees Ltd.
         Marlow House
         Lloyds Avenue
         London
         EC3N 3AL U.K.

                                        ARTICLE XVIII - RIGHTS OF ASSIGNMENT AND
                                                    VESSEL RECIPIENT DESIGNATION

1.       Assignment of the Contract:

         BUILDER shall not assign this Contract unless prior consent of the
BUYER is given in writing. BUYER may, without BUILDER's consent, assign this
Contract to any of its parent, holding, affiliated or successor companies, or to
any third party.

         This Contract shall inure to the benefit of and shall be binding upon
the lawful successors or the legitimate assigns of either of the parties hereto.

2.       BUYER's Right to Designate Recipient of VESSEL:

         BUYER shall have the right to designate a party other than BUYER as the
recipient of the BUYER's rights in respect of delivery and acceptance of the
VESSEL by submission of notice to BUILDER in accordance with Article XXII at any
time prior to the actual date of VESSEL delivery and acceptance. In the event of
submission of such notice by BUYER, BUILDER shall (i) issue the Bill of Sale in
the name of the party which has been so designated by BUYER , (ii) if requested
by BUYER arrange for the stand-by letter of credit and the on demand performance
bond contemplated by Article XI, Paragraph 2, to be amended so as to be for the
benefit of such designee; and (iii) exert its best efforts to issue the other
documents to be furnished by it upon delivery and acceptance of the VESSEL in
the name of said party, which party shall be entitled to all rights, privileges
and benefits which would otherwise accrue to BUYER hereunder upon and following
delivery and acceptance of the VESSEL including, without limitation, those
contained in Article X (Warranty of Quality). The delivery of such


                                       43
<PAGE>   47
notice to BUILDER shall not relieve BUYER of any of its obligations under this
Contract whatsoever including, without limitation, obligations which may relate
to or arise either upon or subsequent to delivery and acceptance of the VESSEL.

                                                  ARTICLE XIX - TAXES AND DUTIES

         BUILDER agrees to bear and pay all taxes, licenses, duties and fees of
whatsoever nature, including withholding taxes, levied or assessed on BUILDER in
connection with or incident to the performance of this Contract by any
governmental agency including, but not limited to, taxes or levies related to
unemployment compensation insurance, old age benefits, social security, or any
other taxes upon the income or wages of BUILDER, its agents, employees, and
representatives and any ad valorem or sales/VAT tax levied on the work or
BUILDER's invoices. BUILDER agrees to stipulate the aforesaid conditions in its
agreements with its subcontractors and representatives and BUILDER agrees to be
liable for any breach of such agreements. BUILDER shall indemnify, defend and
hold BUYER and its affiliates harmless in respect of liability for such taxes,
licenses, duties and fees.

                              ARTICLE XX - PATENTS, TRADEMARKS, COPYRIGHTS, ETC.

1.       Patents, Trademarks and Copyrights:

(a)      The BUILDER shall, without limitation of time, defend any claim, suit
         or proceeding brought against the BUYER, its parent, holding,
         affiliated companies, the owner or operator of the VESSEL and/or the
         VESSEL alleging that the design, process, device, apparatus, plans or
         specifications or the method of construction employed by the BUILDER
         hereunder or the tools or implements used by the BUILDER in the
         performance of this Contract constitutes infringement of any patent,
         and the BUILDER shall indemnify, defend and save the BUYER, its parent,
         holding and affiliated companies, the VESSEL, its owners and operators
         harmless from and against any such claim, suit or proceeding. The BUYER
         shall promptly notify the BUILDER in accordance with Article XXII of
         any such claim, suit or proceeding and shall permit the BUILDER to
         control the conduct and settlement of such claim, suit or proceeding;
         provided, however, no settlement which purports to acknowledge on the
         BUYER's behalf the validity of any patent shall be entered into without
         the BUYER's prior written consent. The BUYER shall provide information
         and assistance to the BUILDER, at the BUYER's expense, as may be
         reasonably necessary to aid in the conduct and settlement of the claim,
         suit or proceeding. The BUYER shall be entitled to participate, at its
         own


                                       44
<PAGE>   48
         expense, in the conduct and settlement of such claim, suit or
         proceeding through its selected representatives and attorneys.

(b)      The BUYER shall, without limitation of time, defend any claim, suit or
         proceeding brought against the BUILDER alleging that the construction
         or use by the BUILDER, pursuant to this Contract, of any design,
         process, device or apparatus specified or furnished by the BUYER and
         mounted upon or used in connection with the VESSEL constitutes
         infringement of any patent and the BUYER shall indemnify, defend and
         save the BUILDER harmless from and against any such claim, suit or
         proceeding. The BUILDER shall promptly notify the BUYER in accordance
         with Article XXII of any such claim, suit or proceeding and shall
         permit the BUYER to control the conduct and settlement of such claim,
         suit or proceeding; provided, however, no settlement which purports to
         acknowledge on the BUILDER's behalf the validity of any patent shall be
         entered into without the BUILDER's prior written consent. The BUILDER
         shall provide information and assistance to the BUYER, at the BUILDER's
         expense, as may be reasonably necessary to aid in the conduct and
         settlement of the claim, suit or proceeding. The BUILDER shall be
         entitled to participate, at its own expense, in the conduct and
         settlement of such claim, suit or proceeding through its selected
         representatives and attorneys.

                                                         ARTICLE XXI - ADDRESSES

         The BUYER's address designated for the purpose of notices under this
Contract shall be Santa Fe International Corporation, 5420 LBJ Freeway, Suite
1100, Dallas, Texas, 75240, U.S.A., Attention: Mr. N. Pharr Smith, telefax
(972)701-7390, unless and until the BUYER notifies the BUILDER to the contrary
in writing. An additional copy of all such notices shall be sent to BUYER's
Representative as designated under this Contract, in accordance with Article
XXII.

