- --------------------------------------------------------------------------------
SHIPBUILDING CONTRACT
(Hull BN460)
- --------------------------------------------------------------------------------
THIS CONTRACT is made as of this 14th day of February, 2005, by and between
KVAERNER PHILADELPHIA SHIPYARD INC., a corporation organized under the laws of
Pennsylvania, having its principal office at 2100 Kitty Hawk Avenue,
Philadelphia, PA 19112 (hereinafter called the "BUILDER"), and MATSON NAVIGATION
COMPANY, INC., a corporation organized under the laws of Hawaii, having its
principal office at 555 12th Street, Oakland, CA 94607 (hereinafter called the
"BUYER").
WITNESSETH:
In consideration of the mutual covenants herein contained, the BUILDER agrees to
design, build, launch, equip and complete at its Philadelphia shipyard
(hereinafter called the "Shipyard") and sell and deliver to the BUYER one (1)
container VESSEL of the type Independence CV 2500, more fully described in
Article 1 hereof (hereinafter called the "VESSEL"), and the BUYER agrees to
purchase and take delivery of the VESSEL from the BUILDER and to pay for the
same, all upon the terms and subject to the conditions hereinafter set forth.
Concurrent with the execution of this Contract, BUYER and BUILDER have executed
a Shipbuilding Contract of even date herewith for the purchase of one (1)
container VESSEL of the type Philadelphia CV 2600 (hereinafter called the "CV
2600 Shipbuilding Contract").
ARTICLE I - DESCRIPTION AND CLASS
1. Description:
The VESSEL shall have the BUILDER's Hull No. BN460 and shall be
designed, constructed, equipped and completed in accordance with the
provisions of this Contract, and the Specification, as defined herein.
The Specification for the construction of the Vessel called
"INDEPENDENCE CV2500 - KPSI SHIP 460," Document No. 460-0101-80-101 V3,
dated January 21, 2005, and the related drawings and plans identified
therein, the General Arrangement Plan, Document No. 460-0101-80-120-B,
Tank Plan, Document No. 460-0101-80-121-B, and Container Stowage Plan,
Document No. 460-0315-80-420-B, initialed by the BUILDER on February 3,
2005, are hereby adopted and agreed and made a part of this Contract
with the same force and effect as though herein set out in full (herein
collectively called the "Specification").
2. Dimensions and Characteristics:
Dimensions:
Overall length: 207.6 m
Length between P.P.: 195.4 m
Breadth moulded: 29.8 m
Depth moulded to uppermost deck: 16.4 m
Design draft: 10.1 m
Cargo Capacity:
The VESSEL's deadweight shall be 27,300 metric tonnes, corresponding to
a mean draft in seawater (specific gravity 1.025 metric tons/m3) of
10.1 m (hereinafter the "guaranteed deadweight). The specified
deadweight shall include items as listed in the Specification.
Container Carrying Capacity:
The VESSEL's container carrying capacity shall be 1,110 container
places, and as otherwise set out in the Specification.
..
Propulsion Machinery:
Type: Reversible slow speed two stroke diesel engine
Max. Continuous power approx. 21,770 kW.
Auxiliary Generators:
Type: 4 (four stroke) MAK diesel generators
Max. continuous power approx. 2 (two) 1360kWm @ 900 rpm
2 (two) 1020 kWm @ 900 rpm
Speed:
The VESSEL's average speed on a sea trial undertaken in both directions
over a measured distance, with clean hull, in calm weather, wind and
sea not exceeding Beaufort 2 and with draft 10.1 m, shall be at least
22.1 knots at 90% MCR and with 15% sea margin.
The speed shall be proved by converting the results of the BUILDER's
sea trial under ballast conditions.
Fuel Consumption:
The fuel consumption of the main engine on the test bed shall not
exceed 176.0 grams per kW per hour when the engine develops 90% of CMCR
under the conditions stipulated in the Specification (hereinafter the
"guaranteed fuel consumption").
3. Classification, Rules and Regulations:
The VESSEL, including its machinery, equipment and outfittings shall be
constructed in accordance with the rules of and under special survey of
Germanischer Lloyd (herein called the "Classification Society"), with
the following class notation; +100 A5 E CONTAINERSHIP SOLAS II-2,
Reg.19 IW, Environmental Passport, +MC E AUT (herein referred to as the
"Class") Decisions of the Classification Society as to compliance or
non-compliance with the rules thereof shall be final and binding upon
both parties hereto. The BUYER may elect to change the Classification
Society at its cost, which shall include the BUILDER's direct and
indirect costs, including delay, disruption and loss of efficiencies.
The VESSEL shall be built and equipped in compliance with all rules and
regulations for registration under the flag of the United States of
America with a Coastwise endorsement.
The VESSEL shall also comply with the rules, regulations and
requirements of other regulatory bodies as described in the
Specification.
All fees and charges incidental to the classification and with respect
to compliance with the above referred rules, regulations and
requirements shall be for account of the BUILDER.
4. Subcontracting:
The BUILDER may in general, at its sole discretion and responsibility,
subcontract portions of the construction work of the VESSEL. However,
to subcontract more than 150 tonnes of the total hull steel weight, the
BUILDER will need the prior written consent of the BUYER. The BUILDER
shall nevertheless always be responsible under the contract for the
quality, workmanship and materials of the VESSEL. The BUYER's rights
hereunder shall not be in any way reduced in respect of such
subcontracted work.
If the BUYER requests the BUILDER to order any equipment or machinery
from a particular supplier, the BUILDER will take all reasonable steps
to comply with such request, but the BUILDER may refuse to comply with
the request unless the BUYER assumes the responsibility for the price
and schedule impacts and for possible technical deficiencies, if any,
compared with the BUILDER nominated supplier.
5. Registration:
The VESSEL shall be registered by the BUYER at its own cost and
expense.
6. Financing Documentation:
a. If the BUYER elects to treat the VESSEL as a qualified vessel
for purposes of using its capital construction fund pursuant
to Section 607 of the Merchant Marine Act, 1936, as amended,
the BUILDER will provide the BUYER, promptly upon the BUYER's
written request, all documentation reasonably necessary to
assist the BUYER with such election.
b. If the BUYER elects to finance the VESSEL by using Title XI of
the Merchant Marine Act, 1936, as amended, the BUILDER will
provide the BUYER, promptly upon the BUYER's written request,
all documentation requested by the U. S. Maritime
Administration that may be necessary to support a waiver
request by the BUYER under 46 CFR 298.13 (b) (2) (ii).
ARTICLE II - CONTRACT PRICE, TERMS OF PAYMENT
AND EFFECTIVE DATE
1. Contract Price:
a. The purchase price of the VESSEL is ONE HUNDRED FORTY FOUR
MILLION THREE HUNDRED AND NINETY-ONE THOUSAND DOLLARS
($144,391,000) plus the cost incurred by the BUILDER with
respect to the construction period financing for the VESSEL as
provided for in paragraph (c) below, net receivable by the
BUILDER, which is exclusive of the BUYER's Supplies as
provided in Article XVIII hereof and shall be subject to
upward or downward adjustment, if any, as hereinafter set
forth in this Contract (herein called the "Contract Price").
The Contract Price is due and payable to the BUILDER upon and
concurrent with delivery of the VESSEL to the BUYER. Payment
shall be made by wire transfer to Citizens Bank (collectively
with any successor thereto, "Builders Bank") for account of
the BUILDER.
b. The Contract Price includes a BUYER's allowance of up to ONE
MILLION NINE HUNDRED THOUSAND DOLLARS ($1,900,000) for spares
and supplies to be selected by the BUYER. Any unexpended
amounts shall be paid to the BUYER at delivery of the VESSEL
or offset against amounts due the BUILDER.
c. With respect to the cost of the construction period financing,
the BUYER shall reimburse the BUILDER for construction
financing costs on the portion of the Contract Price set forth
below from the respective dates set forth below until the
Delivery Date at an interest rate equal to the lesser of (i)
three-month LIBOR plus 350 basis points or (ii) the interest
rate charged the BUILDER by Caterpillar Financial Services
Corporation:
12.5% of the Contract Price February 25, 2005
10% of the Contract Price Keel laying of the VESSEL
7.5% of the Contract Price Float out of the VESSEL
2. Terms of Payment:
The BUYER shall pay the BUILDER the full amount of the Contract Price
at delivery of the VESSEL.
3. Effective Date of Contract:
This Contract shall be binding with immediate effect upon execution,
provided, however, that the occurrence of the following events shall be
a condition to the parties' respective obligations to perform
hereunder:
a. Written consent of the respective boards of directors of the
BUYER and the BUILDER of this Contract and the CV 2600
Shipbuilding Contract, provided that if such consents are not
received by February 24, 2005, this Contract shall
automatically terminate;
b. Written confirmation from the BUILDER by February 18, 2005
that all contractual rights of third parties to acquire the
VESSEL have been terminated with appropriate releases;
c. Written confirmation from the BUYER that it has reviewed and
accepted the Specification as provided in Paragraph 1(c) of
Article V, by February 18, 2005; and
d. By February 18, 2005, the BUILDER shall provide the BUYER with
a guarantee of Kvaerner ASA of (i) the BUILDER's obligations
to make warranty repairs under Article IX hereof, (ii) the
BUILDER's indemnification obligations under Paragraph 2 of
Article XXI hereof, and (iii) the BUILDER's obligation under
that certain Agreement dated of even date herewith signed by
the parties relating to certain rights with respect to future
CV 2600 and CV 2500 type container vessel building positions
at the Shipyard.
