Exhibit 10.31


 


Contract No. QHS-207-5500-06101801


 


 


FORM OF SHIPBUILDING CONTRACT


 


 


FOR


 


 


CONSTRUCTION OF ONE 5500 DWT CLASS OIL TANKER


 


 


(HULL NO.         )


 


 


BETWEEN


 


 


as BUYER


 


 


and


 


 


QINGDAO HYUNDAI SHIPBUILDING CO., LTD


 


as SELLER


 

















 


CONTENTS


 


	
  ARTICLE 1
  - DESCRIPTION AND CLASS

  	
  4

  
	
   

  	
   

  
	
  ARTICLE 2
  - CONTRACT PRICE & TERMS OF PAYMENT

  	
  7

  
	
   

  	
   

  
	
  ARTICLE 3
  - ADJUSTMENT OF THE CONTRACT PRICE

  	
  12

  
	
   

  	
   

  
	
  ARTICLE 4
  - APPROVAL OF PLANS AND DRAWINGS - SUPERVISION AND INSPECTION

  	
  17

  
	
   

  	
   

  
	
  ARTICLE 5 - MODIFICATION, CHANGES AND EXTRAS

  	
  20

  
	
   

  	
   

  
	
  ARTICLE 6
  - TRIALS

  	
  23

  
	
   

  	
   

  
	
  ARTICLE 7
  - DELIVERY

  	
  27

  
	
   

  	
   

  
	
  ARTICLE 8
  - DELAYS & EXTENSION OF TIME FOR DELIVERY

  	
  30

  
	
   

  	
   

  
	
  ARTICLE 9
  - WARRANTY OF QUALITY

  	
  33

  
	
   

  	
   

  
	
  ARTICLE 10
  - CANCELLATION, REJECTION AND RESCISSION BY THE BUYER

  	
  38

  
	
   

  	
   

  
	
  ARTICLE 11
  - BUYER’S DEFAULT

  	
  40

  
	
   

  	
   

  
	
  ARTICLE 12
  - INSURANCE

  	
  43

  
	
   

  	
   

  
	
  ARTICLE 13
  - DISPUTES AND ARBITRATION

  	
  45

  
	
   

  	
   

  
	
  ARTICLE 14
  -ASSIGNMENT

  	
  47

  
	
   

  	
   

  
	
  ARTICLE 15
  - TAXES AND DUTIES

  	
  48

  
	
   

  	
   

  
	
  ARTICLE 16
  - PATENTS, TRADEMARKS AND COPYRIGHT

  	
  49

  
	
   

  	
   

  
	
  ARTICLE 17
  - NOTICES

  	
  50

  
	
   

  	
   

  
	
  ARTICLE 18
  - EFFECTIVE DATE OF CONTRACT

  	
  51

  
	
   

  	
   

  
	
  ARTICLE 19
  - INTERPRETATION

  	
  52

  
	
   

  	
   

  
	
  EXHIBITS

  	
   

  
	
  EXHIBIT “A”

  	
  54

  



 


2

















 


SHIPBUILDING CONTRACT


 


FOR


 


CONSTRUCTION OF ONE 5500DWT CLASS OIL TANKER


 


(HULL NO. QHS-   )


 


This CONTRACT, entered into
this day 18th of Oct. 2006, by and between                                
a corporation organized and existing under the laws of the Republic of Liberia,
having its registered office at 80, Broad Street, Monrovia, Liberia or its
nominee, (hereinafter called the “BUYER”) on one part; and QINGDAO HYUNDAI
SHIPBUILDING CO., LTD, a corporation organized and existing under the Laws of
the People’s Republic of China, having its registered office at Lingshanwei
Jiaonan, PC 266427, Qingdao Shandong Province, the People’s Republic of China
(hereinafter called the “BUILDER” or the “SELLER”), on the other part


 


WITNESSETH


 


In consideration of the
mutual covenants contained herein, the SELLER agrees to design, build, launch,
equip and complete at the BUILDER’s Shipyard and to sell and deliver to the
BUYER after completion and successful trial specified in this Contract one (1) 5500
DWT Class Oil tanker as more fully described in Article 1 hereof
(hereinafter called the “VESSEL”), to be registered at the option of the BUYER
under the Liberian (or equivalent convenient) flag or any other flag which may be chosen by the BUYER and
agreed by the SELLER and the BUYER agrees to purchase and take delivery of the
aforesaid VESSEL from the SELLER and to pay for the same in accordance with the
terms and conditions hereinafter set forth.


 


3

















 


ARTICLE 1 - DESCRIPTION AND CLASS


 


1.                          DESCRIPTION


 


The VESSEL shall be a 5500
metric tons deadweight oil tanker, at design summer draught of 6.0 meters of
the class described below. The VESSEL shall have the BUILDER’s Hull
No.QHS-     and shall be constructed, equipped and
completed as described in and in accordance with the terms of this Contract and
the following documentation:


 


(1)                    Specification (5500 DWT Class Oil Tanker
dated 18th Oct. 2006)


(2)                    General Arrangement (5500DWT Class Oil
Tanker GA dated 18th Oct. 2006)


(3)                    Makers list: (Makers List for 5500DWT Class Oil
Tanker dated 18th Oct. 2006)


 


Attached hereto and signed
by each of the parties to this Contract (hereinafter collectively called the “Specifications”),
making an integral part hereof.


 


2.                          CLASS AND RULES


 


The VESSEL including its
machinery, equipment and out fittings, shall be constructed in accordance with
and shall comply with the rules and regulations of and under the
supervision of Det Norske Veritas (DNV) (hereinafter called the “Classification
Society”) and distinguished in record by the symbols: +A1 Tanker for Oil, ESP,
EC0, TMON or equivalent.


 


The requirements of the
authorities and other regulatory bodies as fully described in the
Specifications including that of the Classification Society are to include any rules or
circulars thereof which have been issued and become effective by the date of
signing this Contract.


 


The SELLER shall arrange
with the Classification Society to assign a representative or representatives
(hereinafter called the “Classification Surveyor”) to the BUILDER’s Shipyard
for supervision of the construction of the VESSEL.


 


All fees and charges
incidental to classification and to compliance with all the rules, regulations
and requirements of this Contract and as described in the Specifications issued
and become effective up to the date of signing this Contract as well as
royalties, if any, payable on account of the construction of the VESSEL shall
be for the account of the SELLER, except as otherwise provided and agreed
herein. The key plans, materials and workmanship entering into the construction
of the VESSEL and the VESSEL itself shall at all times be subject to
inspections and tests in accordance with the rules and regulations of the
Classification Society


 


4

















 


and regulatory bodies, which
rules and regulations as described in detail in pages 9,10 and 11 of
the Specifications are all accepted by the SELLER.


 


Decisions of the
Classification Society as to compliance or non-compliance with Classification rules and
regulations shall be final and binding upon the parties hereto.


 


3.                          PRINCIPAL PARTICULARS AND DIMENSIONS OF THE
VESSEL


 


(a)                    Hull


 


	
  Length
  overall:

  	
   

  	
  abt

  	
   

  	
  102.50 m

  
	
  Length b. p.:

  	
   

  	
  abt

  	
   

  	
  95.00 m

  
	
  Breadth mld:

  	
   

  	
  abt

  	
   

  	
  17.80 m

  
	
  Depth mld:

  	
   

  	
  abt

  	
   

  	
  8.80 m

  
	
  Design Draft:

  	
   

  	
  abt

  	
   

  	
  6.00 m

  
	
  Complement 18 persons

  	
   

  	
   

  	
   

  	
   

  



 


(b)                   Propelling Machinery


The
VESSEL shall be equipped, in accordance with the Specifications, with one (1) set
of HiMSEN 9H25/33P (2610Kw, 900rpm) Main Engine Manufactured by Hyundai Heavy
Industries Co., Ltd. or Yanmar licensed or Mak shall be chosen by the SELLER


 


4.                          GUARANTEED SPEED


 


The SELLER guarantees that
the trial speed at the designed draft of (6.0m) at Max Continuous Output of
main Engine (MCR) with clean bottom in calm and deep sea under beaufort scale
of 2 or around is to be not less than 12.3 knots.


 


The speed shall be corrected
for wind speed and shallow water effect. The correction method of the speed
shall be as specified in the Specifications.


 


5.                          GUARANTEED DEADWEIGHT


 


The SELLER guarantees that
the VESSEL is to have a deadweight of not less than 5500 metric tons at the
summer design draught moulded of 6.00meters in sea water of 1.025 specific
gravity.


 


The term, “Deadweight”, as
used in this Contract, shall be as defined in the Specifications.


 


5

















 


The actual deadweight of the
VESSEL expressed in metric tons shall be based on calculations made by the
BUILDER and checked by the BUYER, and all measurements necessary for such
calculations shall be performed in the presence of the BUYER’s supervisor(s) or
the party authorized by the BUYER and the Classification Society Surveyor.


 


Should there be any dispute
between the BUILDER and the BUYER in such calculations and/or measurements, the
decision of the Classification Society shall be final.


 


6.                          SUBCONTRACTING


 


The SELLER may, at its sole
discretion and responsibility, subcontract any portion of the construction work
of the VESSEL to experienced subcontractors. However delivery and final
assembly into the VESSEL of any such work subcontracted shall be at the BUILDER’s
Shipyard. The SELLER shall always fully remain responsible for such
subcontracted work. The SELLER shall remain responsible for compliance with the
obligations of this Contract as if there had been no sub-contracting.


 


In its contracts with its
subcontractors and suppliers, the SELLER shall always ensure reasonable time
margins so as to avoid delays in the progress of the construction of the
VESSEL.


 


7.                          REGISTRATION


 


The VESSEL shall be
registered by the BUYER at its own cost and expenses under the laws of Liberia
(or equivalent convenient) upon the time of delivery and acceptance
thereof flying Liberian (or equivalent convenient) flag. The cost
and expenses and other relative cost involving applying and inspection for
statutory surveys will be borne by the Buyer.


 


The SELLER warrants that the
VESSEL shall upon delivery in construction and performance aspect be acceptable
for registration under the laws of Liberia in
force at the time of signing the Contract.


 


6

















 


ARTICLE 2 - CONTRACT PRICE & TERMS OF PAYMENT


 


1.                          CONTRACT PRICE


 


The
agreed purchase price of the VESSEL is United States Dollars 10,000,000.00 (in
words: United States Dollars Ten Million Only), (hereinafter called the “Contract
Price”) net receivable by the SELLER, which is exclusive of the cost for the
BUYER’s Supplies as provided in Article 5 hereof. Therefore the Contract
Price is a fixed price and shall not be subject to any upward or downward
adjustment except only in accordance with the provisions of Articles 3, 5 and 6
of this contract.


 


2.                          CURRENCY


 


Any
and all payments by the BUYER to the SELLER under this Contract shall be made
in United States Dollars.


 


3.                          TERMS OF PAYMENT


 


The
Contract Price shall be paid by the BUYER to the SELLER in instalments as
follows:


 


(a)                    1st Instalment


 


The
sum of United States Dollars 2,000,000.00 (United States Dollars Two Million
only), shall become due and payable and be paid by the BUYER within twenty (20)
New York banking days after this Contract has been signed and the Refund Guarantee
referred to in paragraph 7 of this Article has been issued and delivered
to the BUYER.


 


(b)                   2nd Installment:


 


The
sum of United States Dollars 2,000,000.00 (United States Dollars Two Million
only), shall become due and payable and shall be paid within five (5) New
York banking days after the cutting of the first steel plate of the VESSEL in
the SELLER’s workshop has occurred accompanied by a copy of the written
confirmation issued by the Classification Society to the effect that the
cutting of the first steel plate has been carried out.


 


The
SELLER shall give a telex, telefax or letter notice to the BUYER stating that
the 1st steel plate has been cut in its workshop and demand for payment of this
instalment.


