MARITRANS OPERATING COMPANY,
L.P.
BENDER SHIPBUILDING & REPAIR
CO., INC.
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[**] Confidential Treatment
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ARTICLE I — DESCRIPTION AND
CLASS
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6
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6
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B. Dimensions and Characteristics:
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7
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C. Classification, Rules and
Regulations:
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8
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ARTICLE II — CONTRACT PRICE AND TERMS OF
PAYMENT
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8
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8
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8
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ARTICLE III — ADJUSTMENT OF CONTRACT
PRICE
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10
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12
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13
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ARTICLE IV — APPROVAL OF PLANS AND
DRAWINGS AND
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INSPECTION DURING CONSTRUCTION
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A. Approval of Plans and Drawings:
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B. Appointment of Buyer’s
Representative:
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C. Inspection by Buyer’s
Representative:
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E. Responsibility of Buyer:
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ARTICLE V – MODIFICATIONS
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A. Modifications of Specifications:
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C. Substitution of Materials:
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D. Method of Acceptance or Rejection:
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F. Disposition of Surplus Consumable
Stores:
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[**]
Confidential Treatment
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2
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ARTICLE VII — PRODUCTION SCHEDULES AND
PROGRESS MEETINGS
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24
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25
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B. When and How Effected:
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C. Documents to be Delivered to
Buyer:
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ARTICLE IX — DELAYS AND EXTENSION OF TIME
FOR DELIVERY
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C. Definition of Permissible Delay:
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D. Extent of Builder’s
Responsibility:
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ARTICLE XI — BUILDER’S
DEFAULT
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B. Remedies for Builder’s
Default:
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ARTICLE XII — BUYER’S
DEFAULT
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B. Remedies for Buyer’s
Default:
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ARTICLE XIV — DISPUTE
RESOLUTION
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ARTICLE XV — RIGHT OF
ASSIGNMENT
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36
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36
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ARTICLE XVII — PATENTS, TRADEMARKS,
COPYRIGHTS, ETC
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37
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[**]
Confidential Treatment
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3
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A. Patents, Trademarks and
Copyrights:
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37
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B. Specifications and Drawings:
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37
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ARTICLE XVIII — BUYER FURNISHED
EQUIPMENT
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A. Responsibility of Buyer:
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B. Responsibility of Builder:
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ARTICLE XXI — INTERPRETATION
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ARTICLE XXII — LIMITATION OF LIABILITY AND
NO BROKERAGE
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A. Limitation of Liability:
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ARTICLE XXIII — INDEMNITIES
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ARTICLE XXIV – CONTRACT PERFORMANCE
SECURITY
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45
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ARTICLE XXV — MISCELLANEOUS
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B. Buyer’s Business Standards:
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ARTICLE XXVI — EFFECTIVE DATE OF
CONTRACT
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[**]
Confidential Treatment
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4
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The
Specifications
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48
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The
Drawings
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Milestone
Payments
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Protocol of
Delivery and Acceptance
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51
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[**]
Confidential Treatment
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5
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THIS
CONTRACT , dated as of
this 2 nd
day of September, 2005, by and
between Bender Shipbuilding & Repair Co., Inc., a corporation
organized and existing under the laws of Alabama
(“Builder”), having its principal office at 265 South
Water Street, Mobile, AL 36603 (“the Shipyard”), and
Maritrans Operating Company, L.P., a limited partnership organized
and existing under the laws of Delaware (“Buyer”),
having its principal office at Two Harbor Place, 302 Knights Run
Ave., Tampa, FL 33602.
In
consideration of the mutual covenants herein contained, Builder
agrees to design, build, launch, equip and complete at the Shipyard
and sell and deliver to Buyer three (3) 342,000 BBL (@ 100%)
Double Hull AT/B Tank Barges (“the Barges”) and three
12,000 HP Tugs (“the Tugs”) , as more fully described
in Article I hereof (the Barges and the Tugs shall be
connected in pairs hereinafter called “the Units”).
Buyer agrees to purchase and take delivery of the three Units from
Builder at the Shipyard and to pay for the same, all upon the terms
and conditions hereinafter set forth. “Barge”,
“Tug” and “Unit” means any one of the
Barges, Tugs and/or Units, respectively.
ARTICLE I — DESCRIPTION AND
CLASS
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The
Units shall have Builder’s Hull Nos.:
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Tug
1
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7801
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Barge
1
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Tug
2
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7901
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Barge
2
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Tug
3
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8001
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Barge
3
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The
Units shall be designed, constructed, equipped and completed in
accordance with the provisions of this Contract, and the
Specifications (“the Specifications”) and Drawings
(“Drawings”) signed by each of the parties hereto for
identification and attached hereto as Exhibits A and B and made an
integral part hereof.
