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SHIPBUILDING CONTRACT
(Hull BN460)
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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 mainta