 


7

















 


(c)                    3rd Installment:


 


The
sum of United States Dollars 2,000,000.00 (United States Dollars Two Million
only), shall become due and payable and shall be paid within five (5) New
York banking days after keel-laying of the first section of the VESSEL.
The keel-laying shall be notified by the SELLER with a telex, telefax or letter
notice to the BUYER stating that the said keel-laying has been carried out
accompanied by a copy of the written confirmation issued by Classification
Society to the effect that the keel-laying has been carried out. The SELLER
shall send to the BUYER a telex or telefax demand for payment of this
instalment.


 


(d)                   4th Installment:


 


The
sum of United States Dollars 2,000,000.00 (United States Dollars Two Million
only), shall become due and payable and shall be paid within five (5) New
York banking days after successful launching of the VESSEL. The launching of
the VESSEL shall be notified by the SELLER with a telex, telefax or letter
notice to the BUYER stating that the launching of the VESSEL has been
successfully carried out. The SELLER shall send to the BUYER a telex or telefax
demand for payment of this instalment.


 


(e)                    5th Installment (payment upon
Delivery to and Acceptance by
the BUYER of the VESSEL):


 


The
sum of United States Dollars 2,000,000.00 (United States Dollars Two Million
only), plus any increase or minus any decrease due to the modifications of the
Specification and/or the adjustments of the Contract Price hereunder in
accordance with the provisions of the relevant Articles hereof, shall become
due and payable and be paid by the BUYER to the SELLER concurrently with
delivery to and acceptance by the BUYER of the VESSEL and upon the signing of
the Protocol of Delivery and Acceptance by both parties. The SELLER shall send
to the BUYER a telex or telefax demand for this instalment ten (10) days
prior to the scheduled date of delivery of the VESSEL.


 


4.                          METHOD OF PAYMENT


 


(a)                    1st Instalment


 


The
BUYER shall remit the amount of this instalment in accordance with Article 2.
Paragraph 3 (a) by telegraphic transfer to Agricultural Bank of China,
Qingdao Branch, the People’s Republic of China as receiving bank nominated by
the SELLER, for credit to the account of Qingdao Hyundai Shipbuilding
(Shipyard) Co., Ltd., Account No 38130114040003834 with


 


8

















 


direct
SWIFT advice from the remitting bank to Agricultual Bank of China, Qingdao
Branch.


 


(b)                   2nd Instalment


 


The
BUYER shall remit the amount of this instalment in accordance with Article 2,
Paragraph 3(b) by telegraphic transfer to Agricultural Bank of China,
Qingdao Branch, the People’s Republic of China as receiving bank nominated by
the SELLER, for credit to the account of Qingdao Hyundai Shipbuilding
(Shipyard) Co., Ltd., Account No 38130114040003834 with direct SWIFT advice
from the remitting bank to Agricultual Bank of China, Qingdao Branch.


 


(c)                    3rd Instalment


 


The
BUYER shall remit the amount of this instalment in accordance with Article 2,
Paragraph 3(c) by telegraphic transfer to Agricultural Bank of China,
Qingdao Branch, the People’s Republic of China as receiving bank nominated by
the SELLER, for credit to the account of Qingdao Hyundai Shipbuilding
(Shipyard) Co., Ltd., Account No 38130114040003834 with direct SWIFT advice
from the remitting bank to Agricultual Bank of China, Qingdao Branch.


 


(d)                   4th Instalment


 


The
BUYER shall remit the amount of this instalment in accordance with Article 2,
Paragraph 3(d) by telegraphic transfer to Agricultural Bank of China,
Qingdao Branch, the People’s Republic of China as receiving bank nominated by
the SELLER, for credit to the account of Qingdao Hyundai Shipbuilding
(Shipyard) Co., Ltd., Account No 38130114040003834 with direct SWIFT advice
from the remitting bank to Agricultual Bank of China, Qingdao Branch.


 


(e)                    5th Instalment (Payable upon delivery of the
VESSEL)


 


The
BUYER shall, at least four (4) banking days prior to the scheduled date of
delivery of the VESSEL, make an
irrevocable cash deposit in the name of the BUYER
with the SELLER’s Bank for a
period of thirty (30) days and covering the amount of this instalment (as
adjusted in accordance with the provisions of this Contract), with an
irrevocable instruction that the said amount shall only be released to the
SELLER against presentation by the SELLER to the said Agricultual Bank of
China, Qingdao Branch, the


 


9

















 


People’s
Republic of China, of one of the originals of the Protocol of Delivery and
Acceptance signed by the BUYER’s authorised representative and the SELLER’s
authorised representative. Interest, if any, accrued from such deposit, shall
be for the benefit of the BUYER.


 


If
the delivery of the VESSEL is not effected on or before the expiry of a period
of 30 days commencing from the date on which the fifth instalment is deposited
in the Agricultual Bank of China, Qingdao Branch, the People’s Republic of
China in accordance with this paragraph 4(e) of Article 2, the BUYER
shall have the right to withdraw the said deposit plus accrued interest upon
the expiry of such 30 days period. If, following the withdrawal by the BUYER of
the fifth instalment of the Contract Price in accordance with this paragraph 4(e) of
Article 2, a new scheduled delivery date is notified to the BUYER by the
SELLER pursuant to, and in accordance with, this Contract, the BUYER shall make
the cash deposit in accordance with the same terms and conditions as set out
above.


 


5.                          PREPAYMENT


 


The
BUYER shall have the right to make prepayment of any and all instalments before
delivery of the VESSEL, by giving to the SELLER at least thirty (30) days prior
written notice, without any price adjustment of the VESSEL for such prepayment.


 


6.                          SECURITY FOR PAYMENT OF INSTALMENTS BEFORE
DELIVERY


 


The
BUYER shall, upon effectiveness of this Contract, deliver to the SELLER a
Performance Guarantee in the form annexed hereto as Exhibit “A” in
favour of the SELLER issued by AEGEAN BUNKERING SERVICES INC. (hereinafter
called the “Guarantor”). This guarantee shall secure all the Buyer’s
obligations under the Contract.


 


7.                          REFUNDS


 


All
payments made by the BUYER prior to delivery of the VESSEL shall be in the
nature of advance to the SELLER, and in the event that in accordance with the
specific terms of this Contract, the VESSEL is rejected by the BUYER after the
sea trials or this Contract is rescinded or cancelled by the BUYER, the SELLER
shall refund to the BUYER in United States Dollars the full amount of all sums
already paid by the BUYER to the SELLER under this Contract, together with
interest thereon (at the applicable rate specified in this Contract) from the
respective dates such sums were received by the SELLER to the date of
remittance by telegraphic transfer of such refund to the BUYER.


 


10

















 


As
security to the BUYER, the SELLER shall deliver to the BUYER, within Thirty
(30) banking days after the signing this CONTRACT a Refundment Guarantee to be
issued by, (a first class bank
acceptable to the Buyer and its financier), the People’s Republic of China or the
People’s Republic of China, covering 1st, 2nd, 3rd and 4th instalments before
delivery, in a form acceptable to the Buyer and Buyer’s bank.


 


11

















 


ARTICLE 3
- ADJUSTMENT OF THE CONTRACT PRICE


 


The Contract Price of the
VESSEL shall be subject to adjustments as hereinafter set forth. It is hereby
understood by both parties that any reduction of the Contract Price is by way
of liquidated damages and not by way of penalty.


 


1.                          DELIVERY


 


(a)                     No adjustment shall be made and the Contract
Price shall remain unchanged for the first thirty (30) days of delay in
delivery of the VESSEL beyond the Delivery Date (as defined in Article 7
hereof and all references hereafter in this Contract to the “Delivery Date”
shall be construed as references to that term as defined in Article 7
hereof) ending as of 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:


 


(i)                       beginning at twelve o’clock midnight of the
thirty-first (31st) to twelve o’clock midnight of the sixtieth
(60th) day after the Delivery Date, the Contract Price of the VESSEL shall be
reduced by deducting therefrom the sum of United States Dollars one thousand
only (USD 1000.00 ) per day;


 


(ii)                    beginning at twelve o’clock midnight of the
sixty-first (61st) to twelve o’clock midnight of the one hundred and
one hundred-twenty (120th) day after the Delivery Date, the Contract
Price of the VESSEL shall be reduced by deducting therefrom the sum of United
States Dollars one thousand three hundred only (USD1300.00) per day.


 


(iii)                 beginning at twelve o’clock midnight of the
one hundred-twenty-first (121st) to twelve o’clock midnight of the
one hundred and one hundred-eighty (180th) day after the Delivery
Date, the Contract Price of the VESSEL shall be reduced by deducting therefrom
the sum of United States Dollars one thousand seven hundred fifty only (USD
l,750.00) per day.


 


Unless the parties hereto
agree otherwise, the total reduction in the Contract Price shall be deducted
from the fifth instalment of the Contract Price and in


 


12

















 


any event (including the
event that the BUYER consents to take delivery of the VESSEL after the
expiration of the one hundred and eighty (180) day period of delay as described
in Paragraph l(c) of this Article) the total reduction in the Contract
Price shall not be more than would be the case for a delay of one hundred and
fifty (150) days counting from midnight of the thirty-first (31st)
day after the Delivery Date at the above specified rates of reduction that is
United States Dollars Two Hundred and Thirteen Thousand only (USD 213,000.00).


 


(c)                     If the delay in the delivery of the VESSEL
exceeds a period of one hundred and eighty (180) days after the Delivery Date,
as defined in Article 7, then in such event, and after such 180 days
period has expired, the BUYER may, at any time thereafter at its option,
rescind or cancel this Contract in accordance with the provisions of Article 10
of this Contract. The SELLER may at any time after the expiration of the
aforementioned one hundred and eighty (180) day period, if the BUYER has not
served notice of cancellation or rescission pursuant to Article 10, demand
in writing that the BUYER make an election (and in such notice the SELLER shall
specify a future delivery date for the VESSEL), in which case the BUYER shall,
within thirty (30) days after such demand is received by the BUYER, either
notify the SELLER of its decision to cancel this Contract, or consent to take
delivery of the VESSEL at an agreed future date, it being understood and agreed
by the parties hereto that, if the VESSEL is not delivered by such future date,
the BUYER shall have the same right of rescission and cancellation upon the
same terms, as hereinabove provided.


 


(d)                    For the purpose of this Article, the delivery
of the VESSEL shall not be deemed
to be delayed and the contract price shall not be reduced when and if the
delivery date of the VESSEL is
postponed by reason of causes and provisions of Article 5, 6, 11 and 13
hereof. The Contract Price shall not be adjusted or reduced if the delivery of
the VESSEL is delayed by reason of permissible delays as defined in Article 8
hereof.


 


(e)                     If the SELLER notifies the BUYER by telefax
that the delivery of the VESSEL shall be made earlier than the Delivery Date
and such notification is given not less than one (1) month prior to the
newly planned delivery date, a certain amount of bonus shall be given by the
BUYER to the SELLER.


 


Subject
to the above and in the event that the delivery shall be made within thirty
(30) days earlier than the Delivery Date, the Contract Price shall remain
unchanged. In the event that the delivery shall be made more than thirty (30)
days earlier than the specified Delivery Date, then a bonus shall be added to
the Contract Price at a rate of United States Dollars One Thousand Only (USD
1000.00) per day for each full day earlier than the thirtieth (30th) day to
sixtieth (60th) day prior to the Delivery Date. And if


 


13

















 


the
delivery will be made between Sixty (60) and One Hundred and twenty (120) days
prior to the Delivery Date, a bonus shall be added to the Contract Price at a
rate of United States Dollars One Thousand Three hundred Only (USD 1,300.00)
per day for each full day.


 


 


And
if the delivery will be made between One Hundred and twenty (120) days and One
Hundred and eighty (180) days earlier than the Delivery Date, a bonus shall be
added to the Contract price at a rate of United States Dollars One Thousand
Seven hundred fifty only (USD 1,750.00) per day for each full day.


 


The
total increase of the Contract Price for the earlier delivery shall be added to
the fifth instalment of the Contract Price, but shall not be more in any case
than an amount of United States Dollars Two Hundred Thirteen Thousand only (USD
213,000.00).