4. Method of Payment:
Upon receipt of notice from the BUILDER, the BUYER shall remit the
amount of the delivery payment by wire transfer to Citizens Bank
(collectively with any successor thereto, "Builder's Bank") for the
account of the BUILDER.
ARTICLE III - ADJUSTMENT OF CONTRACT PRICE
It is understood and agreed that the damage arising from failure of BUILDER to
comply with the terms of the Specification regarding timing of delivery,
speed, fuel consumption, carrying capacity, and dead weight (collectively,
"Performance Guarantees"), would be difficult to determine.
The Contract Price shall be subject to adjustment, as hereinafter set forth,
in the event of the following contingencies (it being understood by both
parties that any reduction of the Contract Price is by way of liquidated
damages and not by way of penalty). The BUILDER shall pay the BUYER,
concurrently with delivery of the VESSEL, liquidated damages upon the
occurrence of the following:
1. Delivery:
a. The BUILDER shall not pay liquidated damages for the first
thirty (30) days in delay of the delivery of the VESSEL beyond
the Delivery Date as defined in Article VII hereof (ending at
twelve o'clock midnight of the thirtieth (30th) day of delay.
b. If the delivery of the VESSEL is delayed more than thirty (30)
days after the Delivery Date, then, in such event, beginning
at twelve o'clock midnight of the thirtieth (30th) day after
the Delivery Date, the BUILDER shall pay liquidated damages to
the BUYER as follows:
31st - 210th day US$ 20,000 per day (Twenty Thousand U.S.
dollars)
c. But, if the delay in delivery of the VESSEL should continue
for a period of one hundred and eighty (180) days from the
thirty-first (31st) day after the Delivery Date, then in such
event, and after such period has expired, the BUYER may at its
option terminate this Contract in accordance with the
provisions of Article X hereof. The BUILDER may, at any time
after the expiration of the aforementioned hundred and eighty
(180) days of delay in delivery, if the BUYER has not served
notice of termination as provided in Article X hereof, demand
in writing that the BUYER shall make an election, in which
case the BUYER shall, within fifteen (15) days after such
demand is received by the BUYER, notify the BUILDER of its
intention either to terminate this Contract or to consent to
the acceptance of the VESSEL at an agreed future date it being
understood by the parties hereto that, if the VESSEL is not
delivered by such future date, the BUYER shall have the same
right of termination upon the same terms and conditions as
hereinabove provided.
2. Container Carrying Capacity:
a. The VESSEL shall be capable of carrying 1,110 container units.
Alternate loadings shall be according to the specification.
b. The BUILDER shall not pay liquidated damages by reason of the
actual container capacity of the VESSEL being less than 10
containers of the 1,110 container capacity of the VESSEL under
conditions according to the VESSEL's Container Stowage Plan as
given in the Specification.
c. However, should there be a deficiency in said container
capacity of the VESSEL of more than 10 containers (independent
of size) i.e. less than 1,100 container units, the BUILDER
shall pay liquidated damages in the amount of $20,000 per 20'
container, $40,000 per 40' and 45' container, and $55,000 per
refrigerated container short of 1,100 containers.
d. Should the container carrying capacity be less than 1,060
containers, then the BUYER may, at its option, reject the
VESSEL and terminate this Contract in accordance with the
provisions of ARTICLE X hereof, or may accept the VESSEL along
with the maximum liquidated damages for 1,060 containers only.
3. Deadweight:
a. The BUILDER shall not pay liquidated damages by reason of the
actual deadweight of the VESSEL as determined in accordance
with the Specification if the difference is less than (300)
metric tons of the 27,200 metric tons guaranteed deadweight of
the VESSEL.
b. However, in the event that the actual deadweight of the VESSEL
as determined in accordance with the Specification is more
than 300 metric tons below the guaranteed deadweight of the
VESSEL, the BUILDER shall pay liquidated damages in the amount
of $1000 for each full metric ton of such deficiency being
more than 300 metric tons. (disregarding fractions of one (1)
metric ton).
c. In the event of such deficiency in the actual deadweight of
the VESSEL being 1,000 metric tons or more, the BUYER may, at
its option, reject the VESSEL and terminate this Contract in
accordance with the provisions of Article X hereof or accept
the VESSEL at a reduction in the Contract Price, along with
the maximum liquidated damages of $700,000.
4. Speed:
a. The BUILDER shall not pay liquidated damages by reason of the
actual speed, as determined by the trial run, being less than
three-tenths (0.3) of one (1) knot below the guaranteed speed
of 22.1 knots.
b. However, commencing with and including such deficiency of
three-tenths (0.3) of one (1) knot in actual speed below the
guaranteed speed of the VESSEL, the BUILDER shall pay
liquidated damages as follows (but disregarding fractions of
one-tenth (1/10) of a knot):
For 0.3 knots $90,000
For 0.4 knots $180,000
For 0.5knots $270,000
For 0.6 knots $385,000
For 0.7 knots $500,000
For 0.8 knots $615,000
For 0.9 knots $730,000
For 1 full knot $845,000
If the deficiency in actual speed of the VESSEL, upon trial
run is more than one (1) full knot below the guaranteed speed
of the VESSEL, then the BUYER at its option, may reject the
VESSEL and terminate this Contract in accordance with the
provisions of Article X hereof, or may accept the VESSEL along
with maximum liquidated damages of $845,000.
5. Fuel Consumption:
a. The BUILDER shall not pay liquidated damages by reason of the
fuel consumption of the main engine on the test bed, as
determined per the Specification, being more than the
guaranteed fuel consumption of the VESSEL, if such excess is
not more than 1 grams over the guaranteed fuel consumption,
equaling 176.0 g/kWh (167.6 g/KWh + 5%).
b. However, commencing with an excess of one gram in the actual
fuel consumption over the guaranteed fuel consumption, the
BUILDER shall pay liquidated damages in the amount of $100,000
for each full gram increase in fuel consumption.
c. If such actual fuel consumption exceeds 187 g/kWh, the BUYER
may, at its option, reject the VESSEL and terminate this
Contract in accordance with the provisions of Article X
hereof, or may accept the VESSEL along with maximum liquidated
damages of $1,000,000.
6. Maximum Liquidated Damages and Effect of Termination:
Notwithstanding any other provision of this Article III, it is
expressly understood and agreed by the parties hereto that in any case:
a. The aggregate liquidated damages due to be paid by the BUILDER
pursuant to this Article III shall not exceed five per cent
(5%) of the Contract Price.
b. If the BUYER terminates this Contract under this Article, the
BUYER shall notify BUILDER and such termination shall be
effective as of the date notice thereof is received by the
BUILDER, and the BUYER shall not be entitled to any liquidated
damages.
c. If the BUYER terminates this contract in accordance with the
provisions of Article X hereof, all obligations, duties and
liabilities of each of the parties hereto to the other under
this Contract shall be forthwith completely discharged.
ARTICLE IV - SUPERVISION AND INSPECTION AND APPROVAL OF PLANS AND DRAWINGS
1. Approval of Plans and Drawings:
Upon execution of this Contract, the BUILDER represents and the BUYER
acknowledges that
a. the basic design of the vessel has been completed; and
b. all necessary plan approvals have been obtained or are in the
process of being obtained from the regulatory bodies; and
c. the Specification reviewed and agreed to by BUYER, and
incorporated by reference in this Contract, reflects the
current design of the VESSEL upon effective date of this
Contract; and
d. the Original Contract Price for the VESSEL has been agreed to
on this basis. Included in the Specification is a list of
Basic Design Documents that are submitted to the
Classification Society and other regulatory bodies for their
approval. These plans and drawings shall be regarded as
approved by the BUYER. Any request by the BUYER for changes to
any of these plans and drawings, except those required by
regulatory bodies shall be handled as a request for change to
the Specification in accordance with Paragraph 1 Article V.
2. Appointment of Project Manager and Buyer's Representative:
The BUYER shall appoint, at his cost, one representative who shall be
duly authorized in writing by the BUYER (herein called the "Buyer's
Representative") to act on behalf of the BUYER in connections with
changes of the Specification, approval of Change Orders, approval of
the plans and drawings, attendance to the tests and inspections
relating to the VESSEL, its machinery, equipment and outfitting, and
any other matters for which he is specifically authorized by the BUYER.
In case the Buyer's Representative is not stationed at the Shipyard,
the BUYER shall give clear instructions to the BUILDER regarding the
authority of other personnel representing the BUYER at the Shipyard.
