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SHIPBUILDING CONTRACT

Construction Agreement

SHIPBUILDING CONTRACT | Document Parties: KVAERNER PHILADELPHIA SHIPYARD INC., You are currently viewing:
This Construction Agreement involves

KVAERNER PHILADELPHIA SHIPYARD INC.,

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Title: SHIPBUILDING CONTRACT
Date: 3/8/2005
Industry: Water Transportation    

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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 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 abo


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