UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(x) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (Fee Required)
For the fiscal year ended December 31, 1993
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (No Fee Required)
For the transition period from __________________ to __________________
Commission File Number 1-8544
AMERICAN PRESIDENT COMPANIES, LTD.
(Exact name of registrant as specified in its charter)
Delaware 94-2911022
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1111 Broadway
Oakland, CA 94607
(Address of principal executive offices)
Registrant's telephone number: (510) 272-8000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, Par New York Stock Exchange
Value $.01 Pacific Stock Exchange
Rights to Purchase Series A New York Stock Exchange
Junior Participating Preferred Stock Pacific Stock Exchange
Securities registered pursuant to Section 12 (g) of the Act:
None
______________
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. (x)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes (x) No ( )
______________
As of March 1, 1994 the number of shares of Common Stock outstanding was
27,198,180. Based solely upon the closing price of the New York Stock Exchange
on such date, the aggregate market value of Common Stock held by non-affiliates
of the registrant was approximately $907.7 million.
Documents Incorporated by Reference
Portions of registrant's Proxy Statement for its 1994 Annual Meeting of
Stockholders are incorporated by reference into Part III hereof.
______________
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
PART I
<S> <C> <C>
Items 1. and 2. BUSINESS AND PROPERTIES 3-9
Item 3. LEGAL PROCEEDINGS 9-10
Item 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 10
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND
RELATED STOCKHOLDER MATTERS 10
Item 6. SELECTED FINANCIAL DATA 10-11
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND
RESULTS OF OPERATIONS 12-19
Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA 19-46
Item 9. DISAGREEMENTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE 47
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT 47
Item 11. EXECUTIVE COMPENSATION 47
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT 47
Item 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS 48
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K 48-57
SIGNATURES 58-59
</TABLE>
<PAGE>
PART I
ITEMS 1. AND 2. BUSINESS AND PROPERTIES
American President Companies, Ltd. and its subsidiaries (the "company")
provide container transportation and related services in North America, Asia and
the Middle East through an intermodal system combining ocean, rail and truck
transportation.
The company's international transportation operations are conducted
through American President Lines, Ltd., an ocean common carrier with operations
concentrated in the Pacific Basin. Another operating unit, American
Consolidation Services, Ltd., provides cargo distribution, warehousing and
freight consolidation services. Stevedoring and terminal operations on the U.S.
West Coast are conducted through Eagle Marine Services, Ltd. The company's
North America transportation operations are conducted through APL Land Transport
Services, Inc., which provides intermodal transportation and freight brokerage,
and through American President Trucking Company, Ltd., which provides over-the-
road truck transportation in North America. APL Information Services, Ltd.
provides information systems development, maintenance and support services for
the company. The company is also engaged in real estate operations through
Natomas Real Estate Company.
TRANSPORTATION
International
The company provides ocean-going containerized cargo transportation
services in the trans-Pacific and intra-Asia markets. The company's share of
the trans-Pacific market for containerized cargo was approximately 11%, 11%, and
12% in 1993, 1992 and 1991, respectively. The company offers five scheduled
trans-Pacific services per week between key ports in Asia and four U.S. ports
and one Canadian port. Two of these services are made possible under agreements
with Orient Overseas Container Line, a Hong Kong shipping company ("OOCL"),
which permit both companies to offer faster transit times, more frequent
sailings between key markets in Asia and the U.S. West Coast, and sharing of
terminals and several feeder operations within Asia.
Since 1991, the company and OOCL have been parties to agreements
enabling them to exchange vessel space and coordinate vessel sailings until
1996. In February 1994, the company and OOCL agreed to extend the term of the
agreements through 2005. The new contracts are subject to certain conditions,
including U.S. government approval.
In all, the company provides scheduled service between 55 ports in the
Pacific and Indian Oceans and in the Arabian Gulf. In the intra-Asia market,
the company provides service between approximately 400 Asian cities and
commercial centers. The company's ocean transportation business maintains a
total of 180 offices and agents located in the three countries in North America,
27 countries in Asia and the Middle East, 11 countries in Europe, and in Africa
and Australia.
International container transportation operations are seasonal and
subject to the growth of local economies in the markets served, fluctuations in
the relative value of various foreign currencies and resulting changes in demand
for transportation of import and export products. The second and third quarters
are generally the company's strongest in terms of volume, primarily due to the
export of seasonal refrigerated goods from the U.S. in both of these quarters
and increased imports of consumer goods to the U.S. in the third quarter for the
Christmas buying season.
<PAGE>
The following table sets forth the amount and source of the company's
ocean shipping revenues for the past five years, in millions of dollars. While
U.S. import and export amounts are stated net of revenues resulting from the
transportation of military cargo for Operation Desert Storm, the intra-Asia
amounts for 1991 and 1990 include Desert Storm revenues, which were not
segregated from normal operations in this market.
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
U.S. Import $ 880 $ 829 $ 775 $ 761 $ 789
U.S. Export 498 500 498 463 467
Intra-Asia 329 296 280 242 222
Desert Storm 103 26
Total $ 1,707 $ 1,625 $ 1,656 $ 1,492 $1,478
</TABLE>
The company transports goods for import into the U.S. that include
higher value goods such as clothing, electronics, automotive and manufacturing
components and other consumer items. Generally, higher value cargo is
transported at higher rates due to its value, time sensitivity or need for
specialized services.
U.S. export cargoes transported by the company include refrigerated
goods, military shipments and lower value, semi-processed and raw materials, as
well as auto parts, oil field supplies and other higher value finished products.
In the intra-Asia market, the industrialized economies import food, raw
materials and semi-processed goods from developing Asian nations and export auto
parts, electronics and other technological and capital-intensive finished
products.
The company's single largest customer of its international
transportation operations is the U.S. government, which ships military and other
cargo and accounted for approximately 3%, 2% and 4% of consolidated revenues in
1993, 1992 and 1991, respectively, excluding Operation Desert Storm shipments in
1991. Generally, the company bids competitively for contracts to transport
military and other cargo for the U.S. government. Effective June 1, 1993, the
company was the successful bidder and became the preferred carrier for U.S.
military cargo for a period of 12 months.
In 1990 and 1991, the company transported military cargo related to
Operation Desert Storm. Export shipments of Desert Storm cargo began in the
fourth quarter of 1990 and continued through the first quarter of 1991 during
the build-up of U.S. military equipment and supplies. The company also returned
military equipment from this region to the U.S. during the second and third
quarters of 1991.
The following table shows the company's total international
transportation volumes in forty-foot equivalent units ("FEU") for the past five
years:
<TABLE>
<CAPTION>
Year Volumes
<S> <C> <C>
1993 543,000
1992 501,000
1991 513,000
1990 492,000
1989 492,000
</TABLE>
Since 1989, the company and 12 other shipping companies, representing
approximately 85% of total trans-Pacific U.S. import capacity, have been parties
to the Trans-Pacific Stabilization Agreement, which, among other
<PAGE>
things, limits import capacity of participating companies by amounts mutually
determined from time to time in an attempt to improve the balance of supply and
demand in the U.S. import market. The agreement may be terminated upon the
unanimous written consent of the companies. The company believes that the Trans-
Pacific Stabilization Agreement has been effective in supporting rates for
import shipments.
The following table shows the company's utilization of its containership
capacity during the past five years, which for 1991 and 1990 includes the
effects of shipments related to Operation Desert Storm:
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
U.S. Import 89% 89% 93% 85% 92%
U.S. Export 92% 90% 95% 91% 93%
</TABLE>
In addition to military freight revenue, in 1993, 1992 and 1991, the
company collected detention charges from the U.S. government for containers
transported for Operation Desert Storm and held beyond an allowed time, which
contributed $6 million, $41 million and $13 million, respectively, to operating
income in those years. All detention claims have been settled, and a payment of
$8 million was received and recorded as income on January 31, 1994. Additional
payments of up to $2 million are expected to be received in 1994.
The company provides cargo distribution and warehousing services on the
East Coast of the U.S. and consolidation services in Asia, the Middle East,
Europe and Africa through its subsidiary, American Consolidation Services, Ltd.
("ACS"). Freight consolidators combine various shipments from multiple vendors
into a single container load for delivery to a single destination. The company
also serves shippers of less-than-containerload cargoes by combining their
shipments with others bound for the same or proximate geographic locations.
The company operates port terminal facilities in Oakland and Los
Angeles, California, Seattle, Washington and Dutch Harbor, Alaska and major
inland terminal facilities at Chicago, Atlanta and South Kearny, New Jersey.
Each port terminal facility is operated under a long-term use agreement
providing for preferential, although non-exclusive use of the facility by the
company. The company also operates major port terminal facilities in Asia under
long-term lease agreements in Kobe and Yokohama, Japan and Kaohsiung, Taiwan.
The company has entered into a contract with the Port of Los Angeles to
lease a new 226-acre terminal facility for 30 years. Occupancy of the new
facility is scheduled for 1997 upon completion of its construction. The minimum
annual rent under the new lease is estimated to be between $22 million and $26
million, depending upon the final scope of development. The annual rent for the
company's current 129-acre terminal in Los Angeles was approximately $19 million
in 1993.
The company also is negotiating with the Port of Seattle for the
improvement and expansion of its existing terminal facility. Under the proposed
plan, the facility would be expanded from 83 acres to approximately 160 acres by
1997 and the lease term of that facility would be 30 years from the date of
completion. The lease term for the existing facility expires in 2015.
In addition to performing stevedoring and terminal services for the
company's own operations, Eagle Marine Services, Ltd., a subsidiary of the
company, provides these services to third parties at the company's U.S. port
facilities.
<PAGE>
At December 31, 1993, the company was operating 19 containerships, five
of which are chartered under operating lease agreements. The remainder are
owned by the company. In addition, there were four vessels chartered to another
carrier. The following table sets forth the U.S. flag vessels deployed in the
company's trans-Pacific and intra-Asia services at December 31, 1993:
<TABLE>
<CAPTION>
Maximum
Number of Date Placed Capacity Service Speed
Type of Vessel Vessels in Service (in TEUs) (in knots)
________________________________________________________________________________________________
<S> <C> <C> <C> <C>
C-10 5 1988 4,300 24.0
C-9 3 1982-1983 2,900 23.5
L-9 4 1987 2,800 21.0
J-9 2 1984 2,700 22.5
C-8 4 1979 & 1986 2,000 22.0
Pacesetter 1 1973-1974 1,400 23.5
</TABLE>
The company has the authority from the United States Maritime
Administration ("MarAd") to operate a total of 26 foreign-flag-feeder vessels in
its intra-Asia service. At December 31, 1993, the company operated 24 such
vessels, which are leased for terms of up to three years.
In 1993, the company began a fleet modernization program pursuant to
which it has placed orders for the construction of six new C11-class
containerships ("C11") and three new Kl0-class containerships ("K10") for an
aggregate cost of approximately $730 million. The C11s are similar in design to
the company's C10-class vessels, and each is designed to have a capacity of
approximately 4,800 twenty-foot equivalent units ("TEUs") and a service speed of
approximately 25 knots. Delivery of the C11s is scheduled for 1995. Each K10
is designed to have a capacity of approximately 3,600 TEUs and a service speed
of approximately 24 knots. Delivery of the K10s is scheduled for 1996. The
company presently expects the C11s to be deployed in its trans-Pacific service.
The K10s, in combination with capacity from the six C11s, will replace four L9-
class vessels chartered by the company and used in its West Asia/Middle East
service. The charters of the L9s will expire in 1996.
At December 31, 1993, the company operated 112,500 dry containers
consisting of 20-, 40-, 45-, 48-, and 53-foot containers, 49,700 of which were
owned and 62,800 leased under operating lease agreements. As of this date, the
company also operated 7,200 refrigerated containers, 4,200 of which were owned
and 3,000 leased under operating leases. In addition, the company operated
50,300 chassis for the carriage of containers, 27,500 of which were owned and
22,800 leased under capital and operating leases.
North America
The company provides intermodal transportation and freight brokerage
services to North American and international shippers as well as time-critical
cargo transportation and just-in-time delivery (principally to the automotive
manufacturing industry). These services are provided through an integrated
system of rail and truck transportation, the primary element of which is a train
system utilizing double-stack rail cars.
The company's double-stack train system principally serves the North
American, long-haul truck and piggyback rail freight markets, and the
international (export-import) intermodal market through more than 30 U.S.,
Canadian and Mexican inland terminal facilities. Under connecting carrier
agreements, certain railroads have agreed to provide locomotive power, trackage,
terminal services and labor to transport the company's containers on individual
double-stack rail cars and on dedicated unit trains.
<PAGE>
The following table shows the company's total stacktrain volumes (in
FEUs):
<TABLE>
<CAPTION>
Year Volumes
<S> <C> <C>
1993 538,000
1992 508,000
1991 509,000
1990 500,000
1989 465,000
</TABLE>
A standard stacktrain comprises up to 28 double-stack rail cars and has
a capacity of up to 280 FEUs. At December 31, 1993, the company operated 1,100
such rail cars, 200 of which are owned and 900 of which are leased. This
compares to 1,100 and 1,200 double-stack rail cars operated in 1992 and 1991,
respectively.
In combination with its double-stack rail service, the company also
provides local trucking services in North America though a fleet of 400 trucks,
300 which it owns or leases, and 100 which are operated by owner-operators.
Information Systems
The company manages its fleet of containers and chassis using its
computer systems and specialized software, linked through a satellite network
with the company's ships and offices. The company's cargo and container
management system processes cargo bookings, generates bills of lading, expedites
U.S. customs clearance and facilitates the management of rail cars, containers
and other equipment. The company has also developed computer systems designed to
optimize the loading of containers onto ships and to facilitate the planning of
ship, rail and truck moves. The company's communications system permits its
customers to access information regarding the location and status of their cargo
via touch-tone telephone, personal computer or computer-facsimile link.
REAL ESTATE
In 1993, the company sold 99 acres of land, and, at December 31, 1993,
owned approximately 86 acres of land in California. Properties are developed
through a combination of joint ventures with third parties, independent
development efforts and direct sales of partially improved land.
COMPETITION AND REGULATION
International Transportation
The company is a U.S.-flag carrier. It faces vigorous competition,
principally on the basis of price and service, on all of its trade routes from
approximately 19 major U.S.-flag and foreign-flag operators, some of which are
owned by foreign governments. Foreign-flag competitors generally have cost and
operating advantages over U.S.-flag carriers. The timing of increases in
capacity in the ocean transportation industry can result in imbalances in
industry-wide supply and demand, which causes volatility in rates.
The carriage of U.S. military cargo is reserved for U.S.-flag shipping
companies, and this trade is also subject to vigorous competition among such
carriers. The carriage of this cargo is awarded in accordance with competitive
bidding procedures under which the low bidder wins the right to carry a
substantial portion of such cargo for a period of up to 12 months.
<PAGE>
A substantial portion of the company's transportation operations is
subject to regulation by agencies of the U.S. government that have jurisdiction
over shipping practices, maintenance and safety standards and other matters. The
company's wholly-owned subsidiary, American President Lines, Ltd. ("APL") and
MarAd are parties to a 20-year Operating-Differential Subsidy Agreement ("ODS
Agreement") expiring December 31, 1997. This agreement provides for payments by
the U.S. government to partially compensate APL for the greater expense of
operating vessels under U.S. rather than foreign registry. Under APL's ODS
Agreement, its vessels must be registered and built in the U.S. (except as noted
below), manned by U.S. crews and controlled by U.S. citizens. Under its ODS
Agreement, APL also is required, among other things, to operate vessels on
designated trade routes in the foreign commerce of the U.S. and to replace the
capacity of its existing vessels as they reach the end of their statutory lives
(generally 25 years) if the construction differential subsidy, provided by the
U.S. government, is made available. This subsidy has not been made available
since 1981. In addition, APL is required to serve such trade routes within
designated minimum and maximum numbers of annual sailings. In addition, APL may
not, without prior government approval, effect any merger or consolidation or
transfer operation of any of its vessels covered by the ODS agreement.
Since 1981, Congress has twice passed legislation permitting U.S.-flag
carriers to acquire a limited number of foreign-built vessels and thereafter to
operate such vessels under existing subsidy agreements. Under such laws, APL
constructed five C10-class vessels in Germany. APL currently operates certain
of its vessels under this legislation.
In June 1993, Marad awarded APL contracts to manage 12 Ready Reserve
Force vessels for a period of five years. APL receives a per diem fee based
upon the operating status of each vessel.
ODS payments to the company are expected to terminate at the end of
1997. The Clinton Administration and Congress are actively reviewing U.S.
maritime policy. On November 4, 1993, the U.S. House of Representatives passed
the "Maritime Security and Competitiveness Act of 1993," H.R. 2151, which would,
among other things, extend the U.S. government's maritime support program for up
to ten years, but would substantially reduce the amount of support payments per
participating vessel from current levels. Similar legislation has not yet been
addressed by the Senate. Accordingly, the company is unable to predict whether
maritime reform legislation will be enacted or whether enacted legislation, if
any, will have terms similar to H.R. 2151.
In 1993, the company filed applications with MarAd to operate under
foreign flag its six C11-class containerships, which are now under construction
and will be delivered to the company in 1995, and to transfer to foreign flag
seven of the 15 U.S.-flag containerships in its trans-Pacific fleet. Management
of the company believes that, in the absence of ODS or an equivalent government
support program, it is generally no longer commercially viable to own or operate
containerships in foreign trade under the U.S. flag. The company continues to
evaluate its strategic alternatives in light of the expiration of its ODS
agreement and the uncertainties as to whether a new U.S. government maritime
support program acceptable to the company will be enacted or the company's
application to flag its vessels under foreign registry will be approved. While
no assurances can be given, management of the company believes that it will be
able to structure its operations to enable it to continue to operate on a
competitive basis without direct U.S. government support.
<PAGE>
In early 1993, certain covenants of the company's ODS agreement,
including those with respect to the payment of dividends from APL to the
company, were waived by MarAd upon the termination of MarAd's guarantee of the
Merchant Marine Bonds (the "Bonds") issued by the company or its lessors to
finance certain of the company's vessels. In 1992, the company effected the
retirement or redemption of approximately $44 million of Bonds. On January 5,
1993, the company effected the retirement of the remaining $64 million of Bonds.
North America Transportation
The company's stacktrain operations compete with 11 trans-Pacific
containership companies, and three West Coast railroads offering double-stack
train service. In addition, the company's stacktrain operations, together with
its trucking operations, compete with long-haul trucking companies for truckload
shipments. The company's brokerage operations compete for available business
with over 150 shippers' agents. Competition among shippers' agents is based
principally on the types and timeliness of services provided.
Real Estate
In the operation of its real estate business, the company is subject to
regulation by state, county and city boards, agencies and commissions. The
company is also subject to limited and indirect federal regulation.
EMPLOYEES
At December 31, 1993, the company and its subsidiaries employed 624
seagoing and 4,813 shoreside personnel. The seagoing personnel and certain
shoreside personnel were employed under collective bargaining agreements with
several unions.
ITEM 3. LEGAL PROCEEDINGS
The company is a party to various pending legal proceedings, claims and
assessments arising in the course of its business activities, including actions
relating to trade practices, personal injury or property damage, alleged
breaches of contracts, torts, labor matters, employment practices, tax matters
and miscellaneous other matters. Some of these proceedings involve claims for
punitive damages, in addition to other specific relief.
Among these actions are approximately 710 cases pending against the
company, together with numerous other ship owners and equipment manufacturers,
involving injuries or illnesses allegedly caused by exposure to asbestos or
other toxic substances on ships. In one case, Miller, Administrator of Estate
of Moline vs. American Mail Line, et. al., U.S. District Court, Northern
District of Ohio, C86-821, a judgment was entered in May 1991 awarding punitive
damages of $50,000 per named defendant, along with compensatory damages
aggregating $166,000. In March 1993, the U.S. Court of Appeals for the Sixth
Circuit vacated the punitive damages award, holding that punitive damages are
not available in a general maritime unseaworthiness action for wrongful death of
a seaman, remanded the case for consideration of defendants' claims for
indemnity and contribution, and otherwise affirmed the judgment of the District
Court. The plaintiff filed a petition for certiorari with the U.S. Supreme
Court in August 1993. The court refused review of the case without comment on
October 12, 1993.
<PAGE>
The company insures its potential liability for bodily injury to seamen
through mutual insurance associations. Industry-wide resolution of asbestos-
related claims at significantly higher than expected amounts could result in
additional contributions to those associations.
In December 1989, the government of Guam filed a complaint with the
Federal Maritime Commission ("FMC") alleging that American President Lines, Ltd.
and an unrelated company charged excessive rates for carrying cargo between the
U.S. and Guam, in violation of the Shipping Act, 1916 and the Intercoastal
Shipping Act of 1933, and seeking an undetermined amount of reparations. Three
private shippers are also complainants in this proceeding. Evidentiary hearings
are continuing and a decision by the FMC is not expected until late 1994 or
1995.
In March 1992, in connection with the same matter, the government of
Guam and four private shippers filed a class action complaint in the United
States District Court, District of Columbia, based on the same allegations,
seeking an undetermined amount of damages on behalf of all shippers of cargo to
and from Guam on the company's vessels and the vessels of the other named
defendant. In January 1993, the class action complaint was dismissed. An
appeal of the dismissal was filed in the U.S. Court of Appeals for the Circuit
of the District of Columbia in February 1993.
Based upon information presently available, and in light of legal and
other defenses and insurance coverage and other sources of payment available to
the company, management does not expect the legal proceedings described,
individually or in the aggregate, to have a material adverse impact on the
company's consolidated financial position or operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the company's security holders
during the fourth quarter of 1993.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The company's Common Stock is traded on the New York and Pacific Stock
Exchanges using the symbol APS. The reported high and low closing sales prices
per share of the company's Common Stock and cash dividends declared for the
preceding eight fiscal quarters are set forth in Note 12 to the consolidated
financial statements, Part II, Item 8, on page 40.
On March 1, 1994, the company had 3,880 common stockholders of record.
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data for the ten years ending December
31, 1993 are derived from the consolidated financial statements of the company,
which have been examined and reported upon by the company's independent public
accountants as set forth in their report included elsewhere herein. This
information should be read in conjunction with the Consolidated Financial
Statements and Management's Discussion and Analysis of Financial Condition and
Results of Operations.
<PAGE>
<TABLE>
<CAPTION>
TEN-YEAR FINANCIAL REVIEW
(Dollars in millions, except per share amounts) 1993 1992 1991 1990 1989
Results of Operations (1)
Revenues
Transportation
<S> <C> <C> <C> <C> <C>
International $ 1,918 $ 1,873 $ 1,787 $ 1,586 $ 1,576
North America 660 632 645 669 637
Real Estate 16 6 17 15 21
Total Revenues 2,594 2,511 2,449 2,270 2,234
Operating Income (Loss)
Transportation 123 137 131 (64) 51
Real Estate 10 3 12 8 9
Total Operating Income (Loss) 133 140 143 (56) 60
Income (Loss) Before Taxes 131 122 107 (93) 22
Income (Loss) Before Cumulative Effect
of Accounting Changes 80 78 66 (62) 13
Net Income (Loss) 80 56 56 (62) (16)
Earnings (Loss) Per Share, Fully Diluted Before
Cumulative Effect of Accounting Changes (2) 2.50 2.34 1.85 (1.78) 0.16
Earnings (Loss) Per Common Share, Fully Diluted (2) 2.50 1.69 1.56 (1.78) (0.57)
Cash Dividends Per Common Share (2) 0.30 0.30 0.30 0.30 0.29
Financial Position
Cash, Cash Equivalents
& Short-Term Investments $ 84 $ 132 $ 179 $ 118 $ 127
Working Capital 51 (16) 159 112 128
Total Assets 1,454 1,436 1,541 1,608 1,683
Net Capital Expenditures 156 66 20 39 111
Long-Term Debt 250 222 251 279 303
Capital Lease Obligations 17 20 193 202 208
Redeemable Preferred Stock 75 75 75 75 75
Stockholders' Equity 475 397 426 459 567
Capitalization 822 829 955 1,022 1,169
Book Value Per Common Share (2) 17.72 15.25 14.48 12.44 14.18
Financial Ratios
Return on Equity (3) 15.7% 11.6% 10.7% (10.5%) (2.4%)
Cash Flow to Average Total Debt 53.7% 43.4% 44.0% 21.0% 20.3%
Return on Average Assets 5.5% 3.8% 3.5% (3.7%) (1.0%)
Total Debt to Equity (3) 49.4% 75.5% 90.4% 91.3% 82.2%
Current Ratio 1.1 1.0 1.5 1.3 1.4
</TABLE>
<TABLE>
<CAPTION>
TEN-YEAR FINANCIAL REVIEW
(Dollars in millions, except per share amounts) 1988 1987 1986 1985 1984
Results of Operations (1)
Revenues
Transportation
<S> <C> <C> <C> <C> <C>
International $ 1,436 $ 1,271 $ 945 $ 859 $ 902
North America 650 540 469 305 3
Real Estate 45 14 26 7 6
Total Revenues 2,131 1,825 1,440 1,171 911
Operating Income (Loss)
Transportation 129 162 50 69 129
Real Estate 33 7 13 4 4
Total Operating Income (Loss) 162 169 63 73 133
Income (Loss) Before Taxes 136 149 41 52 116
Income (Loss) Before Cumulative Effect
of Accounting Changes 81 79 18 39 104
Net Income (Loss) 81 79 18 39 104
Earnings (Loss) Per Share, Fully Diluted Before
Cumulative Effect of Accounting Changes (2) 1.63 1.62 0.35 0.93 2.89
Earnings (Loss) Per Common Share, Fully Diluted (2) 1.63 1.62 0.35 0.93 2.89
Cash Dividends Per Common Share (2) 0.25 0.25 0.25 0.19
Financial Position
Cash, Cash Equivalents
& Short-Term Investments $ 186 $ 287 $ 276 $ 67 $ 195
Working Capital 178 261 237 36 90
Total Assets 1,711 1,599 1,343 1,060 987
Net Capital Expenditures 379 155 75 128 139
Long-Term Debt 317 138 151 70 38
Capital Lease Obligations 224 234 244 220 226
Redeemable Preferred Stock 75
Stockholders' Equity 617 705 641 538 506
Capitalization 1,254 1,089 1,049 839 804
Book Value Per Common Share (2) 15.26 14.44 12.98 12.94 12.27
Financial Ratios
Return on Equity (3) 11.6% 11.8% 3.0% 7.4% 24.6%
Cash Flow to Average Total Debt 38.6% 50.9% 36.0% 34.2% 49.2%
Return on Average Assets 4.9% 5.4% 1.5% 3.8% 11.7%
Total Debt to Equity (3) 81.2% 54.5% 63.8% 56.1% 58.9%
Current Ratio 1.6 2.0 2.0 1.2 1.5
</TABLE>
(1) The company's fiscal year ends on the last Friday in December. All years
presented above were 52 weeks long, except for 1993 and 1988 which were 53-
week years.
(2) Earnings Per Common Share, Cash Dividends Per Common Share and Book Value
Per Common Share have been computed for all periods retroactively
reflecting the effect of a 3% stock dividend distributed on May 4, 1984, a
3-for-2 stock split effected on May 30, 1985, and a 2-for-1 stock split
effected on December 31, 1993. Earnings Per Common Share also reflect the
repurchase of 3.7 million, 7.8 million, 2.9 million, 1.0 million and 8.8
million shares of the company's common stock during 1992, 1991, 1990, 1989
and 1988, respectively, on a post-split basis. In 1989, 2.0 million shares
of the company's Series B Preferred Stock were converted into common
stock.
(3) Redeemable Preferred Stock is included in Equity for the purpose of
calculating these ratios. If Redeemable Preferred Stock were a component
of Debt instead of Equity, Return on Equity would be 16.8%, 12.1%, 11.0%,
(13.3%), (5.2%) and 12.8% in 1993, 1992, 1991, 1990, 1989 and 1988,
respectively, and Total Debt to Equity would be 72.9%, 108.6%, 123.9%,
122.5%, 106.3% and 103.3% in 1993, 1992, 1991, 1990, 1989, and 1988,
respectively.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS
(In millions) 1993 Change 1992 Change 1991
REVENUES
<S> <C> <C> <C> <C> <C>
International Transportation $ 1,918 2% $ 1,873 5% $ 1,787
North America Transportation 660 4% 632 (2%) 645
Real Estate 16 N/A 6 N/A 17
OPERATING INCOME
Transportation $ 123 (10%) $ 137 4% $ 131
Real Estate 10 N/A 3 N/A 12
</TABLE>
The company's pretax income increased to $125 million in 1993 from $81
million in 1992, excluding the impact of $6 million and $41 million from the
collection of Desert Storm container detention charges in 1993 and 1992,
respectively. All detention claims with the U.S. government have been settled
and a payment of $8 million was received and recorded as income by the company
on January 31, 1994. Additional payments of up to $2 million are expected to be
received in 1994.
The improvements in the company's 1993 results compared with 1992 were
due to higher freight volumes in all of the company's markets, higher operating
margins in the company's North America stacktrain market, lower net interest
expense and increased real estate income. Lower rates in the U.S. export and
intra-Asia markets partially offset these improvements. Also contributing to
the increase in earnings in 1993 were gains totaling $7 million from the sales
of three of the company's older steamships and certain containers.
Additionally, the company's 1993 income and volumes were positively impacted by
the fact that its 1993 fiscal year was 53 weeks long, compared with 52 weeks in
1992 and 1991.
<TABLE>
<CAPTION>
INTERNATIONAL TRANSPORTATION(1) 1993 Change 1992 Change 1991(2)
(Volumes in thousands of FEUs)
Import
<S> <C> <C> <C> <C> <C>
Volumes 214.3 4% 206.8 1% 204.0
Average Revenue per FEU $ 4,107 2% $ 4,013 6% $ 3,800
Export
Volumes 155.5 5% 147.6 (3%) 152.4
Average Revenue per FEU $ 3,200 (5%) $ 3,385 4% $ 3,268
Intra-Asia (Including Desert Storm)
Volumes 173.3 19% 146.1 6% 138.2
Average Revenue per FEU $ 1,899 (6%) $ 2,030 0% $ 2,025
</TABLE>
(1) Volumes and revenue per FEU data are based upon shipments originating
during the period, which differ from the percentage-of-completion method
used for financial reporting purposes.
(2)Excluding trans-Pacific Desert Storm volumes of 19.4 and average revenue per
FEU of $5,309.
The increase in the company's import volumes in 1993 compared with 1992
resulted primarily from expanded direct transportation of commercial dry cargo
from the North and Central regions of the People's Republic of China. Also,
volumes of textiles, footwear, auto parts and electronic goods in the company's
import market improved in 1993 compared with 1992. The company's export volumes
increased due to higher military volumes, particularly since June 1, 1993, when,
as a result of its successful bid, the company became the preferred carrier of
U.S. military cargo for a period of 12 months. The increase in volumes due to
military shipments was partially offset by a
<PAGE>
decline in commercial refrigerated cargo. The company's intra-Asia volumes
increased in 1993, due to expanded service to the People's Republic of China and
the growing trade in Southeast and West Asia.
In 1992, import volumes were slightly above those for 1991 due to
increases in shipments of garments, electronic goods and refrigerated cargo,
partially offset by a decline in shipments of auto parts from Japan. Export
volumes declined in 1992 compared with 1991, primarily due to a decrease in non-
Desert Storm military shipments and generally lower demand for U.S. goods,
partially offset by an increase in volumes of refrigerated cargo. Volumes
improved in the intra-Asia market in 1992 due to strong demand in the Middle
East and India compared with 1991.
Utilization of the company's containership capacity in 1993 was 89% and 92%
for import and export shipments, respectively, compared with 89% and 90% in
1992, and 93% and 95% in 1991. Utilization includes the effects of shipments
related to Operation Desert Storm in 1991. Transportation of Operation Desert
Storm military cargo contributed $103 million to the company's international
transportation revenues in 1991.
Average revenue per forty foot equivalent unit ("FEU") for the company's
import shipments increased in 1993 compared with 1992 due to higher rates and a
higher proportion of textiles, auto parts and refrigerated cargo carried by the
company. Increased volumes of higher-rated intermodal cargo also contributed to
the increase in average revenue per FEU in the company's import market. Average
revenue per FEU for the company's export shipments decreased in 1993 compared
with 1992 due to strong competition in this market and a decrease in the
proportion of higher-rated commercial refrigerated cargo carried by the company.
The company's average revenue per FEU for its intra-Asia shipments declined in
1993 compared with 1992, resulting from competitive pressures in this market.
Also, the company carried a higher proportion of lower-rated short-haul cargo in
the intra-Asia trade during 1993 compared with 1992.
Average revenue per FEU for the company's import shipments increased in
1992 from 1991 due to improved rates and a higher proportion of garments,
refrigerated and intermodal cargo carried by the company in 1992. Average
revenue per FEU for the company's export shipments increased in 1992 compared
with 1991 due to a higher proportion of refrigerated cargo and intermodal
shipments. In the company's intra-Asia market, average revenue per FEU was
unchanged in 1992 compared with 1991, as a higher proportion of refrigerated
cargo was offset by a lower proportion of longer distance shipments.
Since 1991, the company and Orient Overseas Container Line, a Hong Kong
shipping company ("OOCL"), have been parties to agreements enabling them to
exchange vessel space and coordinate vessel sailings until 1996. The agreements
permit both companies to offer faster transit times, more frequent sailings
between key markets in Asia and the U.S. West Coast, and sharing of terminals
and several feeder operations within Asia. In February 1994, the company and
OOCL agreed to extend the term of the agreements through 2005 and to explore
certain other opportunities, including the addition of an Asia-to- Europe
service route. The new contracts are subject to certain conditions, including
U.S. government approval.
The company is party to an Operating-Differential Subsidy ("ODS")
agreement with the U.S. government, expiring on December 31, 1997, which
provides for payment by the U.S. government to partially compensate the company
for the relatively greater expense of vessel operation under U.S. registry. ODS
payments to the company, which were approximately $65 million in 1993, are
expected to terminate at the end of 1997. The Clinton Administration and
Congress are actively reviewing U.S. maritime policy. On November 4, 1993,
the U.S. House of Representatives passed the "Maritime
<PAGE>
Security and Competitiveness Act of 1993," H.R. 2151, which would, among other
things, extend the U.S. government's maritime support program for up to ten
years, but would substantially reduce the amount of support payments per
participating vessel from current levels. Similar legislation has not yet been
addressed by the Senate. Accordingly, the company is unable to predict whether
maritime reform legislation will be enacted, or whether enacted legislation, if
any, will have terms similar to H.R. 2151.
While the company continues to support efforts to enact new maritime
support legislation, prospects for passage of a program acceptable to the
company are unclear. Accordingly, on July 16, 1993, the company filed
applications with the United States Maritime Administration ("MarAd") to operate
under foreign flag its six C11-class containerships, which are now under
construction and will be delivered to the company in 1995, and to transfer to
foreign flag seven of the 15 U.S.-flag containerships currently operating in its
trans-Pacific fleet. Enactment of maritime reform legislation, if any, may
influence the company's decision whether to operate these ships under foreign
flag, should its applications be approved. Management of the company believes
that, in the absence of ODS or an equivalent government support program, it is
generally no longer commercially viable to own or operate containerships in
foreign trade under the U.S. flag because of the higher labor costs and the more
restrictive design, maintenance and operating standards applicable to U.S.-flag
liner carriers. The company continues to evaluate its strategic alternatives in
light of the expiration of its ODS agreement and the uncertainties as to whether
a new U.S. government maritime support program will be enacted or the company's
application to flag its vessels under foreign registry will be approved. While
no assurances can be given, management of the company believes that it will be
able to structure its operations to enable it to continue to operate on a
competitive basis without direct U.S. government support.
<TABLE>
<CAPTION>
NORTH AMERICA TRANSPORTATION(1)
(Volumes in thousands of FEUs) 1993 Change 1992 Change 1991
Revenues (In millions)
<S> <C> <C> <C> <C> <C>
Stacktrain $ 455 8% $ 420 1% $ 418
Non-Stacktrain 205 (3%) 212 (7%) 227
Stacktrain Volumes(2)
North America 345.6 9% 316.9 (1%) 320.7
International 192.6 1% 190.9 1% 188.3
Stacktrain Average Revenue per FEU $ 1,315 (1%) $ 1,327 2% $ 1,304
</TABLE>
(1)Volumes and revenue per FEU data are based upon shipments originating during
the period, which differ from the percentage-of-completion method used for
financial reporting purposes.
(2) In addition to domestic third party business, the transportation of
containers for the company's international customers is a significant
component of the company's stacktrain operations. The effect of these
shipments on domestic operations is eliminated in consolidation and
therefore excluded above in Revenues and Stacktrain Average Revenue per
FEU.
Revenues and volumes from the company's North America stacktrain operations
increased in 1993 from 1992 due to an increase in stacktrain services to Mexico
and Canada and an overall improvement in demand for transportation services in
the North America stacktrain market. Additionally, key competitors in this
market were adversely affected by equipment shortages, which diverted some
shipments to the company. Non-stacktrain volumes declined as the company
converted its automotive shipments to its stacktrains. Stacktrain average
revenue per FEU decreased in 1993 compared with 1992 due to the company's
efforts to reduce stacktrain services that are less profitable.
<PAGE>
Overall revenues from the company's North America transportation operations
declined in 1992 compared with 1991, due primarily to the continuing effects of
the recession and the company's efforts to redirect its non-stacktrain business.
Volumes in the company's North America stacktrain operations were down in 1992
compared with 1991 due to the continuing weak U.S. economy and the company's
withdrawal from the Midwest-Texas lane, partially offset by improvements in
stacktrain automotive volumes. Average revenue per FEU for the company's North
America stacktrain business increased in 1992 compared with 1991 due to an
improvement in cargo mix.
For 1994, the company expects continued growth in the North America
stacktrain markets and in intra-Asia shipping. Rate levels, especially in the
U.S. export trade, ended 1993 at a depressed level and are not expected to
improve significantly in the near term.
<TABLE>
<CAPTION>
TRANSPORTATION OPERATING EXPENSES
(In millions, except cost per FEU) 1993 Change 1992 Change 1991
<S> <C> <C> <C> <C> <C>
Land Transportation $ 934 0% $ 933 (2%) $ 949
Cargo Handling 516 10% 470 19% 395
Vessel, Net 296 5% 281 (4%) 293
Transportation Equipment 184 1% 181 1% 180
Information Systems 49 0% 50 3% 48
Other 303 6% 287 7% 269
Total $2,282 4% $ 2,202 3% $ 2,134
Operating Cost Per FEU $2,568 (5%) $2,694 5% $ 2,557
Percentage of Transportation Revenue 89% 88% 88%
</TABLE>
The company's transportation operating expenses per FEU declined in
1993, compared with 1992, reflecting improvements in the North America
stacktrain cost structure and the company's continued cost control efforts.
Land transportation expenses were relatively unchanged in 1993 compared with
1992 despite a 9% increase in North America stacktrain volume, reflecting
benefits realized from the renegotiation of rail contracts in 1992. Cargo
handling expenses increased in 1993 compared with 1992 due to higher cargo
volumes and contract rate increases at certain Asian and U.S. ports. In 1993,
vessel expenses increased because of increased charter hire activity resulting
from expanded service to China and the Philippines, partially offset by savings
from four fewer ships in service during the year. In 1993, transportation
equipment costs increased from the prior year primarily due to higher
maintenance, repair and lease costs, partially offset by cost savings from
changes in the company's rail cost structure. Other operating expenses
increased in 1993 from 1992, primarily due to higher salary and fringe costs in
North America and Asia operations, partially offset by gains of $7 million from
the sale of three vessels and certain containers, and certain fixed cost savings
in the North America stacktrain operations.
Total transportation operating expenses increased only 3% in 1992 from
1991, despite the significant rise in operating costs in Asia. Land
transportation costs decreased in 1992 compared with 1991 as a result of the
company's renegotiated rail contracts and a decline in conventional rail costs
due to lower non-stacktrain volumes. Cargo handling costs rose substantially in
1992, mainly due to contract rate increases at ports in Asia and the use of OOCL
terminals on the West Coast and in Japan. Vessel expenses declined in 1992
compared with 1991, primarily due to lower fuel costs. The increase in
transportation equipment costs in 1992 compared with 1991 reflects the increase
in lease costs for refrigerated containers and dry containers related to OOCL
activity, partially offset by equipment cost savings resulting from the
renegotiated rail contracts. Information systems costs increased in 1992, due
to increases in salaries and fringe benefits and costs for systems
<PAGE>
projects. Other operating expenses rose in 1992 from 1991 as a result of
increased freight consolidation activities, OOCL start-up costs and increased
agency fees.
General and administrative expenses increased 9% in 1993 compared with
1992. In 1993, the company incurred approximately $9 million in costs related
to certain corporate initiatives to improve company-wide systems and processes.
Partially offsetting these costs in 1993 were cost savings at the corporate
level. Expenditures on corporate initiatives are expected to be approximately
$27 million during 1994. Anticipated cost savings resulting from these
initiatives are expected to be realized in future years, but no assurances can
be given as to the timing or amount of these savings. Depreciation and
amortization expense increased 2% in 1993 from 1992 due to capital spending
activity.
General and administrative expense declined 2% in 1992 compared with 1991
as the company continued its cost savings efforts in this area. Depreciation
and amortization expense increased 1% in 1992 from 1991 resulting from capital
spending during the year.
Net interest expense declined to $11 million in 1993 from $26 million in
1992. This decline was due to the company's restructuring of its long-term
liabilities in late 1992 and early 1993, when the company retired certain
capital lease obligations and redeemed its 11% Public Notes, and lower interest
rates in 1993. Net interest expense in 1992 decreased $10 million from 1991,
reflecting lower debt balances, lower interest rates on refinanced debt and
higher cash balances.
The effective tax rates applicable to the company were 39%, 35% and 38%
in 1993, 1992 and 1991, respectively. The 1993 effective tax rate reflects a
one percent federal corporate tax increase that was effective at the beginning
of the year, and the related $2.7 million impact on the company's deferred tax
balances.
In 1992, the company changed its method of recognizing revenues and
expenses to conform with new transportation industry guidelines established by
the Financial Accounting Standards Board's Emerging Issues Task Force. Under
the new method, the company recognizes revenues on a percentage-of-completion
basis and expenses as incurred. The company previously recorded revenues and
variable expenses at the time freight was loaded. In 1992, the company recorded
a one-time charge of $22 million, after taxes of $13 million, for the effect of
this change in accounting on prior years' results.
In 1992, the company adopted Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes"("SFAS 109"), the effects of which were
applied retroactively to the beginning of fiscal 1989. SFAS 109 requires the
company to compute deferred taxes based upon the amount of taxes payable in
future years, after considering known changes in tax rates and other statutory
provisions that will be in effect in those years.
The company adopted SFAS 106 in 1991, which requires the company to
recognize the cost of providing health care and other benefits to retirees over
the term of employee service, as opposed to the company's previous method of
recognizing those costs when incurred. The cumulative effect of this accounting
change resulted in a one-time charge to earnings in 1991 of $10 million after
income taxes.
<PAGE>
<TABLE>
<CAPTION>
LIQUIDITY AND CAPITAL RESOURCES
(In millions) 1993 1992 1991
Cash, Cash Equivalents and
<S> <C> <C> <C>
Short-term Investments $ 84 $ 132 $ 179
Working Capital 51 (16) 159
Total Assets 1,454 1,436 1,541
Long-term Debt and Capital
Lease Obligations (1) 272 357 453
Cash Provided by Operations 169 176 207
NET CAPITAL EXPENDITURES
Ships $ 93 $ 18 $ 4
Containers, Chassis and Rail Cars 41 31 1
Leasehold Improvements and Other 22 17 15
Total $ 156 $ 66 $ 20
FINANCING ACTIVITIES
Borrowings $ 664 $ 56
Repayment of Debt and Capital Leases (748) $ (97) (91)
Common Stock Repurchases (78) (81)
Dividend Payments (15) (15) (16)
</TABLE>
(1) Includes current and long-term portions.
In November 1993, the company issued $150 million 10-year Senior Notes at
an effective interest rate of 7.3%, and in January 1994, issued $150 million 30-
year Senior Debentures at an effective interest rate of 8.2%. A portion of the
proceeds from the issuance of this debt was used to repay $72 million of bank
borrowings, and the remainder will be used to finance vessel purchases and other
capital expenditures.
In 1992 and early 1993, the company restructured its long-term
liabilities to reduce its high-cost debt and eliminate restrictions on the use
of subsidiary cash. In January 1993, the company purchased the remaining two
vessels previously leased under leveraged leases and retired the related debt
guaranteed by MarAd, eliminating MarAd's restrictions on the payment of
dividends to the company by its wholly-owned subsidiary, American President
Lines, Ltd. The purchase price of these vessels was $131 million, $110 million
of which retired the related capital lease obligations. Also in January 1993,
the company retired $95 million of 11% Public Notes.
In 1993, the company began a fleet modernization program pursuant to
which it has placed orders for the construction of six new C11-class
containerships ("C11") and three new Kl0-class containerships ("K10") for an
aggregate cost of approximately $730 million. The C11s are similar in design to
the company's C10-class vessels, and each is designed to have a capacity of
approximately 4,800 TEUs and a service speed of approximately 25 knots.
Delivery of the C11s is scheduled for 1995. Each K10 is designed to have a
capacity of approximately 3,600 TEUs and a service speed of approximately 24
knots. Delivery of the K10s is scheduled for 1996.
The company presently expects the C11s to be deployed in its trans-
Pacific service. OOCL is in the process of negotiating the purchase of six
vessels similar in size and speed to the company's C11s. OOCL has agreed to
deploy these new vessels in its coordinated trans-Pacific service with the
company under the recent amendment to the slot-sharing agreement between the
parties. The deployment of the 12 new C11-type vessels by the company and OOCL,
replacing 16 older vessels, will increase the combined trans-Pacific capacity of
the company and OOCL by approximately 15%. The company expects growth in demand
in the trans-Pacific market and believes that the increase in combined capacity
will be sufficient to permit the company and OOCL to maintain their combined
relative market share in that market. However, no assurances can be given with
respect to anticipated growth or the utilization
<PAGE>
or impact of capacity. The K10s, in combination with capacity from the six
C11s, will replace four L9-class vessels chartered by the company and used in
its West Asia/Middle East service. The charters of the L9s will expire in 1996.
Deployment of the company's C11s and K10s is subject to U.S. government
approval.
The C11 vessels are being constructed by Howaldtswerke-Deutsche Werft AG,
of Germany (three ships) and Daewoo Shipbuilding and Heavy Machinery, Ltd., of
Korea ("Daewoo") (three ships). The total estimated project cost for
constructing the vessels is $535 million. A payment of $52 million was made to
the shipyards in 1993. The remaining payments are due in two 5% installments in
1994 and 80% upon delivery of the vessels. The company has obtained commitments
from a group of European banks to finance approximately $400 million of the
purchase price. Principal payments on any draw-downs would be due in semi-
annual installments over a 12-year period commencing six months after the
delivery of each vessel. Interest rates would be based upon various margins
over LIBOR or the banks' cost of funds as elected by the company. The remaining
cost of these vessels would be financed with the company's public debt and cash
from operations.
The K10s are being constructed by Daewoo. The total project cost for
constructing these vessels is $195 million. A payment of $18 million was made
to the shipyard in 1993. The remaining payments are due in two 10% installments
in 1995 and 70% upon delivery of the vessels.
Other than progress payments on the C11s and K10s, and the purchase of
the previously leased ships, the company's 1993 capital expenditures were
primarily for purchases of refrigerated containers. In 1992, the company's
capital expenditures were primarily for purchases of refrigerated containers and
the expansion of terminals and operating facilities. Capital expenditures in
1994 are expected to be approximately $200 million, including $52 million for
vessel progress payments. The balance will be used primarily for refrigerated
containers, chassis, terminal improvements in North America and Asia, and
computer systems. At December 31, 1993, the company had outstanding purchase
commitments to acquire facilities, equipment and services totaling $56 million.
The company is in the process of expanding its two major West Coast
ports' facilities and extending their lease terms. The company has entered into
a contract with the Port of Los Angeles to lease a new 226-acre terminal
facility for 30 years. Occupancy of the new facility is scheduled for 1997 upon
completion of construction. The minimum annual rent expense under the new lease
is estimated to be between $22 million and $26 million, depending upon the final
scope of development. The annual rent for the company's current 129-acre
terminal in Los Angeles was approximately $19 million in 1993. The company has
agreed to purchase at least six gantry cranes and certain intermodal handling
equipment for use at this terminal facility, the cost of which is not known at
this time.
The company also is negotiating with the Port of Seattle for the
improvement and expansion of its existing terminal facility. Under the proposed
plan, the facility would be expanded from 83 acres to approximately 160 acres by
1997 and the lease term would be 30 years from completion. The lease for the
existing facility expires in 2015.
In 1993, the company sold its remaining investment in the common stock
of Amtech Corporation ("Amtech"), from which it realized a pretax gain of $9
million. In 1992, the company sold approximately one-half of its investment in
Amtech, from which it realized a pretax gain of $8 million.
<PAGE>
Effective December 31, 1993, the company effected a two-for-one stock
split in the form of a stock dividend. On a post-split basis, the company
repurchased 3,715,928 and 7,774,344 of its outstanding common stock in 1992 and
1991, respectively. The average per share cost of these repurchases were $20.94
and $10.38 in 1992 and 1991, respectively.
The company has a revolving credit agreement with a group of banks to
provide an aggregate commitment of $100 million, which expires December 31,
1996. The revolving credit agreement contains various financial covenants which
require the company to meet certain levels of fixed charge coverage, leverage
and net worth. The agreement restricts the amount of increases in the company's
cash dividends and restricts certain other corporate transactions. Borrowings
under the agreement bear interest at rates based upon various indices as elected
by the company. Any outstanding borrowings under this agreement are classified
as long-term.
The company borrowed under the revolving credit agreement during 1993 to
partially finance the purchase of the leased vessels and for general corporate
purposes. Also during 1993, the company borrowed under uncommitted lines of
credit with certain banks for general corporate purposes. All outstanding bank
borrowings were repaid with a portion of the proceeds from the issuance of $150
million 10-year Senior Notes in November 1993.
The company is negotiating with a group of banks to replace its existing
revolving credit agreement with a $200 million, five-year revolving credit
agreement. While no assurances can be given, the company expects the new
agreement to be finalized in the first fiscal quarter of 1994.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS
<S> <C>
Report of Management 20
Report of Independent Public Accountants 21
Consolidated Financial Statements
Statement of Income 22
Balance Sheet 23
Statement of Cash Flows 24
Statement of Changes in Stockholders' Equity 25
Notes to Consolidated Financial Statements 26-40
Financial Statement Schedules
Schedules II, III, V, VI, IX 41-46
</TABLE>
<PAGE>
REPORT OF MANAGEMENT
To the Stockholders:
The financial statements have been prepared by the company, and we are
responsible for their content. They are prepared in accordance with generally
accepted accounting principles, and in this regard we have undertaken to make
informed judgments and estimates, where necessary, of the expected effect of
future events and transactions. The other financial information in the annual
report is consistent with that in the financial statements.
The company maintains and depends upon a system of internal controls
designed to provide reasonable assurance that our assets are safeguarded, that
transactions are executed in accordance with management's intent and the law,
and that the accounting records fairly and accurately reflect the transactions
of the company. The company has an internal audit program which reviews the
adequacy of the internal controls and compliance with them.
The company engaged Arthur Andersen & Co. as independent public
accountants to provide an objective, independent audit of our financial
statements.
There is an Audit Committee of the Board of Directors which is composed
solely of outside directors. The committee meets whenever necessary to monitor
and review with management, the internal auditors and the independent public
accountants, the company's financial statements and accounting controls. Both
the independent public accountants and the internal auditors have access to the
Audit Committee, without management being present, to discuss internal controls,
auditing and financial reporting matters.
To help assure that its affairs are properly conducted, management has
established policies regarding standards of corporate behavior. The company
regularly reminds its key employees of significant policies and requires them to
confirm their compliance.
/s/ John M. Lillie
John M. Lillie
Chairman of the Board, President and
Chief Executive Officer
/s/ Will M. Storey
Will M. Storey
Executive Vice President and
Chief Financial Officer
/s/ William J. Stuebgen
William J. Stuebgen
Vice President, Controller and
Chief Accounting Officer
Oakland, California
February 11, 1994
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors
of American President Companies, Ltd.
We have audited the accompanying consolidated balance sheet of American
President Companies, Ltd. (a Delaware corporation) and subsidiaries as of
December 31, 1993 and December 25, 1992 and the related consolidated statements
of income, cash flows and changes in stockholders' equity for each of the three
years in the period ended December 31, 1993. These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American President Companies,
Ltd. and subsidiaries as of December 31, 1993 and December 25, 1992 and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1993, in conformity with generally accepted
accounting principles.
As explained in Note 1 to the financial statements, the company has changed its
method of recognizing revenues and expenses effective as of December 28, 1991.
In addition, as explained in Note 7 to the financial statements, the company has
changed its method of accounting for postretirement benefits effective December
29, 1990.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedules listed in the index to financial
statements are presented for purposes of complying with the Securities and
Exchange Commission's rules and are not a required part of the basic financial
statements. This information has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion, is
fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
/s/ Arthur Andersen & Co.
Arthur Andersen & Co.
San Francisco, California
February 11, 1994
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31 December 25 December 27
(In thousands, except 1993 1992 1991
per share amounts)
<S> <C> <C> <C>
Revenues $ 2,594,213 $ 2,511,168 $ 2,448,680
Expenses
Operating, Net of Operating-
Differential Subsidy 2,287,865 2,204,785 2,139,145
General and Administrative 64,281 59,147 60,230
Depreciation and Amortization 109,127 107,180 106,496
Total Expenses 2,461,273 2,371,112 2,305,871
Operating Income 132,940 140,056 142,809
Interest Income 6,290 12,233 8,316
Interest Expense (17,663) (38,668) (44,450)
Gain on Sale of Investment 8,934 8,091
Income Before Taxes 130,501 121,712 106,675
Federal, State and Foreign
Tax Expense 50,392 43,696 40,537
Income Before Cumulative
Effect of Accounting Changes 80,109 78,016 66,138
Cumulative Effect on Prior Years
of Changing the Accounting for:
Revenue and Expenses (21,565)
Postretirement Benefits (10,480)
Net Income $ 80,109 $ 56,451 $ 55,658
Less Dividends on Preferred Stock 6,750 6,750 6,750
Net Income Applicable to
Common Stock $ 73,359 $ 49,701 $ 48,908
Earnings Per Common Share
Primary
Before Cumulative Effect of
Accounting Changes $ 2.65 $ 2.43 $ 1.89
Cumulative Effect of Accounting Changes (0.74) (0.33)
Primary Earnings Per Common Share $ 2.65 $ 1.69 $ 1.56
Fully Diluted
Before Cumulative Effect of
Accounting Changes $ 2.50 $ 2.34 $ 1.85
Cumulative Effect of Accounting Changes (0.65) (0.29)
Fully Diluted Earnings Per Common $ 2.50 $ 1.69 $ 1.56
Share
Dividends Per Common Share $ 0.30 $ 0.30 $ 0.30
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
(In thousands, except share amounts) December 31 December 25
1993 1992
ASSETS
Current Assets
<S> <C> <C>
Cash and Cash Equivalents $ 84,053 $ 92,835
Short-Term Investments 38,846
Trade and Other Receivables 271,053 228,968
Fuel and Operating Supplies 35,354 34,885
Prepaid Expenses and Other 48,378 63,446
Total Current Assets 438,838 458,980
Property and Equipment
Ships 676,854 705,009
Containers, Chassis and Rail Cars 750,557 735,223
Leasehold Improvements and Other 249,636 230,939
Construction in Progress 74,138
1,751,185 1,671,171
Accumulated Depreciation and Amortization (825,003) (794,140)
Property and Equipment, Net 926,182 877,031
Investments and Other Assets 89,357 99,602
Total Assets $ 1,454,377 $ 1,435,613
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
Current Liabilities
Current Portion of Long-Term Debt and Capital Leases $ 4,395 $ 114,061
Accounts Payable and Accrued Liabilities 383,029 360,582
Total Current Liabilities 387,424 474,643
Deferred Income Taxes 130,228 135,608
Other Liabilities 118,966 110,668
Long-Term Debt 250,610 222,056
Capital Lease Obligations 16,696 20,410
Total Long-Term Debt and Capital Lease Obligations 267,306 242,466
Commitments and Contingencies
Redeemable Preferred Stock, $.01 Par Value,
Stated at $50.00, Authorized-2,000,000 Shares
Series C, Shares Issued and Outstanding-1,500,000
in 1993 and 1992 75,000 75,000
Stockholders' Equity
Common Stock $.01 Par Value, Stated at $1.00
Authorized-60,000,000 Shares
Shares Issued and Outstanding- 26,837,000 in
1993 and 13,022,000 in 1992 26,837 13,022
Additional Paid-In Capital 61,656 62,023
Retained Earnings 386,960 322,183
Total Stockholders' Equity 475,453 397,228
Total Liabilities, Redeemable Preferred Stock
and Stockholders' Equity $ 1,454,377 $ 1,435,613
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended December 31 December 25 December 27
(In thousands) 1993 1992 1991
Cash Flows from Operating Activities
<S> <C> <C> <C>
Net Income $ 80,109 $ 56,451 $ 55,658
Adjustments to Reconcile Net Income to Net
Cash Provided by (Used in) Operating Activities:
Depreciation and Amortization 109,127 107,180 106,496
Deferred Income Taxes 6,633 (8,054) 6,009
Change in Receivables (37,915) 7,238 34,267
Issuance of Notes Receivable on Sales
of Real Estate (4,170) (2,067) (7,838)
Change in Fuel and Operating Supplies (469) (1,133) 1,800
Change in Prepaid Expenses and Other
Current Assets 3,055 (9,617) 10,531
(Gain) Loss on Sale of Assets (17,577) (8,279) 258
Change in Accounts Payable and Accrued 35,160 (1,537) (14,534)
Liabilities
Cumulative Effect on Prior Years
of Changes in Accounting 34,783 16,904
Change in Restructuring Charge Liability (16,617) (21,765) (23,761)
Other 11,285 22,611 21,425
Net Cash Provided by Operating Activities 168,621 175,811 207,215
Cash Flows from Investing Activities
Capital Expenditures (156,270) (65,667) (20,472)
Proceeds from Sales of Long-Term Investments 11,310 11,834
Proceeds from Sales of Property and Equipment 8,955 1,811 1,419
Purchase of Short-Term Investments (206,849) (84,824)
Proceeds from Sales of Short-Term Investments 38,846 239,577 13,250
Transfer from Capital Construction Fund 8,662 17,508
Deposits to Capital Construction Fund (5,959) (8,000) (687)
Other 5,036 4,621 4,176
Net Cash Used in Investing Activities (89,420) (5,165) (87,138)
Cash Flows from Financing Activities
Repurchase of Common Stock (77,829) (80,621)
Issuance of Debt 663,571 56,495
Repayments of Capital Lease Obligations (113,465) (67,351) (7,123)
Repayments of Debt (634,932) (29,471) (83,958)
Dividends Paid (14,725) (15,271) (16,069)
Other 12,841 7,551 7,890
Net Cash Used in Financing Activities (86,710) (182,371) (123,386)
Effect of Exchange Rate Changes on Cash (1,273) (2,547) (7,089)
Net Decrease in Cash and Cash Equivalents (8,782) (14,272) (10,398)
Cash and Cash Equivalents at Beginning of Year 92,835 107,107 117,505
Cash and Cash Equivalents at End of Year $ 84,053 $ 92,835 $ 107,107
SUPPLEMENTAL DATA:
Cash Paid for:
Interest $ 26,232 $ 40,793 $ 42,937
Income Taxes (Net of Refunds) $ 32,370 $ 47,967 $ 14,697
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Year Ended December 31 December 25 December 27
(In thousands, except share amounts) 1993 1992 1991
Common Stock
<S> <C> <C> <C>
Beginning Balance $ 13,022 $ 14,719 $ 18,466
Stock Awards and Options Exercised, Net 397 161 140
Issuance of 13,418,000 shares of common stock
to effect a 2-for-1 stock split 13,418
Repurchase and Retirement of Common Stock (1,858) (3,887)
Ending Balance 26,837 13,022 14,719
Additional Paid-In Capital
Beginning Balance 62,023 130,416 199,395
Stock Awards and Options Exercised, Net 13,051 7,578 7,772
Issuance of 13,418,000 shares of common stock
to effect a 2-for-1 stock split (13,418)
Repurchase and Retirement of Common Stock (75,971) (76,751)
Ending Balance 61,656 62,023 130,416
Retained Earnings
Beginning Balance, Restated 322,183 281,191 241,607
Net Income 80,109 56,451 55,658
Cash Dividends
Common (7,975) (8,521) (9,319)
Series C Redeemable Preferred (6,750) (6,750) (6,750)
Other (607) (188) (5)
Ending Balance 386,960 322,183 281,191
Total Stockholders' Equity $ 475,453 $ 397,228 $ 426,326
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Fiscal Year
The consolidated financial statements include the accounts of American President
Companies, Ltd. and its majority-owned subsidiaries (the "company"), after
eliminating intercompany accounts and transactions. The company's fiscal year
ends on the last Friday in December. The company's 1993 fiscal year was 53
weeks, compared with 52 weeks for 1992 and 1991.
Stock Split
Effective December 31, 1993, the company effected a two-for-one stock split in
the form of a stock dividend. All references to the number of common shares and
per common share amounts for prior periods have been restated to reflect the
split.
Revenues and Expenses
In 1992, the company changed its method of recognizing revenues and expenses to
conform with new transportation industry guidelines established by the Financial
Accounting Standards Board's Emerging Issues Task Force. Under the new method,
the company recognizes revenues on a percentage-of-completion basis and expenses
as incurred. The company previously recorded revenues and variable expenses at
the time freight was loaded. As of the beginning of fiscal 1992, the company
recorded a one-time charge of $21.6 million, after taxes of $13.2 million, for
the effect of this change in accounting on prior years.
If the change in accounting had not been implemented, net income for the
year ended December 25, 1992 would have been $75.7 million, or $2.27 per share,
fully diluted. Conversely, if the change had been applied retroactively to the
year ended December 27, 1991, Income Before the Cumulative Effect of Accounting
Change and related Earnings Per Share would have been $70.4 million, or $1.97
per share, fully diluted.
Detention revenue is recognized when cash is received.
Foreign Currency Transactions
Foreign currency transactions and balances are translated to U.S. dollars.
Included in Operating Income for 1993, 1992 and 1991 are net losses on foreign
currency transactions and translations of $1.1 million, $2.0 million and $7.9
million, respectively. The 1991 loss includes the company's write-down of its
assets in India due to the devaluation of the rupee.
The company periodically enters into contracts to buy foreign currencies
in the future to hedge the impact of foreign currency fluctuations on certain
operating commitments. The gains or losses on these contracts are deferred and
recognized when the related operating expenses are incurred, and are recorded as
a decrease or increase in operating expenses in the accompanying Consolidated
Statement of Income.
In 1993, the company entered into foreign currency contracts to buy
Deutsche marks in the future to lock in the U.S. dollar cost of constructing
German-built vessels. These contracts are discussed in Note 10.
