Description: Twin Screw Heavy Fuel Burning Ocean Tugs (4) and ATB Barges (4)
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VESSEL CONSTRUCTION CONTRACT
THIS VESSEL CONSTRUCTION CONTRACT (the “Contract”) entered into as of this twenty-third of August, 2005, by and between VT HALTER MARINE, INC. (VTHM), a Delaware corporation (hereinafter called “Builder”), and VESSEL MANAGEMENT SERVICES, INC., a Delaware corporation (hereinafter called “Owner”).
ARTICLE I — DESCRIPTION OF THE UNITS
(a) Description of the Units
Builder, for and in consideration of the sum to be paid by Owner as hereinafter set forth, agrees to design, engineer, build, launch, equip, outfit, complete and deliver at the shipyard as designated in the attached Exhibits, free and clear from liens, claims and encumbrances, four (4) 135’ x 42’ x 22’ Twin Screw Heavy Fuel Burning Ocean Tugs and four (4) 587’ x 74’ x 40’ Ocean ATB Barges (hereinafter individually referred to as the “Vessel(s)” and a Tug and Barge set is collectively referred to as the “Unit(s)”, each of which is more particularly described on the attached Tug Exhibits “A-1-T”, “A-2-T”, “A-3-T” and “A-4-T” and Barge Exhibits “A-1-B”, “A-2-B”, “A-3-B”, “A-4-B”which shall be constructed in accordance with this Contract , those specifications listed on attached Tug Exhibit “B-1” and Barge Exhibit “B-2” and the Plans and Drawings listed on the attached Tug Exhibit “C-l” and Barge Exhibit “C-2” all of which have concurrently been identified and initialed by the parties hereto and made a part hereof as if fully set forth herein. (The Units referred to in the preceding sentence may be referred to as “Unit No. HFO-1”, “Unit No.HFO-2”, “Unit No.HFO-3” and “Unit No.HFO-4” or “Units 1-4” as the context may require.)
For purposes of this Contract, the Contract Documents shall consist of the following documents (as each is defined in the Contract): this Contract, Tug Exhibits A-1-T, A-2-T, A-3-T and A-4-T, Barge Exhibits A-1-B, A-2-B, A-3-B and A-4-B, Tug Specifications listed on Exhibits B-1 and Barge Specifications B-2, Plans and Drawings
listed on Tug Exhibits C-l and Barge Exhibits C-2, any Change Orders executed pursuant to Article IV hereof and amendments in writing properly signed by the parties.
Except for any Owner-furnished equipment and materials as may be listed in the Contract Documents in connection with construction of the Vessels (collectively, the “Owner Furnished Equipment”), Builder agrees to furnish all facilities, labor, tools, equipment and material necessary for the construction and delivery of the Vessels.
The Units shall be constructed and completed in a good and workmanlike manner with the use of good commercial shipyard practices and marine engineering and procedures to meet the applicable requirements of regulatory bodies as set forth in the Contract Documents, and certificates evidencing the fact that the Units meet required classifications, shall be furnished by Builder to Owner.
The Units are to be documented for full ocean service with coastwise rights under the laws of the U.S. and are to be designed, constructed, equipped and outfitted by Builder to comply with and obtain certificates showing compliance with all applicable requirements, as of the Delivery Date, of the American Bureau of Shipping, U.S. Coast Guard or any other applicable regulatory agencies referred to in the Contract Documents. The Contractor shall build the Units under the supervision and survey of the American Bureau of Shipping so that on delivery the Tug Vessels achieve the class notation ABS X Al Towing Vessel X AMS and the Barge Vessels achieve the class notation ABS X Al Oil and Chemical Tank Barge SH free of all conditions, notations, qualifications, recommendations, reservations and restrictions. If any enforced changes in the American Bureau of Shipping or other applicable classification societies’ rules or in the applicable rules of any governmental agency are made subsequent to the date of this Contract necessitating alterations or additions to a Vessel or a Unit, whereby the cost of a Vessel or a Unit is increased, the time required for completion for a Vessel or a Unit is extended and/or a Vessel or a Unit will not attain the performance criteria required by Article X, Owner shall authorize, and pay for such alterations, additional work items, outfit and/or equipment, and shall authorize such additional time as may be required to meet the enforced changes and the required performance criteria, in accordance with Article IV (Changes in the Plans and Specifications) hereof. If the parties agree that such alterations
or additions do not involve additional time or cost, they shall be completed by Builder as part of this Contract in accordance with the terms and provisions hereof.