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[**]
Confidential Treatment
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6
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B.
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Dimensions and
Characteristics:
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Dimensions of each Unit:
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Overall length (as connected ATB)
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Depth to main deck (barge):
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Depth to main deck (tug):
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The
details of the above dimensions, as well as definitions and methods
of measurements and calculations are more fully described in the
Specifications.
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C.
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Classification, Rules and
Regulations:
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1.
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The
Units, including their machinery, equipment and outfitting shall be
constructed in accordance with the rules (as published and
interpreted as of the date of this Contract, and the edition and
amendments thereto being in force as of the date of this Contract)
of and under special survey of the American Bureau of Shipping
(herein called the “Classification Society”), with the
notation set out in the Specifications (herein referred to as the
“Class”).
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2.
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Decisions of the Classification
Society as to compliance or non-compliance with the rules thereof
shall be final and binding upon both parties hereto.
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3.
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The
Units shall also comply with the rules, regulations and
requirements of other regulatory bodies as described in the
Specifications, as the same have been publicly interpreted and were
in effect as of the date of this Contract.
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4.
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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 Builder.
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D.
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Subcontracting:
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Builder may, at its sole discretion
and responsibility, subcontract any portion of the construction
work of the Units, provided however, that no such subcontract in
excess of Two Hundred Thousand Dollars ($200,000) will be executed
without Buyer’s prior written consent as to amount, work, and
the subcontractor, which consent shall not be unreasonably
withheld. Subject to the provisions of Article X, Builder will
remain responsible to Buyer for the performance of any and
all
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[**]
Confidential Treatment
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subcontractors and for any and all
work by subcontractors.
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E.
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Maker’s List:
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Buyer has reviewed and approved the
list of suppliers nominated by Builder for delivery of certain
therein defined equipment, machinery and services (herein referred
to as the “Maker’s List”) signed by each of the
parties hereto for identification and incorporated within the
Specifications. Builder shall endeavor to select suppliers for the
therein-defined equipment, machinery and services from the
Maker’s List, and may, without the interference of Buyer, in
its sole discretion, select between the different suppliers
nominated therein. However, if Buyer requests Builder to order any
equipment, machinery or services from a particular supplier listed
on the Maker’s List, Builder will take all reasonable steps
to comply with such request, provided that Buyer shall reimburse
Builder any reasonable extra costs associated with such
request.
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ARTICLE II — CONTRACT PRICE
AND TERMS OF PAYMENT
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1.
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The
purchase price of the three Units is US$ Two hundred Twenty Nine
Million, Three Hundred Eighty Three Thousand, Six Hundred Forty
Eight dollars ($229,383,648), broken down as follows:
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$
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[**]
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$
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[**]
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$
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[**]
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$
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[**]
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$
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[**]
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$
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[**]
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(herein called the “Contract
Price”), which is exclusive of Buyer Furnished Equipment as
provided in Article XVII hereof and shall be subject to upward
or downward adjustment, if any, as hereinafter set forth in this
Contract.
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2.
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All
applicable taxes, duties and tariffs imposed by federal, state or
local laws as well as assessments of charges for social security,
retirement and unemployment benefits, are the responsibility of the
Builder and are included in the Contract Price.
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1.
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The
Contract Price shall be paid by Buyer to Builder in accordance with
the milestone payment schedule which is attached hereto as
Exhibit C.
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[**]
Confidential Treatment
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a.
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Although the progress payments are
linked to Contractor’s completion of certain milestones,
Contractor acknowledges that scheduling of all work is exclusively
and solely the responsibility of Contractor, and that Contractor
will not artificially manipulate the schedule of construction of
the Vessel merely to achieve earlier milestone payments.
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b.
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Any
milestone payment shall be due upon the completion of the milestone
an no earlier than 15 days prior to the milestone date
contained in Exhibit C. Within 45 days of the execution
of this Contract, Builder will produce a modified Exhibit C
containing mutually agreed milestone dates.
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2.
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The
Milestone Payment Schedule amounts shall be based upon an average
price of each Unit rather than the actual price set forth in Art.
II.A.
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3.
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Buyer will pay Builder upon
presentation of an invoice:
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a.
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The
initial invoice will be paid within five (5) business days of
receipt
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b.
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All
other invoices will be paid within ten business (10) days of
receipt.
