Document:

Exhibit 10.54

 

STI Cavaliere

 

SHIPBUILDING CONTRACT

 

FOR

 

THE CONSTRUCTION OF

 

ONE (1) 300,000 DWT CLASS CRUDE OIL CARRIER

 

HULL NO. S777

 

BETWEEN

 

STI CAVALIERE SHIPPING COMPANY LIMITED

 

(AS BUYER)

 

AND

 

HYUNDAI SAMHO HEAVY INDUSTRIES CO., LTD.

 

(AS BUILDER)

 

 

INDEX

 

	
 
    	
 
    	
 
    	
PAGE
    
	
 
    	
 
    	
 
    
	
PREAMBLE
    	
 
    	
3
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE 
    	
I
    	
:   DESCRIPTION AND CLASS
    	
4
    
	
 
    	
II
    	
:   CONTRACT PRICE
    	
7
    
	
 
    	
III
    	
:   ADJUSTMENT OF THE CONTRACT PRICE
    	
8
    
	
 
    	
IV
    	
:   INSPECTION AND APPROVAL
    	
12
    
	
 
    	
V
    	
:   MODIFICATIONS, CHANGES AND EXTRAS
    	
17
    
	
 
    	
VI
    	
:   TRIALS AND COMPLETION
    	
19
    
	
 
    	
VII
    	
:   DELIVERY
    	
23
    
	
 
    	
VIII
    	
:   DELAYS AND EXTENSIONS OF TIME (FORCE MAJEURE)
    	
27
    
	
 
    	
IX
    	
:   WARRANTY OF QUALITY
    	
30
    
	
 
    	
X
    	
:   PAYMENT
    	
34
    
	
 
    	
XI
    	
:   BUYER’S DEFAULT
    	
39
    
	
 
    	
XII
    	
:   BUYER’S SUPPLIES
    	
42
    
	
 
    	
XIII
    	
:   ARBITRATION
    	
44
    
	
 
    	
XIV
    	
:   SUCCESSORS AND ASSIGNS
    	
46
    
	
 
    	
XV
    	
:   TAXES AND DUTIES
    	
47
    
	
 
    	
XVI
    	
:   PATENTS, TRADEMARKS AND COPYRIGHTS
    	
48
    
	
 
    	
XVII
    	
:   COMPLIANCE AND ANTI-BRIBERY
    	
49
    
	
 
    	
XVIII
    	
:   INSURANCE
    	
50
    
	
 
    	
XIX
    	
:   INTERPRETATION AND GOVERNING LAW
    	
51
    
	
 
    	
XX
    	
:   NOTICE
    	
52
    
	
 
    	
XXI
    	
:   EFFECTIVENESS OF THIS CONTRACT
    	
53
    
	
 
    	
XXII
    	
:   EXCLUSIVENESS
    	
54
    
	
 
    	
 
    	
 
    
	
EXHIBIT “A”
    	
  LETTER OF GUARANTEE
    	
56
    
	
 
    	
 
    	
 
    
	
EXHIBIT “B”
    	
  PERFORMANCE GUARANTEE
    	
58
    

 

2

 

THIS CONTRACT, made on this 20th day of December, 2013 by and between STI| Cavaliere Shipping Company Limited, a corporation incorporated and existing under the laws of the Republic of the Marshall Islands, having its registered office at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands 96960 (hereinafter called the “BUYER”), the party of the first part and Hyundai Samho Heavy Industries Co., Ltd., a company organized and existing under the laws of the Republic of Korea, having its principal office at 93, Daebul-Ro, Samho-Eup, Yeongam-Gun, Jeollanam-Do, 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 one (1) 300,000 DWT class Crude Oil Carrier as described in Article I hereof (hereinafter called the “VESSEL”) at the BUILDER’s shipyard in Samho, 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)

 

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ARTICLE I: DESCRIPTION AND CLASS

 

1.                            DESCRIPTION

 

The VESSEL shall have the BUILDER’S Hull No. S777 and shall be designed, constructed, equipped, launched and completed in accordance with the specifications (Ref. No. COSC-FS-P1(R1), dated December 18, 2013) and the general arrangement plan (No. 1G-7000-201, dated December 18, 2013) attached thereto (hereinafter called respectively the “SPECIFICATIONS” and the “PLAN”), and which shall constitute an integral part of this CONTRACT although not attached hereto.

 

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
    	
abt.
    	
333
    	
m
    
	
Length,   between perpendiculars
    	
abt.
    	
322
    	
m
    
	
Breadth,   moulded
    	
abt.
    	
60
    	
m
    
	
Depth,   moulded
    	
abt.
    	
29.4
    	
m
    
	
Design   draught, moulded
    	
abt.
    	
20.5
    	
m
    
	
Scantling   draught, moulded
    	
abt.
    	
21.6
    	
m
    

 

Main Engine                                                                     :                                                                       HYUNDAI-MAN B&W 7G80ME-C9.2

with Low Load Tuning (Exhaust Gas By-pass)

 

Nominal Rating : 32,970 kW x 72 RPM

MCR : 24,400 kW x 66 RPM

NCR : 17,080 kW x 58.6 RPM

 

Deadweight, guaranteed :   300,000 metric tons at the scantling draught of 21.6 meters on even keel in sea water of specific gravity of 1.025.

 

Cubic capacity of cargo tanks including slop tanks and residual oil tank (100%) guaranteed: 344,500 m3

 

Speed, guaranteed :   14.8 knots at the design draught of 20.5 meters at the condition of clean bottom and in calm and deep sea with main engine output of 17,080 kW with 15% sea margin.

 

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Specific Fuel Oil Consumption, guaranteed : 161.7 grams/kW-hour + 5% using marine diesel oil having lower calorific value of 42,700 Kcal/Kg at MCR measured at the shop trial with I.S.O reference conditions.

 

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

 

(b)                     The dimensions may be slightly modified by the BUILDER, who also reserves the right to make changes to the SPECIFICATIONS and the PLAN if found necessary to suit the local conditions and facilities of the SHIPYARD, the availability of materials and equipment, the introduction of improved production methods or otherwise, subject to the approval of the BUYER which the BUYER shall not withhold unreasonably.

 

3.                            CLASSIFICATION, RULES AND REGULATIONS

 

(a)                        The VESSEL, including its machinery, equipment and outfittings shall be constructed in accordance with the BUILDER’s shipbuilding practices and “Hyundai Samho Quality Standard”.

 

The VESSEL shall be built in compliance with the applicable current rules and regulations, which have been issued and are effective as of the date of signing this CONTRACT, of American Bureau of Shipping (hereinafter called the “CLASSIFICATION SOCIETY”) and classed and registered with the symbol of +A1(E), Oil Carrier, +AMS, +ACCU, SCR, AB-CM, ESP, TCM, CPS, VEC-L, BWE, BWT, UWILD, PMA, ENVIRO, GP, POT, SPMA, CPP, IGS-Ballast, RW.

 

The VESSEL shall be built in compliance with the Rules and Regulations as described in the SPECIFICATIONS which are in force at the date of signing the CONTRACT and/or which are ratified as of the date of signing the CONTRACT and which will come into force on or before the date of delivery of the VESSEL.

 

(b)                        The BUILDER shall arrange with the CLASSIFICATION SOCIETY for the assignment by the CLASSIFICATION SOCIETY of representative(s) to the VESSEL during construction. All costs, fees, charges and arrangement incidental to classification of the VESSEL in compliance with the 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 rules, requirements and regulations of the CLASSIFICATION SOCIETY shall be final and binding upon the BUILDER and the BUYER.

 

4.                            NATIONALITY OF THE VESSEL

 

The VESSEL shall be registered by the BUYER at its own cost and expense under the laws of Marshall Islands with its home port at the time of its delivery and acceptance hereunder.

 

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5.                            SUB-CONTRACTORS AND SUPPLIERS

 

The BUILDER shall build and outfit the VESSEL according to this CONTRACT at the SHIPYARD at Samho, Korea using mainly its own shipyard organization provided always that main hull blocks of the VESSEL, other than the bow section (including the bulbous bow), the stern blocks, upper deck unit, deck house, engine casing, funnel, T-bulkhead and L-bulkhead (including Lower Stool) and Hopper will be constructed at the SHIPYARD.

 

The BUILDER is, however, authorized to sub-contract part of the work to experienced third party sub-contractors in the vicinity of the SHIPYARD, provided that the BUILDER shall have first given notice in writing to the BUYER for any major sub-contract award (for the purpose of this CONTRACT an award involving consideration in excess of US$2 million or its equivalent in any other currency shall be deemed a major sub-contract) and received the BUYER’s written approval thereof which shall not be unreasonably withheld. The BUILDER shall compensate for direct cost of fuel and tolls required for BUYER’s supervision of subcontractors outside the vicinity of the SHIPYARD (defined as more than 50km from the SHIPYARD).

 

Without prejudice to the generality of the foregoing, the BUILDER shall remain fully liable to the BUYER for the due and complete performance of any work (or part of it) undertaken by any subcontractor as if undertaken by the BUILDER. However, the VESSEL shall always remain at the SHIPYARD unless the BUYER and the BUILDER agrees otherwise.

 

No sub-contract shall bind or purport to bind the BUYER, and each sub-contract shall be the responsibility of the BUILDER.

 

All sub-contractors howsoever employed or engaged are hereby declared and agreed to be subcontractors employed or engaged by the BUILDER and the BUILDER agrees that it is and shall remain fully responsible for and liable in respect of any sub-contractors and/or their acts or omissions and, without prejudice to the generality of the foregoing, the BUILDER shall ensure control over supervision and scheduling of the all work done by sub-contractors.

 

The BUYER may request in the reasonable opinion of the BUYER’S REPRESENTATIVE the BUILDER to replace any sub-contractor whose level of workmanship has been demonstrated not to meet the requirements of this CONTRACT, including the SPECIFICATIONS, which request the BUILDER shall not unreasonably refuse. The BUILDER shall investigate any such request and, if found justified, take appropriate action.

 

(End of Article)

 

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ARTICLE II: CONTRACT PRICE

 

The contract price of the VESSEL delivered and accepted by to the BUYER at the SHIPYARD shall be United States Dollars Ninety Four Million Four Hundred Seventy Five Thousand only (US$94,475,000) (hereinafter called the “CONTRACT PRICE”) which shall be paid plus any increases or less any decreases due to adjustment or modification, if any, as set forth in this CONTRACT. The above CONTRACT PRICE shall include payment for services in the inspection, test, 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)

 

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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 Three Thousand (US$23,000) 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, cancel this CONTRACT by serving upon the BUILDER a notice of cancellation by facsimile to be confirmed by a registered letter via airmail directed to the BUILDER at the address given in this CONTRACT. Such cancellation shall be effective as of the date the registered letter is received by the BUILDER. If the BUYER has not served the notice of cancellation 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.

 

(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

 

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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 three-tenths (3/10) of a knot below the guaranteed speed.

 

(b)         However, as for the deficiency of more than three-tenths (3/10) of a knot in actual speed below the speed guaranteed under this CONTRACT, the CONTRACT PRICE shall be reduced by U.S. Dollars Eighty Thousand (US$80,000) for each full one-tenth (1/10) of a knot in excess of the said three-tenths (3/10) 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 one (1) full 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, cancel this CONTRACT or may accept the VESSEL at a reduction in the CONTRACT PRICE as above provided for one (1) full 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.

 

(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 Eighty Thousand (US$80,000) for each full one per cent (1%) increase in fuel consumption in excess of the said five per cent (5%) increase in fuel consumption. Fraction of less than one per cent (1%) shall be regarded as a

 

9

 

full one percent (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 often percent (10%) 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, cancel this CONTRACT or may accept the VESSEL at a reduction in the CONTRACT PRICE as above provided for the ten per cent (10%) increase only.

 

4.                             DEADWEIGHT BELOW CONTRACT REQUIREMENTS

 

(a)            The guaranteed deadweight shall be deadweight as defined in Article I paragraph 2 hereof.

 

(b)         In the event that deficiency of the actual deadweight certified by the CLASSIFICATION SOCIETY as determined in accordance with the SPECIFICATION is not more than two per cent (2%) of the guaranteed deadweight, there shall be no change in CONTRACT PRICE. However, should there be a deficiency of more than two per cent (2%) (disregarding fractions of less than One (1) metric ton) the CONTRACT PRICE shall be reduced by the sum of United States Dollars Eight Hundred (US$800) for every One (1) metric ton deficiency (disregarding fractions of less than One (1) metric ton).

 

(c)          In the event of such deficiency in the deadweight of the VESSEL being more than three per cent (3%), the BUYER may at its option, reject the VESSEL and cancel the CONTRACT or accept the VESSEL at a reduction in the CONTRACT PRICE to be mutually agreed upon.

 

5.                             CARGO TANKS’ CAPACITY BELOW CONTRACT REQUIREMENTS

 

In the event, as per the final capacity plan issued by the BUILDER and approved by the BUYER, that the actual cubic capacity of cargo tanks including slop tanks and residual oil tank of the VESSEL is less than 344,500 cubic meters then commencing with and including a decrease of 3,445 cubic meters below such cubic capacity the BUILDER shall pay to the BUYER liquidated damages for each full cubic meter (but disregarding fractions of a cubic meter) of such decreased capacity exceeding 3,445 cubic meters but not more than 6,890 cubic meters, the amount of United States Dollars Eight Hundred (US$800) per cubic meter.

 

10

 

However, unless the parties agree otherwise, and without prejudice to any other rights the BUYER may have towards any other deduction under this Contract the amount of deduction from the Contract Price under this paragraph shall not exceed the amount due to cover the deficiency of 6,890 cubic meters below the said required cubic meters hereinabove.

 

Provided that if the deficiency in cubic capacity of the VESSEL in such condition exceeds 6,890 cubic meters below the above cubic capacity then the BUYER shall, subject to the BUILDER’S right to effect alterations or corrections as provided in Article VI.5, be entitled to reject the VESSEL and terminate this Contract in accordance with Article VI below or to accept the VESSEL.

 

6.                             EFFECT OF CANCELLATION

 

It is expressly understood and agreed by the parties hereto that in any case, if the BUYER cancels this CONTRACT under this Article, the BUYER shall not be entitled to any liquidated damages but shall be entitled to the refunding of the price as per Art. X.5.

 

(End of Article)

 

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ARTICLE IV : INSPECTION AND APPROVAL

 

1.                            APPOINTMENT OF BUYER’S REPRESENTATIVE

 

The BUYER shall timely dispatch 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 when work is being done at the SHIPYARD until delivery of the VESSEL, have the right to inspect the VESSEL, her equipment and all accessories, and work 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 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 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.

 

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

 

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requirements of the CONTRACT and the SPECIFICATIONS or the PLAN and likewise advise and communicate 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 unreasonable 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 REPRESENTATrVE with regard to construction, arrangement and outfit of the VESSEL shall be submitted in writing to the authorized representative of the BUILDER. The BUILDER shall notify the BUYER’S REPRESENTATIVE of the names of the persons who are from time to time authorized 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 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 or failing such agreement, request an arbitration in accordance with the provisions of Article XIII hereof. The CLASSIFICATION SOCIETY or the arbitration tribunal, as the case may be, shall determine whether or not a nonconformity with the provisions of this CONTRACT, the SPECIFICATIONS and the PLAN exists. If the CLASSIFICATION SOCIETY or the arbitration tribunal, as the case may be, enters a determination in favour of the BUYER, then in such case the BUILDER shall make at its own cost the necessary alterations or changes, or if such alterations or changes can not be made in time to meet the construction schedule for the VESSEL, the BUILDER shall make fair and reasonable adjustment of the CONTRACT PRICE in lieu of such alterations and

 

13

 

changes. If the CLASSIFICATION SOCIETY or the arbitration tribunal, as the case may be, enters a determination in favour of the BUILDER, then the time for delivery of the VESSEL shall be extended for the period of delay in construction, if any, occasioned by such proceedings, and the BUYER shall compensate the BUILDER for the proven loss and damages incurred by the BUILDER as a result of the dispute herein referred to.

 

Failure of BUYER’S REPRESENTATIVE’S presence at such trials and tests after such due notice has been given to him shall be deemed to be a waiver of the BUYER’S right to demand such alterations or changes after the trials and tests and inspections if such absence could not be avoided by the exercise of the BUYER’S REPRESENTATIVE’S due diligence due to an incident of force majeure nature and/or unless the BUYER’S REPRESENTATIVE gives seven (7) days advance notice of such absence, provided, however, that failure of the BUYER’S REPRESENTATIVE’S presence shall not cause a proven delay in the delivery of the VESSEL.

 

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 XX hereof. The BUYER shall, within twenty two (22) days including mailing time 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 and the schedule of the drawings and plans submission by the BUILDER 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 drawing 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

 

14

 

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 XIII 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 seek clarification from the BUYER prior to implementing them which clarification must be provided in writing by the BUYER within three (3) days of such request from the BUILDER. If the BUYER shall fail to provide the BUILDER with such clarification within the said time limit, then the BUILDER shall be entitled to place its own interpretation on such comments in implementing them.

 

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 and appropriate internet access 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 or subcontractors.

 

The BUYER’S REPRESENTATIVE or his assistants or employees shall observe the work’s rules and regulations 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.

 

15

 

(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 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 of 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.

 

The BUILDER shall provide the BUYER with any assistance that the BUYER may require in obtaining work permits, visas, resident permits and other necessary documents for the BUYER’S REPRESENTATIVE and their staff.

 

As far as practical, the BUILDER shall endeavour not to arrange for inspection of the same type of subcontracting work in two different places on the same day — including at the SHIPYARD premises — the distance between which cannot be covered by one man in one day.

 

6.              RESPONSIBILITY OF THE BUYER

 

The BUYER shall undertake and assure that the BUYER’S REPRESENTATIVE shall carry out his duties hereunder in accordance with the normal shipbuilding practice and in such a way so as to avoid any unnecessary and unreasonable 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 BUYER’S REPRESENTATIVE 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)

 

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ARTICLE V : MODIFICATIONS, CHANGES AND EXTRAS

 

1.                            HOW EFFECTED

 

Minor 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 modifications 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 BUDLDER’s reasonable judgment, 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 the SPECIFICATIONS and the PLAN or otherwise under this CONTRACT can not 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

 

17

 

equipment of at least 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. The BUILDER shall not be entitled to claim any extra cost if it elects to use or install substitute materials.

 

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 authorized 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 ten (10) 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

 

(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)

 

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ARTICLE VI: TRIALS AND COMPLETION

 

1.                           NOTICE

 

The BUILDER shall notify the BUYER in writing or by facsimile at least twenty one (21) 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 ten (10) days in advance of the trial run 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 recognize 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 ran, 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 reasonable 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.

 

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 fulfillment of the performance requirements for the trials as set forth in the SPECIFICATIONS.

 

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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 judgment. 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 engine specifications and the BUYER shall decide and advise the BUILDER of the supplier’s name for lubricating oil and greases at least two (2) months in advance of the keel laying 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 actual net 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 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 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. However, if such interruption or irregular performance occurs more than two times on the same items, then such item(s) should be identified by the BUILDER to the BUYER as soon as practicably possible, and inspected/corrected by the BUILDER as soon as practicably possible. In the meantime, the inspection result, which will be final or preliminary as the case may be, should be informed to the BUYER before the delivery of the VESSEL.

 

(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

 

20

 

might entitle the BUYER to cancel 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 three (3) working 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) working 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 fulfillment of this CONTRACT and the SPECIFICATIONS by such tests or trials as may be necessary.

 

The BUYER shall, within three (3) working 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.

 

(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.

 

(e)          If requested by the BUYER, the BUILDER shall give a demonstration to the BUYER’s crew how to operate the machineries and other equipment of the VESSEL at the time of the trial run or between after trial run and before delivery in order for the BUYER’s crew to be familiarized with the said machineries and other equipment.

 

6.                   EFFECT OF ACCEPTANCE

 

The BUYER’s written 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

 

21

 

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 rejections, including arbitration provided in Article XIII hereof.

 

(End of Article)

 

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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 the 31st day of May, 2016 (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. If the DELIVERY DATE of the VESSEL falls between the 15th of December and 31st of December, then, the BUILDER shall, upon receiving BUYER’s such request, adjust the DELIVERY DATE of the VESSEL to the first convenient banking day of the next year.

 

2.                   WHEN AND HOW EFFECTED

 

Provided that the BUYER shall concurrently with delivery of the VESSEL release to the BUILDER the fourth 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 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:

 

(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

 

23

 

water remaining in tanks if its cost is charged to the BUYER under Article VI. 4. hereof,

 

(d)         DRAWING 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

 

(1)                       Classification certificate for Hull and Machinery

(2)                       Cargo Ship Safety Construction Certificate

(3)                       Cargo Ship Safety Equipment Certificate

(4)                       Cargo Ship Safety Radio Certificate

(5)                       Adjustment Certificate for Magnetic Compass

(6)                       Certificate for Navigation and Signal Lights required by COLREG

(7)                       International Load Line Certificate

(8)                       International Tonnage Certificate

(9)                       I.O.P.P. Certificate

(10)                I.A.P.P. Certificate

(11)                International Sewage Pollution Prevention Certificate

(12)                Suez Canal Tonnage Certificate

(13)                Deadweight Certificate

(14)                Builder’s Certificate

(15)                Statement of Compliance for Maritime Labor Convention 2006

(16)                Test Certificates for Windlass, Anchor, Anchor Chain and Mooring Ropes

(17)                Ship Sanitation Control Exemption Certificate

(18)                International Anti-Fouling System Certificate

(19)                International Energy Efficiency Certificate

 

Any other certificate required by the CLASSIFICATION SOCIETY and/or other relevant regulatory bodies as specified in the SPECIFICATION and/or the PLANS

 

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 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.

 

24

 

(g)          Bill of Sale notarized by the BUILDER and legalized by the BUILDER at the BUYER’s cost, if required for registration of the VESSEL

 

(h)         Commercial invoice

 

(i)             any other documents reasonably required by the BUYER 

 

The BUYER may require the BUILDER by giving reasonable notice, prior to delivery, to arrange for any documents listed above to be duly notarized, where practically possible.

 

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 four (4) days after delivery thereof is effected.

 

From the delivery of the VESSEL until the actual removal thereof from the SHIPYARD, the BUYER shall be responsible for the safety and preservation of the VESSEL in all respects, including without limitation, keeping the VESSEL insured at his own cost, and furthermore,

 

25

 

the BUYER shall indemnify and hold the BUILDER free and harmless against any liability or claims including without limitation, the claims of his insurers arising out of any accident whatsoever, unless caused by the willful misconduct of the BUILDER, his employee or agent.

 

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)

 

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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, strikes, sabotage, lockouts, Acts of God or the public enemy, plague or other epidemics, quarantines, shortage or prolonged failure of electric current, freight embargoes, or defects in major forgings or castings, delays or defects in the BUYER’s supplies as stipulated in Article XII, if any, or shortage of materials, machinery or equipment or inability to obtain delivery or delays in delivery of materials, machinery or equipment, provided that at the time of ordering the same could reasonably be expected by the BUILDER to be delivered in time 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 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 delays in the BUILDER’s other commitments resulting from any such causes as described in this Article which in turn delay the construction of the VESSEL or the BUILDER’s performance under the CONTRACT, or delays caused by the CLASSIFICATION SOCIETY due to Force Majeure 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, provided that such causes could not be foreseen at the time of signing this CONTRACT, 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.

 

2.                   NOTICE OF DELAYS

 

As soon as practicably possible, but not later than fourteen (14) days after commencement of any delay 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

 

27

 

evidence to justify the delay claimed. Within one (1) week after such delay ends, the BUILDER shall likewise advise the BUYER in writing or by 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 two (2) week 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.

 

Failure of the BUILDER to notify the BUYER of any Force Majeure event in accordance with the above shall preclude the BUILDER from claiming Force Majeure for such event.

 

3.                   RIGHT TO CANCEL FOR EXCESSIVE DELAY

 

If the total accumulated time of all permissible and non-permissible delays, excluding delays due to (i) arbitration under Article XIII, (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 three hundred (300) days or more, then, the BUYER may, at any time thereafter, cancel this CONTRACT by giving a written notice of cancellation to the BUILDER. Such cancellation shall be effective as of the date the notice thereof is received by the BUILDER.