 


(f)                       In the event that the SELLER is unable to deliver
the Vessel on the newly planned delivery date as declared, the VESSEL can,
nevertheless, be delivered by the SELLER at a date after such declared newly
planned date.


 


In
such circumstances, and for the purpose of determining the liquidated damages
to the BUYER (according to the provisions of Paragraph 1 (b) of this
Article) and the BUYER’s right to cancel or rescind this Contract (according to
the provisions of Paragraph 1 (c) of this Article), the newly planned
delivery date declared by the SELLER shall not be in any way be treated or be
taken as having substituted the original Delivery Date as defined in Article 7.
The BUYER’s aforesaid right for liquidated damages and to cancel or rescind
this Contract shall be accrued, operated or exercised only to the extent as
described in Paragraph 1 (a), 1 (b) and/or 1 (c) of Article 3.
In whatever circumstances, the Delivery Date as defined in Article 7 (not
the newly planned delivery date as declared by the SELLER) shall be used to
regulate, as so described in Paragraph 1 (a), 1 (b) and/or 1 (c) of Article 3,
the BUYER’s right for liquidated damages and to rescind this Contract and the
SELLER’s liability to pay the aforesaid liquidated damages resulting from the
delay in delivery of the VESSEL.


 


2.                          INSUFFICIENT SPEED


 


(a)                     The Contract Price of the VESSEL shall not be
affected nor changed by reason of the actual speed (as described in detail in
the Specifications and as determined by the Trial Run according to the
Specifications) being equal to or less than three-tenths (3/10) of one knot
below the guaranteed speed as specified in Paragraph 4 of Article 1 of
this Contract.


 


(b)                    However, commencing with and including a
deficiency of more than three-tenths (3/10) of one knot in actual speed (as
determined by the Trial Run according to


 


14

















 


the
Specifications) below the guaranteed speed as specified in Paragraph 4 of Article 1
of this Contract, the Contract Price shall be reduced as follows:


 


In
case of deficiency


 


	
  Above 0.30 but below or at 0.40 knot

  	
   

  	
  USD 5,000 (Total)

  
	
  Above 0.40 but below or at 0.50 knot

  	
   

  	
  USD 10,000 (Total)

  
	
  Above 0.50 but below or at 0.60 knot

  	
   

  	
  USD 15,000 (Total)

  
	
  Above 0.60 but below or at 0.70 knot

  	
   

  	
  USD 20,000 (Total)

  
	
  Above 0.70 but below or at 0.80 knot

  	
   

  	
  USD 25,000 (Total)

  
	
  Above 0.80 but below or at 0.90 knot

  	
   

  	
  USD 40,000 (Total)

  



 


(c)                     If the deficiency in actual speed (as
determined by the Trial Run after correction according to the Specifications)
of the VESSEL upon the Trial Run, is more than nine tenths (9/10) of one knot
below the guaranteed speed of 12.3 knots, then the BUYER may at its option
reject the VESSEL and rescind this Contract in accordance with provisions of Article 10
of this Contract, or may accept the VESSEL at a reduction in the Contract
Price as above provided for nine tenths (9/10) of one knot, that is United
States Dollars forty thousand only (USD 40,000) being the maximum.


 


3.                          DEADWEIGHT


 


(a)                     In the event that there is a deficiency in
the actual deadweight of the VESSEL determined as provided in the
Specifications, the Contract Price shall not be decreased if such deficiency is
One Hundred (100) metric tons or less below the guaranteed deadweight of 5500
metric tons at assigned design summer draught 6.00m.


 


(b)                    However, the Contract Price shall be
decreased by the sum of United States Dollars Seven Hundred only (USD 700.00)
for each metric ton of such deficiency in excess of a deficiency of One Hundred
(100) metric tons.


 


(c)                     In the event that there should be a
deficiency in the VESSEL’S actual deadweight which exceeds Three hundred (300)
metric tons below the guaranteed deadweight, the BUYER may, at its option,
reject the VESSEL and rescind this Contract in accordance with the provisions
of Article 10 of this Contract, or may accept the VESSEL with
reduction in the Contract Price in the maximum amount of United States Dollars One Hundred Thousand only
(USD 100,000.00).


 


The
total reduction in the Contract Price as the result of the operation of the
provisions of this paragraph 4 of Article 3 shall be applied in reducing
the fifth instalment of the Contract Price.


 


4.                          EFFECT OF RESCISSION


 


It is expressly understood
and agreed by the parties hereto that in any case as stated herein, if the
BUYER rescinds this Contract pursuant to any provision under this Article, the
BUYER, save its rights and remedy set out in Article 10 hereof, shall not
be entitled to any liquidated damage whether described above or


 


15

















 


otherwise but shall be entitled
to a refund of payments made prior to delivery and interest thereon.


 


16

















 


ARTICLE 4 – APPROVAL OF PLANS AND DRAWINGS - SUPERVISION
AND INSPECTION


 


1.                          APPOINTMENT OF THE BUYER’S SUPERVISOR


 


The
BUYER shall send in good time to and maintain at the BUILDER’s Shipyard, at the
BUYER’s own cost and expense, one or more representative(s) who shall be duly
accredited in writing by the BUYER (such representative(s) being hereinafter
collectively and individually called the “Supervisor”) to attend, inspect
supervise and survey the construction of the VESSEL, her engines and
accessories.


 


The
SELLER shall make all necessary arrangements to assist BUYER’s Supervisor to
obtain all necessary visas, permits, license, work permits etc. so as to enable
him/them to attend the Construction of the VESSEL in good time.


 


The
SELLER hereby undertakes to assist in order to get the necessary visa for the
Supervisor to enter China will be issued upon demand and without delay provided
that the Supervisor meets with the rules, regulations and laws of the People’s
Republic of China. The BUYER undertakes to give the SELLER adequate notice for
the application of visa.


 


2.                          APPROVAL OF PLANS AND DRAWINGS


 


The
parties hereto shall, within thirty (30) days after signing of this Contract,
mutually agree a list of all the plans and drawings, which are to be sent to
the BUYER for approval (hereinbelow called “the LIST”). Before arrival of the
Supervisor at the BUILDER’s Shipyard, the plans and drawings specified in the
LIST shall be sent to the BUYER, and the BUYER shall, within ten (10) days
after receipt thereof (excluding mailing time), return such plans and drawings
submitted by the SELLER with approval or remarks, if any. Such approval and remarks
shall be in accordance with the Contract and the Specifications.


 


Concurrently
with the arrival of the Supervisor at the BUILDER’s Shipyard, the BUYER shall
notify the BUILDER in writing, stating the authority which the said Supervisor
shall have and stating whether the Supervisor can, on behalf of the BUYER,
approve or disapprove, as the case may be, those plans and drawings
specified in the LIST which have not yet been sent to the BUYER. Should the
Supervisor be so authorised by the BUYER, the Supervisor shall, within five (5) days
after receipt thereof, return those plans and drawings with approval or
remarks, if any.


 


17

















 


Unless
notification is given to the BUILDER by the Supervisor or the BUYER of approval
or disapproval of any plans and drawings within the above-designated period of
time for each case, the said plans and drawings shall be deemed to have been
automatically approved.


 


The
plans and drawings approved by the BUYER or the Supervisor shall be final, and
any alteration thereof shall be regarded as modification specified in Article 5
of this Contract.


 


3.                          SUPERVISION AND INSPECTION BY THE SUPERVISOR


 


The
Supervisor shall have, at all times until delivery of the VESSEL, the right to
attend tests according to the mutually agreed test list and inspect the VESSEL,
her engines, accessories and materials at the BUILDER’s Shipyard, the premises
of its subcontractors or any other place where work is done or materials stored
in connection with the VESSEL. In the event that the Supervisor discovers any
construction or material or workmanship which does not or will not conform to
the requirements of this Contract and the Specifications, the Supervisor shall
promptly give the BUILDER a notice in writing as to such nonconformity, upon
receipt of which the BUILDER shall correct such nonconformity if the BUILDER
agrees with the BUYER. However the BUYER undertakes and assures the SELLER that
the Supervisor shall carry out his inspections in accordance with the agreed
inspection procedure and schedule and usual shipbuilding practice and in a
way as to minimize any increase in building costs and delays in the
construction of the VESSEL.


 


The
BUILDER agrees to furnish free of charge the Supervisor with office space, and
other reasonable facilities according to BUILDER’s practice at, or in the
immediate vicinity of the BUILDER’s Shipyard as may be necessary to enable
the Supervisor to effectively carry out his duties. All international
communication charges (such as telephone and telefax charges) shall be borne by
the BUYER. At all times, during the construction of the VESSEL until delivery
thereof, the Supervisor shall be given free and ready access to the VESSEL, her
engines and accessories, and to any other place where the work is being done,
or the materials are being processed or stored, in connection with the
construction of the VESSEL, including the yards, workshops, stores of the
BUILDER, and the premises of subcontractors of the BUILDER, who are doing work,
or storing materials in connection with the VESSEL’s construction. The travel
expenses for the said access to SELLER’s subcontractors outside of Qingdao city
shall be at BUYER’s account. The transportation within Qingdao city shall be
provided to the Supervisor by the SELLER.


 


4.                          LIABILITY OF THE SELLER


 


18

















 


The
Supervisor engaged by the BUYER under this Contract shall at all times be
deemed to be in the employment of the BUYER. The SELLER shall be under no liability whatsoever to
the BUYER, or to the Supervisor or the BUYER’s employees or agents for personal
injuries, including death, during the time when they, or any of them, are on
the VESSEL, or within the premises of either the SELLER or its subcontractors,
or are otherwise engaged in and about the construction of the VESSEL, unless,
however, such personal injuries, including death, were caused by the negligence
or wilful misconduct of the SELLER, or of any of the SELLER’s employees or
agents or subcontractors of the SELLER. Nor shall the SELLER have any liability
whatsoever to the BUYER for damage to, or loss or destruction of property in
China of the BUYER or of the Supervisor, or of the BUYER’s employees or agents,
unless such damage, loss or destruction is caused by the negligence or wilful
misconduct of the SELLER, or of any of the employees, or agents or
subcontractors of the SELLER.


 


5.                          SALARIES AND EXPENSES


 


All
salaries and expenses of the Supervisor, or any other employees employed by the
BUYER under this Article, shall be for the BUYER’s account.


 


6.                          REPLACEMENT OF SUPERVISOR


 


The
SELLER has the right to request the BUYER in writing to replace any of the
Supervisors who is proved to be unsuitable and unsatisfactory for the proper
progress of the VESSEL’s construction together with reasons. The BUYER shall
investigate the situation by sending its representative to the Builder’s yard,
if necessary, and if the BUYER considers that such SELLER’s request is
justified, the BUYER shall effect the replacement as soon as conveniently
arrangeable.


 


7.                          The supervisors or employees will be informed
by the BUYER to follow the Laws of P. R. of China when they work in China.


 


19

















 


ARTICLE 5 - MODIFICATION, CHANGES AND EXTRAS


 


1.                          HOW EFFECTED


 


The
Specifications and Plans in accordance with which the VESSEL shall be
constructed, may be modified and/or changed at any time hereafter by
written agreement of the parties hereto, provided that such modifications
and/or changes or an accumulation thereof will not, in the SELLER’s reasonable
judgement, adversely affect the BUILDER’s other commitments and provided
further that the BUYER shall consent, if necessary, to a fair and reasonable adjustment of the Contract
Price, time of delivery of the VESSEL and other terms of this Contract, and/or
the Specifications occasioned by such modification and/or changes, if any, as
hereinafter provided. Subject to the above, the SELLER hereby agrees to exert
its best efforts to accommodate such reasonable requests by the BUYER so that
the said changes and/or modifications may be made at a reasonable cost and
within the shortest practicable time. Any such agreement for modifications
and/or changes shall include an agreement as to the increase or decrease, if
any, in the Contract Price of the VESSEL together with an agreement as to any
extension or reduction in the date of delivery, the provision to the SELLER of
any additional securities necessary to the SELLER, or any other alterations in
this Contract, or the Specifications occasioned by such modifications and/or
changes. The aforementioned agreement to modify and/or to change the
Specifications may be effected by an exchange of letter, or telefaxes
signed in each case by an authorised representative of the relevant party,
manifesting such agreement. The letters as well as telefaxes exchanged by the
parties hereto pursuant to the foregoing shall constitute an amendment to the
Specifications under which the VESSEL shall be built, and such letters and telefaxes
shall be deemed to be incorporated into this Contract and the Specifications by
reference and made a part hereof. Upon consummation of the agreement to
modify and/or to change the Specifications, the SELLER shall without delay
alter the construction of the VESSEL in accordance therewith, including any
additions to, or deductions from, the work to be performed in connection with
such construction. If due to whatever reasons, the parties hereto shall fail to
agree on the adjustment of the Contract Price or extension of time of delivery
or the provision of additional security to the SELLER or modification of any
terms of this Contract which are necessitated by such modifications and/or
changes, then the SELLER shall have no obligation to comply with the BUYER’s
request for any modification and/or changes.