         The BUILDER's address designated for the purpose of notices under this
Contract shall be PPL Shipyard Pte. Ltd., 21 Pandan Road, Singapore 609273,
Attention: Mr. Ong Tian Khiam, telefax (65) 264-4130, unless and until the
BUILDER notifies the BUYER to the contrary in writing.

         No later than the Construction Commencement Date, each of the parties
shall furnish to the other in writing the name of its representatives who shall
be authorized to approve and execute all change orders.

                                             ARTICLE XXII - NOTICES AND LANGUAGE

1.       Notice:


                                       45
<PAGE>   49

         Notices required or permitted to be given hereunder shall be in writing
and shall be deemed given when delivered personally, by registered or certified
mail or by facsimile to the address of the party receiving such notice, as
specified in Article XXI.

2.       Language:

         Any and all notices and communications in connection with this Contract
shall be written in the English language.

                                      ARTICLE XXIII - EFFECTIVE DATE OF CONTRACT

         This Contract shall become effective upon the date first written above
(herein called the "Effective Date").

                                                   ARTICLE XXIV - INTERPRETATION

1.       Laws Applicable:

         The parties hereto agree that the validity and interpretation of this
Contract and of each Article and part thereof shall be governed by English law
excluding, however, any of its conflicts of law rules or other provisions which
may refer to the laws of another jurisdiction.

2.       Discrepancies:

         All general language or requirements embodied in the attachments to
this Contract are intended to amplify, explain and implement the requirements of
this Contract. However, in the event that any language or requirements so
embodied permit an interpretation inconsistent with any provisions of this
Contract, then, in each and every such event, the applicable provisions of this
Contract shall prevail and govern. In the event that the specifications conflict
with the drawings, the specifications shall prevail and govern.

3.       Independent Contractor:

         The BUILDER agrees that it is an independent contractor in sole charge
of and in exclusive control of the work. The exercise by the BUYER or its
Representative of any right to review, approve and inspect the work shall not
relieve the BUILDER of its total responsibility for its work and schedule and
that of its contractors and subcontractors.

4.       Headings:


                                       46
<PAGE>   50

         The headings in this Contract shall not be deemed to be a part of this
Contract and are not intended to be used in the interpretation or construction
of this Contract.

5.       Entire Agreement:

         This Contract, along with the Overall Agreement dated on or about 1
February, 2001, between the parties, contains the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior negotiations, representations, undertakings and
agreements on the subject matter of this Contract between the parties for the
construction of this Vessel. In the event of any conflict between the provisions
of this Contract and the Overall Agreement, the provisions of the Overall
Agreement shall prevail.

                                                ARTICLE XXV - CONFLICT AND AUDIT

1.       Conflict of Interest:

         BUILDER shall exercise reasonable care and diligence to prevent any
actions or conditions which could result in a conflict with the best interests
of BUYER, its parent, holding or affiliated companies. This obligation shall
apply to the activities of BUILDER'S employees and agents arising from this
Contract, in their relations with BUYER's employees and representatives and
their respective families, and with vendors, contractors, subcontractors and
third parties hereunder. BUILDER's efforts shall include, but not be limited to
establishing precautions to prevent its and its contractors' and subcontractors'
representatives, employees and agents from making, receiving, providing or
offering any payments, loans or other considerations or gifts or entertainment
of a material value. Material value shall be defined as anything having a value
of Two Hundred United States Dollars (U.S. $200) or more. BUILDER further agrees
that if it should be approached by anyone representing BUYER, its parent,
holding or affiliated companies who requests an item or gift of value, the
BUILDER will immediately notify BUYER. Breach of this provision shall be
considered a material breach of contract entitling BUYER to terminate the
Contract immediately upon written notice. In addition, BUILDER shall:

(a) 1.take no action on behalf of BUYER in the performance of work or rendition
of services under this Contract where the conduct of operations hereunder would
subject either party hereto to liability or penalty under any and all laws,
rules, regulations or decrees of any governmental authorities;

                  2.       ensure that all invoices, final settlements, reports
                           and billings by BUILDER to BUYER reflect properly the
                           facts about all activities and transactions handled
                           for its accounts; and


                                       47
<PAGE>   51

                  3.       notify BUYER promptly upon discovery of any instance
                           where BUILDER has not complied with the requirements
                           of this Paragraph 1(a).

                  If the violation of this Paragraph 1(a) occurred prior to the
                  date of this Contract and resulted directly or indirectly in
                  BUYER's consent to enter into this Contract with BUILDER,
                  BUYER may, at BUYER's sole option, terminate this Contract at
                  any time, and notwithstanding any other provision of this
                  Contract pay no compensation or reimbursement to BUILDER
                  whatsoever for any work done after the date of termination.

         (b)      observe the Foreign Corrupt Practices Act of the United States
                  of America which prohibits directly or indirectly making any
                  offer, payment, promise to pay or authorizing the payment of
                  any money or anything of value to any government official,
                  political party or any candidate for political office for the
                  purpose of 1) influencing any act or decision of any such
                  official or party in his, her or its official capacity, 2)
                  inducing such person to do or omit to do any act in violation
                  of the lawful duty of such official, 3) securing any improper
                  advantage or 4) inducing such official or party to use his,
                  her or its influence with any government to influence any act
                  or decision of such government in order to assist BUYER in
                  obtaining or retaining business.

2.       Audit:

         The BUYER shall have the right to audit BUILDER to verify it is in
compliance with the requirements of Article XXV. In addition, at all reasonable
times during the continuation of this Contract and for a period of two (2) years
thereafter, BUYER's duly authorized representatives, including any third party
designated consultant, shall have access to, and the right to question BUILDER's
and its contractors' and subcontractors' and agents' personnel and to examine
their respective books, records, correspondence, instructions, plans, drawings,
receipts, vouchers, computer records, bid files of contractors and
subcontractors (both successful and unsuccessful), original estimates, change
order files, general ledger entries, payment vouchers and documentation of
business entertainment expenses pertaining to the services hereunder for the
purposes of auditing and verifying that the charges or costs presented by
BUILDER to BUYER for payment are in accordance with this Contract, or for any
other reasonable purpose. However, in no event shall BUYER have the right to
audit the composition of any lump sum prices, percentage overlays or fixed sums.
BUYER's representatives shall have the right to reproduce any of the aforesaid
documents for a period of two (2) years after the completion and acceptance or
termination of the work, or the fulfillment of any warranty obligations arising
under this Contract, whichever is later.