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4.
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Upon request of the Buyer, Builder
shall demonstrate to the reasonable satisfaction of the Buyer that
provision has been made for payment (unless such payment is
disputed by Builder) to all contractors, subcontractors, or others
for services performed on the Units, prior to payment by the Buyer
for work performed by the Builder. Builder hereby agrees to provide
Buyer with a full accounting on a monthly basis of expenditures
made on the project, if requested.
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5.
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If
Owner can demonstrate a reasonable basis for a belief that the
Shipyard may be financially unable to complete the Work required by
this Contract or has breached Maritrans’ Vendor Code of
Conduct, Buyer [**] all of Builder’s books, records, and
correspondence pertaining to the Contract, from the time of initial
payment until 18 months after completion of the last
Unit.
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ARTICLE III — ADJUSTMENT OF
CONTRACT PRICE
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):
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[**]
Confidential Treatment
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1.
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For
each Unit, if the Unit is not delivered on its respective Delivery
Date, for every day after the Delivery Date the Contract Price for
such Unit shall be reduced by deducting therefrom liquidated
damages calculated as follows:
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$[**] per calendar day
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$[**] per calendar day
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$[**] per calendar day
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Provided, that prior to exercising
such right to deduct any such liquidated damages, Buyer shall set
forth in writing to Builder the amount (and related supporting
calculations) of the liquidated damages claimed by Buyer. If
Builder disputes any such claimed liquidated damages, then Buyer
shall if requested provide a bank guaranty or other security
reasonably satisfactory to the Builder in the amount of the
disputed liquidated damages until such time as the dispute with
respect to the underlying claim is resolved between the parties by
mutual agreement or pursuant to Article XIV below.
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2.
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If
Buyer requests in writing that the delivery of any Unit be made
earlier than the Delivery Date, and if the delivery of the Unit is
made, in response to such request of Buyer, then, in such event,
beginning with the first (1 st ) day prior to the Delivery Date,
the Contract Price of the Units shall be increased by adding
thereto US$[**] for each full day (it being understood that
Builder’s acceptance of such request by Buyer for early
delivery shall in no way be construed as a change or alteration of
the Delivery Date under this Contract).
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1.
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The
parties agree that tank testing will be performed to ascertain the
maximum speed of the Unit design. Testing methodology shall be
subject to Buyer’s approval and in accordance with standard
practices for model testing in tank basins. The tank testing may
suggest design improvements to increase the speed of the
Unit.
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a.
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Should model testing indicate a
speed of less than the minimum Guaranteed Speed discussed in
Subparagraph 2 below or Builder and Buyer should agree on changes
to the model after initial model testing which would result in
significant increases in speed performance (equal to or greater
than 0.3 knots), Builder shall make changes to the model and, as
necessary, to the Unit which are mutually agreed as the most cost
effective changes to improve the speed of the Unit. The cost of
such changes shall be borne by
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[**]
Confidential Treatment
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Builder, provided such cost shall
not exceed $ [**] in the total construction costs for each Unit.
Any cost above $[**] in model test and total Unit construction
costs to improve the Guaranteed Speed of the Unit above that
obtained through the model testing shall be borne by Buyer and such
changes will be mutually agreed through a Change Order as to cost
and schedule impact.
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b.
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Should model testing indicate a
speed of greater than the minimum Guaranteed Speed discussed in
Subparagraph 2 below, Buyer may request changes to the model to
attempt to further optimize speed performance. Any changes to the
model or the actual Unit requested by the Buyer to achieve speeds
in excess of the Guaranteed Speed provided for in Subparagraph 2
below shall be mutually agreed as to cost and schedule impact and
is subject to a Change Order.
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2.
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The
Guaranteed Speed of the Unit for both full and ballast conditions
with the Unit operating at 100% MCR or about [**] KW per main
engine and zero percent (0%) sea margin with the tug and barge at
design draft will be [**] knots. Builder agrees that the Guaranteed
Speed may be increased based on results of the model testing
discussed in Subparagraph 1 above. Any increase in the final
Guaranteed Speed above [**] knots will be based on the final model
test results with a reduction applied based on a mutually agreed
margin of error. This margin of error will, in no case, be less
than [**] percent ([**])] of the model test speed results. Any
increase in the Guaranteed Speed will be agreed at the conclusion
of tank testing and a modification to this section of the Contract
will be issued in accordance with Article V of this Contract.
Should the model test results yield a speed result of less than
[**] knots, the requirements of Subparagraph 1 above shall
apply.