 


2.                          CHANGES IN RULES OF CLASSIFICATION
SOCIETY, REGULATIONS, ETC.


 


(1)                    If, after the date of signing this Contract,
any requirements as to classification or as to the rules and regulations
as specified in this Contract and the Specifications to which the construction
of the VESSEL is required to


 


20

















 


conform,
are altered or changed by the Classification Society or any regulatory bodies
authorized to make such alterations or changes, the SELLER and/or the BUYER,
upon receipt of information thereof, shall promptly transmit such information
in full to each other in writing, whereupon within Ten (10) days after
receipt of the said notice by the BUYER from the SELLER or vice versa, the
BUYER shall instruct the SELLER in writing as to the alterations or changes, if
any, to be made in the VESSEL which the BUYER, in its sole discretion, shall
decide. The SELLER shall promptly comply with such alterations or changes, if
any in the construction of the VESSEL, provided that the BUYER shall first
agree:


 


(a)                     As to any fair increase or decrease in the
Contract Price of the VESSEL that is fairly and reasonably occasioned by the
cost for such compliance; and/or


 


(b)                    As to any extension in the time of delivery
of the VESSEL that is necessary due to such compliance; and/or


 


(c)                     As to any increase or decrease in the
guaranteed deadweight and/or speed of the VESSEL, if such compliance results in
increased or reduced deadweight and/or speed; and/or


 


(d)                    As to any other alterations in the terms of
this Contract or of the Specifications or both, if such compliance makes such
alterations of the terms necessary; and/or


 


(e)                     If the Contract Price is to be increased,
then, in addition or as an alternative to any of the provisions above, as to
the provision of additional security by the BUYER to the SELLER if deemed
necessary by the SELLER.


 


Agreement
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
and/or changes of the Specifications and/or Plans.


 


(2)                    If, due to whatever reasons, the parties
shall fail to agree on the adjustment of the Contract Price or extension of the
time for delivery or increase or decrease of the guaranteed speed and
deadweight or the provision of additional security to the SELLER or any
alteration of the terms of this Contract, if any, then the SELLER shall be
entitled to proceed with the construction of the VESSEL in accordance with, and
the BUYER shall continue to be bound by, the terms of this Contract and the
Specifications without making any such alterations or changes, provided the
survey of the Class and the issuance of the Certificates by the Class and
relevant authorities will not be affected.


 


21

















 


3.                          SUBSTITUTION OF MATERIALS AND/OR EQUIPMENT


 


In
the event that any of the materials and/or equipment required by the
Specifications or otherwise under this Contract for the construction of the
VESSEL cannot be procured in time to maintain the Delivery Date of the VESSEL,
the SELLER may, provided that the BUYER shall so agree first in writing, supply
other materials and/or equipment of the same standard and quality in accordance
with the requirements of the Classification Society and of the rules and regulations with
which the construction of the VESSEL must comply in accordance with the terms
of this Contract and the Specifications.


 


4.                          BUYER’S SUPPLIED ITEMS


 


The
BUYER shall deliver to the SELLER at its shipyard the items as specified in the
Specifications which the BUYER shall supply on its account by the time mutually
agreed by the SELLER and the BUYER.


 


Should
the BUYER fail to deliver to the BUILDER such items within the time, agreed,
the delivery of the VESSEL shall automatically be extended for a period of such
delay, provided always that such delay in delivery of the BUYER’s supplied
items shall actually have affected the delivery of the VESSEL. In such event, the
BUYER shall pay to the SELLER all losses and damages sustained by the SELLER
due to such delay in the delivery of the BUYER’s supplied items and such
payment shall be made upon delivery of the VESSEL, but only provided that the
construction program is actually affected.


 


Furthermore,
if the delay in delivery of the BUYER’s supplied items should exceed twenty
(20) days, the SELLER shall be entitled to proceed with the construction of the
VESSEL without installation of such items in or onto the VESSEL, without
prejudice to the SELLER’s right hereinabove provided, and the BUYER shall
accept the VESSEL so completed.


 


The
SELLER shall be responsible for safely storing and handling of the BUYER’s
supplies as specified in the Specifications after delivery to the BUILDER and
shall install and secure them on board the VESSEL at the SELLER’s expenses.


 


Upon
arrival of such shipment of the Buyer’s supplied items, both parties shall
undertake a joint unpacking inspection. If any damages are found to be not
suitable for installation, the SELLER shall be entitled to refuse to accept the
BUYER’s supplied items.


 


22

















 


ARTICLE 6 - TRIALS


 


1.                          NOTICE


 


The
Sea Trials will start when the VESSEL is completed according to the relevant
provisions of the Specifications.


 


The
BUYER and the Supervisor shall receive from the SELLER at least thirty (30)
days notice in advance and five (5) days definite notice in advance in
writing or by telefax, of the time and place of the VESSEL’s sea trial as
described in the Specifications (hereinafter referred to as “the Trial Run”)
and the BUYER and the Supervisor shall promptly acknowledge receipt of such
notice. The BUYER’s representatives and/or the Supervisor shall be on board the
VESSEL to witness such Trial Run, and to check upon the performance of the
VESSEL during the same. The BUYER’s officers and crew may also attend
onboard the VESSEL to witness the Sea Trials. Failure of the BUYER’s
representatives to be present at the Trial Run of the VESSEL, after due notice
to the BUYER and the Supervisor as provided above, shall have the effect to
extend the date for delivery of the VESSEL by the period of delay caused by
such failure to be present. However, if the Trial Run is delayed more than
seven (7) days by reason of the failure of the BUYER’s representatives to
be present after receipt of due notice as provided above, then in such event,
the BUYER shall be deemed to have waived its right to have its representatives
on board the VESSEL during the Trial Run, and the SELLER may conduct such
Trial Run without the BUYER’s representatives being present but with the
Classification Society Surveyor(s) always in attendance, and in such case the
BUYER shall be obliged to accept the VESSEL on the basis of a certificate
jointly signed by the SELLER and the Classification Society certifying that the
VESSEL, after Trial Run, subject to completion of minor alterations and
corrections as provided in this Article, if any, is found to conform to
the Contract and Specifications and is satisfactory in all respects.


 


The
SELLER hereby undertakes to assist the buyer to get the necessary visas and
permits for the BUYER’s representatives to enter China will be issued in order
to enable them attend the Trial Run, on demand and without delay.


 


In
the event of unfavourable weather on the date specified for the Trial Run, the
same shall take place on the first available day thereafter that the weather
conditions permit. The parties hereto recognize that the weather conditions in
Chinese waters in which the Trial Run is to take place are such that great
changes in weather may arise momentarily and without warning and,
therefore, it is agreed that if during the Trial Run of the VESSEL, the weather
should suddenly become unfavourable, as would have precluded the continuance of
the Trial Run, the Trial Run of the VESSEL shall be discontinued and postponed
until the first favourable day next following, unless the BUYER shall assent in
writing, or by telefax of its


 


23

















 


acceptance
of the VESSEL on the basis of the Trial Run made prior to such sudden change in
weather conditions.


 


In
the event that the Trial Run is postponed because of unfavourable weather
conditions, such delay shall be regarded as a permissible delay, as specified
in Article 8 hereof.


 


2.                          HOW CONDUCTED


 


(a)                    All expenses in connection with Trial Run of
the VESSEL or any re-Trial or re-Trials are to be for the account of the
SELLER, who, during the Trial Run and when subjecting the VESSEL to Trial Run,
is to provide, at its own expense, the necessary crew to comply with conditions
of safe navigation. The Trial Run shall be conducted in the manner prescribed
in the Specifications and shall prove fulfilment of the performance required
for the Trial Run as set forth in the Specifications.


 


The
course of Trial Run shall be determined by the BUILDER and shall be conducted
within the trial water equipped
with speed measuring facilities.


 


(b)                   The SELLER shall provide the VESSEL with the
required quantities of water and fuel oil lubrication oil, hydraulic oil greases and other stores
necessary for the conduct of the Trial Run or Trial Runs which shall be
supplied by the SELLER, as prescribed in the Specifications. The fuel oil
lubricating oil, hydraulic oil and greases shall be in accordance with the
applicable engine specifications, and the cost of the quantities of water, fuel
oil, lubricating oil, hydraulic
oil and greases consumed during the Trial Run or Trial Runs shall be for the
account of the SELLER.


 


3.                          TRIAL LOAD DRAFT


 


In
addition to the supplies provided by the SELLER in accordance with
sub-paragraph (b) of the preceding Paragraph 2 hereof, the SELLER shall
provide the VESSEL with the required quantity of fresh water and other stores
necessary for the conduct of the Trial Run. The necessary ballast (fresh water,
sea water or any other ballast as may be required) to bring the VESSEL to
the trial load draft as specified in the Specifications shall be for the SELLER’s
account.


 


4.                          METHOD OF ACCEPTANCE OR REJECTION OF TRIAL
RUN RESULT


 


(a)                    Upon notification of the SELLER of the
completion of the Trial Run of the VESSEL, the BUYER or the BUYER’s Supervisor
shall within Seven (7) days thereafter, notify the BUILDER in writing or
by telefax of its acceptance of the VESSEL TRIAL RUN RESULT or of its rejection of the VESSEL TRIAL RUN RESULT
together with the reasons therefor.


 


24

















 


(b)                   However, should the result of the Trial Run
indicate that the VESSEL or any part thereof including its equipment does
not conform to the requirements of this Contract and/or the
Specifications, then the SELLER and the BUYER shall investigate with the BUYER’s
Supervisor the cause of failure and the proper steps shall be taken to remedy
the same and shall make whatever corrections and alterations and/or re-Trial
Run or Runs as may be necessary without extra cost to the BUYER, and upon
notification by the SELLER of completion of such alterations or corrections
and/or re-trial or re-trials, the BUYER shall,
within Seven (7) days thereafter, notify the SELLER in writing
or by telefax of its acceptance or rejection of the TRIAL RUN RESULT together
with the reason therefor on the basis of the alterations and corrections and/or
re-trial or re-trials by the SELLER.


 


(c)                    In the event that the BUYER fails to notify
the SELLER in writing or by telefax of its acceptance or rejection of the
VESSEL TRIAL RUN RESULT together with the reason therefor within the Seven (7) day
period provided for in sub-paragraphs (a) and (b) above, the BUYER
shall be deemed to have accepted the VESSEL TRIAL RUN RESULT.


 


(d)                   Any dispute arising among the parties hereto
as to the result of any Trial Run or further tests or trials, as the case may be,
of the VESSEL shall be solved by
reference to Arbitration as provided in Article 13, of this Contract.


 


(e)                    Nothing herein shall preclude the BUYER from
accepting the VESSEL with its qualifications and/or remarks following the Trial
Run and/or further tests or trials as aforesaid and the SELLER shall be obliged
to comply with and/or remove such qualifications and/or remarks at the time
before effecting delivery of the VESSEL to the BUYER under this Contract.
However in case there is any minor
qualification and/or remark which does not affect the ship’s performance and/or
Ship’s class rules and regulations and/or Ship’s Class or
Statutory Certificates the delivery of the VESSEL
to the BUYER shall not be affected, provided that the SELLER shall expressly
undertake in writing to comply with and/or remove such minor qualifications
and/or remarks within the Guarantee period of the VESSEL which extends to one (1) year
from the date of delivery of the VESSEL to the BUYER.