                                       48
<PAGE>   52

         BUILDER shall ensure that any subcontract entered into in accordance
with the terms of this Contract confers upon the BUYER the same audit rights in
relation to such contractor or subcontractor as are conferred upon BUYER by this
provision.

                                               ARTICLE XXVI - PUBLICITY RELEASES

         BUILDER and its suppliers and subcontractors if any, shall not reveal
to others, except as required by law, through literature, brochures, or other
types of publicity releases any information regarding the work or its activities
or participation hereunder, without prior written approval from BUYER. The
content of any releases shall be approved in writing in advance by BUYER.




         IN WITNESS WHEREOF, the parties hereto have caused this Contract to be
duly executed effective the day and year first above written.


SANTA FE INTERNATIONAL                  PPL SHIPYARD PTE. LTD.
         CORPORATION
         (BUYER)                                   (BUILDER)



By:                                     By:
   -----------------------------            ---------------------------
Name:  C. Stedman Garber, Jr.           Name:         Ong Tian Khiam

Title: President                        Title:       Managing Director

Witness:                                Witness:
        ------------------------                 ----------------------

Date Signed:                            Date Signed:
            --------------------                    -------------------


                                       49
<PAGE>   53

                                                                     EXHIBIT "A"


                      SCHEDULE OF LABOUR AND MATERIAL RATES


1.     GENERAL CONDITIONS & NOTES

       All of the rates and charges set forth in this Exhibit "A" shall be
       discounted by fifteen percent (15%) for the first two Vessels constructed
       by the Builder for the Buyer. Thereafter the rates and charges shall be
       as mutually agreed but shall in no event be greater than Builder's
       current standard rates and charges less a fifteen percent (15%) discount.

       SHIPYARD'S PERSONNEL - EXPLANATORY NOTES

       1.1    The daily rate shall only apply to personnel working in the
              Shipyard. In the event when the Buyer requires personnel to work
              outside of Singapore, the rate shall be discussed.

       1.2    All personnel's rates are based on the labour law of Singapore and
              are subject to changes which arise directly from changes
              stipulated in the labour law.

       1.3    The minimum hire period shall be 8 normal working hours per day
              for Skilled and Unskilled Labour.

              NORMAL WORKING DAY

              Monday to Friday

              0800 hr      -     1200 hr
              1200 hr      -     1300 hr  (Lunch)
              1300 hr      -     1700 hr

              For any time spent working on instruction outside of the standard
              normal hours, the following rates shall be applied:

              a.  OVERTIME

                  1700 hr  -   2100 hr          Charge at 1.5 times
                  2100 hr  -   2400 hr          Charge at 2.0 times
                  0000 hr  -   0800 hr(next day)Charge at 3.0 times


                            EXHIBIT "A" - Page 1 of 6
<PAGE>   54

              b.  SATURDAY

                  0800 hr  -   1200 hr              ) Charge at normal time

                  1200 hr  -   1300 hr (Lunch)      ) Charge at 1.5 times of
                  1300 hr  -   1700 hr              ) normal rate

                  1700 hr  -   2100 hr              ) Charge at 2.0 times of
                                                    ) normal rate

                  2100 hr  -   0800 hr (next day)   ) Charge at 3.0 times of
                                                    ) normal rate

              C.  SUNDAY/PUBLIC HOLIDAYS

                  0800 hr  -   1200 hr              ) Charge at 2.0 times of
                  1200 hr  -   1300 hr (Lunch)      ) normal rate
                  1300 hr  -   1700 hr              )

                  1700 hr  -   And above (next day)         ) Charge at 3.0
                                                            ) times of
                                                            ) normal rate

       1.4    The rates shall be applied from the time the personnel is
              committed to the work or service until released, including
              mobilization, standby or demobilisation.

       1.5    Where labour supply exceeds six (6) men, a supervisor shall be
              required. This supervisor shall take instructions from the Buyer
              and the Buyer shall be responsible for any work carried out by the
              labour supplied.

       1.6    A levy of S$30.00 per day per man will be imposed in the event the
              Buyer engages any services or hires any equipment from outside the
              shipyard which the Builder is able to provide.

                         SCHEDULE OF RATES FOR PERSONNEL

<TABLE>
<CAPTION>
       CATEGORY                                                            HOURLY RATE (S$)
       --------                                                            ----------------
<S>                                                                        <C>
A)     MANAGEMENT:
       1.     Superintendent / Engineer                                         90.00

B)     SUPERVISORY:
       1.     Safety Officer / Fireman                                          45.00
       2.     Technician                                                        45.00
       3.     Draughtsman                                                       45.00
</TABLE>


                            EXHIBIT "A" - Page 2 of 6
<PAGE>   55

<TABLE>
<S>                                                                             <C>
       4.     Q.C. Technician                                                   45.00
       5.     Foreman (All Trades)                                              45.00
       6.     Assistant Engineer                                                60.00

C)     SKILLED LABOUR :
       1.     Welder                                                            30.00
       2.     Pipe Fitter / Steel Fitter                                        30.00
       3.     HVAC Fitter                                                       30.00
       4.     Mechanical Fitter                                                 30.00
       5.     Electrician                                                       30.00
       6.     Machinist                                                         30.00
       7.     Crane Operator                                                    30.00
       8.     Fork-Lift Driver                                                  30.00
       9.     Watchman                                                          30.00
       10.    Carpenter                                                         30.00
       11.    Painter                                                           30.00
       12.    Cutter                                                            30.00
       13.    Material Handler                                                  30.00
       14.    Sandblaster                                                       30.00
       15.    Rigger / Stager                                                   30.00
       16.    Store-Keeper                                                      30.00
       17.    Store Assistant                                                   20.00

D)     UNSKILLED LABOUR :
       1.     General Worker / Helper                                           18.00
       2.     Cleaner                                                           18.00
       3.     Grinder                                                           18.00
       4.     Oiler                                                             18.00
</TABLE>

NOTE: ANY TRADESMAN NOT SPECIFIED IN THIS SCHEDULE OF RATES SHALL BE QUOTED
SEPARATELY ON REQUEST.

