related to: (1) instrumentation for the collection of scientific information; (2) design of drilling equipment, supplies and other procurement items; (3) design of drilling ship(s) or platform(s); (4) hole reentry; (5) drill string design; (6) logistic and other support problems.

(B) Site Surveys and Recommendations.

(C) Developing, producing, manufacturing, procurement and testing of components, instrumentation and systems required for the job.

(D) Recommendation for and selection and procurement of a drilling platform, and

(E) Conduct the drilling operations and provide necessary logistics for a period of up to four years to carry out all programs including the scientific program previously agreed to.

The Contractor is authorized to proceed with accomplishment of Stage A, including in particular the preparation of an engineering plan, cost study and recommendations for Phase II of the Mohole Project and to recommend other actions to be commenced under the other stages concurrently with Stage A. The plan, study and recommendations will also include the proposed method of project and scientific management and site selection criteria and recommendations of site (if any). The Contractor will furnish, in the cost study, estimates of operating costs of drilling and logistics as well as detailed cost estimates for all work to be accomplished as part of Phase II. In addition to the overall engineering plan as above described the Contractor shall furnish a preliminary engineering plan, and recommendations.

All or part of the work in any stage may be accomplished concurrently with activities under Stage A, if approved in writing by the Foundation. The Contractor may also be authorized in writing to procure such long-lead-time items, material, and equipment as may be required for the project. Any other work related to the project such as site selection, preliminary drilling, design and construction of equipment and facilities and the conducting of drilling operations may be authorized in writing for concurrent performance with activities under Stage A. The funds provided in the contract may be used for all the purposes of this contract.

In addition to cost estimates previously furnished, the Contractor shall, promptly after execution of this agreement, furnish revised detailed cost estimates for work categories. Thereafter, from time to time, the Contractor will furnish revised estimates as instructed.

The final report under Stage A will include recommendations for solving all the basic problems and set forth specifications for required components and systems based on a complete evaluation of existing equipments and available information and theoretical and engineering studies by the prime contractor. Manpower required, recommendations for stages of work, detailed cost analyses and estimates by component, stage or project and fiscal year shall be furnished. The Contractor will also furnish with the final report under Stage A, a progress report of all other work authorized under other stages.

It may prove desirable to expand this broad scope of work in the future in order to include other geophysical surveys, additional shallower holes in other selected oceanic or continental areas, concurrent oceanographic, geophysical or meteorological programs or more complete analysis of the data, either by the prime contractor or under his sponsorship. If such is deemed advisable by the Foundation, either because such additional work is directly related to the Mohole venture, to take advantage of the unique deep water site, for administrative ease or for other reasons, it would be accomplished through subsequent agreement with the Contractor. Such additional programs would be conducted on a non-interference basis with the basic MOHOLE programming and funding.

ARTICLE 4. COMPENSATION

The cost of performance of this contract is defined as the costs of the necessary direct items of the nature described below as direct costs incurred in the performance of the work under this contract and an amount or amounts for overhead determined by the Foundation to be allowable after audit as provided in paragraph "B" of this article. Allowability of costs and cost allocation methods shall be determined in accordance with Subpart 1-15.2 of Part 1-15 of the Federal Procurement Regulations and shall be subject to the special understandings set forth in paragraph "C" of this article entitled "Advance Understandings."

A. Direct Costs

1. Salaries, wages, material and other costs in accordance with the principles in FPR 1-15.202.

2. Consultants and subcontractors as required and subject to approval requirements of the contract.

3. Major equipment items purchased, rented, or as otherwise approved by the Foundation.

4. Overtime as approved by the Foundation based on the Contractor's established work week and such additional overtime as may be approved by the Foundation from time to time.

5. Cost of suspending the progress of the work except as otherwise expressly provided herein.

6. Allowable cost as provided under Subpart 1-15.4 of Part 1-15 of the Federal Procurement Regulations which may be applicable to any portion of the work performed hereunder.

7. Preparation of reports, including printing and reproduction.

8. Costs of the type which have been approved under policy, procedure, personnel, purchasing or accounting and any other manuals prepared by the contractor and approved by the Foundation, which manuals may be revised from time to time with approval of the Foundation.