 


5.                          DISPOSITION OF SURPLUS CONSUMABLE STORES


 


Should
any amount of fuel oil, fresh water, or other unbroached consumable stores
furnished by the SELLER for the Trial Run or Trial Runs remain on board the
VESSEL at the time of acceptance thereof by the BUYER, the BUYER agrees to buy
the same from the SELLER at the purchasing price at the port of delivery
thereof, and payment by the BUYER shall be effected as provided in paragraphs 3
(e) and 4 (e) of Article 2 of this Contract.


 


25

















 


6.                          EFFECT OF ACCEPTANCE


 


The
BUYER’s acceptance of the VESSEL in writing or by telefax notification sent to
the SELLER, in accordance with the provisions set out above, shall be final and
binding so far as conformity of the VESSEL to this Contract and the
Specifications is concerned, and shall preclude the BUYER from refusing formal
delivery by the SELLER of the VESSEL, as hereinafter provided, if the SELLER
complies with all other procedures and requirements for delivery as hereinafter
set forth.


 


26














 


ARTICLE 7 - DELIVERY


 


1.                          TIME AND PLACE


 


The
VESSEL shall be delivered safely afloat by the SELLER to the BUYER at the
BUILDER’s Shipyard, in accordance with the Specifications, and with all
Classification and Statutory Certificates and all other applicable terms and
conditions of this Contract and after completion of Trial Run (or, as the case may be,
re-Trial or re-Trials) and acceptance by the BUYER in accordance with the
provisions of Article 6 hereof on or before the                    ,
provided that in the event of delays in the construction of the VESSEL due to
causes which, under the terms of the Contract, permit the postponement of the
date of delivery, the aforementioned time for delivery of the VESSEL shall be
extended accordingly.


 


The
aforementioned date or such later date to which delivery is extended or agreed
to be extended pursuant to the terms of this Contract is hereinafter called the
“Delivery Date”.


 


2.                          WHEN AND HOW EFFECTED


 


After
the VESSEL is accepted following the sea trials and once the VESSEL is ready
for delivery, the SELLER shall give the BUYER three (3) business days
definite notice of the anticipated delivery date by letter, telefax or telex to
the BUYER.


 


Provided
that the BUYER and the SELLER shall each have fulfilled all of their respective
obligations as stipulated in this Contract, and the VESSEL is ready for
delivery, the delivery of the VESSEL shall be effected forthwith by the
concurrent delivery by each of the parties hereto, one to the other, of the
Protocol of Delivery and Acceptance, duly signed by the parties, acknowledging
delivery of the VESSEL by the SELLER and acceptance thereof by the BUYER.


 


3.                          DOCUMENTS TO BE DELIVERED TO THE BUYER


 


Concurrently
with the delivery and acceptance of the VESSEL by the BUYER, the SELLER shall
deliver to the BUYER the following duly authenticated documents, which shall
accompany the Protocol of Delivery and Acceptance (which shall be prepared in
three originals and executed by each of the parties hereto):


 


27

















 


(a)                    PROTOCOL OF TRIALS of the VESSEL made by the
BUILDER pursuant to the Specifications.


 


(b)                   PROTOCOL OF INVENTORY of the equipment of the
VESSEL including spare parts and the like, all as specified in the
Specifications, made by the BUILDER.


 


(c)                    PROTOCOL OF STORES OF CONSUMABLE NATURE made
by the BUILDER referred to under Paragraph 5 of Article 6 hereof.


 


(d)                   FINISHED DRAWINGS AND PLANS pertaining to the
VESSEL as stipulated in the Specifications, made by the BUILDER.


 


(e)                    PROTOCOL OF LIGHTSHIP AND INCLINING
EXPERIMENT, as per the Specification made by the BUILDER.


 


(f)                      ALL CLASSIFICATION AND OTHER CERTIFICATES
required to be furnished upon delivery of the VESSEL pursuant to this Contract
and the Specifications.


 


It
is agreed that if through no fault on the part of the SELLER the full
terms Classification certificate and/or any other certificates referred to in
this sub-paragraph (f) cannot be issued at the time of delivery of the
VESSEL, then provisional certificates as issued by the Classification Society
or any third party shall be accepted by the BUYER, provided that the BUILDER
shall furnish the BUYER with the full term formal certificates as promptly as
possible (but in any event before the expiry of the provisional certificates).


 


(g)                   the BUILDER’S CERTIFICATE issued by the
SELLER in three (3) originals, each duly notarised


 


(h)                   DECLARATION OF WARRANTY issued by the SELLER
that the VESSEL is delivered to the BUYER free and clear of any liens, charges,
claims, mortgages, or other encumbrances whatsoever upon the BUYER’s title
thereto, and in particular, that the VESSEL is absolutely free of all burdens
in the nature of imposts, taxes levies, dues or charges imposed by the relevant
authorities of the province or country of the port of delivery, as well as of
all liabilities of the SELLER to its sub-contractors, employees and crews
and/or of all liabilities arising from the operation of the VESSEL in Trial Run
or Trial Runs, or otherwise, prior to delivery and any other liabilities,
debits or obligations whatsoever ensuing from any cause or reason whatsoever.


 


(i)                       COMMERCIAL INVOICE made by the SELLER.


 


28

















 


(j)                       BILL OF SALE made by the SELLER in 3
originals, each duly notarised and apostilled.


 


4.                          TITLE AND RISK


 


Title
to and risk of the VESSEL shall pass to the BUYER only upon the delivery and
acceptance thereof having been completed as stated above; it being expressly
understood that, until such delivery is effected, title to the VESSEL, and her
equipment, shall remain with the SELLER and be at the entire risk of the
SELLER.


 


5.                          REMOVAL OF VESSEL


 


The
BUYER shall take possession of the VESSEL immediately upon delivery and
acceptance thereof by the BUYER and shall remove the VESSEL from the premises
of the BUILDER within seven (7) days after delivery and acceptance thereof
is effected. Following delivery of the VESSEL, the SELLER shall not charge the
BUYER for the costs of mooring the VESSEL at the SELLER’s premises within these
seven (7) days. If the BUYER shall not remove the VESSEL from the premises
of the BUILDER within the aforesaid seven (7) days, in such event, after
the lapse of this seven (7) days period for reasons other than Chinese
Authorities’ restrictions or reasons entirely beyond the control of the BUYER
the BUYER shall pay to the SELLER United States Dollars Two Thousand only
(USD2000) per day as reasonable mooring charge of the VESSEL.


 


In
case of early delivery the BUYER shall have the option to keep the VESSEL at least
two (2) weeks at the SELLER’s premises. If the BUYER shall not remove the
VESSEL from the premises of the BUILDER within the aforesaid two (2) weeks,
in such event, the BUYER shall pay to the SELLER thereafter United States
Dollars Two Thousand only (USD2000) per day as reasonable mooring charge of the
VESSEL.


 


6.                          TENDER OF THE VESSEL


 


If
the BUYER fails to take delivery of the VESSEL within Ten (10) days after
completion thereof according to this Contract and the Specifications without
justified reason, the SELLER shall have the right to tender the VESSEL for
delivery after compliance with all procedural requirements as above provided.


 


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ARTICLE 8
– DELAYS & EXTENSION OF TIME FOR DELIVERY


 


1.                          CAUSE OF DELAY


 


If,
at any time before the agreed delivery date, either the construction of the
VESSEL, or any performance required hereunder as a prerequisite of delivery of
the VESSEL is actually prevented or delayed due to any of the following
supervening events beyond the SELLER’s reasonable foresight and control,
namely, war, blockade, revolution, political upheavals insurrection,
mobilization, civil continuos, riots, strikes, sabotage, lockouts, Acts of God
or the public enemy, plague or other epidemics, guaranties, prolonged failure
of electric current from an outside source, freight embargoes, if any,
extremely hot temperature (above 39 degrees C in accordance with official data
of the national meteorological institute), earthquakes, tidal waves typhoons, hurricanes,
storms or other similar causes beyond the reasonable control of the SELLER, or
of its subcontractors, as the case may be, which were not existing and
known to the SELLER and could not reasonably have been foreseen or prevented by
the SELLER at the date of signing of this Contract, or by destruction of the
premises of the SELLER or its subcontractors, or of the VESSEL or any part thereof,
by fire or flood which could not have been prevented by the SELLER, or due to
the Bankruptcy of the equipment suppliers and/or material suppliers, the SELLER
having exercised due diligence in selecting the Suppliers and having done their
utmost to arrange a substitute, or due to the delay caused by Acts of God in
supply of parts essential to the construction of the VESSEL, then, in the event
of delay actually due to the happening of any of the aforementioned
contingencies, the SELLER shall not be liable for such delay and the time for
delivery of the VESSEL under this Contract shall be extended without any
reduction in the Contract Price for a period of time which shall not exceed the
total accumulated time of all such delays during which the construction of the
VESSEL was actually delayed beyond the reasonable control of the SELLER as a
direct result of such event. All the above are subject nevertheless to the
BUYER’s right of cancellation under Paragraph 3 of this Article and
subject to all relevant provisions of this Contract which authorize and permit
extension of the time of delivery of the VESSEL.


 


It
is specifically agreed that for a delay, which is caused by the late delivery
to the SELLER of machinery, equipment and supplies to be incorporated in the
VESSEL, to be considered as caused by an event described in the previous
paragraph, it should be determined that the SELLER when contracting for such
machinery, equipment and supplies was expeditious and prudent, that he has
exercised due diligence in the performance of any acts required of its part,
and that he has exercised due diligence in expediting deliveries under the
SELLER’s Purchase Contract or in seeking equivalent convenient substitute
performance, and in case of late performance or default of a sub-contractor or
supplier, it should be also determined that the SELLER’s choice of the
sub-contractor was reasonable


 


30

















 


and
responsible and that the SELLER has exerted all reasonable efforts to expedite
performance, avoid default or procure reasonable substitute performance.


 


It
is also specifically agreed that if any of the above events is to occur, the
SELLER shall use due diligence and shall as soon as possible take all necessary
and reasonable steps in order to avoid and/or reduce and/or prevent and/or
mitigate any possible ensuing delay.


 


The
SELLER shall not be entitled to any extension of the Contract Delivery Date and
any of the types of delay listed below which may occur, shall be regarded
as non-permissible delays:


 


i.                             Any delay resulting from the SELLER’s own
breach of contract, or fault, or negligence or that of any of its employees or
breach of Contract or fault of its agents, subcontractors or other suppliers.


 


ii.                          Any delay resulting from a cause of delay
already in existence at the time of signing of this Contract.


 


2.                          NOTICE OF DELAY.


 


Within
seven (7) days from the date of commencement of any of the above-mentioned
causes of delay on account of which the SELLER claims that it is entitled under
this Contract to an extension of the time for delivery of the VESSEL, the
SELLER shall advise the BUYER by letter, telefax or telex, of the date on which
such delay commenced and describing in all its details the nature of the event
which caused the delays.


 


In
the event of the delay continuing for more than fourteen (14) days, further
notice, by letter, telex or telefax shall be given to the BUYER every seven (7) days
thereafter setting out the same particulars, as aforesaid, until the causes of
the delay have ended.


 


Likewise
within seven (7) days after such cause of delay ends, the SELLER shall
advise the BUYER by letter, telefax or telex, of the date such cause of delay
ended, and also shall specify the maximum period of the time by which in the
SELLER’s opinion the date for delivery of the VESSEL should be extended by
reason of such cause of delay. Failure of the BUYER to object to the SELLER’s
notification of any claim for extension of the Delivery Date within thirty (30)
days after receipt by the BUYER of such notification, shall be deemed to be a
waiver by the BUYER of its right to object to such extension.


 


The
SELLER shall also immediately take steps to mitigate the effects of the delay
and to accurately determine the period by which the Delivery Date is going to
be postponed by reason of the aforementioned events and shall immediately
notify the BUYER in writing accordingly.