1.     GENERAL CONDITIONS & NOTES

        EQUIPMENT - EXPLANATORY NOTES

       1.1    In the event of a necessity to hire any equipment from an outside
              source, all mobilisation and demobilisation costs shall be for the
              Buyer's account.

       1.2    Should any specialist or extra piece of equipment be required to
              be hired in for an operation on Rental Rate, such costs shall be
              recoverable from the Buyer at cost plus fifteen percent (15%)
              service.


                            EXHIBIT "A" - Page 3 of 6
<PAGE>   56

       1.3    The equipment's rates quoted are inclusive of all fuel and
              refueling, spare parts, maintenance, consumable, use of existing
              slings and shackles (if available).

       1.4    Except where otherwise specified, all rates exclude operators.

       1.5    Minimum hire period shall be four (4) hours unless specified.

       1.6    The Rates shall be applied from the time the equipment is
              committed to the work or service until released.

       1.7    All prices quoted are for work to be carried out within Builder's
              premises only.

       1.8    All cut-off/remnant/etc. of steel materials generated from all
              repair/modification/ conversion works shall be for Builder's
              property. Builder shall be responsible to clear off such steel
              materials.

       1.9    All prices quoted are based on Normal Working Hours:

              Monday to Friday      :       0800 - 1200 Hr
                                            1200 - 1300 Hr (Lunch)
                                            1300 - 1700 Hr

              Saturday              :       0800 - 1200 Hr

SCHEDULE OF RATES FOR CRANES

<TABLE>
<CAPTION>
       DESCRIPTION                          CAPACITY              HOURLY RATE (S$)
       -----------                          --------              ----------------
<S>                                         <C>                   <C>
Type of Cranes:

Crawler / Truck Crane                       20 - 50 Ton                200.00

Link Belt Crawler Crane                     80 - 100 Ton               300.00

Link Belt Crawler Crane                     150 Ton                    600.00

Manitowoc Crawler Crane                     200 Ton                    1,000.00

Manitowoc Crawler Crane                     350 Ton                    1,250.00

Manitowoc Platform Ringer                   600 Ton                    On Application
</TABLE>

NOTE:  ALL OVERTIME ON CRANES WILL BE CHARGED AT FLAT HOURLY RATE.


                            EXHIBIT "A" - Page 4 of 6
<PAGE>   57

                         SCHEDULE OF RATES FOR EQUIPMENT

<TABLE>
<CAPTION>
       TYPE OF EQUIPMENT                                      DAILY RATE (S$)
       -----------------                                      ---------------

<S>                                                           <C>
Air Compressor (Portable) - Diesel Driven
       125 cfm                                                      70.00
       250 cfm                                                     225.00
       600 cfm                                                     360.00
       600 cfm (electric)                                          300.00

Welding Set
       Welding Transformer / Rectifier                              60.00

Fork-Lift
       Above 3.5 Ton                                               260.00
       Up to 3.5 Ton                                               195.00

Gensets:
       350 Kva (excluding supply of diesel)                        450.00

Low Loader:                                                        420.00
</TABLE>

                                  YARD SERVICES

<TABLE>
<S>                                                           <C>
1.     Harbour Tug Services (between 200 to 350 HP):

       Per Call:           a.    Mobilisation                   :    S$150.00
                           b.    Demobilisation                 :    S$150.00
                           c.    In operation (per tug per hr)  :    S$150.00
                           d.    Minimum operating charge       :    S$450.00
</TABLE>

<TABLE>
<CAPTION>
2.     Wharfage Per Day:
                                                              Wharf-Front           Shore-Line
                                                              -----------           ----------

<S>                                                           <C>                   <C>
       a.     Jack-Up Rig / Accommodation Unit                S$1,000.00            S$350.00

       b.     Semi-Submersible                                S$1,350.00

       c.     Ship/Tugboat                                    S$5.00/m length of LOA per day
                                                              (minimum charge of S$500/day)

       d.     Barge                                           S$4.00/m length of LOA per day
                                                              (minimum charge of S$400/day)
</TABLE>


                            EXHIBIT "A" - Page 5 of 6
<PAGE>   58

<TABLE>
<S>                                                           <C>
3.     Loading and unloading of cargo/equipment/etc.: S$100/truck (within the
       yard) charges (alongside PPL's wharf or within to a maximum of
       S$1,000/day the yard)

4.     Mooring and Unmooring
       a.     Jack-Up Rig                                     :S$800.00/moor or unmoor
       b.     Semi-Submersible / Ship                         :S$800.00/moor or unmoor
       c.     Barge                                           :S$400.00/moor or unmoor

5.     Water Supply :
       a.     Fireline                                        :S$100.00/hose per day
       b.     Fresh Water (below 200 m.ton per month):         S$7.50/m.ton
                                 (above 200 m.ton per month)  :S$10.00/m.ton
       c.     Labour Charges for connection and               :S$300.00/operation
              disconnection of hose.