 

If the BUYER has not served the notice of cancellation 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 three hundred (300) 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 cancel this CONTRACT or to consent to the delivery of the VESSEL at such future date, in which case the BUYER shall, within seven (7) 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

 

28

 

(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 cancellation upon the same terms as provided in the above and Article III. 1.

 

If the BUYER shall not make an election within seven (7) 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.

 

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 unauthorized delays on account of which the CONTRACT PRICE of the VESSEL is subject to adjustment as provided in Article III hereof.

 

(End of Article)

 

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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 and acceptance of the VESSEL to the BUYER, guarantees the VESSEL and all parts and equipment thereof that are designed, manufactured, installed or furnished by the BUILDER and its sub contractors under this CONTRACT against all defects which are directly due to defective design, materials, installation, construction miscalculation and/or poor workmanship, provided such defects have not been caused by perils of the sea, rivers or navigation, or by normal wear and tear, overloading, improper loading or stowage, external corrosion of the materials normally expected, fire, accident, incompetence, mismanagement, negligence or willful neglect or by alteration or addition by the BUYER not previously 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.

 

Notwithstanding the above, in the event that within the guarantee period of twelve (12) months any remedies are carried out or replacements are provided by the BUILDER and/or its subcontractors, the guarantee period in respect to such repairs or replacements shall be extended for the period of twelve (12) months from the date upon which the same are carried out, provided that the total accumulated period of guarantee shall not exceed eighteen (18) months from the date of delivery of the VESSEL.

 

2.                   NOTICE OF DEFECTS

 

The BUYER or its duly authorized 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, facsimile 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, provided that such

 

30

 

facsimile 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 fifteen (15) 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, dockage, wharfage, port charges and anything else incurred for the BUYER’s getting and keeping the VESSEL ready for such repairing or replacing.

 

(b)         However, if it is 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 to the VESSEL under the terms described in (c) hereinbelow, unless forwarding or supplying thereof to the VESSEL 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 reasonable cost of making the same repairs or replacements which shall not exceed the average cost of making same repairs or replacements at a reputable European repair yard, a reputable Singapore repair yard and a

 

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reputable Chinese repair yard. The repair yards for the reference of BUILDER’s compensation shall be chosen by the BUYER subject to the BUILDER’s prior written consent which shall not be unreasonably withheld.

 

(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 C.I.F. port of the country where they are to be purchased.

 

(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 XIII 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 this Article. Except as expressly provided in 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 this Article, the BUILDER shall have no liability or responsibility whatsoever or howsoever arising for or in connection with 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 discovered after the expiration of the period of guarantee specified above, nor in any event shall the BUILDER be liable for any worsening of 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 navigation, or normal wear and tear, or fire or accidents at sea or elsewhere or by mismanagement,

 

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accident, negligence, willful neglect, alteration or addition on the part of the BUYER, its employees or agents 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 which were made by other than the BUILDER at the discretion of the BUYER as hereinabove provided.

 

(d)         The liability of the BUILDER provided for in this Article shall be limited to defects directly caused by defective materials, design, construction miscalculation and/or poor workmanship as above provided. 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 above. 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 or otherwise on the part of the BUILDER by reason of the construction and sale of the VESSEL for and to the BUYER.

 

(End of Article)

 

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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

 

United States Dollars Nine Million Four Hundred Forty Seven Thousand Five Hundred only (US$9,447,500) shall be paid within five (5) business days after receipt by the BUYER’s Bank of the Refund Guarantee in the form of the authenticated bank cable (SWIFT) in accordance with 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, Seoul, the Netherlands or Monaco such due date shall fall due upon the first business day next following.

 

(b)    Second Instalment

 

United States Dollars Nine Million Four Hundred Forty Seven Thousand Five Hundred only (US$9,447,500) shall be paid within six (6) months after signing this CONTRACT.

 

(c)     Third Instalment

 

United States Dollars Eighteen Million Eight Hundred Ninety Five Thousand only (US$18,895,000) shall be paid within five (5) business days of receipt by the BUYER of a facsimiled notice from the BUILDER together with a Certificate issued by the CLASSIFICATION SOCIETY confirming that steel cutting has commenced, it being understood that in no eventuality shall this instalment become due earlier than 11 months prior to the DELIVERY DATE in Article VII herein.

 

(d)         Fourth Instalment

 

United States Dollars Fifty Six Million Six Hundred Eighty Five Thousand only

 

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(US$56,685,000) 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 four 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 no payments under the provisions of this Article shall 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 XIII hereof. It is understood that any expenses for receiving such payment shall be for the account of the BUILDER.

 

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 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 and third instalments shall be made to the account of the Shinhan Bank, Korea (hereinafter called “SHINHAN BANK”), Account No. 001-1-544541 at the JP Morgan Chase Bank, New York, USA(hereinafter called the “JPM”) in favour of the BUILDER under advice by

 

35

 

telefax or telex, including swift, to the SHINHAN BANK, Korea by the remitting Bank.

 

(ii)                                  The fourth instalment as provided for in Paragraph 2.(d) of this Article shall be deposited at the account of the SHINHAN BANK, Account No. 001-1-544541 at the JPM in favour of the BUILDER 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 SHINHAN BANK of a copy of the original PROTOCOL OF DELIVERY AND ACCEPTANCE of the VESSEL signed by the BUILDER and the BUYER.

 

If the delivery of the VESSEL is not effected within fifteen (15) days after the scheduled delivery date, the BUYER shall have the right to withdraw the said deposit plus accrued interest (if any) upon the expiry date. However when the newly scheduled delivery date is notified to the BUYER by the BUILDER, the BUYER shall make the cash deposit in accordance with the same terms and conditions as set out above.

 

(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 SHINHAN 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 cancellation of this CONTRACT by the BUILDER under the provisions of Article XI hereof, if the BUYER terminates, cancels or rescinds this CONTRACT pursuant to any of the provisions of 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 six per cent (6%) 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

 

36

 

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 four per cent (4%) per annum.

 

It is hereby understood by both parties that payment of any interest provided herein is by way of liquidated damages due to cancellation 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 mutual agreement of the parties 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 price 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 per cent (6%) per annum from the date following the date of receipt by the BUILDER of such pre-delivery instalment(s) to the date of 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 and the BUILDER shall make such refund to the BUYER within ten (10) business days of such date.

 

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(other than any obligations of the BUYER in respect of facilities afforded to the

 

37

 

BUYER’s REPRESENTATIVE) under this CONTRACT. Any and all refunds or payments due to the BUYER under this CONTRACT shall be made by telegraphic transfer to the account specified by the BUYER.

 

8.                   REFUND GUARANTEE

 

As a condition precedent to the payment of the first intsalment, the BUILDER shall furnish the BUYER with an assignable letter of refundment guarantee issued by the SHINHAN BANK for the refund of all the pre-delivery instalments plus interest as aforesaid to the BUYER under or pursuant to Paragraph 5 above in the substantially similar form and tenor as 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.

 

9.                   PERFORMANCE GUARANTEE

 

Before signing the CONTRACT, the BUYER shall provide the BUILDER with an irrevocable Letter of Guarantee issued by Scorpio Tankers Inc for the due and faithful performance by the BUYER of all its obligations under the CONTRACT including, but not limited to, the payment of the CONTRACT PRICE and taking delivery of the VESSEL in the form as annexed hereto as Exhibit “B”.

 

(End of Article)

 

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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 or third instalment is not paid to the BUILDER within respective DUE DATE of such instalments; or

 

(b)         If the fourth instalment is not deposited in accordance with Article X.4.(a)(ii) hereof or if the said fourth instalment deposit is not released to the BUILDER against presentation by the BUILDER of a copy of the original 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 under the provisions of Article VII hereof; or

 

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

 

In case the BUYER is in default as defined in this Article XI. 1, 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.

 

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;

 

(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 six per cent (6%) 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).

 

39

 

(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 facsimile notice of rescission confirmed in writing.

 

(e)          In the event of such cancellation 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 cancellation 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 but must take reasonable precautions to obtain the true market value of the VESSEL.

 

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 six per cent (6%) 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.

 

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 six per cent (6%) 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

 

40

 

and delivered plus interest thereon at six per cent (6%) 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.

 

3.                   DEFAULT BY THE BUILDER

 

The BUILDER shall be deemed to be in default under this CONTRACT ;

 

(i)             If the BUILDER shall apply for or consent to the appointment of a receiver, trustee or liquidator, shall be adjudicated insolvent, shall apply to the courts for protection from its creditors, file a voluntary petition in bankruptcy or take advantage of any insolvency law, or any action shall be taken by the BUILDER having an effect similar to any of the foregoing or the equivalent thereof in any jurisdiction, or the BUILDER shall be unable to pay its debts as they fall due and following the occurrence of any of the foregoing events and for as long as they are continuing, there has been then a delay of more than fifty (50) days in the commencement of steel cutting or the completion of keel laying or launching after the due date as specified in the construction schedule agreed by the BUYER.

 

(ii)          If the BUILDER, without reasonable excuse, delays in the commencement or progress of the construction of the VESSEL for a period of one hundred (100) days or more and the BUILDER has not rectified the same within fourteen (14) days of being notified by the BUYER of such delay.

 

(iii)       If the refund guarantee is not issued within thirty (30) days from the date of this CONTRACT.

 

In the event of such BUILDER’s default the BUYER may then cancel this CONTRACT by promptly notifying the BUILDER in writing but not later than two (2) weeks from the date the BUYER becomes aware of the BUILDER’s default. Such cancellation is to be effective as of the date when such notice of cancellation is received by the BUILDER.

 

(End of Article)

 

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ARTICLE XII : BUYER’S SUPPLIES

 

1.                   RESPONSIBILITY OF THE BUYER

 

The BUYER shall, at its cost and expense, supply all the BUYER’s supplies mentioned in the SPECIFICATIONS, if any, (hereinafter called the “BUYER’S SUPPLIES”), to the BUILDER at the SHIPYARD in perfect condition ready for installation and in accordance with the time schedule to be furnished by the BUILDER to meet the building schedule of the VESSEL.

 

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 of 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 :

 

(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 ten (10) days from the date specified by the

 

42

 

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 against weather and theft and handling the BUYER’S SUPPLIES, if any, which the BUILDER is required to install on board the VESSEL after delivery of such supplies to the SHIPYARD, and shall install such supplies on board the VESSEL at the BUILDER’s expense.

 

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 willful default or negligence on its part, be responsible for direct repair or correction.

 

(End of Article)

 

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ARTICLE XIII : 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.                   LAWS APPLICABLE

 

Any arbitration arising hereunder shall be governed by and conducted 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 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. The proceedings of any arbitration shall be governed by the rules of the London Maritime Arbitrators Association. The parties shall try to agree a single arbitrator to conduct the arbitration.

 

If the parties cannot agree upon the appointment of the single arbitrator within two (2) weeks after one of the parties has given notice to the other party notifying that the other party to refer the dispute to arbitration, the dispute shall be settled by three arbitrators, each party appointing one arbitrator, the third being appointed by the London Maritime Arbitrators Association. If either of the appointed arbitrators refuses or is incapable of acting, the party who appointed him shall appoint a new arbitrator in his place.

 

If one party fails to appoint an arbitrator - either originally or by way of substitution - for two (2) weeks after the other party having appointed its arbitrator, has served the party making default with notice to make the appointment, the London Maritime Arbitrators

 

44

 

Association shall, after application from the party having appointed its arbitrator, also appoint an arbitrator on behalf of the party making default. The award of the arbitration made by the sole arbitrator or by the majority of the three arbitrators as the case may be shall be final, conclusive and binding upon the parties hereto.

 

4.                   NOTICE OF AWARD:

 

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

 

5.                   EXPENSES:

 

The Arbitrator or 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.

 

6.                   ENTRY IN COURT:

 

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

 

7.                   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 Arbitrator or the Arbitration Board may deem appropriate.

 

(End of Article)

 

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ARTICLE XIV : SUCCESSORS AND ASSIGNS

 

The BUILDER agrees that at any time 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 by the BUYER to (and the title thereof may be taken by) another company.

 

Further, the BUYER may assign its rights (but not its obligations) under this CONTRACT to a first class financial institution in order for the BUYER to obtain finance from such financial institution with prior notification to the BUILDER and its acknowledgement of receipt thereof.

 

In the event of any assignment by the BUYER pursuant to the terms of this CONTRACT the assignee (and the assignee’s successors and assigns) shall succeed to all the rights of the BUYER under this CONTRACT. However, the BUYER shall remain responsible for performance of all the BUYER’s obligations, liabilities and responsibilities under this CONTRACT.

 

It is understood that any expenses or changes incurred in connection with the transfer/ assignment of this CONTRACT by the BUYER shall be for the account of the BUYER.

 

The BUILDER shall have the right to assign its rights (but not its obligations) under this CONTRACT at any time after the effective date hereof, provided that prior written agreements is obtained from the BUYER.

 

(End of Article)

 

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ARTICLE XV : 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)

 

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ARTICLE XVI : 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 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, excepting where it is necessary for usual operation, repair and maintenance of the VESSEL.

 

In case the BUYER requests the prior written consent of the BUILDER as set out in the above paragraph, the BUYER shall provide the BUILDER with a written undertaking from the recipient stating that (1) he acknowledge and shall observe the foregoing terms concerning the BUILDER’s right to confidential information and (2) any confidential information furnished in tangible form shall not be duplicated by recipient except for the purpose of the job specifically assigned to him. (3) Upon the completion of his job requiring reference to the confidential information, recipient shall return to the BUYER at his option or otherwise destroy all the confidential information received in written or tangible form including copies or reproductions or other media containing such confidential information. (4) Any documents or other media developed by the recipient containing confidential information shall be destroyed by the recipient.

 

(End of Article)

 

48

 

ARTICLE XVII : COMPLIANCE AND ANTI-BRIBERY

 

1.                   REPRESENTATIONS OF THE PARTIES

 

During the term of this CONTRACT, each party certifies and represents as follows:

 

(a)         It will comply with the laws of any jurisdiction applicable to such party as it relates to this CONTRACT, including but not limited to any applicable anti-corruption and anti-bribery laws, also including, without limitation, the United States Foreign Corrupt Practices Act (“US FCPA”), the UK Bribery Act 2010 (“UK Bribery Act”) and the anti-bribery or anti-corruption laws of South Korea as such laws may be amended from time to time.

 

(b)         In connection with this CONTRACT, it has not and will not make any payments or gifts or provide other advantages, or any offers or promises of payments or gifts or other advantages of any kind, directly or indirectly, to:

 

a.              any person or entity with the intention of obtaining or retaining a business advantage for itself or the other party to this CONTRACT;

 

b.              any official or member of any government or any agency or instrumentality thereof; any official or member of any public international organisation or any agency or instrumentality thereof; any or official of a political party or any candidate for political office (herein ‘public official’); or any person while knowing or reasonably suspecting that all or a portion of such money or thing of value will be offered, given or promised, directly or indirectly, to any public official, in violation of the UK Bribery Act, the US FCPA or the laws of South Korea.

 

c.               In connection with this CONTRACT, it has not and will not request, agree to accept or accept from any person or entity any payments or gifts or other advantages, or any offers or promises of payments or gifts or other advantages of any kind, directly or indirectly, as a reward or inducement to perform its obligations under this CONTRACT in any way improperly.

 

2.                   INDEMNIFICATION

 

Each party agrees that it will fully indemnify, defend and hold harmless the other party from any claims, liabilities, damages, expenses, penalties, judgments and losses (including reasonable attorneys’ fees) assessed or resulting by reason of a breach of the representations and undertakings contained in this Article XVII to the extent permitted by law.

 

(End of Article)

 

49

 

ARTICLE XVIII : INSURANCE

 

(a)         Until delivery, the VESSEL as well as all her equipment and accessories to be used therein shall be at the risk of the BUILDER and the BUILDER shall at its own expense insure the same from launching and items of BUYER’s supply from time to time delivered to the SHIPYARD until delivery of the VESSEL and while undergoing Acceptance Trials in accordance with the Trials Schedule against the usual marine perils. Such insurance shall be taken out with Korean insurance companies on terms corresponding to the Institute of London Underwriter’s Clauses for BUILDER’s risks, as amended to cover earthquakes. Such insurance shall be in an amount corresponding to the Value of Items of BUYER’s supply delivered as aforesaid together with whichever shall be the greater of:

 

(i)             the value of the items, all equipment and accessories supplied from time to time by the BUILDER and used therein; or

 

(ii)          the total of the instalments of the CONTRACT PRICE hereinafter mentioned already paid (together with interest thereon calculated at the rate of six per cent (6%) per annum from the respective dates on which such instalments have been paid).

 

(b)         Insurance shall be effected by the BUILDER with first class Korean insurers and the BUILDER shall provide the BUYER with a certified copy of all insurance policies on issue of same.

 

(c)          Should the VESSEL be damaged during construction or while undergoing acceptance Trials or otherwise and should such damage not constitute the VESSEL an actual total loss or constructive or arranged or compromised total loss this CONTRACT shall in no way be invalidated but the BUILDER shall at its own expense make good such damage to the satisfaction of the CLASSIFICATION SOCIETY and to the reasonable satisfaction of the BUYER.

 

(End of Article)

 

50

 

ARTICLE XIX : 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)

 

51

 

ARTICLE XX : NOTICE

 

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

 

	
To the BUILDER:
    	
Hyundai Samho Heavy Industries Co., Ltd.
    
	
 
    	
93, Daebul-ro, Samho-eup, Yeongam-gun, Jeollanam-do, Korea
    
	
 
    	
 
    
	
 
    	
Attention : Contract Management Department
    
	
 
    	
S. W. Jeon / General Manager
    
	
 
    	
 
    
	
 
    	
Tel
    	
+82 61 460 2649
    
	
 
    	
Fax
    	
+82 61 460 3707
    
	
 
    	
Email
    	
swc@hshi.co.kr
    
	
 
    	
 
    
	
To the BUYER:
    	
STI Cavaliere Shipping Company Limited
    
	
 
    	
c/o Scorpio Tankers Inc
    
	
 
    	
“Le Millenium”
    
	
 
    	
9 Boulevard Charles III, 98000 Monaco
    
	
 
    	
 
    
	
 
    	
Attention: Mr. Luca Forgione/ Legal Department
    
	
 
    	
 
    
	
 
    	
Tel
    	
+377 97 98 57 00
    
	
 
    	
Fax
    	
+377 97 77 83 46
    
	
 
    	
Mob
    	
+336 80 86 99 86
    
	
 
    	
Email
    	
legal@scorpiogroup.net
    

 

 

The said notices shall become effective upon receipt of e-mail or registered air mail or facsimile by the receiver thereof. Where a notice by e-mail or 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 e-mail or facsimile.

 

(End of Article)

 

52

 

ARTICLE XXI : EFFECTIVENESS OF THIS CONTRACT

 

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

 

(End of Article)

 

53

 

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)

 

54

 

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

 

 

	
BUYER
    	
BUILDER
    
	
 
    	
 
    
	
 
    	
 
    
	
For and on behalf of
    	
For and on behalf of
    
	
STI Cavaliere Shipping   Company Limited
    	
Hyundai Samho Heavy Industries Co., Ltd.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By: 
    	
/s/ Cameron K. Mackey
    	
 
    	
By: 
    	
/s/ Sam H. Ka
    
	
Name: 
    	
Cameron K. Mackey
    	
 
    	
Name: 
    	
Sam H. Ka
    
	
Title: 
    	
Attorney In Fact
    	
 
    	
Title: 
    	
Attorney-in-Fact
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
WITNESS
    	
WITNESS
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
By: 
    	
/s/ Brian M. Lee
    	
 
    	
By: 
    	
/s/ Y.D. Park
    
	
Name:
    	
Brian M. Lee
    	
 
    	
Name:
    	
Y.D. Park
    
	
Title:
    	
Secretary
    	
 
    	
Title:
    	
S.V.P
    

 

55

 

EXHIBIT “A”

 

LETTER OF GUARANTEE

 

Letter of Guarantee NO.:

 

	
 
    	
Date   :                   ,   2013
    

 

Gentlemen:

 

We hereby open our irrevocable letter of guarantee number                         in favour of                                           (hereinafter called the “BUYER”) for account of Hyundai Samho Heavy Industries Co., Ltd., Samho, Korea (hereinafter called the “BUILDER”) as follows in connection with the shipbuilding contract dated                      ,        (hereinafter called “CONTRACT”) made by and between the BUYER and the BUILDER for the construction of                                 having the BUILDER’s Hull No.            (hereinafter called the “VESSEL”).

 

If, in connection with the terms of the CONTRACT, whether so supplemented, amended, changed or modified, the BUYER shall become entitled to a refund of the advance payment made to the BUILDER prior to the delivery of the VESSEL, we hereby irrevocably guarantee the repayment of the same to the BUYER within twenty (20) days after demand not exceeding US$                                                                  (Say U.S. Dollars only) together with interest thereon at the rate of             per cent (       %) per annum from the date following the date of receipt by the BUILDER to the date of remittance by telegraphic transfer of such refund.

 

The amount of this guarantee will be automatically increased upon the BUILDER’s receipt of the respective instalment, not more than two (2) times, each time by the amount of instalment 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                                 only) plus interest thereon at the rate of                        per cent (        %) per annum from the date following the date of the BUILDER’s receipt of each instalment 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 per cent (          %) per annum as provided in Article X of the CONTRACT.

 

This letter of guarantee is available (subject to the third paragraph hereof) against the BUYER’s first written demand and signed statement certifying that the BUYER’s demand for refund has been made in conformity with Article X of the CONTRACT and the BUILDER has

 

56

 

failed to make the refund within twenty (20) days after the Buyer’s demand. Refund shall be made to the Buyer by telegraphic transfer in United States Dollars.

 

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

 

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

 

Notwithstanding the provisions hereinabove, in the event that within twenty (20) days from the date of your claim to the BUILDER referred to above, we receive notification from you or the BUILDER accompanied by written confirmation to the effect 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, we shall under this guarantee, refund to you the sum adjudged to be due to you by the BUILDER pursuant to the award made under such arbitration immediately upon receipt from you of a demand for the sums so adjudged and a copy of the award.

 

This letter of guarantee shall 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 letter of guarantee is assignable and valid 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.

 

This guarantee shall be governed by and construed in accordance with the laws of England and the undersigned hereby submits to the non-exclusive jurisdiction of the courts of England.

 

	
 
    	
Very truly yours,
    
	
 
    	
 
    
	
 
    	
for and on behalf of
    
	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
Name :
    	
 
    
	
 
    	
Title:
    	
 
    
				

 

57

 

EXHIBIT “B”

 

	
Hyundai Samho Heavy Industries Co., Ltd.
    	
 
    
	
93, Daebul-Ro, Samho-Eup, Yeongam-Gun,
    	
Date :                       ,   2013
    
	
Jeollanam-Do, Korea
    	
 
    

 

PERFORMANCE GUARANTEE

 

Gentlemen,

 

In consideration of your executing a shipbuilding contract (hereinafter called the “CONTRACT”) dated           , 2013 with                           (hereinafter called the “BUYER”) providing for the design, construction, equipment, launch and delivery of                               having the BUILDER’s Hull No.        (hereinafter called the “VESSEL”), and providing, among other things, for payment of the contract price amounting to United States Dollars                                     only (US$                ) for the VESSEL, prior to and upon delivery of the VESSEL, the undersigned, as a primary obligor and not as a merely surety, hereby unconditionally and irrevocably guarantees to you or your successors, the due and faithful performance by the BUYER of all its obligations under the CONTRACT and any supplements, amendments, changes or modifications hereinafter made thereto including but not limited to the prompt payment of the contract price, when due (whether on account of principal, interest or otherwise) by the BUYER to you or your successors under the CONTRACT, notwithstanding any obligation of the BUYER being or becoming unenforceable by defect in or want of its powers, (hereby expressly waiving notice of any such supplement, amendment, change or modification as may be agreed to by the BUYER) and confirms that this guarantee shall be fully applicable to the CONTRACT whether so supplemented, amended, changed or modified and if it shall be assigned by the BUYER in accordance with the terms of the CONTRACT. This guarantee will expire on the DELIVERY of the VESSEL as defined in the CONTRACT.

 

The undersigned hereby certifies, represents and warrants that all acts, conditions and things required to be done and performed and to have occurred precedent to the creation and issuance of this guarantee, and to constitute the guarantee the valid and legally binding obligation of the undersigned enforceable in accordance with its terms have been done and performed and have occurred in due and strict compliance with applicable laws.