 


31

















 


If
the SELLER does not give the aforementioned advice forthwith the SELLER shall
lose the right to claim such delay as permissible delay and any right of
postponement of delivery date.


 


3.                          RIGHT TO CANCEL FOR EXCESSIVE DELAY.


 


If
the total accumulated time of all delays on account of the causes specified in
Paragraph 1 of this Article aggregate to One Hundred and Eighty (180) days
or more, excluding delays awarded by an arbitration as specifically provided
for in Article 13 hereof, and excluding delays which are caused due to
default in performance by the BUYER, or due to delays in delivery of the BUYER’s
supplied items or due to causes which, under Article 4,5,6,11 and 12
hereof, permit extension or postponement of the time for delivery of the
VESSEL, then in such event, the BUYER may in accordance with the
provisions set out herein rescind/ cancel this Contract.


 


The
SELLER may, at any time, after the accumulated time of the aforementioned
delays justifying cancellation by the BUYER as above, 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 either notify the SELLER
of its intention to cancel, or consent to an extension of the Delivery Date to
an agreed future date. If any further delay occurs on account of causes
justifying cancellation as specified in this Contract, the BUYER shall have the
same right of cancellation upon the same terms as hereinabove provided.


 


4.                          DEFINITION OF PERMISSIBLE DELAY.


 


Delays
on account of such causes as provided for in Paragraph 1 of this Article, and
any other extensions of a nature which under the terms of this contract permit
postponement of the delivery Date (as provided for under Article 5,6,11
and 13), shall be understood to be (and are herein referred to as) permissible
delays, and are to be distinguished from non-permissible delays on account of
which the Contract Price is subject to adjustment as provided for in Article 3
hereof.


 


32

















 


ARTICLE 9 - WARRANTY OF QUALITY


 


1.                          GUARANTEE OF MATERIAL AND WORKMANSHIP


 


The
SELLER, for a period of twelve (12) months following delivery to the BUYER of
the VESSEL, guarantees the VESSEL, her hull (including paints and coats, where
applicable) engine machinery gear and all parts and equipment thereof that are
manufactured or furnished or supplied or installed or applied by the SELLER
and/or its sub-contractors under this Contract including material, equipment
(however excluding any parts for the Vessel which have been supplied by or on
behalf of the BUYER other than if any defects in respect of such parts arise as
a result of their incorrect or faulty installation or inadequate storage by the
SELLER, the BUILDER and/or any sub-contractors appointed under this Contract)
against all defects which are due to faulty design excluding the defects
accepted by both of Parties prior to delivery or defective materials or defective
construction and/or poor workmanship.


 


If
the guarantees given by suppliers and/or subcontractors have a validity in
excess of twelve (12) months, the SELLER will transfer any residual rights in
the guarantees given by any supplier and/or subcontractor to the BUYER at the
of end of the Guarantee period under this Article 9.


 


2.                          NOTICE OF DEFECTS


 


The
BUYER shall notify the SELLER in writing, or by telefax, as promptly as
possible, after discovery of any defect or deviations for which a claim is made
under this guarantee. The BUYER’s written notice shall describe the nature and
the extent of the defect. The SELLER shall have no obligation under this
guarantee for any defects discovered after the expiry date of the guarantee,
unless notice of such defects, is received by the SELLER not later than fifteen
(15) days after such expiry date. Telefaxed advice with brief details
explaining the nature of such defect and extent of such defect within fifteen
(15) days after such expiry date and a statement that a claim is forthcoming
will be sufficient compliance with the requirements as to time.


 


3.                          REMEDY OF DEFECTS


 


The
SELLER shall remedy at its expense free of charge to the BUYER any defects,
against which the VESSEL or any part of the equipment thereof is


 


33

















 


guaranteed
under this Article by making all necessary repairs and/or replacement.
Such repairs and/or replacement will be made by the SELLER.


 


The
Seller will provide another 12 months guarantee for the replaced parts, however
the maximum guarantee period will not exceed 18 months after the delivery of
the vessel.


 


However,
if it is impractical to make the repair by the SELLER, and if forwarding by the
SELLER of replacement parts, and materials cannot be accomplished without
impairing or delaying the operation or working of the VESSEL, then, in any such
event, the BUYER may subject to the SELLER’s consent in writing, not to be
unreasonably withheld, cause the necessary repairs or replacements to be made
elsewhere at the discretion of the BUYER, provided that the BUYER shall first
give the SELLER notice in writing by letter, telefax, or telex of the time and
place such repairs will be made and, if the VESSEL or her operation or working
is not thereby delayed or impaired, the SELLER shall have the right to verify
by its own representative(s) or that of Classification Society the nature and
extent of the defects complained of. The SELLER shall, in such cases, promptly
advise the BUYER, by telex, after such examination has been completed, of its
acceptance or rejection of the defects as ones that are subject to the
guarantee herein provided. In all minor cases, the Guarantee Engineer(s), as
hereinafter provided for, will act for and on behalf of the SELLER.


 


Upon
the SELLER’s acceptance of the defects as justifying remedy under this Article,
or upon award of the arbitration so determining, the SELLER shall pay to the
BUYER in freely transferable United States Dollars, whatever actual costs for
such repairs or replacements, including forwarding charges, as either agreed or
awarded by the arbitration tribunal to the BUYER, same not to exceed the costs
of effecting such repairs in a average shipyard in China. Any dispute under
this Article shall be referred to arbitration in accordance with the
provisions of Article 13 hereof.


 


Any
liabilities outstanding at the end of the guarantee period, shall be settled
within thirty (30) days after the amounts have been agreed between the parties
or in case of disagreement, upon publication of the Arbitration Award.


 


4.                          EXTENT OF THE SELLER’S LIABILITY


 


The
SELLER shall have no obligation and/or liabilities with respect to defects
discovered after the expiration of the period of guarantee specified above.


 


34

















 


The
SELLER shall be liable to the BUYER for defects and damages caused by any of
the defects specified in Paragraph 1 of this Article provided that such
liability of the SELLER shall be limited to damage occasioned within the
guarantee period specified in Paragraph 1 above.


 


The
SELLER shall not be obligated to repair, and/or be liable for, damages to the
VESSEL, or to any part of the equipment thereof, due to ordinary wear and
tear or caused by the defects other than those specified in Paragraph 1 above,
nor shall there be any SELLER’s liability hereunder for defects in the VESSEL,
or any part of the equipment thereof, caused by fire or accidents or
mismanagement, negligence, on the part of the BUYER, its employees or
agents including the VESSEL’s officers, crew and passengers, or any persons on
or doing work on the VESSEL other than the SELLER, its employees, agents or
subcontractors. Likewise, the SELLER shall not be liable for defects in the
VESSEL, or the equipment or any part thereof, due to repairs or
replacement which were made by persons other than the SELLER and/or their
subcontractors and/or their agents and/or their servants.


 


The
SELLER shall have no responsibility or liability for any defects in the VESSEL
other than the defects specified in Paragraph 1, against which the guarantee is
given by the SELLER under this Article. The SELLER shall not be responsible or
liable for any consequential damages, loss of time, loss of profit or earning
or demurrage occasioned to the BUYER by reason of the defects specified in
Paragraph 1 hereof or due to repairs or other works done to the VESSEL to
remedy such defects.


 


The
SELLER shall not be responsible for remedying defects in any part of the
VESSEL which may, subsequent to the delivery of the VESSEL, have been replaced
or in any way repaired by any other contractor (excluding SELLER’s
subcontractors, agents or servants), or for remedying any defects which have
developed, or have been aggravated by acts, omissions or neglect on the part of
the BUYER, its servants or agents or by ordinary wear and tear or by any other
circumstances beyond the control of the SELLER.


 


The
Guarantee provided in this Article and the obligations and the liabilities
of the SELLER hereunder are exclusive and in lieu of and the BUYER hereby
waives all other remedies, warranties, guarantees or liabilities, express or
implied, arising by law or otherwise (including without limitation any
obligations of the SELLER with respect to fitness, merchantability and consequential
damages) or whether or not occasioned by the SELLER’s negligence. This
Guarantee shall not be extended, altered or varied except by a written
instrument signed by the duly authorized representatives of the SELLER and the
BUYER.


 


35

















 


The
full benefit of any additional guarantees or warranties given by the SELLERS
subcontractors suppliers or manufacturers if any shall, if requested by the
BUYER, be duly transferred to the BUYER by the SELLER.


 


In
case of the sale of the VESSEL from the BUYERS to a new OWNER during the above
stipulated guarantee period, the SELLER agrees to transfer the remaining
guarantee period to the new owner which shall in no circumstances exceed twelve
(12) months from the date of delivery of the VESSEL to the BUYER provided that
this shall not impose any more obligations and/or liabilities to the SELLER
than those contained in the original guarantee as set out herein.


 


5.                          GUARANTEE ENGINEER(S)


 


The
SELLER shall help to arrange one Guarantee Engineer to serve on the VESSEL as
the SELLER’s representative(s) for a period of twelve (12) months, at SELLER’s
option, from the date of delivery of the VESSEL. The BUYER and its employees
shall give such Guarantee Engineer full cooperation in carrying out his duties
as the representative(s) of the SELLER onboard the VESSEL. The BUYER shall
accord the Guarantee Engineer(s) the treatment comparable to the VESSEL’s Chief
Engineer, and shall provide him with accommodations and subsistence at no cost
to the SELLER and/or the Guarantee Engineer.


 


The
BUYER may at its option terminate the stay of the Guarantee Engineer
before the completion of one (1) year but in no event earlier than three (3) months
after delivery of the VESSEL, with SELLER’s prior approval which not to be
unreasonably withheld.


 


The
BUYER shall pay to each Guarantee Engineer the sum of United States Dollars
Four thousand only (USD 4,000.00) per month to cover his/their miscellaneous
expenses and the BUYER shall pay expense of repatriation of one person to
Qingdao, the People’s Republic of China by air upon termination of his service,
and also shall pay the expense of his communications with the SELLER when made
in performance of his duties as the Guarantee Engineer and the expenses, if any,
of his medical and hospital care. The BUYER shall indemnify the Guarantee
Engineer for personal injuries, including death and damages to, or loss or
destruction of property of the Guarantee Engineer, if such death injuries,
damages, loss and/or destruction were caused by gross negligence or wilful
misconduct of the BUYER, its successor(s) and/or assign(s) or its employees
and/or agents.


 


In
case the BUYER considers that the Guarantee Engineer is unsuitable for the job
or is uncooperative with the VESSEL’s Chief Engineer, then the BUYER shall
notify accordingly the SELLER and the SELLER shall assist to arrange
replacement provided that such replacement is approved by the SELLER’s


 


36

















 


superior
organization and the crews certificates and passports of the replacing
engineer(s) can be procured. Until the replacement in the way set out in the
foregoing, no replacement of the guarantee engineer on aboard should be
effected.


 


Pertaining
to the detailed particulars of this paragraph, a detailed Employment Contract
will be executed between the parties hereto upon delivery of the VESSEL.


 


37

















 


ARTICLE 10 - CANCELLATION, REJECTION AND RESCISSION BY
THE BUYER


 


1.                          NOTICE


 


All
payments made by the BUYER prior to the delivery of the VESSEL shall be in the
nature of advance to the SELLER. In the event the BUYER shall exercise its
right of rescission and/or cancellation of this Contract under and pursuant to
any of the provisions of this
Contract specifically permitting the BUYER to do so, then the BUYER shall
notify the SELLER by letter, telefax, or telex and such rescission and/or
cancellation shall be effective as of the date the notice thereof is and/or is
deemed to be received by the SELLER.