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3.
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The
actual speed for the delivered Unit will be determined with the
Unit operating at 100% MCR or about [**] KW per main engine, at the
fuel consumption required to achieve [**] KW, with the Tug and
Barge at design draft. This trial run speed will be conducted in
calm water and, to the extent possible, with no current. The
Unit’s hull will be clean. The measured speed on sea trials
will be adjusted in accordance with common Naval Architecture
practices to account for variations in environmental conditions
from calm water and zero sea margin conditions due to items such as
sea state, wave height and direction, wind and current.
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4.
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The
Contract Price shall be changed by reason of the actual speed, as
determined by the trial run, being less than the Guaranteed Speed
of the Unit. The Contract Price shall be reduced by the amounts set
out in the table below for each one tenth of one knot below the
Guaranteed Speed:
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[**]
Confidential Treatment
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11
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From 0 up to and including 1/10th’s of one
knot below guarantee speed
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$
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[**]
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From greater than 1/10 th ’s of one knot up to and including
2/10’s of one knot below guarantee speed
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$
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[**]
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From greater than 2/10 th ’s of one knot up to and including
3/10’s of one knot below guarantee speed
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$
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[**]
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Greater than 3/10’s of one knot and up to
and including 4/10 th ’s of one knot below guarantee
speed
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$
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[**]
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Greater than 4/10 th ’s of one knot and up to and including
5/10 th
’s of one knot below guarantee
speed
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$
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[**]
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Greater than 5/10ths of one knot and up to and
including 6/10ths of one knot below guarantee speed
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$
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[**]
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Greater than 6/10ths of one knot and up to and
including 7/10ths of one knot below guarantee speed
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$
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[**]
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Each subsequent 1/10 th of
one knot below guarantee speed
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$
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[**]
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5.
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Buyer retains the right at its
discretion to reject any Unit whose speed is less than [**] knots,
and, in the case of such rejection, shall be entitled to exercise
the remedies set out in this Contract.
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1.
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Fuel oil consumption at 4050 kW load
(90 % of MCR) for the selected main engine and at a speed of 750
rpm (or according to propeller law) will not exceed [**] with a
tolerance of [**] percent ([**]) (hereinafter referred to as
“Guaranteed Fuel Oil Consumption”) during test running
at the engine manufacturer’s factory prior to the delivery.
Guaranteed Fuel Oil Consumption shall be valid at reference
conditions ISO 3046/I and a fuel net calorific heat value of 42.700
kJ/kg (10.200 kcal/kg) when running on available fuel without
engine driven pumps. The leakage fuel in each engine will not be
calculated into the consumption.
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2.
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However, commencing with and
including an excess of [**] percent ([**]) in the actual fuel
consumption over the Guaranteed Fuel Oil Consumption, the Contract
Price shall be reduced by the sum of $[**] per engine for each full
[**] percent ([**]) increase in Fuel Oil Consumption above said
[**] percent ([**]) (fractions of one percent (1%) to be prorated)
to a maximum of [**].
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[**]
Confidential Treatment
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12
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3.
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Should the engine manufacturer, in
order to meet the Fuel Oil Consumption guarantee, be required to
make adjustments or modifications to any or all engines and any
such adjustments or modifications result in a delay of delivery of
any engine to the Builder from the mutually agreed scheduled
delivery date, Builder will be entitled to up to [**] days of force
majeure on a day for day basis for such late delivery.
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4.
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Builder and Buyer agree that the
fuel consumption figures and liquidated damages provided for in
Subparagraphs 1 and 2 above are based on a specific engine
manufacturer. Should another engine manufacturer be selected after
execution of this Contract, the fuel consumption and liquidated
damages provided by that manufacturer will apply without any
additional cost or burden to Builder. A change to Subparagraphs 1
and 2 above will be issued as a modification to this Contract
within forty eight (48) hours of final selection of an engine
manufacturer if different from the manufacturer selected
above.
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a.
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The
Unit will achieve noise requirements established by IMO Resolution
A.468, Code for Noise Levels On Board Ship (“IMO
A.468”) for all accommodation spaces, navigation spaces and
service spaces, including the barge office, in accordance with
Sub-subparagraph c below. Measures to be undertaken are discussed
comprehensively in the Specifications.
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b.
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To
achieve the noise levels defined in Sub-subparagraph c below,
Builder will install noise control hardware and materials as
required by the Specifications, and other measures as stated in the
Specifications. Those other measures may also include the strategic
positioning of tanks located directly above the propellers so as to
attenuate propeller induced noise, where possible. Builder will
also retain the services of a qualified HVAC system subcontractor.