 

The payment by the undersigned under this guarantee shall be made forthwith within thirty (30) days upon receipt by us of written demand from you including a substantiated statement that the BUYER is in default of payment of the amounts (including, but not limited to, the instalment(s) payable prior to or upon delivery of the VESSEL) that were due under the CONTRACT, without requesting you to take any or further procedure or step against the

 

58

 

BUYER. In the event that any withholding or deduction is imposed by any law, Article XV of the CONTRACT shall apply so that the undersigned will pay such additional amount as may be necessary in order that the actual amount received after deduction or withholding by virtue of any law outside Korea shall equal to the amount that would have been received if such payment had been made by the BUYER.

 

Notwithstanding the provisions hereinabove, in the event that any of your request under the CONTRACT is disputed by the BUYER and referred to arbitration in accordance with the provisions of the CONTRACT and we receive notification of this from either you or the BUYER, we shall pay you within thirty (30) days from receipt of your written request together with a certified copy of the award ordering the payment by the BUYER to you of the sum due.

 

This guarantee shall be governed by and interpreted in accordance with the laws of England and the undersigned hereby submits to the non-exclusive jurisdiction of the Courts of England and appoints Scorpio UK Ltd                             to receive service of proceedings in such courts on its behalf.

 

 

	
 
    	
Very truly yours,
    
	
 
    	
 
    
	
 
    	
For and on behalf of
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

59

 

WFW

 

Document Separator

 

WFW

 

 

SHIPBUILDING CONTRACT

 

FOR

 

THE CONSTRUCTION OF

 

ONE (1) 300,000 DWT CLASS CRUDE OIL CARRIER

 

 

HULL NO. S777

 

 

BETWEEN

 

 

STI CAVALIERE SHIPPING COMPANY LIMITED

 

 

(AS BUYER)

 

 

AND

 

 

HYUNDAI SAMHO HEAVY INDUSTRIES CO., LTD.

 

 

(AS BUILDER)

 

 

INDEX

 

	
 
    	
 
    	
 
    	
PAGE
    
	
 
    	
 
    	
 
    	
 
    
	
PREAMBLE
    	
 
    	
 
    	
3
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE
    	
I
    	
: DESCRIPTION AND CLASS
    	
4
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
II
    	
: CONTRACT PRICE
    	
7
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
III
    	
: ADJUSTMENT OF THE CONTRACT PRICE
    	
8
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
IV
    	
: INSPECTION AND APPROVAL
    	
12
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
V
    	
: MODIFICATIONS, CHANGES AND EXTRAS
    	
17
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
VI
    	
: TRIALS AND COMPLETION
    	
18
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
VII
    	
: DELIVERY
    	
22
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
VIII
    	
: DELAYS AND EXTENSIONS OF TIME (FORCE MAJEURE)
    	
26
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
IX
    	
: WARRANTY OF QUALITY
    	
29
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
X
    	
: PAYMENT
    	
33
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
XI
    	
: BUYER’S DEFAULT
    	
38
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
XII
    	
: BUYER’S SUPPLIES
    	
41
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
XIII
    	
: ARBITRATION
    	
43
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
XIV
    	
: SUCCESSORS AND ASSIGNS
    	
45
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
XV
    	
: TAXES AND DUTIES
    	
46
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
XVI
    	
: PATENTS, TRADEMARKS AND COPYRIGHTS
    	
47
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
XVII
    	
: COMPLIANCE AND ANTI-BRIBERY
    	
48
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
XVIII
    	
: INSURANCE
    	
49
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
XIX
    	
: INTERPRETATION AND GOVERNING LAW
    	
50
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
XX
    	
: NOTICE
    	
51
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
XXI
    	
: EFFECTIVENESS OF THIS CONTRACT
    	
52
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
XXII
    	
: EXCLUSIVENESS
    	
53
    
	
 
    	
 
    	
 
    	
 
    
	
EXHIBIT “A”  LETTER OF GUARANTEE
    	
55
    
	
 
    	
 
    
	
EXHIBIT “B”  PERFORMANCE GUARANTEE
    	
57
    

 

2

 

THIS CONTRACT, made on this 20th day of December, 2013 by and between STI Cavaliere Shipping Company Limited, a corporation incorporated and existing under the laws of the Republic of the Marshall Islands, having its registered office at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands 96960 (hereinafter called the “BUYER”), the party of the first part and Hyundai Samho Heavy Industries Co., Ltd., a company organized and existing under the laws of the Republic of Korea, having its principal office at 93, Daebul-Ro, Samho-Eup, Yeongam-Gun, Jeollanam-Do, 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 one (1) 300,000 DWT class Crude Oil Carrier as described in Article I hereof (hereinafter called the “VESSEL”) at the BUILDER’s shipyard in Samho, 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)

 

3

 

ARTICLE I : DESCRIPTION AND CLASS

 

1.                   DESCRIPTION

 

The VESSEL shall have the BUILDER’s Hull No. S777 and shall be designed, constructed, equipped, launched and completed in accordance with the specifications (Ref. No. COSC-FS-P1(R1), dated December 18, 2013) and the general arrangement plan (No. 1G-7000-201, dated December 18, 2013) attached thereto (hereinafter called respectively the “SPECIFICATIONS” and the “PLAN”), and which shall constitute an integral part of this CONTRACT although not attached hereto.

 

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
    	
abt.
    	
333 m
    
	
Length, between perpendiculars
    	
abt.
    	
322 m
    
	
Breadth, moulded
    	
abt.
    	
60 m
    
	
Depth, moulded
    	
abt.
    	
29.4 m
    
	
Design draught, moulded
    	
abt.
    	
20.5 m
    
	
Scantling draught, moulded
    	
abt.
    	
21.6 m
    

 

Main Engine                                                                         :                                    HYUNDAI-MAN B&W 7G80ME-C9.2

with Low Load Tuning (Exhaust Gas By-pass)

 

Nominal Rating : 32,970 kW x 72 RPM

MCR             : 24,400 kW x 66 RPM

NCR                : 17,080 kW x 58.6 RPM

 

Deadweight, guaranteed :      300,000 metric tons at the scantling draught of 21.6 meters on even keel in sea water of specific gravity of 1.025.

 

Cubic capacity of cargo tanks including slop tanks and residual oil tank (100%) guaranteed: 344,500 m3

 

Speed, guaranteed :   14.8 knots at the design draught of 20.5 meters at the condition of clean bottom and in calm and deep sea with main engine output of 17,080 kW with 15% sea margin.

 

4

 

Specific Fuel Oil Consumption, guaranteed : 161.7 grams/kW-hour + 5% using marine diesel oil having lower calorific value of 42,700 Kcal/Kg at MCR measured at the shop trial with I.S.O reference conditions.

 

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

 

(b)              The dimensions may be slightly modified by the BUILDER, who also reserves the right to make changes to the SPECIFICATIONS and the PLAN if found necessary to suit the local conditions and facilities of the SHIPYARD, the availability of materials and equipment, the introduction of improved production methods or otherwise, subject to the approval of the BUYER which the BUYER shall not withhold unreasonably.

 

3.                   CLASSIFICATION, RULES AND REGULATIONS

 

(a)              The VESSEL, including its machinery, equipment and outfittings shall be constructed in accordance with the BUILDER’s shipbuilding practices and “Hyundai Samho Quality Standard”.

 

The VESSEL shall be built in compliance with the applicable current rules and regulations, which have been issued and are effective as of the date of signing this CONTRACT, of American Bureau of Shipping (hereinafter called the “CLASSIFICATION SOCIETY”) and classed and registered with the symbol of +A1(E), Oil Carrier, +AMS, +ACCU, SCR, AB-CM, ESP, TCM, CPS, VEC-L, BWE, BWT, UWILD, PMA, ENVIRO, GP, POT, SPMA, CPP, IGS-Ballast, RW.

 

The VESSEL shall be built in compliance with the Rules and Regulations as described in the SPECIFICATIONS which are in force at the date of signing the CONTRACT and/or which are ratified as of the date of signing the CONTRACT and which will come into force on or before the date of delivery of the VESSEL.

 

(b)              The BUILDER shall arrange with the CLASSIFICATION SOCIETY for the assignment by the CLASSIFICATION SOCIETY of representative(s) to the VESSEL during construction. All costs, fees, charges and arrangement incidental to classification of the VESSEL in compliance with the 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 rules, requirements and regulations of the CLASSIFICATION SOCIETY shall be final and binding upon the BUILDER and the BUYER.

 

4.                   NATIONALITY OF THE VESSEL

 

The VESSEL shall be registered by the BUYER at its own cost and expense under the laws of Marshall Islands with its home port at the time of its delivery and acceptance hereunder.

 

5

 

5.                   SUB-CONTRACTORS AND SUPPLIERS

 

The BUILDER shall build and outfit the VESSEL according to this CONTRACT at the SHIPYARD at Samho, Korea using mainly its own shipyard organization provided always that main hull blocks of the VESSEL, other than the bow section (including the bulbous bow) the stern blocks, upper deck unit, deck house, engine casing, funnel, T-bulkhead and L-bulkhead (including Lower Stool) and Hopper will be constructed at the SHIPYARD.

 

The BUILDER is, however, authorized to sub-contract part of the work to experienced third party sub-contractors in the vicinity of the SHIPYARD, provided that the BUILDER shall have first given notice in writing to the BUYER for any major sub-contract award (for the purpose of this CONTRACT an award involving consideration in excess of US$2 million or its equivalent in any other currency shall be deemed a major sub-contract) and received the BUYER’s written approval thereof which shall not be unreasonably withheld. The BUILDER shall compensate for direct cost of fuel and tolls required for BUYER’s supervision of subcontractors outside the vicinity of the SHIPYARD (defined as more than 50km from the SHIPYARD).

 

Without prejudice to the generality of the foregoing, the BUILDER shall remain fully liable to the BUYER for the due and complete performance of any work (or part of it) undertaken by any subcontractor as if undertaken by the BUILDER. However, the VESSEL shall always remain at the SHIPYARD unless the BUYER and the BUILDER agrees otherwise.

 

No sub-contract shall bind or purport to bind the BUYER, and each sub-contract shall be the responsibility of the BUILDER.

 

All sub-contractors howsoever employed or engaged are hereby declared and agreed to be subcontractors employed or engaged by the BUILDER and the BUILDER agrees that it is and shall remain fully responsible for and liable in respect of any sub-contractors and/or their acts or omissions and, without prejudice to the generality of the foregoing, the BUILDER shall ensure control over supervision and scheduling of the all work done by sub-contractors.

 

The BUYER may request in the reasonable opinion of the BUYER’S REPRESENTATIVE the BUILDER to replace any sub-contractor whose level of workmanship has been demonstrated not to meet the requirements of this CONTRACT, including the SPECIFICATIONS which request the BUILDER shall not unreasonably refuse. The BUILDER shall investigate any such request and, if found justified, take appropriate action.

 

(End of Article)

 

6

 

ARTICLE II : CONTRACT PRICE

 

The contract price of the VESSEL delivered and accepted by to the BUYER at the SHIPYARD shall be United States Dollars Ninety Four Million Four Hundred Seventy Five Thousand only (US$94,475,000) (hereinafter called the “CONTRACT PRICE”) which shall be paid plus any increases or less any decreases due to adjustment or modification, if any, as set forth in this CONTRACT. The above CONTRACT PRICE shall include payment for services in the inspection, test, 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)

 

7

 

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 Three Thousand (US$23,000) 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, cancel this CONTRACT by serving upon the BUILDER a notice of cancellation by facsimile to be confirmed by a registered letter via airmail directed to the BUILDER at the address given in this CONTRACT, Such cancellation shall be effective as of the date the registered letter is received by the BUILDER. If the BUYER has not served the notice of cancellation 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.

 

(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

 

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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 three-tenths (3/10) of a knot below the guaranteed speed.

 

(b)         However, as for the deficiency of more than three-tenths (3/10) of a knot in actual speed below the speed guaranteed under this CONTRACT, the CONTRACT PRICE shall be reduced by U.S. Dollars Eighty Thousand (US$80,000) for each full one-tenth (1/10) of a knot in excess of the said three-tenths (3/10) 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 one (1) full knot below the speed guaranteed under this CONTRACT, then the BUYER, at its option, may, subject to the BUILDER’s right to effect alterations of corrections as provided in Article VI.5. hereof, cancel this CONTRACT or may accept the VESSEL at a reduction in the CONTRACT PRICE as above provided for one (1) full 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.

 

(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 Eighty Thousand (US$80,000) for each full one per cent (1%) increase in fuel consumption in excess of the said five per cent (5%) increase in fuel consumption. Fraction of less than one per cent (1%) shall be regarded as a

 

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full one percent (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 ten percent (10%) 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, cancel this CONTRACT or may accept the VESSEL at a reduction in the CONTRACT PRICE as above provided for the ten per cent (10%) increase only.

 

4.              DEADWEIGHT BELOW CONTRACT REQUIREMENTS

 

(a)         The guaranteed deadweight shall be deadweight as defined in Article I paragraph 2 hereof.

 

(b)         In the event that deficiency of the actual deadweight certified by the CLASSIFICATION SOCIETY as determined in accordance with the SPECIFICATION is not more than two per cent (2%) of the guaranteed deadweight, there shall be no change in CONTRACT PRICE. However, should there be a deficiency of more than two per cent (2%) (disregarding fractions of less than One (1) metric ton) the CONTRACT PRICE shall be reduced by the sum of United States Dollars Eight Hundred (US$800) for every One (1) metric ton deficiency (disregarding fractions of less than One (1) metric ton).

 

(c)          In the event of such deficiency in the deadweight of the VESSEL being more than three per cent (3%), the BUYER may at its option, reject the VESSEL and cancel the CONTRACT or accept the VESSEL at a reduction in the CONTRACT PRICE to be mutually agreed upon.

 

5.              CARGO TANKS’ CAPACITY BELOW CONTRACT REQUIREMENTS

 

In the event, as per the final capacity plan issued by the BUILDER and approved by the BUYER, that the actual cubic capacity of cargo tanks including slop tanks and residual oil tank of the VESSEL is less than 344,500 cubic meters then commencing with and including a decrease of 3,445 cubic meters below such cubic capacity the BUILDER shall pay to the BUYER liquidated damages for each full cubic meter (but disregarding fractions of a cubic meter) of such decreased capacity exceeding 3,445 cubic meters but not more than 6,890 cubic meters, the amount of United States Dollars Eight Hundred (US$800) per cubic meter.

 

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However, unless the parties agree otherwise, and without prejudice to any other rights the BUYER may have towards any other deduction under this Contract the amount of deduction from the Contract Price under this paragraph shall not exceed the amount due to cover the deficiency of 6,890 cubic meters below the said required cubic meters hereinabove.

 

Provided that if the deficiency in cubic capacity of the VESSEL in such condition exceeds 6,890 cubic meters below the above cubic capacity then the BUYER shall, subject to the BUILDER’s right to effect alterations or corrections as provided in Article VI.5, be entitled to reject the VESSEL and terminate this Contract in accordance with Article VI below or to accept the VESSEL.

 

6.              EFFECT OF CANCELLATION

 

It is expressly understood and agreed by the parties hereto that in any case, if the BUYER cancels this CONTRACT under this Article, the BUYER shall not be entitled to any liquidated damages but shall be entitled to the refunding of the price as per Art. X.5.

 

(End of Article)

 

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ARTICLE IV : INSPECTION AND APPROVAL

 

1.                   APPOINTMENT OF BUYER’S REPRESENTATIVE

 

The BUYER shall timely dispatch 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 tinder 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 when work is being done at the SHIPYARD until delivery of the VESSEL, have the right to inspect the VESSEL, her equipment and all accessories, and work 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 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 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.

 

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

 

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requirements of the CONTRACT and the SPECIFICATIONS or the PLAN and likewise advise and communicate 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 unreasonable 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 authorized representative of the BUILDER. The BUILDER shall notify the BUYER’S REPRESENTATIVB of the names of the persons who are from time to time authorized 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 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 or failing such agreement, request an arbitration in accordance with the provisions of Article XIII hereof. The CLASSIFICATION SOCIETY or the arbitration tribunal, as the case may be, shall determine whether or not a nonconformity with the provisions of this CONTRACT, the SPECIFICATIONS and the PLAN exists. If the CLASSIFICATION SOCIETY or the arbitration tribunal, as the case may be, enters a determination in favour of the BUYER, then in such case the BUILDER shall make at its own cost the necessary alterations or changes, or if such alterations or changes can not be made in time to meet the construction schedule for the VESSEL, the BUILDER shall make fair and reasonable adjustment of the CONTRACT PRICE in lieu of such alterations and

 

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changes. If the CLASSIFICATION SOCIETY or the arbitration tribunal, as the case may be, enters a determination in favour of the BUILDER, then the time for delivery of the VESSEL shall be extended for the period of delay in construction, if any, occasioned by such proceedings, and the BUYER shall compensate the BUILDER for the proven loss and damages incurred by the BUILDER as a result of the dispute herein referred to.

 

Failure of BUYER’s REPRESENTATIVE’s presence at such trials and tests after such due notice has been given to him shall be deemed to be a waiver of the BUYER’s right to demand such alterations or changes after the trials and tests and inspections if such absence could not be avoided by the exercise of the BUYER’s REPRESENTATIVE’s due diligence due to an incident of force majeure nature and/or unless the BUYER’s REPRESENTATIVE gives seven (7) days advance notice of such absence, provided, however, that failure of the BUYER’s REPRESENTATIVE’s presence shall not cause a proven delay in the delivery of the VESSEL.

 

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 XX hereof. The BUYER shall, within twenty two (22) days including mailing time 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 and the schedule of the drawings and plans submission by the BUILDER 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 drawing 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

 

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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 XIII 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 seek clarification from the BUYER prior to implementing them which clarification must be provided in writing by the BUYER within three (3) days of such request from the BUILDER. If the BUYER shall fail to provide the BUILDER with such clarification within the said time limit, then the BUILDER shall be entitled to place its own interpretation on such comments in implementing them.

 

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 and appropriate internet access 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 or subcontractors.

 

The BUYER’S REPRESENTATIVE or his assistants or employees shall observe the work’s rules and regulations 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.

 

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(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 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 of 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.

 

The BUILDER shall provide the BUYER with any assistance that the BUYER may require in obtaining work permits, visas, resident permits and other necessary documents for the BUYER’s REPRESENTATIVE and their staff.

 

As far as practical, the BUILDER shall endeavour not to arrange for inspection of the same type of subcontracting work in two different places on the same day - including at the SHIPYARD premises — the distance between which cannot be covered by one man in one day.

 

6.                   RESPONSIBILITY OF THE BUYER

 

The BUYER shall undertake and assure that the BUYER’S REPRESENTATIVE shall carry out his duties hereunder in accordance with the normal shipbuilding practice and in such a way so as to avoid any unnecessary and unreasonable 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 BUYER’s REPRESENTATIVE 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)

 

16

 

ARTICLE V : MODIFICATIONS, CHANGES AND EXTRAS

 

1.                   HOW EFFECTED

 

Minor 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 modifications 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 reasonable judgment, 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 the SPECIFICATIONS and the PLAN or otherwise under this CONTRACT can not 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

 

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ARTICLE VI : TRIALS AND COMPLETION

 

1.                   NOTICE

 

The BUILDER shall notify the BUYER in writing or by facsimile at least twenty one (21) 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 ten (10) days in advance of the trial run 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 recognize 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 reasonable 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.

 

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 fulfillment of the performance requirements for the trials as set forth in the SPECIFICATIONS.

 

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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 judgment. 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 engine specifications and the BUYER shall decide and advise the BUILDER of the supplier’s name for lubricating oil and greases at least two (2) months in advance of the keel laying 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 actual net 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 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 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. However, if such interruption or irregular performance occurs more than two times on the same items, then such item(s) should be identified by the BUILDER to the BUYER as soon as practicably possible, and inspected/corrected by the BUILDER as soon as practicably possible. In the meantime, the inspection result, which will be final or preliminary as the case may be, should be informed to the BUYER before the delivery of the VESSEL.

 

(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

 

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might entitle the BUYER to cancel 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 three (3) working 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) working 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 fulfillment of this CONTRACT and the SPECIFICATIONS by such tests or trials as may be necessary.

 

The BUYER shall, within three (3) working 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.

 

(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.

 

(e)          If requested by the BUYER, the BUILDER shall give a demonstration to the BUYER’s crew how to operate the machineries and other equipment of the VESSEL at the time of the trial run or between after trial run and before delivery in order for the BUYER’s crew to be familiarized with the said machineries and other equipment.

 

6.                   EFFECT OF ACCEPTANCE

 

The BUYER’s written 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

 

20

 

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 rejections, including arbitration provided in Article XIII hereof.

 

(End of Article)

 

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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 the 31st day of May, 2016 (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. If the DELIVERY DATE of the VESSEL falls between the 15th of December and 31st of December, then, the BUILDER shall, upon receiving BUYER’s such request, adjust the DELIVERY DATE of the VESSEL to the first convenient banking day of the next year.

 

2.                   WHEN AND HOW EFFECTED

 

Provided that the BUYER shall concurrently with delivery of the VESSEL release to the BUILDER the fourth 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 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:

 

(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

 

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water remaining in tanks if its cost is charged to the BUYER under Article VI. 4. hereof,

 

(d)         DRAWING 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

 

(1)                     Classification certificate for Hull and Machinery

(2)                     Cargo Ship Safety Construction Certificate

(3)                     Cargo Ship Safety Equipment Certificate

(4)                     Cargo Ship Safety Radio Certificate

(5)                     Adjustment Certificate for Magnetic Compass

(6)                     Certificate for Navigation and Signal Lights required by COLREG

(7)                     International Load Line Certificate

(8)                     International Tonnage Certificate

(9)                     I.O.P.P. Certificate

(10)              I.A.P.P. Certificate

(11)              International Sewage Pollution Prevention Certificate

(12)              Suez Canal Tonnage Certificate

(13)              Deadweight Certificate

(14)              Builder’s Certificate

(15)              Statement of Compliance for Maritime Labor Convention 2006

(16)              Test Certificates for Windlass, Anchor, Anchor Chain and Mooring Ropes

(17)              Ship Sanitation Control Exemption Certificate

(18)              International Anti-Fouling System Certificate

(19)              International Energy Efficiency Certificate

 

Any other certificate required by the CLASSIFICATION SOCIETY and/or other relevant regulatory bodies as specified in the SPECIFICATION and/or the PLANS

 

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 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.

 

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(g)          Bill of Sale notarized by the BUILDER and legalized by the BUILDER at the BUYER’s cost, if required for registration of the VESSEL

 

(h)         Commercial invoice

 

(i)             any other documents reasonably required by the BUYER

 

The BUYER may require the BUILDER by giving reasonable notice, prior to delivery, to arrange for any documents listed above to be duly notarized, where practically possible.

 

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 c 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 four (4) days after delivery thereof is effected.

 

From the delivery of the VESSEL until the actual removal thereof from the SHIPYARD, the BUYER shall be responsible for the safety and preservation of the VESSEL in all respects, including without limitation, keeping the VESSEL insured at his own cost, and furthermore,

 

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the BUYER shall indemnify and hold the BUILDER free and harmless against any liability or claims including without limitation, the claims of his insurers arising out of any accident whatsoever, unless caused by the willful misconduct of the BUILDER, his employee or agent.

 

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)

 

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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, strikes, sabotage, lockouts, Acts of God or the public enemy, plague or other epidemics, quarantines, shortage or prolonged failure of electric current, freight embargoes, or defects in major forgings or castings, delays or defects in the BUYER’s supplies as stipulated in Article XII, if any, or shortage of materials, machinery or equipment or inability to obtain delivery or delays in delivery of materials, machinery or equipment, provided that at the time of ordering the same could reasonably be expected by the BUILDER to be delivered in time 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 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 delays in the BUILDER’s other commitments resulting from any such causes as described in this Article which in turn delay the construction of the VESSEL or the BUILDER’s performance under the CONTRACT, or delays caused by the CLASSIFICATION SOCIETY due to Force Majeure 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, provided that such causes could not be foreseen at the time of signing this CONTRACT, 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.

 

2.                   NOTICE OF DELAYS

 

As soon as practicably possible, but not later than fourteen (14) days after commencement of any delay 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

 

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evidence to justify the delay claimed. Within one (1) week after such delay ends, the BUILDER shall likewise advise the BUYER in writing or by 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 two (2) week 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.