Cash, Cash Equivalents and Short-Term Investments
Cash and Cash Equivalents comprise cash balances and investments with maturities
of three months or less at the time of purchase. Short-Term Investments are
carried at cost, which approximates market.
<PAGE>
Property and Equipment
Property and Equipment are recorded at historical cost. For assets financed
under capital lease arrangements, an amount equal to the present value of the
future minimum lease payments is recorded at the date of acquisition as Property
and Equipment with a corresponding amount recorded as a capital lease
obligation. Depreciation and Amortization are computed using the straight-line
method based upon the following estimated useful lives:
<TABLE>
<CAPTION>
Classification Estimated Useful Life
<S> <C>
Ships 15 to 25 Years
Containers, Chassis and Accessories 5 to 15 Years
Rail Cars 5 to 10 Years
Other Property and Equipment Various
Assets Under Capital Lease Arrangements Term of Lease
</TABLE>
Maintenance and repair expenditures of $110.3 million, $101.6 million and $93.9
million have been charged to expense in 1993, 1992 and 1991, respectively, as
they were incurred. Major periodic dry dockings and rail car overhauls totaling
$18.2 million, $21.2 million and $19.7 million at December 31, 1993, December
25, 1992, and December 27, 1991, respectively, have been deferred and are being
amortized over two to five years.
Long-Term Investments
The company has certain investments, long-term deposits and receivables, which
are included in Investments and Other Assets. The fair value of these assets
approximates their carrying value at December 31, 1993. For certain other
investments, it was not practicable to determine fair value, as no quoted market
prices were available.
Software Costs
Costs related to purchased and internally developed software are charged to
expense as incurred.
Capitalized Interest
Interest costs of $1.5 million relating to cash paid for the construction of
vessels were capitalized in 1993. No interest costs were capitalized in 1992
and 1991.
Reclassifications
Certain 1992 and 1991 amounts have been reclassified to conform to the 1993
presentation.
NOTE 2. UNITED STATES MARITIME ADMINISTRATION AGREEMENTS
The company and the United States Maritime Administration ("MarAd") are parties
to an Operating-Differential Subsidy ("ODS") agreement expiring December 31,
1997, which provides for payment by the U.S. government to partially compensate
the company for the relatively greater expense of vessel operation under United
States registry and requires the company to replace the capacity of its existing
vessels as they reach the end of their statutory lives if a construction
differential subsidy, provided by the U.S. government, is made available. This
subsidy has not been made available since 1981. The ODS amounts for 1993, 1992
and 1991 were $64.7 million, $69.7 million and $69.4 million, respectively, and
have been included as a reduction of operating expenses.
<PAGE>
ODS payments to the company are expected to terminate at the end of
1997. The Clinton Administration and Congress are actively reviewing U.S.
maritime policy. On November 4, 1993, the U.S. House of Representatives passed
the "Maritime Security and Competitiveness Act of 1993," H.R. 2151, which would,
among other things, extend the U.S. government's maritime support program for up
to ten years, but would substantially reduce the amount of support payments per
participating vessel from current levels. Similar legislation has not yet been
addressed by the Senate. Accordingly, the company is not able to predict
whether maritime reform legislation will be enacted or whether enacted
legislation, if any, will have terms similar to H.R. 2151.
While the company continues to support efforts to enact new maritime
support legislation, prospects for passage of a program acceptable to the
company are unclear. Accordingly, on July 16, 1993, the company filed
applications with MarAd to operate under foreign flag its six C11-class
containerships and to transfer to foreign flag seven of the 15 U.S.-flag
containerships in its trans-Pacific fleet. Enactment of maritime reform
legislation, if any, may influence the company's decision whether to operate
these ships under foreign flag, should its applications be approved. Management
of the company believes that, in the absence of ODS or an equivalent government
support program, it is generally no longer commercially viable to own or operate
containerships in foreign trade under the U.S. flag because of the higher labor
costs and the more restrictive design, maintenance and operating standards
applicable to U.S.-flag liner carriers. The company continues to evaluate its
strategic alternatives in light of the expiration of its ODS agreement and the
uncertainties as to whether a new U.S. government maritime support program
acceptable to the company will be enacted or the company's application to flag
its vessels under foreign registry will be approved. While no assurances can be
given, management of the company believes that it will be able to structure its
operations to enable it to continue to operate on a competitive basis without
direct U.S. government support.
The company also has a Capital Construction Fund ("CCF") agreement with
MarAd which provides funding for the future acquisition of vessels and other
assets and for the repayment of other vessel acquisition debt. The CCF is
included in Investments and Other Assets on the accompanying Consolidated
Balance Sheet, and there was no balance at December 31, 1993, and a balance of
$2.7 million at December 25, 1992.
The company receives a federal income tax deduction for deposits made to
the CCF, subject to certain restrictions. Withdrawals from the CCF for
investment in vessels or related assets do not give rise to a tax liability, but
reduce the depreciable bases of the assets for income tax purposes. At December
31, 1993, the total tax basis of assets purchased with CCF funds was
approximately $69.3 million less than net book value. Deferred income taxes have
been provided for CCF amounts on deposit or invested in vessels or related
equipment.
NOTE 3. INCOME TAXES
The company adopted Statement of Financial Accounting Standards, "Accounting for
Income Taxes", ("SFAS 109") in 1992, the effects of which were applied
retroactively to the beginning of fiscal 1989. SFAS 109 requires the company to
compute deferred taxes based upon the amount of taxes payable in future years,
after considering known changes in tax rates and other statutory provisions that
will be in effect in those years.
<PAGE>
The reconciliation of the company's effective tax rate to the federal
statutory tax rate is as follows:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
U.S. Federal Statutory Rate 35% 34% 34%
Increases (Decreases) in Rate Resulting from:
State Taxes, Net of Federal Benefit 3% 3% 3%
Effect of Federal Tax Rate Change on Prior Years 2%
Permanent Book/Tax Differences and Other (1%) (2%) 1%
39% 35% 38%
</TABLE>
Effective January 1, 1993, the maximum corporate federal income tax rate
increased to 35%. As a result, an adjustment of approximately $2.7 million was
recorded to reflect the effect of the tax rate increase on deferred taxes
provided in prior periods.
The following is a summary of the company's provision for income taxes,
net of $13.2 million and $6.4 million related to the cumulative effects of the
accounting changes for revenue and expenses and postretirement benefits in 1992
and 1991, respectively, as restated:
<TABLE>
<CAPTION>
(In thousands) 1993 1992 1991
Current
<S> <C> <C> <C>
Federal $ 30,164 $ 19,303 $ 19,231
State 3,291 3,848 2,678
Foreign 6,684 5,980 6,195
40,139 29,131 28,104
Deferred
Federal 7,664 2,456 6,445
State (160) (1,109) (436)
Change in Federal Tax Rate 2,749
10,253 1,347 6,009
Total Provision $ 50,392 $ 30,478 $ 34,113
</TABLE>
The following table shows the tax effect of the company's cumulative
temporary differences and carryforwards included on the company's Consolidated
Balance Sheet as of December 31, 1993 and December 25, 1992:
<TABLE>
<CAPTION>
(In thousands) 1993 1992
<S> <C> <C>
Excess of Tax Over Book Depreciation $ (114,929) $ (114,224)
Tax Deductions for CCF Deposits in Excess of Book
Depreciation of CCF Assets (35,843) (29,769)
Net Tax Deduction for Rent Differential on Capital Leases (25,779) (23,496)
Excess Insurance Reserves Over Claims Paid 23,470 20,727
Pension and Postretirement Accruals 18,515 15,512
Accrued Liabilities 10,692 7,403
Other 9,498 16,104
$ (114,376) $ (107,743)
</TABLE>
The company used all federal alternative minimum tax credits in 1993 and
has California alternative minimum tax credits of $0.8 million at December 31,
1993, which do not expire.
<PAGE>
The amount of deferred tax assets and liabilities as of December 31,1993 and
December 25, 1992 were as follows:
<TABLE>
<CAPTION>
(In thousands) 1993 1992
<S> <C> <C>
Deferred Tax Assets $ 75,749 $ 72,774
Deferred Tax Liabilities (190,125) (180,517)
Total Net Deferred Tax Liability (114,376) (107,743)
Less Net Current Deferred Tax Asset (15,852) (27,865)
Deferred Income Taxes $ (130,228) $ (135,608)
</TABLE>
The net current deferred tax asset is included in Prepaid Expenses and Other on
the accompanying Consolidated Balance Sheet.
NOTE 4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts Payable and Accrued Liabilities at December 31, 1993 and December 25,
1992 were as follows:
<TABLE>
<CAPTION>
(In thousands) 1993 1992
<S> <C> <C>
Accounts Payable $ 39,101 $ 34,254
Accrued Liabilities 268,342 250,506
Current Portion of Accrued Claims 11,500 10,600
Accrued Restructuring Charges 3,135 19,752
Income Taxes 1,551
Unearned Revenue 59,400 45,470
Total Accounts Payable and Accrued Liabilities $ 383,029 $ 360,582
</TABLE>
NOTE 5. LONG-TERM DEBT
Long-term debt at December 31, 1993 and December 25, 1992 consisted of the
following:
<TABLE>
<CAPTION>
(In thousands) 1993 1992
<S> <C> <C>
7 1/8% Senior Notes $150 Million Face Amount
Due on November 15, 2003(1) $ 147,915
11% Notes Payable Due on January 15, 1996 (2) $ 94,500
Series I 8% Vessel Mortgage Bonds Due Through 1997(3) 81,000 104,824
8% Refunding Revenue Bonds Due on November 1, 2009(4) 12,000 12,000
Refunding Revenue Bonds, at Various Rates Not to
Exceed 12%, Due on November 1, 2009(5) 6,495 6,495
Note Payable at 9% Due Through 1997 (6) 3,577 4,485
Note Payable at Prime Plus 1% 616 660
Total Debt 251,603 222,964
Current Portion (993) (908)
Long-Term Debt $ 250,610 $ 222,056
</TABLE>
(1) In November 1993, the company filed a shelf registration to issue up to
$400 million of debt securities in varying terms and amounts. Also in
November 1993, the company issued 7 1/8% Senior Notes with a face amount
of $150 million and an unamortized discount of $2.1 million as of
December 31, 1993. The effective interest rate of this debt is 7.325%.
A portion of the proceeds from the issuance of this debt was used to
repay $72 million of bank borrowings and the remainder will be used for
financing capital expenditures, including progress payments for the
construction of the new vessels. In January 1994, the company issued 8%
Senior Debentures with a face amount of $150 million, due on January 15,
2024. The effective interest rate on this debt is 8.172%. Proceeds from
the issuance of this debt were $147.1 million and will be used to
finance capital expenditures, including vessel progress payments.
<PAGE>
(2) The Notes were redeemed by the company on January 15, 1993 using funds
borrowed under the company's revolving credit agreement described below.
(3) Principal payments are due in equal semiannual installments. The company
has the option to issue Series II Bonds due sequentially in semiannual
payments at the end of the term of the Series I Bonds in lieu of up to
five cash payments, which it has not yet exercised. The bonds issued under
this loan agreement are collateralized by the five C10-class vessels,
which had a net book value of $185.9 million at December 31, 1993. Fair
value of this debt is approximately $87 million at December 31, 1993
assuming a current interest rate of 5.23%.
(4) The Bonds are redeemable on or after November 1, 1999 at a redemption
price of 102% of the principal amount, reducing to 100% of the principal
amount on or after November 1, 2001.
(5) The interest rate at December 31, 1993 was 3.05%. The principal repayment
is collateralized by a $6.6 million letter of credit.
(6) The Note was used to finance the purchase of certain chassis and is
collateralized by the chassis. At December 31, 1993, the net book value of
these chassis was $4.3 million.
Carrying value of significant issues of long-term debt, other than the
Series I Bonds, approximates fair value because the interest rates on
outstanding debt approximates current interest rates that would be offered to
the company for similar debt.
Principal payments scheduled on long-term debt during the next five
years, on the basis that the company issues Series II Bonds totaling $23.8
million per year in lieu of the next five semiannual cash payments on the Series
I Bonds, are as follows:
(In thousands)
1994 $ 993
1995 1,085
1996 13,098
1997 24,137
1998 23,823
The company has a revolving credit agreement with a group of banks to
provide for an aggregate commitment of up to $100 million which expires December
31, 1996. The revolving credit agreement contains various financial covenants
which require the company to meet certain levels of fixed charge coverage,
leverage and net worth. The agreement restricts the amount of increases in the
company's cash dividends and restricts certain other corporate transactions.
Borrowings under the agreement bear interest at rates based upon various indices
as elected by the company. Any outstanding borrowings under this agreement are
classified as long-term. The current annual commitment fee is three-eighths of
one percent of the available amount. The company had no outstanding borrowings
under this agreement at December 31, 1993.
As an alternative to borrowing under its revolving credit agreement, the
company has an option under that agreement to sell up to $150 million of certain
accounts receivable to the banks. This alternative is subject to less
restrictive financial covenants than the borrowing option.
<PAGE>
NOTE 6. LEASES
The company leases equipment under capital leases expiring in three to seven
years. Assets under capital lease included in Property and Equipment on the
accompanying Consolidated Balance Sheet at December 31, 1993 and December 25,
1992 are as follows:
<TABLE>
<CAPTION>
(In thousands) 1993 1992
<S> <C> <C>
Ships $ 129,506
Containers, Chassis and Rail Cars $ 38,291 38,291
Other Property and Equipment 938 938
39,229 168,735
Accumulated Depreciation (29,540) (76,877)
Total $ 9,689 $ 91,858
</TABLE>
The following is a schedule of future minimum lease payments required
under the company's leases that have initial noncancelable terms in excess of
one year as of December 31, 1993:
<TABLE>
<CAPTION>
Capital Operating
(In thousands) Leases Leases
<S> <C> <C>
1994 $ 5,195 $ 194,133
1995 4,842 124,792
1996 12,640 102,902
1997 414 82,571
1998 414 59,440
Later Years 459 932,092
Total Minimum Payments Required $ 23,964 $ 1,495,930
Amount Representing Interest (3,866)
Present Value of Minimum Lease Payments 20,098
Current Portion (3,402)
Long-Term Portion $ 16,696
</TABLE>
In 1993, the company purchased two vessels which had been operated under
capital lease agreements. The purchase price of these vessels totaled $130.8
million, of which $110.1 million retired the related capital lease obligation.
The company financed this transaction with cash and borrowings under its
revolving credit agreement. At December 25, 1992, the capital lease obligation
for these vessels of $110.1 million was recorded as Current Portion of Capital
Lease Obligation. The excess of the purchase price over the capital lease
obligation was added to the net book value of the vessels and will be
depreciated over their remaining useful lives.
Total rental expense for operating leases and short-term rentals was
$289.5 million, $260.4 million and $243.1 million in 1993, 1992 and 1991,
respectively.
NOTE 7. EMPLOYEE BENEFIT PLANS
Pension Plans
The company has defined benefit pension plans covering most of its employees,
which generally call for benefits to be paid to eligible employees at retirement
based on years of credited service and average monthly compensation during the
five years of employment with the highest rate of pay. The company's general
policy is to fund pension costs at no less than the statutory requirement.
Certain plans are funded through a grantor trust. The investment in this trust
at December 31, 1993 was $15.5 million and is included in Investments and Other
Assets on the accompanying Consolidated Balance Sheet.
<PAGE>
The following table sets forth the pension plans' funded status and
amounts recognized in the accompanying Consolidated Balance Sheet at December
31, 1993 and December 25, 1992:
<TABLE>
<CAPTION>
1993 1992
Assets in Accumulated Assets in Accumulated
Excess of Benefits Excess of Benefits
Accumulated in Excess Accumulated in Excess
(In thousands) Benefits of Assets Benefits of Assets
Actuarial Present Value of:
<S> <C> <C> <C> <C>
Vested Benefit Obligation $ (89,291) $ (7,203) $ (71,344) $ (5,766)
Accumulated Benefit Obligation (100,054) (8,251) $ (80,210) $ (4,904)
Actuarial Present Value of
Projected Benefit Obligation $ (142,636) $ (11,834) $ (115,715) $ (9,027)
Plan Assets at Fair Value 130,587 574 119,660 555
Funded Status (12,049) (11,260) 3,945 (8,472)
Unrecognized Net Loss 21,226 1,501 10,294 274
Unrecognized Prior Service Cost (12,930) (14,490)
Unrecognized Transition
(Asset) Obligation (11,381) 994 (12,568) 824
Net Pension Liability $ (15,134) $ (8,765) $ (12,819) $ (7,374)
</TABLE>
The following assumptions were made in determining the company's net
pension liability:
<TABLE>
<CAPTION>
(Weighted Average of All Plans): 1993 1992 1991
<S> <C> <C> <C>
Discount Rate 7.1% 7.9% 7.9%
Rate of Increase in Compensation Levels 5.2% 6.0% 5.9%
Expected Long-Term Rate of Return
on Plan Assets 8.2% 8.2% 8.2%
</TABLE>
Net pension cost related to the company's pension plans included the
following components:
<TABLE>
<CAPTION>
(In thousands) 1993 1992 1991
Costs
<S> <C> <C> <C>
Service Cost $ 7,858 $ 10,546 $ 10,093
Interest Cost on Projected
Benefit Obligation 10,138 9,225 8,300
Total Costs 17,996 19,771 18,393
Benefits
Actual Return on Plan Assets (14,354) (8,336) (18,139)
Net Amortization and Deferral 2,453 (2,172) 9,625
Total Benefits (11,901) (10,508) (8,514)
Net Pension Cost $ 6,095 $ 9,263 $ $9,879
</TABLE>
The company also participates in collectively bargained, multi-employer
plans that provide pension and other benefits to certain union employees. The
company contributed $5.2 million in 1993, $6.5 million in 1992 and $9.6 million
in 1991 to such plans. These contributions are determined in accordance with the
provisions of negotiated labor contracts and generally are based on the number
of hours worked and are expensed as incurred.
Postretirement Benefits Other than Pensions
The company shares the cost of its health care benefits with the majority of its
domestic shoreside retired employees. In 1991, the company adopted Statement of
Financial Accounting Standard No. 106 "Employers' Accounting for Postretirement
Benefits Other Than Pensions" ("SFAS 106") which requires the company to
recognize the cost of providing health care and other benefits to
<PAGE>
retirees over the term of employee service, which is a change from the company's
previous method of recognizing these costs when incurred. The company recognized
a one-time charge of $10.5 million, after taxes of $6.4 million, for the effect
of this change in accounting on prior years.
Postretirement benefit costs recognized under SFAS 106 in the
accompanying Consolidated Statement of Income for the years ended December 31,
1993 and December 25, 1992 were as follows:
<TABLE>
<CAPTION>
(In thousands) 1993 1992
<S> <C> <C>
Interest Cost $ 1,573 $ 1,499
Service Cost 1,033 1,369
Amortization of Gains (117) (53)
Total Postretirement Benefit Cost $ 2,489 $ 2,815
</TABLE>
The following table sets forth the postretirement benefit obligation
recognized in the accompanying Consolidated Balance Sheet at December 31, 1993
and December 25, 1992:
<TABLE>
<CAPTION>
(In thousands) 1993 1992
Accumulated Postretirement Benefit Obligation
<S> <C> <C>
Retirees $ 8,445 $ 7,174
Active Employees - Fully Eligible 2,611 3,020
Active Employees - Not Fully Eligible 8,680 6,830
Unrecognized Net Gain 1,451 2,239
Unamortized Prior Service Cost 2,069 2,186
Total $ 23,256 $ 21,449
</TABLE>
The expected cost of the company's postretirement benefits is assumed to
increase at an annual rate of 12% in 1994. This rate is assumed to decline
approximately 1% per year to 5% in the year 1999 and remain level thereafter.
The health care cost trend rate assumption has a significant impact on the
amounts reported. An increase in the rate of 1% in each year would increase the
accumulated postretirement benefit obligation at December 31, 1993 by $3.5
million and the aggregate of the service and interest cost for 1993 by $0.6
million. The weighted average discount rate used to determine the accumulated
postretirement benefit obligation was 7%. The company has not funded the
liability for these benefits.
Profit-Sharing Plans
The company has defined contribution profit-sharing plans covering certain non-
union employees. Under the terms of these plans, the company has agreed to make
matching contributions equal to those made by the participating employees up to
a maximum of 6% of each employee's base salary. The company's total
contributions to the plans for 1993, 1992 and 1991 were $6.0 million, $5.7
million and $5.1 million, respectively.
NOTE 8. REDEEMABLE PREFERRED STOCK
Shares of 9% Series C Cumulative Convertible Preferred Stock ("Series C
Preferred Stock") are convertible into shares of the company's common stock at
the rate of 2.641 shares of common stock for each share of Series C Preferred
Stock, or a conversion price of $18.9325 per share of common stock. Holders of
this stock have one vote for each share of common stock into which Series C
Preferred Stock is convertible and have agreed to vote in accordance with the
recommendations of the company's Board of Directors on certain matters. The
holders of the Series C Preferred Stock also have a class vote with respect to
mergers, recapitalizations, or other similar transactions which are not approved
by a majority of the independent directors of the company.
<PAGE>
The Series C Preferred Stock is exchangeable at the option of the holder
into shares of 9% Series D Convertible Preferred Stock, which have the same
economic rights as the Series C Preferred Stock, but no voting rights except as
required by law. The holders of the Series C Preferred Stock have agreed to
certain transfer restrictions which do not apply to the Series D Preferred
Stock. On or after July 31, 1995, the company may redeem shares of the Series C
or Series D Preferred Stock outstanding, if any, and must redeem all such shares
on January 31, 2001 at their stated value.
The Series C Preferred Stock carries liquidation rights equal to the
greater of 110% of the stated value per share, plus dividends accrued to the
date of payment, or the current market value of the common stock into which the
Series C Preferred Stock outstanding is convertible.
NOTE 9. STOCKHOLDERS' EQUITY
Common Stock
On December 3, 1993 the Board of Directors of the company authorized a two-for-
one stock split effected in the form of a stock dividend payable January 28,
1994 to stockholders of record on December 31, 1993. On January 28, 1994, the
Board of Directors declared a cash dividend of $0.10 per common share payable on
February 28, 1994 to stockholders of record on February 15, 1994.
On a post-split basis, the company repurchased 3,715,928 and 7,774,344
of its outstanding common stock in 1992 and 1991, respectively. The average per
share cost of these repurchases were $20.94 and $10.38 in 1992 and 1991,
respectively.
The excess of the purchase price of the common stock over its stated
value has been reflected as a decrease in Additional Paid-In Capital.
Earnings Per Common Share
For the periods presented, primary earnings per common share were computed by
dividing net income, reduced by the amount of preferred stock dividends, by the
weighted average number of common shares and common equivalent shares
outstanding during the year. Common equivalent shares consist of stock options
granted. Fully diluted earnings per common share were computed based on the
assumption that the Series C Preferred Stock was converted. The number of
shares used in these computations was as follows:
<TABLE>
<CAPTION>
Weighted Average Number of Common Shares Outstanding
<S> <C> <C> <C>
(In millions) 1993 1992 1991
Primary 27.7 29.4 31.4
Fully Diluted 32.1 33.3 35.7
</TABLE>
Stockholder Rights Plan
The company's stockholder rights agreement provides that rights become
exercisable when a person acquires 20% or more of the company's common stock or
announces a tender offer which would result in the ownership of 20% or more of
the company's common stock, or if a person who has been declared "adverse" by
the independent directors of the company exceeds a threshold stock ownership
established by the Board, which may not be less than 10%. The rights will be
attached to all common stock, Series C Preferred Stock and Series D Preferred
Stock certificates at the rate of one right per common share and one right for
each common share into which Series C and Series D Preferred Stock is
convertible. Once exercisable, each right entitles its holder to purchase two
one-hundredths of a share ("unit") of Series A Junior Participating Preferred
Stock at a purchase price of $130 per unit, subject to adjustment.
<PAGE>
Upon the occurrence of certain other events related to changes in the
ownership of the company's outstanding common stock, each holder of a right
would be entitled to purchase shares of the company's common stock or an
acquiring corporation's common stock having a market value of two times the
exercise value of the right. Rights that are, or were, beneficially owned by an
acquiring or adverse person will be null and void. In addition, the Board of
Directors may, in certain circumstances, require the exchange of each
outstanding right for common stock or other consideration with a value equal to
the exercise price of the rights. The company has reserved 500,000 shares of
preferred stock for issuance pursuant to the exercise of the rights in the
future. The rights expire November 29, 1998 and, subject to certain conditions,
may be redeemed by the Board of Directors at any time at a price of $0.025 per
right.
Stock Incentive Plans
On July 27, 1993, the Compensation Committee of the Board of Directors approved
stock option grants under the company's 1989 Stock Incentive Plan (the "Plan")
for 1,878,192 shares of the company's common stock to 384 key employees of the
company. The options have an exercise price of $22.38 per share, a 10-year term
and vest over a two- to nine-year period based upon the achievement of stock
price appreciation targets. The percentage of the options that vest during
specified time periods will depend on the amount of stock price appreciation in
those time periods. After five years, the options will vest as to 60% of the
covered shares if not otherwise vested, and after nine years, the options will
vest as to the remaining 40% if not otherwise vested. These option grants are
expected to be part of a two-part program replacing annual stock option grants
for five years. To complete the program, the company intends to request
stockholder approval at its 1994 Annual Meeting of Stockholders for an increase
in the number of shares reserved under the Stock Incentive Plan to provide
shares for a second grant of approximately 1,252,108 options with similar
vesting conditions, and certain other grants.
Previous stock option grants under the Plan become exercisable in three
to four equal annual installments commencing one year after grant. The Plan
also provides for awards of restricted shares of common stock and stock units to
officers and other key employees. Recipients of restricted shares must pay the
par value of $0.01 for each restricted share of common stock received.
Restricted shares are not transferable until vested, but the recipient enjoys
full voting and dividend rights. Vesting ordinarily occurs in five unequal
annual installments increasing from 10 percent in the first year to 30 percent
in the fifth year. The liability for these awards is based upon the market value
of the shares at the date of award and is included in Stockholders' Equity.
The 1992 Directors Stock Option Plan provides for the granting of
options to purchase shares of common stock to non-employee members of the
company's Board of Directors. The aggregate number of options which may be
granted under this plan is 200,000. Options become exercisable in three equal
installments on the first three anniversaries of the date of grant.
The following is a summary of the transactions in the plans during 1993:
<TABLE>
<CAPTION>
Stock Options Restricted Shares
Average
Shares Price
<S> <C> <C> <C>
Outstanding at December 25, 1992 2,637,166 $ 12.04 210,900
Granted 2,423,692 21.78
Exercised (833,834) 11.54
Vested (128,700)
Canceled (50,994) 16.09
Outstanding at December 31, 1993 4,176,030 $ 17.80 82,200
Exercisable at December 31, 1993 925,690 $ 11.37
Exercised in 1992 412,926 $ 11.07
Exercised in 1991 525,214 $ 10.93
</TABLE>
At December 31, 1993, a total of 164,392 shares were available for future grants
of stock options, restricted shares and stock units under these plans.
NOTE 10. COMMITMENTS AND CONTINGENCIES
Commitments
In May 1993, the company entered into contracts for the construction and
purchase of six new C11-class containerships from Howaldtswerke-Deutsche Werft
AG, of Germany (three ships) and Daewoo Shipbuilding and Heavy Machinery, Ltd.,
of Korea ("Daewoo") (three ships). The total estimated project cost for the
construction of these vessels is $535 million. A payment of $52 million was
made to the shipyards in 1993. The remaining payments are due in two 5%
installments in 1994 and 80% upon delivery of the vessels, which is scheduled
for 1995. The company has obtained commitments from European banks to finance
approximately $400 million of the purchase price of the six C11-class vessels.
Principal payments on any draw-downs would be due in semi-annual installments
over a 12 year period commencing six months after the delivery of each vessel.
Interest rates would be based upon various margins over LIBOR or the banks' cost
of funds as elected by the company. The remaining cost of these vessels would
be financed with the company's public debt and cash from operations.
In connection with the construction and purchase of the ships from
Howaldtswerke-Deutsche Werft AG, the company entered into foreign currency
contracts to buy Deutsche marks in the future to lock in the U.S. dollar cost of
the Deutsche-mark denominated price of the German-built vessels. Any gains or
losses on these contracts will be deferred and recognized as an adjustment to
the cost basis of the ships when the related payments are made. At December 31,
1993, the company had contracts to purchase $241.5 million in Deutsche marks.
At December 31, 1993, the carrying value of such contracts was an asset of $2.3
million and the fair market value, based on quoted market prices of comparable
instruments, was a liability of $2.0 million. The value of the contracts upon
ultimate settlement is dependent upon actual currency exchange rates at the
various maturity dates in 1994 and 1995.
In December 1993, the company entered into contracts with Daewoo for the
construction and purchase of three diesel-powered K10-class containerships to be
delivered in 1996. The total estimated project cost for construction of these
vessels is $195 million. A payment of $18 million was made to the shipyard in
1993. The remaining payments are due in two 10% installments in 1995 and 70%
upon delivery of the vessels. The project will be financed by funds from the
recent debt offerings and internally generated cash flows.
<PAGE>
At December 31, 1993, the company had outstanding purchase commitments to
acquire facilities, equipment and services totaling $56.4 million. In addition,
the company had commitments to purchase terminal services for its major Asian
operations. These commitments range from one to ten years and the amount of the
commitments under these contracts is based upon the actual services performed.
Also, the company had letters of credit totaling $10.4 million outstanding,
which guarantee the company's performance under certain of its commitments.
The company has entered into a contract with the Port of Los Angeles to
lease a new 226-acre terminal facility for 30 years. Occupancy of the new
facility is scheduled for 1997 upon completion of construction. The minimum
annual rent expense under the new lease is estimated to be between $22 million
and $26 million, depending upon the final scope of development. The annual rent
for the company's current 129-acre terminal in Los Angeles was approximately
$18.5 million in 1993. The company has agreed to purchase at least six gantry
cranes and certain intermodal handling equipment for use at the new Los Angeles
terminal, the cost of which is not known at this time.
The company also is negotiating with the Port of Seattle for the
improvement and expansion of its existing terminal facility. Under the proposed
plan, the facility would be expanded from 83 acres to approximately 160 acres by
1997 and the lease term would be 30 years from completion. The lease for the
existing facility expires in 2015.
Since 1991, the company and Orient Overseas Container Line, a Hong Kong
shipping company ("OOCL"), have been parties to agreements enabling them to
exchange vessel space and coordinate vessel sailings until 1996. In February
1994, the company and OOCL reached agreements to extend the term of the
agreements through 2005 and to explore certain other opportunities, including
the addition of an Asia to Europe service route. The new contracts are subject
to certain conditions, including U.S. government approval. Currently, each
party is guaranteed vessel space and buys extra space as needed. Starting in
December 1993, the company was required to increase the vessel space it
purchases from OOCL and will compensate OOCL for this additional space at a rate
currently calculated at $6.6 million per year. This commitment reduces as the
company increases the capacity it can exchange with OOCL, which is expected to
begin with the delivery of the C11s in 1995.
The company has entered into employment agreements with certain of its
executive officers. The agreements provide for certain payments to each officer
upon termination of employment, other than as a result of death, disability in
most cases, or justified cause, as defined. The aggregate estimated commitment
under these agreements was $15 million at December 31, 1993.
Contingencies
The company is a party to various legal proceedings, claims and assessments
arising in the course of its business activities, none of which in management's
opinion is expected to have a material adverse impact on its consolidated
financial position or operations.
<PAGE>
NOTE 11. BUSINESS SEGMENT INFORMATION
The company provides container transportation services in North America, Asia
and the Middle East through an intermodal system combining ocean, rail and truck
transportation. In addition, the company has real estate holdings which are
being developed and sold.
<TABLE>
<CAPTION>
(In millions) 1993 1992 1991
Revenues
<S> <C> <C> <C>
Transportation $ 2,578.2 $ 2,505.2 $ 2,431.9
Real Estate 16.0 6.0 16.8
Total $ 2,594.2 $ 2,511.2 $ 2,448.7
Operating Income
Transportation $ 122.9 $ 136.7 $ 131.2
Real Estate 10.0 3.4 11.6
Total $ 132.9 $ 140.1 $ 142.8
Identifiable Assets
Transportation $ 1,442.0 $ 1,417.4 $ 1,513.9
Real Estate 12.4 18.2 27.3
Total $ 1,454.4 $ 1,435.6 $ 1,541.2
</TABLE>
Depreciation expense and capital expenditures were related only to
transportation operations in 1993, 1992 and 1991.
The following table shows the percentage of ocean transportation revenues
by country:
<TABLE>
<CAPTION>
1993 1992 1991
Origin Destination Origin Destination Origin Destination
<S> <C> <C> <C> <C> <C> <C>
United States 27% 44% 30% 44% 33% 44%
Hong Kong 12 4 12 5 10 4
Japan 10 12 11 11 11 11
Taiwan 9 4 10 3 10 4
People's Republic
of China 8 1 6 2 6 2
India 5 3 5 2 4 2
Korea 5 2 4 3 4 4
Indonesia 4 1 3 1 3 1
Pakistan 4 2 4 2 3 1
Philippines 4 2 3 3 4 3
Thailand 4 2 3 2 3 1
Other 8 23 9 22 9 23
</TABLE>
Operating income, net income and identifiable assets cannot be allocated on a
geographic basis due to the nature of the company's business.
<TABLE>
<CAPTION>
NOTE 12. QUARTERLY RESULTS (Unaudited)
(In millions, except per share amounts)
1993 1992
Quarter December September June April December September June April
Ended 31 17 25 2 25 18 26 3
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 761.8 $621.8 $ 581.8 $ 628.8 $ 671.2 $ 592.7 $ 585.3 $ 662.0
Operating Income 32.0 49.3 27.9 23.7 19.8 44.0 39.9 36.4
Income Before Taxes 31.1 46.4 33.7 19.3 12.9 37.9 42.2 28.7
Income Before
Cumulative Effect of
Accounting Change 21.2 25.5 21.3 12.1 10.6 23.5 26.2 17.8
Cumulative Effect on
Prior Years from Change in
Accounting for
Revenues and Expenses (1) (21.6)
Net Income (Loss) $ 21.2 $ 25.5 $ 21.3 $ 12.1 $ 10.6 $ 23.5 $ 26.2 $ (3.8)
Earnings (Loss)
Per Common Share
Primary
Before Cumulative Effect of
Accounting Change $ 0.69 $ 0.86 $ 0.71 $ 0.39 $ 0.32 $ 0.75 $ 0.81 $ 0.53
Cumulative Effect of
Accounting Change (0.71)
Primary Earnings (Loss)
Per Common Share $ 0.69 $ 0.86 $ 0.71 $ 0.39 $ 0.32 $ 0.75 $ 0.81 $(0.18)
Fully Diluted
Before Cumulative Effect of
Accounting Change $ 0.66 $ 0.80 $ 0.67 $ 0.38 $ 0.32 $ 0.71 $ 0.77 $ 0.53
Cumulative Effect of
Accounting Change (0.71)
Fully Diluted
Earnings (Loss)
Per Common Share $ 0.66 $ 0.80 $ 0.67 $ 0.38 $ 0.32 $ 0.71 $ 0.77 $(0.18)
Cash Dividends
Per Common Share $ 0.075 $0.075 $ 0.075 $ 0.075 $ 0.075 $ 0.075 $ 0.075 $ 0.075
Market Price
Per Common Share
High $30 $28 1/2 $27 3/4 $24 3/8 $21 1/4 $23 1/2 $23 7/8 $21 5/8
Low 23 22 3/8 23 3/8 19 18 3/4 19 5/8 16 15 1/8
</TABLE>
1) In 1992, the company changed its method of revenue and expense
recognition to a percentage of completion method for revenue, and expenses
as incurred from recording revenue and variable expenses when cargo was
loaded. The cumulative effect of this change on prior years was recognized
as a one-time charge at the beginning of the year.
<PAGE>
SCHEDULE II. AMOUNTS RECEIVABLE FROM RELATED
PARTIES AND UNDERWRITERS, PROMOTERS AND EMPLOYEES
OTHER THAN RELATED PARTIES
<TABLE>
<CAPTION>
______________________________________________________________________________________________
Balance at Balance at End
Name of Beginning Written of Period
Debtor of Period Additions Collected Off Current Noncurrent
______________________________________________________________________________________________
Year Ended
December 31, 1993
<S> <C> <C> <C> <C> <C>
F. Masi $40,000 ($20,000) $20,000
Year Ended
December 25, 1992
J. Burgess $ 8,610 ($8,610)
F. Masi $60,000 ($20,000) $20,000 $20,000
A. Reimers $144,500 ($144,500)
Year Ended
December 27, 1991
J. Burgess(1) $28,610 ($20,000) $8,610
J. Dunkel(2) $80,000 ($80,000)
F. Masi(3) $70,000 ($10,000) $20,000 $40,000
J. McKeon(4) $111,250 ($59,565) ($51,685)
A. Reimers(5) $150,000 ($5,500) $30,000 $114,500
</TABLE>
The company makes loans represented by promissory notes to certain
employees primarily for the purpose of assisting in the employee's relocation.
Generally, these notes are due in five annual installments. In 1990 and 1991
certain notes were amended to extend the payment of the unpaid current portion
to one year after the end of the original term of the note.
(1) Interest at 8.5%, unsecured.
(2) Interest at 11%, unsecured, repaid in 1991.
(3) Interest at 10%, unsecured, due through July 1994.
(4) Interest at 11.5%, unsecured, written-off in 1991 after employment with
the company was terminated.
(5) Interest at 11%, unsecured, repaid in 1992 after employment with the
company was terminated.
<PAGE>
SCHEDULE III. CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(PARENT COMPANY)
<TABLE>
<CAPTION>
INCOME STATEMENT
_______________________________________________________________________________________________
Year Ended December 31 December 25 December 27
(In thousands) 1993 1992 1991
_______________________________________________________________________________________________
<S> <C> <C> <C>
Revenues from Management Fee $ 16,363 $ 30,629 $ 33,528
_______________________________________________________________________________________________
General and Administrative Expenses 32,094 30,119 25,536
_______________________________________________________________________________________________
Operating Income (Loss) (15,731) 510 7,992
_______________________________________________________________________________________________
Other Income (Expense)
Interest Income 22,276 7,163 19,199
Interest Expense (15,479) (15,764) (26,649) Gain on Sale of Investment
8,934 8,091
_______________________________________________________________________________________________
Total Other Income (Expense) 15,731 (510) (7,450)
_______________________________________________________________________________________________
Income Before Taxes and Equity in
Income of Subsidiaries 0 0 542
Tax Expense 1,499 1,553 314
_______________________________________________________________________________________________
Income (Loss) Before Equity in
Income of Subsidiaries (1,499) (1,553) 228
Equity in Income of
Subsidiaries 81,608 79,569 65,910
________________________________________________________________________________________________
Income Before Cumulative
Effect of Accounting Changes 80,109 78,016 66,138
Cumulative Effect on Prior Years
of Changing the Accounting for
Revenue and Expenses(1) (21,565)
Postretirement Benefits(2) (10,480)
________________________________________________________________________________________________
Net Income $ 80,109 $ 56,451 $ 55,658
________________________________________________________________________________________________
________________________________________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET
__________________________________________________________________________________
December 31 December 25
(In thousands) 1993 1992
__________________________________________________________________________________
Assets
<S> <C> <C>
Cash and Cash Equivalents $ 95,300 $ 893
Other Current Assets 2,590 232
Long-Term Assets 21,360 23,116
Investment in Subsidiaries 683,125 609,789
Notes Receivable from Subsidiaries 193,411 74,053
__________________________________________________________________________________
$ 995,786 $ 708,083
__________________________________________________________________________________
__________________________________________________________________________________
Liabilities, Redeemable Preferred Stock
and Stockholders' Equity
Current Liabilities $ 20,417 $ 33,141
Advances from Subsidiaries 228,140 65,393
Other Long-Term Liabilities 48,861 42,821
Notes Payable 147,915 94,500
Redeemable Preferred Stock 75,000 75,000
Stockholders' Equity (3) 475,453 397,228
__________________________________________________________________________________
$ 995,786 $ 708,083
__________________________________________________________________________________
__________________________________________________________________________________
</TABLE>
<PAGE>
SCHEDULE III. CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(PARENT COMPANY), continued
<TABLE>
<CAPTION>
STATEMENT OF CASH FLOWS
_________________________________________________________________________________________________
Year Ended December 31 December 25 December 27
(In thousands) 1993 1992 1991
_________________________________________________________________________________________________
Cash Flows from Operating Activities
<S> <C> <C> <C>
Net Income $ 80,109 $ 56,451 $ 55,658
Adjustments to Reconcile Net Income to
Net Cash Provided by (Used in) Operating
Activities:
Net Income of Subsidiaries (81,608) (79,569) (65,910)
Change in Other Current Assets (2,358) 522 2,331
Change in Current Liabilities (6,603) 10,686 (3,094)
Change in Liabilities due to
Restructuring Charge (6,121) (7,815) (8,367)
Change in Other Assets and Liabilities 6,040 5,874 36,823
__________________________________________________________________________________________________
Net Cash Provided by (Used in)
Operating Activities (10,541) (13,851) 17,441
__________________________________________________________________________________________________
Cash Flows from Investing Activities
Dividends from Subsidiaries 4,137 6,363 26,803
Purchase of Short-Term Investments (64,905) (46,750)
Proceeds from Sales of Short-Term Investments 101,655 10,000
Change in Notes Receivable from Subsidiaries (119,358) (59,653) 117,272
Change in Advances to/from Subsidiaries 162,747 88,362 (21,589)
Other 5,891 (2,880) (1,643)
__________________________________________________________________________________________________
Net Cash Provided by Investing Activities 53,417 68,942 84,093
__________________________________________________________________________________________________
Cash Flows from Financing Activities
Repurchase of Common Stock (77,829) (80,621)
Issuance of Debt 663,379 50,000
Repayments of Debt (609,964) (50,000)
Dividends Paid (14,725) (15,271) (16,069)
Other 12,841 7,551 7,890
__________________________________________________________________________________________________
Net Cash Provided by (Used in) Financing 51,531 (85,549) (88,800)
Activities
__________________________________________________________________________________________________
Net Increase (Decrease) in Cash and
Cash Equivalents 94,407 (30,458) 12,734
__________________________________________________________________________________________________
Cash and Cash Equivalents at Beginning of Year 893 31,351 18,617
__________________________________________________________________________________________________
Cash and Cash Equivalents at End of Year $ 95,300 $ 893 $ 31,351
__________________________________________________________________________________________________
__________________________________________________________________________________________________
</TABLE>
All material intercompany transactions and account balances are eliminated in
consolidation.
(1)The accounting change for Revenue and Expenses is described in Note 1 to the
consolidated financial statements.
(2)The accounting change for Postretirement Benefits is described in Note 7 to
the consolidated financial statements.
(3)For an analysis of Stockholders' Equity, see Consolidated Statement of
Changes in Stockholders' Equity and Note 9 to the consolidated financial
statements.
<PAGE>
SCHEDULE V. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
(In thousands)
Description Balance at Additions Retirements, Balance at
Beginning at Cost Sales and End of Year
of Year Other
1993
<S> <C> <C> <C> <C>
Ships $ 705,009 $ 22,169 $ (50,324) $ 676,854
Containers, Chassis and Rail Cars 735,223 41,078 (25,744) 750,557
Leasehold Improvements and Other 230,939 22,789 (4,092) 249,636
Construction In Progress 74,138 74,138
$ 1,671,171 $ 160,174 $ (80,160) $ 1,751,185
1992
Ships $ 687,212 $ 17,797 $ 705,009
Containers, Chassis and Rail Cars 710,841 31,143 $ (6,761) 735,223
Leasehold Improvements and Other 217,256 16,727 (3,044) 230,939
$ 1,615,309 $ 65,667 $ (9,805) $ 1,671,171
1991
Ships $ 682,558 $ 4,655 $ (1) $ 687,212
Containers, Chassis and Rail Cars 712,767 786 (2,712) 710,841
Leasehold Improvements and Other 218,487 15,031 (16,262) 217,256
$ 1,613,812 $ 20,472 $ (18,975) $ 1,615,309
</TABLE>
<PAGE>
SCHEDULE VI. ACCUMULATED DEPRECIATION AND AMORTIZATION OF
PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
(In thousands)
Description Balance at Additions Retirements, Balance at
Beginning Charged Sales and End of Year
of Year To Expense Other
1993
<S> <C> <C> <C> <C>
Ships $ 294,115 $ 31,724 $ (48,901) $ 276,938
Containers, Chassis and Rail Cars 359,151 48,844 (24,509) 383,486
Leasehold Improvements and Other 140,874 27,643 (3,938) 164,579
$ 794,140 $ 108,211 $ (77,348) $ 825,003
1992
Ships $ 263,280 $ 30,835 $ 294,115
Containers, Chassis and Rail Cars 316,991 47,403 $ (5,243) 359,151
Leasehold Improvements and Other 115,896 27,912 (2,934) 140,874
$ 696,167 $ 106,150 $ (8,177) $ 794,140
1991
Ships $ 233,118 $ 30,162 $ 263,280
Containers, Chassis and Rail Cars 271,573 47,540 $ (2,122) 316,991
Leasehold Improvements and Other 103,157 27,984 (15,245) 115,896
$ 607,848 $ 105,686 $ (17,367) $ 696,167
</TABLE>
<PAGE>
SCHEDULE IX. SHORT-TERM BORROWINGS
<TABLE>
<CAPTION>
Maximum Average Weighted
Category of Weighted Amount Amount Average
Aggregate Balance Average Outstanding Outstanding Interest Rate
Short-Term at end of Interest During the During the During the
Borrowings Period Rate Period Period(1) Period (2)
_____________________________________________________________________________________________
Year Ended December 31, 1993
<S> <C> <C> <C> <C> <C>
Bank Borrowings(3) $0 N/A $37,816,011 $6,330,881 4.11%
There were no short-term borrowings in 1992.
Year Ended December 27, 1991
Line of Credit(4) $0 N/A $50,000,000 $7,200,000 8.00%
</TABLE>
(1) The average amount outstanding was calculated based on an average daily
balance.
(2) The weighted average interest rate during the period was computed by
dividing the actual interest expense by the average short-term debt
outstanding.
(3) These borrowings were made from various banks at prevailing interest rates.
(4) This borrowing was made under the company's previous $100 million revolving
credit agreement.
<PAGE>
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information with respect to Directors and certain executive officers
of the company appearing under the caption "Election of Directors - Information
With Respect to Nominees and Directors" in the company's definitive proxy
statement for the annual meeting of stockholders to be held on April 28, 1994 is
hereby incorporated herein by reference.
The following sets forth certain information with respect to the remaining
executive officers of the company:
Maryellen B. Cattani, age 50, elected Senior Vice President, General Counsel and
Secretary of the company in July 1991. Prior to joining the company, she was a
partner in the law firm of Morrison & Foerster from 1989 to 1991 and Senior Vice
President, General Counsel and Secretary of Transamerica Corporation from 1983
to 1989.
James S. Marston, age 60, elected Senior Vice President and Chief Information
Officer of the company in September 1987, served as Vice President and then
President of AMR Corporation-Technical Training Division from June 1982 to June
1986 and from June 1986 to September 1987, respectively.
William J. Stuebgen, age 46, elected Vice President, Controller of the company
in October 1990. Prior to that, he served as Vice President, Treasurer of the
company from October 1988 to September 1990 and Vice President, Controller from
April 1987 to March 1989.
The executive officers of the company are elected by the Board of Directors.
Each officer holds office until his or her successor has been duly elected and
qualified, or until the earliest of his or her death, resignation, retirement or
removal by the Board.
ITEM 11. EXECUTIVE COMPENSATION
The information appearing under the caption "Compensation of Executive
Officers and Directors" and "Description of Plans" in the company's definitive
proxy statement for the annual meeting of stockholders to be held on April 28,
1994, is hereby incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information appearing under the captions "Election of Directors-
Stock Ownership of Directors and Officers" and "Certain Beneficial Ownership of
Securities" in the company's definitive proxy statement for the annual meeting
of stockholders to be held on April 28, 1994, is hereby incorporated herein by
reference.
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information appearing under the captions "Compensation of Executive
Officers and Directors -- Employment Agreements and Certain Transactions" in the
company's definitive proxy statement for the annual meeting of stockholders to
be held on April 28, 1994, is hereby incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report:
1. Financial Statements and Schedules
The following report of independent public accountants, consolidated
financial statements and notes to the consolidated financial statements of
American President Companies, Ltd. and subsidiaries are contained in Part
II, Item 8:
a. Report of Independent Public Accountants
b. Consolidated Statement of Income
c. Consolidated Balance Sheet
d. Consolidated Statement of Cash Flows
e. Consolidated Statement of Changes in Stockholders' Equity
f. Notes to Consolidated Financial Statements
2. The following schedules are contained in Part II, Item 8:
a. Schedule II - Amounts Receivable from Related Parties and
Underwriters, Promoters and Employees Other than Related Parties
b. Schedule III - Condensed Financial Information of Registrant (Parent
Company)
c. Schedule V - Property, Plant and Equipment
d. Schedule VI - Accumulated Depreciation and Amortization of
Property, Plant and Equipment
e. Schedule IX - Short-Term Borrowings
3. Exhibits required by Item 601 of Regulation S-K
The following documents are exhibits to this Form 10-K
Exhibit No. Description of Document
______________________________________________________________________________
3.1* Certificate of Incorporation, filed as Exhibit 3.1 to the company's
Form SE (File No. 1-8544), dated May 14, 1985.
3.2* Certificate of Amendment of Certificate of Incorporation, filed as
Exhibit 3.1 to the company's Form SE (File No. 1-8544), dated March
11, 1988.
3.3* By-Laws, as amended, filed as Exhibit 3.1 to the company's Form SE
(File No. 1-8544), dated March 27, 1991 and electronically filed as
Exhibit 3.1 to the company's Form 10Q (File No. 1-8544), dated August
3, 1993.
3.4* Amendment to the By-laws dated June 25, 1993 filed as Exhibit 3.2 to
the company's Form 10Q (File No. 1-8544), dated August 3, 1993.
<PAGE>
4.1* Amended and Restated Rights Agreement dated October 22, 1991, between
the company and The First National Bank of Boston, as Rights Agent,
filed as Exhibit 4.1 to the company's Form SE (File No. 1-8544), dated
October 22, 1991.
4.2* Trust Indenture between American President Lines, Ltd., Issuer, and
Security Pacific National Bank, Trustee, dated as of April 22, 1988,
President Truman Issue, filed as Exhibit 4.1 to the company's Form SE
(File No. 1-8544), dated July 26, 1988.
4.3* Forms of Series I and Series II Bonds, filed as part of Exhibit 4.1 to
the company's Form SE (File No. 1-8544), dated July 26, 1988.
4.4* Certificate of Designation, Preferences, and Rights of the 9% Series C
Cumulative Convertible Preferred Stock, filed with the Delaware
Secretary of State on September 20, 1988, filed as Exhibit 4.1 to the
company's Form SE (File No. 1-8544), dated September 21, 1988.
4.5* Specimen Certificate of the company's 9% Series C Cumulative
Convertible Preferred Stock, par value $.01 per share, filed as
Exhibit 4.1 to the company's Form SE (File No. 1-8544), dated August
1, 1989.
4.6* Preferred Stock Purchase Agreement among the company, Hellman &
Friedman Capital Partners, Hellman & Friedman Capital Partners
International (BVI), and APC Partners; dated as of August 3, 1988, and
amendments 1 through 3, dated September, 1988 (without exhibits),
filed as Exhibit 4.1 to the company's Form SE (File No. 1-8544), dated
February 17, 1989.
4.7* Amendment of Preferred Stock Purchase Agreement among the company,
Hellman & Friedman Capital Partners, Hellman & Friedman Capital
Partners International (BVI), and APC Partners; dated March 15, 1989,
filed as Exhibit 4.2 to the company's Form SE (File No. 1-8544), dated
March 14, 1990.
4.8* Registration Rights Agreement, among the company, Hellman & Friedman
Capital Partners, Hellman & Friedman Capital Partners International
(BVI), and APC Partners; dated as of August 3, 1988, as amended
(without exhibits), filed as Exhibit 4.2 to the company's Form SE
(File No. 1-8544), dated February 17, 1989.
4.9* Refunding Revenue Bonds Loan Agreement, dated October 1, 1989, by and
between American President Lines, Ltd. and Alaska Industrial
Development and Export Authority, filed as Exhibit 4.1 to the
company's Form SE (File No. 1-8544), dated May 8, 1991.
4.10* Trust Indenture between Alaska Industrial Development and Export
Authority, Issuer, and Security Pacific National Bank, Trustee, dated
October 1, 1989, to the Refunding Revenue Bonds, Series 1989, filed as
Exhibit 4.2 to the company's Form SE (File No. 1-8544), dated May 8,
1991.
4.11* Refunding Revenue Bonds Guaranty Agreement by and between the company
and Security Pacific National Bank and Alaska Industrial Development
and Export Authority, filed as Exhibit 4.3 to the company's Form SE
(File No. 1-8544), dated May 8, 1991.
4.12* Specimen Certificate of the company's Refunding Revenue Bonds, Series
1989, filed as Exhibit 4.4 to the company's Form SE (File No. 1-8544),
dated May 8, 1991.
<PAGE>
4.13* Refunding Revenue Bonds Loan Agreement between American President
Lines, Ltd. and Alaska Industrial Development and Export Authority
dated October 1, 1991, filed as Exhibit 4.1 to the company's Form SE
(File No. 1-8544), dated March 17, 1992.
4.14* Trust Indenture between Alaska Industrial Development and Export
Authority, Issuer, and Security Pacific National Bank, Trustee, dated
October 1, 1991, to the Refunding Revenue Bonds Series 1991, filed as
Exhibit 4.2 to the company's Form SE (File No. 1-8544), dated March
17, 1992.
4.15* Irrevocable Direct Pay Letter of Credit and Reimbursement Agreement
between American President Lines, Ltd., American President Companies,
Ltd. and The Industrial Bank of Japan, Limited, dated October 3, 1991,
filed as Exhibit 4.3 to the company's Form SE (File No. 1-8544), dated
March 17, 1992.
4.16* Certificate of Elimination with Respect to the $3.50 Series B
Convertible Exchangeable Preferred Stock of American President
Companies, Ltd., dated June 22, 1992, filed as Exhibit 4.1 to the
company's Form 10Q (File No. 1-8544), dated August 3, 1993.
4.17* Certificate of Designation, Preferences and Rights of the 9% Series D
Convertible Preferred Stock of American President Companies, Ltd.,
dated June 29, 1992, filed as Exhibit 4.2 to the company's Form 10Q
(File No. 1-8544), dated August 3, 1993.
4.18* Indenture, dated as of November 1, 1993, between American President
Companies, Ltd. and The First National Bank of Boston as Trustee,
filed as Exhibit 4.1 to the company's Form 8K (File No. 1-8544) dated
November 29, 1993.
4.19* Form of 7-1/8% Senior Note Due 2003 of American President Companies,
Ltd., filed as Exhibit 4.2 to the company's Form 8K (File No. 1-8544)
dated November 29, 1993.
4.20 Form of 8% Senior Debentures Due 2024 of American President Companies,
Ltd.
10.1* Operating-Differential Subsidy Agreement (No. MA/MSB-417), effective
as of January 1, 1978, between the United States and American
President Lines, Ltd., and Addenda Nos. 1 through 79 thereto,
excluding Nos. 16, 52, 56, 67, 72, 73, 76 and 77, filed as Exhibit
10.1 to the company's Form SE (File No. 1-8544), dated March 17, 1992.
10.2* Capital Construction Fund Agreement (No. MA/CCF-306), dated as of
December 8, 1976, between the United States and American President
Lines, Ltd., and Addenda Nos. 1 through 15 thereto, excluding No. 10,
filed as Exhibit 10.2 to the company's Form SE (File No. 1-8544),
dated March 17, 1992.
10.3* Sealift Readiness Agreement (No. SRP 10-83), dated January 1, 1991,
between the Department of the Navy, Military Sealift Command, and
American President Lines, Ltd., filed as Exhibit 10.4 to the company's
Registration Statement on Form 10 (File No. 1-8544), which became
effective on September 1, 1983.
10.4* Lease Agreement, dated June 1, 1988, between Monsanto Company and
American President Intermodal Company, Ltd., filed as Exhibit 10.14 to
the company's Form SE (File No. 1-8544), dated July 26, 1988.
<PAGE>
10.5* Lease Agreement, dated June 1, 1988, between Consolidated Rail
Corporation and American President Intermodal Company, Ltd., filed as
Exhibit 10.2 to the company's Form SE (File No. 1-8544), dated March
14, 1990.
10.6* Lease and Preferential Assignment Agreement dated January 6, 1971, and
First Supplemental Agreement dated February 24, 1971, between the City
of Oakland and Seatrain Terminals of California, Inc., filed as
Exhibit 10.32 to the company's Registration Statement on Form S-l,
Registration No. 2-93718, which became effective on November 1, 1984.
10.7* Second Supplemental Agreement to Lease and Preferential Assignment
Agreement, dated May 3, 1988, filed as Exhibit 10.3 to the company's
Form SE (File No. 1-8544), dated March 14, 1990.
10.8* Preferential Assignment dated February 23, 1972, between the City of
Oakland and Seatrain Terminals of California, Inc., filed as Exhibit
10.33 to the company's Registration Statement on Form S-l,
Registration No. 2-93718, which became effective on November 1, 1984.
10.9* Assignment, Designation of Secondary Use and Consent, dated December
11, 1974, among Seatrain Terminals of California, Inc., American
President Lines, Ltd., the City of Oakland and Seatrain Lines, Inc.,
filed as Exhibit 10.34 to the company's Registration Statement on Form
S-l, Registration No. 2-93718, which became effective on November 1,
1984.
10.10* Acknowledgment of Termination of Consent to Secondary Use and Sublease
and Assumption of Entire Combined Premises and Cranes dated December
18, 1981, between the City of Oakland and American President Lines,
Ltd., filed as Exhibit 10.35 to the company's Registration Statement
on Form S-l, Registration No. 2-93718, which became effective on
November 1, 1984.
10.11* Supplemental Agreement dated July 6, 1982, between the City of Oakland
and American President Lines, Ltd., filed as Exhibit 10.36 to the
company's Registration Statement on Form S-l, Registration No. 2-
93718, which became effective on November 1, 1984.
10.12* Permit No. 441, dated November 26, 1980, Second Amendment to Permit
No. 441, dated February 7, 1983, and Third Amendment to Permit No.
441, dated May 10, 1984, between the City of Los Angeles and American
President Lines, Ltd., filed as Exhibit 10.37 to the company's
Registration Statement on Form S-l, Registration No. 2-93718, which
became effective on November 1, 1984.
10.13* Fourth Amendment to Permit No. 441, dated as of October 29, 1986
between the City of Los Angeles and American President Lines, Ltd.,
filed as Exhibit 10.4 to the company's Form SE (File No. 1-8544),
dated March 23, 1987.
10.14* Financing and Security Agreement, dated March 27, 1984, between
American President Lines, Ltd. and the City of Los Angeles,
California, filed as Exhibit 10.38 to the company's Registration
Statement on Form S-1, Registration No. 2-93718, which became
effective on November 1, 1984.
<PAGE>
10.15* Lease, dated July 31, 1972, Lease Agreement, dated September 1, 1980,
Memorandum, dated September 1, 1980, and two letters dated July 3,
1981 and July 14, 1981, respectively, between Hanshin Port Development
Authority and American President Lines, Ltd., filed as Exhibit 10.39
to the company's Registration Statement on Form S-1, Registration No.
2-93718, which became effective on November 1, 1984.
10.16* Pre-engagement Agreement for Lease dated March 17, 1983, Supplemental
Agreement dated March 17, 1983 and form of Wharf Lease Agreement
between Yokohama Port Terminal Corporation and American President
Lines, Ltd., filed as Exhibit 10.41 to the company's Registration
Statement on Form S-l, Registration No. 2-93718, which became
effective on November 1, 1984.
10.17* Lease Contract of Wharfs Nos. 68 & 69 of Container Terminal No. 3
Kaohsiung Harbor, Taiwan, Republic of China, dated December 31, 1987
and Equipment Agreement between the Kaohsiung Harbor Bureau and APL,
dated December 31, 1987, filed as Exhibit 10.4 to the company's Form
SE (File No. 1-8544), dated March 11, 1988.
10.18* Lease dated April 28, 1978, Memorandum of Understanding, Addendum to
Lease dated May 9, 1978, Addendum No. 2 to Lease dated July 28, 1978,
and Addendum No. 3 to Lease dated March 27, 1984, between Sunset
Cahuenga Building, a Joint Venture, and American President Lines,
Ltd., filed as Exhibit 10.44 to the company's Registration Statement
on Form S-l, Registration No. 2-93718, which became effective on
November 1, 1984.
10.19* Addendum No. 4 dated April 19, 1985 to Lease dated April 28, 1978,
between Sunset Cahuenga Building, a Joint Venture, and American
President Lines, Ltd., filed as Exhibit 10.1 to the company's Form SE
(File No. 1-8544), dated December 12, 1985.
10.20* Addendum No. 5 dated July 25, 1986 to Lease dated April 28, 1978,
between Sunset Cahuenga Building, a Joint Venture, and American
President Lines, Ltd., filed as Exhibit 10.5 to the company's Form SE
(File No. 1-8544), dated March 11, 1988.
10.21* Addendum No. 6, dated May 1, 1988, to Lease dated April 28, 1978,
between Sunset Cahuenga Building, a Joint Venture, and American
President Lines, Ltd., filed as Exhibit 10.13 to the company's Form SE
(File No. 1-8544), dated July 26, 1988.
10.22* Lease Agreement between Port of Seattle and American President Lines,
Ltd. at Terminal 5 dated September 26, 1985, filed as Exhibit 10.5 to
the company's Form SE (File No. 1-8544), dated December 12, 1985.
10.23* Lease Agreement between the company and Bramalea Pacific, Inc. dated
April 18, 1988, and Amendments 1 through 5, filed as Exhibit 10.3 to
the company's Form SE (File No. 1-8544), dated March 27, 1991.
10.24* Deferred Compensation Plan For Directors of the company, filed as
Exhibit 10.49 to the company's Registration Statement on Form S-l,
Registration No. 2-93718, which became effective on November 1, 1984.
10.25* Executive Survivors' Benefits Plan, dated November 29, 1988, filed as
Exhibit 10.4 to the company's Form SE (File No. 1-8544), dated March
17, 1992.
10.26* 1989 Stock Incentive Plan of the company, filed as Exhibit 10.4 to the
company's Form SE (File No. 1-8544), dated March 14, 1990.
<PAGE>
10.27* Amendment to 1989 Stock Incentive Plan of the company, filed as
Exhibit 10.4 to the company's Form SE (File No. 1-8544), dated October
31, 1990.
10.28* Credit agreements dated as of February 12, 1987, between American
President Lines, Ltd. and Kreditanstalt Fuer Wiederaufbau, filed as
Exhibit 10.9 to the company's Form SE (File No. 1-8544), dated March
23, 1987.
