Document:

Exhibit 10.26

 

FOR

 

CONSTRUCTION
AND SALE

 

OF

 

A 4,250 TEU
CONTAINER VESSEL

(HULL NO. 1699)

 

 

BETWEEN

 

Blacksea Marine
Inc.

As BUYER

 

AND

 

 

Samsung
Heavy Industries Co., Ltd.

As BUILDER

 

 

I N D E X

 

	
   

  	
   

  	
  PAGE

  
	
   

  	
   

  	
   

  
	
  PREAMBLE

  	
   

  	
  7

  
	
   

  	
   

  	
   

  
	
  ARTICLE I - DESCRIPTION AND CLASS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  1. Description

  	
   

  	
  8

  
	
  2. Dimensions and
  Characteristics

  	
   

  	
  8

  
	
  3. Classification, Rules and
  Regulations

  	
   

  	
  9

  
	
  4. Subcontracting

  	
   

  	
  10

  
	
  5. Registration

  	
   

  	
  10

  
	
   

  	
   

  	
   

  
	
  ARTICLE II - CONTRACT PRICE AND TERMS OF
  PAYMENT

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  1. Contract Price

  	
   

  	
  11

  
	
  2. Adjustment of Contract
  price

  	
   

  	
  11

  
	
  3. Currency

  	
   

  	
  11

  
	
  4. Terms of Payment

  	
   

  	
  11

  
	
  5. Method of Payment

  	
   

  	
  12

  
	
  6. Notice of Payment on or
  before Delivery

  	
   

  	
  13

  
	
  7. Expenses

  	
   

  	
  13

  
	
  8. Prepayment

  	
   

  	
  13

  
	
  9. Performance Guarantee

  	
   

  	
  14

  
	
   

  	
   

  	
   

  
	
  ARTICLE III - ADJUSTMENT OF CONTRACT PRICE

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  1. Delivery

  	
   

  	
  15

  
	
  2. Speed

  	
   

  	
  16

  
	
  3. Fuel Consumption

  	
   

  	
  17

  
	
  4. Deadweight

  	
   

  	
  17

  
	
  5. Early Delivery

  	
   

  	
  18

  
	
  6. Effect of Rescission

  	
   

  	
  18

  

 

2

 

	
  ARTICLE IV - APPROVAL OF PLANS AND DRAWINGS AND
  INSPECTION DURING CONSTRUCTION

  
	
   

  	
   

  	
   

  
	
  1. Approval of Plans and
  Drawings

  	
   

  	
  19

  
	
  2. Appointment of BUYER’s
  Supervisor

  	
   

  	
  19

  
	
  3. Inspection by the
  Supervisor

  	
   

  	
  20

  
	
  4. Facilities

  	
   

  	
  21

  
	
  5. Liability of BUILDER

  	
   

  	
  21

  
	
  6. Responsibility of BUYER

  	
   

  	
  22

  
	
   

  	
   

  	
   

  
	
  ARTICLE V
  - MODIFICATIONS, CHANGES AND EXTRAS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  1. How Effected

  	
   

  	
  23

  
	
  2. Change in Rules of
  Classification Society, Regulations etc

  	
   

  	
  24

  
	
  3. Substitution of
  Materials

  	
   

  	
  25

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI - TRIALS AND ACCEPTANCE

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  1. Notice

  	
   

  	
  26

  
	
  2. Weather Condition

  	
   

  	
  26

  
	
  3. How Conducted

  	
   

  	
  27

  
	
  4. Method of Acceptance of
  Rejection

  	
   

  	
  27

  
	
  5. Effect of Acceptance

  	
   

  	
  28

  
	
  6. Disposition of Surplus
  Consumable Stores

  	
   

  	
  28

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII - DELIVERY

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  1. Time and Place

  	
   

  	
  29

  
	
  2. When and How Effected

  	
   

  	
  29

  
	
  3. Documents to be
  delivered to BUYER

  	
   

  	
  29

  
	
  4. Tender of VESSEL

  	
   

  	
  30

  
	
  5. Title and Risk

  	
   

  	
  31

  
	
  6. Removal of VESSEL

  	
   

  	
  31

  

 

3

 

	
  ARTICLE VIII - DELAYS AND EXTENSION OF TIME FOR
  DELIVERY (FORCE MAJEURE)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  1. Causes of Delay

  	
   

  	
  32

  
	
  2. Notice of Delay

  	
   

  	
  33

  
	
  3. Definition of Permissible
  Delay

  	
   

  	
  33

  
	
  4. Right to Rescind for
  Excessive Delay

  	
   

  	
  33

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX - WARRANTY OF QUALITY

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  1. Guarantee

  	
   

  	
  35

  
	
  2. Notice of Defects

  	
   

  	
  35

  
	
  3. Remedy of Defects

  	
   

  	
  35

  
	
  4. Extent of the BUILDER’s
  Responsibility

  	
   

  	
  37

  
	
  5. Guarantee Engineer

  	
   

  	
  37

  
	
   

  	
   

  	
   

  
	
  ARTICLE X - RESCISSION BY BUYER

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  1. Notice

  	
   

  	
  39

  
	
  2. Refundment by BUILDER

  	
   

  	
  39

  
	
  3. Discharge of
  Obligations

  	
   

  	
  40

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI - BUYER’S DEFAULT

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  1. Definition of Default

  	
   

  	
  41

  
	
  2. Effect of Default on or
  before Delivery of VESSEL

  	
   

  	
  41

  
	
  3. Disposal of VESSEL

  	
   

  	
  42

  
	
   

  	
   

  	
   

  
	
  ARTICLE XII - ARBITRATION

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  1. Decision by
  Classification Society

  	
   

  	
  43

  
	
  2. Proceedings of
  Arbitration

  	
   

  	
  43

  
	
  3. Notice of Award

  	
   

  	
  44

  
	
  4. Expenses

  	
   

  	
  44

  
	
  5. Entry in Court

  	
   

  	
  44

  
	
  6. Alteration of Delivery
  Date

  	
   

  	
  44

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIII - SUCCESSOR AND ASSIGNS

  	
   

  	
  45

  

 

4

 

	
  ARTICLE XIV - TAXES AND DUTIES

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  1. Taxes and duties
  Incurred in Korea

  	
   

  	
  46

  
	
  2. Taxes and Duties
  Incurred outside Korea

  	
   

  	
  46

  
	
   

  	
   

  	
   

  
	
  ARTICLE XV - PATENTS, TRADEMARKS, COPYRIGHTS,
  ETC

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  1. Patents, Trademarks and
  Copyrights

  	
   

  	
  47

  
	
  2. General Plans,
  Specifications and Working Drawings

  	
   

  	
  47

  
	
   

  	
   

  	
   

  
	
  ARTICLE XVI - BUYER’S SUPPLIES

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  1. Responsibility of BUYER

  	
   

  	
  48

  
	
  2. Responsibility of
  BUILDER

  	
   

  	
  49

  
	
   

  	
   

  	
   

  
	
  ARTICLE XVII - INSURANCE

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  1. Extent of Insurance
  Coverage

  	
   

  	
  50

  
	
  2. Application of the
  Recovered Amounts

  	
   

  	
  50

  
	
  3. Termination of BUILDER’s
  Obligation to Insure

  	
   

  	
  51

  
	
   

  	
   

  	
   

  
	
  ARTICLE XVIII - NOTICE

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  1. Address

  	
   

  	
  52

  
	
  2. Language

  	
   

  	
  52

  
	
  3. Effective Date of
  Notice

  	
   

  	
  53

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIX - EFFECTIVE DATE OF CONTRACT

  	
   

  	
  54

  
	
   

  	
   

  	
   

  
	
  ARTICLE XX - INTERPRETATION

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  1. Laws Applicable

  	
   

  	
  55

  
	
  2. Discrepancies

  	
   

  	
  55

  
	
  3. Entire Agreement

  	
   

  	
  55

  
	
  4. Amendments and
  supplements

  	
   

  	
  55

  

 

5

 

	
  END OF CONTRACT

  	
   

  	
  56

  
	
   

  	
   

  	
   

  
	
  EXHIBIT ”A” LETTER OF REFUNDMENT GUARANTEE

  	
   

  	
  57

  
	
   

  	
   

  	
   

  
	
  EXHIBIT ”B” PERFORMANCE GUARANTEE

  	
   

  	
  61

  
	
   

  	
   

  	
   

  
	
  EXHIBIT ”C” PERFORMANCE GUARANTEE

  	
   

  	
  62

  

 

6

 

THIS CONTRACT, made and entered
into on this 12th day of May,
2006 by and between Blacksea Marine Inc. a corporation incorporated and
existing under the laws of Liberia, having its registered office at 80 Broad
Street, Monrovia, Liberia (hereinafter
called the “BUYER”), on the one part and Samsung Heavy Industries Co., Ltd.,
a corporation incorporated and existing under the laws of the Republic of Korea
of having its registered office at 647-9, Yeoksam-Dong, Kangnam-ku, Seoul,
Korea (hereinafter called the “BUILDER”), on the other part,

 

WITNESSETH:

 

In consideration of the mutual
covenants herein contained, the BUILDER agrees to design, build, launch and
complete in accordance with first class modern Korean shipbuilding
practice and standards one (1) Single Screw Diesel Engine driven Container
VESSEL as described in the Specifications attached herewith and any addendum
thereto (hereinafter called the “VESSEL”) at the BUILDER’s shipyard located in Geoje
Island, Korea (hereinafter called the “Shipyard”) and to deliver and sell the
same to the BUYER, and the BUYER hereby agrees to purchase and accept delivery
of the VESSEL from the BUILDER and to pay for the same upon the terms and
conditions hereinafter set forth.

 

7

 

ARTICLE I - DESCRIPTION AND CLASS

 

1.                          Description :

 

The VESSEL shall be an ocean going single screw
diesel engine driven fully cellular container VESSEL suitable for carrying dry
cargo containers having the BUILDER’s Hull No.1699 and shall be built,
constructed, equipped and completed in accordance with the ‘As-Built-Specifications’
as specified in the shipbuilding
contracts of the BUILDER’s Hull No. 1639 and 1640 (hereinafter called as
the “HN1639 Series Contract”) to build just identical vessels
to the BUILDER’s Hull No. 1639 and 1640 (hereinafter called as the “HN1639
Series”) as a repeat and series, and the ‘Maker List’ as specified in the
Supplement Agreement No.1 (dated June 30, 2005) to the HN 1639 Series Contract
(hereinafter collectively called as the “SPECIFICATIONS”).

 

Thus, all drawings and plans made by the BUILDER
and duly approved by the BUYER during the construction of the HN1639 Series in
accordance with HN 1639 Series Contract shall be used without any further
change, modification and approval by the BUYER, and all extra/credit
costs agreed as of April 28, 2006 for the HN 1639 Series are included
into the ship price described in this CONTRACT, and all construction procedure including model
test and sea trial etc. shall be done on the basis of the just repeat and series VESSEL
of the HN 1639s Series.

 

2.                          Dimensions and
Characteristics :

 

	
  Length,
  overall

  	
   

  	
   

  	
   

  	
  appx.

  	
   

  	
  259.8

  	
  m

  
	
  Length,
  between perpendiculars

  	
   

  	
   

  	
   

  	
  appx.

  	
   

  	
  244.8

  	
  m

  
	
  Breadth, moulded

  	
   

  	
   

  	
   

  	
  appx.

  	
   

  	
  32.25

  	
  m

  
	
  Depth, moulded

  	
   

  	
   

  	
   

  	
  appx.

  	
   

  	
  19.3

  	
  m

  
	
  Designed loaded draught,
  moulded

  	
   

  	
   

  	
   

  	
  appx. 

  	
   

  	
  11.0

  	
  m

  
	
  Scantling draught, moulded

  	
   

  	
   

  	
   

  	
  appx.

  	
   

  	
  12.6

  	
  m

  

 

Main Engine                                                                   :                                                      MAN B&W 8K 90MC-C type License Made MCR
49,680 bhp at 104 r.p.m.

 

	
  Deadweight,
  guaranteed

  	
  :

  	
   

  	
  50,500
  metric tons at the moulded scantling draught of 12.6 meters.

  

 

8

 

	
  Speed,
  guaranteed

  	
  :

  	
   

  	
  24.5
  knots at a draught of 11.0 meters and main engine developing power of 38,880
  bhp (metric).

  
	
   

  	
   

  	
   

  
	
  Fuel
  Consumption, guaranteed :

  	
   

  	
  124.3
  grams/bhp(metric)-hour using marine diesel oil having lower calorific value
  of 10,200 kcal/kg at
  normal continuous rating of 44,710 bhp(metric) measured at the shop trial.

  

 

The details of the aforementioned particulars as
well as the definitions and method of measurements and calculations are as
defined in the SPECIFICATIONS .

 

3.                          Classification, Rules and Regulations :

 

The VESSEL, including its machinery, equipment and
outfittings shall be constructed in accordance with the rules and
regulations in year 2004 July edition of the Classification Society in
accordance with both the interpretation of Classification Society (dated on
2005-06-29 Ref No. MKOKR120/MSSH/Gen-precontract/PUS-J-668) and the
interpretation of the Classification Society (dated 28th February 2006
Ref. No. MKOKR120/MSSH/Gen-Precontract/PUS-J-698 in respect of new updates in effect as of April 28,
2006 from rule and regulations applied to the HN1639 Series) and under special survey of Det Norske
Veritas (hereinafter called the “Classification Society”) and shall be
distinguished in the register by the symbol of X1A1 “
Container Carrier”, NAUTICUS, EO, and In water survey and TMON shall be applied
according to the requirement of the class rule.

 

Decisions
of the Classification Society as to compliance or non-compliance with the
classification shall be final and binding upon both parties hereto. Details of
its notation shall be in accordance with the SPECIFICATIONS .

 

The VESSEL
shall also comply with the compulsory rules, regulations and requirements of
the regulatory bodies as described in the SPECIFICATIONS  rectified and in effect as of the signing date
of this Contract. Non-compulsory rules, regulations and requirements of the
regulatory bodies shall be dealt with in accordance with Article V (2) of
this Contract.

 

9

 

All the
fees and charges incidental to the classification and with respect to
compliance with the above referred rules, regulations and requirements shall be
for account of the BUILDER except otherwise agreed.

 

4.                          Subcontracting :

 

The BUILDER
may, at its sole discretion and responsibility, subcontract any portion of the
construction work of the VESSEL, provided that the construction and assembly of
the VESSEL shall be carried out as is normally done according to the BUILDER’s
building practice and provided further that the BUILDER shall be responsible to
the BUYER in respect of any construction work carried out by such
subcontractors.

 

5.                          Registration :

 

The VESSEL,
at the time of its delivery and acceptance, shall be registered at the port of
registry by the BUYER under Cyprus flag at the BUYER’s expenses.

 

(End of
Article)

 

10

 

ARTICLE II
- CONTRACT PRICE AND TERMS OF PAYMENT

 

1.                          Contract Price :

 

The Contract price of the VESSEL and exclusive of
the BUYER’s Supplies as provided in Paragraph 1 of Article XVI hereof is Sixty
Three Million Eight Hundred Thousand United States Dollars (US$ 63,800,000.-)
(hereinafter called the “Contract Price”), which shall be subject to upward or
downward adjustment, if any, as hereinafter set forth in this Contract.

 

2.                          Adjustment of Contract Price:

 

Increase or
decrease of the Contract Price, if any, due to adjustments thereof made in
accordance with the provisions of this Contract, shall be adjusted by way of
addition to or subtraction from the Contract Price upon delivery and acceptance
of the VESSEL in the manner as hereinafter provided.

 

3.                          Currency :

 

Any and all payments by the
BUYER to the BUILDER which are due under this Contract shall be made in United
States Dollars.

 

4.                          Terms of Payment :

 

The
Contract Price shall be due and payable by the BUYER to the BUILDER in the
instalments as follows :

 

(a)                      First Instalment :

 

The First Instalment amounting to Six Million Three
Hundred and Eighty Thousand United States Dollars (US$ 6,380,000.-) shall be
due and payable upon issuance and delivery to the BUYER of the original of
Refund Guarantee.

 

(b)                     Second Instalment :

 

The Second Instalment amounting to Six
Million Three Hundred and Eighty Thousand United States Dollars (US$
6,380,000.-) shall be due and payable upon eighteen(18) calendar months after
the date of singing of this Contract.

 

11

 

(c)                      Third
Instalment :

 

The Third Instalment amounting to Six Million Three
Hundred and Eighty Thousand United States Dollars (US$ 6,380,000.-) shall be
due and payable upon steel cutting of the VESSEL.

 

(d)                     Fourth Instalment :

 

The Fourth Instalment amounting to Six
Million Three Hundred and Eighty Thousand United States Dollars (US$
6,380,000.-) shall be due and payable upon keel laying of the VESSEL.

 

 (e)                   Fifth Instalment :

 

The Delivery Instalment amounting to Thirty Eight Million
Two Hundred and Eighty Thousand United States Dollars (US$ 38,280,000.-) plus
any increase or minus any decrease due to adjustments of the Contract Price
under and pursuant to the provisions of this Contract, shall be due and payable
upon delivery and acceptance of the VESSEL or upon tender for delivery of the
VESSEL referred to in Paragraph 4 of Article VII of this Contract.

 

It is agreed that no payment shall be effected until
the original Refund Guarantee is delivered to the BUYER.

 

5.                          Method of Payment :

 

 (a)                   First Instalment :

 

Within
Seven(7) banking days after 12th day of May 2006, the BUYER shall
remit by telegraphic transfer the first instalment to the account of The
Export-Import Bank of Korea, Head Office, Seoul, Korea with Deutsche Bank Trust
Company Americas(BIC : BKTRUS33), 60 Wall Street, Mail Stop NYC 60 1310, New
York, NY 10005, USA, Account No.04 029 695, in favour of Samsung Heavy
Industries., Ltd, SWIFT code : EXIKKRSE or other bank as designated by the
Builder, in favor of Samsung Heavy Industrise Co, Ltd.(hereinafter called the “BUILDER’s
Bank”)

 

 (b)                  Second,
Third and Fourth Instalment :

 

Upon receipt of telefax notice from the BUILDER
confirming that the second, third, and fourth instalment on each event is due
and payable, the BUYER shall

 

12

 

remit by telegraphic transfer the second, third, and
fourth instalment to the aforesaid account of the BUILDER’s Bank in favour of
Samsung Heavy Industries Co., Ltd.

 

 (c)                   Fifth Instalment :

 

At least One (1) banking days prior to delivery
and acceptance of the VESSEL, the BUYER shall remit by telegraphic transfer the
fifth instalment to the name of the BUYER at BUILDER’s BANK, with an
irrevocable instruction that the amount so remitted shall be payable to the
BUILDER against a facsimile copy of PROTOCOL OF DELIVERY and ACCEPTANCE OF THE
VESSEL signed by the BUYER and the BUILDER or returned to the BUYER if such
PROTOCOL OF DELIVERY and ACCEPTANCE has not been presented within fifteen (15)
days.

 

Simultaneously with each of all such payments, the
BUYER shall cause the BUYER’s BANK to advise the BUILDER’s BANK of the details
of such payments by authenticated bank cable.

 

Any claim which the BUYER may have against the
BUILDER hereunder shall be settled and liquidated separately from any payment
by the BUYER to the BUILDER hereunder.

 

6.                          Notice of Payment on or
before Delivery :

 

With the
exception of the first instalment, the BUILDER shall give the BUYER Five(5) banking
days prior notice by telefax of the anticipated due date and amount of each
instalment payable on or before delivery of the VESSEL.

 

7.                          Expenses

 

Expenses
and bank charges for remitting payments and any taxes, duties, expenses and
fees connected with such payment shall be for account of the BUYER referred to
in paragraph 2 of Article XIV of this Contract, except expenses and bank
charges of the BUILDER’s BANK.

 

8.                          Prepayment :

 

Prepayment
of any instalment due on or before delivery of the VESSEL shall be subject to
mutual agreement between the parties hereto.

 

13

 

9.                          Performance Guarantee

 

Upon signing this Contract, the BUYER shall provide
the BUILDER with a Performance Guarantee in order to secure the due and
faithful performance of this Contract by the BUYER having same form and
contents as Exhibit ”B” annexed hereto.

 

(End of Article)

 

14

 

ARTICLE III - ADJUSTMENT OF CONTRACT PRICE

 

The
Contract Price shall be subject to adjustment, as hereinafter set forth, in the
event of the following contingencies (it being understood by both parties that
any reduction of the Contract Price is by way of liquidated damages and not by
way of penalty) :

 

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 VII
hereof (ending as of twelve o’clock midnight of the Thirty (30) day of delay).

 

 (b)                  If
the delivery of the VESSEL is delayed more than Thirty (30) days after the Delivery Date, the Contract
Price shall be reduced by the sum of 
Twenty Seven Thousand Five Hundred United States Dollars (US$27,500.-)
for each full day for which thereafter delivery is delayed.

 

However, the total reduction in the Contract Price
shall not be more than as would be the case for a delay of One Hundred Eighty
(180) days counting from the midnight of the Thirty (30) day after the Delivery Date at the above
specified rate of reduction.

 

 (c)                   However, if the delay in
delivery of the VESSEL should continue for a period of Two Hundred Ten (210)
days from the Delivery Date in Paragraph 1 of Article VII, then in such
event, and after such period has expired, the BUYER may, at its option, rescind
this Contract in accordance with the provisions of Article X hereof.

 

The BUILDER may, at any time after the expiration of
the aforementioned Two Hundred Ten (210) days of delay in delivery, if the
BUYER has not served notice of rescission as provided in Article X hereof,
demand in writing that the BUYER shall make an election, in which case the
BUYER shall, within Twenty (20) days after such demand is received by the
BUYER, notify the BUILDER of its intention either to rescind this Contract or
to consent to the acceptance of the VESSEL at the BUILDER’s specified future
date. If the BUYER shall not make an election within Twenty (20) days as
provided hereinabove, the BUYER shall be deemed to have accepted such extension
of the delivery date to the future delivery date indicated by the BUILDER and
it being understood by the parties hereto that if the VESSEL is not delivered
by such future date, the BUYER shall

 

15

 

have the same right of rescission upon the same
terms and conditions as hereinabove provided.

 

It is understood that accrued liquidated damages are
preserved. Further delay shall incur additional liquidated damages in
accordance with existing terms and conditions.

 

 (d)                  For the purpose of this Article, the delivery
of the VESSEL shall be deemed to be delayed when and if the VESSEL, after
taking into account all postponements of the Delivery Date by reason of
permissible delay as defined in Article VIII and/or any other reason under
this Contract, is not delivered by the date upon which delivery is required
under the terms of this Contract.

 

2.                          Speed :

 

 (a)                   The Contract Price shall not be affected or changed by reason of the
trial speed (as determined according to the SPECIFICATIONS  being less than the guaranteed speed, if such
variation is not more than Two-Tenths (2/10) of One (1) knot.

