Document:

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                                                                     EXHIBIT 4.4

                               SUBSIDIARY GUARANTY

                          Dated as of February 11, 2003

                                      From

                           THE GUARANTORS NAMED HEREIN

                                       and

                  THE ADDITIONAL GUARANTORS REFERRED TO HEREIN

                                  as Guarantors

                                   in favor of

                       THE SECURED PARTIES REFERRED TO IN
                     THE CREDIT AGREEMENT REFERRED TO HEREIN
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                                TABLE OF CONTENTS

SECTION                                                                     PAGE
<S>                                                                         <C>
Section 1. Guaranty; Limitation of Liability................................   1

Section 2. Guaranty Absolute................................................   2

Section 3. Waivers and Acknowledgments......................................   3

Section 4. Subrogation......................................................   4

Section 5. Payments Free and Clear of Taxes, Etc............................   5

Section 6. Representations and Warranties...................................   7

Section 7. Covenants........................................................   7

Section 8. Amendments, Guaranty Supplements, Etc............................   7

Section 9. Notices, Etc.....................................................   8

Section 10. No Waiver; Remedies.............................................   8

Section 11. Right of Set-off................................................   9

Section 12. Indemnification.................................................   9

Section 13. Subordination...................................................  10

Section 14. Continuing Guaranty; Assignments under the Credit Agreement.....  10

Section 15. Execution in Counterparts.......................................  11

Section 16. Governing Law; Jurisdiction; Waiver of Jury Trial, Etc..........  11

Exhibit A - Guaranty Supplement
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                               SUBSIDIARY GUARANTY

     SUBSIDIARY GUARANTY dated as of February __, 2003 made by the Persons
listed on the signature pages hereof under the caption "Subsidiary Guarantors"
and the Additional Guarantors (as defined in Section 8(b)) (such Persons so
listed and the Additional Guarantors being, collectively, the "GUARANTORS" and,
individually, each a "GUARANTOR") in favor of the Secured Parties (as defined in
the Credit Agreement referred to below).

     PRELIMINARY STATEMENT. McDermott International, Inc., a Panamanian
corporation ("MII"), J. Ray McDermott, S.A., a Panamanian corporation ("JRMSA"),
J. Ray McDermott Holdings, Inc., a Delaware corporation ("JRMHI"), J. Ray
McDermott, Inc., a Delaware corporation ("JRMI"), and BWX Technologies, Inc., a
Delaware corporation ("BWXT", and together with JRMSA, JRMHI and JRMI, the
"BORROWERS" and each, a "BORROWER"), are parties to a Credit Agreement dated as
of February __, 2003 (as amended, amended and restated, supplemented or
otherwise modified from time to time, the "CREDIT AGREEMENT"; capitalized terms
defined therein and not otherwise defined herein being used herein as therein
defined), with the banks, financial institutions and other institutional lenders
listed on the signature pages thereof as the Initial Lender Parties, Citicorp
USA, Inc. ("CUSA"), as Collateral Agent and Administrative Agent for the Lender
Parties, Salomon Smith Barney ("SSB"), as lead arranger and book runner, [NAME
OF INSTITUTION], as documentation agent, and [NAME OF INSTITUTION], as
syndication agent. Each Guarantor may receive, directly or indirectly, a portion
of the proceeds of the Advances under the Credit Agreement and will derive
substantial direct and indirect benefits from the transactions contemplated by
the Credit Agreement. It is a condition precedent to the making of Advances and
the issuance of Letters of Credit by the Lender Parties under the Credit
Agreement and the entry by the Hedge Banks into Secured Hedge Agreements from
time to time that each Guarantor shall have executed and delivered this
Guaranty.

     NOW, THEREFORE, in consideration of the premises and in order to induce the
Lender Parties to make Advances and to issue Letters of Credit under the Credit
Agreement and the Hedge Banks to enter into Secured Hedge Agreements from time
to time, each Guarantor, jointly and severally with each other Guarantor, hereby
agrees as follows:

     Section 1. Guaranty; Limitation of Liability. (a) Each Guarantor hereby
unconditionally and irrevocably guarantees the punctual payment when due,
whether at scheduled maturity or on any date of a required prepayment or by
acceleration, demand or otherwise pursuant to the terms of this Agreement, of
all Bilateral Obligations and all Obligations of each other Loan Party now or
hereafter existing under or in respect of the Loan Documents (including, without
limitation, any extensions, modifications, substitutions, amendments or renewals
of any or all of the foregoing Obligations), whether direct or indirect,
absolute or contingent, and whether for principal, interest, fees, expenses or
otherwise (such Obligations being the "GUARANTEED OBLIGATIONS"), and agrees to
pay any and all expenses (including, without limitation, reasonable fees and
expenses of counsel) incurred by the Agents or any other Secured Party in
enforcing any rights under this Guaranty or any other Loan Documents. Without
limiting the generality of the foregoing, each Guarantor's liability shall
extend to all amounts that constitute part of the Guaranteed Obligations and
would be owed by any other Loan Party to any Secured Party under or in respect
of the Loan Documents but for the
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fact that they are unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving such other Loan
Party.

     (b) Each Guarantor, and by its acceptance of this Guaranty, the Agents and
each other Secured Party, hereby confirms that it is the intention of all such
Persons that this Guaranty and the Obligations of each Guarantor hereunder not
constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law
(as hereinafter defined), the Uniform Fraudulent Conveyance Act, the Uniform
Fraudulent Transfer Act or any similar foreign, federal or state law to the
extent applicable to this Guaranty and the Obligations of each Guarantor
hereunder. To effectuate the foregoing intention, the Agents, the other Secured
Parties and the Guarantors hereby irrevocably agree that the Obligations of each
Guarantor under this Guaranty at any time shall be limited to the maximum amount
as will result in the Obligations of such Guarantor under this Guaranty not
constituting a fraudulent transfer or conveyance. For purposes hereof,
"BANKRUPTCY LAW" means Section 548 of Title 11, U.S. Code, or any similar
foreign, federal or state law for the relief of debtors.

     (c) Each Guarantor hereby unconditionally and irrevocably agrees that in
the event any payment shall be required to be made to any Secured Party under
this Guaranty or the Parent Guaranty or any other guaranty, such Guarantor will
contribute, to the maximum extent permitted by law, such amounts to each other
Guarantor and the Parent and each other guarantor so as to maximize the
aggregate amount paid to the Secured Parties (up to the amount of the payment so
required to be made) under or in respect of the Loan Documents.

     Section 2. Guaranty Absolute. Each Guarantor guarantees that the Guaranteed
Obligations will be paid strictly in accordance with the terms of the Loan
Documents, regardless of any law, regulation or order now or hereafter in effect
in any jurisdiction affecting any of such terms or the rights of any Secured
Party with respect thereto. The Obligations of each Guarantor under or in
respect of this Guaranty are independent of the Guaranteed Obligations or any
other Obligations of any other Loan Party under or in respect of the Loan
Documents, and a separate action or actions may be brought and prosecuted
against each Guarantor to enforce this Guaranty, irrespective of whether any
action is brought against any Borrower or any other Loan Party or whether any
Borrower or any other Loan Party is joined in any such action or actions. To the
maximum extent permitted by applicable law, the liability of each Guarantor
under this Guaranty shall be irrevocable, absolute and unconditional
irrespective of, and each Guarantor hereby irrevocably waives any defenses it
may now have or hereafter acquire in any way relating to, any or all of the
following:

          (a) any lack of validity or enforceability of any Loan Document;

          (b) any change in the time, manner or place of payment of, or in any
     other term of, all or any of the Guaranteed Obligations or any other
     Obligations of any other Loan Party under or in respect of the Loan
     Documents, or any other amendment or waiver of or any consent to departure
     from any Loan Document, including, without limitation, any increase in the
     Guaranteed Obligations resulting from the extension of additional credit to
     any Loan Party or any of its Subsidiaries or otherwise;
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                                       3

          (c) any taking, exchange, release or non-perfection of any collateral,
     or any taking, release or amendment or waiver of or consent to departure
     from any other guaranty, for all or any of the Guaranteed Obligations;

          (d) any manner of application of collateral, or proceeds thereof, to
     all or any of the Guaranteed Obligations, or any manner of sale or other
     disposition of any collateral for all or any of the Guaranteed Obligations
     or any other Obligations of any Loan Party under the Loan Documents or any
     other assets of any Loan Party or any of its Subsidiaries;

          (e) any change, restructuring or termination of the corporate or other
     legal structure or existence of any Loan Party or any of its Subsidiaries;

          (f) any failure of any Secured Party to disclose to any Loan Party any
     information relating to the business, condition (financial or otherwise),
     operations, performance, properties or prospects of any other Loan Party
     now or hereafter known to such Secured Party (each Guarantor waiving any
     duty on the part of the Secured Parties to disclose such information);

          (g) the failure of any other Person to execute or deliver this
     Guaranty, any Guaranty Supplement (as hereinafter defined) or any other
     guaranty or agreement or the release or reduction of liability of any
     Guarantor or other guarantor or surety with respect to the Guaranteed
     Obligations; or

          (h) any other circumstance (including, without limitation, any statute
     of limitations) or any existence of or reliance on any representation by
     any Secured Party that might otherwise constitute a defense available to,
     or a discharge of, any Loan Party or any other guarantor or surety.

This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is rescinded
or must otherwise be returned by any Secured Party or any other Person upon the
insolvency, bankruptcy or reorganization of any other Loan Party or otherwise,
all as though such payment had not been made.

     Section 3. Waivers and Acknowledgments. (a) Each Guarantor hereby
unconditionally and irrevocably waives promptness, diligence, notice of
acceptance, presentment, demand for performance, notice of nonperformance,
default, acceleration, protest or dishonor and any other notice with respect to
any of the Guaranteed Obligations and this Guaranty and any requirement that any
Secured Party protect, secure, perfect or insure any Lien or any property
subject thereto or exhaust any right or take any action against any Loan Party
or any other Person or any Collateral.

     (b) Each Guarantor hereby unconditionally and irrevocably waives any right
to revoke this Guaranty and acknowledges that this Guaranty is continuing in
nature and applies to all Guaranteed Obligations, whether existing now or in the
future.

     (c) Each Guarantor hereby unconditionally and irrevocably waives (i) any
defense arising by reason of any claim or defense based upon an election of
remedies by any
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                                       4

Secured Party that in any manner impairs, reduces, releases or otherwise
adversely affects the subrogation, reimbursement, exoneration, contribution or
indemnification rights of such Guarantor or other rights of such Guarantor to
proceed against any of the other Loan Parties, any other guarantor or any other
Person or any Collateral and (ii) any defense based on any right of set-off or
counterclaim against or in respect of the Obligations of such Guarantor
hereunder.

     (d) Each Guarantor acknowledges that the Collateral Agent may, except as
otherwise required by the Uniform Commercial Code as in effect from time to time
in the State of New York or other applicable law, without notice to or demand
upon such Guarantor and without affecting the liability of such Guarantor under
this Guaranty, foreclose under any mortgage by nonjudicial sale, and each
Guarantor hereby waives any defense to the recovery by the Collateral Agent and
the other Secured Parties against such Guarantor of any deficiency after such
nonjudicial sale and any defense or benefits that may be afforded by applicable
law.

     (e) Each Guarantor acknowledges that it will receive substantial direct and
indirect benefits from the financing arrangements contemplated by the Loan
Documents and that the waivers set forth in Section 2 and this Section 3 are
knowingly made in contemplation of such benefits.

     Section 4. Subrogation. Each Guarantor hereby unconditionally and
irrevocably agrees not to exercise any rights that it may now have or hereafter
acquire against any Borrower, any other Loan Party or any other guarantor that
arise from the existence, payment, performance or enforcement of such
Guarantor's Obligations under or in respect of this Guaranty or any other Loan
Document, including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution or indemnification and any right to
participate in any claim or remedy of any Secured Party against any Borrower,
any Loan Party or any other guarantor or any Collateral, whether or not such
claim, remedy or right arises in equity or under contract, statute or common
law, including, without limitation, the right to take or receive from any
Borrower, any Loan Party or any other guarantor, directly or indirectly, in cash
or other property or by setoff or in any other manner, payment or security on
account of such claim, remedy or right, unless and until all of the Guaranteed
Obligations and all other amounts payable under this Guaranty shall have been
paid in full in cash, all Letters of Credit and all Secured Hedge Agreements
shall have expired or been terminated, or in the case of Letters of Credit cash
collateralized as provided for in the Credit Agreement, and the Commitments
shall have expired or been terminated. If any amount shall be paid to any
Guarantor in violation of the immediately preceding sentence at any time prior
to the latest of (a) the payment in full in cash of the Guaranteed Obligations
and all other amounts payable under this Guaranty, (b) the Termination Date and
(c) the latest date of expiration or termination of all Letters of Credit and
all Secured Hedge Agreements, or in the case of Letters of Credit cash
collateralized as provided for in the Credit Agreement, such amount shall be
received and held in trust for the benefit of the Secured Parties, shall be
segregated from other property and funds of such Guarantor and shall forthwith
be paid or delivered to the Administrative Agent in the same form as so received
(with any necessary endorsement or assignment) to be credited and applied to the
Guaranteed Obligations and all other amounts payable under this Guaranty,
whether matured or unmatured, in accordance with the terms of the Loan
Documents, or to be held as Collateral for any Guaranteed Obligations or other
amounts payable under this Guaranty thereafter arising. If (i) any Guarantor
shall make payment to any Secured Party of all or any part of the Guaranteed
Obligations, (ii) all
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of the Guaranteed Obligations and all other amounts payable under this Guaranty
shall have been paid in full in cash, (iii) the Termination Date shall have
occurred and (iv) all Letters of Credit and all Secured Hedge Agreements shall
have expired or been terminated, or in the case of Letters of Credit cash
collateralized as provided for in the Credit Agreement, the Secured Parties
will, at such Guarantor's request and expense, execute and deliver to such
Guarantor appropriate documents, without recourse and without representation or
warranty, necessary to evidence the transfer by subrogation to such Guarantor of
an interest in the Guaranteed Obligations resulting from such payment made by
such Guarantor pursuant to this Guaranty.

     Section 5. Payments Free and Clear of Taxes, Etc. (a) Any and all payments
made by any Guarantor under or in respect of this Guaranty or any other Loan
Document shall be made, in accordance with Section 2.12 of the Credit Agreement,
free and clear of and without deduction for any and all present or future Taxes.
If any Guarantor shall be required by law to deduct any Taxes from or in respect
of any sum payable under or in respect of this Guaranty or any other Loan
Document to any Secured Party, (i) the sum payable by such Guarantor shall be
increased as necessary so that after such Guarantor has made all required
deductions (including deductions applicable to additional sums payable under
this Section 5), such Secured Party receives an amount equal to the sum it would
have received had no such deductions been made, (ii) such Guarantor shall make
all such deductions and (iii) such Guarantor shall pay the full amount deducted
to the relevant taxation authority in accordance with applicable law.

     (b) In addition, each Guarantor agrees to pay any present or future Other
Taxes that arise from any payment made by or on behalf of such Guarantor under
or in respect of this Guaranty or any other Loan Document or from the execution,
delivery or registration of, performance under, or otherwise with respect to,
this Guaranty and the other Loan Documents.

     (c) Each Guarantor will indemnify each Secured Party for and hold it
harmless against the full amount of Taxes and Other Taxes, and for the full
amount of taxes of any kind imposed by any jurisdiction on amounts payable under
this Section 5 paid by such Secured Party (including penalties, additions to
tax, interest and reasonable expenses) arising therefrom or with respect
thereto. This indemnification shall be made within 30 days from the date such
Secured Party makes a reasonable written demand (which demand shall be made
within a reasonable time), specifying in reasonable detail (with supporting
documentation reasonably requested by the Guarantors) the reasons therefor.

     (d) If a Secured Party shall become aware that it is entitled to claim a
refund from a taxation authority in respect of Taxes or Other Taxes as to which
it has been indemnified by such Guarantor, or with respect to which such
Guarantor has paid Additional Amounts, pursuant to this Section 5, it shall
promptly notify such Guarantor of the availability of such refund claim and
shall, within 30 days after receipt of a request by such Guarantor, make a claim
to such taxation authority for such refund at such Guarantor's expense. If a
Secured Party receives a refund (including pursuant to a claim for refund made
pursuant to the preceding sentence) in respect of any Taxes or Other Taxes as to
which it has been indemnified by such Guarantor, or with respect to which such
Guarantor has paid Additional Amounts, pursuant to this Section 5, it shall
within 30 days from the date of such receipt pay over such refund to such
Guarantor (but only to the extent of indemnity payments made, or Additional
Amounts paid, by such Guarantor under this Section 5 with respect to the Taxes
or Other Taxes giving rise to such
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refund), net of all out-of-pocket expenses of such Secured Party and without
interest (other than interest paid by the relevant taxation authority with
respect to such refund); provided, however, that such Guarantor, upon the
request of such Secured Party, agrees to repay the amount paid over to such
Guarantor (plus penalties, interest or other charges, if any, imposed by the
relevant taxation authority in respect of such repayment) to such Secured Party
in the event such Secured Party is required to repay such refund to such
taxation authority.

     (e) Within 30 days after the date of any payment of Taxes by or on behalf
of any Guarantor, such Guarantor shall use commercially reasonable efforts to
furnish to the Administrative Agent, at its address referred to in Section 9.02
of the Credit Agreement, the original or certified copy of a receipt evidencing
such payment.

     (f) Upon the reasonable request in writing of any Guarantor, each Secured
Party organized under the laws of a jurisdiction outside the United States
shall, on or prior to the date of its execution and delivery of the Credit
Agreement in the case of each Initial Lender Party and on the date of the
Assignment and Acceptance or Secured Hedge Agreement pursuant to which it
becomes a Secured Party in the case of each other Secured Party, and on or
before the date, if any, it changes its Applicable Lending Office, and from time
to time thereafter as requested in writing by any Guarantor (but only so long
thereafter as such Secured Party remains lawfully able to do so), provide each
of the Administrative Agent and such Guarantor with two original Internal
Revenue Service Forms W-8BEN or W-8ECI (in the case of a Secured Party that
provides a Form W-8BEN other than by reason of the applicability of a tax
treaty, the Secured Party shall also provide a certificate representing that
such Secured Party is not a "bank" for purposes of Section 881(c) of the
Internal Revenue Code, is not a 10-percent shareholder (within the meaning of
Section 871(h)(3)(B) of the Internal Revenue Code) of any Guarantor and is not a
controlled foreign corporation related to any Guarantor (within the meaning of
Section 864(d)(4) of the Internal Revenue Code)), as appropriate, or any
successor or other form prescribed by the Internal Revenue Service, properly
completed and duly executed by such Secured Party, certifying that such Secured
Party is exempt from or entitled to a reduced rate of United States withholding
tax on payments pursuant to this Agreement or the Notes and, in the case of a
Secured Party providing a Form W-8BEN, certifying that such Secured Party is a
foreign corporation, partnership, estate or trust. In addition, each such Lender
Party shall deliver such forms promptly upon the obsolescence or invalidity of
any form previously delivered by such Lender Party. If the forms provided by a
Secured Party at the time such Secured Party first becomes a party to this
Agreement indicate or require a United States interest withholding tax rate in
excess of zero, withholding tax at such rate shall be considered excluded from
Taxes for purposes of this Section 5 unless and until such Secured Party
provides the appropriate forms certifying that a lesser rate applies, whereupon
withholding tax at such lesser rate only shall be considered excluded from Taxes
for periods governed by such forms; provided, however, that if, at the effective
date of the Assignment and Acceptance pursuant to which a Secured Party becomes
a party to this Agreement (or the date, if any a Secured Party changes its
Applicable Lending Office), the Secured Party assignor (or such Secured Party)
was entitled to payments under subsection (a) of this Section 5 in respect of
United States withholding tax with respect to interest paid at such date, then,
to such extent, the term Taxes shall include (in addition to withholding taxes
that may be imposed in the future or other amounts otherwise includable in
Taxes, subject to the provisions of this subsection (f)) United States
withholding tax, if any, applicable with respect to the Secured Party assignee
(or such Secured Party) on such date.
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     (g) For any period with respect to which a Secured Party has failed to
provide any Guarantor following such Guarantor's request therefor pursuant to
subsection (f) above with the appropriate form described in subsection (f) above
(other than if such failure is due to a change in law occurring after the date
on which a form originally was required to be provided or if such form otherwise
is not required under subsection (f) above), such Secured Party shall not be
entitled to indemnification under subsection (a) or (c) of this Section 5 with
respect to Taxes imposed by the United States by reason of such failure;
provided, however, that should a Secured Party become subject to Taxes because
of its failure to deliver a form required hereunder, such Guarantor shall take
such steps as such Secured Party shall reasonably request to assist such Secured
Party to recover such Taxes.

     (h) Any Secured Party claiming any indemnity payment or Additional Amounts
payable pursuant to this Section 5 shall use reasonable efforts (consistent with
legal and regulatory restrictions) to file any certificate or document
reasonably requested in writing by such Guarantor or to change the jurisdiction
of its Applicable Lending Office following the reasonable request in writing of
such Guarantor if the making of such a filing or change would avoid the need for
or reduce the amount of any such indemnity payment or Additional Amounts that
may thereafter accrue and would not, in the sole determination of such Secured
Party, require the disclosure of information that such Secured Party reasonably
considers confidential, or be otherwise disadvantageous to such Secured Party.

     Section 6. Representations and Warranties. Each Guarantor hereby makes each
representation and warranty made in the Loan Documents by the Borrowers with
respect to such Guarantor and each Guarantor hereby further represents and
warrants as follows:

          (a) There are no conditions precedent to the effectiveness of this
     Guaranty that have not been satisfied or waived.

          (b) Such Guarantor has, independently and without reliance upon any
     Secured Party and based on such documents and information as it has deemed
     appropriate, made its own credit analysis and decision to enter into this
     Guaranty and each other Loan Document to which it is or is to be a party,
     and such Guarantor has established adequate means of obtaining from each
     other Loan Party on a continuing basis information pertaining to, and is
     now and on a continuing basis will be completely familiar with, the
     business, condition (financial or otherwise), operations, performance,
     properties and prospects of such other Loan Party.

     Section 7. Covenants. Each Guarantor covenants and agrees that, so long as
any part of the Guaranteed Obligations shall remain unpaid, any Letter of Credit
shall be outstanding and not separately cash collateralized, any Lender Party
shall have any Commitment or any Secured Hedge Agreement shall be in effect,
such Guarantor will perform and observe, and cause each of its Subsidiaries to
perform and observe, all of the terms, covenants and agreements set forth in the
Loan Documents on its or their part to be performed or observed or that the
Borrower has agreed to cause such Guarantor or such Subsidiaries to perform or
observe.