 

Failure of the BUILDER to notify the BUYER of any Force Majeure event in accordance with the above shall preclude the BUILDER from claiming Force Majeure for such event.

 

3.                   RIGHT TO CANCEL FOR EXCESSIVE DELAY

 

If the total accumulated time of all permissible and non-permissible delays, excluding delays due to (i) arbitration under Article XIII, (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 three hundred (300) days or more, then, the BUYER may, at any time thereafter, cancel this CONTRACT by giving a written notice of cancellation to the BUILDER. Such cancellation shall be effective as of the date the notice thereof is received by the BUILDER.

 

If the BUYER has not served the notice of cancellation 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 three hundred (300) 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 cancel this CONTRACT or to consent to the delivery of the VESSEL at such future date, in which case the BUYER shall, within seven (7) 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

 

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(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 cancellation upon the same terms as provided in the above and Article III. 1.

 

If the BUYER shall not make an election within seven (7) 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.

 

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 unauthorized delays on account of which the CONTRACT PRICE of the VESSEL is subject to adjustment as provided in Article III hereof.

 

(End of Article)

 

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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 and acceptanceof the VESSEL to the BUYER, guarantees the VESSEL and all parts and equipment thereof that are designed, manufactured, installed or furnished by the BUILDER and its sub contractors under this CONTRACT against all defects which are directly due to defective design, materials, installation, construction miscalculation and/or poor workmanship, provided such defects have not been caused by perils of the sea, rivers or navigation, or by normal wear and tear, overloading, improper loading or stowage, external corrosion of the materials normally expected, fire, accident, incompetence, mismanagement, negligence or willful neglect or by alteration or addition by the BUYER not previously 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.

 

Notwithstanding the above, in the event that within the guarantee period of twelve (12) months any remedies are carried out or replacements are provided by the BUILDER and/or its subcontractors, the guarantee period in respect to such repairs or replacements shall be extended for the period of twelve (12) months from the date upon which the same are carried out, provided that the total accumulated period of guarantee shall not exceed eighteen (18) months from the date of delivery of the VESSEL.

 

2.                   NOTICE OF DEFECTS

 

The BUYER or its duly authorized 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, facsimile 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, provided that such

 

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facsimile 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 fifteen (15) 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, dockage, wharfage, port charges and anything else incurred for the BUYER’s getting and keeping the VESSEL ready for such repairing or replacing.

 

(b)         However, if it is 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 to the VESSEL under the terms described in (c) hereinbelow, unless forwarding or supplying thereof to the VESSEL 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 reasonable cost of making the same repairs or replacements which shall not exceed the average cost of making same repairs or replacements at a reputable European repair yard, a reputable Singapore repair yard and a

 

30

 

reputable Chinese repair yard. The repair yards for the reference of BUILDER’s compensation shall be chosen by the BUYER subject to the BUILDER’s prior written consent which shall not be unreasonably withheld.

 

(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 C.I.F. port of the country where they are to be purchased.

 

(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 XIII 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 this Article. Except as expressly provided in 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 this Article, the BUILDER shall have no liability or responsibility whatsoever or howsoever arising for or in connection with 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 discovered after the expiration of the period of guarantee specified above, nor in any event shall the BUILDER be liable for any worsening of 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 navigation, or normal wear and tear, or fire or accidents at sea or elsewhere or by mismanagement,

 

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accident, negligence, willful neglect, alteration or addition on the part of the BUYER, its employees or agents 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 which were made by other than the BUILDER at the discretion of the BUYER as hereinabove provided.

 

(d)         The liability of the BUILDER provided for in this Article shall be limited to defects directly caused by defective materials, design, construction miscalculation and/or poor workmanship as above provided. 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 above. 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 or otherwise on the part of the BUILDER by reason of the construction and sale of the VESSEL for and to the BUYER.

 

(End of Article)

 

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ARTICLE X : PAYMENT

 

1.                   CURRENCY

 

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

 

2.                   TERMS OF PAYMENT

 

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

 

(a)    First Instalment

 

United States Dollars Nine Million Four Hundred Forty Seven Thousand Five Hundred only (US$9,447,500) shall be paid within five (5) business days after receipt by the BUYER’s Bank of the Refund Guarantee in the form of the authenticated bank cable (SWIFT) in accordance with 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, Seoul, the Netherlands or Monaco such due date shall fall due upon the first business day next following.

 

(b)    Second Instalment

 

United States Dollars Nine Million Four Hundred Forty Seven Thousand Five Hundred only (US$9,447,500) shall be paid within six (6) months after signing this CONTRACT.

 

(c)     Third Instalment

 

United States Dollars Eighteen Million Eight Hundred Ninety Five Thousand only (US$18,895,000) shall be paid within five (5) business days of receipt by the BUYER of a facsimiled notice from the BUILDER together with a Certificate issued by the CLASSIFICATION SOCIETY confirming that steel cutting has commenced, it being understood that in no eventuality shall this instalment become due earlier than 11 months prior to the DELIVERY DATE in Article VII herein.

 

(d)    Fourth Instalment

 

United States Dollars Fifty Six Million Six Hundred Eighty Five Thousand only

 

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(US$56,685,000) 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 four 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 no payments under the provisions of this Article shall 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 XIII hereof. It is understood that any expenses for receiving such payment shall be for the account of the BUILDER.

 

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 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 and third instalments shall be made to the account of the Shinhan Bank, Korea (hereinafter called “SHINHAN BANK”), Account No. 001-1-544541 at the JP Morgan Chase Bank, New York, USA(hereinafter called the “JPM”) in favour of the BUILDER under advice by

 

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telefax or telex, including swift, to the SHINHAN BANK, Korea by the remitting Bank.

 

(ii)                                  The fourth instalment as provided for in Paragraph 2.(d) of this Article shall be deposited at the account of the SHINHAN BANK, Account No. 001-1-544541 at the JPM in favour of the BUILDER 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 SHINHAN BANK of a copy of the original PROTOCOL OF DELIVERY AND ACCEPTANCE of the VESSEL signed by the BUILDER and the BUYER.

 

If the delivery of the VESSEL is not effected within fifteen (15) days after the scheduled delivery date, the BUYER shall have the right to withdraw the said deposit plus accrued interest (if any) upon the expiry date. However when the newly scheduled delivery date is notified to the BUYER by the BUILDER, the BUYER shall make the cash deposit in accordance with the same terms and conditions as set out above.

 

(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 SHINHAN 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 cancellation of this CONTRACT by the BUILDER under the provisions of Article XI hereof, if the BUYER terminates, cancels or rescinds this CONTRACT pursuant to any of the provisions of 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 six per cent (6%) 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

 

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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 four per cent (4%) per annum.

 

It is hereby understood by both parties that payment of any interest provided herein is by way of liquidated damages due to cancellation 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 mutual agreement of the parties 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 price 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 per cent (6%) per annum from the date following the date of receipt by the BUILDER of such pre-delivery instalment(s) to the date of 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 and the BUILDER shall make such refund to the BUYER within ten (10) business days of such date.

 

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(other than any obligations of the BUYER in respect of facilities afforded to the

 

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BUYER’S REPRESENTATIVE) under this CONTRACT. Any and all refunds or payments due to the BUYER under this CONTRACT shall be made by telegraphic transfer to the account specified by the BUYER.

 

8.                   REFUND GUARANTEE

 

As a condition precedent to the payment of the first intsalment, the BUILDER shall furnish the BUYER with an assignable letter of refundment guarantee issued by the SHINHAN BANK for the refund of all the pre-delivery instalments plus interest as aforesaid to the BUYER under or pursuant to Paragraph 5 above in the substantially similar form and tenor as 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.

 

9.                   PERFORMANCE GUARANTEE

 

Before signing the CONTRACT, the BUYER shall provide the BUILDER with an irrevocable Letter of Guarantee issued by Scorpio Tankers Inc for the due and faithful performance by the BUYER of all its obligations under the CONTRACT including, but not limited to, the payment of the CONTRACT PRICE and taking delivery of the VESSEL in the form as annexed hereto as Exhibit “B”.

 

(End of Article)

 

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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 or third instalment is not paid to the BUILDER within respective DUE DATE of such instalments; or

 

(b)         If the fourth instalment is not deposited in accordance with Article X.4.(a)(ii) hereof or if the said fourth instalment deposit is not released to the BUILDER against presentation by the BUILDER of a copy of the original 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 under the provisions of Article VII hereof; or

 

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

 

In case the BUYER is in default as defined in this Article XI.1, 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.

 

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;

 

(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 six per cent (6%) 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).

 

38

 

(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 often (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 facsimile notice of rescission confirmed in writing.

 

(e)     In the event of such cancellation 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 cancellation 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 but must take reasonable precautions to obtain the true market value of the VESSEL.

 

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 six per cent (6%) 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.

 

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 six per cent (6%) per annum from the respective DUE DATE of the instalment in default to the date of sale, or if the VESSEL has hot 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

 

39

 

and delivered plus interest thereon at six per cent (6%) 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.

 

3.                   DEFAULT BY THE BUILDER

 

The BUILDER shall be deemed to be in default under this CONTRACT;

 

(i)             If the BUILDER shall apply for or consent to the appointment of a receiver, trustee or liquidator, shall be adjudicated insolvent, shall apply to the courts for protection from its creditors, file a voluntary petition in bankruptcy or take advantage of any insolvency law, or any action shall be taken by the BUILDER having an effect similar to any of the foregoing or the equivalent thereof in any jurisdiction, or the BUILDER shall be unable to pay its debts as they fall due and following the occurrence of any of the foregoing events and for as long as they are continuing, there has been then a delay of more than fifty (50) days in the commencement of steel cutting or the completion of keel laying or launching after the due date as specified in the construction schedule agreed by the BUYER.

 

(ii)          If the BUILDER, without reasonable excuse, delays in the commencement or progress of the construction of the VESSEL for a period of one hundred (100) days or more and the BUILDER has not rectified the same within fourteen (14) days of being notified by the BUYER of such delay.

 

(iii)      If the refund guarantee is not issued within thirty (30) days from the date of this CONTRACT.

 

In the event of such BUILDER’s default the BUYER may then cancel this CONTRACT by promptly notifying the BUILDER in writing but not later than two (2) weeks from the date the BUYER becomes aware of the BUILDER’s default. Such cancellation is to be effective as of the date when such notice of cancellation is received by the BUILDER.

 

(End of Article)

 

40

 

ARTICLE XII : BUYER’S SUPPLIES

 

1.                   RESPONSIBILITY OF THE BUYER

 

The BUYER shall, at its cost and expense, supply all the BUYER’s supplies mentioned in the SPECIFICATIONS, if any, (hereinafter called the “BUYER’S SUPPLIES”), to the BUILDER at the SHIPYARD in perfect condition ready for installation and in accordance with the time schedule to be furnished by the BUILDER to meet the building schedule of the VESSEL.

 

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 of 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 of 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:

 

(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 ten (10) days from the date specified by the

 

41

 

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 against weather and theft and handling the BUYER’S SUPPLIES, if any, which the BUILDER is required to install on board the VESSEL after delivery of such supplies to the SHIPYARD, and shall install such supplies on board the VESSEL at the BUILDER’s expense.

 

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 willful default or negligence on its part, be responsible for direct repair or correction.

 

(End of Article)

 

42

 

ARTICLE XIII : 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.                   LAWS APPLICABLE

 

Any arbitration arising hereunder shall be governed by and conducted 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 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. The proceedings of any arbitration shall be governed by the rules of the London Maritime Arbitrators Association. The parties shall try to agree a single arbitrator to conduct the arbitration.

 

If the parties cannot agree upon the appointment of the single arbitrator within two (2) weeks after one of the parties has given notice to the other party notifying that the other party to refer the dispute to arbitration, the dispute shall be settled by three arbitrators, each party appointing one arbitrator, the third being appointed by the London Maritime Arbitrators Association. If either of the appointed arbitrators refuses or is incapable of acting, the party who appointed him shall appoint a new arbitrator in his place.

 

If one party fails to appoint an arbitrator - either originally or by way of substitution - for two (2) weeks after the other party having appointed its arbitrator, has served the party making default with notice to make the appointment, the London Maritime Arbitrators

 

43

 

Association shall, after application from the party having appointed its arbitrator, also appoint an arbitrator on behalf of the party making default. The award of the arbitration made by the sole arbitrator or by the majority of the three arbitrators as the case may be shall be final, conclusive and binding upon the parties hereto.

 

4.                   NOTICE OF AWARD:

 

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

 

5.                   EXPENSES:

 

The Arbitrator or 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.

 

6.                   ENTRY IN COURT:

 

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

 

7.                   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 Arbitrator or the Arbitration Board may deem appropriate.

 

(End of Article)

 

44

 

ARTICLE XIV : SUCCESSORS AND ASSIGNS

 

The BUILDER agrees that at any time 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 by the BUYER to (and the title thereof may be taken by) another company.

 

Further, the BUYER may assign its rights (but not its obligations) under this CONTRACT to a first class financial institution in order for the BUYER to obtain finance from such financial institution with prior notification to the BUILDER and its acknowledgement of receipt thereof.

 

In the event of any assignment by the BUYER pursuant to the terms of this CONTRACT the assignee (and the assignee’s successors and assigns) shall succeed to all the rights of the BUYER under this CONTRACT. However, the BUYER shall remain responsible for performance of all the BUYER’s obligations, liabilities and responsibilities under this CONTRACT.

 

It is understood that any expenses or changes incurred in connection with the transfer/ assignment of this CONTRACT by the BUYER shall be for the account of the BUYER.

 

The BUILDER shall have the right to assign its rights (but not its obligations) under this CONTRACT at any time after the effective date hereof, provided that prior written agreements is obtained from the BUYER.

 

(End of Article)

 

45

 

ARTICLE XV : 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)

 

46

 

ARTICLE XVI : 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 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, excepting where it is necessary for usual operation, repair and maintenance of the VESSEL.

 

In case the BUYER requests the prior written consent of the BUILDER as set out in the above paragraph, the BUYER shall provide the BUILDER with a written undertaking from the recipient stating that (1) he acknowledge and shall observe the foregoing terms concerning the BUILDER’s right to confidential information and (2) any confidential information furnished in tangible form shall not be duplicated by recipient except for the purpose of the job specifically assigned to him. (3) Upon the completion of his job requiring reference to the confidential information, recipient shall return to the BUYER at his option or otherwise destroy all the confidential information received in written or tangible form including copies or reproductions or other media containing such confidential information. (4) Any documents or other media developed by the recipient containing confidential information shall be destroyed by the recipient.

 

(End of Article)

 

47

 

ARTICLE XVII : COMPLIANCE AND ANTI-BRIBERY

 

1.                   REPRESENTATIONS OF THE PARTIES

 

During the term of this CONTRACT, each party certifies and represents as follows:

 

(a)         It will comply with the laws of any jurisdiction applicable to such party as it relates to this CONTRACT, including but not limited to any applicable anti-corruption and anti-bribery laws, also including, without limitation, the United States Foreign Corrupt Practices Act (“US FCPA”), the UK Bribery Act 2010 (“UK Bribery Act”) and the anti-bribery or anti-corruption laws of South Korea as such laws may be amended from time to time.

 

(b)         In connection with this CONTRACT, it has not and will not make any payments or gifts or provide other advantages, or any offers or promises of payments or gifts or other advantages of any kind, directly or indirectly, to:

 

a.             any person or entity with the intention of obtaining or retaining a business advantage for itself or the other party to this CONTRACT;

 

b.             any official or member of any government or any agency or instrumentality thereof; any official or member of any public international organisation or any agency or instrumentality thereof; any or official of a political party or any candidate for political office (herein ‘public official’); or any person while knowing or reasonably suspecting that all or a portion of such money or thing of value will be offered, given or promised, directly or indirectly, to any public official, in violation of the UK Bribery Act, the US FCPA or the laws of South Korea.

 

c.              In connection with this CONTRACT, it has not and will not request, agree to accept or accept from any person or entity any payments or gifts or other advantages, or any offers or promises of payments or gifts or other advantages of any kind, directly or indirectly, as a reward or inducement to perform its obligations under this CONTRACT in any way improperly.

 

2.                   INDEMNIFICATION

 

Each party agrees that it will fully indemnify, defend and hold harmless the other party from any claims, liabilities, damages, expenses, penalties, judgments and losses (including reasonable attorneys’ fees) assessed or resulting by reason of a breach of the representations and undertakings contained in this Article XVII to the extent permitted by law.

 

(End of Article)

 

48

 

ARTICLE XVIII : INSURANCE

 

(a)         Until delivery, the VESSEL as well as all her equipment and accessories to be used therein shall be at the risk of the BUILDER and the BUILDER shall at its own expense insure the same from launching and items of BUYER’s supply from time to time delivered to the SHIPYARD until delivery of the VESSEL and while undergoing Acceptance Trials in accordance with the Trials Schedule against the usual marine perils. Such insurance shall be taken out with Korean insurance companies on terms corresponding to the Institute of London Underwriter’s Clauses for BUILDER’s risks, as amended to cover earthquakes. Such insurance shall be in an amount corresponding to the Value of Items of BUYER’s supply delivered as aforesaid together with whichever shall be the greater of:

 

(i)             the value of the items, all equipment and accessories supplied from time to time by the BUILDER and used therein; or

 

(ii)          the total of the instalments of the CONTRACT PRICE hereinafter mentioned already paid (together with interest thereon calculated at the rate of six per cent (6%) per annum from the respective dates on which such instalments have been paid).

 

(b)         Insurance shall be effected by the BUILDER with first class Korean insurers and the BUILDER shall provide the BUYER with a certified copy of all insurance policies on issue of same.

 

(c)          Should the VESSEL be damaged during construction or while undergoing acceptance Trials or otherwise and should such damage not constitute the VESSEL an actual total loss or constructive or arranged or compromised total loss this CONTRACT shall in no way be invalidated but the BUILDER shall at its own expense make good such damage to the satisfaction of the CLASSIFICATION SOCIETY and to the reasonable satisfaction of the BUYER.

 

(End of Article)

 

49

 

ARTICLE XIX : 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)

 

50

 

ARTICLE XX : NOTICE

 

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

 

	
To the BUILDER : 
    	
Hyundai Samho Heavy Industries Co., Ltd.
    
	
 
    	
93, Daebul-ro, Samho-eup, Yeongam-gun, Jeollanam-do, Korea
    
	
 
    	
 
    
	
 
    	
Attention : 
    	
Contract Management Department
    
	
 
    	
 
    	
S. W. Jeon / General Manager
    
	
 
    	
 
    
	
 
    	
Tel
    	
+82 61 460 2649
    
	
 
    	
Fax
    	
+82 61 460 3707
    
	
 
    	
Email
    	
swc@hshi.co.kr
    
	
 
    	
 
    
	
To the BUYER : 
    	
STI Cavaliere Shipping Company Limited
    
	
 
    	
c/o Scorpio Tankers Inc
    
	
 
    	
“Le Millenium”
    
	
 
    	
9 Boulevard Charles III, 98000 Monaco
    
	
 
    	
 
    
	
 
    	
Attention: Mr. Luca Forgione/ Legal Department
    
	
 
    	
 
    
	
 
    	
Tel
    	
+377 97 98 57 00
    
	
 
    	
Fax
    	
+377 97 77 83 46
    
	
 
    	
Mob
    	
+336 80 86 99 86
    
	
 
    	
Email
    	
legal@scorpiogroup.net
    
				

 

The said notices shall become effective upon receipt of e-mail or registered air mail or facsimile by the receiver thereof. Where a notice by e-mail or 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 e-mail or facsimile.

 

(End of Article)

 

51

 

ARTICLE XXI : EFFECTIVENESS OF THIS CONTRACT

 

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

 

(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 in duplicate on the date and year first above written.

 

	
BUYER
    	
 
    	
BUILDER
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
For and on behalf of
    	
 
    	
For and on behalf of
    
	
STI Cavaliere Shipping Company Limited
    	
 
    	
Hyundai Samho Heavy Industries Co., Ltd.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Sergio Gianfranchi
    	
 
    	
By:
    	
/s/ Sam H. Ka
    
	
Name:
    	
Sergio Gianfranchi
    	
 
    	
Name:
    	
Sam H. Ka
    
	
Title:
    	
Director or Sti Cavaliere
    	
 
    	
Title:
    	
Attorney-in-fact
    
	
 
    	
Shipping Company Limited
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
WITNESS
    	
 
    	
WITNESS
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ James Doyle
    	
 
    	
By:
    	
/s/ Y. D. Park
    
	
Name:
    	
James Doyle
    	
 
    	
Name:
    	
Y. D. Park
    
	
Title:
    	
Analyst
    	
 
    	
Title:
    	
S.V.P
    

 

54

 

EXHIBIT “A”

 

LETTER OF GUARANTEE

 

Letter of Guarantee NO.:

 

Date:             , 2013

 

Gentlemen:

 

We hereby open our irrevocable letter of guarantee number                        in favour of                         (hereinafter called the “BUYER”) for account of Hyundai Samho Heavy Industries Co., Ltd., Samho, Korea (hereinafter called the “BUILDER”) as follows in connection with the shipbuilding contract dated                        ,                (hereinafter called “CONTRACT”) made by and between the BUYER and the BUILDER for the construction of                        having the BUILDER’s Hull No.                        (hereinafter called the “VESSEL”).

 

If, in connection with the terms of the CONTRACT, whether so supplemented, amended, changed or modified, the BUYER shall become entitled to a refund of the advance payment made to the BUILDER prior to the delivery of the VESSEL, we hereby irrevocably guarantee the repayment of the same to the BUYER within twenty (20) days after demand not exceeding US$                         (Say U.S. Dollars only) together with interest thereon at the rate of            per cent (           %) per annum from the date following the date of receipt by the BUILDER to the date of remittance by telegraphic transfer of such refund.

 

The amount of this guarantee will be automatically increased upon the BUILDER’s receipt of the respective instalment, not more than two (2) times, each time by the amount of instalment 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                          only) plus interest thereon at the rate of                  per cent (         %) per annum from the date following the date of the BUILDER’s receipt of each instalment 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 per cent (       %) per annum as provided in Article X of the CONTRACT.

 

This letter of guarantee is available (subject to the third paragraph hereof) against the BUYER’s first written demand and signed statement certifying that the BUYER’s demand for refund has been made in conformity with Article X of the CONTRACT and the BUILDER has

 

55

 

failed to make the refund within twenty (20) days after the Buyer’s demand. Refund shall be made to the Buyer by telegraphic transfer in United States Dollars.

 

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

 

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

 

Notwithstanding the provisions hereinabove, in the event that within twenty (20) days from the date of your claim to the BUILDER referred to above, we receive notification from you or the BUILDER accompanied by written confirmation to the effect 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, we shall under this guarantee, refund to you the sum adjudged to be due to you by the BUILDER pursuant to the award made under such arbitration immediately upon receipt from you of a demand for the sums so adjudged and a copy of the award.

 

This letter of guarantee shall 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 terras of the CONTRACT and, in either case, this letter of guarantee shall be returned to us.

 

This letter of guarantee is assignable and valid 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.

 

This guarantee shall be governed by and construed in accordance with the laws of England and the undersigned hereby submits to the non-exclusive jurisdiction of the courts of England.

 

	
 
    	
Very truly yours,
    
	
 
    	
 
    
	
 
    	
for and on behalf of
    
	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title :
    	
 
    

 

56

 

EXHIBIT “B”

 

	
Hyundai Samho Heavy Industries Co., Ltd.
    	
 
    
	
93, Daebul-Ro, Samho-Eup, Yeongam-Gun,
    	
Date :           ,   2013
    
	
Jeollanam-Do, Korea
    	
 
    

 

PERFORMANCE GUARANTEE

 

Gentlemen,

 

In consideration of your executing a shipbuilding contract (hereinafter called the “CONTRACT”) dated                  , 2013 with                          (hereinafter called the “BUYER”) providing for the design, construction, equipment, launch and delivery of                                  having the BUILDER’s Hull No.                      (hereinafter called the “VESSEL”), and providing, among other tilings, for payment of the contract price amounting to United States Dollars                               only (US$                   ) for the VESSEL, prior to and upon delivery of the VESSEL, the undersigned, as a primary obligor and not as a merely surety, hereby unconditionally and irrevocably guarantees to you or your successors, the due and faithful performance by the BUYER of all its obligations under the CONTRACT and any supplements, amendments, changes or modifications hereinafter made thereto including but not limited to the prompt payment of the contract price, when due (whether on account of principal, interest or otherwise) by the BUYER to you or your successors under the CONTRACT, notwithstanding any obligation of the BUYER being or becoming unenforceable by defect in or want of its powers, (hereby expressly waiving notice of any such supplement, amendment, change or modification as may be agreed to by the BUYER) and confirms that this guarantee shall be fully applicable to the CONTRACT whether so supplemented, amended, changed or modified and if it shall be assigned by the BUYER in accordance with the terms of the CONTRACT. This guarantee will expire on the DELIVERY of the VESSEL as defined in the CONTRACT.