 

 (b)                  However,
if such variation is more than Two-Tenths (2/10) of One (1) knot, then,
the Contract Price shall be decreased by One Hundred and Seventy Five Thousand
United States Dollars (US$ 175,000.-) for each successive whole One-Tenth(1/10)
of a knot in excess of a deficiency of Two-Tenths (2/10) of a knot (in both
cases smaller fractions being disregarded).

 

 (c)                   If the deficiency in the speed upon final sea trial is more than
Half(1/2) a knot below the guaranteed speed of the VESSEL, then the BUYER may,
at its option, reject the VESSEL and rescind this Contract in accordance with
the provisions of Article X hereof, or may accept the VESSEL at a
reduction in the Contract Price as above provided for Half(1/2) a knot only,
that is, at a total reduction of Five Hundred and Twenty Five Thousand United
States Dollars (US$ 525,000.-).

 

16

 

3.                          Fuel Consumption :

 

 (a)                   The Contract Price shall not be affected or
changed in case the fuel consumption, as determined by the shop trial as
specified in the SPECIFICATIONS , is not more than Five percent (5%) in excess
of the guaranteed fuel consumption specified in Paragraph 2 of Article I.

 

 (b)                  However,
in the event that the actual fuel consumption at the shop trial is in excess of
Five percent (5%) of the guaranteed fuel consumption, the Contract Price shall
be reduced by the sum of One Hundred and Ten Thousand United States Dollars
(US$ 110,000.-) for each full one percent(1%) increase in fuel consumption and
pro rata for any fraction of one percent(1%) of the Guaranteed Fuel Consumption
in excess of the said five percent(5%) up to maximum of eight percent(8%) over
the Guaranteed Fuel Consumption.

 

 (c)                   If the deficiency in fuel consumption is more than Eight percent (8%)
then the BUYER may at its option rescind this Contract in accordance with
the provision of Article X hereof.

 

4.                          Deadweight :

 

(a)                      In the event that the deadweight of the
VESSEL as determined in accordance with the SPECIFICATIONS  is less than the guaranteed deadweight as
specified in Paragraph 2 of Article I, the Contract Price shall be reduced
by the sum of One Thousand One Hundred United States Dollars (US$ 1,100.-) for
each full metric ton of such deficiency being more than Seven Hundred (700)
metric tons, up to a maximum reduction of 
One Million Two Hundred and Ten Thousand United States Dollars (US$
1,210,000.-).

 

(b)                     In the event of such deficiency in the
deadweight of the VESSEL being One thousand eight hundred (1,800) metric tons
or more, then, the BUYER may, at its option, reject the VESSEL and rescind this
Contract in accordance with the provisions of Article X hereof or accept
the VESSEL at a reduction in the Contract Price as above provided for One Thousand
Eight Hundred (1,800) metric tons only, that is, at a total reduction of One Million
Two Hundred and Ten Thousand United States Dollars (US$1,210,000.-).

 

17

 

5.                          Early Delivery

 

In the event that
the BUILDER believes that the VESSEL can be completed and ready for Delivery on
a date earlier than the Contractual Delivery Date, then the BUILDER may give
a written notice to the BUYER, no later than six (6) months before the
revised date (the “Early Delivery Date”) informing the approximate date on
which the VESSEL can be ready for the Delivery. The BUYER shall have the
option, but not the obligation, to accept Delivery of the VESSEL on the Early
Delivery Date and upon the BUYER’s acceptance thereof, the parties shall
discuss the specific amount of the additional payment due to the BUILDER for
the accelerated Delivery of the VESSEL on the Early Delivery Date at the
delivery stage of the VESSEL and the compensation payment of the acceleration bonus shall be settled and
paid in full with the final delivery instalment concurrently uponwith the actual
Delivery and acceptance of the VESSEL by the BUYER. If the
Parties fail to reach a mutual agreement on the amount of the Early Delivery
bonus, the BUILDER shall be free to deliver the VESSEL on the original
Contractual Delivery Date or earlier at its option. The Parties hereto acknowledge that there
will be no liquidated damages or other penalty to be imposed on the BUILDER in
the event the VESSEL happens to be delivered on any date later than the Early
Delivery Date but earlier than the original Contractual Delivery Date.

 

6                             Effect of Rescission :

 

It is
expressly understood and agreed by the parties that in any case, if the BUYER
rescinds this Contract under this article, the BUYER shall not be entitled to
any liquidated damages or any other recourse unless by means of the provisions
of Article X hereof.

 

(End of Article)

 

18

 

ARTICLE IV - APPROVAL OF PLANS AND DRAWINGS AND INSPECTION
DURING CONSTRUCTION

 

1.                          Approval of Plans and
Drawings :

 

The SPECIFICATIONS   shall be used for the VESSEL without any
further approval and modification from the BUYER unless otherwise mutually
agreed by both parties. Should any changes are required by the BUYER’s request
or the application of new rules and regulations (of a mandatory nature)
coming into effect after the date of this Contract signing, the BUILDER shall
submit such changes to the BUYER for its approval. If approved by the BUYER,
such changes shall be applied to the VESSEL with cost adjustment in accordance with
Article V of this Contract.

 

2.                          Appointment of BUYER’s
Supervisor :

 

The BUYER may send to and maintain at the
Shipyard, at the BUYER’s own cost and expense, one supervisor who shall be duly
authorized in writing by the BUYER (herein called the “Supervisor”) to act on
behalf of the BUYER in connection with the modifications of the SPECIFICATIONS,
adjustments of the Contract Price and Delivery Date, approval of the plans and
drawings, attendance to the tests and inspections relating to the VESSEL, its
machinery, equipment and outfittings, and any other matters for which he is
specifically authorized by the BUYER. The Supervisor may appoint his
assistant(s) to attend at the Shipyard for the purposes as aforesaid.

 

In the event that
assignment, novation or resale occurs under the Article XIII and  as a result, BUYER’s Supervisor is changed
during the construction of the VESSEL, any and all matters determined by mutual
agreement between the BUYER’s Supervisor and the BUILDER prior to the dispatch
of a new Supervisor shall be accepted and complied by the new Supervisor. In
case two or more Supervisors are dispatched to the Shipyard and authorized,
under the BUILDER’s prior consent, to perform the supervision, each of
them will form uniform opinions between them to keep the design and the
SPECIFICATIONS so as not to adversely affect the CONTRACT PRICE and Delivery of
the VESSEL, provided that such change in the Contract Price will be reasonable
and proven under the BUILDER’s normal practice. In the event of any additional
costs attributable to such dispatch of two or more supervisors due to the
reasons including but not

 

19

 

limited to resale, novation,
charter or any other occurrence otherwise resulting from the BUYER, such costs
shall be borne by the BUYER and the BUYER shall reimburse and hold harmless the
BUILDER from any such costs and expenses.

 

3.                          Inspection by the Supervisor
:

 

The necessary inspections of the VESSEL, its
machinery, equipment and outfittings shall be carried out by the Classification
Society, other regulatory bodies and/or an inspection team of the BUILDER
throughout the entire period of construction in order to ensure that the
construction of the VESSEL is duly performed in accordance with this Contract
and the SPECIFICATIONS. The Supervisor shall have, during construction of the
VESSEL, the right to attend such tests and inspections of the VESSEL, its
machinery and equipment within the premises of either the BUILDER or its
subcontractors. The BUILDER shall give notice to the Supervisor, in advance of
the date and place of such tests and inspections for the convenience of their
attendance. Detailed procedures of the inspection and the tests thereof shall
be in accordance with the SPECIFICATIONS .

 

The BUILDER may request
BUYER’s supervisor to attend the inspection and tests during public holidays
and weekends and/or Company holidays in order to keep BUILDER’s construction
schedule. BUYER’s supervisor shall fully cooperate with BUILDER and promptly
attend such inspection/tests including those for surface preparation and
painting work, which are especially vulnerable to weather condition and time
interval. However, BUILDER shall keep such inspection and tests to a minimum
and only when the inspection and tests affect BUILDER’s construction schedule.
The BUILDER’s prior notice of such inspection/test schedule shall be
informed to the BUYER’s supervisor three(3) working  days in advance as a minimum

 

The Supervisor shall be entitled to request
copies of all test results and trials as soon as required for the performance
of his duties.

 

The Supervisor shall notify the BUILDER of
deficiencies in the construction of the VESSEL or materials. The BUILDER should
examine the deficiency and rectify.

 

If any of the BUYER’s supervisors
discover any construction, material or

 

20

 

workmanship which is not deemed to conform to
the requirements of this Contract and/or the SPECIFICATIONS , the BUYER’s
supervisors shall promptly give the BUILDER a notice in writing that such
alleged non-conformity exists. Upon receipt of such notice from the BUYER’s
supervisor, the BUILDER shall correct such non-conformity, if the BUILDER
agrees to his view. Any disagreement shall be resolved in accordance with
Paragraph 1 of Article XII.

 

4.                          Facilities :

 

The BUILDER shall furnish the Supervisor and
his assistant(s) with adequate office space and such other reasonable
facilities according to the BUILDER’s practice at or in the immediate vicinity
of the Shipyard as may be necessary to enable them to effectively carry
out their duties. The BUYER shall pay for all such facilities other than office
space at the BUILDER’s normal rate of charge.

 

5.                          Liability of BUILDER :

 

The Supervisor and his assistant(s) shall at
all times be deemed to be the employees of the BUYER and not of the BUILDER.
The BUILDER shall be under no liability whatsoever to the BUYER, the Supervisor
or his assistant(s) for personal injuries, including death, suffered during the
time when he or they are on the VESSEL, or within the premises of either the
BUILDER 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 a gross negligence of the BUILDER, or of any of its
employees or agents or subcontractors.

 

Nor shall the BUILDER be
under any liability whatsoever to the BUYER, the Supervisor or his assistant(s)
for damage to, or loss or destruction of property in Korea of the BUYER or of
the Supervisor or his assistant(s), unless such damage, loss or destruction
were caused by a gross negligence of the BUILDER or of any of its employees or
agents or subcontractors.

 

21

 

6.                          Responsibility of BUYER :

 

The BUYER shall undertake and assure that the
Supervisor shall carry out his duties hereunder in accordance with the normal
shipbuilding practice of the BUILDER and in such a way so as to avoid any
unnecessary increase in building cost, delay in the construction of the VESSEL,
and/or any disturbance in the construction schedule of the BUILDER.

 

The BUILDER has the right to request the
BUYER to replace the Supervisor who is deemed unsuitable and unsatisfactory for
the proper progress of the VESSEL’s construction. The BUYER shall investigate
the situation by sending its representative(s) to the Shipyard if necessary,
and if the BUYER considers that such BUILDER’s request is justified, the BUYER
shall effect such replacement as soon as conveniently arrangeable.

 

(End
of Article)

 

22

 

ARTICLE V - MODIFICATIONS,
CHANGES AND EXTRAS

 

1.                          How Effected :

 

Any
modifications and/or changes in the SPECIFICATIONS  shall be made by written agreement of the
parties hereto provided, however, that any modifications and/or changes
requested by the BUYER or an accumulation of such modifications and/or changes
will not adversely affect the BUILDER’s planning or programme in relation to
the BUILDER’s other commitments and if the BUYER shall assent to adjustment of
the Contract Price, time for delivery of the VESSEL and other terms and
conditions of this Contract as hereinafter provided. The BUILDER hereby agrees
to exert its best efforts to accommodate such reasonable request by the BUYER
so that the said changes and/or modifications may be made at a reasonable
cost and within the shortest period of time which is reasonably possible.

 

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 time of delivery, or any other alterations in this Contract
or the SPECIFICATIONS  occasioned by such
modifications and/or changes.

 

The aforementioned agreement to modify and/or change
the SPECIFICATIONS  may be effected
by an exchange of letters signed by the authorized representatives of the
parties hereto, or telefax confirmed in writing, manifesting such agreement.
Such letters and confirmed message exchanged by the parties hereto pursuant to
the foregoing shall constitute an amendment of the SPECIFICATIONS , and such
letters and message shall be incorporated into this Contract and made a part hereof.

 

The BUILDER
may make minor changes to the SPECIFICATIONS , if found necessary for
introduction of improved production methods or otherwise, provided that the
BUILDER shall first obtain the BUYER’s approval which shall not be unreasonably
withheld.

 

23

 

2.              Changes in Rules of
Classification Society, Regulations, etc.:

 

If, after the date of signing this Contract, any
requirements as to classification, or as to the rules and regulations to
which the construction of the VESSEL is required to conform in accordance
with the provisions of Article I. (3), are altered or changed by the
Classification Society or regulatory bodies authorized to make such alterations
or changes, either of the parties hereto upon receipt of information thereof,
shall transmit such information in full to the other party in writing,
thereupon within Twenty-one(21) days after receipt of the said notice from the
other party, the BUYER shall instruct the BUILDER in writing if such
alterations or changes shall be made in the VESSEL or not, in the BUYER’s sole
discretion.

 

(a)          If
such alterations or changes are compulsory for the construction of VESSEL,
either of the parties hereto, upon receipt of such information from
Classification Society or such other regulatory bodies, shall promptly transmit
the same to the other in writing, and the BUILDER shall thereupon incorporate
such alterations or changes into the construction of the VESSEL, provided that
the BUYER shall first agree to reasonable and proven adjustments required by
the BUILDER in the Contract Price, the Delivery Date and other terms and
conditions of this Contract and the SPECIFICATIONS  occasioned by or resulting from such
alterations or changes.

 

(b)   If such
alterations or changes are not compulsory for the construction of the VESSEL,
and the BUYER desires to incorporate such alterations or changes into the
construction of the VESSEL, then, the BUYER shall notify the BUILDER of such
intention. The BUILDER may accept such alterations or changes, provided
that such alterations or changes will not, in the judgement of the BUILDER,
adversely affect the BUILDER’s planning or program in relation to the BUILDER’s
other commitments, and provided, further, that the BUYER shall first agree to
reasonable and proven adjustments required by the BUILDER in the Contract
Price, the Delivery Date and other terms and conditions of this Contract and
the SPECIFICATIONS  occasioned by or
resulting from such alterations or changes.

 

In
the event of a disagreement on price and delivery, and in the event that such
alterations or changes are compulsory for the construction of VESSEL, then the BUILDER shall proceed
with the required alterations and the dispute related to the above shall be
resolved in accordance with the provisions of Article XII.

 

24

 

Such agreement by the BUYER shall be effected in the
same manner as provided in Paragraph 1 of this Article for modifications
and/or changes of the SPECIFICATIONS .

 

3.                          Substitution of Materials :

 

In the event that any of the
materials required by the SPECIFICATIONS  or otherwise under this Contract for the
construction of the VESSEL can not be procured in time to effect delivery of
the VESSEL, or are in short supply, the BUILDER may, provided the BUYER so
agrees in writing, supply other materials and equipment of the best available
and like quality, capable of meeting the requirements of the Classification
Society and of the rules, regulations, requirements and recommendations with
which the construction of the VESSEL must comply. Any agreement as to such
substitution of materials shall be effected in the manner as provided in
Paragraph 1 of this Article, and shall, likewise, include possible decrease or
increase in the Contract Price and other terms and conditions of this Contract
affected by such substitution.

 

(End of Article)

 

25

 

ARTICLE VI - TRIALS AND ACCEPTANCE

 

Since
the VESSEL is the repeat and series of BUILDER’s Hull Nos. 1639 and 1640,
some sea trial items may be deleted subject to mutual agreement between
the BUYER and the BUILDER

 

1.                          Notice :

 

The sea trial shall start
when the VESSEL is reasonably completed according to the SPECIFICATIONS .

 

The BUILDER shall give the BUYER at least Twenty
(20) days estimated prior notice and Seven(7) days confirming prior notice
by telefax of the time and place of the trial run of the VESSEL, and the BUYER
shall promptly acknowledge receipt of such notice. The BUYER shall have its
representatives on board the VESSEL to witness such trial run. Failure in
attendance of the BUYER’s representative at the trial run of the VESSEL for any
reason whatsoever after due notice to the BUYER as above provided shall be
deemed to be a waiver by the BUYER of its right to have its representative on
board the VESSEL at the trial run, and the BUILDER may conduct the trial
run without attendance of the BUYER’s representative, and in such case the
BUYER shall be obligated to accept the VESSEL on the basis of a certificate of
the BUILDER that the VESSEL, upon trial run, is found to conform to this
Contract and the SPECIFICATIONS.

 

2.                          Weather Condition :

 

The trial run shall be
carried out under the weather condition which is deemed favourable enough by
the judgement of the BUILDER. 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 condition permits. It is agreed that, if during
the trial run of the VESSEL, the weather should suddenly become so unfavourable
that orderly conduct of the trial run can no longer be continued, the trial run
shall be discontinued and postponed until the first favourable day next
following, unless the BUYER shall assent in writing to acceptance of the VESSEL
on the basis of the trial run already made before such discontinuance has
occurred. Any delay of trial run caused by such unfavourable weather condition
shall operate to postpone the Delivery Date by the period of the delay involved
and such delay shall be deemed as permissible delay in the delivery of the
VESSEL.

 

26

 

3.                    How Conducted :

 

 (a)                   The VESSEL shall run the official trial trip in the manner as specified
in the SPECIFICATIONS .

 

 (b)               All expenses in connection
with the trial run are to be for account of the BUILDER and the BUILDER shall
provide, at its own expense, the necessary crew to comply with conditions of
safe navigation, fuel oil, fresh water and other consumable stores necessary,
the BUYER shall supply at its own expense lubricating oils and greases.

 

4.                          Method of Acceptance or
Rejection :

 

 (a)                   Upon completion of the trial run, the BUILDER shall give the BUYER a
notice by telefax of completion of the trial run, as and if the BUILDER
considers that the results of trial run indicate conformity of the VESSEL to
this Contract and the SPECIFICATIONS . The BUYER shall, within Five (5)days
after receipt of such notice from the BUILDER, notify the BUILDER by telefax of
its acceptance or rejection of the VESSEL’s conformity to this Contract and the
SPECIFICATIONS .

 

 (b)                  However,
should the result of the trial run show that the VESSEL, or any part or
equipment thereof, does not conform to the requirements of this Contract
and/or the SPECIFICATIONS , or if the BUILDER is in agreement to non-conformity
as specified in the BUYER’s notice of rejection, then, the BUILDER shall take
necessary steps to correct such non-conformity.

 

Upon completion of correction of such
non-conformity, and re-test or trial if necessary, the BUILDER shall give the
BUYER a notice thereof by telefax.

 

The BUYER shall, within Three (3) days
after receipt of such notice from the BUILDER, notify the BUILDER of its
acceptance or rejection of the VESSEL.

 

 (c)           In
any event that the BUYER rejects the VESSEL, the BUYER shall indicate in detail
in its notice of rejection in what respect the VESSEL, or any part or
equipment thereof does not conform to this Contract and/or the SPECIFICATIONS
..

 

 (d)          In the event that the
BUYER fails to notify the BUILDER by telefax of the 

 

27

 

acceptance of or the
rejection together with the reason therefor of the VESSEL within the period as
provided in the above Sub-paragraph (a) or (b), the BUYER shall be deemed
to have accepted the VESSEL.

 

 (e)                   Any dispute between the BUILDER and the BUYER as to the conformity or
non-conformity of the VESSEL to the requirements of this Contract and/or the SPECIFICATIONS
 shall be submitted for final decision in
accordance with Article XII hereof.

 

5.                          Effect of Acceptance :

 

Acceptance
of the VESSEL as above provided 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 of the VESSEL as hereinafter provided, if the BUILDER
complies with all other procedural requirements for delivery as provided in Article VII
hereof. However, the BUYER’s acceptance of the VESSEL shall not affect the BUYER’s
right under Article IX hereof.

 

The BUYER may accept
the VESSEL under protest with outstanding defects to be dealt under the
guarantee provisions or made subject of a claim for damages.

 

6.                          Disposition of Surplus
Consumable Stores

 

Any fuel
oil or other furnished and paid for by the BUILDER for trial runs remaining on
board the VESSEL, at the time of acceptance of the VESSEL by the BUYER, shall
be bought by the BUYER from the BUILDER at the BUILDER’s purchase price for
such supply in Korea and the payment by the BUYER thereof shall be made at the
time of delivery of the VESSEL.

 

The BUILDER
shall pay the BUYER at the time of delivery of the VESSEL an amount for the
consumed quantity until delivery of any lubricating oil and greases which were
furnished and paid for by the BUYER at the BUYER’s purchase price thereof. For
avoidance of doubt, the practice of this Article VI. 6 shall follow the
practice in construction of the BUILDER’s Hull Nos. 1639 and 1640.

 

(End of Article)

 

28

 

 ARTICLE VII - DELIVERY

 

1.                          Time and Place :

 

The VESSEL
shall be delivered by the BUILDER to the BUYER at the Shipyard on or before June 30,
2009, except that, in the event of delays in the construction of the VESSEL or
any performance required under this Contract due to causes which under the
terms of this Contract permit postponement of the date for delivery, the
aforementioned date for delivery of the VESSEL shall be postponed accordingly.

 

The
aforementioned date, or such later date to which the requirement of delivery is
postponed pursuant to such terms, is herein called the “Delivery Date”.

 

2.                          When and How Effected :

 

Provided that the BUILDER and the BUYER shall have
fulfilled all of their obligations stipulated under this Contract, the delivery
of the VESSEL shall be effected forthwith by the concurrent delivery by each of
the parties hereto to the other of the PROTOCOL OF DELIVERY AND ACCEPTANCE,
acknowledging delivery of the VESSEL by the BUILDER and acceptance thereof by the
BUYER.

 

3.                          Documents to be delivered to
BUYER :

 

Upon delivery and acceptance of the VESSEL, the
BUILDER shall deliver to the BUYER the following documents, which shall
accompany the PROTOCOL OF DELIVERY AND ACCEPTANCE :

 

(a)                      PROTOCOL OF TRIALS of the VESSEL made
pursuant to the SPECIFICATIONS .

 

(b)                     PROTOCOL OF INVENTORY of the equipment of the
VESSEL, including spare parts and the like, as specified in the SPECIFICATIONS .

 

(c)                      PROTOCOL OF STORES OF CONSUMABLE NATURE
referred to under Paragraph 6 of Article VI hereof.

 

29

 

 (d)                  ALL
CERTIFICATES including the BUILDERS’s CERTIFICATE required to be furnished upon
delivery of the VESSEL pursuant to this Contract and the SPECIFICATIONS ,
necessary for the registration of the VESSEL and BUYER’s trading requirements.

 

It is
agreed that if, through no fault on the part of the BUILDER, the
Classifications certificates and/or other certificates are not available at the
time of delivery of the VESSEL, provisional certificates shall be accepted by
the BUYER, provided that the BUILDER shall furnish the BUYER with the formal
certificates as promptly as possible after such certificates have been issued.

 

Application
and certificate for statutory inspections for the registry of the VESSEL shall
be arranged by the BUYER at its expense.