All classification, certification, testing, survey and other fees and charges payable to the American Bureau of Shipping and any other third party regulatory bodies required by the Contract in relation to the construction of the Unit shall be for the account of the Builder.
Owner shall be solely responsible for ensuring that all Owner Furnished Equipment meets all applicable classification and regulatory requirements.
ARTICLE II — PRICE AND PAYMENT :
Owner, in consideration of the true and faithful performance on the part of the Builder, agrees to pay to Builder the sum of THIRTY EIGHT MILLION TWO HUNDRED THOUSAND DOLLARS AND NO CENTS ($38,200,000) (hereinafter called the “Contract Price”) each for Unit No.HFO-1, Unit No.HFO-2, Unit No.HFO-3 and Unit No.HFO-4. The portion of the Contract Price attributable to each Vessel (hereinafter called the “Assigned Value”) is contained in Tug Exhibits A-1-T, A-2-T, A-3-T and A-4-T, Barge Exhibits A-1-B, A-2-B, A-3-B and A-4-B, for each Unit. Payments for the Assigned Value are to be made based on the progress of each Vessel in accordance with the Payment Schedules set forth in Tug Exhibits A-1-T, A-2-T, A-3-T and A-4-T, Barge Exhibits A-1-B, A-2-B, A-3-B and A-4-B. The Contract Price is a fixed price and may be adjusted only in strict accordance with, and subject to, the express provisions of this Contract. For the avoidance of doubt, the Contract Price includes: (i) the cost of the Unit completed in accordance with the requirements of this Contract; (ii) the cost of all Builder furnished materials and construction work and the cost of all tests and trials of the Unit to be performed by, or on behalf of, the Builder; (iii) the cost of procuring the classification notation for the Unit, and of obtaining all certificates and other documents that are required to be delivered pursuant to this Contract; and (iv) all other costs and expenses of the Builder as provided for herein or otherwise incurred by the Builder unless expressly provided for in this Contract as being for the Owner’s account. No commission of any kind whatsoever is or will be payable (whether directly or indirectly) by or to any person in relation to or in connection with this Contract or any
of the business transactions described in or contemplated by this Contract. The Contract Price for Units 1, 2, 3 and 4 includes the cargo heating systems and Easy Chemical capability for those Units.
In the event the Down Payment for each Vessel, as required by Tug Exhibits A-1-T, A-2-T, A-3-T and A-4-T, Barge Exhibits A-1-B, A-2-B, A-3-B and A-4-B is not tendered to Builder in immediately available funds by the close of business on the fifth (5 th ) business day following the full execution of this Contract, Builder shall have the right to terminate this Contract, in which event neither party shall have any further liability to the other. In the event Builder chooses not to terminate this Contract, then the Stipulated Delivery Date (as described in Tug Exhibits A-1-T, A-2-T, A-3-T and A-4-T, Barge Exhibits A-1-B, A-2-B, A-3-B and A-4-B) shall be extended by one day for each full business day the Down Payment is delayed beyond the fifth (5 th ) business day following execution of this Contract.