 

The undersigned hereby certifies, represents and warrants that all acts, conditions and things required to be done and performed and to have occurred precedent to the creation and issuance of this guarantee, and to constitute the guarantee the valid and legally binding obligation of the undersigned enforceable in accordance with its terms have been done and performed and have occurred in due and strict compliance with applicable laws.

 

The payment by the undersigned under this guarantee shall be made forthwith within thirty (30) days upon receipt by us of written demand from you including a substantiated statement that the BUYER is in default of payment of the amounts (including, but not limited to, the instalment(s) payable prior to or upon delivery of the VESSEL) that were due under the CONTRACT, without requesting you to take any or further procedure or step against the

 

57

 

BUYER. In the event that any withholding or deduction is imposed by any law, Article XV of the CONTRACT shall apply so that the undersigned will pay such additional amount as may be necessary in order that the actual amount received after deduction or withholding by virtue of any law outside Korea shall equal to the amount that would have been received if such payment had been made by the BUYER.

 

Notwithstanding the provisions hereinabove, in the event that any of your request under the CONTRACT is disputed by the BUYER and referred to arbitration in accordance with the provisions of the CONTRACT and we receive notification of this from either you or the BUYER, we shall pay you within thirty (30) days from receipt of your written request together with a certified copy of the award ordering the payment by the BUYER to you of the sum due.

 

This guarantee shall be governed by and interpreted in accordance with the laws of England and the undersigned hereby submits to the non-exclusive jurisdiction of the Courts of England and appoints Scorpio UK Ltd                            to receive service of proceedings in such courts on its behalf.

 

	
 
    	
Very truly yours,
    
	
 
    	
 
    
	
 
    	
For and on behalf of
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
Name :
    	
 
    
	
 
    	
Title :
    	
 
    

 

58Exhibit 10.55

 

SHIPBUILDING CONTRACT

FOR

THE CONSTRUCTION AND SALE

OF

 

One (1) 300,000 TDW CRUDE OIL TANKER

(HULL NO.: 5407)

 

BY AND BETWEEN

 

STI DUNDEE SHIPPING COMPANY LIMITED

(as BUYER)

 

AND

 

DAEWOO SHIPBUILDING & MARINE ENGINEERING CO., LTD.

(as BUILDER)

 

 

Table of Contents

 

	
ARTICLE I.                                                  DESCRIPTION   AND CLASS
    	
1
    
	
1.
    	
Description:
    	
1
    
	
2.
    	
Dimensions   and Characteristics:
    	
1
    
	
3.
    	
Classification,   Rules and Regulations:
    	
1
    
	
4.
    	
Subcontracting   of Construction Work:
    	
2
    
	
5.
    	
Registration:
    	
2
    
	
ARTICLE II.                                             CONTRACT   PRICE AND TERMS OF PAYMENT
    	
3
    
	
1.
    	
Contract   Price:
    	
3
    
	
2.
    	
Currency:
    	
3
    
	
3.
    	
Terms   of Payment:
    	
3
    
	
4.
    	
Method   of Payment:
    	
4
    
	
5.
    	
Corporate   Guarantee:
    	
5
    
	
ARTICLE III.                                        ADJUSTMENT OF   CONTRACT PRICE
    	
5
    
	
1.
    	
Delivery:
    	
5
    
	
2.
    	
Speed:
    	
6
    
	
3.
    	
Fuel   Consumption:
    	
7
    
	
4.
    	
Deadweight:
    	
7
    
	
5.
    	
Conclusive   Pecuniary Compensation:
    	
7
    
	
6.
    	
Effect   of Termination:
    	
8
    
	
ARTICLE IV.                                         APPROVAL OF   PLANS AND DRAWINGS AND INSPECTION DURING CONSTRUCTION
    	
8
    
	
1.
    	
Approval   of Plans and Drawings:
    	
8
    
	
2.
    	
Appoinment   of Buyer’s Representative:
    	
8
    
	
3.
    	
Inspection:
    	
9
    
	
4.
    	
Facilities:
    	
9
    
	
5.
    	
Liability   of Builder:
    	
10
    
	
6.
    	
Responsibility   of Buyer:
    	
10
    
	
ARTICLE V.                                              MODIFICATIONS
    	
11
    
	
1.
    	
Modification   of Specifications:
    	
11
    
	
2.
    	
Change   in Class, etc.:
    	
11
    
	
3.
    	
Substitution   of Materials:
    	
12
    
	
ARTICLE VI.                                         TRIALS
    	
12
    
	
1.
    	
Notices:
    	
12
    
	
2.
    	
Weather   Conditions:
    	
13
    
	
3.
    	
How   Conducted:
    	
13
    
	
4.
    	
Method   of Acceptance or Rejection:
    	
13
    
	
5.
    	
Effect   of Acceptance:
    	
14
    
	
6.
    	
Disposition   of Surplus Consumable Stores:
    	
15
    
	
ARTICLE VII.                                    DELIVERY DATE   AND DELIVERY
    	
15
    
	
1.
    	
Time   and Place:
    	
15
    
	
2.
    	
When   and How Effected:
    	
15
    
	
3.
    	
Documents   to be Delivered to Buyer:
    	
15
    
	
4.
    	
Tender   of Vessel:
    	
17
    
	
5.
    	
Title   and Risk:
    	
17
    
	
6.
    	
Removal   of Vessel:
    	
17
    
	
ARTICLE VIII.                               DELAYS AND   EXTENSION OF TIME FOR DELIVERY (FORCE MAJEURE)
    	
17
    
	
1.
    	
Causes   of Delay:
    	
17
    
	
2.
    	
Definition   of Permissible Delay:
    	
18
    
	
3.
    	
Notice   of Delay:
    	
18
    
	
4.
    	
Right   to Terminate Contract for Excessive Delay:
    	
18
    
	
ARTICLE I.                                                  WARRANTY OF   QUALITY
    	
19
    

 

ii

 

	
1.
    	
Guarantee:
    	
19
    
	
2.
    	
Notice   of Defects:
    	
19
    
	
3.
    	
Extent   of Builder’s Responsibility:
    	
19
    
	
4.
    	
Remedy   of Defects:
    	
20
    
	
ARTICLE X.                                              REMEDIES OF   BUYER
    	
21
    
	
1.
    	
Notice:
    	
21
    
	
2.
    	
Refund   by Builder:
    	
21
    
	
3.
    	
Discharge   of Obligations:
    	
21
    
	
ARTICLE XI.                                         REMEDIES OF   BUILDER
    	
22
    
	
1.
    	
Definition   of Default:
    	
22
    
	
2.
    	
Interest   and Charges:
    	
22
    
	
3.
    	
Effect   of Default:
    	
22
    
	
4.
    	
Sale   of Vessel:
    	
23
    
	
5.
    	
Remedies   Cumulative:
    	
24
    
	
ARTICLE XII.                                    INSURANCE
    	
24
    
	
1.
    	
Extent   of Insurance Coverage:
    	
24
    
	
2.
    	
Application   of Recovered Amount:
    	
24
    
	
3.
    	
Redelivery   of Buyer’s Supplies:
    	
25
    
	
4.
    	
Termination   of Builder’s Obligation to Insure:
    	
25
    
	
ARTICLE XIII.                               DISPUTES AND   ARBITRATION
    	
25
    
	
1.
    	
Proceedings:
    	
25
    
	
2.
    	
Alteration   of Delivery of the Vessel:
    	
26
    
	
3.
    	
Entry   in Court:
    	
26
    
	
ARTICLE XIV.                                RIGHT OF   ASSIGNMENT
    	
26
    
	
ARTICLE XV.                                     TAXES AND   DUTIES
    	
27
    
	
1.
    	
Taxes   and Duties in Korea:
    	
27
    
	
2.
    	
Taxes   and Duties outside Korea:
    	
27
    
	
ARTICLE XVI.                                PATENTS,   TRADEMARKS, COPYRIGHTS, ETC.
    	
27
    
	
1.
    	
Patents,   Trademarks and Copyrights:
    	
27
    
	
2.
    	
Rights   to General Plans, Specifications and Working Drawings:
    	
27
    
	
ARTICLE XVII.                           COMPLIANCE   AND ANTI-BRIBERY
    	
28
    
	
1.
    	
Representation   of the Parties:
    	
28
    
	
2.
    	
Indemnification:
    	
29
    
	
ARTICLE XVIII.                      BUYER’S   SUPPLIES
    	
29
    
	
1.
    	
Responsibility   of Buyer:
    	
29
    
	
2.
    	
Responsibility   of Builder:
    	
30
    
	
3.
    	
Return   of Buyer’s Supplies
    	
30
    
	
ARTICLE XIX.                                REPRESENTATIVES
    	
30
    
	
ARTICLE XX.                                     NOTICE AND   LANGUAGE
    	
31
    
	
1.
    	
Notice:
    	
31
    
	
2.
    	
Language:
    	
31
    
	
3.
    	
Writing:
    	
31
    
	
ARTICLE XXI.                                EFFECTIVE   DATE OF CONTRACT
    	
31
    
	
ARTICLE XXII.                           INTERPRETATION
    	
32
    
	
1.
    	
Laws   Applicable:
    	
32
    
	
2.
    	
Discrepancies:
    	
32
    
	
3.
    	
Entire   Agreement:
    	
32
    
	
4.
    	
Amendment
    	
32
    
	
5.
    	
Headings:
    	
32
    
	
6.
    	
Severability:
    	
32
    
	
7.
    	
Exclusion   of the Contracts (Rights of Third Parties) Act 1999:
    	
32
    

 

iii

 

	
EXHIBIT A.
    	
REFUND GUARANTEE
    	
34
    
	
EXHIBIT B.
    	
CORPORATE   GUARANTEE
    	
36
    

 

iv

 

SHIPBUILDING CONTRACT

 

BY THIS CONTRACT made the 13th day of December, 2013 by and between STI Dundee Shipping Company Limited, a corporation organized and existing under the laws of the Marshall Island having its registered office at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands 96960 (the “Buyer”), and DAEWOO SHIPBUILDING & MARINE ENGINEERING CO., LTD., a corporation organized and existing under the laws of the Republic of Korea, having its principal office at 85, Da-dong, Jung-Gu, Seoul, Korea (the “Builder”).

 

IT IS AGREED AND DECLARED as follows:

 

Builder agrees to design, build, launch, equip and complete one (1) 300,000 TDW Crude Oil Tanker more fully described in the Specifications (as defined below) (the “Vessel”) at the Builder’s shipyard located at Okpo, Korea (the “Shipyard”) and to sell and deliver the same to Buyer, and Buyer hereby agrees to purchase and take delivery of the Vessel from Builder, on the terms and conditions herein set out.

 

ARTICLE I.                                                  DESCRIPTION AND CLASS

 

1.                                      Description:

 

The Vessel shall have Builder’s Hull No. 5407 and shall be designed, built, equipped, launched and completed in accordance with the provisions of this Contract, and the specifications (Ref. No. TK1313-FS-R0) dated November 28, 2013, the General Arrangement Plan (DWG. No. BPG-SC0-101-001-A) dated November 25, 2013 and the MOM dated December 12, 2013 (together the “Specifications”), signed by the parties for identification and incorporated into this Contract.

 

2.                                      Dimensions and Characteristics:

 

Details of the Vessel’s length, breadth, depth, draft, machinery and all other particulars as well as the definitions and methods of measurement and calculation are as shown in the Specifications.

 

3.                                      Classification, Rules and Regulations:

 

The Vessel, including her machinery, equipment and outfit, shall be constructed in accordance with Builder’s shipbuilding practice, Builder’s quality standard and the edition and amendments thereto in force at the execution date of this Contract, of the rules and regulations of and under special survey of Lloyd’s Register (LR) (the “Classification Society”), and shall be distinguished in the Classification Society’s register by the symbols of +100A1, “Double Hull Oil Tanker”, ESP, CSR, ShipRight (CM, ACS(B)), +LMC, LI, UMS, IGS, DSPM4, CRANE, COW(LR), *IWS, NAVl, ECO(P, BWM-T, IHM, VECS-L), with the descriptive notes of ShipRight (SCM, SERS), ETA. However, the Classification Society among LR, ABS and DNV shall be discussed between Buyer and Builder in a reasonable manner and finally decided by Buyer within two (2) weeks after the signing of the Contract.

 

Builder shall arrange with the Classification Society for the assignment by the Classification Society of representative(s) to the Vessel during construction. All costs, fees, charges and arrangements incidental to classification of the Vessel in compliance with the rules, regulations and

 

1

 

requirements of this Contract, shall be for the account of Builder. Decisions of the Classification Society as to compliance or non-compliance of the Vessel with the said rules and regulations of the Classification Society shall be final and binding upon the parties.

 

The Vessel shall also comply with the applicable rules, regulations and requirements of the other regulatory bodies referred to in the Specifications as in force at the execution date of this Contract and/or which are published and ratified as of the date of signing the Contract.

 

4.                                      Subcontracting of Construction Work:

 

Builder may at its option and sole responsibility towards Buyer, subcontract whole or any portion of the construction work of the Vessel to any properly qualified and experienced subcontractor. The Builder shall submit in advance of subcontracting list of intended subcontractors for the Buyer’s reference, however, any work that is carried out by workers at Builder’s yard even if the relevant workers are not in employment with Builder and/or Builder’s majority owned and controlled affiliates including but not limited to Daewoo Shandong Co., Ltd. (DSSC), Shinhan Machinery Co., Ltd. (SMC) and/or Daehan Shipbuilding Co., Ltd. (DHSC) which is under the Builder’s consignment management shall not be regarded as subcontracted work and the Builder remains fully liable for the due and complete performance of any work undertaken by the Shipyard and/or carried out by subcontractors.

 

It is agreed among the parties that the Vessel shall always remain at the Shipyard unless Buyer and Builder agrees otherwise.

 

Without prejudice to the generality of the foregoing:

 

(i)                             Builder shall remain fully liable to the Buyer for the due and complete performance of any work (or part of it) undertaken by any subcontractor as if undertaken by Builder;

 

(ii)                          All sub-contractors howsoever employed or engaged are hereby declared and agreed to be sub-contractors employed or engaged by Builder and Builder agrees that it is and shall remain fully responsible for and liable in respect of any sub-contractors and/or their acts or omissions and, without prejudice to the generality of the foregoing, Builder shall ensure control over supervision and scheduling of the all work done by subcontractors; and

 

(iii)                       No sub-contract shall bind or purport to bind Buyer, and each sub-contract shall be the responsibility of Builder.

 

Buyer may request Builder to replace any subcontractor whose level of workmanship has been demonstrated not to meet the requirements of the Contract and the Specifications which request Builder shall not unreasonably refuse. Engine room, bow and stern blocks shall be fabricated at the Shipyard.

 

5.                                      Registration:

 

The Vessel shall be registered by Buyer at its own cost and expense under the laws of the Marshall Islands at the port of Majuro at the time of delivery.

 

2

 

ARTICLE II.                                             CONTRACT PRICE AND TERMS OF PAYMENT

 

1.                                      Contract Price:

 

The Contract Price of the Vessel is United States Dollars Ninety Four Million Fifty Thousand only (USD94,050,000.-) (the “Contract Price”), net receivable by Builder, which is exclusive of Buyer’s Supplies. The Contract Price shall be subject to upward or downward adjustment, if any, as set out in this Contract. Any such adjustment shall be determined prior to delivery of the Vessel.

 

2.                                      Currency:

 

All payments required to be made by either party under this Contract shall be made in United States Dollars.

 

3.                                      Terms of Payment:

 

The Contract Price shall be paid by Buyer to Builder in instalments (“Instalment(s)”) as follows: (A “banking day” referred to in this Contract means a day on which commercial banks are open for domestic and foreign exchange business in New York, Seoul, the Netherlands and Monaco.)

 

(a)                                 First Instalment:

 

Fifteen percent (15%) of the Contract Price, amounting to United States Dollars Fourteen Million One Hundred Seven Thousand Five Hundred only (USD14,107,500-), shall be paid within five (5) banking days from the date of receipt by Buyer of a notice from Builder confirming that the Refund Guarantee (as defined in Article X.2) for the Vessel has been issued. The confirmation shall be accompanied by a copy of the Refund Guarantee.

 

(b)                                 Second Instalment:

 

Ten percent (10%) of the Contract Price, amounting to United States Dollars Nine Million Four Hundred Five Thousand only (USD9,405,000.-), shall be paid on or before one hundred and eighty days after the execution date of this Contract.

 

(c)                                  Third Instalment:

 

Ten percent (10%) of the Contract Price, amounting to United States Dollars Nine Million Four Hundred Five Thousand only (USD9,405,000.-), shall be paid within five (5) banking days from the date of receipt by Buyer of a notice from Builder together with a certificate issued by the Classification Society confirming that the steel cutting for the Vessel has commenced, it being understood that in no eventuality shall this installment become due more than twelve (12) months prior to the Delivery Date in Article VII. herein

 

(d)                                 Fourth Instalment:

 

Ten percent (10%) of the Contract Price, amounting to United States Dollars Nine Million Four Hundred Five Thousand only (USD9,405,000.-), shall be paid within five (5) banking days from the date of receipt by Buyer of a notice from Builder together with a certificate issued by the Classification Society confirming that keel laying for the first block of the Vessel has been completed, it being understood that in no eventuality shall this instalment become due more than seven (7) months prior to the Delivery Date in Article VII. herein.

 

3

 

(e)                                  Fifth Instalment:

 

Fifty Five percent (55%) of the Contract Price, amounting to United States Dollars Fifty One Million Seven Hundred Twenty Seven Thousand Five Hundred only (USD51,727,500.-), plus other sums due to Builder under this Contract and any increase or minus any decrease due to adjustments, if any, to the Contract Price shall be paid upon delivery of the Vessel.

 

4.                                      Method of Payment:

 

(a)                                 Instalments Payable before Delivery:

 

At least fourteen (14) days prior to the date of each event provided in Paragraph 3 of this Article on which any payment shall fall due hereunder, with the exception of the payment of the first instalment, the Builder shall notify the Buyer by facsimile or e-mail of the date such payment shall become due.

 

After receipt of a notice from Builder, but in any event on or before the due date of the respective instalment, Buyer shall, at its own cost and expense, remit each of the respective Instalments payable before delivery of the Vessel as provided in Article II.3 by telegraphic transfer to the account of the Export - Import Bank of Korea, Seoul, Korea (SWIFT BIC EXIKKRSE) (hereinafter called “KEXIM”) Account No. 04-029-695 with Deutsche Bank Trust Company Americas, 60 Wall Street Mail Suite NYC60-0501, New York, N.Y. 10004, U.S.A. (SWIFT BIC BKTRUS33) (hereinafter called the “DBTC”) or to the account of a first class Bank (“Builder’s Bank”) in favour of Daewoo Shipbuilding & Marine Engineering Ltd., as indicated by Builder at the same time as the relevant notice is given, under advice by authenticated SWIFT message to HB or Builder’s Bank by the remitting bank.

 

(b)                                 Instalment Payable on Delivery:

 

Upon receipt of a notice from Builder, Buyer shall, at its own cost and expense, deposit the Fifth Instalment payable upon delivery of the Vessel (as provided in Article 11.3(e)) by telegraphic transfer to the account of the KEXIM with DBTC or to the account of the ( Builder’s Bank, under advice by authenticated SWIFT message to KEXIM or the Builder’s Bank by the remitting bank, at least two (2) banking days prior to the scheduled delivery date of the Vessel, with irrevocable instruction that the said deposit shall be released to Builder against presentation by Builder to KEXIM or Builder’s Bank of a duplicate original copy of the Protocol of Delivery and Acceptance of the Vessel signed by Builder and Buyer.

 

If the Protocol of Delivery and Acceptance of the Vessel shall not have been signed within ten (10) days of the deposit of the Fifth Instalment it, together with accrued interest (if any), shall be returned to Buyer unless otherwise agreed. However when the newly scheduled delivery date is notified to the Buyer by the Builder, the Buyer shall make the cash deposit in accordance with the same terms and conditions as set out above.

 

(c)                                  Prompt payment:

 

No payment due and payable to Builder under this Contract shall be delayed or withheld

 

4

 

by Buyer on account of any dispute or disagreement of whatsoever nature arising between the parties hereto or by the reason of reference of the said dispute or disagreement to arbitration provided for in Article XIII and shall not be subject to any setoff or deduction.

 

Time shall be of the essence of this Contract in respect of payment of any of the Instalments and/or interest thereon.

 

5.                                      Corporate Guarantee:

 

Upon execution of this Contract, Buyer shall furnish to Builder an irrevocable and unconditional corporate guarantee (the “Corporate Guarantee”) duly executed and issued by Scorpio Tankers Inc. (the “Corporate Guarantor”), covering and guaranteeing the due performance of Buyer’s obligations under this Contract including, but not limited to, the payment of the Contract Price and taking delivery of the Vessel in accordance with the provisions of this Contract and substantially in the form annexed hereto as Exhibit “B”. The Corporate Guarantor shall on demand furnish to Builder evidence satisfactory to Builder of its power and authority to enter into the Corporate Guarantee and as to the execution thereof by its duly authorised representative. The Corporate Guarantee shall continue in full force and effect until the full performance of all of Buyer’s obligations under this Contract.

 

ARTICLE III.                                        ADJUSTMENT OF CONTRACT PRICE

 

The Contract Price shall be subject to adjustment as hereinafter set out in the following circumstances. Any reduction of the Contract Price pursuant to this Article 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 (ending as of twelve o’clock midnight, Korean time of the thirtieth day of delay).

 

(b)                                 If the delivery of the Vessel, for causes for which Builder is liable, is delayed more than thirty (30) days after the Delivery Date, then, in such event, beginning at twelve o’clock midnight of the thirty-first (31st) day after the Delivery Date, the Contract Price shall be reduced by deducting therefrom as follows:

 

31st - 210th day US Dollars Thirty Thousand only USD 30,000 per day

 

However, the total reduction in the Contract Price shall not exceed the amount due to cover a delay of one hundred eighty (180) days counting from midnight of the thirtieth (30th) day after the Delivery Date at the above specified rate of reduction.

 

(c)                                  If such delay in delivery of the Vessel continues, due to Builder’s default, for a period of one hundred eighty (180) days or more from the thirty-first (31st) day after the Delivery Date, in such event, and after such period has expired, Buyer may, at its option, terminate this Contract in accordance with the provisions of Article X, or accept the Vessel with a

 

5

 

total reduction in the Contract Price of United States Dollars Five Million Four Hundred Thousand only (USD5,400, 000.-).

 

Builder may, at any time after the expiration of the aforementioned two hundred and ten (210) days of delay in delivery, if Buyer has not served notice of termination as provided in Article X, notify Buyer of the expected future date for delivery and demand in writing that Buyer shall make an election, in which case Buyer shall, within ten (10) days after such demand is delivered to Buyer, notify Builder of its termination of this Contract or acceptance of the revised future date for delivery. If the Vessel is not delivered by such revised future date for delivery, Buyer shall have the same right of termination upon the same terms and conditions as hereinabove provided. If Buyer fails to notify Builder of its termination of this Contract as specified above within such ten (10) days period, Buyer shall be deemed to have consented to the delivery of the Vessel at the future date for delivery proposed by Builder.

 

(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 of all postponements of the Delivery Date by reason of permissible delays as defined in this Contract, is not delivered by the date upon which the delivery is required under the terms of this Contract.

 

2.                                      Speed:

 

(a)                                 The Contract Price shall not be affected or changed by reason of a deficiency in the actual speed of the Vessel, as determined on the basis of trial run, being less than three-tenths (3/10) of one (1) knot below the guaranteed speed of the Vessel at the designed draft in the conditions as set out in the Specifications.