     Section 8. Amendments, Guaranty Supplements, Etc. (a) No amendment or
waiver of any provision of this Guaranty and no consent to any departure by any
Guarantor
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therefrom shall in any event be effective unless the same shall be in writing
and signed by the Administrative Agent and the Required Lenders, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that no amendment, waiver
or consent shall, unless in writing and signed by all of the Secured Parties
(other than any Lender that is, at such time, a Defaulting Lender), (a) reduce
or limit the obligations of any Guarantor hereunder, release any Guarantor
hereunder or otherwise limit any Guarantor's liability with respect to the
Obligations owing to the Secured Parties under or in respect of the Loan
Documents except as provided in the next succeeding sentence, (b) postpone any
date fixed for payment hereunder or (c) change the number of Secured Parties or
the percentage of (x) the Commitments, (y) the aggregate unpaid principal amount
of the Advances or (z) the aggregate Available Amount of outstanding Letters of
Credit that, in each case, shall be required for the Secured Parties or any of
them to take any action hereunder. Notwithstanding the foregoing, upon the sale
of a Guarantor to the extent permitted in accordance with the terms of the Loan
Documents, such Guarantor shall be automatically released from this Guaranty.

     (b) Upon the execution and delivery by any Person of a guaranty supplement
in substantially the form of Exhibit A hereto (each, a "GUARANTY SUPPLEMENT"),
(i) such Person shall be referred to as an "ADDITIONAL GUARANTOR" and shall
become and be a Guarantor hereunder, and each reference in this Guaranty to a
"GUARANTOR" shall also mean and be a reference to such Additional Guarantor, and
each reference in any other Loan Document to a "SUBSIDIARY GUARANTOR" shall also
mean and be a reference to such Additional Guarantor, and (ii) each reference
herein to "THIS GUARANTY", "HEREUNDER", "HEREOF" or words of like import
referring to this Guaranty, and each reference in any other Loan Document to the
"SUBSIDIARY GUARANTY", "THEREUNDER", "THEREOF" or words of like import referring
to this Guaranty, shall mean and be a reference to this Guaranty as supplemented
by such Guaranty Supplement.

     Section 9. Notices, Etc. All notices and other communications provided for
hereunder shall be in writing (including telegraphic, telecopy or telex
communication) and mailed, telegraphed, telecopied, telexed or delivered to it,
if to any Guarantor, addressed to it in care of MII at MII's address specified
in Section 9.02 of the Credit Agreement, if to any Agent or any Lender Party, at
its address specified in Section 9.02 of the Credit Agreement, if to any Hedge
Bank, at its address specified in the Secured Hedge Agreement to which it is a
party, or, as to any party, at such other address as shall be designated by such
party in a written notice to each other party. All such notices and other
communications shall be deemed to have been given on the date of receipt if
delivered by hand or overnight courier service or sent by telegraph, telecopy or
telex, or on the date five Business Days after dispatch by certified or
registered mail if mailed, in each case delivered, sent or mailed (properly
addressed) to such party as provided in this Section 9 or in accordance with the
latest unrevoked direction from such party given in accordance with this Section
9. Delivery by telecopier of an executed counterpart of a signature page to any
amendment or waiver of any provision of this Guaranty or of any Guaranty
Supplement to be executed and delivered hereunder shall be effective as delivery
of an original executed counterpart thereof.

     Section 10. No Waiver; Remedies. No failure on the part of any Secured
Party to exercise, and no delay in exercising, any right hereunder shall operate
as a waiver thereof; nor shall any single or partial exercise of any right
hereunder preclude any other or further exercise
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                                       9

thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.

     Section 11. Right of Set-off. Upon (a) the occurrence and during the
continuance of any Event of Default and (b) the making of the request or the
granting of the consent specified by Section 6.01 of the Credit Agreement to
authorize the Administrative Agent to declare the Notes due and payable pursuant
to the provisions of said Section 6.01, each Agent and each Lender Party and
each of their respective Affiliates is hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to set off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by such Agent, such
Lender Party or such Affiliate to or for the credit or the account of any
Guarantor against any and all of the Obligations of such Guarantor now or
hereafter existing under the Loan Documents, irrespective of whether such Agent
or such Lender Party shall have made any demand under this Guaranty or any other
Loan Document and although such Obligations may be unmatured. Each Agent and
each Lender Party agrees promptly to notify such Guarantor after any such
set-off and application; provided, however, that the failure to give such notice
shall not affect the validity of such set-off and application. The rights of
each Agent and each Lender Party and their respective Affiliates under this
Section are in addition to other rights and remedies (including, without
limitation, other rights of set-off) that such Agent, such Lender Party and
their respective Affiliates may have.

     Section 12. Indemnification. (a) Without limitation on any other
Obligations of any Guarantor or remedies of the Secured Parties under this
Guaranty, each Guarantor shall, to the fullest extent permitted by law,
indemnify, defend and save and hold harmless each Secured Party and each of
their Affiliates and their respective officers, directors, employees, agents and
advisors (each, an "INDEMNIFIED PARTY") from and against, and shall pay on
demand, any and all claims, damages, losses, liabilities and expenses
(including, without limitation, reasonable fees and expenses of counsel) that
may be incurred by or asserted or awarded against any Indemnified Party in
connection with or as a result of any failure of any Guaranteed Obligations to
be the legal, valid and binding obligations of any Loan Party enforceable
against such Loan Party in accordance with their terms.

     (b) Each Guarantor hereby also agrees that none of the Indemnified Parties
shall have any liability (whether direct or indirect, in contract, tort or
otherwise) to any of the Guarantors or any of their respective Affiliates or any
of their respective officers, directors, employees, agents and advisors, and
each Guarantor hereby agrees not to assert any claim against any Indemnified
Party on any theory of liability, for special, indirect, consequential or
punitive damages arising out of or otherwise relating to the Facilities, the
actual or proposed use of the proceeds of the Advances or the Letters of Credit,
the Loan Documents or any of the transactions contemplated by the Loan
Documents.

     (c) Without prejudice to the survival of any of the other agreements of any
Guarantor under this Guaranty or any of the other Loan Documents, the agreements
and obligations of each Guarantor contained in Section 1(a) (with respect to
enforcement expenses), the last sentence of Section 2, Section 5 and this
Section 12 shall survive the payment in full of the Guaranteed Obligations and
all of the other amounts payable under this Guaranty.
<PAGE>
                                       10

     Section 13. Subordination Each Guarantor hereby subordinates any and all
debts, liabilities and other Obligations owed to such Guarantor by each other
Loan Party (the "SUBORDINATED OBLIGATIONS") to the Guaranteed Obligations to the
extent and in the manner hereinafter set forth in this Section 13:

          (a) Prohibited Payments, Etc. Except during the continuance of an
     Event of Default, each Guarantor may receive regularly scheduled payments
     from any other Loan Party on account of Debt owed to it by such Loan Party
     and permitted under Section 5.02(b) of the Credit Agreement. After the
     occurrence and during the continuance of any Event of Default, however,
     unless the Administrative Agent otherwise agrees, no Guarantor shall
     demand, accept or take any action to collect any payment on account of Debt
     owed to it by any other Loan Party.

          (b) Prior Payment of Guaranteed Obligations. In any proceeding under
     any Bankruptcy Law, each Guarantor agrees that the Secured Parties shall be
     entitled to receive payment in full in cash of all Guaranteed Obligations
     (including all interest and expenses accruing after the commencement of a
     proceeding under any Bankruptcy Law, whether or not constituting an allowed
     claim in such proceeding ("POST PETITION INTEREST")) before such Guarantor
     receives payment of any Debt owed to it by any other Loan Party.

          (c) Turn-Over. After the occurrence and during the continuance of any
     Event of Default, each Guarantor shall, if the Administrative Agent so
     requests, use commercially reasonable efforts to collect, enforce and
     receive payments on account of Debt owed to it by any Loan Parties as
     trustee for the Secured Parties and deliver such payments to the
     Administrative Agent on account of the Guaranteed Obligations (including
     all Post Petition Interest), together with any necessary endorsements or
     other instruments of transfer, but without reducing or affecting in any
     manner the liability of such Guarantor under the other provisions of this
     Guaranty.

          (d) Administrative Agent Authorization. After the occurrence and
     during the continuance of any Event of Default, the Administrative Agent is
     authorized and empowered (but without any obligation to so do), in its
     discretion, (i) in the name of each Guarantor, to collect and enforce, and
     to submit claims in respect of, Subordinated Obligations and to apply any
     amounts received thereon to the Guaranteed Obligations (including any and
     all Post Petition Interest), and (ii) to require each Guarantor (A) to use
     commercially reasonable efforts to collect and enforce, and to submit
     claims in respect of, Debt owed to it by any Loan Party and (B) to pay any
     amounts received on such obligations to the Administrative Agent for
     application to the Guaranteed Obligations (including any and all Post
     Petition Interest).

     Section 14. Continuing Guaranty; Assignments under the Credit Agreement.
This Guaranty is a continuing guaranty and shall (a) remain in full force and
effect until the latest of (i) the payment in full in cash of the Guaranteed
Obligations and all other amounts payable under this Guaranty, (ii) the
Termination Date and (iii) the latest date of expiration or termination of all
Letters of Credit and all Secured Hedge Agreements or, in the case of the
Letters of Credit, the cash collateralization of such Letters of Credit as
provided for in the Credit Agreement,
<PAGE>
                                       11

(b) be binding upon the Guarantor, its successors and assigns and (c) inure to
the benefit of and be enforceable by the Secured Parties and their successors
and permitted assigns. Without limiting the generality of clause (c) of the
immediately preceding sentence, any Secured Party may assign or otherwise
transfer all or any portion of its rights and obligations under the Credit
Agreement (including, without limitation, all or any portion of its Commitments,
the Advances owing to it and the Note or Notes held by it) to any other Person,
and such other Person shall thereupon become vested with all the benefits in
respect thereof granted to such Secured Party herein or otherwise, in each case
as and to the extent provided in Section 9.07 of the Credit Agreement. No
Guarantor shall have the right to assign its rights hereunder or any interest
herein without the prior written consent of the Secured Parties.

     Section 15. Execution in Counterparts. This Guaranty and each amendment,
waiver and consent with respect hereto may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of a signature page to this Guaranty by telecopier shall be
effective as delivery of an original executed counterpart of this Guaranty.

     Section 16. Governing Law; Jurisdiction; Waiver of Jury Trial, Etc. (a)
This Guaranty shall be governed by, and construed in accordance with, the laws
of the State of New York.

     (b) Each Guarantor hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of any New York State
court or federal court of the United States of America sitting in New York City,
and any appellate court from any thereof, in any action or proceeding arising
out of or relating to this Guaranty or any of the other Loan Documents to which
it is or is to be a party, or for recognition or enforcement of any judgment,
and each Guarantor hereby irrevocably and unconditionally agrees that all claims
in respect of any such action or proceeding may be heard and determined in any
such New York State court or, to the extent permitted by law, in such federal
court. Each Guarantor agrees that a final and non-appealable judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Guaranty or any other Loan Document shall affect any right that
any party may otherwise have to bring any action or proceeding relating to this
Guaranty or any other Loan Document in the courts of any jurisdiction.

     (c) Each Guarantor irrevocably and unconditionally waives, to the fullest
extent it may legally and effectively do so, any objection that it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Guaranty or any of the other Loan Documents to which
it is or is to be a party in any New York State or federal court. Each Guarantor
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such suit, action or proceeding
in any such court.

     (d) EACH GUARANTOR HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR
<PAGE>
                                       12

RELATING TO ANY OF THE LOAN DOCUMENTS, THE ADVANCES OR THE ACTIONS OF ANY
SECURED PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT
THEREOF.
<PAGE>
     IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.

                                             J. RAY McDERMOTT INTERNATIONAL
                                             VESSELS, LTD.

                                             By
                                                 ------------------------------
                                                 Title:   James R. Easter
                                                          Treasurer

                                             HYDRO MARINE SERVICES, INC.

                                             By
                                                 ------------------------------
                                                 Title:   James R. Easter
                                                          Treasurer

                                             J. RAY McDERMOTT UNDERWATER
                                             SERVICES, INC.

                                             By
                                                 ------------------------------
                                                 Title:   James R. Easter
                                                          Treasurer

                                             MENTOR SUBSEA TECHNOLOGY
                                             SERVICES, INC.

                                             By
                                                 ------------------------------
                                                 Title:   James R. Easter
                                                          Treasurer

                                             McDERMOTT TRADE CORPORATION

                                             By
                                                 ------------------------------
                                                 Title:   James R. Easter
                                                          Treasurer
<PAGE>
                                             J. RAY McDERMOTT TECHNOLOGY, INC.

                                             By
                                                 ------------------------------
                                                 Title:   James R. Easter
                                                          Treasurer

                                             OPI VESSELS, INC.

                                             By
                                                 ------------------------------
                                                 Title:   James R. Easter
                                                          Treasurer

                                             J. RAY McDERMOTT ENGINEERING
                                             HOLDINGS, INC.

                                             By
                                                 ------------------------------
                                                 Title:   James R. Easter
                                                          Treasurer

                                             SABINE RIVER REALTY, INC.

                                             By
                                                 ------------------------------
                                                 Title:   James R. Easter
                                                          Treasurer

                                             SPARTEC, INC.

                                             By
                                                 ------------------------------
                                                 Title:   James R. Easter
                                                          Treasurer

                                             J. RAY McDERMOTT WEST AFRICA
                                             HOLDINGS, INC.

                                             By
                                                 ------------------------------
                                                 Title:   James R. Easter
                                                          Treasurer
<PAGE>
                                             J. RAY McDERMOTT ENGINEERING, LLC

                                             By
                                                 ------------------------------
                                                 Title:   James R. Easter
                                                          Treasurer

                                             J. RAY McDERMOTT WEST AFRICA, INC.

                                             By
                                                 ------------------------------
                                                 Title:   James R. Easter
                                                          Treasurer
<PAGE>
                                                                       EXHIBIT A
                                                                          TO THE
                                                             SUBSIDIARY GUARANTY

                         SUBSIDIARY GUARANTY SUPPLEMENT

                                                              _________ __, ____

Citicorp USA, Inc., as Administrative Agent
[1200 Smith Street, Suite 200
Houston, TX 77002]

Attention: _________

              Credit Agreement dated as of February __, 2003 among
        McDermott International, Inc., a Panamanian corporation ("MII"),
           J. Ray McDermott, S.A., a Panamanian corporation ("JRMSA"),
       J. Ray McDermott Holdings, Inc., a Delaware corporation ("JRMHI"),
            J. Ray McDermott, Inc., a Delaware corporation ("JRMI"),
           and BWX Technologies, Inc., a Delaware corporation ("BWXT",
          and together with JRMSA, JRMHI and JRMI, the "BORROWERS" and
        each, a "BORROWER"), the banks, financial institutions and other
       institutional lenders listed on the signature pages thereof as the
         Initial Lender Parties, Citicorp USA, Inc. as Collateral Agent
     and Administrative Agent for the Lender Parties, Salomon Smith Barney,
            as lead arranger and book runner, [NAME OF INSTITUTION],
    as documentation agent, and [NAME OF INSTITUTION], as syndication agent.

Ladies and Gentlemen:

     Reference is made to the above-captioned Credit Agreement and to the
Subsidiary Guaranty referred to therein (such Subsidiary Guaranty, as in effect
on the date hereof and as it may hereafter be amended, supplemented or otherwise
modified from time to time, together with this Guaranty Supplement, being the
"SUBSIDIARY GUARANTY"). The capitalized terms defined in the Subsidiary Guaranty
or in the Credit Agreement and not otherwise defined herein are used herein as
therein defined.

     Section 1. Guaranty; Limitation of Liability. (a) The undersigned hereby
absolutely, unconditionally and irrevocably guarantees the punctual payment when
due, whether at scheduled maturity or on any date of a required prepayment or by
acceleration, demand or otherwise pursuant to the terms of this Agreement, of
all Obligations of each other Loan Party now or hereafter existing under or in
respect of the Loan Documents (including, without limitation, any extensions,
modifications, substitutions, amendments or renewals of any or all of the
foregoing Obligations), whether direct or indirect, absolute or contingent, and
whether for principal, interest, premium, fees, indemnities or otherwise (such
Obligations being the "GUARANTEED OBLIGATIONS"), and agrees to pay any and all
expenses (including, without limitation, reasonable fees and expenses of
counsel) incurred by the Agents or any other Secured
<PAGE>
                                       2

Party in enforcing any rights under this Guaranty Supplement, the Subsidiary
Guaranty or any other Loan Documents. Without limiting the generality of the
foregoing, the undersigned's liability shall extend to all amounts that
constitute part of the Guaranteed Obligations and would be owed by any other
Borrower to any Secured Party under or in respect of the Loan Documents but for
the fact that they are unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving such other Borrower.

     (b) The undersigned, and by its acceptance of this Guaranty Supplement, the
Agents and each other Secured Party, hereby confirms that it is the intention of
all such Persons that this Guaranty Supplement, the Subsidiary Guaranty and the
Obligations of the undersigned hereunder and thereunder not constitute a
fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform
Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar
foreign, federal or state law to the extent applicable to this Guaranty
Supplement, the Subsidiary Guaranty and the Obligations of the undersigned
hereunder and thereunder. To effectuate the foregoing intention, the Agents, the
other Secured Parties and the undersigned hereby irrevocably agree that the
Obligations of the undersigned under this Guaranty Supplement and the Subsidiary
Guaranty at any time shall be limited to the maximum amount as will result in
the Obligations of the undersigned under this Guaranty Supplement and the
Subsidiary Guaranty not constituting a fraudulent transfer or conveyance.

     (c) The undersigned hereby unconditionally and irrevocably agrees that in
the event any payment shall be required to be made to any Secured Party under
this Guaranty Supplement, the Subsidiary Guaranty, the Parent Guaranty or any
other guaranty, the undersigned will contribute, to the maximum extent permitted
by applicable law, such amounts to each other Guarantor and each other guarantor
so as to maximize the aggregate amount paid to the Secured Parties (up to the
amount of the payment so required to be made) under or in respect of the Loan
Documents.

     Section 2. Obligations Under the Guaranty. The undersigned hereby agrees,
as of the date first above written, to be bound as a Guarantor by all of the
terms and conditions of the Subsidiary Guaranty to the same extent as each of
the other Guarantors thereunder. The undersigned further agrees, as of the date
first above written, that each reference in the Subsidiary Guaranty to an
"ADDITIONAL GUARANTOR" or a "GUARANTOR" shall also mean and be a reference to
the undersigned, and each reference in any other Loan Document to a "SUBSIDIARY
GUARANTOR" or a "LOAN PARTY" shall also mean and be a reference to the
undersigned.

     Section 3. Representations and Warranties. The undersigned hereby makes
each representation and warranty set forth in Section 6 of the Subsidiary
Guaranty to the same extent as each other Guarantor.

     Section 4. Delivery by Telecopier. Delivery of an executed counterpart of a
signature page to this Guaranty Supplement by telecopier shall be effective as
delivery of an original executed counterpart of this Guaranty Supplement.

     Section 5. Governing Law; Jurisdiction; Waiver of Jury Trial, Etc. (a) This
Guaranty Supplement shall be governed by, and construed in accordance with, the
laws of the State of New York.
<PAGE>
                                       3

     (b) The undersigned hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of any New York State
court or any federal court of the United States of America sitting in New York
City, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to this Guaranty Supplement, the Subsidiary Guaranty
or any of the other Loan Documents to which it is or is to be a party, or for
recognition or enforcement of any judgment, and the undersigned hereby
irrevocably and unconditionally agrees that all claims in respect of any such
action or proceeding may be heard and determined in any such New York State
court or, to the extent permitted by law, in such federal court. The undersigned
agrees that a final and non-appealable judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this Guaranty
Supplement or the Subsidiary Guaranty or any other Loan Document shall affect
any right that any party may otherwise have to bring any action or proceeding
relating to this Guaranty Supplement, the Subsidiary Guaranty or any of the
other Loan Documents to which it is or is to be a party in the courts of any
other jurisdiction.

     (c) The undersigned irrevocably and unconditionally waives, to the fullest
extent it may legally and effectively do so, any objection that it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Guaranty Supplement, the Subsidiary Guaranty or any
of the other Loan Documents to which it is or is to be a party in any New York
State or federal court. The undersigned hereby irrevocably waives, to the
fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such suit, action or proceeding in any such court.

     (d) THE UNDERSIGNED HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS, THE ADVANCES
OR THE ACTIONS OF ANY SECURED PARTY IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE OR ENFORCEMENT THEREOF.

                                             Very truly yours,

                                             [NAME OF ADDITIONAL GUARANTOR]

                                             By
                                                 ------------------------------
                                                 Title:<PAGE>

                               CONVERSION CONTRACT

                                     BETWEEN

                              DAVIE MARITIME, INC.

                                   AS BUILDER

                                       AND

                              TORCH EXPRESS L.L.C.