The Builder shall submit to Owner appropriate invoices and/or certificates for the progress payments for each Vessel in accordance with the Payment Schedule set for in Tug Exhibits A-1-T, A-2-T, A-3-T and A-4-T, Barge Exhibits A-1-B, A-2-B, A-3-B and A-4-B which shall be due and payable twenty (20) business days after the receipt of each invoice. Builder may, at it discretion, charge Owner interest on any amount due hereunder, if not paid within five (5) business days after it is due, at the per annum rate of 2% over the Chase Manhattan Bank prime rate or the maximum rate allowed by law, whichever is less, with such interest being due from the date such amount is due until paid in full. Payments for all Change Orders and all other additional costs mutually agreed to in accordance with the terms of this Contract but not set forth in the Payment Schedule, less credits for any deductions, shall be made in accordance with the terms of the negotiated Change Order and in any event prior to delivery of the Unit or Vessel to which the change order or additional cost pertains. The Assigned Value must be paid in accordance with the Payment Schedule set forth in Tug Exhibits A-1-T, A-2-T, A-3-T and A-4-T, Barge Exhibits A-1-B, A-2-B, A-3-B and A-4-B.
If any progress payment shall not be made within five (5) business days after it is due in accordance with the Contract Documents including, but not limited to, Tug Exhibits A-1-T, A-2-T, A-3-T and A-4-T, Barge Exhibits A-1-B, A-2-B, A-3-B, and A-4-
B, Builder may, in its sole discretion, suspend or reschedule progress of the work (such right being in addition to any other right set forth herein or at law or in equity) and Owner shall then be obligated to pay Builder, in addition to other amounts becoming due hereunder, all documented direct costs resulting from such suspension or rescheduling of the work. In the event of delay by Owner in payment of any amount due and payable, Builder shall not be obligated to reschedule progress of the work as herein authorized, but may pursue any and all remedies at law or in equity for enforcement of its rights, provided that Owner be given ten (10) days prior written notice before Owner is considered to be in default.
The making of any partial payments shall in no way estop Owner from thereafter asserting any right or remedy accruing to it because of failure of Builder to deliver the completed Units in accordance with the terms hereof.
ARTICLE III — TIME AND CONDITIONS OF DELIVERY AND ACCEPTANCE; TITLE :
Builder shall deliver the Units to Owner at a location set forth on the attached Tug Exhibits A-1-T, A-2-T, A-3-T and A-4-T, Barge Exhibits A-1-B, A-2-B, A-3-B and A-4-B (the “Place of Delivery”) by the Stipulated Delivery Dates (as defined in Tug Exhibits A-1-T, A-2-T, A-3-T and A-4-T, Barge Exhibits A-1-B, A-2-B, A-3-B and A-4-B). All costs and expenses of transporting each Unit to the Place of Delivery shall be borne by and be the obligation of Builder. All costs and expenses of operating and/or transporting the Units after each has reached the Place of Delivery and been accepted by Owner shall be borne by and be the obligation of Owner.
Each Unit shall not be tendered to Owner and Owner shall not be required to accept delivery of the Unit, unless and until:
If all applicable conditions of the Contract Documents have been met by Builder upon delivery of the Unit to Owner, Owner shall execute a Delivery and Acceptance Certificate concurrent with its acceptance of the Unit in the form of the attached Exhibit “D” and will pay to Builder the final Progress Payment invoice including any unpaid balance due, but less (i) any amount in dispute and as to which notice of arbitration has been given and less (ii) any amounts owed to Owner as liquidated damages in accordance with this Contract. Progress Payments shall be made by the Owner to the Builder in accordance with Article II of this contract.
Within ten (10) business days after tender of delivery of a Unit by Builder to Owner in compliance with this Article III, Owner will accept delivery of the Unit or Owner will promptly deliver to Builder a written statement specifying the reasons Owner refused to accept delivery. Within one (1) business day after receipt of such statement, Builder shall advise Owner in writing what action it intends to take in response to Owner’s statement. Owner shall not refuse to accept delivery of a Unit that achieves the Minimum Required Speed of 11.5 knots as measured in accordance with Exhibit “H” for this reason only.