 

(b)                                 If the deficiency in actual speed of the Vessel amounts to or exceeds three-tenths (3/10) of one (1) knot below the guaranteed speed of the Vessel at the design draft, any fractions less than one-tenth (1/10) of one (1) knot of deficiency shall be regarded as a full one-tenth (1/10) of a knot, the Contract Price shall be reduced as follows:

 

	
Deficiency in Actual Speed
    	
 
    	
Total Reduction
    
	
Three-tenths
    	
of a knot
    	
 
    	
USD 
    	
137,000.-
    
	
Four-tenths
    	
of a knot
    	
 
    	
USD 
    	
274,000.-
    
	
Five-tenths
    	
of a knot
    	
 
    	
USD 
    	
411,000.-
    
	
Six-tenths
    	
of a knot
    	
 
    	
USD 
    	
548,000.-
    
	
Seven-tenths
    	
of a knot
    	
 
    	
USD 
    	
685,000.-
    
	
Eight-tenths
    	
of a knot
    	
 
    	
USD 
    	
822,000.-
    

 

The above amounts are not cumulative.

 

(c)                                  If the deficiency in actual speed of the Vessel as determined during the trial run is more than nine-tenth (9/10) of one (1) full knot below the guaranteed speed of the Vessel at the designed draft, Buyer may, at its option, reject the Vessel in accordance with Article VI.4 and terminate this Contract in accordance with the provisions of Article X, or accept the Vessel with a total reduction in the Contract Price of United States Dollars Eight Hundred Twenty Two Thousand only (USD822,000.-).

 

6

 

3.                                      Fuel Consumption:

 

(a)                                 The Contract Price shall not be affected or changed by reason of the actual specific fuel consumption of the Vessel’s main engine, as determined by a shop trial of the engine manufacturer according to the Specifications, exceeding the guaranteed specific fuel consumption of the Vessel’s main engine, if such excess is not more than five percent (5%) of the guaranteed specific fuel consumption in the conditions as set out in the Specifications.

 

(b)                                 If the actual specific fuel consumption exceeds five percent (5%) over the guaranteed specific fuel consumption of the Vessel’s main engine, the Contract Price shall be reduced by the sum of United States Dollars One Hundred Twenty Thousand only (USD120,000.-) for each full one percent (1%) increase in specific fuel consumption above said five percent (5%), fractions of less than 1% shall be regarded as a full one percent (1%), up to a maximum of nine percent (9%) above the guaranteed specific fuel consumption of the Vessel’s main engine.

 

(c)                                  If the actual specific fuel consumption exceeds nine percent (9%) above the guaranteed specific fuel consumption of the Vessel’s main engine, Buyer may, at its option and subject to the Builder’s right to effect alterations or corrections as specified in ARTICLE V of the Contract, reject the Vessel in accordance with Article VI.4 and terminate this Contract in accordance with the provisions of Article X, or accept the Vessel with a total reduction in the Contract Price of United States Dollars Four Hundred Eighty Thousand only (USD480,000.-).

 

4.                                      Deadweight:

 

(a)                                 The Contract Price shall not be affected or changed by reason of a deficiency in the actual deadweight of the Vessel, being not more than Two Thousand (2,000) metric tons below the guaranteed deadweight at the scantling draft in the conditions as set out in the Specifications.

 

(b)                                 If the deficiency in the actual deadweight of the Vessel exceeds Two Thousand (2,000) metric tons below the guaranteed deadweight at the scantling draft, the Contract Price shall be reduced by the sum of United States Dollars One Thousand Four Hundred only (USD1,400) for each full metric ton of such deficiency in excess of Two Thousand (2,000) metric tons (but disregarding fractions of a ton) up to a maximum deficiency of Five Thousand (5,000) metric tons.

 

(c)                                  If the deficiency in the actual deadweight of Vessel is more than Five Thousand (5,000) metric tons below the guaranteed deadweight at the scantling draft, then, Buyer may, at its option, reject the Vessel in accordance with Article VI.4 and terminate this Contract in accordance with the provisions of Article X, or accept the Vessel with a total reduction in the Contract Price of United States Dollars Four Million Two Hundred Thousand only (USD4,200,000.-).

 

5.                                      Conclusive Pecuniary Compensation:

 

The liquidated damages hereunder shall be the conclusive pecuniary compensation recoverable in connection with each particular event stated herein and Builder shall not be liable for any additional compensation claimed by Buyer in relation to such particular event and its consequential events.

 

7

 

6.                                      Effect of Termination:

 

If Buyer terminates this Contract for any reason whatsoever, Buyer shall not be entitled to any liquidated damages but shall be entitled to the refund of the purchase price as per Art X.2.

 

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

 

1.                                      Approval of Plans and Drawings:

 

(a)                                 Builder shall submit to Buyer three (3) copies of each of the plans and drawings, the list of which shall be mutually agreed upon between the parties hereto, for its approval. Buyer shall, within fourteen (14) days after receipt thereof, return to Builder one (1) copy of such plans and drawings with Buyer’s approval or comments (if any) written thereon.

 

(b)                                 If the Representative (as hereinafter defined) shall have been sent by Buyer to the Shipyard as set out in Article IV.2, Builder may submit any remaining plans and drawings to the Representative for his approval. The Representative shall, within seven (7) days after receipt thereof, return to Builder one (1) copy of such plans and drawings with his approval or comments (if any) written thereon. Approval by the Representative of the plans and drawings duly submitted to him shall be deemed to be approval by Buyer for all purposes of this Contract.

 

(c)                                  If the above comments made by Buyer are not clearly specified or detailed, Builder shall seek clarification and the Buyer shall have further seven (7) days to reply with such clarifications. In the absence of clarifications from the Buyer within said time, the Builder may place its own interpretation on such comments in implementing the same. In the event the plans and drawings submitted by the Builder to the Buyer or the Representative in accordance with this Article do not meet with the Buyer’s or the Representative’s approval, the matter may be submitted by either party hereto for determination pursuant to Article XIII hereof.

 

(d)                                 If Buyer or the Representative shall fail to return the plans and drawings to Builder within the time limit as above provided, such plans and drawings shall be deemed to have been approved or confirmed without any comment.

 

2.                                      Appointment of Buyer’s Representative:

 

Buyer shall in due time despatch to and maintain at the Shipyard, at Buyer’s own cost and expense, one or more representative(s) (the “Representative” or the “Representatives”) who shall be duly authorized in writing by Buyer to act on behalf of Buyer in connection with modifications of the Specifications, adjustment of the Contract Price and the Delivery Date, confirmation of the Production Schedule, approval of the plans and drawings, to supervise adequately the construction by the Builder of the Vessel, attendance to the tests and inspections relating to the Vessel, its machinery, equipment and outfit and any other matters for which he is authorized by Buyer.

 

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3.                                      Inspection:

 

The necessary tests and inspections of the Vessel, her machinery, equipment and outfit either as required by the Classification Society or by other applicable regulatory bodies or as agreed by the parties hereto, shall be carried out by the Classification Society, other regulatory bodies and/or an inspection team of Builder throughout the entire period of construction, in order to ensure that the construction of the Vessel is duly performed in accordance with this Contract and the Specifications. During construction of the Vessel the Representative shall have the right to attend such tests and inspections of the Vessel, her machinery and equipment as mutually agreed between Buyer and Builder.

 

Builder shall give a reasonable advance notice to the Representative of the date and place of such tests, trials and inspections which may be attended by him. Failure by the Representative to be present at such tests, trials and inspections after due notice to him as aforesaid shall be deemed to be a waiver of the Representative’s right to be present if such absence could not be avoided by the exercise of the Buyer’s Representative’s due diligence due to an incident of force majeure nature and/or unless the Buyer’s Representative gives seven (7) days advance notice of such absence. In the event that Builder needs an inspection for coating work to be made during non-working hours for smooth progress of work, the Representative shall exercise his best endeavour to attend such inspection provided that Builder has given a reasonable advance notice to the Representative

 

At all times when work is being done at the Shipyard until delivery of the Vessel, the Representative shall, subject to the reasonable requirements of the Shipyard’s work program and safety control, be permitted free and ready access to the Vessel, her machinery and equipment, and to any other place where work on the Vessel is being done, or materials are being processed or stored in connection with the construction of the Vessel, including the yards, workshops, stores and offices of Builder, and the premises of subcontractors of Builder, who are doing work or storing materials in connection with the Vessel’s construction.

 

If the Representative discovers any construction, material or workmanship which he considered not to conform to the requirements of this Contract and/or the Specifications, the Representative shall promptly give Builder a notice in writing specifying the alleged non-conformity. Upon receipt of such notice from the Representative, Builder shall correct such non-conformity, if Builder agrees to his view. Any disagreement shall be resolved in accordance with Article XIII.1.

 

If the Classification Society or an arbitrator enters a determination in favour of Buyer, then in such case Builder shall correct such non-conformity, or if such corrections cannot be made in time to meet the construction schedule for the Vessel, Builder shall make fair and reasonable adjustment of the Contract Price in lieu of such corrections subject to the prior written agreement of the parties. If the Classification Society or the arbitrator enters a determination in favour of Builder, then the time for delivery of the Vessel shall be extended for the period of delay in construction, if any, occasioned by such proceedings, and Buyer shall compensate Builder for the proven direct loss and damages incurred by Builder as a result of the dispute herein referred to.

 

4.                                      Facilities:

 

Builder shall furnish the Representatives with adequate office space equipped with desks, chairs, tables, filing cabinets, book shelves, internal and external telephone extensions, international line for telefax machine and a set of personal computer, internet access, and printer at, or in the immediate vicinity of the Shipyard and shall make available the use of such other reasonable facilities as may be necessary to enable them to carry out their duties effectively, according to Builder’s practice. However, Buyer shall pay telephone and telefax charges, and shall reimburse costs and expenses for installation of telefax or external telephone lines and facilities and office

 

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equipment and furniture, if any, provided additionally.

 

The Builder shall provide the Buyer with any assistance that the Buyer may require in obtaining work permits, visas, resident permits and other necessary documents for the Representative and their staff.

 

As far as practical, the Builder shall endeavour not to arrange for inspection of the same type of subcontracting work in two different places on the same day — including at the Shipyard premises — the distance between which cannot be covered by one man in one day.

 

5.                                      Liability of Builder:

 

The Representative(s) shall at all times be deemed to be the employee(s) of Buyer and not of Builder.

 

Builder shall be under no liability whatsoever to Buyer, or the Representative(s) for personal injuries or death, whether or not suffered during the time when he or they are on the Vessel, or within the premises of either Builder or its subcontractors, or are otherwise engaged in and about the construction of the Vessel, unless such personal injuries or death are caused by gross negligence of Builder. Without prejudice to the foregoing, in the event that such injury or death is caused by the fault (other than gross negligence) of Builder, its employees, agents or subcontractors, Buyer shall assume the liability (if any) which Builder, its employees, agents and/or subcontractors may otherwise have had in respect of or for the relevant injury or death (as the case may be).

 

Buyer shall keep Builder, its employees, agents and subcontractors indemnified and harmless from and against all and any proceedings, costs, claims, expenses and liabilities whatsoever brought, caused or incurred by or in respect of personal injuries or death suffered as aforesaid by Buyer or the Representative(s), provided that Buyer shall have no obligation to keep Builder indemnified and harmless as prescribed above in respect of any such injuries or death caused by the gross negligence of Builder or any of its employees, agents or subcontractors.

 

6.                                      Responsibility of Buyer:

 

Buyer shall advise Builder in advance of the names, experiences and scope of authority of the Representative(s) and of any other information pertaining to their qualifications. If Builder shall have reasonable cause to disapprove of any of the Representative(s), it shall so advise Buyer and Buyer shall take proper action.

 

Buyer shall undertake and assure that Buyer’s Representative(s) shall carry out their duties hereunder in accordance with good shipbuilding practice and in such a way as to avoid any unnecessary increase in building cost or delay in the production schedules of Builder. The Representative(s) shall abide by the work rules and regulations prevailing at the premises of Builder and its subcontractors.

 

Builder has the right to request Buyer to replace any Representative(s) if deemed unsuitable and unsatisfactory for the proper progress of the Vessel’s construction. If Buyer considers that such Builder’s request is justified, Buyer shall effect such replacement as soon as conveniently arrangeable.

 

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ARTICLE V.                                              MODIFICATIONS

 

1.                                      Modification of Specifications:

 

The Specifications may be modified to a minor extent by written agreement of the parties hereto, provided that such modifications will not, in Builder’s reasonable judgement, adversely affect Builder’s planning or program in relation to Builder’s other commitments, and provided, further, that Buyer shall first agree, before such modifications and/or changes are carried out, to alterations in the Contract Price, the Delivery Date, deadweight, speed and other terms and conditions of this Contract and Specifications occasioned by or resulting from such modifications and/or changes within seven (7) days from the receipt by Buyer of Builder’s proposal. Builder has the right to continue construction of the Vessel on the basis of the Specifications until agreement as above has been reached.

 

An agreement to modify this Contract or the Specifications shall be effected by an exchange of letters signed by the authorized representatives of the parties or by an addendum to this Contract and/or the Specifications.

 

Builder may also make minor changes to the Specifications including, but not limited to, the dimensions and characteristics of the Vessel, if found necessary to suit the Shipyard’s local conditions and facilities, the availability of materials and equipment, introduction of improved methods or otherwise, provided that Builder shall first agree with the Buyer reasonable alterations of the Contract Price, the Delivery Date and obtain Buyer’s approval, which shall not be unreasonably withheld or delayed. In the event that Buyer intends not to give such approval, Buyer shall submit the reasons for such rejection to Builder promptly (in any event within seven (7) days of receiving Builder’s request for such approval), failing which Buyer shall be deemed to have given such approval.

 

2.                                      Change in Class, etc.:

 

If after the date of this Contract, any requirements of the Classification Society, or of other rules and regulations specified in Article I.3 (or the interpretation thereof by the relevant body), to which the construction of the Vessel is required to conform, are changed by the Classification Society or other regulatory bodies authorized to make such changes, the following provisions shall apply unless a waiver of the changed requirement, rule, regulation or interpretation is obtained pursuant to Buyer’s request:

 

(a)                                         If the changes are compulsory for the Vessel, any of the parties hereto, upon receipt of information from the Classification Society or such other regulatory bodies, shall promptly transmit the same to the other in writing, and Builder shall thereupon incorporate such changes into the construction of the Vessel, provided that Buyer shall first have agreed to adjustments required by Builder in the Contract Price, the Delivery Date, deadweight, speed and other terms and conditions of this Contract and the Specifications occasioned by or resulting from such changes within seven days from the receipt by Buyer of Builder’s proposal. Builder has the right to continue construction of the Vessel on the basis of the unmodified Specifications unless and until such agreement has been reached between the parties in writing.

 

(b)                                         If the changes are not compulsory for the Vessel, but Buyer desires to incorporate any of them into the construction of the Vessel, Buyer shall notify Builder of that intention. Builder

 

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may accept such changes, provided that such changes will not in its reasonable judgement adversely affect Builder’s planning or program in relation to Builder’s other commitments, and provided, further, that Buyer shall first have agreed to adjustments required by Builder in the Contract Price, the Delivery Date, deadweight, speed, cubic capacity and other terms and conditions of this Contract and the Specifications occasioned by or resulting from such changes within seven (7) days from the receipt by Buyer of Builder’s proposal.

 

Agreements as to any changes under this Article V.2 shall be made in the same manner as provided in Article V.1 for modifications or changes to the Specifications.

 

Any delay in the construction of the Vessel caused by Buyer’s delay in making a decision or agreement as above shall constitute a permissible delay under this Contract.

 

3.                                      Substitution of Materials:

 

If any of the materials or equipment required by the Specifications or otherwise under this Contract for the construction of the Vessel are in short supply or cannot be procured in time to maintain the Delivery Date of the Vessel or are unreasonably high in price as compared with prevailing international market rates, Builder may, provided that Buyer shall so agree in writing (which agreement shall not be unreasonably withheld), supply other materials capable of meeting the requirements of the Classification Society and of the rules, regulations and requirements with which the construction of the Vessel must comply. Any agreement as to substitution of materials shall be effected in the manner as provided in Article V.1. The Builder shall not be entitled to claim any extra cost if it elects to use or install substitute materials.

 

ARTICLE VI.                                                TRIALS

 

1.                                      Notices:

 

Builder shall notify Buyer tentatively at least fourteen (14) days in advance of the expected time and place of the trial run of the Vessel, and Buyer shall promptly acknowledge receipt of such notice. Such date shall be confirmed by Builder at least five (5) days in advance. However, if the trial run of the Vessel is postponed or delayed due to unreadiness of the Vessel for the trial run then a fresh notice under this Article V1.1 shall be required. If the trial run of the Vessel is postponed or delayed due to unfavourable weather conditions then no fresh notice under this Article V1.1 shall be required and the trial shall take place on the first available day thereafter that weather conditions permit.

 

Buyer shall have the Representative(s) and such other persons as Buyer may require in writing on board the Vessel to witness the trial run. Failure by the Representative(s) to attend the trial run of the Vessel for any reason whatsoever after due notice to Buyer as above provided shall be deemed to be a waiver by Buyer of its right to have the Representative(s) on board the Vessel at the trial run, and Builder may conduct the trial run without the Representative(s) being present, provided that a representative of the Classification Society shall be on board the Vessel for such trial run. In such case Buyer shall be obliged to accept the Vessel on the basis of a certificate of Builder, confirmed by the Classification Society, if applicable, that the Vessel, on the trial run, is found to conform to this Contract and the Specifications. In any event Builder shall promptly supply to Buyer a copy of all records of tests and trials carried out with regard to the Vessel, her

 

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machinery and equipment.

 

2.                                      Weather Conditions:

 

The trial run shall be carried out under weather conditions which are deemed favourable enough in the reasonable judgement of Builder in accordance with the Specifications. 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 weather conditions permit.

 

It is agreed that if during the trial run the weather should suddenly become so unfavourable that the satisfactory conduct of the trial run can no longer be continued, the trial run shall be discontinued and postponed until the next following favourable day, unless Buyer shall assent in writing to a request from Builder to accept the Vessel on the basis of the trial run already made before such discontinuance occurred.

 

Any reasonable delay in the trial run caused by unfavourable weather conditions shall be deemed a permissible delay in the delivery of the Vessel and shall operate to postpone the Delivery Date by the period of delay involved.

 

3.                                      How Conducted:

 

(a)                                 All expenses in connection with the trial run are for the account of Builder, and Builder shall provide at its own expense the necessary crew to comply with the requirements of safe navigation. The trial run shall be conducted in the manner prescribed in the Specifications, and shall prove fulfilment of the performance requirements for the trial run as set forth in the Specifications. The course of the trial run shall be determined by Builder. Builder shall have the right to conduct preliminary trials and to repeat any trial whatsoever as it deems necessary.

 

(b)                                 Notwithstanding Article VI.3(a), lubricating oils and greases necessary for the trial run shall be supplied by Buyer at the Shipyard prior to the time advised by Builder for the conduct of tests and trials as stated in the Specifications, and Builder shall pay Buyer upon delivery of the Vessel the cost of the quantities of lubricating oils and greases consumed during the trial run at their original purchase prices. In measuring such consumed quantities, lubricating oils and greases remaining in the main engine, sump-tanks, other machinery and in pipes, stem tube and the like on the delivery of the Vessel, shall be excluded.

 

The quantities of lubricating oils and greases to be supplied by Buyer as aforesaid shall be in accordance with the instructions of Builder. The fuel oil as well as lubricating oils and greases shall be in accordance with the engine specifications and Buyer shall advise Builder of the suppliers’ names for lubricating oils and greases in due time, provided always that such suppliers shall be acceptable to Builder and/or the makers of all the machinery.

 

4.                                      Method of Acceptance or Rejection:

 

(a)                                 If during any sea trials any breakdowns occur entailing interruption or irregular performance which can be repaired on board, the trial shall be continued after repairs and be valid in all respects. If such repair is temporarily made to continue sea trials, the Builder will inspect the repaired part after sea trials to assure that it complies with the

 

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Specifications. However, if such interruption or irregular performance occurs more than two times on the same items, then such item(s) should be identified by Buyer as soon as practicably possible, and inspected/corrected by the Builder as soon as practicably possible. In the meantime, the inspection result, which will be final or preliminary as the case may be, should be given to the Buyer before the delivery of the Vessel.

 

(b)                                 As soon as practicable after satisfactory completion of the trial run, Builder shall give Buyer a written report thereon and written notice that Builder considers that the results of the trial run indicate conformity of the Vessel to this Contract and the Specifications. Buyer shall, within three (3) Business Days after receipt of such notice from Builder, notify Builder of its acceptance or rejection of the Vessel on the basis of its conformity or nonconformity with the requirements of this Contract and the Specifications.

 

(c)                                  If the results of the trial run indicate that the Vessel, or any part or equipment thereof, does not conform to the requirements of this Contract and/or the Specifications, then, Builder shall take the necessary steps to correct such non-conformity. Upon completion of correction of such non-conformity, Builder shall give Buyer notice thereof. Buyer shall, within three (3) days after receipt of such notice from Builder notify Builder of its acceptance or rejection of the Vessel. However, Buyer shall not be entitled to reject the Vessel by reason of any minor or insubstantial defect or non-conformity judged from the viewpoint of standard shipbuilding practice but in such case, the Builder shall not be released from its obligation to correct and/or remedy such minor or insubstantial nonconformity as far as practicable during the Warranty Period.

 

(d)                                 If Buyer considers that the results of the trial run indicate that the Vessel or any part or equipment thereof does not conform to this Contract and/or the Specifications, Buyer shall indicate in detail in a notice of rejection in what respect the Vessel or any part or equipment thereof, does not in its opinion conform to this Contract and/or the Specifications.

 

(e)                                  If Buyer fails to notify Builder in writing or telefax confirmed in writing of the acceptance or rejection of the Vessel together with the reason therefor within the period as provided in Article VI.4 (b) or (c), Buyer shall be deemed to have accepted the Vessel.

 

(f)                                   Builder may dispute the rejection of the Vessel by Buyer under this Article VI.4, in which case the matter shall be submitted for final decision by arbitration in accordance with Article XIII.

 

(g)                                  If requested by the Buyer, and such request is consistent with the constraints of the Builder and not to be unreasonably denied, the Builder at its own cost, time and risk shall give a demonstration to the Buyer’s crew how to operate the machineries and other equipment of the Vessel at the time of the trial run or between after trial run and before delivery in order for the Buyer’s crew to be familiarized with the said machineries and other equipment in accordance with the Builder’s practice.

 

5.                                      Effect of Acceptance:

 

Acceptance of the Vessel as above provided shall be final and binding so far as the conformity of the Vessel to this Contract and the Specifications is concerned, and shall preclude Buyer from refusing formal delivery of the Vessel as hereinafter provided, if Builder complies with all

 

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procedural requirements for delivery of the Vessel as provided in Article VII.

 

6.                                      Disposition of Surplus Consumable Stores:

 

Should any fuel oil, fresh water or consumable stores furnished by Builder for the trial run remain on board the Vessel at the time of delivery thereof to Buyer, Buyer agrees to buy the same from Builder at the original purchase prices thereof, and payment by Buyer shall be made upon delivery of the Vessel.

 

ARTICLE VII.                                        DELIVERY DATE AND DELIVERY

 

1.                                      Time and Place:

 

(a)                                 Delivery Date and Place:

 

The Vessel shall be delivered safely afloat at either a berth at the Shipyard or (where such berth is unsafe or unavailable) at a suitable place at or near the Shipyard by Builder to Buyer on or before January 5, 2016 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”.

 

With sixty (60) days prior written notice to Buyer of its intention to deliver the Vessel early, Builder shall be entitled to deliver the Vessel to Buyer up to sixty (60) days earlier than the Delivery Date, provided that the Buyer consents to such earlier Delivery Date, with such consent not to be unreasonably withheld or delayed.

 

2.                                      When and How Effected:

 

Provided that Buyer shall have fulfilled all of its obligations under this Contract (including, but not limited to, full payment of the Contract Price and settlement of any indebtedness to Builder), delivery of the Vessel shall be duly made hereunder by Builder, and such delivery shall be evidenced by a Protocol of Delivery and Acceptance signed by the parties hereto, acknowledging delivery of the Vessel by Builder and acceptance thereof by Buyer.