10.29* Guarantees dated as of February 12, 1987, by the company in favor of
Kreditanstalt Fuer Wiederaufbau, filed as Exhibit 10.10 to the
company's Form SE (File No. 1-8544), dated March 23, 1987.
10.30* 1988 Deferred Compensation Plan dated November 29, 1988, filed as
Exhibit 10.5 to the company's Form SE (File No. 1-8544), dated
February 17, 1989.
10.31* Grantor Trust Agreement with U.S. Trust Company of California, N.A.,
effective April 10, 1989, filed as Exhibit 10.1 to the company's Form
SE (File No. 1-8544), dated August 1, 1989.
10.32* Employment Agreement as amended, dated January 29, 1991 between the
company and John M. Lillie, filed as Exhibit 10.1 to the company's
Form SE (File No. 1-8544), dated May 8, 1991.
10.33* Employment Agreement, dated March 4, 1991 between Will M. Storey and
the company, filed as Exhibit 10.2 to the company's Form SE (File No.
1-8544), dated May 8, 1991.
10.34* Employment Agreement, dated July 30, 1991 between Joji Hayashi and the
company, filed as Exhibit 10.1 to the company's Form SE (File No. 1-
8544), dated October 22, 1991.
10.35* Employment Agreement, dated July 30, 1991 between James S. Marston and
the company, filed as Exhibit 10.2 to the company's Form SE (File No.
1-8544), dated October 22, 1991.
10.36* Employment Agreement, dated July 30, 1991 between Timothy J. Rhein and
the company, filed as Exhibit 10.3 to the company's Form SE (File No.
1-8544), dated October 22, 1991.
10.37* Agreement dated May 6, 1991 between the company and Richard L. Tavrow,
filed as Exhibit 10.3 to the company's Form SE (File No. 1-8544),
dated March 17, 1992.
10.38* Form of Indemnity Agreement dated March 11, 1988 between the company
and W. B. Seaton, Charles S. Arledge, John H. Barr, Calvin S. Hatch,
J. Hayashi, Forrest N. Shumway and Barry L. Williams, filed as Exhibit
10.3 to the company's Form SE (File No. 1-8544), dated February 17,
1989.
10.39* Form of Indemnity Agreements dated April 25, 1991 between the company
and F. Warren Hellman, John M. Lillie, Timothy J. Rhein, Will M.
Storey, filed as Exhibits 10.3 through 10.6 to the company's Form SE
(File No. 1-8544), dated May 8, 1991.
10.40* Trans-Pacific Stabilization Agreement, a Cooperative Working Agreement
among Ocean Common Carriers, including American President Lines, Ltd.,
signed November 22, 1988, filed as Exhibit 10.2 to the company's Form
SE (File No. 1-8544), dated August 1, 1989.
<PAGE>
10.41* Assignment Agreement from United States Lines, Inc. to American
President Lines, Ltd. with attached supplements, dated September 16,
1987, filed as Exhibit 10.8 to the company's Form SE (File No. 1-
8544), dated March 14, 1990.
10.42* Receivables Purchase Agreement, dated August 29, 1991 between American
President Domestic Company, Ltd. and J.P. Morgan Delaware, Morgan
Guaranty Trust Company of New York, Bank of America National Trust and
Savings Association, Barclays Bank PLC, Citibank, N.A., The First
National Bank of Boston, The First National Bank of Chicago, Security
Pacific National Bank and Morgan Guaranty Trust Company of New York,
as agent, filed as Exhibit 10.04 to the company's Form SE (File No. 1-
8544), dated October 22, 1991.
10.43* Receivables Purchase Agreement, dated August 29, 1991 between American
President Lines, Ltd. and J.P. Morgan Delaware, Morgan Guaranty Trust
Company of New York, Bank of America National Trust and Savings
Association, Barclays Bank PLC, Citibank, N.A., The First National
Bank of Boston, The First National Bank of Chicago, Security Pacific
National Bank and Morgan Guaranty Trust Company of New York, as agent,
filed as Exhibit 10.05 to the company's Form SE (File No. 1-8544),
dated October 22, 1991.
10.44* Master Slot Charter Agreement between American President Lines, Ltd.
and Orient Overseas Container Line Inc. dated July 24, 1991, filed as
Exhibit 10.5 to the company's Form SE (File No. 1-8544), dated March
17, 1992.
10.45* Reciprocal Slot Exchange and Coordinated Sailing Agreement between
American President Lines, Ltd. and Orient Overseas Container Line Inc.
dated July 24, 1991, filed as Exhibit 10.6 to the company's Form SE
(File No. 1-8544), dated March 17, 1992.
10.46* Agreement dated January 2, 1992 between the company and W.B. Seaton,
filed as Exhibit 10.01 to the company's Form SE (File No. 1-8544),
dated May 5, 1992.
10.47* Amendment No. 1, dated March 17, 1992, to the Receivables Purchase
Agreement between APL Land Transport Services, Inc. and the
Purchasers, J.P. Morgan Delaware and Morgan Guaranty Trust Company of
New York, as agents, filed as Exhibit 10.02 to the company's Form SE
(File No. 1-8544), dated May 5, 1992.
10.48* Amendment No. 1, dated March 17, 1992, to the Receivables Purchase
Agreement, between American President Lines, Ltd. and the Purchasers,
J.P. Morgan Delaware, Morgan Guaranty Trust Company of New York, as
agent, filed as Exhibit 10.03 to the company's Form SE (File No. 1-
8544), dated May 5, 1992.
10.49* Amended and Restated Credit Agreement and APC Subordination Agreement,
dated March 17, 1992 among American President Lines, Ltd., borrower,
American President Companies, Ltd., guarantor, and J.P. Morgan
Delaware, Morgan Guaranty Trust Company of New York, Bank of America
National Trust and Savings Association, Barclays Bank PLC, Citibank,
N.A., The First National Bank of Boston, The First National Bank of
Chicago, Security Pacific National Bank and Morgan Guaranty Trust
Company of New York, as agent, filed as Exhibit 10.05 to the company's
Form SE (File No. 1-8544), dated May 5, 1992.
10.50* 1992 Directors' Stock Option Plan, dated March 17, 1992, filed as
Exhibit 10.06 to the company's Form SE (File No. 1-8544), dated May 5,
1992.
<PAGE>
10.51* Amendment No. 1 dated May 5, 1992 to the Amended and Restated Credit
Agreement dated March 17, 1992 among American President Lines, Ltd.,
borrower, American President Companies, Ltd., guarantor, and Morgan
Guaranty Trust Company of New York, as agent, filed as Exhibit 10.01
to the company's Form SE (File No. 1-8544), dated July 28, 1992.
10.52* Amended and Restated Retirement Plan for the Directors of American
President Companies, Ltd., dated September 15, 1992, filed as Exhibit
10.01 to the company's Form SE (File No. 1-8544), dated October 20,
1992.
10.53* Amendment No. 1 dated July 28, 1992 to the Employment Agreement as
amended, between the company and John M. Lillie, filed as Exhibit 10.1
to the company's Form SE (File No. 1-8544), dated March 24, 1993.
10.54* Amendment No. 2 dated January 26, 1992 to the Employment Agreement as
amended, between the company and John M. Lillie, filed as Exhibit 10.2
to the company's Form SE (File No. 1-8544), dated March 24, 1993.
10.55* Amendment No. 1 to the 1988 Deferred Compensation Plan, effective
January 1, 1992, filed as Exhibit 10.3 to the company's Form SE (File
No. 1-8544), dated March 24, 1993.
10.56* Addenda Nos. 16 and 17 to the Capital Construction Fund Agreement (No.
MA/CCF-306), dated as of December 8, 1976, between the United States
and American President Lines, Ltd., filed as Exhibit 10.4 to the
company's Form SE (File No. 1-8544), dated March 24, 1993.
10.57* Vessel Sale Agreement for the President Lincoln, dated October 30,
1992 among American President Lines, Ltd., the Purchaser, and Xerox
Credit Corporation, Owner Participant, filed as Exhibit 10.5 to the
company's Form SE (File No. 1-8544), dated March 24, 1993.
10.58* Vessel Sale Agreement for the President Washington and President
Monroe, dated November 17, 1992 among American President Lines, Ltd.,
the Purchaser, Bank of American National Trust and Savings
Association, not in its individual capacity but solely as Owner
Trustee under the related trust agreements for the benefit of the
Trustors named and General Electric Credit Corporation of Georgia,
Owner Participant, filed as Exhibit 10.6 to the company's Form SE
(File No. 1-8544), dated March 24, 1993.
10.59* Amendment No. 2 dated December 9, 1992 to the Amended and Restated
Credit Agreement dated March 17, 1992 among American President Lines,
Ltd., borrower, American President Companies, Ltd., guarantor, and
Morgan Guaranty Trust Company of New York, as agent, filed as Exhibit
10.7 to the company's Form SE (File No. 1-8544), dated March 24, 1993.
10.60* Amendment No. 2 dated December 9, 1992 to the APD Receivables Purchase
Agreement dated August 29, 1991 among APL Land Transportation
Services, Inc., seller, J.P. Morgan Delaware, as administrative agent,
and Morgan Guaranty Trust Company of New York, as co-agent, filed as
Exhibit 10.8 to the company's Form SE (File No. 1-8544), dated March
24, 1993.
10.61* Amendment No. 2 dated December 9, 1992 to the APL Receivables Purchase
Agreement dated August 29, 1991 among American President Companies,
Ltd., seller, J.P. Morgan Delaware, as administrative agent, and
Morgan Guaranty Trust Company of New York, as co-agent, filed as
Exhibit 10.9 to the company's Form SE (File No. 1-8544), dated March
24, 1993.
<PAGE>
10.62* Amendment No. 1 to the Executive Survivors' Benefits Plan, effective
December 4, 1992, filed as Exhibit 10.10 to the company's Form SE
(File No. 1-8544), dated March 24, 1993.
10.63* Excess-Benefit Plan of the company, amended and restated effective
January 1, 1993, filed as Exhibit 10.11 to the company's Form SE (File
No. 1-8544), dated March 24, 1993.
10.64* American President Companies, Ltd. SMART Plan, amended and restated
effective January 1, 1993, filed as Exhibit 10.12 to the company's
Form SE (File No. 1-8544), dated March 24, 1993.
10.65* American President Companies, Ltd. Retirement Plan, amended and
restated effective January 1, 1993, filed as Exhibit 10.13 to the
company's Form SE (File No. 1-8544), dated March 24, 1993.
10.66 Contract for the Purchase of Containership Vessels dated May 10, 1993,
between Howaldtswerke-Deutsche Werft and Aktungesellschaft and
American President Lines, Ltd.
10.67 Contract for the Purchase of Containership Vessels dated May 10, 1993,
between Daewoo Shipbuilding and Heavy Machinery, Ltd. and American
President Lines, Ltd.
10.68 Commitment Letter from Kreditanstalt fur Wiederaufbau to American
President Companies, Ltd.
10.69* Amendment No. 1 to the Contract for the Purchase of Containership
Vessels, dated June 3, 1993, between Daewoo Shipbuilding and Heavy
Machinery, Ltd., filed as Exhibit 10.4 to the company's Form 10Q (File
No. 1-8544, dated August 3, 1993.)
10.70* Addendum No. 17 to the Capital Construction Fund Agreement (No. MA/CCF-
306), dated April 22, 1993, between the United States and American
President Lines, Ltd. filed as Exhibit 10.5 to the company's Form 10Q
(File No. 1-8544), dated August 3, 1993.
10.71* Permit No. 733, dated September 10, 1993, between the City of Los
Angeles and Eagle Marine Services, Ltd., and the Guaranty of Agreement
made by American President Lines, Ltd., excluding exhibits, filed as
Exhibit 10.1 to the company's Form 10Q (File No. 1-8544), dated
November 18, 1993.
10.72 Addenda Nos. 87 and 89 dated August 16, 1991 and March 19, 1992,
respectively to the Operating-Differential Subsidy Agreement (No.
MA/MSB-417), effective as of January 1, 1978, between the United
States and American President Lines, Ltd.
10.73 Amendments Nos. 3, 4 and 5 dated March 1, 1993, December 2, 1993 and
February 1, 1994, respectively, to the Amended and Restated Credit
Agreement dated March 17, 1992 among American President Lines, Ltd.,
as borrower, American President Companies, Ltd., as guarantor, and
Morgan Guaranty Trust Company of New York, as agent, and the banks
named therein.
10.74 Indemnity Agreement dated October 5, 1993 between the company and Toni
Rembe.
10.75 Amendment No. 1 dated January 31, 1994 to the Reciprocal Slot Exchange
and Coordinated Sailing Agreement between American President Lines,
Ltd. and Orient Overseas Container Line Inc. dated July 24, 1991.
<PAGE>
10.76* Indemnity Agreement dated March 17, 1992 between the company and John
J. Hagenbuch, filed as Exhibit 10.04 to the company's Form SE (File
No. 1-8544), dated May 5, 1992.
11.1 Computation of Earnings Per Share.
21.1 Subsidiaries of the company.
23.1 Consent of Independent Public Accountants.
24.1 Powers of Attorney
*Incorporated by Reference
Pursuant to Item 601(b) (4) (iii) (A) of Regulation S-K, the company
agrees to furnish to the Securities and Exchange Commission upon its request
copies of documents pertaining to United States Merchant Marine Bonds secured by
mortgages on certain vessels owned by the company described in the Consolidated
Financial Statements of American President Companies Ltd. and Subsidiaries.
Documents pertaining to such bonds, other than United States Merchant Marine
Bonds, are substantially identical to those set forth as Exhibit 4.2 and 4.3
hereto.
Pursuant to Instruction 2 Item 601 of Regulation S-K, the company has
omitted the Contract for the Purchase of Containership Vessels dated December 2,
1993, between Daewoo Shipbuilding and Heavy Machinery, Ltd. and American
President Lines, Ltd. Such document is substantially identical to the Contract
for the Purchase of Containership Vessels dated May 10, 1993, between Daewoo
Shipbuilding and Heavy Machinery, Ltd. and American President Lines, Ltd.,
except with respect to prices and dates of delivery, set forth as Exhibit 10.67.
(b) Reports on Form 8-K during the fourth quarter:
On December 6, 1993, the company filed a Form 8K, dated November 29,
1993, for sale of $150 million aggregate principal amount of its 7-1/8% Senior
Notes Due 2003.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
AMERICAN PRESIDENT COMPANIES, LTD.
(Registrant)
By /s/ William J. Stuebgen
William J. Stuebgen
Vice President,
Controller and
Chief Accounting Officer
March 9, 1994
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ John M. Lillie* March 9, 1994
John M. Lillie
Chairman of the Board
of Directors, President
and Chief Executive Officer
/s/ Charles S. Arledge* March 9, 1994
Charles S. Arledge
Director
/s/ John H. Barr* March 9, 1994
John H. Barr
Director
/s/ John J. Hagenbuch* March 9, 1994
John J. Hagenbuch
Director
/s/ Joji Hayashi* March 9, 1994
Joji Hayashi
Director
/s/ F. Warren Hellman* March 9, 1994
F. Warren Hellman
Director
/s/ Toni Rembe* March 9, 1994
Toni Rembe
Director
<PAGE>
/s/ Timothy J. Rhein* March 9, 1994
Timothy J. Rhein
Director
W. B. Seaton
Director
/s/ Forrest N. Shumway* March 9, 1994
Forrest N. Shumway
Director
/s/ Will M. Storey* March 9, 1994
Will M. Storey
Executive Vice President,
Chief Financial Officer
and Director
/s/ Barry L. Williams* March 9, 1994
Barry L. Williams
Director
*By: /s/ Maryellen B. Cattani March 9, 1994
Maryellen B. Cattani
Attorney-in-fact
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR THE INDIVIDUAL
SECURITIES REPRESENTED HEREBY, THIS GLOBAL SECURITY MAY NOT BE TRANSFERRED
EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A
NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR
DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.
AMERICAN PRESIDENT COMPANIES, LTD.
8% Senior Debenture Due 2024
CUSIP: 029103AD0
No. $
American President Companies, Ltd., a corporation duly organized and
existing under the laws of Delaware (herein called the "Company", which
term includes any successor Person under the Indenture hereinafter
referred to), for value received, hereby promises to pay to
,
or registered assigns, the principal sum of
Dollars on January 15, 2024, and to pay interest thereon from January 12,
1994 or from the most recent Interest Payment Date to which interest has
been paid or duly provided for, semiannually on January 15 and July 15 in
each year, commencing July 15, 1994, at the rate of 8% per annum, until
the principal hereof is paid or made available for payment. The interest
so payable, and punctually paid or duly provided for, on any Interest
Payment Date will, as provided in such Indenture, be paid to the Person in
whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be the January 1 or July 1 (whether or not a
Business Day), as the case may be, next preceding such Interest Payment
Date. Any such interest not so punctually paid or duly provided for will
forthwith cease to be payable to the Holder on such Regular Record Date
and may either be paid to the Person in whose name this Security (or one
or more Predecessor Securities) is registered at the close of business on
a Special Record Date for the payment of such Defaulted Interest to be
fixed by the Trustee, notice whereof shall be given to Holders of
Securities not less than 10 days prior to such Special Record Date, or be
paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities may be
listed, and upon such notice as may be required by such exchange, all as
more fully provided in said Indenture. The principal of (and premium, if
any) and interest on this Security will be payable (i) in the case this
Security is a Global Security registered in the name of a Depositary or
its nominee, to such Depositary or such nominee and (ii) in the case this
Security is in definitive registered form, to the person in whose name the
Security is registered at the office or agency of the Company maintained
for that purpose in the Borough of Manhattan, The City of New York, or in
Canton, Massachusetts, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public
and private debts; provided, however, that at the option of the Company
payment of interest may be made by check mailed to the address of the
Person entitled thereto as such address shall appear in the Security
Register or by wire transfer to an account designated by such Person in
writing not later than ten days prior to the date of such payment.
Reference is hereby made to the further provisions of this Security
set forth below, which further provisions shall for all purposes have the
same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to herein, this Security shall not be entitled to any
benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated: January 12, 1994 AMERICAN PRESIDENT COMPANIES, LTD.
By: /s/ John M. Lillie
Attest: /s/ Peter A. V. Huegel
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities, of the series
designated herein,referred to in the within-mentioned
Indenture.
THE FIRST NATIONAL BANK OF BOSTON,
as Trustee
By: /s/ Roland S. Gustafson
Authorized Signatory
This Security is one of a duly authorized issue of Securities of the
Company (herein called the "Securities"), issued and to be issued in one
or more series under an Indenture, dated as of November 1, 1993 (herein
called the "Indenture"), between the Company and The First National Bank
of Boston, as Trustee (herein called the "Trustee", which term includes
any successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement
of the respective rights, limitations of rights, duties and immunities
thereunder of the Company, the Trustee and the Holders of the Securities,
and of the terms upon which the Securities are, and are to be,
authenticated and delivered. This Security is one of the series
designated as 8% Senior Debentures Due 2024 (herein collectively called
the "Senior Debentures"), limited in aggregate principal amount to
$150,000,000.
The Indenture contains provisions for defeasance at any time of (1)
the entire indebtedness of the series of which this Security is a part or
(2) certain restrictive covenants and Events of Default with respect to
this Security, in each case upon compliance with certain conditions set
forth in the Indenture.
If an Event of Default with respect to the Securities of this series
shall occur and be continuing, the principal of all the Securities of this
series may be declared due and payable in the manner and with the effect
provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations
of the Company and the rights of the Holders of the Securities of each
series under the Indenture at any time by the Company and the Trustee with
the consent of the Holders of a majority in aggregate principal amount of
the Securities at the time Outstanding of each series to be affected. The
Indenture also contains provisions permitting the Holders of specified
percentages in aggregate principal amount of the Securities of each series
at the time Outstanding, on behalf of the Holders of all the Securities of
such series, to waive compliance by the Company with certain provisions of
the Indenture and certain past defaults under the Indenture and their
consequences. Any such consent or waiver by the Holder of this Security
shall be conclusive and binding upon such Holder and upon all future
Holders of this Security and of any Security issued upon the registration
of transfer hereof or in exchange herefor or in lieu hereof, whether or
not notation of such consent or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any
proceeding with respect to the Indenture or for the appointment of a
receiver or trustee or for any other remedy thereunder, unless such Holder
shall have previously given the Trustee written notice of a continuing
Event of Default with respect to the Securities of this series, the
Holders of not less than 25% in principal amount of the Securities of this
series at the time Outstanding shall have made written request to the
Trustee and offered the Trustee reasonable indemnity, and the Trustee
shall not have received from the Holders of a majority in principal amount
of this series at the time Outstanding a written direction inconsistent
with such request, and shall have failed to institute any such proceeding,
for 60 days after receipt of such notice, request and offer of indemnity.
The foregoing shall not apply to any suit instituted by the Holder of this
Security for the enforcement of any payment of principal hereof or any
premium or interest hereon on or after the respective due dates expressed
herein.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of (and
premium, if any) and interest on this Security at the times, place and
rate, and in the coin or currency, herein prescribed.
This Security may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by any such nominee to the
Depositary or another such nominee and is exchangeable only if (i) the
Depositary notifies the Company that it is unwilling or unable to continue
as Depositary for this Security or if at any time the Depositary ceases to
be a clearing agency registered under the Exchange Act, (ii) the Company
in its sole discretion determines that this Security shall be exchangeable
for definitive Senior Debentures in registered form, or (iii) an Event of
Default with respect to the Senior Debentures represented by this Security
has occurred and is continuing. If this Security is exchangeable pursuant
to the preceding sentence, it shall be exchangeable for Senior Debentures
issuable in denominations of $1,000 and integral multiples thereof and
registered in such names as the Depositary holding this Security shall
direct. Subject to the foregoing, this Security is not exchangeable,
except for global securities of like denominations to be registered in the
name of the Depositary or its nominee. If the Senior Debentures were
subsequently issued in registered form, they would thereafter be
transferred or exchanged without any service charge at the office of the
Trustee, or at any other office or agency maintained by the Company for
such purpose.
Subject to the preceding paragraph and as provided in the Indenture
and subject to certain limitations therein set forth, the transfer of this
Security is registrable in the Security Register, upon surrender of this
Security for registration of transfer at the office or agency of the
Company in any place where the principal of and any premium and interest
on this Security are payable, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney
duly authorized in writing, and thereupon one or more new Securities of
this series and of like tenor, of authorized denominations and for the
same aggregate principal amount, will be issued to the designated
transferee or transferees.
The Securities of this series are issuable only in registered form
without coupons in denominations of $1,000 and any integral multiple
thereof. As provided herein and in the Indenture and subject to certain
limitations therein set forth, Securities of this series are exchangeable
for a like aggregate principal amount of Securities of this series and of
like tenor of a different authorized denomination, as requested by the
Holder surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection
therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the
Trustee may treat the Person in whose name this Security is registered as
the owner hereof for all purposes, whether or not this Security be
overdue, and neither the Company, the Trustee nor any such agent shall be
affected by notice to the contrary.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
MATERIAL MARKED WITH A DOUBLE ASTERISK
HAS BEEN OMITTED PURSUANT TO A GRANT OF
CONFIDENTIAL TREATMENT BY THE COMMISSION
CONTRACT FOR THE PURCHASE OF CONTAINERSHIP VESSELS
between
Howaldtswerke-Deutsche Werft Aktiengesellschaft
and
American President Lines, Ltd.
CONTRACT FOR THE PURCHASE OF CONTAINERSHIP VESSELS
<TABLE>
---------oo0oo---------
<CAPTION>
C O N T E N T S
Article Page
<S> <C>
1 General Statement of Work 3
2 Plans and Specifications 6
3 Interpretation 9
4 Payment of Contract Price 10
5 Changes 15
6 Rights to Engineering and Design Data 21
7 Extension of Time for Completion of Work 23
8 Liquidated Damages for Delay in Delivery 27
9 Contractor to Receive and care for Items 29
Furnished by Purchaser
10 Insurance on the Vessel and Material 29
11 Loss of or Damage to a Vessel 31
12 Indemnification 33
13 Appointment of Representatives of Purchaser 34
14 Materials and Workmanship 35
15 Inspection, Approval of Plans and Work 37
16 Trials 40
17 Delivery 41
Article Page
18 Guarantee 46
19 Default of Purchaser 55
20 Default of Contractor 57
21 Action by Purchaser Upon Default of Contractor 59
22 Action by Purchaser upon Force Majeure 61
23 Replacement Finance Commitment 61
24 Supplies on Board at Delivery 62
25 Title 63
26 Liens 64
27 Taxes 66
28 Patent Infringement 66
29 Assignment of Contract 67
30 Computation of Time 68
31 Contractor to Comply with All Laws and Regulations 68
32 Applicable Law 69
33 Disputes, Arbitration 69
34 Conditions 72
35 General 72
36 Effective Date 75
---------oo0oo---------
</TABLE>
THIS CONTRACT (herein, as it may be amended from time to time in accordance with
its terms called this "Contract") entered into of this 10th day of May, 1993, by
and between on the one hand American President Lines, Ltd., registered in the
State of Delaware and having its principal office at 1111 Broadway, Oakland,
California 94607 (hereinafter called "Purchaser"), and on the other hand
Howaldtswerke-Deutsche Werft Aktiengesellschaft a corporation organized and
existing under the laws of Germany having its registered office at Werftstrasse
112 - 114, 2300 Kiel, Germany, ("Contractor").
WITNESSETH:
WHEREAS, Purchaser and Contractor desire to enter into this Contract pursuant to
which Contractor agrees to design, build, launch, equip and complete at its
shipyard known as Howaldtswerke-Deutsche Werft Aktiengesellschaft, located in D-
2300 Kiel 14, Werftsstrasse 112-114 ("Shipyard") and sell and deliver to
Purchaser three (3) container vessels more particularly described in Article I
hereof (individually a "Vessel", collectively, "Vessels") and Purchaser agrees
to purchase and take delivery of the Vessels from the Contractor and pay for the
same, all upon the terms and conditions hereinafter set forth;
WHEREAS, Purchaser and Contractor will on the date hereof enter into a separate
agreement, concerning options for identical vessels annexed hereto as Exhibit 1.
NOW, THEREFORE, in consideration of the premises and of the mutual promises
hereinafter set forth, the parties agree as follows:
ARTICLE 1
GENERAL STATEMENT OF WORK
a) Contractor shall furnish all plant facilities, labor, materials,
supplies and equipment, and shall perform all work, necessary to design,
engineer, construct, launch, outfit, test and deliver the Vessels, at its own
risk and expense, in strict accordance with the provisions of this Contract and
the Plans (as defined in Article 2 a) below) and Specifications (as defined in
Article 2 b) below). Contractor shall also do everything else required of
Contractor by this Contract, the Plans and Specifications (including the
installation or stowage on board of all outfit, equipment and spares which the
Plans or Specifications provide shall be furnished by Purchaser), all for the
total consideration of DEM ** (in words: Deutsche Marks
** ) subject to such
additions or deductions as are provided for in Articles 5, 14, 17 and 33 ("the
Contract Price"). The obligations of the Contractor set forth in this Article 1
are herein referred to as the "Contract Work". Of the Contract Price DEM
** (in words: Deutsche Marks
** ), as it may be
increased or decreased pursuant to Articles 5, 14, 17, and 33 is allocated to
each Vessel (the "Per Vessel Contract Price").
b) The Vessels shall be identified as Contractor's Hull Numbers 297,
298 and 299, and shall be constructed at Contractor's Shipyard.
c) When the Contract Work required to be performed with respect to
any one of the Vessels is Complete (as defined in Subclause d) below), or at
such earlier time as may be specified by Purchaser pursuant to Article 17 d),
and after such Vessel has passed the trials and tests required by this Contract,
such Vessel shall be delivered by Contractor and be accepted by Purchaser in
accordance with Article 17.
d) A Vessel shall be deemed to be Complete when the Contractor has
fulfilled any and all of his obligations stipulated under this Contract, the
Plans and Specifications with respect to said Vessel and said Vessel is freed
from all Deficiencies (as defined in Article 18 b) below) known to Purchaser and
Contractor at delivery.
e) Contractor shall timely commence the Contract Work after this
Contract has come into force and the Contractor shall prosecute the Contract
Work with due diligence thereafter. Contractor shall deliver the Vessels to
Purchaser on or before close of business hours local time on the dates set forth
below (which dates shall be business days) (such dates, as the same may be
extended or accelerated pursuant to Articles 5 or 7, shall hereinafter be
referred to as the "Delivery Dates" ):
Delivery Date
Contractor's Hull No. 297 April 12, 1995
Contractor's Hull No. 298 July 10, 1995
Contractor's Hull No. 299 November 30, 1995
Within the period of 60 (sixty) days after signing of this Contract, the
Contractor shall be entitled to finally fix the Delivery Dates to dates, which
shall not exceed the dates stated above by more than 25 (twentyfive) days.
f) Contractor may be entitled, subject to the provisions of this
Article, to a grace period (extension) in the Delivery Date(s) of the Vessel(s)
not to exceed 28 (twentyeight) days, provided always that on or before the 90th
(ninetieth) day before the respective Vessel's Delivery Date, as the same may be
extended pursuant to the Contract, the Contractor must submit a notice to the
Purchaser specifying the proposed grace period for such Vessel which shall state
the factual basis for the grace period
g) For purposes of this Contract, the term Vessel(s) shall include
the vessel structure and all materials and equipment installed or to be
installed thereon, and all outfitting, equipment and spares.
h) The Contractor may not subcontract the Contract Work or any parts
hereof. Notwithstanding the foregoing Contractor may at the Contractor's
responsibility subcontract parts of the Contract Work:
(i) provided Purchaser has granted his written approval hereof (which
must be granted or rejected within 10 (ten) business days after written notice
hereof); or
(ii) to subcontractors as described in the "Maker's List"
which forms part of the Plans; or
(iii) provided any and all work of such subcontractors takes
place at the Shipyard; or
(iv) provided such parts are minor parts less vital to the
construction of the Vessels.
ARTICLE 2
PLANS AND SPECIFICATIONS
a) For the purpose of this Contract, the term "Plans" shall refer to
those drawings listed below, as the same may hereafter from time to time be
altered, supplemented or deleted in accordance with Article 3 or 5 and said
Plans are incorporated in their entirety in this Contract:
- - General Arrangement dated May 5, 1993
- - Maker List dated May 5, 1993
The foregoing Plans have, at or before execution of this Contract, been
identified by the signatures of the parties hereto.
b) For the purposes of this Contract, the term "Specifications" shall
refer to those documents titled
- - Part I: Specification General and Hull dated May 5, 1993;
- - Part II: Specification Machinery dated May 5, 1993;
- - Part III: Specification Automation and Electric dated
May 5, 1993
and as the same may hereafter from time to time be altered, supplemented or
deleted pursuant to the provisions of Article 3 or Article 5 and said
Specifications are incorporated in their entirety in this Contract.
The Specifications have, at or before the execution of this Contract, been
identified by the signatures of the parties hereto. All references in this
Contract to the Specifications are intended to apply with equal force to the
more general requirements of the Specifications (including, without limitation,
any set forth in the Specifications) and the more specific requirements.
c) CONTRACTOR WARRANTS AND AGREES:
(i) that the Contract Work shall be performed in strict
accordance with each and every direction, provision and
requirement set forth in this Contract and/or the Plans
and/or Specifications;
(ii) that the Vessels, and each of them, will possess each
and every feature of construction, design and
performance and each and every other characteristic and
feature required in the Vessels by this Contract and/or
the Plans and/or Specifications;
(iii) that the satisfaction of Contractor's obligations under
clauses (i) and (ii) of this Article 2 c) shall be
solely the obligation and responsibility of Contractor
and solely at the risk of Contractor;
(iv) that Contractor shall fully and completely satisfy such
obligations, notwithstanding any cost or expense which
it may be required to incur in connection therewith,
irrespective of such cost or expense regardless of
foreseeability;
(v) that Contractor is a sophisticated, substantial and
experienced shipbuilder and, prior to entering into this
Contract, has had sufficient opportunity to review all
of the provisions of this Contract and the Plans and
Specifications.
d) Nothing contained in the Plans or Specifications may be altered or
deleted except by a plan, drawing or document expressly making such alteration
or deletion and expressly referring to the matter thereby altered or deleted (an
"Amendment") which shall become effective upon its execution by Contractor and
Purchaser. All Amendments shall be clearly labeled as an Article 5 Change, as
appropriate. No Amendment of one part or aspect of the Plans or Specifications
shall effect any alteration or deletion to any other part of the Plans or
Specifications by implication or otherwise; and no approval or rejection (or
failure to approve or reject) of any plan, specification, document or Contract
Work under Article 14 or 15 shall effect any alteration or deletion to any part
of the Plans or Specification by implication or otherwise.
e) Prior to commencement of the Contract Work, and at all relevant
times after commencement of the Contract Work, Contractor shall provide
Purchaser with a Work Schedule containing a critical path treatment of major and
significant work elements, in their proper sequence, which must be completed to
insure delivery of the Vessels by their Delivery Dates. Contractor agrees to
maintain a current Work Schedule throughout the Contract Work and to provide
copies to Purchaser upon demand.
ARTICLE 3
INTERPRETATION
a) If any discrepancy, difference or conflict exists between the
provisions of this Contract, on the one hand, and the Plans and/or
Specifications on the other hand, then to the extent of such discrepancy,
difference or conflict only, the Plans and Specifications shall be ineffectual,
and the provisions of this Contract shall prevail, and in all other respects the
Plans and Specifications shall be in full force and effect; provided that to the
extent such discrepancy, difference or conflict arises solely because this
Contract, on the one hand, and the Plans and/or Specifications, on the other
hand, contain requirements that are in addition to the requirements of the
other, then all of such additional requirements shall be fully complied with by
Contractor.
b) If any discrepancy, difference or conflict exists between the
provisions of the Specifications, on the one hand, and the Plans on the other
hand, then to the extent of such discrepancy, difference or conflict only, the
Plans shall be ineffectual, and the provisions of the Specifications shall
prevail, and in all other respects the Plans shall be in full force and effect;
provided that to the extent such discrepancy, difference or conflict arises
solely because the Specifications, on the one hand, and the Plans, on the other
hand, contain requirements that are in addition to the requirements of the
other, then all of such additional requirements shall be fully complied with by
Contractor.
c) Any conflict between any requirement of the Plans or
Specifications and any other requirement(s) of the Plans or Specifications, or
the impossibility - through the use of technology which is available to or in
the world wide shipbuilding industry and without regard to the cost, expense or
time involved - of complying with any requirement of the Plans or Specifications
or with any group or combination of such requirements, is herein called an
"Error".
d) A conflict as described in Subclause c) above is to be considered
an Error notwithstanding that the conflict is between one or more requirements
which are specific in nature and one or more requirements which are general in
nature. Purchaser hereby disclaims any express or implied warranty that the
Plans and Specifications do not include any Errors, whether minor or major, and
it is agreed that Purchaser shall have no liability or responsibility of any
nature to Contractor with respect to Errors, and Contractor shall correct such
Errors with no increase in the Contract Price after first notifying and
obtaining Purchaser's written approval hereof.
e) In the event there are any omissions in the Plans and
Specifications that effect the seaworthiness of the Vessel(s), the Contractor
shall correct such omissions, after first notifying Purchaser in writing and
obtaining Purchaser's written approval, with no increase in the Contract Price.
f) Any changes made pursuant in this Article shall be set forth in an
Amendment, as appropriate to the Plans and Specifications and shall be forwarded
to Purchaser for approval upon which it shall be executed by both parties.
ARTICLE 4
PAYMENT OF CONTRACT PRICE
a) Purchaser shall have no obligation to make any payments in respect
of a Vessel beyond such Vessel's Per Vessel Contract Price, as it may be
increased or decreased pursuant to Articles 5, 14, 17 and 33.
b) Payment of the Per Vessel Contract Price shall be made in
installments as follows and in the manner described in Article 4 d):
(i) ** % ( ** per cent) on the effective date of
this Contract, subject to Contractor's delivery of an
irrevocable stand by letter of credit issued by an
internationally reputable 1st class bank in the amount
hereof together with interest hereon as per Article 4
e) in favor of Purchaser securing Contractor's refund
obligations to Purchaser under this Contract and
payable in accordance with terms of an arbitration
award if Contractor has not authorized payment under
the stand by letter of credit beforehand. All costs and
fees in connection with the stand by letter of credit
(without limitation fees to the bank in respect of
payments under the stand by letter of credit) shall be
paid by Contractor. The stand by letter of credit shall
be identical in words and substance to the draft
herefore annexed hereto as Exhibit 2.
(ii) ** % ( ** per cent) upon commencement of steel
cutting of each Vessel.
(iii) ** % ( ** per cent) upon keel laying (setting of
first block in building dock) of each Vessel.
(iv) The balance upon delivery of a respective Vessel,
subject to Contractor's delivery of a stand by letter
of credit in the amount of ** % of the per Vessel
Contract Price to secure payment of guarantee/warranty
items arising under the Contract in favor of Purchaser.
The stand by letter of credit shall be issued by an
internationally reputable 1st class bank, and shall be
irrevocable. The stand by letter of credit shall
furthermore be payable on demand/by sight provided that
Contractor has been given prior notice of the claim and
30 (thirty) days within which to settle the invoice for
the costs paid by Purchaser to remedy the Deficiency
pursuant to Article 18. All costs and fees in
connection with the stand by letter of credit
(including without limitation fees to the bank in
respect of payments under the letter of credit) shall
be paid by Contractor. The stand by letter of credit
shall be identical in words and substance to the draft
herefore annexed hereto as Exhibit 3.
c) Payments under this Contract shall be made at the following times
and in the manner described in Article 4 d):
(i) for an Article 5 Change (as defined in Article 5 a) (x)
to the extent the aggregate cost of such changes,
calculated in accordance with the provisions of Article
5, do not exceed ** % ( ** per cent) of the Per
Vessel Contract Price, then payment of such changes
shall be made simultaneously with the delivery of a
Vessel; (y) to the extent of the aggregate cost of such
changes calculated in accordance with the provisions of
Article 5 exceed ** % ( ** per cent) of the Per
Vessel Contract Price, then payment to such extent for
such changes shall be made as follows:
- ** % ( ** per cent) within 10 (ten) days of
the date the cost of such change is established;
subject to Contractor's delivery to Purchaser of an
irrevocable stand by letter of credit issued in favor
of Purchaser by an internationally reputable 1st class
bank in the amount hereof together with interest hereon
as per Article 4 e) securing Contractor's refund
obligations to Purchaser under this Contract and
payable in accordance with the terms of an arbitration
award if Contractor has not authorized payment under
the stand by letter of credit beforehand. All costs and
fees in connection with the stand by letter of credit
(including without limitation fees to the bank in
respect of payments under the stand by letter of
credit) shall be paid by Contractor. The stand by
letter of credit shall be identical in words and
substance mutatis mutandis to the draft for a stand by
letter of credit annexed hereto as Exhibit 2;
- the balance of the cost of such change shall be made
simultaneously with delivery of such Vessel.
(ii) for amounts accruing prior to delivery but for which no
specific date is set forth in this Contract, payments
shall be made simultaneously with delivery of a Vessel;
(iii) for amounts for which a specific payment date is set
forth in this Contract, payments shall be made in
accordance with said date;
(iv) for amounts accruing after delivery in respect of a
Deficiency, payment shall be due as follows:
1) If the parties agree that the Deficiency in question is a
Deficiency, not later than 30 (thirty) business days
after Contractor's receipt of invoice for the
Deficiency remedied pursuant to Article 18; or
2) if the parties are in dispute as to whether the
Deficiency is a Deficiency, on the date set forth in
the decision of the Arbitrator(s) (as defined in
Article 33) together with interest thereon calculated
in accordance with Article 4 e) as from the date
Contractor received invoice for the Deficiency
remedied.
d) All payments to be made under Article 4 b) and Article 4 c) (i),
shall be made in Deutsche Marks, the legal currency of Germany, and all payments
to be made under Article 8 and Article 18 shall be made in United States
Dollars, the legal currency of the United States of America. All payments to be
made in favor of the Contractor, shall be made by means of bank wire or swift
transfer to Contractor.
Payments shall be made unconditional and deemed fulfilled when
credited to any account designated by the Contractor.
Any charges arising in connection with payment(s) - if any - shall
be borne by paying party.
e) All overdue payments under this Contract shall bear interest at a
rate equal to ** % ( ** per cent) per annum over the German Lombard rate,
from the due date thereof until paid or credited.
f) Any payment due under the Contract, except one which the party to
which it is owed has by written notice to the other elected to refer to the
Arbitrator(s) pursuant to Article 33, may be set-off and deducted by the party
to which such payment is owed against and from any and all payments due or to
become due to the other party; provided that nothing in this Article 4 f) shall
be construed as making the right of set-off established herein the sole or
exclusive means by which a party may seek payment of a payment, and it is
expressly agreed that the right of set-off established herein may be exercised
independently of or concurrently with any other rights of the parties with
respect to due payments. Any and all payments made by the Purchaser prior to the
delivery of the Vessel shall be in the nature of advances to the Contractor on
account of the Vessels.
g) Purchaser intends to enter into a forward exchange contract for
that part of the Contract Price (DEM) which is due on delivery of the respective
Vessels. Kreditanstalt fuer Wiederaufbau ("KFW") has verbally agreed, during a
period of 3 (three) month after issuance of KFW's commitment letter for the long
term financing, to enter at best rates available to KFW with a bank of KFW's
choice into a forward exchange contract for the benefit of Purchaser entitling
the Purchaser to convert the outstanding Contract Price as mentioned above from
DEM to USD. This agreement of KFW shall be confirmed in writing. Should KFW not
provide such facility, the Contractor shall assume this obligation, thus enter
at best rates available to the Contractor in the market into a forward exchange
contract for the benefit of Purchaser entitling the Purchaser to have the
outstanding Contract Price as mentioned above converted from DEM into USD, and
always provided Purchaser shall be the party to make the decisions if and when
the forward exchange contract shall be made. Contractor shall not be liable for
braking cost arising due to defaults/faults of the Purchaser in this connection.
Should Purchaser not make any decision on the forward exchange contract within
the afore-mentioned period, KFW has the option to enter into such an agreement
for the benefit of the Purchaser on the last working day of the said 3 (three)
months' period unless the parties otherwise agree.
ARTICLE 5
CHANGES
a) Any Amendment to the Plans or Specifications, other than an
Amendment governed by Article 3, is herein called an "Article 5 Change". If the
changes in Contractor's costs as to a Vessel associated with an Article 5 Change
are a net increase, Contractor shall be entitled to an increase in the Per
Vessel Contract Price, and if such changes in costs are a net decrease,
Contractor shall allow a reduction in the Per Vessel Contract Price. Contractor
shall also be allowed such extension, if any, in the Delivery Date(s) as is
reasonably associated with an Article 5 Change. The amount of such increase or
decrease in the Per Vessel Contract Price and extension in the Delivery Date(s)
shall be calculated upon the basis of diligent and efficient performance and
without any loss in the relative priority of the Vessels compared to any other
work at the Shipyard. The costs associated with the elimination or addition of
Contract Work shall be calculated, as follows:
(i) materials included in the Contract Work which will no
longer be needed and which have not already been
purchased, and new materials to be used directly in the
Contract Work due to the Article 5 Change, shall be
valued at their estimated purchase price to Contractor,
with a reasonable estimate of escalation for the period
between the date of calculating cost and the estimated
date on which the purchase price would have become or
is to become fixed;
(ii) materials included in the Contract Work already
purchased by Contractor but no longer needed in the
Contract Work shall be valued at zero and shall be
tendered to Purchaser for disposition (for Purchaser's
own account) as Purchaser sees fit, Contractor hereby
agreeing to reasonably assist in such disposition, and
the Purchaser shall not be entitled to a credit for
said materials.
(iii) direct labor (at Contractor's standard rates which
includes the process directly related to said labor)
which will no longer be needed and new direct labor (at
Contractor's standard rates which includes the process
directly related to said labor) necessitated by the
Article 5 Change shall be valued by multiplying the
number of hours of each specific category of labor by
the estimated direct hourly labor cost to Contractor of
such category, with a reasonable estimate of escalation
for the period between the date of calculating cost and
the estimated date on which the cost of labor would
have become or is to become fixed;
(iv) direct shipyard engineering labor cost (at Contractor's
standard rates which includes the process directly
related to said labor) which will no longer be needed,
and new direct shipyard engineering labor cost (at
Contractor's standard rates which includes the process
directly related to said labor) due to the Article 5
Change, shall be valued in the same manner as direct
labor, and subcontracted consultants, engineering and
testing shall be valued at cost to Contractor, with a
reasonable estimate of escalation for the period
between the date of calculating cost and the estimated
date on which the price of the subcontracted services
would have become or is to become fixed;
(v) an overhead factor of ** % ( ** per cent) shall
be applied to the amounts set forth in (iii) and (iv)
above (but not any other amounts set forth above);
b) Purchaser shall be entitled to propose an Article 5 Change with
respect to any or all of the Vessels by delivery of an appropriate Amendment.
Purchaser's proposal may alter or delete the Plans and/or Specifications, and/or
may alter or delete any of the plans and other documents furnished by Contractor
under Article 15 (whether or not theretofore approved by Purchaser and whether
or not the Contract Work shown therein has been completed by Contractor and/or
approved by Purchaser). Any alteration in or deletion from such plans and other
documents which Contractor is not obligated to make under Article 15 shall be
considered an Amendment of the Plans and Specifications and an Article 5 Change;
those which Contractor is obligated to make under Article 15 shall not be
considered an Amendment or an Article 5 Change. Unless expressly stated to the
contrary in the document proposing it, any alteration in or deletion from such
plans and other documents proposed by Purchaser shall be deemed proposed under
Article 15 and not this Article 5. Contractor shall within 14 (fourteen) days
after receipt of an Amendment submit to Purchaser a detailed written estimate
(including the calculations described in Article 5 a)) of: (i) any increase or
decrease in the Per Vessel Contract Price required on account of such Article 5
Change; (ii) any extension in the Delivery Date(s) required on account of such
Article 5 Change; and (iii) the effect of such Article 5 Change on weights,
moments and centers of gravity of the Vessel(s). If an Article 5 Change proposed
by Purchaser would result in an Error, Contractor shall so state in its
estimate, which shall in such event be accompanied by such worksheets,
calculations and other supporting documentation as Purchaser reasonably
requests.
c) Purchaser shall reply in writing to any response by Contractor
under Article 5 b), and such reply shall be made within fourteen (14) business
days after receipt by Purchaser of such response. In its reply, Purchaser shall
either: (i) consent to the estimates contained in Contractor's response,
whereupon the parties shall execute the associated Amendment together with an
amendment to this Contract, which shall include provisions on increase in or
reduction of the Per Vessel Contract Price(s) together with change(s) in the
Delivery Date(s) (if any) as set forth in such estimate; or (ii) object to
Contractor's response on the ground that the estimates contained therein are not
in compliance with Article 5 a) and Article 5 b); or (iii) withdraw its proposal
for such reason(s) as Purchaser may, in its sole discretion, deem appropriate.
d) Contractor shall be entitled to propose an Article 5 Change in the
Plans and Specifications which does not result in or create an Error. Such
proposal of an Article 5 Change by Contractor shall be made in writing and shall
contain the detailed estimates required of Contractor under Article 5 b).
Purchaser shall reply in writing to any proposal by Contractor of an Article 5
Change, and such reply shall be made within 14 (fourteen) business days after
receipt by Purchaser of such proposal. In its reply, Purchaser shall either:
(i) consent to the proposal, whereupon the parties shall complete and execute an
Amendment reflecting the Article 5 Change in question together with an amendment
to this Contract which shall include provisions on increase in or reduction of
the Per Vessel Contract Price(s) together with change(s) in the Delivery Date(s)
(if any), as set forth in such estimate; or (ii) reject such proposal for such
reason(s) as Purchaser may, in its sole discretion, deem appropriate. Upon such
rejection, the proposal in question shall, without further action by either
party, be deemed to have been withdrawn.
e) In the event of a dispute under Article 5 c) (ii) or any other
provision of this Contract with respect to an Article 5 Change, and prior to any
decision of the Arbitrator(s) with respect to such dispute, Purchaser shall have
the right to have Contractor proceed to perform an Article 5 Change proposed by
Purchaser. Purchaser shall provide written notice to Contractor of any such
election and Contractor shall then immediately prepare a notice which shall: (i)
state Contractor's good faith estimate of the increase or decrease in any Per
Vessel Contract Price which will be required for such Article 5 Change under
Article 5 a); and (ii) state Contractor's good faith estimate of any extension
of any Delivery Date which will be required for such Article 5 Change under
Article 5 a). Upon receipt of notice from Contractor pursuant to the preceding
sentence, Purchaser and Contractor shall execute the Amendment together with an
amendment to this Contract prepared by Contractor in accordance with the
contents of said notice. Thereafter, Contractor shall proceed with the
performance of the work provided for in such Amendment, and changes in the Per
Vessel Contract Price(s) and changes in the Delivery Date(s) (if any) will be
based upon the estimates contained in such notice; and Contractor shall, when
payment in dispute is made, deliver to Purchaser a guarantee issued by an
internationally reputable bank in favor of the Purchaser and in respect of the
disputed portion of the increase in the Per Vessel Contract Price - if any - and
payable in accordance with the terms of an arbitration award and provided that
if it shall subsequently be agreed or determined pursuant to Article 33 that any
of the estimates required from Contractor under the preceding sentence were in
error, the adjustments necessary to correct such estimates will promptly be
made.
f) In all cases in which Article 5 Changes are proposed by Purchaser,
but the proposals are subsequently withdrawn, the reasonably documented cost
incurred by Contractor in preparing an estimate of the net increase or decrease
in the Contract Price(s) and the effect on the Delivery Date(s) and on weights,
moments and centers of gravity shall be paid to Contractor by Purchaser.
g) Notwithstanding anything in this Article 5 to the contrary,
Contractor shall not be obligated to perform an Article 5 Change with respect to
any Vessel either (i) if the aggregate adjustment in its Per Vessel Contract
Price agreed or determined between Purchaser and Contractor on account of such
Article 5 Change and all other Article 5 Changes affecting such Vessel is a net
increase of more than ** % ( ** per cent) (without any rounding) over
the original Per Vessel Contract Price set forth in Article 1 a) at the date
hereof; or (ii) Contractor furnishes evidence establishing that performing such
Article 5 Change would inevitably interfere with Contractor's compliance with
the terms of other construction contracts then in effect for work at the
Shipyard. Contractor is obligated to take care of Purchaser's interest in
obtaining the requested Article 5 Changes with highest possible priority besides
the other construction contracts. Contractor shall together with Purchaser try
in good faith to find an agreeable solution on the basis of this Contract to
meet Purchaser's interest in this connection.
h) Notwithstanding anything in Article 5 to the contrary, Purchaser
shall be entitled to elect to have the Vessel(s) built to U. S. Flag requirement
provided (1) said election with respect to any Vessel concerned is made on or
before June 4, 1993; and (2) Purchaser shall pay all extra costs associated with
said election in accordance with Article 5. If Purchaser does not exercise this
U. S. Flag election within the above stated time frame, then Purchaser's request
shall be dealt with as and Article 5 Change accordingly.
ARTICLE 6
RIGHTS TO ENGINEERING AND DESIGN DATA
a) All plans, designs and engineering and design data including,
without limitation, the Plans and Specifications furnished to Contractor by
Purchaser, which are the property of Purchaser, shall remain the property of
Purchaser. Such plans, designs and engineering and design data may be used by
Contractor only in such manner as is permitted by this Article 6.
b) All plans and designs (including detail plans, working plans and
reproducibles) and all other engineering and design data required to be
developed by Contractor in the performance of the Contract Work and as mutually
agreed and delivered to Purchaser, shall, upon development, become the property
of Purchaser. Subject to the provisions of this Article 6 b), Purchaser and/or
affiliates (including without limitation companies which directly or indirectly
hold any portion of Purchaser's share capital and such companies' subsidiaries)
shall have the full right to use the same in such manner as it may deem proper,
including, without limitation, the right to build another vessel from said
documents, the right to make reproducibles and copies thereof, the right to
publish or to withhold from publication, and the right to make alterations
therein, additions thereto or other changes. Except as otherwise provided in
the Specifications, Contractor shall be entitled to recover the reasonable costs
of reproduction and handling plus ** % ( ** per cent) of such costs in
the event Contractor is required by Purchaser to provide copies of such
Contractor-developed plans, designs and engineering and design data to the
Purchaser or any designee of Purchaser. Notwithstanding anything in this
Article 6 b) to the contrary, unless prohibited by law relating to U.S. national
defense or security, Contractor shall be permitted to retain, for its own
official records, and internal use (except for identical rebuildings) copies or
duplicates of the plans, designs, engineering and design data described in the
first sentence of this Article 6 b).
c) All plans, designs and engineering and design data furnished by
Contractor in the performance of the Contract Work, but not developed by
Contractor in the performance of the Contract Work (herein, the "Contractor-
Owned Data") shall not become the property of Purchaser. However, Contractor
agrees with the Purchaser that Contractor will make such Contractor-Owned Data
available (without royalties, fees, commission or other consideration of any
kind) to the Purchaser for use in connection with the Vessels, or any other
similar vessels to be built for Purchaser and/or affiliates (including without
limitation companies which directly or indirectly hold any portion of
Purchaser's share capital and such companies' subsidiaries). Contractor further
agrees with the Purchaser that such Contractor-Owned Data shall also be
available to any party that the Purchaser may from time to time designate for
use in connection with the construction of other vessels; provided that
Contractor shall in such event be entitled to a reasonable royalty, license fee
or commission from the designated party (not exceeding USD ** (United
States Dollars ** )) per vessel so constructed, up to a maximum
of USD ** (United States Dollars ** )
for all vessels so constructed) for the use of such Contractor-Owned Data as is
patented or constitutes trade secrets and was designated as such prior to its
disclosure by Contractor. Except as expressly provided to the contrary in the
foregoing proviso, Contractor's agreements in this Article 6 c) shall apply to
both patented and unpatented plans, designs and engineering and design data but
shall not apply to plans, designs and engineering and design data licensed by
Contractor from a third party not affiliated or controlled by Contractor where
the terms of the license prevent such a commitment by Contractor.
d) Contractor shall take reasonable precautions to maintain in
confidence, and will not use or permit the use of, except as provided in Article
6 b), all of the designs, plans and engineering and design data described in
Article 6 a) and Article 6 b), and all information which is contained therein,
other than anything contained therein which was known to Contractor at the time
of disclosure, or which is or shall become available to it (without violation of
any right of Purchaser) from sources other than Purchaser or a naval architect
or any other consultant, independent contractor, agent, employee or officer of
Purchaser, or which is or shall become obvious to those skilled in the trade to
which the information relates. Notwithstanding anything to the contrary in the
preceding sentence, Contractor shall not be precluded from making any disclosure
which may be necessary for the prosecution of the Contract Work, providing that
in making such disclosure, Contractor shall impose upon any person, firm or
corporation to whom such disclosure is made, conditions relating to the
confidential treatment thereof to the same effect as those imposed upon
Contractor in this Article 6 d).
ARTICLE 7
EXTENSION OF TIME FOR COMPLETION OF WORK
a) If Contractor provides notice as set forth in Article 7 d),
Contractor shall be entitled to an extension of any of the Delivery Dates only
if (i) there is a specific cause of delay which Contractor can prove will solely
and directly delay delivery of a Vessel beyond the Delivery Date for such Vessel
and which cause is delaying or will delay Contract Work which is in the critical
path of the delivery of the said Vessel; (ii) such cause of delay is one of the
excusable causes set forth in Article 7 b); (iii) Contractor proves that it used
its best efforts to prevent or minimize the actual delay in delivery, including
without limitation performing other or additional Contract Work in order to
prevent or minimize such delay and (iv) but for such cause of delay the said
Vessel would have been delivered on time. The amount of any such extension
shall be the number of days by which Contractor can prove that the Delivery Date
actually will be delayed solely and directly by such cause of delay. Contractor
shall at all times have the burden of proving each of the matters required to be
established by Article 7; and in the event that it is not possible to determine
whether, or to what extent, any delay in delivery is attributable to causes
excused by the terms of Article 7, the Contractor shall not be entitled to any
extension of any of the Delivery Dates and Purchaser shall be entitled to
recover liquidated damages for the entire period of delay.
b) Contractor shall be entitled to an extension of the Delivery
Date(s), as provided in Article 7 a), for any delay caused by Purchaser (other
than such delays, if any, as are caused by Purchaser in exercising any or all of
its rights or duties under this Contract in accordance with the terms of this
Contract); by legislation or formal action of government prohibiting
construction; by war or preparation for war; by naval or military authorities;
by adverse weather conditions at the time of scheduled sea trial with respect to
Vessel(s) where sea trial condition will be at design draft according to
Specifications; by acts of God (other than ordinary storms or inclement weather
conditions), earthquake, hurricanes, lightning, floods, or landslides, or other
acts of overwhelming force, i.e., force majeure, whether manmade or natural; by
strikes, lockouts and other labor disturbances as are the result of causes
reasonably beyond Contractor's control; explosions, fires, vandalism, riots,
insurrections, sabotage, blockages, embargoes or epidemics as are the result of
causes reasonably beyond Contractor's control; by the short, late, or non-
delivery to Contractor of items required to be incorporated in the Vessel(s), or
late performance of Contractor's subcontractors or carriers by land, sea or air,
provided that the late, short, or non-delivery or performance resulted from
causes which would entitle Contractor to an extension of the Delivery Date(s)
under this Article 7 b), and provided further that it is determined that
Contractor's contracting for such items or with said subcontractors was
expeditious and prudent, that Contractor has exercised due diligence in the
performance of any acts required of Contractor with respect to such items or
subcontractors, that Contractor has exercised due diligence in monitoring the
acts and circumstances of the vendors of such items and subcontractors and that
Contractor has exercised due diligence in expediting deliveries or performance
under Contractor's purchase or subcontract or procuring equivalent substitute
performance with respect to such items; or by delays resulting from Purchaser's,
Contractor's or Regulatory Body's authorized rejection of any of the following
major structural castings and forgings: castings of main engine, stem and stern
frames, rudder castings and rudder horn, crankshafts, intermediate and propeller
shaft, propeller and anchors, provided always that such authorized rejection is
made prior to installation or fitting (whichever is the earlier) of the forging
or casting in question, and provided always that Contractor has the burden to
prove (i) that the cause(s) for such rejections cannot be referred to
manufacturer(s) negligent act(s) or omission(s) and (ii) that the manufacturer
has used its very best efforts in manufacturing said castings and forgings,
where it is determined that Contractor's contracting for such services was
expeditious and prudent, that Contractor has exercised due diligence in the
performance of any acts required of Contractor with respect to such services,
that Contractor has exercised due diligence in monitoring the acts and
circumstances of such manufacturer(s), and that Contractor has exercised due
diligence in procuring equivalent substitute performance.
c) Notwithstanding anything to the contrary in this Article 7,
Contractor shall not be entitled to any extension of any Delivery Date for
(i) any delay resulting from a cause of delay in existence
as of the date of this Contract; or
(ii) any delay resulting from a cause of delay, which was or
reasonably should have been anticipated by Contractor
by reason of facts, which were or after reasonable
inquiry should have become known to Contractor as of
the date of this Contract; or
(iii) any delay resulting from the late performance or
default of a vendor, subcontractor or carrier, if such
delay results from a cause of delay in effect published
and announced, as of the date of the award of the
purchase contract, subcontract or carriage contract
where Contractor had or, after reasonable diligent
inquiry, should have had, notice of such cause of delay
prior to or at the time of such award (other than a
cause of delay determined to be industry-wide); or
(iv) any delay resulting from any dispute or arbitration
proceeding under this Contract, provided that in the
case of Contract Work under dispute or arbitration
which would otherwise be performed prior to resolution
thereof, Contractor shall not be required to proceed
therewith (and a corresponding extension of the
Delivery Date(s) shall be allowed) if, after the
written request of Contractor, Purchaser declines to
confirm its willingness to pay the amount found due in
respect thereof.
d) Contractor shall transmit written notice to Purchaser of a cause
of delay pursuant to Article 7 a) as soon as practicable and no later than 14
(fourteen) days after the date on which Contractor had knowledge of such cause
of delay, or within 14 (fourteen) days after the date on which Contractor, after
reasonable diligent inquiry, should have had knowledge of such cause of delay.
Within 14 (fourteen) days after cause of delay set forth in Article 7 a) has
ceased to exist, Contractor shall furnish to Purchaser a written statement of
the actual or estimated delay in the completion of the Contract Work resulting
from such cause, together with a statement as to the cause of such delay and
such detailed documentation as is then available to it justifying such
extension. Any such detailed documentation thereafter becoming available to it
shall be promptly furnished to Purchaser. On the basis of the statements and
information furnished to Purchaser by Contractor relative to delay in delivery,
Purchaser and Contractor shall, at intervals selected by Purchaser, but not less
frequently than once every 6th (sixth) month, confer and attempt to agree upon
the number of days by which any or all of the Delivery Dates shall be extended.
In the event that Purchaser and Contractor cannot so agree within 30 (thirty)
days after such conference, the extension of such Delivery Date shall be
determined as a dispute pursuant to the provisions of Article 33.
e) The granting of a time extension under this Article by reason of
delays caused by Purchaser shall not foreclose any other rights or remedies
which Contractor may have against third parties due to such delays.
f) No extension of any Delivery Date shall be granted under this
Article 7 unless Contractor shall have first provided notice and submitted
statements and detailed documentation reasonably justifying such extension
within the time limits set in Subclause d) of this Article 7.
g) The extension of the Vessel(s) Delivery Date(s) provided for in
this Article 7 shall be the only remedy for delay to which Contractor shall be
entitled; and by way of illustration, but not limitation, Contractor shall not
be entitled to damages or any adjustments in the Per Vessel Contract Price(s) or
in the Delivery Dates for disruption, compactness or congestion.
ARTICLE 8
LIQUIDATED DAMAGES FOR DELAY IN DELIVERY
a) In the event that delivery of a respective Vessel is not made on
or before close of business, local time, on the Delivery Date (including a grace
period provided by Article 1 f) applicable to such Vessel, Purchaser will suffer
damages which are extremely difficult of ascertainment. It is agreed that the
sum of USD ** (in words: United States Dollars
** ) per day represents a reasonable measure of
the damages to Purchaser for each day of delay in delivery of each respective
Vessel, and Contractor shall pay said sum to Purchaser as per-day liquidated
damages, and not as a penalty, for each calendar day elapsing from such time of
the Delivery Date (as it may be extended by the grace period or otherwise under
this Contract) applicable to a respective Vessel, until delivery of such Vessel
is made.
b) All payments required to be made by Contractor for the liquidated
damages earned as provided for in Article 8 a) above, shall be paid as follows:
(i) Contractor's first payment, regardless of the amount
owing, is due on the 60th (sixtieth) day after delivery
of a respective Vessel has been delayed beyond the
Delivery Date (as it may be extended by the grace
period or otherwise under the Contract) up to and
including said 60 (sixty) days' period; and thereafter
(ii) on a weekly basis in arrears commencing on the 7th
(seventh) day after the 60 (sixty) days' period
mentioned in Subclause (i) above;
and continuing on the last day of each succeeding 7 (seven) day period
thereafter until the day on which delivery of such Vessel is made or this
Contract is terminated with respect to that Vessel, at which time Contractor
shall pay the entire remaining amount due under this Article 8 through such
time of delay. In case the Purchaser terminates this Contract with respect to a
Vessel according to Subclause a) of Article 21, the liquidated damages paid
and/or payable to Purchaser by Contractor in respect of such Vessel are limited
to an amount of USD ** (United States Dollars
** ) according to Article 21 a). If according to this Subclause
b) of this Article 8 Contractor has paid to Purchaser liquidated damages in an
amount exceeding USD ** (United States Dollars ** )
in respect of such Vessel Purchaser has to repay to Contractor the amount of
liquidated damages exceeding USD ** (United States Dollars
** ) upon Purchaser's termination of the Contract according
to Subclause a) of Article 21.
c) The payment of such sums as may become due to Purchaser under this
Article 8 shall not affect any rights of Purchaser as to matters other than late
delivery of a Vessel, or any rights of Purchaser under Articles 20, 21 and 23.
d) Payment of liquidated damages by the Contractor under this Article
8 will constitute full satisfaction of any and all claims of the Purchaser under
the Contract against the Contractor resulting from delayed delivery of the
Vessel, except as otherwise provided in this Contract.