9. Such items not excluded by other provisions of this contract or considered unallowable, which in the opinion of the Foundation should be included in the direct cost of the work called for by this contract and which are not normally included as items of indirect cost by the Contractor.

B. Indirect Costs

The Contractor shall be provisionally reimbursed for:

1. The indirect cost of services performed by Contractor's engineering depart. ment at the rate of 37% of the direct salaries of such direct engineering personnel performing services under the contract.

2. The Contractor shall be provisionally reimbursed for home office, general and administrative overhead expenses at the rate of 3.16% of all direct costs incurred in performance of the contract.

3. The provisional overhead rates may be appropriately adjusted after audit as provided in Article 5(e) by mutual agreement of the parties at the request of either party.

C. Advance Understandings

Notwithstanding other articles of this contract the following understandings are applicable to this contract:

1. Travel criteria for allowability will be as set forth in FPR 1-15 or as set forth in the Contractor's manual on travel as approved by the Foundation.

2. General and independent research and investigation work not directly or indirectly related to the Mohole Project will not be considered an allowable cost.

3. Anticipatory costs incurred prior to the effective date of the contract shall not be considered an allowable cost of this contract.

4. Home Office central warehouse and yard expenses, unless directly or indirectly related to performance hereof, will not be considered as an allowable cost.

5. Costs of advertising will be considered unallowable except for: (1) the recruitment by the Contractor of personnel required for the performance by the Contractor of obligations arising under a Government contract, or (2) the procurement of scarce items required by the Contractor for the performance of a Government contract, or (3) the disposal of scrap or surplus materials acquired by the Contractor in the performance of a Government contract.

6. A review may be made of engineering charges to determine whether they are disproportionately weighted to the contract due to higher salaried personnel utilization, and consideration may be given to use of direct engineering hours in lieu of direct salaries as a base for derivation of an engineering overhead rate. Engineering overhead normally classified by the contractor as "engineering not chargeable to jobs" and normally included in the G&A expenses will be reclassified to the direct cost base prior to computation of the G&A rate under this contract.

7. The Contractor's procedures and policies relating to overseas travel and transportation and other related allowances as well as the individual employee agreements will be submitted for approval by the Foundation.

8. The Contractor will be guided by policies set forth in the following manuals subject to their approval in writing by the Foundation. Such manuals may be subsequently modified by mutual agreement of the parties at any time:

a. Personnel Policies

b. Employment

c. Timekeeping and Payroll

d. Purchasing

e. Warehouse and Materials Control

f. Equipment Accounting

g. Invoice Audit

h. General Accounting

ARTICLE 5. ALLOWABLE COST, FIXED FEE AND PAYMENT

(a) For the performance of this contract the Foundation shall pay to the Contractor: Allowable costs as set forth in the compensation clause of this contract subject to the limitations set forth in the Articles entitled "Limitation of Governments Obligation", Compensation, and "Limitation of Cost."

(b) Once each month (or at more frequent intervals, if approved by the Foundation) the Contractor shall submit to an authorized representative of the Contracting Officer, in such form and reasonable detail as such representative may require, an original and six copies of each invoice or public voucher supported by a statement of cost incurred by the Contractor in performance of this contract and claimed to constitute allowable cost.

(c) Supporting invoices and vouchers shall show cost allocations under general headings when applicable as follows:

1. Direct Salaries (exclusive of Brown & Root central office engineering) 2. Engineering Direct Labor (central office only)

3. Engineering Overhead

4. Consultants

5. Direct Materials

6. Travel

7. Equipment Purchased (all capital equipment purchased with contract funds shall be described together with any identifying numbers listed) 8. Equipment Rental Cost

9. Subcontract Costs

10. Indirect Job Costs

11. General and Administrative Expense

12. Fixed Fee (show computation and the amount withheld)

13. Other Expenditures (separately itemized as to item and amount) Each voucher shall show under each category of cost allocation both the amount currently billed and the cumulative cost for that category.

(d) As promptly as practicable after receipt of each invoice or voucher, the Foundation shall, subject to the provisions of (e) and (f) below, make payment thereon except that the Foundation shall withhold from each billing 15% of the progress payment on the fixed fee until a reserve of either 15% of the total fixed fee or $100,000 whichever is less shall have been set aside.