 

3.                                      Documents to be Delivered to Buyer:

 

Upon delivery and acceptance of the Vessel, Builder shall deliver to 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, all as specified in the Specifications.

 

(c)                                  Protocol of Stores of Consumable Nature referred to under Article VI.3(b), including the original purchase price thereof.

 

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(d)                                 Certificates including Builder’s Certificate required to be furnished upon delivery of the Vessel pursuant to this Contract and the Specifications, including:

 

(1)                       Builder’s Certificate issued by the Builder

(2)                       Classification Certificate issued by the Classification Society

(3)                       Cargo Ship Safety Radio Certificate issued by the Classification Society or other assigned Authority

(4)                       Cargo Ship Safety Construction Certificate issued by the Classification Society or other assigned Authority

(5)                       Cargo Ship Safety Equipment Certificate issued by the Classification Society or other assigned Authority

(6)                       International Load Line Certificate issued by the Classification Society

(7)                       International Tonnage Certificate issued by the Classification Society or other assigned Authority

(8)                       International Oil Pollution Prevention Certificate issued by the Classification Society or other assigned Authority

(9)                       International Air Pollution Prevention Certificate issued by the Classification Society or other assigned Authority

(10)                International Sewage Pollution Prevention Certificate issued by the Classification Society or other assigned Authority

(11)                Suez Canal special Tonnage Certificate issued by the Classification Society or other assigned Authority

(12)                Certificate of International Convention on the Control of Harmful AFS on Ships issued by the Classification Society or other assigned Authority

(13)                Certificate of EIAPP for Main Engine and Auxiliary Engine issued by the Classification Society or other assigned Authority.

(14)                Statement of Compliance for Regulation Standard A 3.1 of MLC 2006 issued by the Classification Society

(15)                Ship Sanitation Control Exemption Certificate issued by the Korean Government

(16)                Cargo Gear Certificate corresponding to ILO forms issued by the Classification Society (Hose handling cranes, provision cranes and ER crane only)

(17)                Adjustment Certificates for magnetic compass issued by the Builder.

(18)                International energy efficiency Certificate issued by the Classification Society (SEEMP to be provided by the Owner)

(19)                Minor Certificates including Manufacturers’ Certificates and Builder’s Certificates which are normally issued for Machinery, Equipment and Outfits of the Vessel

 

Any other certificate required by the Classification Society and/or other relevant regulatory bodies as specified in the Specifications and/or the Plans. It is agreed that if, through no fault on the part of Builder, the classification certificate and/or other certificates are not available at the time of delivery of the Vessel, provisional certificates shall be accepted by Buyer, provided that Builder shall furnish to Buyer the formal certificates as promptly as possible after such formal certificates have been issued.

 

(e)                                  Declaration of Warranty of Builder that the Vessel is delivered to Buyer free and clear of any liens, debt, charges, claims, mortgages, or other encumbrances and in particular, that the Vessel is absolutely free of all burdens in the nature of imposts, taxes or charges imposed by the Korean governmental authorities, as well as of all liabilities of Builder to its subcontractors, employees and crew, 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

 

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Contract.

 

(f)                                   Drawings and Plans pertaining to the Vessel as stipulated in the Specifications.

 

(g)                                  Commercial Invoice

 

(h)                                 Bill of Sale notarised by Builder and legalised by Builder

 

(i)                                     any other documents reasonably required by Buyer.

 

The Buyer may require the Builder by giving reasonable notice, prior to delivery, to arrange for any documents listed above to be duly notarized, where practically possible.

 

4.                                      Tender of Vessel:

 

If Buyer fails to take delivery of the Vessel after completion thereof according to this Contract and the Specifications, Builder shall have the right to tender the delivery of the Vessel to Buyer. Such tender shall be made by Builder by a notice to Buyer stating that the Vessel is tendered for delivery pursuant to Article VII.4 of the Contract.

 

5.                                      Title and Risk:

 

Subject to Article VII.4 of the Contract, the title to and risk of the Vessel shall pass to Buyer only upon delivery and acceptance thereof having been completed as stated above, and the title to and risk of the Vessel and her equipment shall remain with Builder until such delivery is effected.

 

6.                                      Removal of Vessel:

 

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 Buyer shall not remove the Vessel from the premises of the Shipyard within the aforesaid three (3) days, then, in such event Buyer shall pay to Builder reasonable mooring charges for the Vessel.

 

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

 

1.                                      Causes of Delay:

 

If at any time before the delivery of the Vessel, either the construction of the Vessel or any performance required hereunder is delayed due to Acts of God; acts of princes or rulers; requirements of government authorities; war or other hostilities or preparations therefor; blockade, revolution, insurrections, mobilization, civil war, civil commotion or riots; vandalism; sabotage; strikes, lockouts or other labour disturbances outside of the control of the Builder; plague or other epidemics; quarantines; flood, typhoons, hurricanes, storms or other abnormal weather conditions not included in normal planning; earthquakes; tidal waves; landslides; fires, lightning, explosions, collisions or strandings; embargoes; import restrictions; shortage of materials or equipment, or delay in delivery or inability to take delivery thereof (provided that such materials and equipment at the time of ordering could reasonably be expected by Builder to be delivered in time); prolonged

 

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failure, shortage or restriction of electric current, oil or gas supplies; defects in materials, machinery or equipment which could not have been detected by Builder using reasonable care (provided same did not result from Builder’s failure to take the reasonable and necessary measures to avoid any such delay); delays caused by the Classification Society or other bodies whose documents are required; destruction of or damage to the Shipyard or works of Builder, suppliers, or of or to the Vessel or any part thereof, by any causes herein described; delays in Builder’s other commitments resulting from any causes herein described which in turn delay the construction of the Vessel or Builder’s performance under this Contract; delays caused by any faulty action or omission on the part of Buyer (but without prejudice to any other rights of Builder under this Contract); any causes or accidents whatsoever beyond the control of Builder whether or not of the nature indicated by the foregoing words; then and in any such case, the Delivery Date shall be postponed for such period as the delivery of the Vessel is delayed thereby.

 

2.                                      Definition of Permissible Delay:

 

Delays on account of such causes as specified in Article VIII.1 and any other delays of a nature which under the terms of this Contract permit 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 in Article III.

 

3.                                      Notice of Delay:

 

(a)                                 As soon as practically possible, but not later than ten (10) days after the commencement of any cause of delay, on account of which Builder claims that it is entitled under this Contract to a postponement of the Delivery Date, Builder shall (if practically possible) notify Buyer of the dates, the cause of delay which has occurred and its expected duration.

 

(b)                                 Within ten (10) days after the ending of such cause of delay the Builder shall notify Buyer in writing of the date such cause of delay ended.

 

(c)                                  Builder shall also notify Buyer of the period by which the Delivery Date is postponed by reason of such cause of delay with all reasonable despatch after it has been determined. Failure by Buyer to object to Builder’s claim for postponement of the Delivery Date within fourteen (14) days after receipt by Buyer of such notice of claim shall be deemed to be a waiver by Buyer of its right to object to such postponement of the Delivery Date.

 

(d)                                 Failure of the Builder to notify the Buyer of any causes of delay as specified in Article VIII.1 and any other causes of delays which, under the terms of this Contract, are to be considered as permissible delays, shall preclude the Builder from claiming Force Majeure for such event.

 

4.                                      Right to Terminate Contract for Excessive Delay:

 

If the total accumulated time of all permissible delays on account of the causes specified in Article VIII.1 (but excluding delays caused by any error or omission on the part of Buyer and any other delays which under the terms of this Contract permit postponement of the Delivery Date), amounts to two hundred and ten (210) days or more, then, in such event, Buyer may terminate this Contract in accordance with the provisions of Article X. If Buyer has not served notice of termination as provided in Article X, Builder may, at any time after the said accumulated time justifying termination by Buyer has occurred, notify Buyer of the expected future date for delivery and demand in writing that Buyer shall make an election, in which case Buyer shall, within ten (10) days after such

 

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demand is delivered to Buyer, notify Builder of either its termination of this Contract or its acceptance of the revised future date for delivery specified by Builder. If the Vessel is not delivered by such revised future date, Buyer shall have the same right of termination upon the same terms and conditions as above provided. If Buyer fails to notify Builder of its termination of this Contract as specified above within such ten (10) days period, Buyer shall be deemed to have consented to the delivery of the Vessel at the revised future date for delivery.

 

ARTICLE IX.                                                            WARRANTY OF QUALITY

 

1.                                      Guarantee:

 

Subject to the provisions hereinafter set out, Builder undertakes (by way of post-delivery guarantee against defects in the Vessel) to remedy or replace, free of charge to Buyer, any defects in the Vessel which are due to defective design, material and/or improper workmanship on the part of Builder and/or its subcontractors, provided that the defects shall appear or be discovered during a period of twelve (12) months after the Delivery Date (the “Warranty Period”) and a written notice thereof is duly given to Builder as prescribed below. For the purpose of this Article IX, the Vessel includes her hull, machinery, equipment and gear and all other parts and equipment that are designed, manufactured, installed or furnished by the Builder and its subcontractors, but excludes material, machinery and equipment which have been supplied by or on behalf of Buyer.

 

Notwithstanding the above, in the event that within the guarantee period of twelve (12) months any remedies are carried out or replacements are provided by the BUILDER and/or its subcontractors, the guarantee period in respect to such repairs or replacements shall be extended for the period of twelve (12) months from the date upon which the same are carried out, provided that the total accumulated period of guarantee shall not exceed eighteen (18) months from the date of delivery of the VESSEL.

 

2.                                      Notice of Defects:

 

Buyer shall notify Builder in writing of any defects for or in respect of which claim is made under the aforesaid guarantee as promptly as possible after the discovery thereof. Buyer’s notice shall describe the nature and extent of each of the defects and contain photos of each of those defects, if possible. Builder shall in any event have no obligation whatsoever for or in respect of any defect if such notice of defect is not received by Builder in relation to that defect within ten (10) days after the first discovery thereof. Builder shall also have no obligation whatsoever for or in respect of any defect if such notice of defect is not received by Builder in relation to that effect within fifteen (15) days after expiry of the Warranty Period.

 

3.                                      Extent of Builder’s Responsibility:

 

(a)                                 Builder shall have no responsibility or liability whatsoever for or in relation to any defects in the Vessel other than the defects specified and guaranteed against in Article IX.1, and Builder shall not be liable in any circumstances whatsoever for any liability or loss other than the relevant cost of remedying the defect or any other 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 occasioned to Buyer by reason of the defects specified in Article IX.1 or owing to repairs or other works done to the Vessel to remedy such defects.

 

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(b)           Builder shall not be responsible for any defects in any part of the Vessel which may subsequent to delivery of the Vessel have been replaced or in any way repaired by any other contractors (except those approved by Builder), nor for any defect which has been caused by omission or improper use and maintenance of the Vessel on the part of Buyer, its servants or agents or by ordinary wear and tear or by perils of the sea, rivers or navigations or by accidents or fire or by any other circumstances whatsoever beyond the control of Builder.

 

(c)           The undertakings contained in this Article replace and exclude any other liability, guarantee, warranty and/or condition imposed or implied by the law, customary, statutory or otherwise, by reason of the construction and/or sale of the Vessel by Builder for and to Buyer.

 

4.             Remedy of Defects:

 

(a)           Builder shall remedy at its expense any defects, against which the Vessel is guaranteed under this Article by making all necessary repairs or replacements at the Builder’s nominated yard.

 

(b)           However, if it is impractical to bring the Vessel to the Shipyard, Buyer may cause the necessary repairs or replacements to be made at another place which is deemed by the Buyer with the consent of the Builder, such consent not to be unreasonably withheld, to be suitable for the purpose, provided that, in such event, Builder may forward or supply replacement parts or materials to the Vessel on CIF terms unless such forwarding or supply thereof to the Vessel would impair or delay the operation or working schedule of the Vessel.

 

If Buyer proposes to cause the necessary repairs or replacements to be made to Vessel at any yard or works other than the Shipyard, Buyer shall before doing so, and in any event as soon as possible, give Builder notice of the time and place where such repairs will be made. If the Vessel is not thereby delayed, nor her operation or working schedule thereby materially impaired, Builder shall have the right to verify by its own or appointed representative(s) the nature and extent of the defects complained of. Builder shall, in such case, promptly advise Buyer after such examination has been completed, of its acceptance or rejection of defects as being covered by the undertakings hereby provided.

 

Upon Builder’s acceptance of defects as justifying remedy under this Article IX.3.(b), or upon the final award of an arbitration so determining, Builder shall reimburse Buyer the documented expenses incurred by Buyer, but such reimbursement shall not exceed the average cost of making the same repairs or replacements at a reputable European repair yard, a reputable Singapore repair yard and a reputable Chinese repair yard. The repair yards for the reference of Builder’s compensation shall be chosen by the Buyer subject to the Builder’s prior written consent which shall not be unreasonably withheld.

 

(c)           In any case, the Vessel shall at Buyer’s risk and expense be taken to the place chosen and be kept ready in all respects for such repairs or replacements at that place and Builder shall not be responsible for towage, dockage, wharfage, port charges, and anything else incurred in Buyer’s getting and keeping the Vessel ready for such repairs and replacements.

 

20

 

(d)              Builder shall have the option to retrieve at its own cost any of the replaced equipment and parts where the defects are remedied in accordance with the provisions of this Article IX.

 

(e)              Any dispute under this Article shall be referred to arbitration in accordance with the provisions of Article XIII.1.(b).

 

ARTICLE X.                   REMEDIES OF BUYER

 

1.             Notice:

 

The payments made by Buyer prior to the delivery of the Vessel shall be in the nature of advances to Builder. If Buyer shall exercise its right of termination in accordance with the terms of this Contract then the Buyer shall notify the Builder of its termination under the terms of this Contract and such termination shall be effective as of the date when the notice is received by Builder.

 

2.             Refund by Builder:

 

Unless Builder duly contests any termination by Buyer by commencing arbitration within ten (10) working days (as defined below) of receiving a relevant notice of termination pursuant to this Contract, the Builder shall forthwith refund to Buyer the full amount of all sums paid by Buyer to Builder on account of the Vessel, provided that for this purpose the date of commencing arbitration shall be the date on which the Builder appoints an arbitrator and that the term “working day” shall mean a day which is not a public holiday (including a Saturday and a Sunday) in Seoul or London.

 

In such event, Builder shall pay Buyer interest at the rate of six percent (6%) per annum on the amount required herein to be refunded to Buyer, computed from the respective date following the date of receipt by Builder of each instalment or advance payment to the date of remittance of such refund to Buyer by Builder, provided, however, that if the said termination by Buyer is made under the provisions of Article VIII.4, then in such event the Builder shall not be required to pay any interest.

 

As security for the due performance of its obligations under this Article X, as a condition precedent to the payment of the first instalment, the Builder shall provide Buyer with a transferable irrevocable stand by letter of credit issued by Builder’s Bank, substantially in form and substance as annexed hereto, as Exhibit A, which cover the full amount of all sums paid by Buyer to Builder on account of the Vessel and any interest payable thereon, if a termination will become effective pursuant to this Article (the “Refund Guarantee”).

 

3.             Discharge of Obligations:

 

Upon such refundment by Builder to Buyer, all obligations, duties and liabilities of Builder under this Contract shall be forthwith completely discharged.

 

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ARTICLE XI.                  REMEDIES OF BUILDER

 

1.             Definition of Default:

 

Buyer shall be deemed to be in default under this Contract in any of the following events:

 

(a)           if Buyer fails to pay the first, second, third or fourth Instalment to Builder on the due date for payment thereof under this Contract; or

 

(b)           if the fifth instalment is not paid in accordance with Article II.4.(b) hereof; or

 

(c)           if Buyer fails to deliver the Corporate Guarantee to Builder on the due date in accordance with the provisions of Article II.5; or

 

(d)           if Buyer fails to take delivery of the Vessel when the Vessel is duly tendered for delivery by Builder under the provisions of Article VII; or

 

(e)           if Buyer or the Corporate Guarantor (without the prior written consent of the Builder) stops payment of its debts, or ceases to carry on its business, or is unable to pay its debts as they fall due, or enters into any arrangements with its creditors generally, or becomes insolvent, or is in liquidation or administration or subject to any other insolvency procedure in any jurisdiction, or if a receiver, manager, trustee, custodian or analogous officer is appointed in respect of all or any part of its property, undertaking or assets.

 

2.             Interest and Charges:

 

If Buyer shall be in default of payment of any Instalment as provided in Article XI.1 (a) and (b), Buyer shall pay interest on such Instalment at the rate of six percent (6%) per annum from the due date thereof to the date of payment of the full amount including interest to Builder. In case Buyer shall fail to take delivery of the Vessel as provided in Article XI.1(d), Buyer shall be deemed to be in default and the Builder shall notify in writing the Buyer to that effect, and the Buyer shall, upon receipt of such notification, forthwith acknowledge in writing to the Builder that such notification has been received.

 

In addition, Buyer shall be liable for any reasonable and documented cost and expenses incurred by Builder by reason of the occurrence of any default of Buyer or by reason of the exercise by Builder of any remedy hereunder.

 

3.             Effect of Default:

 

(a)           If any default by Buyer occurs as defined in Article XI.1(a), (b), (c), or (d) the Delivery Date shall be automatically postponed for the period of continuance of such default by Buyer and (for the avoidance of doubt) Builder shall not be obliged to pay any liquidated damages for the delay in delivery of the Vessel caused thereby.

 

(b)           If any default by Buyer as defined in Article XI.1 (a), (b), (c), or (d) continues for a period of ten (10) days, or if any default by Buyer as defined in Article XI.1(e) occurs, Builder may, at its option, terminate this Contract by giving written notice to such effect to Buyer. Upon receipt by Buyer of such written notice of termination, this Contract shall forthwith stand terminated and any of Buyer’s Supplies delivered to the Shipyard shall become part or parts of the Vessel.

 

In the event of such termination of this Contract, Builder shall be entitled to retain and apply any Instalment(s) paid by Buyer to Builder on account of this Contract to the recovery of Builder’s loss and damage including, but not limited to, reasonably estimated

 

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profit which Builder would have been entitled to receive if the Vessel had been completed and delivered to Buyer.

 

Buyer shall ensure that Buyer’s Representatives leave Builder’s yard upon the termination of the Contract.

 

4.             Sale of Vessel:

 

(a)           If Builder terminates this Contract as provided in this Article XI, Builder shall have the full right and power either to construct/complete or not to construct/complete the Vessel and the full right and power either to sell or not to sell the Vessel (in its completed or uncompleted state, as the case may be) at any stage.

 

Builder shall be entitled to construct the Vessel without engaging any independent construction supervisors or inspectors. If Builder engages such supervisors or inspectors, the reasonable costs of such engagement shall form part of the costs of sale which Builder is entitled to recover from Buyer.

 

In the event that the Builder decides to sell the Vessel in its uncompleted state or to construct/complete and sell it under a shipbuilding contract with a new purchaser, Builder shall be entitled to engage newbuilding brokers to find a suitable purchaser and/or to achieve such sale (whether by way of a new shipbuilding contract or otherwise). All and any money payable to such brokers under or in relation to such engagement and/or such sale shall constitute part of the costs of sale which Builder is entitled to recover from Buyer.

 

In the event that Builder sells the Vessel as described above, that part of the contract price for sale of the Vessel which corresponds to the changes (if any) made to the Specifications after the termination of the Contract shall be excluded from calculating the proceeds of the sale of the Vessel which are to be applied as prescribed below.

 

(b)           In the event of the sale of the Vessel in its completed state, the proceeds of sale received by Builder shall be applied firstly to payment of all costs and expenses attending such sale and otherwise incurred by Builder as a result of Buyer’s default, and secondly to payment of: (i) all unpaid Instalments and interest on such Instalments at the rate of six percent (6%) per annum from the respective due dates thereof to the date of application; and (ii) all and any other payment of money which Builder would have been entitled to receive from Buyer had the Contract been performed in full without being terminated.

 

(c)           In the event of the sale of the Vessel in its incomplete state, the proceeds of sale received by Builder shall be applied firstly to payment of all costs and expenses attending such sale and otherwise incurred by Builder as a result of Buyer’s default, and secondly to payment of: (i) all costs of construction of the Vessel less the Instalment(s) retained by Builder; and (ii) all and any other payment of money which Builder would have been entitled to receive from Buyer had the Contract been performed in full without being terminated.

 

(d)           In either of the above events of sale, if the proceeds of sale exceed the total amount to which such proceeds are to be applied as aforesaid, Builder shall promptly pay the excess to Buyer without interest, provided, however, that the amount of such payment to Buyer shall in no event exceed the total amount of Instalment(s) already paid by Buyer and the cost of Buyer’s Supplies, if any.

 

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(e)           If the proceeds of sale are insufficient to pay such total amount payable as set out in Article XI.4(b) or (c), Buyer shall promptly pay the deficiency to Builder upon demand.

 

5.             Remedies Cumulative:

 

No remedy referred to in this Article XI is intended to be exclusive, but each shall be cumulative and is in addition to, and may be exercised concurrently with, any other remedy which is referred to in this Article XI, or which may otherwise be available to Builder including, without limitation, the right to terminate this Contract.

 

ARTICLE XII.                INSURANCE

 

1.             Extent of Insurance Coverage:

 

From the time of launching of the Vessel until the Vessel is completed, delivered to and accepted by Buyer, Builder shall, at its own cost and expense, keep the Vessel and all machinery, materials, equipment, appurtenances and outfit, delivered to the Shipyard for the Vessel, or built into or installed in or upon the Vessel, including Buyer’s Supplies, fully insured with first class Korean insurance companies under insurance coverage corresponding to the latest Institute of London Underwriters Clauses for Builders’ Risks.

 

The amount of such insurance coverage shall, up to the date of delivery of the Vessel, be in an amount at least equal to, but not limited to, the aggregate of the payments made by Buyer to Builder plus the value of Buyer’s Supplies in custody of the Shipyard, if any. The insurance referred to hereinabove shall be taken out in the name of Builder and all losses under the insurance shall be payable to Builder.

 

If Buyer so requests, Builder shall at Buyer’s cost procure insurance on the Vessel and all parts, materials, machinery and equipment intended therefore against other risks not provided in this Article XII.1 and shall make all arrangements to that end. The cost of such insurance shall be reimbursed to Builder by Buyer upon delivery of the Vessel.

 

Notwithstanding the above, Buyer shall compensate Builder for any increased cost and expense with evidence under or pursuant to any provision of this Article XII, incurred by Builder due to any Buyer’s default as specified in Article XI.

 

2.             Application of Recovered Amount:

 

(a)           Partial Loss

 

If the Vessel shall be damaged by any insured cause whatsoever prior to acceptance thereof by Buyer and in the further event that such damage shall not constitute an actual, constructive, arranged or compromised total loss of the Vessel, Builder shall apply the amount recovered under the insurance referred to in Article XII.1 to the repair of such damage to the Classification Society’s satisfaction and in accordance with the Specifications, and Buyer shall accept the Vessel under this Contract when completed in accordance with this Contract and the Specifications.

 

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(b)           Total Loss

 

If the Vessel is determined to be an actual, constructive, arranged or compromised total loss, Builder shall by agreement between the parties hereto, either:

 

(i)       proceed in accordance with the terms of this Contract, in which case the amount recovered under said insurance shall be applied to the reconstruction of the Vessel’s damage, provided the parties hereto shall have further agreed in writing as to such reasonable postponement of the Delivery Date and adjustment of other terms of this Contract (including the Contract Price) as may be necessary for the completion of such reconstruction; or

 

(ii)      refund immediately to Buyer the amount of all Instalments paid to Builder under this Contract plus an amount equal to the value of any Buyer’s Supplies which shall have become a total loss as aforesaid without any interest, whereupon this Contract shall be deemed to be terminated and all rights, duties, liabilities and obligations of each of the parties towards the other shall terminate forthwith.

 

If the parties fail to reach all necessary agreements within two (2) months after the Vessel is determined to be an actual, constructive, arranged or compromised total loss, the provisions of Article XII.2(b) (ii) shall apply.

 

3.             Redelivery of Buyer’s Supplies:

 

If the Vessel shall be determined to be an actual, constructive, arranged or compromised total loss and it shall not be agreed between the parties that the Vessel be reconstructed as aforesaid, Builder shall redeliver to Buyer at the Shipyard any Buyer’s Supplies which shall not have become a total loss.