ARTICLE 9
CONTRACTOR TO RECEIVE AND CARE FOR ITEMS
FURNISHED BY PURCHASER
Contractor shall, at its own risk and expense, receive, inspect and check as to
agreement with bills of lading or other transport documents, store, protect,
insure and install aboard the Vessels all of the items which may be furnished by
Purchaser in connection with the Contract Work. Contractor shall be liable to
Purchaser for any damage to or loss of any items furnished by Purchaser
occurring during Contractor's custody thereof, no matter how such damage or loss
may arise.
In the event that the Plans or Specifications provide that Purchaser shall
furnish to Contractor specified items of material or equipment on or before
given dates, Contractor shall be entitled to recover all actual, direct and
documentable costs (excluding consequential or incidental damages) reasonably
incurred as a result of a failure by Purchaser to deliver such items on or
before the specified dates. Contractor's right under this Subclause shall be in
addition to, and not in lieu of, Contractor's right under Article 7.
ARTICLE 10
INSURANCE ON THE VESSELS AND MATERIAL
Contractor shall procure that each of the Vessels and all materials, outfit,
equipment and appliances (including all materials, outfit, equipment and
appliances provided by Purchaser) for and used or to be used in the construction
thereof, shall, at the expense of Contractor, and as part of the Contract Price
at all times, be kept fully insured under a full form marine builder's risk
policy equivalent to London Institute Clauses for Builder's Risks (1/6/88) CL
351 amended to delete Article 6 (Earthquake and Volcanic Eruption Exclusion);
London Institute War Clauses Builder's Risks (1/6/88) CL 349; and London
Institute Strike Clauses Builder's Risks (1/6/88) CL 350. Notwithstanding the
above, the required insurance will not include pre-keel-insurance. Contractor
will verify coverage by the engine manufacturer as available for engines and any
transit exposure between construction sites for engines and hulls. Contractor
will provide coverage for war, hurricane, earthquake and strikes, as from moment
of keel laying including all risk of Physical Damage to Purchaser furnished
materials of any of the Vessel and until each of the Vessels is delivered to and
accepted by the Purchaser. The amount of insurance, the deductibles, the
percentage escalation allowed, the terms of the policies (including, without
limitation, their effective dates), and the insurance companies, underwriters,
or underwriting funds shall at all times be satisfactory to the Purchaser.
Contractor shall submit to Purchaser for approval as to form and substance,
copies of the insurance policies that Contractor intends to procure in
compliance with the requirements of this Article 10. All policies of insurance
shall be taken out in the name of Contractor and Purchaser as primary insured.
All losses under such policies shall be made payable to Contractor and Purchaser
for distribution among themselves as their respective interests may appear. All
policies shall provide that there shall be no recourse against Purchaser for the
payment of premiums or commissions and that no cancellation of such policies,
for any reason whatsoever, shall become effective unless and until 30 (thirty)
days prior written notice thereof has been given by the insurance underwriter to
Purchaser.
Contractor shall procure that copies of all cover notes and original policies,
with evidence of prepayment of all premiums or other charges, shall be delivered
to Purchaser upon the earlier of keel laying or delivery of engines and other
major items to the Shipyard pursuant to this Contract for its approval and
custody. Policies, if not in conformance herewith, shall be surrendered and
canceled upon direction of the Purchaser, and, concurrently therewith, new
policies in conformance with this Article 10 shall be procured and delivered to
Purchaser for its approval and custody. At the final adjustment of the premium
for such policies following delivery of a Vessel: (i) adjustment due to changes
in the Per Vessel Contract Price or Delivery Date pursuant to Articles 5 and 7
shall be for the account of Purchaser, and shall for purposes of this Contract
be considered adjustments pursuant to such respective Articles; and (ii) all
other adjustments shall be for the account of Contractor.
ARTICLE 11
LOSS OF OR DAMAGE TO A VESSEL
a) In the event of loss of or damage to a Vessel prior to the
delivery of such Vessel pursuant to Article 17, which does not constitute a
total loss of such Vessel, such loss or damage shall be made good at
Contractor's expense, and the Delivery Date shall be extended in accordance with
Article 7 (provided that the cause of such total loss is excused under Article
7); and any insurance proceeds shall be paid to Contractor concurrently with
repair of such loss or damage progresses.
b) In the event of a total loss of a Vessel, prior to delivery of
such Vessel pursuant to Article 17, construction of such Vessel shall proceed
unless Purchaser shall elect to terminate the Contract with respect to such
Vessel, which election cannot be exercised, if the Vessel prior to the total
loss had not had the main engine installed. If Purchaser elects to terminate the
Contract with respect to such Vessel, Purchaser shall give written notice to
that effect to the Contractor. If no election is made to terminate the Contract
with respect to such Vessel, then Contractor, or, at Contractor's option,
another qualified shipyard selected by Contractor and satisfactory to and
approved beforehand in writing by Purchaser, shall as subcontractor proceed with
the construction and delivery of such Vessel in accordance with this Contract,
the Specifications and the Plans (and Contractor shall be entitled to payment on
account of such construction and delivery on the terms set forth herein), and
the Delivery Date applicable to such Vessel shall be extended in accordance with
Article 7 (provided that the cause of such total loss is excused under Article
7).
c) Notwithstanding any other rights of the Purchaser under this
Contract, in the event that there is a total loss of a Vessel prior to delivery
of such Vessel pursuant to Article 17, and such loss results from a risk covered
by insurance, as set forth in Article 10, all of the proceeds of such insurance
payable as a result of such loss shall be paid to the Purchaser and Contractor
as follows:
(i) if Purchaser elects to terminate the Contract in
respect of such Vessel an amount equal to payments made
from Purchaser to Contractor under this Contract in
respect of said Vessel together with interest thereon
as provided for in Article 4 e) from the date Purchaser
made the payments to the date on which reimbursement is
made and an amount equal to the value of lost or
damaged items furnished by Purchaser shall be paid to
Purchaser, whereas Contractor shall receive the
residual amount, if any:
(ii) if the Contract is not terminated in respect of such
vessel, an amount corresponding to the value of lost or
damaged items furnished by Purchaser shall be paid to
Purchaser, whereas Contractor shall receive the
residual amount, if any.
d) Notwithstanding any other rights of the Purchaser under this
Contract, in the event that there is a total loss of a Vessel prior to delivery
of such vessel pursuant to Article 17, and such loss results from a risk not
covered by insurance, as set forth in Article 10, and an election is made by
Purchaser to terminate the Contract with respect to such Vessel, Contractor
shall pay to the Purchaser an amount equal to all payments made under this
Contract in respect of the Vessel lost up to the date of the total loss together
with interest thereon as provided for in Article 4 e) from the date Purchaser
made the payments to the date on which reimbursement is made. Additionally,
Contractor shall pay to Purchaser an amount equal to the value of all lost or
damaged items provided by Purchaser for and used or to be used in the
construction of such Vessel.
e) Notwithstanding anything to the contrary in Subclause c) (ii) and
d) in this Article, Purchaser shall not be entitled to interest on payments made
to Contractor always provided that the cause of such total loss is excused under
Article 7.
ARTICLE 12
INDEMNIFICATION
a) Except as provided in Article 12 b), Contractor shall indemnify
fully, hold safe and harmless, and defend Purchaser, Purchaser's subsidiaries
and affiliates (including without limitation companies which directly or
indirectly hold any portion of Purchaser's share capital and such companies'
subsidiaries) and their respective agents, officers, directors, servants and
employees, and the Vessels and each of them (individually a "Protected Party"
and collectively the "Protected Parties"), from and against any and all losses,
claims, damages, liabilities, demands, suits, causes of action, costs and
expenses (including interest and attorneys' fees) arising or resulting from
injury, death, harm and/or loss to any third person and/or any property
whatsoever of any third person arising from, pertaining to or in any manner
connected with the performance of the Contract Work (at any location(s)
whatsoever) and/or any duties of Contractor hereunder and/or any work performed
at the Shipyard (whether part of the Contract Work or not), (including, without
limitation, those based on negligence, breach of contract, breach of warranty or
claim under strict liability in tort against any Protected Party, or by or
against Contractor or any third party), excepting only such injury, death, harm
or loss, if any, and only to the extent as may be caused by the negligence or
willful misconduct of Purchaser or its officers, directors, employees, or agents
or such independent contractors, if any, as are directly engaged by Purchaser
(other than Contractor) or for which Contractor is not responsible under law.
For purposes of this Article 12, it is agreed that the workmen, agents,
employees and independent contractors of Contractor or its subcontractors shall
at all times be agents, employees or independent contractors of Contractor or
its subcontractors and shall not be employees, agents or independent contractors
of Purchaser.
b) Contractor's obligations, as set forth in Article 12 a), shall not
apply to any claim arising out of injury, death, harm or loss sustained after
the delivery of the Vessel to which it relates (or of all Vessels to which it
relates); provided that this exclusion shall not apply to any claim arising
after delivery directly or indirectly as a consequence of injury, death, harm or
loss sustained prior to such delivery.
c) Contractor hereby expressly waives any right of express, implied
or equitable indemnity or contribution from or against Purchaser or the Vessels,
or any of them, on account of any claim, loss, damage, liability demand, suit,
cause of action cost or expense (including interest and attorneys' fees) arising
from, pertaining to or in any manner connected with any of the matters to which
Contractor's indemnity obligations under Article 12 a) or Article 12 b) would
apply.
ARTICLE 13
APPOINTMENT OF REPRESENTATIVES OF PURCHASER
With respect to the performance of this Contract, Purchaser shall be entitled to
designate one or more authorized representatives who shall have authority to
exercise one or more rights accorded to Purchaser under this Contract. Notice
of all such designations (together with a statement of the scope of authority of
each designee) and notice of the revocation of any prior designation shall be
given by Purchaser to Contractor in writing. Where this Contract gives
Purchaser the right to direct action or inaction by Contractor, Contractor shall
have no obligation to follow, and it shall not acquire any rights by following,
any such directions, except those which shall be issued in writing over the
signature of an authorized representative of Purchaser acting within the scope
of this actual authority.
Contractor shall furnish Purchaser and his representatives free of charge with
adequately maintained offices (desks, files, telephones, telefaxes, typing
services, change rooms, clothing and gear, lockers etc.) conveniently located in
the Shipyard and in close proximity to the Vessel(s). The Purchaser's office in
addition to the yard phone, shall be equipped with a direct call (24 hours)
outside telephone to allow communication between Purchaser and Purchaser's
representative(s) in the Shipyard. Fees for telephone, telefax and telex are for
Purchaser's account. The Contractor shall free of charge supply lodging and
meals at the Shipyard for 6 (six) Purchaser representatives and shipyard
superintendents.
ARTICLE 14
MATERIALS AND WORKMANSHIP
a) Contractor (in carrying out the Contract Work) and the Vessels
(including any and all Items as defined in Article 14 b)) shall comply with all
of the requirements of the American Bureau of Shipping and other authorities as
mentioned in the Specification and as required by law having jurisdiction over
the Contract Work and the completed Vessels (hereinafter called "Regulatory
Body" or "Regulatory Bodies"), notwithstanding that there may be shown in or on
the Plans or Specifications a specific requirement as to any item of Contract
Work notwithstanding any approvals shown in or upon said documents or any
approvals given by Purchaser upon inspection of any Contract Work, subject,
however, to the following: (i) if the Plans or Specifications specifically
require work in excess of that required by any Regulatory Body, such
specifically required work shall be performed by Contractor as Contract Work
required by this Contract; and (ii) if the Plans and Specifications require work
which is less than that required by any Regulatory Body, Contractor shall
perform the work required by the Regulatory Body as Contract Work required by
this Contract; provided that if any Regulatory Body requirements promulgated
subsequent to the date hereof, exceeds or is otherwise in conflict with the
requirements of the Plans and Specifications and the Regulatory Body
requirements promulgated on the date hereof, and effects an increase in the cost
to Contractor of the Contract Work, the Contract Price, the Per Vessel Contract
Prices and Delivery Date(s) shall be adjusted pursuant to the provisions of
Article 5.
b) All items of machinery, material, workmanship, outfit, spares and
equipment incorporated or installed or to be incorporated or installed in the
Vessels ("Items") shall be in full compliance with this Contract and the
requirements of the Plans and Specifications. Contractor shall furnish to
Purchaser, for its approval, the purchase specifications and vendors' plans and
specifications for Items supplied by persons or entities other than Contractor
which Contractor contemplates incorporating in a Vessel, and all changes
thereto, and the names of the manufacturers, vendors, subcontractors or other
suppliers of such Items. Subject to Article 15 e), if Purchaser has not
specified, within 28 (twentyeight) days following receipt of such plans and
specifications, one or more requirements of this Contract, the Plans or the
Specifications which would be violated by such plans and specifications, they
shall be considered approved by Purchaser. Nothing in this Article 14 b) shall,
however, limit Purchaser's right to specify a change in such plans and
specifications as an Article 5 Change under Article 5. Amendments to such
approved plans and specifications may be submitted by Contractor to Purchaser
prior to incorporation or installation of the affected Items in a Vessel for
approval or rejection on the same terms as its original approval. When required
by the Plans or Specifications, or when called for by Purchaser, Contractor
shall furnish full information concerning all other Items which it contemplates
incorporating or installing in a Vessel. In the event Purchaser has reasonable
grounds for seeking such confirmation, all manufacturers, vendors,
subcontractors, and other suppliers of Items in the nature of machinery or
mechanical or other working equipment shall be required to submit a certificate
executed by the prospective manufacturer, vendor, subcontractor or other
supplier confirming that it has no present intention to discontinue
manufacturing such Item or Items or to cease providing parts or service for such
Items, and if satisfactory confirmation is not received, Contractor shall make
such other arrangements as are necessary to assure continued availability of
parts and service for such Items. Notwithstanding anything to the contrary in
law, in equity or in this Contract, under no circumstances shall any approval
granted by Purchaser under this Article 14 or any other provision of this
Contract or otherwise, have the effect of relieving Contractor from any of its
obligations under this Contract including but not limited to Articles 2 c), 12
and 18. The satisfaction of such obligations shall at all times remain solely
the responsibility of Contractor.
c) Notwithstanding anything set forth in this Article 14, Contractor
shall have no responsibility under this Article 14 as to Items furnished by
Purchaser other than that the installation thereof shall be carried out in
accordance with this Contract and the Plans and Specifications.
ARTICLE 15
INSPECTION, APPROVAL OF PLANS AND WORK
a) The Contract Work shall be subject to inspection by and the
approval of representatives of Purchaser and representatives of all relevant
Regulatory Bodies at any and all reasonable times during manufacture or
construction and at any and all places where manufacture or construction are
carried on, and Contractor shall be required to insert the provisions of this
Article 15 a) in all subcontracts entered into by it in connection with the
Contract Work.
b) All plans and other documents required to be furnished by the
Specifications shall be submitted by the Contractor in their proposed final form
to Purchaser for its approval, and, within 28 (twentyeight) days after receipt
thereof, or such longer period as is reasonably required and is specified in
writing by Purchaser within 5 (five) business days after receipt thereof,
Purchaser shall in writing either (i) approve such plan or document; (ii)
tentatively approve such plan or document subject to Contractor's acceptance of
changes proposed therein by Purchaser; (iii) tentatively reject such plan or
document with a request for resubmission in response to the comments of
Purchaser; or (iv) reject such plan or document. Any failure by Purchaser to so
approve, tentatively approve, tentatively reject or reject such plan or document
within such period shall constitute approval of such plan or document.
All rejections shall specify those aspects of the rejected plan or
document which do not, or which provide for Contract Work which does not,
conform to the requirements of this Contract or the Plans or Specifications.
c) If a plan or document is approved, Contractor shall, subject to
Article 15 d), proceed with the Contract Work which is shown therein. If a plan
or document is rejected as set forth in Article 15 b), Contractor shall promptly
alter the rejected document and resubmit it as altered, for Purchaser's approval
in accordance with Article 15 b). Amendments to such an approved plan or
document may be submitted by Contractor to Purchaser prior to incorporation of
the affected workmanship, equipment or materials into a Vessel for approval,
tentative approval, tentative rejection or rejection on the same terms as its
original approval. Appropriate amendments shall be so submitted reasonably
promptly after Contractor becomes aware that any approved plan or document in
any way fails to conform to the requirements of this Contract or the Plans or
Specifications, and neither Purchaser's prior approval of such plan or document,
Contractor's completion of the Contract Work shown therein nor Purchaser's
approval of such Contract Work shall in any way restrict Purchaser's right, at
its option, to draw any such failure to conform to Contractor's attention. All
Contract Work performed by Contractor prior to approval by Purchaser of all
plans or documents covering or affecting such work shall be at the sole risk and
expense of the Contractor, and Contractor shall bear all costs, damages or
liabilities which may result from the ordering of any materials or the
performance of any work prior to approval of the plans or documents which cover
such materials or work. Additionally, and notwithstanding anything to the
contrary in law, in equity or in this Contract, under no circumstances shall any
approval granted by Purchaser under this Article 15 c) or any other provision of
this Contract or otherwise, or any failure to reject by Purchaser under this
Article 15 c) or any other provision of this Contract or otherwise, have the
effect of relieving Contractor from any of its obligations under this Contract
including but not limited to Articles 2 c), 12 and 18. The satisfaction of such
obligations shall at all times remain solely the responsibility of Contractor.
d) The Vessels, and all Items as the same may at any time or at any
place be completed or be in progress, shall be subject, to inspection by and the
approval of Purchaser. Purchaser shall, reasonably promptly after tender of any
work or Items for approval, approve all work and Items which comply with the
requirements of this Contract and the Plans and Specifications, and Purchaser
shall be entitled (but shall not be obligated) to reject all work and Items
which do not conform to any of said requirements, even though: (i) plans,
specifications or documents covering such work or Items have previously been
approved by Purchaser under Article 14 or 15; or (ii) such work or Items have
previously been approved by Purchaser under this Article 15 d). Nothing in this
Article 15 d) shall, however, limit Purchaser's right to specify a change in any
Contract Work as an Article 5 change under Article 5. All rejections shall be
made in writing, and shall specify those aspects of the work or Items inspected
which do not conform to the requirements of this Contract or the Plans or
Specifications. If any work or Items shall be duly rejected by the Purchaser as
not complying with the Contract and/or the Plans and/or the Specifications,
Contractor shall promptly correct such work or replace such Items without charge
therefor. Notwithstanding anything to the contrary in law, in equity or in this
Contract, under no circumstances shall any approval granted by Purchaser under
this Article 15 d) or any other provision of this Contract or otherwise, or any
failure to reject by Purchaser under this Article 15 d) or any other provision
of this Contract or otherwise have the effect of relieving Contractor from any
of its obligations under this Contract including but not limited to Articles 2
c), 3, 12 and 18. The satisfaction of such obligations shall at all times
remain solely the responsibility of Contractor.
e) Nothing contained in this Article 15 or in Article 3 shall have
the effect of relieving Contractor from any requirements included in the
Specifications to obtain any approval of Purchaser.
ARTICLE 16
TRIALS
a) Contractor shall subject each respective Vessel, and all Items and
work incorporated therein, to such shop, dock, sea and other trials and tests as
are required with respect to such Vessel by the Plans or Specifications. The
total expense of such trials shall be borne by Contractor, except as otherwise
expressly provided.
b) Purchaser shall have the right to have authorized representatives
present at all shop, dock, sea and other trials and tests. Contractor shall
provide Purchaser with 3 (three) days prior written notice of all trials and
tests (except sea trials) designated for such notice by Purchaser after receipt
from Contractor of a schedule of trials and tests and with 24 (twentyfour) hours
prior written or telegraphic notice of all other trials and tests (except sea
trials). Contractor shall provide Purchaser with 14 (fourteen) days' prior
written notice of all sea trials: provided that only 1 (one) day's prior written
notice need be provided to Purchaser with respect to retrials at sea conducted
within 3 (three) days after completion of a previous sea trial at or upon which
the need for such retrial was determined. All trials and tests conducted
without notice to Purchaser, shall be reconducted by Contractor at the sole
expense of Contractor.
c) If, at and upon any trial or test required by this Article 16, a
Deficiency (as defined in Article 18 b)) shall be discovered in a Vessel,
Contractor shall, after correcting such Deficiency, be required to make further
trials and tests sufficient in extent and number to reasonably demonstrate
complete correction thereof: provided that additional sea trials will not be
required if the correction of such
Deficiency can be verified in shop or dock trials or tests. The total
expense of all additional trials and tests required by this Article 16 shall be
borne by Contractor.
d) After all trials and tests required by this Article 16 have been
completed, Contractor shall return the tried and tested Vessel to the Shipyard,
and open up such machinery as Regulatory Bodies and/or Purchaser require(s) for
post-trial inspection and examination. Any Deficiencies then appearing in such
machinery shall be corrected by Contractor. After Contractor has made such
corrections, Contractor shall close and connect, retry and retest the machinery,
as appropriate, and then make ready for service. The Regulatory Bodies and/or
Purchaser shall be entitled to require further post-trial examination and
inspection at which Contractor shall reasonably demonstrate complete correction
of any and all Deficiencies in such machinery.
ARTICLE 17
DELIVERY
a) When a respective Vessel is Complete (as defined in Article 1 d)),
and all trials and tests required by Article 16 have been satisfactorily
performed, or at such earlier time as is provided in Article 17 d), that Vessel
shall, provided prior written notice hereof of not less than 30 (thirty) days
was given by Contractor to Purchaser, be offered for delivery to Purchaser
alongside a safe and accessible pier at the Shipyard where there must be
sufficient water for the Vessel to always be afloat, custom to the contrary
notwithstanding. The Vessel thus offered shall be free and clear of all liens,
claims, charges, security interests or encumbrances of any nature whatsoever
except as may have been created by Purchaser (other than those in favor of
Contractor or any other person in connection with entering into or carrying out
this Contract) or exist in Purchaser's favor. Such offer of delivery of the
Vessel shall also be accompanied by an offer from Contractor to deliver the
following documents (hereinafter the "Delivery Documents"):
(i) Protocol of Delivery and Acceptance acknowledging
delivery of such Vessel to, and acceptance and taking
possession of such Vessel by, Purchaser in accordance
with this Contract, executed in duplicate by
Contractor. Such Protocol shall state the date and
time of such delivery and acceptance.
(ii) Declaration of Warranty of Contractor that such Vessel
is delivered to Purchaser free and clear of any liens,
claims, charges, security interests or encumbrances of
any nature whatsoever except as may have been created
by Purchaser (other than those in favor of Contractor
or any other person in connection with entering into
or carrying out this Contract) or exist in Purchaser's
favor, and that such Vessel is absolutely free of all
burdens in the nature of import duties, taxes or
charges imposed by the nation, city, county, state, or
port of delivery.
(iii) Instruments confirming that title to such Vessel has
vested in Purchaser, as provided herein, in such
number and form as may reasonably be requested by
Purchaser.
(iv) Protocol of Inventory, as required by the Plans and
Specifications, of the equipment of the Vessel,
including spare parts.
(v) All certificates required to be furnished upon
delivery of the Vessels pursuant to this Contract and
the Specifications. It is agreed that if, through no
fault on the part of the Contractor, the formal
Regulatory Body certificates and/or other formal
certificates are not available at the time of delivery
of the Vessels, provisional or interim certificates
adequate to allow intended use of the Vessel shall be
accepted by the Purchaser, provided that the
Contractor shall furnish the Purchaser with the formal
certificates as promptly as possible after such formal
certificates have been issued.
(vi) Protocol of trials.
(vii) Protocol of stores of consumable nature.
(viii) Builder's certificate (notarized and legalized).
(ix) Non-registration certificate (issued by the local
court or appropriate legal body).
(x) Commercial invoice.
(xi) Bill of sale (notarized and legalized).
(xii) Drawings and Plans pertaining to the Vessels.
b) If, at the time an offer of delivery of a Vessel is made, such
Vessel shall be Complete, and if such offer shall be accompanied by an offer of
delivery of the Delivery Documents, such Vessel and the Delivery Documents shall
thereupon be accepted by Purchaser in accordance with Article 17 c). If, at
such time, the Vessel in question shall not be Complete, Purchaser shall be
entitled to refuse acceptance of such Vessel by thereupon delivering to
Contractor a written specification of those aspects of such Vessel which prevent
it from being Complete. Any subsequent offer or offers of delivery shall be
made and accepted on the terms set forth in Article 17 a) and Article 17 b).
Notwithstanding the foregoing, if, at such time the Vessel in question is
complete but for Minor and Insignificant Deficiencies, Purchaser shall not be
entitled to refuse acceptance of such Vessel. Purchaser and Contractor shall
then draw up a list of these Minor and Insignificant Deficiencies (Remaining
Item List) stating how and when these Deficiencies shall be remedied by
Contractor after acceptance of delivery. Purchaser and Contractor shall be under
an obligation to conduct good faith discussions with each other in this respect.
"Minor and Insignificant Deficiencies" are those which do not affect the
seaworthiness of the Vessel(s) or its/their full use in its/their intended
service and purpose, which is a high speed container liner service on a
regularly scheduled basis, and shall not include Deficiencies contained in
Subclause b) (iii) of Article 18.
c) Acceptance of a Vessel by Purchaser shall be accomplished by (i)
the delivery to Contractor of a counterpart of the Protocol of Delivery and
Acceptance executed by Purchaser; and (ii) the payment by Purchaser to
Contractor of that portion of the Per Vessel Contract Price which Purchaser is
required to pay upon delivery of the Vessel pursuant to Article 4. Purchaser
may (but shall not be obligated to) specify in the protocol of Delivery and
Acceptance to be delivered by it such Deficiencies as may be known to exist in
the Vessel at the time the Vessel is accepted. All such Deficiencies, which may
be known to exist in the Vessel at the time the Vessel is accepted, shall
thereafter be deemed to and be treated as Deficiencies arising and reported
during the Guarantee Period. Purchaser shall be afforded two days free of any
wharfage or other charge, and up to 3 (three) days additional at a reasonable
wharfage fee, within which to remove the Vessel from the Shipyard.
d) Notwithstanding anything to the contrary in this Contract,
Purchaser may, at its option, demand delivery of a respective Vessel at any time
(whether prior or subsequent to the time established for the offer of delivery
of such Vessel pursuant to Article 17 a)) if such Vessel is, at the time of
demand, in such a state of completion that Purchaser is able to obtain approval
of the operation of such Vessel from all Regulatory Bodies having jurisdiction
over such Vessel's operation. Contractor shall within 5 (five) days of any
demand by Purchaser pursuant to the preceding sentence, offer the Vessel in
question for delivery to Purchaser in accordance with the first sentence of
Article 17 a), together with such of the Delivery Documents, if any, as can be
obtained by Contractor as of the date of such offer, and such offer shall be
accepted by Purchaser in accordance with Article 17 c), provided that the amount
of a reduction of the Per Vessel Contract Price shall be reasonably estimated by
Contractor. Purchaser upon delivery of the Vessel in question has to pay the Per
Vessel Contract Price as adjusted less said reduction. If Purchaser does not
agree to this reduction, Contractor has to deliver to Purchaser a guarantee in
favor of Purchaser issued by an internationally reputable 1st class bank for the
amount of the difference between Contractor's estimate and Purchaser's estimate
of the reduction, payable in accordance with the Decision of an arbitration
award pursuant to Article 33. Purchaser's demand pursuant to this Article 17 d)
shall be deemed a proposal for an Article 5 Change deleting the Contract Work
not yet completed and the Per Vessel Contract Price shall be adjusted and
documentation prepared by Contractor accordingly. All disputes arising under
this Article 17 d) shall be referred to the Arbitrator(s) for resolution, and
subject to the foregoing provisions in this Subclause d) Contractor shall have
no right to refuse to offer a Vessel for delivery on account of any such
dispute. If Contractor documents that such an Article 5 Change will have an
effect on any of his warranties and/or other liabilities under this Contract,
such warranties and/or liabilities shall be adjusted by the parties in writing
as necessitated hereby and in case the parties agree that Contractor shall
subsequently carry out the work comprised by said Article 5 Change, such
warranties and/or liabilities shall come into force only after completion of
said work.
e) In every instance in which a right or obligation under this
Contract is in any manner dependent upon delivery of a Vessel, such delivery
shall not be deemed to have occurred unless and until such Vessel has been
accepted by Purchaser under this Article 17. Acceptance of the Vessel by
Purchaser under this Article 17 shall signify that Purchaser has taken
possession of the Vessel as of the time and date set forth in the Protocol of
Delivery and Acceptance and that Contractor may terminate all insurance required
to be provided by Contractor under Article 10 in respect of such Vessel.
Acceptance of any Vessel by Purchaser under this Article 17 shall not be deemed
to constitute a waiver of or otherwise prejudice, Purchaser's rights under
Article 18 with respect to any Deficiency, whether known or unknown, whether or
not noted in any document delivered in connection with delivery of the Vessel,
which may exist in such Vessel at the time it is accepted by Purchaser. Any such
Deficiency may be reported to and shall be corrected at the sole cost and
expense of Contractor during the Guarantee Period, as provided in Article 18.
ARTICLE 18
GUARANTEE
a) Subject to the provisions of this Article 18, Contractor
guarantees that each Vessel for a period of 1 (one) year FROM THE DATE OF
DELIVERY OF SUCH VESSEL UNDER ARTICLE 17 (THE "GUARANTEE PERIOD") shall be free
from any and all Deficiencies.
b) The term "Deficiency" shall mean: (i) any weakness, failure,
breaking down, incompleteness, defect or deterioration in any Vessel, including
without limitation, in any workmanship, engineering, equipment, machinery,
materials, outfitting or spares, incorporated therein or to be delivered
therewith; or (ii) any failure of any Vessel, including without limitation of
any workmanship, engineering, equipment, machinery, materials, outfitting or
spares incorporated therein or to be delivered therewith, to satisfy any of the
requirements of this Contract or of the Plans or Specifications; or (iii) the
existence of a condition to a certificate issued by a Regulatory Body.
"Deficiency" shall not, however, include any such fault in an Item furnished by
Purchaser which was installed or stowed on board by Contractor in accordance
with all of the requirements of this Contract and the Plans and Specifications.
c) Notwithstanding any inspection or failure to reject by the
Purchaser or any Regulatory Body pursuant to this Contract, if at any time
within the Guarantee Period with respect to any Vessel there shall appear, exist
or be discovered any Deficiency, and Purchaser gives Contractor notice
specifying such Deficiency within 30 (thirty) days after the end of the
Guarantee Period with respect to such Vessel or if the Vessel is at sea at the
end of such period within 15 (fifteen) days after completion of the voyage but
in no event later than 60 (sixty) days after expiration of the Guarantee Period,
such Deficiency shall, upon written demand by Purchaser, be corrected at the
sole cost and expense of Contractor: provided that Contractor shall not be
responsible for the correction of any Deficiency if such Deficiency is due to
negligence or misuse by Purchaser; and provided further that Contractor shall
not be responsible for the correction of any Deficiency in any Vessel, if such
Deficiency is due to ordinary wear and tear. Except as may otherwise be
provided in this Contract, the liability of Contractor to Purchaser on account
of any Deficiency under this paragraph c) shall not extend beyond the actual
cost of repair or correction thereof, including the cost of docking or
drydocking the Vessel in which such Deficiency exists (to the extent provided in
Article 18 f)).
If a Deficiency causes damage to an item of workmanship, machinery,
materials, equipment, outfitting or spares of a Vessel during such item's
Guarantee Period, Contractor shall be liable for the cost of correcting or
repairing such damage in an amount not exceeding USD ** (United States
Dollars ** ).
Contractor shall have the option to have at its sole expense, except for
suitable accommodations and food to be supplied by Purchaser, an engineer on
board each Vessel at any time during the Guarantee Period dependent on the
necessity. The Purchaser has the same option if the Purchaser deems it necessary
in connection with a possible Deficiency claim. If it comes out that the alleged
deficiency was no Deficiency, Purchaser has to reimburse Contractor the costs
for this engineer.
In computing the Guarantee Period provided with respect to a Vessel or
an Item of any one of the Vessels, there shall be excluded any time during which
such Vessel or Item is prevented from entering or is taken out of service on
account of any Deficiency in such Vessel or Item.
d) Purchaser may elect to have such work as is necessary to correct a
Deficiency in any Vessel performed by a reputable and qualified shipyard of
Purchaser's choice in any port or ports in the world or by the Vessel's crew,
and Contractor shall be liable to Purchaser for the full expense thereof,
including without limitation, the cost of all labor (including Vessel crew
labor) (at straight time or overtime) and materials and any taxes,
transportation charges or import or export duties which may be incurred with
respect to such materials or labor. Such corrective work may be scheduled by
Purchaser so as to minimize its disruptive effect on the Vessel's operation; and
any such work requiring drydocking may be performed at Purchaser's option at any
time at the earlier of the Vessel's first drydocking or within 60 (sixty) months
after delivery of such Vessel. Costs in connection with drydocking shall be
applied as provided for in Article 18 f) as if such work were correction of
underwater Deficiencies. Notwithstanding the foregoing, Purchaser will give
Contractor the first opportunity to perform non-emergency repairs to
Deficiencies, which cannot be performed by the Vessel's crew, and shall give
notice of such Deficiencies as soon as possible without delay, provided
Contractor can correct said Deficiencies on terms no less favorable than those
which Purchaser can arrange with respect to time, place and disruption of the
Vessel's schedule.
e) Contractor shall be given 5 (five) business days' notice of and an
opportunity to inspect a Deficiency in such Vessel, before correction (or
attempted corrections of such Deficiency); provided that if correction (or
attempted corrections) is scheduled (so as not to interfere with maintaining the
Vessel's schedule or for other good cause) so as to make such notice
impracticable, or such notice is for any other reason impracticable, Purchaser
shall notify Contractor of the Deficiency within 30 (thirty) days after
discovery thereof. No failure of Purchaser to give notice as required by this
Article 18 d) and/or e) shall result in any loss or diminution of Purchaser's
rights under this Article 18, provided any delay in giving notice does not
exceed 30 (thirty) days and actual notice is given during the Guarantee Period.
f) In the event that any underwater Deficiencies are discovered in a
Vessel at any time within 30 (thirty) months of the date of delivery of such
Vessel and either (i) such Deficiency is discovered during the Guarantee Period
applicable to such Vessel, or (ii) it is agreed or Purchaser proves that such
Deficiencies arose during the Guarantee Period applicable to such Vessel
(whether or not such Deficiencies were reported during such period), Contractor
shall be responsible for such Deficiencies and the correction thereof in
accordance with this Article 18 provided that Purchaser shall pay, as its
expense, for the haul day and any lay days required to accomplish such Vessel's
normal drydocking maintenance, and Contractor, in addition to the cost of the
correction of such Deficiency, shall also pay, as its expense, for each
additional drydocking lay day which is required to correct such Deficiency.
Notwithstanding the foregoing, if a Vessel is drydocked solely on account of a
Deficiency at any time within 12 (twelve) months of the date of delivery of such
Vessel, and such Deficiency exists, Contractor shall pay all drydocking charges,
as well as the cost of correction of such Deficiency. Purchaser may, at its
expense, conduct an underwater survey within the Guarantee Period, but its
failure to do so shall not affect any rights accorded it by this Article 18.
g) Notwithstanding the provisions of this Article 18 g) with respect
to assignment of certain portions of certain warranties and guarantees, it is
agreed that Contractor's obligations, as established in this Article 18, shall
extend and apply to all workmanship and to each and every item of machinery,
material, equipment, outfitting and spares which is incorporated in or is
delivered with the Vessel, whether furnished or fabricated by Contractor or a
subcontractor or some other vendor, manufacturer or supplier. (Contractor has
no obligations under this Article 18, however as to any fault in an Item
furnished by Purchaser which was installed or stowed on board by Contractor in
accordance with all of the requirements of this Contract and the Plans and
Specifications.) Contractor hereby assigns to Purchaser, to the extent possible
and without charge therefore, that portion of any warranty or guarantee made by
a subcontractor or other vendor, manufacturer or supplier with respect to any
item of workmanship, machinery, material, equipment, outfitting or spares which
extends beyond the Guarantee Period applicable to the Vessel containing such
item or which is otherwise more favorable to Purchaser than the guarantee of
Contractor under this Article 18. The assignment referred to in the preceding
sentence shall become effective at and upon delivery of the Vessel to which such
guarantee or warranty applies, and Contractor hereby agrees to deliver to
Purchaser, within thirty days of the date of delivery of each respective Vessel,
copies of all contracts, certifications or other documents which embody or set
forth such warranties or guarantees as are assigned to Purchaser under this
Article 18 g). Contractor shall seek to obtain best possible guarantees and
warranties from subcontractors, venders, manufacturers and suppliers and seek to
ensure that those may be assigned to Purchaser.
h) Except as otherwise provided in this Contract without limitation
as per Article 18 f), Contractor shall have no responsibility under this Article
18 with respect to any Deficiency not arising, existing or discovered in a
Vessel during the Guarantee Period applicable to such Vessel and reported in
writing to Contractor within 30 (thirty) days after the expiration of such
Guarantee Period with respect to the Vessel in which such Deficiency exists or
if the Vessel is at sea at the end of such period within 15 (fifteen) days after
completion of the voyage, but in no event later than 60 (sixty) days after
expiration of the Guarantee Period, it being specifically understood that any
such Deficiencies and all damages resulting therefrom shall be the exclusive
responsibility of Purchaser: provided that Contractor's obligation with respect
to the correction of Deficiencies for which Contractor is responsible as
provided herein shall be to fully, completely and properly correct such
Deficiencies, excepting normal wear and tear of work and materials employed in
such corrections.
i) Trial Deficiencies. The parties hereby agree that certain
Deficiencies identified as a result of tests or trials provided for herein and
as per the Specifications shall result in the payment by Contractor to Purchaser
of liquidated damages (and not as a penalty) as provided in the specific
schedules appearing below:
(1) Speed:
a) the guaranteed service speed of each of the Vessels at
design draft ** ( ** ) m shall be **
( ** ) knots and shall be demonstrated by
Contractor during sea trials under conditions as described
in the Specifications.
b) Contractor shall have no liability to Purchaser by reason
of the actual speed of any of the Vessels as determined
during trial run being less than **
( ** ) knot below the guaranteed service
speed as defined herein and in the Specifications. However,
commencing with and including such Deficiency of **
( ** ) knot in actual speed below the
guaranteed service speed of any of the Vessels, Contractor
shall pay as liquidated damages for any of the Vessels in
respect of which such a Deficiency exists as follows (but
disregarding fractions of ** ( ** ) of a
knot):
For ** ( ** ) of a knot a total sum of
USD ** (United States Dollars ** ).
For ** ( ** ) of a knot a total sum of
USD ** (United States Dollars ** ).
For ** ( ** ) of a knot a total sum of
USD ** (United States Dollars ** ).
For ** ( ** ) of a knot a total sum of
USD ** (United States Dollars ** ).
For ** ( ** ) of a knot a total sum of
USD ** (United States Dollars ** ).
For ** ( ** ) of a knot a total sum of
USD ** (United States Dollars ** ).
For ** ( ** ) of a knot a total sum of
USD ** (United States Dollars ** ).
If the Deficiency in actual speed of any of the
Vessels upon trial is ** ( ** ) knot or more
below the guaranteed service speed, the Purchaser may
at its option terminate the Contract with respect to
that Vessel in accordance with Subclause (5) below.
(2) Fuel Consumption:
a) The guaranteed fuel consumption of each of the Vessels
shall be as defined in the Specifications and shall be
demonstrated by the Contractor during the shop tests.
b) Contractor shall have no liability to Purchaser by reason
of the fuel consumption of any of the Vessels as determined
during shop tests being more than the guaranteed fuel
consumption as defined in the Specifications and herein,
provided such excess is not more than ** % ( ** per
cent) over the guaranteed fuel consumption. However,
commencing with and including an excess of ** %
( ** per cent) in actual fuel consumption of any
of the Vessels Contractor shall pay as liquidated damages
for such Vessel the sum of USD ** (United States
Dollars ** ) for each full ** %
( ** per cent) increase in fuel consumption above
said ** % ( ** per cent) (fractions of ** %
( ** per cent) to be prorated) up to a maximum of
** % ( ** per cent) over the guaranteed fuel
consumption of that Vessel.
If fuel consumption of any of the Vessels exceeds ** %
( ** per cent) of the guaranteed fuel consumption,
the Purchaser may, at its option terminate the Contract
with respect to that Vessel in accordance with Subclause
(5) below.
(3) Deadweight:
a) The guaranteed deadweight of each of the Vessels shall be
as defined in the Specifications and shall be demonstrated
by the Contractor.
b) Contractor shall have no liability to Purchaser by reason
of the actual deadweight of any of the Vessels as
determined in accordance with the Specifications being less
than ** ( ** ) metric tons below the
guaranteed deadweight. However, Contractor shall pay as
liquidated damages to Purchaser the sum of USD **
(United States Dollars ** ) for each full
metric ton of such deficiency being more than **
( ** ) metric tons up to a maximum deficiency of
** ( ** ) metric tons (said
calculation disregarding fractions of ** ( ** )
metric ton). In the event of a deficiency in actual
deadweight of any of the Vessels being more than **
( ** ) metric tons then, Purchaser may, at
its option, terminate the Contract in respect to that
Vessel in accordance with Subclause (5) below.
(4) Container Capacity Warranty:
a) The guaranteed TEU standard container slot capacity of
each Vessel when stacked ** ( ** ) high on
deck shall be as specified in the Specifications and the
General Arrangement Plan.
b) Contractor shall have no liability to Purchaser by reason
of the actual container slot capacity of each Vessel being
less than ** ( ** ) TEU below the guaranteed
container slot capacity of each Vessel. However, Contractor
shall pay as liquidated damages to Purchaser for any of the
Vessels the sum of USD ** (United States Dollars
** ) per TEU for each Vessel having a TEU
deficiency below the guaranteed TEU standard container slot
capacity less ** ( ** ) TEU.
In the event of the actual container slot capacity of any
of the Vessels being ** ( ** ) TEU less than
the guaranteed TEU standard container slot capacity as
defined in a) above, Purchaser may at its option terminate
the Contract in respect to that Vessel in accordance with
Subclause (5) below.
(5) Purchaser's Option to Terminate:
If for any reason or combination of reasons set forth above
in Subclauses (1) through (4) of this Article 18 (i),
Purchaser elects to terminate the Contract in respect of
the deficient Vessel, then within 10 (ten) days of receipt
of notice of said termination Contractor shall refund to
Purchaser the amount of all installments of the Contract
Price with respect to the Vessel in respect of which the
Contract is terminated together with interest thereon as
provided for in Article 4 e) from the date Purchaser made
the payments to the date on which reimbursement is made
together with an amount equal to the value of items
furnished by Purchaser. This refund shall discharge all
obligations, duties and liabilities of each of the parties
hereto to the other under this Contract and Contractor
shall have no liability to Purchaser for any liquidated
damages under this Article.
j) Apart from Purchaser's rights under this Contract, Purchaser shall
have no further claims against Contractor for Deficiencies, loss or damage to
the Vessels, including, but not limited to, consequential damages for loss of
use of the Vessels and all other consequential damages for damage or loss to the
Vessels.
ARTICLE 19
DEFAULT OF PURCHASER
a) In the event Purchaser is in Default (as defined in Subclause b)
below) under this Contract, and such Default is not remedied by Purchaser within
15 (fifteen) days after Purchaser's receipt of a written notice from Contractor
specifying said Default and specifying that Contractor intends to terminate this
Contract, if Purchaser does not remedy the Default within said 15 (fifteen)
days, Contractor may terminate this Contract with respect to the Vessel for
which the Default has occurred by giving written notice hereof to Purchaser not
later than 5 (five) days after the expiry of said 15 (fifteen) days' period. In
the event Contractor terminates this Contract for said Vessel in accordance with
this Article, Contractor shall have the right to recover damages for such
default from Purchaser, provided, however, that Purchaser shall only be liable
for such actual loss and damages Contractor has sustained on account of such
Default of Purchaser after Contractor has in good faith used its best efforts to
mitigate and minimize such damages, and also provided that Purchaser shall
receive an appropriate credit for all sums previously paid to Contractor,
including equipment and materials previously supplied to Contractor by Purchaser
and either retained or incorporated in the Vessel. Upon termination of the
Contract with respect to a Vessel by Contractor under this Article, title to the
said Vessel shall vest in Contractor without any further action.
b) For the purpose of this Contract, Purchaser shall be considered to
be in "Default" hereunder in any of the following events:
(i) Purchaser fails to make a required payment or payments
under this Contract, unless Purchaser remedies such
failure by payment of all of the required payment or
the undisputed portion thereof within 15 (fifteen)
business days after receipt of said written notice of
such failure from Contractor or such longer period as
may be agreed to by Contractor. Notwithstanding the
foregoing, in the event that Purchaser initiates an
arbitration proceeding under Article 33 within 15
(fifteen) business days after receipt of Contractor's
notice of default, Purchaser shall not be considered to
be in Default, unless within 15 (fifteen) business days
after the Arbitrator's(s') decision or a final judgment
by a court of competent jurisdiction Purchaser fails to
remedy any failure to make any payments for which it
was therein found liable.
(ii) Purchaser fails to take delivery of any of the Vessels
when such Vessel is duly tendered for delivery by the
Contractor under the provisions of Article 17 hereof.
(iii) If Purchaser shall (a) apply for consent to the
appointment of a receiver, trustee or liquidator of
itself or of all or any part of its assets, (b) admit
in writing its inability to pay its debts as they
mature, (c) make a general assignment for the benefit
of creditors, (d) file or consent to the filing of a
petition in bankruptcy or a petition or answer seeking
reorganization or an arrangement with creditors or to
take advantage of any insolvency, readjustment of debt,
dissolution or liquidation law, or (e) if a receiver,
liquidator or trustee of Purchaser of any of its assets
is appointed by court order and such order remains in
effect for more than 30 (thirty) days; or (f) Purchaser
is adjudicated bankrupt or insolvent, always provided
that if Purchaser's parent company provides a parent
guarantee in respect of Purchaser's obligations under
this Contract no Default will arise.
ARTICLE 20
DEFAULT OF CONTRACTOR
Any of the following shall constitute an "Event of Default" of Contractor under
this Contract:
a) Delivery of a respective Vessel is delayed for more than 180 (one
hundred eighty) days beyond the Delivery Date, (as it may have been extended by
the grace period or otherwise under this Contract), and notwithstanding that
Contractor has paid liquidated damages for any part or all of such 180 (one
hundred eighty) days' period and will continue to pay such liquidated damages.
b) Contractor shall (i) apply for consent to the appointment of a
receiver, trustee or liquidator of itself or of all or any part of its assets,
(ii) admit in writing its inability to pay its debts as they mature, (iii) make
a general assignment for the benefit of creditors, (iv) file or consent to the
filing of a petition in bankruptcy or a petition or answer seeking
reorganization or an arrangement with creditors or to take advantage of any
insolvency, readjustment of debt, dissolution or liquidation law, or (v) file or
consent to the filing of an answer admitting the material allegations of, or
default in answering, a petition filed against it in any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation proceeding, or (vi) take any action under the laws of any applicable
jurisdiction analogous to any of the foregoing, or action shall be taken by it
for the purpose of effecting any of the foregoing.
c) A receiver, liquidator or trustee of Contractor, or of any of its
assets is appointed by court order and such order remains in effect for more
than 30 (thirty) days; or Contractor is adjudicated bankrupt or insolvent; or
any of the property of Contractor is sequestered by court order and such order
remains in effect for more than 30 (thirty) days; or a petition is filed against
Contractor under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any jurisdiction,
whether now or hereafter in effect, and is not dismissed within 60 (sixty) days
after such filing or adequate security posted within 30 (thirty) days to stay
the involuntary proceedings.
ARTICLE 21
ACTION BY PURCHASER UPON DEFAULT OF CONTRACTOR
a) (i) In the event that any one or more of the Events of Default
specified in Article 20 shall have occurred, Purchaser, if it so elects, may
terminate this Contract with respect to such Vessel. Purchaser's right, in
addition to Purchaser's rights under Subclause b) and c) of this Article, to
keep and/or claim any and all liquidated damages paid or payable by Contractor
to Purchaser in accordance with Article 8 with respect to such Vessel shall be
limited to liquidated damages in an amount of USD ** (United States
Dollars ** ).
(ii)In addition to Purchaser's option to terminate by reason of
an 180 (one hundred eighty) days' delivery delay as defined in Subclause a) of
Article 20, Purchaser shall have the option, at its sole discretion, to
negotiate a revised Contract Delivery Date with Contractor ("Revised Delivery
Date"). In the event a Revised Delivery Date is agreed upon, Contractor's
obligation to pay Purchaser liquidated damages for delay as specified in
Article 8 in respect of the Vessel for which a Revised Delivery Date is agreed
shall be limited to an amount of USD ** (United States Dollars
** ) and furthermore Contractor's obligation to pay liquidated damages
for delay subsequent to the 180 (one hundred eighty) days' period specified in
Subclause a) of Article 20 shall be suspended with respect to such Vessel. If
Contractor delivers the Vessel at issue on or before the Revised Delivery Date,
as it may be extended under the Contract, no liquidated damages for any delay
beyond the initial 180 (one hundred eighty) days' delay period referred to
herein in respect of such Vessel shall be payable and the amount payable for
said 180 (one hundred and eighty) day period shall be in an amount limited to
USD ** (United States Dollars ** ). If Contractor fails
to deliver the Vessel at issue on or before the Revised Delivery Date, Purchaser
may terminate the Contract with respect to that Vessel, and Contractor shall be
liable for liquidated damages for all delay including the 180 (one hundred
eighty) days' delay, however, limited to an amount of USD **
(United States Dollars ** ).
b) In the event of termination under this Article 21 Purchaser may
then, if it so elects and it is not otherwise unlawful, proceed to have the work
on such Vessel completed anywhere, without the payment of any rental or other
charge therefore to Contractor for such period of time as may be necessary to
remove the Vessel from the Shipyard for completing the Contract Work, the
removal of the Vessel to be effected within maximum 60 (sixty) days. If
Purchaser shall elect to have all or part of the Contract Work with respect to
such undelivered Vessel completed, Contractor shall (i) assign such subcontracts
and orders for material, services, and supplies to be used in the performance of
said Contract Work to Purchaser as Purchaser may direct, and (ii) pay to
Purchaser the amount by which the total cost to Purchaser of completing said
work (including all amounts paid to Contractor hereunder) reasonably exceeds the
Per Vessel Contract Price(s) with respect to the Vessel(s) Purchaser elects to
have completed. Not withstanding the foregoing Contractor's liability under this
Subclause b) (ii) shall not in respect of a Vessel exceed an amount equal to
** % ( ** per cent) of the Per Vessel Contract Price.
After having completed the Vessel, the Purchaser has to pay to the
Contractor the Per Vessel Contract Price with amendments, if any, less (a) the
installments already paid by Purchaser to the Contractor, (b) the amounts paid
by the Purchaser to the Contractor's subcontractors and sellers in respect of
subcontract and orders, assigned to Purchaser in accordance with this Subclause
b) and (c) all costs not incurred by Contractor due to Contractor not having to
complete the Vessel.
c) In the event of termination under this Article 21, if Purchaser
shall elect not to complete such Vessel, Contractor shall immediately pay to
Purchaser an amount equal to:
(i) payments made from Purchaser to Contractor under this
Contract in respect of said Vessel;
(ii) the value of items furnished by Purchaser, or return
said items to the Purchaser at the option of the
Contractor;
d) Except if Contractor's default has resulted from Contractor's bad
faith, Purchaser shall have no other remedies for Contractor's default other
than those arising under this Contract.
ARTICLE 22
ACTION BY PURCHASER UPON FORCE MAJEURE
In the event a Delivery Date has been extended as provided for in Article 7
cumulatively for more than 220 (two hundred twenty) days, Purchaser may
terminate the Contract with respect to that Vessel. In the event Purchaser
elects to terminate the Contract for such Vessel, Contractor shall immediately
repay to Purchaser an amount equal to payments made from Purchaser to Contractor
under this Contract in respect of said Vessel together with an amount equal to
the value of items furnished by Purchaser, or return said items to the Purchaser
at the option of Contractor.
ARTICLE 23
REPLACEMENT FINANCE COMMITMENT
In order to induce Purchaser to execute this Contract, Contractor has caused
Kreditanstalt fuer Wiederaufbau ("the Bank") to issue a commitment ("the
Commitment") for post delivery financing for the benefit of Purchaser with
respect to the Vessels to be constructed hereunder. The Commitment provides that
the Bank will have no obligation to disburse the loan proceeds with respect to
any Vessel that is delivered later than 270 (two hundred seventy) days after the
respective original Contract Delivery Dates fixed as provided for under
Subclause e) of Article 1.
Contractor agrees to maintain the Commitment in place with respect to the
Vessels until the funds covered by the Commitment are disbursed. Contractor
agrees that if the Commitment terminates after the said 270 (two hundred and
seventy) days as a result (in whole or in part) of circumstances attributable
(in whole or in part) to the Contractor, Contractor shall, within 30 (thirty)
days after receipt of Purchaser's notice stating that the Bank has terminated
the Commitment or has advised the Purchaser in writing of their intent to
terminate the Commitment, cause a substitute commitment ("the Replacement
Commitment") to be made available to Purchaser with respect to the Vessel or
Vessels (the "Unfinanced Vessel") as to which the Commitment has or will
terminate. The Replacement Commitment shall contain terms and conditions no less
favorable to Purchaser than those in the Commitment. If Contractor has not
caused a Replacement Commitment satisfactory to Purchaser to be issued to
Purchaser within 30 (thirty) days of Purchaser's notice, Purchaser may terminate
this Contract with respect to any Unfinanced Vessel. In the event Purchaser
elects to terminate the Contract for such Unfinanced Vessel, Contractor shall
immediately repay to Purchaser an amount equal to payments made from Purchaser
to Contractor under this Contract in respect of such Unfinanced Vessel, together
with an amount equal to the value of items furnished by Purchaser or return said
items to the Purchaser at the option of Contractor.
ARTICLE 24
SUPPLIES ON BOARD AT DELIVERY
Lubricating oil left in the storage tanks and diesel oil, fuel oil and distilled
water on board at delivery of each Vessel shall be inventoried by Contractor,
and Purchaser shall pay for them at prevailing market prices at the time and
place of delivery of each Vessel to Purchaser. The lubricating oil vendor shall
have been approved by Purchaser. Contractor to remove all waste-oil and sludge
from each of the Vessels at Contractor's sole cost and expense at or prior to
delivery.
ARTICLE 25
TITLE
a) Prior to delivery under Article 17, Contractor shall retain, to
the extent not furnished or paid for by Purchaser, title to each of the Vessels,
to the extent completed, and title to all work and material performed upon, or
installed in any Vessel (including a hull or any part thereof in the process or
course of construction), or placed on board any such Vessel or that is located
elsewhere which is intended for use in the performance of Contract Work. Prior
to delivery under Article 17, to the extent that Purchaser shall have paid
Contractor for such material and labor or provided same, title shall vest in
Purchaser without any further action. Such material will be held by Contractor
in custody for Purchaser free of charge. The risk of loss of or damage to all
such work and material and any undelivered Vessel(s) shall remain with
Contractor, and Purchaser shall not be deemed to have waived its rights to
require Contractor to correct any Deficiency and to deliver each of the Vessels
with the Contract Work Complete, as provided in this Contract.
b) Prior to the delivery of a Vessel, any lien thereon or on any work
or materials performed upon or installed in such Vessel arising under law in
Contractor's favor (but only such liens as run solely in favor of Contractor)
shall not be deemed to violate the provisions of this Article 25 or Article 26.
c) Title to all scrap and title to any material which is surplus to
the requirements of this Contract (except material furnished by Purchaser) shall
vest in Contractor.
d) Title and risk in any of the Vessels shall be fully vested in
Purchaser upon delivery of said Vessel in accordance with the provisions of
Article 17.
e) In the event that the Purchaser shall terminate this Contract with
respect to any Vessel and provided termination does not take place according to
Article 21 b) and further provided that the Contractor has duly paid any and all
amounts including all damages, due to the Purchaser under this Contract, then
title to said Vessel shall vest in the Contractor without any further action.
ARTICLE 26
LIENS
a) At the time Contractor requests any payment under the provisions
of this Contract, and at all other reasonable times, Purchaser may, if it has
reasonable cause to request such information, require Contractor to furnish a
written statement satisfactory to Purchaser showing what, if any liens, security
interests or rights in rem of any kind have been or can be acquired or attached
on or against any of the Vessels or any property aboard the Vessels or any
Contract Work (whether incorporated in any of the Vessels or not), or any
material at the Shipyard or elsewhere (including material furnished by
Purchaser) related to the performance of the Contract Work. Contractor agrees
that no liens, security interests or rights in rem of any kind shall at any time
be permitted to lie or attach against or upon any of the Vessels or any of said
property, Contract Work or materials, except liens, security interests or rights
in rem as are permitted to exist under Articles 25 b) or 17 a) or as arise
solely out of the act, neglect or default of Purchaser (other than the entering
into or carrying out of this Contract).
b) If a lien, security interest or right in rem of any kind is filed
or asserted against or attached upon any of the Vessels or any of said property,
material or Contract Work, Contractor shall promptly notify Purchaser thereof in
writing. If such lien, security interest or right does not arise solely out of
the act, neglect or default of Purchaser (other than the entering into or
carrying out of this Contract), Contractor shall, not later than 14 (fourteen)
days thereafter, secure the discharge or release of such lien, security interest
or right in rem; provided that if Contractor desires to contest such lien, and
such release or discharge is not available under law during such contest
(including, without limitation, through the filing of a bond or security),
Contractor shall immediately take such steps as in the opinion of Purchaser
shall prevent such lien, security interest or right in rem from delaying or
otherwise adversely affecting the Contract Work and shall indemnify fully, hold
safe and harmless and defend Purchaser and any and all of the Protected Parties
(including the Vessels) from all costs, claims, charges and damages by reason of
such lien, security interest, right in rem or claims and/or in any way
attributable thereto.
c) Notwithstanding the provisions of Article 26 b), Purchaser may
secure the removal of such lien, security interest or right in rem, in which
event Contractor shall reimburse Purchaser for its costs of securing such
discharge or release (which cost shall include any expenses incurred in
connection therewith, including reasonable attorney's fees) by deducting such
sum from any payments due or to become due to Contractor under this Contract.
In the event such cost is in excess of the amount of any such reimbursement by
deductions, Contractor shall pay the amount of such excess to Purchaser
promptly upon demand.
d) Notwithstanding the provisions of Article 26 b), Purchaser,
without securing the discharge or release of such lien, security interest or
right in rem as provided in Article 26 c), may nevertheless withhold from any
payments due or to become due to Contractor, unless and until such lien,
security interest or right in rem is released or discharged by Contractor, a sum
equal to the amount determined by Purchaser to be required to secure the release
or discharge of such lien, security interest or right in rem, which amount shall
include the estimated amount of all expenses which might be incurred therewith,
including reasonable attorneys' fees.
ARTICLE 27
TAXES
Contractor shall pay, as a cost of Contractor, all taxes, assessments and duties
lawfully assessed or levied prior to delivery of a Vessel against such Vessel
and material, supplies and equipment to be used or used in the performance of
this Contract (excepting, however, material, supplies and equipment furnished to
Contractor by Purchaser) and any sales, use or excise taxes with respect thereto
lawfully assessed or levied prior to, or concurrently with, delivery of such
Vessel.
ARTICLE 28
PATENT INFRINGEMENT
a) Contractor shall be responsible for any and all claims against
Purchaser and/or any and all of the Protected Parties, for infringement of
patents, patent rights, copyrights, trademarks or trade secrets, in the
construction, in the use of or in the sale of any of the said Vessels as
constructed by Contractor (excepting claims arising solely out of the Plans or
Specifications or any equipment, machinery or material supplied to Contractor by
Purchaser, and such use of any of the foregoing as Contractor is required to
make by the express terms of this Contract and the Plans and Specifications),
and Contractor shall indemnify fully, hold safe and harmless and defend
Purchaser and any and all of the Protected Parties, from and against all such
claims (without exception) and against all losses, claims, liabilities, demands,
suits, causes of action, costs or expenses which any of them may be obligated to
pay by reason thereof, including expenses of litigation and attorneys' fees, if
any. Purchaser shall indemnify fully, hold safe and harmless and defend
Contractor, its agents, officers, directors, servants and employees, and (prior
to delivery hereof) the Vessels, and each of them, from and against all claims,
including expenses of litigation and attorneys fees, arising solely out of the
Plans or Specifications or any equipment, machinery or material supplied to
Contractor by Purchaser, and such use of any of the foregoing as Contractor is
required to make by the express terms of this Contract and the Plans and
Specifications.
b) In the event that a Vessel, or any part thereof, by reason of a
claim for which Contractor is responsible under Article 28 a) shall be held to
constitute an infringement of a patent, patent right, copyright, trademark or
trade secret, and the use of such Vessel or any part thereof shall be enjoined,
Contractor shall, at its option and at its own expense, either procure for
Purchaser the right to continue using such Vessel and every part thereof, or, if
it can be done without material effect or delay upon such Vessel's operations,
replace any infringing part of such Vessel with a noninfringing part which is
satisfactory to Purchaser.
ARTICLE 29
ASSIGNMENT OF CONTRACT
The benefits and obligations of this Contract shall inure to and be binding upon
the successors and permitted assigns of the original parties hereto. No
assignment shall be made by Contractor except with the prior written consent of
Purchaser. Purchaser may, with notice to Contractor, assign all or any of its
rights under this Contract, as they relate to one or more Vessels, or in one or
more of the Vessels (including a hull or any part thereof in the process or
course of construction and all other property title to which has vested in
Purchaser pursuant to Article 25), to any third party; provided that Purchaser
shall remain liable for its obligations hereunder. In connection with an
assignment by Purchaser of all of its rights with respect to one or more of the
Vessels (or all the parts thereof in the process or course of construction and
all other property associated therewith) if Contractor, to Contractor's
reasonable satisfaction, is presented with evidence of such assignee's financial
capability to complete the remaining progress payments of Purchaser hereunder,
Contractor shall agree to relieve Purchaser of all obligations hereunder.