The Delivery and Acceptance Certificate shall acknowledge performance of this Contract by both parties and shall be conclusive evidence that all the duties and obligations of each of the parties have been performed except as to (i) minor and insignificant defects set forth in the Delivery’ and Acceptance Certificate, (ii) latent defects and (iii) items covered by warranty. The expression “minor and insignificant defects” means defects which: (i) do not and will not adversely affect the seaworthiness of the Unit; (ii) do not and will not prevent the unrestricted use of the Unit in its intended service or purpose; (iii) do not and will not adversely affect the operational efficiency of the Unit; or (iv) do not and will not involve any condition, qualification, recommendation, reservation or restriction in relation to any certificate issued (or to be issued) by the American Bureau of Shipping or any regulatory authority or any other specified party that in the opinion of the Owner (acting in good faith) is or could be material in a commercial or technical sense. The Builder shall deliver the unit to the owner free and clear of all encumbrances whatsoever.
The Builder shall deliver the Unit to the Owner safely afloat alongside a safe and accessible pier at the Builder’s shipyard where there must be sufficient water for the Unit always to remain afloat and from where there must be direct, free, unimpeded, safe and lawful access to international waters. Owner shall be afforded five (5) days free of any wharfage or any other charge within which to remove the Unit from the point and time of Delivery.
Subject to this Article and to Article XXIII (Choice of Law and Dispute Resolution), should Owner fail to accept a Unit within ten (10) business days of the later to occur of (i) Owner’s receipt of Builder’s final progress payment invoice indicating completion of the Unit in accordance with the Contract Documents and (ii) delivery of the Unit to Owner in accordance with this Article, Owner shall be in default of this Contract, and Builder shall have the right to take all necessary steps to mitigate its damages and protect its rights and interests including, but not limited to, the right to sue for specific performance of this Contract, or to retain any deposits or other payments made hereunder. Builder’s exercise of the foregoing remedies, or any other remedies or rights, shall not be deemed a waiver or release by Builder of any other rights or remedies that Builder may have at law or in equity, taking into account the terms of this Contract
including, but not limited to the right to sue for any additional damages, costs, expenses, or attorneys’ fees incurred by Builder in pursuing relief and recovery of damages or expenses resulting from Owner’s default.
Title to all materials, equipment, supplies, and other property incorporated into or purchased for incorporation into each Vessel shall vest in Owner as and when Builder receives payment from Owner under this Contract, subject to Builder’s liens and rights at common law, by statute or under this Contract. Title to Owner Furnished Equipment shall, at all time, remain in Owner notwithstanding that Builder shall have the risk of loss as provided in Article XIII, Liability and Indemnity.
ARTICLE IV — CHANGES IN THE PLANS AND SPECIFICATIONS :
Subject to the requirements of other work then pending in Builder’s yard, Owner has the right to require any deletions from or additions to the plans and specifications for each Vessel on giving due notice in writing to Contractor, the dollar amount of any such changes to be agreed upon in advance by Owner and Builder, and added to, or deducted from, the total Contract Price and Assigned Value for such Vessel. If any such change shall delay the completion of such Vessel, Builder shall be allowed a reasonable extension of time of the Stipulated Date of Delivery sufficient to cover such delay. If any such change shall likely result in such Vessel not attaining the required performance criteria under Article X, Owner and Builder shall agree on such modifications of the requested change necessary in order for the Vessel to attain the required performance criteria before such change is effected. A statement of the increase or decrease to the Contract Price and Assigned Value, and/or any additional contract time required, as aforesaid, shall be submitted to Owner by Builder in the form shown on Exhibit “E”, and shall be approved by Owner in writing before any such change is made. Notwithstanding the foregoing, no change shall be made in the general dimensions and/or characteristics of any Vessel which would diminish the capacity of the Vessel to perform as originally intended by the Contract Documents, except by mutual consent of the parties.