The BUILDER shall appoint one representative who shall be duly
authorized in writing by the BUILDER (herein called "Builder's
Representative") to act on behalf of the BUILDER in connection with
changes of the Specification, approval of Change orders, approval of
the plans and drawings, attendance at the tests and inspections
relating to the VESSEL, its machinery, equipment, outfitting and any
other matters for which he is specifically authorized by the BUILDER.
Until the Buyer's Representative's arrival at the Shipyard, and during
the absence of the Buyer's Representative in the Shipyard, all
inspections shall by made by the Classification Society and/or BUILDER,
and the BUYER shall be deemed to have inspected the construction work
performed by the BUILDER in the above manner in accordance with the
Contract and Specification. Such acceptance by the BUYER of inspections
made by the Classification Society and/or BUILDER is subject to due
notices of inspections being given to the BUYER or the Buyer's
Representative.
3. Supervision and Inspection:
a. The necessary inspections of the VESSEL, its machinery,
equipment and outfittings shall be carried out by the
Classification Society, other regulatory bodies and/or an
inspection team of the BUILDER throughout the entire period of
construction, in order to ensure that the construction of the
VESSEL is duly performed in accordance with the Contract.
b. Prior to the execution of the Contract, the inspections of the
VESSEL have been performed by the BUILDER and the
Classification Society without the presence of the Buyer's
Representative. All inspections performed prior to the
execution of the Contract by the BUILDER and the
Classification Society, if any, shall be accepted by the BUYER
and shall not be repeated at a later stage, subject to
Paragraph 10 of Article IV. The BUYER shall be given access to
review all such prior inspections of the Classification
Society and other regulatory bodies.
c. The Buyer's Representative and his assistants shall have,
during the construction of the VESSEL, the right to attend all
tests, trials and inspections of the VESSEL and its Materials.
The BUILDER shall give a notice to the Buyer's Representative
reasonably in advance of the date and place of such tests and
inspections to be attended by him for is convenience. Failure
of the Buyer's Representative and/or his assistants to be
present at such tests and inspections after due notice to him
as above provided shall be deemed a waiver of his right to be
present.
d. In order to determine that the VESSEL is being constructed in
accordance with the terms of the Contract and the
Specification the Buyer's Representative and his assistants
shall, at all times until delivery and acceptance of the
VESSEL, have the right to inspect the VESSEL, her engines and
all accessories and all work in progress, or material utilized
in connection with the construction of the VESSEL, wherever
such work is being done, or such material is stored, including
the yards, workshops, stores and offices of the BUILDER. The
BUILDER shall seek to arrange with its subcontractors that the
Buyer's Representative and his assistants have a similar right
of inspection and supervision with respect to the work
performed by the subcontractors.
e. In cases requiring approval from Classification Society, such
inspections shall, to the extent possible, be carried out as
joint inspection by the Buyer's Representative and the
representative of the Classification Society.
f. The Buyer's Representative shall, on behalf of the BUYER, make
decisions or give advice or suggestions to the BUILDER on all
problems arising during the course of or in connection with
the construction of the VESSEL with a view to co-operating to
the utmost with the BUILDER in the construction process.
g. In the event that the Buyer's Representative discovers any
Materials, construction or workmanship which is not deemed to
conform to the requirements of the Contract, the Buyer's
Representative shall promptly give the Builder's
Representative a notice in writing as to such non-conformity.
Upon receipt of such notice from the Buyer's Representative,
the BUILDER shall correct such non-conformity, if the BUILDER
agrees to his view.. In the event of difference of opinion
between the parties hereto, the BUILDER or the BUYER may
request resolution of the matter in accordance with the
provisions of Article XIV hereof.
h. Any acceptance or approval of the BUYER or the Buyer's
Representative shall in no way alter or diminish the BUILDER's
obligation under this Contract.
4. Responsibility of the BUILDER:
a. The BUILDER shall furnish the Buyer's Representatives and his
assistants with one suitable standard office trailer complete
with furniture, telephone, facsimile and computer access and
parking space proximate to the location of this trailer. Such
office space and amenities shall be equivalent as those
provided to the BUYER in connection with the construction of
the BUILDER's Hull 001 and Hull 002.
b. The BUILDER shall, at all times, until delivery of the VESSEL,
give the Buyer's Representative and his assistants free and
ready access to the VESSEL, her engines and accessories, and
reasonable access to any other place where work is being done,
or materials are being processed or stored, in connection with
the construction of the VESSEL, including the yards, workshops
and stores of the BUILDER, and the premises of subcontractors
of the BUILDER, who are doing work or storing materials in
connection with the construction of the VESSEL.
5. Liability of the BUILDER:
The Buyer's Representative, his subcontractors and his assistants shall
at all times be deemed to be the employee of the BUYER. The BUILDER
shall be under no liability whatsoever for personal injuries to, or
death of, such Buyer's Representative or employees or agents of the
BUYER, or for damage to, or loss or destruction of, their property,
unless such injury, death, damage, loss or destruction is shown to have
been caused by the gross negligence or willful acts of the BUILDER
and/or subcontractor and/or their employees or agents, while acting
within the scope of their employment.
6. Responsibility of the BUYER:
The BUYER shall undertake and assure that the Buyer's Representative
shall carry out his duties hereunder in accordance with the normal
shipbuilding practices of the BUILDER and in such a way as to avoid any
unnecessary increase in building cost, delay in or interference with
the design and construction of the VESSEL, and/or any disturbance in
the construction schedule of the BUILDER. The BUILDER has the right to
request the BUYER to replace the Buyer's Representative and/or his
assistants who is deemed unsuitable and unsatisfactory for the proper
progress of the VESSEL's construction. The BUYER shall investigate the
situation by sending his representatives to the Shipyard if necessary,
and if the BUYER considers that such BUILDER's request is justified,
the BUYER shall effect such replacement as soon as practicable.
7. Liability of the BUYER:
The BUILDER and his employees, agents and subcontractors shall at all
times be deemed to be employees of the BUILDER. The BUYER shall be
under no liability whatsoever for personal injuries to, or death of,
such BUILDER's employees, agents, or subcontractors, or for damage to,
or loss or destruction of, their property, unless such injury, death,
damage, loss or destruction is shown to have been caused by the gross
negligence or willful acts of the BUYER, Buyer's Representative and/or
subcontractor and/or their employees or agents, while acting within the
scope of their employment.
8. Approval by Regulatory Bodies:
a. All plans or data required by the Classification Society or
other relevant regulatory bodies in connection with approval
of the VESSEL shall be prepared and submitted by the BUILDER
or its subcontractors and suppliers, except such data which is
explicitly requested by the relevant regulatory body to be
submitted by the BUYER.
b. The BUYER shall be informed by the BUILDER about discussions
of technical matters related to such approval between the
BUILDER and the regulatory bodies.
c. The BUILDER shall facilitate regular status meetings among the
BUILDER, the Buyer's Representative and the Classification
Society to discuss issues related to approval by the
Classification Society of the Vessel.
9. The BUILDER's Master Production Schedule:
The BUYER shall be provided with the latest official version of the
Builder's master production schedule showing the main production
activities for the Vessel and the main production activities for the
final outfitting, mechanical completion and testing.
10. Approval of Previously Completed Work
The BUYER acknowledges that construction of the VESSEL has begun and
that any changes requested by the BUYER to parts of the VESSEL that
have already been constructed shall be treated as a request for a
change under Article V hereof. The BUILDER shall be required, at the
BUILDER's cost, to correct any previously completed work that is found
not to be in conformity with the Specification.
ARTICLE V - MODIFICATIONS
1. Modifications of Specification:
The Specification may only be modified and/or changed by written
agreement of the parties hereto, provided that such modifications
and/or changes or an accumulation thereof will not, in the BUILDER's
judgment, materially affect the BUILDER's planning or program in
relation to the BUILDER's other commitments, and provided, further,
that the BUYER shall first agree, in writing, before such modifications
and/or changes are carried out, to alterations in the Contract Price,
the Delivery Date and other terms and conditions of this Contract and
Specification occasioned by or resulting from such modifications and/or
changes.
Such agreement may be effected by an exchange of letters signed by the
authorized representatives of the parties hereto manifesting agreements
of the parties hereto, which shall constitute amendments to this
Contract and/or the Specification.
The BUILDER may make minor changes to the Specification, if found
necessary for to suit the BUILDER'S local facilities; the availability
of Materials; introduction of improved production methods or otherwise,
provided that the BUILDER shall obtain the BUYER's prior written
approval, which shall not be unreasonably withheld.
2. Change in Class, etc:
In the event that, after the date of this Contract, any requirements as
to class, or as to rules and regulations to which the construction of
the VESSEL is required to conform, are altered or changed by the
Classification Society or the other regulatory bodies authorized to
make such alterations or changes, the following provisions shall apply:
a. If such alterations or changes are compulsory for the VESSEL,
either of the parties hereto, upon receipt of such information
from the Classification Society or such other regulatory
bodies, shall promptly transmit the same to the other in
writing, and the BUILDER shall thereupon incorporate such
alterations or changes in to the construction of the VESSEL.