Contractor agrees to cooperate with Purchaser (without subjecting Purchaser to
any fee or expense reimbursement therefore) in connection with any assignment by
Purchaser of all or part of this Contract in connection with any such
assignment. Any assignment made in violation of this Article 29 shall be void
and of no force or effect. If any assignments under this Clause would lead to
change of the structure of the post delivery financing with regard to the
Vessels in a manner which will cause a monetary loss to Contractor and Purchaser
does not agree to indemnify Contractor for such loss, then said assignments can
only be granted after Contractor's prior written consent, which consent shall
not be withheld unreasonably.
ARTICLE 30
COMPUTATION OF TIME
Except as otherwise provided in this Contract, all periods of time shall be
computed by including Saturdays, Sundays and holidays, except that if any period
terminates on a Saturday, Sunday or bank holiday in USA (in the case of periods
applicable to action by Purchaser) or in Germany (in the case of periods
applicable to action by Contractor), it shall be deemed extended to the business
day next succeeding. References herein to "business days" refer to days other
than Saturdays, Sundays and such holidays.
ARTICLE 31
CONTRACTOR TO COMPLY WITH ALL LAWS AND REGULATIONS
Contractor shall comply with all national, state and local laws, rules and
regulations, and the requirements of any applicable classification society and
of the departments and agencies of any nation and any state and local
jurisdiction and any international body affecting the construction and operation
of works, plants, or vessels in or on navigable waters and the shores thereof,
and all other waters subject to the control of any nation and any state and
local jurisdiction and shall procure at its own expense such permits from the
nation and from state and local authorities as may be necessary in connection
with beginning or carrying on to completion the Contract Work and shall at all
times comply with all national, state and local laws in any way affecting the
Contract Work.
ARTICLE 32
APPLICABLE LAW
This Contract shall be governed by New York State Law without reference to the
laws of any other jurisdiction and each of the parties hereby submits itself to
the exclusive jurisdiction of any court sitting in the State of New York for
purposes of any arbitration proceedings under this Contract and enforcement of
any awards or court judgments rendered hereunder. Service in any such action or
proceeding may be made by notice to the other party given as set forth in
Article 35.
ARTICLE 33
DISPUTES, ARBITRATION
a) In the event of any dispute arising out of or relating to this
Contract or any provision hereof, such dispute shall be referred to the
Arbitrator(s), as defined in this Article 33, and the decision of the
Arbitrator(s) shall be final and binding upon both parties hereto.
b) No dispute under this Contract shall entitle Contractor to cease
work on any part of the Contract Work or to refuse delivery of a Vessel
(provided Purchaser delivers to Contractor - simultaneously with delivery of
such Vessel - a guarantee issued by an internationally reputable bank in favor
of Contractor and in respect of the amount in dispute, which amount shall not
exceed the difference between payments
made by Purchaser under this Contract in respect of such Vessel and the
Per Vessel Contract Price plus all other payment claims of Contractor according
to this Contract and payable in accordance with the terms of an arbitration
award) nor shall any such dispute entitle Purchaser to withhold any portion of
any payment which is not in dispute.
c) The parties agree to designate and appoint a sole Arbitrator, and
if they cannot agree within 10 (ten) days on a sole Arbitrator, a panel of 3
(three) Arbitrators shall be chosen, one by each party within 30 (thirty) days
and the third by said two Arbitrators within 30 (thirty) days. In the event one
party fails to appoint its Arbitrator according to this Article and/or the two
Arbitrators cannot agree on the third Arbitrator, he shall be appointed by the
Society of Maritime Arbitrators, Inc. in New York within 30 (thirty) days. All
persons designated as Arbitrator under this Contract shall be knowledgeable in
commercial vessel construction, and shall not have had, shall then not have and
shall then have no expectation of acquiring, any business or financial
relationship with either of the parties hereto, except such relationship as may
be acquired by reason of being designated as Arbitrator. Neither the sole
Arbitrator nor the third Arbitrator shall be a national of the country of either
party.
d) Proceedings before the Arbitrator(s) shall be scheduled to
commence promptly after Purchaser or Contractor refers a dispute for resolution
under this Article 33, but in no event later than 14 (fourteen) days after
selection of the Arbitrator(s). It is the express intent of the parties that
all disputes referred to arbitration be settled with all possible dispatch, but
in no event later than 60 (sixty) days after proceedings before the
Arbitrator(s) commenced. Such proceedings shall be conducted in accordance with
such rules as the Arbitrator(s) deems best suited to the dispute in questions;
provided that: (i) each party shall have a right to have its attorney present at
all proceedings before the Arbitrator(s), and (ii) either party shall have the
right to have all testimony presented to the Arbitrator(s) and all other
proceedings before the Arbitrator(s) recorded on recording tape or by a
certified court reporter, with the cost thereof to be borne by the party
requesting such recording; and (iii) each party shall have the right to present
arguments and evidence to the Arbitrator(s); and (iv) each party shall be
entitled to all rights and privileges granted by the Arbitrator(s) to the other
party; and (v) each party shall be entitled to compel the attendance of
witnesses or production of documents, and for this purpose, the Arbitrator(s)
shall have the power to issue subpoenas; and (vi) each party shall have the
right to obtain discovery and (upon leave of the Arbitrator(s)) take
dispositions, of the scope and in the manner provided in the United States
Federal Rules of Civil Procedure; and (vii) the Arbitrator(s) shall have the
power to impose on either party such terms, conditions, consequences,
liabilities, sanctions and penalties as he deems necessary or appropriate (which
shall be as conclusive, final and enforceable as his award on the merits) to
compel or induce the appearance of, or production of documents in the custody
of, any officer, director, agent or employee of such party or its independent
contractors or subcontractors or any party which controls, is controlled by or
is under common control with such party or its independent contractors or
subcontractors. Costs in connection with such arbitration including fees and
expenses of the Arbitrator(s) and the parties' attorney's expenses, shall be
awarded by the Arbitrator(s) based upon the respective merits of the parties'
positions as determined by the Award. Any arbitration proceeding shall be
conducted by the parties and the Arbitrator(s) with all reasonable dispatch, and
a decision reached and announced within 7 (seven) days after submission. If
required by either party, a detailed written opinion shall be issued 21 (twenty
one) days after publication of the decision, setting forth the facts, reasons
and conclusions upon which the decision was made.
e) The decision of the Arbitrator(s), when reduced to writing and
signed by the Arbitrator, shall be final, conclusive and binding upon the
parties hereto, and judgment may be entered on any award made hereunder in any
court having jurisdiction thereof. Any award of money by the Arbitrator(s)
shall specify whether interest is due as set forth in Article 4 e) and, if it is
due, shall specify the date from which it accrues.
f) All proceedings before the Arbitrator(s) shall be held at New
York, or such other location as may be agreed to by both parties in writing.
ARTICLE 34
CONDITIONS
a) The obligations of the Purchaser under this Contract are expressly
subject to and conditioned upon the following:
(i) Purchaser shall have obtained a binding commitment from
financier(s) with respect to the financing of each
Vessel on terms satisfactory to Purchaser;
(ii) The fulfillment of any and all of the conditions
precedent of Daewoo Corporation and Daewoo
Shipbuilding and Heavy Machinery Ltd. under a contract
for the purchase of containership vessels entered into
by the Purchaser on the date hereof and the
effectiveness of such contract.
b) The obligations of the Contractor under this Contract are
expressly subject to and conditioned upon the approval of Contractors
Supervisory Board which shall be obtained on or before three business days after
signature of this Contract.
ARTICLE 35
GENERAL
a) Any notices relating to this Contract shall be given to the other
party at the address set forth below or at such other address as either party
shall designate in writing:
Contractor: Howaldtswerke-Deutsche Werft Aktiengesellschaft
Department KA
Werftstrasse 112-114
D-2300, Kiel 14
Telex: 292 288 (Answerback: HDW D)
Attention: Mr. Lehmann
Purchaser: American President Lines, Ltd.
1111 Broadway, Oakland, California 94607
Telex: MCI 6719357
Attention: Stephen Schmidt
Delivery or service of any notice shall be deemed completed (i) if personally
delivered, upon such delivery to the individual listed in the "Attention" lines
above or such other individuals may have been authorized by a party, by notice
to the other, to accept such notice on its behalf; (ii) if telexed, upon
acknowledgment thereof by return telex (NOT AUTOMATIC ANSWERBACK) or other
written document; or (iii) if mailed, upon receipt.
b) This Contract supersedes all prior agreements or understandings,
whether written or oral, of Contractor or Purchaser relating to the subject
hereof and incorporates the entire understanding of the parties with respect
thereto. This Contract may be amended, and any right or condition thereunder
waived, only by a written instrument signed by the party against whom such
amendment or waiver is sought to be enforced.
c) In the event that any action or proceeding shall be commenced or
any claim shall be asserted which, if successful, may entitle one party to
indemnification from the other pursuant to the express provisions of this
Contract, the party seeking indemnification shall give written notice of such
action, proceeding or claim to the other reasonably promptly after receipt of
written notice of such action, proceeding or claim. If a Vessel shall at any
time be arrested or if any property of a party shall at any time be attached or
otherwise levied upon on account of a matter subject to identification under
this Contract, the indemnifying party shall, upon demand by the other, promptly
secure the release of any such arrest, attachment or levy. The indemnified
party shall be entitled to participate in the discharge of any such arrests
attachment or levy. The indemnifying party shall be entitled to participate in
and, to the extent it shall wish, to direct the defense of such action,
proceeding or claim (including the selection of counsel reasonably satisfactory
to the indemnified party) at its own expense. The indemnified party shall
reasonably cooperate in the defense of such action, but any out-of-pocket
expenses so incurred by the indemnified party shall be promptly reimbursed by
the other. The indemnified party shall have the right to employ its own counsel
in any such case, but the fees and expenses of such counsel shall be its own
expense, unless the employment of such counsel shall have been authorized by the
other party in connection with the defense of such action or claim, or unless
the other party shall not have employed counsel to have charge of the defense of
the action or claim, in either of which events such fees and expenses shall be
borne by the other party. Any failure of a party entitled to indemnification
under the express provisions of this Contract to comply with any requirement of
this Subclause c) shall relieve the other of liabilities pursuant to such
express provisions only to the extent that the other can establish that such
party was prejudiced as a proximate result of such failure. The obligations of
one party to indemnify the other under any express provision of this Contract
shall not be terminated by termination of this Contract, delivery of any or all
Vessels or expiration of any or all Guarantee Periods.
d) Each Vessel shall be in every respect identical to each and every
other Vessel, to the extent and scope as required by the Plans and/or
Specifications.
e) All references in this Contract to Articles are to Articles of
this Contract, except as otherwise expressly indicated.
f) The use herein of (i) the neuter gender includes the masculine and
the feminine; (ii) the singular number includes the plural, whenever the context
so requires.
g) The Article headings and table of contents in this Contract are
inserted for convenience and the words contained therein shall in no way be held
to expand, amplify, modify or aid in the interpretation or construction hereof.
h) This Contract may be executed in any number of counterparts, each
of which shall be deemed to be an original instrument, but all of which together
shall constitute one and the same instrument.
ARTICLE 36
EFFECTIVE DATE
This Contract shall not become effective and neither party shall have any
obligation or liability hereunder until all of the respective conditions of each
party described in Article 34 have been satisfied or waived, at which time the
Contract will become automatically effective, provided that this must be
accomplished on or before May 27, 1993 (unless otherwise provided in Article 34)
or otherwise this Contract is null and void. Each party shall notify the other
forthwith upon becoming aware that the conditions precedent to the performance
of its obligations hereunder have been satisfied or waived.
IN WITNESS WHEREOF, the parties have executed this Contract in multiple
counterparts as of the date first above written.
ATTEST: By: Howaldtswerke-Deutsche Werft
Aktiengesellschaft
/s/ Jochen Rhode
Name: Jochen Rhode
Title: Member of Board of Management
ATTEST: By: American President Lines, Ltd.
/s/ Joji Hayashi
Name: Joji Hayashi
Title: President and Chief Executive Officer
PH930719Csec-1000ai-HDW
MATERIAL MARKED WITH A DOUBLE ASTERISK
HAS BEEN OMITTED PURSUANT TO A GRANT OF
CONFIDENTIAL TREATMENT BY THE COMMISSION
CONTRACT FOR THE PURCHASE OF CONTAINERSHIP VESSELS
between
Daewoo Shipbuilding and Heavy Machinery Ltd.
and
American President Lines, Ltd.
CONTRACT FOR THE PURCHASE OF CONTAINERSHIP VESSELS
<TABLE>
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<CAPTION>
C O N T E N T S
Article Page
<S> <C>
1 General Statement of Work 3
2 Plans and Specifications 6
3 Interpretation 8
4 Payment of Contract Price 10
5 Changes 14
6 Rights to Engineering and Design Data 20
7 Extension of Time for Completion of Work 22
8 Liquidated Damages for Delay in Delivery 26
9 Contractor to Receive and care for Items 28
Furnished by Purchaser
10 Insurance on the Vessel and Material 29
11 Loss of or Damage to a Vessel 30
12 Indemnification 32
13 Appointment of Representatives of Purchaser 34
14 Materials and Workmanship 34
15 Inspection, Approval of Plans and Work 37
16 Trials 39
17 Delivery 41
Article Page
18 Guarantee 45
19 Default of Purchaser 55
20 Default of Contractor 57
21 Action by Purchaser Upon Default of Contractor 58
22 Action by Purchaser upon Force Majeure 60
23 Replacement Finance Commitment 61
24 Supplies on Board at Delivery 62
25 Title 62
26 Liens 63
27 Taxes 65
28 Patent Infringement 66
29 Assignment of Contract 67
30 Computation of Time 68
31 Contractor to Comply with All Laws and Regulations 68
32 Applicable Law 69
33 Disputes, Arbitration 69
34 Conditions 71
35 General 72
36 Effective Date 75
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</TABLE>
THIS CONTRACT (herein, as it may be amended from time to time in accordance with
its terms called this "Contract") entered into of this 10th day of May, 1993, by
and between on the one hand American President Lines, Ltd., registered in the
State of Delaware and having its principal office at 1111 Broadway, Oakland,
California 94607 (hereinafter called "Purchaser"), and on the other hand Daewoo
Corporation and Daewoo Shipbuilding and Heavy Machinery Ltd., both corporations
organized and existing under the laws of the Republic of Korea having their
registered office at 541, 5-Ga, Namdaemun-Ro, Chung-Gu, Seoul, Korea
(hereinafter collectively called "Contractor").
WITNESSETH:
WHEREAS, Purchaser and Contractor desire to enter into this Contract pursuant to
which Contractor agrees to design, build, launch, equip and complete at its
shipyard known as OKPOYARD, located in Koje Island, Korea ("Shipyard") and sell
and deliver to Purchaser three (3) container vessels more particularly described
in Article I hereof (individually a "Vessel", collectively, "Vessels") and
Purchaser agrees to purchase and take delivery of the Vessels from the
Contractor and pay for the same, all upon the terms and conditions hereinafter
set forth;
WHEREAS, Purchaser and Contractor will on the date hereof enter into a separate
agreement, concerning options for identical vessels annexed hereto as Exhibit 1.
NOW, THEREFORE, in consideration of the premises and of the mutual promises
hereinafter set forth, the parties agree as follows:
ARTICLE 1
GENERAL STATEMENT OF WORK
a) Contractor shall furnish all plant facilities, labor, materials,
supplies and equipment, and shall perform all work, necessary to design,
engineer, construct, launch, outfit, test and deliver the Vessels, at its own
risk and expense, in strict accordance with the provisions of this Contract and
the Plans (as defined in Article 2 a) below) and Specifications (as defined in
Article 2 b) below). Contractor shall also do everything else required of
Contractor by this Contract, the Plans and Specifications (including the
installation or stowage on board of all outfit, equipment and spares which the
Plans or Specifications provide shall be furnished by Purchaser), all for the
total consideration of USD ** (in words: United States Dollars
** , subject to such additions or
deductions as are provided for in Articles 5, 14, 17 and 33 ("the Contract
Price"). The obligations of the Contractor set forth in this Article 1 are
herein referred to as the "Contract Work". Of the Contract Price USD
** (in words: United States Dollars
** ) as it may be increased or decreased
pursuant to Articles 5, 14, 17, and 33, is allocated to each Vessel (the "Per
Vessel Contract Price").
b) The Vessels shall be identified as Contractor's Hull Numbers 4028,
4029 and 4033 and shall be constructed at Contractor's Shipyard.
c) When the Contract Work required to be performed with respect to
any one of the Vessels is Complete (as defined in Subclause d) below), or at
such earlier time as may be specified by Purchaser pursuant to Article 17 d),
and after such Vessel has passed the trials and tests required by this Contract,
such Vessel shall be delivered by Contractor and be accepted by Purchaser in
accordance with Article 17.
d) A Vessel shall be deemed to be Complete when the Contractor has
fulfilled any and all of his obligations stipulated under this Contract, the
Plans and Specifications with respect to said Vessel and said Vessel is freed
from all Deficiencies (as defined in Article 18 b) below) known to Purchaser and
Contractor at delivery.
e) Contractor shall timely commence the Contract Work after this
Contract has come into force and the Contractor shall prosecute the Contract
Work with due diligence thereafter. Contractor shall deliver the Vessels to
Purchaser on or before close of business hours local time on the dates set forth
below (which dates shall be business days) (such dates, as the same may be
extended or accelerated pursuant to Articles 5 or 7, shall hereinafter be
referred to as the "Delivery Dates" ):
Delivery Date
Contractor's Hull No. 4028 May 30, 1995
Contractor's Hull No. 4029 June 21, 1995
Contractor's Hull No. 4033 October 17, 1995
Within the period of 60 (sixty) days after signing of this
Contract, the Contractor shall be entitled to finally fix the Delivery Dates to
dates, which shall not exceed the dates stated above by more than 25
(twentyfive) days.
f) Contractor may be entitled, subject to the provisions of this
Article, to a grace period (extension) in the Delivery Date(s) of the Vessel(s)
not to exceed 28 (twentyeight) days, provided always that on or before the 90th
(ninetieth) day before the respective Vessel's Delivery Date, as the same may be
extended pursuant to the Contract, the Contractor must submit a notice to the
Purchaser specifying the proposed grace period for such Vessel which shall state
the factual basis for the grace period.
g) For purposes of this Contract, the term Vessel(s) shall include
the vessel structure and all materials and equipment installed or to be
installed thereon, and all outfitting, equipment and spares.
h) The Contractor may not subcontract the Contract Work or any parts
hereof. Notwithstanding the foregoing Contractor may at the Contractor's
responsibility subcontract parts of the Contract Work:
(i) provided Purchaser has granted his written approval
hereof (which must be granted or rejected within 10 (ten)
business days after written notice hereof); or
(ii) to subcontractors as described in the "Maker's List"
which forms part of the Plans; or
(iii) provided any and all work of such subcontractors takes
place at the Shipyard; or
(iv) provided such parts are minor parts less vital to the
construction of the Vessels.
ARTICLE 2
PLANS AND SPECIFICATIONS
a) For the purpose of this Contract, the term "Plans" shall refer to
those drawings listed below, as the same may hereafter from time to time be
altered, supplemented or deleted in accordance with Article 3 or 5 and said
Plans are incorporated in their entirety in this Contract:
- - General Arrangement dated May 5, 1993
- - Maker List dated May 5, 1993
The foregoing Plans have, at or before execution of this Contract, been
identified by the signatures of the parties hereto.
b) For the purposes of this Contract, the term "Specifications" shall
refer to those documents titled
- -Part I: Specification General and Hull dated May 5, 1993
- -Part II: Specification Machinery dated May 5, 1993
- -Part III: Specification Automation and Electric dated May 5, 1993,
and as the same may hereafter from time to time be altered, supplemented or
deleted pursuant to the provisions of Article 3 or Article 5 and said
Specifications are incorporated in their entirety in this Contract.
The Specifications have, at or before the execution of this Contract, been
identified by the signatures of the parties hereto. All references in this
Contract to the Specifications are intended to apply with equal force to the
more general requirements of the Specifications (including, without limitation,
any set forth in the Specifications) and the more specific requirements.
c) CONTRACTOR WARRANTS AND AGREES:
(i) that the Contract Work shall be performed in strict
accordance with each and every direction, provision and
requirement set forth in this Contract and/or the Plans
and/or Specifications;
(ii) that the Vessels, and each of them, will possess each and
every feature of construction, design and performance and
each and every other characteristic and feature required
in the Vessels by this Contract and/or the Plans and/or
Specifications;
(iii) that the satisfaction of Contractor's obligations under
clauses (i) and (ii) of this Article 2 c) shall be solely
the obligation and responsibility of Contractor and solely
at the risk of Contractor;
(iv) that Contractor shall fully and completely satisfy such
obligations, notwithstanding any cost or expense which it
may be required to incur in connection therewith,
irrespective of such cost or expense regardless of
foreseeability;
(v) that Contractor is a sophisticated, substantial and
experienced shipbuilder and, prior to entering into this
Contract, has had sufficient opportunity to review all of
the provisions of this Contract and the Plans and
Specifications.
d) Nothing contained in the Plans or Specifications may be altered or
deleted except by a plan, drawing or document expressly making such alteration
or deletion and expressly referring to the matter thereby altered or deleted (an
"Amendment") which shall become effective upon its execution by Contractor and
Purchaser. All Amendments shall be clearly labeled as an Article 5 Change, as
appropriate. No Amendment of one part or aspect of the Plans or Specifications
shall effect any alteration or deletion to any other part of the Plans or
Specifications by implication or otherwise; and no approval or rejection (or
failure to approve or reject) of any plan, specification, document or Contract
Work under Article 14 or 15 shall effect any alteration or deletion to any part
of the Plans or Specification by implication or otherwise.
e) Prior to commencement of the Contract Work, and at all relevant
times after commencement of the Contract Work, Contractor shall provide
Purchaser with a Work Schedule containing a critical path treatment of major and
significant work elements, in their proper sequence, which must be completed to
ensure delivery of the Vessels by their Delivery Dates. Contractor agrees to
maintain a current Work Schedule throughout the Contract Work and to provide
copies to Purchaser upon demand.
ARTICLE 3
INTERPRETATION
a) If any discrepancy, difference or conflict exists between the
provisions of this Contract, on the one hand, and the Plans and/or
Specifications on the other hand, then to the extent of such discrepancy,
difference or conflict only, the Plans and Specifications shall be ineffectual,
and the provisions of this Contract shall prevail, and in all other respects the
Plans and Specifications shall be in full force and effect; provided that to the
extent such discrepancy, difference or conflict arises solely because this
Contract, on the one hand, and the Plans and/or Specifications, on the other
hand, contain requirements that are in addition to the requirements of the
other, then all of such additional requirements shall be fully complied with by
Contractor.
b) If any discrepancy, difference or conflict exists between the
provisions of the Specifications, on the one hand, and the Plans on the other
hand, then to the extent of such discrepancy, difference or conflict only, the
Plans shall be ineffectual, and the provisions of the Specifications shall
prevail, and in all other respects the Plans shall be in full force and effect;
provided that to the extent such discrepancy, difference or conflict arises
solely because the Specifications, on the one hand, and the Plans, on the other
hand, contain requirements that are in addition to the requirements of the
other, then all of such additional requirements shall be fully complied with by
Contractor.
c) Any conflict between any requirement of the Plans or
Specifications and any other requirement(s) of the Plans or Specifications, or
the impossibility - through the use of technology which is available to or in
the world wide shipbuilding industry and without regard to the cost, expense or
time involved - of complying with any requirement of the Plans or Specifications
or with any group or combination of such requirements, is herein called an
"Error".
d) A conflict as described in Subclause c) above is to be considered
an Error notwithstanding that the conflict is between one or more requirements
which are specific in nature and one or more requirements which are general in
nature. Purchaser hereby disclaims any express or implied warranty that the
Plans and Specifications do not include any Errors, whether minor or major, and
it is agreed that Purchaser shall have no liability or responsibility of any
nature to Contractor with respect to Errors, and Contractor shall correct such
Errors with no increase in the Contract Price after first notifying and
obtaining Purchaser's written approval hereof.
e) In the event there are any omissions in the Plans and
Specifications that effect the seaworthiness of the Vessel(s), the Contractor
shall correct such omissions, after first notifying Purchaser in writing and
obtaining Purchaser's written approval, with no increase in the Contract Price.
f) Any changes made pursuant in this Article shall be set forth in an
Amendment, as appropriate to the Plans and Specifications and shall be forwarded
to Purchaser for approval upon which it shall be executed by both parties.
ARTICLE 4
PAYMENT OF CONTRACT PRICE
a) Purchaser shall have no obligation to make any payments in respect
of a Vessel beyond such Vessel's Per Vessel Contract Price, as it may be
increased or decreased pursuant to Articles 5, 14, 17 and 33.
b) Payment of the Per Vessel Contract Price shall be made in
installments as follows and in the manner described in Article 4 d):
(i) ** % ( ** per cent) on the effective date of
this Contract, subject to Contractor's delivery to
Purchasers of an irrevocable stand by letter of credit
issued by the Export-Import Bank of Korea ("Kexim") in
favor of Purchaser in the amount hereof together with
interest hereon as per Article 4 e) securing Contractor's
refund obligation to Purchaser under this Contract and
payable in accordance with the terms of an arbitration
award, if Contractor has not authorized payment under the
stand by letter of credit beforehand. All costs and fees
in connection with the stand by letter of credit
(including without limitation fees to the bank(s) in
respect of payments under the stand by letter of credit)
shall be paid by Contractor. The stand by letter of credit
shall be identical in words and substance to the draft
herefore annexed hereto as Exhibit 2.
(ii) ** % ( ** per cent) upon the commencement of
steel cutting of each Vessel.
(iii) ** % ( ** per cent )upon keel laying (setting
of first block in building dock) of each Vessel.
(iv) The balance upon delivery of a respective Vessel, subject
to Contractor's delivery of a stand by letter of credit in
the amount of ** % of the per Vessel Contract Price to
secure payment of guarantee/warranty items arising under
the Contract in favor of Purchaser. The stand by letter of
credit shall be issued by Kexim and shall be irrevocable.
The letter of credit shall furthermore be payable on
demand/by sight provided that Contractor has been given
prior notice of the claim and 30 (thirty) days within
which to settle the invoice for the costs paid by
Purchaser to remedy the Deficiency pursuant to Article 18.
All costs and fees in connection with the stand by letter
of credit (including without limitation fees to the
bank(s) in respect of payments under the stand by letter
of credit) shall be paid by Contractor. The stand by
letter of credit shall be identical in words and substance
to the draft herefore annexed hereto as Exhibit 3.
c) Payments under this Contract shall be made at the following times
and in the manner described in Article 4 d):
(i) for an Article 5 Change (as defined in Article 5 a) (x)
to the extent the aggregate cost of such changes,
calculated in accordance with the provisions of Article 5,
do not exceed ** % ( ** per cent) of the Per
Vessel Contract Price, then payment of such changes shall
be made simultaneously with the delivery of a Vessel; (y)
to the extent of the aggregate cost of such changes
calculated in accordance with the provisions of Article 5
exceed ** % ( ** per cent) of the Per Vessel
Contract Price, then payment to such extent for such
changes shall be made as follows:
- ** % ( ** per cent) within 10 (ten) days of
the date the cost of such change is established;
subject to Contractor's delivery to Purchaser of an
irrevocable stand by letter of credit issued by
Kexim in favor of Purchaser in the amount hereof
together with interest hereon as per Article 4 e)
securing Contractor's refund obligations to
Purchaser under this Contract and payable in
accordance with the terms of an arbitration award if
Contractor has not authorized payment under the
stand by letter of credit beforehand. All costs and
fees in connection with the stand by letter of
credit (including without limitation fees to the
bank(s) in respect of payments under the stand by
letter of credit) shall be paid by Contractor. The
stand by letter of credit shall be identical in
words and substance mutatis mutandis to the draft
for a stand by letter of credit annexed hereto as
Exhibit 2;
- the balance of the cost of such change shall be made
simultaneously with delivery of such Vessel.
(ii) for amounts accruing prior to delivery but for which no
specific date is set forth in this Contract, payments
shall be made simultaneously with delivery of a Vessel;
(iii) for amounts for which a specific payment date is set
forth in this Contract, payments shall be made in
accordance with said date;
(iv) for amounts accruing after delivery in respect of a
Deficiency, payment shall be due as follows:
1) If the parties agree that the Deficiency in question is a
Deficiency, not later than 30 (thirty) business days
after Contractor's receipt of invoice for the
Deficiency remedied pursuant to Article 18; or
2) if the parties are in dispute as to whether the
Deficiency is a Deficiency, on the date set forth in
the decision of the Arbitrator(s) (as defined in
Article 33) together with interest thereon calculated
in accordance with Article 4 e) as from the date
Contractor received invoice for the Deficiency
remedied.
d) All payments to be made under this Contract, shall be made in
United States Dollars, the legal currency of the United States of America. All
payments to be made in favor of the Contractor, shall be made by means of bank
wire or swift transfer to Contractor. Payments shall be made unconditional and
deemed fulfilled when credited to the account of Kexim with
** (account No. ** ) in
favor of Daewoo Corporation under advice by authenticated cable or telex to
Kexim by the remitting bank.
Any charges arising in connection with payment(s) - if any - shall
be borne by the paying party.
e) All overdue payments under this Contract shall bear interest at a
rate of ** % p.a. ( ** per cent per annum), from the due date thereof
until paid or credited.
f) Any payment due under the Contract, except one which the party to
which it is owed has by written notice to the other elected to refer to the
Arbitrator(s) pursuant to Article 33, may be set-off and deducted by the party
to which such payment is owed against and from any and all payments due or to
become due to the other party; provided that nothing in this Article 4 f) shall
be construed as making the right of set-off established herein the sole or
exclusive means by which a party may seek payment of a payment, and it is
expressly agreed that the right of set-off established herein may be exercised
independently of or concurrently with any other rights of the parties with
respect to due payments. Any and all payments made by the Purchaser prior to the
delivery of the Vessels shall be in the nature of advances to the Contractor on
account of the Vessels.
ARTICLE 5
CHANGES
a) Any Amendment to the Plans or Specifications, other than an
Amendment governed by Article 3, is herein called an "Article 5 Change". If the
changes in Contractor's costs as to a Vessel associated with an Article 5 Change
are a net increase, Contractor shall be entitled to an increase in the Per
Vessel Contract Price, and if such changes in costs are a net decrease,
Contractor shall allow a reduction in the Per Vessel Contract Price. Contractor
shall also be allowed such extension, if any, in the Delivery Date(s) as is
reasonably associated with an Article 5 Change. The amount of such increase or
decrease in the Per Vessel Contract Price and extension in the Delivery Date(s)
shall be calculated upon the basis of diligent and efficient performance and
without any loss in the relative priority of the Vessels compared to any other
work at the Shipyard. The costs associated with the elimination or addition of
Contract Work shall be calculated, as follows:
(i) materials included in the Contract Work which will no
longer be needed and which have not already been
purchased, and new materials to be used directly in the
Contract Work due to the Article 5 Change, shall be valued
at their estimated purchase price to Contractor, with a
reasonable estimate of escalation for the period between
the date of calculating cost and the estimated date on
which the purchase price would have become or is to become
fixed;
(ii) materials included in the Contract Work already purchased
by Contractor but no longer needed in the Contract Work
shall be valued at zero and shall be tendered to Purchaser
for disposition (for Purchaser's own account) as Purchaser
sees fit, Contractor hereby agreeing to reasonably assist
in such disposition, and the Purchaser shall not be
entitled to a credit for said materials.
(iii) direct labor (at Contractor's standard rates which
includes the process directly related to said labor) which
will no longer be needed and new direct labor (at
Contractor's standard rates which includes the process
directly related to said labor) necessitated by the
Article 5 Change shall be valued by multiplying the number
of hours of each specific category of labor by the
estimated direct hourly labor cost to Contractor of such
category, with a reasonable estimate of escalation for the
period between the date of calculating cost and the
estimated date on which the cost of labor would have
become or is to become fixed;
(iv) direct shipyard engineering labor cost (at Contractor's
standard rates which includes the process directly related
to said labor) which will no longer be needed, and new
direct shipyard engineering labor cost (at Contractor's
standard rates which includes the process directly related
to said labor) due to the Article 5 Change, shall be
valued in the same manner as direct labor, and
subcontracted consultants, engineering and testing shall
be valued at cost to Contractor, with a reasonable
estimate of escalation for the period between the date of
calculating cost and the estimated date on which the price
of the subcontracted services would have become or is to
become fixed;
(v) an overhead factor of ** % ( ** per cent) shall
be applied to the amounts set forth in (iii) and (iv)
above (but not any other amounts set forth above);
b) Purchaser shall be entitled to propose an Article 5 Change with
respect to any or all of the Vessels by delivery of an appropriate Amendment.
Purchaser's proposal may alter or delete the Plans and/or Specifications, and/or
may alter or delete any of the plans and other documents furnished by Contractor
under Article 15 (whether or not theretofore approved by Purchaser and whether
or not the Contract Work shown therein has been completed by Contractor and/or
approved by Purchaser). Any alteration in or deletion from such plans and other
documents which Contractor is not obligated to make under Article 15 shall be
considered an Amendment of the Plans and Specifications and an Article 5 Change;
those which Contractor is obligated to make under Article 15 shall not be
considered an Amendment or an Article 5 Change. Unless expressly stated to the
contrary in the document proposing it, any alteration in or deletion from such
plans and other documents proposed by Purchaser shall be deemed proposed under
Article 15 and not this Article 5. Contractor shall within 14 (fourteen) days
after receipt of an Amendment submit to Purchaser a detailed written estimate
(including the calculations described in Article 5 a)) of: (i) any increase or
decrease in the Per Vessel Contract Price required on account of such Article 5
Change; (ii) any extension in the Delivery Date(s) required on account of such
Article 5 Change; and (iii) the effect of such Article 5 Change on weights,
moments and centers of gravity of the Vessel(s). If an Article 5 Change proposed
by Purchaser would result in an Error, Contractor shall so state in its
estimate, which shall in such event be accompanied by such worksheets,
calculations and other supporting documentation as Purchaser reasonably
requests.
c) Purchaser shall reply in writing to any response by Contractor
under Article 5 b), and such reply shall be made within fourteen (14) business
days after receipt by Purchaser of such response. In its reply, Purchaser shall
either: (i) consent to the estimates contained in Contractor's response,
whereupon the parties shall execute the associated Amendment together with an
amendment to this Contract, which shall include provisions on increase in or
reduction of the Per Vessel Contract Price(s) together with change(s) in the
Delivery Date(s) (if any) as set forth in such estimate; or (ii) object to
Contractor's response on the ground that the estimates contained therein are not
in compliance with Article 5 a) and Article 5 b); or (iii) withdraw its proposal
for such reason(s) as Purchaser may, in its sole discretion, deem appropriate.
d) Contractor shall be entitled to propose an Article 5 Change in the
Plans and Specifications which does not result in or create an Error. Such
proposal of an Article 5 Change by Contractor shall be made in writing and shall
contain the detailed estimates required of Contractor under Article 5 b).
Purchaser shall reply in writing to any proposal by Contractor of an Article 5
Change, and such reply shall be made within 14 (fourteen) business days after
receipt by Purchaser of such proposal. In its reply, Purchaser shall either:
(i) consent to the proposal, whereupon the parties shall complete and execute an
Amendment reflecting the Article 5 Change in question together with an amendment
to this Contract which shall include provisions on increase in or reduction of
the Per Vessel Contract Price(s) together with change(s) in the Delivery Date(s)
(if any), as set forth in such estimate; or (ii) reject such proposal for such
reason(s) as Purchaser may, in its sole discretion, deem appropriate. Upon such
rejection, the proposal in question shall, without further action by either
party, be deemed to have been withdrawn.
e) In the event of a dispute under Article 5 c) (ii) or any other
provision of this Contract with respect to an Article 5 Change, and prior to any
decision of the Arbitrator(s) with respect to such dispute, Purchaser shall have
the right to have Contractor proceed to perform an Article 5 Change proposed by
Purchaser. Purchaser shall provide written notice to Contractor of any such
election and Contractor shall then immediately prepare a notice which shall: (i)
state Contractor's good faith estimate of the increase or decrease in any Per
Vessel Contract Price which will be required for such Article 5 Change under
Article 5 a); and (ii) state Contractor's good faith estimate of any extension
of any Delivery Date which will be required for such Article 5 Change under
Article 5 a). Upon receipt of notice from Contractor pursuant to the preceding
sentence, Purchaser and Contractor shall execute the Amendment together with an
amendment to this Contract prepared by Contractor in accordance with the
contents of said notice. Thereafter, Contractor shall proceed with the
performance of the work provided for in such Amendment, and changes in the Per
Vessel Contract Price(s) and changes in the Delivery Date(s) (if any) will be
based upon the estimates contained in such notice; and Contractor shall, when
payment in dispute is made, deliver to Purchaser a guarantee issued by an
internationally reputable bank in favor of the Purchaser and in respect of the
disputed portion of the increase in the Per Vessel Contract Price - if any - and
payable in accordance with the terms of an arbitration award and provided that
if it shall subsequently be agreed or determined pursuant to Article 33 that any
of the estimates required from Contractor under the preceding sentence were in
error, the adjustments necessary to correct such estimates will promptly be
made.
f) In all cases in which Article 5 Changes are proposed by Purchaser,
but the proposals are subsequently withdrawn, the reasonable documented cost
incurred by Contractor in preparing an estimate of the net increase or decrease
in the Contract Price(s) and the effect on the Delivery Date(s) and on weights,
moments and centers of gravity shall be paid to Contractor by Purchaser.
g) Notwithstanding anything in this Article 5 to the contrary,
Contractor shall not be obligated to perform an Article 5 Change with respect to
any Vessel either (i) if the aggregate adjustment in its Per Vessel Contract
Price agreed or determined between Purchaser and Contractor on account of such
Article 5 Change and all other Article 5 Changes affecting such Vessel is a net
increase of more than ** % ( ** per cent) (without any rounding) over
the original Per Vessel Contract Price set forth in Article 1 a) at the date
hereof; or (ii) Contractor furnishes evidence establishing that performing such
Article 5 Change would inevitably interfere with Contractor's compliance with
the terms of other construction contracts then in effect for work at the
Shipyard. Contractor is obligated to take care of Purchaser's interest in
obtaining the requested Article 5 Changes with highest possible priority besides
the other construction contracts. Contractor shall together with Purchaser try
in good faith to find an agreeable solution on the basis of this Contract to
meet Purchaser's interest in this connection.
h) Notwithstanding anything in Article 5 to the contrary, Purchaser
shall be entitled to elect to have the Vessel(s) built to U. S. Flag
requirements provided (1) said election with respect to any Vessel concerned is
made on or before June 4, 1993; and (2) Purchaser shall pay all extra costs
associated with said election in accordance with Article 5. If Purchaser does
not exercise this U. S. Flag election within the above stated time frame, then
Purchaser's request shall be dealt with as Article 5 Change accordingly.
ARTICLE 6
RIGHTS TO ENGINEERING AND DESIGN DATA
a) All plans, designs and engineering and design data including,
without limitation, the Plans and Specifications furnished to Contractor by
Purchaser, which are the property of Purchaser, shall remain the property of
Purchaser. Such plans, designs and engineering and design data may be used by
Contractor only in such manner as is permitted by this Article 6.
b) All plans and designs (including detail plans, working plans and
reproducibles) and all other engineering and design data required to be
developed by Contractor in the performance of the Contract Work and as mutually
agreed and delivered to Purchaser, shall, upon development, become the property
of Purchaser. Subject to the provisions of this Article 6 b), Purchaser and/or
affiliates (including without limitation companies which directly or indirectly
hold any portion of Purchaser's share capital and such companies' subsidiaries)
shall have the full right to use the same in such manner as it may deem proper,
including, without limitation, the right to build another vessel from said
documents, the right to make reproducibles and copies thereof, the right to
publish or to withhold from publication, and the right to make alterations
therein, additions thereto or other changes. Except as otherwise provided in
the Specifications, Contractor shall be entitled to recover the reasonable costs
of reproduction and handling plus ** % ( ** per cent) of such costs in
the event Contractor is required by Purchaser to provide copies of such
Contractor-developed plans, designs and engineering and design data to the
Purchaser or any designee of Purchaser. Notwithstanding anything in this
Article 6 b) to the contrary, unless prohibited by law relating to U.S.,
national defense or security, Contractor shall be permitted to retain, for its
own official records, and internal use (except for identical rebuildings) copies
or duplicates of the plans, designs, engineering and design data described in
the first sentence of this Article 6 b).
c) All plans, designs and engineering and design data furnished by
Contractor in the performance of the Contract Work, but not developed by
Contractor in the performance of the Contract Work (herein, the "Contractor-
Owned Data") shall not become the property of Purchaser. However, Contractor
agrees with the Purchaser that Contractor will make such Contractor-Owned Data
available (without royalties, fees, commission or other consideration of any
kind) to the Purchaser for use in connection with the Vessels, or any other
similar vessels to be built for Purchaser and/or affiliates (including without
limitation companies which directly or indirectly hold any portion of
Purchaser's share capital and such companies' subsidiaries). Contractor further
agrees with the Purchaser that such Contractor-Owned Data shall also be
available to any party that the Purchaser may from time to time designate for
use in connection with the construction of other vessels; provided that
Contractor shall in such event be entitled to a reasonable royalty, license fee
or commission from the designated party (not exceeding USD ** (United
States Dollars ** )) per vessel so constructed, up to a maximum
of USD ** (United States Dollars
** ) for all vessels so constructed) for the use
of such Contractor-Owned Data as is patented or constitutes trade secrets and
was designated as such prior to its disclosure by Contractor. Except as
expressly provided to the contrary in the foregoing proviso, Contractor's
agreements in this Article 6 c) shall apply to both patented and unpatented
plans, designs and engineering and design data but shall not apply to plans,
designs and engineering and design data licensed by Contractor from a third
party not affiliated or controlled by Contractor where the terms of the license
prevent such a commitment by Contractor.
d) Contractor shall take reasonable precautions to maintain in
confidence, and will not use or permit the use of, except as provided in Article
6 b), all of the designs, plans and engineering and design data described in
Article 6 a) and Article 6 b), and all information which is contained therein,
other than anything contained therein which was known to Contractor at the time
of disclosure, or which is or shall become available to it (without violation of
any right of Purchaser) from sources other than Purchaser or a naval architect
or any other consultant, independent contractor, agent, employee or officer of
Purchaser, or which is or shall become obvious to those skilled in the trade to
which the information relates. Notwithstanding anything to the contrary in the
preceding sentence, Contractor shall not be precluded from making any disclosure
which may be necessary for the prosecution of the Contract Work, providing that
in making such disclosure, Contractor shall impose upon any person, firm or
corporation to whom such disclosure is made, conditions relating to the
confidential treatment thereof to the same effect as those imposed upon
Contractor in this Article 6 d).
ARTICLE 7
EXTENSION OF TIME FOR COMPLETION OF WORK
a) If Contractor provides notice as set forth in Article 7 d),
Contractor shall be entitled to an extension of any of the Delivery Dates only
if (i) there is a specific cause of delay which Contractor can prove will solely
and directly delay delivery of a Vessel beyond the Delivery Date for such Vessel
and which cause is delaying or will delay Contract Work which is in the critical
path of the delivery of the said Vessel; (ii) such cause of delay is one of the
excusable causes set forth in Article 7 b); (iii) Contractor proves that it used
its best efforts to prevent or minimize the actual delay in delivery, including
without limitation performing other or additional Contract Work in order to
prevent or minimize such delay and (iv) but for such cause of delay the said
Vessel would have been delivered on time. The amount of any such extension
shall be the number of days by which Contractor can prove that the Delivery Date
actually will be delayed solely and directly by such cause of delay. Contractor
shall at all times have the burden of proving each of the matters required to be
established by Article 7; and in the event that it is not possible to determine
whether, or to what extent, any delay in delivery is attributable to causes
excused by the terms of Article 7, the Contractor shall not be entitled to any
extension of any of the Delivery Dates and Purchaser shall be entitled to
recover liquidated damages for the entire period of delay.
b) Contractor shall be entitled to an extension of the Delivery
Date(s), as provided in Article 7 a), for any delay caused by Purchaser (other
than such delays, if any, as are caused by Purchaser in exercising any or all of
its rights or duties under this Contract in accordance with the terms of this
Contract); by legislation or formal action of government prohibiting
construction; by war or preparation for war; by naval or military authorities;
by adverse weather conditions at the time of scheduled sea trial with respect to
Vessel(s) where sea trial condition will be at design draft according to
Specifications; by acts of God (other than ordinary storms or inclement weather
conditions), earthquake, hurricanes, lightning, floods, or landslides, or other
acts of overwhelming force, i.e., force majeure, whether manmade or natural; by
strikes, lockouts and other labor disturbances as are the result of causes
reasonably beyond Contractor's control; explosions, fires, vandalism, riots,
insurrections, sabotage, blockages, embargoes or epidemics as are the result of
causes reasonably beyond Contractor's control; by the short, late, or non-
delivery to Contractor of items required to be incorporated in the Vessel(s), or
late performance of Contractor's subcontractors or carriers by land, sea or air,
provided that the late, short, or non-delivery or performance resulted from
causes which would entitle Contractor to an extension of the Delivery Date(s)
under this Article 7 b), and provided further that it is determined that
Contractor's contracting for such items or with said subcontractors was
expeditious and prudent, that Contractor has exercised due diligence in the
performance of any acts required of Contractor with respect to such items or
subcontractors, that Contractor has exercised due diligence in monitoring the
acts and circumstances of the vendors of such items and subcontractors and that
Contractor has exercised due diligence in expediting deliveries or performance
under Contractor's purchase or subcontract or procuring equivalent substitute
performance with respect to such items; or by delays resulting from Purchaser's,
Contractor's or Regulatory Body's authorized rejection of any of the following
major structural castings and forgings: castings of main engine, stem and stern
frames, rudder castings and rudder horn, crankshafts, intermediate and propeller
shaft, propeller and anchors, provided always that such authorized rejection is
made prior to installation or fitting (whichever is the earlier) of the forging
or casting in question, and provided always that Contractor has the burden to
prove (i) that the cause(s) for such rejections cannot be referred to
manufacturer(s) negligent act(s) or omission(s) and (ii) that the manufacturer
has used its very best efforts in manufacturing said castings and forgings,
where it is determined that Contractor's contracting for such services was
expeditious and prudent, that Contractor has exercised due diligence in the
performance of any acts required of Contractor with respect to such services,
that Contractor has exercised due diligence in monitoring the acts and
circumstances of such manufacturer(s), and that Contractor has exercised due
diligence in procuring equivalent substitute performance.
c) Notwithstanding anything to the contrary in this Article 7,
Contractor shall not be entitled to any extension of any Delivery Date for
(i) any delay resulting from a cause of delay in existence as
of the date of this Contract; or
(ii) any delay resulting from a cause of delay, which was or
reasonably should have been anticipated by Contractor by
reason of facts, which were or after reasonable inquiry
should have become known to Contractor as of the date of
this Contract; or
(iii) any delay resulting from the late performance or default
of a vendor, subcontractor or carrier, if such delay
results from a cause of delay in effect, published or
announced as of the date of the award of the purchase
contract, subcontract or carriage contract where
Contractor had or, after reasonable diligent inquiry,
should have had, notice of such cause of delay prior to or
at the time of such award (other than a cause of delay
determined to be industry-wide); or
(iv) any delay resulting from any dispute or arbitration
proceeding under this Contract, provided that in the case
of Contract Work under dispute or arbitration which would
otherwise be performed prior to resolution thereof,
Contractor shall not be required to proceed therewith (and
a corresponding extension of the Delivery Date(s) shall be
allowed) if, after the written request of Contractor,
Purchaser declines to confirm its willingness to pay the
amount found due in respect thereof.
d) Contractor shall transmit written notice to Purchaser of a cause
of delay pursuant to Article 7 a) as soon as practicable and no later than 14
(fourteen) days after the date on which Contractor had knowledge of such cause
of delay, or within 14 (fourteen) days after the date on which Contractor, after
reasonable diligent inquiry, should have had knowledge of such cause of delay.
Within 14 (fourteen) days after cause of delay set forth in Article 7 a) has
ceased to exist, Contractor shall furnish to Purchaser a written statement of
the actual or estimated delay in the completion of the Contract Work resulting
from such cause, together with a statement as to the cause of such delay and
such detailed documentation as is then available to it justifying such
extension. Any such detailed documentation thereafter becoming available to it
shall be promptly furnished to Purchaser. On the basis of the statements and
information furnished to Purchaser by Contractor relative to delay in delivery,
Purchaser and Contractor shall, at intervals selected by Purchaser, but not less
frequently than once every 6th (sixth) month, confer and attempt to agree upon
the number of days by which any or all of the Delivery Dates shall be extended.
In the event that Purchaser and Contractor cannot so agree within 30 (thirty)
days after such conference, the extension of such Delivery Date shall be
determined as a dispute pursuant to the provisions of Article 33.
e) The granting of a time extension under this Article by reason of
delays caused by Purchaser shall not foreclose any other rights or remedies
which Contractor may have against third parties due to such delays.
f) No extension of any Delivery Date shall be granted under this
Article 7 unless Contractor shall have first provided notice and submitted
statements and detailed documentation reasonably justifying such extension
within the time limits set in Subclause d) of this Article 7.
g) The extension of the Vessel(s) Delivery Date(s) provided for in
this Article 7 shall be the only remedy for delay to which Contractor shall be
entitled; and by way of illustration, but not limitation, Contractor shall not
be entitled to damages or any adjustments in the Per Vessel Contract Price(s) or
in the Delivery Dates for disruption, compactness or congestion.
ARTICLE 8
LIQUIDATED DAMAGES FOR DELAY IN DELIVERY
a) In the event that delivery of a respective Vessel is not made on
or before close of business, local time, on the Delivery Date (including a grace
period provided by Article 1 f) applicable to such Vessel, Purchaser will suffer
damages which are extremely difficult of ascertainment. It is agreed that the
sum of USD ** (in words: United States Dollars
** ) per day represents a reasonable measure of the
damages to Purchaser for each day of delay in delivery of each respective
Vessel, and Contractor shall pay said sum to Purchaser as per-day liquidated
damages, and not as a penalty, for each calendar day elapsing from such time of
the Delivery Date (as it may be extended by the grace period or otherwise under
this Contract) applicable to a respective Vessel, until delivery of such Vessel
is made.
b) All payments required to be made by Contractor for the liquidated
damages earned as provided for in Article 8 a) above, shall be paid as follows:
(i) Contractor's first payment, regardless of the amount
owing, is due on the 60th (sixtieth) day after delivery of
a respective Vessel has been delayed beyond the Delivery
Date (as it may be extended by the grace period or
otherwise under the Contract) up to and including said 60
(sixty) day period; and thereafter
(ii) on a weekly basis in arrears commencing on the 7th
(seventh) day after the 60 (sixty) days' period mentioned
in Subclause (i) above;
and continuing on the last day of each succeeding 7 (seven) days' period
thereafter until the day on which delivery of such Vessel is made or this
Contract is terminated with respect to that Vessel, at which time Contractor
shall pay the entire remaining amount due under this Article 8 through such
time of delay. In case the Purchaser terminates this Contract with respect to a
Vessel according to Subclause a) of Article 21, the liquidated damages paid
and/or payable to Purchaser by Contractor in respect of such Vessel are limited
to an amount of USD ** (United States Dollars ** )
according to Article 21 a). If according to this Subclause b) of this Article 8
Contractor has paid to Purchaser liquidated damages in an amount exceeding USD
** (United States Dollars ** ) in respect of such
Vessel, Purchaser has to repay to Contractor the amount of liquidated damages
exceeding USD ** (United States Dollars ** ) upon
Purchaser's termination of the Contract according to Subclause a) of Article 21.
c) The payment of such sums as may become due to Purchaser under this
Article 8 shall not affect any rights of Purchaser as to matters other than late
delivery of a Vessel, or any rights of Purchaser under Articles 20, 21 and 23.
d) Payment of liquidated damages by the Contractor under this Article
8 will constitute full satisfaction of any and all claims of the Purchaser under
the Contract against the Contractor resulting from delayed delivery of the
Vessel, except as otherwise provided in this Contract.
ARTICLE 9
CONTRACTOR TO RECEIVE AND CARE FOR ITEMS
FURNISHED BY PURCHASER
Contractor shall, at its own risk and expense, receive, inspect and check as to
agreement with bills of lading or other transport documents, store, protect,
insure and install aboard the Vessels all of the items which may be furnished by
Purchaser in connection with the Contract Work. Contractor shall be liable to
Purchaser for any damage to or loss of any items furnished by Purchaser
occurring during Contractor's custody thereof, no matter how such damage or loss
may arise.
In the event that the Plans or Specifications provide that Purchaser shall
furnish to Contractor specified items of material or equipment on or before
given dates, Contractor shall be entitled to recover all actual, direct and
documentable costs (excluding consequential or incidental damages) reasonably
incurred as a result of a failure by Purchaser to deliver such items on or
before the specified dates. Contractor's right under this Subclause shall be in
addition to, and not in lieu of, Contractor's right under Article 7.
ARTICLE 10
INSURANCE ON THE VESSELS AND MATERIAL
Contractor shall procure that each of the Vessels and all materials, outfit,
equipment and appliances (including all materials, outfit, equipment and
appliances provided by Purchaser) for and used or to be used in the construction
thereof, shall, at the expense of Contractor, and as part of the Contract Price
at all times, be kept fully insured under a full form marine builder's risk
policy equivalent to London Institute Clauses for Builder's Risks (1/6/88) CL
351 amended to delete Article 6 (Earthquake and Volcanic Eruption Exclusion);
London Institute War Clauses Builder's Risks (1/6/88) CL 349; and London
Institute Strike Clauses Builder's Risks (1/6/88) CL 350. Notwithstanding the
above, the required insurance will not include pre-keel-insurance. Contractor
will verify coverage for engines and any transit exposure between construction
sites for engines and hulls and will provide coverage for war, hurricane,
earthquake and strikes, as from moment of keel laying including all risk of
Physical Damage to Purchaser furnished materials of any of the Vessel and until
each of the Vessels is delivered to and accepted by the Purchaser. The amount
of insurance, the deductibles, the percentage escalation allowed, the terms of
the policies (including, without limitation, their effective dates), and the
insurance companies, underwriters, or underwriting funds shall at all times be
satisfactory to the Purchaser. Contractor shall submit to Purchaser for
approval as to form and substance, copies of the insurance policies that
Contractor intends to procure in compliance with the requirements of this
Article 10. All policies of insurance shall be taken out in the name of
Contractor, Purchaser and Kexim, as primary insured and a Loss Payable clause
providing that the insurance proceeds shall be payable directly to Purchaser as
specified in this Contract. All losses under such policies shall be made payable
to Contractor and Purchaser for distribution among themselves as their
respective interests may appear. All policies shall provide that there shall
be no recourse against Purchaser for the payment of premiums or commissions and
that no cancellation of such policies, for any reason whatsoever, shall become
effective unless and until 30 (thirty) days prior written notice thereof has
been given by the insurance underwriter to Purchaser.
Contractor shall procure that copies of all cover notes and original policies,
with evidence of prepayment of all premiums or other charges, shall be delivered
to Purchaser 10 (ten) days prior to the earlier of keel laying or delivery of
engines and other major items to the Shipyard pursuant to this Contract for its
approval and custody. Policies, if not in conformance herewith, shall be
surrendered and canceled upon direction of the Purchaser, and, concurrently
therewith, new policies in conformance with this Article 10 shall be procured
and delivered to Purchaser for its approval and custody. At the final
adjustment of the premium for such policies following delivery of a Vessel: (i)
adjustment due to changes in the Per Vessel Contract Price or Delivery Date
pursuant to Articles 5 and 7 shall be for the account of Purchaser, and shall
for purposes of this Contract be considered adjustments pursuant to such
respective Articles; and (ii) all other adjustments shall be for the account of
Contractor.
ARTICLE 11
LOSS OF OR DAMAGE TO A VESSEL
a) In the event of loss of or damage to a Vessel prior to the
delivery of such Vessel pursuant to Article 17, which does not constitute a
total loss of such Vessel, such loss or damage shall be made good at
Contractor's expense, and the Delivery Date shall be extended in accordance with
Article 7 (provided that the cause of such total loss is excused under Article
7); and any insurance proceeds shall be paid to Contractor concurrently with
repair of such loss or damage progresses.
b) In the event of a total loss of a Vessel, prior to delivery of
such Vessel pursuant to Article 17, construction of such Vessel shall proceed
unless Purchaser shall elect to terminate the Contract with respect to such
Vessel, which election cannot be exercised, if the Vessel prior to the total
loss had not had the main engine installed. If Purchaser elects to terminate the
Contract with respect to such Vessel, Purchaser shall give written notice to
that effect to the Contractor. If no election is made to terminate the Contract
with respect to such Vessel, then Contractor, or, at Contractor's option,
another qualified shipyard selected by Contractor and satisfactory to and
approved beforehand in writing by Purchaser, shall as subcontractor proceed with
the construction and delivery of such Vessel in accordance with this Contract,
the Specifications and the Plans (and Contractor shall be entitled to payment on
account of such construction and delivery on the terms set forth herein), and
the Delivery Date applicable to such Vessel shall be extended in accordance with
Article 7 (provided that the cause of such total loss is excused under Article
7).
c) Notwithstanding any other rights of the Purchaser under this
Contract, in the event that there is a total loss of a Vessel prior to delivery
of such Vessel pursuant to Article 17, and such loss results from a risk covered
by insurance, as set forth in Article 10, all of the proceeds of such insurance
payable as a result of such loss shall be paid to the Purchaser and Contractor
as follows:
(i) if Purchaser elects to terminate the Contract in respect
of such Vessel an amount equal to payments made from
Purchaser to Contractor under this Contract in respect of
said Vessel together with interest thereon as provided for
in Article 4 e) from the date Purchaser made the payments
to the date on which reimbursement is made and an amount
equal to the value of lost or damaged items furnished by
Purchaser shall be paid to Purchaser, whereas Contractor
shall receive the residual amount, if any:
(ii) if the Contract is not terminated in respect of such
vessel, an amount corresponding to the value of lost or
damaged items furnished by Purchaser shall be paid to
Purchaser, whereas Contractor shall receive the residual
amount, if any.
d) Notwithstanding any other rights of the Purchaser under this
Contract, in the event that there is a total loss of a Vessel prior to delivery
of such vessel pursuant to Article 17, and such loss results from a risk not
covered by insurance, as set forth in Article 10, and an election is made by
Purchaser to terminate the Contract with respect to such Vessel, Contractor
shall pay to the Purchaser an amount equal to all payments made under this
Contract in respect of the Vessel lost up to the date of the total loss together
with interest thereon as provided for in Article 4 e) from the date Purchaser
made the payments to the date on which reimbursement is made. Additionally,
Contractor shall pay to Purchaser an amount equal to the value of all lost or
damaged items provided by Purchaser for and used or to be used in the
construction of such Vessel.
e) Notwithstanding anything to the contrary in Subclause c) (ii) and
d) of this Article, Purchaser shall not be entitled to interest on payments made
to Contractor always provided that the cause of such total loss is excused under
Article 7.
ARTICLE 12
INDEMNIFICATION
a) Except as provided in Article 12 b), Contractor shall indemnify
fully, hold safe and harmless, and defend Purchaser, Purchaser's subsidiaries
and affiliates (including without limitation companies which directly or
indirectly hold any portion of Purchaser's share capital and such companies'
subsidiaries) and their respective agents, officers, directors, servants and
employees, and the Vessels and each of them (individually a "Protected Party"
and collectively the "Protected Parties"), from and against any and all losses,
claims, damages, liabilities, demands, suits, causes of action, costs and
expenses (including interest and attorneys' fees) arising or resulting from
injury, death, harm and/or loss to any third person and/or any property
whatsoever of any third person arising from, pertaining to or in any manner
connected with the performance of the Contract Work (at any location(s)
whatsoever) and/or any duties of Contractor hereunder and/or any work performed
at the Shipyard (whether part of the Contract Work or not), (including, without
limitation, those based on negligence, breach of contract, breach of warranty or
claim under strict liability in tort against any Protected Party, or by or
against Contractor or any third party), excepting only such injury, death, harm
or loss, if any, and only to the extent as may be caused by the negligence or
willful misconduct of Purchaser or its officers, directors, employees, or agents
or such independent contractors, if any, as are directly engaged by Purchaser
(other than Contractor) or for which Contractor is not responsible under law.
For purposes of this Article 12, it is agreed that the workmen, agents,
employees and independent contractors of Contractor or its subcontractors shall
at all times be agents, employees or independent contractors of Contractor or
its subcontractors and shall not be employees, agents or independent contractors
of Purchaser.
b) Contractor's obligations, as set forth in Article 12 a), shall not
apply to any claim arising out of injury, death, harm or loss sustained after
the delivery of the Vessel to which it relates (or of all Vessels to which it
relates); provided that this exclusion shall not apply to any claim arising
after delivery directly or indirectly as a consequence of injury, death, harm or
loss sustained prior to such delivery.
c) Contractor hereby expressly waives any right of express, implied
or equitable indemnity or contribution from or against Purchaser or the Vessels,
or any of them, on account of any claim, loss, damage, liability demand, suit,
cause of action cost or expense (including interest and attorneys' fees) arising
from, pertaining to or in any manner connected with any of the matters to which
Contractor's indemnity obligations under Article 12 a) or Article 12 b) would
apply.
ARTICLE 13
APPOINTMENT OF REPRESENTATIVES OF PURCHASER
With respect to the performance of this Contract, Purchaser shall be entitled to
designate one or more authorized representatives who shall have authority to
exercise one or more rights accorded to Purchaser under this Contract. Notice
of all such designations (together with a statement of the scope of authority of
each designee) and notice of the revocation of any prior designation shall be
given by Purchaser to Contractor in writing. Where this Contract gives
Purchaser the right to direct action or inaction by Contractor, Contractor shall
have no obligation to follow, and it shall not acquire any rights by following,
any such directions, except those which shall be issued in writing over the
signature of an authorized representative of Purchaser acting within the scope
of this actual authority.
Contractor shall furnish Purchaser and his representatives free of charge with
adequately maintained offices (desks, files, telephones, telefaxes, typing
services, change rooms, clothing and gear, lockers etc.) conveniently located in
the Shipyard and in close proximity to the Vessel(s). The Purchaser's office in
addition to the yard phone, shall be equipped with a direct call (24 hours)
outside telephone to allow communication between Purchaser and Purchaser's
representative(s) in the Shipyard. Fees for telephone, telefax and telex are for
Purchaser's account. The Contractor shall free of charge supply lodging and
meals at the Shipyard for 6 (six) Purchaser representatives and shipyard
superintendents.