6.     Electricity Supply :
       a.     Shore power for 50 Hz only                      :S$0.80/kwh
       b.     Labour Charges for connection/
              disconnection of cable                          :S$500/operation
</TABLE>

                                  YARD SERVICES

<TABLE>
<S>                                                           <C>
7.     Gas Free :

       a.     Government Chemist                              :Cost + 15% service charge
       b.     Shipyard Safety Personnel                       :S$200/day

8.     Garbage Disposal                                       :S$200/day

9.     General Gate Security                                  :S$50/man per day

10.    Spacer Barge (PPL's own spacer barge)                  :S$150/day

11.    Gangway                                                :S$100/day

12.    Storage Per Month:

       a.     Ordinary open space                             :S$4.00/sq.m.
       b.     Open hard-core area                             :S$5.00/sq.m.
       c.     Open hard-core area c/w gantry crane            :S$6.00/sq.m.
       d.     Covered workshop                                :S$7.00/sq.m.
       e.     Warehouse                                       :S$25.00/sq.m.
       f.     Office space                                    :S$43.00/sq.m.
</TABLE>


                                ------ END ------


                            EXHIBIT "A" - Page 6 of 6
<PAGE>   59

                                                                     EXHIBIT "B"

                                             PROTOCOL OF DELIVERY AND ACCEPTANCE
                                                             FOR HULL NO. (2001)


KNOW ALL MEN BY THESE PRESENTS:

         That PPL SHIPYARD PTE. LTD., ("BUILDER") has constructed and sold and
by these presents does grant, convey and deliver to _________________________
("BUYER") all right, title, and interest to the jack-up drilling vessel bearing
BUILDER'S HULL NO. 2001 (the "Vessel") pursuant to a Contract for the
Construction and Sale of One Jack-Up Drilling Unit, effective (MM DD YY), as
currently amended, and all schedules thereto (the "Contract") and that the
undersigned, as a duly authorized representative of BUYER, does hereby on its
behalf accept delivery of the Vessel as aforesaid, subject to the following.

         Nothing contained in this document shall in any way affect, diminish,
impair or prejudice any of the obligations, undertakings, guarantees, warranties
or liabilities of BUILDER pursuant to the provisions of the Contract, as
currently amended, which are applicable after delivery.

         Signed at __________________________________________________
at________________hours on _____________________, 20__.

PPL SHIPYARD PTE. LTD.
         (BUILDER)                          -------------------------------
                                                              (BUYER)

By:                                         By:
         ------------------------                    ------------------------
Name:                                       Name:
         ------------------------                    ------------------------

Title:                                      Title:
         ------------------------                    ------------------------

Witness:                                    Witness:
         ------------------------                    ------------------------


                            EXHIBIT "B" - Page 1 of 1
<PAGE>   60
                                                                   EXHIBIT "C-1"

                                                                     IRREVOCABLE
                                                       STAND-BY LETTER OF CREDIT

                      NO.
                          ---------------------------------

Santa Fe International Corporation
5420 LBJ Freeway
Suite 1100
Dallas, TX 75240-2648

Dear Sirs:

         We hereby establish this Irrevocable Stand-by Letter of Credit in your
favor in connection with the Contract for the Construction and Sale of One
Jack-Up Drilling Unit, Hull No. 2001, effective February 1, 2001, between PPL
Shipyard Pte. Ltd. and you for the account of PPL Shipyard Pte. Ltd. up to the
aggregate amount of Seven Million Two Hundred Thirty-Six Thousand Nine Hundred
Fifty United States Dollars (U.S.$7,236,950) available for payment against your
draft marked with the above credit number accompanied by a certificate (the
"Default Certificate") signed by you reading as follows:

         "Pursuant to your Letter of Credit No. (#####) dated (MM DD YY), in
         favor of Santa Fe International Corporation ("Buyer"), we hereby
         certify that the amount of the attached draft ($$$$$) is due and
         payable to Buyer in connection with the Contract for the Construction
         and Sale of One Jack-Up Drilling Unit, Hull No. 2001, effective
         February 1, 2001."

         The expiry date ("Expiry Date") of this Letter of Credit shall be
February 15, 2004, or the 380th day after the actual date of delivery and
acceptance of the Drilling Unit, whichever is the earlier, provided that if the
380th day after the actual date of delivery and acceptance of the Drilling Unit
does not occur by January 15, 2004, and PPL Shipyard Pte. Ltd. has not obtained
an extension of this Stand-by Letter of Credit, you may consider the full amount
of this Stand-by Letter of Credit to be due and payable. The evidence of actual
date of delivery and acceptance of the Drilling Unit shall be by means of
presentation of the signed and dated PROTOCOL OF DELIVERY AND ACCEPTANCE as
attached hereto.

         We hereby agree with the drawers, endorsers and bonafide holders of all
drafts drawn under and in compliance with the terms of this Stand-by Letter of
Credit that such drafts will be duly honored upon presentation to drawee on or
before the Expiry Date at our offices located at _________________________,


                           EXHIBIT "C-1" - Page 1 of 2
<PAGE>   61

U.S.A. Partial draws are allowed with total drawings not to exceed the aggregate
amount of this Letter of Credit.

         Except as otherwise expressly stated herein, this Letter of Credit is
subject to the Uniform Customs and Practice for Documentary Credits (1993
Revision), International Chamber of Commerce Publication No. 500 (hereinafter
called the "UCPDC") and shall be supplementally governed by the laws of New
York, U.S.A. to the extent that they do not conflict with the UCPDC.



                           EXHIBIT "C-1" - Page 2 of 2
<PAGE>   62

                                                                   EXHIBIT "C-2"




                                    ON DEMAND
                                PERFORMANCE BOND



This AGREEMENT is made the         day of February, 2001 BETWEEN [
SURETY        ] having its registered office at [                             ]
(hereinafter called the "SURETY") of the one part and SANTA FE INTERNATIONAL
CORPORATION of Two Lincoln Centre, Suite 1100, 5420 LBJ Freeway, Dallas, TX
75240-2648, U.S.A., its assigns and successors in law (hereinafter called the
"BENEFICIARY") of the other part.