HVAC systems will be analyzed for noise in accordance with
procedures defined in, ASHRAE 1999, Chapter 46, “Sound
and Vibration Control”. HVAC systems will be designed with a
goal that HVAC system noise contributions are at least
approximately [**] below the limits stated in IMO A.468 such that
when machinery noise contributions are present, the total noise
level in a ship compartment does not exceed the levels.
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c.
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Builder will achieve compliance with
IMO A.468 standards for the navigation bridge (65-dBA) and for all
offices (65-dBA) at 01 deck
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[**]
Confidential Treatment
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13
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and
above and for all accommodation space cabins (60-dBA) at 01 deck
and above. For all other accommodation space cabins, mess rooms,
and office spaces located on main deck or those accommodation space
cabins or office spaces which, by arrangement, are located adjacent
to any machinery spaces, connection/coupler systems or in close
proximity to propellers, Builder will achieve a noise level between
[**]. Galleys, pantries, recreation rooms, and exercise rooms at
main deck level will be at a maximum of [**], as required by IMO
A.468.
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d.
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Any
noise level that exceeds the requirements stated above will be
investigated by Builder’s selected noise analyst. The cost of
such noise analyst will be to the account of Builder. This noise
analyst will develop a comprehensive list of recommended corrective
actions and specific elements of this list will be acted upon by
Builder as discussed below, to the reasonable satisfaction of the
noise analyst and Buyer. Builder may, at its discretion, elect to
implement those measures which it considers to be most cost
effective in reducing the noise levels to those spaces mentioned
above and Builder will expend up to $[**] per Unit on corrective
actions which are considered by the Builder and the Builder’s
assigned noise analyst to be the most cost effective measures to
achieve the required noise levels. This $[**], or any portion
thereof, will be the cost for changes to the first Unit only. These
same changes will be applied to all subsequent Units. However, upon
expenditure of this $[**], Builder may, at its discretion, elect to
pay liquidated damages specified herein in lieu of taking such
corrective action should the cost of any or all corrective action
exceed the value of the liquidated damages to be paid under this
section. Further:
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(1)
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Should, upon completion of
corrective actions taken by the Builder, the noise level problem
persist or is mitigated only to a level which is still above the
required levels stated above, Builder shall pay liquidated damages
of $[**] per decibel per space above the required levels to a
maximum level of [**] decibels above the required noise level. The
liquidated damages under this section will be limited to a total of
$[**].
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(2)
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Should the noise levels in any
accommodation or control space, after corrective action has been
taken by the Builder, exceed the levels stated above by greater
than [**] decibels, Builder will pay liquidated damages in the
amount of [**] per decibel per space in excess of [**] decibels
above the required noise level. The liquidated damage to be paid
for cases where noise levels exceed by greater than [**]
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[**]
Confidential Treatment
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14
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decibels above the required noise
levels will be limited to a total of $[**].
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(3)
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Buyer may elect to refuse to accept
the Unit for any noise level in any accommodation or control space
at 01 level or above which exceeds the guaranteed levels of
Paragraph D.1.(c). above by greater than 10 decibels or any
other space identified in Paragraph D.1.(c) which is equal to
or greater than [**].
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a.
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The
Units will meet the Specification requirements regarding vibration
limits as set out in ISO 6954, “Mechanical Vibration
and Shock - Guidelines for the Overall Evaluation of Vibration in
Merchant Ships” for peak acceleration less than or
equal to 285mm/s 2 for the frequency range of [**] and
for peak velocity less than or equal to 9 mm/s for the frequency
range [**].
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b.
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During the engineering design phase
Builder will retain the services of the propulsion engine
manufacturer selected by Buyer to perform a propulsion system
torsional analysis. Builder will also retain the services of a
qualified noise and vibration analysis firm such as BBN
Technologies to perform a comprehensive whole ship (hull and
superstructure) finite element vibration analysis using methods
defined in the Specifications.
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c.
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Predicted vibration levels during
the design phase will be compared against the specified vibration
limits to verify vibration compliance. If excessive vibration is
predicted, Builder will undertake reasonable corrective measures
such as selection of a specific alternate propeller, local
stiffening of structure, or inclusion of additional vibration
dampening material into the ship design.
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d.
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Any
vibration level that exceeds the requirements stated above will be
investigated by Builder’s selected vibration analyst. The
cost of such vibration analyst will be to the account of Builder.