ARTICLE 14
MATERIALS AND WORKMANSHIP
a) Contractor (in carrying out the Contract Work) and the Vessels
(including any and all Items as defined in Article 14 b)) shall comply with all
of the requirements of the American Bureau of Shipping and other authorities as
mentioned in the Specification and as required by law having jurisdiction over
the Contract Work and the completed Vessels (hereinafter called "Regulatory
Body" or "Regulatory Bodies"), notwithstanding that there may be shown in or on
the Plans or Specifications a specific requirement as to any item of Contract
Work notwithstanding any approvals shown in or upon said documents or any
approvals given by Purchaser upon inspection of any Contract Work, subject,
however, to the following: (i) if the Plans or Specifications specifically
require work in excess of that required by any Regulatory Body, such
specifically required work shall be performed by Contractor as Contract Work
required by this Contract; and (ii) if the Plans and Specifications require work
which is less than that required by any Regulatory Body, Contractor shall
perform the work required by the Regulatory Body as Contract Work required by
this Contract; provided that if any Regulatory Body requirements promulgated
subsequent to the date hereof, exceeds or is otherwise in conflict with the
requirements of the Plans and Specifications and the Regulatory Body
requirements promulgated on the date hereof, and effects an increase in the cost
to Contractor of the Contract Work, the Contract Price, the Per Vessel Contract
Prices and Delivery Date(s) shall be adjusted pursuant to the provisions of
Article 5.
b) All items of machinery, material, workmanship, outfit, spares and
equipment incorporated or installed or to be incorporated or installed in the
Vessels ("Items") shall be in full compliance with this Contract and the
requirements of the Plans and Specifications. Contractor shall furnish to
Purchaser, for its approval, the purchase specifications and vendors' plans and
specifications for Items supplied by persons or entities other than Contractor
which Contractor contemplates incorporating in a Vessel, and all changes
thereto, and the names of the manufacturers, vendors, subcontractors or other
suppliers of such Items. Subject to Article 15 e), if Purchaser has not
specified, within 28 (twentyeight) days following receipt of such plans and
specifications, one or more requirements of this Contract, the Plans or the
Specifications which would be violated by such plans and specifications, they
shall be considered approved by Purchaser. Nothing in this Article 14 b) shall,
however, limit Purchaser's right to specify a change in such plans and
specifications as an Article 5 Change under Article 5. Amendments to such
approved plans and specifications may be submitted by Contractor to Purchaser
prior to incorporation or installation of the affected Items in a Vessel for
approval or rejection on the same terms as its original approval. When required
by the Plans or Specifications, or when called for by Purchaser, Contractor
shall furnish full information concerning all other Items which it contemplates
incorporating or installing in a Vessel. In the event Purchaser has reasonable
grounds for seeking such confirmation, all manufacturers, vendors,
subcontractors, and other suppliers of Items in the nature of machinery or
mechanical or other working equipment shall be required to submit a certificate
executed by the prospective manufacturer, vendor, subcontractor or other
supplier confirming that it has no present intention to discontinue
manufacturing such Item or Items or to cease providing parts or service for such
Items, and if satisfactory confirmation is not received, Contractor shall make
such other arrangements as are necessary to assure continued availability of
parts and service for such Items. Notwithstanding anything to the contrary in
law, in equity or in this Contract, under no circumstances shall any approval
granted by Purchaser under this Article 14 or any other provision of this
Contract or otherwise, have the effect of relieving Contractor from any of its
obligations under this Contract including but not limited to Articles 2 c), 12
and 18. The satisfaction of such obligations shall at all times remain solely
the responsibility of Contractor.
c) Notwithstanding anything set forth in this Article 14, Contractor
shall have no responsibility under this Article 14 as to Items furnished by
Purchaser other than that the installation thereof shall be carried out in
accordance with this Contract and the Plans and Specifications.
ARTICLE 15
INSPECTION, APPROVAL OF PLANS AND WORK
a) The Contract Work shall be subject to inspection by and the
approval of representatives of Purchaser and representatives of all relevant
Regulatory Bodies at any and all reasonable times during manufacture or
construction and at any and all places where manufacture or construction are
carried on, and Contractor shall be required to insert the provisions of this
Article 15 a) in all subcontracts entered into by it in connection with the
Contract Work.
b) All plans and other documents required to be furnished by the
Specifications shall be submitted by the Contractor in their proposed final form
to Purchaser for its approval, and, within 28 (twentyeight) days after receipt
thereof, or such longer period as is reasonably required and is specified in
writing by Purchaser within 5 (five) business days after receipt thereof,
Purchaser shall in writing either (i) approve such plan or document; (ii)
tentatively approve such plan or document subject to Contractor's acceptance of
changes proposed therein by Purchaser; (iii) tentatively reject such plan or
document with a request for resubmission in response to the comments of
Purchaser; or (iv) reject such plan or document. Any failure by Purchaser to so
approve, tentatively approve, tentatively reject or reject such plan or document
within such period shall constitute approval of such plan or document.
All rejections shall specify those aspects of the rejected plan or
document which do not, or which provide for Contract Work which does not,
conform to the requirements of this Contract or the Plans or Specifications.
c) If a plan or document is approved, Contractor shall, subject to
Article 15 d), proceed with the Contract Work which is shown therein. If a plan
or document is rejected as set forth in Article 15 b), Contractor shall promptly
alter the rejected document and resubmit it as altered, for Purchaser's approval
in accordance with Article 15 b). Amendments to such an approved plan or
document may be submitted by Contractor to Purchaser prior to incorporation of
the affected workmanship, equipment or materials into a Vessel for approval,
tentative approval, tentative rejection or rejection on the same terms as its
original approval. Appropriate amendments shall be so submitted reasonably
promptly after Contractor becomes aware that any approved plan or document in
any way fails to conform to the requirements of this Contract or the Plans or
Specifications, and neither Purchaser's prior approval of such plan or document,
Contractor's completion of the Contract Work shown therein nor Purchaser's
approval of such Contract Work shall in any way restrict Purchaser's right, at
its option, to draw any such failure to conform to Contractor's attention. All
Contract Work performed by Contractor prior to approval by Purchaser of all
plans or documents covering or affecting such work shall be at the sole risk and
expense of the Contractor, and Contractor shall bear all costs, damages or
liabilities which may result from the ordering of any materials or the
performance of any work prior to approval of the plans or documents which cover
such materials or work. Additionally, and notwithstanding anything to the
contrary in law, in equity or in this Contract, under no circumstances shall any
approval granted by Purchaser under this Article 15 c) or any other provision of
this Contract or otherwise, or any failure to reject by Purchaser under this
Article 15 c) or any other provision of this Contract or otherwise, have the
effect of relieving Contractor from any of its obligations under this Contract
including but not limited to Articles 2 c), 12 and 18. The satisfaction of such
obligations shall at all times remain solely the responsibility of Contractor.
d) The Vessels, and all Items as the same may at any time or at any
place be completed or be in progress, shall be subject, to inspection by and the
approval of Purchaser. Purchaser shall, reasonably promptly after tender of any
work or Items for approval, approve all work and Items which comply with the
requirements of this Contract and the Plans and Specifications, and Purchaser
shall be entitled (but shall not be obligated) to reject all work and Items
which do not conform to any of said requirements, even though: (i) plans,
specifications or documents covering such work or Items have previously been
approved by Purchaser under Article 14 or 15; or (ii) such work or Items have
previously been approved by Purchaser under this Article 15 d). Nothing in this
Article 15 d) shall, however, limit Purchaser's right to specify a change in any
Contract Work as an Article 5 change under Article 5. All rejections shall be
made in writing, and shall specify those aspects of the work or Items inspected
which do not conform to the requirements of this Contract or the Plans or
Specifications. If any work or Items shall be duly rejected by the Purchaser as
not complying with the Contract and/or the Plans and/or the Specifications,
Contractor shall promptly correct such work or replace such Items without charge
therefor. Notwithstanding anything to the contrary in law, in equity or in this
Contract, under no circumstances shall any approval granted by Purchaser under
this Article 15 d) or any other provision of this Contract or otherwise, or any
failure to reject by Purchaser under this Article 15 d) or any other provision
of this Contract or otherwise have the effect of relieving Contractor from any
of its obligations under this Contract including but not limited to Articles 2
c), 3, 12 and 18. The satisfaction of such obligations shall at all times
remain solely the responsibility of Contractor.
e) Nothing contained in this Article 15 or in Article 3 shall have
the effect of relieving Contractor from any requirements included in the
Specifications to obtain any approval of Purchaser.
ARTICLE 16
TRIALS
a) Contractor shall subject each respective Vessel, and all Items and
work incorporated therein, to such shop, dock, sea and other trials and tests as
are required with respect to such Vessel by the Plans or Specifications. The
total expense of such trials shall be borne by Contractor, except as otherwise
expressly provided.
b) Purchaser shall have the right to have authorized representatives
present at all shop, dock, sea and other trials and tests. Contractor shall
provide Purchaser with 3 (three) days prior written notice of all trials and
tests (except sea trials) designated for such notice by Purchaser after receipt
from Contractor of a schedule of trials and tests and with 24 (twentyfour) hours
prior written or telegraphic notice of all other trials and tests (except sea
trials). Contractor shall provide Purchaser with 14 (fourteen) days' prior
written notice of all sea trials: provided that only 1 (one) day's prior written
notice need be provided to Purchaser with respect to retrials at sea conducted
within 3 (three) days after completion of a previous sea trial at or upon which
the need for such retrial was determined. All trials and tests conducted
without notice to Purchaser, shall be reconducted by Contractor at the sole
expense of Contractor.
c) If, at and upon any trial or test required by this Article 16, a
Deficiency (as defined in Article 18 b)) shall be discovered in a Vessel,
Contractor shall, after correcting such Deficiency, be required to make further
trials and tests sufficient in extent and number to reasonably demonstrate
complete correction thereof: provided that additional sea trials will not be
required if the correction of such Deficiency can be verified in shop or dock
trials or tests. The total expense of all additional trials and tests required
by this Article 16 shall be borne by Contractor.
d) After all trials and tests required by this Article 16 have been
completed, Contractor shall return the tried and tested Vessel to the Shipyard,
and open up such machinery as Regulatory Bodies and/or Purchaser require(s) for
post-trial inspection and examination. Any Deficiencies then appearing in such
machinery shall be corrected by Contractor. After Contractor has made such
corrections, Contractor shall close and connect, retry and retest the machinery,
as appropriate, and then make ready for service. The Regulatory Bodies and/or
Purchaser shall be entitled to require further post-trial examination and
inspection at which Contractor shall reasonably demonstrate complete correction
of any and all Deficiencies in such machinery.
ARTICLE 17
DELIVERY
a) When a respective Vessel is Complete (as defined in Article 1 d)),
and all trials and tests required by Article 16 have been satisfactorily
performed, or at such earlier time as is provided in Article 17 d), that Vessel
shall, provided prior written notice hereof of not less than 30 (thirty) days
was given by Contractor to Purchaser, be offered for delivery to Purchaser
alongside a safe and accessible pier at the Shipyard where there must be
sufficient water for the Vessel to always be afloat, custom to the contrary
notwithstanding. The Vessel thus offered shall be free and clear of all liens,
claims, charges, security interests or encumbrances of any nature whatsoever
except as may have been created by Purchaser (other than those in favor of
Contractor or any other person in connection with entering into or carrying out
this Contract) or exist in Purchaser's favor. Such offer of delivery of the
Vessel shall also be accompanied by an offer from Contractor to deliver the
following documents (hereinafter the "Delivery Documents"):
(i) Protocol of Delivery and Acceptance acknowledging
delivery of such Vessel to, and acceptance and taking
possession of such Vessel by, Purchaser in accordance
with this Contract, executed in duplicate by Contractor.
Such Protocol shall state the date and time of such
delivery and acceptance.
(ii) Declaration of Warranty of Contractor that such Vessel
is delivered to Purchaser free and clear of any liens,
claims, charges, security interests or encumbrances of
any nature whatsoever except as may have been created by
Purchaser (other than those in favor of Contractor or
any other person in connection with entering into or
carrying out this Contract) or exist in Purchaser's
favor, and that such Vessel is absolutely free of all
burdens in the nature of import duties, taxes or charges
imposed by the nation, city, county, state, or port of
delivery.
(iii) Instruments confirming that title to such Vessel has
vested in Purchaser, as provided herein, in such number
and form as may reasonably be requested by Purchaser.
(iv) Protocol of Inventory, as required by the Plans and
Specifications, of the equipment of the Vessel,
including spare parts.
(v) All certificates required to be furnished upon delivery
of the Vessels pursuant to this Contract and the
Specifications. It is agreed that if, through no fault
on the part of the Contractor, the formal Regulatory
Body certificates and/or other formal certificates are
not available at the time of delivery of the Vessels,
provisional or interim certificates adequate to allow
intended use of the Vessel shall be accepted by the
Purchaser, provided that the Contractor shall furnish
the Purchaser with the formal certificates as promptly
as possible after such formal certificates have been
issued.
(vi) Protocol of trials.
(vii) Protocol of stores of consumable nature.
(viii) Builder's certificate (notarized and legalized).
(ix) Non-registration certificate (issued by the local court
or appropriate legal body).
(x) Commercial invoice.
(xi) Bill of sale (notarized and legalized).
(xii) Drawings and Plans pertaining to the Vessels.
b) If, at the time an offer of delivery of a Vessel is made, such
Vessel shall be Complete, and if such offer shall be accompanied by an offer of
delivery of the Delivery Documents, such Vessel and the Delivery Documents shall
thereupon be accepted by Purchaser in accordance with Article 17 c). If, at
such time, the Vessel in question shall not be Complete, Purchaser shall be
entitled to refuse acceptance of such Vessel by thereupon delivering to
Contractor a written specification of those aspects of such Vessel which prevent
it from being Complete. Any subsequent offer or offers of delivery shall be
made and accepted on the terms set forth in Article 17 a) and Article 17 b).
Notwithstanding the foregoing, if, at such time the Vessel in question is
complete but for Minor and Insignificant Deficiencies, Purchaser shall not be
entitled to refuse acceptance of such Vessel. Purchaser and Contractor shall
then draw up a list of these Minor and Insignificant Deficiencies (Remaining
Item List) stating how and when these Deficiencies shall be remedied by
Contractor after acceptance of delivery. Purchaser and Contractor shall be under
an obligation to conduct good faith discussions with each other in this respect.
"Minor and Insignificant Deficiencies" are those which do not affect the
seaworthiness of the Vessel(s) or its/their full use in its/their intended
service and purpose, which is a high speed container liner service on a
regularly scheduled basis, and shall not include Deficiencies contained in
Subclause b) (iii) of Article 18.
c) Acceptance of a Vessel by Purchaser shall be accomplished by (i)
the delivery to Contractor of a counterpart of the Protocol of Delivery and
Acceptance executed by Purchaser; and (ii) the payment by Purchaser to
Contractor of that portion of the Per Vessel Contract Price which Purchaser is
required to pay upon delivery of the Vessel pursuant to Article 4. Purchaser
may (but shall not be obligated to) specify in the protocol of Delivery and
Acceptance to be delivered by it such Deficiencies as may be known to exist in
the Vessel at the time the Vessel is accepted. All such Deficiencies, which may
be known to exist in the Vessel at the time the Vessel is accepted, shall
thereafter be deemed to and be treated as Deficiencies arising and reported
during the Guarantee Period. Purchaser shall be afforded two days free of any
wharfage or other charge, and up to 3 (three) days additional at a reasonable
wharfage fee, within which to remove the Vessel from the Shipyard.
d) Notwithstanding anything to the contrary in this Contract,
Purchaser may, at its option, demand delivery of a respective Vessel at any time
(whether prior or subsequent to the time established for the offer of delivery
of such Vessel pursuant to Article 17 a)) if such Vessel is, at the time of
demand, in such a state of completion that Purchaser is able to obtain approval
of the operation of such Vessel from all Regulatory Bodies having jurisdiction
over such Vessel's operation. Contractor shall within 5 (five) days of any
demand by Purchaser pursuant to the preceding sentence, offer the Vessel in
question for delivery to Purchaser in accordance with the first sentence of
Article 17 a), together with such of the Delivery Documents, if any, as can be
obtained by Contractor as of the date of such offer, and such offer shall be
accepted by Purchaser in accordance with Article 17 c), provided that the amount
of a reduction of the Per Vessel Contract Price shall be reasonably estimated by
Contractor. Purchaser upon delivery of the Vessel in question has to pay the Per
Vessel Contract Price as adjusted less said reduction. If Purchaser does not
agree to this reduction, Contractor has to deliver to Purchaser a guarantee in
favor of Purchaser issued by an internationally reputable 1st class bank for the
amount of the difference between Contractor's estimate and Purchaser's estimate
of the reduction, payable in accordance with the Decision of an arbitration
award pursuant to Article 33. Purchaser's demand pursuant to this Article 17 d)
shall be deemed a proposal for an Article 5 Change deleting the Contract work
not yet completed and the Per Vessel Contract Price shall be adjusted and
documentation prepared by Contractor accordingly. All disputes arising under
this Article 17 d) shall be referred to the Arbitrator(s) for resolution, and
subject to the foregoing provisions in this Subclause d) Contractor shall have
no right to refuse to offer a Vessel for delivery on account of any such
dispute. If Contractor documents that such an Article 5 Change will have an
effect on any of his warranties and/or other liabilities under this Contract,
such warranties and/or liabilities shall be adjusted by the parties in writing
as necessitated hereby and in case the parties agree that Contractor shall
subsequently carry out the work comprised by said Article 5 Change, such
warranties and/or liabilities shall come into force only after completion of
said work.
e) In every instance in which a right or obligation under this
Contract is in any manner dependent upon delivery of a Vessel, such delivery
shall not be deemed to have occurred unless and until such Vessel has been
accepted by Purchaser under this Article 17. Acceptance of the Vessel by
Purchaser under this Article 17 shall signify that Purchaser has taken
possession of the Vessel as of the time and date set forth in the Protocol of
Delivery and Acceptance and that Contractor may terminate all insurance required
to be provided by Contractor under Article 10 in respect of such Vessel.
Acceptance of any Vessel by Purchaser under this Article 17 shall not be deemed
to constitute a waiver of or otherwise prejudice, Purchaser's rights under
Article 18 with respect to any Deficiency, whether known or unknown, whether or
not noted in any document delivered in connection with delivery of the Vessel,
which may exist in such Vessel at the time it is accepted by Purchaser. Any such
Deficiency may be reported to and shall be corrected at the sole cost and
expense of Contractor during the Guarantee Period, as provided in Article 18.
ARTICLE 18
GUARANTEE
a) Subject to the provisions of this Article 18, Contractor
guarantees that each Vessel for a period of 1 (one) year FROM THE DATE OF
DELIVERY OF SUCH VESSEL UNDER ARTICLE 17 (THE "GUARANTEE PERIOD") shall be free
from any and all Deficiencies.
b) The term "Deficiency" shall mean: (i) any weakness, failure,
breaking down, incompleteness, defect or deterioration in any Vessel, including
without limitation, in any workmanship, engineering, equipment, machinery,
materials, outfitting or spares, incorporated therein or to be delivered
therewith; or (ii) any failure of any Vessel, including without limitation of
any workmanship, engineering, equipment, machinery, materials, outfitting or
spares incorporated therein or to be delivered therewith, to satisfy any of the
requirements of this Contract or of the Plans or Specifications; or (iii) the
existence of a condition to a certificate issued by a Regulatory Body.
"Deficiency" shall not, however, include any such fault in an Item furnished by
Purchaser which was installed or stowed on board by Contractor in accordance
with all of the requirements of this Contract and the Plans and Specifications.
c) Notwithstanding any inspection or failure to reject by the
Purchaser or any Regulatory Body pursuant to this Contract, if at any time
within the Guarantee Period with respect to any Vessel there shall appear, exist
or be discovered any Deficiency, and Purchaser gives Contractor notice
specifying such Deficiency within 30 (thirty) days after the end of the
Guarantee Period with respect to such Vessel or if the Vessel is at sea at the
end of such period within 15 (fifteen) days after completion of the voyage but
in no event later than 60 (sixty) days after expiration of the Guarantee Period,
such Deficiency shall, upon written demand by Purchaser, be corrected at the
sole cost and expense of Contractor: provided that Contractor shall not be
responsible for the correction of any Deficiency if such Deficiency is due to
negligence or misuse by Purchaser; and provided further that Contractor shall
not be responsible for the correction of any Deficiency in any Vessel, if such
Deficiency is due to ordinary wear and tear. Except as may otherwise be
provided in this Contract, the liability of Contractor to Purchaser on account
of any Deficiency under this paragraph c) shall not extend beyond the actual
cost of repair or correction thereof, including the cost of docking or
drydocking the Vessel in which such Deficiency exists (to the extent provided in
Article 18 f)).
If a Deficiency causes damage to an item of workmanship, machinery,
materials, equipment, outfitting or spares of a Vessel during such item's
Guarantee Period, Contractor shall be liable for the cost of correcting or
repairing such damage in an amount not exceeding USD ** (United
States Dollars ** ).
Contractor shall have the option to have at its sole expense, except for
suitable accommodations and food to be supplied by Purchaser, an engineer on
board each Vessel at any time during the Guarantee Period dependent on the
necessity. The Purchaser has the same option if the Purchaser deems it necessary
in connection with a possible Deficiency claim. If it comes out that the alleged
deficiency was no Deficiency, Purchaser has to reimburse Contractor the costs
for this engineer. In computing the Guarantee Period provided with respect to a
Vessel or an Item of any one of the Vessels, there shall be excluded any time
during which such Vessel or Item is prevented from entering or is taken out of
service on account of any Deficiency in such Vessel or Item.
d) Purchaser may elect to have such work as is necessary to correct a
Deficiency in any Vessel performed by a reputable and qualified shipyard of
Purchaser's choice in any port or ports in the world or by the Vessel's crew,
and Contractor shall be liable to Purchaser for the full expense thereof,
including without limitation, the cost of all labor (including Vessel crew
labor) (at straight time or overtime) and materials and any taxes,
transportation charges or import or export duties which may be incurred with
respect to such materials or labor. Such corrective work may be scheduled by
Purchaser so as to minimize its disruptive effect on the Vessel's operation; and
any such work requiring drydocking may be performed at Purchaser's option at any
time at the earlier of the Vessel's first drydocking or within 60 (sixty) months
after delivery of such Vessel. Costs in connection with drydocking shall be
applied as provided for in Article 18 f) as if such work were correction of
underwater Deficiencies. Notwithstanding the foregoing, Purchaser will give
Contractor the first opportunity to perform non-emergency repairs to
Deficiencies, which cannot be performed by the Vessel's crew, and shall give
notice of such Deficiencies as soon as possible without delay, provided
Contractor can correct said Deficiencies on terms no less favorable than those
which Purchaser can arrange with respect to time, place and disruption of the
Vessel's schedule.
e) Contractor shall be given 5 (five) business days' notice of and an
opportunity to inspect a Deficiency in such Vessel, before correction (or
attempted corrections of such Deficiency); provided that if correction (or
attempted corrections) is scheduled (so as not to interfere with maintaining the
Vessel's schedule or for other good cause) so as to make such notice
impracticable, or such notice is for any other reason impracticable, Purchaser
shall notify Contractor of the Deficiency within 30 (thirty) days after
discovery thereof. No failure of Purchaser to give notice as required by this
Article 18 d) and/or e) shall result in any loss or diminution of Purchaser's
rights under this Article 18, provided any delay in giving notice does not
exceed 30 (thirty) days and actual notice is given during the Guarantee Period.
f) In the event that any underwater Deficiencies are discovered in a
Vessel at any time within 30 (thirty) months of the date of delivery of such
Vessel and either (i) such Deficiency is discovered during the Guarantee Period
applicable to such Vessel, or (ii) it is agreed or Purchaser proves that such
Deficiencies arose during the Guarantee Period applicable to such Vessel
(whether or not such Deficiencies were reported during such period), Contractor
shall be responsible for such Deficiencies and the correction thereof in
accordance with this Article 18 provided that Purchaser shall pay, as its
expense, for the haul day and any lay days required to accomplish such Vessel's
normal drydocking maintenance, and Contractor, in addition to the cost of the
correction of such Deficiency, shall also pay, as its expense, for each
additional drydocking lay day which is required to correct such Deficiency.
Notwithstanding the foregoing, if a Vessel is drydocked solely on account of a
Deficiency at any time within 12 (twelve) months of the date of delivery of such
Vessel, and such Deficiency exists, Contractor shall pay all drydocking charges,
as well as the cost of correction of such Deficiency. Purchaser may, at its
expense, conduct an underwater survey within the Guarantee Period, but its
failure to do so shall not affect any rights accorded it by this Article 18.
g) Notwithstanding the provisions of this Article 18 g) with respect
to assignment of certain portions of certain warranties and guarantees, it is
agreed that Contractor's obligations, as established in this Article 18, shall
extend and apply to all workmanship and to each and every item of machinery,
material, equipment, outfitting and spares which is incorporated in or is
delivered with the Vessel, whether furnished or fabricated by Contractor or a
subcontractor or some other vendor, manufacturer or supplier. (Contractor has
no obligations under this Article 18, however as to any fault in an Item
furnished by Purchaser which was installed or stowed on board by Contractor in
accordance with all of the requirements of this Contract and the Plans and
Specifications.) Contractor hereby assigns to Purchaser, to the extent possible
and without charge therefore, that portion of any warranty or guarantee made by
a subcontractor or other vendor, manufacturer or supplier with respect to any
item of workmanship, machinery, material, equipment, outfitting or spares which
extends beyond the Guarantee Period applicable to the Vessel containing such
item or which is otherwise more favorable to Purchaser than the guarantee of
Contractor under this Article 18. The assignment referred to in the preceding
sentence shall become effective at and upon delivery of the Vessel to which such
guarantee or warranty applies, and Contractor hereby agrees to deliver to
Purchaser, within thirty days of the date of delivery of each respective Vessel,
copies of all contracts, certifications or other documents which embody or set
forth such warranties or guarantees as are assigned to Purchaser under this
Article 18 g). Contractor shall seek to obtain best possible guarantees and
warranties from subcontractors, venders, manufacturers and suppliers and seek to
ensure that those may be assigned to Purchaser.
h) Except as otherwise provided in this Contract without limitation
as per Article 18 f), Contractor shall have no responsibility under this Article
18 with respect to any Deficiency not arising, existing or discovered in a
Vessel during the Guarantee Period applicable to such Vessel and reported in
writing to Contractor within 30 (thirty) days after the expiration of such
Guarantee Period with respect to the Vessel in which such Deficiency exists or
if the Vessel is at sea at the end of such period within 15 (fifteen) days after
completion of the voyage, but in no event later than 60 (sixty) days after
expiration of the Guarantee Period, it being specifically understood that any
such Deficiencies and all damages resulting therefrom shall be the exclusive
responsibility of Purchaser: provided that Contractor's obligation with respect
to the correction of Deficiencies for which Contractor is responsible as
provided herein shall be to fully, completely and properly correct such
Deficiencies, excepting normal wear and tear of work and materials employed in
such corrections.
i) Trial Deficiencies. The parties hereby agree that certain
Deficiencies identified as a result of tests or trials provided for herein and
as per the Specifications shall result in the payment by Contractor to Purchaser
of liquidated damages (and not as a penalty) as provided in the specific
schedules appearing below:
(1) Speed:
a) the guaranteed service speed of each of the Vessels at
design draft ** ( ** ) m shall be **
( ** ) knots and shall be demonstrated
by Contractor during sea trials under conditions as
described in the Specifications.
b) Contractor shall have no liability to Purchaser by reason
of the actual speed of any of the Vessels as determined
during trial run being less than ** of **
( ** ) knot below the guaranteed
service speed as defined herein and in the Specifications.
However, commencing with and including such Deficiency of
** of ** ( ** ) knot in actual
speed below the guaranteed service speed of any of the
Vessels, Contractor shall pay as liquidated damages for any
of the Vessels in respect of which such a Deficiency exists
as follows (but disregarding fractions of **
( ** ) ** ):
For ** ( ** ) of a knot a total sum of USD
** (United States Dollars ** ).
For ** ( ** ) of a knot a total sum of USD
** (United States Dollars ** ).
For ** ( ** ) of a knot a total sum of USD
** (United States Dollars ** ).
For ** ( ** ) of a knot a total sum of USD
** (United States Dollars ** ).
For ** ( ** ) of a knot a total sum of USD
** (United States Dollars ** ).
For ** ( ** ) of a knot a total sum of USD
** (United States Dollars ** ).
For ** ( ** ) of a knot a total sum of USD
** (United States Dollars ** ).
If the Deficiency in actual speed of any of the Vessels
upon trial is ** ( ** ) knot or more below the
guaranteed service speed, the Purchaser may at its option
terminate the Contract with respect to that Vessel in
accordance with Subclause (5) below.
(2) Fuel Consumption:
a) The guaranteed fuel consumption of each of the Vessels
shall be as defined in the Specifications and shall be
demonstrated by the Contractor during the shop tests.
b) Contractor shall have no liability to Purchaser by reason
of the fuel consumption of any of the Vessels as determined
during shop tests being more than the guaranteed fuel
consumption as defined in the Specifications and herein,
provided such excess is not more than ** % ( **
per cent) over the guaranteed fuel consumption. However,
commencing with and including an excess of ** %
( ** per cent) in actual fuel consumption of any
of the Vessels Contractor shall pay as liquidated damages
for such Vessel the sum of USD ** (United States
Dollars ** ) for each full ** % ( **
per cent) increase in fuel consumption above said ** %
( ** per cent) (fractions of ** % ( ** per
cent) to be prorated) up to a maximum of ** %
( ** per cent) over the guaranteed fuel
consumption of that Vessel.
If fuel consumption of any of the Vessels exceeds ** %
( ** per cent) of the guaranteed fuel consumption,
the Purchaser may, at its option terminate the Contract
with respect to that Vessel in accordance with Subclause
(5) below.
(3) Deadweight:
a) The guaranteed deadweight of each of the Vessels shall be
as defined in the Specifications and shall be demonstrated
by the Contractor.
b) Contractor shall have no liability to Purchaser by reason
of the actual deadweight of any of the Vessels as
determined in accordance with the Specifications being less
than ** ( ** ) metric tons below the
guaranteed deadweight. However, Contractor shall pay as
liquidated damages to Purchaser the sum of USD **
(United States Dollars ** ) for each
full metric ton of such deficiency being more than **
( ** ) metric tons up to a maximum deficiency
of ** ( ** ) metric tons (said
calculation disregarding fractions of 1 (one) metric ton).
In the event of a deficiency in actual deadweight of any of
the Vessels being more than ** ( ** )
metric tons then, Purchaser may, at its option, terminate
the Contract in respect to that Vessel in accordance with
Subclause (5) below.
(4) Container Capacity Warranty:
a) The guaranteed TEU standard container slot capacity of
each Vessel when stacked ** ( ** ) high on
deck shall be as specified in the Specifications and the
General Arrangement Plan.
b) Contractor shall have no liability to Purchaser by reason
of the actual container slot capacity of each Vessel being
less than ** ( ** ) TEU below the guaranteed
container slot capacity of each Vessel. However, Contractor
shall pay as liquidated damages to Purchaser for any of the
Vessels the sum of USD ** (United States Dollars
** ) per TEU for each Vessel having a TEU
deficiency below the guaranteed TEU standard container slot
capacity less ** ( ** ) TEU.
In the event of the actual container slot capacity of any
of the Vessels being ** ( ** ) TEU less than
the guaranteed TEU standard container slot capacity as
defined in a) above, Purchaser may at its option terminate
the Contract in respect to that Vessel in accordance with
Subclause (5) below.
(5) Purchaser's Option to Terminate:
If for any reason or combination of reasons set forth
above in Subclauses (1) through (4) of this Article 18 (i),
Purchaser elects to terminate the Contract in respect of
the deficient Vessel, then within 10 (ten) days of receipt
of notice of said termination Contractor shall refund to
Purchaser the amount of all installments of the Contract
Price with respect to the Vessel in respect of which the
Contract is terminated together with interest thereon as
provided for in Article 4 e) from the date Purchaser made
the payments to the date on which reimbursement is made
together with an amount equal to the value of items
furnished by Purchaser. This refund shall discharge all
obligations, duties and liabilities of each of the parties
hereto to the other under this Contract and Contractor
shall have no liability to Purchaser for any liquidated
damages under this Article.
j) Apart from Purchaser's rights under this Contract, Purchaser shall
have no further claims against Contractor for Deficiencies, loss or damage to
the Vessels, including, but not limited to, consequential damages for loss of
use of the Vessels and all other consequential damages for damage or loss to the
Vessels.
ARTICLE 19
DEFAULT OF PURCHASER
a) In the event Purchaser is in Default (as defined in Subclause b)
below) under this Contract, and such Default is not remedied by Purchaser within
15 (fifteen) days after Purchaser's receipt of a written notice from Contractor
specifying said Default and specifying that Contractor intends to terminate this
Contract, if Purchaser does not remedy the Default within said 15 (fifteen)
days, Contractor may terminate this Contract with respect to the Vessel for
which the Default has occurred by giving written notice hereof to Purchaser not
later than 5 (five) days after the expiry of said 15 (fifteen) days' period. In
the event Contractor terminates this Contract for said Vessel in accordance with
this Article, Contractor shall have the right to recover damages for such
default from Purchaser, provided, however, that Purchaser shall only be liable
for such actual loss and damages Contractor has sustained on account of such
Default of Purchaser after Contractor has in good faith used its best efforts to
mitigate and minimize such damages, and also provided that Purchaser shall
receive an appropriate credit for all sums previously paid to Contractor,
including equipment and materials previously supplied to Contractor by Purchaser
and either retained or incorporated in the Vessel. Upon termination of the
Contract with respect to a Vessel by Contractor under this Article, title to the
said Vessel shall vest in Contractor without any further action.
b) For the purpose of this Contract, Purchaser shall be considered to
be in "Default" hereunder in any of the following events:
(i) Purchaser fails to make a required payment or payments
under this Contract, unless Purchaser remedies such
failure by payment of all of the required payment or the
undisputed portion thereof within 15 (fifteen) business
days after receipt of said written notice of such failure
from Contractor or such longer period as may be agreed to
by Contractor. Notwithstanding the foregoing, in the event
that Purchaser initiates an arbitration proceeding under
Article 33 within 15 (fifteen) business days after receipt
of Contractor's notice of default, Purchaser shall not be
considered to be in Default, unless within 15 (fifteen)
business days after the Arbitrator's(s') decision or a
final judgment by a court of competent jurisdiction
Purchaser fails to remedy any failure to make any payments
for which it was therein found liable.
(ii) Purchaser fails to take delivery of any of the Vessels
when such Vessel is duly tendered for delivery by the
Contractor under the provisions of Article 17 hereof.
(iii) If Purchaser shall (a) apply for consent to the
appointment of a receiver, trustee or liquidator of itself
or of all or any part of its assets, (b) admit in writing
its inability to pay its debts as they mature, (c) make a
general assignment for the benefit of creditors, (d) file
or consent to the filing of a petition in bankruptcy or a
petition or answer seeking reorganization or an
arrangement with creditors or to take advantage of any
insolvency, readjustment of debt, dissolution or
liquidation law, or (e) if a receiver, liquidator or
trustee of Purchaser of any of its assets is appointed by
court order and such order remains in effect for more than
30 (thirty) days; or (f) Purchaser is adjudicated bankrupt
or insolvent, always provided that if Purchaser's parent
company provides a parent guarantee in respect of
Purchaser's obligations under this Contract no Default
will arise.
ARTICLE 20
DEFAULT OF CONTRACTOR
Any of the following shall constitute an "Event of Default" of Contractor under
this Contract:
a) Delivery of a respective Vessel is delayed for more than 180 (one
hundred eighty) days beyond the Delivery Date, (as it may have been extended by
the grace period or otherwise under this Contract), and notwithstanding that
Contractor has paid liquidated damages for any part or all of such 180 (one
hundred eighty) days' period and will continue to pay such liquidated damages.
b) Contractor shall (i) apply for consent to the appointment of a
receiver, trustee or liquidator of itself or of all or any part of its assets,
(ii) admit in writing its inability to pay its debts as they mature, (iii) make
a general assignment for the benefit of creditors, (iv) file or consent to the
filing of a petition in bankruptcy or a petition or answer seeking
reorganization or an arrangement with creditors or to take advantage of any
insolvency, readjustment of debt, dissolution or liquidation law, or (v) file or
consent to the filing of an answer admitting the material allegations of, or
default in answering, a petition filed against it in any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation proceeding, or (vi) take any action under the laws of any applicable
jurisdiction analogous to any of the foregoing, or action shall be taken by it
for the purpose of effecting any of the foregoing.
c) A receiver, liquidator or trustee of Contractor, or of any of its
assets is appointed by court order and such order remains in effect for more
than 30 (thirty) days; or Contractor is adjudicated bankrupt or insolvent; or
any of the property of Contractor is sequestered by court order and such order
remains in effect for more than 30 (thirty) days; or a petition is filed against
Contractor under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any jurisdiction,
whether now or hereafter in effect, and is not dismissed within 60 (sixty) days
after such filing or adequate security posted within 30 (thirty) days to stay
the involuntary proceedings.
ARTICLE 21
ACTION BY PURCHASER UPON DEFAULT OF CONTRACTOR
a) (i) In the event that any one or more of the Events of Default
specified in Article 20 shall have occurred, Purchaser, if
it so elects, may terminate this Contract with respect to
such Vessel. Purchaser's right, in addition to Purchaser's
rights under Subclause b) and c) of this Article, to keep
and/or claim any and all liquidated damages paid or payable
by Contractor to Purchaser in accordance with Article 8
with respect to such Vessel shall be limited to liquidated
damages in an amount of USD ** (United States
Dollars ** ).
(ii) In addition to Purchaser's option to terminate by reason
of an 180 (one hundred eighty) days' delivery delay as
defined in Subclause a) of Article 20, Purchaser shall
have the option, at its sole discretion, to negotiate a
revised Contract Delivery Date with Contractor ("Revised
Delivery Date"). In the event a Revised Delivery Date is
agreed upon, Contractor's obligation to pay Purchaser
liquidated damages for delay as specified in Article 8 in
respect of the Vessel for which a Revised Delivery Date is
agreed shall be limited to an amount of USD **
(United States Dollars ** ) and
furthermore Contractor's obligation to pay liquidated
damages for delay subsequent to the 180 (one hundred
eighty) days' period specified in Subclause a) of Article
20 shall be suspended with respect to such Vessel. If
Contractor delivers the Vessel at issue on or before the
Revised Delivery Date, as it may be extended under the
Contract, no liquidated damages for any delay beyond the
initial 180 (one hundred eighty) days' delay period
referred to herein in respect of such Vessel shall be
payable and the amount payable for said 180 (one hundred
and eighty) day period shall be in an amount limited to
USD ** (United States Dollars ** ).
If Contractor fails to deliver the Vessel at issue on or
before the Revised Delivery Date, Purchaser may terminate
the Contract with respect to that Vessel, and Contractor
shall be liable for liquidated damages for all delay
including the 180 (one hundred eighty) days' delay,
however, limited to an amount of USD ** (United
States Dollars ** ).
b) In the event of termination under this Article 21 Purchaser may
then, if it so elects and it is not otherwise unlawful, proceed to have the work
on such Vessel completed anywhere, without the payment of any rental or other
charge therefore to Contractor for such period of time as may be necessary to
remove the Vessel from the Shipyard for completing the Contract Work, the
removal of the Vessel to be effected within maximum 60 (sixty) days. If
Purchaser shall elect to have all or part of the Contract Work with respect to
such undelivered Vessel completed, Contractor shall (i) assign such subcontracts
and orders for material, services, and supplies to be used in the performance of
said Contract Work to Purchaser as Purchaser may direct, and (ii) pay to
Purchaser the amount by which the total cost to Purchaser of completing said
work (including all amounts paid to Contractor hereunder) reasonably exceeds the
Per Vessel Contract Price(s) with respect to the Vessel(s) Purchaser elects to
have completed. Not withstanding the foregoing Contractor's liability under this
Subclause b) (ii) shall not in respect of a Vessel exceed an amount equal to
** % ( ** per cent) of the Per Vessel Contract Price.
After having completed the Vessel, the Purchaser has to pay to the
Contractor the Per Vessel Contract Price with amendments, if any, less (a) the
installments already paid by Purchaser to the Contractor, (b) the amounts paid
by the Purchaser to the Contractor's subcontractors and sellers in respect of
subcontract and orders, assigned to Purchaser in accordance with this Subclause
b) and (c) all costs not incurred by Contractor due to Contractor not having to
complete the Vessel.
c) In the event of termination under this Article 21, if Purchaser
shall elect not to complete such Vessel, Contractor shall immediately pay to
Purchaser an amount equal to:
(i) payments made from Purchaser to Contractor under this
Contract in respect of said Vessel;
(ii) the value of items furnished by Purchaser, or return said
items to the Purchaser at the option of the Contractor;
d) Except if Contractor's default has resulted from Contractor's bad
faith, Purchaser shall have no other remedies for Contractor's default other
than those arising under this Contract.
ARTICLE 22
ACTION BY PURCHASER UPON FORCE MAJEURE
In the event a Delivery Date has been extended as provided for in Article 7
cumulatively for more than 220 (two hundred twenty) days, Purchaser may
terminate the Contract with respect to that Vessel. In the event Purchaser
elects to terminate the Contract for such Vessel, Contractor shall immediately
repay to Purchaser an amount equal to payments made from Purchaser to Contractor
under this Contract in respect of said Vessel together with an amount equal to
the value of items furnished by Purchaser, or return said items to the Purchaser
at the option of Contractor.
ARTICLE 23
REPLACEMENT FINANCE COMMITMENT
In order to induce Purchaser to execute this Contract a commitment (the
"Commitment") for post delivery financing for the benefit of Purchaser with
respect to the Vessels to be constructed hereunder has been made available to
Purchaser by a group of German banks (the "Banks"). The Commitment provides that
the Banks will have no obligation to disburse the loan proceeds with respect to
any Vessel that is delivered later than 270 (two hundred seventy) days after the
respective original Contract Delivery Dates fixed as provided for under
Subclause e) of Article 1.
Contractor agrees that if the Commitment terminates after the said 270 (two
hundred and seventy) days, as a result (in whole or in part) of circumstances
attributable (in whole or in part) to the Contractor, Contractor shall, within
30 (thirty) days after receipt of Purchaser's notice stating that the Banks have
terminated the Commitment or have advised the Purchaser in writing of their
intent to terminate the Commitment, cause a substitute commitment ("the
Replacement Commitment") to be made available to Purchaser with respect to the
Vessel or Vessels (the "Unfinanced Vessel") as to which the Commitment has or
will terminate. The Replacement Commitment shall contain terms and conditions no
less favorable to Purchaser than those in the Commitment. If Contractor has not
caused a Replacement Commitment satisfactory to Purchaser to be issued to
Purchaser within 30 (thirty) days of Purchaser's notice, Purchaser may terminate
this Contract with respect to any Unfinanced Vessel. In the event Purchaser
elects to terminate the Contract for such Unfinanced Vessel, Contractor shall
immediately repay to Purchaser an amount equal to payments made from Purchaser
to Contractor under this Contract in respect of such Unfinanced Vessel, together
with an amount equal to the value of items furnished by Purchaser or return said
items to the Purchaser at the option of Contractor.
ARTICLE 24
SUPPLIES ON BOARD AT DELIVERY
Lubricating oil left in the storage tanks and diesel oil, fuel oil and distilled
water on board at delivery of each Vessel shall be inventoried by Contractor,
and Purchaser shall pay for them at prevailing market prices at the time and
place of delivery of each Vessel to Purchaser. The lubricating oil vendor shall
have been approved by Purchaser. Contractor to remove all waste-oil and sludge
from each of the Vessels at Contractor's sole cost and expense at or prior to
delivery.
ARTICLE 25
TITLE
a) Prior to delivery under Article 17, Contractor shall retain, to
the extent not furnished or paid for by Purchaser, title to each of the Vessels,
to the extent completed, and title to all work and material performed upon, or
installed in any Vessel (including a hull or any part thereof in the process or
course of construction), or placed on board any such Vessel or that is located
elsewhere which is intended for use in the performance of Contract Work. Prior
to delivery under Article 17, to the extent that Purchaser shall have paid
Contractor for such material and labor or provided same, title shall vest in
Purchaser without any further action. Such material will be held by Contractor
in custody for Purchaser free of charge. The risk of loss of or damage to all
such work and material and any undelivered Vessel(s) shall remain with
Contractor, and Purchaser shall not be deemed to have waived its rights to
require Contractor to correct any Deficiency and to deliver each of the Vessels
with the Contract Work Complete, as provided in this Contract.
b) Prior to the delivery of a Vessel, any lien thereon or on any work
or materials performed upon or installed in such Vessel arising under law in
Contractor's favor (but only such liens as run solely in favor of Contractor)
shall not be deemed to violate the provisions of this Article 25 or Article 26.
c) Title to all scrap and title to any material which is surplus to
the requirements of this Contract (except material furnished by Purchaser) shall
vest in Contractor.
d) Title and risk in any of the Vessels shall be fully vested in
Purchaser upon delivery of said Vessel in accordance with the provisions of
Article 17.
e) In the event that the Purchaser shall terminate this Contract with
respect to any Vessel and provided termination does not take place
according to Article 21 b) and further provided that the Contractor has duly
paid any and all amounts including all damages, due to the Purchaser under this
Contract, then title to said Vessel shall vest in the Contractor without any
further action.
ARTICLE 26
LIENS
a) At the time Contractor requests any payment under the provisions
of this Contract, and at all other reasonable times, Purchaser may, if it has
reasonable cause to request such information, require Contractor to furnish a
written statement satisfactory to Purchaser showing what, if any liens, security
interests or rights in rem of any kind have been or can be acquired or attached
on or against any of the Vessels or any property aboard the Vessels or any
Contract Work (whether incorporated in any of the Vessels or not), or any
material at the Shipyard or elsewhere (including material furnished by
Purchaser) related to the performance of the Contract Work. Contractor agrees
that no liens, security interests or rights in rem of any kind shall at any time
be permitted to lie or attach against or upon any of the Vessels or any of said
property, Contract Work or materials, except liens, security interests or rights
in rem as are permitted to exist under Articles 25 b) or 17 a) or as arise
solely out of the act, neglect or default of Purchaser (other than the entering
into or carrying out of this Contract). Notwithstanding the foregoing,
Contractor shall be entitled to attach a lien on any of the Vessels in favor of
Kexim in an amount not to exceed the balance of the Per Vessel Contract Price
mentioned in Article 4, b) (ii) to be paid by the Purchaser at the time of
delivery of any Vessel and provided that Purchaser prior to the Contractor
attaching a lien has entered into an agreement with Kexim which is satisfactory
to Purchaser to protect Purchaser's interests hereunder. In the event a Kexim
lien is attached to a Vessel as provided for above Contractor agrees that
notwithstanding anything to the contrary stated in this Contract Purchaser shall
be entitled to pay the balance of the Per Vessel Contract Price mentioned in
Article 4 b) (ii) directly to Kexim to satisfy the lien, in which event
Purchaser shall be entitled to delivery of such Vessel.
b) If a lien, security interest or right in rem of any kind is filed
or asserted against or attached upon any of the Vessels or any of said property,
material or Contract Work, Contractor shall promptly notify Purchaser thereof in
writing. If such lien, security interest or right does not arise solely out of
the act, neglect or default of Purchaser (other than the entering into or
carrying out of this Contract), Contractor shall, not later than 14 (fourteen)
days thereafter, secure the discharge or release of such lien, security interest
or right in rem; provided that if Contractor desires to contest such lien, and
such release or discharge is not available under law during such contest
(including, without limitation, through the filing of a bond or security),
Contractor shall immediately take such steps as in the opinion of Purchaser
shall prevent such lien, security interest or right in rem from delaying or
otherwise adversely affecting the Contract Work and shall indemnify fully, hold
safe and harmless and defend Purchaser and any and all of the Protected Parties
(including the Vessels) from all costs, claims, charges and damages by reason of
such lien, security interest, right in rem or claims and/or in any way
attributable thereto.
c) Notwithstanding the provisions of Article 26 b), Purchaser may
secure the removal of such lien, security interest or right in rem, in which
event Contractor shall reimburse Purchaser for its costs of securing such
discharge or release (which cost shall include any expenses incurred in
connection therewith, including reasonable attorney's fees) by deducting such
sum from any payments due or to become due to Contractor under this Contract.
In the event such cost is in excess of the amount of any such reimbursement by
deductions, Contractor shall pay the amount of such excess to Purchaser
promptly upon demand.
d) Notwithstanding the provisions of Article 26 b), Purchaser,
without securing the discharge or release of such lien, security interest or
right in rem as provided in Article 26 c), may nevertheless withhold from any
payments due or to become due to Contractor, unless and until such lien,
security interest or right in rem is released or discharged by Contractor, a sum
equal to the amount determined by Purchaser to be required to secure the release
or discharge of such lien, security interest or right in rem, which amount shall
include the estimated amount of all expenses which might be incurred therewith,
including reasonable attorneys' fees.
ARTICLE 27
TAXES
Contractor shall pay, as a cost of Contractor, all taxes, assessments and duties
lawfully assessed or levied prior to delivery of a Vessel against such Vessel
and material, supplies and equipment to be used or used in the performance of
this Contract (excepting, however, material, supplies and equipment furnished to
Contractor by Purchaser) and any sales, use or excise taxes with respect thereto
lawfully assessed or levied prior to, or concurrently with, delivery of such
Vessel.
ARTICLE 28
PATENT INFRINGEMENT
a) Contractor shall be responsible for any and all claims against
Purchaser and/or any and all of the Protected Parties, for infringement of
patents, patent rights, copyrights, trademarks or trade secrets, in the
construction, in the use of or in the sale of any of the said Vessels as
constructed by Contractor (excepting claims arising solely out of the Plans or
Specifications or any equipment, machinery or material supplied to Contractor by
Purchaser, and such use of any of the foregoing as Contractor is required to
make by the express terms of this Contract and the Plans and Specifications),
and Contractor shall indemnify fully, hold safe and harmless and defend
Purchaser and any and all of the Protected Parties, from and against all such
claims (without exception) and against all losses, claims, liabilities, demands,
suits, causes of action, costs or expenses which any of them may be obligated to
pay by reason thereof, including expenses of litigation and attorneys' fees, if
any. Purchaser shall indemnify fully, hold safe and harmless and defend
Contractor, its agents, officers, directors, servants and employees, and (prior
to delivery hereof) the Vessels, and each of them, from and against all claims,
including expenses of litigation and attorneys fees, arising solely out of the
Plans or Specifications or any equipment, machinery or material supplied to
Contractor by Purchaser, and such use of any of the foregoing as Contractor is
required to make by the express terms of this Contract and the Plans and
Specifications.
b) In the event that a Vessel, or any part thereof, by reason of a
claim for which Contractor is responsible under Article 28 a) shall be held to
constitute an infringement of a patent, patent right, copyright, trademark or
trade secret, and the use of such Vessel or any part thereof shall be enjoined,
Contractor shall, at its option and at its own expense, either procure for
Purchaser the right to continue using such Vessel and every part thereof, or, if
it can be done without material effect or delay upon such Vessel's operations,
replace any infringing part of such Vessel with a noninfringing part which is
satisfactory to Purchaser.
ARTICLE 29
ASSIGNMENT OF CONTRACT
The benefits and obligations of this Contract shall inure to and be binding upon
the successors and permitted assigns of the original parties hereto. No
assignment shall be made by Contractor except with the prior written consent of
Purchaser. Notwithstanding the foregoing Contractor shall be entitled to assign
its rights under this Contract for security purposes to Kexim. Purchaser may,
with notice to Contractor, assign all or any of its rights under this Contract,
as they relate to one or more Vessels, or in one or more of the Vessels
(including a hull or any part thereof in the process or course of construction
and all other property title to which has vested in Purchaser pursuant to
Article 25), to any third party; provided that Purchaser shall remain liable for
its obligations hereunder. In connection with an assignment by Purchaser of all
of its rights with respect to one or more of the Vessels (or all the parts
thereof in the process or course of construction and all other property
associated therewith) if Contractor, to Contractor's reasonable satisfaction, is
presented with evidence of such assignee's financial capability to complete the
remaining progress payments of Purchaser hereunder, Contractor shall agree to
relieve Purchaser of all obligations hereunder. Contractor agrees to cooperate
with Purchaser (without subjecting Purchaser to any fee or expense reimbursement
therefore) in connection with any assignment by Purchaser of all or part of this
Contract in connection with any such assignment. Any assignment made in
violation of this Article 29 shall be void and of no force or effect. If any
assignments under this Clause would lead to change of the structure of the post
delivery financing with regard to the Vessels in a manner which will cause a
monetary loss to Contractor and Purchaser does not agree to indemnify Contractor
for such loss, then said assignments can only be granted after Contractor's
prior written consent, which consent shall not be withheld unreasonably.
ARTICLE 30
COMPUTATION OF TIME
Except as otherwise provided in this Contract, all periods of time shall be
computed by including Saturdays, Sundays and holidays, except that if any period
terminates on a Saturday, Sunday or bank holiday in USA (in the case of periods
applicable to action by Purchaser) or in Korea (in the case of periods
applicable to action by Contractor), it shall be deemed extended to the business
day next succeeding. References herein to "business days" refer to days other
than Saturdays, Sundays and such holidays.
ARTICLE 31
CONTRACTOR TO COMPLY WITH ALL LAWS AND REGULATIONS
Contractor shall comply with all national, state and local laws, rules and
regulations, and the requirements of any applicable classification society and
of the departments and agencies of any nation and any state and local
jurisdiction and any international body affecting the construction and operation
of works, plants, or vessels in or on navigable waters and the shores thereof,
and all other waters subject to the control of any nation and any state and
local jurisdiction and shall procure at its own expense such permits from the
nation and from state and local authorities as may be necessary in connection
with beginning or carrying on to completion the Contract Work and shall at all
times comply with all national, state and local laws in any way affecting the
Contract Work.
ARTICLE 32
APPLICABLE LAW
This Contract shall be governed by New York State Law without reference to the
laws of any other jurisdiction and each of the parties hereby submits itself to
the exclusive jurisdiction of any court sitting in the State of New York for
purposes of any arbitration proceedings under this Contract and enforcement of
any awards or court judgments rendered hereunder. Service in any such action or
proceeding may be made by notice to the other party given as set forth in
Article 35.
ARTICLE 33
DISPUTES, ARBITRATION
a) In the event of any dispute arising out of or relating to this
Contract or any provision hereof, such dispute shall be referred to the
Arbitrator(s), as defined in this Article 33, and the decision of the
Arbitrator(s) shall be final and binding upon both parties hereto.
b) No dispute under this Contract shall entitle Contractor to cease
work on any part of the Contract Work or to refuse delivery of a Vessel
(provided Purchaser delivers to Contractor - simultaneously with delivery of
such Vessel -a guarantee issued by an internationally reputable bank in favor of
Contractor and in respect of the amount in dispute, which amount shall not
exceed the difference between payments made by Purchaser under this Contract in
respect of such Vessel and the Per Vessel Contract Price plus all other payment
claims of Contractor according to this Contract and payable in accordance with
the terms of an arbitration award) nor shall any such dispute entitle Purchaser
to withhold any portion of any payment which is not in dispute.
c) The parties agree to designate and appoint a sole Arbitrator, and
if they cannot agree within 10 (ten) days on a sole Arbitrator, a panel of 3
(three) Arbitrators shall be chosen, one by each party within 30 (thirty) days
and the third by said two Arbitrators within 30 (thirty) days. In the event one
party fails to appoint its Arbitrator according to this Article and/or the two
Arbitrators cannot agree on the third Arbitrator, he shall be appointed by the
Society of Maritime Arbitrators, Inc. in New York within 30 (thirty) days. All
persons designated as Arbitrator under this Contract shall be knowledgeable in
commercial vessel construction, and shall not have had, shall then not have and
shall then have no expectation of acquiring, any business or financial
relationship with either of the parties hereto, except such relationship as may
be acquired by reason of being designated as Arbitrator. Neither the sole
Arbitrator nor the third Arbitrator shall be a national of the country of either
party.
d) Proceedings before the Arbitrator(s) shall be scheduled to
commence promptly after Purchaser or Contractor refers a dispute for resolution
under this Article 33, but in no event later than 14 (fourteen) days after
selection of the Arbitrator(s). It is the express intent of the parties that
all disputes referred to arbitration be settled with all possible dispatch, but
in no event later than 60 (sixty) days after proceedings before the
Arbitrator(s) commenced. Such proceedings shall be conducted in accordance with
such rules as the Arbitrator(s) deems best suited to the dispute in questions;
provided that: (i) each party shall have a right to have its attorney present at
all proceedings before the Arbitrator(s), and (ii) either party shall have the
right to have all testimony presented to the Arbitrator(s) and all other
proceedings before the Arbitrator(s) recorded on recording tape or by a
certified court reporter, with the cost thereof to be borne by the party
requesting such recording; and (iii) each party shall have the right to present
arguments and evidence to the Arbitrator(s); and (iv) each party shall be
entitled to all rights and privileges granted by the Arbitrator(s) to the other
party; and (v) each party shall be entitled to compel the attendance of
witnesses or production of documents, and for this purpose, the Arbitrator(s)
shall have the power to issue subpoenas; and (vi) each party shall have the
right to obtain discovery and (upon leave of the Arbitrator(s)) take
dispositions, of the scope and in the manner provided in the United States
Federal Rules of Civil Procedure; and (vii) the Arbitrator(s) shall have the
power to impose on either party such terms, conditions, consequences,
liabilities, sanctions and penalties as he deems necessary or appropriate (which
shall be as conclusive, final and enforceable as his award on the merits) to
compel or induce the appearance of, or production of documents in the custody
of, any officer, director, agent or employee of such party or its independent
contractors or subcontractors or any party which controls, is controlled by or
is under common control with such party or its independent contractors or
subcontractors. Costs in connection with such arbitration including fees and
expenses of the Arbitrator(s) and the parties' attorney's expenses, shall be
awarded by the Arbitrator(s) based upon the respective merits of the parties'
positions as determined by the Award. Any arbitration proceeding shall be
conducted by the parties and the Arbitrator(s) with all reasonable dispatch, and
a decision reached and announced within 7 (seven) days after submission. If
required by either party, a detailed written opinion shall be issued 21 (twenty
one) days after publication of the decision, setting forth the facts, reasons
and conclusions upon which the decision was made.
e) The decision of the Arbitrator(s), when reduced to writing and
signed by the Arbitrator, shall be final, conclusive and binding upon the
parties hereto, and judgment may be entered on any award made hereunder in any
court having jurisdiction thereof. Any award of money by the Arbitrator(s)
shall specify whether interest is due as set forth in Article 4 e) and, if it is
due, shall specify the date from which it accrues.
f) All proceedings before the Arbitrator(s) shall be held at New
York, or such other location as may be agreed to by both parties in writing.
ARTICLE 34
CONDITIONS
a) The obligations of the Purchaser under this Contract are expressly
subject to and conditioned upon the following:
(i) Purchaser shall have obtained a binding commitment from
financier(s) with respect to the financing of each
Vessel on terms satisfactory to Purchaser;
(ii) The fulfillment of any and all of the conditions
precedent of Howaldtswerke-Deutsche Werft
Aktiengesellschaft under a contract for the purchase of
containership vessels entered into by the Purchaser on
the date hereof and the effectiveness of such contract;
(iii) Kexim's issuance of an export license in respect of the
Vessels.
b) The obligations of the Contractor under this Contract are
expressly subject to and conditioned upon:
(i) Kexim's issuance of an export license in respect of the
Vessels.
ARTICLE 35
GENERAL
a) Any notices relating to this Contract shall be given to the other
party at the address set forth below or at such other address as either party
shall designate in writing:
Contractor: Daewoo Shipbuilding & Heavy Machinery Ltd.
541, 5-Ga, Namdaemun - Ro
Chung-Gu, Seoul
The Republic of Korea
Attention: Mr. I. S. Lee/Director Ship Marketing
Division
Telex: K 24698 or 22213 (Answerback: DWOKPO)
Purchaser: American President Lines, Ltd.
1111 Broadway, Oakland, California 94607
Telex: MCI 6719357
Attention: Stephen Schmidt
Delivery or service of any notice shall be deemed completed (i) if personally
delivered, upon such delivery to the individual listed in the "Attention" lines
above or such other individuals may have been authorized by a party, by notice
to the other, to accept such notice on its behalf; (ii) if telexed, upon
acknowledgment thereof by return telex (NOT AUTOMATIC ANSWERBACK) or other
written document; or (iii) if mailed, upon receipt.
b) This Contract supersedes all prior agreements or understandings,
whether written or oral, of Contractor or Purchaser relating to the subject
hereof and incorporates the entire understanding of the parties with respect
thereto. This Contract may be amended, and any right or condition thereunder
waived, only by a written instrument signed by the party against whom such
amendment or waiver is sought to be enforced.
c) In the event that any action or proceeding shall be commenced or
any claim shall be asserted which, if successful, may entitle one party to
indemnification from the other pursuant to the express provisions of this
Contract, the party seeking indemnification shall give written notice of such
action, proceeding or claim to the other reasonably promptly after receipt of
written notice of such action, proceeding or claim. If a Vessel shall at any
time be arrested or if any property of a party shall at any time be attached or
otherwise levied upon on account of a matter subject to identification under
this Contract, the indemnifying party shall, upon demand by the other, promptly
secure the release of any such arrest, attachment or levy. The indemnified
party shall be entitled to participate in the discharge of any such arrests
attachment or levy. The indemnifying party shall be entitled to participate in
and, to the extent it shall wish, to direct the defense of such action,
proceeding or claim (including the selection of counsel reasonably satisfactory
to the indemnified party) at its own expense. The indemnified party shall
reasonably cooperate in the defense of such action, but any out-of-pocket
expenses so incurred by the indemnified party shall be promptly reimbursed by
the other. The indemnified party shall have the right to employ its own counsel
in any such case, but the fees and expenses of such counsel shall be its own
expense, unless the employment of such counsel shall have been authorized by the
other party in connection with the defense of such action or claim, or unless
the other party shall not have employed counsel to have charge of the defense of
the action or claim, in either of which events such fees and expenses shall be
borne by the other party. Any failure of a party entitled to indemnification
under the express provisions of this Contract to comply with any requirement of
this Subclause c) shall relieve the other of liabilities pursuant to such
express provisions only to the extent that the other can establish that such
party was prejudiced as a proximate result of such failure. The obligations of
one party to indemnify the other under any express provision of this Contract
shall not be terminated by termination of this Contract, delivery of any or all
Vessels or expiration of any or all Guarantee Periods.
d) Each Vessel shall be in every respect identical to each and every
other Vessel and to the vessels to be purchased by Purchaser from Howaldtswerke-
Deutsche Werft Aktiengesellschaft under a contract for the purchase of
containership vessels of even date to the extent and scope as required by the
Plans and/or Specifications
e) All references in this Contract to Articles are to Articles of
this Contract, except as otherwise expressly indicated.
f) The use herein of (i) the neuter gender includes the masculine and
the feminine; (ii) the singular number includes the plural, whenever the context
so requires.
g) The Article headings and table of contents in this Contract are
inserted for convenience and the words contained therein shall in no way be held
to expand, amplify, modify or aid in the interpretation or construction hereof.
h) This Contract may be executed in any number of counterparts, each
of which shall be deemed to be an original instrument, but all of which together
shall constitute one and the same instrument.