The BUILDER shall present to the BUYER the adjustment required
by the BUILDER in the Contract Price, the Delivery Date and
other terms and conditions of the Contract occasioned by the
change. The adjustment shall then be agreed on as a Change
order in accordance with Paragraph 1(b) of Article V hereof.
b. If such alterations or changes are not compulsory for the
VESSEL, but the BUYER desires to incorporate such alterations
or changes into the construction of the VESSEL, then, the
BUYER shall notify the BUILDER of such intention. The BUILDER
may accept such alterations or changes, provided that such
alterations or changes will not, in the judgment of the
BUILDER, adversely affect the BUILDER's planning or program in
relation to the BUILDER's other commitments, and provided,
further, that the BUYER shall first agree to adjustments
required by the BUILDER in the Contract Price, the Delivery
Date and other terms and conditions of this Contract and the
Specification occasioned by or resulting from such alterations
or changes.
c. Agreements as to such alterations or changes under this
Paragraph shall be made in the same manner as provided in
Paragraph 1 of this Article for modifications or changes to
the Specification.
3. Substitution of Materials:
In the event that any of the materials required by the Specification or
otherwise under this Contract for the construction of the VESSEL cannot
be procured in time or are in short supply to maintain the Delivery
Date of the VESSEL, the BUILDER may, provided that the BUILDER shall
obtain the BUYER's prior written approval, which shall not be
unreasonably withheld., supply other materials capable of meeting the
requirements of the Classification Society and of the rules,
regulations and requirements with which the construction of the VESSEL
must comply. Any agreement as to such substitution of materials shall
be effected in the manner provided in Paragraph 1 of this Article, and
shall, likewise, include alterations in the Contract Price and other
terms and conditions of this contract occasioned by or resulting from
such substitution.
ARTICLE VI - TRIALS
1. Notice:
The BUYER shall receive from the BUILDER at least fourteen (14) days
prior notice in writing of the time, place of the trial run of the
VESSEL, and a description of the trials to be performed, and the BUYER
shall give prompt written acknowledgment of the receipt of such notice.
The BUYER shall have the right to have a reasonable number of
authorized representatives, employees, inspectors and any other person
reasonably designated by the BUYER present at the sea trial.
The BUILDER may, after due notice as described here above, conduct
trial runs of the VESSEL without the presence of the Buyer's
Representative of other authorized representative of the BUYER provided
that the Classification Society is present. In such case, the BUYER
shall be obligated to accept the results of the trial runs on the basis
of a certificate of the BUILDER, confirmed by the Classification
Society, stating the results of the runs.
2. Weather Condition:
The trial run shall be carried out under weather conditions deemed
favorable enough in the judgment of the BUILDER. In the event of
unfavorable weather on the date specified for the trial run, the same
shall take place on the first available day thereafter that the weather
condition permits. It is agreed that, if during the trial run of the
VESSEL, the weather should suddenly become so unfavorable that orderly
conduct of the trial run can no longer be continued, the trial run
shall be discontinued and postponed until the first favorable day next
following, unless the BUYER shall assent in writing to acceptance of
the VESSEL on the basis of the trial run already made before such
discontinuance has occurred.
Any delay of trial run caused by such unfavorable weather condition
shall operate to postpone the Delivery Date by the period of delay
involved and such delay shall be deemed as a permissible delay in the
delivery of the VESSEL.
3. How Conducted:
a. All expenses in connection with the trial run are to be for
the account of the BUILDER and the BUILDER shall provide at
its own expense the necessary crew to comply with conditions
of safe navigation. The trial run shall be conducted in the
manner prescribed in the Specification, and shall prove
fulfillment of the performance requirements for the trial run
as set forth in the Specification. The course of trial run
shall be determined by the BUILDER.
b. Notwithstanding the foregoing, fuel oil, lubricating oil and
greases necessary for the trial run of the VESSEL shall be
supplied by the BUILDER at the Shipyard prior to the time of
the trial run, and the BUYER shall pay the BUILDER upon
delivery of the VESSEL the cost of the quantities of fuel oil,
lubricating oil and greases not consumed during the trial run
at the original purchase price. In measuring the consumed
quantity, lubricating oils and greases remaining in the main
engine, other machinery and their pipes, stem tube and the
like, shall be excluded. The quantity of fuel oil, lubricating
oils and greases supplied by the BUILDER shall be in
accordance with the instructions of the BUYER.
4. Method of Acceptance or Rejection:
a. Upon completion of the trial run, the BUILDER shall give the
BUYER written notice of completion of the trial run, and if
the BUILDER considers that the results of the trial run
indicate conformity of the VESSEL to this Contract and the
Specification. The BUYER shall, within three (3) days after
receipt of such notice from the BUILDER, provide the BUILDER
written notice of its intent to accept or reject the VESSEL on
the Contract Delivery Date.
b. However, should the results of the trial run indicate that the
VESSEL, or any part or equipment thereof, does not conform to
the requirements of this Contract and/or the Specification,
or if the BUILDER is in agreement as to non-conformity
as specified in the BUYER's notice of rejection, then, the
BUILDER shall with the written concurrence of the BUYER take
the necessary steps to correct such non-conformity. Upon
completion of correction of such non-conformity, the
BUILDER shall give the BUYER written notice thereof. The
BUYER shall, within two (2) days after receipt of such
notice from the BUILDER, notify the BUILDER of its acceptance
or rejection of the VESSEL. The BUYER may only demand a new
trial run if this is the only way the BUILDER can prove that
the nonconformities have been corrected. In the event a new
trial run takes place, the provisions set forth in Paragraphs
1, 2 and 3 hereof shall govern this trial run except that the
BUILDER shall be entitled to give a written notice of two (2)
days for such new trial run. Upon completion of the additional
trial run, the provisions of Paragraph 4 shall apply.
c. In any event that the BUYER rejects the VESSEL, the BUYER
shall specify in its notice of rejection in what respect the
VESSEL, or any part or equipment thereof does not conform to
the Contract .
d. In event that the BUYER fails to provide the BUILDER written
notice of the acceptance of or the rejection together with the
reason therefor of the VESSEL within the period as provided in
the above subparagraphs (a) or (b), the BUYER shall be deemed
to have accepted the VESSEL.
e. The BUILDER may dispute the rejection of the VESSEL by the
BUYER under this Paragraph 4, in which case the matter shall
be submitted for final decision in accordance with Article XIV
hereof.
5. Effect of Acceptance:
a. Acceptance of the VESSEL as above provided shall be final and
binding and the VESSEL will be deemed to be in conformity with
the Contract. The BUYER shall not refuse formal delivery of
the VESSEL as hereinafter provided, if the BUILDER complies
with all other procedural requirements for delivery as
provided in Article VII hereof.
b. If minor work or items on the VESSEL are incomplete or missing
when the VESSEL otherwise is ready for delivery and such work
or items do not materially affect the operation of the VESSEL
nor are likely to cause damage or excessive deterioration to
the VESSEL, the BUYER shall not withhold its consent to accept
delivery of the VESSEL subject to the right of the BUYER to
have such items completed by the BUILDER in a reasonable
manner and period of time. The parties shall on delivery
execute a protocol of outstanding work and a schedule for
completion of such work.
6. Disposition of Surplus Consumable Stores:
Should any fresh water or other consumable stores furnished by the
BUILDER for the trial run remain on board the VESSEL at the time of
acceptance thereof by the BUYER, the BUYER agrees to buy the same from
the BUILDER at the original purchase price thereof, and payment by the
BUYER shall be effected upon delivery of the VESSEL.
ARTICLE VII - DELIVERY
1. Time and Place:
a. The VESSEL shall be delivered by the BUILDER to the BUYER at
the Shipyard or at another location acceptable to both Parties
hereto. The original Delivery Date for the VESSEL shall be on
or before May 7, 2006 (herein called the "Original Delivery
Date").
b. Delays on account of such causes which under the terms of the
Contract permit the BUILDER to postpone the delivery of the
VESSEL shall be understood to be Permissible Delay (herein
called "Permissible Delay"). Permissible Delays are to be
distinguished from unauthorized delays on account of which the
Contract Price is subject to adjustment as provide for in
Paragraph 1 of Article III hereof.
c. The Original Delivery Date shall be adjusted by the total
Permissible Delay and the adjusted date shall be the Delivery
Date (herein called the "Delivery Date"). The VESSEL shall be
delivered by the BUILDER to the BUYER on or before the
Delivery Date.
2. When and How Effected:
Provided that the BUYER shall have fulfilled all of its obligations
stipulated under this Contract, delivery of the VESSEL shall be
effected forthwith by the concurrent delivery by each of the parties
hereto to the other of the PROTOCOL OF DELIVERY AND ACCEPTANCE,
acknowledging delivery of the VESSEL by the BUILDER and acceptance
thereof by the BUYER.
To the extent that there is a dispute with respect to the amount that
the BUILDER owes to the BUYER for deficiencies at delivery of the
VESSEL, the BUYER shall deduct from the delivery payment the amount of
such deficiencies and deposit such amount into an escrow account. The
accrued interest from such escrow account shall be distributed pro rata
between the parties based on the final distribution of the amounts held
in the escrow account.