 


2.                          REFUND BY THE SELLER


 


Upon
rescission and/or cancelling of this Contract by the BUYER pursuant to the
provisions hereof, the SELLER shall refund in United States Dollars immediately
to the BUYER the full amount of all sums paid by the BUYER and received by the
SELLER on account of the VESSEL together with interest thereon at the rate of
five percent (5%) p.a. on the amounts required to be refunded to the BUYER,
computed from the respective dates on which the relevant sums were paid by the BUYER
to the SELLER to the date of remittance by transfer of such refund net to the
BUYER by the SELLER, unless the SELLER disputes the BUYER’s cancellation and/or rescission by
instituting arbitration within fifteen (15) New York banking days in accordance
with Article 13. However, in the event of total loss as described in Article 12
of this Contract, then, no interest will be refunded on the amount required
herein.


 


If
the BUYER’s cancellation or rescission of this Contract is disputed by the
SELLER by instituting arbitration as aforesaid, then no refund shall be made by
the SELLER, and the BUYER shall not be entitled to demand repayment from
Guarantee Bank under the Refund Guarantee until the arbitration award between
the BUYER and the SELLER or, in case of appeal or appeals, the final court
order, which shall be in favor of the BUYER, declaring the BUYER’s cancellation
and/or rescission justified, is made and delivered to the SELLER.


 


All
sums so refunded shall be paid in freely transferable United States Dollars and
the SELLER undertakes to obtain any necessary exchange control or fiscal
consents or licenses necessary to effect such payment.


 


For
the purpose of this Article, the SELLER shall have delivered to the BUYER, the
irrevocable Refund Guarantee.


 


38

















 


Upon
such refund by the SELLER to the BUYER, all obligations, duties and liabilities
of each of the parties hereto to the other under this Contract shall be
forthwith completely discharged


 


39

















 


ARTICLE 11 - BUYER’S DEFAULT


 


1.                          DEFINITION OF DEFAULT


 


The
BUYER shall be deemed in default of its obligation under the Contract if any of
the following events occurs:


 


(a)                    The BUYER fails to pay the Second or Third or
Fourth instalment to the SELLER within five (5) New York banking days
after any such instalment become due and payable under the provisions of Article 2
hereof and provided the BUYER shall have received the SELLER’s demand for
payment and the respective Refund Guarantee in accordance with Article 2
hereof; or


 


(b)                   The BUYER fails to pay the fifth instalment
to the SELLER in accordance with Paragraph 3(e) and 4(e) of Article 2
hereof; or


 


(c)                    The BUYER fails to accept and take delivery
of the VESSEL, when the VESSEL is duly tendered for delivery by the SELLER
under the provisions of Article 7 hereof within seven (7) days from
the tendered date and without any justifiable reason thereof under this
Contract;


 


2.                          NOTICE OF DEFAULT


 


If
the BUYER is in default of any instalment of the Contract Price, or in
performance if its obligations as provided hereinabove, the SELLER shall notify
the BUYER to that effect by telex, confirmed in writing, after the date of
occurrence of the default as per Paragraph 1 of this Article and the BUYER
shall forthwith acknowledge by telex, confirmed in writing, to the SELLER that
such notification has been received. In case the BUYER does not give the
aforesaid telex acknowledgment to the SELLER within five (5) New York
banking days, it shall be deemed that such notification has been duly received
by the BUYER.


 


3.                          INTEREST AND CHARGE


 


If
the BUYER is in default of payment as to any instalment as provided in
Paragraph 1 (a) and/or 1 (b) of this Article, the BUYER shall pay
interest on such instalment at the rate of five percent (5%) per annum from the
due date thereof to the date of payment to the SELLER of the full amount
including all aforesaid interest. In case the BUYER shall unjustifiably fail to
take delivery of the VESSEL when required to as provided in Paragraph 1 (c) of
this Article, the BUYER shall be deemed in default of payment of the fifth
instalment and shall pay interest thereon at the same rate as aforesaid from
and including the day on


 


40

















 


which
the VESSEL is tendered for delivery by the SELLER to the date on which payment of the fifth instalment is
received by the SELLER.


 


In
any event of default by the BUYER under l(a) or l(b) or l(c) of
this Article, the BUYER shall also pay all charges and expenses incurred by the
SELLER in consequence of such default.


 


4.                          DEFAULT BEFORE DELIVERY OF THE VESSEL


 


(a)                    If any default by the BUYER occurs as defined
in Paragraph 1 (a) or 1 (b) or 1 (c) of this Article, the
Delivery Date shall, at the SELLER’s option, be postponed for a period of
continuance of such default by the BUYER.


 


(b)                   If any such default as defined in Paragraph 1
of this Article committed by the BUYER continues for a period of fifteen
(15) days after receiving the notice provided in Paragraph 2 of this Article,
then, the SELLER shall have all following rights and remedies:


 


(i)                       The SELLER may, at its option, cancel or
rescind this Contract, by giving notice of such effect to the BUYER by letter
or telefax or telex. Upon receipt by the BUYER of such notice of cancellation
or rescission, all of the BUYER’s supplies and all its equipment and machinery
shall be kept as a security for the SELLER’s claim; and


 


(ii)                    In the event of such cancellation or
rescission of this Contract, the SELLER shall also be entitled to retain any
instalment or instalments of the Contract Price paid by the BUYER to the SELLER
as a security for SELLER’s claim; and


 


(iii)                 In addition to the above and in the event of
such rescission or cancellation, the SELLER shall be entitled (but not bound)
to exercise and enforce any or all of its rights, powers and remedies under
this Contract (including but not limited to the sale of the VESSEL and
application of the proceeds thereof pursuant to Paragraph 5 herebelow) and/or
under any or all of the securities provided to the SELLER by way of security
for the BUYER’s obligations hereunder.


 


5.                          SALE OF THE VESSEL


 


(a)                    In the event of cancellation or rescission of
this Contract by the SELLER as above provided, the SELLER shall have full right
and power either to complete or private sale on such terms and conditions as
the SELLER thinks fit without being answerable for any loss or damage
occasioned to the


 


41

















 


BUYER
thereby. In any case the SELLER will use due diligence in obtaining the best
possible sale price of the VESSEL, which should not be inferior to the actual
market value of the VESSEL at the time of the sale.


 


In
the case of sale of the VESSEL, the SELLER shall give reasonable early written
notice by letter, telefax or telex, to the BUYER and the BUYER shall be
entitled to bid for the VESSEL at a public auction or to make an offer to buy
the VESSEL if it receives notice from the SELLER of its intention to sell it privately.


 


(b)                   In the event of the sale of the VESSEL in its
completed state, the proceeds of sale received by the SELLER shall be applied
firstly to payment of all expenses attending such sale and otherwise incurred
by the SELLER as a result of the BUYER’s default, and then to payment of all
unpaid instalments and/or unpaid balance of the Contract Price (less the value
of the BUYER’s Supplies) and interest on such instalments at the interest rate
as specified in the relevant provisions set out above from the respective due
dates thereof to the date of application.


 


(c)                    In the event of the sale of the VESSEL in its
incomplete state, the proceeds of sale received by the SELLER shall be applied
firstly to all expenses attending such sale and otherwise incurred by the
SELLER as a result of the BUYER’s default, and then payment of all costs of
construction of the VESSEL (such costs of construction, as herein mentioned,
shall include but are not limited to all costs of labour and/or prices paid or
to be paid by the SELLER for the equipment and/or technical design and/or
materials purchased or to be purchased, installed and/or to be installed on the
VESSEL) less the instalments so retained by the SELLER, and compensation to the
SELLER for a reasonable sum of loss of profit due to the cancellation or
rescission of this Contract.


 


(d)                   In either of the above events or rescission
of this Contract, if the proceeds of sale exceeds the total of the amounts to
which such proceeds are to be applied as aforesaid, the SELLER shall promptly
pay the excess to the BUYER without interest, provided, however that the amount
of such payment to the BUYER shall in no event exceed the total amount of
instalments already paid by the BUYER and the cost of the BUYER’s supplies, if
any.


 


(e)                    If the proceeds of sale are insufficient to
pay such total amounts payable as aforesaid, the BUYER shall promptly pay the
deficiency to the SELLER upon request.


 


42

















 


ARTICLE 12 – INSURANCE


 


1.                                       EXTENT OF INSURANCE COVERAGE


 


From
the time of launching of the VESSEL until the VESSEL is completed, the SELLER
shall, at its own cost and expense, keep the VESSEL and all machinery,
materials, equipment, appurtenances and outfit, delivered by SELLER for the
VESSEL or built into, or installed in or upon the VESSEL, fully insured with
first class Chinese insurance company for SELLER’s/BUILDER’s risk.
(Institute Clauses for Builder’s Risks).


 


The
insurance coverage shall be carried up to the date of delivery of the VESSEL,
and shall be in an amount at least equal to the aggregate amount of all
payments made by the BUYER to the SELLER plus the value of the BUYER’s supplies
in the custody of the SELLER. The policy referred to hereinabove shall be taken
out in the name of the SELLER and all losses under such policy shall be payable
to the SELLER.


 


2.                                       APPLICATION OF RECOVERED AMOUNT.


 


(a)                                  Partial Loss :


 


In
the event the VESSEL shall be damaged by any insured cause whatsoever prior to
acceptance and delivery thereof by the BUYER and in the further event that such
damage shall not constitute an actual or a constructive total loss of the
VESSEL, the SELLER shall apply the amount recovered under the insurance policy
referred to in Paragraph 1 of this Article to the repair of such damage to
the full and complete satisfaction of the Classification Society, of the
regulatory bodies and other institutions or authorities as described in the
Specifications without additional expenses to the BUYER and without any
notations, recommendations or remarks whatsoever and the BUYER shall accept the
VESSEL under this Contract if fully repaired and completed in accordance with
this Contract and Specifications.


 


(b)                                 Total Loss :


 


However,
in the event that the VESSEL is determined to be an actual or constructive
total loss, the SELLER shall either :


 


(i)                       By the mutual agreement between the parties
hereto, proceed in accordance with terms of this Contract, in which case the
amount recovered under said insurance policy shall be applied to the
reconstruction and/or repair of the VESSEL’s damages and/or reinstallation of
BUYER’s supplies without additional expenses to the BUYER, provided the parties
hereto shall have first agreed in writing as to such reasonable extension of
the Delivery Date and adjustment of other terms of this Contract including the
Contract Price as may be necessary or the completion of such
reconstruction and/or repair; or


 


43

















 


(ii)                    If due to whatever reasons the parties fail
to agree on the above, then refund immediately to the BUYER the amount of all
installments paid to the SELLER under this Contract without interests plus the
value of the BUYER’s supplies (if totally lost) whereupon this Contract shall
be deemed to be rescinded, cancelled and automatically terminated, all rights,
duties, liabilities and other obligations of each of the parties to the other
shall terminate forthwith, and the SELLER shall forthwith redeliver to the
BUYER any of the BUYER’s supplies which shall not have become a total loss.


 


Within
thirty (30) days after receiving notice of any damage to the VESSEL
constituting an actual or a constructive total loss, the BUYER shall notify the
SELLER in writing by letter or telefax, or by telex of its agreement or
disagreement under this sub-paragraph. In the event that BUYER fails to so
notify the SELLER, then such failure shall be construed as a disagreement on
the part of the BUYER. This Contract shall be deemed as rescinded and
cancelled and the BUYER shall receive the refund as hereinabove provided and
the provisions hereof shall apply.


 


3.                                       TERMINATION OF THE SELLER’S OBLIGATION TO
INSURE.


 


The
SELLER’s obligation to insure the VESSEL hereunder shall cease and terminate
forthwith upon delivery thereof to and acceptance by the BUYER.


 


44

















 


ARTICLE 13 – DISPUTES AND ARBITRATION


 


1.                                       PROCEEDINGS


 


In
the event of any dispute between the parties hereto as to any matter arising
out of or relating to this Contract or any stipulation herein or with respect
thereto which cannot be settled by the parties them selves forthwith, such
dispute shall be resolved by arbitration in London in accordance with the Laws
of England and the LMAA procedure current at the time. Either party may demand
arbitration of any such disputes by giving written notice by letter, telefax or
telex to the other party. Any demand for arbitration by either party hereto
shall state the name of the arbitrator appointed by such party and shall also
state briefly the question or questions as to which such party is demanding
arbitration. Within twenty (20) days after receipt of notice of such demand for
arbitration, the other party shall in turn appoint a second arbitrator. The two
arbitrators thus appointed shall have the power, in case of disagreement to
appoint an Umpire. The Arbitrators and the Umpire shall be members of the
London Marine Arbitrators’ Association (“LMAA”).