This vibration analyst will develop a comprehensive list of
recommended corrective actions and each element of this list will
be acted upon by Builder to the reasonable satisfaction of the
vibration analyst and Buyer. If, upon completion of all directed
corrective actions, the vibration level exceeds the standard
required in Article III.D.2.(a), Buyer may elect to refuse to
accept the vessel.
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[**]
Confidential Treatment
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15
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ARTICLE IV — APPROVAL OF
PLANS AND DRAWINGS AND
INSPECTION DURING CONSTRUCTION
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A.
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Approval of Plans and
Drawings:
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1.
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Builder shall submit to Buyer four
(4) hard copies and one (1) electronic copy via e-mail or
on CD-ROM of the plans, drawings, and calculations required to be
submitted thereto for its review. Buyer or Buyer’s designated
Engineering representative shall, within twenty one
(21) calendar days after earliest receipt thereof, respond to
Builder, either through hard copy or electronically via e mail,
with Buyer’s comments, if any, either written on the plans
thereon or in a comment letter referencing the plan, drawing or
calculation. All hard copy drawing, plan and calculation
submissions between Buyer and Builder will be by overnight delivery
through a well established courier service, the cost of such
courier service being borne by the sender. Buyer will, in response
to any drawing, plan or calculation submission from Builder,
designate each drawing formally as either “Approved without
comment”, “Approved with Comments” or “Not
Approved”. Builder and Buyer will coordinate their efforts to
ensure that the twenty one (21) calendar day review time is
reduced to the minimum interval consistent with effective review
through mutually agreed drawing development and submission
schedules and timely assignment of adequate personnel to the tasks
of review. Builder may formally request expedited review for plans,
drawings and calculations. Buyer agrees to consider each such
request on a case by case basis and advise Builder of ability to
meet the requested date and any delays to other review tasks but is
in under no obligation to accept expedited review. Builder shall
submit to the Regulatory Agencies, the plans, drawings and
calculations that require their approval. Copies of all
correspondence between the Builder and the Regulatory Agencies as
well as all hard copies of plans, drawings and calculations
returned stamped by the Regulatory Agencies shall be submitted
immediately to the Buyer in hard copy or in electronic files shared
through Builder’s electronic file system.
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2.
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When and if Buyer’s
Representative shall have been sent by Buyer to Builder in
accordance with Paragraph B of this Article, Builder shall
provide the Buyer’s Representative at any and all Builder
sites where a Buyer’s Representative is assigned one
(1) hard copy of the latest revisions of all previously
approved drawings. This Buyer’s Representative, regardless of
where located, will be provided one information hard copy of all
drawing, plan and calculation submissions to Buyer addressed in
Subparagraph 1 above.
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3.
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Plans, drawings and calculations
must be submitted for review and approval by the Owner and
Regulatory Agencies prior to their use for the
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[**]
Confidential Treatment
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16
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construction of the vessel. Plans,
drawings and calculations must be reviewed and returned by the
Owner within twenty one (21) calendar days of receipt by the
Owner. If the plans, drawings or calculations are not returned by
the Owner within twenty one (21) working days, they shall be
deemed to be approved. Should the Builder begin work covered by a
plan, drawing, calculation, etc. being reviewed by the Owner prior
to the Owner’s return of the drawing by the time specified
herein, the Builder shall be responsible for all remediation and
additional work to complete the work to satisfy the Owner’s
comments within the scope of these Specifications with no
additional cost to the Owner. The Builder is required to submit a
plan, drawing or calculation for comment and approval by the Owner
even if it is identical in every way to the original Contract
Drawing.
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4.
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Approval of these drawings by the
Buyer or the Regulatory Agencies shall not relieve the Builder of
its responsibility to deliver a complete and operable Unit in
accordance with the requirements of the Specifications.
Construction errors and omissions must be corrected by the Builder
in accordance with Article X prior to delivery, even if the
item at hand was constructed as depicted on the plans, drawings or
calculations approved by the Buyer or the Regulatory Agencies. In
no case shall the approval of the drawings be interpreted as
approval of errors or omissions.
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5.
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Errors or inconsistencies in Buyer
comments to drawings, plans and calculations submitted under
Paragraph 3 above with regard to the specifications, contract
drawings or any requirements of class or regulatory authority will
be brought to the immediate attention of the Buyer by the Builder
with full delineation of the nature and scope of the error or
inconsistency. Buyer direction to incorporate such errors or
inconsistencies will be formally documented by Buyer to Builder
with full acknowledgement of Builder’s notification. Buyer
directed incorporation of such errors or inconsistencies may be the
subject of an adjustment to contract price, if rejected by class or
regulatory authority.