 

 (e)                   DECLARATION OF WARRANTY of the BUILDER that the VESSEL is delivered to
the BUYER free and clear of any liens, charges, claims, mortgages, or other
encumbrances upon the BUYER’s title thereto, and in particular that the VESSEL
is absolutely free of all burdens in the nature of imposts, taxes or charges
imposed by Korean Governmental Authorities, as well as of all liabilities of
the BUILDER to its subcontractors, employees and crew, and of the liabilities
arising from the operation of the VESSEL in trial runs, or otherwise, prior to
delivery.

 

 (f)                     DRAWING AND PLANS pertaining to the VESSEL as stipulated in the      SPECIFICATIONS .

 

 (g)                  COMMERCIAL
INVOICE.

 

4.                          Tender of VESSEL :

 

If
the BUYER fails to take delivery of the VESSEL after completion thereof
according to this Contract and the SPECIFICATIONS  without any justifiable reason, the BUILDER
shall have the right to tender delivery of the VESSEL after compliance with all
procedural requirements as above provided.

 

30

 

5.                          Title and
Risk :

 

Title to
and risk of loss 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 and risk
of loss of the VESSEL and her equipment shall be in the BUILDER.

 

6.                          Removal of VESSEL :

 

The BUYER
shall take possession of the VESSEL immediately upon delivery and acceptance
thereof and shall remove the VESSEL from the premises of the Shipyard within
Three (3) days after delivery and acceptance thereof is effected.

 

If the BUYER shall not remove the VESSEL from the
premises of the Shipyard within the aforesaid Three (3) days, in such
event, the BUYER shall pay to the BUILDER the reasonable mooring charges of the
VESSEL.

 

(End of Article)

 

31

 

ARTICLE VIII - DELAYS AND EXTENSION OF TIME FOR
DELIVERY

(FORCE MAJEURE)

 

1.                          Causes of Delay (Force
Majeure) :

 

If, at any
time either the construction or delivery of the VESSEL or any performance
required hereunder as a prerequisite to the delivery thereof is delayed by any
of the following events; namely war, acts of state or government, blockade,
revolution, insurrections, mobilization, civil commotion, riots, national
strikes, sabotage, Acts of God or the public enemy, plague or other epidemics,
quarantines, prolonged failure of electric current, freight embargoes, or
defects in major forgings or castings or delay in BUYER’s supplied articles, if
any, or defects in materials, machinery or equipment which could not have been
detected by the BUILDER using reasonable care, or earthquakes, tidal waves,
typhoons, hurricanes, prolonged or unusually severe weather conditions or by
destruction of the premises or works of the BUILDER or its sub-contractors, or
of the VESSEL, or any part thereof, by fire, landslides, flood, lightning,
explosion, or other causes beyond the control of the BUILDER, or its
sub-contractors, as the case may be, or for any other causes which, under
the terms of this Contract, authorize and permit extension of the time for
delivery of the VESSEL, then, in the event of delays due to the happening of
any of the aforementioned contingencies, the Delivery Date of the VESSEL under
this Contract shall be extended for a period of time which shall not exceed the
total accumulated time of all such delays.

 

The
enumerated contingencies shall not give rise to an extension of the delivery
date unless :

 

i)                             The occurrence could not reasonably have been foreseen by the
BUILDER at the date of signing of the Contract.

 

ii)                          The BUILDER shall have exercised reasonable
due diligence to avoid or minimize the occurrence of such event.

 

iii)                       The BUILDER
shall have used reasonable efforts to mitigate the duration and effects of such
events of the construction schedule.

 

32

 

2.                          Notice of Delay :

 

Within
Fourteen (14) days after the date of occurrence of any cause of delay, on
account of which the BUILDER claims that it is entitled under this Contract to
a postponement of the Delivery Date, the BUILDER shall notify the BUYER in
writing or by telefax confirmed in writing of the date when such cause of delay
occurred. Likewise, within Fourteen (14) days
after the date of ending of such cause of delay, the BUILDER shall notify the
BUYER in writing or by telefax confirmed in writing of the date when such cause
of delay ended.

 

The BUILDER shall also notify the BUYER of the
period, by which the Delivery Date is postponed by reason of such cause of
delay, with all reasonable dispatch after it has been determined. If the BUILDER
does not give the timely advice as above, the BUILDER shall lose the right to
claim such delays as permissible delay.

 

Failure of the BUYER to acknowledge to the BUILDER’s
claim for postponement of the Delivery Date within Fourteen (14)  days after receipt by the BUYER of such
notice of claim shall be deemed to be a waiver by the BUYER of its right to
object to such postponement of the Delivery Date.

 

3.                          Definition of Permissible
Delay :

 

Delays on
account of such causes as specified in Paragraph 1 of this Article and any
other delay of a nature which under the terms of this Contract permits
postponement of the Delivery Date shall be understood to be permissible delays
and are to be distinguished from unauthorized delays on account of which the
Contract Price is subject to adjustment as provided for in Article III
hereof.

 

4.                          Right to Rescind for
Excessive Delay :

 

If the
total accumulated time of all delays whether permissible or not exceeds One
Hundred and Eighty (180) days, then, in such event, the BUYER may rescind
this Contract in accordance with the provisions of Article X hereof.

 

The
accumulated time as above shall exclude the time lost due to BUYER’s Default or
delays in the BUYER’s supplies. The BUILDER may, at any time after the
accumulated time of the aforementioned delays justifying rescission by the
BUYER, demand in writing that the BUYER shall make an election proposing a new
delivery date, in which case the BUYER shall, within Fourteen (14) days

 

33

 

after
such demand is received by the BUYER, either notify the BUILDER of its
intention to rescind this Contract, or consent to a postponement of the
Delivery Date to an agreed specific future date; it being understood and agreed
by the parties hereto that, if any further delay occurs on account of causes
justifying rescission as specified in this Article, the BUYER shall have the
same right of rescission upon the same terms as herein above provided.

 

(End
of Article) 

 

34

 

ARTICLE IX
- WARRANTY OF QUALITY

 

1.                          Guarantee :

 

The
BUILDER, for the period of Twelve (12) months after delivery of the VESSEL
(hereinafter called “Guarantee Period”), guarantees the VESSEL and her engine,
including all parts and equipment manufactured, furnished or installed by the
BUILDER under this Contract, and including the machinery, equipment and
appurtenances thereof, under the Contract but excluding any item which is
supplied or designated by the BUYER or by any other bodies on behalf of the
BUYER, against all defects discovered within the Guarantee Period which are due
to improper design, defective material, and/or poor workmanship or negligent or
other improper acts or omissions on the part of the BUILDER or its
subcontractors (hereinafter called the “Defect” or “Defects”) and are not a
result of accident, ordinary wear and tear, misuse, mismanagement, negligent or
other improper acts or omissions or neglect on the part of the BUYER, its
employee or agents.

 

Upon
rectification of an item claimed under this guarantee, this item shall be
covered for further Twelve (12) months under the same terms and conditions.
However, this is limited to a maximum of Twenty Four (24) months from delivery
date.

 

2.                          Notice of Defects :

 

The BUYER
shall notify the BUILDER in writing, or by telefax of any defect for which
claim is made under this guarantee, as promptly as possible after discovery
thereof. The BUYER’s notice shall describe in detail the nature, cause if known
and extent of the Defects.

 

The BUILDER
shall have no obligation for any Defect discovered prior to the expiry date of
the Guarantee Period, unless notice of such Defect is received by the BUILDER
not later than Twenty (20) days after such expiry date.

 

3.                          Remedy of Defects :

 

(a)                      The BUILDER
shall remedy, at its expense, any Defect against which the VESSEL is guaranteed
under this Article, by making all necessary repairs or replacements at the
Shipyard.

 

35

 

(b)                     However, if the BUYER should
determine that it is commercially or operationally impracticable to bring the
VESSEL to the Shipyard, the BUYER may cause the necessary repairs or
replacements to be made elsewhere which is deemed suitable for the purpose,
provided that, in such event, the BUILDER may forward or supply
replacement parts or materials to the
BUYER’s agent to be designated by the BUYER in writing, unless
forwarding or supplying thereof the VESSEL would impair or delay the operation
of working schedule of the VESSEL. In the event that the BUYER proposes to
cause the necessary repairs or replacements for the VESSEL to be made at any
other shipyard or works than the Shipyard, the BUYER shall first, but in all
events as soon as possible, give the BUILDER a notice in writing or by telefax
confirmed in writing of the time and place when and where such repairs will be
made, and if the VESSEL is not thereby delayed, or her operation or working schedule is
not thereby impaired, the BUILDER shall have the right to verify by its own
representative(s) the nature, cause and extent of the Defects complained of.
The BUILDER shall, in such case, promptly advise the BUYER by telefax, after
such examination has been completed, of its acceptance or rejection of the
Defects as ones that are covered by the guarantee herein provided. Upon the
BUILDER’s acceptance of the Defects as justifying remedy under this Article, or
upon award of the arbitration so determining, the BUILDER shall pay to the
BUYER for such repairs or replacements justified reasonable and proven actual
cost of repairs or replacements.

 

(c)                      The
reimbursement of the costs incurred in relation to guarantee works shall be
paid in a lumpsum after expiration of the guarantee period.

 

(d)                     In
any case, the VESSEL shall be taken, at the BUYER’s cost and responsibility, to
the place elected, ready in all respects for such repairs or replacement.

 

(e)                      Any dispute
under this Article shall be referred to arbitration in accordance with the
provisions of Article XII hereof.

 

36

 

4.                          Extent of BUILDER’s
Responsibility :

 

 (a)                   The BUILDER shall have no responsibility or liability for any other
defect whatsoever in the VESSEL than the Defects specified in Paragraph 1 of
this Article. Nor the BUILDER shall in any circumstance be responsible or
liable for any consequential or special loss, damage or expense including but
not limited to loss of time, loss of profit of earning or demurrage directly or
indirectly occasioned to the BUYER by reason of the Defects specified in
Paragraph 1 of this Article or due to repairs or other works done to the
VESSEL to remedy such Defects.

 

 (b)                  The
BUILDER shall not be responsible for any defect in any part of the VESSEL
which may, subsequently to delivery of the VESSEL, have been replaced or
repaired in any way by any other contractor unless the BUILDER has not objected
the contractor to perform guarantee repairs, or for any defect which have
been caused or aggravated by omission or improper use and maintenance of the VESSEL
on the part of the BUYER, its servants or agents or by ordinary wear and
tear or by any other cause beyond the control of the BUILDER.

 

 (c)                   The guarantee contained as hereinabove in this Article replaces
and excludes any other liability, guarantee, warranty and/or condition imposed
or implied by the law, customary, statutory or otherwise, by reason of the
construction and sale of the VESSEL by the BUILDER for and to the BUYER.

 

5.                          Guarantee Engineer :

 

The BUILDER
shall have the right to appoint a Guarantee Engineer to serve on the VESSEL as
its representative for a period of Three (3) months from the date the
VESSEL is delivered. However, if the BUYER and the BUILDER shall deem it
necessary to keep the Guarantee Engineer on the VESSEL for a longer period,
then he shall remain on board the VESSEL after the said Three (3) months,
but not longer than Six (6) months from the delivery of the VESSEL.

 

The BUYER, and its
employees, shall give such Guarantee Engineer full cooperation in carrying out
his duties as the representative of the BUILDER on board the VESSEL.

 

The Guarantee Engineer shall
sign BUYER’s Indemnity Forms and shall at all times deemed to be an employee of
the BUILDER.

 

The BUYER shall accord the
Guarantee Engineer treatment comparable to the

 

37

 

VESSEL’s Chief Engineer, and
shall provide board and lodging at no cost to the BUILDER and/or the Guarantee
Engineer.

 

While the Guarantee Engineer is on board the VESSEL,
the BUYER shall pay to the BUILDER the sum of Seven Thousand United States
Dollars (US$ 7,000.-) per month as a compensation for a part of cost and
charges to be borne by the BUILDER in connection with Guarantee Engineer and
also shall pay the expenses of his repatriation to Seoul, Korea by air upon
termination of his service, the expenses of his communication with the BUILDER
incurred in performing his duties and expenses, if any, of his medical and
hospital care in the VESSEL’s hospital.

 

Pertaining to the detailed particulars of this
Paragraph, an agreement will be made according to this effect between the
parties hereto upon delivery of the VESSEL.

 

(End of Article)

 

38

 

ARTICLE X - RESCISSION BY
BUYER

 

1.                          Notice :

 

The
payments made by the BUYER prior to delivery of the VESSEL shall be in the
nature of advances to the BUILDER, and in the event that the VESSEL after sea
trial is rejected by the BUYER or the VESSEL is cancelled by the BUYER in
accordance with the terms of this Contract under and pursuant to any of the
provisions of this Contract specifically permitting the BUYER to do so and in
the event that the Contract is rescinded by the BUYER under and pursuant to any
of the provisions of this Contract specially permitting the BUYER, then the
BUYER shall notify the BUILDER in writing or by telefax confirmed in writing,
and such rescission shall be effective as of the date when notice thereof is
received by the BUILDER.

 

2.                          Refundment by BUILDER :

 

In case the
BUILDER receives the notice stipulated in Paragraph 1 of this Article, the
BUILDER shall promptly refund to the BUYER the full amount of all sums paid by
the BUYER to the BUILDER on account of the VESSEL together with the interest
thereon, unless the BUILDER proceeds to the arbitration under the provisions of
Article XII hereof.

 

In such
event, the BUILDER shall pay the BUYER interest at the rate of Six percent
(6.0%)per annum on the amount required herein to be refunded to the BUYER,
computed from the dates following on which such sums were paid by the BUYER to
the BUILDER to the date of remittance by transfer of such refund to the BUYER
by the BUILDER.

 

As security for refund of
instalments prior to delivery of the VESSEL, the BUILDER shall furnish the
BUYER within Fourteen (14) calendar days after the Contract signing with a
letter of guarantee covering the amount of such pre-delivery instalments in
favour of the BUYER. Such letter of guarantee shall have substantially the same
form and substance as Exhibit ”A” annexed hereto.

 

39

 

3.                          Discharge of Obligations :

 

Upon such
refund by the BUILDER 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.

 

(End
of Article)

 

40

 

ARTICLE XI
- BUYER’S DEFAULT

 

1.                          Definition of Default :

 

The BUYER shall be deemed to be in default of its
performance of obligations under this Contract in the following cases :

 

(a)                      If the first, second, third, fourth or fifth
instalment are not paid by the BUYER to the BUILDER within Five (5) banking
days after such instalment becomes due and payable as provided in Article II
hereof;

 

or

 

(b)                     If the Delivery instalment is not paid by the
BUYER to the BUILDER concurrently with the delivery of the VESSEL as provided
in Article II hereof;

 

or

 

(c)                      If the BUYER, when the VESSEL is duly
tendered for delivery by the BUILDER:

 

i)                           fails to take delivery of the VESSEL within Five
(5) banking days from tendered date

 

ii)                          having initiated the arbitration procedure
the BUYER does not accept delivery within Seven (7) days of an arbitration
award which is not appealed.

 

2.                          Effect of Default on or
before Delivery of VESSEL :

 

 (a)                   Should the BUYER make default in payment of any instalment of the
Contract Price on or before delivery of the VESSEL, the BUYER shall pay the
instalment(s) in default plus accrued interest thereon at the rate of Six
percent (6.0%) per annum computed from the due date of such instalment to the
date when the BUILDER receives the payment, and, for the purpose of Paragraph 1
of Article VII hereof the Delivery Date of the VESSEL shall be
automatically extended by the period of continuance of such default by the BUYER.
In any event of default by the BUYER, the BUYER shall also pay direct charges
and expenses incurred by the BUILDER in consequence of such default after
mutual agreement.

 

(b)                  If any default by the BUYER
continues for a period of Ten (10) days after the BUILDER’s notification,
the BUILDER may, at its option, rescind this Contract by giving notice of such
effect to the BUYER by telefax confirmed in writing.

 

41

 

Upon dispatch by the BUILDER
of such notice of rescission, this Contract shall be forthwith rescinded and
terminated. In the event of such rescission of this Contract, the BUILDER shall
be entitled to retain any instalment or instalments already paid by the BUYER
to the BUILDER on account of this Contract and the BUYER’s Supplies, if any.

 

3.                          Disposal of VESSEL :

 

 (a)                   In the event that this Contract is rescinded by the BUILDER under the
provisions of Paragraph 2(b) of this Article, the BUILDER may, at its sole
discretion, either complete the VESSEL and sell the same, or sell the VESSEL in
its incomplete state, free of any right or claim of the BUYER. Such sale of the
VESSEL by the BUILDER shall be either by public auction or private contract at
the BUILDER’s sole discretion and on such terms and conditions as the BUILDER
shall deem fit.

 

 (b)                  In
the event of such sale of the VESSEL, the amount of the sale received by the
BUILDER shall be applied firstly to all expenses attending such sale or
otherwise incurred by the BUILDER as a result of the BUYER’s default, secondly
to the payment of all costs and expenses of construction of the VESSEL incurred
by the BUILDER less BUYER’s Supplies and the instalments already paid by the
BUYER and the compensation to the BUILDER for a reasonable loss of profit due
to rescission of this Contract, and finally to the repayment to the BUYER
without interest, if any balance is obtained.

 

(c)                      If the
proceeds of sale are insufficient to pay such total costs and loss of profit as
aforesaid, the BUYER shall promptly pay the deficiency to the BUILDER upon
request.

 

(End
of Article)

 

42

 

ARTICLE XII - ARBITRATION

 

1.                          Decision by the Classification Society :

 

If any
dispute arises between the parties hereto in regard to the design and/or
construction of the VESSEL, its machinery and equipment, and/or in respect of
the materials and/or workmanship thereof and/or thereon, and/or in respect of
interpretations of this Contract or the SPECIFICATIONS , the parties may by
mutual agreement refer the dispute to the Classification Society or to such
other expert as may be mutually agreed between the parties hereto, and
whose decision shall be final, conclusive and binding upon the parties hereto.

 

2.                          Proceedings of Arbitration :

 

In the event that the parties hereto do not agree to
settle a dispute according to Paragraph 1 of this Article and/or in the
event of any other dispute of any kind whatsoever between the parties and
relating to this Contract or its rescission or any stipulation herein, such
dispute shall be submitted to arbitration in London. Each party shall appoint
an arbitrator and in the event that they cannot agree, the two arbitrators so
appointed shall appoint an Umpire.

 

If the two arbitrators are unable to agree upon an
Umpire within Twenty(20) days after appointment of the second arbitrator,
either of the said two arbitrators may apply to the President for the time
being of the London Maritime Arbitrators Association to appoint the third
arbitrator, and the three arbitrators shall constitute the board of
arbitration.

 

Such arbitration shall be in accordance with and
subject to the provisions of the English Arbitration Act 1996 or any statutory
modification or re-enactment thereof for the time being in force.

 

The Arbitration shall be conducted in accordance
with the rules in force of the London Maritime Arbitrators Association.

 

Either party may demand arbitration of any such
dispute by giving notice to the other party. Any demand for arbitration by
either of the parties hereto shall state the name of the arbitrator appointed
by such party and shall also state specifically the question or questions as to
which such party is demanding arbitration.

 

43

 

Within Fourteen(14) days after receipt of notice of
such demand for arbitration, the other party shall in turn appoint a second
arbitrator and give notice in writing of such appointment to the party
demanding arbitration. If a party fails to appoint an arbitrator as
aforementioned within Fourteen(14) days following receipt of notice of demand
for arbitration by the other party, the party failing to appoint an arbitrator
shall be deemed to have accepted and appointed, as its own arbitrator, the
arbitrator appointed by the party demanding arbitration and the arbitration
shall proceed before this sole arbitrator who alone in such event shall
constitute the Arbitration Board.

 

The award of the arbitrators and/or Umpire shall be
final and binding on both   parties.

 

3.                          Notice of Award :

 

The award
shall immediately be given to the BUYER and the BUILDER by telefax.

 

4.                          Expenses :

 

The
Arbitration Board shall determine which party shall bear the expenses of the
arbitration or the portion of such expenses which each party shall bear.

 

5.                          Entry in Court :

 

In case of
failure by either party to respect the award of the arbitration, the judgement may be
entered in any proper court having jurisdiction thereof.

 

6.                          Alteration of Delivery Date :

 

In the
event of reference to arbitration of any dispute arising out of matters
occurring prior to delivery of the VESSEL, the award may include any
postponement of the Delivery Date which the Arbitration Board may deem
appropriate.

 

(End of Article)

 

44

 

ARTICLE XIII - SUCCESSOR AND ASSIGNS

 

Neither
of the parties hereto shall assign this Contract to any other individual or
company save as provided hereto. unless prior consent of the other party is
given in writing. Should circumstances permit with or without alteration of the
terms and conditions of this Contract, such consent shall not be unreasonably
withheld by either party.

 

The
BUYER is hereby allowed to assign the Contract for the purposes of financing.

 

The BUYER is further allowed to
nominate a company controlled by the BUYER to take over the Contract.

 

The BUILDER shall fully cooperate
in case the BUYER requests UK Tax lease financing arrangements.

 

In
the event of any assignment pursuant to the terms of this Contract, the
assignee shall succeed to all of the rights and obligations of the assignor
under this Contract and the assignor shall remain responsible for the
fulfillment of this Contract.

 

In
the event of the assignment from the BUYER to any other individual or company
the BUILDER shall be entitled to request a Performance Guarantee from the BUYER
having same form and contents as Exhibit ”C” annexed hereto.

 

The
BUYER and the BUILDER understand and acknowledge that the VESSEL shall be built
and constructed as a repeat and series vessel of the BUILDER’s Hull Nos. 1639
and 1640 as stipulated in this Contract. Thus, in the event
of a resale, assignment and novation of the VESSEL, any and all matters determined by mutual
agreement between the BUYER and the BUILDER prior to the resale, assignment and
novation of the VESSEL shall be accepted and complied by the New BUYER (i.e.,
assignee). If the New BUYER or
its supervisor makes unreasonable requests that may have a significant
impact on the delivery schedule of the VESSEL and/or costs of construction
(including, without limitation to, request for fundamental change of ship type
or excessive revision of design specifications, etc.), the BUILDER shall be
entitled to refuse these requests. The BUYER shall notify the above to the New
BUYER before assignment or novation and the New BUYER will have to accept any
additional cost related to the new supervision.

 

(End
of Article)

 

45

 

ARTICLE XIV
- TAXES AND DUTIES

 

1.                          Taxes and Duties Incurred in
Korea :

 

The BUILDER
shall bear and pay all taxes, duties, stamps and fees incurred in Korea in
connection with execution and/or performance of this Contract as the BUILDER,
except for any taxes and duties imposed in Korea upon the BUYER’s Supplies.

 

2.                          Taxes and Duties Incurred
outside Korea :

 

The BUILDER shall bear and pay all taxes,
duties, stamps and fees incurred outside Korea in connection with execution
and/or performance of this Contract including guarantee matter as the BUILDER.

 

The BUYER shall bear and pay all taxes,
duties, stamps and fees incurred outside Korea in connection with execution
and/or performance of this Contract as the BUYER.