3. Documents to be Delivered to the BUYER:
Upon delivery and acceptance of the VESSEL, the BUILDER shall deliver
to the BUYER the following documents, which shall accompany the
PROTOCOL OF DELIVERY AND ACCEPTANCE:
a. PROTOCOL OF TRIALS of the VESSEL made pursuant to the
Specification.
b. PROTOCOL OF INVENTORY of the equipment of the VESSEL,
including spare parts and the like, all as specified in the
Specification.
c. PROTOCOL OF STORES OF CONSUMABLE NATURE referred to under
subparagraphs 3(b) of Article VI hereof, including the
original purchase price thereof.
d. ALL CERTIFICATES, clean and free of conditions, including the
BUILDER's CERTIFICATE required to be furnished upon delivery
of the VESSEL pursuant to this Contract and the Specification.
It is agreed that if, through no fault on the part of the
BUILDER, the classification and/or other certificates are not
available at the time of delivery of the VESSEL, provisional
certificates shall be accepted by the BUYER, provided that the
BUILDER shall furnish the BUYER with the formal certificates
as promptly as possible after such formal certificates have
been issued.
e. DECLARATION OF WARRANTY of the BUILDER that the VESSEL is
delivered to the BUYER free and clear of any liens, charges,
claims, mortgages, or other encumbrances upon the BUYER's
title thereto, and in particular, that the VESSEL is
absolutely free of all burdens in the nature of imposts, taxes
or charges imposed by local or federal authorities, as well as
of all liabilities of the BUILDER to its subcontractors,
employees and crew, and of all liabilities arising from the
operation of the VESSEL in trial runs, or otherwise, prior to
delivery.
f. DRAWINGS AND PLANS pertaining to the VESSEL as stipulated in
the Specification.
g. COMMERCIAL INVOICE.
h. BILL of SALE.
The BUILDER will cooperate with the BUYER to provide any other
documents reasonably required by the BUYER to secure financing for the
VESSEL.
4. Tender of the VESSEL:
If the BUYER fails to take delivery of the VESSEL after completion
thereof according to the Contract without any justifiable reason, the
BUILDER shall have the right to tender delivery of the VESSEL after
compliance with all procedural requirements as above provided.
5. Title and Risk:
Title to and risk of loss of the VESSEL shall pass to the BUYER only
upon delivery and acceptance thereof having been completed as stated
above; it being expressly understood that, until such delivery is
effected, title to and risk of loss of the VESSEL and her equipment
shall be in the BUILDER.
The BUILDER warrants that the sale of the VESSEL to BUYER will not
result in any violation of or be in conflict with, or result in a
breach of or constitute a default under, any term or provision of any
agreement, instrument or other restriction to which the BUILDER is a
party or by which it is bound.
6. Removal of the VESSEL:
The BUYER shall take possession of the VESSEL immediately upon delivery
and acceptance thereof and shall remove the VESSEL from the premises of
the Shipyard within three (3) days after delivery and acceptance
thereof is completed. If the BUYER shall not remove the VESSEL from the
premises of the Shipyard within the aforesaid three (3) days, then, in
such event the BUYER shall pay to the BUILDER the mooring charges of
the VESSEL.
ARTICLE VIII-DELAYS AND EXTENSION OF TIME FOR DELIVERY DUE TO FORCE MAJEURE
1. Causes of Force Majeure:
Force Majeure (herein called "Force Majeure") is any or more of the
events defined below:
Acts of God; acts of princes; or rulers; requirements of government
authorities; war or other hostilities or preparations thereto;
blockade; revolution; insurrections; mobilizations; civil war; civil
commotion; riots; strikes and other labor disturbances including local
strikes affecting the BUILDER; sabotages; acts of terrorists; lockouts;
labor shortages; plague; epidemics; fire; flood; typhoons, hurricanes,
storms or other weather conditions not included in normal planning;
earthquakes; tidal waves; landslides; explosions; collisions;
strandings; embargoes; delays in transportation; import restrictions;
shortage of Materials or delay in delivery or inability to take
delivery thereof, provided that such Materials at the time of ordering
could reasonably be expected by the BUILDER to be delivered in time;
prolonged failure or restriction of electric current or petroleum;
mishaps of casting and/or forging.
2. Notice of Delay:
Within ten (10) days from the date of commencement of the delay on
account of which the BUILDER claims that it is entitled under this
Contract to a postponement of the Delivery Date of the VESSEL, the
BUILDER shall advise the BUYER in writing of the date such delay
commences and the reasons therefore.
Likewise within ten (10) days after such delay ends, the BUILDER shall
advise the BUYER in writing of the date such delay ended, and also
shall specify the period of time by which the Delivery Date is
postponed by reason of such delay. Failure of the BUYER to acknowledge
the BUILDER's notification of any claim for postponement of the
Delivery Date within ten (10) days after receipt of such notification
shall be deemed to be a waiver by the BUYER of its right to object to
such postponement.
3. Definition of Permissible Delay:
Delays on account of such causes as specified in Paragraph 1 of this
Article and any other delays of a nature which under the terms of this
Contract permits postponement of the Delivery Date shall be understood
to be permissible delays and are to be distinguished from unauthorized
delays on account of which the Contract Price is subject to adjustment
as provided for in Article III hereof.
4. Right to Terminate for Excessive Delay due to Force Majeure:
If the total accumulated time of all delays on account of the causes
specified in Paragraph 1 of this Article, excluding other types of
delays of a nature which, under the terms of this Contract, permit
postponement of the Delivery Date, amounts to Two Hundred and Ten (210)
days or more, then, in such event, the BUYER may terminate this
Contract in accordance with the provisions of Article X hereof. The
BUILDER may, at any time after the accumulated time of the
aforementioned delays justifying rescission by the BUYER, demand in
writing that the BUYER shall make an election, in which case the BUYER
shall, within twenty (20) days after such demand is received by the
BUYER, either notify in writing the BUILDER of its intention to
terminate this Contract, or consent to a postponement of the Delivery
Date to a specific future date; it being understood and agreed by the
parties hereto that, if any further delay occurs on account of causes
justifying termination as specified in this Article, the BUYER shall
have the same right of termination upon the same terms as hereinabove
provided.
ARTICLE IX-WARRANTY OF QUALITY
1. Warranty:
Subject to the provisions hereinafter set forth, the BUILDER undertakes
to remedy, free of charge to the BUYER, any defects in the VESSEL which
are due to defective material, faulty design and/or bad workmanship on
the part of the BUILDER and/or its subcontractors, provided that the
defects are discovered within a period of twelve (12) months after the
date of delivery of the VESSEL and a notice thereof is duly given to
the BUILDER as hereinabove provided. For the purpose of this Article,
the VESSEL shall include her hull, machinery, equipment and gear, but
excludes any parts for the VESSEL which has been supplied by or on
behalf of the BUYER. Upon expiration of the warranty period, and to the
extent permitted by vendors, the BUILDER agrees to transfer any
guarantees or warranties supplied to it by vendors and subcontractors.
2. Notice of Defects:
The BUYER shall notify the BUILDER in writing of any defects for which
claim is made under this guarantee as promptly as possible after
discovery thereof. If the defect was discovered during dry-docking of
the VESSEL, the BUYER must notify the BUILDER in time for the BUILDER
to inspect the defect before the VESSEL leaves the dry-dock if this is
necessary for a prudent inspection of the defect. The BUYER's written
notice shall in sufficient detail describe the nature and extent of the
defects. The BUILDER shall have no obligation for any defects
discovered prior to the expiry date of the said twelve (12) months
period, unless notice of such defects is received by the BUILDER not
later than thirty (30) days after such expiry date.
3. Remedy of Defects:
a. The BUILDER shall remedy, at its expense, any defects, against
which the VESSEL is guaranteed under this Article, by making
all necessary repairs or replacements at the Shipyard. Upon
having remedied such defects the BUILDER shall give the BUYER
a further guarantee period of 6 months for the aforementioned
repairs but not longer than 18 months in total.
b. However, if it is impractical to bring the VESSEL to the
Shipyard, the BUYER may cause the necessary repairs or
replacements to be made elsewhere which is deemed suitable for
the purpose, provided that, in such event, the BUILDER may
forward or supply replacement parts or materials to the
VESSEL, unless forwarding or supplying thereof to the VESSEL
would impair or delay the operation or working schedule of the
VESSEL. In the event that the BUYER proposes to cause the
necessary repairs or replacements to be made to the VESSEL at
any other shipyard or works than the Shipyard, the BUYER shall
first, but in all events as soon as possible, give the BUILDER
notice in writing of the time and place such repairs will be
made, and if the VESSEL is not thereby delayed, or her
operation or working schedule is not thereby impaired, the
BUILDER shall have the right to verify by its own
representative(s) the nature and extents of the defects
complained of. The BUILDER shall, in such case, promptly
advise the BUYER in writing, after such examination has been
completed, of its acceptance or rejection of the defects as
ones that are covered by the guarantee herein provided. Upon
the BUILDER'S acceptance of the defects as justifying remedy
under this Article, or upon such final decision by a competent
court, the BUILDER shall immediately pay to the BUYER for such
repairs or replacements a sum up to a sum equal to the
reasonable cost of making the same repairs or replacements in
the Shipyard. Subject to a written agreement with the
BUILDER, warranty repairs may be made by the crewmembers of
the VESSEL, provided however that BUYER submits documentation
for the work performed and BUILDER will not reimburse BUYER at
labor rates in excess of $55.00.
c. In any case, the VESSEL shall be taken at the BUYER's cost,
risk and responsibility to the place elected, ready in all
respects for such repairs or replacements.
d. Any dispute under this Article shall be referred to dispute
resolution in accordance with the provisions of Article XIV
hereof.