ARTICLE 36
EFFECTIVE DATE
This Contract shall not become effective and neither party shall have any
obligation or liability hereunder until all of the respective conditions of each
party described in Article 34 have been satisfied or waived, at which time the
Contract will become automatically effective, provided that this must be
accomplished on or before May 27, 1993 (unless otherwise provided in Article 34)
or otherwise this Contract is null and void. Each party shall notify the other
forthwith upon becoming aware that the conditions precedent to the performance
of its obligations hereunder have been satisfied or waived.
IN WITNESS WHEREOF, the parties have executed this Contract in multiple
counterparts as of the date first above written.
ATTEST: By: Daewoo Corporation
/s/ Ok-Nyun Kim
Name: Ok-Nyun Kim
Title: Attorney-in-Fact
ATTEST: By: Daewoo Shipbuilding and Heavy
Machinery Ltd.
/s/ Won Seok Yune
Name: Won Seok Yune
Title: President
ATTEST: By: American President Lines, Ltd.
/s/ Joji Hayashi
Name: Joji Hayashi
Title: President and Chief Executive Officer
PH930719Csec-0200ai-Daewoo
--
MATERIAL MARKED WITH A DOUBLE ASTERISK
HAS BEEN OMITTED PURSUANT TO A GRANT OF
CONFIDENTIAL TREATMENT BY THE COMMISSION
June 4, 1993
American President Companies, Ltd.
1111 Broadway
Oakland, California 94607
Attn: Mr. Steven H. Tulsky
American President Lines, Ltd.
1111 Broadway
Oakland, CA 94607
Attn: Mr. Steven H. Tulsky
COMMITMENT LETTER
Re: Howaldtswerke-Deutsche Werft AG
("HDW") three (3)x Containership
Newbuildings identified as Yard
Nos. "297", "298" and "299" ("1st
HDW Ship","2nd HDW Ship" and "3rd
HDW Ship" respectively and together
"HDW Ships") and Daewoo
Shipbuilding & Heavy Machinery,
Ltd. ("Daewoo") three (3)x
Containership Newbuildings
identified as Yard Nos. "4028",
"4029" and "4033" ("1st Daewoo
Ship", "2nd Daewoo Ship" and "3rd
Daewoo Ship" respectively and
together "Daewoo Ships", the Daewoo
Ships together with the HDW Ships
being called the "Newbuildings")
Dear Sirs:
We refer to the proposed replacement of existing
container vessels used in liner container transportation service
currently operated by American President Lines, Ltd. ("APL") and
to our recent discussions about the possibility of post-delivery
financing being provided for up to 80% of the cost of the
purchase by APL of the six (6) Newbuildings.
The HDW Ships have been ordered from HDW under the
terms of a shipbuilding contract dated May 10, 1993 ("the HDW
Contract") by APL, and the Daewoo Ships have been ordered under
the terms of a shipbuilding contract dated May 10, 1993 ("the
Daewoo Contract") by APL, subject to each of such Contracts
becoming effective in accordance with its terms.
This Commitment Letter sets out the terms and
conditions upon which:
(1) Kreditanstalt fur Wiederaufbau ("KfW") is in
a position to offer, and commit itself to provide, post-delivery
financing for the HDW Ships; and
(2) a syndicate of banks consisting of
Commerzbank AG, (the "Syndicate Agent"), Deutsche Schiffsbank AG,
Dresdner Lank AG in Hamburg and Vereins-und Westbank AG (together
"the Syndicate") has been formed which is in a position to offer,
and commit itself to provide, post-delivery financing for the
Daewoo Ships.
KfW's commitment to provide post-delivery
financing for the HDW Ships and the Syndicate's commitment to
provide post-delivery financing for the Daewoo Ships, upon the
terms and conditions hereinafter set out, is expressly subject to
all of the following preconditions (the "Preconditions") first
being fulfilled, by no later than 2400 hours (Frankfurt time) on
the later of (i) June 4, 1993 or (ii) such other date as may be
agreed by APL and both of the shipbuilders under the HDW Contract
and the Daewoo Contract with respect to their effective dates,
but no later than June 30, 1993 (or such later time or date as
both KfW and the Syndicate shall agree in their sole discretion)
(the "Preconditions Fulfillment Date") failing which this
Commitment Letter will cease to be binding upon both KfW and the
Syndicate:
(1) Signatures by the parties thereto of the HDW
Contract and the Daewoo Contract together with evidence
satisfactory to KfW and the Syndicate that the conditions under
Article 34 of each such Contract as to the effectiveness of each
such Contract have been fulfilled in every respect upon
effectiveness of the commitments contained in this Commitment
Letter (such evidence to be in the form of an officer's
certificate of APL, or certificates directly from HDW and Daewoo,
to such effect);
(2) The unqualified acceptance by authorized and
binding signatories of APL and American President Companies, Ltd.
(the "Guarantor") of all of the terms and conditions of this
Commitment Letter; and
(3) The formation of the Syndicate and a firm
commitment by each Syndicate member to make its respective
Maximum Contribution specified in paragraph (ii) of Clause 3
below, which shall be evidenced by each member bank's execution
and delivery of this Commitment Letter.
KfW shall certify promptly in writing or by
telefax (confirmed in writing) to APL and the Syndicate when all
of the Preconditions have been met.
This Commitment Letter is based upon the HDW
Contract and the Daewoo Contract, copies of which, certified as
true and complete copies by APL, have been supplied to KfW, the
principal terms of which are:
HDW Contract
Contract Price: 1st HDW Ship - DM **
2nd HDW Ship - DM **
3rd HDW Ship - DM **
Payment Terms For Each HDW Ship: ** % on the
date of effectiveness of the HDW Contract, ** % on the date of
commencement of steel cutting of such HDW Ship, ** % on the date
of commencement of keel laying of such HDW Ship, and ** % on
delivery of such HDW Ship from the proceeds of a subportion of
the HDW Ship Tranche (see below).
Purchaser: APL.
Original Contract Delivery Dates (which expression
shall mean the date set against the relevant HDW Ship below, as
the same may be extended by up to 25 calendar days by HDW under
Article 1(e) of the HDW Contract but excluding any other
extensions thereto which may be permitted under Article 7 (force
majeure) or any other provisions of the HDW Contract):
1st HDW Ship - April 12, 1995
2nd HDW Ship - July 10, 1995
3rd HDW Ship - November 30, 1995
Classification: With a reputable and recognized
classification society.
Container Slot Capacity: Approximately ** TEUs
for each HDW Ship.
Daewoo Contract:
Contract Price: 1st Daewoo Ship - USD
**
2nd Daewoo Ship - USD
**
3rd Daewoo Ship - USD
**
Payment Terms for each Daewoo Ship: ** % on the
date of effectiveness of the Daewoo Contract, ** % on the date of
commencement of steel cutting of such Daewoo Ship, ** % on the
date of commencement of keel laying of such Daewoo Ship and ** %
on delivery of such Daewoo Ship from the proceeds of a subportion
of the Daewoo Ship Tranche (see below).
Purchaser: APL.
Original Contract Delivery Dates (which expression
shall mean the date set against the relevant Daewoo Ship below,
as the same may be extended by up to 25 calendar days by Daewoo
under Article 1(e) of the Daewoo Contract but excluding any other
extensions thereto which may be permitted under Article 7 (force
majeure) or any other provisions of the Daewoo Contract):
1st Daewoo Ship - May 30, 1995
2nd Daewoo Ship - June 21, 1995
3rd Daewoo Ship - October 17, 1995
Classification: With a reputable and recognized
classification society.
Container Slot Capacity: Approximately ** TEUs
for each Daewoo Ship.
APL shall advise KfW promptly in writing of any
proposed alteration which, individually or taken together with
past alterations, would cause the original contract price of any
Newbuilding to change by more than 5%, which would change terms
and currency of payment, or which would cause the TEU container
slot capacity of any of the Newbuildings not to be approximately
** TEUs, with each and every such alteration to be first
approved in writing by KfW and the Syndicate Agent. Copies of
all amendments to the HDW Contracts and the Daewoo Contracts
shall be promptly furnished to the Agent and the Syndicate Agent.
Subject to all of the Preconditions being met by
the Preconditions Fulfillment Date, the financing to be made
available by KfW (in respect of the HDW Ships) and by the
Syndicate (in respect of the Daewoo Ships) will be documented
under a single loan facility agreement (the "Loan Agreement")
upon terms and conditions generally accepted in this type of ship
financing and will include, but not be limited to, the following:
(1) Borrower and Owner of the Newbuildings.
APL is the owner and the borrower in respect of
the Newbuildings, and will be hereinafter referred to as the
"Borrower".
The Borrower may (i) appoint one or more owner
trustees or special purpose corporations approved (together with
beneficiaries or stockholders, respectively) by the Agent and the
Syndicate Agent, each owning and bareboat chartering a
Newbuilding on a "hell and high water" basis to APL on terms and
conditions subject to the approval of the Agent and the Syndicate
Agent and (ii) register any of the Newbuildings under the laws of
the United States of America or any of the following open
registries: Republic of Panama, the Marshall Islands, Republic
of Liberia, Vanuatu and the Bahamas. Any other registries
proposed by the Borrower must be approved by the Agent and the
Syndicate Agent. If any such owner trustee or special purpose
corporation is so appointed then each shall be considered a
"Borrower" for purposes of the commitments under this Commitment
Letter.
(2) Structure.
The loan facility ("the Loan Facility") to be made
available by KfW and the Syndicate under the Loan Agreement,
subject to the terms and conditions thereof, will consist of the
following:
(i) The HDW Ships will be financed by a loan
("the HDW Ship Tranche") which will consist of three (3)
subportions, one per each HDW Ship ("HDW Subportion 1", "HDW
Subportion 2" and "HDW Subportion 3" relating to the 1st HDW
Ship, the 2nd HDW Ship and the 3rd HDW Ship, respectively), each
such subportion to be in a sum equal to, but not to exceed, ** %
of the USD equivalent of the presently contemplated Deutsche mark
("DM") contract price of the relevant HDW Ship or, in the case of
a reduction of such contract price, a sum equal to ** % of the
USD equivalent of the reduced price, but not more than USD **
per subportion.
**
(ii) The Daewoo Ships will be financed by a loan
(the "Daewoo Ship Tranche") consisting of three (3) subportions,
one per each Daewoo Ship ("Daewoo Subportion 1" relating to the
1st Daewoo Ship, "Daewoo Subportion 2" relating to the 2nd Daewoo
Ship, and "Daewoo Subportion 3" relating to the 3rd Daewoo Ship,
respectively), each subportion to be in a maximum sum of USD **
, which is equal to ** % of the USD contract price of each
Daewoo Ship, or in the case of a reduction of such contract
price, ** % of the reduced price.
(3) Lenders. Agent and Co-Agent.
Agent as to the entire Loan Facility:
Kreditanstalt fur Wiederaufbau (in this capacity called the
"Agent").
Syndicate Agent to the Daewoo Ship Tranche:
Commerzbank AG.
Lenders
(i) HDW Ship Tranche: KfW as sole lender.
(a) KfW may grant participations to one or more
banks or other entities in or to all or any part of its rights
and obligations under the Commitment Letter, the Loan Agreement
and the KfW Security Documents (as hereinafter defined)
(including, without limitation, all or a portion of its
contribution to the HDW Ship Tranche); provided however, that,
notwithstanding the grant of any such participation by KfW, such
participation, and the right to grant such a participation, shall
be expressly subject to the following conditions and limitations:
(v) the prior written approval of the Borrower, which approval
shall not be unreasonably withheld, (w) KfW's and the Borrower's
obligations under the Loan Agreement and the KfW Security
Documents (including, without limitation, its contribution to the
HDW Ship Tranche) shall remain unchanged, (x) KfW shall remain
solely responsible to the other parties hereto and thereto for
the performance of its obligations, (y) KfW shall remain the
Agent for all purposes of this Commitment Letter, the Loan
Agreement and the KfW Security Documents, and (z) the Borrower
and the Syndicate Agent shall continue to deal solely and
directly with KfW in connection with KfW and the Borrower's
rights and obligations under the Commitment Letter, the Loan
Agreement and the KfW Security Documents.
(b) Upon an occurrence of an Event of Default
(see Appendix A), KfW may assign all or a portion of its rights
and obligations under the Commitment Letter, the Loan Agreement
and the KfW Security Documents to any existing participants in
the HDW Ship Tranche.
(ii) Daewoo Ship Tranche: The Syndicate, with
each member of the Syndicate acting as several lender to the
extent of the maximum
contribution set against its name as follows:
Maximum
Contribution
(USD)
Commerzbank AG **
Dresdner Bank AG in Hamburg **
Vereins-und Westbank AG **
Deutsche Schiffsbank AG **
USD **
(a) Each member of the Syndicate may grant
participations to one or more banks or other entities in or to
all or any part of its rights and obligations under the
Commitment Letter, the Loan Agreement and the Syndicate Security
Documents (as hereinafter defined) (including, without
limitation, all or a portion of its contribution to the Daewoo
Ship Tranche); provided however, that, notwithstanding the grant
of any such participation by any such member, such participation,
and the right to grant such a participation, shall be expressly
subject to the following conditions and limitations: (w) such
member's and the Borrower's obligations under the Loan Agreement
and the Syndicate Security Documents (including, without
limitation, its contribution to the Daewoo Ship Tranche) shall
remain unchanged, (x) such member shall remain solely responsible
to the other parties hereto and thereto for the performance of
such obligations, (y) such member shall remain a member of the
Syndicate for all purposes of this Commitment Letter, the Loan
Agreement and the Syndicate Security Documents, (z) the Borrower,
the Syndicate Agent and the Syndicate shall continue to deal
solely and directly with such member in connection with such
member's and the Borrower's rights and obligations under the
Commitment Letter, the Loan Agreement and the Syndicate Security
Documents. The prior written approval of the Borrower (which
approval shall not be unreasonably withheld) shall be required
before any proposed participant is given any information obtained
from the Borrower or the Guarantor.
(b) Each member of the Syndicate may assign to
one or more banks or other entities all or a portion of its
rights and obligations under the Commitment Letter, the Loan
Agreement and the Syndicate Security Documents; provided however
that each such assignment shall be subject to and shall not be
effective until the satisfaction of the following conditions:
(x) the prior written approval of the Borrower and the Syndicate
Agent, which approval shall not be unreasonably withheld, and (y)
the execution by the assignee of an agreement accepting the
obligations assigned to it by the assignor under the Commitment
Letter, the Loan Agreement and the Syndicate Security Documents,
such agreement shall be in a form and substance reasonably
acceptable to the Borrower and the Syndicate Agent. Upon the
fulfillment of the above conditions, the assignee thereunder
shall, without further act, be a party hereto and to the Loan
Agreement and the Syndicate Security Documents and, to the extent
that rights and obligations hereunder shall have been assigned to
it, have the rights and obligations of the assignor, and the
assignor shall relinquish and be released from such rights and
obligations.
(The phrase "relevant lender(s)" when used
hereafter in this Commitment Letter shall be deemed to refer to
whichever of KfW or the Syndicate is the lender of the HDW Ship
Tranche or the Daewoo Ship Tranche in question.)
(4) Currency of Loans.
The HDW Ship Tranche (HDW Subportion 1, HDW
Subportion 2 and HDW Subportion 3) and the Daewoo Ship Tranche
(Daewoo Subportion 1, Daewoo Subportion 2 and Daewoo Subportion
3) will each always be denominated in United States Dollars
("USD").
(5) Disbursement.
Subject to a minimum of five (5) New
York/Frankfurt banking days' prior written notice to the Agent
and the Syndicate Agent, the Borrower shall request KfW to
disburse to HDW the relevant subportion of the HDW Ship Tranche
or the Syndicate Agent to disburse to Daewoo the relevant
subportion of the Daewoo Ship Tranche, as the case may be, upon
the delivery to and acceptance by the Borrower of the relevant
Newbuilding from the relevant shipyard, but in no event later
than 270 days after the Original Contractual Delivery Date (as
defined above) for that Newbuilding (as set above).
In the event that the relevant Newbuilding has not
been delivered within 270 days after its Original Contractual
Delivery Date, KfW (in the case of an HDW Ship) or the Syndicate
(in the case of a Daewoo Ship) will cease to be under any
obligation to disburse the relevant subportion of the HDW Ship
Tranche or the Daewoo Ship Tranche relating to that Newbuilding.
KfW or the Syndicate, as the case may be, shall determine in its
sole discretion (but without obligation on its part) whether and
on what conditions, which will include the payment of any costs,
expenses and losses arising out of cancellation and
non-utilization of funding as a result of late disbursement, the
above deadline may be extended.
**
(6) Maximum Loan Amounts.
The maximum loan amounts shall be:
(i) HDW Ship Tranche (KfW): USD ** ,
and
(ii) Daewoo Ship Tranche (the Syndicate): USD
** ;
provided, however, that the maximum loan amount in each case
shall not exceed the sum of ** % of the USD equivalent of the DM
contract price of each HDW Ship or ** % of the USD contract price
of each Daewoo Ship, as the case may be (see Clause 2 above).
Such maximum loan amounts may be reduced from time to time to
take into account any reductions in contract price at the request
of the Borrower, but any reductions made in loan amounts shall
not thereafter be eligible for borrowing.
(7) Commitment Commission.
By acceptance of this Commitment Letter, the
Borrower undertakes to pay:
(i) to KfW commitment commission at 0.375% per
annum commencing from October 1, 1993 on the sum which from time
to time represents the unutilized portion of the maximum HDW Ship
Tranche (as per Clause 6(i)); and
(ii) to the Syndicate (via the Syndicate Agent)
commitment commission at 0.375% per annum commencing from October
1, 1993 on the sum which from time to time represents the
unutilized portion of the maximum Daewoo Ship Tranche (as per
Clause 6(ii)).
Such commitment commission shall be payable by the
Borrower on each calendar quarter day (31st March, 3Oth June,
3Oth September, 31st December) and on the last delivery date of
each of the HDW Ships and the Daewoo Ships, respectively, in
arrears, commencing on December 31, 1993 and being deemed to
accrue from October 1, 1993 up to the date of disbursement of the
final subportion of the HDW Ship Tranche or the final subportion
of the Daewoo Ship Tranche, as the case may be, or the
cancellation or expiry of the availability period for the
relevant Tranche (whichever shall first occur).
(8) Participation and Agency Fees.
(i) Participation Fees
The Borrower undertakes to pay, and shall pay, **
% of the following non-refundable fees within three (3)
Frankfurt/New York banking days after the date that KfW certifies
to the Borrower that all of the Preconditions have been
fulfilled:
(a) to KfW USD[ ** ] (being ** % of the
maximum USD amount of the HDW Ship Tranche, (USD[ ** ])
(as per Clause 6(i)); and
(b) to the Syndicate Agent (for sharing among the
Syndicate in proportions to be agreed among the Syndicate) USD
** (being ** % of the maximum Daewoo Ship Tranche (as per
Clause 6(ii)).
If the USD equivalent of the HDW Ship Tranche is
reduced from USD ** , or the Daewoo Ship Tranche is reduced
after payment of the initial ** % of the relevant participation
fee, then the remainder of the participation fee payable shall be
the difference between (i) ** % of the reduced HDW or Daewoo Ship
Tranche, as the case may be, and (ii) the amount of the
participation fee already paid by the Borrower, and such
remaining fees shall be payable on a pro rata basis on the
delivery date of the related Newbuilding under the HDW Contract
or the Daewoo Contract, as the case may be, but, in the event of
cancellation or failure to enter into the Loan Agreement by
** , no later than the earlier of (i) the cancellation date
in respect to that subportion relating thereto or (ii) **
if APL, the Guarantor, the Syndicate and the Agent shall not have
entered into the Loan Agreement by such date. Upon payment these
fees shall not be refunded even if the HDW Ship Tranche or the
Daewoo Ship Tranche, as the case may be, is for whatever reason
subsequently not disbursed or is cancelled or reduced.
(ii) Agency Fees
The Borrower undertakes to pay and shall pay to
the Agent (for sharing among the Agent and the Syndicate Agent) a
non-refundable fixed agency fee of USD ** per annum (USD **
per annum for each of the Agent and the Syndicate Agent), such
fee to be paid within (3) Frankfurt/New York banking days
following the date of execution of the Loan Agreement by the
Borrower and annually thereafter so long as any part of the Loan
Facility remains outstanding.
(9) Loan Period and Repayment.
(i) HDW Ship Tranche
(a) Each subportion of the HDW Ship Tranche
will be repaid over ** years from the date of delivery
under the HDW Contract of the HDW Ship to which it relates
in ** consecutive semi-annual
installments **
**
starting six (6) months after such date of delivery of
the 1st HDW Ship, 2nd HDW Ship and the 3rd HDW Ship,
respectively, **
** ("HDW Scheduled
Installments").
(b) **
(ii) Daewoo Ship Tranche
(a) Each subportion of the Daewoo Ship Tranche
will be repaid over ** years from the date of
delivery under the Daewoo Contract of the Daewoo Ship to which it
relates **
** * in ** consecutive semi-annual
installments ** starting six (6) months after
such date of delivery of the 1st Daewoo Ship, the 2nd Daewoo Ship
and the 3rd Daewoo Ship, respectively, **
** ("Daewoo Scheduled
Installments").
* See illustration in Appendix B.
* See illustration in Appendix C.
(b) **
(iii) **
(10) Interest.
(i) HDW Ship Tranche
Interest will be paid to KfW semi-annually in
arrears
either:
(a) at**
** per annum for the related HDW Subportion effective
for ** years beginning from the date of delivery of the
related HDW Ship under the HDW Contract, and **
thereafter; or
(b) at**
** per annum for the related HDW Subportion
effective for ** years beginning from the date of delivery of
Related HDW Ship under the HDW Contract, and ** per
annum thereafter.
The Borrower shall indicate by written notice to
the Agent given at least ten (10) Frankfurt/New York banking days
prior to the initial delivery date of an HDW Ship or at least ten
(10) such banking days prior to the commencement of any interest
period if the Borrower wishes to choose the interest rate
provided in paragraph (a) above,
** . If the
Borrower shall fail to give such notice, then the interest rate
applicable to the succeeding interest period shall be the **
rate specified in paragraph (b) above.
**
. Further details are to be agreed upon
between KfW and the Borrower and will be set forth in the Loan
Agreement.
(ii) Daewoo Ship Tranche
On each subportion of the Daewoo Ship
Tranche, interest will be paid to the Syndicate (via the
Syndicate Agent) semi-annually in arrears at **
per annum for the related Daewoo Subportion effective for **
years beginning from the date of delivery of the related Daewoo
Newbuilding under the Daewoo Contract, and ** per
annum thereafter.
Subject to not less than ten (10) New
York/Frankfurt banking days' prior written notice to the
Syndicate, at the end of each six (6) month interest period in
respect of each subportion of the Daewoo Ship Tranche, the
Borrower may request a change ** from
** to **
per annum within the first years from the date of delivery
of the related Daewoo Ship and ** per annum for the
remaining duration of the respective
subportion, ** .
(iii) **
(a) **
(b) **
(11) Prepayment.
(i) Voluntary Prepayment
The Borrower shall be permitted to effect a
prepayment of the Loan Facility in whole or in part (being an
amount of not less than USD ** or any integral multiple
thereof, except where the payment is a final payment under a
subportion), subject to thirty (30) days' prior written notice to
the Agent and the Syndicate Agent; provided, however, that any
such prepayment shall be applied as follows:
First:
**
; and
Second: to effect a prepayment of the
remaining installments of HDW Subportion or Daewoo
Subportion chosen by the Borrower, such prepayment
to be applied against the related HDW or Daewoo
Scheduled Installments of that subportion in
inverse order of their maturity.
(ii) Total Loss
In the case of a total loss of any Newbuilding
following its delivery, proceeds of insurance, net of any
collection commission shall be applied in the following order:
First: in prepayment of the Subportion
applicable to that Newbuilding plus interest
accrued thereon and any monies due to the related
lender(s) under the indemnity clause referred to
in Clause 11(iv);
Second: subject to no Event of Default
(see Appendix A), or event, which, with the
passage of time or the giving of notice, or both,
would constitute an Event of Default, having
occurred and being continuing the balance shall be
released to the Borrower.
(iii) Sale or Total Vessel Prepayment
Subject to no Event of Default (See Appendix A),
or event which, with the passage of time or the giving of notice,
or both, would constitute an Event of Default, having occurred
and being continuing, the Borrower shall be permitted to sell any
Newbuilding, or to prepay the entire HDW Subportion or Daewoo
Subportion relating to any Newbuilding, in either case free of
any Mortgage, by the payment to the Agent or the Syndicate Agent,
as the case may be, of the total outstanding Subportion relating
to such Newbuilding plus interest accrued thereon and any monies
due to the related lender(s) under the indemnity clause referred
to in Clause (11)(iv).
(iv) Indemnity and Prepayment Commission
The Borrower will indemnify the relevant
lender(s) for any losses (excluding lost profits), expenses and
costs (including any interest differential loss and/or costs)
incurred in liquidation or redeploying the funds,
**
obtained by the relevant lender(s) for funding of any such
subportion which is prepaid by the Borrower under paragraphs (i)
or (ii) above) that the relevant lender(s) may incur or sustain
as a consequence of or by reason of any such prepayment. KfW
shall calculate the amount of compensation to be paid by the
Borrower in respect of the prepayment of any subportion of the
HDW Ship Tranche, and the Syndicate Agent shall calculate the
amount of compensation to be paid by the Borrower in respect of
the prepayment of any subportion of the Daewoo Ship Tranche. In
case of prepayment of any subportion of the HDW Ship Tranche or
of the Daewoo Ship Tranche **
** , the
Borrower shall, in addition to the said indemnity, pay to the
relevant lender(s) in respect of any prepayment of any such
subportion a prepayment commission of ** % flat rate calculated
on the amount of each such subportion so prepaid during the first
** years after the date of delivery of the related Newbuilding
with no such commission to be charged thereafter.
(12) Charges for Overdue Payments.
(i) HDW Ship Tranche
KfW may increase the rate of interest on overdue repayment
installments of any HDW Subportion to the rate per annum which is
** % above the rate per annum
**
("Default Rate").
KfW reserves the right to charge the Borrower
interest for overdue payment of interest, commitment commission,
participation fee, agency fee or other sums due from the Borrower
to KfW under this Commitment Letter, the Loan Agreement or any of
the Security Documents, but unpaid, at the Default Rate (as
determined above) for sums payable in USD prevailing on the due
date of such payment and calculated from the due date of such
payment until the date upon which the same is credited in full to
the account of KfW.
Such charges for overdue payment shall be payable
without delay on the Agent's first written demand and in the case
of any default in payment, compounded monthly.
(ii) Daewoo Ship Tranche
The Syndicate may increase the rate of
interest on overdue repayment installments of any subportion to
the rate per annum which is the Syndicate Agent's Default Rate
(determined in the same manner as the Default Rate).
The Syndicate reserves the right to charge
the Borrower interest for overdue payment of interest, commitment
commission, participation fee, agency fee or other sums due from
the Borrower to the Syndicate under this Commitment Letter, the
Loan Agreement or any of the Security Documents, but unpaid, at
the rate per annum which is the Syndicate Agent's Default Rate
for sums payable in USD prevailing on the due date of such
payment and calculated from the due date of such payment until
the date upon which the same is credited in full to the account
of the Syndicate with the Syndicate Agent.
Such charges for overdue payment shall be
payable without delay on the Syndicate Agent's first written
demand and in the case of defaulted payment, compounded monthly.
(13) Calculation Basis.
Interest on each subportion of the HDW Ship
Tranche, interest on each subportion of the Daewoo Ship Tranche,
commitment commission and charges for overdue payments, if any,
and compensation for prepayment, if any, shall be calculated on
the basis of the actual number of days elapsed over a year of 360
days.
(14) Taxes.
All payments by the Borrower under this Commitment
Letter, the Borrower under the Loan Agreement incorporating the
terms of this Commitment Letter and by the relevant parties to
the Security Documents (as hereinafter defined) shall be made
free and clear of any taxes, duties, withholdings or other
deductions or retentions whatsoever. If the Borrower or any
other party to the Loan Agreement or any of the Security
Documents (the "Obligors") is required by law to make any such
withholding or deduction or retention from any sum payable by it
to KfW in respect of the HDW Ship Tranche or to the Syndicate in
respect of the Daewoo Ship Tranche, the relevant Obligor shall
pay to KfW or the Syndicate, as the case may be, such additional
amounts as will ensure that KfW or the Syndicate, as the case may
be, shall receive and retain the full amount of such sum as
though no such withholding or deduction or retention were
required to be made. Additionally, the Obligors shall indemnify,
on an after-tax basis, KfW or the Syndicate, as the case may be,
(each an "Indemnitee") for any and all franchise taxes and taxes
based on gross or net income suffered by such Indemnitee imposed
by any taxing authority by reason of the incorporation or
residence of an Obligor in the jurisdiction of the taxing
authority imposing such tax or the presence of any property
securing the HDW Ship Tranche or the Daewoo Ship Tranche in the
jurisdiction of the taxing authority imposing such tax.
All stamp or similar duties or taxes required to
be paid under any applicable law or jurisdiction in order to
render the Loan Agreement or any of the Security Documents
admissible in evidence or enforceable therein shall be for the
account of and payable by the Borrower.
(15) Security.
The KfW Security Documents (as hereinafter
defined) and the Syndicate Security Documents (as hereinafter
defined) are herein together called the "Security Documents".
(i) HDW Ship Tranche
The following collateral for the HDW Ship
Tranche together with interest and costs shall be granted to KfW
and shall be in a form and substance satisfactory to KfW and its
special counsel (together the "KfW Security Documents"):
(a) on each HDW Ship, securing the whole
HDW Tranche of not more than USD ** in principal amount,
a first priority ship mortgage in favor of KfW or a trustee for
KfW duly executed by the Borrower and filed or registered, as
appropriate, under the laws of the jurisdiction of such Ship's
registry, which Ship shall be registered in the name of the
Borrower under a permitted flag of registry;
(b) **
;
(c) first priority assignment duly
executed by the Borrower granting a security interest in respect
of all monies payable under any demise charters and time charters
having a duration of six (6) months or longer in respect of each
HDW Ship;
(d) first priority assignment duly
executed by the Borrower of interests in insurances covering each
HDW Ship, together with notices to relevant brokers and
underwriters;
(e) a guarantee or guarantees of the
Guarantor covering the Borrower's total obligations in respect of
the related HDW Ship Tranche and under the Loan Agreement and the
KfW Security Documents to which the Borrower is a party;
provided, however, that such guarantee in respect of obligations
under the Loan Agreement shall be executed and delivered no later
than the execution and delivery of the Loan Agreement.
(ii) Daewoo Ship Tranche
The following securities for the Daewoo
Ship Tranche together with interest and costs shall be granted to
the Syndicate (or the Agent or the Syndicate Agent on its behalf)
and shall be in a form and substance satisfactory to the Agent
and its special counsel (together, the "Syndicate Security
Documents"):
(a) on each Daewoo Ship, securing the
whole Daewoo Tranche of not more than USD ** in principal
amount, a first priority ship mortgage in favor of the Syndicate
or a trustee for the Syndicate duly executed by the Borrower and
filed or registered, as appropriate under the laws of the
jurisdiction of its registry covering the Daewoo Ship Tranche
being secured under the mortgage on each Daewoo Ship, which Ship
shall be registered in the name of the Borrower under a permitted
flag of registry;
(b) first priority assignment duly
executed by the Borrower granting a security interest in respect
of all monies payable under any demise charters and time charters
having a duration of six (6) months or longer in respect of each
Daewoo Ship;
(c) first priority assignment duly
executed by the Borrower of interests in insurances covering each
Daewoo Ship, together with notices to relevant brokers and
underwriters; and
(d) a guarantee or guarantees of the
Guarantor covering the Borrower's total obligations in respect of
the related Daewoo Ship Tranche and under the Loan Agreement and
the Syndicate Security Documents to which the Borrower is a
party; provided, however, that such guarantee in respect of
obligations under the Loan Agreement shall be executed and
delivered no later than the execution and delivery of the Loan
Agreement.
(16) Conditions Precedent to the Disbursement
of each Subportion of the HDW Ship Tranche
and each Subportion of the Daewoo Ship
Tranche.
These will be the normal conditions,
representations, warranties and covenants in this type of loan
agreement but will specifically include in respect of the
disbursement of each subportion of the HDW Ship Tranche and of
the Daewoo Ship Tranche respectively:
(i) there shall not have occurred any material
adverse change in the financial condition of either of the
Borrower or the Guarantor which in the reasonable opinion of the
Agent and/or the Syndicate would materially and adversely affect
the ability of (x) the Borrower to perform its obligations as to
the repayment of the Loan Facility by the installments together
with interest thereon herein set out or to perform its
obligations under the Loan Agreement and the Security Documents
to which it is or will become a party, or (y) the Guarantor to
perform its obligations under each of the guarantees;
(ii) signatures by all relevant parties of the
Loan Agreement in respect of the entire Loan Facility prepared in
form and upon terms satisfactory to KfW, the Syndicate and the
Borrower reflecting (inter alia) all the terms set forth or
referred to in this Commitment Letter, such Loan Agreement to be
drawn up on behalf of KfW and the Syndicate by Haight, Gardner,
Poor & Havens, special counsel to the Agent and the Syndicate;
(iii) all participation fees, agency fees and
commitment commissions accrued and due to the relevant lender(s)
to have been paid in full;
(iv) any exchange control or other governmental
licenses or permissions in respect of the Borrower and the
Guarantor and considered necessary by the Agent, the Syndicate
Agent or their legal counsel have been obtained by the Borrower
and the Guarantor and shall have not been varied or revoked;
(v) evidence satisfactory to the Agent and the
Syndicate Agent and the Borrower either that all interest
payments to the relevant lender(s) under the Loan Facility can be
made free of any withholding tax, or that the relevant lender(s)
is or are entitled to rely upon a double tax treaty to obtain
exemption therefrom or, if there is a withholding tax and no
applicable double tax treaty to obtain exemption therefrom, the
Borrower is permitted under applicable law(s) to pay to the
relevant lender(s) such additional amounts as will ensure that
the relevant lender(s) shall receive and retain the full amount
of such sum as though no withholding or deduction or retention
were required to be made;
(vi) acceptance of the relevant HDW Ship or
Daewoo Ship by the Borrower from the relevant shipyard with the
highest classification of a vessel of its type and with all
regulatory approvals in effect and such Newbuilding to be free of
all mortgages, liens or other encumbrances, except for those
required under this Commitment Letter;
(vii) registration of the relevant HDW Ship or
Daewoo Ship, under the laws of the jurisdiction of a permitted
registry, in the name of the Borrower;
(viii) signatures by all the relevant parties of
all the KfW Security Documents or the Syndicate Security
Documents which are required to be granted on or prior to
delivery of the relevant HDW Ship or Daewoo Ship and, in the case
of ship mortgages, registered on the relevant ship register so as
to be valid and enforceable;
(ix) legal opinions and/or other confirmations
together with supporting documents to be provided by legal
counsel chosen by the Agent and the Syndicate Agent, as the case
may be, in form and substance satisfactory to the Agent and the
Syndicate Agent, as the case may be, and covering the Loan
Agreement and the KfW Security Documents or the Syndicate
Security Documents, as the case may be;
(x) confirmation from the relevant shipyard that
it has received payments covering the full contract price of the
relevant HDW Ship or Daewoo Ship other than any subportion of the
HDW Ship Tranche or Daewoo Ship Tranche, as the case may be,
being used to satisfy those obligations;
(xi) evidence in form and substance satisfactory
to the Agent that the relevant Newbuilding has been insured at
the expense of the Borrower against all risks customarily to be
insured against (including usual hull and machinery marine risks,
increased value and war risks) each for an amount of not less
than the greater of (a) the market value at the time of that
Newbuilding and (b) a sum equal to ** % of the then outstanding
balance of all the relevant subportion(s) from time to time
advanced by the relevant lender(s) to finance that Newbuilding
and protection and indemnity risks), and upon terms and
conditions acceptable to the relevant lender(s). If the Agent or
the Syndicate Agent, as the case may be, so requires, a report
from an independent broker or consultant acceptable to the Agent
or the Syndicate Agent, respectively, as to the adequacy and
terms of such insurance cover shall be obtained, and thereafter
annually, if the Agent or the Syndicate Agent, as the case may
be, so requests at the Borrower's expense.
All insurances are to be effected in the name of
the Borrower, the Agent and the Syndicate, as the case may be,
with first-class underwriters, insurance companies or
associations and via brokers approved by the Agent and the
Syndicate Agent, as the case may be, (such approval not to be
unreasonably withheld). There shall be a waiver by such
brokers/associations in respect of any lien for unpaid fleet
premium to which they would otherwise be entitled except such
proportion thereof as shall be directly attributable to the three
(3) HDW Ships and the three (3) Daewoo Ships, respectively.
Mortgagee's interest insurance and, if the same or
equivalent is available in the market, Additional Perils
(Pollution) cover shall also be effected at the Borrower's
expense on each Newbuilding covering at all times ** % of the
outstanding balance of the relevant subportion(s) from time to
time advanced by the relevant lender(s) to finance that
Newbuilding with underwriters via brokers and upon terms approved
in writing by the Agent.
(xii) the filing of any financing statement or
other document necessary, or reasonably requested by the Agent or
the Syndicate Agent, to perfect their security interests under
any of the Security Documents in the United States of America,
the jurisdiction of registration of any Newbuilding and any other
relevant jurisdiction.
(17) Major Covenants.
The covenants contained in the Loan Agreement and
the Security Documents will be normal for this type of ship
financing but will specifically include:
(i) No Merger or Consolidation
The Borrower or the Guarantor shall each covenant
that it will not consolidate or amalgamate with, or merge into,
any other entity; or sell, convey, transfer, lease, or otherwise
dispose of all or substantially all of its assets, including but
not limited to, by dividend (whether by one transaction or a
series of transactions and whether related or not); provided
however, that it may consolidate or amalgamate with, or merge
into, any other entity; or sell, convey, transfer, lease, or
otherwise dispose of all or substantially all of its assets if
the buyer, assignee or transferee corporation (the "Assignee")
shall be a solvent corporation following such transaction and
shall have executed and delivered an agreement, in form and
substance reasonably satisfactory to KfW and the Syndicate,
containing an assumption by the Assignee of the due and punctual
performance and observance of all covenants and obligations of
the Borrower or the Guarantor, as the case may be, hereunder,
under the Loan Agreement and under any Security Documents to
which it is or shall be a party, and confirming the accuracy of
any representations and warranties made herein or in the Loan
Agreement and each such Security Document as of the dates herein
or therein required with respect to such Assignee;
(ii) Reporting of Financial Information
The Borrower and the Guarantor shall each covenant
to send as soon as possible, (a) but in no event later than one
hundred twenty (120) days after the end of each fiscal year, its
consolidated audited accounts of all financial statements of the
Guarantor and consolidated financial statements for the Borrower,
such financial statements to be prepared in accordance with
generally accepted United States accounting principles at such
time consistently applied and a report thereon by Arthur Andersen
& Co. or other independent public auditors of internationally
recognized standing as may be acceptable to KfW and the
Syndicate, (b) copies of all quarterly reports filed with the
Securities and Exchange Commission and, within 75 days after the
end of the first three quarters of its fiscal year, unaudited
consolidated statements of income and changes in financial
position of each of the Guarantor and the Borrower and related
balance sheets for each such period, all certified as true and
correct by a financial officer of the Guarantor or the Borrower,
as the case may be, (c) as soon as the same is instituted (or, to
the knowledge of the Borrower or the Guarantor, threatened),
details of any litigation, arbitration or administrative
proceedings against or involving it or the Newbuildings which is
likely to have a material adverse effect on any of the Borrower,
the Guarantor or construction of the Newbuildings, (d) annual
officer's certificates as to any Events of Default to be provided
by the Borrower, and (e) from time to time, and on demand, such
additional financial or other information relating to the
Borrower or the Guarantor and the Newbuildings, as may be
reasonably requested by the Agent or the Syndicate Agent.
(iii) Demise and Time Charter.
Borrower may not demise charter any HDW Ship or
Daewoo Ship without the prior written approval of the Agent and
the Syndicate Agent, respectively. The Borrower may time charter
any of the Newbuildings if the terms of such time charter do not
violate applicable law or regulations of the United States and
the jurisdiction of its registry; provided that Borrower remains
fully liable for all its obligations under the Security
Documents. In the case of any time charter having a time charter
term in excess of one (1) year (including any permitted renewals
or extensions, other than those that become effective only upon
mutual agreement of the parties to such charters), the Borrower
will provide to KfW and the Syndicate Agent five (5) days prior
written notice of its intent to enter into any such time charter
and as soon thereafter as is practicable, the Borrower shall give
the Agent or the Syndicate Agent, as the case may be, a copy of
such time charter and insurance certificates evidencing that
insurance complying with Clause 16(xi) hereof will be in force
with respect to the subject Newbuildings during such time
charter. In addition, the Borrower will include (or require the
inclusion) in such time charter of appropriate provisions which
provides that such time charter is expressly subject and
subordinate to all the terms of the related ship mortgage(s), as
the case may be, and the rights of the mortgagee(s) thereunder in
the event of a foreclosure or repossession.
(iv) The Borrower shall covenant that if, in
connection with any financing of any of the container vessels
**
it agrees (x) to
create or permit to be outstanding any encumbrances over any of
its present or future assets (other than the ** and
security relating to such ** of the type to be
granted hereunder relating to the Newbuildings) or revenues as
additional security and/or (y) to any financial covenants in
connection with any such financing put in place, in either case,
within the first three years after delivery of the last of the
Newbuildings, the Borrower will grant to KfW and the Syndicate
either (x) additional security (which is equivalent in form and
type of security with and otherwise is on terms not less
favorable than such other security) and/or (y) similar financial
covenants to ones provided to such other lenders, as the case may
be; provided, however, if such financing of any such **
is for a loan amount of ** % or greater of the purchase price,
KfW and the Syndicate shall not be entitled to any such
additional financial covenants.
(18) Costs.
(i) the Borrower undertakes to pay to the Agent
and the Syndicate Agent promptly on the Agent and the Syndicate
Agent's first demand and on a full indemnity basis all reasonable
legal fees and expenses or other out-of-pocket expenses incurred
by the Agent and the Syndicate Agent in the drafting, negotiation
and preparation of this Commitment Letter (inclusive of any
appendices and exhibits hereto) and the Loan Agreement and the
Security Documents envisaged by this Commitment Letter, even if
the Preconditions are not met by the Preconditions Fulfillment
Date or if the Loan Agreement is not signed or the HDW Ship
Tranche or the Daewoo Ship Tranche is for whatever reason not
disbursed; and
(ii) the Borrower shall undertake in the Loan
Agreement to pay to the relevant lender(s) upon the first demand
and on a full indemnity basis:
(a) all costs, losses and expenses (including
legal costs and expenses plus any VAT thereon), including but not
limited to those in connection with cancellation and
non-utilization of funding and the cost of an independent review
of insurances, reasonably incurred or sustained by the Agent or
the Syndicate Agent unless the cancellation is due to the
relevant lender(s)' inability to advance the relevant tranche or
portion or subportion thereof; and
(b) all costs, losses and expenses (including
legal costs and expenses plus any VAT thereon) reasonably
incurred by the Agent or the Syndicate Agent in the preservation
or enforcement of any of the collateral or rights of KfW and/or
of the Syndicate under or as envisaged by the Loan Agreement
and/or any of the Security Documents.
(19) Payments.
(i) HDW Ship Tranche
All payments due to KfW in USD shall be effected
only to its account **
** U.S.A., and in the case of DM payments, payment
shall be made to its account **
** any other account which KfW may specify
in writing from time to time; and
(ii) Daewoo Ship Tranche
All payments due to the Syndicate in USD shall be
effected only to the account of the Syndicate Agent at **
.
(20) General Indemnity.
The Borrower agrees to indemnify and hold harmless
KfW and the members of the Syndicate and their respective
officers, directors, employees, agents, advisors,
representatives, affiliates and controlling persons (each an
"Indemnified Party") from and against any and all claims,
damages, losses, liabilities and expenses (including without
limitation, fees and disbursements of counsel), joint or several,
which may be incurred by or asserted against any Indemnified
Party, in each case arising out of or relating to any
investigation, litigation or proceeding (or the preparation of
any defense with respect thereto) arising out of or relating to
the transactions contemplated hereby (including, without
limitation, any use made or proposed to be made with the proceeds
of the Newbuildings), whether or not an Indemnified Party is a
party thereto, and whether or not the transactions contemplated
hereby are consummated, except to the extent such claim, damage,
loss, liability or expense has resulted from such Indemnified
Party's negligence or willful misconduct. The obligation to the
Indemnified Parties hereunder shall survive the expiration or
termination of this Commitment Letter, if the Loan Agreement is
not entered into by the parties hereto, however, upon the
execution and delivery of the Loan Agreement and the Security
Documents, the terms and conditions set forth in the Loan
Agreement, and the Security Documents shall supersede the terms
of this Clause 20.
(21) Governing Law.
The Loan Agreement and all the Security Documents
(other than ship mortgages which will be governed by the laws of
the flag) shall be governed by the laws of the State of New York.
This Commitment Letter and the legal relations
constituted by its acceptance shall be governed by the laws of
the State of New York and KfW, each member of the Syndicate, the
Agent, the Syndicate Agent, the Borrower and the Guarantor by
their respective signatures hereto each hereby respectively
submits to the jurisdiction of the State of New York.
(22) Expiry of Offer.
The offers respectively made by KfW and the
Syndicate, subject to fulfillment of all the Preconditions, to
make available the HDW Ship Tranche and the Daewoo Ship Tranche
upon the terms and conditions contained in this Commitment Letter
will expire at 2400 hours (Frankfurt time) on the later of (i)
June 4, 1993 or (ii) or such other date as may be agreed upon by
APL and both of the Shipbuilders under the HDW Contract and the
Daewoo Contract with respect to their effective dates but no
later than June 30, 1993, unless the unqualified acceptance by
the Borrower is received by KfW prior to that time on that date.
KfW and the Syndicate reserve the right in their sole discretion
to extend this deadline.
(23) Confidentiality.
The Agent and the Syndicate members agree to
maintain the confidentiality of all information provided by the
Borrower or the Guarantor to the Agent or any Syndicate member or
any participants or assignees provided pursuant to this
Commitment Letter, the Loan Agreement or any Security Document,
and will not use such information for any purpose other than its
extension of credit under such documents, and will not disclose
the same to third parties other than such participants, and shall
procure such confidentiality undertakings from such participants
or assignees in favor of the Borrower and the Guarantor.
Notwithstanding the foregoing, following acceptance by each of
the Agent and the members of the Syndicate of the provisions
hereof and their execution of this Commitment Letter (i) each of
the Agent and the members of the Syndicate may make public
disclosure of the existence and amount of KfW's and the
Syndicate's commitment and undertaking hereunder and of the
identity of the parties, (ii) each of the Agent and the members
of the Syndicate may file a copy of this Commitment Letter, the
Loan Agreement or any Security Document in any public record in
which it is required by law to be filed, and (iii) each of the
Agent and the members of the Syndicate may make such other public
disclosure of the terms and conditions hereof and of the Loan
Agreement or any Security Document as it may be required by law,
in the opinion of its counsel, to make or at the request of and
required by any regulatory or supervisory authority having
jurisdiction over it. The obligations of each of the Agent and
the members of the Syndicate hereunder with respect to
confidentiality shall survive the expiration or termination of
this Commitment Letter.
(24) Accuracy and Completeness of Information
Furnished.
The Borrower represents and warrants that (i) all
written information which has been or will hereafter be made
available to the Agent, the Syndicate Agent and each Syndicate
member by the Borrower or any of its representatives in
connection with the transactions contemplated hereby, at the time
when given, was or will be complete and correct in all material
respects and did not and will not contain any untrue statement of
a material fact or omit to state a material fact necessary in
order to make the statements contained therein not misleading in
light of the circumstances under which such statements were or
are made, and (ii) all financial projections, if any, that have
been prepared by the Borrower and made available to the Agent,
the Syndicate Agent and each member of the Syndicate and any
potential lender, have been or will be prepared in good faith
based upon reasonable assumptions (it being understood that such
projections are subject to significant uncertainties and
contingencies, many of which are beyond the Borrower's control,
and that no assurance can be given that the projections will be
realized).
Notwithstanding any provision herein to the
contrary, including fulfillment of all the Preconditions, the
relevant lender(s) shall be entitled to cancel their respective
commitments under this Commitment Letter if the Loan Agreement
and the related guarantees of the Guarantor together with the
forms of related Security Documents in form and substance
acceptable to both KfW and the Syndicate incorporating (inter
alia) the terms of this Commitment Letter and such other terms
and conditions generally accepted in this type of ship financing
(which shall be subject to negotiation with, and acceptance by,
KfW and each member of the Syndicate) have not been signed by the
Borrower, the Guarantor, the Agent, the Syndicate Agent and each
proposed Syndicate member on or before ** . KfW and the
Syndicate reserve the right in their sole discretion to extend
this deadline.
Please indicate your acceptance of the terms of
this commitment by signing and returning to KfW the counterpart
of this Commitment Letter, signed by authorized signatories of
the Borrower and the Guarantor.
Yours faithfully,
KREDITANSTALT FUR WIEDERAUFBAU
(as sole lender of the HDW Ship
Tranche and as Agent)
Dr. Peter Klaus/Wolfgang Pfisterer
By:
Title:Director/Procurist
Dated: 4 June 1993
COMMERZBANK AG
(as member of the Syndicate and
Syndicate Agent)
Joachim Hagemann/Stefan Kuch
By:
Title:SVP/Associate &
Vice President
Dated: 4 June 1993
DRESDNER BANK AG in Hamburg
Dr. Wilfried Sohl/Gerhard Roller
By:
Title: General Manager/Senior
Counsel
Dated: 4 June 1994
VEREINS-UND WESTBANK AG
Jurgen Kopcke/Susanne Mertens
By:
Title: Senior Vice President
Assistant Vice President
Dated: 4 June 1993
DEUTSCHE SCHIFFSBANK AG
Dr. Wulf-Peter Schiering/Klaus
Pieper
By:
Title: Senior General Manager/
General Manager
Dated: 4 June 1993
Accepted and Agreed:
AMERICAN PRESIDENT COMPANIES, LTD.
By:Steven H. Tulsky
Title: Assistant Treasurer
Dated: 4 June 1993
AMERICAN PRESIDENT LINES, LTD.
By:Steven H. Tulsky
Title: Assistant Treasurer
Dated: 4 June 1993
APPENDIX "A"
EVENTS OF DEFAULT
In this Appendix:
"Mortgage" in respect of any HDW Ship means a
first priority ship mortgage in favor of KfW or a trustee for
KfW, and in respect of any Daewoo Ship means either (1) a first
priority ship mortgage in favor of the Syndicate or trustee for
the Syndicate, or (2) a second priority mortgage in favor of KfW
or a trustee for KfW;
"Obligors" means the Borrower and the Guarantor
and "Obligor" means any of them;
"Security Documents" means the KfW Security
Documents and the Syndicate Security Documents together.
It shall be an Event of Default if:
(1) any Obligor fails to pay to KfW or the
Syndicate Agent, as the case may be, in accordance with the Loan
Agreement within three (3) Business Days being days on which
banks are open for business in London, New York and Frankfurt of
the due date for payment of any sum of principal, interest,
commission or other moneys payable by such Obligor in respect of
the HDW Ship Tranche (or any portion or subportion thereof) or in
respect of the Daewoo Ship Tranche (or any subportion thereof)
under the terms of the Loan Agreement and/or of any of the
Security Documents thereof, or, in case of sums expressed to be
payable upon demand of the Agent or the Syndicate Agent, as the
case may be, within fifteen (15) Business Days following the date
of such demand, in the currency and in the manner specified
herein or therein; or
(2) any of the Obligatory Insurances being
insurances which are required to be effected and maintained
pursuant to the Loan Agreement or any Mortgage thereon on any
Newbuilding are cancelled due to non-payment of premiums or
otherwise and not replaced, or any Newbuilding, mortgagee or
lender ceases to be insured in accordance with the provisions of
the Loan Agreement and/or of any Mortgage; or
(3) there is any breach, default or omission by
any Obligor in the performance or observance of any of the other
terms or conditions of the Loan Agreement or of any of the
Security Documents (other than a Mortgage) or of any other
document issued pursuant thereto and if such breach, default or
omission is capable of being remedied, the same has not been
remedied within thirty (30) days after a request from the Agent
to the Obligor in writing to do so; or
(4) there occurs any event which constitutes an
Event of Default under any Mortgage on any Newbuilding; or
(5) any Mortgage on any Newbuilding ceases to be
valid and enforceable and duly registered on that Newbuilding
having the priority of record required under the terms of the
Loan Agreement or any Security Document or the liens or security
interests created or intended to be created thereunder cease to
be in full force and effect; or
(6) any Obligor is in default in the payment when
due of any sum or sums which aggregate in excess of USD **
at any one time under any documentation relating to any other
Financial Indebtedness whatsoever (excluding for this purpose the
HDW Ship Tranche and the Daewoo Ship Tranche), and such Financial
Indebtedness shall have been accelerated in accordance with the
terms thereof; or
Note: "Financial Indebtedness" would be defined
to mean in relation to each Obligor, (a) any indebtedness
(whether long or short term) owed to any bank or financial
institution; (b) any liability under any financial lease or
bareboat charter and (c) any guarantee, indemnity or other
assurance against financial loss given by that Obligor in respect
of any of the foregoing.
(7) there is a final, unappealable and
enforceable judgment made against any Obligor greater than ** %
of the Tangible Net Worth of the Guarantor, which is not covered
by insurance and is not satisfied or stayed within sixty (60)
days after such judgment; or
Note: "Tangible Net Worth" shall mean, with
respect to the Guarantor, the aggregate of all assets of the
Guarantor which would, in accordance with generally accepted
United States accounting principles, appear as assets on the
balance sheet of the Guarantor, less the sum of (i) all
liabilities and indebtedness on such balance sheet and (ii) all
intangible assets such as goodwill, patents, trademarks,
franchises, licenses and other like intangibles.
(8) any Newbuilding becomes a total loss and the
proceeds of the Obligatory Insurances or relevant compensation
for compulsory acquisition (if any) are not paid to the Agent or
Syndicate Agent, as the case may be, within one hundred and
eighty (180) days of the occurrence of such Total Loss or
compulsory acquisition in an amount at least equal to the
aggregate of the outstanding balances of the relevant
subportion(s) advanced by the relevant lender(s) to finance that
Newbuilding together with all interest accrued thereon, if that
amount is not paid by the Borrower to the Syndicate Agent within
the said period of one hundred and eighty (180) days; or
(9) any representation or warranty made by or on
behalf of any Obligor in the Loan Agreement or in any of the
Security Documents or by the Borrower in any certificate,
statement or other document issued by or on behalf of any Obligor
pursuant to the Loan Agreement shall prove to have been incorrect
or misleading in any material respect when made or deemed made;
or
(10) without the prior written consent of the
Agent and the Syndicate Agent there is a merger or consolidation
of any Obligor with any other corporation other than otherwise
permitted in the Loan Agreement; or
(11) any license, authorization, consent or
approval at any time necessary to enable any Obligor to comply
with its obligations under the Loan Agreement and/or any of the
Security Documents be revoked or not granted or fails to remain
in full force and effect for a period of thirty (30) days after
notice thereof from the Agent, the Syndicate Agent or any trustee
with respect to the Newbuildings.
Bankruptcy, confiscation and insolvency defaults
consistent with such defaults usually found in
similar ship financings to be negotiated and
agreed upon in the Loan Agreement and the
Security Documents.
Appendix B
HDW Scheduled Installments
Semi-Annual Payment Due at Principal Balance
Period # End of Period Remaining at End of Period
**
Appendix C
Daewoo Scheduled Installments
Semi-Annual Payment Due at Principal Balance
Period # End of Period Remaining at End of Period
**
PH930716Csec-1130ai-Filing
Addendum No. 87
Contract No. MA/MSB-417
ADDENDUM TO
OPERATING-DIFFERENTIAL SUBSIDY AGREEMENT
WITH
AMERICAN PRESIDENT LINES, LTD.
THIS AGREEMENT is made by and between the UNITED STATES OF
AMERICA (herein called the "United States"), represented by the
SECRETARY OF TRANSPORTATION, acting by and through the MARITIME
ADMINISTRATOR (herein called the "Administrator"), and AMERICAN
PRESIDENT LINES, LTD., a corporation organized and existing under
the laws of the State of Delaware (herein called the "Operator"),
as an addendum to that certain agreement, Contract No. MA/MSB-417
(herein called the "Agreement").
WITNESSETH:
WHEREAS:
1. The Administrator has made the necessary determinations and
findings in accordance with the Merchant Marine Act, 1936,
as amended (herein called the "Act"); and
2. The Administrator has authorized an amendment to the
Agreement; and
3. The parties have agreed to said amendment and desire to
incorporate the same into the Agreement in the manner
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises, the parties
hereto agree as follows:
2
I. Pursuant to the provisions of Article I-12 of the Agreement,
the Agreement and Appendix thereto are hereby amended by deleting
the existing Appendix G and by substituting in lieu thereof the
annexed revised Appendix G to include therein the following:
Effective August 16, 1991, the waiver of the provisions of
section 804(a) of the Act granted on August 16, 1991, to
allow the Operator, as a party to the Transpacific Space
Utilization Agreement, Federal Maritime Commission No. 217-
011324, to charter space on a foreign-flag vessel or vessels
that may be operated by another party to the Agreement,
covering trade from United States ports and points to the
Far East, as described in the Agreement; and the waiver of
the provisions of section 804(a) granted on August 16, 1991,
to allow the Operator, as a party to the Transpacific
Stabilization Agreement (as amended in 1991), Federal
Maritime Commission No. 203-011223, to charter space on a
foreign-flag vessel or vessels that may be operated by
another party to the Agreement, covering trade from the Far
East, as described in the Agreement, to ports and points in
North America, as described in the Agreement.
Effective September 27, 1991, the waiver of the provisions
of section 804(a) of the Act granted on June 3, 1988, and
amended on October 11, 1989, December 20, 1990, modified
January 15, 1991, and temporarily modified January 25, 1991,
for a period of 210 days, August 20, 1991, for an additional
30 days, and September
3
20, 1991, for an additional 30 days, under special
circumstances and for good cause shown, is amended to permit
Operator to own or charter and operate 13 or 14 foreign-flag
feeder vessels, instead of the 10 vessels as originally
granted.
Effective September 27, 1991, a waiver of the provisions of
section 804(a) of the Act, under special circumstances and
for good cause shown, is granted to permit Operator to
participate in a reciprocal slot exchange and coordinated
sailing agreement, designated Federal Maritime Commission
No. 203-011340, and in a Master Slot Charter Agreement both
with Orient Overseas Container Line Inc. subject to the
conditions as specified in Appendix G.
Effective January 2, 1992, a waiver of the provisions of
section 804(a) of the Act granted September 27, 1991, under
special circumstances and for good cause shown, is amended
to permit Operator to participate in the Master Slot Charter
Agreement as amended by Addendum 1. Addendum 1 adds two
Indonesia feeder loops to the geographic scope of service.
Effective January 3, 1992, the waiver of the provisions of
section 804(a) of the Act granted on June 3, 1988, and
amended on October 11, 1989, December 20, 1990, September
27, 1991, modified January 15, 1991, and temporarily
modified January 25, 1991, for a period of 210 days, August
20, 1991, for an additional 30 days, and September 20, 1991,
for an additional 30 days, under special
4
circumstances and for good cause shown, is amended to permit
Operator to alternatively utilize one 900 FEU feeder vessel
or two 450 FEU feeder vessels to serve Karachi.
II. Except as herein otherwise expressly provided, the
Agreement, as heretofore amended, shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have executed this
Addendum No. 87, in four counterparts, effective as of the
date(s) indicated and actually on the 30th day of March, 1993.
(SEAL) UNITED STATES OF AMERICA
SECRETARY OF TRANSPORTATION
ATTEST: MARITIME SUBSIDY BOARD
By:/s/JOEL C. RICHARD By:/s/JAMES E. SAARI
Secretary
(SEAL)
ATTEST: AMERICAN PRESIDENT LINES, LTD.
By:/s/DAVID V. AINSWORTH By:/s/FREDERICK M. SEVEKOW,JR.
Name:David Ainsworth Name F. M. Sevekow, Jr.
Title: Vice President, Title: Vice President and
General Counsel and General Counsel
Assistant Secretary
Approved as to form:
By:/s/MURRAY A. BLOOM
Assistant Chief Counsel
Maritime Administration
Addendum No. 87
Appendix G
Contract No. MA/MSB-417
AMERICAN PRESIDENT LINES, LTD.
SECTION 804 WAIVERS
Pursuant to the provisions of section 804(b) of the Act, the
following waivers for foreign-flag operations of the Operator or
related companies have been granted under special circumstances
and for good cause shown, and shall expire, unless otherwise
shown, upon termination of the Agreement:
1. Waiver granted by the Maritime Administration on October 17,
1962, as modified on May 1, 1963, to permit APL to issue
passenger tickets and/or exchange orders for the
transportation of passengers on foreign-flag vessels, whether
or not the operators of such vessels are members of the
Transpacific Passanger Conference with the understanding
that some part of the
passenger passage involved will be on a vessel operated by a
member of the Transpacific Passenger Conference.
2. Waiver granted by the Maritime Administration on February 21,
1974, to permit APL to conduct direct mail campaigns for the
purpose of soliciting passenger traffic only, for steamship
lines operating foreign-flag vessels, and to book passengers
for such foreign-flag vessels resulting from the direct mail
campaign.
Both 1 and 2 are subject to the following conditions:
(a) The waivers under section 804 of the Act granted
hereunder shall run concurrently with the period of this
Contract.
(b) The waivers may be canceled by the Maritime
Administration upon 90 days written notice to APL.
(c) No change in the character of the services rendered
shall be made without prior notice to and approval of
the Maritime Administration, otherwise the waiver shall
be deemed to have terminated concurrently with the
unauthorized change of service.
(d) The Maritime Administration may upon its own motion
modify the waivers to the extent deemed advisable upon
proper written notice to APL.
(e) For each calendar year that the waivers are in effect,
APL shall file not later than May 15 following each
year, a report of the services performed under the
waivers.
3. Effective March 15, 1985, a waiver of the provisions of
section 804(a) of the Act, to allow the Operator, as a party
to Federal Maritime Commission Agreement 10420 (the "FMC
Agreement"), to charter available capacity on a foreign-flag
vessel or vessels that may be operated by another party to
the FMC Agreement, said waiver to run concurrently with the
period of this Agreement, which Agreement terminates by its
terms on December 31, 1997; Provided it is understood by the
Operator that the Maritime Administration reserves the right
to reinstate the semiannual reporting requirements concerning
vessel sailings, capacity, and utilization which were
eliminated in the October 11, 1984, amendments to the FMC
Agreement.