 

(End of Article)

 

46

 

ARTICLE XV - PATENTS, TRADEMARKS, COPYRIGHTS,
ETC.

 

1.                          Patents, Trademarks and
Copyrights :

 

Machinery
and equipment of the VESSEL may bear the patent number trademarks or trade
names of the manufacturers. The BUILDER shall defend and hold harmless the
BUYER from patent liability or claims of patent infringement of any nature or
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 costs and expenses of litigation, if any.

 

Nothing
contained herein shall be construed as transferring any patent or trademark
rights or copyrights in equipment covered by this Contract, and all such rights
are hereby expressly reserved to the true and lawful owners thereof.

 

The BUILDER’s warranty hereunder does not extend to
the BUYER’s Supplies.

 

2.                          General Plans,
Specifications and Working Drawings :

 

The BUILDER retains all rights with respect
to the SPECIFICATIONS , and plans and working drawings, technical descriptions,
calculations, test results and other data, information and documents concerning
the design and construction of the VESSEL and the BUYER undertakes therefore
not to disclose the same or divulge any information contained therein to any
third parties, without the prior written consent of the BUILDER, except where
it is necessary for usual operation, repair,
registration, classification, chartering, sale and maintenance of
the VESSEL.

 

(End
of Article)

 

47

 

ARTICLE XVI - BUYER’S SUPPLIES

 

1.                          Responsibility of BUYER :

 

(a)              The BUYER shall, at its own risk, cost and
expense, supply and deliver to the BUILDER all of the items to be furnished by
the BUYER as specified in the SPECIFICATINS (herein called the BUYER’s
Supplies) at warehouse or other storage of the Shipyard in the proper condition
ready for installation in or on the VESSEL, in accordance with the time schedule designated
and advised by the BUILDER to the BUYER within sixty (60) days from signing
this Contract.

 

 (b)                  In
order to facilitate installation by the BUILDER of the BUYER’s Supplies in or
on the VESSEL, the BUYER shall furnish the BUILDER with necessary
specifications, plans, drawings, instruction books, manuals, test reports and
certificates required by the rules and regulations of the SPECIFICATIONS .

 

If so requested by the BUILDER, the BUYER shall,
without any charge to the BUILDER, cause the representatives of the
manufacturers of the BUYER’s Supplies to assist the BUILDER in installation
thereof in or on the VESSEL and/or to carry out installation thereof by themselves
or to make necessary adjustments at the Shipyard.

 

 (c)                   Any and all of the BUYER’s Supplies shall be subject to the BUILDER’s
reasonable right of rejection, as and if they are found to be unsuitable or in
improper condition for installation.

 

 (d)                  Should
the BUYER fail to deliver any of the BUYER’s Supplies within the time
designated, the Delivery Date shall be automatically extended for a period
which actually caused the delay in the delivery of the VESSEL.

 

 (e)                   If delay in delivery of any of the BUYER’s
Supplies exceeds thirty (30) days, then, the BUILDER shall be entitled to
proceed with construction of the VESSEL without installation thereof in or on
the VESSEL as hereinabove provided, and the BUYER shall accept and take
delivery of the VESSEL so constructed, unless such delay is caused by Force
Majeure in which case the provision Paragraph 1(d) of this Article shall
apply.

 

48

 

2.                          Responsibility of BUILDER :

 

The BUILDER
shall be responsible for storing and handling with reasonable care of the BUYER’s
Supplies after delivery thereof at the Shipyard, and shall, at its own cost and
expense, install them in or on the VESSEL, unless otherwise provided herein or
agreed by the parties hereto, provided, always, that the BUILDER shall not be
responsible for quality, efficiency and/or performance of any of the BUYER’s
Supplies.

 

(End
of Article)

 

49

 

ARTICLE XVII - INSURANCE

 

1.                          Extent of Insurance Coverage

 

From the
time of launching until delivery of the VESSEL, the BUILDER shall, at its own
cost and expense, insure the VESSEL and all machinery and equipment,
appurtenances and outfits, including the BUYER’s Supplies, built into or
installed in or upon the VESSEL, against all risks under the “Institute Causes
for BUILDER’s Risk”, with first class insurance company or underwriters in
Korea.

 

The amount
of such insurance coverage shall, up to the date of delivery of the VESSEL, not
be less than the aggregate amount of all instalments paid by the BUYER to the
BUILDER, plus the value of the BUYER’s Supplies in the custody of the Shipyard.

 

2.                          Application of the Recovered
Amounts

 

In the
event that the VESSEL shall be damaged from any insured cause at any time
before delivery of the VESSEL, and in the further event that such damage shall
not constitute an actual or constructive total loss of the VESSEL, the amount
received in respect of the insurance shall be applied by the BUILDER in repair
of such damage, satisfactory to the Classification Society, and the BUYER shall
accept the VESSEL under this Contract if completed in accordance with this
Contract and the SPECIFICATIONS , however, subject to the extension of delivery
time under Article VIII hereof (except in case of negligence of the
BUILDER).

 

Should the
VESSEL from any cause become an actual or constructive total loss, the BUILDER
shall either :

 

 (a)                   proceed in accordance with the terms of this Contract, in which case
the amount received in respect of the insurance shall be applied to the
construction and repair of damage of the VESSEL, provided the parties hereto
shall have first agreed thereto in writing and to such reasonable extension of
delivery time as may be necessary for the completion of such reconstruction
and repair ; or

 

50

 

 (b)                  refund promptly to the BUYER
the full amount of all sums paid by the BUYER to the BUILDER as instalments in
advance of delivery of the VESSEL with Six percent (6.0%) interest, and deliver
to the BUYER all BUYER’s Supplies (or the insurance proceeds paid with respect
thereto), in which case this Contract shall be deemed to be automatically
terminated and all right, duties, liabilities and obligations of each of the
parties to the other shall forthwith cease and terminate.

 

3.                          Termination of BUILDER’s
Obligation to Insure

 

The BUILDER shall be under no obligation to insure
the VESSEL hereunder after delivery and acceptance of the VESSEL.

 

(End
of Article)

 

51

 

ARTICLE XVIII – NOTICE

 

1.                          Address :

 

Any and all
notices and communications in connection with this Contract shall be addressed
as follows :

 

To the BUYER :

Blacksea Marine Inc.

80 Broad Street,
Monrovia, Liberia

Cable address :    BLAMAR

Telefax No.  :      231-7-7000-422

 

To the BUILDER:

 

Samsung Heavy Industries Co., Ltd.

647-9, 11th Floor, KIPS Building, Yeoksam-Dong, Kangnam-Ku,

Seoul, Korea

Cable address : SSYARD SEOUL

Telefax No. : (+82 2) 3458-7349, (+82 2) 3458-7319

 

or preferably to its Geoje Yard :

 

Samsung Heavy Industries Co., Ltd.

P.O.BOX Gohyun 9

530, Jangpyung-Ri, Shinhyun-Up, Geoje-Si, Kyungnam, Korea

	
  Telefax
  No. :

  	
  (+82
  55) 630-4947 (Design Department)

  
	
   

  	
  (+82
  55) 630-4978 (Customer Satisfaction Team.)

  

 

2.                          Language :

 

Any and all
notices and communications in connection with this Contract shall be written in
the English language.

 

52

 

3.                          Effective Date of Notice :

 

The notice
in connection with this Contract shall become effective from the date when such
notice is received by the BUYER or by the BUILDER except otherwise described in
the Contract.

 

(End of
Article)

 

53

 

ARTICLE XIX -
EFFECTIVE DATE OF CONTRACT

 

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

 

(End of Article)

 

54

 

ARTICLE XX - INTERPRETATION

 

1.                          Laws Applicable :

 

The parties
hereto agree that the validity and interpretation of this Contract and of each Article and
part thereof shall be governed by 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 permit of an interpretation inconsistent with any
provisions of this Contract, then, in each and every such event, the applicable
provisions of this Contract shall prevail and govern. In the event of conflict
between the SPECIFICATIONS  and Plans,
the SPECIFICATIONS  shall prevail and
govern.

 

3.                          Entire Agreement :

 

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

 

4.                          Amendments and Supplements :

 

Any
supplement, memorandum of understanding or amendment, whatsoever form it may be
relating to this Contract, to be made and signed among parties hereof after
signing this Contract, shall be the integral part of this Contract and
shall be predominant over the respective corresponding Article and/or
Paragraph of this Contract.

 

The
Contract can only be amended in writing.

 

(End of Article)

 

55

 

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

 

 

	
  BUYER
  :

  	
  BUILDER :

  
	
  BLACKSEA MARINE INC.

  	
  SAMSUNG HEAVY IND. CO., LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ Iraklis Prokopakis

  	
   

  	
   

  	
  /s/ K.J. Song

  	
   

  
	
  By    : 

  	
  Iraklis Prokopakis

  	
   

  	
  By   :   K. J. Song

  
	
  Title
  : 

  	
  Attorney-In-Fact

  	
  Title
  :

  	
  Attorney-In-Fact

  
						

 

56

 

EXHIBIT “A”

 

LETTER OF
REFUNDMENT GUARANTEE

 

Gentlemen
:

 

We
hereby issue our letter of guarantee no.              in favour of Blacksea Marine
Inc.,(hereinafter called the “BUYER”) for account of Samsung Heavy Industries
Co., Ltd.(hereinafter called the “BUILDER”) as follows in consideration of the
shipbuilding contract dated May 12, 2006 (hereinafter called the “Contract”)
made by and among the BUYER and the BUILDER for the construction of one(1) single
screw diesel engine driven Container VESSEL having BUILDER’s Hull No. 1699
(hereinafter called the “VESSEL”).

 

If
in connection with the terms of the Contract the BUYER shall become entitled to
a refund of the advance payment(s) made to the BUILDER prior to the delivery of
the VESSEL, we hereby irrevocably guarantee the repayment of the same to the
BUYER immediately on demand being initially US$ 6,380,000.- (Say U.S. Dollars Six
Million Three Hundred and Eighty Thousand only) together with interest thereon
at the rate of Six (6) percent per annum from the respective dates on
which such sums were paid by the BUILDER to the date of remittance by
telegraphic transfer of such refund.

 

The
amount of this guarantee will be automatically increased, not more than
three  times, upon BUILDER’s receipt of
the respective instalment: each time by the amount of instalment of US$ 6,380,000.-
(Say U.S. Dollars Six Million Three Hundred and Eighty Thousand only), US$ 6,380,000.-
(Say U.S. Dollars Six Million Three Hundred and Eighty Thousand only) and US$ 6,380,000.-
(Say U.S. Dollars Six Million Three Hundred and Eighty Thousand only)
respectively plus interest thereon as provided in the Contract, but in any
eventuality the amount of this guarantee shall not exceed the total sum of US$ 25,520,000.-
(Say U.S. Dollars Twenty Five Million Five Hundred and Twenty Thousand only)
plus interest thereon at the rate of Six (6) percent per annum from the
respective dates on which such sums were paid by the BUYER to the BUILDER to
the date of remittance by telegraphic transfer of the refund.

 

Our
liability under this letter of guarantee shall not be affected by any
alteration to or variation of the terms of the Contract you may hereafter
agree with the BUILDER and by any other matter of circumstances, including
bankruptcy or insolvency of the BUILDER, which might otherwise discharge our
liability hereunder as guarantor of the BUILDER’s obligations as aforesaid.

 

57

 

In
case any refund is made to you by the BUILDER or by us under this guarantee,
our liability hereunder shall be automatically reduced by the amount of such
refund.

 

This
letter of guarantee is available against BUYER’s simple receipt and signed
statement certifying that BUYER’s demand for refund has been made in conformity
with Article X of the Contract and the BUILDER has failed to make the
refund within Thirty One (31) days after BUYER’s demand to the BUILDER.

 

Refund
shall be made to BUYER by telegraphic transfer in United States Dollars to an
account designated by you without deduction, withholding or set-off.

 

This
letter of guarantee shall expire and become null and void upon receipt by the
BUYER of the sum guaranteed hereby or upon acceptance by the BUYER of the
delivery of the VESSEL in accordance with the terms of the Contract and, in
either case, this letter of guarantee shall be returned to us. This guarantee
is valid from the date of this letter of guarantee until or in the event of
delayed delivery until such time as the VESSEL is delivered by the BUILDER to
the BUYER in accordance with the terms of the Contract.

 

Notwithstanding
the provisions hereinabove, in case we receive notification from you or the
BUILDER confirmed by an Arbitrator stating that your claim to cancel the
Contract or your claim for refundment thereunder has been disputed and referred
to Arbitration in accordance with the provisions of the Contract, the period of
validity of this guarantee shall be extended until Thirty (30) days after the
final and non-appealable award shall be rendered in the Arbitration and a copy
thereof acknowledged by the Arbitrators. In such case, this guarantee shall not
be available unless and until such acknowledged copy of the final award in the
Arbitration justifying your claim is presented to us.

 

Your
rights in respect of this letter of guarantee are assignable from the date of
this letter of guarantee until such time as the VESSEL is delivered by the
BUILDER to the BUYER in accordance with the provisions of the Contract, on the
understanding that you will notify us of the identity of any assignee of your
rights under this letter of guarantee.

 

Any
notice or demand under this letter of guarantee shall be given by facsimile and
sent to:

 

58

 

 

 

 

 

or
to such other address as we might notify to you in writing. A notice shall be
deemed to be served and shall take effect 2 hours after its transmission is
completed, provided that if a notice would be deemed to be served on a day
which is not a business day, or which is a business day but after 5:00 p.m.
local time, in the place of receipt, the notice shall be deemed to be served
and shall take effect at 9:00 a.m. on the next day which is a business
day.

 

This
guarantee shall be governed by and construed in accordance with the Laws of
England. Any disputes arising under this guarantee (but not any disputes
arising under the Contract which shall be determined by arbitration in
accordance with the terms of the Contract and as referenced in this letter of
guarantee) shall be determined by the High Court of Justice in London to whose
exclusive jurisdiction we hereby submit. We appoint 

 

                                                                                                              as
our agents for service of process in connection with any proceedings in such
courts.

 

We
each jointly and severally hereby represent and guarantee that we have the
corporate power and authority to execute, deliver and perform the
obligations under this letter of guarantee, and that such execution and
performance will not violate or conflict with any provision of law, statute,
rule, permit or regulation of any government, regulatory body, agency or other
authority in the jurisdictions where we are subject to such laws and
regulations.

 

59

 

IN
WITNESS WHEREOF, we have hereunder set our hands and seal by our duly
authorized representatives this         
day of                 ,
2006.

 

	
   

  	
  Very
  truly yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  For
  and on behalf of

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
  Name
  :

  
	
   

  	
  Title
  : Attorney-in-Fact

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  For
  and on behalf of

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
  Name
  :

  
	
   

  	
  Title
  : Attorney-in-Fact

  

 

60

 

EXHIBIT “B”

 

Samsung
Heavy Industries Co., Ltd.

11th
Floor, KIPS Building

647-9,
Yoksam-Dong, Kangnam-Ku,

Seoul,
Korea 135-080

 

Date
:                                  
, 2006

 

PERFORMANCE GUARANTEE

 

In
consideration of the performance of a certain shipbuilding contract dated
                      (hereinafter
called the “Contract”) by BLACKSEA MARINE INC. of 80 Broad street, Monrovia,
Liberia having your Hull No.1699 (hereinafter called the “VESSEL”) providing
among other things for payment of the Contract Price amounting to United States
Dollars             (US$              );

 

We,
the undersigned, hereby irrevocably and unconditionally guarantee to you, your
successors, and assigns the due and faithful performance by the BUYER of its
all liabilities and responsibilities under the Contract and any supplement,
amendment, change or modification hereafter made thereto, including but not
limited to, due and prompt payment of the Contract Price by the BUYER to you,
your successors, and assigns under the Contract and any supplement, amendment,
change or modification as aforesaid (hereby expressly waiving notice of any
such supplement, amendment, change or modification as may be agreed to by
the BUYER and confirming that this guarantee shall be fully applicable to the
Contract as so supplemented, amended, changed or modified).

 

This
Performance Guarantee shall be governed by the laws of England.

 

 

	
  GUARANTOR
  :

  
	
  BY
  :

  	
   

  	
   

  
	
  TITLE :

  
	
  WITNESS
  :

  

 

61

 

EXHIBIT “C”

 

Samsung
Heavy Industries Co., Ltd.

11th
Floor, KIPS Building

647-9,
Yoksam-Dong, Kangnam-Ku,

Seoul,
Korea 135-080

 

Date
:                                             , 2006

 

PERFORMANCE GUARANTEE

 

In
consideration of the assignment of a certain shipbuilding contract dated                    (hereinafter
called the “Contract”) by us to       
having your Hull No.1699 (hereinafter called the “VESSEL”) providing
among other things for payment of the Contract Price amounting to United States
Dollars            (US$              );

 

We,
the undersigned, hereby irrevocably and unconditionally guarantee to you, your
successors, and assigns the due and faithful performance by the BUYER of its
all liabilities and responsibilities under the Contract and any supplement,
amendment, change or modification hereafter made thereto, including but not
limited to, due and prompt payment of the Contract Price by the BUYER to you,
your successors, and assigns under the Contract and any supplement, amendment,
change or modification as aforesaid (hereby expressly waiving notice of any
such supplement, amendment, change or modification as may be agreed to by
the BUYER and confirming that this guarantee shall be fully applicable to the
Contract as so supplemented, amended, changed or modified).

 

This
Performance Guarantee shall be governed by the laws of England.

 

 

	
  GUARANTOR
  :

  
	
  BY
  :

  	
   

  	
   

  
	
  TITLE :

  
	
  WITNESS
  :

  

 

62Exhibit 10.27

 

SHIPBUILDING
CONTRACT

 

 

FOR

 

 

THE
CONSTRUCTION AND SALE OF

 

ONE
(1) 6,500 TEU CLASS CONTAINER CARRIER

 

 

HULL
NO. S4001

 

 

BETWEEN

 

 

BOXCARRIER
(NO.1) CORP.

 

 

(AS
BUYER)

 

 

AND

 

 

SUNGDONG
SHIPBUILDING & MARINE ENGINEERING CO., LTD.

 

(AS
BUILDER)

 

 

 

I N D E X

 

	
   

  	
   

  	
  PAGE

  
	
  PREAMBLE

  	
   

  	
  1

  
	
   

  	
   

  	
   

  
	
  ARTICLE     I

  	
  : DESCRIPTION AND CLASS

  	
  2

  
	
   

  	
   

  	
   

  
	
   

  	
  II

  	
  : CONTRACT PRICE

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  III

  	
  : ADJUSTMENT OF THE
  CONTRACT PRICE

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  IV

  	
  : INSPECTION AND
  APPROVAL

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  V

  	
  : MODIFICATIONS,
  CHANGES AND EXTRAS

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  VI

  	
  : TRIALS AND COMPLETION

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  VII

  	
  : DELIVERY

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  VIII

  	
  : DELAYS AND EXTENSIONS
  OF TIME (FORCE MAJEURE)

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  IX

  	
  : WARRANTY OF QUALITY

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  X

  	
  : PAYMENT

  	
  33

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  XI

  	
  : BUYER’S DEFAULT

  	
  38

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  XII

  	
  : BUYER’S SUPPLIES

  	
  41

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  XIII

  	
  : INSURANCE

  	
  43

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  XIV

  	
  : ARBITRATION

  	
  44

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  XV

  	
  : SUCCESSORS AND
  ASSIGNS

  	
  46

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  XVI

  	
  : TAXES AND DUTIES

  	
  47

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  XVII

  	
  : PATENTS, TRADEMARKS
  AND COPYRIGHTS

  	
  48

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  XVIII

  	
  : INTERPRETATION AND
  GOVERNING LAW

  	
  49

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  XIX

  	
  : NOTICE

  	
  50

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  XX

  	
  :EFFECTIVENESS OF THIS
  CONTRACT

  	
  51

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  XXI

  	
  : INTERPRETATION

  	
  52

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  XXII

  	
  :EXCLUSIVENESS

  	
  53

  

 

SCHEDULES

 

EXHIBIT “A”  REFUND GUARANTEE LETTER OF REFUNDMENT
GUARANTEE

 

EXHIBIT “B”  PERFORMANCE GUARANTEE

 

 

SHIPBUILDING
CONTRACT

 

THIS CONTRACT, made on this
26 day of July, 2006 by and between BOXCARRIER (NO.1) CORP. , a corporation
incorporated and existing under the laws of Republic of Liberia with its
registered office at 80 Broad Street, Monrovia, Liberia (hereinafter called the
“BUYER”), the party of the first part and Sungdong Shipbuilding &
Marine Engineering Co., Ltd., a company organized and existing under the laws
of the Republic of Korea, having its registered office at 1609-2, Hwang-li,
Gwangdo-myeon, Tongyoung-si, Gyeongnam, 650-827, Korea (hereinafter called the
“BUILDER”), the party of the second part,

 

W I T N E S S E T H
:

 

In consideration of the
mutual covenants contained herein, the BUILDER agrees to design, build, launch,
equip and complete in accordance with the Sung Dong Shipbuilding &
Marine Engineering Quality Standard one (1) Single Screw Diesel Engine
driven Container VESSEL as described in the Specifications as described in
Article I hereof (hereinafter called the “VESSEL”) at the BUILDER’s yards
in Korea (hereinafter called the “SHIPYARD”) and to deliver and sell the VESSEL
to the BUYER, and the BUYER agrees to accept delivery of and purchase from the
BUILDER the VESSEL, according to the terms and conditions hereinafter set forth
:

 

(End of Preamble)

 

1

 

ARTICLE I :
DESCRIPTION AND CLASS

 

1.                        DESCRIPTION

 

The
VESSEL shall have the BUILDER’s Hull No. S4001 and shall be built,
constructed, equipped and completed in accordance with the specifications
No. SD-DN-6500T.CN.FS-01 dated July 26, 2006 and the general
arrangement plan No. SD-DN-6500T.CN.GA-01 dated July 26, 2006
attached thereto and the ‘Maker List’ No. SD-DN-6500T.CN.ML-01 dated
July 26, 2006 (hereinafter called respectively the “SPECIFICATIONS” and
the “PLAN”) signed by both parties, which shall constitute an integral
part of this CONTRACT although not attached hereto.

 

The
SPECIFICATIONS and the PLAN are intended to explain each other and anything
shown on the PLAN and not stipulated in the SPECIFICATIONS or anything
stipulated in the SPECIFICATIONS and not shown on the PLAN shall be deemed and
considered as if included in both. Should there be any inconsistencies or
contradictions between the SPECIFICATIONS and the PLAN, the SPECIFICATIONS
shall prevail. Should there be any inconsistencies or contradictions between
this CONTRACT and the SPECIFICATIONS, this CONTRACT shall prevail.