                                    AS OWNER

                                DECEMBER 3, 2002

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                PAGE
<S>                                                                                <C>
1.    DEFINITIONS AND INTERPRETATION........................................       4
2.    SUBJECT MATTER........................................................      10
3.    BUILDER'S REPRESENTATIONS, WARRANTIES AND COVENANTS...................      11
4.    CONSIDERATION.........................................................      12
5.    MASTER CONVERSION SCHEDULE............................................      13
6.    INVOICING.............................................................      14
7.    PAYMENT OF INVOICES...................................................      14
8.    INSPECTION, ACCESS, AND TESTS.........................................      14
9.    TIME FOR COMPLETION...................................................      15
10.   RE-DELIVERY AND RISK OF LOSS..........................................      16
11.   ALTERATIONS OR CHANGES................................................      19
12.   INSURANCE AND INDEMNITY...............................................      20
13.   TITLE TO THE SHIP.....................................................      24
14.   TERMINATION, DEFAULT AND SUSPENSION...................................      25
15.   PAYMENT OF SUPPLIERS AND WORKMEN......................................      28
16.   ASSIGNMENT............................................................      28
17.   NOMINATED SUBCONTRACTORS..............................................      28
18.   REPRESENTATIONS ABOUT COMMISSIONS.....................................      30
19.   REGARDING WARRANTIES AND RELATED MATTERS..............................      30
20.   DISPUTES..............................................................      32
21.   NOTICES...............................................................      33
22.   OWNER-FURNISHED EQUIPMENT.............................................      34
23.   TAXES.................................................................      34
24.   MISCELLANEOUS.........................................................      34
25.   CONTRACT EMBODIES ALL AGREEMENTS......................................      35
26.   PATENTS...............................................................      35
27.   USE OF SPECIFICATION..................................................      35
28.   GOVERNING LAW.........................................................      35
29.   CONTRACT EFFECTIVE DATE...............................................      35
30.   OTHER.................................................................      37

SCHEDULE 1     BUILDER'S REQUIREMENTS.......................................      38
SCHEDULE 2     EMPLOYEES AND COLLECTIVE AGREEMENTS..........................      42
SCHEDULE 3     FORM OF PARENT GUARANTEE.....................................      43
SCHEDULE 4     FORM OF PERFORMANCE BOND.....................................      45
SCHEDULE 5     FORM OF RE-DELIVERY ACCEPTANCE CERTIFICATE...................      48
SCHEDULE 6     DELIVERY PROTOCOL............................................      54
SCHEDULE 7     US SUBCONTRACTOR REQUIREMENTS................................      57

APPENDIX A     SPECIFICATION................................................      58
APPENDIX B     UNIT RATES...................................................      59
APPENDIX C     MASTER CONVERSION SCHEDULE...................................      73
</TABLE>

                                      -i-
<PAGE>

      This Conversion Contract is made and entered into the 3rd day of December
2002, by and between DAVIE MARITIME, INC., a company organized and existing
under the laws of Canada whose registered office address is 22 George D. Davie
Rd., Levis, Quebec G6V 8V5 in the city and judicial district of Quebec, Province
of Quebec, represented by Mr. Richard Bertrand, duly authorized to act
hereunder, as he so states (the "Builder"), and TORCH EXPRESS L.L.C., a company
organized and existing under the laws of Louisiana whose registered office
address is 401 Whitney Ave., Gretna, LA 700056 USA. (the "Owner"),

WHEREAS:

1.    The Trustee (as defined below) is vested with the property of the shipyard
      (the "Yard") formerly owned by Davie Industries, Inc. under the terms of a
      judgement handed down on October 24, 2001 and in compliance with legal
      prescriptions in this field;

2.    The property so vested in the Trustee includes all facilities required for
      the due performance of the Contract (as defined below);

3.    The Trustee is the owner of all of the outstanding shares of Builder and
      will, for the duration of the Contract, be the owner of at least a
      majority of such shares, subject only to any disposition of such shares in
      accordance with the applicable provisions of the Trustee Agreement;

4.    Pursuant to an Operating Contract entered into on December 3, 2002,
      Builder is entitled to make exclusive use of the Yard to carry on the
      business of ship repair and construction;

5.    Builder has available to it all production and technical personnel
      required for the due and timely performance of the Contract whose services
      will be provided in accordance with the Collective Agreements listed in
      Schedule 1;

6.    The Trustee is vested with property, subject to the claims of the Secured
      Creditor (as defined below), including steel plate and other items to be
      incorporated in the Work in accordance with the Supply Contract (as
      defined below);

7.    The unsecured creditors and inspectors of the bankrupt estate of Davie
      Industries Inc. and the Quebec Superior Court have given or issued all
      consents, approvals and orders required to approve the ownership of
      Builder, the Operating Contract, the Supply Contract and the entering into
      and performance of the Contract as the legal, valid and binding obligation
      of Builder enforceable in accordance with its terms;

8.    As provided in the Trustee Agreement, Owner's consent is required for any
      sale or other disposition of the Yard or the shares of Builder owned by
      Trustee;

9.    The structure reflected in the Contracts and Agreements referred to in the
      foregoing recitals complies with the requirements imposed by the Guarantor
      (as

                                      -2-
<PAGE>

      defined below) as conditions of issue of the Performance Bond (as defined
      below);

10.   The Contract is being entered into on the basis that it will not become
      effective unless by the date specified in Article 29 all of the conditions
      therein specified shall have been satisfied or waived by the Party for
      whose benefit they have been included.

WITNESSETH that Builder and Owner have agreed as follows:

1. DEFINITIONS AND INTERPRETATION

1.1   DEFINITIONS

      As used herein:

      "APPROVED PROGRESS REPORT" shall mean a Report signed on behalf of Owner
      and Builder by Owner's Representative(s) and Builder's Representative(s)
      agreeing the Tasks completed and partially completed during a month, and
      specifying the number of Points earned

      in respect thereof;

      "BUILDER'S FURNISHED PROPERTY" shall mean any property of Builder
      (including but not limited to, those items of Materials and Equipment
      supplied by Builder in the performance of the Work, and any dry dock or
      vessels of any type);

      "BUILDERS REPRESENTATIVE(S)" shall mean the individual or individuals
      appointed in writing on the date of signing of the Contract as Builder's
      Representative(s) with such authority as shall be specified in such
      appointment and includes any individual who is appointed subsequently in
      addition to, or in substitution for, the original appointee(s);

      "BUILDER'S REQUIREMENTS" means all rules, regulations and policies to be
      complied with by Owner's Representative(s) and any person retained by
      Owner to assist Owner's Representative(s) in carrying out their duties as
      set out in Schedule 1;

      "BUILDERS RISKS" shall mean risk of any loss of and/or damage to the Ship,
      the Work and/or the Materials and Equipment (including Owner Furnished
      Equipment located in Builders Yard) for the duration of the Contract;

      "BUILDER'S SUPPLIERS" shall mean those entities (other than Owner) which
      provide Materials and Equipment to Builder for the purposes of the
      Contract;

      "BUSINESS DAY" means any day which is not a Saturday or a Sunday or a
      statutory holiday in the Province of Quebec;

      "CERTIFICATES" shall mean the certificates listed in the Specifications
      under `Regulatory Approval and Certifications' as appropriate;

                                      -3-
<PAGE>

      "CHANGE ORDER" shall mean a notice in writing, signed by Owner's
      Representative(s) and Builder specifying the changes agreed by Owner and
      Builder in respect of any additions to, deductions from or alterations in
      the Specification and/or the Master Conversion Schedule;

      "CHANGE ORDER REQUEST" shall mean a notice in writing, signed by either
      Owner's Representative or Builder specifying the changes proposed by Owner
      or Builder in respect of any addition to or deductions from or alterations
      and/or the Specification and/or the Master Conversion Schedule;

      "CLASSIFICATION SOCIETY" means Lloyd's Register of Shipping;

      "COLLECTIVE AGREEMENTS" means the collective bargaining agreements listed
      in Schedule 2;

      "CONTRACT" shall mean the contract constituted by Articles 1 to 30,
      Appendices A to C, Schedules 1 to 7 and all other documents identified
      therein as being incorporated herein;

      "CONTRACT EFFECTIVE DATE" shall mean the date on which the Contract
      becomes effective in accordance with Article 29;

      "CONTRACT PRICE" shall mean the price payable by Owner to Builder for the
      performance of the Work, as specified in Article 4, and includes all
      amounts payable as provided in Change Orders;

      "CONTRACT SIGNING DATE" means the date first written above;

      "CONTRACTUAL RE-DELIVERY DATE" means the date which is 350 days after
      Contract Signing Date, as extended by the duration of any one or more
      periods of Permissible Delay; provided that Owner shall have authorized in
      writing the performance by Builder, during the period commencing with the
      Contract Signing Date (notwithstanding that the Contract shall not have
      become effective), of that portion of the Work specified by Builder in its
      letter to Owner dated November December 3, 2002;

      "CONDITION DEFICIENCY" shall mean any condition of the Ship identified
      upon Inspection on the basis of which the Ship is no longer in the same
      condition as when first physically delivered to the Yard (fair wear and
      tear excepted, and subject always to alteration in the Ship's condition
      resulting from the proper performance of the Work);

      "CONVERSION DEFICIENCY" shall mean any defect or fault in, caused by, or
      incidental to the Work and/or Materials and Equipment supplied by Builder
      in the performance of the Work, whether latent or otherwise;

                                      -4-
<PAGE>

      "CREDIT AGREEMENT" means the agreement(s) pursuant to which the Working
      Capital Facility will be made available;

      "CRITICAL ACTIVITIES" means those activities specified as Critical
      Activities in the Master Conversion Schedule;

      "DAY" unless otherwise specified shall mean a calendar day;

      "DECREE" means Decree No. 1154-2002 dated 27 September 2002 issued by the
      Government of Quebec;

      "DELIVERY" means delivery of the Unconverted Ship by Owner to Builder for
      the purposes of the Contract as provided in Article 2.1;

      "DOLLARS" of "$" means United States Dollars unless a contrary intention
      appears;

      "FOB" means free on board;

      "FORCE MAJEURE EVENT OR DEVELOPMENT" shall mean any act of government,
      princes or rulers, war, blockade, revolution, insurrection, mobilization,
      civil war, civil commotion, riots, terrorism or strikes (including those
      caused by and/or participated in by Builder's Suppliers and/or the
      employees of Builder's Suppliers, but excluding (a) those caused by and/or
      participated in by Builder and/or the employees of Builder whose services
      will be made available in accordance with the Collective Agreements, and
      (b) for the purposes of the parenthetical wording in Article 14.3(a),
      neither the taking of any action by Samir nor any change in the status of
      the Working Capital Facility Guarantee shall constitute a Force Majeure
      Event or Development), acts of God, plague or other epidemics,
      quarantines, freight embargoes, delay in delivery and short supply of
      material/machinery/equipment to be supplied by Builder's Suppliers to the
      extent that this results from such an event or development and is not due
      to the negligence of Builder and/or Builder's Suppliers and/or Builder's
      sub-contractors, and delays in Builder's other commitments resulting from
      any cause of force majeure which in turn delay the performance of the
      Work, earthquakes, tidal waves, flood, typhoons, hurricanes or storms that
      this results in loss of or damage to the Yard and/or Work and/or Ship or
      any part thereof, and fire, flood or other causes beyond the reasonable
      control of the party claiming the existence of the Force Majeure Event or
      Development, whether that party is Builder or Owner, as the case may be;

      "GUARANTOR" means Investissement Quebec which will be the issuer of the
      Performance Bond as authorized by the Decree;

      "GUARANTOR'S REQUIREMENTS" means the requirements imposed by Guarantor on
      Builder as a condition of issue of the Performance Bond and the Working
      Capital Facility guarantee (including, without limitation, those contained
      in Guarantor's Offer of Guarantee dated October 11, 2002, Guarantor's
      letter dated November 29, 2002 to Builder and those contained in the
      Indemnity Agreement dated December 3, 2002 by Builder and Trustee in
      favour of Guarantor);

                                      -5-
<PAGE>

      "INSPECTION" shall mean the inspection of the Work and the Ship to be
      carried out by Owner's Representative(s) in accordance with Article 10.4;

      "INTERIM PERIOD WORK" means any work included in the Work which is
      performed by Builder in accordance with Owner's instructions after
      Contract Signing Date and prior to Contract Effective Date;

      "LIQUIDATED DAMAGES" means damages payable to Owner by Builder for delay
      (other than Permissible Delay) as specified in and subject to the
      provisions of Article 9.6;

      "MASTER CONVERSION SCHEDULE" shall mean the schedule attached as Appendix
      C, as revised from time to time;

      "MATERIALS AND EQUIPMENT" means all materials, machinery, appurtenances
      and outfit, equipment and appliances to form part of, be incorporated into
      or installed upon, otherwise used, or to be used, in the Work on, or
      removed from, the Ship, whether at the Yard or otherwise;

      "NOMINATED SUBCONTRACTS" and "NOMINATED SUBCONTRACTORS" shall have the
      meanings ascribed to such terms by Article 17.1;

      "NON-PERMISSIBLE DELAY" means delay which is not Permissible Delay;

      "OPERATING CONTRACT" means the agreement dated November 21, 2002 between
      Trustee and Builder whereby Builder is entitled to operate the Yard for
      ship construction and repair purposes;

      "OWNER FURNISHED EQUIPMENT" or "OFE" means any and all equipment and/or
      materials delivered to the Yard by Owner and/or information provided by
      Owner to Builder, as set out in the Specification;

      "OWNER'S REPRESENTATIVE(S)" means the individual or individuals appointed
      in writing on the date of signing of the Contract as Owner's
      Representative(s) with such authority as shall be specified in such
      appointment and includes any individual who is appointed subsequently in
      addition to, or in substitution for, the original appointee(s);

      "PARENT" means Torch Offshore Inc., of which Owner is a wholly-owned
      subsidiary;

      "PARENT GUARANTEE" means the guarantee of Owner's obligation to be given
      by Parent in the form attached as Schedule 3;

      "PARTY" means Builder or Owner and "PARTIES" means both of them;

      "PERFORMANCE BOND" means the Performance Bond to be issued by Investment
      Quebec in the form attached as Schedule 4.

                                      -6-
<PAGE>

      "PERMISSIBLE DELAY" shall mean that cumulated period by which, directly or
      indirectly, performance of the Critical Activities is adversely affected
      as a result of any one or more of the following: (i) a Change Order or a
      series of Change Orders, (ii) a Force Majeure Event or Development, (iii)
      the duration of the period specified in the last sentence of Article 9.5,
      (iv) a suspension pursuant to Article 14.1, or (v) a Nominated
      Subcontractor delay according to Article 17.2(h), provided that such delay
      does not result from Builder's failure to take reasonable, necessary
      measures to avoid or minimize such delay;

      "POINT" means a unit used in the spreadsheet attached to the Master
      Conversion Schedule used to calculate the value for each of the Tasks;

      "POINT VALUE" means the value ascribed to each completed Task, as
      calculated pursuant to Article 5.1;

      "POLICIES" means the insurance policies to be maintained in force pursuant
      to Article 12.2;

      "PRELIMINARY ENGINEERING" means all preliminary engineering work performed
      prior to Contract Signing Date pursuant to the Contract for the Provision
      of Technical Services entered into in February 2002 between Davie
      Industries Inc. and Parent which has been assigned by Davie Industries
      Inc. to Builder and by Parent to Owner;

      "RE-DELIVERY" shall mean the passing of care and custody of the Ship
      and/or the Work from Builder to Owner upon completion by Builder of the
      Work and/or Remedial Work (if any) as evidenced by the signature by Owner
      of a Re-Delivery Acceptance Certificate, pursuant to Article 10;

      "RE-DELIVERY ACCEPTANCE CERTIFICATE" means a certificate issued by Owner
      in accordance with Article 10 in the form set out in Schedule 5;

      "REMEDIAL WORK" shall mean such work as is appropriate and necessary to
      ensure that

      (a)   Conversion Deficiencies are remedied so that the Work is completed
            pursuant to the Specification and Master Conversion Schedule; and/or

      (b)   Condition Deficiencies are remedied so that the Ship is returned to
            the same condition as when first physically delivered to the Yard
            (fair wear and tear excepted, and subject always to improvement in
            Ship's condition resulting from the proper performance of the Work;

      "SAMIR" means Samir Financial LLC which holds first charge security over
      the Yard, the validity of which is being disputed by Trustee;

                                      -7-
<PAGE>

      "SEA TRIALS" shall mean the conduct and completion by Builder prior to
      Re-Delivery of reasonable and satisfactory local sea-trials of the Ship,
      as described in the Specification and/or as required by the Classification
      Society;

      "SHIP" means the vessel `Smit Express', registered under the laws of
      Vanuatu, IMO Number 8116049, to be renamed `Midnight Express' and
      includes, unless the context requires otherwise, the Unconverted Ship;

      "SPECIFICATION" means the Specification titled "Project P-371 Midnight
      Express Conversion - Offshore Multi-Service Cargo Vessel for Torch Express
      LLC" as revised under date of October 28, 2002 and includes all documents
      and drawings attached thereto or referred to therein and all subsequent
      revisions thereto;

      "STRUCTURED FINANCING FACILITY" means the financing facility to be made
      available to Owner as described in Industry Canada letter dated June 28,
      2002 as extended by letter dated October 17, 2002;

      "SUPPLY CONTRACT" means the agreement dated December 3, 2002 between
      Trustee and Builder whereby steel and other materials will be made
      available for incorporation in the Work;

      "TASKS" means each of the activities identified under the heading
      "Activity Description" in the Master Conversion Schedule;

      "TRUSTEE" means and The Groupe Thibault Van Houtte & Ass. Ltd., in its
      capacity as trustee in bankruptcy for Industries Davie Inc. ("Davie
      Industries"), a legal person duly incorporated under the Quebec Companies
      Act, with its head office located at 70, rue Dalhousie, Office 100,
      Quebec, Province of Quebec, Canada, G1K 4B2;

      "TRUSTEE AGREEMENT" means the agreement dated December 3, 2002 between
      Trustee and Owner;

      "UNCONVERTED SHIP" means the Ship in the condition in which it shall be
      immediately prior to time of Delivery;

      "UNIT RATES" means the rates for procurement of materials, rates for
      itemized work and rates for labour and/or equipment specified in Appendix
      B;

      "WORK" means all work and services to be performed and provided by Builder
      under the Contract in respect of the conversion of the Ship into a dynamic
      positioning pipelay vessel, testing, Sea Trials and Re-Delivery of the
      Ship in accordance with the Specification and the Master Conversion
      Schedule, to include the Ship having the Certificates upon Re-Delivery,
      and shall also include everything necessary for, or incidental to, such
      works or services save that works and services in consequence of terms
      such as "to repair and/or renew as necessary", "in accordance with
      instructions", "renewal of defective parts",

                                      -8-
<PAGE>

      "machining as necessary", "recondition", etc., are not covered by the
      Contract (save where such terms are used in the Specification);

      "WORKING CAPITAL FACILITY" means the working capital facility in the
      amount of Cdn $20 million to be made available to Builder;

      "WORKING CAPITAL FACILITY GUARANTEE" means the full guarantee of the
      Working Capital Facility to be issued by Guarantor as authorized by
      theDecree;

      "YARD" shall mean Builder's dry-dock, wet berth and shipyard where the
      Work is to be performed and such other premises where, with the prior
      approval of Owner, any of the Work is to be performed.

1.2 INTERPRETATION

      (a)   Headings contained in the Contract are for convenience only and
            shall be ignored in the interpretation of the Contract.

      (b)   References to Articles unless otherwise specified are to Articles 1
            to 30.

2. SUBJECT MATTER

2.1 The Unconverted Ship, which is berthed at the Yard, shall be delivered to
Builder for purposes of the Contract at the Yard on such date as Builder and
Owner shall jointly determine to be appropriate. Delivery shall be evidenced by
a Protocol of Delivery in the form attached as Schedule 6.

2.2 Builder agrees to complete the Work on the Ship, and to effect Re-Delivery
at the Yard on or before the Contractual Re-Delivery Date. The Ship is to be
converted in accordance with the Specification which is hereby made a part
hereof. Builder has reviewed carefully the Specification before entering into
the Contract and warrants to Owner that it is unaware of any defect or
deficiency in any of them that could adversely affect its ability to complete
the Work prior to the Contractual Re-Delivery Date.

2.3 The Specification is identified by the initials of Builder's Representatives
and Owner's Representatives. Any conflict between the requirements of Articles 1
to 30 and the Specification shall be resolved by giving preference first to
Articles 1 to 30, then to the Specification.

2.4 Builder agrees to furnish at its expense all plant, labour, tools, equipment
and materials, all naval architecture, engineering and detailed working plans
and drawings, and to obtain all licenses, permits, inspections, surveys and
classification approvals necessary for the conversion of the Ship and completion
of the Work.

2.5 The Ship, at the time of Re-Delivery, shall have the Certificates listed in
the Specification, all of which shall be procured by Builder at Builder's
expense. If, in any circumstances, the Classification Society issues a
provisional Classification Certificate in respect of the Work and/ or the Ship,
any such work as is necessary to facilitate the grant of a full

                                      -9-
<PAGE>

Classification Certificate, and any further steps as are necessary to acquire
that full Classification Certificate, shall be undertaken by Builder at
Builder's expense, except as provided in Article 11.2. As long as the proper
operation of the Ship is not impaired by the work described in any Provisional
Classification Certificate, Owner shall be bound to accept Re-Delivery. The
completion of such work by Builder shall be carried out after Re-Delivery.

2.6 All certificates shall be procured by Builder in Owner's name.

2.7 Unless otherwise noted by the Specification and/or the plans, padeyes for
handling, rudders, propellers, main shafting, or thrusters are assumed to exist
and are not included.

2.8 Costs of tugs and/or pilots associated with moving the Ship out of or within
the Yard and/or connected with the conduct of Sea-Trials shall be for Builder's
account, pending Re-Delivery.

2.9 Owner's Representative(s) and all persons who at any time are present in the
Yard at the request of Owner to assist Owner's Representative(s) shall comply
fully with Builder's Requirements. For this purpose, Builder has provided Owner
with copies of all Builder's Requirements and shall hereafter provide copies of
all updates and amendments to Owner's Representative(s) on a timely basis.

3. BUILDER'S REPRESENTATIONS, WARRANTIES AND COVENANTS

3.1 Builder hereby represents, warrants and covenant to and with Owner:

      (a)   that the statements made in Recitals 1 to 9 are true and correct;

      (b)   to use its best efforts to procure that the conditions contained in
            Article 29.1(b)(d), (f) and (g) are satisfied as soon as possible
            and, in any event, prior to the expiry of 90 days after the Contract
            Signing Date;

      (c)   to maintain in full force and effect the Collective Agreements, the
            Credit Agreement, the Operating Contract, the Supply Contract and
            all other contracts required for the due performance of the
            Contract;

      (d)   to do whatever else is required so that Builder will have available
            to it all labour, Materials and Equipment required for the proper
            performance of the Contract;

      (e)   that Builder will not, prior to Redelivery of the Ship, undertake or
            become obligated to perform any shipbuilding, ship repair or other
            work the performance of which could materially impair Builder's
            ability to perform the Contract in accordance with its terms;

      (f)   that, assuming the availability of the Working Capital Facility in
            accordance with the Credit Agreement and the payment by Owner of
            instalments of the Contract Price when due, Builder will have
            available to it sufficient financial resources for

                                      -10-
<PAGE>

            the due performance of the Contract without the need for additional
            third party financing;

      (g)   not to do or omit to do anything if, as a result, Builder would be
            in breach of any of Guarantor's Requirements; and

      (h)   it is aware and acknowledges that Owner is relying on each of the
            foregoing representations, warranties and covenants in entering into
            the Contract.

3.2 Builder acknowledges and agrees to and with Owner that:

      (a)   Owner is entering into the Contract with the expectation that due
            and timely performance will not be affected adversely by any action
            taken by Samir;

      (b)   Upon Samir becoming entitled to exercise any rights with respect to
            any security held by it, including the Yard and the steel and other
            materials to be supplied pursuant to the Supply Contract, Builder
            will either cause Samir to execute and deliver an instrument in
            writing recognizing the validity and enforceability in accordance
            with their respective terms of the Trustee Agreement, the Operating
            Contract, the Supply Contract, the Shareholder Agreement and the
            Contract or take such other steps as may be required to ensure that
            the due and timely performance of each of them is not materially
            affected by any act or omission of Samir; and

      (c)   Builder will indemnify and save harmless Owner for all losses, costs
            or damages (other than indirect losses, costs and damages) suffered
            or incurred by Owner as the result of any breach by Builder of the
            foregoing obligations.