WHEREAS this Agreement is made pursuant to an agreement dated on or about
February 1, 2001 (hereinafter called "the Contract") made between PPL SHIPYARD
PTE LTD of 21 Pandan Road, Singapore 609273 (hereinafter called "the BUILDER")
of the one part and you of the other part whereby the BUILDER has agreed to
execute and complete the construction and sale of one Jack-up Drilling Unit
(Hull No. 2001) ("the Contract Works") for the sum of approximately Seventy-Two
Million Three Hundred Sixty-Nine Thousand Five Hundred United States Dollars
(US$72,369,500).

AND WHEREAS we have agreed to guarantee the due performance of the Contract in
the manner specified herein.

NOW WE HEREBY AGREE with you as follows:

1.       In consideration of you not insisting on the BUILDER paying a security
         deposit for the Contract, we hereby irrevocably and unconditionally
         undertake, covenant and firmly bind ourselves to pay to you on first
         demand and without prior recourse to the BUILDER any sum or sums which
         from time to time may be demanded by you up to a maximum aggregate of
         Seven Million Two Hundred Thirty-Six Thousand Nine Hundred Fifty United
         States Dollars (US$7,236,950) ("the Said Sum").

2.       Should you notify us in writing, at any time prior to the expiry of
         this Bond, by notice purporting to be signed for and on your behalf
         that you require payment to be made of the whole or any part of the
         Said Sum, we irrevocably and unconditionally agree to pay the same to
         you immediately on demand (and in any case not later than one hundred
         and twenty (120) hours after the receipt of any demand) without further
         reference to the


                           EXHIBIT "C-2" - Page 1 of 4
<PAGE>   63
          BUILDER and notwithstanding any dispute or difference which may have
          arisen under the Contract or any instruction which may be given to us
          by the BUILDER not to pay the same.

3.       We hereby confirm and agree that we shall be under no duty or
         responsibility to inquire into:

          3.1  the reason or circumstances of any demand hereunder, or

4.        3.2 the respective rights, obligations and/or liabilities of
          yourselves and the BUILDER under the Contract, or

          3.3  the authenticity of your notice or the authority or entitlement
          of persons signing such notice,

          but that we shall be entitled to and shall rely upon any written
          demand by you hereunder.

4.       Any payment to be made by us hereunder shall be made without any
         set-off, deduction or counterclaim whatsoever.

5.       We confirm and agree that except only in the clear case of established
         fraud, no party shall be entitled to enjoin or restrain you from making
         any call or demand on this Bond or receiving monies under this Bond or
         enjoin or restrain us from making payment under the Bond on any other
         ground.

6.       We agree that our liability hereunder shall not be discharged, affected
         or impaired in any way by reason of any modification, amendment or
         variation in or to any of the conditions or provisions of the Contract
         or the Contract Works (whether without our consent or otherwise) or by
         reason of any breach or breaches of the Contract by the BUILDER,
         whether the same are made with or without our knowledge or consent. We
         further agree that no invalidity in the Contract nor its avoidance,
         suspension or termination shall discharge, affect or impair our
         liability hereunder and that no waiver, compromise, indulgence or
         forbearance, whether as to time, payment, performance or any other
         matter afforded by you to the BUILDER under the Contract, shall
         discharge, affect or impair our liability hereunder.

7.       We confirm that this Bond is irrevocable, that our liability hereunder
         shall be a continuing liability notwithstanding any change in the
         constitution or organisation of the BUILDER and that this Bond shall
         remain in full force and effect until the first to happen of the
         following events:

          7.1 the original of this Bond is returned by you to us at our address
          aforesaid; or


                           EXHIBIT "C-2" - Page 2 of 4
<PAGE>   64

          7.2 expiry of this Bond as hereinafter provided.

8.       This Bond shall expire as to any undrawn portion of the Said Sum at the
         close of banking business on the day which is fifteen (15) calendar
         days after the expiry of the full warranty period specified under the
         Contract. Notification of demand for payment may be presented to us at
         any time prior to expiry of the Bond. "Undrawn Portion" shall mean the
         Said Sum less the aggregate amount which shall have been the subject of
         notification by you of your demand for payment as hereinbefore
         provided.

9.       The BENEFICIARY may, without the consent of either the SURETY or the
         BUILDER, assign this Bond to any of its parent, holding, affiliated or
         successor companies. The Beneficiary may, subject to the consent of the
         SURETY, not to be unreasonably withheld, assign this Bond to any third
         party to whom it assigns the Contract.

10.      Terms used herein shall, unless the context otherwise requires, have
         the meanings ascribed to them in the Contract.

11.      The costs and expense of procuring and stamping the Bond shall be borne
         by the BUILDER.

12.      This Bond shall be governed by and construed in accordance with the
         laws of Singapore and we hereby agree to submit to the jurisdiction of
         the Courts of Singapore.

13.      The SURETY hereby declares, confirms and warrants that under its
         constitution and the applicable laws and regulations of Singapore, it
         has the necessary power and authority and all necessary authorizations,
         approvals and consents thereunder including those of all governmental
         and regulatory authorities all of which have been obtained to enable
         the SURETY to enter into, execute, deliver and perform the obligations
         undertaken by the SURETY under this Bond and the signatory(ies) to this
         Bond is/are the SURETY's duly authorized officer(s) and the obligations
         on the SURETY's part contained in this Bond are valid and legally
         binding on and enforceable against the SURETY under the laws of
         Singapore.

14.      The SURETY further confirms it is not necessary or advisable under the
         laws of Singapore in order to ensure the legality, enforceability and
         priority of this Bond or of any part thereof, that this Bond be filed,
         registered or recorded in any public office or elsewhere or that any
         other instrument relating thereto be executed, delivered, filed,
         registered or recorded, that any tax or duty be paid or that other
         actions be taken.