 

2.                        BASIC
DIMENSIONS AND PRINCIPAL PARTICULARS OF THE VESSEL

 

(a)                   The
basic dimensions and principal particulars of the VESSEL shall be :

 

	
  Length, overall

  	
  about

  	
  300.0

  	
   

  	
  M

  
	
  Length, between perpendiculars

  	
  286.6

  	
   

  	
  M

  
	
  Breadth, moulded

  	
  40.0

  	
   

  	
  M

  
	
  Depth to Upper Deck, moulded

  	
  24.2

  	
   

  	
  M

  
	
   

  	
   

  	
   

  	
   

  
	
  Design draft, moulded, in seawater of specific
  gravity of 1.025

  	
  12.0

  	
   

  	
  M

  
	
  Scantling draft, moulded, in seawater of specific
  gravity of 1.025

  	
  14.5

  	
   

  	
  M

  
	
   

  	
   

  	
   

  	
   

  
	
  Deadweight guaranteed on the above moulded design
  draft of 12.0 M

  	
  59,000

  	
   

  	
  M/T

  

 

2

 

	
  Deadweight on the above moulded scantling draft of
  14.5 M

  	
  83,300  

  	
   

  	
  M/T

  
	
   

  	
   

  	
   

  	
   

  
	
  Main propulsion engine

  	
  MAN B&W 10K98MC-C

  
	
   

  	
  MCR :

  	
  77,600 PS x 104 RPM

  
	
   

  	
  NCR :

  	
  69,840 PS x 100.4 RPM

  
	
   

  
	
  Speed guaranteed at 12.0meters design draft at the
  condition of clean bottom and in calm and deep sea with main engine
  developing a NCR of 69,840 PS with fifteen per cent (15%) sea margin

  	
   

  	
  25.6 KNOTS

  
	
   

  	
   

  	
   

  
	
  Specific Fuel consumption guaranteed of the main
  engine applying I.S.O. reference conditions to the result of official shop
  test at a MCR of 77,600 PS using marine fuel oil having lower calorific value
  of 10,200 Kcal per Kg.

  	
   

  	
  126.0 gr/BHP.HR

  
							

 

The
details of the above particulars as well as the definitions and method of
measurements and calculations are as indicated in the SPECIFICATIONS.

 

(b)                  All
other vessels Hull Number S4002, S4003, S4004 and S4005 shall be built as
identical sister ships unless a modification to a design is agreed upon.

 

3.                 CLASSIFICATION,
RULES AND REGULATIONS 

 

(a)            The VESSEL
including its machinery, equipment and outfittings shall be built in compliance
with the rules and regulations of Det Norske Veritas (hereinafter called
the “CLASSIFICATION SOCIETY”), in force as of the date of this CONTRACT, to be
classed and registered as +1A, CONTAINER CARRIER, EO, BIS, TMON, NAUTICUS
(NEWBUILDING) and also to comply with the rules and regulations, in force
as of the date of this CONTRACT, as described in the SPECIFICATIONS. Provided
that the BUILDER shall have an option to declare the CLASSIIFICATION SOCIETY as
either equivalent Lloyd Register of Shipping or Det Norske Veritas within three
(3) month after signing of this CONTRACT.

 

(b)           The BUILDER shall arrange
with the CLASSIFICATION SOCIETY for the assignment by the CLASSIFICATION
SOCIETY of representative(s) to the VESSEL during

 

3

 

construction.
All fees and charges incidental to classification of the VESSEL in compliance
with the above specified rules, regulations and requirements of this CONTRACT
shall be for the account of the BUILDER.

 

(c)            The decision of the
CLASSIFICATION SOCIETY as to whether the VESSEL complies with the regulations
of the CLASSIFICATION SOCIETY shall be final and binding upon the BUILDER and
the BUYER.

 

Details of its notation shall be in
accordance with the SPECIFICATIONS.

 

The VESSEL shall also comply with the
compulsory rules, regulations and requirements of the regulatory bodies as
described in the SPECIFICATIONS rectified and in effect as of the signing date
of this Contract. Non-compulsory rules, regulations and requirements of the
regulatory bodies shall be dealt with in accordance with Article V (2) of
this Contract.

 

All the fees and charges incidental
to the classification and with respect to compliance with the above referred
rules, regulations and requirements shall be for account of the BUILDER except
otherwise agreed.

 

4.                 SUBCONTRACTING

 

The BUILDER may, at its sole discretion and
responsibility, subcontract any portion of the construction work of the VESSEL,
provided that the construction and assembly of the VESSEL shall be carried out
as is normally done according to the BUILDER’s building practice and provided
further that the BUILDER shall be responsible to the BUYER in respect of any
construction work carried out by such subcontractors.

 

5.                 NATIONALITY
OF THE VESSEL

 

The
VESSEL shall be registered by the BUYER at its own cost and expense under the
laws of either Greece or Cyprus or Bahamas or Marshall Islands or Panama or
Liberia with its home port of either Piraeus or Limassol or Nassau or Majuro or
Panama or Monrovia at the time of its delivery and acceptance hereunder
provided that the BUYER may in its sole discretion declare the VESSEL’S
flag and registration within four (4) months after the signing of the
CONTRACT. In the case that the BUYER declares the VESSEL’S flag and
registration to the Greece, the BUYER should pay the extra cost.

 

(End of Article)

 

4

 

ARTICLE II
: CONTRACT PRICE

 

The contract price of the
VESSEL delivered to the BUYER at the SHIPYARD shall be United States Dollars
Ninety One Million Five Hundred Thousand (US$ 91,500,000) (hereinafter called
the “CONTRACT PRICE”) which shall be paid plus any increases or less any
decreases due to adjustment or modifications, if any, as set forth in this
CONTRACT. The above CONTRACT PRICE shall include payment for services in the
inspection, tests, survey and classification of the VESSEL which will be
rendered by the CLASSIFICATION SOCIETY and shall not include the cost of the
BUYER’s supplies as stipulated in Article XII.

 

The CONTRACT PRICE also
includes all costs and expenses for supplying all necessary drawings as
stipulated in the SPECIFICATIONS except those to be furnished by the BUYER for
the VESSEL in accordance with the SPECIFICATIONS.

 

(End of Article)

 

5

 

ARTICLE III
: ADJUSTMENT OF THE CONTRACT PRICE

 

The CONTRACT PRICE of the
VESSEL shall be adjusted as hereinafter set forth in the event of the following
contingencies. It is hereby understood by both parties that any adjustment of
the CONTRACT PRICE as provided for in this Article is by way of liquidated
damages and not by way of penalty.

 

1.                 DELAYED
DELIVERY

 

(a)            No adjustment shall be made
and the CONTRACT PRICE shall remain unchanged for the first thirty (30) days of
the delay in delivery of the VESSEL [ending as of 12 o’clock midnight Korean
Standard Time on the thirtieth (30th) day of delay] beyond the Delivery Date
calculated as provided in Article VII.1. hereof.

 

(b)           If delivery of the VESSEL is
delayed more than thirty (30) days beyond the date upon which the delivery is
due from the BUILDER under the terms of this CONTRACT, then, beginning at
midnight of the thirtieth (30th) day after such due date, the CONTRACT PRICE of
the VESSEL shall be reduced by U.S. Dollars Twenty Two Thousand only (US$
22,000.-) for each full day of delay.

 

However,
unless the parties agree otherwise, the total amount of deduction from the
CONTRACT PRICE shall not exceed the amount due to cover the delay of one
hundred and eighty (180) days after thirty (30) days of the delay in delivery
of the VESSEL at the rate of deduction as specified hereinabove.

 

(c)            But, if the delay in
delivery of the VESSEL continues for a period of more than two hundred and ten
(210) days beyond the date upon which the delivery is due from the BUILDER
under the terms of this CONTRACT then, in such event, and after such period has
expired, the BUYER may, at its option, rescind this CONTRACT by serving upon
the BUILDER a notice of rescission by facsimile to be confirmed by a registered
letter via airmail directed to the BUILDER at the address given in this
CONTRACT. Such rescission shall be effective as of the date the notice thereof
is received by the BUILDER. If the BUYER has not served the notice of
rescission after the aforementioned two hundred and ten (210) days delay in delivery,
the BUILDER may demand the BUYER to make an election in accordance with
Article VIII.3. hereof.

 

6

 

(d)           For the purpose of this
Article, the delivery of the VESSEL shall be deemed to be delayed when and if
the VESSEL, after taking into full account extension of the Delivery Date or
permissible delays as provided in Article V, VI, VIII, XI or elsewhere in
this CONTRACT, is delivered beyond the date upon which delivery would then be
due under the terms of this CONTRACT.

 

2.                 INSUFFICIENT
SPEED

 

(a)             The CONTRACT PRICE of the
VESSEL shall not be affected or changed, if the actual speed, as determined by
trial runs more fully described in Article VI hereof, is less than the
speed required under the terms of this CONTRACT and the SPECIFICATIONS provided
such deficiency in actual speed is not more than two-tenths (2/10) of a knot
below the guaranteed speed.

 

(b)            However, as for the
deficiency of more than two-tenths (2/10) of a knot in actual speed below the
speed guaranteed under this CONTRACT, the CONTRACT PRICE shall be reduced by
U.S. Dollars Two Hundred Thousand only (U.S.$ 200,000.-) for each full
one-tenth (1/10) of a knot in excess of the said two-tenths (2/10) of a knot of
deficiency in speed [fractions of less than one-tenth (1/10) of a knot shall be
regarded as a full one-tenth (1/10) of a knot]. However, unless the parties
agree otherwise, the total amount of reduction from the CONTRACT PRICE shall
not exceed the amount due to cover the deficiency of one (1) full knot
below the guaranteed speed at the rate of reduction as specified above.

 

(c)            If the deficiency in actual
speed of the VESSEL is more than seven point five-tenths (7.5/10) knot below
the speed guaranteed under this CONTRACT, then the BUYER, at its option, may,
subject to the BUILDER’s right to effect alterations or corrections as provided
in Article VI.5. hereof, rescind this CONTRACT or may accept the
VESSEL at a reduction in the CONTRACT PRICE as above provided for seven point
five-tenths (7.5/10) knot of deficiency only.

 

3.                 EXCESSIVE
FUEL CONSUMPTION

 

(a)            The CONTRACT PRICE shall not
be affected or changed by reason of the fuel consumption of the VESSEL’s main
engine, as determined by the engine manufacturer’s shop trial as per the SPECIFICATIONS
being more than the guaranteed fuel consumption of the VESSEL’s main engine, if
such excess is not more than five per cent (5%) over the guaranteed fuel
consumption.

 

7

 

(b)           However, as for the excess
of more than five per cent (5%) in the actual fuel consumption over the
guaranteed fuel consumption of the VESSEL’s main engine, the CONTRACT PRICE
shall be reduced by U.S. Dollars Two Hundred Thousand only (US$ 200,000.-) for
each full one per cent (1%) increase in fuel consumption in excess of the said
five per cent (5%) increase in fuel consumption [fractions of less than one per
cent (1%) shall be regarded as a full one per cent (1%)]. However, unless the
parties agree otherwise, the total amount of reduction from the CONTRACT PRICE
shall not exceed the amount due to cover the excess of nine per cent (9%) over
the guaranteed fuel consumption of the VESSEL’s main engine at the rate of
reduction as specified above.

 

(c)            If such actual fuel
consumption exceeds the guaranteed fuel consumption of the VESSEL’s main engine
by more than ten per cent (10%), the BUYER, at its option, may, subject to the
BUILDER’s right to effect alterations or corrections as specified in
Article VI.5. hereof, rescind this CONTRACT or may accept the VESSEL
at a reduction in the CONTRACT PRICE as above provided for the nine per cent (9%)
increase only.

 

4.                 DEADWEIGHT
BELOW CONTRACT REQUIREMENTS

 

(a)            The CONTRACT PRICE of the
VESSEL shall not be affected or changed, if actual deadweight, determined as
provided in this CONTRACT and the SPECIFICATIONS, is below the deadweight of 83,300
metric tons on the moulded design draft of 12.0 metres required by this
CONTRACT and the SPECIFICATIONS by an amount of 83,300 metric tons or less.
However, should the deficiency in the actual deadweight of the VESSEL be more
than 830 metric tons below the said required deadweight, then the CONTRACT
PRICE of the VESSEL shall be reduced for each full one (1) metric ton
[fractions of less than one (1) metric ton shall be disregarded] of
decreased deadweight in excess of 830 metric tons by the sum of U.S. Dollars One
Thousand One Hundred only (US$ 1,100.-) per metric ton.

 

However,
unless the parties agree otherwise, the total amount of deduction from the CONTRACT
PRICE shall not exceed the amount due to cover the deficiency of 2,000 metric
tons below the said required deadweight hereinabove.

 

(b)           If the deficiency in the
deadweight of the VESSEL is more than 2,000 metric tons below the said required
deadweight, then the BUYER, at its option, may, subject to the BUILDER’s right
to effect alterations or corrections without the BUYER’s prior

 

8

 

consent
as specified in Article VI.5. hereof, rescind this CONTRACT or may accept
the VESSEL at a reduction in the CONTRACT PRICE as above provided for metric
tons of deficiency only.

 

5.                 EFFECT
OF RESCISSION

 

It
is expressly understood and agreed by the parties hereto that in any case, if
the BUYER rescinds this CONTRACT under this Article, the BUYER shall not be
entitled to any liquidated damages, unless by means of the provision of
Article X hereof.

 

(End of Article)

 

9

 

ARTICLE IV
: INSPECTION AND APPROVAL

 

1.                 APPOINTMENT
OF BUYER’S REPRESENTATIVE

 

The
BUYER shall timely despatch to and maintain at the SHIPYARD, at its own cost,
expense and risk, one or more representatives (hereinafter called the “BUYER’S
REPRESENTATIVE”), who shall be duly accredited in writing by the BUYER to
supervise adequately the construction by the BUILDER of the VESSEL, her
equipment and all accessories. Before the commencement of any item of work
under this CONTRACT, the BUILDER shall, whenever reasonably required,
previously exhibit, furnish to, and within the limits of the BUYER’S
REPRESENTATIVE’s authority, secure the approval from the BUYER’S REPRESENTATIVE
of any and all plans and drawings prepared in connection therewith. Upon
appointment of the BUYER’S REPRESENTATIVE, the BUYER shall notify the BUILDER
in writing of the name and the scope of the authority of the BUYER’S
REPRESENTATIVE.

 

2.                 AUTHORITY
OF THE BUYER’S REPRESENTATIVE

 

Such
BUYER’S REPRESENTATIVE shall, at all times during working hours of the
construction until delivery of the VESSEL, have the right to inspect the
VESSEL, her equipment and all accessories, and work in progress, or materials
utilized in connection with the construction of the VESSEL, wherever such work
is being done or such materials are stored, for the purpose of determining that
the VESSEL, her equipment and accessories are being constructed in accordance
with the terms of this CONTRACT and/or the SPECIFICATIONS and the PLAN.

 

The
BUILDER will endeavor to arrange for the inspection by the BUYER’S
REPRESENTATIVE during working hours of the BUILDER. However, such inspection
may be arranged beyond the BUILDER’s normal working hours, including
weekend and/or holiday if this is considered necessary by the BUILDER in order
to meet the BUILDER’s construction schedule, on the condition that the BUILDER
will inform the BUYER’S REPRESENTATIVE at least two (2) days in
advance of such inspection.

 

The
BUYER’S REPRESENTATIVE shall, within the limits of the authority conferred upon
him by the BUYER, make decisions or give advice to the BUILDER on behalf of the
BUYER promptly on all problems arising out of, or in connection with, the
construction of

 

10

 

the
VESSEL and generally act in a reasonable manner with a view to cooperating to
the utmost with the BUILDER in the construction process of the VESSEL.

 

The
decision, approval or advice of the BUYER’S REPRESENTATIVE shall be deemed to
have been given by the BUYER and once given shall not be withdrawn, revoked or
modified except with consent of the BUILDER. Provided that the BUYER’S
REPRESENTATIVE or his assistants shall comply with the foregoing obligations,
no act or omission of the BUYER’S REPRESENTATIVE or his assistants shall, in
any way, diminish the liability of the BUILDER under Article IX (WARRANTY
OF QUALITY). The BUYER’S REPRESENTATIVE shall notify the BUILDER promptly in
writing of his discovery of any construction or materials, which he believes do
not or will not conform to the requirements of the CONTRACT and the SPECIFICATIONS
or the PLAN and likewise advise and consult with the BUILDER on all matters
pertaining to the construction of the VESSEL, as may be required by the
BUILDER, or as he may deem necessary.

 

However,
if the BUYER’S REPRESENTATIVE fails to submit to the BUILDER without delay any
such demand concerning alterations or changes with respect to the construction,
arrangement or outfit of the VESSEL, which the BUYER’S REPRESENTATIVE has
examined, inspected or attended at the test thereof under this CONTRACT or the
SPECIFICATIONS, the BUYER’S REPRESENTATIVE shall be deemed to have approved the
same and shall be precluded from making any demand for alterations, changes, or
complaints with respect thereto at a later date.

 

The
BUILDER shall comply with any such demand which is not contradictory to this
CONTRACT and the SPECIFICATIONS or the PLAN, provided that any and all such
demands by the BUYER’S REPRESENTATIVE with regard to construction, arrangement
and outfit of the VESSEL shall be submitted in writing to the authorised
representative of the BUILDER. The BUILDER shall notify the BUYER’S
REPRESENTATIVE of the names of the persons who are from time to time authorised
by the BUILDER for this purpose.

 

It
is agreed upon between the BUYER and the BUILDER that the modifications,
alterations or changes and other measures necessary to comply with such demand
may be effected at a convenient time and place at the BUILDER’s reasonable
discretion in view of the construction schedule of the VESSEL.

 

In
the event that the BUYER’S REPRESENTATIVE shall advise the BUILDER that he has
discovered or believes the construction or materials do not or will not
conform to the

 

11

 

requirements
of this CONTRACT and the SPECIFICATIONS or the PLAN, and the BUILDER shall not
agree with the views of the BUYER’S REPRESENTATIVE in such respect, either the
BUYER or the BUILDER may, with the agreement of the other party, seek an
opinion of the CLASSIFICATION SOCIETY.

 

3.                 APPROVAL
OF DRAWINGS

 

(a)            The BUILDER shall submit to
the BUYER three (3) copies of each of the plans and drawings to be
submitted to the BUYER for its approval at its address as set forth in
Article XIV hereof. The BUYER shall, within fourteen (14) days after
receipt thereof return to the BUILDER one (1) copy of such plans and
drawings with the approval or comments, if any, of the BUYER. A list of the
plans and drawings to be so submitted to the BUYER shall be mutually agreed
upon between the parties hereto.

 

(b)           When and if the BUYER’S REPRESENTATIVE
shall have been sent by the BUYER to the SHIPYARD in accordance with Paragraph
1 of this Article, the BUILDER may submit the remainder, if any, of the
plans and drawings in the agreed list, to the BUYER’S REPRESENTATIVE for his
approval, unless otherwise agreed upon between the parties hereto.

 

The
BUYER’S REPRESENTATIVE shall, within ten (10) days after receipt thereof,
return to the BUILDER one (1) copy of such plans and drawings with his
approval or comments written thereon, if any. Approval by the BUYER’S
REPRESENTATIVE of the plans and drawings duly submitted to him shall be deemed
to be the approval by the BUYER for all purposes of this CONTRACT.

 

(c)            In the event that the BUYER
or the BUYER’S REPRESENTATIVE shall fail to return the plans and drawings to
the BUILDER within the time limit as hereinabove provided, such plans and
drawings shall be deemed to have been automatically approved without any
comment. In the event the plans and drawings submitted by the BUILDER to the
BUYER or the BUYER’S REPRESENTATIVE in accordance with this Article do not
meet with the BUYER’s or the BUYER’S REPRESENTATIVE’s approval, the matter
may be submitted by either party hereto for determination pursuant to
Article XIV hereof. If the BUYER’s comments on the plans and drawings that
are returned to the BUILDER by the BUYER within the said time limit are not
clearly specified or detailed, the BUILDER shall be entitled to place its own
interpretation on such comments in implementing them.

 

12

 

(d)           Approval of drawings by
Buyers shall not constitute a waiver of Builder’s responsibility to deliver the
vessel in accordance with the Contract and Specifications.

 

4.                 SALARIES
AND EXPENSES

 

All salaries and expenses of the BUYER’S REPRESENTATIVE or
any other person or persons employed by the BUYER hereunder shall be for the
BUYER’s account.

 

5.                 RESPONSIBILITY
OF THE BUILDER

 

(a)            The BUILDER shall provide
the BUYER’S REPRESENTATIVE and his assistants free of charge with suitably
furnished office space at, or in the immediate vicinity of, the SHIPYARD
together with access to telephone and facsimile facilities as may be
necessary to enable the BUYER’S REPRESENTATIVE and his assistants to carry out
their work under this CONTRACT. However, the BUYER shall pay for the telephone
or facsimile facilities used by the BUYER’S REPRESENTATIVE or his assistants.

 

The
BUILDER, its employees, agents and subcontractors, during its working hours
until delivery of the VESSEL, shall arrange for them to have free and ready
access to the VESSEL, her equipment and accessories, and to any other place
(except the areas controlled for the purpose of national security) where work
is being done, or materials are being processed or stored in connection with the
construction of the VESSEL including the premises of sub-contractors.

 

The
BUYER’S REPRESENTATIVE or his assistants or employees shall observe the work’s
rules, regulations and the guidances prevailing at the BUILDER’s and its
sub-contractor’s premises. The BUILDER shall promptly provide to the BUYER’S
REPRESENTATIVE and/or his assistants and shall ensure that its sub-contractors
shall promptly provide all such information as he or they may reasonably
request in connection with the construction of the VESSEL and her engines,
equipment and machinery.

 

(b)           The BUYER’S REPRESENTATIVE
and his assistants shall at all times remain the employees of the BUYER. The
BUILDER shall not be liable to the BUYER or the BUYER’S REPRESENTATIVE or to
his assistants or to the BUYER’s employees or

 

13

 

agents
for personal injuries, including death, during the time they, or any of them,
are on the VESSEL, or within the premises of either the BUILDER or its
sub-contractors, or are otherwise engaged in and about the construction of the
VESSEL, unless, however, such personal injuries, including death, are caused by
the gross negligence of the BUILDER, its sub-contractors, or its or their
employees or agents. The BUILDER shall not be liable to the BUYER for damages
to, or destruction of property of the BUYER or of the BUYER’S REPRESENTATIVE or
his assistants or the BUYER’s employees or agents, unless such damages, loss or
destruction is caused by the gross negligence of the BUILDER, its
sub-contractors, or its or their employees or agents.

 

6.                 RESPONSIBILITY
OF THE BUYER

 

The BUYER shall undertake
and assure that the BUYER’S REPRESENTATIVE and his assistants shall carry out
their duties hereunder in accordance with the normal shipbuilding practice and
in such a way as to avoid any unnecessary increase in building cost, delay in
the construction of the VESSEL, and/or any disturbance in the construction
schedule of the BUILDER.