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B.
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Appointment of Buyer’s
Representative:
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Buyer may send to and maintain at
the Shipyard, at Buyer’s own cost and expense, one
representative who shall be duly authorized in writing by Buyer
(herein called “ Buyer’s Representative”) to act
on behalf of Buyer in connection with modifications of the
Specifications, adjustments of the Contract Price, approval of the
plans and drawings, attendance to the tests and inspections
relating to the Units, its machinery, equipment and outfitting, and
any other matters for which he is specifically authorized by
Buyer
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C.
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Inspection by Buyer’s
Representative:
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[**]
Confidential Treatment
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17
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1.
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The
necessary inspections of the Units, its machinery, equipment and
outfitting shall be carried out by the Classification Society,
other regulatory bodies and/or an inspection team of Builder
throughout the entire period of construction, in order to ensure
that the construction of the Units is duly performed in accordance
with this Contract and the Specifications. Buyer’s
Representative shall have, during construction of the Units, the
right to attend all tests, trials and inspections of the Units,
their machinery, equipment and outfitting. Builder shall give a
notice to Buyer’s Representative reasonably in advance of the
date and place of such tests and inspections to be attended by him
for his convenience. Failure of Buyer’s Representative to be
present at such tests and inspections after due notice to him as
above provided shall be deemed to be a waiver of his right to be
present.
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2.
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In
the event that Buyer’s Representative discovers any
construction or material or workmanship which is not deemed to
conform to the requirements of this Contract and/or the
Specifications, Buyer’s Representative shall promptly give
Builder a notice in writing as to such non-conformity. Upon receipt
of such notice from Buyer’s Representative, Builder shall
correct such non-conformity, if Builder agrees to his view. In all
working hours during the construction of the Units until delivery
thereof, Buyer’s Representative shall be given free and ready
access to the Units, their engines and accessories, and to any
other place where work is being done, or materials are being
processed or stored, in connection with the construction of the
Units, including the yards, workshops, stores and offices of
Builder. Builder shall seek to arrange with Builder’s
subcontractors that Buyer’s Representative has a similar
right of inspection and supervision in respect of the work
performed by the subcontractors.
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3.
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The
fact that the work and materials have been inspected from time to
time and that payments on account have been made shall not relieve
the Builder from the responsibility to remedy any defective work or
materials. The right of inspection reserved by the Buyer is solely
for the benefit of the Buyer, and does not relieve the Builder of
any responsibilities under this Agreement.
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D.
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Facilities:
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Builder shall furnish Buyer’s
Representative and up to three (3) assistant(s) with adequate
office space, and such other reasonable facilities according to the
Builder’s practice at or in the immediate vicinity of the
Shipyard as may be necessary to enable them to effectively carry
out their duties.
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E.
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Responsibility of
Buyer:
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1.
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Buyer shall undertake and assure
that Buyer’s Representative shall carry out his duties
hereunder in accordance with the normal shipbuilding
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[**]
Confidential Treatment
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18
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practice of Builder and in such a
way as to avoid any unnecessary increase in building cost, delay in
or interference with the construction of the Units, and/or any
disturbance in the construction schedule of Builder.
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2.
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Builder has the right to request
Buyer to replace Buyer’s Representative who Builder deems
unsuitable and unsatisfactory for the proper progress of the
Units’ construction. Buyer shall investigate the situation by
sending a senior executive to the Shipyard if necessary, and if
Buyer considers that such Builder’s request is justified,
Buyer shall effect such replacement as soon as
practicable.
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ARTICLE V –
MODIFICATIONS
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A.
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Modifications of
Specifications:
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1.
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The
Buyer may, from time to time, by a written Change Order Form (or
such other Form upon which the Parties mutually agree) issued to
the Builder, make changes in Specifications or drawings, issue
additional instructions, require additional work or direct the
omission of work previously ordered. The provisions of this
Agreement shall apply to all such changes, modifications and
additions with the same force and effect as if they were embodied
in the original Specifications and drawings.
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2.
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Except as provided for in
subparagraph 3 below, changes to the Specifications proposed by the
Builder shall be detailed on a Change Order Form by the
Builder’s authorized representative for Buyer approval. The
provisions of this Agreement shall apply to all such changes,
modifications and additions with the same force and effect as if
they were embodied in the original Specifications and
drawings.
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3.