4. Effective January 24, 1986, the terms of Amendment 2 to the
Federal Maritime Commission Agreement 10420 (the "FMC
Agreement") are included in the section 804(a) waiver granted
on March 15, 1985, under special circumstances and for good
cause shown, to allow the Operator, as a party to the FMC
Agreement, to charter available capacity on a foreign-flag
vessel or vessels that may be operated by another party to
the FMC Agreement, said waiver to run concurrently with the
period of this Agreement, which Agreement terminates by its
terms on December 31, 1997; Provided it is understood by the
Operator that the Maritime Administration reserves the right
to reinstate reporting requirements concerning vessel
sailings, capacity, and utilization which were eliminated in
the October 11, 1984, amendment to the FMC Agreement.
5. Waiver granted by the Maritime Administration on May 7, 1990,
for a third period of two years extending until May 22,
1992, and amended March 28, 1991, to permit APL to own or
charter and operate:
* four foreign-flag vessels of approximately 350 FEU
capacity, said vessels to be operated on approximately
weekly service between a foreign port on Line A or Line B
as described in Appendix A hereof, including Singapore,
and Manila and Thailand.
* two foreign-flag vessels of approximately 700 FEU
capacity each, on approximately fortnightly service
between a foreign port on Line A or Line B as described
in Appendix A hereof, including Singapore, Manila and
Thailand.
* alternative authority; either may be utilized, but not at
the same time.
6. Waiver granted by the Maritime Administrative on June 3,
1988, and amended October 11, 1989, December 20, 1990,
September 27, 1991, and January 3, 1992, for period of five
years, to permit APL to own or charter and operate 13 or 14
foreign-flag vessels as described below:
Approximate
No. ships Capacity Between Service Area
2* 350 FEU Extension Persian Gulf-Gulf of Oman,
each area port Oman***
__________________________________________________________________
port coverage: Fujayrah or Dubai,Ad Dammam,Al Kuwayt,
Khor al Bahrain,Masqat, Mina Raysut,
Fakkan inducement ports
1* 700 FEU Extension Persian Gulf-Gulf of Oman
area port Oman
__________________________________________________________________
port coverage: Fujayrah or Dubai,Ad Dammam,Al Kuwayt,
Khor al Bahrain,Masqat, Mina Raysut,
Fakkan inducement ports
1** 900 FEU Extension Karachi, other ports in
area port India
__________________________________________________________________
port coverage: Fujayrah Karachi, ports in India
2** 450 FEU Extension Karachi, other ports in
each area port India
__________________________________________________________________
port coverage: Fujayrah Karachi, ports in India
2** 950 FEU Extension Karachi, other ports in India
each area port Gulf of Oman, Oman
__________________________________________________________________
port coverage: Colombo Karachi, ports in India,
Fujayrah, Masqat, Mina Raysut
2 400 FEU Extension west coast of India***
each area port
__________________________________________________________________
port coverage: Colombo or Bombay, Mangalore,
Fujayrah, Porbandar, Cochin, optional,
Singapore, Jamnagar/Tuticorin
or Madras
3 300 FEU Extension Bay of Bengal ports
each area port
__________________________________________________________________
port coverage: Colombo or Calcutta, Chalna,
Singapore Chittagong, Madras,
inducement Vishakhapatnam/
Paradip
_______________
* Alternative authority; either deployment may be utilized, but
not at the same time.
** Alternative authority; any deployment may be utilized, but
not at the same time.
*** The west coast India feeder vessels may, after a voyage to
India, upon return to the relay port, proceed on a voyage to the
Persian Gulf-Gulf of Oman, after which, upon return to the relay
port, the vessels will commence the next voyage to the west coast
India.
Approximate
No. ships Capacity Between Service Area
1 250 FEU Singapore mainland Malaysia
_________________________________________________________________
port coverage: Singapore Port Kelang, Pinang,
Pasir Gudang
1 300 FEU Singapore Indonesia
__________________________________________________________________
port coverage: Singapore Djakarta, optional
Surabaya/Semarang
1 350 FEU Extension Red Sea (excluding Egypt
area port and Ethiopia), Gulf of Aden,
Oman
__________________________________________________________________
port coverage: Colombo Juddah, Hudaydah (Al Ahmedi)
Fujayrah Port Sudan, Aqaba
2 350 FEU Extension Indian Subcontinent
area ports
__________________________________________________________________
port coverage: Singapore Colombo, Madras, Bombay,
Cochin
The following temporary authorities in this waiver 6 are granted:
The one Persian Gulf-Gulf of Oman vessel may be of a capacity
of 700 FEU, effective from the date after January 15, 1991,
that the vessel enters service, for a period not to exceed 90
days.
The Bay of Bengal vessels may be of a capacity of 400 FEU
each, effective from the date after January 15, 1991, that
each vessel enters service, for a period not to exceed 90
days. One of the three vessels is authorized to operate
between Singapore and Colombo incident to serving Bay of
Bengal ports.
This waiver no. 6 is temporarily modified, for a period of 210
days commencing January 25, 1991, extended 30 days by authority
granted August 20, 1991, extended a further 30 days by authority
granted September 20, 1991, as follows:
1) to the extent not already included, the port coverage of
APL's three feeder services operating in or to the Arabian
Sea, Gulf of Oman, and Persian Gulf--the Persian Gulf-Gulf of
Oman service the Karachi service, and the west coast India
service--be expanded to include ports in the Gulf of Oman
(principally Fujayrah and Masqat), Oman (principally Mina
Raysut), and Karachi;
2) an increase from one to two in the number of feeder vessels
of 700 FEU capacity that APL may operate in its Persian Gulf-
Gulf of Oman feeder;
3) authority to operate a single feeder vessel of up to 350 FEU
capacity between either Colombo or Fujayrah and ports in the
Red Sea exclusive of Egypt and Ethiopia;
4) authority to operate a three-vessel feeder, using vessels of
up to 700 FEU capacity, between Singapore and one or more of
APL's major extension area ports -- Colombo, Madras, Bombay,
Cochin, Karachi, Fujayrah, and Damman; and
5) in addition to the four specific authorities next above,
authority to coordinate all APL feeder services providing
capacity to or through the Arabian Sea, (i.e. the existing
Persian Gulf/Gulf of Oman, Karachi, and the west coast India
services, and the added Red Sea and Singapore West Asian
services) by combining sailings and/or interchanging vessels
operated in those services. Any such combination and
interchange authority, as to any individual service area
component, would be performed subject to the overall capacity
limitation contemplated in that service area's individual
authority.
7. Waiver granted by the Maritime Administration on February 6,
1989, and amended November 24, 1989, until June 3, 1993, to
permit APL to own or charter and operate six foreign-flag
vessels of approximately 400 FEU capacity each, said vessels
to be operated between a foreign port or ports on Line A or
Line B as described in Appendix A hereof, including
Singapore, and a port or ports in the People's Republic of
China.
Waivers 5 and 7 are subject to the following conditions:
(a)The waiver may be canceled in whole or in part upon 90
days' written notice to APL, such notice to state the
reason(s) for such cancellation;
(b)No change in the character of the services rendered
between the ports as described above shall be made
without prior notice to an approval by the Maritime
Administration, otherwise the Maritime Administration may
take such action as appropriate.
(c)The Maritime Administration may upon its own motion
modify the waiver to the extent deemed advisable upon
proper written notice to the Operator, such notice to
state the reason(s) for such modification;
(d)APL shall not carry military cargo on the foreign-flag
vessels operated pursuant to this waiver;
(e)APL covenants that no ODS paid to APL will be paid to or
used for the benefit of any foreign interest whose
relationship with APL is approved by this waiver; and
(f)APL shall not enter into any charter arrangements
involving vessels under the flag of the following
countries, unless otherwise permitted by law:
Albania
Bulgaria
Estonia
Laos
Latvia
Lithuania
Mongolian People's Republic
Commonwealth of Independent States (formerly
U.S.S.R.)
North Korea
Vietnam
Cambodia
Cuba
Libya
Iraq
Waiver 6 is subject to the above conditions, except condition
(d).
8. Waiver granted by the Maritime Administration on August 16,
1991, to allow the Operator, as a party to the Transpacific
Space Utilization Agreement, Federal Maritime Commission No.
217-011324, to charter space on a foreign-flag vessel or
vessels that may by operated by another party to the
Agreement, covering trade from United States ports and points
to the Far East, as described in the Agreement.
9. Waiver granted by the Maritime Administration on August 16,
1991, to allow the Operator, as a party to the Transpacific
Stabilization Agreement (as amended in 1991), Federal
Maritime Commission No. 203-011223, to charter space on a
foreign-flag vessel or vessels that may be operated by
another party to the Agreement, covering trade from the Far
East, as described in the Agreement, to ports and points in
North America, as described in the Agreement.
Waiver 8 and 9 are subject to the following conditions:
(a)The waiver shall run concurrently with the period of this
Agreement.
(b)No change in the character of the service arranged for
under space charter arrangements shall be made without
prior notice to and approval of the Maritime
Administration, otherwise the waiver will be deemed to
have terminated concurrently with the unauthorized
change.
10.Waiver granted by the Maritime Administration on September
27, 1991, to allow the Operator to slot charter on foreign-
flag vessels of Orient Overseas Container Line Inc. (OOCL)
pursuant to APL's participation in a reciprocal slot exchange
and coordinated sailing agreement, designated Federal
Maritime Commission No. 203-011340, and in a Master Slot
Charter Agreement, both between APL and OOCL. Waiver granted
on January 2, 1992 to add two Indonesia feeder loops to the
geographic scope of services described in the Master Slot
Charter Agreement, as amended by Addendum 1. This waiver 10
is subject to the following conditions:
(a) APL shall covenant that it will not withdraw any
vessel (except for overage vessels) from operation under its
ODS contract during the period when the agreement with OOCL
is in effect, without the prior approval of the Maritime
Administration;
(b) No change in the geographic scope of the shared
OOCL/APL services set out in Sections 4 and 6 of the Master
Slot Charter Agreement beyond ports on TR 2, and Singapore
and Port Kelang, or in frequency of any of these shared
services beyond weekly service shall be made without prior
approval by the Maritime Administration, otherwise the
Maritime Administration may take such action as is
appropriate, including termination of the waiver upon 90
days' prior written notice;
(c) The Maritime Administration may upon its own motion
modify the waiver to the extent deemed advisable upon proper
written notice to APL, such notice to state the reason(s) for
such modification;
(d) APL covenants that no ODS paid to APL will be paid to or used for
the benefit of any foreign interest whose relationship with
APL is approved by this waiver;
(e) APL shall not enter into any charter arrangements
involving vessels under the flag of the following countries,
unless otherwise permitted by law:
Albania
Bulgaria
Estonia
Laos
Latvia
Lithuania
Mongolian People's Republic
Commonwealth of Independent States (formerly
U.S.S.R.)
North Korea
Vietnam
Cambodia
Cuba
Libya
Iraq
(f) No space on APL's vessels operated under the OOCL
space-sharing agreement, FMC No. 203-011340, shall be
utilized for the carriage of cargo reserved for U.S.-flag
vessels under any statue, resolution, or regulation, unless
such cargo is carried pursuant to bills of lading or
contracts of carriage issued to, or entered into with, the
shipper of such cargo by or for a citizen of the United
States which is a party to said FMC Agreement.
Addendum No. 89
Contract No. MA/MSB-417
ADDENDUM TO
OPERATING-DIFFERENTIAL SUBSIDY AGREEMENT
WITH
AMERICAN PRESIDENT LINES, LTD.
THIS AGREEMENT is made by and between the UNITED STATES OF
AMERICA (herein called the "United States"), represented by the
SECRETARY OF TRANSPORTATION, acting by and through the MARITIME
SUBSIDY BOARD (herein called the "Board"), and AMERICAN PRESIDENT
LINES, LTD., a corporation organized and existing under the laws
of the State of Delaware (herein called the "Operator"), as an
addendum to that certain agreement, Contract No. MA/MSB-417
(herein called the "Agreement").
WITNESSETH:
WHEREAS:
1. The Board has made the necessary determinations and
findings in accordance with the Merchant Marine Act, 1936, as
amended (herein called the "Act");
2. The Board on March 19, 1992, approved an amendment to
the Agreement to waive the consecutive dividend policy and other
restrictive provisions of Article II-21(a) and (b) of the
Agreement, subject to certain conditions; and
3 The parties have agreed to said amendment and desire to
incorporate the same into the Agreement in the manner hereinafter
set forth.
NOW, THEREFORE, in consideration of the premises, the
parties hereto agree as follows:
I. Effective March 19, 1992, the Agreement is hereby
amended by
2
waiving the conservative dividend policy set forth in Article II-
21(a) of the Agreement, including the additional dividend
requirements of 46 CFR Part 283.4
II. Effective March 19, 1992, the Agreement is hereby
amended by waiving the provisions set forth in Article II-21 (b)
of the Agreement.
III. The amendment is subject expressly to the following
conditions:
1. The actions authorized by the waivers set forth
in this amendment are not effective until Operator relieves the
Maritime Administration (MARAD) of all its Title XI loan guaranty
and insurance obligations by a prepaying all of its direct Title XI
obligations; (b) purchasing certain of its chartered vessels that
were financed with Title XI debt and simultaneously causing the
prepayment of that debt; and (c) causing the prepayment and
refinancing with non-Title XI debt of the existing Title XI debt
on its other chartered vessels.
2. Operator must continue to provide financial
data to MARAD during the life of the Agreement to demonstrate its
ability to meet its obligations.
IV. Except as herein otherwise expressly provided, the
Agreement, as heretofore amended, shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have executed this
Addendum No. 89, in four counterparts, effective of the date(s)
indicated and actually on the 19th day of June, 1992.
3
(SEAL) UNITED STATES OF AMERICA
SECRETARY OF TRANSPORTATION
ATTEST: MARITIME SUBSIDY BOARD
By:/s/JAMES E. SAARI By:/s/W. PATRICK MORRIS
Secretary Member
(SEAL)
ATTEST: AMERICAN PRESIDENT LINES, LTD.
By:/s/DAVID V. AINSWORTH By:/s/FREDERICK M. SEVEKOW,JR.
Name:David Ainsworth Name Frederick M. Sevekow, Jr.
Title: Assistant Secretary Title: Vice President
Approved as to form:
By:/s/MURRAY A.BLOOM
Assistant Chief Counsel
Maritime Administration
[CONFORMED COPY]
AMENDMENT NO. 3 TO AMENDED AND RESTATED CREDIT AGREEMENT
AMENDMENT dated as of March 1, 1993 to the Amended and Restated
Credit Agreement dated as of March 17, 1992, as amended prior to the date hereof
(the "Agreement"), among AMERICAN PRESIDENT LINES, LTD. ("APL"), AMERICAN
PRESIDENT COMPANIES, LTD. ("APC"), the BANKS listed on the signature pages
hereof and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the "Agent").
The parties hereto agree as follows:
SECTION 1. Definitions; References. Unless otherwise
specifically defined herein, each term used herein which is defined in the
Agreement has the meaning assigned to such term in the Agreement. Each
reference to "hereof", "hereunder", "herein" and "hereby" and each other similar
reference and each reference to "this Agreement" and each other similar
reference contained in the Agreement shall from and after the Amendment No. 3
Effective Date (as defined below) refer to the Agreement as amended hereby.
SECTION 2. Amendment of Section 5.06. The second sentence of
Section 5.06 of the Agreement is amended by changing the dollar amount therein
from "$380,000,000" to "$330,000,000".
SECTION 3. Amendment of Section 5.11. The first paragraph of
Section 5.11 of the Agreement is amended to read in full as follows:
SECTION 5.11. Consolidated Leverage Ratio. The Consolidated
Leverage Ratio at any time during each fiscal quarter of APC specified
below will not be greater than the ratio set forth opposite such fiscal
quarter.
Fiscal Quarter Ratio
Each Fiscal Quarter through 1.15 to 1
Second Fiscal Quarter 1994
Third Fiscal Quarter 1994 and 1.00 to 1
each Fiscal Quarter thereafter
SECTION 4. Governing Law. This Amendment shall be governed by
and construed in accordance with the laws of the State of New York.
SECTION 5. Counterparts; Effectiveness. This Amendment may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Amendment shall become effective on the date (the "Amendment
No. 3 Effective Date") when each of the following conditions shall have been
satisfied:
(a) receipt by the Agent of counterparts hereof signed by APL,
APC and the Required Banks (or, in the case of any party as to which an
executed counterpart shall not have been received, the Agent shall have
received telegraphic, telex, facsimile or other written confirmation
from such party of execution of a counterpart hereof by such party); and
(b) receipt by the Agent of evidence reasonably satisfactory to
it that, prior to or contemporaneously with the effectiveness of this
Amendment, APC, APL and/or any other Wholly-Owned Subsidiary or
Wholly-Owned Subsidiaries shall have made a capital contribution or
capital contributions to EAC/BEN in an aggregate amount of at least
$90,000,000;
provided that this Amendment shall not become effective or binding on any party
hereto unless all of the foregoing conditions are satisfied not later than June
30, 1993. The Agent shall promptly notify APL, APC and the Banks of the
Amendment No. 3 Effective Date, and such notice shall, in the absence of
manifest error, be conclusive and binding on all parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be duly executed as of the date first above written.
AMERICAN PRESIDENT LINES, LTD.
By /s/ Randall K. Gausman
Title: Assistant Treasurer
AMERICAN PRESIDENT COMPANIES, LTD.
By /s/ Steven Tulsky
Title: Assistant Treasurer
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Robert M. Osieski
Title: Vice President
J.P. MORGAN DELAWARE
By /s/ Philip S. Detjens
Title: Vice President
BANK OF AMERICA NATIONAL TRUST
and SAVINGS ASSOCIATION
By /s/ Michael J. Dasher
Title: Vice President
BARCLAYS BANK PLC
By /s/ Paul M. Barnes
Title: Associate Director
CITIBANK, N.A.
By /s/ Benjamin S. A. Moody
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON
By /s/ Alicia Szendiuch
Title: Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By /s/ Kathleen L. Ross
Title: Vice President
[EXECUTION COPY]
AMENDMENT NO. 4 TO AMENDED AND RESTATED CREDIT AGREEMENT
AMENDMENT dated as of December 2, 1993 to the Amended and Restated
Credit Agreement dated as of March 17, 1992, as amended prior to the date hereof
(the "Agreement") among AMERICAN PRESIDENT LINES, LTD. ("APL"), AMERICAN
PRESIDENT COMPANIES, LTD. ("APC"), the BANKS listed on the signature pages
thereof and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the "Agent").
The parties hereto agree as follows:
SECTION 1. Definitions; References. Unless otherwise specifically
defined herein, each term used herein which is defined in the Agreement has the
meaning assigned to such term in the Agreement. Each reference to "hereof",
"hereunder", "herein" and "hereby" and each other similar reference and each
reference to "this Agreement" and each other similar reference contained in the
Agreement shall from and after the date hereof refer to the Agreement as amended
hereby.
SECTION 2. Amendment of Section 5.15. Clause (i) of the proviso in
Section 5.15 of the Agreement is amended to read as follows:
(i) the payment in any fiscal quarter of the Guarantor of a regular
quarterly dividend not exceeding (x) $.15 per share for any fiscal quarter
ending before September 18, 1993 or (y) $.225 per share (adjusted for
stock splits and stock dividends, if any, after December 2, 1993) for any
fiscal quarter ending after September 18, 1993;
SECTION 3. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 4. Counterparts; Effectiveness. This Amendment may be signed
in any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Amendment shall become effective as of the date hereof when the Agent shall
have received duly executed counterparts hereof signed by APL, APC and the
Required Banks (or, in the case of any party as to which an executed counterpart
shall not have been received, the Agent shall have received telegraphic, telex,
facsimile or other written confirmation from such party of execution of a
counterpart hereof by such party).
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date first above written.
AMERICAN PRESIDENT LINES, LTD.
By /s/ Randall K. Gausman
Title: Assistant Treasurer
AMERICAN PRESIDENT COMPANIES, LTD.
By /s/ Randall K. Gausman
Title: Assistant Treasurer
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Diana H. Imhof
Title: Associate
J.P. MORGAN DELAWARE
By /s/ David J. Morris
Title: Vice President
BANK OF AMERICA NATIONAL TRUST
and SAVINGS ASSOCIATION
By /s/ Michael J. Dasher
Title: Vice President
BARCLAYS BANK PLC
By /s/ Keith Mackie
Title: Associate Director
CITIBANK, N.A.
By /s/ John F. Heuss
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON
By /s/ Alicia Szendiuch
Title: Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By /s/ Karen J. Andrews
Title: Vice President
__[EXECUTION COPY]
AMENDMENT NO. 5 TO AMENDED AND RESTATED CREDIT AGREEMENT
AMENDMENT dated as of February 1, 1994 to the Amended and
Restated Credit Agreement dated as of March 17, 1992, as amended prior to the
date hereof (the "Agreement"), among AMERICAN PRESIDENT LINES, LTD. ("APL"),
AMERICAN PRESIDENT COMPANIES, LTD. ("APC"), the BANKS listed on the signature
pages hereof and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the
"Agent").
The parties hereto agree as follows:
SECTION 1. Definitions; References. Unless otherwise specifically
defined herein, each term used herein which is defined in the Agreement has the
meaning assigned to such term in the Agreement. Each reference to "hereof",
"hereunder", "herein" and "hereby" and each other similar reference and each
reference to "this Agreement" and each other similar reference contained in the
Agreement shall from and after the Amendment No. 5 Effective Date (as defined in
Section 9 below) refer to the Agreement as amended hereby.
SECTION 2. Reduction of Commitments. The Commitments of the
several Banks under the Agreement are reduced pro rata, as of February 1, 1994,
so that the aggregate amount of the Commitments is reduced to $100,000,000.
SECTION 3. Deletion of Sub-Limits on Amount that APC Can Borrow.
(a) The proviso at the end of the first sentence of Section 2.01 of the
Agreement (which provides that the aggregate outstanding principal amount of the
Loans to APC shall at no time exceed 50% of the aggregate amount of the
Commitments) is deleted.
(b) Clause (b) of Section 3.02 of the Agreement is amended by
deleting sub-clause (ii) thereof (which states as a condition to borrowing that
the aggregate outstanding principal amount of the Loans to APC will not exceed
50% of the aggregate amount of the Commitments). The word "and" immediately
preceding said sub-clause (ii) and the reference to "(i)" in the second line of
said clause (b) are also deleted.
SECTION 4. Authorization; No Contravention. Section 4.02 of the
Agreement is amended by deleting the words "the borrowing of the full amount of
the Commitments by APL and the borrowing of 50% of the aggregate amount of the
Commitments by APC" and replacing them with the words "the borrowing of the full
amount of the Commitments by APC".
SECTION 5. Deletion of Cross-Guarantees. Article IX of the
Agreement is deleted in its entirety.
SECTION 6. Elimination of All Other Obligations of APL.
Notwithstanding anything to the contrary in any provision of the Agreement, APL
is deleted as a party thereto and shall have no rights or obligations thereunder
after the Amendment No. 5 Effective Date.
SECTION 7. Notices and Payment Obligations. All notices to be
given to APL under the Agreement after the Amendment No. 5 Effective Date
pursuant to Section 6.01, 6.02, 6.03 or 10.09 or Article VIII shall be effective
if, and only if, given to APC. All payments to be made by APL under Section
7.09, 10.03 or 10.04 of the Agreement after the Amendment No. 5 Effective Date
shall be made by APC. Any action permitted to be taken by APL under Section
10.07(f) of the Agreement after the Amendment No. 5 Effective Date may be taken
by APC.
SECTION 8. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 9. Counterparts; Effectiveness. This Amendment may be signed
in any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Amendment shall become effective on the date (the "Amendment No. 5
Effective Date") when the Agent shall have received:
(a) duly executed counterparts hereof signed by APL, APC and all
the Banks (or, in the case of any party as to which an executed
counterpart shall not have been received, the Agent shall have received
telegraphic, telex, facsimile or other written confirmation from such
party of execution of a counterpart hereof by such party); and
(b) an opinion of Peter A.V. Huegel, Esq., Senior Counsel of APC,
substantially in the form of Exhibit A hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date first above written.
AMERICAN PRESIDENT LINES, LTD.
By /s/ Randall K. Gausman_
Title: Assistant Treasurer
AMERICAN PRESIDENT COMPANIES, LTD.
By /s/ Randall K. Gausman_
Title: Assistant Treasurer
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Diana H. Imhof
Title: Associate
J.P. MORGAN DELAWARE
By /s/ Philip S. Detjens
Title: Vice President
BANK OF AMERICA NATIONAL TRUST
and SAVINGS ASSOCIATION
By /s/ Michael J. Dasher
Title: Vice President
BARCLAYS BANK PLC
By /s/ Paul M. Barnes
Title: Associate Director
CITIBANK, N.A.
By /s/ John F. Heuss
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON
By /s/ Alicia Szendiuch
Title: Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By /s/ Gerald F. Mackin
Title: Vice President
--
DIRECTORS' INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT, made and entered into as of the 5th day
of October, 1993 ("Agreement"), by and between AMERICAN PRESIDENT
COMPANIES, LTD., a Delaware corporation ("Company"), and Toni Rembe
("Director").
In consideration of the mutual promises in this Agreement, and
intending to be legally bound, the Company and Director do hereby
covenant and agree as follows:
Section 1. Services by Director. Director agrees to serve as a
director so long as she is duly appointed or elected and qualified in
accordance with the applicable provisions of the Certificate of
Incorporation and By-laws of the Company or any subsidiary of the
Company and until such time as she resigns or fails to stand for
election. Director may at any time and for any reason resign from such
position (subject to any other contractual obligation or other
obligation imposed by operation of law), in which event the Company
shall have no obligation under this Agreement to continue Director in
any such position.
Section 2. Indemnification. The Company shall indemnify
Director to the fullest extent permitted by applicable law in effect on
the date hereof or as such law may from time to time be amended (but, in
the case of any such amendment, only to the extent such amendment
permits the Company to provide broader indemnification rights than the
law permitted the Company to provide before such amendment). Without in
any way diminishing the scope of the indemnification provided by this
Section 2, the Company will indemnify Director if and whenever she is or
was involved in any manner (including, without limitation, as a party or
as a witness) in any threatened, pending or completed Proceeding,
including without limitation any such Proceeding brought by or in the
right of the Company, by reason of the fact that she is or was an Agent
or by reason of anything done or not done by her in such capacity,
against Expenses and Liabilities actually and reasonably incurred by
Director or on her behalf in connection with the investigation, defense,
settlement or appeal of any such Proceeding. No initial finding by the
Board, its counsel, Independent Counsel, arbitrators or the stockholders
shall be effective to deprive Director of the protection of this
indemnity, nor shall a court to which Director may apply for enforcement
of this indemnity give any weight to any such adverse finding in
deciding any issue before it, as it is intended that Director shall be
paid promptly by the Company all amounts necessary to effectuate the
foregoing indemnity in full. In addition to, and not as a limitation
of, the foregoing, the rights of indemnification of Director provided
under this Agreement shall include those rights set forth in Sections 3,
6 and 7 below.
Section 3. Advancement of Expenses. All reasonable Expenses
incurred by or on behalf of Director shall be advanced by the Company to
Director within 20 days after the receipt by the Company of a written
request for an advance or advances of Expenses from time to time,
whether prior to or after final disposition of a Proceeding (unless
there has been a final determination that Director is not entitled to be
indemnified for
such Expenses), including without limitation any Proceeding
brought by or in the right of the Company. Director's entitlement to
advancement of Expenses shall include those incurred in connection with
any Proceeding by Director seeking an adjudication or award in
arbitration pursuant to this Agreement. The requests shall reasonably
evidence the Expenses incurred by Director in connection therewith. If
required by law at the time of such advance, Director hereby undertakes
to repay the amounts advanced if it shall ultimately be determined that
Director is not entitled to be indemnified pursuant to the terms of this
Agreement.
Section 4. Procedure for Determination of Entitlement to
Indemnification.
(a) Whenever Director believes that she is entitled to
indemnification pursuant to this Agreement, Director shall submit
a written request for indemnification to the Company to the
attention of the Chairman of the Board with a copy to the
Secretary. This request shall include documentation or
information which is necessary for the determination of
entitlement to indemnification and which is reasonably available
to Director. Determination of Director's entitlement to
indemnification shall be made not later than 60 days after any
judgment, order, settlement, dismissal, arbitration award,
conviction, acceptance of a plea of nolo contendere or its
equivalent, or other disposition or partial disposition of any
Proceeding or any other event which could enable the Company to
determine Director's entitlement to indemnification. The
Chairman of the Board or the Secretary shall, promptly upon
receipt of Director's request for indemnification, advise the
Board in writing that Director has made such request for
indemnification.
(b) The Company shall be entitled to select the forum
in which Director's entitlement to indemnification will be heard
unless a Triggering Event has occurred, in which case Director
shall be entitled to select the forum. The Company or Director,
as the case may be, shall notify the other party in writing as to
the forum selected, which selection shall be from among the
following:
(i) The stockholders of the Company;
(ii)A quorum of the Board consisting of
Disinterested Directors;
(iii) Independent Counsel, which counsel shall
make the determination in a written opinion; or
(iv) A panel of three arbitrators, one of whom is
selected by the Company, another of whom is
selected by Director and the last of whom is
selected by the first two arbitrators so selected;
or if for any reason three arbitrators are not
selected within 30 days after the appointment of
the first arbitrator, then selection of additional
arbitrators to complete the three person panel
shall be made by the
American Arbitration Association under its
commercial arbitration rules now in effect.
Section 5. Presumptions and Effect of Certain Proceedings. Upon
making a request for indemnification, Director shall be presumed to be
entitled to indemnification under this Agreement and the Company shall
have the burden of proof to show that such indemnification is expressly
prohibited by applicable law in order to overcome that presumption in
reaching any contrary determination. If the person or persons so
empowered to make the determination shall have failed to make the
requested indemnification within 60 days after any judgment, order,
settlement, dismissal, arbitration award, conviction, acceptance of a
plea of nolo contendere or its equivalent, or other disposition or
partial disposition of any Proceeding or any other event which could
enable the Company to determine Director's entitlement to
indemnification, the requisite determination of entitlement to
indemnification shall be deemed to have been made and Director shall be
absolutely entitled to indemnification under this Agreement, absent (i)
misrepresentation or omission by Director of a material fact in the
request for indemnification or (ii) a specific finding that all or any
part of such indemnification is expressly prohibited by law. The
termination of any Proceeding by judgment, order, settlement,
arbitration award or conviction, or upon a plea of nolo contendere or
its equivalent, shall not of itself (a) adversely affect the rights of
Director to indemnification except as may be provided herein, (b) create
a presumption that Director did not act in good faith and in a manner
which she reasonably believed to be in or not opposed to the best
interests of the Company, or (c) with respect to any criminal action or
proceeding, create a presumption that Director had reasonable cause to
believe that her conduct was unlawful.
Section 6. Remedies of Director in Cases of Determination not to
Indemnify or to Advance Expenses.
(a) In the event that (i) an initial determination is made that
Director is not entitled to indemnification, (ii) advances are not made
pursuant to this Agreement, (iii) payment has not been timely made
following a determination of entitlement to indemnification pursuant to
this Agreement or (iv) Director otherwise seeks enforcement of this
Agreement, Director shall be entitled to a final adjudication in an
appropriate court of the State of Delaware of her entitlement to such
indemnification or advance. Alternatively, Director at her option may
seek an award in arbitration to be conducted by a single arbitrator
pursuant to the commercial arbitration rules of the American Arbitration
Association now in effect, which award is to be made within 90 days
following the filing of the demand for arbitration. The Company shall
not oppose Director's right to seek any such adjudication or arbitration
award. In any such proceeding or arbitration Director shall be presumed
to be entitled to indemnification under this Agreement and the Company
shall have the burden of proof to overcome that presumption.
(b) In the event an initial determination has been made, in
whole or in part, that Director is not entitled to indemnification, the
decision in the judicial proceeding or
arbitration provided in paragraph (a) of this Section 6 shall be made de
novo and Director shall not be prejudiced by reason of a determination
that she is not entitled to indemnification.
(c) If an initial determination is made or deemed to have been
made pursuant to the terms of this Agreement that indemnification of
Director is not expressly prohibited by law, Director shall be entitled
to indemnification and the Company shall be bound by such determination
in the absence of (i) a misrepresentation or omission of a material fact
by Director or (ii) a specific finding (which has become final) that all
or any part of such indemnification is expressly prohibited by law.
(d) The Company shall be precluded from asserting that the
procedures and presumptions of this Agreement are not valid, binding and
enforceable. The Company shall stipulate in any such court or before
any such arbitrator that the Company is bound by all the provisions of
this Agreement and is precluded from making any assertion to the
contrary.
(e) Expenses incurred by Director in connection with her
request for indemnification under, seeking enforcement of, or to recover
damages for breach of, this Agreement shall be borne by the Company.
Section 7. Other Rights to Indemnification. Director's rights
of indemnification and advancement of expenses provided by this
Agreement shall not be deemed exclusive of any other rights to which
Director may now or in the future be entitled under applicable law, the
Certificate of Incorporation, By-laws, agreement, vote of stockholders,
resolution of directors, or otherwise.
Section 8. Limitations on Indemnity. The Company shall not be
liable under this Agreement to make any payment to Director to the
extent that Director has already been reimbursed pursuant to such D & O
Insurance as the Company may maintain for Director's benefit.
Notwithstanding the availability of such insurance, Director also may
claim indemnification from the Company pursuant to this Agreement by
assigning to the Company any claims under such insurance to the extent
Director is paid by the Company.
Section 9. Duration and Scope of Agreement; Binding Effect.
This Agreement shall continue so long as Director shall be subject to
any possible Proceeding by reason of the fact that she is or was an
Agent and shall be applicable to Proceedings commenced or continued
after execution of this Agreement, whether arising from acts or
omissions occurring before or after such execution. This Agreement
shall be binding upon the Company and its successors and assigns and
shall inure to the benefit of Director and her spouse, assigns, heirs,
devisees, executors, administrators and other legal representatives.
Section 10. Severability. If any provision or provisions of
this Agreement (or any portion thereof) shall be held to be invalid,
illegal or unenforceable for any reason
whatsoever: (a) the validity, legality and enforceability of the
remaining provisions of this Agreement shall not in any way be affected
or impaired thereby; and (b) to the fullest extent possible, the
provisions of this Agreement shall be construed so as to give effect to
the intent manifested by the provision held invalid, illegal or
unenforceable.
Section 11. Identical Counterparts. This Agreement may be
executed in one or more counterparts, each of which shall for all
purposes be deemed to be an original but all of which together shall
constitute one and the same Agreement. Only one such counterpart signed
by the party against whom enforceability is sought needs to be produced
to evidence the existence of this Agreement.
Section 12. Interpretation of Agreement. It is understood that
the parties hereto intend this Agreement to be interpreted and enforced
so as to provide indemnification to Director to the fullest extent now
or hereafter permitted by law.
Section 13. Headings. The headings of the Sections and
paragraphs of this Agreement are inserted for convenience only and shall
not be deemed to constitute part of this Agreement or to affect the
construction thereof.
Section 14. Definitions. For purposes of this Agreement:
(a) "Agent" shall mean any person who (i) is or was a director,
officer or employee of the Company or a subsidiary of the Company
whether serving in such capacity or as a director, officer, employee,
agent, fiduciary or other official of another entity at the request, for
the convenience, or to represent the interests of the Company or a
subsidiary of the Company or (ii) was a director, officer or employee of
a corporation which was a predecessor corporation of the Company or a
subsidiary of the Company whether serving in such capacity or as a
director, officer, employee, agent, fiduciary or other official of
another entity at the request, for the convenience, or to represent the
interests of such predecessor corporation.
(b) "Disinterested Director" shall mean a director of the
Company who is not or was not a party to the Proceeding in respect of
which indemnification is being sought by Director.
(c) "Expenses" shall include all direct and indirect costs
(including, without limitation, attorneys' fees, retainers, court costs,
transcripts, fees of experts, witness fees, travel expenses, duplicating
costs, printing and binding costs, telephone charges, postage, delivery
service fees, all other disbursements or out-of-pocket expenses and
reasonable compensation for time spent by Director for which she is
otherwise not compensated by the Company or any third party) actually
and reasonably incurred in connection with either the investigation,
defense, settlement or appeal of a Proceeding or establishing or
enforcing a right to indemnification under this Agreement, applicable
law or otherwise; provided, however, that "Expenses" shall not include
any judgments, fines or Employee Retirement Income Security Act of 1974
("ERISA") excise taxes or penalties.
(d) '"Independent Counsel" shall mean a law firm or a member of
a law firm that neither is presently nor in the past five years has been
retained to represent: (i) the Company or Director in any matter
material to either party, or (ii) any other party to the Proceeding
giving rise to a claim for indemnification hereunder. Notwithstanding
the foregoing, the term "Independent Counsel" shall not include any
person who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing either the
Company or Director in an action to determine Director's right to
indemnification under this Agreement.
(e) "Liabilities shall mean liabilities of any type whatsoever,
including, but not limited to, judgments, fines, ERISA excise taxes and
penalties, and amounts paid in settlement.
(f) "Proceeding" shall mean any action, suit, arbitration,
alternate dispute resolution mechanism, investigation, administrative
hearing or any other proceeding whether civil, criminal, administrative
or investigative.
(g) "Triggering Event" shall mean the acquisition by any person
(other than the Company) of 30% or more of the outstanding shares of
common stock of the Company unless a majority of the entire Board, which
shall include the affirmative vote of at least one director from each
class of the Board, shall have earlier approved such acquisition.
Section 15. Pronouns. Use of the masculine pronoun shall be
deemed to include usage of the feminine pronoun where appropriate.
Section 16. Modification and Waiver. No supplement,
modification or amendment of this Agreement shall be binding unless
executed in writing by both of the parties to this Agreement. No waiver
of any provision of this Agreement shall be deemed to constitute a
waiver of any other provision hereof (whether or not similar) nor shall
such waiver constitute a continuing waiver.
Section 17. Notice by Director and Defense of Claims. Director
agrees promptly to notify the Company in writing upon being served with
any summons, citation, subpoena, complaint, indictment, information or
other document relating to any matter which may be subject to
indemnification hereunder, whether civil, criminal, administrative or
investigative; but the omission so to notify the Company will not
relieve it from any liability which it may have to Director if such
omission does not prejudice the Company's rights and if such omission
does prejudice the Company's rights, it will relieve the Company from
liability only to the extent of such prejudice; nor will such omission
relieve the Company from any liability which it may have to Director
otherwise than under this Agreement. With respect to any Proceeding as
to which Director notifies the Company of the commencement thereof:
(a) The Company will be entitled to participate therein at its
own expense; and
(b) Except as otherwise provided below, to the extent that it
may wish, the Company jointly with any other indemnifying party
similarly notified will be entitled to assume the defense thereof, with
counsel reasonably satisfactory to Director. After notice from the
Company to Director of its election so to assume the defense thereof,
the Company will not be liable to Director under this Agreement for any
Expenses subsequently incurred by Director in connection with the
defense thereof other than reasonable costs of investigation or as
otherwise provided below. Director shall have the right to employ her
counsel in such Proceeding but the fees and expenses of such counsel
incurred after notice from the Company of its assumption of the defense
thereof shall be at the expense of Director unless (i) the employment of
counsel by Director has been authorized by the Company, (ii) Director
shall have reasonably concluded that there may be a conflict of interest
between the Company and Director in the conduct of the defense of such
action or that counsel may not be adequately representing Director,
(iii) a Triggering Event shall have occurred or (iv) the Company shall
not in fact have employed counsel to assume the defense of such action,
in each of which cases the fees and expenses of counsel shall be at the
expense of the Company. The Company shall not be entitled to assume the
defense of any Proceeding as to which Director shall have made the
conclusion provided for in (ii) above or if an event specified in (iii)
above shall have occurred.
(c) The Company shall not be liable to indemnify Director under
this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent. The Company shall not settle any
action or claim in any manner which would impose any penalty or
limitation on Director without Director's written consent. Neither the
Company nor Director will unreasonably withhold their consent to any
proposed settlement.
Section 18. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have
been duly given if (i) delivered by hand and receipted for by the party
to whom said notice or other communication shall have been directed or
(ii) mailed by certified or registered mail with postage prepaid, on the
third business day after the date on which it is so mailed:
(a) If to Director, to:
Pillsbury, Madison & Sutro
235 Montgomery Street
Suite 1623
San Francisco, CA 94104
(b) If to the Company, to:
American President Companies, Ltd.
1111 Broadway
Oakland, CA 94607
Attn: Chairman of the Board
With a copy to:
Secretary
or to such other address as may have been furnished to Director by the
Company or to the Company by Director, as the case may be.
Section 19. Governing Law. The parties agree that this
Agreement shall be governed by, and construed and enforced in accordance
with, the laws of the State of Delaware, as applied to contracts between
Delaware residents entered into and to be performed entirely within
Delaware.
Section 20. Consent to Jurisdiction. The Company and Director
each hereby irrevocably consent to the jurisdiction of the courts of the
State of Delaware for all purposes in connection with any action or
proceeding which arises out of or relates to this Agreement and agree
that any action instituted under this Agreement shall be brought only in
the state courts of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
AMERICAN PRESIDENT COMPANIES,
LTD.
By: /s/ Maryellen B. Cattani
Maryellen B. Cattani
Senior Vice President,
General Counsel and
Secretary
DIRECTOR
/s/ Toni Rembe
Toni Rembe
PH931208Cins-0230ai-Indemnity
EXHIBIT 1
AMENDMENT NO. 1
to
American President Lines, Ltd. ("APL")
Orient Overseas Container Line, Inc. ("OOCL")
Reciprocal Slot Exchange and Coordinated Sailing Agreement
This Amendment of the above-referenced Agreement dated July 24, 1991
between APL and OOCL is entered into as of the 31 day of January, 1994 between
the same Parties, each in the same capacity.
WHEREAS, APL has previously entered into legally binding contracts for
the construction of six (6) new C-11 vessels (the "APL C-11 Vessels"); and
WHEREAS, the parties wish to provide for OOCL's contemplated new ship
construction program and for certain other matters;
The Parties agree as follows:
I. This Amendment shall take effect upon the latest of:
(1) The date this Amendment may become effective after filing
with the Federal Maritime Commission in accordance with the Shipping Act of
1984,
(2) The date on which any required approval of this Amendment
by the Maritime Administration, U.S. Department of Transportation, shall have
been granted and become final, and
(3) The date ship construction contracts for six (6) Vessels
to be built pursuant to similar specifications and essentially the same size and
speed as the APL C-11 Vessels (the "OOCL New Vessels") shall have been entered
into by OOCL, directly or through affiliated corporations, and become legally
binding. (The OOCL New Vessels and the APL C-11 Vessels shall hereinafter be
collectively referred to as the "New Vessels.")
II. The first sentence of subsection a. of Article 9.1 of the
Agreement is hereby amended to read as follows:
"This Agreement as amended shall take effect as of the Effective
Date determined in accordance with subsection b. below and shall
continue through and including December 31, 2005."
III. The following provisions are hereby added at the end of
subsection a. of Article 9.2 of the Agreement:
"The provisions of this subsection 9.2.a. shall lapse and cease
to have effect two (2) years following delivery of the first New
Vessel or, if later, one year following delivery of the last New
Vessel by the shipyard unless there is in existence a material
issue arising under this subsection, as to which a Party shall
then have demanded consultation and which shall not have been
resolved as of such time, in which case the provisions of this
subsection 9.2.a. shall continue in effect.
In the event that APL and OOCL enter into a coordinated service
arrangement with a third party carrier in the Trade, the Parties
will review this subsection 9.2.a. with a view to modifying this
subsection to the extent the Parties agree is appropriate.
IV. Subsections a. and d. of Article 9.2. are hereby amended by
substituting the number 305 for the number 90 in each of said subsections.
V. Subsection 9.2.c. is hereby revised to read as follows:
"c. If any government or agency thereof imposes upon any Party
any restriction, or any required approval or condition thereof
existing as of the date hereof is withdrawn or shall cease to
have effect by operation of law or otherwise, which restriction,
or the absence of which approval or condition, shall or would
have a material adverse effect upon a Party in the Trade, the
Party upon whom such restrictions are imposed, or for whom such
approvals are required, shall fully advise the other Party
thereof. Thereafter, the Parties, each acting in good faith,
shall take all reasonable measures to ameliorate the effects of
such restriction or absence or cessation of approval and to adapt
their services to the new situation created thereby to the extent
commercially practicable. If, within sixty (60) days after the
giving of such advice, all such ameliorative efforts have failed
and the Parties fail to reach agreement as to any such adaptation
and the effect of the restriction or disapproval shall have a
continuing material adverse effect upon a Party in the Trade,
either Party may terminate the Agreement upon not less than three
hundred five (305) days prior written notice after expiry of such
sixty (60) day cure period; provided however, in the event of any
such restriction or disapproval which results in the severance of
article 13 of this Agreement, the phrase 'material adverse
effect' shall mean actual damages material to its business in the
Trade and not anticipated or hypothetical damages."
VI. Subsection d. of Article 9.2 is hereby amended by adding the
following sentence at the end of the subsection: "The provisions
of this subsection 9.2.d. shall lapse and cease to have effect
after December 31, 1997."
VII. Article 18: "Signature Page" is hereby renumbered Article 19,
and the following new Article 18 is added:
"Article 18: Undertaking With Respect to Stock Transactions
a. Both of the Parties to this Agreement agree that, during the
term of this Agreement and for a period of one (1) year after the
expiration of such term, neither it nor any subsidiary or
affiliate, acting alone or as part of a group, will acquire, or
offer to agree to acquire, directly or indirectly, by option or
otherwise, more than one percent (1%) of the outstanding voting
securities of the other Party to this Agreement or its direct or
indirect parent, or otherwise seek to influence or control in any
manner the management or policies of any such other Party or its
direct or indirect parent (other than in connection with the
matters contemplated by this Agreement), without the prior
written consent of such other Party.
b. If there is a change in control of a Party, or any person or
entity that directly or indirectly controls that Party, such
change of control shall be deemed a breach of that Party's
obligations under this Agreement permitting the other Party to
terminate the Agreement for cause under Article 9.2.b. A change
in control is defined for these purposes as the acquisition by a
person or entity, other than a subsidiary or an affiliate of the
Party that has not itself undergone a change in control, of
control of 30% or more of the beneficial ownership of the Party.
An affiliate is defined as a person that directly, or indirectly
through one or more intermediaries, controls, or is controlled
by, or is under common control with the Party."
VIII. The Parties shall file with the Federal Maritime Commission
revised pages of APL/OOCL, Reciprocal Slot Exchange and Coordinated Sailing
Agreement in compliance with the Commission's rules at 46 C.F.R. Part 572
promptly following execution of this Amendment.
AMERICAN PRESIDENT LINES, LTD.ORIENT OVERSEAS
CONTAINER LINE, INC.
By /s/ J. Hayashi By: /s/ C H Chung
Printed Name: J. Hayashi Printed Name: C H Chung
Title: President and Title: Chairman
Chief Executive Officer
EXHIBIT 11.1
AMERICAN PRESIDENT COMPANIES, LTD. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
________________________________________________________________________________________________
Year Ended December 31 December 25
December 27
1993 1992 1991
________________________________________________________________________________________________
(In thousands, except
per share amounts)
________________________________________________________________________________________________
PRIMARY EARNINGS PER COMMON SHARE
Income Before Cumulative
<S> <C> <C> <C>
Effect of Accounting Changes $ 80,109 $ 78,016 $ 66,138
Cumulative Effect on Prior Years
of Changing the Accounting for:
Revenue and Expenses (21,565)
Postretirement Benefits (10,480)
________________________________________________________________________________________________
Net Income $ 80,109 $ 56,451 $ 55,658
Preferred Dividends Series C (6,750) (6,750) (6,750)
________________________________________________________________________________________________
Earnings Available $ 73,359 $ 49,701 $ 48,908
________________________________________________________________________________________________
Weighted Average:
Common Stock 26,559 28,332 30,654
Common Stock Equivalents(1) 1,147 1,019 704
________________________________________________________________________________________________
Total Shares 27,706 29,351 31,358
________________________________________________________________________________________________
Primary Earnings Per Common
Share
Before Cumulative Effect of
Accounting Changes $ 2.65 $ 2.43 $ 1.89
Cumulative Effect of
Accounting Changes (0.74) (0.33)
________________________________________________________________________________________________
Primary Earnings Per Common
Share $ 2.65 $ 1.69 $ 1.56
________________________________________________________________________________________________
FULLY DILUTED EARNINGS PER COMMON SHARE
Income Before Cumulative
Effect of Accounting Changes $ 80,109 $ 78,016 $ 66,138
Cumulative Effect on Prior Years
of Changing the Accounting for:
Revenue and Expenses (21,565)
Postretirement Benefits (10,480)
________________________________________________________________________________________________
Net Income $ 80,109 $ 56,451 $ 55,658
________________________________________________________________________________________________
Weighted Average:
Common Stock 26,559 28,331 30,654
Common Stock Equivalents(1) 1,579 1,019 1,064
Preferred Stock Series C 3,962 3,962 3,962
________________________________________________________________________________________________
Total Shares 32,100 33,312 35,680
________________________________________________________________________________________________
Fully Diluted Earnings Per Common Share
Before Cumulative Effect of
Accounting Changes $ 2.50 $ 2.34 $ 1.85
Cumulative Effect of
Accounting Changes (0.65) (0.29)
_________________________________________________________________________________________________
Fully Diluted Earnings Per
Common Share $ 2.50 $ 1.69 $ 1.56
________________________________________________________________________________________________
</TABLE>
(1) Assumes conversion of outstanding stock options as determined by
application of the treasury stock method.
EXHIBIT 21.1
AMERICAN PRESIDENT COMPANIES, LTD.
SUBSIDIARIES OF THE COMPANY
<TABLE>
<CAPTION>
SUBSIDIARY JURISDICTION OF INCORP.
____________________________________________________________________________________________
<S> <C>
ACS CANADA, LTD. CANADA
AMERICAN CONSOLIDATION SERVICES of NORTH AMERICA, LTD. DELAWARE
AMERICAN CONSOLIDATION SERVICES, LTD. HONG KONG
AMERICAN CONSOLIDATION SERVICES, LTD. TAIWAN
AMERICAN CONSOLIDATION SERVICES (PHILIPPINES), INC. PHILIPPINES
AMERICAN PRESIDENT BUSINESS LOGISTICS SERVICES DELAWARE
AMERICAN PRESIDENT COMPANIES FOUNDATION CALIFORNIA
AMERICAN PRESIDENT LINES CANADA, LTD. CANADA
AMERICAN PRESIDENT LINES, LTD. DELAWARE
AMERICAN PRESIDENT LINES (CHINA) COMPANY, LTD. PEOPLES REPUBLIC
OF CHINA
AMERICAN PRESIDENT LINES (LANKA) AGENCIES, LTD. SRI LANKA
AMERICAN PRESIDENT TRUCKING COMPANY, LTD. DELAWARE
APC DE MEXICO, S.A. DE C.V. MEXICO
APL (BANGLADESH) AGENCIES, LTD. BANGLADESH
APL CORPORATION DELAWARE
APL EXPRESS, LTD. DELAWARE
APL EXPRESS TRANSPORTATION, LTD. DELAWARE
APL INFORMATION SERVICES, LTD. DELAWARE
APL INTERNATIONAL CORPORATION DELAWARE
APL LAND TRANSPORT SERVICES, INC. TENNESSEE
APL NEWBUILDS, LTD. NEVADA
ASIAN-AMERICAN CONSOLIDATION SERVICES, LTD. CALIFORNIA
EAGLE INTERMODAL, LTD. DELAWARE
EAGLE MARINE SERVICES (INDIA), LTD. DELAWARE
EAGLE MARINE SERVICES, LTD. DELAWARE
EAGLE SHIPPING AGENCIES PRIVATE, LTD. INDIA
NATOMAS REAL ESTATE COMPANY CALIFORNIA
PIONEER INTERMODAL SERVICES COMPANY, LTD THAILAND
SIAM INTERMODAL SERVICES, LTD. THAILAND
SONG-DOR HOLDINGS, LTD. HONG KONG
TRADE U.S.A., LTD. DELAWARE
VASCOR, LTD. DELAWARE
</TABLE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report dated February 11, 1994 included in this
Form 10-K, into the company's previously filed Registration Statements
on Form S-3 No. 33-60893, and Form S-8 Nos. 2-89096, 2-89094, 33-17499,
33-28640, 33-24847 and 33-36030.
/s/ Arthur Andersen & Co.
San Francisco, California
March 9, 1994
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
The undersigned does hereby make, constitute and appoint Will M. Storey,
Maryellen B. Cattani, Timothy J. Windle and Peter A. V. Huegel, jointly and
severally, my true and lawful attorneys-in-fact, with full power of substitution
in each, for me and in my name, place and stead to execute for me and on my
behalf in each or any one of my offices and capacities with American President
Companies, Ltd. (the "Company"), as shown below, the Company's Annual Report on
Form 10-K for the year ended December 31, 1993, with exhibits thereto and other
documents in connection therewith, which the Company contemplates filing with
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, and any and all amendments to said Form 10-K, hereby
ratifying, approving and confirming all that any such attorney-in-fact may do by
virtue of these presents.
IN WITNESS WHEREOF, I have executed these presents this 8th day of
March, 1994.
/s/ Charles S. Arledge
Charles S. Arledge
Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
The undersigned does hereby make, constitute and appoint Will M. Storey,
Maryellen B. Cattani, Timothy J. Windle and Peter A. V. Huegel, jointly and
severally, my true and lawful attorneys-in-fact, with full power of substitution
in each, for me and in my name, place and stead to execute for me and on my
behalf in each or any one of my offices and capacities with American President
Companies, Ltd. (the "Company"), as shown below, the Company's Annual Report on
Form 10-K for the year ended December 31, 1993, with exhibits thereto and other
documents in connection therewith, which the Company contemplates filing with
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, and any and all amendments to said Form 10-K, hereby
ratifying, approving and confirming all that any such attorney-in-fact may do by
virtue of these presents.
IN WITNESS WHEREOF, I have executed these presents this 8th day of
March, 1994.
/s/ John H. Barr
John H. Barr
Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
The undersigned does hereby make, constitute and appoint Will M. Storey,
Maryellen B. Cattani, Timothy J. Windle and Peter A. V. Huegel, jointly and
severally, my true and lawful attorneys-in-fact, with full power of substitution
in each, for me and in my name, place and stead to execute for me and on my
behalf in each or any one of my offices and capacities with American President
Companies, Ltd. (the "Company"), as shown below, the Company's Annual Report on
Form 10-K for the year ended December 31, 1993, with exhibits thereto and other
documents in connection therewith, which the Company contemplates filing with
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, and any and all amendments to said Form 10-K, hereby
ratifying, approving and confirming all that any such attorney-in-fact may do by
virtue of these presents.
IN WITNESS WHEREOF, I have executed these presents this 8th day of
March, 1994.
/s/ John J. Hagenbuch
John J. Hagenbuch
Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
The undersigned does hereby make, constitute and appoint Will M. Storey,
Maryellen B. Cattani, Timothy J. Windle and Peter A. V. Huegel, jointly and
severally, my true and lawful attorneys-in-fact, with full power of substitution
in each, for me and in my name, place and stead to execute for me and on my
behalf in each or any one of my offices and capacities with American President
Companies, Ltd. (the "Company"), as shown below, the Company's Annual Report on
Form 10-K for the year ended December 31, 1993, with exhibits thereto and other
documents in connection therewith, which the Company contemplates filing with
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, and any and all amendments to said Form 10-K, hereby
ratifying, approving and confirming all that any such attorney-in-fact may do by
virtue of these presents.
IN WITNESS WHEREOF, I have executed these presents this 8th day of
March, 1994.
/s/ Toni Rembe
Toni Rembe
Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
The undersigned does hereby make, constitute and appoint Will M. Storey,
Maryellen B. Cattani, Timothy J. Windle and Peter A. V. Huegel, jointly and
severally, my true and lawful attorneys-in-fact, with full power of substitution
in each, for me and in my name, place and stead to execute for me and on my
behalf in each or any one of my offices and capacities with American President
Companies, Ltd. (the "Company"), as shown below, the Company's Annual Report on
Form 10-K for the year ended December 31, 1993, with exhibits thereto and other
documents in connection therewith, which the Company contemplates filing with
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, and any and all amendments to said Form 10-K, hereby
ratifying, approving and confirming all that any such attorney-in-fact may do by
virtue of these presents.
IN WITNESS WHEREOF, I have executed these presents this 8th day of
March, 1994.
/s/ Joji Hayashi
Joji Hayashi
Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
The undersigned does hereby make, constitute and appoint Will M. Storey,
Maryellen B. Cattani, Timothy J. Windle and Peter A. V. Huegel, jointly and
severally, my true and lawful attorneys-in-fact, with full power of substitution
in each, for me and in my name, place and stead to execute for me and on my
behalf in each or any one of my offices and capacities with American President
Companies, Ltd. (the "Company"), as shown below, the Company's Annual Report on
Form 10-K for the year ended December 31, 1993, with exhibits thereto and other
documents in connection therewith, which the Company contemplates filing with
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, and any and all amendments to said Form 10-K, hereby
ratifying, approving and confirming all that any such attorney-in-fact may do by
virtue of these presents.
IN WITNESS WHEREOF, I have executed these presents this 8th day of
March, 1994.
/s/ F. Warren Hellman
F. Warren Hellman
Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
The undersigned does hereby make, constitute and appoint Will M. Storey,
Maryellen B. Cattani, Timothy J. Windle and Peter A. V. Huegel, jointly and
severally, my true and lawful attorneys-in-fact, with full power of substitution
in each, for me and in my name, place and stead to execute for me and on my
behalf in each or any one of my offices and capacities with American President
Companies, Ltd. (the "Company"), as shown below, the Company's Annual Report on
Form 10-K for the year ended December 31, 1993, with exhibits thereto and other
documents in connection therewith, which the Company contemplates filing with
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, and any and all amendments to said Form 10-K, hereby
ratifying, approving and confirming all that any such attorney-in-fact may do by
virtue of these presents.
IN WITNESS WHEREOF, I have executed these presents this 8th day of
March, 1994.
/s/ John M. Lillie
John M. Lillie
Chairman of the Board,
President, Chief Executive Officer
and Director
(Principal Executive Officer)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
The undersigned does hereby make, constitute and appoint Will M. Storey,
Maryellen B. Cattani, Timothy J. Windle and Peter A. V. Huegel, jointly and
severally, my true and lawful attorneys-in-fact, with full power of substitution
in each, for me and in my name, place and stead to execute for me and on my
behalf in each or any one of my offices and capacities with American President
Companies, Ltd. (the "Company"), as shown below, the Company's Annual Report on
Form 10-K for the year ended December 31, 1993, with exhibits thereto and other
documents in connection therewith, which the Company contemplates filing with
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, and any and all amendments to said Form 10-K, hereby
ratifying, approving and confirming all that any such attorney-in-fact may do by
virtue of these presents.
IN WITNESS WHEREOF, I have executed these presents this 8th day of
March, 1994.
/s/ Timothy J. Rhein
Timothy J. Rhein
Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
The undersigned does hereby make, constitute and appoint Will M. Storey,
Maryellen B. Cattani, Timothy J. Windle and Peter A. V. Huegel, jointly and
severally, my true and lawful attorneys-in-fact, with full power of substitution
in each, for me and in my name, place and stead to execute for me and on my
behalf in each or any one of my offices and capacities with American President
Companies, Ltd. (the "Company"), as shown below, the Company's Annual Report on
Form 10-K for the year ended December 31, 1993, with exhibits thereto and other
documents in connection therewith, which the Company contemplates filing with
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, and any and all amendments to said Form 10-K, hereby
ratifying, approving and confirming all that any such attorney-in-fact may do by
virtue of these presents.
IN WITNESS WHEREOF, I have executed these presents this 8th day of
March, 1994.
/s/ Forrest N. Shumway
Forrest N. Shumway
Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
The undersigned does hereby make, constitute and appoint Will M. Storey,
Maryellen B. Cattani, Timothy J. Windle and Peter A. V. Huegel, jointly and
severally, my true and lawful attorneys-in-fact, with full power of substitution
in each, for me and in my name, place and stead to execute for me and on my
behalf in each or any one of my offices and capacities with American President
Companies, Ltd. (the "Company"), as shown below, the Company's Annual Report on
Form 10-K for the year ended December 31, 1993, with exhibits thereto and other
documents in connection therewith, which the Company contemplates filing with
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, and any and all amendments to said Form 10-K, hereby
ratifying, approving and confirming all that any such attorney-in-fact may do by
virtue of these presents.
IN WITNESS WHEREOF, I have executed these presents this 8th day of
March, 1994.
/s/ Will M. Storey
Will M. Storey
Executive Vice President,
Chief Financial Officer, Treasurer
and Director
(Principal Financial Officer)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
The undersigned does hereby make, constitute and appoint Will M. Storey,
Maryellen B. Cattani, Timothy J. Windle and Peter A. V. Huegel, jointly and
severally, my true and lawful attorneys-in-fact, with full power of substitution
in each, for me and in my name, place and stead to execute for me and on my
behalf in each or any one of my offices and capacities with American President
Companies, Ltd. (the "Company"), as shown below, the Company's Annual Report on
Form 10-K for the year ended December 31, 1993, with exhibits thereto and other
documents in connection therewith, which the Company contemplates filing with
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, and any and all amendments to said Form 10-K, hereby
ratifying, approving and confirming all that any such attorney-in-fact may do by
virtue of these presents.
IN WITNESS WHEREOF, I have executed these presents this 8th day of
March, 1994.
/s/ Barry L. Williams
Barry L. Williams
Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
The undersigned does hereby make, constitute and appoint Will M. Storey,
Maryellen B. Cattani, Timothy J. Windle and Peter A. V. Huegel, jointly and
severally, my true and lawful attorneys-in-fact, with full power of substitution
in each, for me and in my name, place and stead to execute for me and on my
behalf in each or any one of my offices and capacities with American President
Companies, Ltd. (the "Company"), as shown below, the Company's Annual Report on
Form 10-K for the year ended December 31, 1993, with exhibits thereto and other
documents in connection therewith, which the Company contemplates filing with
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, and any and all amendments to said Form 10-K, hereby
ratifying, approving and confirming all that any such attorney-in-fact may do by
virtue of these presents.
IN WITNESS WHEREOF, I have executed these presents this 8th day of
March, 1994.
/s/ William J. Stuebgen
William J. Stuebgen
Vice President - Controller
(Principal Accounting Officer)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
The undersigned does hereby make, constitute and appoint Will M. Storey,
Maryellen B. Cattani, Timothy J. Windle and Peter A. V. Huegel, jointly and
severally, my true and lawful attorneys-in-fact, with full power of substitution
in each, for me and in my name, place and stead to execute for me and on my
behalf in each or any one of my offices and capacities with American President
Companies, Ltd. (the "Company"), as shown below, the Company's Annual Report on
Form 10-K for the year ended December 31, 1993, with exhibits thereto and other
documents in connection therewith, which the Company contemplates filing with
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, and any and all amendments to said Form 10-K, hereby
ratifying, approving and confirming all that any such attorney-in-fact may do by
virtue of these presents.
IN WITNESS WHEREOF, I have executed these presents this 8th day of
March, 1994.
/s/ Maryellen B. Cattani
Maryellen B. Cattani
Senior Vice President,
General Counsel and Secretary