If the Parties are unable to agree on the adjustment to the Contract Price and Assigned Value, and/or any additional contract time required by the change directed by the Owner, Builder shall perform the requested change and Owner shall pay Builder for
such change on an actual time and direct material cost basis using Builder’s published “Standard T&M Rates” as the same may be changed from time to time based on Builder’s rates with the U.S. Government; provided, however, in no event shall the rates charged Owner be less favorable than Builder’s rates to other customers. Owner shall pay Builder’s invoices for such actual time and direct material costs for change work in accordance with the payment terms for progress payment invoices set forth in Article II hereof. All payments made pursuant to this paragraph (i) shall be subject to future if; adjustment and (ii) shall not constitute a waiver of Owner’s rights under Article XXIII. The Builder will maintain a daily record of labor, equipment and materials utilized in time and materials work covered under a change and will present this record to Owner. If, at any time, a unit price or lump sum basis of compensation can be agreed to for work being performed under this paragraph, such compensation may be set forth in writing as a change.
ARTICLE V — LIQUIDATED DAMAGES :
If completion and delivery of a Unit shall be delayed beyond the respective Stipulated Delivery Date, as adjusted in accordance with the provisions of the Contract hereof, it is agreed that Owner will suffer damages which are difficult of ascertainment and the parties hereby agree that Owner shall sustain, and Builder agrees to pay, as liquidated damages an amount in accordance with the following schedule for each calendar day that actual delivery is delayed beyond the sixteenth day following the Stipulated Delivery Date:
Day 17 through
26 — $1,000/day
In no event shall the liquidated damages payable hereunder exceed $1,900,000 per unit. Owner’s right to such liquidated damages shall be Owner’s sole and exclusive remedy for damages or loss due to late delivery of a Unit and Owner specifically waives all other rights or remedies at law or in equity, for damages or loss due to late delivery of a unit, other than Owner’s right under clause (a)(iv) of Article XX (Events of Default) in
the event completion and delivery of a Unit is delayed more than one sixty one (161) days after the Stipulated Delivery Date (as adjusted in accordance with the terms of this Contract) of the Unit.
ARTICLE VI — OWNER FURNISHED EQUIPMENT :
Within ten (10) business days from the execution of this Contract, Builder shall deliver to Owner a schedule of dates for the delivery to Builder by Owner of Owner Furnished equipment and information (the “Schedule of Delivery of Owner Furnished Equipment”).
If delivery by Owner to the designated shipyard of any of the components of Owner Furnished Equipment is delayed beyond the respective scheduled dates of delivery shown on the Schedule of Delivery of Owner Furnished Equipment, it is agreed that the Stipulated Delivery Date of the affected Unit(s) shall be extended on a day for day basis for each day of delay of such Owner Furnished Equipment or such other period, whether longer or shorter, as the parties may mutually agree in writing taking into consideration the degree the Work is actually delayed by the delay of such Owner Furnished Equipment.
Owner shall be responsible for all costs of transportation of Owner Furnished Equipment to the designated shipyard as well as all classification and regulatory certificates. All Owner furnished equipment arriving at Builder’s yard shall be stored in a secure area allocated to Owner for storage of equipment and supplies until required by Builder for installation into the Vessels. Such securing area shall be plainly marked to indicate Owner’s possession and ownership of such equipment and supplies.
ARTICLE VII — INSPECTION BY OWNER’S REPRESENTATIVE :
Builder will furnish without additional charge to Owner reasonable space at its yard(s) for the duly authorized and designated representative(s) of Owner who shall have reasonable access to the Work of Builder. Owner’s representative(s) shall promptly inspect as required during the construction process and accept all workmanship and material which is in conformity with the Contract Documents by executing an inspection release form in the form attached as Exhibit “I” and shall with equal promptness, reject
all workmanship and material which does not comply with the Contract Documents, provided that the acceptance of such workmanship and material by Owner’s representative shall not prejudice the rights of Owner under the provisions of Article IX (Warranty) and Article III (Time and Conditions of Delivery and Acceptance), hereof. Interim inspection acceptance by Owner shall be followed by final inspection acceptance by Owner after final installation and area closeout to ensure that that final installation and finish are in accordance with the Vessel specifications and regulatory requirements.