 

The BUILDER has the right to request the BUYER to replace any
of the BUYER’S REPRESENTATIVE and/or his assistants who are deemed unsuitable
and unsatisfactory for the proper progress of the VESSEL’s construction. The
BUYER shall investigate the situation by sending its representative(s) to the
SHIPYARD and if the BUYER considers that such BUILDER’s request is justified,
the BUYER shall effect the replacement as soon as conveniently arrangeable.

 

(End of Article)

 

14

 

ARTICLE V : MODIFICATIONS, CHANGES AND EXTRAS

 

1.                 HOW EFFECTED

 

Any modifications or changes to the SPECIFICATIONS and the
PLAN under which the VESSEL is to be constructed may be made at any time
hereafter by written agreement of the parties hereto. Any modification or
change requested by the BUYER which does not affect the frame-work of the
SPECIFICATIONS shall be agreed to by the BUILDER if the BUYER agrees to
adjustment of the CONTRACT PRICE, deadweight and/or cubic capacity, speed
requirements, the Delivery Date and other terms and conditions of this CONTRACT
reasonably required as a result of such modification or change. The BUILDER has
the right to continue construction of the VESSEL on the basis of the
SPECIFICATIONS and the PLAN until the BUYER has agreed to such adjustments. The
BUILDER shall be entitled to refuse to make any alteration, change or
modification of the SPECIFICATIONS and/or the PLAN requested by the BUYER, if
the BUYER does not agree to the aforesaid adjustments within seven
(7) days of the BUILDER’s notification of the same to the BUYER, or, if,
in the BUILDER’s judgement, the compliance with such request of the BUYER would
cause an unreasonable disruption of the normal working schedule of the
SHIPYARD.

 

The
BUILDER, however, agrees to exert its efforts to accommodate such reasonable
request by the BUYER so that the said change and modification shall be made at
a reasonable cost and within the shortest period of time reasonably possible.
The aforementioned agreement to modify and change the SPECIFICATIONS and the
PLAN may be effected by exchange of letters or facsimiles manifesting the
agreement.

 

The letters and facsimiles exchanged by the parties pursuant
to the foregoing shall constitute an amendment to this CONTRACT and the
SPECIFICATIONS or the PLAN under which the VESSEL shall be built. Upon
consummation of such an agreement to modify and change the SPECIFICATIONS or
the PLAN, the BUILDER shall alter the construction of the VESSEL in accordance
therewith including any addition to, or deduction from, the work to be
performed in connection with such construction.

 

2.                 SUBSTITUTION
OF MATERIAL

 

If
any materials, machinery or equipment required for the construction of the
VESSEL by

 

15

 

the
SPECIFICATIONS and the PLAN or otherwise under this CONTRACT cannot be procured
in time to meet the BUILDER’s construction schedule for the VESSEL, or are
in short supply, or are unreasonably high in price compared with the prevailing
international market price, the BUILDER may supply, subject to the BUYER’s
prior approval, other materials, machinery or equipment of equal quality and
effect capable of meeting the requirements of the CLASSIFICATION SOCIETY and
the rules, regulations and requirements with which the construction of the
VESSEL must comply.

 

3.                 CHANGES
IN RULES AND REGULATIONS

 

If the specified rules and regulations with which the
construction of the VESSEL is required to comply are altered or changed by the
CLASSIFICATION SOCIETY or bodies authorised to make such alterations or
changes, either the BUYER or the BUILDER, upon receipt of due notice thereof,
shall forthwith give notice thereof to the other party in writing. Thereupon,
within fifteen (15) days after giving the notice to the BUILDER or receiving
the notice from the BUILDER, the BUYER shall advise the BUILDER as to the
alterations and changes, if any, to be made on the VESSEL which the BUYER, in
its sole discretion, shall decide. The BUILDER shall not be obliged to comply
with such alterations and/or changes if the BUYER fails to notify the BUILDER
of its decision within the time limit stated above.

 

The
BUILDER shall comply promptly with the said request of the BUYER, provided that
the BUILDER and the BUYER shall first agree to :

 

(a)            any increase or decrease in
the CONTRACT PRICE of the VESSEL that is occasioned by such compliance ;

 

(b)           any extension or advancement
in the Delivery Date of the VESSEL that is occasioned by such compliance ;

 

(c)            any increase or decrease in
the deadweight and/or cubic capacity of the VESSEL, if such compliance results
in any increase or reduction in the deadweight and/or cubic capacity ;

 

(d)           adjustment of the speed
requirements if such compliance results in any increase or reduction in the
speed ; and

 

16

 

(e)            any other alterations in the
terms of this CONTRACT or of the SPECIFICATIONS or the PLAN or both, if such
compliance makes such alterations of the terms necessary.

 

Any
delay in the construction of the VESSEL caused by the BUYER’s delay in making a
decision or agreement as above shall constitute a permissible delay under this
CONTRACT. Such agreement by the BUYER shall be effected in the same manner as
provided above for modification and change of the SPECIFICATIONS and the PLAN.

 

(End of Article)

 

17

 

ARTICLE VI
: TRIALS AND COMPLETION

 

1.                 NOTICE

 

The BUILDER shall notify the BUYER in writing or by facsimile
at least twenty (20) days in advance of the time and place of the trial run of
the VESSEL. Such notice shall specify the place from which the VESSEL will
commence her trial run and approximate date upon which the trial run is
expected to take place. Such date shall be further confirmed by the BUILDER
five (5) days in advance of the trial run in writing or by facsimile.

 

The BUYER’S REPRESENTATIVE, who is to witness the performance
of the VESSEL during such trial run, shall be present at such place on the date
specified in such notice. Should the BUYER’S REPRESENTATIVE fail to be present
after the BUILDER’s due notice to the BUYER as provided above, the BUILDER
shall be entitled to conduct such trial run with the presence of the
representative(s) of the CLASSIFICATION SOCIETY only without the BUYER’S
REPRESENTATIVE being present. In such case, the BUYER shall be obliged to
accept the VESSEL on the basis of a certificate issued by the BUILDER that the
VESSEL, after the trial run, subject to alterations and corrections, if
necessary, has been found to conform with the SPECIFICATIONS and this
CONTRACT and is satisfactory in all respects, provided the BUILDER first makes
such corrections and alterations promptly.

 

2.                 WEATHER
CONDITION

 

In
the event of unfavourable weather on the date specified for the trial run, the
trial run shall take place on the first available day that weather conditions
permit. The parties hereto recognise that the weather conditions in Korean
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, the weather should become so unfavourable that
the trial run cannot be continued, then the trial run shall be discontinued and
postponed until the first favourable day next following, unless the BUYER shall
assent to the acceptance of the VESSEL by notification in writing on the basis
of such trial run so far made prior to such change in weather conditions. Any
delay of the trial run caused by such unfavourable weather conditions shall
also operate to extend the Delivery Date of the VESSEL for the period of delay
occasioned by such unfavourable weather conditions.

 

18

 

3.              HOW
CONDUCTED

 

All
expenses in connection with the trials of the VESSEL are to be for the account
of the BUILDER, which, during the trials, is to provide at its own expense the
necessary crew to comply with conditions of safe navigation. The trials shall
be conducted in the manner prescribed in this CONTRACT and the SPECIFICATIONS,
and shall prove fulfilment of the performance requirements for the trials as
set forth in the SPECIFICATIONS.

 

The
BUILDER shall be entitled to conduct preliminary sea trials, during which the
propulsion plant and/or its appurtenance shall be adjusted according to the
BUILDER’s judgement. The BUILDER shall have the right to repeat any trial
whatsoever as it deems necessary.

 

4.                 CONSUMABLE
STORES

 

The BUILDER shall load the VESSEL with the required quantity
of fuel oil, lubricating oil and greases, fresh water, and other stores necessary
to conduct the trials as set forth in the SPECIFICATIONS. The necessary ballast
(fuel oil, fresh water and such other ballast as may be required) to bring
the VESSEL to the trial load draft, as specified in the SPECIFICATIONS, shall
be supplied and paid for by the BUILDER whilst lubricating oil and greases
shall be supplied and paid for by the BUYER within the time advised by the
BUILDER for the conduct of sea trials as well as for use before the delivery of
the VESSEL to the BUYER. The fuel oil as well as lubricating oil and greases
shall be in accordance with the specifications of the main engine and other
machinery and the BUYER shall decide and advise the BUILDER of the supplier’s
name for lubricating oil and greases before the work-commencement of the
VESSEL, provided that the supplier shall be acceptable to the BUILDER and/or
the makers of all the machinery.

 

Any
fuel oil, fresh water or other consumable stores furnished and paid for by the
BUILDER for trial runs remaining on board the VESSEL, at the time of acceptance
of the VESSEL by the BUYER, shall be bought by the BUYER from the BUILDER at
the BUILDER’s purchase price for such supply in Korea and payment by the BUYER
thereof shall be made at the time of delivery of the VESSEL. The BUILDER shall
pay the BUYER at the time of delivery of the VESSEL for the consumed quantity
of any lubricating oil and greases which were furnished and paid for by the
BUYER at the BUYER’s purchase price thereof. The consumed quantity of
lubricating oils and greases shall be calculated on the basis of the difference
between the remaining amount, including the same remaining in the

 

19

 

main
engine, other machinery and their pipes, stern tube and the like, and the
supplied amount.

 

5.                 ACCEPTANCE
OR REJECTION

 

(a)               If, during any sea trial,
any breakdown occurs entailing interruption or irregular performance which can
be repaired on board, the trial shall be continued after such repairs and be
valid in all respects.

 

(b)           However, if, during or after
the trial run, it becomes apparent that the VESSEL or any part of her
equipment requires alterations or corrections which but for this provision
would or might entitle the BUYER to rescind this CONTRACT, the BUILDER shall
notify the BUYER promptly in writing or by facsimile to such effect and shall
simultaneously advise the BUYER of the estimated additional time required for
the necessary alterations or corrections to be made.

 

The
BUYER shall, within five(5) days of receipt from the BUILDER of notice of
completion of such alterations or corrections and after such further trials or
tests as necessary, notify the BUILDER in writing or by facsimile confirmed in
writing of its acceptance, qualified acceptance or rejection of the VESSEL, all
in accordance with the SPECIFICATIONS, the PLAN and this CONTRACT, and shall
not be entitled to reject the VESSEL on such grounds until such time.

 

(c)               Save as above provided, the
BUYER shall, within three(3) days after completion of the trial run, notify
the BUILDER in writing or by facsimile confirmed in writing of its acceptance
of the VESSEL or of the details in respect of which the VESSEL does not
conform to the SPECIFICATIONS or this CONTRACT.

 

If
the BUILDER is in agreement with the BUYER’s determinations as to
non-conformity, the BUILDER shall make such alterations or changes as
may be necessary to correct such non-conformity and shall prove the
fulfilment of this CONTRACT and the SPECIFICATIONS by such tests or trials as
may be necessary.

 

The
BUYER shall, within three (3) days after completion of such tests and/or
trials, notify the BUILDER in writing or by facsimile confirmed in writing of
its acceptance or rejection of the VESSEL.

 

20

 

(d)           However, the BUYER shall not
be entitled to reject the VESSEL by reason of any minor or insubstantial items
judged from the point of view of standard shipbuilding and shipping practice as
not being in conformity with the SPECIFICATIONS, but, in that case, the BUILDER
shall not be released from the obligation to correct and/or remedy such minor
or insubstantial items as soon as practicable after the delivery of the VESSEL.

 

6.                 EFFECT
OF ACCEPTANCE

 

The
BUYER’s written or facsimiled notification of acceptance delivered to the
BUILDER as above provided, shall be final and binding insofar as conformity of
the VESSEL with the SPECIFICATIONS is concerned and shall preclude the BUYER
from refusing formal delivery of the VESSEL as hereinafter provided, if the
BUILDER complies with all conditions of delivery, as herein set forth and
provided that, in the case of qualified acceptance, any matters which were
mentioned in the notice of the qualified acceptance by the BUYER as requiring
correction have been corrected satisfactorily.

 

If the BUYER fails to notify the BUILDER of its acceptance or
rejection of the VESSEL as hereinabove provided, the BUYER shall be deemed to
have accepted the VESSEL. Nothing contained in this Article shall preclude
the BUILDER from exercising any and all rights which the BUILDER has under this
CONTRACT if the BUILDER disagrees with the BUYER’s rejection of the VESSEL or
any reasons given for such rejection, including arbitration provided in
Article XIV hereof.

 

(End of Article)

 

21

 

ARTICLE VII
: DELIVERY

 

1.                 TIME
AND PLACE

 

The
VESSEL shall be delivered by the BUILDER to the BUYER at the SHIPYARD, safely
afloat on or before 30th April, 2009 (hereinafter called the
“DELIVERY DATE”) after completion of satisfactory trials and acceptance by the
BUYER in accordance with the terms of Article VI, except that, in the
event of delays in delivery of the VESSEL by the BUILDER due to causes which
under the terms of this CONTRACT permit extensions of the time for delivery of
the VESSEL, the aforementioned DELIVERY DATE shall be extended accordingly.

 

It
is hereby agreed that the BUILDER shall have the right to advance the DELIVERY
DATE provided that the BUILDER shall have given to the BUYER written notice of
the new proposed earlier delivery date at least six (6) months before such
new proposed advanced delivery date; and

 

Any
such new proposed earlier delivery date shall be considered as the DELIVERY
DATE for the purpose of this CONTRACT.

 

2.                 WHEN
AND HOW EFFECTED 

 

Provided that the BUYER shall concurrently with delivery of
the VESSEL release to the BUILDER the fifth instalment as set forth in
Article X.2. hereof and shall have fulfilled all of its obligations
provided for in this CONTRACT, delivery of the VESSEL shall be forthwith
effected upon acceptance thereof by the BUYER, as hereinabove provided, by the
concurrent delivery by each of the parties hereto to the other of a PROTOCOL OF
DELIVERY AND ACCEPTANCE acknowledging delivery of the VESSEL by the BUILDER and
acceptance thereof by the BUYER, which PROTOCOL shall be prepared in duplicate
and signed by each of the parties hereto.

 

3.                 DOCUMENTS
TO BE DELIVERED TO THE BUYER

 

Upon delivery and acceptance of the VESSEL, the BUILDER shall
deliver to the BUYER the following documents, which shall accompany the
aforementioned PROTOCOL OF DELIVERY AND ACCEPTANCE :

 

22

 

(a)            PROTOCOL OF TRIALS of the
VESSEL made pursuant to this CONTRACT and the SPECIFICATIONS,

 

(b)           PROTOCOL OF INVENTORY of the
equipment of the VESSEL, including spare parts, all as specified in the
SPECIFICATIONS,

 

(c)            PROTOCOL OF STORES OF
CONSUMABLE NATURE, such as all fuel oil and fresh water remaining in tanks if
its cost is charged to the BUYER under Article VI.4. hereof,

 

(d)           DRAWINGS AND PLANS
pertaining to the VESSEL as stipulated in the SPECIFICATIONS, which shall be
furnished to the BUYER at no additional cost,

 

(e)            ALL CERTIFICATES required to
be furnished upon delivery of the VESSEL pursuant to this CONTRACT, the
SPECIFICATIONS and the customary shipbuilding practice, including

 

(i)                                 Classification
Certificate

(ii)                              Safety
Construction Certificate

(iii)                           Safety
Equipment Certificate

(iv)                          Safety
Radio Certificate

(v)                             International
Loadline Certificate

(vi)                          International
Tonnage Certificate

(vii)                       BUILDER’s
Certificate

(viii)                    De-ratting
Exemption Certificate

 

However,
it is agreed by the parties that if the Classification Certificate and/or other
certificates are not available at the time of delivery of the VESSEL,
provisional certificates shall be accepted by the BUYER, provided that the
BUILDER shall furnish the BUYER with formal certificates as promptly as
possible after such formal certificates have been issued.

 

(f)              DECLARATION OF WARRANTY of
the BUILDER that the VESSEL is delivered to the BUYER free and clear of any
liens, claims, mortgages, or other encumbrances upon the BUYER’s title thereto,
and in particular, that the VESSEL is absolutely free of all burdens in the
nature of imposts, taxes, or charges imposed by the prefecture or country

 

23

 

of
the port of delivery, as well as of all liabilities of the BUILDER to its
sub-contractors and employees and of all liabilities arising from the operation
of the VESSEL in trial runs, or otherwise, prior to delivery except as
otherwise provided under this CONTRACT.

 

(g)                     COMMERCIAL INVOICE.

 

4.                 TENDER
OF THE VESSEL

 

If
the BUYER fails to take delivery of the VESSEL after completion thereof
according to this CONTRACT and the SPECIFICATIONS, the BUILDER shall have the
right to tender delivery of the VESSEL after compliance with all procedural
requirements as provided above.

 

5.                 TITLE
AND RISK

 

Title
and risk shall pass to the BUYER upon delivery and acceptance of the VESSEL
being effected as stated above and the BUILDER shall be free of all
responsibility or liability whatsoever related with this CONTRACT except for
the warranty of quality contained in Article IX and the obligation to
correct and/or remedy, as provided in Article VI.5.(d), if any, it being
expressly understood that, until such delivery is effected, the VESSEL and
equipment thereof are at the entire risk of the BUILDER including but not
confined to, risks of war, insurrection and seizure by Governments or Authorities,
whether Korean or foreign, and whether at war or at peace. The title to the
BUYER’s supplies as provided in Article XII shall remain with the BUYER
and the BUILDER’s responsibility for such BUYER’s supplies shall be as
described in Article XII.2.

 

6.                 REMOVAL
OF THE VESSEL

 

The BUYER shall take possession of the VESSEL immediately
upon delivery thereof and shall remove the VESSEL from the SHIPYARD within
three (3) days after delivery thereof is effected. Port dues and other
charges levied by the Korean Government Authorities after delivery of the
VESSEL and any other costs related to the removal of the VESSEL shall be borne
by the BUYER.

 

(End of Article)

 

24

 

ARTICLE VIII
: DELAYS AND EXTENSIONS OF TIME (FORCE MAJEURE)

 

1.                 CAUSES
OF DELAY

 

If, at any time after signing this CONTRACT, either the
construction or delivery of the VESSEL or any performance required hereunder as
a prerequisite to the delivery thereof is delayed by any of the following events;
namely war, acts of state or government, blockade, revolution, insurrections,
mobilization, civil commotion, riots, general workers strikes, sabotage,  Acts of God or the public enemy, plague or
other epidemics, quarantines, prolonged failure of electric current, freight
embargoes, or defects in major forgings or castings, or delays in the BUYER’s
supplies as stipulated in Article XII, if any, or or defects in materials,
machinery or equipment which could not have been detected by the BUILDER using
reasonable care or earthquakes, tidal waves, typhoons, hurricanes, prolonged or
unusually severe weather conditions or by destruction of the premises or works
of the BUILDER or its sub-contractors, or of the VESSEL, or any
part thereof, by fire, landslides, flood, lightning, explosion or the
BUILDER’s performance under the CONTRACT, or delays caused by the
CLASSIFICATION SOCIETY or the BUYER’s faulty action or omission, or other
causes beyond the control of the BUILDER, or its sub-contractors, as the case
may be, or for any other causes which, under the terms of this CONTRACT,
authorise and permit extension of the time for delivery of the VESSEL, then, in
the event of delays due to the happening of any of the aforementioned
contingencies, the DELIVERY DATE of the VESSEL under this CONTRACT shall be
extended for a period of time which shall not exceed the total accumulated time
of all such delays.

 

The BUILDER shall have
used reasonable efforts to mitigate the duration and effects of such events of
the construction schedule.

 

2.                 NOTICE
OF DELAYS

 

As
soon as practicably possible after commencement of any delay but not later than
fourteen (14) days on account of which the BUILDER claims that it is entitled
under this CONTRACT to an extension of the DELIVERY DATE of the VESSEL,
excluding delays due to arbitration, the BUILDER shall advise the BUYER in
writing or by facsimile of the date such delay commenced, the reasons thereof
and, if possible, its estimated duration of the probable delay in the delivery
of the VESSEL, and shall supply the BUYER if reasonably available with evidence
to justify the delay claimed. Within fourteen (14) days after such delay ends,
the BUILDER shall likewise advise the BUYER in writing or by

 

25

 

facsimile
of the date that such delay ended, and also, shall specify the period of time
by which the BUILDER claims the DELIVERY DATE should be extended by reason of
such delay. Failure of the BUYER to object to the BUILDER’s notification of any
claim for extension of the date for delivery of the VESSEL within fourteen (14)
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.

 

3.                 RIGHT
TO RESCIND FOR EXCESSIVE DELAY

 

If
the total accumulated time of all permissible and non-permissible delays,
excluding delays due to (i) arbitration under Article XIV,
(ii) the BUYER’s defaults under Article XI, (iii) modifications
and changes under Article V or (iv) delays or defects in the BUYER’s
supplies as stipulated in Article XII, aggregates two hundred and forty
(240) days or more, then, the BUYER may, at any time thereafter, rescind this
CONTRACT by giving a written notice of rescission to the BUILDER. Such
rescission shall be effective as of the date the notice thereof is received by
the BUILDER.

 

If
the BUYER has not served the notice of rescission as provided in the above or
Article III.1. hereof, the BUILDER may, at any time after expiration of
the accumulated time of the delay in delivery, either two hundred and forty
(240) days in case of the delay in this Paragraph or two hundred and ten (210)
days in case of the delay in Article III.1, notify the BUYER of the future
date upon which the BUILDER estimates the VESSEL will be ready for delivery and
demand in writing or by facsimile that the BUYER make an election either to
rescind this CONTRACT or to consent to the delivery of the VESSEL at such
future date, in which case the BUYER shall, within fourteen(14) days after
receipt of such demand, make and notify the BUILDER of such election. If the
BUYER elects to consent to the delivery of the VESSEL at such future date (or
other future date as the parties may agree):

 

(a)            Such future date shall
become the contractual delivery date for the purposes of this CONTRACT and
shall be subject to extension by reason of permissible delays as herein
provided, and

 

(b)           If the VESSEL is not
delivered by such revised contractual delivery date (as extended by reason of
permissible delays), the BUYER shall have the same right of rescission upon the
same terms as provided in the above and Article III. 1.

 

If
the BUYER shall not make an election within fourteen(14) days as provided
hereinabove, the BUYER shall be deemed to have accepted such extension of the
DELIVERY DATE to

 

26

 

the
future delivery date indicated by the BUILDER.

 

4.              DEFINITION
OF PERMISSIBLE DELAYS

 

Delays
on account of the foregoing causes shall be understood to be permissible
delays, and are to be distinguished from non-permissible unauthorised delays on
account of which the CONTRACT PRICE of the VESSEL is subject to adjustment as
provided in Article III hereof.

 

(End of Article)

 

27

 

ARTICLE IX
: WARRANTY OF QUALITY

 

1.                 GUARANTEE
OF MATERIAL AND WORKMANSHIP

 

The BUILDER, for the period of twelve (12) months from the
date of delivery of the VESSEL to the BUYER, guarantees the VESSEL and her
engine and all parts and equipment thereof that are manufactured or furnished
by the BUILDER under this CONTRACT against all defects which are directly due
to faulty design, defective materials, construction miscalculation and/or poor
workmanship, or negligent or other improper acts or omissions on the part of
the BUILDER or its subcontractors provided
such defects have not been caused by perils of the sea, rivers or
navigations, or by normal wear and tear, overloading, improper loading or
stowage, corrosion of the materials other than related to lack of maintenance,
fire, accidents at sea or elsewhere, or by incompetence, mismanagement,
negligence or wilful neglect or any alteration or addition to the VESSEL which
has not previously been approved by the BUILDER.