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The
Builder shall make no changes or variations from the Drawings or
Specifications except on written order of the Buyer’s
Representative through the vehicle of a Change Order Form or
through a design change reflected in a Buyer-approved plan or
drawing, it being understood that the Specifications and Drawings
are for guidance in developing the final design and production
drawings by Builder. Buyer and Builder agree that, as the detailed
design progresses, some changes from the Specifications and the
Drawings may be required to meet performance requirements or may be
useful to the Builder to improve cost effectiveness of the project
without any reductions in or to fundamental performance criteria,
serviceability, operability or maintenance costs to the Buyer. Such
changes, made in the development of the final design or production
drawings, will only be subject to approval by the Buyer and will
not be subject to Change Order which requires any adjustment to
Contract Price.
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[**]
Confidential Treatment
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4.
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Changes or variations to existing
work, as well as new items, are to be fully described and priced on
the Change Order Form. Each Change Order will be priced by the
Builder and signed by the Buyer’s Representative prior to the
start of any “change” work. No claims for an addition
to the contract amount shall be valid unless this procedure is
done.
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5.
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For
any Change Order, including Change Orders requesting changes to the
delivery date based upon late delivery of the Vessel or Owner
furnished equipment, delays in Owner-furnished work, or Force
Majeure, the Builder must note on the Change Order Form and
demonstrate:
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a.
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what effect, if any, the changes,
additions, or delays will have on the total number of days
originally quoted; and
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b.
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by
specific reference to the work schedule and Critical Path Analysis
why, and the extent to which, the Change Order will physically
interfere with timely completion of the work, or why reasonable
adjustments cannot be made to keep the work on schedule.
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6.
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If
the parties acting in good faith cannot agree on a price or time
relating to a Change Order, the Builder shall nevertheless perform
the work if so instructed by the Buyer’s representative. In
such event, the Builder’s entitlement to a cost adjustment or
modification of the Redelivery Date shall be resolved pursuant to
XIII of this Agreement. In no event shall the value of any single
Buyer-directed change order exceed a value of $[**] per Change
Order and the value of Buyer directed Change Orders in the
aggregate shall not exceed $[**] per Unit.
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7.
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Where appropriate, the value of
Change Orders is to be paid on a progress payment schedule
commensurate with the related work and its schedule for
accomplishment. In these cases, these progress payments will be
based on the Buyer’s assigned valuation for the Buyer Change
Order.
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8.
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In
any case, the Builder bears the burden of establishing the
reasonable cost of the change order and/or the need for any
modification to the Redelivery Date.
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9.
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The
Builder shall promptly respond to Buyer’s proposals for
changes and shall return all Change Order Forms to the Buyer, in
conformity with this Paragraph, within 48 hours of submission by
the Buyer. Extensions of time to return the Change Order Form may
be granted if the Builder establishes that the nature of the
proposed change requires additional time, and informs the Buyer of
the need and basis for additional time within the 48-hour period
following submission by the Buyer. No extension of the Redelivery
Date shall be granted for delays caused by the Builder’s
failure to provide a timely return of the Change Order
Form.
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[**]
Confidential Treatment
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20
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10.
|
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The
Buyer’s Representative shall retain the original copies of
all Change Orders.
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B.
|
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Change in Class:
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In
the event that, after the date of this Contract, any requirements
as to class, or as to rules and regulations (or the interpretation
thereof) to which the construction of the Units are required to
conform, are altered or changed by the Classification Society, the
US Coast Guard or any other regulatory bodies authorized to make
such alterations or changes, the following provisions shall
apply:
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1.
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If
such alterations or changes are compulsory for the Units, either of
the parties hereto, upon receipt of such information from the
Classification Society, the US Coast Guard or such other regulatory
bodies, shall promptly transmit the same to the other in writing,
and Builder shall thereupon incorporate such alterations or changes
to the construction of the Units, provided that Buyer shall first
agree to adjustments required by Builder in the Contract Price, the
Delivery Date and other terms and conditions of this Contract and
the Specifications occasioned by or resulting from such alterations
or changes.
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2.
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If
such alterations or changes are not compulsory for the Units, but
Buyer desires to incorporate such alterations or changes into the
construction of the Units, then, Buyer shall notify Builder of such
intention. Builder may accept such alterations or changes, provided
that such alterations or changes will not, in the judgment of
Builder, adversely affect Builder’s planning or program in
relation to Builder’s other commitments, and provided,
further, that Buyer shall first agree to adjustments required by
Builder in the Contract Price, the Delivery Date and other terms
and conditions of this Contract and the Specifications occasioned
by or resulti
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