                           EXHIBIT "C-2" - Page 3 of 4
<PAGE>   65

IN WITNESS WHEREOF we have executed this Bond and affixed our common seal
hereunto on the date and year first above written.




The Common Seal of   [             ]                          )
                                                              )
was hereunto affixed in the presence of:-                     )




----------------------------------
Director




----------------------------------
Director/Secretary


                           EXHIBIT "C-2" - Page 4 of 4
<PAGE>   66


                                                                     EXHIBIT "D"

                                                         CONTRACT SPECIFICATIONS



                                  SEE ATTACHED.



                          EXHIBIT "D" - Page 1 of _____
<PAGE>   67


                                   EXHIBIT "E"

                             CONTRACT DRAWINGS LIST

The Contract Plans that form a part of these Specifications are as follows:

<TABLE>
<CAPTION>
DRAWING NO.                 ALT.                      TITLE
-----------                 ----                      -----
<S>                        <C>              <C>
7126-J-001-1                  0             General Arrangement - Outboard
                                            Profile

7126-J-010                    0             Inner Bottom Tank Arrangement

7126-J-011                    0             General Arrangement - Machinery Deck
                                            6'-0" A.B.L.

7126-J-012                    0             General Arrangement - Machinery Deck
                                            18'-6" A.B.L.

7126-J-013-1                  0             General Arrangement - Top Deck Plan

7126-J-013-2                  0             General Arrangement - Main Deck

7126-J-014                    0             General Arrangement - Drill Floor
                                            and Cantilever Beam Pipe Rack

7126-J-015                    0             General Arrangement - Cantilever
                                            Beam Cellar Deck and Mud Processing
                                            Area

7126-J-016                    P             Primary Structure Plan

7126-J-020                    0             General Arrangement Quarters - Sht 1
                                            & 2

7126-J-030                    P             Lines Plan

7126-J-100-1                  P             Scantling Plan - Main Deck

7126-J-100-2                  P             Scantling Plan - 18'-6" Flat

7126-J-100-3                  P             Scantling Plan - Inner Bottom
</TABLE>


                            EXHIBIT "E" - Page 1 of 7
<PAGE>   68

<TABLE>
<CAPTION>
DRAWING NO.                 ALT.                      TITLE
-----------                 ----                      -----
<S>                        <C>              <C>
7126-J-100-4                  P             Scantling Plan - Bottom Plating

7126-J-101-1                  P             Scantling Plan - Transverse Sections
                                            - Frames 2A to 10A

7126-J-101-2                  P             Scantling Plan - Transverse Sections
                                            - Frames 11 to 22

7126-J-101-3                  P             Scantling Plan - Transverse Sections
                                            - Frames 23 to 28, 30, 31, and Side
                                            Shell

7126-J-102                    P             Scantling Plan - Longitudinal
                                            Bulkheads

7126-J-103                    P             Scantling Plan - Longitudinal
                                            Girders

7126-J-104-1                  P             Scantling Plan -Leg Well Modules

7126-J-104-2                  P             Scantling Plan -Leg Well Modules

7126-J-106-1                  P             Dry Tow Strong Boxes

7126-J-106-2                  P             Dry Tow Strong Boxes

7126-J-120-1                 P1             Crane Foundations - Sea Trax 6032 -
                                            Crane No. 1 & Details

7126-J-120-2                 P1             Crane Foundations - Sea Trax 7232 -
                                            Crane No. 2 & Details

7126-J-120-3                 P1             Crane Foundations - Sea Trax 6032 -
                                            Crane No. 3 & Details

7126-J-130-1                 P2             Scantling Plan - Quarters

7126-J-130-2                 P2             Scantling Plan - Quarters

7126-J-130-3                 P2             Scantling Plan - Quarters

7126-J-130-4                 P2             Scantling Plan - Quarters

7126-J-131-1                  P             Structural Plan - Heliport
</TABLE>


                            EXHIBIT "E" - Page 2 of 7
<PAGE>   69

<TABLE>
<CAPTION>
DRAWING NO.                 ALT.                      TITLE
-----------                 ----                      -----
<S>                        <C>              <C>
7126-J-131-2                  P             Heliport - Details and Sections

7126-J-131-3                  P             Heliport - Details and Sections

7126-J-140-1                  P             Scantling Plan - Substructure and
                                            Cantilever Beams

7126-J-140-2                  P             Scantling Plan - Substructure and
                                            Cantilever Beams

7126-J-140-3                  P             Scantling Plan - Substructure and
                                            Cantilever Beams

7126-J-140-4                  P             Scantling Plan - Substructure and
                                            Cantilever Beams

7126-J-140-5                  P             Scantling Plan - Substructure and
                                            Cantilever Beams

7126-J-140-6                  P             Scantling Plan - Substructure and
                                            Cantilever Beams

7126-J-140-7                  P             Scantling Plan - Substructure and
                                            Cantilever Beams

7126-J-140-8                  P             Scantling Plan - Substructure and
                                            Cantilever Beams

7126-J-140-9                  P             Scantling Plan - Substructure and
                                            Cantilever Beams

7126-J-141-1                  P             Drill Floor Structure

7126-J-141-2                  P             Drill Floor Structure

7126-J-142-1                  P             Cantilever Support, Guides and
                                            Securing Arrangement

7126-J-142-2                  P             Cantilever Support, Guides and
                                            Securing Arrangement
</TABLE>


                            EXHIBIT "E" - Page 3 of 7
<PAGE>   70

<TABLE>
<CAPTION>
DRAWING NO.                 ALT.                      TITLE
-----------                 ----                      -----
<S>                        <C>              <C>
7126-J-142-3                  P             Cantilever Support, Guides and
                                            Securing Arrangement

7126-J-142-4                  P             Cantilever Support, Guides and
                                            Securing Arrangement

7126-J-142-5                  P             Cantilever Support, Guides and
                                            Securing Arrangement