4. CONSIDERATION

4.1 Owner agrees to pay Builder, in respect of Preliminary Engineering and the
Work, the total sum of $37,092,544.

4.2 It is specifically understood and agreed that the amount specified in
Article 4.1 is made up of $778,334 for the Preliminary Engineering and
$36,314,210 for the Work and that the latter amount will only be increased or
decreased for changes to the Work as provided for in Article 11.

4.3 Owner's obligation to pay the Contract Price shall (subject to Article
29.1(e)) not be in any way dependent upon financial commitments which Owner may
have from others.

4.4 Owner will pay Builder at Contract Effective Date as stipulated in Article
29.3 $3,631,421 less 10% of the amount applicable to Interim Period Work.

4.5 All changes to the Work will be priced as provided in Article 11.

                                      -11-
<PAGE>

4.6 With respect to liens:

      (a)   Builder acknowledges that the Ship will be mortgaged in favour of
            Owner's lenders under a mortgage, the terms of which will prohibit
            the incurring of liens against the Ship. Builder shall not create or
            exercise or suffer the creation or exercise by any third party
            (including, without limitation, its employees, suppliers,
            subcontractors, agents and Governments) of any lien, charge,
            mortgage, hypothec, right of retention or encumbrance (collectively
            a "Lien") of any kind on the Ship, the Work, equipment, machinery,
            materials, supplies and other articles and things attached to,
            placed on, bought or ordered in connection with the Work or the
            Ship; provided that Builder does not hereby waive any maritime liens
            it may have as a matter of law nor any of its rights of retention
            and priority as provided by the Civil Code.

      (b)   With respect to all suppliers, subcontractors or agents (hereinafter
            individually or collectively referred to as "Creditors" or a
            "Creditor") employed by Builder, Builder undertakes to use its best
            efforts to obtain from each Creditor (having due regard for the
            existence of the Performance Guarantee) a waiver of Lien for any
            work or materials furnished by such Creditor in connection with the
            Work or the Ship, Builder shall, upon request, provide Owner with
            copies of such waivers.

      (c)   If Builder is in breach or default under this Article 4.6 and if the
            aggregate amount of such unpaid liens is more than $10,000, Owner
            shall, among other things, have the right to pay such outstanding
            Liens itself, obtain a discharge of such Lien at the expense of
            Builder and deduct same from the next payment due.

            For greater certainty it is agreed that a "denunciation" shall not
constitute a Lien for the purpose of this Article 4.6.

4.7 If the Contract does not become effective in accordance with Article 29
Owner shall pay to Builder within 10 Business Days any unpaid balance of the
portion of the Contract Price payable for Interim Period Work.

5. MASTER CONVERSION SCHEDULE

5.1 The Master Conversion Schedule has been established by Builder and is
attached at Appendix C. This schedule is primarily a GANT chart of the Ship
conversion including about 300 Critical Activities. Builder and Owner
acknowledge that the Master Conversion Schedule is based on information
available as at the Contract Signing Date. As drawings are produced, the Master
Conversion Schedule will be updated periodically. For the avoidance of doubt,
such changes specified here above as may occur to the Master Conversion Schedule
shall not require a Change Order under Article 11.1 and will not be for Owner's
account.

5.2 Attached to the Master Conversion Schedule is a spreadsheet that allocates
the portion of the Contract Price which is payable for each Task in over 10,000
Points. Each Task is broken down between labour and material (material includes
equipment and subcontractors). The value of 1 (one) Point equals 90 (ninety)
percent of the Contract Price (i.e. less the 10%

                                      -12-
<PAGE>

down payment to be made by Owner to Builder in accordance with Article 3.4
above) divided by 10,000 (the "Point Value").

5.3 Within two (2) Business Days of the end of each month Builder and Owner's
Representative(s) will agree the Tasks which have been completed and partially
completed and derive the cumulative number of Points earned by Builder, and such
agreement will be recorded in an Approved Progress Report.

6. INVOICING

            Builder will invoice Owner monthly in amounts calculated by taking
the difference between the total cumulative Points earned by the end of the
month and the cumulative number of Points earned by the end of the previous
month and multiplying the result by the Point Value.

7. PAYMENT OF INVOICES

7.1 Progress payments based on the relevant monthly invoice amount, as
calculated in Article 6, shall be made by Owner to Builder within thirty (30)
days of receipt by Owner of Builder's invoice. Owner shall use its reasonable
endeavours to make payment to Builder within fifteen (15) days, subject to
Builder providing such assistance as Owner may reasonably require to enable
Owner's financiers to expedite verification that payment of the invoiced amount
is due and provided that Owner shall not be in default of its payment
obligations so long as payment of the applicable invoice is made within 30 days
of receipt.

7.2 All payments shall be made by transfer to Builder's bank account, the
details of which are to be provided by Builder to Owner on the Contract Signing
Date, without set-off or deduction except where Builder, as provided in the
Contract, has become obligated to pay any amount to Owner.

7.3 Amounts payable under Approved Change Orders, as defined in Article 11,
shall be invoiced by Builder monthly and paid by Owner within thirty (30) days
of receipt of the Approved Change Order and the corresponding invoice.

8. INSPECTION, ACCESS, AND TESTS

8.1 All tests and/or Sea-Trials to be performed in the course of the Work shall
be for the account of Builder. The detailed manner and method of performing the
Work hereunder shall be under the control of Builder, Owner being interested
only in the result obtained. Notwithstanding, Owner shall be given a reasonable
opportunity to inspect the Work, and to require performance by Builder of all
reasonable and appropriate tests in addition to those required by the
Classification Society or other regulatory bodies, as defined under "Rules and
Regulations in Section 0610 of the Specification, during normal and/or
multi-shift business hours. The costs of such tests which Builder is required to
perform by Owner shall be borne by Builder if such tests indicate the existence
of Conversion Deficiencies and/or Condition Deficiencies. In any other case the
cost of such tests shall be borne by Owner. Such tests and any approvals given
or comments made by Owner pursuant thereto shall not relieve Builder of any of
its obligations under the Contract. Builder will, upon notice in writing by
Owner or

                                      -13-
<PAGE>

Owner's Representatives in accordance with Article 10.7, correct any Conversion
Deficiency and/or Condition Deficiency, irrespective of any prior acceptance of
same by the Classification Society. No inspection or testing shall affect in any
manner any of the warranties, covenants or agreements of Builder under the
Contract or constitute a waiver thereof by Owner; provided, however, that
Builder shall not be required to delay work because of the absence of Owner's
Representatives. Owner's Representatives will be available in order to support
multi-shift work practices.

8.2 Builder shall furnish Owner's Representatives with office space, adequate
for up to four (4) Owner's Representatives, which office space shall be heated
and air conditioned, equipped with desks, chairs, tables, filing cabinets, book
shelves, internal and external telephone extensions, a telefax machine with an
international line and a set of (three (3) desk-top computers, one (1) laptop
computer, two (2) printers and Windows 98, Excel, Word, Access, Internet and
e-mail software) at the Yard and shall make available the use of such other
reasonable facilities as may be necessary to enable them to carry out their
duties effectively, together with two (2) standard pick-up trucks fully taxed
and insured as appropriate to be utilized within the Yard, at no cost to Owner.

9. TIME FOR COMPLETION

9.1 Builder shall effect Re-Delivery of the Ship on or before the Contractual
Re-Delivery Date. Upon Re-Delivery, the Ship will be free and clear of any
debts, duties, liabilities, right of retention or liens of any description
whatsoever or any claim whatsoever arising from events prior to the Re-Delivery,
other than those caused by any act of Owner unrelated to the Contract.

9.2 If at any time before Re-Delivery, there is a Permissible Delay, then,
subject to Articles 9.3 and 9.5 the Contractual Re-Delivery Date then in effect
shall be extended by the period of Permissible Delay, provided always that such
period did not result from Builder's failure to take reasonable, necessary
measures to avoid such delay. Force Majeure Events or Developments giving rise
to delay(s) lasting 24 hours or less shall not be considered grounds for a
Permissible Delay. If any series of Force Majeure Events or Developments occurs
which are due to a single cause then, in such case, all such events shall be
treated as one event.

9.3 All reasonable action shall be taken by the party claiming the existence of
a Force Majeure Event or Development, to remove or overcome the cause of the
Force Majeure Event or Development and to minimize the effect of that Force
Majeure Event or Development on the Re-Delivery Date, such claiming party to act
with all reasonable dispatch. The provisions contained in this Article shall not
apply to financial obligations otherwise due. Each party claiming the existence
of a Force Majeure Event or Development shall maintain records thereof which
shall be open to inspection by the other and shall give notice to the other in
writing within two (2) business days of learning of the existence of a Force
Majeure Event or Development. Such notice shall include the anticipated duration
of the period of Permissible Delay.

9.4 For greater certainty, it is agreed between Builder and Owner that any delay
that is not a Permissible Delay cannot be used to increase the Contract Price or
extend the Contractual Re-Delivery Date.

                                      -14-
<PAGE>

9.5 The Contractual Re-Delivery Date then in effect shall automatically be
extended by the anticipated duration of the period of Permissible Delay
specified in a notice given by Builder unless Owner, within five (5) working
days after receipt of notice of such Permissible Delay under Article 9.5, states
its objection in writing to so treating such event or development as a
Permissible Delay. In such circumstances the rights of both Builder and Owner
shall be preserved, and the burden shall be on Builder to establish its right to
rely on, and its compliance with, the provisions of this Article 9.5. It is
understood and agreed that the second and each subsequent day for which the Yard
is closed because of snow will constitute a period of Permissible Delay.

9.6 In the event that the Re-Delivery is delayed seven (7) days beyond the
Contractual Re-Delivery, Owner shall be entitled to Liquidated Damages in the
amount of $25,000 per day for the first ten (10) days of delay, $35,000 per day
for the next twenty (20) days and $50,000 per day for the remaining days until
Re-Delivery of the Ship. Such Liquidated Damages shall however not accrue if the
delay is less than seven (7) days. Such Liquidated Damages will be limited to
ten per cent (10%) of the Contract Price, as amended during the currency of the
Contract and will represent Owner's sole remedy for any and all damages,
including but not limited to consequential damages and incidental damages,
relating to delay.

9.7 In the event that Re-Delivery of the Ship takes place on or before the
Contractual Re-Delivery Date, Owner shall pay Builder a daily bonus based on the
number of days by which Re-Delivery is earlier than the Contractual Re-Delivery
Date less a grace period of 7 days, determined as follows:

      (a)   if Re-Delivery takes place within seven (7) and seventeen (17) days
            before the Contractual Re-Delivery Date, $12,500 for each day by
            which Re-Delivery is earlier than the Re-Delivery Date, and

      (b)   if Re-Delivery takes place more than seventeen but less than
            thirty-one (31) days before the Contractual Re-Delivery Date,
            $17,500 for each day by which Re-Delivery is earlier than the
            seventeenth (17th) day before the Re-Delivery Date, and

      (c)   if Re-Delivery takes place more than thirty (30) days before the
            Contractual Re-Delivery Date, $25,000 for each day by which
            Re-Delivery is earlier than the thirtieth (30th) day before the
            Re-Delivery Date.

Provided, however, that the maximum amount payable by Owner to Builder by way of
bonus under this Article 9.7 shall not exceed five per cent (5%) of the Contract
Price as amended from time to time.

10. RE-DELIVERY AND RISK OF LOSS

10.1 Builder shall complete the Work in accordance with the Specification and
Master the Conversion Schedule, in sufficient time to allow Re-Delivery of the
Ship on or before the Contractual Re-Delivery Date. Prior to the commencement of
Sea-Trials Builder will give Owner's Representatives at least five (5) days
notice of commencement. Owner will, if so requested by Builder, provide Builder
with such qualified crew as Builder reasonably requires in

                                      -15-
<PAGE>

order to conduct the Sea-Trials, failing which the crew shall be provided by
Builder. For the avoidance of doubt, completion of the Work includes completion
of Sea Trials and receipt by Owner of the Certificates in accordance with
Article 2.5 for Builder's account. Builder and Owner shall be entitled to have
present at all Sea Trials an appropriate number of nominated observers for the
purpose of witnessing them. Any crew provided by Owner shall be treated as
personnel of Builder and the responsibility of Builder (as shall Owner's
Representative and observers who are on board the Ship for the purpose of the
Sea Trials), and Builder shall undertake in respect of such crew Owner's
Representatives and observers those same obligations as are set out in Article
12.1(c) for the duration of the Sea Trials.

10.2 The Ship shall, upon Re-Delivery, be in the same condition as it was at the
time of Delivery to Builder (fair wear and tear excepted, and subject always to
alteration in Ship's condition resulting from the proper performance of the
Work).

10.3 When Builder considers that the Work is complete (having delivered to Owner
full written copies of all Sea Trial results) it shall request of Owner, in
writing, that Owner issue a signed Re-Delivery Acceptance Certificate in respect
of the Ship.

10.4 Within two (2) days of receiving Builder's written request under Article
10.3, Owner's Representative(s) shall conduct an Inspection of the Work and the
Ship for the purpose of identifying Conversion Deficiencies (if any) in the Work
and the Condition Deficiencies (if any) in the Ship.

10.5 If Owner is satisfied upon Inspection of the Work and the Ship that there
are no Conversion Deficiencies or Condition Deficiencies, it shall, within two
(2) days of completion of the Inspection, issue to Builder a signed Re-Delivery
Acceptance Certificate, which, when signed by Owner, will constitute acceptance
of the Work and the Ship by Owner, and Re-Delivery of the Ship.

10.6 Builder shall, at the time of Re-Delivery, Re-Deliver the Ship to Owner
free and clear of all liens, claims or other encumbrances, other than those
which are attributable to any act or omission of Owner, in a seaworthy condition
at a safe berth at the Yard, always afloat. Upon Re-Delivery of the Ship, Owner
shall pay the balance of the Contract Price to Builder. Risk of loss of and/or
damage to the Ship shall pass to Owner upon Re-Delivery.

10.7 Owner shall not unreasonably refuse to issue a signed Re-Delivery
Acceptance Certificate. Owner shall notify Builder and Guarantor in writing,
within five (5) days of the Inspection, of any Conversion Deficiency and/or
Condition Deficiency, on the basis of which Owner refuses to issue a signed
Re-Delivery Acceptance Certificate. Such notice shall specify the work required
to remedy the Conversion Deficiency and/or Condition Deficiency.

10.8 Subject to the remaining provisions of this Article 10, upon receipt of
Owner's written notice pursuant to Article 10.7, Builder shall immediately
undertake the Remedial Work specified in such notice. Upon completion of such
Remedial Work in respect of the Conversion Deficiencies (so that the Work is
completed pursuant to the Specification and Master Conversion Schedule) and/or
Condition Deficiencies (so that the Ship is returned to the condition referred
to

                                      -16-
<PAGE>

in Article 10.2), Owner shall issue a signed Re-Delivery Acceptance Certificate,
on the basis of which Re-Delivery of the Ship will occur.

10.9 If:

      (a)   within seven (7) days of receipt by Builder of Owner's written
            notice under Article 10.7 Owner and Builder are unable to agree that
            Owner's reason for refusing to issue a signed Re-Delivery Acceptance
            Certificate constitutes a Conversion Deficiency and/or a Condition
            Deficiency as specified in such notice, or

      (b)   where Owner refuses to issue a signed Re-Delivery Acceptance
            Certificate in respect of any purported Remedial Work carried out by
            Builder,

Owner shall pay Builder the undisputed amount of the Contract Price remaining
outstanding, and shall deposit the disputed amount (including, if applicable,
the bonus potentially claimable by Builder) in an interest bearing escrow
account in the joint names of Owner and Builder at a mutually acceptable
financial institution, and the dispute shall be referred to arbitration as
provided in Article 20.2.

10.10 Where any dispute arises as referred to in Article 10.9, then
notwithstanding any referral to arbitration which may occur (and without
prejudice to either party's other rights and remedies under the Contract (in
particular, but without limitation, in relation to the payment of Liquidated
Damages by Builder pursuant to Article 9.6 or the payment of bonus amounts by
Owner pursuant to Article 9.7) or available to it at law or in equity), Owner
may, at its option:

      (a)   after giving prior written notice to Guarantor, require that any or
            all of the alleged Conversion Deficiencies and/or Condition
            Deficiencies be subjected to Remedial Work by Builder, in which case
            Builder shall perform the Remedial Work so requested subject,
            however, to Builder's right to claim for additional compensation in
            accordance with Section 11.3 for any portion of the Remedial Work
            ruled to be unjustified by the arbitrators; or

      (b)   where the operational capacity of the Ship is not impaired and after
            giving prior written notice to Guarantor, take repossession of the
            Ship, in which case (i) the amount of Liquidated Damages, if any,
            would stop accruing from the date of a repossession of the Ship and
            the risk of loss and/or damage to the Ship shall automatically pass
            to Owner, and (ii) Owner shall have the right to carry out the
            Remedial Work and, if the outcome of the arbitration favours Owner,
            offset its costs from the amount placed in the escrow account
            pursuant to Article 10.9.

10.11 Where Owner makes the election provided for in Article 10.10(b):

      (a)   Builder shall (i) remove its employees, agents and contractors,
            together with their equipment, from the Ship, and (ii) render all
            necessary assistance to the Ship in leaving the Yard at the earliest
            moment Owner wishes to do so; and

                                      -17-
<PAGE>

      (b)   on demand by Owner, Builder shall assign all sub-contracts relevant
            to any Remedial Work to Owner (unless Builder is not permitted to do
            so by the terms of such sub-contracts) and shall execute all
            instruments and take all other steps which may be required to vest
            in Owner (insofar as Owner does not already have the same) title to
            all rights, set-offs and other benefits held by Builder in
            connection with the Work which are relevant to the Remedial Work;
            provided that all such assignments shall be made without prejudice
            to any rights of recourse Builder may have against subcontractor at
            the date of assignment.

10.12 Sea Trial procedures will be developed by Builder subject always to
approval by Owner, on the basis of SNAME Technical Research Bulletin 3-47 Guide
for Sea Trials.

11. ALTERATIONS OR CHANGES

11.1 If, during the performance of the Work, Owner or Builder needs or desires
to make any additions to, deductions from, or alterations in the Plans and/or
Specification and/or Master Conversion Schedule, Owner or Builder, as the case
may be, shall issue a Change Order Request to the other specifying the changes
proposed. Builder shall have no obligation to perform any work under a Change
Order Request nor shall Owner have any obligation to pay for any work carried
out in purported pursuance of a Change Order Request. Where (i) the Change Order
Request is given by Owner, Builder's response and (ii) the Change Order Request
is made by Builder such Request must specify:

      (a)   details of the change(s) proposed, including reference to new
            drawings and/or specifications, if any;

      (b)   the value of the Change Order, positive or negative; and

      (c)   the number of days by which the Contractual Re-Delivery Date is to
            be extended or reduced by virtue of the proposed Change Order, it
            being agreed that changes that do not affect the Master Conversion
            Schedule's Critical Path Activities and do not otherwise constitute
            Permissible Delay cannot be used to extend the Contractual
            Re-Delivery Date.

Each Change Order will embody all of the information specified above in relation
to Change Order Requests and responses.

11.2 Should the rules and regulations of the regulatory agencies or any
interpretation thereof referred to in the Specification be altered or changed
after the Contract Signing Date, then such change(s) will be the subject of a
Change Order to the extent that they affect the Work.

11.3 In the event that the parties cannot agree upon a lump sum price for the
work to be carried out pursuant to a Change Order proposed by either Party and
the other's response given in accordance with Article 11.1, Owner may, at its
election, pay for such work by application of the Unit Rates for Procurement of
Materials, Unit Rates for Itemized Work and/or Unit Rates for Labour or
Equipment in Appendix B. Payment, accordingly, shall constitute full
compensation for the labour and materials covered by the applicable Change Order
Request and response.

                                      -18-
<PAGE>

11.4 In the event of the identification in the course of performance of the Work
of hazardous waste materials, including but not limited to asbestos and tin or
lead based coatings which will require special handling, testing and disposal, a
Change Order will be issued covering the work required to deal with such
materials.

11.5 Notwithstanding the foregoing, where a Change Order Request, if
implemented, could result in the Contract Price being 110% or more than the
original Contract Price specified in Article 4.1, notice shall be given to the
Guarantor and no Change Order giving effect to any such Change Order Request
shall become effective for any purpose unless and until Guarantor has approved
the same in writing; provided that Guarantor shall not unreasonably withhold
such approval.

12. INSURANCE AND INDEMNITY

12.1 For the purposes of the Contract:

      (a)   Builder's Furnished Property

            Owner shall have no responsibility to Builder in respect of damage
            to or loss of any property of Builder (including, but not limited
            to, such of the Materials and Equipment as are supplied by Builder
            and any dry-dock or vessels of any type), irrespective of whether
            any such damage or loss is caused or contributed to by any act,
            default or negligence of Owner and provided always that insurance
            coverage is available under the terms and conditions of the policies
            issued in accordance with Article 12.2, and Builder will hold
            harmless and indemnify Owner from and against, and shall defend at
            its own expense, all claims, suits, costs, liabilities, judgements,
            fines penalties and demands arising out of or resulting from any
            such loss or damage.

      (b)   Owner's Property

            Builder's obligations to Owner with respect to OFE are as set out in
            Article 22.2. Builder shall be fully responsible to Owner in respect
            of damage to or loss of any other property of Owner in the Yard,
            irrespective of whether any such damage or loss is caused or
            contributed to by any act, default or neglect of Owner, and Builder
            will hold harmless and indemnify Owner from and against, and shall
            defend at its own expense, all claims, suits, costs, liabilities,
            judgements, fines penalties and demands arising out of or resulting
            from any such loss or damage.

      (c)   Personnel of Builder

            Builder shall hold harmless and indemnify Owner from and against any
            and all claims, suits, costs, liabilities, judgements, fines,
            penalties and demands in respect of personal injury to or death of
            any personnel of Builder and/or its sub-contractors, other than US
            Subcontractors (as defined in clause (d) below) irrespective of the
            cause of such personal injury or death and including negligence.