 


In
the event however, that said other party should fail to appoint a second
arbitrator as aforesaid within twenty (20) days following receipt of notice of
demand of arbitration, it is agreed that such party shall thereby be deemed to
have accepted and appointed as its own arbitrator the one already appointed by
the party demanding arbitration, and the arbitration shall proceed forthwith
before this sole arbitrator. And in the further event that the two arbitrators
appointed respectively by the parties hereto as aforesaid should be unable to
reach agreement on the appointment of the Umpire within twenty (20) days from
the date on which the second arbitrator is appointed, either party of the said
two arbitrators may apply to the High Court of Justice in London, or to
the President, for the time being, of the LMAA. The Arbitration Award issued by
the sole Arbitrator or by the two Arbitrators, or by the Umpire as the case may be,
shall be final, conclusive and binding upon both parties hereto unless appealed
by either party in accordance with the English Laws.


 


The
arbitration will be conducted in London, in accordance with and subject to the
provisions of the Arbitration Act 1996, or any statutory modifications or
re-enactment thereof, for the time being in force, and in accordance with
English law currently in force.


 


2.                                       ALTERNATIVE ARBITRATION BY AGREEMENT


 


Notwithstanding
the preceding provisions of this Article, it is recognized that in the event of
any dispute or difference of opinion arising in regard to the


 


45

















 


construction
of the VESSEL, her machinery and equipment, or concerning the quality
of materials or workmanship thereof or thereon, such dispute may be
referred (by mutual agreement of the parties hereto) to the Classification
Society, in such case, the opinion of the Classification Society shall be final
and binding on the parties hereto.


 


3.                                       NOTICE OF AWARD


 


Notice
of any award being issued shall immediately by given in writing or by telex
confirmed in writing to the SELLER and the BUYER.


 


4.                                       EXPENSES


 


The
arbitrator(s) shall determine which party shall bear the expenses of the
arbitration or the proportion of such expenses which each party shall bear.


 


5.                                       AWARD OF ARBITRATION – ENTRY INTO COURT


 


In
case of failure by either party to honour the Arbitration Award(s) promptly, a
judgment may be entered in any proper court having jurisdiction thereof.


 


6.                                       ALTERATION OF DELIVERY TIME


 


In
the event of reference to arbitration of any dispute arising out of matters
occurring prior to delivery of the VESSEL, the BUYER shall not be entitled to
extend the Delivery Date as defined in Article 7 hereof. The Arbitration
Tribunal however, shall be empowered to decide as to what extent if any the
Delivery Date is altered as a result of the arbitration proceedings, if at all.


 


7.                                       SERVICE AGENTS IN London


 


All
notices in connection with the above Arbitration and any Appeals thereof shall
be given by letter or telefax in accordance with Article 17 hereunder. In
addition, the BUYER hereby irrevocably appoints Messrs. Mr. Riches
Consulting. Address: Old Jarretts Farmhouse, Brantridge Lane, Balcombe, West
Sussex, RH17 6JR, United Kingdom, and the SELLER hereby irrevocably appoints                        
as their U.K. respective agents to receive service of documents.


 


46

















 


ARTICLE 14 - RIGHT OF ASSIGNMENT


 


1.                          The Buyer shall not be entitled to assign its
rights under this Contract without the prior written consent of the Seller
(such consent not to be unreasonably withheld). However the Buyer shall be
entitled without the prior written consent of the sellers but with prior
written notice to the Sellers, to assign it rights under this contract in
favour of a bank or financial Institution which will finance part or all
of the pre-delivery instalments payable under this Contract as security for
such financing (it being understood for the avoidance of doubt that:


 


(i)  Such assignement shall be an assignement by
way of security in favour of a financier of the Buyer and not an assignement by
way of transfer in favour of a third party purchaser,


 


(ii)
The Seller shall not by virtue of such assignement have any additional
obligation and/or risk other than those existing prior the date of such
assignement and


 


(iii)
The Buyer shall remain responsible for the Performance of all obligations under
this contract, including but not limited to paying all instalments of the
Contract price, which shall be approved by this bank or Financial Institution.


 


2.                          ASSIGNMENT WITH EFFECT FROM DELIVERY.


 


Provided
that the BUYER shall remain responsible for the performance of all obligation
under this Contract (including but not limited to paying all installments and
execution of the Protocol of the Delivery and Acceptance) and further that the
SELLER’s right to receive all installments (including the delivery installment)
from the BUYER and all rights and benefits hereunder are not in any way
prejudiced and the SELLER’s prior consent in writing, the BUYER shall be
entitled to sell its interest in this Contract to a third party with effect
from delivery of the VESSEL and the SELLER will upon request of the BUYER issue
delivery documents in favor of such third party and deliver the VESSEL to such
third party. In such event and upon delivery of the VESSEL, all rights of the
BUYER shall be transferred to such third party and the BUYER shall cease to
have any right in and under this Contract.


 


47

















 


ARTICLE 15 - TAXES AND DUTIES


 


1.                          TAXES AND DUTIES INCURRED IN CHINA.


 


The
SELLER shall bear and pay all taxes, duties, stamps, dues levies and fees of
whatsoever nature incurred or imposed in China in connection with the execution
and/or performance of this Contract by the SELLER and its sub-contractors, and
any payments to be made hereunder by the BUYER. The SELLER warrants that BUYER’s supplies for the construction or
use of the VESSEL maybe imported into China without taxes, duties or
restrictions, however, The Buyer’s supplies list shall be approved by the
Seller before steel cutting, the amount for Buyer’s supplies to be less than
10% of contract price and in compliance with the laws of the People’s Republic
of China.


 


2.                          TAXES AND DUTIES INCURRED OUTSIDE CHINA.


 


The
BUYER shall bear and pay all taxes, duties, stamps and fees incurred outside
China in connection with execution and/or performance of this Contract by the
BUYER, except for taxes, duties, stamps, dues, levies and fees imposed upon
those items which are to be procured by the SELLER for the construction of the
VESSEL in accordance with the terms of this Contract and the Specifications.


 


48

















 


ARTICLE 16 - PATENTS, TRADEMARKS AND COPYRIGHT.


 


The machinery and equipment of the VESSEL may bear
the patent number, trademarks or trade names of the manufacturers. The SELLER
shall defend and save harmless the BUYER from patent liability or claims of
patent infringement of any nature of kind, including costs and expenses for, or
on account of any patented or patentable invention made or used in the
performance of this Contract and also including cost and expense of litigation,
if any.


 


The SELLER’s indemnity
hereunder does not extend to equipment or parts supplied by the BUYER to the
SELLER if any.


 


49

















 


ARTICLE 17 - NOTICES


 


Any and all notices and
communications by letter, telefax or telex, in connection with this Contract
shall be addressed as follows :


 


	
  To the BUYER

  	
   

  	
  : Aegean Bunkering
  Services Inc.

  
	
  Address

  	
   

  	
  : 42, Hadjikyriakou
  Avenue, Piraeus 185 38-Greece

  
	
  Telephone No.

  	
   

  	
  : +30210 4586000

  
	
  Telefax

  	
   

  	
  : +30210 4586242

  



 


To the BUILDER : QINGDAO
HYUNDAI SHIPBUILDING CO., LTD


 


	
  Address

  	
   

  	
  : Lingshanwei Jiaonan, PC
  266427

  
	
   

  	
   

  	
    Qingdao, Shandong,

  
	
   

  	
   

  	
    The People’s Republic of China

  
	
   

  	
   

  	
   

  
	
  Telephone No.

  	
   

  	
  : +86-532-83181033

  	
  Telefax : +86-532-83182618

  



 


Any change of address shall
be communicated in writing by registered mail by the party making such change
to the other party and in the event of failure to give such notice of change,
communications addressed to the party at their last known address shall be
deemed sufficient.


 


Any and all notices,
requests, demands, instructions, advice and communications in connection with
this Contract shall be deemed to be given at, and shall become effective from,
the time when the same is delivered to the address of the party to be served,
provided, however, that registered airmail shall be deemed to be delivered ten (10) days
after the date of dispatch, express courier service shall be deemed to be
delivered five (5) days after the date of dispatch, and telex acknowledged
by the answer backs shall be deemed to be delivered upon dispatch.


 


Any and all notices,
communications, Specifications and drawing in connection with this Contract
shall be written in the English language and each party hereto shall have no obligation
to translate them into any other language.


 


50

















 


ARTICLE 18 - EFFECTIVE DATE OF CONTRACT.


 


This
Contract shall become effective upon signing by the parties hereto.


 


51

















 


ARTICLE 19 - INTERPRETATION


 


1.                          LAW APPLICABLE


The
parties hereto agree that validity and interpretation of this Contract and of
each Article and part hereof be governed by and interpreted in
accordance with the Laws of England.


 


2.                          DISCREPANCIES


All
general language or requirements embodied in the Specifications are intended to
amplify, explain and implement the requirements of this Contract. However, in
the event that any language or requirements so embodied in the Specifications
permit an interpretation inconsistent with any provision of this Contract, then
in each and every such event the applicable provisions of this Contract shall
govern. The Specifications and plans are also intended to explain each other,
anything shown on the plans and not stipulated in the Specifications or
stipulated in the Specifications and not shown on the plans, shall be deemed
and considered as if embodied in both. In the event of conflict between the
Specifications and plans, the Specifications shall govern.


 


However,
with regard to such inconsistency or contradiction between this Contract and
the Specifications as may later occur by any change or changes in the
Specifications agreed upon by and among the parties hereto after execution of
this Contract, then such change or changes shall govern.


 


3.                          DEFINITION


(a) In
absence of stipulation of “banking day(s)” or “business day(s)”, the “day” or “days”
shall be taken as “calendar day” or “calendar days’”.


 


(b) “BUILDER”
and “BUYER” used in the Specifications shall correspond to “SELLER” and “BUYER”
respectively used in this Contract.


 


4.                          ENTIRE AGREEMENT


This
Contract contains the entire agreement and understanding between the parties
hereto and supersedes all prior negotiations, representations, undertakings and
agreements on any subject matter of this Contract.


 


5.                          AMENDMENTS AND SUPPLEMENTS


Any
Supplement, Memorandum of Understanding or Amendment executed after the date
hereof in whatsoever form it may be, relating to this Contract, shall
be made in writing and signed by both parties. Such Supplement,


 


52

















 


Memorandum of Understanding
or Amendment shall be an integral part of this Contract and shall be
predominant over the respective corresponding article/or paragraph of this
Contract.


 


IN WITNESS WHEREOF, the
parties hereto have caused this Contract to be duly executed on the day and
year first above written.


 


	
  THE BUYER:

  
	
   

  
	
  Representative

  	
  :

  	
  SPYROS FOKAS

  
	
   

  	
   

  	
   

  
	
  Signature

  	
  :

  	
  /s/ SPYROS FOKAS

  	
   

  
	
   

  	
   

  	
   

  
	
  Date

  	
  :

  	
  18th October 2006

  



 


	
  WITNESS : INTERMODAL
  SHIPBROKERS CO

  
	
   

  
	
  Representative

  	
  :

  	
  GEORGE DERMATIS

  
	
   

  	
   

  	
   

  
	
  Signature

  	
  :

  	
  /s/ GEORGE DERMATIS

  	
   

  
	
   

  	
   

  	
   

  
	
  Date

  	
  :

  	
  18th October 2006

  



 


 


	
  THE SELLER: QINGDAO
  HYUNDAI SHIPBUILDING CO., LTD

  
	
   

  
	
   

  
	
  Representative

  	
  :

  	
  Z.M. CHUNG

  
	
   

  	
   

  	
   

  
	
  Signature

  	
  :

  	
  /s/ Z.M. CHUNG

  	
   

  
	
   

  	
   

  	
   

  
	
  Date

  	
  :

  	
  2006/10/18

  



 


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