4. Extent of the BUILDER's Responsibility:
a. The BUILDER shall have no responsibility or liability for any
other defects whatsoever in the VESSEL than the defects
specified in Paragraph 1 of this Article. Nor shall the
BUILDER in any circumstances be responsible or liable for any
consequential or special losses, damages or expenses
including, but not limited to, loss of time, loss or breach of
charters or other contractual commitments, loss of profit or
earning or demurrage directly or indirectly occasioned to the
BUYER by reason of the defects specified in Paragraph 1 of
this Article or due to repairs or other works done to the
VESSEL to remedy such defects.
b. The BUILDER shall not be responsible for any defects in any
part of the VESSEL which may subsequent to delivery of the
VESSEL have been replaced or in any way repaired by any other
contractor, or for any defects which have been caused or
aggravated by omission or improper use and maintenance of the
VESSEL on the part of the BUYER, its servants or agents or by
ordinary wear and tear or by any other circumstances
whatsoever beyond the control of the BUILDER.
c. A final guaranty survey of the VESSEL shall be conducted by
the BUYER at or near the expiration of the guarantee period.
Such survey shall be based on the guarantee deficiencies in
the contract work appearing or discovered during the guarantee
period. In the event that the VESSEL is not available for the
guarantee survey on or before the end of the guarantee period,
the BUYER promptly shall submit to the BUILDER a list of all
of the guarantee deficiencies in the contract work appearing
or discovered during the guarantee period and all damage for
which the BUILDER is liable under the provisions of this
Article IX. The final guarantee survey shall be held at such
port in the United States as the BUYER designates and seven
(7) days written notice of time and place for such guarantee
survey shall be given to the BUILDER by the BUYER. The
BUILDER shall have the right to attend the guarantee survey.
d. At the end of the guarantee period, the BUILDER agrees to
transfer and assign to the BUYER, as to any item of material
installed in the VESSEL, the guarantee rights of the BUILDER
against the vendor of such item of material where under the
terms of such vendor's guarantee the vendor's obligations
extend for a period beyond the guarantee period; provided that
the BUILDER may exclude from such assignment any rights
against the vendor in favor of the BUILDER for guarantee
deficiencies and damages within the guarantee period. The
BUILDER shall advise the BUYER of the terms of any such
guarantees that are assigned to the BUYER.
e. The guarantee contained as hereinabove in this Article
replaces and excludes any other liability, guarantee, warranty
and/or condition imposed or implied by the law, customary,
statutory or otherwise, by reason of the construction and sale
of the VESSEL for and to the BUYER. THE BUILDER MAKES NO
FURTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY
OF MERCHANTABILITY OR FITNESS OF THE VESSEL, ITS MACHINERY OR
EQUIPMENT FOR A PARTICULAR PURPOSE.
f. The BUILDER shall deliver to the BUYER a guarantee from
Kvaerner ASA with respect to the BUILDER's performance during
the guarantee period.
5. Guarantee Engineer:
The BUILDER shall have the right to appoint a guarantee engineer to
serve on the VESSEL as its representative for such portion of the
guarantee period as the BUILDER may decide. The BUYER and its employees
shall give the guarantee engineer full cooperation in carrying out his
duties as the representative of the BUILDER on board the VESSEL. The
BUYER shall accord the guarantee engineer the treatment comparable to
the VESSEL's chief engineer and shall provide him with accommodations
and subsistence at no cost of the BUILDER and/or the guarantee
engineer.
Pertaining to the detailed particulars of this Paragraph, an agreement
will be made according to this effect between the parties hereto upon
delivery of the VESSEL.
The guarantee engineer shall, at all times and in all respects, be
deemed to be an employee of the BUILDER. The BUYER shall be under no
liability whatsoever to the BUILDER or the guarantee engineer for
personal injuries, including death, suffered by the guarantee engineer
during the time when he is on board the VESSEL. Nor shall the BUYER be
under any liability whatsoever to the guarantee engineer.
ARTICLE X - TERMINATION BY BUYER
1. Notice:
The payments made by the BUYER prior to the delivery of the VESSEL
shall be in the nature of advances to the BUILDER. In the event that
the BUYER shall exercise its right of termination of this Contract
under and pursuant to any of the provisions of this Contract
specifically permitting the BUYER to do so, then the BUYER shall notify
the BUILDER in writing and such termination shall be effective as of
the date notice thereof is received by the BUILDER.
2. Refund by the BUILDER:
Thereupon, the BUILDER shall promptly refund to the BUYER the full
amount of all sums paid by the BUYER to the BUILDER on account of the
VESSEL (unless the BUILDER proceeds to dispute resolution under the
provisions of Article XIV hereof). In such event, the BUILDER shall pay
the BUYER interest at the rate of two percent (2%) per annum above the
average LIBOR three month rate on the amount required herein to be
refunded to the BUYER, computed from the respective dates on which such
sums were paid by the BUYER to the BUILDER to the date of remittance by
transfer of such refund to the BUYER by the BUILDER, provided, however,
that if such rescission by the BUYER is made under the provisions of
Paragraph 4 of Article VIII hereof, the BUILDER shall not be required
to pay any interest.
3. Discharge of Obligations:
Upon such refund by the BUILDER to the BUYER, all obligations, duties
and liabilities of each of the parties hereto to the other under this
Contract shall be forthwith completely discharged.
ARTICLE XI-BUYER'S DEFAULT
1. Definition of Default:
The BUYER shall be deemed to be in default of performance of its
obligations under this Contract in the following cases:
a. If the BUYER fails to take delivery of the VESSEL, when the
VESSEL is duly tendered for delivery by the BUILDER under the
provisions of Article VII hereof.
b. If the BUYER fails to make any payment under Article II in
this Contract.
c. The BUYER being dissolved or adjudged bankrupt or making a
general assignment for the benefit of its creditors, or the
appointment of a receiver or receivers of any kind whatsoever,
whether or not appointed in bankruptcy, common law or equity
proceedings, whether temporary or permanent, for the property
of the BUYER, or the filing by the BUYER of a petition for
reorganization or other proceedings with reference to the
BUYER, under the Bankruptcy Code of the United States or any
similar law, state or federal or in any other jurisdiction in
which the BUYER has assets or is registered to do business, or
the filing of such petition of creditors and approval thereof
by the Court, whether proposed by a creditor, a stockholder or
any other person whatsoever, or the filing of an answer to
such a petition admitting insolvency or inability to pay its
debts.
2. Interest and Charge:
If the BUYER is in default of a payment as to any installment as
provided in Paragraph 1(a) and (b) of this Article, the BUYER shall pay
interest on such installment at the rate of the three-month LIBOR plus
2% per annum from the due date thereof to the date of payment to the
BUILDER on the full amount including interest; in case the BUYER shall
fail to take delivery of the VESSEL as provided in Paragraph 1(a) of
this Article, the BUYER shall be deemed in default of the final payment
and shall pay interest thereon at the same rate as aforesaid from and
including the day on which the VESSEL is tendered for delivery by the
BUILDER. In any event of default by the BUYER, the BUYER shall also pay
all charges and expenses incurred by the BUILDER in consequence of such
default.
3. Effect of Default:
a. If any default by the BUYER occurs as provided hereinbefore,
the Delivery Date shall be automatically postponed for a
period of continuance of such default by the BUYER.
b. If any default by the BUYER continues for a period of fifteen
(15) days, the BUILDER may, at its option, cancel this
Contract by giving notice of such effect to the BUYER in
writing. Upon receipt by the BUYER of such notice of
cancellation, this Contract shall forthwith become cancelled
and any of the BUYER's Supplies shall become the sole property
of the BUILDER.
In the event of such cancellation of this Contract, the
BUILDER shall be entitled to retain any Installments
theretofore paid by the BUYER to the BUILDER on account of
this Contract.