 

4.             Termination of Builder’s Obligation to Insure:

 

Builder’s obligations to insure the Vessel hereunder shall cease and terminate forthwith upon delivery thereof to Buyer.

 

ARTICLE XIII.              DISPUTES AND ARBITRATION

 

1.             Proceedings:

 

If any dispute, controversy or difference shall arise between the parties hereto out of or in relation to or in connection with this Contract which cannot be settled by the parties themselves, it shall be resolved as follows:

 

(a)           Any dispute relating solely to technical matters concerning the construction, material or quality of work under this Contract or the Specifications may, subject to mutual agreement between the parties hereto, be referred to a suitably qualified expert who (if the parties cannot agree on his identity) shall be appointed by the President for the time being of the Royal Institution of Naval Architects, London. The said expert shall act as assessor and not an arbitrator. He shall publish his determination of the dispute in writing. Such determination shall include findings as to any required extension of the Delivery Date by

 

25

 

reason of the dispute and may also include a finding as to payment of costs incurred in relation to or in connection with such dispute.

 

His determination thus published shall be final and binding on the parties.

 

(b)           All other disputes arising out of or in connection with this Contract shall be referred to arbitration in London, England before a tribunal of three arbitrators, unless the parties shall agree upon the appointment of a sole arbitrator. One arbitrator shall be appointed by Builder and another by Buyer, and the two arbitrators shall choose and appoint the third arbitrator by agreement. If the two arbitrators fail to choose and appoint the third arbitrator by agreement, either of the said two arbitrators may apply to the President for the time being of The London Maritime Arbitrators’ Association to choose and appoint the third arbitrator on behalf of the two arbitrators.

 

Such arbitration shall be conducted in accordance with the Arbitration Act 1996 of United Kingdom or any re-enactment or statutory modification thereof for the time being in force and with the rules of The London Maritime Arbitrators’ Association for the time being in force.

 

The final award (interim or otherwise) of the arbitration tribunal shall be final and binding on the parties save that the parties shall have the same rights of appeal as they would be allowed to under the Arbitration Act 1996 of the United Kingdom or any re-enactment or statutory modification thereof for the time being in force.

 

2.             Alteration of Delivery of the Vessel:

 

In the event of reference to arbitration of any dispute or disputes arising out of matters occurring prior to delivery of the Vessel, the award by the arbitration tribunal shall include a declaration as to any postponement of the Delivery Date which the arbitration tribunal may in his/their absolute discretion deem appropriate.

 

3.             Entry in Court:

 

Judgement on an award by arbitrators may be entered in any court of competent jurisdiction for enforcement thereof.

 

ARTICLE XIV.               RIGHT OF ASSIGNMENT

 

Neither party shall assign or transfer all or any part of its rights or obligations under this Contract to any third party without the prior written consent thereto of the other party, such consent not to be unreasonably withheld. No assignment that has been done in breach of the foregoing provisions shall be effective. Builder shall not refuse to give such consent if Buyer wishes to assign all of its rights under this Contract to a single assignee (acting as trustee or otherwise) by way of security for any loan provided to Buyer by any one or more banks or other financial institutions to finance its purchase of the Vessel hereunder. Without prejudice to the foregoing, no assignment of Buyer’s rights under this Contract shall be binding upon Builder unless notice thereof is given to Builder.

 

In the event of any such assignment by either party, all costs including legal and other costs incurred in relation thereto shall be borne and paid for by the assignor, and the assignor shall

 

26

 

remain liable under this Contract to the other party to the same extent as it was prior to the making of the assignment and shall cause the assignee to observe and respect the terms thereof.

 

This Contract shall be binding upon the respective successors of the parties and effective for the benefit their respective assigns.

 

ARTICLE XV.                TAXES AND DUTIES

 

1.             Taxes and Duties in Korea:

 

Builder shall bear and pay all taxes and duties levied or imposed in Korea in connection with the execution and/or performance of this Contract, except any taxes and duties imposed in Korea upon Buyer’s Supplies or upon the activities or personal incomes of Buyer’s employees and agents (including the Representatives and representatives of the manufacturers of Buyer’s Supplies).

 

2.             Taxes and Duties outside Korea:

 

Buyer shall bear and pay all taxes and duties levied or imposed outside Korea in connection with execution and/or performance of this Contract except for any taxes and duties imposed upon those items or services to be procured by Builder or its subcontractors for construction of the Vessel.

 

ARTICLE XVI.               PATENTS, TRADEMARKS, COPYRIGHTS, ETC.

 

1.             Patents, Trademarks and Copyrights:

 

(a)           Builder shall indemnify and hold harmless the Buyer against all actual claims, losses, damages and liabilities (excluding any indirect or consequential losses) for infringement of patent rights, copyrights, design rights, service marks or trademarks arising directly from the construction of the Vessel by Builder at the Shipyard and against all costs and expenses of litigation, if any (excluding Buyer’s internal costs and expenses), but such indemnity shall not extend to any claims, losses, damages and liabilities involving Buyer’s Supplies.

 

(b)           Buyer shall indemnify Builder and its subcontractors against all actual claims, losses, damages and liabilities (excluding any indirect or consequential losses) for infringement of patent rights, copyrights, design rights, service marks or trademarks arising directly from the performance by Builder of its obligations to take delivery, store, install, test and commission the Buyer’s Supplies under this Contract and against all costs and expenses of litigation, if any (excluding Builder’s internal costs and expenses).

 

(c)           Nothing contained herein shall be construed as transferring such patent, trademark, service mark or copyright covered by this Contract, and all such rights are hereby expressly reserved to the true and lawful owners thereof.

 

2.             Rights to General Plans, Specifications and Working Drawings:

 

(a)           Builder retains all rights with respect to the Specifications, plans, working drawings,

 

27

 

technical descriptions, calculations, test results and other data, information and all other materials and documents relating to the design and construction of the Vessel (“Design Documents”).

 

(b)           Buyer shall not use the Design Documents other than for the purposes of construction, operation, repair and maintenance of the Vessel.

 

(c)           Buyer undertakes to keep the Design Documents confidential and not to disclose the same or divulge any information contained therein directly or indirectly to any third parties, without the prior written consent of Builder, except where it is necessary for the usual operation, repair and maintenance of the Vessel. Where Buyer discloses the Design Documents to such third parties, it shall ensure that it imposes identical restrictions on such third parties as to confidentiality, use and disclosure as are imposed on Buyer herein and strictly enforce such restrictions.

 

(d)           Buyer shall indemnify Builder against all actual claims, losses, damages and liabilities (excluding any indirect or consequential losses) arising from breach by Buyer of its obligations under this Article or any failure by third parties to which it has disclosed the Design Documents to comply with their parallel obligations in accordance with the terms of confidentiality, use and disclosure set forth herein.

 

ARTICLE XVII.             COMPLIANCE AND ANTI-BRIBERY

 

1.             Representations of the Parties:

 

During the term of this CONTRACT, each party certifies and represents as follows:

 

(a)           It will comply with the laws of any jurisdiction applicable to such party as it relates to this CONTRACT, including but not limited to any applicable anti-corruption and anti-bribery laws, also including, without limitation, the United States Foreign Corrupt Practices Act (“US FCPA”), the UK Bribery Act 2010 (“UK Bribery Act”) and the anti-bribery or anti-corruption laws of South Korea as such laws may be amended from time to time.

 

(b)           In connection with this CONTRACT, it has not and will not make any payments or gifts or provide other advantages, or any offers or promises of payments or gifts or other advantages of any kind, directly or indirectly, to:

 

a.     any person or entity with the intention of obtaining or retaining a business advantage for itself or the other party to this CONTRACT;

 

b.     any official or member of any government or any agency or instrumentality thereof; any official or member of any public international organisation or any agency or instrumentality thereof; any or official of a political party or any candidate for political office (herein ‘public official’); or any person while knowing or reasonably suspecting that all or a portion of such money or thing of value will be offered, given or promised, directly or indirectly, to any public official, in violation of the UK Bribery Act, the US FCPA or the laws of South Korea.

 

c.     In connection with this CONTRACT, it has not and will not request, agree to accept or

 

28

 

accept from any person or entity any payments or gifts or other advantages, or any offers or promises of payments or gifts or other advantages of any kind, directly or indirectly, as a reward or inducement to perform its obligations under this CONTRACT in any way improperly.

 

2.             Indemnification:

 

Each party agrees that it will fully indemnify, defend and hold harmless the other party from any claims, liabilities, damages, expenses, penalties, judgments and losses (including reasonable attorneys’ fees) assessed or resulting by reason of a breach of the representations and undertakings contained in this Article XVII to the extent permitted by law.

 

ARTICLE XVIII.           BUYER’S SUPPLIES

 

1.             Responsibility of Buyer:

 

(a)           Buyer shall, at its own risk, cost and expense, supply and deliver to Builder all of the items (including funnel mark, ship name and other information necessary for the timely construction of the Vessel) to be furnished by Buyer as set out in the specifications (“Buyer’s Supplies”) at warehouse or other storage of the Shipyard in good condition ready for installation or use in or on the Vessel, in accordance with the time schedule designated by Builder to meet the building schedule of the Vessel.

 

(b)           In order to facilitate installation or use by Builder of Buyer’s Supplies in or on the Vessel, Buyer shall furnish Builder with necessary specifications, plans, drawings, instruction books, manuals, test reports and certificates required by Builder. Buyer, if so requested by Builder, shall, without any charge to Builder, cause representatives of the manufacturers of Buyer’s Supplies to assist Builder in installation thereof in or on the Vessel and/or to carry out installation thereof by themselves or to make necessary adjustments, tests and inspection thereof at the Shipyard.

 

(c)           Any and all of Buyer’s Supplies shall be subject to Builder’s reasonable right of rejection, if they are found to be unsuitable or in improper condition for installation or use. However, if so requested by Buyer, Builder may repair or adjust Buyer’s Supplies without prejudice to Builder’s other rights hereunder and without being responsible for any consequences arising therefrom. In such case, Buyer shall reimburse Builder for all costs and expenses incurred by Builder in such repair or adjustment and the Delivery Date shall be postponed for any period of delay in the construction of the Vessel caused by the making of such repair or adjustment.

 

(d)           Should Buyer fail to deliver any of Buyer’s Supplies within the time designated by Builder, the Delivery Date shall be extended for the period of such delay in delivery of Buyer’s Supplies if such delay in delivery shall affect the Vessel’s construction or the Delivery Date of the Vessel. In such event, Buyer shall be responsible for all direct losses and direct damages incurred by Builder related to the Vessel by the reason of such delay in delivery of Buyer’s Supplies and such payment shall be made upon delivery of the Vessel.

 

(e)           If delay in delivery of any of Buyer’s Supplies exceeds fifteen (15) days, then Builder shall be entitled to proceed with construction of the Vessel without installation thereof in or on

 

29

 

the Vessel, without prejudice to Builder’s other rights as hereinabove provided, and Buyer shall accept and take delivery of the Vessel as so constructed.

 

2.             Responsibility of Builder:

 

Builder shall be responsible for the storing and handling with reasonable care of Buyer’s Supplies after delivery thereof to 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 Builder shall not be responsible for quality, efficiency and/or performance of any of Buyer’s Supplies and for the loss of or damage to Buyer’s Supplies caused without Builder’s wilful misconduct or gross negligence.

 

3.             Return of Buyer’s Supplies

 

Where under any provision of this Contract Builder shall be required either to refund the value of or to return Buyer’s Supplies to Buyer, then Builder shall lawfully discharge any such obligation by returning the Buyer’s Supplies in question FOB Okpo or, in Builder’s option by paying to Buyer the invoiced cost to Buyer of such supplies CIF Okpo.

 

ARTICLE XIX.              REPRESENTATIVES

 

Buyer’s representative and address designated for the purpose of notices and other communications under this Contract shall be:

 

	
 
    	
STI DUNDEE SHIPPING COMPANY Limited
    
	
 
    	
 
    
	
Address:
    	
c/o Scorpio Tankers Inc.
    
	
 
    	
“Le Millenium”
    
	
 
    	
9 Boulevard Charles III, 98000 Monaco
    
	
 
    	
 
    
	
Attention:
    	
Mr. Luca Forgione / Legal Department
    
	
 
    	
 
    
	
Telephone:
    	
+377 97 98 57 00
    
	
 
    	
 
    
	
Telefax:
    	
+377 97 77 83 46
    
	
 
    	
 
    
	
Mobile
    	
+336 80 86 99 86
    
	
 
    	
 
    
	
Email
    	
legal@scorpiogroup.net
    

 

unless and until Buyer notifies Builder otherwise in writing.

 

Builder’s representative and address designated for the purpose of notices and other communications under this Contract shall be:

 

	
 
    	
Daewoo Shipbuilding & Marine Engineering Co., Ltd.
    
	
 
    	
 
    
	
Address :
    	
85, Da-dong, Jung-Gu,
    
	
 
    	
Seoul, Republic of Korea,
    

 

30

 

	
Attention:
    	
Mr. W. S. Choi / General Manager
    
	
 
    	
 
    
	
Telephone:
    	
+82 2 2129 0982
    
	
 
    	
 
    
	
Telefax:
    	
+82 2 2129 0086
    
	
 
    	
 
    
	
Email:
    	
wschoi1@dsme.co.kr
    

 

unless and until Builder notifies Buyer otherwise in writing.

 

ARTICLE XX.                NOTICE AND LANGUAGE

 

1.             Notice:

 

Except as may be more specifically set out in any particular provision of this Contract, any and all notices, requests, demands, instructions, advices and communications in connection with this Contract shall be in writing and shall be conveyed by registered airmail, by express courier service, personally, by telefax or by email, and shall be deemed to be given at, and become effective from, the time when the same is delivered to (or in the case of a telefax or email, received at) the address of the party to be served.

 

2.             Language:

 

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

 

3.             Writing:

 

A telefax or email message shall be deemed to be a notice “in writing” for purposes of this Contract.

 

ARTICLE XXI.              EFFECTIVE DATE OF CONTRACT

 

This Contract shall become effective from the date of its execution by both Buyer and Builder. However, if Builder fails to provide Buyer with Refund Guarantee referred to in Article X.2 within fourteen (14) days after the date of the Contract, then, the Contract shall automatically become null and void, unless otherwise mutually agreed in writing between the parties hereto, and the parties shall be immediately and completely discharged from all of their obligations to the other party under this Contract as though this Contract had never been entered into at all.

 

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ARTICLE XXII.             INTERPRETATION

 

1.             Laws Applicable:

 

This Contract shall be governed by and construed in accordance with the laws of England.

 

2.             Discrepancies:

 

In the event of any conflict between this Contract and the Specifications, the provisions of this Contract shall prevail. In the event of any conflict between the specifications and General Arrangement Plan, the provisions of the specifications shall prevail.

 

3.             Entire Agreement:

 

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

 

4.             Amendment:

 

No provision of this Contract may be amended, modified, waived or terminated except by an instrument in writing executed by each of the parties hereto.

 

5.             Headings:

 

The descriptive headings of Articles and Clauses herein are for convenience of reference only and are not to be used in construing or interpreting this Contract.

 

6.             Severability:

 

Any provision of this Contract which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provisions in any other jurisdiction.

 

7.             Exclusion of the Contracts (Rights of Third Parties) Act 1999:

 

No provision of this Contract shall be enforceable under the Contracts (Rights of Third Parties) Act 1999 by any person who is not a party to this Contract.

 

32

 

IN WITNESS WHEREOF, the parties hereto have caused this Contract to be signed by their duly authorized signatories the day and year first above written.

 

 

	
For and on behalf of :
    	
 
    	
For and on behalf of :
    
	
STI DUNDEE SHIPPING COMPANY LIMITED
    	
 
    	
DAEWOO SHIPBUILDING &
    
	
 
    	
 
    	
MARINE ENGINEERING CO., LTD.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Brian M. Lee
    	
 
    	
By:
    	
/s/ Yoon Keun Jang
    
	
Name:
    	
BRIAN M. LEE
    	
 
    	
Name:
    	
YOON KEUN JANG
    
	
Title:
    	
SECRETARY
    	
 
    	
Title:
    	
VICE PRESIDENT
    

 

 

EXHIBIT A.                    REFUND GUARANTEE

 

	
To:
    	
Date: [                    ]
    

 

IRREVOCABLE STAND BY LETTER OF CREDIT

 

Gentlemen:

 

We hereby open our irrevocable Letter of Credit No.         in favour of                                                      (herein called “Buyer”) for account of Daewoo Shipbuilding & Marine Engineering Co., Ltd., Seoul, Korea (herein called “Builder”) as follows in connection with the Shipbuilding Contract dated                  (hereinafter called the “Contract”) made by and between Buyer and the Builder for the construction and sale of one (1) 300,000 TDW Crude Oil Tanker having Builder’s Hull No. 5407 (hereinafter called the “Vessel”).

 

If in connection with the terms and conditions of the Contract, whether so supplemented, amended, changed or modified, the Buyer shall become entitled to a refund of the advance payments made to Builder prior to the delivery of the Vessel, we hereby irrevocably guarantee to make the repayment of the same to Buyer within ten (10) working days after demand by the Buyer together with interest thereon at the rate of six percent (6%) per annum from the date following the date of receipt by Builder of each advance payment to the date of remittance by telegraphic transfer of such refund.

 

This Letter of Credit shall be in force and effect from the date of Builder’s actual receipt of the first instalment or advance payment in the amount of United States Dollars.

 

The amount of this Credit will be automatically increased upon Builder’s receipt of each successive advance payment, not more than four (4) times, each time by the amount of the advance payment plus interest thereon as provided in the Contract, but in any eventuality the amount of this Credit shall not exceed the total sum of United States Dollars                                      (USD           ) plus interest thereon at the rate of six percent (6%) per annum from the date following the date of Builder’s receipt of each advance payment to the date of remittance by telegraphic transfer of the refund. If any termination of the Contract is based on delays due to Force Majeure or other causes beyond the control of Builder as specified in Article VIII of the Contract, no interest shall be payable.

 

This Letter of Credit is available against Buyer’s written statement stating that Buyer’s demand for refund has been made in conformity with the Contract and Builder has failed to make the refund within twenty (20) days after the Buyer’s demand. Refund shall be made to the Buyer by telegraphic transfer in United States Dollars.

 

This Letter of Credit shall expire and become null and void upon receipt by Buyer of the sum guaranteed hereby together with interest thereon as aforesaid or upon the execution by Buyer and Builder of the Protocol of Delivery and Acceptance of the Vessel or if the Contract is terminated due to Buyer’s default in accordance with the provisions of Article XI of the Contract, unless such default has been disputed with notice to us by Buyer within ten (10) working days of Buyer’s receipt of Builder’s written notice of termination. In any such case, this Letter of Credit shall be returned to us.

 

34

 

This Letter of Credit is transferable and valid until January 5, 2016, which date shall be adjusted and fixed in accordance with Article VII.1(a) of the Contract, or, in the event of delayed delivery, the expiration date of this Letter of Credit shall be extended to such time as the Vessel is delivered by Builder to Buyer in accordance with the provisions of the Contract.

 

Notwithstanding the provisions hereinabove, in case we receive notification from you or Builder confirmed by an arbitrator stating that your claim to cancel or terminate the Contract or your claim for refundment thereunder has been disputed and referred to Arbitration in accordance with the provisions of the Contract, this Letter of Credit shall be valid, until thirty (30) days after the final award shall be rendered in the Arbitration and a copy thereof acknowledged by the Arbitrators. In such case, this Letter of Credit shall not be available unless and until such acknowledged copy of the final award in the Arbitration justifying your claim is presented to us.

 

Except as otherwise expressly stated herein, this Letter of Credit is subject to the Uniform Customs and Practice for Documentary Credits (2007 Revision), International Chamber of Commerce Publication No. 600 ( hereinafter called the “UCPDC”) and to the extent not contrary to the UCPDC this Letter of Credit shall be governed by the laws of England. And any dispute arising out of or in relation to this Letter of Credit shall be determined by the High Court of England to whose non-exclusive jurisdiction we hereby agree to submit. For the purposes of any legal proceedings hereunder we hereby irrevocably appoint [                                       ] at present of [                                          ] as our agents for the service of process.

 

Yours very truly,

 

	
 
    	
For and on behalf of
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title:
    

 

35

 

EXHIBIT B.              CORPORATE GUARANTEE

 

(CORPORATE GUARANTEE)

 

Daewoo Shipbuilding &

Marine Engineering Co., Ltd.

85, Da-dong, Jung-gu,

Seoul, Republic of Korea

 

	
 
    	
Date: [
    	
]
    

 

Dear Sirs,

 

Hull No. [                            ]

 

1.     We refer to the shipbuilding contract dated [                                                               ] (as may be and may have been from time to time amended, varied and/or supplemented the “Contract”) made between (1) [                                                               ] (the “Buyer”) and (2) yourselves (the “Builder”) for the construction and sale of a [                                                               ] having your hull number [                               ] (the “Vessel”).

 

2.     In consideration of your entering into the Contract with the Buyer and the payment to us of five United States Dollars (USD 5) and other good and valuable consideration (the receipt and sufficiency of which we hereby acknowledge), we, the undersigned, as a primary obligor and not merely as a surety, hereby irrevocably and unconditionally:-

 

(A)     guarantee to you the due and full performance by the Buyer of all of its obligations under the Contract including, without limitation, the taking of delivery of the Vessel and the payment by the Buyer of all amounts of whatever nature payable by it under the Contract; and

 

(B)     undertake within thirty (30) days upon your first written demand, including a substantiated statement that the Buyer is in default of its obligations under the Contract, to pay and/or perform our obligations under paragraph (A) above, without requesting you to take any further procedure or step against the Buyer.

 

3.     We hereby expressly waive notice of any supplement, amendment, change or modification to or of the Contract that may be agreed between you and the Buyer.

 

4.     This Corporate Guarantee shall remain in full force and effect from the date hereof until the delivery of the Vessel in accordance with the provisions of the Contract.

 

5.     This Corporate Guarantee shall be a continuing guarantee. Our liability of under this guarantee shall not be discharged or affected by any intermediate performance of obligation or payment or settlement of account by the Buyer, any security or other indemnity now or hereafter held by you in respect thereof or of the Buyer’s obligations under the Contract, any invalidity, illegality or unenforceability of the Contract, any alteration, amendment or variation of the terms of the

 

36

 

Contract, any allowance of time, forbearance, forgiveness or indulgence in respect of any matter concerning the Contract or this guarantee on your part, or the insolvency, bankruptcy, winding up or analogous proceedings or re-organisation of the Buyer, or any act, omission, fact or circumstances whatsoever which might otherwise diminish or nullify in any way our obligations under this Corporate Guarantee.

 

6.     All payments by us under this Corporate Guarantee shall be made within thirty (30) days upon your first written demand, including a substantiated statement that the Buyer is in default of payment of the amounts that were due under the Contract, in United States Dollars to such account as you may designate without any deduction of any present or future taxes, restrictions or conditions of any nature, or any set-off or counter-claim for any reason whatsoever. If we are required to make any deduction or withholding in respect of taxes from any payment due hereunder, the sum due from us in respect of such payment shall be increased to the extent necessary to ensure that, after the making of such deduction or withholding, you receive (and retain, free from any liability in respect of such deduction or withholding) a net sum equal to the sum which you would have received had no such deduction or withholding been required to be made.

 

7.     Any demand or notice to be made by you hereunder shall be made in writing in the English language and shall be delivered to us in person or sent by registered airmail or by telefax addressed to us at the following address:-

 

[                                     ]

[                                     ]

[                                     ]

Telefax:  [                     ]

 

8.     The benefit of this Corporate Guarantee shall not be assigned by you without our consent, such consent not to be unreasonable withheld, to any lawful assignee of the Contract and shall enure for the benefit of yourselves, your successors and assigns.

 

9.     This Corporate Guarantee shall be governed by and construed in accordance with the laws of England.

 

10.  We hereby agree that any dispute, controversy or difference arising out of or in relation to this Corporate Guarantee shall be finally settled either (i) by proceedings in the English courts or (ii) if we so elect, by arbitration in London, England before a tribunal of three arbitrators in accordance with the United Kingdom Arbitration Act 1996 or any re-enactment or statutory modification thereof for the time being in force and with the rules of The London Maritime Arbitrators’ Association (“LMAA”) for the time being in force.

 

 

Yours faithfully,

 

[INSERT NAME OF CORPORATE GUARANTOR]

By:

Title:

 

37

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