                                      -19-
<PAGE>

      (d)   US Subcontractors

            In respect of each subcontractor ("US Subcontractor") which is a
            United States resident or who intends to employ any United States
            resident ("US Employee") to perform any work in connection with its
            subcontract Builder shall not be entitled to enter into a
            subcontract which does not satisfy the requirements of Schedule 7.

      (e)   Personnel of Owner

            Owner shall hold harmless and indemnify Builder from and against any
            and all claims, suits, costs, liabilities, judgements, fines,
            penalties and demands in respect of personal injury to or death of
            any personnel of Owner, irrespective of the cause of personal injury
            or death and including negligence.

      (f)   Third Party Claims

            Builder hereby agrees to indemnify, defend and hold harmless Owner
            from and against any and all claims, demands or causes of action, by
            any and all third parties other than claims relating to the subject
            matter of clause (d) above arising out of or in any way connected
            with, directly or indirectly, the performance by Builder of the
            Contract, for loss, damages, recourse or compensation of any kind
            for death or injury to any person or loss of or damage to property,
            of any and all third parties, howsoever arising, and whether based
            in whole or in part on any negligent act or omission of Owner.

      (g)   The Ship

            Builder shall, for the duration of the period beginning with
            Delivery and ending with Re-delivery, take full responsibility for
            the care and custody of the Ship. In case of any damage to or loss
            of the Ship not amounting to an actual or a constructive total loss,
            Builder shall repair and make good the same to the satisfaction of
            Owner so that at Re-Delivery the Ship shall be without any Condition
            Deficiency in good order and condition.

      (h)   Workers' Compensation

            Builder shall, at all times, pay or cause to be paid assessments and
            contributions required to be paid pursuant to applicable worker's
            compensation legislation and, upon failure to do so, Owner, in
            addition to its other rights, may deduct the amount of such
            assessment or contribution from any payment then due or to become
            due to Builder under the Contract.

            Notwithstanding the foregoing, Builder shall be under no obligation
to indemnify Owner, as provided above, if and to the extent that (a) the
insurance to be maintained in accordance with the remaining provisions of
Article 12 does not provide coverage in respect of the loss to be indemnified
against, and (b) such loss results from any act, default or negligence of Owner.

                                      -20-
<PAGE>

12.2 Builder shall at its sole cost and expense obtain insurance coverage so as
to fully cover all of its obligations set forth in the Contract, and shall
maintain such insurance coverage in full force throughout the duration of the
Contract with insurers, and on terms satisfactory to Owner, such insurance
coverage to include:

      (a)   Builder's risk insurance covering the Ship, the Work and the
            Materials and Equipment (collectively "Builder's Risks") to their
            full value at time of loss. For this purpose, "full value" shall
            mean (i) $9,750,000 in respect of the agreed value of the
            Unconverted Ship and (ii) $36,314,200 in respect of the Contract
            Price (subject to increase by the amount of any Change Order that
            increases the Contract Price). Such Builder's Risk insurance cover
            shall correspond, with such amendments as are necessary to provide
            the coverage specified in this clause (a), at least to the cover
            provided by The Institute Clauses Builder's Risks (CL351 - 1/6/88)
            but shall include cover for faulty welds and completed operations
            insurance (which will include coverage for Builder's obligations
            under Article 19.1 and 19.2);

      (b)   Coverage for war risks and associated risks including strikes, riots
            and civil commotions in respect of Builder's Risks to correspond at
            least to the cover provided by the Institute Clauses War (Builders'
            Risks) (CL 349 - 1/6/88) and the Institute Clauses Strikes
            (Builders' Risks) (CL 350 - 1/6/88), extended to include the period
            from the time of Delivery of the Ship until Re-Delivery;

      (c)   Comprehensive general liability insurance, for a sufficient amount
            and in any event with a limit of not less than ten million Dollars
            ($10,000,000) for any one occurrence for bodily injury, personal
            injury and/or property damage arising out of or in connection with
            the performance of the Contract, subject to a $10,000,000 general
            aggregate. Such insurance shall specifically cover the contractual
            liabilities and indemnities herein assumed by Builder and shall
            include "Products and Completed Operations Liability" provisions or
            endorsements;

      (d)   Automobile liability insurance covering owned, non-owned, and hired
            automotive equipment in the minimum amount of one million Dollars
            ($1,000,000) combined single limit for bodily injury or property
            damage;

      (e)   Builder shall provide Owner with satisfactory evidence of the
            following insurance coverages to be maintained by Builder or its
            subcontractor with respect to any tugs or other ships used in
            connection with the Work:

            (i)   Hull and machinery insurance on each ship per the Institute
                  Time Clauses - Hulls (CL 280 - 1/10/83) or equivalent covering
                  fire, explosions and marine perils, with three-fourths
                  collision clause {including Tower's Liability Insurance per
                  the American Institute Tug Form (August 1, 1976) or
                  equivalent, if the ship is a tug} in an amount equal to the
                  full insurable value of the ship, together with Institute War
                  and Strikes Clause Hulls - Time (CL 281 - 1/10/83) and
                  Institute Additional Perils Clause - Hulls (CL 294 - 1/10/83).

                                      -21-
<PAGE>

            (ii)  Protection and Indemnity Insurance in accordance with the UK
                  P&I Club Rules current at the date of execution of the
                  Contract or equivalent, including collision liability not
                  covered by the hull machinery insurance maintained in
                  accordance with clause (i) above.

12.3  (a)   All policies to be maintained by Builder in accordance with Article
            12.2 shall name Owner as additional assured with a waiver of
            subrogation, provided that there is no recourse to Owner for the
            payment of premiums, deductibles or other charges, and, in respect
            of coverage under Article 12.2(a), shall provide that payment for
            all losses shall be made to Owner or its order; shall be endorsed to
            be primary as respects any other insurance carried by Owner, and any
            `other insurance' or `cover elsewhere' clauses are to be deemed
            deleted as to Owner; and shall be so written or endorsed to provide
            that the insurers shall have no right of recovery against Owner.

      (b)   The proceeds of the insurance maintained under Article 12.2(a) shall
            be dealt with as follows:

            (i)   In the event the Ship or the Work shall be damaged by any
                  insured cause whatsoever prior to Re-Delivery and in the
                  further event that such damage shall not constitute an actual
                  or a constructive total loss of the Ship, all amounts received
                  under such insurance coverage shall, firstly and in priority
                  to any indemnification for any other loss or damage, be
                  applied by Builder to the repair of such damage in a manner
                  satisfactory to the Classification Society and all regulatory
                  bodies. Owner shall accept Re-Delivery if the Work is so
                  repaired and completed in accordance with the Contract,
                  subject to the provisions of Article 10.

            (ii)  In the event that the Ship is declared to be an actual or
                  constructive total loss prior to Re-Delivery, Builder shall
                  refund, or cause the insurer to pay, immediately to Owner an
                  amount equal to:

                  (A)   The declared value of the Ship under the applicable
                        insurance policies; and

                  (B)   All moneys paid by Owner to Builder on account of the
                        Price.

      (c)   The Contract, upon receipt by Owner of the termination payment
            provided for in Article 12.3(b)(ii), shall, at Owner's option, be
            deemed to be terminated..

      (d)   Builder shall procure with its underwriters that all proceeds of
            insurance payable to Owner as provided above shall be remitted to
            Owner in Dollars.

12.4 Owner shall at its sole cost and expense obtain insurance coverage with
respect to OFE in such amounts and on such terms as it shall determine to be
appropriate, except that all such policies shall be so written or endorsed to
provide that insurers shall have no right of recovery against Builder. Owner
shall be fully entitled to be paid and to deal in its sole discretion with the
proceeds of all insurance maintained pursuant to this Article 12.4.

                                      -22-
<PAGE>

12.5 The Ship and all replacement parts, materials, engines, machinery, outfit
and equipment within the premises of the Yard, shall be marked with the Ship's
identification number.

12.6 All insurance policies to be maintained by Builder shall provide for not
less than thirty (30) calendar days written notice to Owner of any cancellation,
or of any material change in coverage and for the delivery to Owner of a renewal
certificate prior to their expiration.

12.7 Not later than the Contract Effective Date, Builder shall furnish Owner
with certificates of insurance or other evidence acceptable to Owner certifying
that the insurance policies referred to in Article 12.2 are in full force and
effect, provided that receipt of such certificates shall not constitute
acceptance thereof nor waiver of Builder's responsibility hereunder.

12.8 All insurance policies to be obtained, maintained and paid for by Builder
shall be written in such a way that Builder's subcontractors shall have the
benefit of, and be covered by, insurance of types and amounts necessary to cover
risks (other than those to be covered by insurance of the nature described in
Schedule 7) inherent in the work to be performed by them.

12.9 The deductibles (if any) on any of the insurance policies referred to in
Article 12.2 shall not exceed one hundred and fifty thousand Dollars ($150,000)
for any one occurrence.

12.10 Builder shall do nothing to render any of the insurance policies void or
invalid and shall indemnify and shall hold harmless Owner from all consequences
of any failure by Builder to obtain and maintain the insurance provided for in
Article 12.2. If Builder shall at any time fail to comply with any of its
obligations under this Article then:

      (a)   Owner shall have the right to effect any applicable insurance
            coverage which Builder has failed to effect as required by the
            Contract and to deduct the cost (including premiums) from any amount
            otherwise payable to Builder; and

      (b)   Builder shall indemnify Owner for any loss or damage suffered as a
            result thereof.

13. TITLE TO THE SHIP

            Notwithstanding transfer of the custody of the Ship to Builder,
title and right to possession of the Ship and all Materials and Equipment
purchased for, appropriated to or removed from the Ship are to be vested in
Owner at all stages of the Work, to the extent that Owner has paid Builder for
Material and Equipment, with the exception of the scrap material which is
removed from the Ship (which shall vest in Builder) in the execution of the
Work. Builder shall identify, segregate and label all such Materials and
Equipment.

                                      -23-
<PAGE>

14. TERMINATION, DEFAULT AND SUSPENSION

14.1 SUSPENSION BY OWNER

            Owner shall be entitled to suspend the Work, at its sole option at
any time for a single period of not less than 30 and not more than 120 days, by
seven (7) days' written notice to Builder, whereupon:

      (a)   Builder shall promptly suspend further performance of the Work and
            during the period of such suspension shall properly care for and
            protect the Ship, the Work, all Materials and Equipment and all
            Owner Furnished Equipment.

      (b)   to the extent that performance of the Critical Activities (or any
            other Tasks constituting part of the Work, where the number of such
            Tasks is materially increased or the performance of such Tasks is
            materially affected) is adversely affected, the Contractual
            Re-Delivery Date shall be extended by a period equal to the
            suspension period.

      (c)   Owner shall reimburse Builder for any costs unavoidably and
            reasonably incurred by reason of and during the period of suspension
            (including amounts payable under the Nominated Subcontracts);
            provided that Owner shall not be liable to Builder for any indirect
            or consequential loss or damage of any nature whatsoever, including
            without limitation, loss of business opportunities, loss of profit
            or loss of use incurred or suffered by Builder by virtue of the
            period of suspension.

      (d)   Should, during the period of suspension, Builder desire to move the
            Ship or to relocate Materials and/or Equipment intended for
            incorporation in the Work in order to carry out its normal business,
            then all reasonable costs incurred by Builder in demobilizing and
            remobilizing the Ship or such Materials and/or Equipment and
            personnel as may be affected by the Suspension Notice shall be for
            the account of Owner and shall be paid to Builder as an adjustment
            to the Contract Price.

      (e)   Except as expressly provided above, any costs, loss or damage
            sustained by Builder during any period of suspension shall be for
            Builder's account.

            Upon receipt of Builder's written order to recommence the suspended
Work or part thereof, Builder shall promptly recommence the same within 24 hours
of receipt of Owner's written notice.

            For greater certainty, it is hereby declared that Owner's suspension
rights may be exercised on only one occasion and that, in the absence of default
by Builder, Owner's only rights to prevent resumption of the Work immediately
following the suspension period shall be those contained in Article 14.2 below.

                                      -24-
<PAGE>

14.2 TERMINATION FOR CONVENIENCE BY OWNER

            Owner may terminate the Contract for its convenience at any time by
fourteen (14) days written notice to Builder, in which event Owner's liability
to Builder shall be limited to paying Builder:

      (a)   that portion of the Contract Price earned by Builder up to the date
            of termination, such portion to be calculated in accordance with the
            Point Value formula contained in Article 5.3 by reference to the
            Master Conversion Schedule and the Work actually performed by
            Builder to the date of termination;

      (b)   all costs directly attributable to the termination incurred by
            Builder for dismissal of labour and redundancy of Materials and
            Equipment purchased by Builder for the performance of the Contract
            (including, without limitation, amounts payable to Builder's
            subcontractor), provided that such costs are properly documented and
            that Owner shall be liable only where Builder demonstrates that due
            economy and mitigation has been exercised and that the costs stem
            directly and unavoidably from the termination, or, where
            appropriate, that the costs have been correctly apportioned; and

      (c)   an amount equal to ten per cent (10%) of the unearned balance of the
            Contract Price by way of agreed compensation to Builder for loss of
            profit.

14.3 BUILDER DEFAULT

            Upon the occurrence of any of the following events (each an "Event
of Default"):

      (a)   Builder fails to prosecute the Work with diligence, in accordance
            with the Master Conversion Schedule, or otherwise fails to comply
            substantially with all its obligations under the Contract (except
            and to the extent that such failure is due to a Force Majeure Event
            or Development), Owner gives Builder and Guarantor written notice
            thereof and Builder fails within five (5) days to present a plan of
            action to begin remedying the noted failure or, having presented
            such a plan, fails within a further thirty (30) days (or any longer
            period of time mutually agreed) to begin remedying the failure;

      (b)   Builder files a voluntary petition in bankruptcy or is adjudicated
            as bankrupt or insolvent, or files a petition or answer seeking any
            arrangement, liquidation, dissolution or similar relief for itself
            under any applicable law or regulation, or seeks or consents to or
            acquiesces in the appointment of any trustee, receiver or liquidator
            of itself or of all or any substantial part of its assets, or makes
            any general assignment for the benefit of, or liquidates or
            dissolves; or

      (c)   a petition is filed against Builder seeking any reorganization,
            arrangement, composition, adjustment, liquidation, dissolution or
            similar relief under any applicable law or regulation, and such
            petition remains undismissed or unstayed for an aggregate of thirty
            (30) days, or if any trustee, receiver or liquidator of Builder or
            of all or any substantial part of its property shall be appointed
            without

                                      -25-
<PAGE>

            the consent or acquiescence of Builder, and such appointment shall
            remain unvacated or unstayed for an aggregate of thirty (30) days;

Owner shall be entitled to advise Builder and Guarantor in writing that an Event
of Default has occurred, following which Guarantor shall advise Owner in writing
either that it intends to complete the Work at the Yard in accordance with the
Contract (Option 1 under the Performance Bond) or that bids will be obtained
from a third party shipyard for completion of the Work (Option 2 under the
Performance Bond) or that Owner may arrange for completion of the Work (Option 3
under the Performance Bond). In the case where Option 2 is elected:

            (i)   Guarantor shall, in consultation and with the assistance of
                  Owner, prepare a request for bids, including an agreed
                  statement of the scope of work required for completion and
                  shall provide such request to not more than three shipyards
                  which are determined to be capable of completing the Work in a
                  competent and timely manner having due regard, among other
                  things, to the loss of revenue to be incurred by Owner for
                  delayed Re-Delivery and any requirements of Owner's lenders;
                  and

            (ii)  Guarantor shall, in consultation and with the assistance of
                  Owner, evaluate all bids received in response to the request
                  and determine which of such bids should be accepted, following
                  which Owner shall enter into the required completion contract
                  whereby payments will be made as provided in Option 2 and
                  otherwise on terms and conditions agreed by Guarantor and
                  Owner.

14.4 DEFAULT TERMINATION BY BUILDER

            Upon the occurrence of any of the following events:

      (a)   Owner fails to make any payment when due under the Contract or fails
            to accept Re-Delivery of the Ship in accordance with the Contract
            and either of such failures shall have continued for more than
            fifteen (15) Business Days after Builder shall have given written
            notice thereof to Owner; or

      (b)   Owner or Parent files a voluntary petition in bankruptcy or is
            adjudicated as bankrupt or insolvent, or files a petition or answer
            seeking any arrangement, liquidation, dissolution or similar relief
            for itself under any applicable law or regulation, or seeks or
            consents to or acquiesces in the appointment of any trustee,
            receiver or liquidator of itself or of all or any substantial part
            of its assets, or makes any general assignment for the benefit of
            creditors, or liquidates or dissolves; or

      (c)   a petition is filed against Owner or Parent seeking any
            reorganization, arrangement, composition, adjustment, liquidation,
            dissolution or similar relief under any applicable law or
            regulation, and such petition remains undismissed or unstayed for an
            aggregate of thirty (30) days, or if any trustee, receiver or
            liquidator of Owner or Parent or of all or any substantial part of
            its property shall be appointed without the consent or acquiescence
            of Builder and such

                                      -26-
<PAGE>

            appointment shall remain unvacated or unstayed for an aggregate of
            thirty (30) days; or

      (d)   suspension of the Work by Owner pursuant to Article 14.1 has
            continued for more than 120 continuous days.

            Builder may terminate the Contract by giving notice in writing to
Owner, whereupon Owner shall become bound to pay Builder the sums that it would
be obliged to pay on exercising its right of termination for convenience under
Article 14.2.

15. PAYMENT OF SUPPLIERS AND WORKMEN

15.1 Builder warrants that it will pay its suppliers, subcontractors and workmen
on a timely basis for all materials, equipment and labour used or to be used in
the Work and that its books and records, reflecting that these debts are kept
current, will be made available for reasonable inspection by Owner. Builder also
warrants that, insofar as is reasonably practical, all Materials and Equipment
acquired for use in the Work will be marked, tagged or stored in such a manner
that they may be readily identifiable as appropriated for use in the Work.

16. ASSIGNMENT

16.1 Owner shall be entitled:

      (a)   to assign the Contract and the Guarantee and its interest in the
            insurance coverage specified in Article 12 to banks and other
            financial institutions as security for the indebtedness to be
            incurred as provided in Article 29.1(f);

      (b)   to grant security by way of a first preferred mortgage on the Ship
            in favour of such banks and financial institutions;

and Builder will execute and deliver all consents and other documents required
for this purpose. No further assignment shall be permitted without Builder's
prior written consent.

16.2 Except as provided herein, Builder shall not be entitled to sub-contract
any substantial part of the performance of the Work without Owner's prior
written consent or to assign the Contract. For this purpose, "assign" shall be
deemed to include any transfer or change of control of the ownership of Builder
which is not consented to in writing by Owner.

17. NOMINATED SUBCONTRACTORS

17.1 Owner has nominated the following subcontractors to supply material,
equipment and services:

      (a)   Siemens Energy and Automation Inc. ("Siemens") for the supply of an
            integrated propulsion system pursuant to a Contract dated June 27,
            2002 (the "Siemens Subcontract").

                                      -27-
<PAGE>

      (b)   Caterpillar Motoren GmbH & Co. KG ("Caterpillar") for the supply of
            3 marine diesel engines pursuant to an undated Contract, (Version
            4-2000) (the "Caterpillar Subcontract").

      (c)   Schottel Inc. ("Schottel") for the supply of rudder propellers and a
            tunnel thruster pursuant to an undated contract (the "Schottel
            Subcontract").

(Siemens, Caterpillar and Schottel are collectively referred to as the
"Nominated Subcontractors" and the Siemens Subcontract, the Caterpillar
Subcontract and the Schottel Subcontract are collectively referred to as the
"Nominated Subcontracts").

17.2 Builder will accept an assignment of the Nominated Subcontracts to it in
accordance with the following:

      (a)   At the time of each assignment, Owner and each of the Nominated
            Subcontractors shall confirm to Builder in writing that with respect
            to the applicable Nominated Subcontract:

            (i)   it is in full force and effect and there have been no
                  modifications, assignments or changes except as disclosed in
                  writing to Builder;

            (ii)  Owner has satisfied its obligations under the Nominated
                  Subcontract to the extent required to the date of the
                  assignment, neither party has committed any default and
                  neither party is claiming any amount against the other except
                  for amounts which will be due and payable in the ordinary
                  course of completing the Nominated Subcontract;

            (iii) arbitration proceedings have not been commenced by either
                  party against the other;

            (iv)  there are no agreements or understandings between the parties
                  other than those expressly set out in the Nominated
                  Subcontract;

            (v)   they are aware that the workers' compensation legislation of
                  Quebec does not provide coverage for their employees and that
                  either (A) they have obtained such coverage, or (B) they agree
                  that Builder shall have no obligations to provide any such
                  coverage for such employees;

      (b)   The assignments shall not obligate Builder to provide any security
            for payment of the Nominated Subcontract price and any such
            obligation in any Nominated Subcontract shall be Owner's
            obligations;

      (c)   The Nominated Subcontracts shall be incorporated into and shall form
            a part of the Contract;

      (d)   In the event of any inconsistency between a Nominated Subcontract
            and the Specification, the former shall take precedence for all
            purposes under the Contract;

                                      -28-
<PAGE>

      (e)   The Contract Price includes amounts of $6,997,600 for the Siemens
            Subcontract, $1,680,000 for the Caterpillar Subcontract and
            $2,382,000 for the Schottel Subcontract. Any applicable taxes or
            duties that are stated in a Nominated Subcontract to be extra to a
            Nominated Subcontractor's price, that have not been included in the
            foregoing amounts, shall be paid by Owner to Builder as an extra to
            the Contract Price;

      (f)   Builder will make payments when due in accordance with the
            applicable provisions of the Nominated Subcontracts (less any
            applicable withholding taxes) and shall, if so required by Owner,
            provide evidence of such payment as a condition of obtaining payment
            of an equivalent amount in accordance with Articles 5 to 7. Owner
            shall be entitled to set off against any amount otherwise payable to
            Builder any amount paid by Owner as guarantor under any Nominated
            Subcontract;

      (g)   The warranties contained in each Nominated Subcontract shall, upon
            Re-delivery be assigned to Owner, as provided in Article 19.5;

      (h)   The Contractual Re-Delivery Date will be extended if and to the
            extent delays caused by the failure of any one or more of the
            Nominated Subcontractors to deliver any Equipment in accordance with
            the requirements of the Master Conversion Schedule or if a force
            majeure event as contemplated under the applicable Nominated
            Subcontract occurs, provided that (i) the delay caused by the
            Nominated Subcontractor affects the critical path, (ii) Builder has
            taken all commercially reasonable actions to expedite the Nominated
            Subcontractor and (iii) remedies to alleviate a postponement of the
            Re-Delivery Date and mitigating actions proposed by Builder through
            a Change Order Request have been refused by Owner; and

      (i)   With respect to each of the Nominated Subcontracts, Builder will not
            be responsible for ensuring the adequacy or quality of the scope of
            supply or the performance of the equipment or services supplied by
            each Nominated Subcontractor, the timeliness of delivery or dealing
            with any disputes regarding same (for which purpose Builder will, if
            so requested by Owner, reassign one or more of the Nominated
            Subcontracts to Owner).