 

The BUILDER will be responsible for all machinery or parts of
machinery and all constructions which are supplied by sub-contractors and will
guarantee the above mentioned for a period of twelve (12) months on the basis
as laid down in this Paragraph. Upon rectification of an item claimed under this guarantee,
this item shall be covered for further twelve (12) months under the same terms
and conditions. However, this is limited to a maximum of Eighteen (18) months
from Delivery Date.

 

2.                 NOTICE
OF DEFECTS

 

The
BUYER or its duly authorised representative will notify the BUILDER in writing
or by facsimile promptly after discovery of any defect for which a claim is to
be made under this guarantee.

 

The BUYER’s written notice shall include full particulars as
to the nature of the defect and the extent of the damage caused thereby, but
excluding consequential damage as hereinafter provided. The BUILDER will be
under no obligation with respect to this guarantee in respect of any claim for
defects discovered prior to the expiry date of the guarantee, unless notice of
such defects is received by the BUILDER before the expiry date. However,
facsimiled advice received by the BUILDER within seven (7) days after such
expiry date that a claim is forthcoming will be sufficient compliance with the
requirement as to time,

 

28

 

provided that such facsimiled advice shall include at least a
brief description of the defect including the identity of the equipment, extent
of damage, name and number of any replacement part and description of any
remedial work required, and that full particulars are given to the BUILDER not
later than fourteen (14) days after the expiry date.

 

3.                 REMEDY
OF DEFECTS

 

(a)             The BUILDER shall remedy, at
its expense, any defects, against which the VESSEL is guaranteed under this
Article, by making all necessary and reasonably practicable repairs or
replacements at the SHIPYARD or elsewhere as provided for in
(b) hereinbelow.

 

In
such case, the VESSEL shall be taken at the BUYER’s cost and responsibility to
the place selected, ready in all respects for such repairs or replacements and
in any event, the BUILDER shall not be responsible for towage

 

(b)           However, BUYER should
determine and prove if it is commercially and/or operationally impractical
(which shall include, but not be limited to, an emergency) to bring the VESSEL
to the SHIPYARD, the BUYER may cause the necessary repairs or replacements
to be made elsewhere which is deemed by the BUYER with the consent of the
BUILDER which shall not be unreasonably withheld, to be suitable for the
purpose, provided that, in such event, the BUILDER may forward or supply
replacement parts or materials under the terms described in
(c) hereinbelow, unless forwarding or supplying thereof under the terms
described in (c) hereinbelow would impair or delay the operation or
working schedule of the VESSEL. In the event that the BUYER proposes to
cause the necessary repairs or replacements to be made to the VESSEL at any
shipyard or works other than the SHIPYARD, the BUYER shall first (but in all
events as soon as reasonably possible) give the BUILDER notice in writing or by
facsimile of the time and place such repairs will be made, and if the VESSEL is
not thereby delayed, or her operation or working schedule is not thereby
impaired, the BUILDER shall have the right to verify by its own
representative(s) the nature and extent of the defects complained of. The
BUILDER shall, in such case, promptly advise the BUYER by facsimile, after such
examination has been completed, of its acceptance or rejection of the defects
as ones that are covered by the guarantee herein provided. Upon the BUILDER’s
acceptance of the defects as justifying remedy under this Article, or upon
award of the arbitration so determining, the BUILDER shall compensate the BUYER
an amount equal to the actual proven cost of making the same repairs or
replacements.

 

29

 

(c)            In the event that it is
necessary for the BUILDER to forward a replacement for a defective
part under this guarantee, replacement parts shall be shipped to the BUYER
under the terms of CIF port of the country where vessel will be repaired.

 

(d)           The BUILDER reserves the
option to retrieve, at the BUILDER’s cost, any of the replaced equipment/parts
in case defects are remedied in accordance with the provisions in this Article.

 

(e)           Any dispute under this
Article shall be referred to arbitration in accordance with the provisions
of Article XIV hereof.

 

4.                 EXTENT
OF THE BUILDER’S LIABILITY

 

(a)            After delivery of the VESSEL
the responsibility of the BUILDER in respect of and/or in connection with the
VESSEL and/or this CONTRACT shall be limited to the extent expressly provided
in the Paragraphs of this Article. Except as expressly provided in the
Paragraphs of this Article, in no circumstances and on no ground whatsoever
shall the BUILDER have any responsibility or liability whatsoever or howsoever
arising in respect of or in connection with the VESSEL or this CONTRACT after
the delivery of the VESSEL. Further, but without in any way limiting the
generality of the foregoing, the BUILDER shall have no liability or
responsibility whatsoever or howsoever arising for or in connection with any
consequential or special losses, damages or expenses (including but not limited
to loss of time, loss of profit or earnings or demurrage directly or indirectly
caused), any pecuniary loss or expense, any liability to any third party or any
fine, compensation, penalty or other payment or sanction incurred by or imposed
upon the BUYER or any other party whatsoever in relation to or in connection
with this CONTRACT or the VESSEL.

 

(b)           The BUILDER shall be under
no obligation with respect to defects in respect of which the BUILDER has not
received notice in accordance with Paragraph 2 of this Article by the
expiry date of the guarantee specified in Paragraph 1, nor in any event shall
the BUILDER be liable for any worsening of the defects after the expiry date of
the guarantee.

 

(c)            The BUILDER shall under no
circumstances be liable for defects in the VESSEL or any part of equipment
thereof caused by perils of the sea, rivers or navigations, or by normal wear
and tear, overloading, improper loading or stowage, corrosion of the

 

30

 

materials
other than related to lack of maintenance, fire, accidents at sea or elsewhere,
or by incompetence, mismanagement, negligence or wilful neglect or any
alteration or addition on the part of the BUYER, its employees or agents
or any other person on or doing work on the VESSEL, including the VESSEL’s
officers, crew and passengers. Likewise, the BUILDER shall not be liable for
defects in the VESSEL or any part of equipment thereof that are due to
repairs carried out by any other than the BUILDER or which have not been
carried out in accordance with the procedure set out in Paragraph 3 (b) of
this Article.

 

(d)           The BUILDER shall not be
obliged to repair, not be liable for, damage to the VESSEL or any part of
the equipment thereof, which after delivery of the VESSEL, is caused other than
by the defects of the nature specified in this Article. The guarantees
contained as hereinabove in this Article replace and exclude any other
liability, guarantee, warranty and/or condition imposed or implied by statute,
common law, custom, contract (including this CONTRACT) or otherwise on the
part of the BUILDER by reason of the construction and sale of the VESSEL
for and to the BUYER or for any other reason whatsoever.

 

5.                       GUARANTEE ENGINEER

 

The BUILDER shall have the right to appoint
a Guarantee Engineer to serve on the VESSEL as its representative for a period
of Three (3) months from the date the VESSEL is delivered. However, if the
BUYER and the BUILDER shall deem it necessary to keep the Guarantee Engineer on
the VESSEL for a longer period, then he shall remain on board the VESSEL after
the said Three (3) months, but not longer than Six (6) months from
the delivery of the VESSEL.

 

The BUYER, and its
employees, shall give such Guarantee Engineer full cooperation in carrying out
his duties as the representative of the BUILDER on board the VESSEL.

 

The Guarantee Engineer shall
sign BUYER’s Indemnity Forms and shall at all times deemed to be an employee of
the BUILDER.

 

The BUYER shall accord the
Guarantee Engineer treatment comparable to the VESSEL’s Chief Engineer, and
shall provide board and lodging at no cost to the BUILDER and/or the Guarantee
Engineer.

 

While the Guarantee Engineer is on board the VESSEL,
the BUYER shall pay to the BUILDER the sum of United States Dollars Six
Thousand and Five Hundred (US$ 6,500.-) per month as a compensation for a
part of cost and charges to be borne by the BUILDER in connection with
Guarantee Engineer and also shall pay the expenses of his repatriation to

 

31

 

Korea by air upon termination of his service, the
expenses of his communication with the BUILDER incurred in performing his
duties and expenses, if any, of his medical and hospital care in the VESSEL’s
hospital.

 

Pertaining to the detailed particulars of this
Paragraph, an agreement will be made according to this effect between the
parties hereto upon delivery of the VESSEL.

 

(End of Article)

 

32

 

ARTICLE X :
PAYMENT

 

1.                 CURRENCY

 

All
payments under this CONTRACT shall be made in United States Dollars.

 

2.                 TERMS
OF PAYMENT

 

The
payments of the CONTRACT PRICE shall be made as follows :

 

(a)            First Instalment

 

Twenty per cent (20 %) of the CONTRACT PRICE amounting to
U.S.Dollars Eighteen Million Three Hundred Thousand only (US$ 18,300,000.-)
shall be paid within three (3) business days after receipt by the BUYER of
the original of the Refund Guarantee specified in Paragraph 8 of this Article.

 

Under this CONTRACT, in counting the business days, only
Saturdays and Sundays are excepted. When a due date falls on a day when banks
are not open for business in New York, N.Y., U.S.A., such due date shall fall
due upon the first business day next following.

 

(b)           Second Instalment

 

Twenty
per cent (20%) of the CONTRACT PRICE amounting to U.S.Dollars Eighteen Million
Three Hundred Thousand only (US$ 18,300,000.-) shall be paid within three
(3) business days of receipt by the Buyer of a facsimiled advice from the
BUILDER that steel cutting has been commenced.

 

(c)            Third Instalment

 

Ten
per cent (10%) of the CONTRACT PRICE amounting to U.S.Dollars Nine Million One
Hundered Fifty Thousand only (US$ 9,150,000.-) shall be paid within three
(3) business days of receipt by the BUYER of a facsimiled advice from the
BUILDER that the first block of the keel has been laid.

 

33

 

(d)           Fourth Instalment

 

Ten
per cent (10%) of the CONTRACT PRICE amounting to U.S.Dollars Nine Million One
Hundred Fifty Thousand only (US$ 9,150,000-) shall be paid within three
(3) business days of receipt by the BUYER of a facsimiled advice from the
BUILDER that the launching of the VESSEL has been completed.

 

(f)              Fifth
Instalment

 

Forty
per cent (40%) of the CONTRACT PRICE amounting to U.S.Dollars Thirty Six
Million Six Hundred Thousand only (US$ 36,600,000.-) plus or minus any increase
or decrease due to modifications and/or adjustment, if any, arising prior to
delivery of the VESSEL of the CONTRACT PRICE under Articles III and V of this
CONTRACT shall be paid to the BUILDER concurrently with the delivery of the
VESSEL. (The date stipulated for payment of each of the five instalments
mentioned above is hereinafter in this Article and in Article XI
referred to as the “DUE DATE” of that instalment).

 

It is understood and agreed upon by the BUILDER and the BUYER
that all payments under the provisions of this Article shall not be
delayed or withheld by the BUYER due to any dispute or disagreement of
whatsoever nature arising between the BUILDER and the BUYER. Should there be
any dispute in this connection, the matter shall be dealt with in accordance
with the provisions of arbitration in Article XIV hereof. Expenses for
remitting payments and any other expenses connected with such payments shall be
for the account of the BUYER.

 

3.                 DEMAND
FOR PAYMENT

 

At least fourteen (14) days prior to the date of each event
provided in Paragraph 2 of this Article on which any payment shall fall
due hereunder, with the exception of the payment of the first and second instalments,
the BUILDER shall notify the BUYER by facsimile of the date such payment shall
become due.

 

The BUYER shall immediately acknowledge receipt of such
notification by facsimile to the BUILDER, and make payment as set forth in this
Article. If the BUILDER fails to receive the BUYER’s said acknowledgement
within three (3) days after sending the aforementioned notification, the
BUILDER shall promptly facsimile to the BUYER a second notification of similar
import. The BUYER shall immediately acknowledge by facsimile receipt of the

 

34

 

foregoing second notification regardless of whether or not
the first notification was acknowledged as aforesaid.

 

4.                 METHOD
OF PAYMENT

 

(a)           All the pre-delivery
payments and the payment due on delivery in settlement of the CONTRACT PRICE as
provided for in Paragraph 2 of this Article shall be made in U.S. Dollars
on or before the DUE DATE thereof by telegraphic transfer as follows ;

 

(i)                                    The
payment of the first, second, third and fourth instalments shall be made to the
account of the BUILDER with a bank to be duly designated by the BUILDER, in
Korea (the “BUILDER’S BANK”) or any other bank by telegraphic transfer
remittance at least two(2) business days prior to the DUE DATE notified by
the BUILDER.

 

(ii)                                 The
fifth instalment as provided for in Paragraph 2.(f) of this
Article shall be deposited at the BUILDER’S BANK in the name of the Buyer
or, if the BUILDER requires, with any other bank in the name of the Byuer by
telegraphic transfer remittance at least two (2) business days prior to
the scheduled delivery date of the VESSEL notified by the BUILDER, with
instructions that the said instalment is payable to the BUILDER against
presentation by the BUILDER to the BUILDER’S BANK or any other bank, as the
case may be, of a duplicate original copy of the PROTOCOL OF DELIVERY AND
ACCEPTANCE of the VESSEL signed by the BUILDER and the BUYER.

 

(b)           Simultaneously with each of
such payments, the BUYER shall advise the BUILDER of the details of the
payments by facsimile and at the same time, the BUYER shall cause the BUYER’s
remitting Bank to advise the BUILDER’S BANK or any other bank of the details of
such payments by authenticated bank cable or telex.

 

5.                 REFUND
BY THE BUILDER

 

The payments made by the BUYER to the BUILDER prior to
delivery of the VESSEL shall constitute advances to the BUILDER. If the VESSEL
is rejected by the BUYER in accordance with the terms of this CONTRACT, or
except in the case of rescission or rescission of this CONTRACT by the BUILDER
under the provisions of Article XI hereof, if the BUYER terminates or
rescinds this CONTRACT pursuant to any of the provisions of

 

35

 

this CONTRACT specifically permitting the BUYER to do so, the
BUILDER shall forthwith refund to the BUYER, in U.S. Dollars, the full amount
of total sums paid by the BUYER to the BUILDER in advance of delivery together
with interest thereon as herein provided.

 

The transfer and other bank charges of such refund shall be
for the BUILDER’s account. The interest rate of the refund, as above provided,
shall be seven per cent (7%) per annum from the date following the date of
receipt by the BUILDER of the pre-delivery instalment(s) to the date of
remittance by telegraphic transfer of such refund, provided, however, that if
the cancellation of this CONTRACT by the BUYER is based upon delays due to
force majeure or other causes beyond the control of the BUILDER as provided for
in Article VIII hereof, then in such event, the interest rate of refund
shall be reduced to six point five per cent (6.5%) per annum.

 

It is hereby understood by both parties that payment of any
interest provided herein is by way of liquidated damages due to rescission of
this CONTRACT and not by way of compensation for use of money.

 

If, the BUILDER is required to refund to the BUYER the
instalments paid by the BUYER to the BUILDER as provided in this Paragraph, the
BUILDER shall return to the BUYER all of the BUYER’s supplies as stipulated in
Article XII which were not incorporated into the VESSEL and pay to the
BUYER an amount equal to the cost to the BUYER of those supplies incorporated
into the VESSEL.

 

6.                 TOTAL
LOSS

 

If there is a total loss or a constructive total loss of the
VESSEL prior to delivery thereof, the BUILDER shall proceed according to the
option of the Buyer hereto either:

 

(a)            to build another vessel in
place of the VESSEL so lost and deliver it under this CONTRACT to the BUYER,
provided that the parties hereto shall have agreed in writing to a reasonable cost
and time for the construction of such vessel in place of the lost VESSEL; or

 

(b)           to refund to the BUYER the
full amount of the total sums paid by the BUYER to the BUILDER under the
provisions of Paragraph 2 of this Article together with interest thereon
at the rate of six point five per cent (6.5%) per annum from the date following
the date of receipt by the BUILDER of such pre-delivery instalment(s) to the
date of

 

36

 

payment
by the BUILDER to the BUYER of the refund.

 

If
the parties hereto fail to reach such agreement within two (2) months
after the VESSEL is determined to be a total loss or constructive total loss,
the provisions of (b) hereinabove shall be applied.

 

7.                 DISCHARGE
OF OBLIGATIONS

 

Such refund as provided in the foregoing Paragraphs 5 and 6
by the BUILDER to the BUYER shall forthwith discharge all the obligations,
duties and liabilities of each of the parties hereto to the other except the
claims of the BUILDER against the BUYER, if any, under this CONTRACT. Any and
all refunds or payments due to the BUYER under this CONTRACT shall be effected
by telegraphic transfer to the account specified by the BUYER.

 

8.                 REFUND
GUARANTEE

 

The
BUILDER shall deliver to the BUYER by hard copy or by SWIFT through the BUYER’s
bank, acceptable to the BUILDER, an assignable letter of guarantee issued by a
Bank acceptable to the Buyer as soon as possible but in any case no later than
Ninety (90) days from the date of this CONTRACT for the refund of the
pre-delivery instalments plus interest as aforesaid to the BUYER under or
pursuant to Paragraph 5 above in the form annexed hereto as
Exhibit “A”. All expenses in issuing and maintaining the letter of
guarantee described in this Paragraph shall be borne by the BUILDER. In case of
SWIFT, the BUYER shall advise the BUILDER of the details of the BUYER’s bank
including the SWIFT address upon execution of this CONTRACT.

 

9.                 PERFORMANCE
GUARANTEE

 

Upon
signing this CONTRACT, the BUYER shall provide the BUILDER with an irrevocable
and Corporate Guarantee pursuant to the Terms and Provisions of this Contract
issued by a Corporate Guarantor acceptable to the BUILDER for the due and
faithful performance by the BUYER of all its liabilities and responsibilities
under the CONTRACT including, but not limited to, the payment of the CONTRACT
PRICE and taking delivery of the VESSEL, in the form annexed hereto as
Exhibit “B”.

 

(End of Article)

 

37

 

ARTICLE XI
: BUYER’S DEFAULT

 

1.                 DEFINITION
OF DEFAULT

 

The
BUYER shall be deemed to be in default under this CONTRACT in the following
cases :

 

(a)            If the first, second, third
and fourth is not paid to the BUILDER within respective Three (3) banking
days of such instalments; or

 

(b)           If the fifth instalment is
not deposited at the BUILDER’S BANK or at the account of the BUILDER with any
other bank in accordance with Article X.4.(a)(ii) hereof or if the
said fifth instalment deposit is not released to the BUILDER against
presentation by the BUILDER of a duplicate original copy of the PROTOCOL OF
DELIVERY AND ACCEPTANCE; or

 

(c)            If the BUYER fails to take
delivery of the VESSEL when the VESSEL is duly tendered for delivery by the
BUILDER within Three (3) banking days under the provisions of
Article VII hereof; or

 

(d)           If and order or an effective
resolution shall be passed for winding up of the BUYER (except for the purpose
of reorganization, merger or amalgamation); or

 

(e)            If the BUYER fails to be in
punctual, due and full compliance with any of its obligations under this
CONTRACT.

 

In case the BUYER is in default of any of its obligations
under this CONTRACT, the BUILDER is entitled to and shall have the following
rights, powers and remedies in addition to such other rights, powers and
remedies as the BUILDER may have elsewhere in this CONTRACT and/or at law,
at equity or otherwise.

 

2.                 EFFECT
OF THE BUYER’S DEFAULT ON OR BEFORE THE DELIVERY OF THE VESSEL

 

If
the BUYER shall be in default as provided in Paragraph 1 above of its
obligations under this CONTRACT, then;

 

38

 

(a)            The DELIVERY DATE of the
VESSEL shall be extended automatically for the actual period of such default
and the BUILDER shall not be obliged to pay any liquidated damages for the
delay in delivery of the VESSEL caused thereby.

 

(b)           The BUYER shall pay to the
BUILDER interest at the rate of seven per cent (7%) per annum in respect of the
instalment(s) in default from the respective DUE DATE to the date of actual
receipt by the BUILDER of the full amount of such instalment(s).

 

(c)            If the BUYER is in default
in payment of any of the instalment(s) due and payable prior to or
simultaneously with the delivery of the VESSEL, the BUILDER shall, in writing
or by facsimile, notify the BUYER to that effect, and the BUYER shall, upon
receipt of such notification, forthwith acknowledge in writing or by facsimile
to the BUILDER that such notification has been received.

 

(d)           If any of the BUYER’s
default continues for a period of ten(10) days after the BUILDER’s
notification to the BUYER of such default, the BUILDER may, at its option,
rescind this CONTRACT by serving upon the BUYER a written notice or a facsimile
notice of rescission confirmed in writing.

 

(e)           In the event of such
rescission by the BUILDER of this CONTRACT due to the BUYER’s default as
provided for in paragraph 1 above, the BUILDER shall be entitled to retain and
apply the instalments already paid by the BUYER to the recovery of the
BUILDER’s loss and damage including, but not being limited to, reasonable
estimated profit due to the BUYER’s default and the rescission of this CONTRACT
and at the same time the BUILDER shall have the full right and power either to
complete or not to complete the VESSEL which is the sole property of the
BUILDER as it deems fit, and to sell the VESSEL at a public or private sale on
such terms and conditions as the BUILDER thinks fit without being answerable
for any loss or damage.

 

The proceeds received by the BUILDER from the sale shall be
applied in addition to the instalment(s) retained by the BUILDER as mentioned
hereinabove as follows : -

 

First,                           in
payment of all reasonable costs and expenses of the sale of the VESSEL,
including interest thereon at seven per cent (7%) per annum from the respective
date of payment of such costs and expenses aforesaid to the date of sale on
account of the BUYER’s default.

 

39

 

Second,           if the VESSEL has been
completed, in or towards satisfaction of the unpaid balance of the CONTRACT
PRICE, to which shall be added the cost of all additional work and extras
agreed by the BUYER including interest thereon at seven per cent (7%) per annum
from the respective DUE DATE of the instalment in default to the date of sale,
or if the VESSEL has not been completed, in or towards satisfaction of the
unpaid amount of the cost incurred by the BUILDER prior to the date of sale on
account of construction of the VESSEL, including work, labour, materials and
reasonably estimated profit which the BUILDER would have been entitled to
receive if the VESSEL had been completed and delivered plus interest thereon at
seven per cent (7%) per annum from the respective DUE DATE of the instalment in
default to the date of sale.

 

Third,                      the
balance of the proceeds, if any, shall belong to the BUYER, and shall forthwith
be paid over to the BUYER by the BUILDER.

 

In the event of the proceeds from the sale together with
instalment(s) retained by the BUILDER being insufficient to pay the BUILDER,
the BUYER shall be liable for the deficiency and shall pay the same to the
BUILDER upon its demand.