(e) At any time or times prior to final payment under this contract, the Foundation may have invoices or vouchers and statements of cost audited. Each payment theretofore made shall be subject to reduction for amounts included in the related invoice or voucher which are found by the Foundation or the General Accounting Office on the basis of such audit, not to constitute an allowable cost. Any payment on preceding invoices or vouchers may be reduced for overpayments, or increased for under payments.

(f) On receipt and approval of the invoice or voucher designated by the Contractor as the "completion invoice" or "completion voucher" and upon compliance by the Contractor with all the provisions of this contract (including, without limitation, any provisions relating to patents and the provisions of (g) below), the Foundation shall, after such audit as is considered necessary by the Foundation, pay to the Contractor any balance of allowable cost, and that part of the fixed fee which has been withheld pursuant to (d) above or otherwise not paid to the Contractor. The completion invoice or voucher shall be submitted by the Contractor promptly following completion of the work under this contract but in no event later than one year (or such longer period as the Foundation may in its discretion approve in writing) from the date of such completion. (g) The Contractor agrees that any refunds, rebates, credits, or other amounts (including any interest thereon) accruing to or received by the Contractor or any

assignee under this contract shall be paid by the Contractor to the Foundation, to the extent that they are properly allocable to costs for which the Contractor has been reimbursed by the Foundation under this contract. Reasonable expenses incurred by the Contractor for the purpose of securing such refunds, rebates, credits, or other amounts shall be allowable costs hereunder when approved by the Foundation. Prior to final payment under this contract, the Contractor and each assignee under this contract whose assignment is in effect at the time of final payment under this contract shall execute and deliver:

(1) An assignment to the Foundation, in form and substance satisfactory to the Foundation, of refunds, rebates, credits, or other amounts (including any interest thereon) properly allocable to costs for which the Contractor has been reimbursed by the Foundation under this contract; and

(2) A release discharging the Government, its officers, agents, and employees from all liabilities, obligations, and claims arising out of or under this contract, subject only the following exceptions:

(a) Specified claims in stated amounts or in estimated amounts where the amounts are not susceptible of exact statement by the Contractor; (b) Claims, together with reasonable expenses incidental thereto, based upon liabilities of the contractor to third parties arising out of the performance of this contract; provided that such claims are not known to the Contractor on the date of the execution of the release; and provided further that the Contractor gives notice of such claims in writing to the Contracting Officer not more than six (6) years after the date of the release or the date of any notice to the Contractor that the Foundation is prepared to make final payment, whichever is earlier; and

(c) Claims for reimbursement of costs (other than expenses of the Contractor by reason of any indemnification of the Government against patent liability), including reasonable expenses incidental thereto, incurred by the Contractor under any provisions of this contract relating to patents.

ARTICLE 6. AMOUNT ALLOTTED AND FIXED FEE AND TOTAL ESTIMATED COST PLUS FEE OF CONTRACT

(a) There has been allotted for this contract, the sum of $1,277,990 for the period through August 31, 1962. A fixed fee of $49,229 is included in the amount allotted. Payment of the fixed fee shall be made in monthly installments. Each such installment shall bear the same proportion to the total amount of fixed fee allotted to the contract, as the proportion of the costs of the work at the date of such installment bears to the total sum then allotted for this contract.

(b) The total estimated cost of the contract is $44,928,000 and the fixed fee is $1,800,000 for a total estimated cost plus fixed fee of $46,728,000.

ARTICLE 7. LIMITATION OF GOVERNMENT'S OBLIGATION

(a) It is estimated that the total cost to the Government, inclusive of fixed fee, for the performance of this contract will not exceed the estimated cost and fixed fee set forth in Article 6b, and the Contractor agrees to use its best efforts to perform the work specified in the contract for all obligations under this contract within such estimated cost. The fixed fee for complete performance of this contract is specified in Article 6b.