18. REPRESENTATIONS ABOUT COMMISSIONS

            Should any third party claim any commission, finders fee or similar
fee in connection with the Contract or the procurement thereof as a result of
any alleged prior agreement between Owner or Builder and such third party, Owner
or Builder, as the case may be, agrees to indemnify, protect and hold the other
harmless from and against any such claim or claims.

19. REGARDING WARRANTIES AND RELATED MATTERS

19.1 Builder warrants that the Work will be completed in accordance with the
Specification in a good and workmanlike manner and that all labour and work
done, and

                                      -29-
<PAGE>

installations made shall meet the requirements and standards described in the
Specification, and all Materials and Equipment used by Builder in the Work,
except those specified or furnished by Owner, shall be of the quality set forth
in the Specification. If at any time within one year (365 days) after
Re-Delivery there shall appear or be discovered any Conversion Deficiency, such
Conversion Deficiency shall be made good, at Builder's expense, in accordance
with the requirements of the Specification. The one-year (365-day) Conversion
Warranty constitutes an express warranty by Builder with respect to the quality,
design, manufacture and/or fitness of the Work. Builder shall be responsible for
the cost of correcting any such Conversion Deficiency only to the extent that
the same resulted from defective workmanship, Material or Equipment and not from
ordinary wear and tear, or the negligence or improper act of Owner. Builder
shall not be responsible for any required correction of which Owner has failed
to give written notice within the 365-day period.

19.2 Any Remedial Work required to be performed to correct a Conversion
Deficiency for which Builder is liable hereunder shall be carried out at the
Yard, if practical. Where (a) because of geographical distance involved or in
case of emergency it would be impractical to return to the Yard for repairs or
replacements in respect of a Conversion Deficiency, or (b) Builder is unable to
perform any Remedial Work for whatever reason, Owner may contract to have such
work performed by another shipyard or ship repair facility. In such
circumstances Builder shall be responsible only for a sum representing no more
than the equivalent of the cost of repairs or replacements to correct the
Conversion Deficiency at the Yard plus up to 50% straight time. In the event
Owner elects to have any work performed to correct a Conversion Deficiency by
someone other than Builder, it is an express condition precedent of this
warranty that Builder must be notified three (3) days prior to the commencement
of that work, unless the work shall be of an emergency nature to prevent further
damage or to complete a critical operation undertaken by the Ship at sea, in
which case repairs may be started immediately and Builder must be notified not
later than noon on the next Working Day. Such notification shall include a
description of the Conversion Deficiency, location of the Ship and the company
selected to perform the repair or replacement work to correct the Conversion
Deficiency. Owner shall be entitled to recover any amount owing to it for any
Remedial Work performed by someone other than Builder by claiming under the
completed operations insurance coverage and retaining all proceeds.

19.3 Builder shall not be liable, under any theory of liability whatsoever,
including, but not limited to, express or implied warranty, negligence or
manufacturer's strict liability under the general maritime law or the law of any
state or country whatsoever, for contingent, consequential or incidental
damages, such as, but not limited to, any claim for `down time', loss of
earnings or damage to the Ship or cargo but shall be liable only for making good
the Conversion Deficiency or paying cost of same, as set forth in the foregoing
provisions of this Article.

19.4 Subject to the foregoing provisions of this Article 19 and the provisions
of Article 1.5 relating to Condition Deficiencies, it is expressly provided that
Builder DOES NOT WARRANT machinery, equipment and fittings purchased by Builder
for installation in the Ship, but hereby agrees, upon Re-Delivery, to extend and
assign the manufacturer's and/or supplier's warranty or guarantee, if any, to
Owner. Builder will, however, be responsible for proper installation of all
equipment purchased by Builder and installed in the Ship.

                                      -30-
<PAGE>

19.5 EXCEPT AS HEREIN SET FORTH IN THIS ARTICLE 19, BUILDER MAKES NO WARRANTIES,
EXPRESS OR IMPLIED, AND PARTICULARLY DOES NOT MAKE ANY IMPLIED WARRANTIES OF
FITNESS FOR PARTICULAR PURPOSE, MERCHANTABILITY OR WORKMANSHIP WITH RESPECT TO
THE SHIP, IT BEING UNDERSTOOD AND AGREED THAT OWNER'S SOLE REMEDIES ARE THOSE
SPECIFIED IN THE CONTRACT.

20. DISPUTES

20.1 CLASSIFICATION REQUIREMENTS

            In the event that any dispute shall arise during the performance of
the Work as to the conformity of any Work or material with Classification
Society requirements, such dispute shall be submitted to the Lloyd's Register of
Shipping Surveyor or, at the option of either Party, to the head office of
Lloyd's Register of Shipping and his or its decision as to whether or not such
construction or material meets Classification Society requirements shall be
final and binding.

            In the event of any dispute concerning the conformity of any Work to
the standards provided for by the Contract which the Parties agree to be of a
technical nature, such dispute may be submitted to the Lloyd's Register of
Shipping Surveyor or, at the option of either Party, to the head office of
Lloyd's Register of Shipping and his or its decision as to whether or not such
construction or material meets the standards provided for in the Contract shall
be final and binding.

20.2 ARBITRATION

            Should any dispute, controversy or claim of a nature other than the
disputes described in Article 20.1 arise between Builder and Owner, the matter
in dispute shall be determined by arbitration in accordance with the
International Arbitration Rules of the American Arbitration Association.

            For this purpose:

      (a)   the arbitration panel shall consist of three arbitrators, one of
            such persons to be appointed by each of the Parties and the third
            (who shall be the Chairman of the arbitration panel) by the two so
            chosen;

      (b)   the arbitration shall be conducted at Montreal, Quebec.

      (c)   the language of the arbitration shall be English;

      (d)   all notices required to be given (i) by Owner to Builder shall also
            be given to Guarantor and (ii) by Builder to Owner shall also be
            given to Parent;

      (e)   Guarantor and Parent shall each be a party to the arbitration and
            shall be entitled, but not bound, to participate on the basis that
            (i) Guarantor's interest and that of

                                      -31-
<PAGE>

            Builder shall be the same, and (ii) Owner's interest and that of
            Parent shall be the same; and

      (f)   as provided in the Performance Guarantee and the Parent Guarantee,
            Guarantor and Parent will be bound, respectively, by any arbitration
            award, whether or not they elect to participate in accordance with
            clause (e).

Builder shall not cease performance of the Work pending a decision of the
arbitrators.

20.3 The existence of a dispute and all negotiations connected with such dispute
shall at all times be, and remain, confidential.

21. NOTICES

21.1 Any notices required or permitted to be given by either Party hereto by or
under the provisions of the Contract shall be addressed as follows:

      (a)   To Builder:

            Davie Maritime Inc.
            22 rue George D. Davie
            Levis, Quebec  G6V 8V5

            Attention: Project Manager
            Telefax:  (418) 838-0090

      (b)   To Owner:

            Torch Express L.L.C.
            401 Whitney Avenue
            Gretna, Louisiana  70056
            U.S.A.

            Attention: Robert E. Fulton, Chief Financial Officer
            Telefax:  (504) 367-7075

            With a copy to: Vincent Lecarme, Project Manager, at the same
            address

            All such notices shall be sent by courier delivery or by telefax
(confirmed by courier delivery). Notices sent by courier shall be deemed to have
been received two (2) Business Days after sending them by courier delivery and
on the next Business Day in the case of notices sent by telefax. Either Party
may, from time to time, designate in writing a different address or another
person as recipient of all or certain Notices, whereupon the above provisions
shall be deemed to be automatically amended accordingly.

                                      -32-
<PAGE>

21.2 In the case of notices of default, Owner shall provide a copy to the
Guarantor:

            Investissement Quebec
            393 St-Jacques Street
            Office Number 500
            Montreal, Quebec  H2Y 1N9

            Attention:  Secretary
            Telefax:  (514) 873-9917

22. OWNER-FURNISHED EQUIPMENT

22.1 Owner and Builder will discuss the basis on which Owner may be able to
deliver Owner Furnished Equipment to the Yard in a timely manner so as not to
delay the progress of the Work in accordance with the Master Schedule and
Builder will schedule the installation and commissioning of Owner Furnished
Equipment to prevent any such delay. Following such discussion, Owner will, at
its option, either (a) decide to postpone installation and/or commissioning
activities until the Ship has been Re-Delivered, or (b) negotiate with Builder a
Change Order in appropriate form whereby OFE will be installed and commissioned
prior to Re-Delivery and Builder will assist with installation and commissioning
under the direction of personnel provided by the suppliers of Owner Furnished
Equipment.

22.2 From and after delivery of any OFE to the Yard, Builder shall be
responsible for exercising due care in its storage and handling prior to its
installation in the Ship. For this purpose, all Owner Furnished Equipment and
materials shall be stored at no cost to Owner in a designated area of
approximately 10,000 sq. ft., of which 2,000 sq. ft. shall consist of climate
controlled storage space or covered space.

23. TAXES

            Owner shall indemnify and hold Builder harmless with respect to all
duties payable on the importation into Canada of equipment and materials for
incorporation into the conversion as part of the Work. For the purposes of this
Article 23, (a) Builder shall provide Owner, from time to time, with particulars
of the items in respect of which indemnity may be sought, (b) Builder shall
assist and cooperate with Owner, as required, for the purposes of minimizing the
amount of any duties payable, including the provision of all required
documentation and access to Builder's records for audit purposes, and (c) duties
shall mean customs duties (including interest and penalties) levied by the
government of Canada in respect of such equipment and materials.

24. MISCELLANEOUS

24.1 No waiver by Party of any default by the other in the strict and literal
performance of, or compliance with, any provision, condition or requirement
herein shall be deemed to be a waiver of the strict and literal performance of
and compliance with any other provision, condition or requirement herein, nor to
be a waiver of, or in any manner to release such other from, strict compliance
with any provision, condition or requirement in the future.

                                      -33-
<PAGE>

24.2 Except as expressly stated in the Contract, neither Party shall be liable
to the other for any indirect or consequential loss or damage of any nature
whatsoever including, without limitation, loss of business opportunities, loss
of profit or loss of use incurred or suffered by the other party for any cause
whatsoever including negligence.

24.3 Notwithstanding anything contrary in the Contract, the aggregate liability
of Builder to Owner for any breach or series of breaches of Builder's
obligations shall not exceed an amount equal to the Contract Price.

25. CONTRACT EMBODIES ALL AGREEMENTS

            The Contract embodies all agreements between Owner and Builder and
any promises, agreements, representations or obligations which may have been
previously made or undertaken by either party and not set out herein are
superseded and shall be of no further force or effect.

26. PATENTS

26.1 Builder agrees to indemnify and hold harmless Owner against any and all
claims, losses and liabilities (including but not limited to court costs and
legal fees) for infringement of any intellectual property rights belonging to or
alleged to belong to any third party brought against Owner with respect to the
Plans and/or other designs, materials, processes machinery and/or Materials and
Equipment used by Builder in the Work, except as the claim relates to the
Unconverted Ship, Materials or Equipment supplied by Nominated Subcontractors,
or to OFE.

26.2 Owner agrees to indemnify and hold harmless Builder against any and all
claims, losses and liabilities (including but not limited to court costs and
legal fees) for infringement of any intellectual property rights belonging to or
alleged to belong to any third party brought against Owner with respect to the
Plans and/or other designs, materials, processes, machinery and/or Materials or
Equipment provided by Owner or Nominated Subcontractors used by Builder in the
Work or related to Owner Furnished Equipment.

27. USE OF SPECIFICATION

            The Specification is and shall remain the property of Owner.

28. GOVERNING LAW

            The Contract shall be governed by and construed in accordance with
the laws of the Province of Quebec and the laws of Canada applicable thereto.

29. CONTRACT EFFECTIVE DATE

29.1 The following conditions are included for the sole benefit of Owner, who
shall be entitled to waive any one or more of them in whole or in part:

      (a)   the issue of the Performance Bond;

                                      -34-
<PAGE>

      (b)   the delivery to Owner of satisfactory evidence that the Credit
            Agreement has been entered into;

      (c)   the Trustee Agreement, the Operating Contract and the Supply
            Contract shall continue to be in full force and effect;

      (d)   the execution, delivery and issue of all consents, approvals and
            orders of the nature described in Recital 7 which have not been
            executed, delivered or issued as of the Contract Signing Date;

      (e)   the obtaining by Owner of construction financing in the amount of $
            60 million on terms and conditions acceptable to Owner in its sole
            discretion;

      (f)   the Structured Financing Facility shall continue to be available;

      (g)   the assignment of the Nominated Subcontracts;

      (h)   the delivery to Owner of the insurance certificates referred to in
            Article 12.2.

      (i)   the delivery to Owner of any certificates or legal opinions it may
            require to satisfy itself as to the validity and enforceability of
            any of the foregoing;

      (j)   no event of the nature described in Article 14.3(a) to (c) shall
            have occurred and be continuing;

      (k)   no breach will have occurred of the Guarantor's Requirements; and

      (l)   the approval of the board of directors of Parent to the giving of
            the Parent Guarantee.

29.2 The following conditions are included for the sole benefit of Builder, who
shall be entitled to waive any one or more of them in whole or in part:

      (a)   the entering into of the Credit Agreement;

      (b)   the Operating Contract and the Supply Contract shall continue to be
            in full force and effect;

      (c)   the execution, delivery and issue of all consents, approvals and
            orders of the nature described in Recital 7 which have not been
            executed, delivered or issued as of the Contract Signing Date;

      (d)   the assignment of the Nominated Subcontracts; and

      (e)   no event of the nature described in Article 14.4(a) to (c) shall
            have occurred and be continuing.

29.3 Within three (3) days of the date as of which the last to be satisfied of
the conditions specified in Articles 29.1 and 29.2 shall have been satisfied or
waived Owner shall

                                      -35-
<PAGE>

deliver to Builder the Parent Guarantee and shall pay to Builder $3,631,421,
less 10% of the amount applicable to Interim Period Work.

29.4 The Contract shall become effective when all of the conditions specified in
Articles 29.1 to 29.3 shall have been satisfied; provided that, unless otherwise
agreed, the Contract will become null and void at the expiry of 90 days after
the date of execution unless by such later date each of such conditions shall
have been satisfied or waived.

29.5 Article 20 shall be effective from the Contract Signing Date.

30. OTHER

30.1 LANGUAGE

            The Parties confirm that it is their wish that the Contract, as well
as any other documents relating to the Contract, including notices, schedules
and authorizations, have been and shall be drawn up in the English language
only. Les parties aux presente confirment leur volonte que cette convention, de
meme que tous les documents, y compris tous avis, cedules et autorisations s'y
rattachant, soient rediges en anglais seulement.

30.2 COUNTERPARTS

            The Contract may be executed by the Parties in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute one and the same instrument.

            IN WITNESS WHEREOF the parties have caused the Contract to be signed
by their duly authorized signatories the day, month and year first above
written.

                                       DAVIE MARITIME INC.

                                       By:
                                          ----------------------------
                                           Richard Bertrand

                                       TORCH EXPRESS L.L.C.

                                       By:
                                          ----------------------------
                                           Lyle Stockstill

                                      -36-
<PAGE>

                                   SCHEDULE 1
                             BUILDER'S REQUIREMENTS

1. INTRODUCTION

            The following directives are issued to protect Builder's property.
Evidently, all safety measures that apply to Owner cannot be specified in this
Schedule; certain special cases will require special measures.

2. GENERALITIES

2.1 GOVERNMENTAL REGULATIONS AND HEALTH AND SAFETY PROCEDURES

            Builder is revising all its health and safety procedures to comply
with the new Health and Safety Regulation, issued by the CSST (Occupational
Health and Safety Commission). Copies will be provided to Owner as soon as they
are completed and approved.

2.2 OWNER'S REPRESENTATIVES

2.2.1 The representatives of Owner must leave their personal addresses, and
telephone numbers with Industrial Security so they can be reached outside
regular working hours in case of an emergency.

2.2.2 The representatives of Owner must supply a list of employees and vehicles
to be used by it with Industrial Security.

2.3 EMPLOYEE PASSES

            Each employee of Owner must be registered and must sign for a pass
that must be submitted in at the end of the Work.

2.4 RESPONSIBILITIES OF OWNER

2.4.1 Owner is responsible for all its employees and other people working for
him within the Yard. It must inform such employees of all the safety regulations
applicable in the Yard.

2.5 USE OF A CAMERA

            Photography, without written permission from a Builder's
representative, is forbidden.

2.6 USE OF ALCOHOL, DRUGS AND TOBACCO

2.6.1 Bringing in or the use of alcohol and/or drugs is forbidden. Any person
found with or under the influence of these products will be evicted at once and
will be refused future access to the Yard.

                                      -37-
<PAGE>

2.6.2 Bill 444 on the regulation concerning the use of tobacco has been in
effect since December 17, 1999. Smoking is prohibited in workshops, trailers,
warehouses and office buildings.

3. PERSONAL SAFETY EQUIPMENT

            Builder's safety regulations require that all employees wear an
approved safety helmet, safety glasses and safety boots to move around the Yard
and in workshops. The employees of Owner must comply with these requirements as
well.

4. SAFETY PRACTICE

4.1 OWNER'S EQUIPMENT

            Any equipment belonging to Owner must be placed out of harm's way so
as not to create an obstruction or cause any kind of danger. However, if it is
impossible to avoid this kind of situation, Industrial Security will be informed
and suitable signposting will be placed in this area.

4.2   EXCAVATION

            The Plant Service Director must authorize excavation work. Care must
be taken to avoid damaging subterranean installation such as:

      (a)   Water, steam, acetylene, oxygen, etc. conduits.

      (b)   Electrical cables.

      (c)   Foundations.

      (d)   Etc.

4.3 USE OF EXPLOSIVES

            The Plant Service Director and the Health and Safety Coordinator
must approve any work requiring the use of explosives beforehand.

4.4 TEMPORARY SHELTERS

            Temporary shelters such as tool sheds, offices or other temporary
structures must not be heated with open flames.

5. WORK PERMIT

5.1 GENERALITIES

5.1.1 Owner must not begin any work without first obtaining a work permit issued
by a person responsible for Plant Services or the Project Manager.

                                      -38-
<PAGE>

5.1.2 This permit does not discharge Owner of its obligation to exercise
constant surveillance to ensure that suitable conditions and safety measures are
in place.

5.2 HOT WORKING

            Owner commits to enquire about and respect the hot working procedure
issued by Builder.

6. EQUIPMENT BELONGING TO BUILDER

6.1 GENERALITIES

            For safety reasons, Owner must not use Builder equipment without
express permission from the person responsible for Plant Services.

6.2 CONNECTING TO EXISTING CONDUITS

            Owner and/or subcontractor must have obtained authorization from the
person responsible for Plant Services before opening or connecting to existing
conduits. 6.2.1 Only the Industrial Security department must make any connection
to a fire hydrant. Industrial Security will take a water meter reading, before
and after connection, for the purpose of billing Owner.

6.2.2 As for air and electricity connection, the person responsible for Plant
Services must authorize before the work starts.

7. FIRES, DISCHARGES AND OTHER EMERGENCIES

            Any emergency (fire, discharge, etc.) must IMMEDIATELY be reported
to Industrial Security at EXTENSION 2333 giving the nature and location of the
emergency. The Industrial Security department has an intervention team trained
to intervene in emergency situations.

8. TRAFFIC REGULATIONS

8.1 SPEED LIMIT

            The speed limit within the Yard is 25 km per hour. Offenders to this
rule will be denied access to the Yard.

8.2 TRANSPORTATION OF EMPLOYEES

            Builder's safety regulations require that employees must be seated
when being transported. They must not sit on the sides or panel, legs hanging,
when a vehicle is moving.

8.3 PARKING

            Parking is permitted only in designated areas. It is strictly
forbidden to park a vehicle in prohibited zones, i.e. in front of fire hydrants,
entrances and exits of buildings.

                                      -39-
<PAGE>

8.4 EMERGENCY VEHICLES

            Emergency vehicles such as fire trucks, ambulances and Industrial
Security vehicles have priority over all vehicles. Other vehicles must give way
to them.

8.5 ACCIDENT/DAMAGE REPORTS CAUSED TO BUILDER PROPERTY

            Any accident must be reported at once to Industrial Security at
extension 2333.

8.6 VEHICLE CHECKS

            Owner must submit to a vehicle check at the entrance and/or exit of
the Yard when asked to by Industrial Security.

9. WORK ON SHIPS TO BE REPAIRED, BUILT OR RECONVERTED

            When Owner must work onboard a ship being repaired, built or
reconverted, it must get the specific procedures for the zone where it will do
the work from the ship manager.

10. DANGERS TO THE ENVIRONMENT

10.1 DISCHARGES

            Any discharge of dangerous material must be reported to extension
2333 at once.

10.2 RESPONSIBILITIES OF OWNER

      Owner is responsible for its dangerous or toxic material. Owner must leave
nothing on Builder's property at the end of the Work. No liquid, but water, may
be put into the sewers.

10.3 DANGEROUS GOODS

      Any goods classified as dangerous goods must not leave the Yard without a
dangerous waste transport manifest, and a copy must be given to Industrial
Security.

                                      -40-
<PAGE>

                                   SCHEDULE 2
                       EMPLOYEES AND COLLECTIVE AGREEMENTS

1. At the date hereof, the persons who were formerly hourly-rated employees of
the Bankrupt are covered by the following collective agreements:

      (a)   Agreement covering production workers (originally 1,600) which is in
            force for the period ending December 31, 2003

      (b)   Agreement covering security personnel and firefighters (originally
            25 and 55, respectively) which is in force for the period ended
            December 31, 2003

      (c)   Agreement covering technical personnel (originally 55) which is in
            force for the period ending December 31, 2003

      (d)   Agreement covering marine draughtsmen (originally 28) which is in
            force for the period ending December 31, 2003

2. Subject only to required confirmation by general assembly, each of the
periods specified in paragraph 1. will be extended to the first to occur of
Re-Delivery pursuant to the Conversion Contract and June 30, 2004.

3. Subject only to obtaining court approval pursuant to Article 45 of the Quebec
Labour Code, Builder will become the employer of all such individuals for
purposes of the Collective Agreements.

4. The Trustee is responsible for all past claims under the foregoing Collective
Agreements and those of salaried employees of Bankrupt.