7126-J-143                    P             Cantilever Bearing Plates

7126-J-144                    P             Cantilever Beam Drilling Clamp

7126-J-150                    P             Leg Structure

7126-J-151-1                  P             59'-0" Diameter Can

7126-J-151-2                  P             59'-0" Diameter Can

7126-J-151-3                  P             59'-0" Diameter Can

7126-J-160-1                  P             Framing Below Jack Foundation and
                                            Lower Guide

7126-J-160-2                  P             Framing Below Jack Foundation and
                                            Lower Guide

7126-J-161                    P             Jack Foundation Bracing

7126-J-162                    P             Pump Tower and Leg Jetting Piping

JU2-S312-03                   0             Innerbottom Tanks - Access
                                            Fiberglass Stairways

JU2-S327-01                   P             JU-2000 Conductor Tensioning
                                            Platform Structure and Details
                                            (Sheets 1-6)

JU2-S327-03                   P             JU-2000 Conductor Tensioner Access
                                            Removable Panel Walkways (Sheets
                                            1-4)
</TABLE>


                            EXHIBIT "E" - Page 4 of 7
<PAGE>   71

<TABLE>
<CAPTION>
DRAWING NO.                 ALT.                      TITLE
-----------                 ----                      -----
<S>                        <C>              <C>
JU2-S327-04                   P             JU-2000 Upper Sliding Walkways
                                            Structure and Details

JU2-S327-05                   P             JU-2000 Aft Hinge Panels for
                                            Conductor Tension Unit

JU2-S327-06                   P             JU-2000 Wellhead Support Beams

JU2-01002-01                  0             Proposed Central Treated Water
                                            Cooling System Concept

JU2-P401-01                   0             Piping Diagram - Sea Water Piping
                                            Schematic

JU2-P401-02                   0             Burner Boom Water Curtain Piping
                                            Schematic

JU2-P402-01                   0             Potable water Piping Schematic

JU2-P402-02                   0             Potable Water (Quarters) Piping
                                            Schematic - Shts 1-4

JU2-P403-01                   0             Spud Can and Leg Jetting Piping
                                            Schematic

JU2-P404-01                   0             Piping Diagram - Quarters Sanitary
                                            Piping Schematic Shts 1&2

JU2-P405-01                   0             Fuel Oil Piping Schematic

JU2-P407-01                   0             Brake Cooling Unit Piping System
                                            Schematic

JU2-P408-01                   0             Brine Piping Schematic

JU2-P408-02                   0             Base Oil Piping Schematic

JU2-P409-01                   0             Preload Supply and Dump Piping
                                            Schematic

JU2-P410-01                   0             Bilge and Stripping Piping Schematic
                                            Shts 1&2

JU2-P411-01                   0             Piping Diagram - Drill Water Piping
                                            Schematic

JU2-P411-02                   0             Pressure Washdown Piping Schematic

JU2-P412-01                   0             Compressed Air Piping Schematic Shts
                                            1&2
</TABLE>


                            EXHIBIT "E" - Page 5 of 7
<PAGE>   72

<TABLE>
<CAPTION>
DRAWING NO.                 ALT.                      TITLE
-----------                 ----                      -----
<S>                        <C>              <C>
JU2-P413-01                   0             Bulk Mud and Cement Piping Schematic

JU2-P414-01                   0             Chilled Water (Quarters) Piping
                                            System Schematic

JU2-P415-01                   0             Piping Diagram - H.P. Mud & Cement
                                            Piping Schematic Shts 1&2

JU2-P416-01                   0             Low Pressure Mud Piping Schematic
                                            Shts 1&2

JU2-P417-01                   0             Lube Oil and Dirty Oil Piping System
                                            Schematic

JU2-P418-01                   0             Piping Diagram - L.P. Mud Processing
                                            System Schematic

JU2-P419-01                   0             Vents and Sounding Tubes Piping
                                            Schematic

JU2-P420-01                   0             Firemain (Hull) System Piping
                                            Schematic Shts 1-3

JU2-P420-02                   0             Firemain (Quarters) System Piping
                                            Schematic Shts 1&2

JU2-P423-01                   0             Breathing Air Piping Schematic Shts
                                            1&2

JU2-P424-01                   0             Piping Diagram - Firefighting Foam
                                            Piping System Schematic

JU2-P430-01                   0             Quarters Sprinkler System Piping
                                            Schematic Shts 1-3

JU2-P431-01                   0             Hydraulic Piping System ( BOP and
                                            Diverter)

JU2-P432-01                   0             Well Test/ Flare Boom Piping
                                            Schematic

JU2-P436-01                   0             Discharge Drain Oil/Water (Hull
                                            Pollution Drains)

JU2-P439-01                   1             Piping Diagram - CAT 3516B Engine
                                            Piping System Schematic Shts 1&2
</TABLE>


                            EXHIBIT "E" - Page 6 of 7
<PAGE>   73

<TABLE>
<CAPTION>
DRAWING NO.                 ALT.                      TITLE
-----------                 ----                      -----
<S>                        <C>              <C>
JU2-P494-01                   0             Lift & Roll Hydraulic Piping
                                            Schematic

STD-01003-01                  0             Substructure Lift & Roll Guidance
                                            Layout

JU2-E601-01                   0             Over-all One Line Diagram

JU2-E601-02                   0             Schematic 480V, 3ph, 60Hz Main
                                            Switchboard Shts 1-6

JU2-E601-03                   0             Ventilation MCC, 480V, 3ph, 3W, 60Hz

JU2-E601-04                   0             Drilling MCC 480V, 3ph, 60Hz Shts
                                            1&2

JU2-E601-05                   0             Schematic, Emergency Switchboard

JU2-E601-06                   0             208/120V, 3ph, 4W, 60Hz Main
                                            switchboard

JU2-E601-07                   0             Schematic & Arrgt, 600V Generator
                                            Power & Control
</TABLE>


                            EXHIBIT "E" - Page 7 of 7