(b) The sum presently available for payment and allotted to this contract and the period of performance which it is estimated the allotted amount will cover, are specified in Article 6a. It is anticipated that from time to time additional funds will be allotted to this contract up to the full estimated cost, and the agreed fixed fee. When additional funds are allotted from time to time for continued performance of the work, the parties shall agree as to the applicable estimated period of contract performance which shall be covered by such funds and the contract amended accordingly. The Contractor agrees to use its best efforts to perform or to have performed work on this contract up to the point at which, in the event of termination of this contract for the convenience of the Government pursuant to the clause of this contract entitled "Termination", the total amount paid and payable by the Government pursuant to any settlement including cost and fixed fee under paragraph (e) of such clause would, in the exercise of reasonable judgment by the Contractor, approximate the total amount at the time allotted to this contract. The Contractor shall not be obligated to continue performance of the work beyond such point.

(c) The Government shall not be obligated to reimburse the Contractor for costs incurred (including amounts payable in respect to subcontracts and termination settlement costs) and to pay the Contractor's fixed fee in excess of the total amount from time to time allotted to this contract. However, when and to the extent that the total amount allotted to this contract has been increased any costs incurred by the Contractor and any fixed fee to which the Contractor may be entitled, prior to the increase and in excess of the amount previously allotted, shall be allowable to the same extent as if such costs had been incurred and fee earned after such increase in amount allotted.

(d) In the event funds allotted are considered by the Contractor to be inadequate to cover the work to be performed for the period set forth in the contract, the Contractor shall notify the Contracting Officer in writing when within the next sixty (60) days the work will reach a point, at which, in the event of termination of this contract for the convenience of the Government pursuant to the clause of this contract entitled "Termination", the total amount paid and payable by the Government pursuant to a settlement including cost and fixed fee under paragraph (e) of such clause will approximate Seventy-five percent (75%) of the total amount then allotted to the Contract. The notice shall state the estimated date when such point will be reached and the estimated amount of additional funds required to continue performance for the period set forth in the schedule. The Contractor shall, thirty (30) days prior to the end of the period specified in the contract, advise the Contracting Officer in writing as to the estimated amount of additional funds which will be required on the basis of the obligation for performance in accordance with paragraph (b) of this clause, for the timely performance of the work under the contract for such further period as may be specified in the contract or otherwise agreed to by the parties. If, after such notification, additional funds are not allotted by the end of the period set forth in the contract, or an agreed date in substitution therefor, the Contracting Officer will, upon written request of the Contractor, terminate this contract on such date, or on a date to be specified in such request, on which the Contractor, in the exercise of his reasonable judgment, estimates that he will have discharged his obligation to perform hereunder in accordance with paragraph (b) of this clause, whichever is later, pursuant to the provisions of the clause of this contract entitled "Termination".

(e) When additional funds are allotted from time to time for continued performance of the work under this contract, the parties shall agree as to the applicable period of contract performance which shall be covered by such funds, and the provisions of paragraphs (b), (c) and (d) of this clause shall apply in like manner to such additional allotted funds and substituted date pertaining thereto, and the contract shall be amended accordingly.

(f) The Government may at any time prior to termination allot additional funds for this contract, and, with the consent of the Contractor, after notice of termination, may rescind such termination in whole or in part, and allot additional funds for this contract.

(g) In the event that sufficient amounts are not allotted to this contract to allow completion of the work contemplated by this contract, the Contractor shall be entitled, subject to the limitations of paragraph (c) of this clause, to a percentage of the fixed fee set forth in the contract equivalent to the percentage that cost to the date of termination bear to the total estimated cost of this project.

(h) Nothing in this clause shall affect the right of the Government to terminate this contract pursuant to the clause of this contract entitled "Termination". (i) For the purpose of this clause, the allotment or allotments specified in the contract shall not be decreased without the consent of the Contractor.

(j) This clause shall be applicable and the clause of this contract entitled "Limitation of Cost" inapplicable until such time as an amount equal to the total estimated cost and fee set forth in the conract is allotted to this contract and thereafter the clause of this contract entitled "Limitation of Cost" shall be applicable and this clause inapplicable.

ARTICLE 8. LIMITATION OF COST

This clause shall become operative at the time the total estimated cost plus fee of contract set forth in article 6b has been allotted.

(a) It is estimated that the total cost to the Foundation, exclusive of any fixed fee, for the performance of this contract will not exceed the estimated cost set forth in the contract, and the Contractor agrees to use its best efforts