5. Discussions are ongoing with respect to the actions to be taken to deal with
the pension plans for the above employees. Builder will have no obligation to
accept a transfer of any of such plans which are currently in a deficit position
or for the pension obligations of any of them prior to them becoming employees
of Builder.

                                      -41-
<PAGE>

                                   SCHEDULE 3
                            FORM OF PARENT GUARANTEE

                                                                       <*>, 2002

Davie Maritime Inc.
22 rue George D. Davie
Levis, Quebec G6V 8V5

                           Midnight Express Conversion Contract

Gentlemen:

We refer to the Midnight Express Conversion Contract (the "Contract") dated
November 12, 2002 made among you, as builder (the "Builder"), and our
wholly-owned subsidiary, Torch Express L.L.C., as owner (the "Owner"), in
respect of the conversion of the "Midnight Express" into a dynamically
positioned pipe-laying vessel.

In consideration of your entry into the Contract, we hereby irrevocably and
unconditionally guarantee to you that Owner will duly and punctually observe and
perform all terms and conditions contained in and discharge all obligations
required under the Contract.

This guarantee shall be a continuing guarantee and shall remain in force and
effect until all obligations of Owner under the Contract have been fully and
completely. Furthermore, we hereby consent, subject to notification, to any
changes, extensions or adjustments of the Contract and agree that no such
changes, extensions or adjustments shall discharge us from any liability herein
in whole or in part.

We further represent, warrant and agree that:

      (a)   our obligations as guarantor shall, without limitation, include the
            obligation to provide Owner with sufficient funds to cure any
            default promptly following the giving by you of any notice of
            default;

      (b)   our obligations hereunder shall not be affected by any act,
            omission, matter or thing which might, but for this provision,
            operate to release or otherwise exonerate from our liabilities
            hereunder including without limitation:

            (i)   any time or waiver granted to Owner, or

            (ii)  any delay or omission on the part of yourselves in exercising
                  any rights, powers or remedies available to you against Owner;

      (c)   as provided in Article 20.2 of the Contract, we shall be a party to
            any arbitration conducted in accordance with such Article and,
            whether or not we exercise our right to participate in such
            arbitration, we shall be bound, as guarantor, by any

                                      -42-
<PAGE>

            award of the arbitrators and by the order of any court in Canada or
            the United States which is issued for the purpose of enforcing such
            award; and

      (d)   this Guarantee has been duly authorized by all necessary corporate
            action and is our valid, binding obligation enforceable in
            accordance with its terms.

This guarantee shall be governed by and construed in accordance with the law of
<*>.

Any notice hereunder shall be sent by post or fax (confirmed by registered mail)
to ourselves at the address and fax number set out below.

Signed by:

For and on behalf of:

                                      -43-
<PAGE>

                                   SCHEDULE 4
                            FORM OF PERFORMANCE BOND

            KNOW ALL MEN BY THESE PRESENTS THAT DAVIE MARITIME INC. as
Principal, hereinafter called the Principal, and INVESTISSEMENT QUEBEC a
corporation created and existing under the laws of Quebec and duly authorized to
act as Surety for the purpose of the Contract described hereinafter, hereinafter
called the Surety, are held and firmly bound unto TORCH EXPRESS LLC as Obligee,
hereinafter called the Obligee, in the amount of FORTY MILLION DOLLARS ($40 000
000.00) in lawful money of Canada, for the payment of which sum, well and truly
to be made, the Principal and the Surety bind themselves, their heirs,
executors, administrators, successors and assigns jointly and severally, firmly
by these presents.

            WHEREAS, the Principal has entered into a written contract with the
Obligee, dated NOVEMBER DECEMBER 3, 2002, for the CONVERSION OF THE VESSEL
"MIDNIGHT EXPRESS" INTO A DYNAMICALLY POSITIONED PIPE LAYING VESSEL in
accordance with the Contract Documents submitted therefor which are by reference
made part hereof and are hereinafter referred to as the Contract.

            NOW, THEREFORE, THE CONDITION OF THIS OBLIGATION is such that if the
Principal shall promptly and faithfully perform the Work under the Contract then
this obligation shall be null and void; otherwise it shall remain in full force
and effect. The Work will be deemed to be performed within the meaning of the
present paragraph at the earlier of the following dates: the date on which a
Re-Delivery Acceptance Certificate is signed by the Obligee and the date on
which the Obligee was obligated to sign a Re-Delivery Acceptance Certificate.

            Whenever the Principal shall be, and declared by the Obligee to be,
in default to perform the Work under the Contract, the Obligee having performed
the Obligee's obligations thereunder, the Surety shall promptly, upon receiving
a written notice, at its option either:

2.    complete the Work under the Contract in accordance with its terms and
      conditions; or

3.    obtain a bid or bids for submission to the Obligee for completing the Work
      under the Contract in accordance with its terms and conditions, and upon
      determination by the Obligee and the Surety of the lowest responsible
      bidder and with the Obligee's consent (which consent shall not
      unreasonably be withheld), arrange for a contract between such bidder and
      the Obligee and make available as work progresses (even though there
      should be a default, or a succession of defaults, under the contract or
      contracts of completion, arranged under this paragraph) sufficient funds
      to pay the cost of completion of the Work less the balance of the Contract
      price; but not exceeding the amount set forth in the first paragraph
      hereof. The term "balance of the Contract price", as used in his
      paragraph, shall mean the total amount payable by the Obligee to the
      Principal under the Contract, less the amount properly paid by the Obligee
      to the Principal; or

4.    allow the Obligee to arrange for the completion of the Work, in which case
      the Surety will pay for the direct costs incurred by the Obligee for the
      completion of the Work less

                                      -44-
<PAGE>

      the balance of the Contract price (as defined hereabove) but not exceeding
      the amount set forth in the first paragraph hereof.

            It is further understood and agreed that:

      (a)   as provided in Article 20.2 of the Contract, the Surety shall be a
            party to any arbitration conducted in accordance with such Article
            whether or not the Surety exercises its right to anticipate in such
            arbitration, and the Surety shall be bound by any award of the
            arbitrators and by the order of any court in Canada which is issued
            for the purpose of enforcing such award;

      (b)   the Obligee shall be entitled to assign the benefits of this Bond to
            a lender(s) in connection with the financing of the conversion of
            the Vessel without the Surety's consent and the Surety will execute
            an assignment agreement within five business days after the request
            of the Obligee with the lender(s) to accomplish the assignment of
            this Bond in a matter satisfactory to the lender(s);

      (c)   this Bond shall be governed and construed in accordance with the
            laws of the Province f Quebec;

      (d)   the Surety shall not be liable for a greater sum than the amount set
            forth in the first paragraph hereof (but which, for greater
            certainty, shall not be reduced by the amount of payments made by
            Obligee on account of the Contract Price);

      (e)   nothing in this Bond shall obligate Surety to pay any amount in
            respect of the Nominated Subcontracts (as such term is defined in
            the Contract), except where Option 1 is elected, in which case
            Surety shall pay all amounts which Builder would have been required
            to pay and for which Obligee is obligated to reimburse it as part of
            the Contract Price;

      (f)   no right of action shall accrue on this Bond to, or for the use of,
            any person or corporation other than the Obligee named herein, or
            the heirs, executors, administrators or successors of the Obligee
            (including the assigns referred to in clause (b) above);

      (g)   any dispute with respect to this Bond or the interpretation thereof
            shall be referred to arbitration between the Surety and the Obligee
            in accordance with the provisions of Article 20.2 of the Contract as
            if such provisions were incorporated herein;

      (h)   the issue of this Bond has been duly authorized by all necessary
            action on the part of the Government of Quebec and the valid,
            binding obligation of the Surety enforceable against it in
            accordance with its terms; and

      (i)   any notice hereunder shall be sent by post of fax (confirmed by
            registered mail) to ourselves at the address and fax number set out
            below.

                                      -45-
<PAGE>

            IN WITNESS WHEREOF, the Principal and the Surety have Signed and
Sealed this Bond this day <*> of <*>2002

SIGNED, SEALED AND DELIVERED in      )
the presence of:                     )
                                     )
INVESTISSEMENT QUEBEC                )   DAVIE MARITIME INC.

-------------------------------------    ------------------------------------
                                     )
                                     )

                                      -46-
<PAGE>

                                   SCHEDULE 5
                   FORM OF RE-DELIVERY ACCEPTANCE CERTIFICATE

The undersigned, Davie Maritime Inc. ( "Builder") and of Torch Express L.L.C.
(Owner), acknowledge and certify that the "M.V. Midnight Express" (the "Ship"),
previously delivered to Builder for the purpose of conversion to a pipe laying
vessel in accordance with the terms and conditions of the Midnight Express
Conversion Contract ("Contract"), is being re-delivered to Owner on the date
hereof on the following terms and conditions:

1.    Builder's liabilities and responsibilities for the care and custody of the
      Ship shall automatically cease as at _______________hours on
      ________________________(date), at which time responsibility for the care
      and custody of the Ship shall revert to Owner.

2.    Builder hereby confirms to Owner that the Ship is free from any liens,
      claims or other encumbrances, other than those attributable to any act or
      omission of Owner.

3.    The following documents are attached to this Re-Delivery Certificate and
      form part of it:

      Annex A - Lloyd's Register Certificate
      Annex B - List of outstanding Work items
      Annex C - Outstanding insurance claims
      Annex D - Documents related to the transfer of the benefit of warranties
                from Builder to Owner
      Annex E - Documents to be provided at re-delivery as per Annex A of the
                Specification

SIGNED AT ___________________________Province of Quebec, the ____________ day of
_____________________, 20__ at ______________ hours.

                                          TORCH EXPRESS INC.

                                          By:
                                             ---------------------------------

                                          DAVIE MARITIME INC.

                                          By:
                                             ---------------------------------

                                      -47-
<PAGE>

                                     ANNEX A

                          [LLOYDS REGISTER CERTIFICATE]

                                      -48-
<PAGE>

                                     ANNEX B

                             OUTSTANDING WORK ITEMS

                        [OUTSTANDING ITEMS TO BE LISTED]

                                      -49-
<PAGE>

                                     ANNEX C

                                INSURANCE CLAIMS

                        [OUTSTANDING CLAIMS TO BE LISTED]

                                      -50-
<PAGE>

                                     ANNEX D

                           WARRANTY TRANSFER DOCUMENTS

   [LIST SUBCONTRACTS CONTAINING WARRANTIES WHICH ARE BEING ASSIGNED TO OWNER]

                                      -51-
<PAGE>

                                     ANNEX E

                              RE-DELIVERY DOCUMENTS

      [LIST DOCUMENTS TO BE DELIVERED AS PER ANNEX A OF THE SPECIFICATION]

                                      -52-
<PAGE>

                                   SCHEDULE 6
                                DELIVERY PROTOCOL

1.    Owner shall effect Delivery of the Ship to Builder afloat, alongside and
      upright at Builder's shipyard and in accordance with approved Master
      Conversion Schedule of the Contract.

2.    Owner shall arrange for and supervise the removal of the content of the
      Ship's stores.

3.    Owner and Builder hereby acknowledge that all compartments shall be
      inspected concurrently by Owner's and Builder's representatives for the
      purpose of the turnover operation. This inspection shall be completed
      within ten (10) working days. Builder's inspection authority shall
      arrange, at Builder's expense, for the presence of photographers during
      this period to photograph each compartment. In addition to the
      photographs, and to serve as an additional partial record, compartment
      inspection sheets (see form "SHIP'S TURNOVER - COMPARTMENT INSPECTION
      SHEET" attached) shall be prepared to record, as a minimum, the specific
      following information:

      (a)   Compartment designation;

      (b)   Date of inspection;

      (c)   Unphotographed contents of compartments;

      (d)   Condition of contents not photographed;

      (e)   Condition of compartments not definable by photographs;

      (f)   Handover of keys (if applicable); and

      (g)   Signatures of Owner's and Builder's representatives.

      All photographs shall be marked with the date indicating when the
      photographs were taken. A complete set of photographs and compartment
      inspection sheets shall be kept by Builder, which shall serve as the
      original list of photographs and compartment inspection sheets.

4.    Immediately prior to Delivery of the Ship to Builder, Owner and Builder
      will be required to sign an acceptance certificate in the form provided in
      attachment ("SHIP'S TURNOVER COMPLETION CERTIFICATE"). Until such
      acceptance certificate is executed by Builder, all risk of loss with
      respect to the Ship and in accordance with the Contract shall remain in
      Owner.

5.    Owner and Builder hereby acknowledge and agree that upon completion of the
      signing by Owner and Builder of the acceptance certificate described in
      article 4, the entire Ship's staff will be withdraw; whereupon formal
      Delivery of the Ship to Builder will be deemed to be completed and, in
      accordance with the Contract terms, the Ship shall then be entirely in
      Builder's care and custody. Builder may not commence work, in any

                                      -53-
<PAGE>

      compartment, until such acceptance certificate is signed, and the
      provisions of article 4 have been fulfilled.

                     SHIP'S TURNOVER COMPLETION CERTIFICATE

Acceptance of delivery of the ship   (Name)

1.    The undersigned, on behalf of Torch Express LLC and Davie Maritime Inc.,
      acknowledge to have handed over and received respectively the former dock
      ship SMIT EXPRESS for the purpose of the Conversion Project, all in
      accordance with the terms and conditions of the Contract dated _____, made
      between Torch Express LLC. and Davie Maritime Inc.

2.    It is mutually agreed by all parties that the condition report by
      compartment or area shall be considered as an addendum to the Contract;
      and shall be a valid document in the Delivery of the Ship to Builder even
      if the inspection and signing occur after the signing of this agreement.

AUTHORISED SIGNATORIES:

    Owner : Torch Express LLC.        For and on behalf of Torch Express LLC.

                                      Signed:
                                             ----------------------------------
                                      Name:
                                             ----------------------------------
                                      Title:
                                             ----------------------------------

    Builder : Davie Maritime Inc.        For and on behalf of the Davie
                                         Maritime Inc.

                                      Signed:
                                             ----------------------------------
                                      Name:
                                             ----------------------------------
                                      Title:
                                             ----------------------------------

                                      -54-
<PAGE>

                 SHIP'S TURNOVER - COMPARTMENT INSPECTION SHEET

                 INFORMATION TO BE INSERTED ON EACH PHOTOGRAPHS:
                 -     IDENTIFICATION OF THE PROJECT
                 -     NAME OF THE COMPARTMENT
                 -     DATE OF INSPECTION OF THE COMPARTMENT

COMPARTMENT NAME:
                        ------------------------------------------------------

DATE OF INSPECTION:
                        ------------------------------------------------------

<TABLE>

<S>                                      <C>
UNPHOTOGRAPHEDCONTENTS                   CONDITION
----------------------                   ---------

----------------------                   ---------

----------------------                   ---------

----------------------                   ---------

----------------------                   ---------
</TABLE>

CONDITION OF COMPARTMENT NOT DEFINABLE BY PHOTOGRAPHS:

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
 IDENTIFICATION OF THE        HANDED       IDENTIFICATION OF THE       HANDED
         KEYS                  OVER               KEYS                  OVER
-------------------------    --------      ---------------------      --------
<S>                          <C>           <C>                        <C>
                             YES   NO                                 YES   NO
-------------------------    ---   --      ---------------------      ---   --

-------------------------    ---   --      ---------------------      ---   --

-------------------------    ---   --      ---------------------      ---   --

-------------------------    ---   --      ---------------------      ---   --
</TABLE>

GENERAL COMMENTS :

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

TORCH EXPRESS LLC       SIGNED:
                                 ---------------------------
                        NAME:
                                 ---------------------------
DAVIE MARITIME INC.     SIGNED:
                                 ---------------------------
                        NAME:
                                 ---------------------------

                                      -55-
<PAGE>

                                   SCHEDULE 7
                          US SUBCONTRACTOR REQUIREMENTS

Subcontracts with US Subcontractors must contain the following:

1.    A hold harmless/indemnification in favour of Builder and Owner with
      respect to bodily injury or death sustained by the subcontractor's
      employees during the performance of their duties under the subcontract.
      Such indemnification/hold harmless must not be limited by any insurance
      coverage in effect (worker's compensation/employer's liability, etc.)

2.    An obligation that the subcontractor must have a minimum of $10 million of
      worker's compensation, employer's liability and comprehensive general
      liability coverage, with insurers having an AM Best Rating of A or better.
      The policies will add Builder and Owner as additional insureds and waive
      any subrogation against both. They will also extend coverage to include
      liabilities assumed under contract, and the "Action over Indemnity".

3.    A provision that any suit by the sub-contractors against Builder and/or
      Owner must be brought in Canada.

                                      -56-
<PAGE>

                                   APPENDIX A
                                  SPECIFICATION

Revision 4 dated October 28, 2002 of the Specification has been initialled by
Builder and Owner and is bound separately as a Contract Document.

                                      -57-
<PAGE>

                                   APPENDIX B
                                   UNIT RATES

BILLING RATES FOR TIME & MATERIAL WORK (T&M)

<TABLE>
<S>                           <C>
Straight Time Billing Rate:   US$ 34.94 / Hr.
Overtime Billing Rate:        US$ 49.14 / Hr.
Procurement Mark-up:          Cost plus freight plus 14%
</TABLE>

-     Lump sum pricing provided supersedes Unit Pricing and Time & Material
      (T&M) rates listed. Lump sum pricing cannot necessarily be pro-rated to
      form a basis for pricing for changes or additional work.

-     All work is to have a mutually agreed upon price prior to commencement.
      Any work authorized without a mutually agreed upon price will be worked on
      a time and material basis. This work will be charged based on the
      materials and actual labor, supervision and service hours expended and
      calculated at the rates listed above.

-     All rework required for T&M items will be charged at the same rates listed
      above.

<TABLE>
<CAPTION>
  ITEM NO.              DESCRIPTION              UNIT PRICES, BUDGET PRICES
  --------              -----------               TAXES EXCLUDED IN U.S.D.
                                                  ------------------------

<S>         <C>                                  <C>
    1,0              DRYDOCKING ITEMS            SEE CONVERSION QUOTATION

    2,0                 UNIT PRICES

    2.1      Staging per m3                                 $3.49

   2,2,1     Renewal of welded straight shell               $9.56
             plating (25 mm) per kg (min 10
             tons)

   2,2,2     Renewal of welded single shaped                $10.38
             shell plating (25 mm) per kg
             (min 10 tons)

   2,2,3     Renewal of welded double shaped                $10.82
             shell plating (25 mm) per kg
             (min 10 tons)

   2,3,1     Fairing of welded straight shell               $10.79
             plating (25 mm) per kg (min 10
             tons)

   2,3,2     Fairing of welded single shaped                $11.73
             shell plating (25 mm) per kg
             (min 10 tons)
</TABLE>

                                      -58-
<PAGE>

<TABLE>
<S>          <C>                                  <C>
   2,3,3     Fairing of welded double shaped                $12.24
             shell plating (25 mm) per kg
             (min 10 tons)

    2.4      Renewal of welded straight tank                $10.65
             top plate plating (16 mm) per kg
             (min 10 tons)

   2,5,1     Renewal of welded straight                     $10.53
             internals (12 mm) in D.B. tanks
             per kg (min 10 tons)

   2,5,2     Renewal of welded shaped                       $11.92
             internals (12 mm) in D.B. tanks
             per kg (min 10 tons)

   2,6,1     Renewal of welded straight                     $10.53
             internals (12 mm) in ballast
             tanks per kg (min 10 tons)

   2,6,2     Renewal of welded shaped                       $11.92
             internals (12 mm) in ballast
             tanks per kg (min 10 tons)

    2.7      Renewal of checkered plate (5                  $14.88
             mm) per kg (min 5 tons)

    2.8      Renewal of bulwark plating (10                 $15.04
             mm) per kg (min 10 tons)

    2.9      Renewal of rails and stanchions               $302.73
             per m (min 10 m)

   2,10,1    Grit blasting SA-2,5 on outside                $30.52
             shell per m2 (min 200 m2)

   2,10,2    Grit blasting SA-2,5 inside tank               $40.71
             per m2 (min 500 m2)

   2,11,1    Grit blasting SA-2,0 on outside                $21.81
             shell per m2 (min 200 m2)

   2,11,2    Grit blasting SA-2,0 inside tank               $29.36
             per m2 (min 200 m2)

   2,12,1    Sandsweep on outside shell per                 $9.56
             m2 (min 200 m2)

   2,12,2    Sandsweep inside tank per m2                   $12.66
             (min 200 m2)

   2,13,1    Painting on shell with owner's                 $2.14
             supplied conventional paint per
             m2 (min 200 m2)

   2,13,2    Painting inside tank with
             owner's supplied conventional
             paint per m2 (min 200 m2)

    2.14     Marine growth removal on hull by               $12.47
             hand scraping per m2

    2.15     Marine growth removal on hull by           Not available
             power driven brushes per m2

    2.16     Cleanin & scraping f.w. tank         To de determined with tank
                                                          condition

    2.17     Cleaning & gas freeing fuel tank               $53.26
             per m3 of capacitiy assuming
             tank empty.