4. Sale of the VESSEL:
a. In the event of cancellation of this Contract as above
provided, the BUILDER shall have full right and power either
to complete or not to complete the VESSEL as it deems fit, and
to sell the VESSEL at a public or private sale on such terms
and conditions as the BUILDER thinks fit without being
answerable for any loss or damage.
b. In the event of the sale of the VESSEL in its completed state,
the proceeds of the sale received by the BUILDER shall be
applied firstly to the payment of all expenses attending such
sale and otherwise incurred by the BUILDER as a result of the
BUYER's default, and then to payment of all unpaid
Installments of the Contract Price and interest on such
Installments at the rate of three month LIBOR plus (2%) per
annum from the respective due dates thereof to the date of
application.
c. In the event of sale of the VESSEL in its incomplete state,
the proceeds of sale received by the BUILDER shall be applied
firstly to all expenses attending such sale and otherwise
incurred by the BUILDER as a result of the BUYER's default,
and then to payment of all costs of construction of the VESSEL
less the Installments so retained by the BUILDER as
compensation to the BUILDER for a reasonable loss of profit
due to the rescission of this Contract.
d. In either of the above events of sale, if the proceeds of sale
exceeds the total of amounts to which such proceeds are to be
applied as aforesaid the BUILDER shall promptly pay the excess
to the BUYER without interest, provided, however, that the
amount of such payment to the BUYER shall in no event exceed
the total amount of Installments already paid by the BUYER and
the cost of the BUYER's Supplies, if any.
e. If the proceeds of sale are insufficient to pay such total
amounts payable as aforesaid, the BUYER shall promptly pay the
deficiency to the BUILDER upon request.
ARTICLE XII -BUILDER'S DEFAULT
1. The following shall constitute events of default of the BUILDER under
this Contract:
a. The BUILDER being dissolved or adjudged a bankrupt or making a
general assignment for the benefit of its creditors, or the
appointment of a receiver or receivers of any kind whatsoever,
whether or not appointed in bankruptcy, common law or equity
proceedings, whether temporary or permanent, for the property
of the BUILDER, or the filing by the BUILDER of a petition for
reorganization or other proceedings with reference to the
BUILDER, under any of the provisions of the Bankruptcy Code of
the United States or any similar law, state or federal or in
any jurisdiction in which the Contractor has assets or is
registered to do business, or the filing of such petition by
creditors and approval thereof by the Court, whether proposed
by a creditor, a stockholder or any other person whatsoever,
or the filing of an answer to such petition admitting
insolvency or inability to pay its debts.
b. If any default by the BUILDER continues for a period of thirty
(30) days, the BUYER may, at its option, terminate this
Contract by giving notice of such effect to the BUILDER in
accordance with ARTICLE X hereof, which termination shall
be effective, without further act or deed immediately upon the
receipt of such notice provided, such termination shall not
prevent either party from initiating proceedings pursuant to
the provisions of Article XIV with respect to any claim it may
allege concerning rights and obligations under this Contract.
The BUYER, if it so elects, may, notwithstanding the pendency
of any such proceedings under ARTICLE XIV require a refund of
the full amount of all sums paid by the BUYER to the BUILDER
on account of the VESSEL and, at the BUYER'S option, the
BUILDER shall either purchase for their fair market value or
return to the BUYER all of the BUYER'S supplies.
ARTICLE XIII-INSURANCE
1. Extent of Insurance Coverage:
From the time of the first Materials destined for inclusion as part of
the VESSEL and until the same is completed, delivered to and accepted
by the BUYER, the BUILDER shall, at its own cost and expense, keep the
VESSEL and all machinery, materials, equipment, appurtenances and
outfit delivered to the Shipyard for the VESSEL or built into, or
installed in or upon the VESSEL, including the BUYER's Supplies, fully
insured with reputable insurance companies with coverage corresponding
to the American Institute Builder's Risk Clauses (dated February 8,
1979).
The amount of such insurance coverage shall, up to the date of delivery
of the VESSEL, be in an amount at least equal to, but not limited to,
the value of the contract work completed to date, including the value
of the BUYER's Supplies. The policy referred to hereinabove shall be
taken out in the name of the BUILDER and all losses under such policy
shall be payable to the BUILDER.
If the BUYER so requests, the BUILDER shall at the BUYER's cost procure
insurance on the VESSEL and all parts, materials, machinery and
equipment intended therefor against risks of earthquake, strikes, war
peril or other risks not heretofore provided and shall make all
arrangements to that end. The cost of such insurance shall be
reimbursed to the BUILDER by the BUYER upon delivery of the VESSEL.
2. Application of Recovered Amount:
a. Partial Loss:
In the event the VESSEL shall be damaged by any insured cause
whatsoever prior to acceptance thereof by the BUYER and in the
further event that such damage shall not constitute an actual
or a constructive total loss of the VESSEL, the BUILDER shall
apply the amount recovered under the insurance policy referred
to in Paragraph 1 of this Article to the repair of such damage
satisfactory to the Classification Society, and the BUYER
shall accept the VESSEL under the Contract if completed in
accordance with this Contract and Specification.
b. Total Loss:
However, in the event that the VESSEL is determined to be an
actual or constructive total loss, the BUILDER shall by the
mutual agreement between the parties hereto, either:
i. Proceed in accordance with the terms of this
Contract, in which case the amount recovered under
said insurance policy shall be applied to the
reconstruction of the VESSEL's damage, provided the
parties hereto shall have first agreed in writing to
such reasonable postponement of the Delivery Date and
adjustment of other terms of this Contract including
the Contract Price as may be necessary for the
completion of such reconstruction; or
ii. Refund immediately to the BUYER the amount of all
Installments paid to the BUILDER under this Contract
without any interest, whereupon this Contract shall
be deemed to be terminated and all rights, duties,
liabilities and obligations of each of the parties to
the other shall terminate forthwith.
If the parties hereto fail to reach such agreement within two
(2) months after the VESSEL is determined to be an actual or
constructive total loss, the provisions of subparagraphs
(b)(ii) as above shall apply.
3. Termination of the BUILDER's Obligation to Insure:
The BUILDER's obligation to insure the VESSEL hereunder shall cease and
terminate forthwith upon delivery thereof and acceptance by the BUYER.
ARTICLE XIV-DISPUTE RESOLUTION
1. Technical Disputes:
Any dispute or any difference of opinion between the parties hereto
relating to conformity of the construction of the VESSEL or material
used to Classification requirements shall be referred to the
Classification Society for settlement by and between the parties and
the Classification Society.
In the event that the settlement cannot be reached by the three parties
above-mentioned, then such matter shall be referred to arbitration as
hereinafter provided.
2. Arbitration:
a. Except for cases which are settled under Paragraph 1 hereof,
any dispute arising under or by virtue of this Contract or any
difference of opinion between the parties hereto concerning
their rights and obligations under this Contract, shall be
referred to arbitration in the State of Pennsylvania, of three
arbitrators one to be appointed by each party and a third
arbitrator to be appointed by both arbitrators. The
arbitration shall be conducted in accordance with the
procedures set forth by the American Arbitration Association.
Either party may demand arbitration of any such dispute or
difference of opinion by giving notice in writing to the other
party. Any demand for arbitration by either of the parties
hereto shall state the name of the arbitrator appointed by
such party and shall also state specifically the question or
questions as to which such party is demanding arbitration.
Within fourteen (14) days after receipt of notice of such
demand for arbitration, the other party shall in turn appoint
a second arbitrator and give notice in writing of such
appointment to the party demanding arbitration.
b. If a party fails to appoint an arbitrator as aforementioned
within fourteen (14) days following receipt of notice of
demand for arbitration by the other party, the party failing
to appoint an arbitrator shall be deemed to have accepted and
appointed, as its own arbitrator, the arbitrator appointed by
the party demanding arbitration and the arbitration shall
proceed before this sole arbitrator.
c. All arbitration awards are final and may be entered into any
court of competent jurisdiction.
3. Alteration of Delivery Date:
In the event of arbitration of any dispute arising or occurring prior
to delivery of the VESSEL, an award of the arbitrators shall include a
finding as to whether or not the delivery date of the VESSEL is in any
way altered thereby.
ARTICLE XV-ENTIRE AGREEMENT AND ASSSIGNMENT OF CONTRACT
This Contract, including the Specification and Plans and Exhibits, which are
incorporated herein and made part of this Contract, contains the entire
agreement and understanding between the parties hereto and supersedes all prior
negotiations, representations, undertakings and agreements on any subject matter
of this Contract. The benefits and obligations of this Contract shall inure to
and be binding upon the successors and assigns of the original parties hereto,
respectively; provided, however, that no assignment shall be made by either
party without the prior written consent of the other. The BUYER consents to the
assignment of the Contract to a lender in connection with the construction
period financing for the Vessel, provided that such assignment will not diminish
the BUILDER'S obligations to perform under this Contract. At delivery, the BUYER
shall have the right to assign this Contract to a third party nominee for
delivery and final delivery payment purposes, provided the BUYER shall remain
responsible for the performance of such assignee.
ARTICLE XVI-TAXES AND DUTIES
The BUILDER shall pay, as a cost of the BUILDER, all United States, States,
County, City and other taxes, assessments and duties lawfully assessed or levied
prior to delivery and acceptance of the Vessel by the BUYER against the Vessel
and material, supplies and equipment to be used or used in the performance of
this Contract (excepting, however, material, supplies and equipment furnished to
the BUILDER by the BUYER) and any sales, use or excise taxes with respect
thereto lawfully assessed or levied prior to or concurrently with delivery and
acceptance of the Vessel by the BUYER.
ARTICLE XVII-PATENTS, TRADEMARKS, COPYRIGHTS, ETC.