ARTICLE VIII — FORCE MAJEURE :
All agreements of Builder contained in this Contract respecting the Stipulated Delivery Date of each Unit shall be subject to extension by reason of Force Majeure, which term is hereby declared to include all causes whatsoever beyond the reasonable control and without the fault of the Builder. The parties agree that such causes shall include, but shall not be limited to, the following: strikes, lockouts, or other industrial disturbances; unavailability or interruptions or inadequacy of fuel supplies; act of God; actions or inactions of Owner; war, terrorism, preparation for war, the requirement, urgency or intervention of Naval or Military executives or other agencies of government; arrests and restraints of rulers and people, blockade, sabotage, vandalism and malicious mischief, threats of vandalism and bomb scares and insurrection; landslides, floods, hurricanes, tornadoes, earthquakes; collisions and fires; non-delivery and/or late delivery of any Owner Furnished Equipment; unavailability or late delivery of Builder furnished steel if such steel was ordered in a timely manner by Builder and the steel supplier(s) had accepted the order with stipulated delivery date(s) which subsequently were not met and delays due to changes authorized by Owner. Rain shall not be considered a Force Majeure event unless (1) its occurrence requires a shutdown of an affected portion of the Builder’s yard where the work hereunder is being performed prior to 12:00 noon on a regularly scheduled work day, or (2) on the day of such rain, the majority of the then remaining work of the Unit includes painting and such rain or other weather conditions do not permit painting. For each day on which rain meets the requirements set forth in the preceding sentence, Builder shall be entitled to (1) day’s extension of the Stipulated Delivery Date.
Within thirty (30) days of knowledge of any Force Majeure event which may affect the Stipulated Delivery Date, the party declaring a Force Majeure extension shall notify the other party in writing and shall furnish an estimate, if possible, of the probable extent of the delay. Upon receipt of any such notice, the party receiving the notice shall, within fourteen (14) days, acknowledge the same in writing and indicate agreement that such delay be treated as a Force Majeure event, or state any objections, and the reasons therefore, to acceptance of this delay as a Force Majeure event. If either party fails to notify the other party of a Force Majeure event within thirty (30) days after knowledge of the event, such party shall be estopped from thereafter claiming Force Majeure for any period of delay more than thirty (30) days prior to said notice. If the party receiving the notice should fail to respond within fourteen (14) days, the extension of time shall be considered approved.
If the completion of a Unit is delayed by Force Majeure, the Stipulated Delivery Date of that Unit and all subsequent Units shall be extended by a period equal to the period of such delay or delays.
Notwithstanding the foregoing, Owner shall not be excused by reason of Force Majeure for failing to pay any of Builder’s invoices when due and payable.
ARTICLE IX -WARRANTY :
During the Builder’s Warranty Period, as hereinafter defined, for each Unit delivered hereunder, Builder warrants (1) the material, equipment and design (exclusive of Owner Furnished Equipment), and (2) that all labor and workmanship, including labor and workmanship for the installation of Owner Furnished Equipment, furnished by Builder shall have been performed in a good and workmanlike manner and that the Unit(s) are constructed with the use of good commercial shipyard practices and procedures. The provisions set forth herein as to the liabilities of the Builder are to apply also to all labor and workmanship furnished by any sub- contractor retained by Builder for the performance of this Contract.
Subject to the exceptions set forth below in this Article, Builder shall have no responsibility whatsoever with respect to any defect, claim, or loss of a Unit or Vessel not reported in writing to Builder within two (2) years from the Delivery Date (such period
being hereinafter referred to as the “Builder’s Warranty Period”). Solely for purposes of this Article IX, “Delivery Date” shall be defined as the earlier of the following: (a) fourteen (14) days after date of the final invoice from Builder upon completion of the Unit in accordance with the requirements set forth in Article III (a) t