    2.18     Removal and disposal of ballast               $127.82
             mud  and sludge per m3

    2.19     Pumping and disposal of oily                  $127.82
             bilge water per m3

    2,20     Renewal of steel straight pipes
             S.G.P. 1" to 22.0" on Deck per
             6,09 running meter including
             suppports/fastening clips and
             testing.(ASSUME 6,09 meter LONG
             PIPE SCH 40 WITH 2 FLANGES 150
             lbs)

                            1"                             $400.57

                           1,5"                            $495.45

                            2"                             $495.60

                            3"                             $985.62

                            4"                            $1,019.28

                            6"                            $1,211.65

                            8"                            $1,776.83

                           10"                            $1,957.36

                           12"                            $2,216.04
</TABLE>

                                      -59-
<PAGE>

<TABLE>
<S>           <C>                                         <C>
                           14"                            $2,788.84

                           16"                            $3,059.57

                           18"                            $3,512.14

                           20"                            $3,942.96

                           22"                            $4,593.48

              Renewal of steel straight pipes
              S.G.P. 1" to 22.0" located in
              engine room pump room and tanks
              per 6,09 running meter
              including suppports/fastening
              clips and testing.(ASSUME 6,09
              meter LONG PIPE SCH 40 WITH 2
              FLANGES 150 lbs)

                            1"                             $643.08

                           1,5"                            $790.19

                            2"                             $790.35

                            3"                            $1,577.82

                            4"                            $1,611.48

                            6"                            $1,870.34

                            8"                            $2,731.30

                           10"                            $2,911.84

                           12"                            $3,245.31

                           14"                            $4,094.67

                           16"                            $4,365.40

                           18"                            $4,884.46

                           20"                            $5,315.28

                           22"                            $5,965.79

              Renewal of steel straight pipes
              S.G.P. 1" to 22.0" including
              one elbow installation on Deck
              per 6,09 running meter
              including suppports/fastening
              clips and testing.(ASSUME 6,09
              meter LONG PIPE SCH 40 WITH 2
              FLANGES 150 lbs)

                            1"                             $527.11

                           1,5"                            $621.97

                            2"                             $622.52

                            3"                            $1,290.10

                            4"                            $1,326.99

                            6"                            $1,632.98

                            8"                            $2,220.49

                           10"                            $2,439.11

                           12"                            $2,834.66

                           14"                            $3,493.13

                           16"                            $3,834.32

                           18"                            $4,409.42

                           20"                            $4,980.35

                           22"                            $5,714.06

              Renewal of steel straight pipes
              S.G.P. 1" to 22.0" located in
              engine room pump room and tanks
              including installation of 1
              elbow per 6,09 running meter
              including suppports/fastening
              clips and testing.(ASSUME 6,09
              meter LONG PIPE SCH 40 WITH 2
              FLANGES 150 lbs)

                            1"                             $769.62

                           1,5"                            $916.72

                            2"                             $917.27
</TABLE>

                                      -60-
<PAGE>

<TABLE>
<S>           <C>                                         <C>
                            3"                            $1,882.31

                            4"                            $1,919.20

                            6"                            $2,291.67

                            8"                            $3,174.97

                           10"                            $3,393.59

                           12"                            $3,863.92

                           14"                            $4,798.95

                           16"                            $5,140.15

                           18"                            $5,781.73

                           20"                            $6,352.66

                           22"                            $7,086.37

              Renewal of steel straight pipes
              H.G.P. 1" to 22.0" on Deck per
              6,09 running meter including
              suppports/fastening clips and
              testing. (ASSUME 6,09 meter
              LONG PIPE SCH 80 WITH 2 FLANGES
              150 lbs)

                            1"                             $482.18

                           1,5"                            $582.74

                            2"                             $693.25

                            3"                            $1,189.52

                            4"                            $1,238.66

                            6"                            $1,385.42

                            8"                            $2,869.89

                           10"                            $3,045.45

                           12"                            $3,243.92

                           14"                            $6,234.58

                           16"                            $6,510.43

                           18"                            $6,863.27

                           20"                            $7,952.29

                           22"                            $8,744.82

              Renewal of steel straight pipes
              H.G.P. 1" to 22.0" in engine
              room pump room and tanks per
              6,09 running meter including
              suppports/fastening clips and
              testing. (ASSUME 6,09 meter
              LONG PIPE SCH 80 WITH 2 FLANGES
              150 lbs)

                            1"                             $774.56

                           1,5"                            $927.35

                            2"                            $1,109.54

                            3"                            $1,903.65

                            4"                            $1,952.79

                            6"                            $2,099.55

                            8"                            $4,456.01

                           10"                            $4,631.58

                           12"                            $4,830.04

                           14"                            $9,651.61

                           16"                            $9,927.46

                           18"                            $10,280.30

                           20"                            $11,808.11

                           22"                            $12,600.65
</TABLE>

                                      -61-
<PAGE>

<TABLE>
<S>           <C>                                         <C>
              Renewal of steel straight pipes
              H.G.P. 1" to 22.0" on Deck
              including installation of 1
              elbow per 6,09 running meter
              including suppports/fastening
              clips and testing. (ASSUME 6,09
              meter LONG PIPE SCH 80 WITH 2
              FLANGES 150 lbs)

                            1"                             $684.34

                           1,5"                            $785.54

                            2"                             $946.40

                            3"                            $1,647.34

                            4"                            $1,702.79

                            6"                            $1,877.09

                            8"                            $4,154.17

                           10"                            $4,394.33

                           12"                            $4,643.16

                           14"                            $9,836.46

                           16"                            $10,211.20

                           18"                            $10,688.16

                           20"                            $12,564.82

                           22"                            $13,434.51

              Renewal of steel straight pipes
              H.G.P. 1" to 22.0" in engine
              room pump room and tanks
              including installation of 1
              elbow per 6,09 running meter
              including suppports/fastening
              clips and testing. (ASSUME 6,09
              meter LONG PIPE SCH 80 WITH 2
              FLANGES 150 lbs)

                           1,5"                           $1,130.15

                            2"                            $1,362.68

                            3"                            $2,361.47

                            4"                            $2,416.92

                            6"                            $2,591.22

                            8"                            $5,740.30

                           10"                            $5,980.46

                           12"                            $6,229.28

                           14"                            $13,253.49

                           16"                            $13,628.22

                           18"                            $14,105.19

                           20"                            $16,420.64

                           22"                            $17,290.33

              Renewal of steel straight pipes
              Galv. S.G.P. 1" to 22.0" on
              Deck per 6,09 running meter
              including suppports/fastening
              clips and testing. (ASSUME 6,09
              meter LONG PIPE SCH 40 WITH 2
              FLANGES 150 lbs)

                            1"                             $404.42

                           1,5"                            $502.41

                            2"                             $512.06

                            3"                            $1,031.66

                            4"                            $1,056.97

                            6"                            $1,278.26

                            8"                            $1,942.64

                           10"                            $2,195.48

                           12"                            $2,507.72

                           14"                            $3,000.77
</TABLE>

                                      -62-
<PAGE>

<TABLE>
<S>           <C>                                         <C>

                           16"                            $3,305.54

                           18"                            $3,788.24

                           20"                            $4,251.34

                           22"                            $4,957.29

              Renewal of steel straight pipes
              Galv. S.G.P. 1" to 22.0" in
              engine room pump room and tank
              per 6,09 running meter
              including suppports/fastening
              clips and testing. (ASSUME 6,09
              meter LONG PIPE SCH 40 WITH 2
              FLANGES 150 lbs)

                            1"                             $646.93

                           1,5"                            $797.15

                            2"                             $806.81

                            3"                            $1,623.87

                            4"                            $1,649.18

                            6"                            $1,936.95

                            8"                            $2,897.12

                           10"                            $3,149.96

                           12"                            $3,536.99

                           14"                            $4,306.60

                           16"                            $4,611.37

                           18"                            $5,160.55

                           20"                            $5,623.65

                           22"                            $6,329.60

              Renewal of steel straight pipes
              Galv. S.G.P. 1" to 22.0" on
              Deck including installation of
              1 elbow per 6,09 running meter
              including suppports/fastening
              clips and testing. (ASSUME 6,09
              meter LONG PIPE SCH 40 WITH 2
              FLANGES 150 lbs)

                            1"                             $531.21

                           1,5"                            $629.19

                            2"                             $639.66

                            3"                            $1,337.76

                            4"                            $1,367.28

                            6"                            $1,706.41

                            8"                            $2,399.91

                           10"                            $2,702.41

                           12"                            $3,162.81

                           14"                            $3,732.81

                           16"                            $4,117.56

                           18"                            $4,790.09

                           20"                            $5,442.39

                           22"                            $6,248.21

              Renewal of steel straight pipes
              Galv. S.G.P. 1" to 22.0" in
              engine room pump room and tank
              including installation of 1
              elbow per 6,09 running meter
              including suppports/fastening
              clips and testing. (ASSUME 6,09
              meter LONG PIPE SCH 40 WITH 2
              FLANGES 150 lbs)

                            1"                             $773.72

                           1,5"                            $923.93

                            2"                             $934.41

                            3"                            $1,929.96
</TABLE>

                                      -63-
<PAGE>

<TABLE>
<S>           <C>                                         <C>
                            4"                            $1,959.49

                            6"                            $2,365.10

                            8"                            $3,354.39

                           10"                            $3,656.89

                           12"                            $4,192.07

                           14"                            $5,038.63

                           16"                            $5,423.39

                           18"                            $6,162.40

                           20"                            $6,814.70

                           22"                            $7,620.52

              Renewal of Copper Nickel
              straight pipes C.N.P. 1" to
              22.0" on Deck per 6,09 running
              meter including
              suppports/fastening clips and
              testing.(ASSUME 6,09 meter LONG
              PIPE SCH 40 WITH 2 FLANGES 150
              lbs)

                            1"                             $566.37

                           1,5"                            $702.37

                            2"                             $773.51

                            3"                            $1,470.89

                            4"                            $1,615.03

                            6"                            $1,951.75

                            8"                            $3,989.65

                           10"                            $5,049.91

                           12"                            $5,570.67

                           14"                            $9,057.84

                           16"                            $9,996.65

                           18"                            $11,178.04

                           20"                            $13,275.98

                           22"                            $15,023.42

              Renewal of Copper Nickel
              straight pipes C.N.P. 1" to
              22.0" in engine room pump room
              and tanks per 6,09 running
              meter including
              suppports/fastening clips and
              testing. (ASSUME 6,09 meter
              LONG PIPE SCH 40 WITH 2 FLANGES
              150 lbs)

                            1"                             $858.75

                           1,5"                           $1,046.98

                            2"                            $1,151.36

                            3"                            $2,162.82

                            4"                            $2,306.96

                            6"                            $2,643.68

                            8"                            $5,475.99

                           10"                            $6,536.26

                           12"                            $7,065.32

                           14"                            $12,278.41

                           16"                            $13,217.23

                           18"                            $14,398.62

                           20"                            $16,935.34

                           22"                            $18,682.79
</TABLE>

                                      -64-
<PAGE>

<TABLE>
<S>           <C>                                         <C>

              Renewal of Copper Nickel
              straight pipes C.N.P. 1" to
              22.0" on Deck including
              installation of 1 elbow per
              6,09 running meter including
              suppports/fastening clips and
              testing.(ASSUME 6,09 meter LONG
              PIPE SCH 40 WITH 2 FLANGES 150
              lbs)

                            1"                             $788.41

                           1,5"                            $940.35

                            2"                            $1,041.12

                            3"                            $1,961.51

                            4"                            $2,127.23

                            6"                            $2,530.61

                            8"                            $5,491.38

                           10"                            $6,744.83

                           12"                            $7,533.73

                           14"                            $13,526.84

                           16"                            $14,735.20

                           18"                            $16,488.18

                           20"                            $19,697.42

                           22"                            $22,070.59

              Renewal of Copper Nickel
              straight pipes C.N.P. 1" to
              22.0" in engine room pump room
              and tanks including
              installation of 1 elbow per
              6,09 running meter including
              suppports/fastening clips and
              testing. (ASSUME 6,09 meter
              LONG PIPE SCH 40 WITH 2 FLANGES
              150 lbs)

                            1"                            $1,080.79

                           1,5"                           $1,284.95

                            2"                            $1,418.97

                            3"                            $2,653.45

                            4"                            $2,819.16

                            6"                            $3,222.54

                            8"                            $6,977.72

                           10"                            $8,231.18

                           12"                            $9,028.39

                           14"                            $16,747.41

                           16"                            $17,955.78

                           18"                            $19,708.75

                           20"                            $23,356.79

                           22"                            $25,729.96

   2,21.a     Supply and install insulation
              on Pipe. Operating temperature
              ( degree Celcius ) 60 to 120.
              Material Foam Glass one layer
              of 1 1/2 " Thick Cladding SST
              316 22 Guage

                           1,5"                             $95.82

                            2"                             $107.11

                            3"                             $128.81

                            4"                             $143.93

                            6"                             $190.16

                            8"                             $234.89

                           10"                             $311.18

                           12"                             $336.43

                           14'"'                           $295.83
</TABLE>

                                      -65-
<PAGE>

<TABLE>
<S>           <C>                                         <C>
                           16"                             $331.58

                           18"                             $173.58

                           20"                             $389.65

                           24"                             $445.84

   2,21,b     Supply and install insulation
              on flat surfaces. Operating
              temperature ( degree Celcius )
              60 to 120. Material Foam Glass
              one layer of 1 1/2 " Thick
              Cladding SST 316 22 Guage

   2,21,c     Supply and install insulation
              on Curved surfaces. Operating
              temperature ( degree Celcius )
              60 to 120. Material Foam Glass
              one layer of 1 1/2 " Thick
              Cladding SST 316 22 Guage

   2,22,a     Forged steel flange slip-on
              Raised Face 150Lbs

                            1"                              $95.96

                           1,5"                            $147.37

                            2"                             $148.65

                            3"                             $214.80

                            4"                             $272.06

                            6"                             $277.95

                            8"                             $404.54

                           10"                             $498.60

                           12"                             $540.51

                           14"                             $662.02

                           16"                             $779.54

                           18"                             $902.16

                           20"                            $1,011.94

                           24"                            $1,198.77

                           26"                            $1,826.64

                           28"                            $2,216.47

                           30"                            $2,111.40

                           32"                            $3,004.77

                           34"                            $3,590.23

                           36"                            $3,161.53

   2,22,b     Forged steel flange slip-on
              Raised Face 150 Lbs Galv.

                            1"                              $96.75

                           1,5"                            $148.36

                            2"                             $150.49

                            3"                             $217.73

                            4"                             $275.99

                            6"                             $283.70

                            8"                             $413.52

                           10"                             $513.42

                           12"                             $563.28

                           14"                             $696.98

                           16"                             $831.51

                           18"                             $969.19

                           20"                            $1,095.12

                           24"                            $1,309.66

                           26"                            $2,053.40
</TABLE>

                                      -66-
<PAGE>

<TABLE>
<S>           <C>                                         <C>
                           28"                            $2,577.93

                           30"                            $2,416.28

                           32"                            $3,366.46

                           34"                            $3,994.52

                           36"                            $3,534.58

   2,22,c     Flange, WNK, Comp. 90/10 Copper
              Nickel Inner ; short type outer
              carbon steel A-105- Class 150
              galvd

                            1"                             $112.08

                           1,5"                            $169.67

                            2"                             $176.01

                            3"                             $247.50

                            4"                             $314.91

                            6"                             $342.72

                            8"                             $528.50

                           10"                             $652.51

                           12"                             $745.22

                           14"                            $1,030.33

                           16"                            $1,208.63

                           18"                            $1,366.72

                           20"                            $1,712.70

                           24"                            $2,007.94

                           26"                               N/A

                           28"                               N/A

                           30"                               N/A

                           32"                               N/A

                           34"                               N/A

                           36"                               N/A

    2.23      Price per valve for opening up,
              clean, inspect, grind disc with
              seat and close up in good
              order.

                        GLOBE VALVE

                            1"                              $78.35

                           1,5"                            $117.52

                            2"                             $156.69

                           2,5"                            $195.86

                            3"                             $235.04

                            4"                             $313.38

                            5"                             $391.73

                            6"                             $470.07

                            8"                             $626.76

                           10"                             $783.45

                           12"                             $940.15

                           14"                            $1,096.84

                           16"                            $1,253.53

                           18"                            $1,410.22

                        GATE VALVE                          $0.00

                            1"                              $82.09

                           1,5"                            $123.13

                            2"                             $164.17

                           2,5"                            $205.21

                            3"                             $246.26
</TABLE>

                                      -67-
<PAGE>

<TABLE>
<S>           <C>                                         <C>

                            4"                             $328.34

                            5"                             $410.43

                            6"                             $492.51

                            8"                             $656.68

                           10"                             $820.85

                           12"                             $985.02

                           14"                            $1,149.19

                           16"                            $1,313.36

                           18"                            $1,477.53

                     SWING CHECK VALVE

                            1"                              $80.39

                           1,5"                            $120.59

                            2"                             $160.79

                           2,5"                            $200.99

                            3"                             $241.18

                            4"                             $321.57

                            5"                             $401.96

                            6"                             $482.36

                            8"                             $643.14

                           10"                             $803.93

                           12"                             $964.71

                           14"                            $1,125.50

                           16"                            $1,286.29

                           18"                            $1,447.07

                      BUTTERFLY VALVE

                            1"                              $80.39

                           1,5"                            $120.59

                            2"                             $160.79

                           2,5"                            $200.99

                            3"                             $241.18

                            4"                             $321.57

                            5"                             $401.96

                            6"                             $482.36

                            8"                             $643.14

                           10"                             $803.93

                           12"                             $964.71

                           14"                            $1,125.50

                           16"                            $1,286.29

                           18"                            $1,447.07

    2.24      Price per valve for removal ,
              overhauling in shop including
              machining, closing up in good
              order and reinstallation.

                        GLOBE VALVE

                            1"                             $181.62

                           1,5"                            $225.78

                            2"                             $268.50

                           2,5"                            $321.20

                            3"                             $388.86

                            4"                             $484.28

                            5"                             $562.62

                            6"                             $644.52
</TABLE>

                                      -68-
<PAGE>

<TABLE>
<S>           <C>                                     <C>
                            8"                             $874.19

                           10"                            $1,100.31

                           12"                            $1,310.34

                           14"                            $1,580.96

                           16"                            $1,771.42

                           18"                            $2,100.74

                        GATE VALVE

                            1"                             $185.36

                           1,5"                            $231.39

                            2"                             $275.98

                           2,5"                            $330.55

                            3"                             $400.07

                            4"                             $499.23

                            5"                             $631.18

                            6"                             $766.68

                            8"                             $978.90

                           10"                            $1,287.30

                           12"                            $1,504.80

                           14"                            $1,832.77

                           16"                            $2,130.43

                           18"                            $2,467.23

                     SWING CHECK VALVE

                            1"                             $183.67

                           1,5"                            $228.86

                            2"                             $272.60

                           2,5"                            $326.32

                            3"                             $395.00

                            4"                             $492.46

                            5"                             $572.86

                            6"                             $656.80

                            8"                             $890.57

                           10"                            $1,120.78

                           12"                            $1,334.91

                           14"                            $1,609.62

                           16"                            $1,804.18

                           18"                            $2,137.59

                      BUTTERFLY VALVE                  Time & Material

    2.25      Price per valve for renewal

                        GLOBE VALVE

                            1"                             $130.03

                           1,5"                            $192.54

                            2"                             $224.49

                           2,5"                            $286.30

                            3"                             $302.64

                            4"                             $461.74

                            5"                             $736.56

                            6"                             $800.47

                            8"                            $1,367.62

                           10"                            $2,233.73

                           12"                        Time & Material
</TABLE>

                                      -69-
<PAGE>

<TABLE>
<S>           <C>                                     <C>
                           14"                        Time & Material
'
                           16"                        Time & Material

                           18"                        Time & Material

                        GATE VALVE

                            1"                             $133.58

                           1,5"                            $175.49

                            2"                             $214.55

                           2,5"                            $263.58

                            3"                             $302.64

                            4"                             $371.55

                            5"                             $595.24

                            6"                             $686.85

                            8"                             $823.66

                           10"                            $1,432.71

                           12"                        Time & Material

                           14"                        Time & Material

                           16"                        Time & Material

                           18"                        Time & Material

                     SWING CHECK VALVE

                            1"                               N/A

                           1,5"                              N/A

                            2"                             $362.26

                           2,5"                            $423.36

                            3"                             $448.21

                            4"                             $550.50

                            5"                             $731.58

                            6"                             $814.67

                            8"                         Time & Material

                           10"                         Time & Material

                           12"                         Time & Material

                           14"                         Time & Material

                           16"                         Time & Material

                           18"                         Time & Material

              BUTTERFLY VALVE                          Time & Material

   2,26,1     Open & close manhole including               $128.13
              gasket renewal

   2,26,2     Renewal of s/s stud c.w. nut and              $64.07
              washer.

    2.28      Renewal of entrance door gasket               $89.00
              per lin. m.

    2.29      Renewal of vitreous china bassin         Time & Material
              each

   2,30,1     Electrical motors overhauling
              including cleaning and bearing
              renewal. Disconnection,
              handling & reconnection on a T
              & M basis.

                          ,5 H.P.                          $142.03

                           1 H.P.                          $142.03

                           2 H.P.                          $142.03

                           5 H.P.                          $142.03

                          10 H.P.                          $142.03

                          15 H.P.                          $159.78

                          25 H.P.                          $213.04

                          50 H.P.                          $355.06

                          75 H.P.                          $426.08
</TABLE>

                                      -70-
<PAGE>

<TABLE>
<S>          <C>                                <C>
                         100 H.P.                          $568.10

   2,30,2    Electrical motors revarnish and
             baking of rotor and stator.

                          ,5 H.P.                           $71.01

                           1 H.P.                           $71.01

                           2 H.P.                           $71.01

                           5 H.P.                           $71.01

                          10 H.P.                           $71.01

                          15 H.P.                           $71.01

                          25 H.P.                          $106.52

                          50 H.P.                          $142.03

                          75 H.P.                          $177.53

                         100 H.P.                          $213.04

   2,30,3    Electrical motors rewinding of
             rotor.

                          ,5 H.P.                          $266.30

                           1 H.P.                          $266.30

                           2 H.P.                          $266.30

                           5 H.P.                          $266.30

                          10 H.P.                          $266.30

                          15 H.P.                          $319.56

                          25 H.P.                          $355.06

                          50 H.P.                          $532.59

                          75 H.P.                          $603.61

                         100 H.P.                          $781.14

    2.32     Ultrasonic testing each                        $12.47

     3       SERVICES

    3.1      Chemist and gas free
             certification. Assuming 2 visits.

    3.4      Fire watchmen per hour                         $49.86

    3.5      Fire line connection /                        $199.45
             disconnection

   3,6,1     Shore power connection /                      $199.45
             disconnection

   3,6,2     Shore power supply per KwHr                    $0.05

    3.7      Earth wire connection /                        $99.73
             disconnection

    3.8      Garbage removal per 6 m3 bin                  $262.90

   3,9,1     Cooling water connection /                    $199.45
             disconnection

   3,9,2     Cooling water supply per ton                   $0.23

    3,10     Gangway installation each                     $199.45

    3.11     Shore cran (200 Tons) capacity                $177.53
             per hour

   3,12,1    Shore telephone line connection                $99.73
             / disconnection each

   3,12,2    Shore telephone long distance            At cost plus 10 %
             calls

    3.13     Supply of 5000 tons of ballast
             water

    3.14     Supply of 100 tons of fresh water

    3.15     Compressed air suppy                No charge on regular working
                                                            hours

    3.16     Accomodation decks protection                  $55.55
             per m2

    3.17     Ventilation fan per day                        $23.12

    3.18     Delivery of owner's supply         Time & Material applicable on
                                                      major delivery only

   3,25,1    Sewage line connection /                      $398.91
             disconnection each

   3,25,2    Yard's sewage holding tank (700               $284.05
             gals) pumping and disposal each
</TABLE>

                                      -71-
<PAGE>

                                   APPENDIX C

                           MASTER CONVERSION SCHEDULE

                           WITH ATTACHED POINTS MATRIX

                                      -72-

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00049-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00049-of-00352.parquet"}]]