1. Patents, Trademarks and Copyrights:
Machinery and equipment of the VESSEL may bear the patent number,
trademarks or trade names of the manufacturers.
The BUILDER shall defend and save harmless the BUYER from patent
liability or claims of patent infringement of any nature or kind,
including costs and expenses for, or on account of any patented or
patentable invention made or used in the performance of this Contract
and also including costs and expenses of litigation, if any.
Nothing contained herein shall be construed as transferring any patent
or trademark rights or copyrights in equipment covered by this
Contract, and all such rights are hereby expressly reserved to the true
and lawful owners thereof.
The BUILDER's warranty hereunder does not extend to the BUYER's
Supplies.
2. General Plans, Specification and Working Drawings:
The BUILDER retains all rights with respect to the Specification, and
plans and working drawings, technical descriptions, calculations, test
results and other data, information and documents concerning the design
and construction of the VESSEL and the BUYER undertakes therefore not
to disclose the same or divulge any information contained therein to
any third parties, without the prior written consent of the BUILDER,
excepting where it is necessary for usual operation, repair and
maintenance of the VESSEL.
ARTICLE XVIII-BUYER'S SUPPLIES
1. Responsibility of the BUYER:
a. The BUYER shall, at its own risk, cost and expense, supply and
deliver to the BUILDER all of the items to be furnished by the
BUYER according to an agreed list (herein called the "BUYER's
Supplies") at a warehouse or other storage of the Shipyard in
the proper condition ready for installation in or on the
VESSEL, in accordance with the time scheduled designated by
the BUILDER.
b. In order to facilitate installation by the BUILDER of the
BUYER's Supplies in or on the VESSEL, the BUYER shall furnish
the BUILDER with necessary specifications, plans, drawings,
instruction books, manuals, test reports and certificates
required by the rules and regulations. The BUYER, if so
requested by the BUILDER, shall, without any charge to the
BUILDER, cause the representatives of the manufacturers of the
BUYER's Supplies to assist the BUILDER in installation thereof
in or on the VESSEL and/or to carry out installation thereof
by themselves or to make necessary adjustments thereof at the
Shipyard.
c. Any and all of the BUYER's Supplies shall be subject to the
BUILDER's reasonable right of rejection, as and if they are
found to be unsuitable or in improper condition for
installation. However, if so requested by the BUYER, the
BUILDER may repair or adjust the BUYER's Supplies without
prejudice to the BUILDER's other rights hereunder and without
being responsible for any consequences therefrom. In such
case, the BUYER shall reimburse the BUILDER for all costs and
expenses incurred by the BUILDER in such repair or adjustment
and the Delivery Date shall be automatically postponed for a
period of time necessary for such repair or replacement.
d. Should the BUYER fail to delivery any of the BUYER's Supplies
within the time designated, the Delivery Date shall be
automatically extended for a period of such delay in delivery.
In such event, the BUYER shall be responsible for and pay to
the BUILDER all losses and damages incurred by the BUILDER by
reason of such delay in delivery of the BUYER's Supplies and
such payment shall be made upon delivery of the VESSEL. If
delay in delivery of any of the BUYER's Supplies exceeds
thirty (30) days, then, the BUILDER shall be entitled to
proceed with construction of the VESSEL without installation
thereof in or on the VESSEL, without prejudice to the
BUILDER's other rights as hereinabove provided, and the BUYER
shall accept and take delivery of the VESSEL so constructed.
2. Responsibility of BUILDER:
The BUILDER shall be responsible for storing and handling with
reasonable care of the BUYER's Supplies after delivery thereof at the
Shipyard, and shall, at BUYER's cost and expense, install them in or on
the VESSEL, unless otherwise provided herein or agreed by the parties
hereto, provided, always, that the BUILDER shall not be responsible for
quality, efficiency and/or performance of any of the BUYER's Supplies.
If the BUILDER does not deliver the VESSEL, the BUILDER shall return
all of the BUYER's Supplies to the BUYER or shall reimburse the BUYER
for the cost of such supplies.
ARTICLE XIX -NOTICE
1. Address:
Any and all notices and communications in connection with this Contract
shall be addressed as follows:
To the BUYER: Matson Navigation Company, Inc.
555 12th Street
Oakland, CA 94607
Attn: Senior Vice President and General Counsel
Telephone No.: 510-628-4583
Facsimile No.: 510-628-7331
To the BUILDER: Kvaerner Philadelphia Shipyard Inc.
Philadelphia Naval Business Center
2100 Kitty Hawk Avenue
Philadelphia, PA 19112
Telephone No.: 215-875 2600
Facsimile No.: 215-875 2700
Any notice, including any written notice, required hereunder, shall be
effected and deemed received only as follows:
In the case of e-mail, at the time of transmission recorded on the
message such time is within normal business hours on a working day at
the place of receipt, otherwise at the commencement of normal business
hours on the next such working day, always provided, however, that such
notice shall be sent by registered mail or dispatched for delivery by
hand or by courier not later than on the day of such transmission.
a. In the case of a letter, whether sent by registered mail or
delivered by hand or by courier, at the date and time of its
actual delivery if delivered within normal business hours on a
working day at the place of receipt, otherwise at the
commencement of normal business on the next such working day.
b. In the case of a telecopier/photographic facsimile
transmission, at the time recorded together with the telephone
dialing code of the receiving machine on the message if such
time is within normal business hours on a working day at the
place of receipt, otherwise at the commencement of normal
business hours on the next such working day, but only if the
time of receipt and the said code appear on the received
facsimile copy, always provided, however, that such notice
shall be sent by registered mail or dispatched for delivery by
hand or by courier not later than on the day of such
transmission.
2. Language:
Any and all notices and communications in connection with this Contract
shall be written in the English language.
ARTICLE XX - INTERPRETATION
1. Laws Applicable:
The parties hereto agree that the validity and interpretation of this
Contract and of each Article and part thereof shall be governed by the
laws of the United States of America and the State of New York.
2. Discrepancies:
If there is any discrepancy, difference or conflict between the
provisions of the Articles of the Contract and the Specification, then
to the extent of such discrepancy, difference or conflict only, the
Specification shall be ineffectual and the provisions of the Articles
of the Contract shall prevail; but in all other aspects, the
Specification shall be in full force and effect.
If there is any discrepancy, difference or conflict between the plans
of the Specification and the text of the Specification, then to the
extent of such discrepancy, difference or conflict the text of the
Specification shall prevail; provided, however, any work called for by
the text of the Specification and not shown on the plans of the
Specification and any work shown on the plans of he Specification but
not called for in the text of the Specification shall be performed by
the BUILDER as part of the Contract work.
Any discrepancy, difference or conflict described hereabove discovered
by one of the parties hereto shall be brought to the attention of the
other party hereto promptly in writing.
3. Counterparts:
This Contract may executed and delivered, including execution and
delivery by facsimile transmission, in counterparts, each of which
shall be deemed an original and together shall constitute one and the
same instrument.
ARTICLE XXI - LIMITATION OF LIABILITY; INDEMNIFICATION
AND NO BROKERAGE
1. Limitation of Liability:
The parties confirm that the express remedies and measures of damages
provided in this Contract satisfy the essential purposes hereof. For
breach of any provision for which an express remedy or measure of
damages is provided, such express remedy or measure of damages shall be
the sole and exclusive remedy therefore. If no remedy or measure of
damages is expressly herein provided, the obligor's liability shall be
limited to direct actual damages only; such direct actual damages shall
be the sole and exclusive remedy. The parties confirm and agree that
under this Contract, no party shall be required to pay or be liable for
special, consequential, incidental, punitive, exemplary or indirect
damages, lost profit or business interruption damages, by statute, in
tort, contract or otherwise. To the extent any damages required to be
paid hereunder are liquidated damages, the parties acknowledge that the
damages are difficult or impossible to determine, otherwise obtaining
an adequate remedy is inconvenient and the liquidated damages
constitute a reasonable approximation of the harm and loss.
2. Indemnification by the BUILDER
The BUILDER shall defend, indemnify and hold harmless the BUYER, its
parent, subsidiaries, affiliates, agents, subcontractors, directors,
officers and employees from and against any claims, demands,
obligations, liens and suits of every nature whatsoever by OceanBlue
Express, Inc. or any of its directors, officers, employees,
shareholders, advisors or consultants, or any third-party with whom
OceanBlue Express, Inc. has executed a contract in relation to the
Vessel, arising out of or based upon the BUYER's purchase of the
VESSEL.
3. Brokerage
No third party shall be entitled to receive any brokerage commissions,
finder's fees, fees for financial advisory services or similar
compensation in connection with the transaction contemplated by this
Contract based on any arrangement or agreement made by or on behalf of
neither the BUYER nor the BUILDER.
IN WITNESS WHEREOF, the parties hereto have caused this Contract to be duly
executed the day and year first above written.
KVAERNER PHILADELPHIA MATSON NAVIGATION COMPANY, INC.
SHIPYARD INC.
By:/s/ David E. Meehan By:/s/ James S. Andrasick
----------------------------- -----------------------------
David E. Meehan James S. Andrasick
President and Chief Executive President and Chief Executive
Officer Officer