 

(End of Article)

 

40

 

ARTICLE XII
: BUYER’S SUPPLIES

 

1.                 RESPONSIBILITY
OF THE BUYER

 

The
BUYER shall, at its own risk, cost and expense, supply all the BUYER’s supplies
as specified in Paragraph 0.16.1 of the SPECIFICATIONS (hereinafter called the
“BUYER’S SUPPLIES”), to the BUILDER at the SHIPYARD in proper condition ready
for installation and in accordance with the time schedule to be furnished
by the BUILDER sixty
(60) days from signing this Contract.

 

In order to facilitate the installation of the BUYER’S
SUPPLIES by the BUILDER, the BUYER shall furnish the BUILDER with the necessary
plans, instruction books, test report and all test certificates required by the
BUILDER and shall cause the representative(s) of the makers of the BUYER’S
SUPPLIES to give the BUILDER any advice, instructions or assistance which the
BUILDER may reasonably require in the installation or adjustment thereof
at the SHIPYARD, all without cost or expense to the BUILDER.

 

The BUYER shall be liable for any expense incurred by the
BUILDER for repair of the BUYER’S SUPPLIES due to defective design or
materials, poor workmanship or performance or due to damage in transit and the
DELIVERY DATE of the VESSEL shall be extended for the period of such repair if
such repair shall affect the delivery of the VESSEL.

 

Commissioning into good order of the BUYER’S SUPPLIES during
and after installation on board shall be made at the BUYER’s expense by the
representative of respective maker or the person designated by the BUYER in
accordance with the BUILDER’s building schedule.

 

Should the BUYER fail to deliver to the BUILDER the BUYER’S
SUPPLIES and the necessary document or advice for such supplies within the time
specified by the BUILDER, the DELIVERY DATE of the VESSEL shall automatically
be extended for the period of such delay if such delay in delivery shall affect
the delivery of the VESSEL. In such event, the BUYER shall pay to the BUILDER
all losses and damages sustained by the BUILDER due to such delay in the
delivery of the BUYER’S SUPPLIES and such payment shall be made upon delivery
of the VESSEL, provided, however, that the BUILDER shall have :

 

41

 

(a)            furnished the BUYER with the
time schedule referred to above, two (2) months prior to installation
of the BUYER’S SUPPLIES and

 

(b)           given the BUYER written
notice of any delay in delivery of the BUYER’S SUPPLIES and the necessary
document or advice for such supplies as soon as the delay occurs which might
give rise to a claim by the BUILDER under this Paragraph.

 

Furthermore, if the delay in delivery of the BUYER’S SUPPLIES
and the necessary document or advice for such supplies should exceed twenty
(20) days from the date specified by the BUILDER, the BUILDER shall be entitled
to proceed with construction of the VESSEL without installation of such items
(regardless of their nature or importance to the BUYER or the VESSEL) in or on
the VESSEL without prejudice to the BUILDER’s right hereinabove provided, and
the BUYER shall accept the VESSEL so completed.

 

2.                 RESPONSIBILITY
OF THE BUILDER

 

The
BUILDER shall be responsible for storing, safekeeping and handling with
reasonable care of the BUYER’S SUPPLIES which the BUILDER is required to
install on board the VESSEL under Paragraph 0.16.1 of the SPECIFICATIONS after
delivery of such supplies to the SHIPYARD, and shall install such supplies on board
the VESSEL at the BUILDER’s expense unless otherwise specified in the
SPECIFICATIONS.

 

However, the BUILDER shall not be responsible for the
quality, performance or efficiency of any equipment included in the BUYER’S
SUPPLIES and is under no obligation with respect to the guarantee of such
equipment against any defects caused by poor quality, performance or efficiency
of the BUYER’S SUPPLIES. If any of the BUYER’S SUPPLIES is lost or damaged
while in the custody of the BUILDER, the BUILDER shall, if the loss or damage
is due to wilful default or negligence on its part, be responsible for such
loss or damage.

 

(End of Article)

 

42

 

ARTICLE XIII
- INSURANCE

 

1.                          EXTENT OF INSURANCE COVERAGE

 

From the time of launching until
delivery of the VESSEL, the BUILDER shall, at its own cost and expense, insure
the VESSEL and all machinery and equipment, appurtenances and outfits,
including the BUYER’s Supplies, built into or installed in or upon the VESSEL,
against all risks under the “Institute Causes for BUILDER’s Risk”, with first
class insurance company or underwriters in.

 

The amount of such insurance coverage
shall, up to the date of delivery of the VESSEL, not be less than the aggregate
amount of all instalments paid by the BUYER to the BUILDER, plus the value of
the BUYER’s Supplies in the custody of the Shipyard.

 

The BUILDER shall provide the copy of corresponding
insurance coverage of the VESSEL to the BUYER.

 

2.                          TERMINATION OF BUILDER’S
OBLIGATION TO INSURE

 

The BUILDER shall be under no obligation to insure
the VESSEL hereunder after delivery and acceptance of the VESSEL.

 

 

(End
of Article)

 

43

 

ARTICLE XIV:
ARBITRATION

 

1.                 APPOINTMENT
OF THE ARBITRATOR

 

If any dispute or difference shall arise between the parties
hereto concerning any matter or thing herein contained, or the operation or the
design and / or construction of the VESSEL, its machinery and equipment
thereof, or any matter or thing in any way connected with this CONTRACT or the
rights, duties or liabilities of either party under or in connection with this
CONTRACT, then, in every such case, the dispute or difference shall be referred
to arbitration in London by a sole arbitrator. The arbitrator shall be
appointed by agreement within fourteen (14) days of first written notification
of either party to the other of intention to arbitrate such dispute or
difference, or in default of such agreement, upon the application of either of
the parties, by the President for the time being of the London Maritime
Arbitrators Association who shall in making any such appointment have due
regard to the requirement for an expeditious resolution of the dispute and in
particular the availability of any arbitrator so appointed for an early hearing
date.

 

2.                 LAWS
APPLICABLE

 

Any arbitration arising hereunder shall be governed by and
construed in accordance with the Arbitration Act 1996 of England or any
statutory modification or re-enactments thereof for the time being in force.
The award of the arbitrator shall be final and binding upon parties hereto.

 

3.                 PROCEEDINGS

 

In the event of any dispute or difference arising or
occurring prior to delivery to, or acceptance by, the BUYER of the VESSEL being
referred to arbitration, the parties hereby acknowledge that time is of the
essence in obtaining an award from the arbitrator on such dispute or difference
and the parties hereby agree that the arbitration shall be conducted according
to the following timetable:

 

(a)           The claimant in the
arbitration to serve points of claim within fourteen (14) days of the
appointment of the arbitrator.

 

(b)          The respondent in the
arbitration to serve points of defence and points of counterclaim,

 

44

 

if
any, within fourteen (14) days thereafter.

 

(c)        The claimant to serve points
of reply and defence to counterclaim, if any, within seven (7) days
thereafter and the hearing of the arbitration to commence within twelve (12)
weeks of the appointment of the arbitrator.

 

4.                 ALTERATION
OF DELIVERY OF THE VESSEL

 

In the event of the arbitration of any dispute or difference
arising or occurring prior to delivery to, or acceptance by the BUYER of the
VESSEL, the award by the arbitrator shall include a finding as to whether or
not the contractual delivery date of the VESSEL should, as a result of such
dispute, be in any way altered thereby.

 

5.                 NOTICE OF AWARD

 

The award shall immediately be given
to the BUYER and the BUILDER by telefax.

 

6.                 EXPENSES

 

The Arbitration Board shall determine
which party shall bear the expenses of the arbitration or the portion of such
expenses which each party shall bear.

 

7.                 ENTRY IN COURT

 

In case of failure by either party to
respect the award of the arbitration, the judgement may be entered in any
proper court having jurisdiction thereof.

 

(End of Article)

 

45

 

ARTICLE XV:
SUCCESSORS AND ASSIGNS

 

The BUILDER agrees that,
prior to delivery of the VESSEL, this CONTRACT may, with the prior written
approval of the BUILDER, which the BUILDER shall not unreasonably withhold, be
transferred to and the title thereof may be taken by another company. In
the event of any assignment pursuant to the terms of this CONTRACT, the
assignee, its successors and assigns shall succeed to all the rights and
obligations of the BUYER under this CONTRACT. However, the BUYER shall remain
responsible for performance by the assignee, its successors and assigns of all
the BUYER’s obligations, liabilities and responsibilities under this CONTRACT.
It is understood that any expenses or charges incurred due to the transfer of
this CONTRACT shall be for the account of the BUYER.

 

The BUYER is hereby allowed to assign the Contract for the
purposes of financing without BUILDER’S approval. However, the BUYER shall
remain responsible for performance by the assignee, its successors and assigns
of all the BUYER’s obligations, liabilities and responsibilities under this
CONTRACT. It is understood that any expenses or charges incurred due to the
transfer of this CONTRACT shall be for the account of the BUYER. The BUYER is
further allowed to nominate a company controlled by the BUYER to take over the
Contract.

 

The BUILDER shall fully
cooperate in case the BUYER requests UK Tax lease financing arrangements. However,
the BUYER shall remain responsible for performance by the assignee, its
successors and assigns of all the BUYER’s obligations, liabilities and
responsibilities under this CONTRACT. It is understood that any expenses or
charges incurred due to the transfer of this CONTRACT shall be for the account
of the BUYER.

 

The BUILDER shall have the
right to assign this CONTRACT at any time after the effective date hereof,
provided that prior written agreement is obtained from the BUYER.

 

(End of Article)

 

46

 

ARTICLE XVI:
TAXES AND DUTIES

 

1.                 TAXES

 

Unless otherwise expressly provided for in this CONTRACT, all
costs and taxes including stamp duties, if any, incurred in or levied by any
country except Korea in connection with this CONTRACT shall be borne by the
BUYER and corresponding costs and taxes in Korea, before delivery of the
VESSEL, if any, shall be borne by the BUILDER.

 

2.                 DUTIES

 

The BUILDER shall hold the BUYER harmless from any payment of
duty imposed in Korea upon materials or supplies which, under the terms of this
CONTRACT, or amendments thereto, may be supplied by the BUYER from abroad
for the construction of the VESSEL.

 

The BUILDER shall likewise hold the BUYER harmless from any
payment of duty imposed in Korea in connection with materials or supplies for
operation of the VESSEL, including running stores, provisions and supplies
necessary to stock the VESSEL for its operation. This indemnity does not,
however, extend to any items purchased by the BUYER for use in connection with
the VESSEL which are not absolutely required for the construction or operation
of the VESSEL.

 

(End of Article)

 

47

 

ARTICLE XVII:
PATENTS, TRADEMARKS AND COPYRIGHTS

 

1.                 PATENTS,
TRADEMARKS AND COPYRIGHTS

 

Machinery and equipment of the VESSEL, whether made or
furnished by the BUILDER under this CONTRACT, may bear the patent numbers,
trademarks, or trade names of the manufacturers. The BUILDER shall defend and
save harmless the BUYER from all liabilities or claims for or on account of the
use of any patents, copyrights or design of any nature or kind, or for the
infringement thereof including any unpatented invention made or used in the
performance of this CONTRACT and also for any costs and expenses of litigation,
if any in connection therewith. No such liability or responsibility shall be
with the BUILDER with regard to components and/or equipment and/or design
supplied by the BUYER.

 

Nothing contained herein shall be construed as transferring
any patent or trademark rights or copyrights in equipment covered by this
CONTRACT, and all such rights are hereby expressly reserved to the true and
lawful owners thereof.

 

2.                 RIGHTS
TO THE SPECIFICATIONS, PLANS, ETC.

 

The
BUILDER retains all rights with respect to the SPECIFICATIONS, plans and
working drawings, technical descriptions, calculations, test results and other
data, information and documents concerning the design and construction of the
VESSEL and the BUYER shall not disclose the same or divulge any information
contained therein to any third parties, including but not limited to any other
shipbuilders, without the prior written consent of the BUILDER, excepting where
it is necessary for usual operation, repair and maintenance of the VESSEL.

 

(End of Article)

 

48

 

ARTICLE XVIII:
INTERPRETATION AND GOVERNING LAW

 

This CONTRACT has been
prepared in English and shall be executed in duplicate and in such number of
additional copies as may be required by either party respectively. The
parties hereto agree that the validity and interpretation of this CONTRACT and
of each Article and part thereof shall be governed by the laws of
England.

 

(End of Article)

 

49

 

ARTICLE XIX
: NOTICE

 

Any and all notices,
requests, demands, instructions, advices and communications in connection with
this CONTRACT shall be written in English, sent by registered air mail or
facsimile and shall be deemed to be given when first received whether by
registered mail or facsimile. They shall be addressed as follows, unless and
until otherwise advised : -

 

	
  To the BUILDER :

  	
  Sungdong Shipbuilding & Marine Engineering Co.,
  Ltd.

  
	
   

  	
  1609-2, Hwang-li,
  Gwangdo-myeon, Tongyoung-si,

  
	
   

  	
  Gyeongnam, Korea

  
	
   

  	
   

  
	
   

  	
  Contract Administration
  Department

  
	
   

  	
  Attn : Mr. S. K. Ahn

  
	
   

  	
  Facsimile: (82) 55 650
  9294

  
	
   

  	
  Telephone: (82) 55 650
  9311

  
	
   

  	
   

  
	
  To
  the BUYER :

  	
  Danaos Shipping Co., Ltd.

  
	
   

  	
  Akti Kondyli 14, 185 45 Piraeus, Greece

  
	
   

  	
  Attn : Mr. Dimitrios
  Vastarouchas

  
	
   

  	
  Facsimile : (30) 210 422
  0855

  
	
   

  	
  Telephone: (30) 210 419
  6529

  

 

The said notices shall
become effective upon receipt of the letter or facsimile communication by the
receiver thereof. Where a notice by facsimile is concerned which is required to
be confirmed by letter, then, unless the CONTRACT or the relevant
Article thereof otherwise requires, the notice shall become effective upon
receipt of the facsimile.

 

(End of Article)

 

50

 

ARTICLE XX
: EFFECTIVENESS OF THIS CONTRACT

 

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

 

(End of Article)

 

51

 

ARTICLE XXI
- INTERPRETATION

 

1.                          LAWS APPLICABLE

 

The parties hereto agree that the
validity and interpretation of this Contract and of each Article and
part thereof shall be governed by 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 permit of an interpretation inconsistent with any
provisions of this Contract, then, in each and every such event, the applicable
provisions of this Contract shall prevail and govern. In the event of conflict
between the SPECIFICATIONS and Plans, the SPECIFICATIONS shall prevail and
govern.

 

3.                          ENTIRE AGREEMENT

 

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

 

4.                          AMENDMENTS AND SUPPLEMENTS

 

Any supplement, memorandum of
understanding or amendment, whatsoever form it may be relating to
this CONTRACT, to be made and signed among parties hereof after signing this
CONTRACT, shall be the integral part of this CONTRACT and shall be
predominant over the respective corresponding Article and/or Paragraph of
this CONTRACT.

 

The Contract can only be amended in
writing.

 

(End of Article)

 

52

 

ARTICLE XXII
: EXCLUSIVENESS

 

This CONTRACT shall
constitute the only and entire agreement between the parties hereto, and unless
otherwise expressly provided for in this CONTRACT, all other agreements, oral
or written, made and entered into between the parties prior to the execution of
this CONTRACT shall be null and void.

 

(End of Article)

 

53

 

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

 

 

	
  BUYER

  	
  BUILDER

  
	
   

  	
   

  
	
   

  	
   

  
	
  For and on behalf of

  	
  For and on behalf of

  
	
  BOXCARRIER (NO.1) CORP.

  	
  SUNGDONG
  SHIPBUILDING &

  
	
   

  	
  MARINE ENGINEERING CO.,LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By

  	
  /s/ John Coustas

  	
   

  	
  By

  	
  /s/ Kwan Hong Yu

  	
   

  
	
  Name: John Coustas

  	
  Name: Kwan Hong Yu

  
	
  Title:

  	
  Title:

  
	
  President & Chief
  Executive Officer

  	
  Chairman & Chief
  Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  WITNESS : /s/ Heung Chul
  Jung, Attorney-in-fact

  	
  WITNESS: [Illegible]

  
						

 

54

 

EXHIBIT “A”

 

LETTER OF
REFUNDMENT GUARANTEE

 

Gentlemen
:

 

We
hereby issue our letter of guarantee
no.             in
favour of                   
(hereinafter called the “BUYER”) for account of
                  
(hereinafter called the “BUILDER”) as follows in consideration of the
shipbuilding contract dated (hereinafter called the “Contract”) made by and
among the BUYER and the BUILDER for the construction of one(1) single
screw diesel engine driven Container VESSEL having BUILDER’s Hull
No. (hereinafter called the “VESSEL”).

 

If
in connection with the terms of the Contract the BUYER shall become entitled to
a refund of the advance payment(s) made to the BUILDER prior to the delivery of
the VESSEL, we hereby irrevocably guarantee the repayment of the same to the
BUYER immediately on demand being initially US$ (Say U.S. Dollars) together
with interest thereon at the rate of Seven (7) percent per annum from the
respective dates on which such sums were paid by the BUILDER to the date of
remittance by telegraphic transfer of such refund.

 

The
amount of this guarantee will be automatically increased, not more than three
times, upon BUILDER’s receipt of the respective instalment: each time by the
amount of instalment of US$ (Say U.S. Dollars), US$.- (Say U.S. Dollars) and US$.-
(Say U.S. Dollars) respectively plus interest thereon as provided in the
Contract, but in any eventuality the amount of this guarantee shall not exceed
the total sum of US$.- (Say U.S. Dollars plus interest thereon at the rate of
Seven (7) percent per annum from the respective dates on which such sums
were paid by the BUYER to the BUILDER to the date of remittance by telegraphic
transfer of the refund. However, in the event of cancellation of the CONTRACT
being based on delays due to force majeure or other causes beyond the control
of the BUILDER, the interest rate of refund shall be reduced to six point five
per cent (6.5%) per annum as provided in Article X of the CONTRACT.

 

Our
liability under this letter of guarantee shall not be affected by any
alteration to or variation of the terms of the Contract you may hereafter
agree with the BUILDER and by any other matter of circumstances, including
bankruptcy or insolvency of the BUILDER, which might otherwise discharge our
liability hereunder as guarantor of the BUILDER’s obligations as aforesaid.

 

In
case any refund is made to you by the BUILDER or by us under this guarantee,
our liability hereunder shall be automatically reduced by the amount of such
refund.

 

This
letter of guarantee is available against BUYER’s simple receipt and signed
statement certifying that BUYER’s demand for refund has been made in conformity
with Article X of the Contract and the BUILDER has failed to make the
refund within Thirty One (31) days after BUYER’s demand to the BUILDER.

 

1

 

Refund
shall be made to BUYER by telegraphic transfer in United States Dollars to an
account designated by you without deduction, withholding or set-off.

 

This
letter of guarantee shall expire and become null and void upon receipt by the
BUYER of the sum guaranteed hereby or upon acceptance by the BUYER of the
delivery of the VESSEL in accordance with the terms of the Contract and, in
either case, this letter of guarantee shall be returned to us. This guarantee
is valid from the date of this letter of guarantee until or in the event of
delayed delivery until such time as the VESSEL is delivered by the BUILDER to
the BUYER in accordance with the terms of the Contract.

 

Notwithstanding
the provisions hereinabove, in case we receive notification from you or the
BUILDER confirmed by an Arbitrator stating that your claim to cancel the
Contract or your claim for refundment thereunder has been disputed and referred
to Arbitration in accordance with the provisions of the Contract, the period of
validity of this guarantee shall be extended until Thirty (30) days after the
final and non-appealable award shall be rendered in the Arbitration and a copy
thereof acknowledged by the Arbitrators. In such case, this guarantee shall not
be available unless and until such acknowledged copy of the final award in the
Arbitration justifying your claim is presented to us.

 

Your rights in respect of this letter of guarantee are
assignable from the date of this letter of guarantee until such time as the
VESSEL is delivered by the BUILDER to the BUYER in accordance with the
provisions of the Contract, on the understanding that you will notify us of the
identity of any assignee of your rights under this letter of guarantee.

 

Any
notice or demand under this letter of guarantee shall be given by facsimile and
sent to:

 

 

 

 

 

 

or
to such other address as we might notify to you in writing. A notice shall be
deemed to be served and shall take effect 2 hours after its transmission is
completed, provided that if a notice would be deemed to be served on a day
which is not a business day, or which is a business day but after
5:00 p.m. local time, in the place of receipt, the notice shall be deemed
to be served and shall take effect at 9:00 a.m. on the next day which is a
business day.

 

This
guarantee shall be governed by and construed in accordance with the Laws of
England. Any disputes arising under this guarantee (but not any disputes arising
under the Contract which shall be determined by arbitration in accordance with
the terms of the Contract and as referenced in this letter of guarantee) shall
be determined by the High Court of Justice in London to whose exclusive
jurisdiction we hereby submit. We appoint

 

2

 

                                                             as
our agents for service of process in connection with any proceedings in such
courts.

 

We
each jointly and severally hereby represent and guarantee that we have the
corporate power and authority to execute, deliver and perform the
obligations under this letter of guarantee, and that such execution and
performance will not violate or conflict with any provision of law, statute,
rule, permit or regulation of any government, regulatory body, agency or other
authority in the jurisdictions where we are subject to such laws and
regulations.

 

IN
WITNESS WHEREOF, we have hereunder set our hands and seal by our duly
authorized representatives this
          day of
               ,
2006.

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  For
  and on behalf of

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
  Name
  :

  
	
   

  	
  Title
  : Attorney-in-Fact

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  For
  and on behalf of

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
  Name
  :

  
	
   

  	
  Title
  : Attorney-in-Fact

  

 

3

 

EXHIBIT “B”

 

 

Date
:             , 2006

 

PERFORMANCE GUARANTEE

 

In
consideration of the performance of a certain shipbuilding contract dated
                                      
(hereinafter called the “Contract”) by having your Hull No. (hereinafter
called the “VESSEL”) providing among other things for payment of the Contract
Price amounting to United States Dollars
                                  
(US$                                  );

 

We, the undersigned, hereby
irrevocably and unconditionally guarantee to you, your successors, and assigns
the due and faithful performance by the BUYER of its all liabilities and
responsibilities under the Contract and any supplement, amendment, change or
modification hereafter made thereto, including but not limited to, due and
prompt payment of the Contract Price by the BUYER to you, your successors, and
assigns under the Contract and any supplement, amendment, change or
modification as aforesaid (hereby expressly waiving notice of any such
supplement, amendment, change or modification as may be agreed to by the
BUYER and confirming that this guarantee shall be fully applicable to the
Contract as so supplemented, amended, changed or modified).

 

This
Performance Guarantee shall be governed by the laws of England.

 

 

	
  GUARANTOR
  :

  
	
  BY
  :

  	
   

  	
   

  
	
  TITLE :

  
	
  WITNESS
  :

  

 

4

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